Session of 2000
         
HOUSE BILL No. 2690
         
By Committee on Financial Institutions
         
1-24
         

  9             AN  ACT concerning securities; relating to the regulation of variable an-
10             nuities; amending K.S.A. 40-436 and K.S.A. 1999 Supp. 17-1252, 17-
11             1261, 17-1262 and 17-1270a and repealing the existing sections.
12      
13       Be it enacted by the Legislature of the State of Kansas:
14             Section  1. K.S.A. 1999 Supp. 17-1252 is hereby amended to read as
15       follows: 17-1252. When used in this act, unless the context otherwise
16       requires:
17             (a) "Commissioner" means the securities commissioner of Kansas,
18       appointed as provided in K.S.A. 17-1270 75-6301, and amendments
19       thereto.
20             (b) "Agent" means any individual other than a broker-dealer who
21       represents a broker-dealer or issuer in effecting or attempting to effect
22       purchases or sales of securities. "Agent" does not include an individual
23       who represents an issuer only in transactions in securities exempted by
24       K.S.A. 17-1261, and amendments thereto, other than subsection subsec-
25       tions (e) and (h) of K.S.A. 17-1261, and amendments thereto, or who
26       represents a broker-dealer in effecting transactions in this state limited
27       to those transactions described in section 15(h)(2) of the securities and
28       exchange act of 1934. A partner, officer or director of a broker-dealer or
29       issuer, or a person occupying a similar status or performing similar func-
30       tions, is an agent only if such person otherwise comes within this
31       definition.
32             (c) "Broker-dealer" means any person engaged in the business of pur-
33       chasing, offering for sale or selling securities for the account of others or
34       for such person's own account; but the term does not include an agent,
35       issuer, bank, savings institution, insurance company, or a person who ef-
36       fects transactions in this state exclusively with the issuer of the securities
37       involved in the transactions or with any person to whom a sale is exempt
38       under subsection (f) of K.S.A. 17-1262, and amendments thereto.
39             (d) "Guaranteed" means guaranteed as to payment of principal, in-
40       terest or dividends.
41             (e) "Issuer" means any person who issues or proposes to issue any
42       security, except that with respect to certificates of deposit, voting-trust
43       certificates or collateral-trust certificates, or with respect to certificates of


2

  1       interest or shares in an unincorporated investment trust not having a
  2       board of directors (or persons performing similar functions) or of the
  3       fixed, restricted management or unit type; the term "issuer" also means
  4       the person or persons performing the acts and assuming the duties of
  5       depositor or manager pursuant to the provisions of the trust or other
  6       agreement or instrument under which the security is issued. The issuer
  7       of a certificate of interest in an oil and gas royalty, lease or mineral deed
  8       is the owner of the interest in the oil and gas royalty, lease or mineral
  9       deed who creates the certificate of interest for purpose of sale.
10             (f) "Nonissuer" means not directly or indirectly for the benefit of the
11       issuer.
12             (g) "Person" means an individual, a corporation, a partnership, a lim-
13       ited liability company, an association, a joint-stock company, a trust where
14       the interests of the beneficiaries are evidenced by a security, an unincor-
15       porated organization, a government or a political subdivision of a
16       government.
17             (h)  (1) "Sale" or "sell" includes every contract of sale of, contract to
18       sell, or disposition of, a security or interest in a security for value.
19             (2) "Offer" or "offer to sell" includes every attempt or offer to dispose
20       of, or solicitation of an offer to buy, a security or interest in a security for
21       value.
22             (3) Any security given or delivered with, or as a bonus on account of,
23       any purchase of securities or any other thing is considered to constitute
24       part of the subject of the purchase and to have been offered and sold for
25       value.
26             (4) Every sale or offer of a warrant or right to purchase or subscribe
27       to another security of the same or another issuer, and every sale or offer
28       of a security which gives the holder a present or future right or privilege
29       to convert into another security of the same or another issuer, is consid-
30       ered to include an offer of the other security.
31             (5) A purported gift of assessable stock is considered to involve an
32       offer and sale of such stock.
33             (i) "Securities act of 1933," "securities exchange act of 1934," "public
34       utility holding company act of 1935," and "investment company act of
35       1940" mean the federal statutes of those names.
36             (j) "Security" means any note; stock; treasury stock; bond; debenture;
37       evidence of indebtedness; certificate of interest or participation in any
38       profit-sharing agreement; collateral-trust certificate; preorganization cer-
39       tificate or subscription; transferable share; investment contract; voting-
40       trust certificates; thrift certificates or investment certificates, or thrift
41       notes issued by investment companies; certificate of deposit for a security;
42       certificate of interest in oil and gas royalties, leases or mineral deeds; or,
43       in general, any interest or instrument commonly known as a "security,"


3

  1       or any certificate of interest or participation in, temporary or interim
  2       certificate for, guarantee of, or warrant or right to subscribe to or pur-
  3       chase, any of the foregoing. "Security" does not include any insurance or
  4       endowment policy or annuity contract under which an insurance company
  5       promises to pay a fixed sum of money either in a lump sum or periodically
  6       for life or some other specified period.
  7             (k) "State" means any state, territory, or possession of the United
  8       States, as well as the District of Columbia and Puerto Rico.
  9             (l) "Investment adviser" means any person who, for compensation,
10       engages in the business of advising others, either directly or through
11       publications or writings, as to the value of securities or as to the advisa-
12       bility of investing in, purchasing, or selling securities, or who, for com-
13       pensation and as a part of a regular business, issues or promulgates anal-
14       yses or reports concerning securities. The term does not include:
15             (1) An investment adviser representative;
16             (2) a bank, savings institution, or trust company;
17             (3) a lawyer, accountant, engineer or teacher whose performance of
18       these services is solely incidental to the practice of the individual's
19       profession;
20             (4) a broker-dealer or its agent whose performance of these services
21       is solely incidental to the conduct of its business as a broker-dealer and
22       who receives no special compensation for them;
23             (5) a publisher of any bona fide newspaper, news column, news mag-
24       azine, newsletter, or business or financial publication or service, whether
25       communicated in hard copy form or by electronic means, or otherwise
26       that does not consist of the rendering of advice on the basis of the specific
27       investment situation of each client;
28             (6) any person that is a federal covered adviser; or
29             (7) such other persons not within the intent of this definition as the
30       commissioner designates by order or by rules and regulations.
31             (m)  (1) "Investment adviser representative" means any partner, of-
32       ficer, director of or a person occupying a similar status or performing
33       similar functions or other individual except clerical or ministerial person-
34       nel, who is employed by or associated with:
35             (A) An investment adviser that is registered or required to be regis-
36       tered under this act and who does any of the following:
37             (i) Makes any recommendations or otherwise renders advice regard-
38       ing securities;
39             (ii) manages accounts or portfolios of clients;
40             (iii) determines which recommendation or advice regarding securities
41       should be given;
42             (iv) solicits, offers or negotiates for the sale of or sells investment
43       advisory services; or


4

  1             (v) supervises employees who perform any of the foregoing; or
  2             (B) a federal covered adviser, subject to the limitations of section
  3       203A of the investment advisers act of 1940, as the commissioner may
  4       designate by rule or order.
  5             (2) "Investment adviser representative" does not include such other
  6       persons employed by or associated with either an investment adviser or
  7       federal covered adviser not within the intent of this subsection as the
  8       commissioner may designate by rule or order.
  9             (n) "Federal covered security" means any security that is a covered
10       security under section 18(b) of the securities act of 1933 or rules or reg-
11       ulations promulgated thereunder.
12             (o) "Federal covered adviser" means a person who is registered under
13       section 203 of the investment advisers act of 1940 or excluded from the
14       definition of "investment adviser" under section 202(a)(11) of the invest-
15       ment advisers act of 1940.
16             Sec.  2. K.S.A. 1999 Supp. 17-1261 is hereby amended to read as
17       follows: 17-1261. The following securities shall be exempt from the reg-
18       istration requirements of K.S.A. 17-1255 through 17-1260, and amend-
19       ments thereto:
20             (a) Any security issued or guaranteed by the United States or by any
21       state, territory or insular possession thereof, or by any political subdivision
22       of any such state, territory or insular possession, or by the District of
23       Columbia, or by any public agency or instrumentality of one or more of
24       any of the foregoing.
25             (b) Any security issued or guaranteed by Canada, any Canadian prov-
26       ince, any political subdivision of any such province, any agency or cor-
27       porate or other instrumentality of one or more of the foregoing or any
28       other foreign government or governmental combination or entity with
29       which the United States maintains diplomatic relations, if the security is
30       recognized as a valid obligation by the issuer, insurer or guarantor.
31             (c) Any security issued by and representing an interest in or a debt
32       of, or guaranteed by, any bank organized under the laws of the United
33       States, or any bank, savings institution, credit union or trust company
34       organized and supervised under the laws of this state except that the
35       issuer of such security is subject to the supervision of the banking de-
36       partment, savings and loan department or credit union administrator of
37       this state.
38             (d) Any security issued by and representing an interest in or a debt
39       of, or guaranteed by, any federal savings and loan association, or any
40       savings and loan association organized under the laws of this state and
41       authorized to do business in this state.
42             (e) Any security issued by and representing an interest in or a debt
43       of, or guaranteed by, any insurance company organized under the laws


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  1       of any state and authorized to do business in this state when such secu-
  2       rities are sold by the issuer.
  3             (f) Any security issued or guaranteed by any railroad, or public utility
  4       which is:
  5             (1) a registered holding company under the public utility holding
  6       company act of 1935 or a subsidiary of such a company within the mean-
  7       ing of that act; or
  8             (2) regulated by a governmental authority of the United States or any
  9       state in respect to the issuance or guarantee of the security.
10             (g) Any security as to which the commissioner by rule and regulation
11       finds that registration is not necessary or appropriate for the protection
12       of investors.
13             (h) Any security issued by any person organized and operated not for
14       private profit but exclusively for religious, educational, benevolent, char-
15       itable, fraternal, social, athletic, fire protection, fire fighting or reforma-
16       tory purposes, or as a chamber of commerce or trade or professional
17       association if no part of the net earnings of such person inures to the
18       benefit of any private stockholder and provided that the issuer has filed
19       with the commissioner at least 10 days prior to any sale a notice setting
20       forth the material terms of the proposed sale, copies of any sales and
21       advertising literature to be used, and such other information required by
22       the commissioner, and the commissioner does not by order disallow the
23       exemption within 10 days after filing. The commissioner may require the
24       filing of a notice and other information pursuant to rules and regulations
25       adopted by the commissioner.
26             (i) Any commercial paper which arises out of a current transaction or
27       the proceeds of which have been or are to be used for current transac-
28       tions, and which evidences an obligation to pay cash within nine months
29       of the date of issuance, exclusive of days of grace, or any renewal of such
30       paper which is likewise limited, or any guarantee of such paper or of any
31       such renewal.
32             (j) Any securities issued in connection with an employee's stock pur-
33       chase, savings, pension, profit-sharing or similar benefit plan, or a self-
34       employed person's retirement plan.
35             (k) Any security evidencing membership in, or issued as a patronage
36       dividend by, a cooperative association organized under the laws of this
37       state exclusively for the purpose of conducting an agricultural, dairy, live-
38       stock or produce business, or selling, processing, storing, marketing or
39       otherwise handling any agricultural, dairy, livestock or produce, and any
40       activities incidental to these purposes.
41             (l) Any security issued by and representing an interest in or debt of,
42       or evidencing membership in, or issued as a patronage dividend to resi-
43       dents or landowners of not to exceed five contiguous counties in Kansas


6

  1       by a cooperative association organized under the laws of this state exclu-
  2       sively for the purpose of conducting an agricultural, dairy, livestock or
  3       produce business, or selling, processing, storing, marketing, retailing, or
  4       otherwise handling any agricultural, dairy, livestock or produce, or farm
  5       supplies, and any activities incidental to these purposes.
  6             (m) Securities constituting part of an issue, which, in whole or in part
  7       has been lawfully sold and distributed to the public in this or any other
  8       state, when offered for resale in good faith and not directly or indirectly
  9       for the benefit of the issuer or for the direct or indirect purpose of pro-
10       moting any scheme or enterprise having the effect of violating or evading
11       any provisions of this act, except that this exemption shall not apply (1)
12       where the authority to sell such securities has been prohibited or denied
13       under the provisions of this act, or (2) where the sale of such securities
14       in this state has been enjoined as provided in this act or (3) until there
15       shall have been filed with the securities commissioner of Kansas by any
16       registered broker-dealer a prospectus in such form as may be prescribed
17       by the commissioner containing: (A) Latest available financial statement
18       of the issuer; (B) management personnel; and (C) such other available
19       information as the commissioner may require. The filing of the prospectus
20       and its approval by the commissioner shall constitute the exemption
21       herein provided. Any prospectus may be disapproved at any time, if after
22       a reasonable notice and a hearing, the commissioner shall find that the
23       further exemption of the securities would be fraudulent or tend to work
24       imposition or fraud upon the purchaser thereof.
25             (n) Any annuity, gift annuity, charitable remainder unitrust, charita-
26       ble remainder annuity trust, endowment contract, life income contract,
27       or investment contract issued by the governing body of any four-year
28       liberal arts college situated in the state of Kansas, and the provisions of
29       K.S.A. 17-1254, and amendments thereto, shall not apply to any person
30       in the issuance of such securities governed by this subsection.
31             (o) Any annuity, gift annuity, charitable remainder unitrust, charita-
32       ble remainder annuity trust, endowment contract, life income contract or
33       investment contract issued by the governing body of any nonprofit cor-
34       poration or foundation organized under the laws of this state, for religious,
35       charitable or educational purposes, or for the treatment and rehabilitation
36       of children and adolescents, and which corporation or foundation is li-
37       censed by the secretary of social and rehabilitation services or secretary
38       of health and environment, if such corporation or foundation has been in
39       existence for more than five years and has fund balances in its endowment
40       fund and unrestricted funds totaling together $1,000,000 or more, and
41       the provisions of K.S.A. 17-1254, and amendments thereto, shall not apply
42       to any person in the issuance of securities governed by this subsection.
43             (p) Any security issued by a bank holding company wholly or partially


7

  1       in exchange for the capital stock of a bank that is, or will become upon
  2       consummation of such exchange, a subsidiary of such bank holding com-
  3       pany; or any security issued by a savings and loan holding company wholly
  4       or partially in exchange for the capital stock of an insured institution that
  5       is, or will become upon consummation of such exchange, a subsidiary of
  6       such savings and loan holding company. As used in this subsection,
  7       "bank," "bank holding company" and "subsidiary" shall have the same
  8       meanings as are set forth in the federal bank holding company act of
  9       1956, as amended and "savings and loan holding company" and "insured
10       institution" shall have the same meanings as are set forth in section 408
11       of the national housing act, as amended.
12             Sec.  3. K.S.A. 1999 Supp. 17-1262 is hereby amended to read as
13       follows: 17-1262. Except as expressly provided in this section, the follow-
14       ing transactions shall be exempt from the registration requirements of
15       K.S.A. 17-1254, 17-1255, 17-1257, 17-1258, 17-1259 and 17-1260, and
16       amendments thereto:
17             (a) Any isolated transaction, whether effected through a broker-
18       dealer or not.
19             (b) Any nonissuer distribution by or through a registered broker-
20       dealer of outstanding securities at a price reasonably related to the current
21       market price of such securities, if Moody's manual, Standard & Poor's
22       manual, or any recognized securities manual approved by the commis-
23       sioner, pursuant to rules and regulations or orders contains:
24             (1) The names of the issuer's officers and directors,; and (2) audited
25       financial statements, including a balance sheet of the issuer as of a date
26       within 18 months, and a profit and an income or loss statement for either
27       the full fiscal year preceding that date or the most recent full year of
28       operations. If the commissioner finds that the sale of certain securities in
29       this state under this exemption would work or tend to work a fraud on
30       purchasers thereof, the commissioner may revoke the exemption pro-
31       vided by this subsection with respect to such securities by issuing an order
32       to that effect and sending copies providing notice of such order to all
33       registered 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.


8

  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-


9

  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; (2) the seller believes that the purchaser is purchasing for in-
18       vestment; (3) no commission nor other remuneration is paid or given,
19       directly or indirectly, for soliciting the purchaser; and (4) neither the
20       issuer nor any person acting on its behalf shall offer or sell the securities
21       by any form of general solicitation or general advertising, including, but
22       not limited to, the following: (A) Any advertisement, article, notice or
23       other communication published in any newspaper, magazine or similar
24       media or broadcast over television or radio or (B) any seminar or meeting
25       whose attendees have been invited by any general solicitation or general
26       advertising.
27             In calculating the number of sales in a twelve-month period, sales made
28       in violation of K.S.A. 17-1255, and amendments thereto, and sales exempt
29       from registration under subsection (a) or (l) shall be taken into account.
30       For purposes of the exemption in this subsection, a husband and wife
31       shall be considered as one purchaser. A corporation, partnership, asso-
32       ciation, joint-stock company, trust or other unincorporated organization
33       shall be considered as one purchaser unless it was organized for the pur-
34       pose of acquiring the purchased securities. In such case each beneficial
35       owner of equity interest or equity securities in the entity shall be consid-
36       ered a separate purchaser. The commissioner may withdraw this exemp-
37       tion or impose conditions upon its use.
38             (m) Any transaction pursuant to rules and regulations adopted by the
39       commissioner for limited offerings which was adopted for the purpose of
40       furthering the objectives of compatibility with federal exemptions and
41       uniformity among the states.
42             (n) Any transaction pursuant to rules and regulations adopted by the
43       commissioner concerning the offer or sale of an oil, gas or mining lease,


10

  1       fee or title if the commissioner finds that registration is not necessary or
  2       appropriate for the protection of investors.
  3             (o) Any offer or sale by an investment company, as defined by K.S.A.
  4       16-630, and amendments thereto, of its investment certificates.
  5             (p) The offer or sale of a security, issued by Kansas Venture Capital,
  6       Inc., or its successors.
  7             Sec.  4. K.S.A. 1999 Supp. 17-1270a is hereby amended to read as
  8       follows: 17-1270a. (a) The commissioner, by rules and regulations or or-
  9       der, may require the payment of a filing fee and the filing of documents
10       with respect to a covered security under section 18(b)(2) of the securities
11       act of 1933, as follows:
12             (1) Prior to the initial offer of such federal covered security in this
13       state, all documents that are part of a federal registration statement filed
14       with the United States securities and exchange commission under the
15       securities act of 1933, together with a consent to service of process, and
16       a fee not to exceed $2,500;
17             (2) after the initial offer of such federal covered security in this state,
18       all documents that are a part of an amendment to a federal registration
19       statement filed with the United States securities and exchange commis-
20       sion under the securities act of 1933, which shall be filed concurrently
21       with the commissioner, together with a fee not to exceed $100;
22             (3) an annual or periodic report of sales of such federal covered se-
23       curities in this state;
24             (4) each notice filing under this subsection (a) shall be effective for
25       one year from its original filing date, or such other date required by the
26       commissioner by rules and regulations or order, and shall be renewed
27       annually, so long as the covered security continues to be offered in this
28       state, by payment of an annual renewal fee not to exceed $2,500.
29             (b) With respect to a covered security under section 18(b)(4)(D) of
30       the securities act of 1933, the commissioner, by rules and regulations or
31       order, may require the issuer to file a notice on form D together with a
32       fee not to exceed the amount authorized by paragraph (3) of subsection
33       (b) of K.S.A. 17-1259, and amendments thereto.
34             (c) The commissioner, by rules and regulations or otherwise, may
35       require the filing of any document filed with the United States securities
36       and exchange commission with respect to a covered security under section
37       18(b)(3) and (4) of the securities act of 1933, together with a fee not to
38       exceed the amount authorized by paragraph (3) of subsection (b) of K.S.A.
39       17-1259, and amendments thereto.
40             (d) The commissioner may issue a stop order suspending the offer
41       and sale of a federal covered security, except a covered security under
42       section 18(b)(1) of the securities act of 1933, if it finds that:
43             (1) The order is in the public interest; and


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  1             (2) there is a failure to comply with any condition established under
  2       this section.
  3             (e) The commissioner, by rules and regulations or order, may waive
  4       any or all of the provisions of this section.
  5             (f) Notwithstanding the provisions of this section, until October 10,
  6       1999, the commissioner may require the registration of any federal cov-
  7       ered security for which the fees required by this section have not been
  8       paid promptly following written notification from the commissioner to
  9       the issuer of the nonpayment or underpayment of such fees. An issuer
10       shall be considered to have promptly paid such fees if they are remitted
11       to the commissioner within 15 days following such person's receipt of
12       written notification from the commissioner.
13             (g) (f) This section shall be part of and supplemental to the Kansas
14       securities act.
15             Sec.  5. K.S.A. 40-436 is hereby amended to read as follows: 40-436.
16       (a) Any domestic life insurance company may after adoption of a reso-
17       lution by its board of directors, establish one or more separate accounts,
18       and may allocate to such separate account or accounts any amounts, in-
19       cluding without limitation proceeds applied under optional modes of set-
20       tlement or under dividend options, paid to the company which are to be
21       applied under the terms of an individual or group life or annuity contract
22       issued in connection therewith to provide benefits payable in fixed or in
23       variable amounts, or in both, and such contracts may provide other
24       benefits.
25             (b) The amounts allocated to each such account and accumulations
26       thereon may be invested and reinvested in any class of investments which
27       may be authorized in the contracts without regard to any requirements
28       or limitations prescribed by the laws of this state governing the invest-
29       ments of life insurance companies: Provided,, except that to the extent
30       that the company's reserve liability with regard to: (1) Benefits guaranteed
31       as to amount and duration,; and (2) funds guaranteed as to principal
32       amount or stated rate of interest is maintained in any separate account,
33       a portion of the assets of such separate account at least equal to such
34       reserve liability shall be invested in accordance with the laws of this state
35       governing the investments of life insurance companies. The investments
36       in such separate account or accounts shall not be taken into account in
37       applying the investment limitations applicable to other investments of the
38       company.
39             (c) The income, if any, and gains and losses, realized or unrealized,
40       on each account shall be credited to or charged against the amounts
41       allocated to the account in accordance with the contracts, without regard
42       to other income, gains or losses of the company.
43             (d) Assets allocated to a separate account shall be valued at their


12

  1       market value on the date of valuation, or if there is no readily available
  2       market, then in accordance with the terms of the contracts: Provided,,
  3       except that the portion of the assets of such separate account at least equal
  4       to the company's reserve liability with regard to the guaranteed benefits
  5       and funds referred to in subsection (b) hereof, if any, shall be valued in
  6       accordance with the rules otherwise applicable to the company's assets.
  7             (e) Amounts allocated to a separate account in the exercise of the
  8       power granted by this act shall be owned by the company, and the com-
  9       pany shall not be, nor hold itself out to be, a trustee with respect to such
10       amounts. If and to the extent so provided under the applicable contracts,
11       that portion of the assets of any such separate account equal to the re-
12       serves and other contract liabilities with respect to such account shall not
13       be chargeable with liability arising out of any other business the company
14       may conduct.
15             (f) The company shall maintain in each such separate account assets
16       with a value at least equal to the reserves and other contract liabilities
17       with respect to such account, except as may otherwise be approved by
18       the commissioner of insurance. No sale, exchange or other transfer of
19       assets may be made by a company between any of its separate accounts
20       or between any other investment account and one or more of its separate
21       accounts unless, in case of a transfer into a separate account, such transfer
22       is made solely to establish the account or to support the operation of the
23       contracts with respect to the separate account to which the transfer is
24       made, and unless such transfer, whether into or from a separate account,
25       is made (1) by a transfer of cash, or (2) by a transfer of securities having
26       a readily determinable market value, provided except that such transfer
27       of securities is approved by the commissioner. The commissioner may
28       approve other transfers among such accounts if, in his the commissioner's
29       opinion, such transfers would not be inequitable.
30             (g) If any contract provides for payment of benefits in variable
31       amounts, it shall contain a statement of the essential features of the pro-
32       cedure to be followed by the company in determining the dollar amount
33       of such variable benefits. Any such contract, including a group contract,
34       and any certificate issued thereunder shall state that such dollar amount
35       may decrease or increase and shall contain on its first page a statement
36       that the benefits thereunder are on a variable basis.
37             (h) A foreign or alien life insurance company authorized to do busi-
38       ness in this state may be authorized to issue or deliver contracts in this
39       state providing for payments which vary directly according to investment
40       experience only if authorized to issue such contracts under the laws of its
41       domicile.
42             (i) No domestic life insurance company shall be authorized to issue
43       such contracts, and no foreign or alien life insurance company shall be


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  1       authorized to issue or deliver such contracts in this state, until such com-
  2       pany has satisfied the commissioner that its condition and methods of
  3       operation in connection with the issuance of such contracts will not be
  4       such as to render its operation hazardous to the public or to its policy-
  5       holders in this state. In determining the qualification of a company to
  6       issue or deliver such contracts in this state, the commissioner shall con-
  7       sider, among other things, the history and financial condition of the com-
  8       pany; the character, responsibility, and general fitness of the officers and
  9       directors of the company; and in the case of a foreign or alien company,
10       whether the regulation provided by the laws of its domicile provides a
11       degree of protection to policyholders and the public substantially equal
12       to that provided by this section and the rules and regulations issued by
13       the commissioner pursuant thereto. The state of entry of an alien com-
14       pany shall be deemed its place of domicile for this purpose.
15             (j) Every life insurance company which issues or delivers such con-
16       tracts in this state shall file with the commissioner, in addition to the
17       annual statement required by K.S.A. 40-225, and amendments thereto,
18       such other periodic or special reports as the commissioner may prescribe.
19             (k) Any domestic life insurance company which establishes one or
20       more separate accounts pursuant to this section, may amend its charter
21       or bylaws to provide for special voting rights and procedures for the own-
22       ers of contracts under such separate account relating to investment policy,
23       investment advisory services and selection of independent public account-
24       ants, in relation to the administration of the assets in any such separate
25       account and such other matters as the company deems necessary in the
26       management of the assets in any such separate account. This provision
27       shall not in any way affect existing laws pertaining to the voting rights of
28       the company's policyholders.
29             (l) The commissioner shall have the sole and exclusive jurisdiction
30       and authority to regulate the issuance and sale of such contracts and to
31       promulgate such reasonable rules and regulations as may be necessary to
32       carry out the purposes and provisions of this act, and such contracts, the
33       companies which issue them, and the agents or other persons who sell
34       them, shall not also be subject to the provisions of article 12 of chapter
35       17 of the Kansas Statutes Annotated nor and to the jurisdiction of the
36       securities commissioner of this state. 
37       Sec.  6. K.S.A. 40-436 and K.S.A. 1999 Supp. 17-1252, 17-1261, 17-
38       1262 and 17-1270a are hereby repealed.
39        Sec.  7. This act shall take effect and be in force from and after its
40       publication in the statute book.