Session of 1999
SENATE BILL No. 122
An Act concerning securities; relating to the
regulation of investment advisors; amending
K.S.A. 1998 Supp. 17-1253 and repealing the existing
section.
Be it enacted by the Legislature of the State of Kansas:
Section 1. K.S.A. 1998 Supp.
17-1253 is hereby amended to read as
follows: 17-1253. (a) It is unlawful for any person, in connection
with the
offer, sale or purchase of any security, directly or
indirectly, to:
(1) To employ any device, scheme
or artifice to defraud;
(2) to make any untrue statement
of a material fact or to omit to state
a material fact necessary in order to make the statements made, in
the
light of the circumstances under which they are made, not
misleading; or
(3) to engage in any act, practice
or course of business which operates
or would operate as a fraud or deceit upon any person.
(b) It is unlawful for any person who
receives any consideration from
another person primarily for advising the other person as to the
value of
securities or their purchase or sale, whether through the issuance
of anal-
yses or reports or otherwise, to:
(1) To employ any device, scheme
or artifice to defraud the other
person; or
(2) to engage in any act, practice
or course of business which operates
or would operate as a fraud or deceit upon the other
person.;
(3) to knowingly sell any security to
or purchase any security from a
client while acting as a principal for such person's own account
without
disclosing to such client in writing before the completion of
such trans-
action the capacity in which the person is acting and obtaining
the consent
of the client to such transaction;
(4) to knowingly effect any sale or
purchase of any security for the
account of a client while acting as a broker for a person other
than such
client without disclosing to such client in writing before the
completion
of such transaction the capacity in which the person is acting
and obtain-
ing the consent of the client to the transaction;
and
(5) to engage in any dishonest or
unethical practice as the commis-
sioner may define by rule and regulation. The prohibitions of
subsections
3 and 4 of this section shall not apply to any transaction with
a customer
of a broker-dealer if such broker-dealer is not acting as an
investment
advisor in relation to such transaction.
(c) It is unlawful for any investment
adviser to enter into, extend, or
renew any investment advisory contract if the contract:
(1) Provides for compensation to the
investment adviser on the basis
of a share of capital gains upon or capital appreciation of the
funds or any
portion of the funds of the client;
(2) fails to provide in writing that no
assignment of the contract may
be made by the investment adviser without the consent of the other
party
to the contract; or
(3) fails to provide in writing that the
investment adviser, if a part-
nership, shall notify the other party to the contract of any change
in the
membership of the partnership within a reasonable time after the
change.
Subsection (c)(1) shall not prohibit an
investment advisory contract
which provides for compensation based upon the total value of a
fund
averaged over a definite period, or as of definite dates or taken
as of a
definite date, or in any other manner authorized by rules and
regulations
adopted by the commissioner for the purposes of furthering
compatibility
with federal regulations authorizing fees based upon a share of the
capital
gains upon or capital appreciation of client assets.
``Assignment,'' as used
in this subsection, includes any direct or indirect transfer or
hypotheca-
tion of an investment advisory contract by the assignor or of a
controlling
block of the assignor's outstanding voting securities by a security
holder
of the assignor; but, if the investment adviser is a partnership,
no assign-
ment of an investment advisory contract is considered to result
from the
death or withdrawal of a minority of the members of the
investment
adviser having only a minority interest in the business of the
investment
adviser, or from the admission to the investment adviser of one or
more
members who, after admission, will be only a minority of the
members
and will have only a minority interest in the business.
(d) In the solicitation of clients of
a person described in subsection
(b), it is unlawful for any person to make any untrue statement
of a ma-
terial fact, or to omit to state a material fact necessary in
order to make
the statement made, in light of the circumstances under which
the state-
ment is made, not misleading.
(d) (e) It is
unlawful for any investment adviser to take or have cus-
tody of any securities or funds of any client if:
(1) The commissioner by rules and
regulations prohibits custody; or
(2) in the absence of such rules and
regulations, the investment ad-
viser fails to notify the commissioner that such adviser has or may
have
custody.
(e) (f) A
conviction for an intentional violation of this section is a
severity level 6, nonperson felony. Any violation of this section
committed
on or after July 1, 1993, resulting in a loss of $25,000 or more,
regardless
of its location on the sentencing grid block, shall have a
presumptive
sentence of imprisonment.
Sec. 2. K.S.A. 1998 Supp. 17-1253 is hereby
repealed.
Sec. 3. This act shall take effect and be in force
from and after its
publication in the statute book.
I hereby certify that the above BILL originated in the
SENATE, and passed that body
____________________________________
__________________________________
|
__________________________________
|
Passed the HOUSE ______________________________
| __________________________________ |
| __________________________________ |
APPROVED ______________________________
| __________________________________ |