(1) (a) The general assembly hereby finds and declares that:

(I) Medical marijuana businesses need to be able to access capital in order to effectively grow their businesses and remain competitive in the marketplace;

(II) The current regulatory structure for medical marijuana creates a substantial barrier to investment from out-of-state interests;

(III) There is insufficient capital in the state to properly fund the capital needs of Colorado medical marijuana businesses;

(IV) Colorado medical marijuana businesses need to have ready access to capital from investors in states outside of Colorado; and

(V) Providing access to legitimate sources of capital helps prevent the opportunity for those who engage in illegal activity to gain entry into the state's regulated medical marijuana market.

(b) Therefore, the general assembly is providing a mechanism for Colorado medical marijuana businesses to access capital from investors in other states.

(2) A direct beneficial interest owner who is a natural person must either:

(a) Have been a resident of Colorado for at least one year prior to the date of the application; or

(b) Be a United States citizen prior to the date of the application.

(3) (a) A medical marijuana business may be comprised of an unlimited number of direct beneficial interest owners that have been residents of Colorado for at least one year prior to the date of the application.

(b) On and after January 1, 2017, a medical marijuana business that is composed of one or more direct beneficial interest owners who have not been Colorado residents for at least one year prior to application shall have at least one officer who has been a Colorado resident for at least one year prior to application, and all officers with day-to-day operational control over the business must be Colorado residents for at least one year prior to application. A medical marijuana business under this subsection (3)(b) is limited to no more than fifteen direct beneficial interest owners, including all parent and subsidiary entities, all of whom are natural persons.

(c) Notwithstanding the requirements of subsection (3)(b) of this section, the state licensing authority may review the limitation on the number of direct beneficial interest owners and may increase the number of allowable interests above fifteen based on reasonable considerations such as developments in state and federal financial regulations, market conditions, and the licensee's ability to access legitimate sources of capital.

(d) A direct beneficial interest owner that is a closely held business entity must consist entirely of natural persons who are United States citizens prior to the date of the application, including all parent and subsidiary entities.

(4) A medical marijuana business may include qualified institutional investors that own thirty percent or less of the medical marijuana business.

(5) (a) A person who intends to apply as a direct beneficial interest owner and is not a Colorado resident for at least one year prior to the date of application shall first submit a request to the state licensing authority for a finding of suitability as a direct beneficial interest owner. The person shall receive a finding of suitability prior to submitting an application to the state licensing authority to be a direct beneficial interest owner. Failure to receive a finding of suitability prior to application is grounds for denial by the state licensing authority.

(b) The state licensing authority shall perform a limited initial background check on qualified limited passive investors. If the initial background check provides reasonable cause for additional investigation, the state licensing authority may require a full background check.

(6) The state licensing authority shall review the medical marijuana business's operating documents to ensure compliance with this section.

(7) For purposes of this section, unless the context otherwise requires, "institutional investor" means:

(a) A bank as defined in section 3 (a)(6) of the federal "Securities Exchange Act of 1934", as amended;

(b) An insurance company as defined in section 2 (a)(17) of the federal "Investment Company Act of 1940", as amended;

(c) An investment company registered under section 8 of the federal "Investment Company Act of 1940", as amended;

(d) An investment adviser registered under section 203 of the federal "Investment Advisers Act of 1940", as amended;

(e) Collective trust funds as defined in section 3 (c)(11) of the federal "Investment Company Act of 1940", as amended;

(f) An employee benefit plan or pension fund that is subject to the federal "Employee Retirement Income Security Act of 1974", as amended, excluding an employee benefit plan or pension fund sponsored by a licensee or an intermediary or holding company licensee that directly or indirectly owns five percent or more of a licensee;

(g) A state or federal government pension plan;

(h) A group comprised entirely of persons specified in subsections (7)(a) to (7)(g) of this section; or

(i) Any other entity identified through rule by the state licensing authority.