Colorado Private Fund Adviser Exemption

As of July 15, 2017, the Colorado Division of Securities (“CDS”) adopted Rule 51-4.11(IA) of the Code of Colorado Regulations which exempts certain investment advisers whose sole clients are qualifying private funds from having to register with the state (the “Colorado Private Fund Adviser Exemption”). Investment advisers that meet the requirements of the Colorado Private Fund Adviser Exemption can file as an exempt reporting adviser (“ERA”) with the CDS. Previously, such investment advisers located in Colorado were required to register with the state. The Colorado Private Fund Adviser Exemption generally mirrors the SEC’s private fund adviser exemption and similar exemptions of other states; however, there are some important differences as discussed below.

Colorado Private Fund Adviser Requirements Generally.

In order to take advantage of the Colorado Private Fund Adviser Exemption, an investment adviser must:

  • provide investment advice solely to one or more “qualifying private funds” as defined by the SEC (generally, any private fund not registered under the Investment Company Act of 1940, as amended, (e.g., a 3(c)(1) or 3(c)(7) fund));
  • not be subject to any “bad actor” disqualification events under Regulation D (this does not apply specifically to SEC ERAs);
  • file a report (generally, Part 1A of the Form ADV) and any amendments thereto required of an SEC ERA; and
  • pay the fees prescribed by the Colorado securities commissioner.

Additional Requirements for Certain 3(c)(1) Fund Advisers

Investment advisers to 3(c)(1) funds that are not “venture capital funds” (as defined by the SEC) (such 3(c)(1) fund, a “Non-VC 3(c)(1) Fund”) must also satisfy the following conditions with respect to each Non-VC 3(c)(1) Fund:

  • such Non-VC 3(c)(1) Fund’s securities may only be beneficially owned by persons who, after deducting the value of the primary residence from such person’s net worth, meet the qualified client definition (which deviates from the accredited investor threshold adopted by some states);
  • disclose the services, duties and other material information affecting the rights and responsibilities of each beneficial owner, if any; and
  • obtain and deliver annual audited financial statements to the Non-VC 3(c)(1) Fund’s investors.

Relief from “Gatekeeper” Requirement

Generally, Colorado investment advisers to pooled investment funds must engage an independent representative (a CPA or attorney) as a “gatekeeper” to review all fees, expenses and capital withdrawals from the pooled investment fund. However, an investment adviser availing of the Colorado Private Fund Adviser Exemption is not subject to this requirement and, thus, is not burdened with the obligation or expense to engage such third-party gatekeeper.

Transitioning to Registration and SEC Eligibility

Investment advisers no longer eligible for the Colorado Private Fund Adviser Exemption must register with the state within 90 days of such ineligibility. Moreover, once an adviser’s assets under management equals or exceeds $110 million as of an annual updating amendment to Form ADV, such adviser must file as an SEC ERA or register with the SEC, as applicable.


The Colorado Private Fund Adviser Exemption is a welcomed and useful exemption for Colorado private fund advisers. If you would like assistance in filing for the exemption or have any questions, please contact Scott Kitchens (415-762-2847) or Tony Wise (415-762-2863) at Cole-Frieman & Mallon LLP’s Denver office.


Cole-Frieman & Mallon is a boutique law firm focused on providing institutional quality legal services to the investment management industry. Please contact us if you would like more information on this topic.

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