This is a bond which certain registered investment professionals are required by law to post with some states. It is a contract whereby the surety agrees to have secondary responsibility to the state (the obligee) for any default or debt of the registered investment adviser (the principal). The bond indemnifies the obligee for losses sustained as a result of any covered defaults, up to the amount of the Bond.
To become a licensed registered investment advisor, many states require the advisor to post a surety bond in lieu of a cash deposit. Investment advisors can purchase these required surety bonds direct from Colonial.