Session of 2000
HOUSE BILL No. 2690
By Committee on Financial Institutions
1-24
9 AN ACT
concerning securities; relating to the regulation of variable
an-
10 nuities; amending
K.S.A. 40-436 and K.S.A. 1999 Supp. 17-1252, 17-
11 1261, 17-1262 and
17-1270a and repealing the existing sections.
12
13 Be it enacted by the Legislature of the
State of Kansas:
14 Section
1. K.S.A. 1999 Supp. 17-1252 is hereby amended to read as
15 follows: 17-1252. When used in this act,
unless the context otherwise
16 requires:
17
(a) "Commissioner" means the securities commissioner of
Kansas,
18 appointed as provided in K.S.A.
17-1270 75-6301, and amendments
19 thereto.
20 (b) "Agent" means
any individual other than a broker-dealer who
21 represents a broker-dealer or issuer in
effecting or attempting to effect
22 purchases or sales of securities. "Agent"
does not include an individual
23 who represents an issuer only in
transactions in securities exempted by
24 K.S.A. 17-1261, and amendments thereto,
other than subsection subsec-
25 tions (e) and (h) of K.S.A. 17-1261,
and amendments thereto, or who
26 represents a broker-dealer in effecting
transactions in this state limited
27 to those transactions described in section
15(h)(2) of the securities and
28 exchange act of 1934. A partner, officer or
director of a broker-dealer or
29 issuer, or a person occupying a similar
status or performing similar func-
30 tions, is an agent only if such person
otherwise comes within this
31 definition.
32
(c) "Broker-dealer" means any person engaged in the business
of pur-
33 chasing, offering for sale or selling
securities for the account of others or
34 for such person's own account; but the term
does not include an agent,
35 issuer, bank, savings institution,
insurance company, or a person who ef-
36 fects transactions in this state
exclusively with the issuer of the securities
37 involved in the transactions or with any
person to whom a sale is exempt
38 under subsection (f) of K.S.A. 17-1262, and
amendments thereto.
39 (d) "Guaranteed"
means guaranteed as to payment of principal, in-
40 terest or dividends.
41 (e) "Issuer"
means any person who issues or proposes to issue any
42 security, except that with respect to
certificates of deposit, voting-trust
43 certificates or collateral-trust
certificates, or with respect to certificates of
2
1 interest or shares in an
unincorporated investment trust not having a
2 board of directors (or persons
performing similar functions) or of the
3 fixed, restricted management or unit
type; the term "issuer" also means
4 the person or persons performing the
acts and assuming the duties of
5 depositor or manager pursuant to the
provisions of the trust or other
6 agreement or instrument under which
the security is issued. The issuer
7 of a certificate of interest in an
oil and gas royalty, lease or mineral deed
8 is the owner of the interest in the
oil and gas royalty, lease or mineral
9 deed who creates the certificate of
interest for purpose of sale.
10 (f) "Nonissuer"
means not directly or indirectly for the benefit of the
11 issuer.
12 (g) "Person"
means an individual, a corporation, a partnership, a
lim-
13 ited liability company, an
association, a joint-stock company, a trust where
14 the interests of the beneficiaries are
evidenced by a security, an unincor-
15 porated organization, a government or a
political subdivision of a
16 government.
17 (h)
(1) "Sale" or "sell" includes every contract of sale of,
contract to
18 sell, or disposition of, a security or
interest in a security for value.
19 (2) "Offer" or
"offer to sell" includes every attempt or offer to dispose
20 of, or solicitation of an offer to buy, a
security or interest in a security for
21 value.
22 (3) Any security
given or delivered with, or as a bonus on account of,
23 any purchase of securities or any other
thing is considered to constitute
24 part of the subject of the purchase and to
have been offered and sold for
25 value.
26 (4) Every sale or
offer of a warrant or right to purchase or subscribe
27 to another security of the same or another
issuer, and every sale or offer
28 of a security which gives the holder a
present or future right or privilege
29 to convert into another security of the
same or another issuer, is consid-
30 ered to include an offer of the other
security.
31 (5) A purported
gift of assessable stock is considered to involve an
32 offer and sale of such stock.
33 (i) "Securities
act of 1933," "securities exchange act of 1934," "public
34 utility holding company act of 1935," and
"investment company act of
35 1940" mean the federal statutes of those
names.
36 (j) "Security"
means any note; stock; treasury stock; bond; debenture;
37 evidence of indebtedness; certificate of
interest or participation in any
38 profit-sharing agreement; collateral-trust
certificate; preorganization cer-
39 tificate or subscription; transferable
share; investment contract; voting-
40 trust certificates; thrift certificates or
investment certificates, or thrift
41 notes issued by investment companies;
certificate of deposit for a security;
42 certificate of interest in oil and gas
royalties, leases or mineral deeds; or,
43 in general, any interest or instrument
commonly known as a "security,"
3
1 or any certificate of interest or
participation in, temporary or interim
2 certificate for, guarantee of, or
warrant or right to subscribe to or pur-
3 chase, any of the foregoing.
"Security" does not include any insurance or
4 endowment policy or annuity contract
under which an insurance company
5 promises to pay a fixed sum of
money either in a lump sum or periodically
6 for life or some other specified
period.
7 (k) "State"
means any state, territory, or possession of the United
8 States, as well as the District of
Columbia and Puerto Rico.
9
(l) "Investment adviser" means any person who, for
compensation,
10 engages in the business of advising others,
either directly or through
11 publications or writings, as to the value
of securities or as to the advisa-
12 bility of investing in, purchasing, or
selling securities, or who, for com-
13 pensation and as a part of a regular
business, issues or promulgates anal-
14 yses or reports concerning securities. The
term does not include:
15 (1) An investment
adviser representative;
16 (2) a bank,
savings institution, or trust company;
17 (3) a lawyer,
accountant, engineer or teacher whose performance of
18 these services is solely incidental to the
practice of the individual's
19 profession;
20 (4) a
broker-dealer or its agent whose performance of these services
21 is solely incidental to the conduct of its
business as a broker-dealer and
22 who receives no special compensation for
them;
23 (5) a publisher
of any bona fide newspaper, news column, news mag-
24 azine, newsletter, or business or financial
publication or service, whether
25 communicated in hard copy form or by
electronic means, or otherwise
26 that does not consist of the rendering of
advice on the basis of the specific
27 investment situation of each client;
28 (6) any person
that is a federal covered adviser; or
29 (7) such other
persons not within the intent of this definition as the
30 commissioner designates by order or by
rules and regulations.
31 (m)
(1) "Investment adviser representative" means any partner,
of-
32 ficer, director of or a person occupying a
similar status or performing
33 similar functions or other individual
except clerical or ministerial person-
34 nel, who is employed by or associated
with:
35 (A) An investment
adviser that is registered or required to be regis-
36 tered under this act and who does any of
the following:
37 (i) Makes any
recommendations or otherwise renders advice regard-
38 ing securities;
39 (ii) manages
accounts or portfolios of clients;
40 (iii) determines
which recommendation or advice regarding securities
41 should be given;
42 (iv) solicits,
offers or negotiates for the sale of or sells investment
43 advisory services; or
4
1
(v) supervises employees who perform any of the foregoing;
or
2 (B) a
federal covered adviser, subject to the limitations of section
3 203A of the investment advisers act
of 1940, as the commissioner may
4 designate by rule or order.
5
(2) "Investment adviser representative" does not include such
other
6 persons employed by or associated
with either an investment adviser or
7 federal covered adviser not within
the intent of this subsection as the
8 commissioner may designate by rule or
order.
9
(n) "Federal covered security" means any security that is a
covered
10 security under section 18(b) of the
securities act of 1933 or rules or reg-
11 ulations promulgated thereunder.
12 (o) "Federal
covered adviser" means a person who is registered under
13 section 203 of the investment advisers act
of 1940 or excluded from the
14 definition of "investment adviser" under
section 202(a)(11) of the invest-
15 ment advisers act of 1940.
16 Sec.
2. K.S.A. 1999 Supp. 17-1261 is hereby amended to read as
17 follows: 17-1261. The following securities
shall be exempt from the reg-
18 istration requirements of K.S.A. 17-1255
through 17-1260, and amend-
19 ments thereto:
20 (a) Any security
issued or guaranteed by the United States or by any
21 state, territory or insular possession
thereof, or by any political subdivision
22 of any such state, territory or insular
possession, or by the District of
23 Columbia, or by any public agency or
instrumentality of one or more of
24 any of the foregoing.
25 (b) Any security
issued or guaranteed by Canada, any Canadian prov-
26 ince, any political subdivision of any such
province, any agency or cor-
27 porate or other instrumentality of one or
more of the foregoing or any
28 other foreign government or governmental
combination or entity with
29 which the United States maintains
diplomatic relations, if the security is
30 recognized as a valid obligation by the
issuer, insurer or guarantor.
31 (c) Any security
issued by and representing an interest in or a debt
32 of, or guaranteed by, any bank organized
under the laws of the United
33 States, or any bank, savings institution,
credit union or trust company
34 organized and supervised under the laws of
this state except that the
35 issuer of such security is subject to the
supervision of the banking de-
36 partment, savings and loan
department or credit union administrator of
37 this state.
38 (d) Any security
issued by and representing an interest in or a debt
39 of, or guaranteed by, any federal savings
and loan association, or any
40 savings and loan association organized
under the laws of this state and
41 authorized to do business in this
state.
42 (e) Any security
issued by and representing an interest in or a debt
43 of, or guaranteed by, any insurance company
organized under the laws
5
1 of any state and authorized to do
business in this state when such secu-
2 rities are sold by the
issuer.
3 (f) Any
security issued or guaranteed by any railroad, or public
utility
4 which is:
5 (1) a
registered holding company under the public utility holding
6 company act of 1935 or a subsidiary
of such a company within the mean-
7 ing of that act; or
8
(2) regulated by a governmental authority of the United States
or any
9 state in respect to the issuance or
guarantee of the security.
10 (g) Any security
as to which the commissioner by rule and regulation
11 finds that registration is not necessary or
appropriate for the protection
12 of investors.
13 (h) Any security
issued by any person organized and operated not for
14 private profit but exclusively for
religious, educational, benevolent, char-
15 itable, fraternal, social, athletic, fire
protection, fire fighting or reforma-
16 tory purposes, or as a chamber of commerce
or trade or professional
17 association if no part of the net earnings
of such person inures to the
18 benefit of any private stockholder
and provided that the issuer has filed
19 with the commissioner at least 10
days prior to any sale a notice setting
20 forth the material terms of the
proposed sale, copies of any sales and
21 advertising literature to be used,
and such other information required by
22 the commissioner, and the
commissioner does not by order disallow the
23 exemption within 10 days after
filing. The commissioner may require the
24 filing of a notice and other information
pursuant to rules and regulations
25 adopted by the commissioner.
26 (i) Any
commercial paper which arises out of a current transaction or
27 the proceeds of which have been or are to
be used for current transac-
28 tions, and which evidences an obligation to
pay cash within nine months
29 of the date of issuance, exclusive of days
of grace, or any renewal of such
30 paper which is likewise limited, or any
guarantee of such paper or of any
31 such renewal.
32 (j) Any
securities issued in connection with an employee's stock pur-
33 chase, savings, pension, profit-sharing or
similar benefit plan, or a self-
34 employed person's retirement plan.
35 (k) Any security
evidencing membership in, or issued as a patronage
36 dividend by, a cooperative association
organized under the laws of this
37 state exclusively for the purpose of
conducting an agricultural, dairy, live-
38 stock or produce business, or selling,
processing, storing, marketing or
39 otherwise handling any agricultural, dairy,
livestock or produce, and any
40 activities incidental to these
purposes.
41 (l) Any security
issued by and representing an interest in or debt of,
42 or evidencing membership in, or issued as a
patronage dividend to resi-
43 dents or landowners of not to exceed five
contiguous counties in Kansas
6
1 by a cooperative association
organized under the laws of this state exclu-
2 sively for the purpose of conducting
an agricultural, dairy, livestock or
3 produce business, or selling,
processing, storing, marketing, retailing, or
4 otherwise handling any agricultural,
dairy, livestock or produce, or farm
5 supplies, and any activities
incidental to these purposes.
6
(m) Securities constituting part of an issue, which, in whole
or in part
7 has been lawfully sold and
distributed to the public in this or any other
8 state, when offered for resale in
good faith and not directly or indirectly
9 for the benefit of the issuer or for
the direct or indirect purpose of pro-
10 moting any scheme or enterprise having the
effect of violating or evading
11 any provisions of this act, except that
this exemption shall not apply (1)
12 where the authority to sell such securities
has been prohibited or denied
13 under the provisions of this act, or (2)
where the sale of such securities
14 in this state has been enjoined as provided
in this act or (3) until there
15 shall have been filed with the securities
commissioner of Kansas by any
16 registered broker-dealer a prospectus in
such form as may be prescribed
17 by the commissioner containing: (A) Latest
available financial statement
18 of the issuer; (B) management personnel;
and (C) such other available
19 information as the commissioner may
require. The filing of the prospectus
20 and its approval by the commissioner shall
constitute the exemption
21 herein provided. Any prospectus may be
disapproved at any time, if after
22 a reasonable notice and a hearing, the
commissioner shall find that the
23 further exemption of the securities would
be fraudulent or tend to work
24 imposition or fraud upon the purchaser
thereof.
25 (n) Any annuity,
gift annuity, charitable remainder unitrust, charita-
26 ble remainder annuity trust, endowment
contract, life income contract,
27 or investment contract issued by the
governing body of any four-year
28 liberal arts college situated in the state
of Kansas, and the provisions of
29 K.S.A. 17-1254, and amendments thereto,
shall not apply to any person
30 in the issuance of such securities governed
by this subsection.
31 (o) Any annuity,
gift annuity, charitable remainder unitrust, charita-
32 ble remainder annuity trust, endowment
contract, life income contract or
33 investment contract issued by the governing
body of any nonprofit cor-
34 poration or foundation organized under the
laws of this state, for religious,
35 charitable or educational purposes, or for
the treatment and rehabilitation
36 of children and adolescents, and which
corporation or foundation is li-
37 censed by the secretary of social and
rehabilitation services or secretary
38 of health and environment, if such
corporation or foundation has been in
39 existence for more than five years and has
fund balances in its endowment
40 fund and unrestricted funds totaling
together $1,000,000 or more, and
41 the provisions of K.S.A. 17-1254, and
amendments thereto, shall not apply
42 to any person in the issuance of securities
governed by this subsection.
43 (p) Any security
issued by a bank holding company wholly or partially
7
1 in exchange for the capital stock of
a bank that is, or will become upon
2 consummation of such exchange, a
subsidiary of such bank holding com-
3 pany; or any security issued by a
savings and loan holding company wholly
4 or partially in exchange for the
capital stock of an insured institution that
5 is, or will become upon consummation
of such exchange, a subsidiary of
6 such savings and loan holding
company. As used in this subsection,
7 "bank," "bank holding company" and
"subsidiary" shall have the same
8 meanings as are set forth in the
federal bank holding company act of
9 1956, as amended and "savings and
loan holding company" and "insured
10 institution" shall have the same meanings
as are set forth in section 408
11 of the national housing act, as
amended.
12 Sec.
3. K.S.A. 1999 Supp. 17-1262 is hereby amended to read as
13 follows: 17-1262. Except as expressly
provided in this section, the follow-
14 ing transactions shall be exempt from the
registration requirements of
15 K.S.A. 17-1254, 17-1255, 17-1257, 17-1258,
17-1259 and 17-1260, and
16 amendments thereto:
17 (a) Any isolated
transaction, whether effected through a broker-
18 dealer or not.
19 (b) Any nonissuer
distribution by or through a registered broker-
20 dealer of outstanding securities at a price
reasonably related to the current
21 market price of such securities, if
Moody's manual, Standard & Poor's
22 manual, or any recognized
securities manual approved by the commis-
23 sioner, pursuant to rules and
regulations or orders contains:
24 (1) The
names of the issuer's officers and directors,;
and (2) audited
25 financial statements, including a
balance sheet of the issuer as of a date
26 within 18 months, and
a profit and an income or loss statement
for either
27 the full fiscal year preceding that
date or the most recent full year of
28 operations. If the commissioner finds that
the sale of certain securities in
29 this state under this exemption would work
or tend to work a fraud on
30 purchasers thereof, the commissioner may
revoke the exemption pro-
31 vided by this subsection with respect to
such securities by issuing an order
32 to that effect and sending
copies providing notice of such order to all
33 registered broker-dealers.
34 (c) Any nonissuer
transaction by a registered broker-dealer pursuant
35 to an unsolicited order or offer to buy.
The commissioner may require,
36 by rules and regulations, that: (1) The
customer acknowledge upon a
37 specified form that the sale was
unsolicited; and (2) a signed copy of each
38 such form be preserved by the broker-dealer
for a specified period.
39 (d) Any
transactions in a bond or other evidence of indebtedness
40 secured by a real or chattel mortgage or
deed of trust, or by an agreement
41 for the sale of real estate or chattels, if
the entire mortgage, deed of trust
42 or agreement, together with all the bonds
or other evidences of indebt-
43 edness secured thereby, is offered and sold
as a unit.
8
1 (e) Any
transaction by an executor, administrator, sheriff, marshal,
2 receiver, trustee in bankruptcy,
guardian or conservator; any transaction
3 executed by a bona fide pledgee
without any purpose of evading this act
4 or any transaction incident to a
judicially approved reorganization in
5 which a security is issued in
exchange for one or more outstanding se-
6 curities, claims or property
interests.
7 (f) Any
offer or sale to a bank, savings institution, trust company,
8 insurance company, investment company
as defined in the investment
9 company act of 1940, pension or
profit-sharing trust or other financial
10 institution or institutional buyer or to a
broker-dealer or underwriter.
11 (g) Any offer or
sale of a preorganization certificate or subscription
12 if: (1) No commission or other remuneration
is paid or given directly or
13 indirectly for soliciting any prospective
subscriber and no advertising has
14 been published in connection with any such
sale; (2) no payment is made
15 by any subscriber; and (3) such certificate
or subscription is expressly
16 voidable by the subscriber until such
subscriber has been notified of final
17 acceptance or completion of the
organization and until the securities sub-
18 scribed for have been registered. The
commissioner may require, by rules
19 and regulations or by order, reports of
sales under this exemption.
20 (h) Any
transaction pursuant to an offer to existing security holders
21 of the issuer, including persons who at the
time of the transaction are
22 holders of convertible securities,
nontransferable warrants or transferable
23 warrants exercisable within 90 days of
their issuance, if: (1) No commis-
24 sion or other remuneration (other than a
standby commission) is paid or
25 given directly or indirectly for soliciting
any security holder in this state;
26 or (2) the issuer first files a notice
specifying the terms of the offer and
27 the commissioner does not by order disallow
the exemption within the
28 next five full business days.
29 (i) Any offer
(but not a sale) of a security if: (1) Registration state-
30 ments for such security have been filed
under both this act and the se-
31 curities act of 1933 if no stop order or
refusal order is in effect and no
32 public proceeding or examination looking
toward such an order is pending
33 under either act; or (2) a registration
statement for such security has been
34 filed under K.S.A. 17-1256
or 17-1258, and amendments thereto, no stop
35 order or emergency order issued pursuant to
K.S.A. 17-1260, and amend-
36 ments thereto, is in effect and the offer
is made on behalf of the issuer
37 by a registered broker-dealer.
38 (j) The issuance
of any stock dividend, whether the corporation dis-
39 tributing the dividend is the issuer of the
stock or not, if nothing of value
40 is given by stockholders for the
distribution other than the surrender of
41 a right to a cash dividend where the
stockholder can elect to take a div-
42 idend in cash or stock.
43 (k) A transaction
involving the distribution of the securities of an is-
9
1 suer to the security holders of
another person in connection with a
2 merger, consolidation, exchange of
securities, sale of assets or other re-
3 organizations to which the issuer, or
its parent or subsidiary, and the other
4 person, or its parent or subsidiary,
are parties, if:
5 (1) The
securities to be distributed are registered under the
securities
6 act of 1933 before the consummation
of the transaction; or
7 (2) the
securities to be distributed are not required to be registered
8 under the securities act of 1933,
written notice of the transaction and a
9 copy of the materials, if any, by
which approval of the transaction will be
10 solicited is given to the commissioner at
least 10 days before the consum-
11 mation of the transaction and the
commissioner does not disallow, by
12 order, the exemption within the next 10
days.
13 (l) The offer or
sale of securities by an issuer that is a corporation,
14 limited partnership or limited liability
company formed under the laws
15 of the state of Kansas, if: (1) The
aggregate number of sales by the issuer
16 in the twelve-month period ending on the
date of the sale does not exceed
17 20 sales; (2) the seller believes that the
purchaser is purchasing for in-
18 vestment; (3) no commission nor other
remuneration is paid or given,
19 directly or indirectly, for soliciting the
purchaser; and (4) neither the
20 issuer nor any person acting on its behalf
shall offer or sell the securities
21 by any form of general solicitation or
general advertising, including, but
22 not limited to, the following: (A) Any
advertisement, article, notice or
23 other communication published in any
newspaper, magazine or similar
24 media or broadcast over television or radio
or (B) any seminar or meeting
25 whose attendees have been invited by any
general solicitation or general
26 advertising.
27 In calculating the
number of sales in a twelve-month period, sales made
28 in violation of K.S.A. 17-1255, and
amendments thereto, and sales exempt
29 from registration under subsection (a) or
(l) shall be taken into account.
30 For purposes of the exemption in this
subsection, a husband and wife
31 shall be considered as one purchaser. A
corporation, partnership, asso-
32 ciation, joint-stock company, trust or
other unincorporated organization
33 shall be considered as one purchaser unless
it was organized for the pur-
34 pose of acquiring the purchased securities.
In such case each beneficial
35 owner of equity interest or equity
securities in the entity shall be consid-
36 ered a separate purchaser. The commissioner
may withdraw this exemp-
37 tion or impose conditions upon its use.
38 (m) Any
transaction pursuant to rules and regulations adopted by the
39 commissioner for limited offerings which
was adopted for the purpose of
40 furthering the objectives of compatibility
with federal exemptions and
41 uniformity among the states.
42 (n) Any
transaction pursuant to rules and regulations adopted by the
43 commissioner concerning the offer or sale
of an oil, gas or mining lease,
10
1 fee or title if the commissioner
finds that registration is not necessary or
2 appropriate for the protection of
investors.
3 (o) Any
offer or sale by an investment company, as defined by K.S.A.
4 16-630, and amendments thereto, of
its investment certificates.
5 (p) The
offer or sale of a security, issued by Kansas Venture Capital,
6 Inc., or its successors.
7 Sec.
4. K.S.A. 1999 Supp. 17-1270a is hereby amended to read as
8 follows: 17-1270a. (a) The
commissioner, by rules and regulations or or-
9 der, may require the payment of a
filing fee and the filing of documents
10 with respect to a covered security under
section 18(b)(2) of the securities
11 act of 1933, as follows:
12 (1) Prior to the
initial offer of such federal covered security in this
13 state, all documents that are part of a
federal registration statement filed
14 with the United States securities and
exchange commission under the
15 securities act of 1933, together with a
consent to service of process, and
16 a fee not to exceed $2,500;
17 (2) after the
initial offer of such federal covered security in this state,
18 all documents that are a part of an
amendment to a federal registration
19 statement filed with the United States
securities and exchange commis-
20 sion under the securities act of 1933,
which shall be filed concurrently
21 with the commissioner, together with a fee
not to exceed $100;
22 (3) an annual or
periodic report of sales of such federal covered se-
23 curities in this state;
24 (4) each notice
filing under this subsection (a) shall be effective for
25 one year from its original filing date, or
such other date required by the
26 commissioner by rules and regulations or
order, and shall be renewed
27 annually, so long as the covered security
continues to be offered in this
28 state, by payment of an annual renewal fee
not to exceed $2,500.
29 (b) With respect
to a covered security under section 18(b)(4)(D) of
30 the securities act of 1933, the
commissioner, by rules and regulations or
31 order, may require the issuer to file a
notice on form D together with a
32 fee not to exceed the amount authorized by
paragraph (3) of subsection
33 (b) of K.S.A. 17-1259, and amendments
thereto.
34 (c) The
commissioner, by rules and regulations or otherwise, may
35 require the filing of any document filed
with the United States securities
36 and exchange commission with respect to a
covered security under section
37 18(b)(3) and (4) of the securities act of
1933, together with a fee not to
38 exceed the amount authorized by paragraph
(3) of subsection (b) of K.S.A.
39 17-1259, and amendments thereto.
40 (d) The
commissioner may issue a stop order suspending the offer
41 and sale of a federal covered security,
except a covered security under
42 section 18(b)(1) of the securities act of
1933, if it finds that:
43 (1) The order is
in the public interest; and
11
1 (2) there
is a failure to comply with any condition established under
2 this section.
3 (e) The
commissioner, by rules and regulations or order, may waive
4 any or all of the provisions of this
section.
5
(f) Notwithstanding the provisions of this section,
until October 10,
6 1999, the commissioner may
require the registration of any federal cov-
7 ered security for which the
fees required by this section have not been
8 paid promptly following
written notification from the commissioner to
9 the issuer of the nonpayment
or underpayment of such fees. An issuer
10 shall be considered to have
promptly paid such fees if they are remitted
11 to the commissioner within 15 days
following such person's receipt of
12 written notification from the
commissioner.
13 (g)
(f) This section shall be part of and supplemental to
the Kansas
14 securities act.
15 Sec.
5. K.S.A. 40-436 is hereby amended to read as follows:
40-436.
16 (a) Any domestic life insurance company may
after adoption of a reso-
17 lution by its board of directors, establish
one or more separate accounts,
18 and may allocate to such separate account
or accounts any amounts, in-
19 cluding without limitation proceeds applied
under optional modes of set-
20 tlement or under dividend options, paid to
the company which are to be
21 applied under the terms of an individual or
group life or annuity contract
22 issued in connection therewith to provide
benefits payable in fixed or in
23 variable amounts, or in both, and such
contracts may provide other
24 benefits.
25 (b) The amounts
allocated to each such account and accumulations
26 thereon may be invested
and reinvested in any class of investments which
27 may be authorized in the contracts without
regard to any requirements
28 or limitations prescribed by the laws of
this state governing the invest-
29 ments of life insurance
companies: Provided,,
except that to the extent
30 that the company's reserve liability with
regard to: (1) Benefits guaranteed
31 as to amount and
duration,; and (2) funds guaranteed as to
principal
32 amount or stated rate of interest is
maintained in any separate account,
33 a portion of the assets of such separate
account at least equal to such
34 reserve liability shall be invested in
accordance with the laws of this state
35 governing the investments of life insurance
companies. The investments
36 in such separate account or accounts shall
not be taken into account in
37 applying the investment limitations
applicable to other investments of the
38 company.
39 (c) The income,
if any, and gains and losses, realized or unrealized,
40 on each account shall be credited to or
charged against the amounts
41 allocated to the account in accordance with
the contracts, without regard
42 to other income, gains or losses of the
company.
43 (d) Assets
allocated to a separate account shall be valued at their
12
1 market value on the date of
valuation, or if there is no readily available
2 market, then in accordance with the
terms of the contracts:
Provided,,
3 except that the portion of the
assets of such separate account at least equal
4 to the company's reserve liability
with regard to the guaranteed benefits
5 and funds referred to in subsection
(b) hereof, if any, shall be valued in
6 accordance with the rules otherwise
applicable to the company's assets.
7 (e) Amounts
allocated to a separate account in the exercise of the
8 power granted by this act shall be
owned by the company, and the com-
9 pany shall not be, nor hold itself
out to be, a trustee with respect to such
10 amounts. If and to the extent so provided
under the applicable contracts,
11 that portion of the assets of any such
separate account equal to the re-
12 serves and other contract liabilities with
respect to such account shall not
13 be chargeable with liability arising out of
any other business the company
14 may conduct.
15 (f) The company
shall maintain in each such separate account assets
16 with a value at least equal to the reserves
and other contract liabilities
17 with respect to such account, except as may
otherwise be approved by
18 the commissioner of insurance. No sale,
exchange or other transfer of
19 assets may be made by a company between any
of its separate accounts
20 or between any other investment account and
one or more of its separate
21 accounts unless, in case of a transfer into
a separate account, such transfer
22 is made solely to establish the account or
to support the operation of the
23 contracts with respect to the separate
account to which the transfer is
24 made, and unless such transfer, whether
into or from a separate account,
25 is made (1) by a transfer of cash, or (2)
by a transfer of securities having
26 a readily determinable market value,
provided except that such transfer
27 of securities is approved by the
commissioner. The commissioner may
28 approve other transfers among such accounts
if, in his the commissioner's
29 opinion, such transfers would not be
inequitable.
30 (g) If any
contract provides for payment of benefits in variable
31 amounts, it shall contain a statement of
the essential features of the pro-
32 cedure to be followed by the company in
determining the dollar amount
33 of such variable benefits. Any such
contract, including a group contract,
34 and any certificate issued
thereunder shall state that such dollar amount
35 may decrease or increase and shall contain
on its first page a statement
36 that the benefits
thereunder are on a variable basis.
37 (h) A foreign or
alien life insurance company authorized to do busi-
38 ness in this state may be authorized to
issue or deliver contracts in this
39 state providing for payments which vary
directly according to investment
40 experience only if authorized to issue such
contracts under the laws of its
41 domicile.
42 (i) No domestic
life insurance company shall be authorized to issue
43 such contracts, and no
foreign or alien life insurance company shall be
13
1 authorized to issue or deliver such
contracts in this state, until such com-
2 pany has satisfied the commissioner
that its condition and methods of
3 operation in connection with the
issuance of such contracts will not be
4 such as to render its operation
hazardous to the public or to its policy-
5 holders in this state. In determining
the qualification of a company to
6 issue or deliver such contracts in
this state, the commissioner shall con-
7 sider, among other things, the
history and financial condition of the com-
8 pany; the character, responsibility,
and general fitness of the officers and
9 directors of the company; and in the
case of a foreign or alien company,
10 whether the regulation provided by the laws
of its domicile provides a
11 degree of protection to policyholders and
the public substantially equal
12 to that provided by this section and the
rules and regulations issued by
13 the commissioner pursuant
thereto. The state of entry of an alien com-
14 pany shall be deemed its place of domicile
for this purpose.
15 (j) Every life
insurance company which issues or delivers such con-
16 tracts in this state shall file with the
commissioner, in addition to the
17 annual statement required by K.S.A. 40-225,
and amendments thereto,
18 such other periodic or special reports as
the commissioner may prescribe.
19 (k) Any domestic
life insurance company which establishes one or
20 more separate accounts pursuant to this
section, may amend its charter
21 or bylaws to provide for special voting
rights and procedures for the own-
22 ers of contracts under such separate
account relating to investment policy,
23 investment advisory services and selection
of independent public account-
24 ants, in relation to the administration of
the assets in any such separate
25 account and such other matters as the
company deems necessary in the
26 management of the assets in any such
separate account. This provision
27 shall not in any way affect existing laws
pertaining to the voting rights of
28 the company's policyholders.
29 (l) The
commissioner shall have the sole and exclusive
jurisdiction
30 and authority to regulate the issuance and
sale of such contracts and to
31 promulgate such reasonable rules and
regulations as may be necessary to
32 carry out the purposes and provisions of
this act, and such contracts, the
33 companies which issue them, and the agents
or other persons who sell
34 them, shall not
also be subject to the provisions of article 12 of
chapter
35 17 of the Kansas Statutes Annotated
nor and to the jurisdiction of the
36 securities commissioner of this
state.
37 Sec. 6. K.S.A. 40-436 and K.S.A.
1999 Supp. 17-1252, 17-1261, 17-
38 1262 and 17-1270a are hereby repealed.
39 Sec. 7. This act shall
take effect and be in force from and after its
40 publication in the statute book.