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Investment Advisor Bond

What is an Investment Advisor Bond?

An Investment Advisor bond is a type of license surety bond. The bond is required by state governments as a requirement of individuals attempting to obtain an Investment Advisor license. The bond amount varies by state, typically ranging from $10,000 to $50,000. Like other types of license bonds, an investment advisor bond holds an individual responsible if they violate laws and codes of conduct relating to their professions - in this case an investment advisor. The investor harmed by the investment advisor's misdeeds may file a claim against the bond seeking financial compensation. You may also hear this type of bond referred to as an Registered Investment Advisor (RIA) surety bond, but despite the slight difference in title, both types of surety bonds work in the exact same way.

Investment Advisor Bond vs. Blue Sky Bond

Though similar, these are two distinct types of surety bonds. Blue Sky laws exist to deter fraud in the financial services industry. Blue Sky Bonds hold advisors accountable if they specifically violate Blue Sky laws, but they may not apply to all the categories of misbehavior that investment advisor bonds cover. Therefore, an advisor may need both kinds of bonds depending on what kind of advice he or she offers. If you're unsure about your own exact bonding requirements, rely on the experts at Viking Bond Service to help you figure things out.

How does an Investment Advisor Bond work?

Investment advisors must follow certain standards of professional conduct, which vary by state. If they violate the codes and it causes financial harm to an investor, the bond provides a way for the investor to seek out justice and hold the investment advisor financially responsible. The company that issues the bond guarantees payment for all valid claims filed against the bond. The bonded party (the investment advisor) has the final financial responsibility, but the surety will step in to pay the claim if the bonded investment advisor can't or won't. When that happens, the investment advisor must then pay the surety back.

In this way, investment advisor bonds serve two key functions. First, they provide a mechanism through which investors who feel they've been manipulated or deceived by their investment advisor can seek out damages in the form of financial compensation. Second, they provide a legally-binding framework to hold unethical advisors accountable - a framework that makes it less likely for them to escape financial responsibility or violate laws and professional practices with impunity.

Who should get an Investment Advisor Bond?

Anyone seeking an investment advisor license. Since it's illegal to work as an investment advisor without a license, and it's impossible to get a license without a valid bond, it's important to secure a bond sooner rather than later. Offering investment advice without a valid license or bond could result in stiff penalties ranging from fines to permanent loss of license - which could end a career. To find an investment advisor surety bond fast, rely on the resources of Viking Bond Service.

Will an Investment Advisor Surety Bond Work for Multiple States?

It will not. Bonds are only active and applicable in the state where they're issued. Advisors who plan to serve clients in multiple states will need to follow the necessary licensure requirements for each, including obtaining separate investment advisor bonds in individual states.

Who are the parties involved in an Investment Advisor Surety Bond?

The investment advisor surety bond, like all kinds of surety bonds, involves three parties:

  • The Principal - The party that obtains the bond and must pay for all claims. The investment advisor is the principal.
  • The Obligee - The party that files a claim against the bond seeking compensation for damages. The investor is the obligee.
  • The Surety - The party that issues the bond to the principal and settles claims with the obligee. The surety acts line a line of credit that backs the principal up but must be paid back.

How much does an Investment Advisor Bond cost?

That depends on two primary factors. First, how big the bond must be as determined by the state. The bond amount determines how much the surety agrees to pay out in claims. Investment advisors pay just a small percentage of that amount to obtain the bond. The exact cost depends on the applicant's credit score and financial history. As long as an investment advisor avoids having claims filed against the bond, the premiums are the only cost.

Can you get an Investment Advisor Bond with bad credit?

Some surety bond companies deny applicants with bad credit and others don't. Increase your chances of being approved for a great bond at a competitive rate by working with Viking Bond Service - a national surety brokerage working with a vast array of surety relationships.

How long does an Investment Advisor Bond remain valid?

Investment advisor bonds are annually renewable and are usually continuous in nature. This means that as long as the investment advisor license or registration is active, the bond requirement will persist. To renew a bond, an advisor will need to have their credit and bond-worthiness reevaluated by the surety company. Renewal could cost more or less than the previous bond cost depending on changes to the applicant's credit standing. After paying for renewal, the bond becomes active again for however long the bond agreement specified. A quality surety brokerage like Viking Bond Service makes the renewal process easy and error-free by helping investment advisors stay aware of the renewal deadline and take action early enough that bond issues don't put their license in jeopardy.

How are claims handled for Investment Advisor Bonds?

Investments go south sometimes at no fault of the investment advisor. Upon receiving a claim, the surety will launch a comprehensive investigation to determine whether the investment advisor actually violated any laws. If so, the surety settles the claim, at which point the principal must pay the surety back the full amount of the debt with interest added and also likely the cost of the investigation.

How to apply for an Investment Advisor Bond?

Simply submit a standard bond application to Viking Bond Service, along with any supplemental information the underwriter requires. Investment advisor bonds are usually simple and easy to process. Quotes are obtained the same day or within 24 hours in most cases.

Viking Bond Service - A Partner to Investment Advisors

If you're eager to get a bond ASAP to finish the requirements for an investor advisor's license, complete our online application 24/7. If you need more information first, we are happy to answer all your questions. Simply contact us through the form on this page or by calling 888-278-7389.

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