Ch. 62 1997 Session Laws of Kansas 175
An Act relating to the regulation of securities; amending K.S.A.
17-1254, 17-1255, 17-
1262a, 17-1263, 17-1268, 17-1270 and 17-1272 and K.S.A. 1996 Supp.
17-1252, 17-
1259, 17-1261 and 17-1262 and repealing the existing sections; also
repealing K.S.A. 17-
1256 and K.S.A. 1996 Supp. 75-6308.
Be it enacted by the Legislature of the State of
Kansas:
New Section 1. (a) The commissioner, by rules and regulations
or
order, may require the payment of a filing fee and the filing of
documents
with respect to a covered security under section 18(b)(2) of the
securities
act of 1933, as follows:
(1) Prior to the initial offer of such federal covered security
in this
state, all documents that are part of a federal registration
statement filed
with the United States securities and exchange commission under
the
securities act of 1933, together with a consent to service of
process, and
a fee not to exceed $2,500;
(2) after the initial offer of such federal covered security in
this state,
176 1997 Session Laws of Kansas Ch. 62
all documents that are a part of an amendment to a federal
registration
statement filed with the United States securities and exchange
commis-
sion under the securities act of 1933, which shall be filed
concurrently
with the commissioner, together with a fee not to exceed
$100;
(3) an annual or periodic report of sales of such federal
covered se-
curities in this state;
(4) each notice filing under this subsection (a) shall be
effective for
one year from its original filing date, or such other date required
by the
commissioner by rules and regulations or order, and shall be
renewed
annually, so long as the covered security continues to be offered
in this
state, by payment of an annual renewal fee not to exceed
$2,500.
(b) With respect to a covered security under section 18(b)(4)(D)
of
the securities act of 1933, the commissioner, by rules and
regulations or
order, may require the issuer to file a notice on form D together
with a
fee not to exceed the amount authorized by paragraph (3) of
subsection
(b) of K.S.A. 17-1259, and amendments thereto.
(c) The commissioner, by rules and regulations or otherwise,
may
require the filing of any document filed with the United States
securities
and exchange commission with respect to a covered security under
section
18(b)(3) and (4) of the securities act of 1933, together with a fee
not to
exceed the amount authorized by paragraph (3) of subsection (b) of
K.S.A.
17-1259, and amendments thereto.
(d) The commissioner may issue a stop order suspending the
offer
and sale of a federal covered security, except a covered security
under
section 18(b)(1) of the securities act of 1933, if it finds
that:
(1) The order is in the public interest; and
(2) there is a failure to comply with any condition established
under
this section.
(e) The commissioner, by rules and regulations or order, may
waive
any or all of the provisions of this section.
(f) Notwithstanding the provisions of this section, until
October 10,
1999, the commissioner may require the registration of any federal
cov-
ered security for which the fees required by this section have not
been
paid promptly following written notification from the commissioner
to
the issuer of the nonpayment or underpayment of such fees. An
issuer
shall be considered to have promptly paid such fees if they are
remitted
to the commissioner within 15 days following such person's receipt
of
written notification from the commissioner.
(g) This section shall be part of and supplemental to the Kansas
se-
curities act.
New Sec. 2. (a) To encourage uniform interpretation and
adminis-
tration of the Kansas securities act and effective securities
regulation and
enforcement, the commissioner may cooperate with the securities
agen-
cies or administrators of other states, Canadian provinces or
territories,
Ch. 62 1997 Session Laws of Kansas 177
or other countries, the securities and exchange commission, the
com-
modity futures trading commission, the securities investor
protection cor-
poration, any self-regulatory organization, any national or
international
organization of securities officials or agencies and any
governmental law
enforcement or regulatory agency.
(b) The cooperation authorized by this section includes, but is
not
limited to, the following:
(1) Establishing a central depository for registration under the
Kansas
securities act and for documents and fees required under such act.
The
commissioner shall by rules and regulations establish procedures
and
requirements for filing documents and fees;
(2) making a joint registration examination or enforcement
investi-
gation;
(3) holding a joint administrative hearing;
(4) filing and prosecuting a joint civil or administrative
proceeding;
(5) sharing and exchanging personnel;
(6) sharing and exchanging information and documents subject to
the
restrictions of the Kansas open records act; and
(7) formulating, in accordance with the Kansas administrative
pro-
cedure act, rules and regulations on matters such as statements of
policy,
guidelines and interpretive opinions and releases.
(c) This section shall be part of and supplemental to the Kansas
se-
curities act.
Sec. 3. K.S.A. 1996 Supp. 17-1252 is hereby amended to read
as
follows: 17-1252. When used in this act, unless the context
otherwise
requires:
(a) ``Commissioner'' means the securities commissioner of
Kansas,
appointed as provided in K.S.A. 17-1270, and amendments
thereto.
(b) ``Agent'' means any individual other than a broker-dealer
who
represents a broker-dealer or issuer in effecting or attempting to
effect
purchases or sales of securities. ``Agent'' does not include
an individual
who represents an issuer only in transactions in securities
exempted by
subsections (a), (b), (c), (e), (f), (g), (i), (j),
(k), (l) or (p) of K.S.A. 17-
1261, and amendments thereto, or who represents a broker-dealer
in
effecting transactions in this state limited to those transactions
described
in section 15(h)(2) of the securities and exchange act of 1934.
A partner,
officer or director of a broker-dealer or issuer, or a person
occupying a
similar status or performing similar functions, is an agent only if
such
person otherwise comes within this definition.
(c) ``Broker-dealer'' means any person engaged in the business
of pur-
chasing, offering for sale or selling securities for the account of
others or
for such person's own account; but the term does not include an
agent,
issuer, bank, savings institution, insurance company, or a person
who ef-
fects transactions in this state exclusively with the issuer of the
securities
178 1997 Session Laws of Kansas Ch. 62
involved in the transactions or with any person to whom a sale
is exempt
under subsection (f) of K.S.A. 17-1262, and amendments
thereto.
(d) ``Guaranteed'' means guaranteed as to payment of principal,
in-
terest or dividends.
(e) ``Issuer'' means any person who issues or proposes to issue
any
security, except that with respect to certificates of deposit,
voting-trust
certificates or collateral-trust certificates, or with respect to
certificates of
interest or shares in an unincorporated investment trust not having
a
board of directors (or persons performing similar functions) or of
the
fixed, restricted management or unit type; the term ``issuer'' also
means
the person or persons performing the acts and assuming the duties
of
depositor or manager pursuant to the provisions of the trust or
other
agreement or instrument under which the security is issued. The
issuer
of a certificate of interest in an oil and gas royalty, lease or
mineral deed
is the owner of the interest in the oil and gas royalty, lease or
mineral
deed who creates the certificate of interest for purpose of
sale.
(f) ``Nonissuer'' means not directly or indirectly for the
benefit of the
issuer.
(g) ``Person'' means an individual, a corporation, a
partnership, an
association, a joint-stock company, a trust where the interests of
the ben-
eficiaries are evidenced by a security, an unincorporated
organization, a
government or a political subdivision of a government.
(h) (1) ``Sale'' or ``sell'' includes every contract of sale of,
contract to
sell, or disposition of, a security or interest in a security for
value.
(2) ``Offer'' or ``offer to sell'' includes every attempt or
offer to dispose
of, or solicitation of an offer to buy, a security or interest in a
security for
value.
(3) Any security given or delivered with, or as a bonus on
account of,
any purchase of securities or any other thing is considered to
constitute
part of the subject of the purchase and to have been offered and
sold for
value.
(4) Every sale or offer of a warrant or right to purchase or
subscribe
to another security of the same or another issuer, and every sale
or offer
of a security which gives the holder a present or future right or
privilege
to convert into another security of the same or another issuer, is
consid-
ered to include an offer of the other security.
(5) A purported gift of assessable stock is considered to
involve an
offer and sale of such stock.
(i) ``Securities act of 1933,'' ``securities exchange act of
1934,'' ``public
utility holding company act of 1935,'' and ``investment company act
of
1940'' mean the federal statutes of those names.
(j) ``Security'' means any note; stock; treasury stock; bond;
debenture;
evidence of indebtedness; certificate of interest or participation
in any
profit-sharing agreement; collateral-trust certificate;
preorganization cer-
tificate or subscription; transferable share; investment contract;
voting-
Ch. 62 1997 Session Laws of Kansas 179
trust certificates; thrift certificates or investment
certificates, or thrift
notes issued by investment companies; certificate of deposit for a
security;
certificate of interest in oil and gas royalties, leases or mineral
deeds; or,
in general, any interest or instrument commonly known as a
``security,''
or any certificate of interest or participation in, temporary or
interim
certificate for, guarantee of, or warrant or right to subscribe to
or pur-
chase, any of the foregoing. ``Security'' does not include any
insurance or
endowment policy or annuity contract under which an insurance
company
promises to pay money either in a lump sum or periodically for life
or
some other specified period.
(k) ``State'' means any state, territory, or possession of the
United
States, as well as the District of Columbia and Puerto
Rico.
(l) ``Investment adviser'' means any person who, for
compensation,
engages in the business of advising others, either directly or
through
publications or writings, as to the value of securities or as to
the advisa-
bility of investing in, purchasing, or selling securities, or who,
for com-
pensation and as a part of a regular business, issues or
promulgates anal-
yses or reports concerning securities. The term does not
include:
(1) An investment adviser representative;
(1) (2) a bank, savings and loan
association, credit union institution,
or trust company;
(2) (3) a lawyer, accountant, engineer
or teacher whose performance
of these services is solely incidental to the practice of the
individual's
profession;
(3) (4) a broker-dealer or its
agent whose performance of these serv-
ices is solely incidental to the conduct of its business as
a broker-dealer
and who receives no special compensation for them;
(4) (5) a publisher of any bona fide
newspaper, news column, news
magazine, newsletter, or business or financial publication
of general, reg- or service, whether
communicated in hard copy
ular, and paid circulation
form or by electronic means, or otherwise that does not consist of
the
rendering of advice on the basis of the specific investment
situation of
each client;
(5) a person who has no place of business in this state
if (A) such
person's only clients in this state are other investment advisers,
broker-
dealers, banks, savings and loan associations, credit unions, trust
com-
panies, insurance companies, investment companies as defined in
the
investment company act of 1940, pension or profit-sharing trusts,
or other
financial institutions or institutional buyers, whether acting for
themselves
or as trustees, or (B) during any period of 12 consecutive months
such
person does not direct business communications into this state in
any
manner to more than five clients other than those specified in
subsection
(l)(5)(A), whether or not such person or any of the persons to whom
the
communications are directed is then present in this state;
or
(6) any person that is a federal covered adviser;
or
180 1997 Session Laws of Kansas Ch. 62
(6) (7) such other persons not within
the intent of this definition as
the commissioner designates by order or by rules and
regulations.
(m) ``Investment adviser representative'' means any partner,
officer,
director of or a person occupying a similar status or performing
similar
functions or other individual except clerical or ministerial
personnel, who
is employed by or associated with an investment adviser that is
registered
or required to be registered under this act, or who has a place of
business
located in this state and is employed by or associated with a
federal cov-
ered adviser; and who does any of the following:
(1) Makes any recommendations or otherwise renders advice
regard-
ing securities;
(2) manages accounts or portfolios of clients;
(3) determines which recommendation or advice regarding
securities
should be given;
(4) solicits, offers or negotiates for the sale of or sells
investment ad-
visory services; or
(5) supervises employees who perform any of the
foregoing.
(n) ``Federal covered security'' means any security that is a
covered
security under section 18(b) of the securities act of 1933 or rules
or reg-
ulations promulgated thereunder.
(o) ``Federal covered adviser'' means a person who is
registered under
section 203 of the investment advisers act of 1940 or excluded from
the
definition of ``investment adviser'' under section 202(a)(11) of
the invest-
ment advisers act of 1940.
Sec. 4. K.S.A. 17-1254 is hereby amended to read as follows:
17-
1254. (a) It is unlawful for any person to engage
in transact business in
this state as a broker-dealer or agent unless that person is
registered under
this act, except in transactions exempt under K.S.A. 17-1262,
and amend-
ments thereto, unless such person is registered as a
broker-dealer under.
this section. It is unlawful for any person to engage in business
in this
state as an agent, except in transactions exempt under K.S.A.
17-1262,
and amendments thereto, unless such person is registered under
this
section as an agent for a specified broker-dealer registered under
this
section or for a specified issuer. It is unlawful for any person to
transact
business in this state as an investment adviser unless such person
is reg-
istered under this section as an investment adviser or as a
broker-dealer
or such person's only clients in this state are investment
companies, as
defined in the federal investment company act of 1940, or insurance
com-
panies. A conviction for an intentional violation of this
subsection is a
severity level 7, 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
(b) It is unlawful for any broker-dealer registered under
this act or
Ch. 62 1997 Session Laws of Kansas 181
issuer to employ or associate with an agent transacting
business in this
state unless the agent is registered under this act. The
registration of an
agent is not effective during any period when the agent is not
associated
with a particular broker-dealer registered under this act or a
particular
issuer. When an agent begins or terminates a connection with a
broker-
dealer or issuer, or begins or terminates those activities which
make the
person an agent, the agent as well as the broker-dealer or issuer
shall
promptly notify the commissioner.
(c) It is unlawful for any person to transact business in
this state as
an investment adviser or as an investment adviser representative
unless:
(1) The person is so registered under this act;
or
(2) the person has no place of business in this state
and:
(A) The person's only clients in this state are investment
companies
as defined in the investment company act of 1940, other investment
ad-
visers, federal covered advisers, broker-dealers, banks, trust
companies,
savings institutions, insurance companies, employee benefit plans
with
assets of not less than $1,000,000 and governmental agencies or
instru-
mentalities, whether acting for themselves or as trustees with
investment
control, or other institutional investors as are designated by
rules and
regulations or order of the commissioner; or (B) during the
preceding
twelve-month period has had not more than five clients, other than
those
specified in subparagraph (A), who are residents of this
state.
(d) It is unlawful for:
(1) Any person required to be registered as an investment
adviser
under this act to employ or associate with an investment adviser
repre-
sentative unless the investment adviser representative is
registered under
this act. The registration of an investment adviser representative
is not
effective during any period when such person is not associated with
an
investment adviser registered under this act; or
(2) any federal covered adviser to employ, or associate with
an in-
vestment adviser representative having a place of business located
in this
state, unless such investment adviser representative is registered
under
this act, or is exempt from registration.
When an investment adviser representative described in
paragraphs
(1) or (2) begins or terminates employment or association with an
invest-
ment adviser or federal covered adviser, the investment adviser or
federal
covered adviser shall promptly notify the commissioner.
(e) Except with respect to federal covered advisers whose
only clients
are those described in paragraph (2) of subsection (c) of this
section, it is
unlawful for any federal covered adviser to conduct advisory
business in
this state unless such person files with the commissioner such
documents
as have been filed with the securities and exchange commission
together
with a consent to service of process, and pays an initial and
renewal notice
filing fee, if the commissioner by rules and regulations or order
requires.
Each notice filing under this section shall be effective from its
original
182 1997 Session Laws of Kansas Ch. 62
filing date and expire on December 31 each year, unless
renewed. Not-
withstanding the provisions of this subsection, until October 10,
1999, the
commissioner may require the registration of any federal covered
adviser
for which fees required by this subsection have not been paid
promptly
following written notification from the commissioner of the
nonpayment.
A federal covered adviser shall be considered to have promptly paid
such
fees if they are remitted to the commissioner within 15 days
following
such person's receipt of written notification from the
commissioner.
(f) A conviction for an intentional violation of subsection
(a) through
(d) of this section is a severity level 7, 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. This subsection
shall
not apply to a failure to notify the commissioner of termination of
em-
ployment or association as an agent or investment adviser
representative.
(b) (g) A broker-dealer, agent
or, investment adviser or investment
adviser representative may be registered after filing with the
commis-
sioner, or the commissioner's designee as permitted by subsection
(j) (p),
a written application containing such relevant information and in
such
form as the commissioner may require. The applicant shall be
registered
if the commissioner finds that the applicant and, if applicable,
the officers,
directors or partners are of good character and reputation, that
the ap-
plicant's knowledge of the securities business and the applicant's
financial
responsibility are such that the applicant is suitable to engage in
the busi-
ness, that the applicant has supplied all information required by
the com-
missioner and that the applicant has paid the necessary fee. The
com-
missioner may require as a condition of registration that the
applicant and
any officers, directors or partners or, in the case of an
investment adviser,
any persons who represent or will represent the investment adviser
in
doing or performing any acts or functions which make such person
an
investment adviser pass a written examination as evidence of
knowledge
of the securities business. In determining the character and
reputation of
the applicant, the commissioner shall take into consideration any
felony
conviction of such person, but such a conviction shall not
automatically
operate as a bar to registration.
(c) Before registering any broker-dealer, agent or
investment adviser,
the commissioner may by rules and regulations require such
broker-
dealer, agent or investment adviser to enter into and file in the
office of
the commissioner a bond in a sum of not less than $5,000 and not
more
than $25,000 and may determine its conditions. No bond shall be
required
of any investment adviser who does not maintain custody of
customers'
moneys, securities or property, or any registrant whose net
capital, which
shall be defined by rules and regulations, exceeds $100,000, nor
shall a
bond be required of any agent of such registrant. Any bond required
shall
run to the state of Kansas, insuring the faithful compliance with
the pro-
Ch. 62 1997 Session Laws of Kansas 183
visions of this act by the broker-dealer, agent or investment
adviser, such
bond to be executed as surety by a surety company authorized to
do
business in this state. Such bond may be so drawn as to cover the
original
registration and any renewal thereof. Every bond shall provide for
suit
thereon by any person who has a cause of action under K.S.A.
17-1268,
and amendments thereto, and, if the commissioner by rules and
regula-
tions requires, by any person who has a cause of action not arising
under
this act the total liability of the surety to all persons shall not
exceed the
amount specified in the bond. Every bond shall provide that no suit
may
be maintained to enforce any liability on the bond unless brought
within
three years after the sale or other act upon which it is
based.
(h) The commissioner may, by rules and regulations or order,
require
a minimum capital for registered broker-dealers, subject to the
limitations
of section 15 of the securities exchange act of 1934, and establish
minimum
financial requirements for investment advisers, subject to the
limitations
of section 222 of the investment advisers act of 1940, which may
include
different requirements for those investment advisers who maintain
cus-
tody of clients' funds or securities or who have discretionary
authority
over the same and those investment advisers who do not.
(i) The commissioner may, by rules and regulations or order,
require
registered broker-dealers, agents and investment advisers who have
cus-
tody of or discretionary authority over client funds or securities,
to post
bonds in amounts as the commissioner may prescribe, subject to the
lim-
itations of section 15 of the securities and exchange act of 1934
for broker-
dealers and section 222 of the investment advisers act of 1940 for
invest-
ment advisers, and may determine their conditions. Any
appropriate
deposit of cash or securities shall be accepted in lieu of any bond
so re-
quired. No bond may be required of any registrant whose net
capital, or,
in the case of an investment adviser, whose minimum financial
require-
ments, which may be defined by rules and regulations, exceeds
the
amounts required by the commissioner. Every bond shall provide for
suit
thereon by any person who has a cause of action under K.S.A.
17-1268,
and amendments thereto, and, if the commissioner by rules and
regula-
tions or order requires, by any person who has a cause of action
not
arising under this act. Every bond shall provide that no suit may
be
maintained to enforce any liability on the bond unless brought
within the
time limitations provided by law.
(j) (1) Every registered broker-dealer and investment adviser
shall
make and keep such accounts, correspondence, memoranda, papers,
books
and other records as the commissioner prescribes by rules and
regulations
or order, subject to the limitations provided by section 15 of the
securities
exchange act of 1934, in the case of a broker-dealer, and section
222 of
the investment advisers act of 1940, in the case of an investment
adviser.
All records so required with respect to an investment adviser,
shall be
184 1997 Session Laws of Kansas Ch. 62
preserved for such period as the commissioner prescribes by
rules and
regulations or order.
(2) With respect to investment advisers, the commissioner may
re-
quire that certain information be furnished or disseminated as
necessary
or appropriate in the public interest or for the protection of
investors and
advisory clients. To the extent determined by the commissioner,
infor-
mation furnished to clients or prospective clients of an investment
adviser
that would be in compliance with the investment advisers act of
1940 and
the rules thereunder may be used in whole or partial satisfaction
of this
requirement.
(d) (k) The names and addresses
of all persons approved for registra-
commissioner shall main-
tion as broker-dealers, agents or investment advisers and all of
the orders
in respect thereto shall be recorded in a ``register of
broker-dealers and
agents'' kept in the office of the commissioner
tain records of registration, notice filings and orders pertaining
to broker-
dealers, agents, investment advisers, federal covered advisers and
invest-
ment adviser representatives. Unless the commissioner has
designated
alternative registration expiration dates as permitted by
subsection (j) (p),
every registration under this section shall expire on the
first day of January December 31 each year, but any registration for
the succeeding year
in
shall be renewed upon written application and payment of the fee
as
herein provided without filing a further statement or furnishing
any fur-
ther information unless specifically required by the commissioner.
Unless
the commissioner has designated alternative registration renewal
dates as
permitted by subsection (j) (p),
application for renewals must be made
not later than December 31 in each year; otherwise, they shall be
treated
as original applications.
(e) When a registered agent terminates the agent's
connection with
the issuer or registered broker-dealer specified in the application
of such
agent, the registration of such agent shall terminate immediately
and the
specified issuer or registered broker-dealer shall promptly notify
the com-
missioner. When changes in the personnel of a partnership or in
the
principals, copartners, officers or directors of any broker-dealer
involve a
majority of the capital of such broker-dealer, the commissioner
shall be
promptly notified of such changes; but when such changes involve
less
than a majority of the capital of such broker-dealer, the
commissioner
shall be notified of such changes by not later than the next annual
renewal
of registration of such broker-dealer.
For purposes of this subsection, notices received by the
commissioner
from any designee selected pursuant to subsection (j) shall
constitute
notice from the issuer or registered broker-dealer to the
commissioner.
(f) (l) The fee for original or
renewal registration of each broker-
dealer and each investment adviser shall be not more than
$300 and the. The
fee for an original
fee for renewal of each broker-dealer registration
or renewal notice filing of each federal covered adviser shall
be not more
Ch. 62 1997 Session Laws of Kansas 185
than $300. The fee for original registration of each
investment adviser, The fee for original or
renewal registration
other than an individual investment adviser who does not have
custody
of customers' moneys, securities or other property, shall be not
more than
$300 and the fee for renewal of each such investment adviser
registration
shall be not more than $300.
of an each agent and investment adviser
representative shall be not more
than $50 and the fee for renewal of any agent's
registration shall be not. Each fee for original registration shall be
payable with
more than $50. The fee for original registration of an individual
invest-
ment adviser who does not have custody of customers' moneys,
securities
or other property shall be not more than $50, and the fee for
renewal of
the registration of any individual investment adviser who does not
have
custody of customers' moneys, securities or other property shall be
not
more than $50
the application for original registration and each fee for renewal
of reg-
istration shall be payable with the application for renewal and, in
either
case, the fee shall not be returned if the application is
withdrawn. The
commissioner shall establish such fees by rules and
regulations.
(g) (m) The commissioner may by order
deny, suspend or revoke the
registration of any broker-dealer, agent
or, investment adviser or invest-
ment adviser representative if the commissioner finds that such
an order
is in the public interest and that the applicant or registrant, or,
in the case
of a broker-dealer or investment adviser, any partner, officer or
director
or any person occupying a similar status or performing similar
functions:
(1) Has filed an application for registration which as of its
effective
date (or as of any date after filing in the case of an order
denying effect-
iveness) was incomplete in any material respect or contained any
state-
ment which was, in the light of the circumstances under which it
was
made, false or misleading with respect to any material
fact;
(2) has willfully violated or willfully failed to comply with
any provi-
sion of this act or a predecessor act or any rules and regulations
or order
under this act or a predecessor act;
(3) has been convicted, within the past 10 years, of any
misdemeanor
involving a security or any aspect of the securities business or of
any
felony, if the commissioner determines, after investigation, that
such per-
son has not been sufficiently rehabilitated to warrant the public
trust;
(4) is permanently or temporarily enjoined by any court of
competent
jurisdiction from engaging in or continuing any conduct or practice
as an
investment adviser, broker-dealer, or as an affiliated person or
employee
of an investment company, depository institution, insurance
company, or
involving any aspect of the securities business or commodities
investment
business;
(5) is the subject of an order of the commissioner denying,
suspend-
ing or revoking registration as a broker-dealer, agent
or, investment ad-
viser or investment adviser representative;
(6) is the subject of an order entered within the past five
years by the
186 1997 Session Laws of Kansas Ch. 62
securities administrator of any other state or by the securities
and
exchange commission denying, suspending or revoking registration as
a
broker-dealer, agent or, investment adviser
or investment adviser repre-
sentative (or the substantial equivalent of those terms as
defined in this
act), or is the subject of an order of the securities and exchange
commis-
sion suspending or expelling the person from a national
securities
exchange or national securities association registered under the
federal
securities exchange act of 1934, or is the subject of an order by
the com-
modities futures trading commission denying, suspending or
revoking
registration under the commodities exchange act, or is the subject
of an
order suspending or expelling from membership in or association
with a
member of a self-regulatory organization registered under the
securities
exchange act of 1934 or the commodities exchange act, or is the
subject
of a United States post office fraud order; but the commissioner
may not
enter any order under this clause on the basis of an order under
any other
state act unless that order was based on facts which would
currently con-
stitute a ground for an order under this section;
(7) has engaged in dishonest or unethical practices in the
securities
business;
(8) in the case of a broker-dealer or investment adviser, is
insolvent,
either in the sense that such person's liabilities exceed such
person's assets
or in the sense that such person cannot meet such person's
obligations as
they mature;
(9) is not qualified on the basis of such factors as training,
experience,
and knowledge of the securities business, but the commissioner may
not
enter an order solely on the basis of lack of experience if the
applicant or
registrant is qualified by training or knowledge or both;
(10) is failing to keep or maintain sufficient records to permit
an audit
disclosing the condition of the registrant's business;
(11) has failed to pay the proper registration fee; but the
commis-
sioner may not enter a revocation order under this clause, and the
com-
missioner shall vacate any denial order entered under this clause
when
the deficiency has been corrected;
(12) has failed reasonably to supervise the sales or
investment adviser
representative or employees; or
(13) has willfully and without cause failed to comply with a
request
for information by the commissioner or person designated by the
com-
missioner in conducting investigations or examinations under this
act.
(h) (n) The commissioner may by
emergency order suspend registra-
tion pending final determination of any proceeding under this
section.
Upon the entry of any order under this section, the commissioner
shall
promptly notify the applicant or registrant (as well as the
employer or
prospective employer if the applicant or registrant is an agent)
that it has
been entered and of the reasons therefor and that, upon written
request,
Ch. 62 1997 Session Laws of Kansas 187
the matter will be set for a hearing which shall be conducted in
accor-
dance with the provisions of the Kansas administrative procedure
act.
(i) (o) If the commissioner finds that
any registrant or applicant for
registration is no longer in existence or has ceased to do business
as a
broker-dealer, agent or investment adviser, is an adjudged
incapacitated
person, or cannot be located after reasonable search, the
commissioner
may cancel the registration or application in accordance with the
provi-
sions of the Kansas administrative procedure act.
(j) (p) (1) The commissioner may
participate, in whole or in part,
with any national securities association or national securities
exchange
registered with the United States securities and exchange
commission
under the federal securities exchange act of 1934 or with any
association
of state securities administrators in a central registration
depository where
the broker-dealer, agent and investment adviser registrations
required by
subsection (b) (g) may be centrally or
simultaneously effected and the
accompanying registration fees may be centrally collected for all
states
that require the registration of such persons and participate in
such a
central registration depository.
(2) If the commissioner finds that participation in such a
central reg-
istration depository is in the public interest, the commissioner
may by
rules and regulations or by order require that:
(A) Applications for the registration or the renewal of the
registration
of any broker-dealer, agent or investment adviser as required by
this sec-
tion may be made or effected through or in conjunction or
coordination
with such a central registration depository;
(B) alternative registration expiration and renewal dates for
regis-
tered broker-dealers, agents and investment advisers be utilized in
lieu
of the registration expiration and renewal dates provided under
subsec-
tion (d) (k);
(C) all fees for the registration or the renewal of the
registration of
any broker-dealer, agent or investment adviser be collected by such
a
central registration depository in the dollar amounts required by
subsec-
tion (f) (l), provided that such fees are
subsequently submitted to the
commissioner pursuant to K.S.A. 17-1270, and amendments thereto,
and
remitted by the commissioner pursuant to K.S.A. 17-1271, and
amend-
ments thereto.
(3) Subsequent to the effective date of any rules and
regulations or
order of the commissioner that is adopted under subsection
(j)(2) (p)(2):
(A) All applications for the registration or the renewal of the
regis-
tration of any broker-dealer, agent or investment adviser, and all
docu-
ments supporting such applications, which shall be filed with or
received
by such a central registration depository shall be deemed to be
filed with
or received by the commissioner pursuant to subsection
(b) (g), when
such applications or documents are received by such a central
registration
depository; and
188 1997 Session Laws of Kansas Ch. 62
(B) any statement which is contained in any application for the
reg-
istration or the renewal of the registration of any broker-dealer,
agent or
investment adviser or contained in any document supporting such
appli-
cations, which is filed with or received by such a central
registration de-
pository and which is, at the time and in light of the
circumstances under
which it is made, false or misleading in any material respect shall
consti-
tute a violation of K.S.A. 17-1264, and amendments thereto.
Sec. 5. K.S.A. 17-1255 is hereby amended to read as follows:
17-
1255. (a) It is unlawful for any person to offer or sell any
security in this
state, except securities exempt under K.S.A. 17-1261 and
amendments unless:
thereto or when sold in transactions exempt under K.S.A. 17-1262
and
amendments thereto, unless such security is registered by
notification
under K.S.A. 17-1256 and amendments thereto or by coordination
under
K.S.A. 17-1257 and amendments thereto or by qualification under
K.S.A.
17-1258 and amendments thereto
(1) It is registered under this act;
(2) the security or transaction is exempt under K.S.A.
17-1261 or
17-1262, and amendments thereto; or
(3) it is a federal covered security for which the fee has
been paid and
documents have been filed as required by section 1.
(b) A conviction for an intentional violation of this section is
a severity
level 7, 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. 6. K.S.A. 1996 Supp. 17-1259 is hereby amended to read
as
follows: 17-1259. (a) When securities are registered by
notification or by
coordination or by qualification, they may be offered and sold by a
reg-
istered agent of the insurer issuer or by
any registered broker-dealer.
Every registration shall remain effective for one year after its
effective
date unless the commissioner by rule rules and
regulations or order ex-
tends the period of effectiveness or until terminated upon request
of the
registrant with the consent of the commissioner. No registration is
effec-
tive while a stop order is in effect under K.S.A. 17-1260, and
amendments
thereto. So long as a registration remains effective, all
outstanding secu-
rities of the same class shall be considered to be registered for
the purpose
of any nonissuer distribution. Any registration statement may be
amended
after its effective date so as to increase the securities specified
therein as
proposed to be offered. The commissioner may permit the omission
of
any document or item of information from any registration
statement.
Upon completion of a registered offering a registrant shall file a
final
report of sales.
(b) (1) Every person filing a registration statement shall pay a
fee of
.05% of the maximum aggregate offering price at which the
securities are
Ch. 62 1997 Session Laws of Kansas 189
to be offered in this state, but not less than $100 or more than
$2,500 for
each year of effectiveness. The commissioner shall establish
registration
fees by rules and regulations. The commissioner may by rule
and regu- If a registration
statement is vol-
lation set the maximum amount of securities that may be registered
at
any one time by a face-amount certificate company or an open-end
man-
agement company or unit investment trust, as those terms are
defined in
the investment company act of 1940.
untarily withdrawn prior to being examined by the staff of the
commis-
sioner, the commissioner may refund 50% of the fee so paid.
(2) The commissioner may by rules and regulations set a fee not
to
exceed $100 for filing to amend an effective registration
statement. If an
application to amend increases the maximum aggregate offering price
of
securities to be offered in this state, an additional fee shall be
paid based
upon the increase in such price calculated in accordance with the
rate
and annual minimum and maximum fees specified in paragraph (1)
of
this section.
(3) The commissioner may by rule and regulation set a fee not
to
exceed $2,500 for an application or filing made in connection with
any
exemption from securities registration.
(c) The commissioner at the time of the granting of the
authorization
to sell securities as herein provided, may determine and fix the
maximum
amount that may be paid as or in the way of commission,
advertising
expense and all other expenses from the sale of such
securities.
(d) Before any authorization to sell securities shall be issued
by the
commissioner as herein provided, all stock or securities of any
kind issued,
or to be issued, for consideration less than the public offering
price or
for consideration other than cash may be required to be deposited
in
escrow according to such conditions as the commissioner shall
provide by
rule and regulation.
(e) The commissioner shall keep a register showing the
issuer, datemaintain records of securities
registrations, exemption filings, notice fil-
of registration, amount in number of dollars, of the securities
registered
ings and orders issued as required or authorized by this
act.
(f) Neither the commissioner nor any employee of the securities
de-
partment shall be interested as an officer, director, or
stockholder in se-
curing any authorization to sell securities under the provisions of
this act.
(g) Upon termination of a registration the filing of a final
report as
required by subsection (a) shall satisfy the filing requirements of
subsec-
tion (m)(3) of K.S.A. 17-1261, and amendments thereto.
Sec. 7. K.S.A. 1996 Supp. 17-1262 is hereby amended to read
as
follows: 17-1262. Except as expressly provided in this section,
K.S.A.
17-1254, 17-1255, 17-1256, 17-1257, 17-1258,
17-1259 and 17-1260, and
amendments thereto, shall not apply to any of the following
transactions:
190 1997 Session Laws of Kansas Ch. 62
(a) Any isolated transaction, whether effected through a
broker-
dealer or not.
(b) Any nonissuer distribution by or through a registered
broker-
dealer of outstanding securities at a price reasonably related to
the current
market price of such securities, if Moody's manual, Standard &
Poor's
manual, or any recognized securities manual approved by the
commis-
sioner, contains the names of the issuer's officers and directors,
a balance
sheet of the issuer as of a date within 18 months, and a profit and
loss
statement for either the fiscal year preceding that date or the
most recent
year of operations. If the commissioner finds that the sale of
certain se-
curities in this state under this exemption would work or tend to
work a
fraud on purchasers thereof, the commissioner may revoke the
exemption
provided by this subsection with respect to such securities by
issuing an
order to that effect and sending copies of such order to all
registered
broker-dealers.
(c) Any nonissuer transaction by a registered broker-dealer
pursuant
to an unsolicited order or offer to buy. The commissioner may
require,
by rules and regulations, that: (1) The customer acknowledge upon
a
specified form that the sale was unsolicited; and (2) a signed copy
of each
such form be preserved by the broker-dealer for a specified
period.
(d) Any transactions in a bond or other evidence of
indebtedness
secured by a real or chattel mortgage or deed of trust, or by an
agreement
for the sale of real estate or chattels, if the entire mortgage,
deed of trust
or agreement, together with all the bonds or other evidences of
indebt-
edness secured thereby, is offered and sold as a unit.
(e) Any transaction by an executor, administrator, sheriff,
marshal,
receiver, trustee in bankruptcy, guardian or conservator; any
transaction
executed by a bona fide pledgee without any purpose of evading this
act
or any transaction incident to a judicially approved reorganization
in
which a security is issued in exchange for one or more outstanding
se-
curities, claims or property interests.
(f) Any offer or sale to a bank, savings institution, trust
company,
insurance company, investment company as defined in the
investment
company act of 1940, pension or profit-sharing trust or other
financial
institution or institutional buyer or to a broker-dealer or
underwriter.
(g) Any offer or sale of a preorganization certificate or
subscription
if: (1) No commission or other remuneration is paid or given
directly or
indirectly for soliciting any prospective subscriber and no
advertising has
been published in connection with any such sale; (2) no payment is
made
by any subscriber; and (3) such certificate or subscription is
expressly
voidable by the subscriber until such subscriber has been notified
of final
acceptance or completion of the organization and until the
securities sub-
scribed for have been registered. The commissioner may require, by
rules
and regulations or by order, reports of sales under this
exemption.
(h) Any transaction pursuant to an offer to existing security
holders
Ch. 62 1997 Session Laws of Kansas 191
of the issuer, including persons who at the time of the
transaction are
holders of convertible securities, nontransferable warrants or
transferable
warrants exercisable within 90 days of their issuance, if: (1) No
commis-
sion or other remuneration (other than a standby commission) is
paid or
given directly or indirectly for soliciting any security holder in
this state;
or (2) the issuer first files a notice specifying the terms of the
offer and
the commissioner does not by order disallow the exemption within
the
next five full business days.
(i) Any offer (but not a sale) of a security if: (1)
Registration state-
ments for such security have been filed under both this act and the
se-
curities act of 1933 if no stop order or refusal order is in effect
and no
public proceeding or examination looking toward such an order is
pending
under either act; or (2) a registration statement for such security
has been
filed under K.S.A. 17-1256 or 17-1258, and amendments thereto, no
stop
order or emergency order issued pursuant to K.S.A. 17-1260, and
amend-
ments thereto, is in effect and the offer is made on behalf of the
issuer
by a registered broker-dealer.
(j) The issuance of any stock dividend, whether the corporation
dis-
tributing the dividend is the issuer of the stock or not, if
nothing of value
is given by stockholders for the distribution other than the
surrender of
a right to a cash dividend where the stockholder can elect to take
a div-
idend in cash or stock.
(k) A transaction involving the distribution of the securities
of an is-
suer to the security holders of another person in connection with
a
merger, consolidation, exchange of securities, sale of assets or
other re-
organizations to which the issuer, or its parent or subsidiary, and
the other
person, or its parent or subsidiary, are parties, if:
(1) The securities to be distributed are registered under the
securities
act of 1933 before the consummation of the transaction; or
(2) the securities to be distributed are not required to be
registered
under the securities act of 1933, written notice of the transaction
and a
copy of the materials, if any, by which approval of the transaction
will be
solicited is given to the commissioner at least 10 days before the
consum-
mation of the transaction and the commissioner does not disallow,
by
order, the exemption within the next 10 days.
(l) The offer or sale of securities by an issuer that is a
corporation,
limited partnership or limited liability company formed under the
laws
of the state of Kansas, if: (1) The aggregate number of sales by
the issuer
in the twelve-month period ending on the date of the sale does not
exceed
20 sales, except that until July 1, 1993, aggregate number
of sales by a; (2) the
seller believes that
limited liability company shall not exceed 35
the purchaser is purchasing for investment; (3) no commission nor
other
remuneration is paid or given, directly or indirectly, for
soliciting the
purchaser; and (4) neither the issuer nor any person acting on its
behalf
shall offer or sell the securities by any form of general
solicitation or
192 1997 Session Laws of Kansas Ch. 62
general advertising, including, but not limited to, the
following: (A) Any
advertisement, article, notice or other communication published in
any
newspaper, magazine or similar media or broadcast over television
or
radio or (B) any seminar or meeting whose attendees have been
invited
by any general solicitation or general advertising.
In calculating the number of sales in a twelve-month period,
sales made
in violation of K.S.A. 17-1255, and amendments thereto, and sales
exempt
from registration under subsection (a) or (l) shall be taken into
account.
For purposes of the exemption in this subsection, a husband and
wife
shall be considered as one purchaser. A corporation, partnership,
asso-
ciation, joint-stock company, trust or other unincorporated
organization
shall be considered as one purchaser unless it was organized for
the pur-
pose of acquiring the purchased securities. In such case each
beneficial
owner of equity interest or equity securities in the entity shall
be consid-
ered a separate purchaser. The commissioner may withdraw this
exemp-
tion or impose conditions upon its use.
(m) Any transaction pursuant to rules and regulations adopted by
the
commissioner for limited offerings which was adopted for the
purpose of
furthering the objectives of compatibility with federal exemptions
and
uniformity among the states.
(n) Any transaction pursuant to rules and regulations adopted by
the
commissioner concerning the offer or sale of an oil, gas or mining
lease,
fee or title if the commissioner finds that registration is not
necessary or
appropriate for the protection of investors.
(o) Any offer or sale by an investment company, as defined by
K.S.A.
16-630, and amendments thereto, of its investment
certificates.
(p) The offer or sale of a security, issued by Kansas Venture
Capital,
Inc., or its successors.
Sec. 8. K.S.A. 17-1262a is hereby amended to read as follows:
17-
1262a. (a) As used in this section:
(1) ``Commission or other remuneration'' shall include any
consid-
eration, compensation or fees paid or given to an agent in exchange
for
the agent's services, except that ``commission or other
remuneration'' shall
not include any interest in the oil and gas estate, including any
overriding
royalty interest, or the production therefrom so long as the
identity of the
person or persons owning or holding any such interest and the
extent of
such interest is fully disclosed to all purchasers.
(2) ``Public advertising or public solicitation'' means any
offers to sell
or sales that are effected by means of any advertising or general
solici-
tation printed in any brochure, prospectus, offering memoranda,
handbill,
newspaper, magazine, periodical or other publication of general
circula-
tion and mailed or delivered to its subscribers or addressees, or
com-
municated by radio, public seminar, television, general telephone
solici-
tation, or similar means.
Ch. 62 1997 Session Laws of Kansas 193
(3) ``Purchasers'' means any individual, corporation,
partnership, as-
sociation, joint stock company, trust or unincorporated
organization, ex-
cept that if such entity was organized for the specific purpose of
acquiring
the oil or gas interests offered, each beneficial owner of equity
interests
or equity securities in such entity shall count as a separate
purchaser.
(b) Except as hereinafter expressly provided, K.S.A. 17-1254,
17-
1255, 17-1256, 17-1257, 17-1258, 17-1259 and
17-1260, and amendments
thereto, shall not apply to any offer to sell or sale of any
limited partner-
ship interest involving, or any fractional or undivided interest,
or any
certificate based upon any fractional or undivided interest in any
oil or
gas royalty, lease or deed, including subsurface gas storage and
payments
out of production, if the land subject to the interest or
certificate is sit-
uated in Kansas and:
(1) All sales are made to persons who are and have been during
the
preceding two years engaged primarily in the business of drilling
for,
producing, or refining oil or gas or whose corporate predecessor,
in the
case of a corporation, has been so engaged or whose officers and
2/3 of
the directors, in the case of a corporation having an existence of
less than
two years, have each been so engaged; or
(2) all sales are made to not more than a total of 32 purchasers
with-
out regard to whether the purchasers reside within or without the
state
of Kansas, and:
(A) The seller of such interests reasonably believes that all
purchasers
of such interests are purchasing for investment and not for resale;
and
(B) no commission or other remuneration is paid or given
directly or
indirectly for the solicitation, offer to sell or sale of any such
interests;
and
(C) no public advertising or public solicitation is used in
connection
with the solicitation, offer to sell or sale of any such interest;
or
(3) all sales of such interests involve properties that produce
oil or
gas or petroleum products in paying quantities on the date of sale
and
the seller, subsequent to the sale, does not retain any ownership
interest
in or control over the lease or the interest or interests that are
being sold.
(c) The exemption provided by this section shall not be
cumulative
to or used in conjunction with any other exemption provided under
K.S.A.
17-1262, and amendments thereto, nor shall any exemption provided
by
K.S.A. 17-1262, and amendments thereto, other than the exemption
pro-
vided by subsections (a), (e), (m) or (n) of that section or by
this section,
be available for any offer to sell or sale of any limited
partnership interest
involving, or any fractional or undivided interest, or any
certificate based
upon any fractional or undivided interest in any oil or gas
royalty, lease
or deed, including subsurface gas storage and payments out of
production.
Sec. 9. K.S.A. 17-1263 is hereby amended to read as follows:
17-
1263. Every nonresident applicant for registration under this act
and
194 1997 Session Laws of Kansas Ch. 62
every nonresident issuer which proposes to offer its securities
in this state
through an agent or broker-dealer on an agency basis, unless its
securities
are exempt under subsection (a), (b), (c), (e), (f), (g),
(i) or, (j), (k), (l) or
(p) of K.S.A. 17-1261, and amendments thereto, or are
offered in trans-
actions exempt under K.S.A. 17-1262, and amendments thereto,
shall file
with the commissioner, in such form as he the
commissioner may by rulerules and
regulations prescribe, an irrevocable consent appointing
the
secretary of state of Kansas or his the
secretary's successor in office to be
his such applicant's attorney to receive
service of any lawful process in
any noncriminal suit, action, or proceeding against him or
his such ap-
plicant or such applicant's successor, executor or
administrator which
arises under this act or any rule and regulation or order
hereunder after
the consent has been filed, with the same force and validity as if
served
personally on the person filing the consent. Registration of
securities by
a broker-dealer shall not subject the issuer of such securities to
the
requirements of this section. A person who has filed such a consent
in
connection with a previous registration need not file
another.
Service may be made by leaving a copy of the process in the
office of
the secretary of state of Kansas, and it is not effective
unless:
(a) The plaintiff (who may be the commissioner in a suit,
action, or
proceeding instituted by him the
commissioner) forthwith sends notice of
the service and a copy of the process by registered mail to the
defendant
or respondent at his such person's last
address on file with the commis-
sioner,; and
(b) the plaintiff's affidavit of compliance with this subsection
is filed
in the case on or before the return day of the process, if any, or
within
such further time as the court may allow.
When process is served under this section, the court, or the
commis-
sioner in a proceeding before him the
commissioner, shall order such
continuance as may be necessary to afford the defendant or
respondent
reasonable opportunity to defend.
Sec. 10. K.S.A. 17-1268 is hereby amended to read as follows:
17-
1268. (a) Any person, who offers or sells a security in violation
of K.S.A.
17-1254 or 17-1255, and amendments thereto, or offers or
sells a security
by means of any untrue statement of a material fact or any omission
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
(the buyer not knowing of the untruth or omission) and who does
not
sustain the burden of proof that such person did not know and in
the
exercise of reasonable care could not have known of the untruth or
omis-
sion, is liable to the person buying the security from such person,
who
may sue either at law or in equity to recover the consideration
paid for
the security, together with interest at 15% per annum from the date
of
payment, costs, and reasonable attorney fees, less the amount of
any in-
Ch. 62 1997 Session Laws of Kansas 195
come received on the security, upon the tender of the security,
or for
damages if the buyer no longer owns the security. Damages are
the
amount that would be recoverable upon a tender less:
(1) The value of the security when the buyer disposed of
it,; and (2)
interest at 15% per annum from the date of disposition.
(b) Every person who directly or indirectly controls a seller
liable
under subsection (a), every partner, officer, or director (or
person occu-
pying a similar status or performing similar functions) or employee
of
such a seller who materially aids in the sale, and every
broker-dealer or
agent who materially aids in the sale is also liable jointly and
severally
with and to the same extent as the seller, unless the nonseller who
is so
liable sustains the burden of proof that such nonseller did not
know, and
in the exercise of reasonable care could not have known, of the
existence
of the facts by reason of which the liability is alleged to exist.
There is
contribution as in cases of contract among the several persons so
liable.
(c) Any tender specified in this section may be made at any
time
before entry of judgment. Every cause of action under this statute
survives
the death of any person who might have been a plaintiff or
defendant.
No person may sue under this section if:
(1) The buyer received a written offer, before suit and at a
time when
the buyer owned the security, to refund the consideration paid,
together
with interest at 15% per annum from the date of payment, less
the
amount of any income received on the security, and the buyer failed
to
accept the offer within 30 days of its
receipt,; or (2) the buyer received
such an offer before suit and at a time when the buyer did not own
the
security, unless the buyer rejected the offer in writing within 30
days of
its receipt.
(d) No person who has made or engaged in the performance of
any
contract in violation of any provision of this act or any rule and
regulation
or order hereunder, or who has acquired any purported right under
any
such contract with knowledge of the facts by reason of which its
making
or performance was in violation, may base any suit on the contract.
Any
condition, stipulation, or provision binding any person acquiring
any se-
curity or receiving any investment advice to waive
compliance with any
provision of this act or any rule and regulation or order hereunder
is void.
Sec. 11. K.S.A. 17-1270 is hereby amended to read as follows:
17-
1270. (a) This act shall be administered by the securities
commissioner
of Kansas.
(b) All fees herein provided for shall be collected by the
commis-
sioner. All salaries and expenses necessarily incurred in the
administration
of this act shall be paid from the securities act fee fund.
(c) The commissioner may, except with respect to
securities exempt, by rules and
regulations
under K.S.A. 17-1261, and amendments thereto, and transactions
exempt
under K.S.A. 17-1262, and amendments thereto
196 1997 Session Laws of Kansas Ch. 62
or order may require the filing of any prospectus,
pamphlet, circular, form
letter, advertisement, or other sales literature addressed or
intended for
distribution to prospective investors, including clients or
prospective cli-
ents of an investment adviser unless the security or transaction is
exempt
under K.S.A. 17-1261 or 17-1262, and amendments thereto, or is a
federal
covered security.
(d) The books and records of every person issuing or
guaranteeing
any securities subject to the provisions of this act and of every
broker-
dealer or, agent, investment adviser or
investment adviser representative
registered under this act shall, as the commissioner deems
necessary or
appropriate in the public interest or for the protection of
investors, be
subject at any time, or from time to time, to such periodic or
special
examinations by the commissioner, or such accountant or examiner as
the
commissioner may determine. The commissioner, by rules and
regula-
tions, may set a fee to be paid by the person, broker-dealer or
investment
adviser subject to the examination at cost to the agency. For the
purpose
of avoiding unnecessary duplication of examinations, the
commissioner
may cooperate with other proper authorities.
(e) The commissioner may require any registered
broker-dealer, reg-
istered investment adviser or issuer who has registered securities
under
this act to file a semiannual report containing such reasonable
informa-
tion, except with respect to securities exempt under K.S.A.
17-1261, and
amendments thereto, or transactions exempt under K.S.A. 17-1262,
and
amendments thereto, as the commissioner may believe necessary
regard-
ing the financial condition of such person and the securities sold
in this
state by such person. Each such report shall be accompanied by a
filing
fee of $5.
(f) (e) The commissioner may from time
to time adopt, amend, and
revoke such rules and regulations, orders and forms as may be
necessary
to carry out the provisions of this act. In prescribing rules and
regulations
and forms, the commissioner may cooperate with the securities
admin-
istrators of the other states and the securities and exchange
commission
with a view to effectuating the policy of this statute to achieve
maximum
uniformity in the form and content of registration statements,
applica-
tions, and reports wherever practicable. All rules and regulations
and
forms of the commissioner shall be published. No provision of this
act
imposing any liability applies to any act done or omitted in good
faith in
conformity with any rules and regulations, form, or order of the
commis-
sioner, notwithstanding that the rules and regulations, form or
order may
later be amended, revoked or rescinded or be determined by judicial
or
other authority to be invalid for any reason. Every hearing in an
admin-
istrative proceeding shall be public unless the commissioner in the
com-
missioner's discretion grants a request joined in by all the
respondents
that the hearing be conducted privately.
(g) (f) A document is filed when it is
received by the commissioner.
Ch. 62 1997 Session Laws of Kansas 197
The commissioner may receive a document filed by electronic
format
that is submitted by direct digital transmission, magnetic tape or
diskette,
and may maintain and provide the document in such an electronic
format.
The commissioner shall keep a register of all applications
for registration Records
maintained by the
and registration statements which are or have ever been effective
under
this act and all denial, suspension, or revocation orders which
have ever
been entered under this act. The register
commissioner, as required by this act, and copies of such records
shall be
made available to the public in accordance with the open records
act. shallCopies shall be certified under the
commissioner's seal of office if re-
be open for public inspection. The information contained in or
filed with
any registration statement, application, or report may be made
available
to the public under such rules and regulations as the commissioner
may
adopt. Upon request and after payment of a fee per page in an
amount
fixed by the commissioner and approved by the director of accounts
and
reports under K.S.A. 45-204, and amendments thereto, the
commissioner
shall furnish to any person photostatic or other copies of any
entry in the
register or any document which is a matter of public record, which
copies
quested. In any proceeding or prosecution under this act, any copy
so
certified is prima facie evidence of the contents of the entry or
document
certified. The commissioner in the commissioner's discretion may
honor
requests from interested persons for interpretative
opinions.
Sec. 12. K.S.A. 17-1272 is hereby amended to read as follows:
17-
1272. It will not be necessary to negative any of the exemptions
or exclu-
sions provided in this act in any complaint, information,
indictment, or
any other writ or proceedings laid or brought under this act, and
the
burden of proof of any such exemption, exclusion or of status as
a federal
covered security shall be upon the party claiming the benefit
of such
exemption, exclusion or status.
Sec. 13. K.S.A. 1996 Supp. 17-1261 is hereby amended to read
as
follows: 17-1261. K.S.A. 17-1255 through 17-1260, and
amendments
thereto, shall not apply to any of the following
securities:
(a) Any security issued or guaranteed by the United States or by
any
state, territory or insular possession thereof, or by any political
subdivision
of any such state, territory or insular possession, or by the
District of
Columbia, or by any public agency or instrumentality of one or more
of
any of the foregoing.
(b) Any security issued or guaranteed by Canada, any Canadian
prov-
ince, any political subdivision of any such province, any agency or
cor-
porate or other instrumentality of one or more of the foregoing or
any
other foreign government or governmental combination or entity
with
which the United States maintains diplomatic relations, if the
security is
recognized as a valid obligation by the issuer, insurer or
guarantor.
(c) Any security issued by and representing an interest in or a
debt
198 1997 Session Laws of Kansas Ch. 62
of, or guaranteed by, any bank organized under the laws of the
United
States, or any bank, savings institution, credit union or trust
company
organized and supervised under the laws of this state except that
the
issuer of such security is subject to the supervision of the
banking de-
partment, savings and loan department or credit union administrator
of
this state.
(d) Any security issued by and representing an interest in or a
debt
of, or guaranteed by, any federal savings and loan association, or
any
savings and loan association organized under the laws of this state
and
authorized to do business in this state.
(e) Any security issued by and representing an interest in or a
debt
of, or guaranteed by, any insurance company organized under the
laws
of any state and authorized to do business in this state when such
secu-
rities are sold by the issuer.
(f) Any security issued or guaranteed by any railroad, or public
utility
which is:
(1) Subject to the jurisdiction of the interstate
commerce commis-
sion;
(2) (1) a registered holding company
under the public utility holding
company act of 1935 or a subsidiary of such a company within the
mean-
ing of that act; or
(3) (2) regulated by a governmental
authority of the United States or
any state in respect to the issuance or guarantee of the
security.
(g) Any security as to which the commissioner by rule and
regulation
finds that registration is not necessary or appropriate for the
protection
of investors.
(h) Any security issued by any person organized and operated not
for
private profit but exclusively for religious, educational,
benevolent, char-
itable, fraternal, social, athletic, fire protection, fire fighting
or reforma-
tory purposes, or as a chamber of commerce or trade or
professional
association if no part of the net earnings of such person inures to
the
benefit of any private stockholder and provided that the issuer has
filed
with the commissioner at least 10 days prior to any sale a notice
setting
forth the material terms of the proposed sale, copies of any sales
and
advertising literature to be used, and such other information
required by
the commissioner, and the commissioner does not by order disallow
the
exemption within 10 days after filing.
(i) Any commercial paper which arises out of a current
transaction or
the proceeds of which have been or are to be used for current
transac-
tions, and which evidences an obligation to pay cash within nine
months
of the date of issuance, exclusive of days of grace, or any renewal
of such
paper which is likewise limited, or any guarantee of such paper or
of any
such renewal.
(j) Any securities issued in connection with an employee's stock
pur-
Ch. 62 1997 Session Laws of Kansas 199
chase, savings, pension, profit-sharing or similar benefit plan,
or a self-
employed person's retirement plan.
(k) Any security evidencing membership in, or issued as a
patronage
dividend by, a cooperative association organized under the laws of
this
state exclusively for the purpose of conducting an agricultural,
dairy, live-
stock or produce business, or selling, processing, storing,
marketing or
otherwise handling any agricultural, dairy, livestock or produce,
and any
activities incidental to these purposes.
(l) Any security issued by and representing an interest in or
debt of,
or evidencing membership in, or issued as a patronage dividend to
resi-
dents or landowners of not to exceed five contiguous counties in
Kansas
by a cooperative association organized under the laws of this state
exclu-
sively for the purpose of conducting an agricultural, dairy,
livestock or
produce business, or selling, processing, storing, marketing,
retailing, or
otherwise handling any agricultural, dairy, livestock or produce,
or farm
supplies, and any activities incidental to these purposes.
(m) Securities constituting part of an issue, which, in whole or
in part
has been lawfully sold and distributed to the public in this or any
other
state, when offered for resale in good faith and not directly or
indirectly
for the benefit of the issuer or for the direct or indirect purpose
of pro-
moting any scheme or enterprise having the effect of violating or
evading
any provisions of this act, except that this exemption shall not
apply (1)
where the authority to sell such securities has been prohibited or
denied
under the provisions of this act, or (2) where the sale of such
securities
in this state has been enjoined as provided in this act or (3)
until there
shall have been filed with the securities commissioner of Kansas by
any
registered broker-dealer a prospectus in such form as may be
prescribed
by the commissioner containing: (A) Latest available financial
statement
of the issuer; (B) management personnel; and (C) such other
available
information as the commissioner may require. The filing of the
prospectus
and its approval by the commissioner shall constitute the
exemption
herein provided. Any prospectus may be disapproved at any time, if
after
a reasonable notice and a hearing, the commissioner shall find that
the
further exemption of the securities would be fraudulent or tend to
work
imposition or fraud upon the purchaser thereof.
(n) Any annuity, gift annuity, charitable remainder unitrust,
charita-
ble remainder annuity trust, endowment contract, life income
contract,
or investment contract issued by the governing body of any
four-year
liberal arts college situated in the state of Kansas, and the
provisions of
K.S.A. 17-1254, and amendments thereto, shall not apply to any
person
in the issuance of such securities governed by this
subsection.
(o) Any annuity, gift annuity, charitable remainder unitrust,
charita-
ble remainder annuity trust, endowment contract, life income
contract or
investment contract issued by the governing body of any nonprofit
cor-
poration or foundation organized under the laws of this state, for
religious,
200 1997 Session Laws of Kansas Ch. 62
charitable or educational purposes, or for the treatment and
rehabilitation
of children and adolescents, and which corporation or foundation is
li-
censed by the secretary of social and rehabilitation services or
secretary
of health and environment, if such corporation or foundation has
been in
existence for more than five years and has fund balances in its
endowment
fund and unrestricted funds totaling together $1,000,000 or more,
and
the provisions of K.S.A. 17-1254, and amendments thereto, shall not
apply
to any person in the issuance of securities governed by this
subsection.
(p) Any security issued by a bank holding company wholly or
partially
in exchange for the capital stock of a bank that is, or will become
upon
consummation of such exchange, a subsidiary of such bank holding
com-
pany; or any security issued by a savings and loan holding company
wholly
or partially in exchange for the capital stock of an insured
institution that
is, or will become upon consummation of such exchange, a subsidiary
of
such savings and loan holding company. As used in this
subsection,
``bank,'' ``bank holding company'' and ``subsidiary'' shall have
the same
meanings as are set forth in the federal bank holding company act
of
1956, as amended and ``savings and loan holding company'' and
``insured
institution'' shall have the same meanings as are set forth in
section 408
of the national housing act, as amended.
Sec. 14. K.S.A. 17-1254, 17-1255, 17-1256, 17-1262a, 17-1263,
17-
1268, 17-1270 and 17-1272 and K.S.A. 1996 Supp. 17-1252, 17-1259,
17-
1261, 17-1262 and 75-6308 are hereby repealed.
Sec. 15. This act shall take effect and be in force from and
after its
publication in the statute book.
Approved April 4, 1997.