Session Law

Identifying Information:L. 2002 ch. 017
Other Identifying Information:2002 Senate Bill 398
Tax Type:Other
Brief Description:An Act concerning securities; relating to the regulation thereof; concerning the powers of the securities commissioner; amending K.S.A. 17-1257, 17-1258 and 17-1266a and K.S.A. 2001 Supp. 17-1252, 17-1254, 17-1261, 17-1263 and 17-1270 and repealing the existing sections.
Keywords:


Body:

CHAPTER 17

SENATE BILL No. 398


An Act concerning securities; relating to the regulation thereof; concerning the powers of

the securities commissioner; amending K.S.A. 17-1257, 17-1258 and 17-1266a and

K.S.A. 2001 Supp. 17-1252, 17-1254, 17-1261, 17-1263 and 17-1270 and repealing the


existing sections.


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

Section 1. K.S.A. 2001 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. 75-6301, 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

K.S.A. 17-1261, and amendments thereto, other than subsection (h) 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

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, a lim-

ited liability company, an association, a joint-stock company, a trust where

the interests of the beneficiaries are evidenced by a security, an unincor-

porated organization, a government or a political subdivision of a govern-

ment.

(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,'' ``investment advisers act of 1940''

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-

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;

(2) a bank, savings institution, or trust company;

(3) a lawyer, accountant, engineer or teacher whose performance of

these services is solely incidental to the practice of the individual's pro-

fession;

(4) a broker-dealer or its agent whose performance of these services

is solely incidental to the conduct of its business as a broker-dealer and

who receives no special compensation for them;

(5) a publisher of any bona fide newspaper, news column, news mag-

azine, newsletter, or business or financial publication or service, whether

communicated in hard copy 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;

(6) any person that is a federal covered adviser; or

(7) such other persons not within the intent of this definition as the

commissioner designates by order or by rules and regulations.

(m) (1) ``Investment adviser representative'' means any partner, of-

ficer, or director of, or a person occupying a similar status or performing

similar functions or any other individual except clerical or ministerial

personnel, who is employed by or associated with:

(A) An investment adviser that is registered or required to be regis-

tered under this act and who does any of the following:

(i) Makes any recommendations or otherwise renders advice regard-

ing securities;

(ii) manages accounts or portfolios of clients;

(iii) determines which recommendation or advice regarding securities

should be given;

(iv) solicits, offers or negotiates for the sale of or sells investment

advisory services; or

(v) supervises employees who perform any of the foregoing; or

(B) a federal covered adviser, subject to the limitations of section

203A of the investment advisers act of 1940, as the commissioner may

designate by rule or order.

(2) ``Investment adviser representative'' does not include such other

persons employed by or associated with either an investment adviser or

federal covered adviser not within the intent of this subsection as the

commissioner may designate by rule or order.

(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. 2. K.S.A. 2001 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. 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.

(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 shall may take into consideration any

felony criminal conviction of such person, but such a conviction shall not

automatically operate as a bar to registration.

(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, 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

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 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, 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 commission

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 commodities

futures trading commission denying, suspending or revoking registration

under the commodities exchange act, or is the subject of an order sus-

pending 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 constitute 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 an agent, invest-

ment adviser representative or employees 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 or, investment adviser, is or investment adviser rep-

resentative; (2) an adjudged incapacitated person, or; or (3) cannot be

located after reasonable search, the commissioner may cancel the regis-

tration or application in accordance with the provisions of the Kansas

administrative procedure act.

(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 a central any registration depository where

the broker-dealer, agent and, investment adviser or investment adviser

representative registrations required by subsection (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 the registration depository.

(2) If the commissioner finds that participation in such a central 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 or, investment adviser or investment adviser

representative as required by this section may be made or effected

through or in conjunction or coordination with such a central the regis-

tration depository;

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

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

viser 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 or, investment adviser or investment adviser rep-

resentative be collected by such a central the registration depository in

the dollar amounts required by subsection (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 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 or, investment adviser or investment

adviser representative, and all documents supporting such applications,

which shall be filed with or received by such a central the registration

depository shall be deemed to be filed with or received by the commis-

sioner pursuant to subsection (g), when such applications or documents

are received by such a central 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 or,

investment adviser or investment adviser representative or contained in

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

ceived by such a central 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 amendments thereto.

Sec. 3. K.S.A. 17-1257 is hereby amended to read as follows: 17-

1257. (a) Any security for which may be registered by coordination under

this act if a registration statement has been filed but has not been declared

effective under the securities act of 1933 in connection with the same

offering may be registered by coordination.

(b) A registration statement under this section may be filed by the

issuer, any other person on whose behalf the securities will be offered or

by any registered broker-dealer,. The registration statement shall be filed

in the office of the commissioner and shall contain the following infor-

mation and be accompanied by the following documents:

(1) One copy of the prospectus filed under the securities act of 1933

together with all amendments as of the date of filing;

(2) the amount of securities to be offered in this state;

(3) any adverse order, judgment or decree entered in connection with

the offering by the regulatory authorities in any state or by any court of

or by the securities and exchange commission;

(4) a copy of the articles of incorporation and bylaws (or their sub-

stantial equivalents) currently in effect, a copy of any agreements with or

among underwriters, a copy of any indenture or other instrument gov-

erning the issuance of the security to be registered, and a specimen or

copy of the security;

(5) payment of the registration fee prescribed in K.S.A. 17-1259, and

amendments thereto;

(6) if required under K.S.A. 17-1263, and amendments thereto, a

consent to service of process meeting the requirements of that section;

and

(7) an undertaking to forward promptly all amendments to the federal

registration statement, other than an amendment which merely delays

the effective date.

(c) A registration statement under this section will automatically be-

come effective at the moment the federal registration statement becomes

effective if all the following conditions are satisfied:

(1) No stop order is in effect under K.S.A. 17-1260, and amendments

thereto, and no proceeding is pending under K.S.A. 17-1260, and amend-

ments thereto;

(2) the registration statement has been on file with the commissioner

for at least 10 days; and

(3) a statement of the maximum and minimum offering prices and

the maximum underwriting discounts and commissions has been on file

for two full business days or such shorter period as the commissioner may

permit by rules and regulations or otherwise and the offering is made

within those limitations.

(d) The registrant shall promptly notify the commissioner by tele-

phone or telegram of the date and time when the federal registration

statement became effective and the content of the price amendment, if

any, and shall promptly file a post-effective amendment containing the

information and documents in the price amendment. ``Price amendment''

means the final federal amendment which includes a statement of the

offering price, underwriting and selling discounts or commissions,

amount of proceeds, conversion rates, call prices, and other matters de-

pendent upon the offering price. Upon failure to receive the required

notification and post-effective amendment with respect to the price

amendment, the commissioner may enter a stop order, without notice or

hearing, retroactively denying effectiveness to the registration statement

or suspending its effectiveness until compliance with this subsection, if

the commissioner promptly notifies the registrant by telephone or tele-

gram electronic means and promptly confirms by letter or telegram when

the commissioner notifies by telephone of in writing the issuance of the

order. If the registrant proves compliance with the requirements of this

subsection as to notice and post-effective amendment, the stop order is

void as of the time of its entry.

(e) The commissioner may by rule and regulation or otherwise waive

either or both of the conditions specified in paragraphs (2) and (3) of

subsection (c). If the federal registration becomes effective before all

these conditions are satisfied and they are not waived, the registration

statement automatically becomes effective as soon as all the conditions

are satisfied. If the registrant advises the commissioner of the date when

the federal registration statement is expected to become effective, the

commissioner shall promptly advise the registrant by telephone or tele-

gram, at the registrant's expenses, whether all the conditions are satisfied

and whether he the commissioner then contemplates the institution of a

proceeding under K.S.A. 17-1260, and amendments thereto; but this ad-

vice by the commissioner does not preclude the institution of such a

proceeding at any time.

Sec. 4. K.S.A. 17-1258 is hereby amended to read as follows: 17-

1258. (a) Any security may be registered by qualification. A registration

statement under this section may be filed by the issuer, any other person

on whose behalf the securities will be offered or by a registered broker-

dealer,. The registration statement shall be filed in the office of the com-

missioner and shall contain the following information and be accompa-

nied by the following documents:

(1) The name and address of the issuer and the location of its principal

office, if any, in this state;

(2) the kind and amount of securities to be offered; the proposed

offering price or the method by which it is to be computed; any variation

therefrom at which any portion of the offering is to be made to any person

or class of persons other than the underwriters, with a specification of

any such person or class; the basis upon which the offering is to be made

if otherwise than for cash; the estimated aggregate underwriting and sell-

ing discounts or commissions and finders' fees (including separately cash,

securities, contracts, or anything else of value to accrue to the under-

writers in connection with the offering) or, if the selling discounts or

commissions are variable, the basis of determining them and their max-

imum and minimum amounts; the estimated amounts of other selling

expenses, including legal, engineering, and accounting charges; the name

and address of underwriters, a copy of any underwriting or selling-group

agreement pursuant to which the distribution is to be made, or the pro-

posed form of any such agreement whose terms have not yet been de-

termined; and a description of the plan of distribution of any securities

which are to be offered otherwise than through an underwriter;

(3) amount of securities to be offered in this state;

(4) the state (or foreign jurisdiction) and date of organization of the

issuer; the general character and location of its business; a description of

its physical properties and equipment; and a statement of the general

competitive conditions in the industry or business in which it is or will be

engaged;

(5) with respect to every director and officer of the issuer (or person

occupying a similar status or performing similar functions): His The per-

son's name, address, and principal occupation for the past five years; the

amount of securities of the issuer held by him the person as of a specified

date within ninety days of the filing of the registration statement; and a

description of any material interest in any material transaction with the

issuer or any significant subsidiary effected within the past three years or

proposed to be effected;

(6) with respect to persons covered by clause (5): The remuneration

paid during the past twelve months, directly or indirectly, by the issuer

(together with all predecessors, parents, subsidiaries, and affiliates) to all

those persons in the aggregate;

(7) with respect to any person owning of record, or beneficially if

known, ten percent or more of the outstanding shares of any class of

equity security of the issuer: The information specified in clause (5) other

than his the person's occupation;

(8) with respect to every promoter if the issuer was organized within

the past three years: The information specified in clause (5), any amount

paid to him the promoter within that period or intended to be paid to

him, and the consideration for any such payment;

(9) with respect to any person on whose behalf any part of the offering

is to be made in a non-issuer distribution: His The person's name and

address; the amount of securities of the issuer held by him the person as

of the date of the filing of the registration statement; a description of any

material interest in any material transaction with the issuer or any signif-

icant subsidiary effected within the past three years or proposed to be

effected; and a statement of his the person's reasons for making the of-

fering;

(10) the capitalization and long-term debt of the issuer, including (A)

a description of each security outstanding or being registered or otherwise

offered, and (B) a statement of the amount and kind of consideration

(whether in the form of cash, physical assets, services, patents, goodwill,

or anything else) for which the issuer has issued any of its securities within

the past five years or is obligated to issue any of its securities;

(11) the estimated cash proceeds to be received by the issuer from

the offering and the purposes for which the proceeds are to be used by

the issuer; and, if any part of the proceeds is to be used to acquire any

property (including goodwill) otherwise than in the ordinary course of

business, the names and addresses of the vendors and the purchase price;

(12) a description of any stock options (or other security options)

outstanding, or to be created in connection with the offering; together

with the amount of any such options held or to be held by every person

required to be named in clause (2), (5), (7), (8), or (9), and by any person

who holds or will hold ten percent or more in the aggregate of any such

options;

(13) a specimen or copy of the security being registered; a copy of

the issuer's articles of incorporation and bylaws (or their substantial equiv-

alents) as currently in effect; and a copy of any indenture or other instru-

ment covering the security to be registered;

(14) a balance sheet or statement of financial condition of the issuer

as of a date within four months prior to the filing of the registration

statement; a profit and loss statement and analysis of surplus, and other

financial statements required by and presented in conformity with gen-

erally accepted accounting principles for each of the three fiscal years

preceding the date of the balance sheet or statement of financial condition

and for any period between the close of the last fiscal year and the date

of the balance sheet or statement of financial condition, or for the period

of the issuer's and any predecessors' existence if less than three years;

and

(15) such additional information as the commissioner may require by

rule or order.

(b) The commissioner, by rule and regulation or order, may require

financial statements of an issuer to be reviewed or audited by independent

certified public accountants.

(b) (c) A registration statement under this section will become effec-

tive when the commissioner so orders.

Sec. 5. K.S.A. 2001 Supp. 17-1261 is hereby amended to read as

follows: 17-1261. The following securities shall be exempt from the reg-

istration requirements of K.S.A. 17-1255 through 17-1260, and amend-

ments thereto:

(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, insured or guaranteed by Canada, any Ca-

nadian province, any political subdivision of any such province, any agency

or corporate 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 currently maintains diplomatic relations, or any

of its political subdivisions, if the security is recognized as a valid obli-

gation by the issuer, insurer or guarantor.

(c) Any security issued by and representing an interest in or a debt

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 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) 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

(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. The commissioner, by rule and regu-

lation or order, may require the filing of a notice and specify conditions

for this exemption pursuant to rules and regulations adopted by the com-

missioner.

(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-

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,

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) (n) 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

company; or any security issued by a savings and loan holding company

wholly or partially in exchange for the capital stock of an insured insti-

tution 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. 6. K.S.A. 2001 Supp. 17-1263 is hereby amended to read as

follows: 17-1263. (a) Every nonresident applicant for registration under

this act and 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), (j),

(k), (l) or (p) of K.S.A. 17-1261, and amendments thereto, or are offered

in transactions exempt under K.S.A. 17-1262, and amendments thereto,

shall file with the commissioner, in such form as the commissioner may

by rules and regulations prescribe, an irrevocable consent appointing the

secretary of state of Kansas or the secretary's successor in office to be

such applicant's attorney to receive service of any lawful process in any

noncriminal suit, action, or proceeding against such applicant 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 pre-

vious registration need not file another.

(b) 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) (1) The plaintiff (who may be the commissioner in a suit, action,

or proceeding instituted by the commissioner) sends notice of the service

and a copy of the process by registered mail to the defendant or respon-

dent at such person's last address on file with the commissioner; and

(b) (2) 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.

(c) When process is served under this section subsection (b), the

court, or the commissioner in a proceeding before the commissioner, shall

order such continuance as may be necessary to afford the defendant or

respondent reasonable opportunity to defend.

(d) In an administrative proceeding under this act, service of process

may be made in accordance with the Kansas administrative procedure

act.

Sec. 7. K.S.A. 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 provision of

this act or any rule and regulation or order hereunder, the commissioner

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 licensed registered broker-

dealer, sales representative or agent, investment adviser or investment

adviser representative;

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

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

commissioner under this act, imposing a civil penalty up to a maximum

of $5,000 for each violation; or

(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

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

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

Sec. 8. K.S.A. 2001 Supp. 17-1270 is hereby amended to read as

follows: 17-1270. (a) This act shall be administered by the securities com-

missioner 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, by rules and regulations or order may require

the filing of any prospectus, pamphlet, circular, form letter, advertise-

ment, or other sales literature addressed or intended for distribution to

prospective investors, including clients or prospective clients of an in-

vestment adviser, unless the security or transaction is exempt under

K.S.A. 17-1261 or 17-1262, and amendments thereto, or is a federal cov-

ered security for which no filing can be required by the commissioner

under the securities act of 1933 and K.S.A. 2001 Supp. 17-1270a, and

amendments thereto.

(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, 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 may require the person, broker-dealer

or investment adviser subject to the examination at cost to reimburse the

agency for all reasonable costs of the examination. For the purpose of

avoiding unnecessary duplication of examinations, the commissioner may

cooperate with other proper authorities.

(e) The commissioner may from time to time adopt, amend, and re-

voke 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.

(f) A document is filed when it is received by the commissioner. 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.

Records maintained by the 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. Copies shall be certified under the commis-

sioner's seal of office if requested. 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.

(g) The commissioner in the commissioner's discretion may honor

requests from interested persons for interpretative opinions.

Sec. 9. K.S.A. 17-1257, 17-1258 and 17-1266a and K.S.A. 2001 Supp.

17-1252, 17-1254, 17-1261, 17-1263 and 17-1270 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 1, 2002.


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Date Composed: 10/10/2002 Date Modified: 10/10/2002