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14  AN ACT relating to the regulation of securities; amending K.S.A. 17-
15    1254, 17-1255, 17-1262a, 17-1263, 17-1268, 17-1270 and 17-1272 and
16    K.S.A. 1996 Supp. 17-1252, 17-1259, 17-1261 and 17-1262 and re-
17    pealing the existing sections; also repealing K.S.A. 17-1256 and K.S.A.
18    1996 Supp. 75-6308.
19
20  Be it enacted by the Legislature of the State of Kansas:
21    New Section 1.  (a) The commissioner, by rule rules and regula-
22  tions or order, may require the payment of a filing fee and the filing of
23  documents with respect to a covered security under section 18(b)(2) of
24  the securities act of 1933, as follows:
25    (1)  Prior to the initial offer of such federal covered security in this
26  state, all documents that are part of a federal registration statement filed
27  with the United States securities and exchange commission under the
28  securities act of 1933, together with a consent to service of process, and
29  a fee not to exceed $2,500;
30    (2)  after the initial offer of such federal covered security in this state,
31  all documents that are a part of an amendment to a federal registration
32  statement filed with the United States securities and exchange commis-
33  sion under the securities act of 1933, which shall be filed concurrently
34  with the commissioner, together with a fee not to exceed $100;
35    (3)  an annual or periodic report of sales of such federal covered se-
36  curities in this state;
37    (4)  each notice filing under this subsection (a) shall be effective for
38  one year from its original filing date, or such other date required by the
39  commissioner by rule rules and regulations or order, and shall be re-
40  newed annually, so long as the covered security continues to be offered
41  in this state, by payment of an annual renewal fee not to exceed $2,500.
42    (b)  With respect to a covered security under section 18(b)(4)(D) of
43  the securities act of 1933, the commissioner, by rule rules and regula-
HB 2094--Am. by SCW
                                     

 1  tions or order, may require the issuer to file a notice on form D together
 2  with a fee not to exceed the amount authorized by paragraph (3) of sub-
 3  section (b) of K.S.A. 17-1259, and amendments thereto.
 4    (c)  The commissioner, by rule rules and regulations or otherwise,
 5  may require the filing of any document filed with the United States se-
 6  curities and exchange commission with respect to a covered security un-
 7  der section 18(b)(3) and (4) of the securities act of 1933, together with a
 8  fee not to exceed the amount authorized by paragraph (3) of subsection
 9    (b) of K.S.A. 17-1259, and amendments thereto.
10    (d)  The commissioner may issue a stop order suspending the offer
11  and sale of a federal covered security, except a covered security under
12  section 18(b)(1) of the securities act of 1933, if it finds that:
13    (1)  The order is in the public interest; and
14    (2)  there is a failure to comply with any condition established under
15  this section.
16    (e)  The commissioner, by rule rules and regulations or order, may
17  waive any or all of the provisions of this section.
18    (f)  Notwithstanding the provisions of this section, until October
19  10, 1999, the commissioner may require the registration of any fed-
20  eral covered security for which the fees required by this section
21  have not been paid promptly following written notification from the
22  commissioner to the issue [issuer] of the nonpayment or underpay-
23  ment of such fees. An issuer shall be considered to have promptly
24  paid such fees if they are remitted to the commissioner within 15
25  days following such person's receipt of written notification from the
26  commissioner.
27    (g)  This section shall be part of and supplemental to the Kansas
28  securities act.
29    New Sec. 2.  (a) To encourage uniform interpretation and adminis-
30  tration of the Kansas securities act and effective securities regulation and
31  enforcement, the commissioner may cooperate with the securities agen-
32  cies or administrators of other states, Canadian provinces or territories,
33  or other countries, the securities and exchange commission, the com-
34  modity futures trading commission, the securities investor protection cor-
35  poration, any self-regulatory organization, any national or international
36  organization of securities officials or agencies and any governmental law
37  enforcement or regulatory agency.
38    (b)  The cooperation authorized by this section includes, but is not
39  limited to, the following:
40    (1)  Establishing a central depository for registration under the Kansas
41  securities act and for documents and fees required under such act. The
42  commissioner shall by rules and regulations establish procedures and
43  requirements for filing documents and fees;
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 1    (2)  making a joint registration examination or enforcement investi-
 2  gation;
 3    (3)  holding a joint administrative hearing;
 4    (4)  filing and prosecuting a joint civil or administrative proceeding;
 5    (5)  sharing and exchanging personnel;
 6    (6)  sharing and exchanging information and documents subject to the
 7  restrictions of the Kansas open records act; and
 8    (7)  formulating, in accordance with the Kansas administrative pro-
 9  cedure act, rules and regulations on matters such as statements of policy,
10  guidelines and interpretive opinions and releases.
11    (c)  This section shall be part of and supplemental to the Kansas se-
12  curities act.
13    Sec. 3.  K.S.A. 1996 Supp. 17-1252 is hereby amended to read as
14  follows: 17-1252. When used in this act, unless the context otherwise
15  requires:
16    (a)  ``Commissioner'' means the securities commissioner of Kansas,
17  appointed as provided in K.S.A. 17-1270, and amendments thereto.
18    (b)  ``Agent'' means any individual other than a broker-dealer who
19  represents a broker-dealer or issuer in effecting or attempting to effect
20  purchases or sales of securities. ``Agent'' does not include an individual
21  who represents an issuer only in transactions in securities exempted by
22  subsections (a), (b), (c), (e), (f), (g), (i), (j), (k), (l) or (p) of K.S.A. 17-
23  1261, and amendments thereto, or who represents a broker-dealer in
24  effecting transactions in this state limited to those transactions described
25  in section 15(h)(2) of the securities and exchange act of 1934. A partner,
26  officer or director of a broker-dealer or issuer, or a person occupying a
27  similar status or performing similar functions, is an agent only if such
28  person otherwise comes within this definition.
29    (c)  ``Broker-dealer'' means any person engaged in the business of pur-
30  chasing, offering for sale or selling securities for the account of others or
31  for such person's own account; but the term does not include an agent,
32  issuer, bank, savings institution, insurance company, or a person who ef-
33  fects transactions in this state exclusively with the issuer of the securities
34  involved in the transactions or with any person to whom a sale is exempt
35  under subsection (f) of K.S.A. 17-1262, and amendments thereto.
36    (d)  ``Guaranteed'' means guaranteed as to payment of principal, in-
37  terest or dividends.
38    (e)  ``Issuer'' means any person who issues or proposes to issue any
39  security, except that with respect to certificates of deposit, voting-trust
40  certificates or collateral-trust certificates, or with respect to certificates of
41  interest or shares in an unincorporated investment trust not having a
42  board of directors (or persons performing similar functions) or of the
43  fixed, restricted management or unit type; the term ``issuer'' also means
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 1  the person or persons performing the acts and assuming the duties of
 2  depositor or manager pursuant to the provisions of the trust or other
 3  agreement or instrument under which the security is issued. The issuer
 4  of a certificate of interest in an oil and gas royalty, lease or mineral deed
 5  is the owner of the interest in the oil and gas royalty, lease or mineral
 6  deed who creates the certificate of interest for purpose of sale.
 7    (f)  ``Nonissuer'' means not directly or indirectly for the benefit of the
 8  issuer.
 9    (g)  ``Person'' means an individual, a corporation, a partnership, an
10  association, a joint-stock company, a trust where the interests of the ben-
11  eficiaries are evidenced by a security, an unincorporated organization, a
12  government or a political subdivision of a government.
13    (h) (1)  ``Sale'' or ``sell'' includes every contract of sale of, contract to
14  sell, or disposition of, a security or interest in a security for value.
15    (2)  ``Offer'' or ``offer to sell'' includes every attempt or offer to dispose
16  of, or solicitation of an offer to buy, a security or interest in a security for
17  value.
18    (3)  Any security given or delivered with, or as a bonus on account of,
19  any purchase of securities or any other thing is considered to constitute
20  part of the subject of the purchase and to have been offered and sold for
21  value.
22    (4)  Every sale or offer of a warrant or right to purchase or subscribe
23  to another security of the same or another issuer, and every sale or offer
24  of a security which gives the holder a present or future right or privilege
25  to convert into another security of the same or another issuer, is consid-
26  ered to include an offer of the other security.
27    (5)  A purported gift of assessable stock is considered to involve an
28  offer and sale of such stock.
29    (i)  ``Securities act of 1933,'' ``securities exchange act of 1934,'' ``public
30  utility holding company act of 1935,'' and ``investment company act of
31  1940'' mean the federal statutes of those names.
32    (j)  ``Security'' means any note; stock; treasury stock; bond; debenture;
33  evidence of indebtedness; certificate of interest or participation in any
34  profit-sharing agreement; collateral-trust certificate; preorganization cer-
35  tificate or subscription; transferable share; investment contract; voting-
36  trust certificates; thrift certificates or investment certificates, or thrift
37  notes issued by investment companies; certificate of deposit for a security;
38  certificate of interest in oil and gas royalties, leases or mineral deeds; or,
39  in general, any interest or instrument commonly known as a ``security,''
40  or any certificate of interest or participation in, temporary or interim
41  certificate for, guarantee of, or warrant or right to subscribe to or pur-
42  chase, any of the foregoing. ``Security'' does not include any insurance or
43  endowment policy or annuity contract under which an insurance company
HB 2094--Am. by SCW
                                     

 1  promises to pay money either in a lump sum or periodically for life or
 2  some other specified period.
 3    (k)  ``State'' means any state, territory, or possession of the United
 4  States, as well as the District of Columbia and Puerto Rico.
 5    (l)  ``Investment adviser'' means any person who, for compensation,
 6  engages in the business of advising others, either directly or through
 7  publications or writings, as to the value of securities or as to the advisa-
 8  bility of investing in, purchasing, or selling securities, or who, for com-
 9  pensation and as a part of a regular business, issues or promulgates anal-
10  yses or reports concerning securities. The term does not include:
11    (1)  An investment adviser representative;
12    (1) (2)  a bank, savings and loan association, credit union institution,
13  or trust company;
14    (2) (3)  a lawyer, accountant, engineer or teacher whose performance
15  of these services is solely incidental to the practice of the individual's
16  profession;
17    (3) (4)  a broker-dealer or its agent whose performance of these serv-
18  ices is solely incidental to the conduct of its business as a broker-dealer
19  and who receives no special compensation for them;
20    (4) (5)  a publisher of any bona fide newspaper, news column, news
21  magazine, newsletter, or business or financial publication of general, reg-
22  ular, and paid circulation or service, whether communicated in hard copy
23  form or by electronic means, or otherwise that does not consist of the
24  rendering of advice on the basis of the specific investment situation of
25  each client;
26    (5)  a person who has no place of business in this state if (A) such
27  person's only clients in this state are other investment advisers, broker-
28  dealers, banks, savings and loan associations, credit unions, trust com-
29  panies, insurance companies, investment companies as defined in the
30  investment company act of 1940, pension or profit-sharing trusts, or other
31  financial institutions or institutional buyers, whether acting for themselves
32  or as trustees, or (B) during any period of 12 consecutive months such
33  person does not direct business communications into this state in any
34  manner to more than five clients other than those specified in subsection
35    (l)(5)(A), whether or not such person or any of the persons to whom the
36  communications are directed is then present in this state; or
37    (6)  any person that is a federal covered adviser; or
38    (6) (7)  such other persons not within the intent of this definition as
39  the commissioner designates by order or by rules and regulations.
40    (m)  ``Investment adviser representative'' means any partner, officer,
41  director of or a person occupying a similar status or performing similar
42  functions or other individual except clerical or ministerial personnel, who
43  is employed by or associated with an investment adviser that is registered
HB 2094--Am. by SCW
                                     

 1  or required to be registered under this act, or who has a place of business
 2  located in this state and is employed by or associated with a federal cov-
 3  ered adviser; and who does any of the following:
 4    (1)  Makes any recommendations or otherwise renders advice regard-
 5  ing securities;
 6    (2)  manages accounts or portfolios of clients;
 7    (3)  determines which recommendation or advice regarding securities
 8  should be given;
 9    (4)  solicits, offers or negotiates for the sale of or sells investment ad-
10  visory services; or
11    (5)  supervises employees who perform any of the foregoing.
12    (n)  ``Federal covered security'' means any security that is a covered
13  security under section 18(b) of the securities act of 1933 or rules or reg-
14  ulations promulgated thereunder, except that, until October 10, 1999, or
15  such other date as may be legally permissible, a covered security for which
16  a fee has not been paid and promptly remedied following written notifi-
17  cation to the issuer of the nonpayment or underpayment of such fees, as
18  required by this act, shall not be a federal covered security.
19    (o)  ``Federal covered adviser'' means a person who is registered under
20  section 203 of the investment advisers act of 1940 or excluded from the
21  definition of ``investment adviser'' under section 202(a)(11) of the invest-
22  ment advisers act of 1940, except that, until October 10, 1999, or such
23  other due date as may be legally permissible, a person so registered or
24  excluded for which a fee has not been paid and promptly remedied fol-
25  lowing written notification to the adviser of such nonpayment or under-
26  payment of such fees, as required by this act, shall not be a federal covered
27  adviser.
28    Sec. 4.  K.S.A. 17-1254 is hereby amended to read as follows: 17-
29  1254. (a) It is unlawful for any person to engage in transact business in
30  this state as a broker-dealer or agent unless that person is registered under
31  this act, except in transactions exempt under K.S.A. 17-1262, and amend-
32  ments thereto, unless such person is registered as a broker-dealer under
33  this section. It is unlawful for any person to engage in business in this
34  state as an agent, except in transactions exempt under K.S.A. 17-1262,
35  and amendments thereto, unless such person is registered under this
36  section as an agent for a specified broker-dealer registered under this
37  section or for a specified issuer. It is unlawful for any person to transact
38  business in this state as an investment adviser unless such person is reg-
39  istered under this section as an investment adviser or as a broker-dealer
40  or such person's only clients in this state are investment companies, as
41  defined in the federal investment company act of 1940, or insurance com-
42  panies. A conviction for an intentional violation of this subsection is a
43  severity level 7, nonperson felony. Any violation of this section committed
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 1  on or after July 1, 1993, resulting in a loss of $25,000 or more, regardless
 2  of its location on the sentencing grid block, shall have a presumptive
 3  sentence of imprisonment.
 4    (b)  It is unlawful for any broker-dealer registered under this act or
 5  issuer to employ or associate with an agent transacting business in this
 6  state unless the agent is registered under this act. The registration of an
 7  agent is not effective during any period when the agent is not associated
 8  with a particular broker-dealer registered under this act or a particular
 9  issuer. When an agent begins or terminates a connection with a broker-
10  dealer or issuer, or begins or terminates those activities which make the
11  person an agent, the agent as well as the broker-dealer or issuer shall
12  promptly notify the commissioner.
13    (c)  It is unlawful for any person to transact business in this state as
14  an investment adviser or as an investment adviser representative unless:
15    (1)  The person is so registered under this act; or
16    (2)  the person has no place of business in this state and:
17    (A)  The person's only clients in this state are investment companies
18  as defined in the investment company act of 1940, other investment ad-
19  visers, federal covered advisers, broker-dealers, banks, trust companies,
20  savings institutions, insurance companies, employee benefit plans with
21  assets of not less than $1,000,000 and governmental agencies or instru-
22  mentalities, whether acting for themselves or as trustees with investment
23  control, or other institutional investors as are designated by rule rules
24  and regulations or order of the commissioner; or (B) during the preced-
25  ing twelve-month period has had not more than five clients, other than
26  those specified in subparagraph (A), who are residents of this state.
27    (d)  It is unlawful for:
28    (1)  Any person required to be registered as an investment adviser
29  under this act to employ or associate with an investment adviser repre-
30  sentative unless the investment adviser representative is registered under
31  this act. The registration of an investment adviser representative is not
32  effective during any period when such person is not associated with an
33  investment adviser registered under this act; or
34    (2)  any federal covered adviser to employ, or associate with an in-
35  vestment adviser representative having a place of business located in this
36  state, unless such investment adviser representative is registered under
37  this act, or is exempt from registration.
38    When an investment adviser representative described in paragraphs
39    (1) or (2) begins or terminates employment or association with an invest-
40  ment adviser or federal covered adviser, the investment adviser or
41  federal covered adviser shall promptly notify the commissioner.
42    (e)  Except with respect to federal covered advisers whose only clients
43  are those described in paragraph (2) of subsection (c) of this section, it is
HB 2094--Am. by SCW
                                     

 1  unlawful for any federal covered adviser to conduct advisory business in
 2  this state unless such person files with the commissioner such documents
 3  as have been filed with the securities and exchange commission together
 4  with a consent to service of process, and pays an initial and renewal notice
 5  filing fee, if the commissioner by rule rules and regulations or order
 6  requires. Each notice filing under this section shall be effective from its
 7  original filing date and expire on December 31 each year, unless re-
 8  newed. Notwithstanding the provisions of this subsection, until Oc-
 9  tober 10, 1999, the commissioner may require the registration of
10  any federal covered adviser for which fees required by this subsec-
11  tion have not been paid promptly following written notification
12  from the commissioner of the nonpayment. A federal covered ad-
13  viser shall be considered to have promptly paid such fees if they are
14  remitted to the commissioner within 15 days following such person's
15  receipt of written notification from the commissioner.
16    (f)  A conviction for an intentional violation of subsection (a) through
17  (e) (d) of this section is a severity level 7, nonperson felony. Any violation
18  of this section committed on or after July 1, 1993, resulting in a loss of
19  $25,000 or more, regardless of its location on the sentencing grid block,
20  shall have a presumptive sentence of imprisonment. This subsection shall
21  not apply to a failure to notify the commissioner of termination of em-
22  ployment or association as an agent or investment adviser representative.
23    (b) (g)  A broker-dealer, agent or, investment adviser or investment
24  adviser representative may be registered after filing with the commis-
25  sioner, or the commissioner's designee as permitted by subsection (j) (p),
26  a written application containing such relevant information and in such
27  form as the commissioner may require. The applicant shall be registered
28  if the commissioner finds that the applicant and, if applicable, the officers,
29  directors or partners are of good character and reputation, that the ap-
30  plicant's knowledge of the securities business and the applicant's financial
31  responsibility are such that the applicant is suitable to engage in the busi-
32  ness, that the applicant has supplied all information required by the com-
33  missioner and that the applicant has paid the necessary fee. The com-
34  missioner may require as a condition of registration that the applicant and
35  any officers, directors or partners or, in the case of an investment adviser,
36  any persons who represent or will represent the investment adviser in
37  doing or performing any acts or functions which make such person an
38  investment adviser pass a written examination as evidence of knowledge
39  of the securities business. In determining the character and reputation of
40  the applicant, the commissioner shall take into consideration any felony
41  conviction of such person, but such a conviction shall not automatically
42  operate as a bar to registration.
43    (c)  Before registering any broker-dealer, agent or investment adviser,
HB 2094--Am. by SCW
                                     

 1  the commissioner may by rules and regulations require such broker-
 2  dealer, agent or investment adviser to enter into and file in the office of
 3  the commissioner a bond in a sum of not less than $5,000 and not more
 4  than $25,000 and may determine its conditions. No bond shall be required
 5  of any investment adviser who does not maintain custody of customers'
 6  moneys, securities or property, or any registrant whose net capital, which
 7  shall be defined by rules and regulations, exceeds $100,000, nor shall a
 8  bond be required of any agent of such registrant. Any bond required shall
 9  run to the state of Kansas, insuring the faithful compliance with the pro-
10  visions of this act by the broker-dealer, agent or investment adviser, such
11  bond to be executed as surety by a surety company authorized to do
12  business in this state. Such bond may be so drawn as to cover the original
13  registration and any renewal thereof. Every bond shall provide for suit
14  thereon by any person who has a cause of action under K.S.A. 17-1268,
15  and amendments thereto, and, if the commissioner by rules and regula-
16  tions requires, by any person who has a cause of action not arising under
17  this act the total liability of the surety to all persons shall not exceed the
18  amount specified in the bond. Every bond shall provide that no suit may
19  be maintained to enforce any liability on the bond unless brought within
20  three years after the sale or other act upon which it is based.
21    (h)  The commissioner may, by rule rules and regulations or order,
22  require a minimum capital for registered broker-dealers, subject to the
23  limitations of section 15 of the securities exchange act of 1934, and estab-
24  lish minimum financial requirements for investment advisers, subject to
25  the limitations of section 222 of the investment advisers act of 1940, which
26  may include different requirements for those investment advisers who
27  maintain custody of clients' funds or securities or who have discretionary
28  authority over the same and those investment advisers who do not.
29    (i)  The commissioner may, by rule rules and regulations or order,
30  require registered broker-dealers, agents and investment advisers who
31  have custody of or discretionary authority over client funds or securities,
32  to post bonds in amounts as the commissioner may prescribe, subject to
33  the limitations of section 15 of the securities and exchange act of 1934 for
34  broker-dealers and section 222 of the investment advisers act of 1940 for
35  investment advisers, and may determine their conditions. Any appropri-
36  ate deposit of cash or securities shall be accepted in lieu of any bond so
37  required. No bond may be required of any registrant whose net capital,
38  or, in the case of an investment adviser, whose minimum financial require-
39  ments, which may be defined by rule rules and regulations, exceeds the
40  amounts required by the commissioner. Every bond shall provide for suit
41  thereon by any person who has a cause of action under K.S.A. 17-1268,
42  and amendments thereto, and, if the commissioner by rule rules and
43  regulations or order requires, by any person who has a cause of action
HB 2094--Am. by SCW
                                     

 1  not arising under this act. Every bond shall provide that no suit may be
 2  maintained to enforce any liability on the bond unless brought within the
 3  time limitations provided by law.
 4    (j) (1)  Every registered broker-dealer and investment adviser shall
 5  make and keep such accounts, correspondence, memoranda, papers, books
 6  and other records as the commissioner prescribes by rule rules and reg-
 7  ulations or order, subject to the limitations provided by section 15 of the
 8  securities exchange act of 1934, in the case of a broker-dealer, and section
 9  222 of the investment advisers act of 1940, in the case of an investment
10  adviser. All records so required with respect to an investment adviser,
11  shall be preserved for such period as the commissioner prescribes by rule
12  rules and regulations or order.
13    (2)  With respect to investment advisers, the commissioner may re-
14  quire that certain information be furnished or disseminated as necessary
15  or appropriate in the public interest or for the protection of investors and
16  advisory clients. To the extent determined by the commissioner, infor-
17  mation furnished to clients or prospective clients of an investment adviser
18  that would be in compliance with the investment advisers act of 1940 and
19  the rules thereunder may be used in whole or partial satisfaction of this
20  requirement.
21    (d) (k)  The names and addresses of all persons approved for registra-
22  tion as broker-dealers, agents or investment advisers and all of the orders
23  in respect thereto shall be recorded in a ``register of broker-dealers and
24  agents'' kept in the office of the commissioner commissioner shall main-
25  tain records of registration, notice filings and orders pertaining to broker-
26  dealers, agents, investment advisers federal covered advisers and in-
27  vestment adviser, federal covered advisers representatives. Unless the
28  commissioner has designated alternative registration expiration dates as
29  permitted by subsection (j) (p), every registration under this section shall
30  expire on the first day of January in December 31 each year, but any
31  registration for the succeeding year shall be renewed upon written ap-
32  plication and payment of the fee as herein provided without filing a fur-
33  ther statement or furnishing any further information unless specifically
34  required by the commissioner. Unless the commissioner has designated
35  alternative registration renewal dates as permitted by subsection (j) (p),
36  application for renewals must be made not later than December 31 in
37  each year; otherwise, they shall be treated as original applications.
38    (e)  When a registered agent terminates the agent's connection with
39  the issuer or registered broker-dealer specified in the application of such
40  agent, the registration of such agent shall terminate immediately and the
41  specified issuer or registered broker-dealer shall promptly notify the com-
42  missioner. When changes in the personnel of a partnership or in the
43  principals, copartners, officers or directors of any broker-dealer involve a
HB 2094--Am. by SCW
                                     

 1  majority of the capital of such broker-dealer, the commissioner shall be
 2  promptly notified of such changes; but when such changes involve less
 3  than a majority of the capital of such broker-dealer, the commissioner
 4  shall be notified of such changes by not later than the next annual renewal
 5  of registration of such broker-dealer.
 6    For purposes of this subsection, notices received by the commissioner
 7  from any designee selected pursuant to subsection (j) shall constitute
 8  notice from the issuer or registered broker-dealer to the commissioner.
 9    (f) (l)  The fee for original or renewal registration of each broker-
10  dealer and each investment adviser shall be not more than $300 and the
11  fee for renewal of each broker-dealer registration. The fee for an original
12  or renewal notice filing of each federal covered adviser shall be not more
13  than $300. The fee for original registration of each investment adviser,
14  other than an individual investment adviser who does not have custody
15  of customers' moneys, securities or other property, shall be not more than
16  $300 and the fee for renewal of each such investment adviser registration
17  shall be not more than $300. The fee for original or renewal registration
18  of an each agent and investment adviser representative shall be not more
19  than $50 and the fee for renewal of any agent's registration shall be not
20  more than $50. The fee for original registration of an individual invest-
21  ment adviser who does not have custody of customers' moneys, securities
22  or other property shall be not more than $50, and the fee for renewal of
23  the registration of any individual investment adviser who does not have
24  custody of customers' moneys, securities or other property shall be not
25  more than $50. Each fee for original registration shall be payable with
26  the application for original registration and each fee for renewal of reg-
27  istration shall be payable with the application for renewal and, in either
28  case, the fee shall not be returned if the application is withdrawn. The
29  commissioner shall establish such fees by rules and regulations.
30    (g) (m)  The commissioner may by order deny, suspend or revoke the
31  registration of any broker-dealer, agent or, investment adviser or invest-
32  ment adviser representative if the commissioner finds that such an order
33  is in the public interest and that the applicant or registrant, or, in the case
34  of a broker-dealer or investment adviser, any partner, officer or director
35  or any person occupying a similar status or performing similar functions:
36    (1)  Has filed an application for registration which as of its effective
37  date (or as of any date after filing in the case of an order denying effect-
38  iveness) was incomplete in any material respect or contained any state-
39  ment which was, in the light of the circumstances under which it was
40  made, false or misleading with respect to any material fact;
41    (2)  has willfully violated or willfully failed to comply with any provi-
42  sion of this act or a predecessor act or any rules and regulations or order
43  under this act or a predecessor act;
HB 2094--Am. by SCW
                                     

 1    (3)  has been convicted, within the past 10 years, of any misdemeanor
 2  involving a security or any aspect of the securities business or of any
 3  felony, if the commissioner determines, after investigation, that such per-
 4  son has not been sufficiently rehabilitated to warrant the public trust;
 5    (4)  is permanently or temporarily enjoined by any court of competent
 6  jurisdiction from engaging in or continuing any conduct or practice as an
 7  investment adviser, broker-dealer, or as an affiliated person or employee
 8  of an investment company, depository institution, insurance company, or
 9  involving any aspect of the securities business or commodities investment
10  business;
11    (5)  is the subject of an order of the commissioner denying, suspend-
12  ing or revoking registration as a broker-dealer, agent or, investment ad-
13  viser or investment adviser representative;
14    (6)  is the subject of an order entered within the past five years by the
15  securities administrator of any other state or by the securities and
16  exchange commission denying, suspending or revoking registration as a
17  broker-dealer, agent or, investment adviser or investment adviser repre-
18  sentative (or the substantial equivalent of those terms as defined in this
19  act), or is the subject of an order of the securities and exchange commis-
20  sion suspending or expelling the person from a national securities
21  exchange or national securities association registered under the federal
22  securities exchange act of 1934, or is the subject of an order by the com-
23  modities futures trading commission denying, suspending or revoking
24  registration under the commodities exchange act, or is the subject of an
25  order suspending or expelling from membership in or association with a
26  member of a self-regulatory organization registered under the securities
27  exchange act of 1934 or the commodities exchange act, or is the subject
28  of a United States post office fraud order; but the commissioner may not
29  enter any order under this clause on the basis of an order under any other
30  state act unless that order was based on facts which would currently con-
31  stitute a ground for an order under this section;
32    (7)  has engaged in dishonest or unethical practices in the securities
33  business;
34    (8)  in the case of a broker-dealer or investment adviser, is insolvent,
35  either in the sense that such person's liabilities exceed such person's assets
36  or in the sense that such person cannot meet such person's obligations as
37  they mature;
38    (9)  is not qualified on the basis of such factors as training, experience,
39  and knowledge of the securities business, but the commissioner may not
40  enter an order solely on the basis of lack of experience if the applicant or
41  registrant is qualified by training or knowledge or both;
42    (10)  is failing to keep or maintain sufficient records to permit an audit
43  disclosing the condition of the registrant's business;
HB 2094--Am. by SCW
                                     

 1    (11)  has failed to pay the proper registration fee; but the commis-
 2  sioner may not enter a revocation order under this clause, and the com-
 3  missioner shall vacate any denial order entered under this clause when
 4  the deficiency has been corrected;
 5    (12)  has failed reasonably to supervise the sales or investment ad-
 6  viser representative or employees; or
 7    (13)  has willfully and without cause failed to comply with a request
 8  for information by the commissioner or person designated by the com-
 9  missioner in conducting investigations or examinations under this act.
10    (h) (n)  The commissioner may by emergency order suspend registra-
11  tion pending final determination of any proceeding under this section.
12  Upon the entry of any order under this section, the commissioner shall
13  promptly notify the applicant or registrant (as well as the employer or
14  prospective employer if the applicant or registrant is an agent) that it has
15  been entered and of the reasons therefor and that, upon written request,
16  the matter will be set for a hearing which shall be conducted in accor-
17  dance with the provisions of the Kansas administrative procedure act.
18    (i) (o)  If the commissioner finds that any registrant or applicant for
19  registration is no longer in existence or has ceased to do business as a
20  broker-dealer, agent or investment adviser, is an adjudged incapacitated
21  person, or cannot be located after reasonable search, the commissioner
22  may cancel the registration or application in accordance with the provi-
23  sions of the Kansas administrative procedure act.
24    (j) (p) (1)  The commissioner may participate, in whole or in part,
25  with any national securities association or national securities exchange
26  registered with the United States securities and exchange commission
27  under the federal securities exchange act of 1934 or with any association
28  of state securities administrators in a central registration depository where
29  the broker-dealer, agent and investment adviser registrations required by
30  subsection (b) (g) may be centrally or simultaneously effected and the
31  accompanying registration fees may be centrally collected for all states
32  that require the registration of such persons and participate in such a
33  central registration depository.
34    (2)  If the commissioner finds that participation in such a central reg-
35  istration depository is in the public interest, the commissioner may by
36  rules and regulations or by order require that:
37    (A)  Applications for the registration or the renewal of the registration
38  of any broker-dealer, agent or investment adviser as required by this sec-
39  tion may be made or effected through or in conjunction or coordination
40  with such a central registration depository;
41    (B)  alternative registration expiration and renewal dates for regis-
42  tered broker-dealers, agents and investment advisers be utilized in lieu
43  of the registration expiration and renewal dates provided under subsec-
HB 2094--Am. by SCW
                                     

 1  tion (d) (k);
 2    (C)  all fees for the registration or the renewal of the registration of
 3  any broker-dealer, agent or investment adviser be collected by such a
 4  central registration depository in the dollar amounts required by subsec-
 5  tion (f) (l), provided that such fees are subsequently submitted to the
 6  commissioner pursuant to K.S.A. 17-1270, and amendments thereto, and
 7  remitted by the commissioner pursuant to K.S.A. 17-1271, and amend-
 8  ments thereto.
 9    (3)  Subsequent to the effective date of any rules and regulations or
10  order of the commissioner that is adopted under subsection (j)(2) (p)(2):
11    (A)  All applications for the registration or the renewal of the regis-
12  tration of any broker-dealer, agent or investment adviser, and all docu-
13  ments supporting such applications, which shall be filed with or received
14  by such a central registration depository shall be deemed to be filed with
15  or received by the commissioner pursuant to subsection (b) (g), when
16  such applications or documents are received by such a central registration
17  depository; and
18    (B)  any statement which is contained in any application for the reg-
19  istration or the renewal of the registration of any broker-dealer, agent or
20  investment adviser or contained in any document supporting such appli-
21  cations, which is filed with or received by such a central registration de-
22  pository and which is, at the time and in light of the circumstances under
23  which it is made, false or misleading in any material respect shall consti-
24  tute a violation of K.S.A. 17-1264, and amendments thereto.
25    Sec. 5.  K.S.A. 17-1255 is hereby amended to read as follows: 17-
26  1255. (a) It is unlawful for any person to offer or sell any security in this
27  state, except securities exempt under K.S.A. 17-1261 and amendments
28  thereto or when sold in transactions exempt under K.S.A. 17-1262 and
29  amendments thereto, unless such security is registered by notification
30  under K.S.A. 17-1256 and amendments thereto or by coordination under
31  K.S.A. 17-1257 and amendments thereto or by qualification under K.S.A.
32  17-1258 and amendments thereto unless:
33    (1)  It is registered under this act;
34    (2)  the security or transaction is exempt under K.S.A. 17-1261 or 17-
35  1262, and amendments thereto; or
36    (3)  it is a federal covered security for which the fee has been paid
37  and documents have been filed as required by section 1.
38    (b)  A conviction for an intentional violation of this section is a severity
39  level 7, nonperson felony. Any violation of this section committed on or
40  after July 1, 1993, resulting in a loss of $25,000 or more, regardless of its
41  location on the sentencing grid block, shall have a presumptive sentence
42  of imprisonment.
43    Sec. 6.  K.S.A. 1996 Supp. 17-1259 is hereby amended to read as
HB 2094--Am. by SCW
                                     

 1  follows: 17-1259. (a) When securities are registered by notification or by
 2  coordination or by qualification, they may be offered and sold by a reg-
 3  istered agent of the insurer issuer or by any registered broker-dealer.
 4  Every registration shall remain effective for one year after its effective
 5  date unless the commissioner by rule rules and regulations or order
 6  extends the period of effectiveness or until terminated upon request of
 7  the registrant with the consent of the commissioner. No registration is
 8  effective while a stop order is in effect under K.S.A. 17-1260, and amend-
 9  ments thereto. So long as a registration remains effective, all outstanding
10  securities of the same class shall be considered to be registered for the
11  purpose of any nonissuer distribution. Any registration statement may be
12  amended after its effective date so as to increase the securities specified
13  therein as proposed to be offered. The commissioner may permit the
14  omission of any document or item of information from any registration
15  statement. Upon completion of a registered offering a registrant shall file
16  a final report of sales.
17    (b) (1)  Every person filing a registration statement shall pay a fee of
18  .05% of the maximum aggregate offering price at which the securities are
19  to be offered in this state, but not less than $100 or more than $2,500 for
20  each year of effectiveness. The commissioner shall establish registration
21  fees by rules and regulations. The commissioner may by rule and regu-
22  lation set the maximum amount of securities that may be registered at
23  any one time by a face-amount certificate company or an open-end man-
24  agement company or unit investment trust, as those terms are defined in
25  the investment company act of 1940. If a registration statement is vol-
26  untarily withdrawn prior to being examined by the staff of the commis-
27  sioner, the commissioner may refund 50% of the fee so paid.
28    (2)  The commissioner may by rules and regulations set a fee not to
29  exceed $100 for filing to amend an effective registration statement. If an
30  application to amend increases the maximum aggregate offering price of
31  securities to be offered in this state, an additional fee shall be paid based
32  upon the increase in such price calculated in accordance with the rate
33  and annual minimum and maximum fees specified in paragraph (1) of
34  this section.
35    (3)  The commissioner may by rule and regulation set a fee not to
36  exceed $2,500 for an application or filing made in connection with any
37  exemption from securities registration.
38    (c)  The commissioner at the time of the granting of the authorization
39  to sell securities as herein provided, may determine and fix the maximum
40  amount that may be paid as or in the way of commission, advertising
41  expense and all other expenses from the sale of such securities.
42    (d)  Before any authorization to sell securities shall be issued by the
43  commissioner as herein provided, all stock or securities of any kind issued,
HB 2094--Am. by SCW
                                     

 1  or to be issued, for consideration less than the public offering price or
 2  for consideration other than cash may be required to be deposited in
 3  escrow according to such conditions as the commissioner shall provide by
 4  rule and regulation.
 5    (e)  The commissioner shall keep a register showing the issuer, date
 6  of registration, amount in number of dollars, of the securities registered
 7  maintain records of securities registrations, exemption filings, no-
 8  tice filings and orders issued as required or authorized by this act.
 9    (f)  Neither the commissioner nor any employee of the securities de-
10  partment shall be interested as an officer, director, or stockholder in se-
11  curing any authorization to sell securities under the provisions of this act.
12    (g)  Upon termination of a registration the filing of a final report as
13  required by subsection (a) shall satisfy the filing requirements of subsec-
14  tion (m)(3) of K.S.A. 17-1261, and amendments thereto.
15    Sec. 7.  K.S.A. 1996 Supp. 17-1262 is hereby amended to read as
16  follows: 17-1262. Except as expressly provided in this section, K.S.A. 17-
17  1254, 17-1255, 17-1256, 17-1257, 17-1258, 17-1259 and 17-1260, and
18  amendments thereto, shall not apply to any of the following transactions:
19    (a)  Any isolated transaction, whether effected through a broker-
20  dealer or not.
21    (b)  Any nonissuer distribution by or through a registered broker-
22  dealer of outstanding securities at a price reasonably related to the current
23  market price of such securities, if Moody's manual, Standard & Poor's
24  manual, or any recognized securities manual approved by the commis-
25  sioner, contains the names of the issuer's officers and directors, a balance
26  sheet of the issuer as of a date within 18 months, and a profit and loss
27  statement for either the fiscal year preceding that date or the most recent
28  year of operations. If the commissioner finds that the sale of certain se-
29  curities in this state under this exemption would work or tend to work a
30  fraud on purchasers thereof, the commissioner may revoke the exemption
31  provided by this subsection with respect to such securities by issuing an
32  order to that effect and sending copies of such order to all registered
33  broker-dealers.
34    (c)  Any nonissuer transaction by a registered broker-dealer pursuant
35  to an unsolicited order or offer to buy. The commissioner may require,
36  by rules and regulations, that: (1) The customer acknowledge upon a
37  specified form that the sale was unsolicited; and (2) a signed copy of each
38  such form be preserved by the broker-dealer for a specified period.
39    (d)  Any transactions in a bond or other evidence of indebtedness
40  secured by a real or chattel mortgage or deed of trust, or by an agreement
41  for the sale of real estate or chattels, if the entire mortgage, deed of trust
42  or agreement, together with all the bonds or other evidences of indebt-
43  edness secured thereby, is offered and sold as a unit.
HB 2094--Am. by SCW
                                     

 1    (e)  Any transaction by an executor, administrator, sheriff, marshal,
 2  receiver, trustee in bankruptcy, guardian or conservator; any transaction
 3  executed by a bona fide pledgee without any purpose of evading this act
 4  or any transaction incident to a judicially approved reorganization in
 5  which a security is issued in exchange for one or more outstanding se-
 6  curities, claims or property interests.
 7    (f)  Any offer or sale to a bank, savings institution, trust company,
 8  insurance company, investment company as defined in the investment
 9  company act of 1940, pension or profit-sharing trust or other financial
10  institution or institutional buyer or to a broker-dealer or underwriter.
11    (g)  Any offer or sale of a preorganization certificate or subscription
12  if: (1) No commission or other remuneration is paid or given directly or
13  indirectly for soliciting any prospective subscriber and no advertising has
14  been published in connection with any such sale; (2) no payment is made
15  by any subscriber; and (3) such certificate or subscription is expressly
16  voidable by the subscriber until such subscriber has been notified of final
17  acceptance or completion of the organization and until the securities sub-
18  scribed for have been registered. The commissioner may require, by rules
19  and regulations or by order, reports of sales under this exemption.
20    (h)  Any transaction pursuant to an offer to existing security holders
21  of the issuer, including persons who at the time of the transaction are
22  holders of convertible securities, nontransferable warrants or transferable
23  warrants exercisable within 90 days of their issuance, if: (1) No commis-
24  sion or other remuneration (other than a standby commission) is paid or
25  given directly or indirectly for soliciting any security holder in this state;
26  or (2) the issuer first files a notice specifying the terms of the offer and
27  the commissioner does not by order disallow the exemption within the
28  next five full business days.
29    (i)  Any offer (but not a sale) of a security if: (1) Registration state-
30  ments for such security have been filed under both this act and the se-
31  curities act of 1933 if no stop order or refusal order is in effect and no
32  public proceeding or examination looking toward such an order is pending
33  under either act; or (2) a registration statement for such security has been
34  filed under K.S.A. 17-1256 or 17-1258, and amendments thereto, no stop
35  order or emergency order issued pursuant to K.S.A. 17-1260, and amend-
36  ments thereto, is in effect and the offer is made on behalf of the issuer
37  by a registered broker-dealer.
38    (j)  The issuance of any stock dividend, whether the corporation dis-
39  tributing the dividend is the issuer of the stock or not, if nothing of value
40  is given by stockholders for the distribution other than the surrender of
41  a right to a cash dividend where the stockholder can elect to take a div-
42  idend in cash or stock.
43    (k)  A transaction involving the distribution of the securities of an is-
HB 2094--Am. by SCW
                                     

 1  suer to the security holders of another person in connection with a
 2  merger, consolidation, exchange of securities, sale of assets or other re-
 3  organizations to which the issuer, or its parent or subsidiary, and the other
 4  person, or its parent or subsidiary, are parties, if:
 5    (1)  The securities to be distributed are registered under the securities
 6  act of 1933 before the consummation of the transaction; or
 7    (2)  the securities to be distributed are not required to be registered
 8  under the securities act of 1933, written notice of the transaction and a
 9  copy of the materials, if any, by which approval of the transaction will be
10  solicited is given to the commissioner at least 10 days before the consum-
11  mation of the transaction and the commissioner does not disallow, by
12  order, the exemption within the next 10 days.
13    (l)  The offer or sale of securities by an issuer that is a corporation,
14  limited partnership or limited liability company formed under the laws
15  of the state of Kansas, if: (1) The aggregate number of sales by the issuer
16  in the twelve-month period ending on the date of the sale does not exceed
17  20 sales, except that until July 1, 1993, aggregate number of sales by a
18  limited liability company shall not exceed 35; (2) the seller believes that
19  the purchaser is purchasing for investment; (3) no commission nor other
20  remuneration is paid or given, directly or indirectly, for soliciting the
21  purchaser; and (4) neither the issuer nor any person acting on its behalf
22  shall offer or sell the securities by any form of general solicitation or
23  general advertising, including, but not limited to, the following: (A) Any
24  advertisement, article, notice or other communication published in any
25  newspaper, magazine or similar media or broadcast over television or
26  radio or (B) any seminar or meeting whose attendees have been invited
27  by any general solicitation or general advertising.
28    In calculating the number of sales in a twelve-month period, sales made
29  in violation of K.S.A. 17-1255, and amendments thereto, and sales exempt
30  from registration under subsection (a) or (l) shall be taken into account.
31  For purposes of the exemption in this subsection, a husband and wife
32  shall be considered as one purchaser. A corporation, partnership, asso-
33  ciation, joint-stock company, trust or other unincorporated organization
34  shall be considered as one purchaser unless it was organized for the pur-
35  pose of acquiring the purchased securities. In such case each beneficial
36  owner of equity interest or equity securities in the entity shall be consid-
37  ered a separate purchaser. The commissioner may withdraw this exemp-
38  tion or impose conditions upon its use.
39    (m)  Any transaction pursuant to rules and regulations adopted by the
40  commissioner for limited offerings which was adopted for the purpose of
41  furthering the objectives of compatibility with federal exemptions and
42  uniformity among the states.
43    (n)  Any transaction pursuant to rules and regulations adopted by the
HB 2094--Am. by SCW
                                     

 1  commissioner concerning the offer or sale of an oil, gas or mining lease,
 2  fee or title if the commissioner finds that registration is not necessary or
 3  appropriate for the protection of investors.
 4    (o)  Any offer or sale by an investment company, as defined by K.S.A.
 5  16-630, and amendments thereto, of its investment certificates.
 6    (p)  The offer or sale of a security, issued by Kansas Venture Capital,
 7  Inc., or its successors.
 8    Sec. 8.  K.S.A. 17-1262a is hereby amended to read as follows: 17-
 9  1262a. (a) As used in this section:
10    (1)  ``Commission or other remuneration'' shall include any consid-
11  eration, compensation or fees paid or given to an agent in exchange for
12  the agent's services, except that ``commission or other remuneration'' shall
13  not include any interest in the oil and gas estate, including any overriding
14  royalty interest, or the production therefrom so long as the identity of the
15  person or persons owning or holding any such interest and the extent of
16  such interest is fully disclosed to all purchasers.
17    (2)  ``Public advertising or public solicitation'' means any offers to sell
18  or sales that are effected by means of any advertising or general solici-
19  tation printed in any brochure, prospectus, offering memoranda, handbill,
20  newspaper, magazine, periodical or other publication of general circula-
21  tion and mailed or delivered to its subscribers or addressees, or com-
22  municated by radio, public seminar, television, general telephone solici-
23  tation, or similar means.
24    (3)  ``Purchasers'' means any individual, corporation, partnership, as-
25  sociation, joint stock company, trust or unincorporated organization, ex-
26  cept that if such entity was organized for the specific purpose of acquiring
27  the oil or gas interests offered, each beneficial owner of equity interests
28  or equity securities in such entity shall count as a separate purchaser.
29    (b)  Except as hereinafter expressly provided, K.S.A. 17-1254, 17-
30  1255, 17-1256, 17-1257, 17-1258, 17-1259 and 17-1260, and amendments
31  thereto, shall not apply to any offer to sell or sale of any limited partner-
32  ship interest involving, or any fractional or undivided interest, or any
33  certificate based upon any fractional or undivided interest in any oil or
34  gas royalty, lease or deed, including subsurface gas storage and payments
35  out of production, if the land subject to the interest or certificate is sit-
36  uated in Kansas and:
37    (1)  All sales are made to persons who are and have been during the
38  preceding two years engaged primarily in the business of drilling for,
39  producing, or refining oil or gas or whose corporate predecessor, in the
40  case of a corporation, has been so engaged or whose officers and 2/3 of
41  the directors, in the case of a corporation having an existence of less than
42  two years, have each been so engaged; or
43    (2)  all sales are made to not more than a total of 32 purchasers with-
HB 2094--Am. by SCW
                                     

 1  out regard to whether the purchasers reside within or without the state
 2  of Kansas, and:
 3    (A)  The seller of such interests reasonably believes that all purchasers
 4  of such interests are purchasing for investment and not for resale; and
 5    (B)  no commission or other remuneration is paid or given directly or
 6  indirectly for the solicitation, offer to sell or sale of any such interests;
 7  and
 8    (C)  no public advertising or public solicitation is used in connection
 9  with the solicitation, offer to sell or sale of any such interest; or
10    (3)  all sales of such interests involve properties that produce oil or
11  gas or petroleum products in paying quantities on the date of sale and
12  the seller, subsequent to the sale, does not retain any ownership interest
13  in or control over the lease or the interest or interests that are being sold.
14    (c)  The exemption provided by this section shall not be cumulative
15  to or used in conjunction with any other exemption provided under K.S.A.
16  17-1262, and amendments thereto, nor shall any exemption provided by
17  K.S.A. 17-1262, and amendments thereto, other than the exemption pro-
18  vided by subsections (a), (e), (m) or (n) of that section or by this section,
19  be available for any offer to sell or sale of any limited partnership interest
20  involving, or any fractional or undivided interest, or any certificate based
21  upon any fractional or undivided interest in any oil or gas royalty, lease
22  or deed, including subsurface gas storage and payments out of production.
23    Sec. 9.  K.S.A. 17-1263 is hereby amended to read as follows: 17-
24  1263. Every nonresident applicant for registration under this act and
25  every nonresident issuer which proposes to offer its securities in this state
26  through an agent or broker-dealer on an agency basis, unless its securities
27  are exempt under subsection (a), (b), (c), (e), (f), (g), (i) or, (j), (k), (l) or
28    (p) of K.S.A. 17-1261, and amendments thereto, or are offered in trans-
29  actions exempt under K.S.A. 17-1262, and amendments thereto, shall file
30  with the commissioner, in such form as he the commissioner may by
31  rule rules and regulations prescribe, an irrevocable consent appointing
32  the secretary of state of Kansas or his the secretary's successor in office
33  to be his such applicant's attorney to receive service of any lawful process
34  in any noncriminal suit, action, or proceeding against him or his such
35  applicant or such applicant's successor, executor or administrator which
36  arises under this act or any rule and regulation or order hereunder after
37  the consent has been filed, with the same force and validity as if served
38  personally on the person filing the consent. Registration of securities by
39  a broker-dealer shall not subject the issuer of such securities to the
40  requirements of this section. A person who has filed such a consent in
41  connection with a previous registration need not file another.
42    Service may be made by leaving a copy of the process in the office of
43  the secretary of state of Kansas, and it is not effective unless:
HB 2094--Am. by SCW
                                     

 1    (a)  The plaintiff (who may be the commissioner in a suit, action, or
 2  proceeding instituted by him the commissioner) forthwith sends notice of
 3  the service and a copy of the process by registered mail to the defendant
 4  or respondent at his such person's last address on file with the commis-
 5  sioner,; and
 6    (b)  the plaintiff's affidavit of compliance with this subsection is filed
 7  in the case on or before the return day of the process, if any, or within
 8  such further time as the court may allow.
 9    When process is served under this section, the court, or the commis-
10  sioner in a proceeding before him the commissioner, shall order such
11  continuance as may be necessary to afford the defendant or respondent
12  reasonable opportunity to defend.
13    Sec. 10.  K.S.A. 17-1268 is hereby amended to read as follows: 17-
14  1268. (a) Any person, who offers or sells a security in violation of K.S.A.
15  17-1254 or 17-1255, and amendments thereto, or offers or sells a security
16  by means of any untrue statement of a material fact or any omission to
17  state a material fact necessary in order to make the statements made in
18  the light of the circumstances under which they are made not misleading
19  (the buyer not knowing of the untruth or omission) and who does not
20  sustain the burden of proof that such person did not know and in the
21  exercise of reasonable care could not have known of the untruth or omis-
22  sion, is liable to the person buying the security from such person, who
23  may sue either at law or in equity to recover the consideration paid for
24  the security, together with interest at 15% per annum from the date of
25  payment, costs, and reasonable attorney fees, less the amount of any in-
26  come received on the security, upon the tender of the security, or for
27  damages if the buyer no longer owns the security. Damages are the
28  amount that would be recoverable upon a tender less:
29    (1)  The value of the security when the buyer disposed of it,; and (2)
30  interest at 15% per annum from the date of disposition.
31    (b)  Every person who directly or indirectly controls a seller liable
32  under subsection (a), every partner, officer, or director (or person occu-
33  pying a similar status or performing similar functions) or employee of
34  such a seller who materially aids in the sale, and every broker-dealer or
35  agent who materially aids in the sale is also liable jointly and severally
36  with and to the same extent as the seller, unless the nonseller who is so
37  liable sustains the burden of proof that such nonseller did not know, and
38  in the exercise of reasonable care could not have known, of the existence
39  of the facts by reason of which the liability is alleged to exist. There is
40  contribution as in cases of contract among the several persons so liable.
41    (c)  Any tender specified in this section may be made at any time
42  before entry of judgment. Every cause of action under this statute survives
43  the death of any person who might have been a plaintiff or defendant.
HB 2094--Am. by SCW
                                     

 1  No person may sue under this section if:
 2    (1)  The buyer received a written offer, before suit and at a time when
 3  the buyer owned the security, to refund the consideration paid, together
 4  with interest at 15% per annum from the date of payment, less the
 5  amount of any income received on the security, and the buyer failed to
 6  accept the offer within 30 days of its receipt,; or (2) the buyer received
 7  such an offer before suit and at a time when the buyer did not own the
 8  security, unless the buyer rejected the offer in writing within 30 days of
 9  its receipt.
10    (d)  No person who has made or engaged in the performance of any
11  contract in violation of any provision of this act or any rule and regulation
12  or order hereunder, or who has acquired any purported right under any
13  such contract with knowledge of the facts by reason of which its making
14  or performance was in violation, may base any suit on the contract. Any
15  condition, stipulation, or provision binding any person acquiring any se-
16  curity or receiving any investment advice to waive compliance with any
17  provision of this act or any rule and regulation or order hereunder is void.
18    Sec. 11.  K.S.A. 17-1270 is hereby amended to read as follows: 17-
19  1270. (a) This act shall be administered by the securities commissioner
20  of Kansas.
21    (b)  All fees herein provided for shall be collected by the commis-
22  sioner. All salaries and expenses necessarily incurred in the administration
23  of this act shall be paid from the securities act fee fund.
24    (c)  The commissioner may, except with respect to securities exempt
25  under K.S.A. 17-1261, and amendments thereto, and transactions exempt
26  under K.S.A. 17-1262, and amendments thereto, by rules and regula-
27  tions and regulations or order may require the filing of any prospectus,
28  pamphlet, circular, form letter, advertisement, or other sales literature
29  addressed or intended for distribution to prospective investors, including
30  clients or prospective clients of an investment adviser unless the security
31  or transaction is exempt under K.S.A. 17-1261 or 17-1262, and amend-
32  ments thereto, or is a federal covered security.
33    (d)  The books and records of every person issuing or guaranteeing
34  any securities subject to the provisions of this act and of every broker-
35  dealer or, agent, investment adviser or investment adviser represen-
36  tative registered under this act shall, as the commissioner deems nec-
37  essary or appropriate in the public interest or for the protection of
38  investors, be subject at any time, or from time to time, to such periodic
39  or special examinations by the commissioner, or such accountant or ex-
40  aminer as the commissioner may determine. The commissioner, by rules
41  and regulations, may set a fee to be paid by the person, broker-dealer or
42  investment adviser subject to the examination at cost to the agency. For
43  the purpose of avoiding unnecessary duplication of examinations, the
HB 2094--Am. by SCW
                                     

 1  commissioner may cooperate with other proper authorities.
 2    (e)  The commissioner may require any registered broker-dealer, reg-
 3  istered investment adviser or issuer who has registered securities under
 4  this act to file a semiannual report containing such reasonable informa-
 5  tion, except with respect to securities exempt under K.S.A. 17-1261, and
 6  amendments thereto, or transactions exempt under K.S.A. 17-1262, and
 7  amendments thereto, as the commissioner may believe necessary regard-
 8  ing the financial condition of such person and the securities sold in this
 9  state by such person. Each such report shall be accompanied by a filing
10  fee of $5.
11    (f) (e)  The commissioner may from time to time adopt, amend, and
12  revoke such rules and regulations, orders and forms as may be necessary
13  to carry out the provisions of this act. In prescribing rules and regulations
14  and forms, the commissioner may cooperate with the securities admin-
15  istrators of the other states and the securities and exchange commission
16  with a view to effectuating the policy of this statute to achieve maximum
17  uniformity in the form and content of registration statements, applica-
18  tions, and reports wherever practicable. All rules and regulations and
19  forms of the commissioner shall be published. No provision of this act
20  imposing any liability applies to any act done or omitted in good faith in
21  conformity with any rules and regulations, form, or order of the commis-
22  sioner, notwithstanding that the rules and regulations, form or order may
23  later be amended, revoked or rescinded or be determined by judicial or
24  other authority to be invalid for any reason. Every hearing in an admin-
25  istrative proceeding shall be public unless the commissioner in the com-
26  missioner's discretion grants a request joined in by all the respondents
27  that the hearing be conducted privately.
28    (g) (f)  A document is filed when it is received by the commissioner.
29  The commissioner may receive a document filed by electronic format
30  that is submitted by direct digital transmission, magnetic tape or diskette,
31  and may maintain and provide the document in such an electronic format.
32  The commissioner shall keep a register of all applications for registration
33  and registration statements which are or have ever been effective under
34  this act and all denial, suspension, or revocation orders which have ever
35  been entered under this act. The register Records maintained by the
36  commissioner, as required by this act, and copies of such records
37  shall be made available to the public in accordance with the open
38  records act. Copies shall be open for public inspection. The information
39  contained in or filed with any registration statement, application, or report
40  may be made available to the public under such rules and regulations as
41  the commissioner may adopt. Upon request and after payment of a fee
42  per page in an amount fixed by the commissioner and approved by the
43  director of accounts and reports under K.S.A. 45-204, and amendments
HB 2094--Am. by SCW
                                     

 1  thereto, the commissioner shall furnish to any person photostatic or other
 2  copies of any entry in the register or any document which is a matter of
 3  public record, which copies [Copies] shall be certified under the com-
 4  missioner's seal of office if requested. In any proceeding or prosecution
 5  under this act, any copy so certified is prima facie evidence of the contents
 6  of the entry or document certified. The commissioner in the commissi-
 7  oner's discretion may honor requests from interested persons for inter-
 8  pretative opinions.
 9    Sec. 12.  K.S.A. 17-1272 is hereby amended to read as follows: 17-
10  1272. It will not be necessary to negative any of the exemptions or exclu-
11  sions provided in this act in any complaint, information, indictment, or
12  any other writ or proceedings laid or brought under this act, and the
13  burden of proof of any such exemption, exclusion or of status as a federal
14  covered security shall be upon the party claiming the benefit of such
15  exemption, exclusion or status.
16    Sec. 13.  K.S.A. 1996 Supp. 17-1261 is hereby amended to read
17  as follows: 17-1261. K.S.A. 17-1255 through 17-1260, and amend-
18  ments thereto, shall not apply to any of the following securities:
19    (a)  Any security issued or guaranteed by the United States or
20  by any state, territory or insular possession thereof, or by any po-
21  litical subdivision of any such state, territory or insular possession,
22  or by the District of Columbia, or by any public agency or instru-
23  mentality of one or more of any of the foregoing.
24    (b)  Any security issued or guaranteed by Canada, any Cana-
25  dian province, any political subdivision of any such province, any
26  agency or corporate or other instrumentality of one or more of the
27  foregoing or any other foreign government or governmental com-
28  bination or entity with which the United States maintains diplo-
29  matic relations, if the security is recognized as a valid obligation
30  by the issuer, insurer or guarantor.
31    (c)  Any security issued by and representing an interest in or a
32  debt of, or guaranteed by, any bank organized under the laws of
33  the United States, or any bank, savings institution, credit union or
34  trust company organized and supervised under the laws of this
35  state except that the issuer of such security is subject to the super-
36  vision of the banking department, savings and loan department or
37  credit union administrator of this state.
38    (d)  Any security issued by and representing an interest in or a
39  debt of, or guaranteed by, any federal savings and loan association,
40  or any savings and loan association organized under the laws of
41  this state and authorized to do business in this state.
42    (e)  Any security issued by and representing an interest in or a
43  debt of, or guaranteed by, any insurance company organized un-
HB 2094--Am. by SCW
                                     

 1  der the laws of any state and authorized to do business in this state
 2  when such securities are sold by the issuer.
 3    (f)  Any security issued or guaranteed by any railroad, or public
 4  utility which is:
 5    (1)  Subject to the jurisdiction of the interstate commerce commis-
 6  sion;
 7    (2) (1)  a registered holding company under the public utility
 8  holding company act of 1935 or a subsidiary of such a company
 9  within the meaning of that act; or
10    (3) (2)  regulated by a governmental authority of the United
11  States or any state in respect to the issuance or guarantee of the
12  security.
13    (g)  Any security as to which the commissioner by rule and reg-
14  ulation finds that registration is not necessary or appropriate for
15  the protection of investors.
16    (h)  Any security issued by any person organized and operated
17  not for private profit but exclusively for religious, educational, be-
18  nevolent, charitable, fraternal, social, athletic, fire protection, fire
19  fighting or reformatory purposes, or as a chamber of commerce
20  or trade or professional association if no part of the net earnings
21  of such person inures to the benefit of any private stockholder and
22  provided that the issuer has filed with the commissioner at least
23  10 days prior to any sale a notice setting forth the material terms
24  of the proposed sale, copies of any sales and advertising literature
25  to be used, and such other information required by the commis-
26  sioner, and the commissioner does not by order disallow the ex-
27  emption within 10 days after filing.
28    (i)  Any commercial paper which arises out of a current trans-
29  action or the proceeds of which have been or are to be used for
30  current transactions, and which evidences an obligation to pay
31  cash within nine months of the date of issuance, exclusive of days
32  of grace, or any renewal of such paper which is likewise limited,
33  or any guarantee of such paper or of any such renewal.
34    (j)  Any securities issued in connection with an employee's stock
35  purchase, savings, pension, profit-sharing or similar benefit plan,
36  or a self-employed person's retirement plan.
37    (k)  Any security evidencing membership in, or issued as a pa-
38  tronage dividend by, a cooperative association organized under
39  the laws of this state exclusively for the purpose of conducting an
40  agricultural, dairy, livestock or produce business, or selling, proc-
41  essing, storing, marketing or otherwise handling any agricultural,
42  dairy, livestock or produce, and any activities incidental to these
43  purposes.
HB 2094--Am. by SCW
                                     

 1    (l)  Any security issued by and representing an interest in or
 2  debt of, or evidencing membership in, or issued as a patronage
 3  dividend to residents or landowners of not to exceed five contig-
 4  uous counties in Kansas by a cooperative association organized
 5  under the laws of this state exclusively for the purpose of con-
 6  ducting an agricultural, dairy, livestock or produce business, or
 7  selling, processing, storing, marketing, retailing, or otherwise han-
 8  dling any agricultural, dairy, livestock or produce, or farm sup-
 9  plies, and any activities incidental to these purposes.
10    (m)  Securities constituting part of an issue, which, in whole or
11  in part has been lawfully sold and distributed to the public in this
12  or any other state, when offered for resale in good faith and not
13  directly or indirectly for the benefit of the issuer or for the direct
14  or indirect purpose of promoting any scheme or enterprise having
15  the effect of violating or evading any provisions of this act, except
16  that this exemption shall not apply (1) where the authority to sell
17  such securities has been prohibited or denied under the provisions
18  of this act, or (2) where the sale of such securities in this state has
19  been enjoined as provided in this act or (3) until there shall have
20  been filed with the securities commissioner of Kansas by any reg-
21  istered broker-dealer a prospectus in such form as may be pre-
22  scribed by the commissioner containing: (A) Latest available finan-
23  cial statement of the issuer; (B) management personnel; and (C)
24  such other available information as the commissioner may require.
25  The filing of the prospectus and its approval by the commissioner
26  shall constitute the exemption herein provided. Any prospectus
27  may be disapproved at any time, if after a reasonable notice and
28  a hearing, the commissioner shall find that the further exemption
29  of the securities would be fraudulent or tend to work imposition
30  or fraud upon the purchaser thereof.
31    (n)  Any annuity, gift annuity, charitable remainder unitrust,
32  charitable remainder annuity trust, endowment contract, life in-
33  come contract, or investment contract issued by the governing
34  body of any four-year liberal arts college situated in the state of
35  Kansas, and the provisions of K.S.A. 17-1254, and amendments
36  thereto, shall not apply to any person in the issuance of such se-
37  curities governed by this subsection.
38    (o)  Any annuity, gift annuity, charitable remainder unitrust,
39  charitable remainder annuity trust, endowment contract, life in-
40  come contract or investment contract issued by the governing
41  body of any nonprofit corporation or foundation organized under
42  the laws of this state, for religious, charitable or educational pur-
43  poses, or for the treatment and rehabilitation of children and ad-
HB 2094--Am. by SCW
                                     

 1  olescents, and which corporation or foundation is licensed by the
 2  secretary of social and rehabilitation services or secretary of health
 3  and environment, if such corporation or foundation has been in
 4  existence for more than five years and has fund balances in its
 5  endowment fund and unrestricted funds totaling together
 6  $1,000,000 or more, and the provisions of K.S.A. 17-1254, and
 7  amendments thereto, shall not apply to any person in the issuance
 8  of securities governed by this subsection.
 9    (p)  Any security issued by a bank holding company wholly or
10  partially in exchange for the capital stock of a bank that is, or will
11  become upon consummation of such exchange, a subsidiary of such
12  bank holding company; or any security issued by a savings and loan
13  holding company wholly or partially in exchange for the capital
14  stock of an insured institution that is, or will become upon con-
15  summation of such exchange, a subsidiary of such savings and loan
16  holding company. As used in this subsection, ``bank,'' ``bank hold-
17  ing company'' and ``subsidiary'' shall have the same meanings as
18  are set forth in the federal bank holding company act of 1956, as
19  amended and ``savings and loan holding company'' and ``insured
20  institution'' shall have the same meanings as are set forth in section
21  408 of the national housing act, as amended.
22    Sec. 13 14.  K.S.A. 17-1254, 17-1255, 17-1256, 17-1262a, 17-1263,
23  17-1268, 17-1270 and 17-1272 and K.S.A. 1996 Supp. 17-1252, 17-1259,
24  17-1261, 17-1262 and 75-6308 are hereby repealed.
25    Sec. 14 15.  This act shall take effect and be in force from and after
26  its publication in the statute book.