Session Law

Identifying Information:L. 2003 ch. 117
Other Identifying Information:2003 Senate Bill 110
Tax Type:Other
Brief Description:An Act concerning securities; relating to certain unlawful acts and penalties therefor; in- vestigation by commission; civil penalties; amending K.S.A. 17-1264 and 17-1265 and K.S.A. 2002 Supp. 17-1253, 17-1254, 17-1255 and 17-1266a and repealing the existing sections.
Keywords:


Body:

CHAPTER 117

SENATE BILL No. 110


An Act concerning securities; relating to certain unlawful acts and penalties therefor; in-

vestigation by commission; civil penalties; amending K.S.A. 17-1264 and 17-1265 and

K.S.A. 2002 Supp. 17-1253, 17-1254, 17-1255 and 17-1266a and repealing the existing


sections.


Be it enacted by the Legislature of the State of Kansas:

Section 1. K.S.A. 2002 Supp. 17-1253 is hereby amended to read as

follows: 17-1253. (a) It is unlawful for any person, in connection with the

offer, sale or purchase of any security, directly or indirectly:

(1) To employ any device, scheme or artifice to defraud;

(2) to make any untrue statement of a material fact or to omit to state

a material fact necessary in order to make the statements made, in the

light of the circumstances under which they are made, not misleading; or

(3) to engage in any act, practice or course of business which operates

or would operate as a fraud or deceit upon any person.

(b) It is unlawful for any person who receives any consideration from

another person primarily for advising the other person as to the value of

securities or their purchase or sale, whether through the issuance of anal-

yses or reports or otherwise:

(1) To employ any device, scheme or artifice to defraud the other

person;

(2) to engage in any act, practice or course of business which operates

or would operate as a fraud or deceit upon the other person;

(3) to knowingly sell any security to or purchase any security from a

client while acting as a principal for such person's own account without

disclosing to such client in writing before the completion of such trans-

action the capacity in which the person is acting and obtaining the consent

of the client to such transaction;

(4) to knowingly effect any sale or purchase of any security for the

account of a client while acting as a broker for a person other than such

client without disclosing to such client in writing before the completion

of such transaction the capacity in which the person is acting and obtain-

ing the consent of the client to the transaction; and

(5) to engage in any dishonest or unethical practice as the commis-

sioner may define by rule and regulation. The prohibitions of subsections

3 (3) and 4 of this section (4) shall not apply to any transaction with a

customer of a broker-dealer if such broker-dealer is not acting as an in-

vestment advisor in relation to such transaction.

(c) It is unlawful for any investment adviser to enter into, extend, or

renew any investment advisory contract if the contract:

(1) Provides for compensation to the investment adviser on the basis

of a share of capital gains upon or capital appreciation of the funds or any

portion of the funds of the client;

(2) fails to provide in writing that no assignment of the contract may

be made by the investment adviser without the consent of the other party

to the contract; or

(3) fails to provide in writing that the investment adviser, if a part-

nership, shall notify the other party to the contract of any change in the

membership of the partnership within a reasonable time after the change.

Subsection (c)(1) shall not prohibit an investment advisory contract

which provides for compensation based upon the total value of a fund

averaged over a definite period, or as of definite dates or taken as of a

definite date, or in any other manner authorized by rules and regulations

adopted by the commissioner for the purposes of furthering compatibility

with federal regulations authorizing fees based upon a share of the capital

gains upon or capital appreciation of client assets. ``Assignment,'' as used

in this subsection, includes any direct or indirect transfer or hypotheca-

tion of an investment advisory contract by the assignor or of a controlling

block of the assignor's outstanding voting securities by a security holder

of the assignor; but, if the investment adviser is a partnership, no assign-

ment of an investment advisory contract is considered to result from the

death or withdrawal of a minority of the members of the investment

adviser having only a minority interest in the business of the investment

adviser, or from the admission to the investment adviser of one or more

members who, after admission, will be only a minority of the members

and will have only a minority interest in the business.

(d) In the solicitation of clients of a person described in subsection

(b), it is unlawful for any person to make any untrue statement of a ma-

terial fact, or to omit to state a material fact necessary in order to make

the statement made, in light of the circumstances under which the state-

ment is made, not misleading.

(e) It is unlawful for any investment adviser to take or have custody

of any securities or funds of any client if:

(1) The commissioner by rules and regulations prohibits custody; or

(2) in the absence of such rules and regulations, the investment ad-

viser fails to notify the commissioner that such adviser has or may have

custody.

(f) (1) A conviction for an intentional violation of this section is a

severity level 6, nonperson felony. Any violation of this section committed

on or after July 1, 1993, resulting in a loss of $25,000 or more, regardless

of its location on the sentencing grid block, shall have a presumptive

sentence of imprisonment. Any violation of this section 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.

(2) A conviction for an intentional violation of this section resulting

in a loss of $100,000 or more is a severity level 4, nonperson felony.

(3) A conviction for an intentional violation of this section resulting

in a loss of at least $25,000 but less than $100,000 is a severity level 5,

nonperson felony.

(4) A conviction for an intentional violation of this section resulting

in a loss of less than $25,000 is a severity level 7, nonperson felony.

Sec. 2. K.S.A. 2002 Supp. 17-1254 is hereby amended to read as

follows: 17-1254. (a) It is unlawful for any person to 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.

(b) It is unlawful for any broker-dealer registered under this act or

issuer to employ or associate with an agent transacting business in this

state unless the agent is registered under this act or engages only in trans-

actions exempt under K.S.A. 17-1262, and amendments thereto. The reg-

istration 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 or is exempt from registration. 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 investment

adviser or federal covered adviser, the investment adviser or federal cov-

ered 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

filing date and expire on December 31 each year, unless renewed.

(f) (1) 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 subsec-

tion shall not apply to a failure to notify the commissioner of termination

of employment or association as an agent or investment adviser repre-

sentative. Any violation of this section 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.

(2) A conviction for an intentional violation of subsection (a) through

(d) resulting in a loss of $100,000 or more is a severity level 5, nonperson

felony.

(3) A conviction for an intentional violation of subsection (a) through

(d) resulting in a loss of at least $25,000 but less than $100,000 is a severity

level 6, nonperson felony.

(4) A conviction for an intentional violation of subsection (a) through

(d) resulting in a loss of less than $25,000 is a severity level 7, nonperson

felony.

(5) The provisions of this subsection shall not apply to a failure to

notify the commissioner of termination of employment or association as

an agent or investment adviser representative.

(g) A broker-dealer, agent, investment adviser or investment adviser

representative may be registered after filing with the commissioner, or

the commissioner's designee as permitted by subsection (p), a written

application containing such relevant information and in such form as the

commissioner may require. The applicant shall be registered if the com-

missioner finds that the applicant and, if applicable, the officers, directors

or partners are of good character and reputation, that the applicant's

knowledge of the securities business and the applicant's financial respon-

sibility are such that the applicant is suitable to engage in the business,

that the applicant has supplied all information required by the commis-

sioner and that the applicant has paid the necessary fee. The commis-

sioner 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 may take into consideration any criminal

conviction of such person.

(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 mini-

mum financial requirements for investment advisers, subject to the lim-

itations of section 222 of the investment advisers act of 1940, which may

include different requirements for those investment advisers who main-

tain custody of clients' funds or securities or who have discretionary au-

thority 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

required. No bond may be required of any registrant whose net capital,

or, in the case of an investment adviser, whose minimum financial

requirements 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 com-

missioner by rules and regulations 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 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.

(k) The commissioner shall maintain records of registration, notice

filings and orders pertaining to broker-dealers, agents, investment advi-

sers, federal covered advisers and investment adviser representatives. Un-

less the commissioner has designated alternative registration expiration

dates as permitted by subsection (p), every registration under this section

shall expire December 31 each year, but any registration for the suc-

ceeding year shall be renewed upon written application and payment of

the fee as herein provided without filing a further statement or furnishing

any further information unless specifically required by the commissioner.

Unless the commissioner has designated alternative registration renewal

dates as permitted by subsection (p), application for renewals must be

made not later than December 31 in each year; otherwise, they shall be

treated as original applications.

(l) The fee for original or renewal registration of each broker-dealer

and each investment adviser shall be not more than $300. The fee for an

original or renewal notice filing of each federal covered adviser shall be

not more than $300. The fee for original or renewal registration of each

agent and investment adviser representative shall be not more than $50.

Each fee for original registration shall be payable with the application for

original registration and each fee for renewal of registration shall be pay-

able with the application for renewal and, in either case, the fee shall not

be returned if the application is withdrawn. The commissioner shall es-

tablish such fees by rules and regulations.

(m) The commissioner may by order deny, suspend or revoke the

registration of any broker-dealer, agent, investment adviser or investment

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 ef-

fectiveness), was incomplete in any material respect or contained any

statement 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 any rules and regulations or order under this 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, investment adviser

or investment adviser representative;

(6) is the subject of an order entered within the past five years by the

securities administrator of any other state or by the securities and

exchange commission denying, suspending or revoking registration as a

broker-dealer, agent, investment adviser or investment adviser represen-

tative (, 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 an agent, investment adviser

representative or employee to ensure compliance with this act; 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.

(n) The commissioner may by emergency order suspend registration

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 or investment adviser

representative), that it has been entered and of the reasons therefor and

that, upon written request, the matter will be set for a hearing which shall

be conducted in accordance with the provisions of the Kansas adminis-

trative procedure act.

(o) The commissioner may cancel the registration or application in

accordance with the provisions of the Kansas administrative procedure

act, if the commissioner finds that any registrant or applicant for regis-

tration is: (1) No longer in existence or has ceased to do business as a

broker-dealer, agent, investment adviser or investment adviser represen-

tative; (2) an adjudged incapacitated person; or (3) cannot be located after

reasonable search.

(p) (1) The commissioner may participate, in whole or in part, with

any national securities association or national securities exchange regis-

tered 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 any registration depository where the broker-

dealer, agent, investment adviser or investment adviser representative

registrations required by subsection (g) may be centrally or simultane-

ously effected and the accompanying registration fees may be collected

for all states that require the registration of such persons and participate

in the registration depository.

(2) If the commissioner finds that participation in the registration

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, investment adviser or investment adviser rep-

resentative as required by this section may be made through the regis-

tration depository;

(B) alternative registration expiration and renewal dates for regis-

tered broker-dealers, agents, investment advisers and investment adviser

representative be utilized in lieu of the registration expiration and renewal

dates provided under subsection (k);

(C) all fees for the registration or the renewal of the registration of

any broker-dealer, agent, investment adviser or investment adviser rep-

resentative be collected by the registration depository in the dollar

amounts required by subsection (l), provided that such fees are subse-

quently 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 amendments thereto.

(3) Subsequent to the effective date of any rules and regulations or

order of the commissioner that is adopted under subsection (p)(2):

(A) All applications for the registration or the renewal of the regis-

tration of any broker-dealer, agent, investment adviser or investment ad-

viser representative, and all documents supporting such applications,

which shall be filed with or received by the registration depository shall

be deemed to be filed with or received by the commissioner pursuant to

subsection (g), when such applications or documents are received by the

registration depository; and

(B) any statement which is contained in any application for the reg-

istration or the renewal of the registration of any broker-dealer, agent,

investment adviser or investment adviser representative or contained in

any document supporting such applications, which is filed with or re-

ceived by the registration depository 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 constitute a violation of K.S.A. 17-1264, and amend-

ments thereto.

Sec. 3. K.S.A. 2002 Supp. 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, unless:

(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 K.S.A. 2002 Supp. 17-

1270a.

(b) (1) 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. Any violation of this section 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.

(2) A conviction for an intentional violation of this section resulting

in a loss of $100,000 or more is a severity level 5, nonperson felony.

(3) A conviction for an intentional violation of this section resulting

in a loss of at least $25,000 but less than $100,000 is a severity level 6,

nonperson felony.

(4) A conviction for an intentional violation of this section resulting

in a loss of less than $25,000 is a severity level 7, nonperson felony.

Sec. 4. K.S.A. 17-1264 is hereby amended to read as follows: 17-

1264. (a) It is unlawful for any person to make or cause to be made, in

any document filed with the commissioner or in any proceeding under

this act, any statement which is, at the time and in the light of the cir-

cumstances under which it is made, false or misleading in any material

respect while knowing the statement made to be false or misleading in

any material respect.

(b) A conviction for an intentional violation of this section is a severity

level 10 8, 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 sen-

tence of imprisonment.

Sec. 5. K.S.A. 17-1265 is hereby amended to read as follows: 17-

1265. (a) The commissioner may: (1) Make public or private investigations

within or outside of this state as necessary to determine whether any

registration should be granted, denied or revoked or whether any person

has violated or is about to violate any provision of this act or any rule or

order hereunder, or to aid in the enforcement of this act or in the pre-

scribing of forms or adoption of rules and regulations; (2) require or

permit any person to file a statement in writing, under oath or otherwise

as the commissioner determines, of all the facts and circumstances con-

cerning the matter to be investigated; and (3) publish information con-

cerning any violation of this act or any rule or order hereunder.

(b) The commissioner may appoint special investigators to aid in in-

vestigations conducted pursuant to the Kansas securities act. Such special

investigators shall have authority to make arrests, serve subpoenas and all

other process, conduct searches and seizures, store evidence, and carry

firearms, concealed or otherwise while investigating violations of this act

and to generally enforce all the criminal laws of this state as violations of

such laws are encountered by such special investigators. The director as

defined in K.S.A. 74-5602 and amendments thereto is authorized to offer

and carry out a special course of instruction for special investigators per-

forming law enforcement duties under authority of this subsection (b).

Such special investigators shall not carry firearms without having first

successfully completed such special law enforcement training course.

(c) For the purpose of any investigation or proceeding under this act,

the commissioner or any officer designated by the commissioner may

administer oaths and affirmations, subpoena witnesses, compel their at-

tendance, take evidence, and require the production of any books, papers,

correspondence, memoranda, agreements, or other documents or records

which the commissioner deems relevant or material to the inquiry.

(d) In case of contumacy by, or refusal to obey a subpoena issued to

any person, any court of competent jurisdiction, upon application by the

commissioner, may issue to that person an order requiring the person to

appear before the commissioner, or the officer designated by the com-

missioner, there to produce documentary evidence if so ordered or to

give evidence touching the matter under investigation or in question. Any

failure to obey the order of the court may be punished by the court as a

contempt of court.

(e) No person is excused from attending and testifying or from pro-

ducing any document or record before the commissioner, or in obedience

to the subpoena of the commissioner or any officer designated by the

commissioner, or in any proceeding instituted by the commissioner, on

the ground that the testimony or evidence (, documentary or otherwise),

required of the person may tend to incriminate the person or subject the

person to a penalty or forfeiture. No individual may be prosecuted or

subjected to any penalty or forfeiture for or on account of any transaction,

matter or thing concerning which such person is compelled, after claiming

privilege against self-incrimination, to testify or produce evidence (, doc-

umentary or otherwise), except that the individual so testifying shall not

be exempt from prosecution and punishment for perjury committed in

so testifying.

(f) The commissioner may issue and apply to enforce subpoenas in

this state at the request of a securities agency or administrator of another

state if the activities constituting an alleged violation for which the infor-

mation is sought would be a violation of the Kansas securities act if the

activities had occurred in this state.

Sec. 6. K.S.A. 2002 Supp. 17-1266a is hereby amended to read as

follows: 17-1266a. (a) If the commissioner determines after notice and

opportunity for a hearing that any person has engaged, is engaging or is

about to engage in any act or practice constituting a violation of any pro-

vision of this act or any rule and regulation or order hereunder, the com-

missioner by order may require that such person cease and desist from

the unlawful act or practice and take such affirmative action as in the

judgment of the commissioner will carry out the purposes of this act.

(b) If the commissioner makes written findings of fact that the public

interest will be irreparably harmed by delay in issuing an order under

subsection (a), the commissioner may issue an emergency temporary

cease and desist order. Such order, even when not an order within the

meaning of K.S.A. 77-502, and amendments thereto, shall be subject to

the same procedures as an emergency order issued under K.S.A. 77-536,

and amendments thereto. Upon the entry of such an order, the commis-

sioner shall promptly notify the person subject to the order that it has

been entered, of the reasons and that upon written request the matter

will be set for a hearing which shall be conducted in accordance with the

provisions of the Kansas administrative procedure act. If no hearing is

requested and none is ordered by the commissioner, the order will remain

in effect until it is modified or vacated by the commissioner. If a hearing

is requested or ordered, the commissioner, after notice of and opportu-

nity for hearing to the person subject to the order, shall by written find-

ings of fact and conclusions of law vacate, modify or make permanent the

order.

(c) If the commissioner reasonably believes that a person has violated

this act or a rule and regulation or order of the commissioner under this

act, the commissioner, in addition to any specific power granted under

this act, after notice and hearing in an administrative proceeding, unless

the right to notice and hearing is waived by the person against whom the

sanction is imposed, may:

(1) Censure the person if the person is a registered broker-dealer,

agent, investment adviser or investment adviser representative;

(2) issue an order against an applicant, registered person or other

person who knowingly violates this act or a rule or order of the commis-

sioner under this act, imposing a civil penalty up to a maximum of $5,000

$25,000 for each violation. If any person is found to have violated any

provision of this act, and such violation is committed against elder or

disabled persons, as defined in K.S.A. 50-676, and amendments thereto,

in addition to any civil penalty otherwise provided by law, the commis-

sioner may impose an additional penalty not to exceed $15,000 for each

such violation;

(3) bar or suspend the person from association with a broker-dealer

or investment adviser registered in this state; or

(4) issue an order requiring the person to pay restitution for any loss

arising from the violation or requiring the person to disgorge any profits

arising from the violation. Such order may include the assessment of in-

terest not to exceed 15% per annum from the date of the violation.

(d) Every hearing in an administrative proceeding shall be public un-

less the commissioner in the commissioner's discretion grants a request

joined in by all the respondents that the hearing be conducted privately.

New Sec. 7. (a) It is unlawful for any person to intentionally influ-

ence, coerce, manipulate or mislead any person in connection with finan-

cial statements or appraisals to be used in the offer, sale or purchase of

securities for the purpose of rendering such financial statements or ap-

praisals materially misleading.

(b) A conviction for a violation of this section is a severity level 8,

nonperson felony.

New Sec. 8. (a) It is unlawful for any person to:

(1) Alter, destroy, shred, mutilate, conceal, cover up or falsify any

record with the intent to impede, obstruct or influence any investigation

by the commissioner or the commissioner's designee;

(2) alter, destroy, shred, mutilate or conceal a record with the intent

to impair the object's integrity or availability for use in a proceeding be-

fore the commissioner or a proceeding brought by the commissioner; or

(3) take action harmful to a person with the intent to retaliate, in-

cluding, but not limited to, interference with lawful employment of such

person, for providing truthful information relating to a violation of the

Kansas securities act.

(b) Violation of this section is a severity level 8, nonperson felony.

Sec. 9. K.S.A. 17-1264 and 17-1265 and K.S.A. 2002 Supp. 17-1253,

17-1254, 17-1255 and 17-1266a are hereby repealed.

Sec. 10. This act shall take effect and be in force from and after its

publication in the statute book.

Approved April 21, 2002.


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Date Composed: 10/29/2003 Date Modified: 10/29/2003