Surety Bond Encyclopedia

Investment Adviser ($10,000) Bond - Statewide in Oregon

Brief Summary

Oregon will not license a state investment adviser based in Oregon until a $10,000 bond or letter of credit is on file with the Division of Financial Regulation. A surety bond on DFR form 440-5650 is the simpler route for most firms, and it satisfies a requirement that follows the firm for six years after it stops being licensed.

Under OAR 441-175-0110, every applicant for a license as an Oregon based state investment adviser must file a $10,000 surety bond or a $10,000 letter of credit with the Director of the Department of Consumer and Business Services. The bond runs to the State of Oregon on DFR form 440-5650, protects anyone with a cause of action against the adviser under Oregon Securities Law, and must be kept in force during licensing and for at least six years afterward.

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How to Apply for a Investment Adviser ($10,000) Bond:

Confirm the firm is an Oregon based state investment adviser and not an out-of-state or SEC-regulated firm.
Have the firm's legal name and address exactly as they appear on Form ADV.
Complete the bond application and review the quote.
Receive the executed $10,000 bond on DFR Surety Bond form 440-5650.
File the bond with the Division of Financial Regulation with the license application.
Keep the bond in force during licensing and for six years after the license ends.

Detailed Information About the Oregon Investment Adviser ($10,000) Bond:

The bond outlasts the license

The detail most advisers miss is the tail. OAR 441-175-0110 requires the bond or letter of credit to be maintained during the period of licensing and for at least six years after the person ceases to be licensed. Once six years have passed, the adviser may ask for release, and the director will grant it unless claims are pending against the person for violating the Oregon Securities Law. Closing the firm does not end the bond.

Who has to post it

The rule applies to applicants for a license as an Oregon based state investment adviser. DFR describes these as firms located in Oregon managing less than $100 million in assets. ORS 59.175(4) exempts an investment adviser whose principal office is outside Oregon if it is licensed in its home state and complies with that state's bonding or net capital requirements. SEC-regulated firms notice file through IARD rather than licensing as a state adviser.

What the bond guarantees

DFR's Surety Bond form 440-5650 names the State of Oregon as obligee. The bond is void if the principal and its agents and employees comply with the Oregon Securities Law. If they do not, the surety pays damages up to $10,000 to any person who has a cause of action against the principal. The surety must be authorized by the director to transact insurance in Oregon and must give 30 days written notice to the principal and the Securities Section before cancelling.

Letter of credit option

Instead of a bond, the adviser may file a $10,000 letter of credit from a financial institution authorized to transact banking business in Oregon. It carries the same six-year maintenance requirement.

Other licensing items

The bond is one part of the application. DFR also requires Form ADV, a $200 annual fee, proposed client contracts and financial statements under OAR 441-175-0100, at least one person licensed as an investment adviser under Oregon securities law, and proof of errors and omissions insurance of at least $1 million, attested on DFR form 440-5379. The E&O policy does not replace the bond.

Eligibility and Requirements for a Oregon Investment Adviser ($10,000) Bond:

Bond amount of exactly $10,000, or a $10,000 letter of credit from an Oregon authorized financial institution.
State of Oregon named as obligee on DFR form 440-5650.
Surety authorized by the director to transact insurance in Oregon.
30 days written notice of cancellation to the principal and the Securities Section.
Separate errors and omissions insurance of at least $1 million.
Premium set by surety underwriting from the $10,000 amount, the long maintenance period and the principals' credit and regulatory history.

Oregon Investment Adviser ($10,000) Bond FAQs:

Can I cancel the bond when I close my advisory firm?

No. OAR 441-175-0110 requires the bond or letter of credit to stay in force for at least six years after you stop being licensed. After that you may request release, which the director grants unless claims are pending under the Oregon Securities Law.

My firm is based in another state. Do I need this bond?

ORS 59.175(4) exempts an investment adviser whose principal office is outside Oregon if it is licensed in its home state and meets that state's bonding or net capital rules. DFR asks such firms to confirm this in a letter.

Does my $1 million E&O policy satisfy the bond?

No. DFR lists errors and omissions insurance of at least $1 million as a separate requirement. The $10,000 bond or letter of credit is still required.

Which form does Oregon require?

DFR Surety Bond form 440-5650, naming the State of Oregon as obligee and written by a surety authorized to transact insurance in Oregon.

How is the premium set?

The surety prices the bond from the $10,000 amount, the six-year tail after licensing ends and the principals' credit, finances and regulatory record. The quote is specific to your firm.