Kentucky Statutes 292.412 – Registration of securities Internet Web site operators
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(1) This section applies to registrants operating an Internet Web site pursuant to KRS
292.411(1)(r).
(2) Broker-dealers registered pursuant to KRS § 292.330 and operating an Internet Web site, pursuant to KRS § 292.411(1)(r), shall make an annual notice filing with the department on a form prescribed by the commissioner, but shall be otherwise exempt from the provisions of this section.
(3) In lieu of the registration requirements of KRS § 292.330, a person may apply for registration with the department as an Internet Web site operator by filing an application on a form prescribed by the commissioner that shall include the following:
(a) The Internet Web site operator is a business entity organized pursuant to the laws of Kentucky, authorized to do business in Kentucky, and engaged exclusively in intrastate offers and sales of securities in Kentucky;
(b) The Internet Web site operator is solely engaged in the business of operating an Internet Web site in accordance with this section and KRS § 292.411(1)(r);
(c) The identity, location, and contact information for the Internet Web site operator and any director, executive officer, general partner, managing member, or other person with management authority designated by the commissioner;
(d) A statement that the Internet Web site operator or any director, executive officer, general partner, managing member, or other person with management authority of the Internet Web site operator has never been subject to any conviction, order, judgment, decree, or other action specified in the Securities Act of 1933 Rule 17 C.F.R. § 230.506(d); and
(e) Any other documents, certifications, or information the commissioner may require to administer and enforce the requirements of this section.
(4) (a) An Internet Web site operator registered pursuant to this section shall:
1. Charge a fee to an issuer for an offering of securities on the Internet Web site only in a:
a. Fixed amount for each offering;
b. Variable amount based on the length of time that securities are offered on the Internet Web site; or
c. Combination of the fixed and variable amounts; and
2. Comply with any other requirements that the commissioner, by administrative regulation or order, determines is necessary or appropriate in the public interest or for the protection of investors.
(b) An Internet Web site operator registered pursuant to this section shall not:
1. Offer investment advice or recommendations;
2. Solicit purchases, sales, or offers to buy the securities offered or displayed on its Internet Web site;
3. Compensate employees, agents, or other persons for the solicitation of securities or the sale of securities displayed or referenced on the Internet Web site;
4. Be compensated based on the amount of securities sold;
5. Identify, promote, or otherwise refer to any individual security offered on its Internet Web site in any advertising for the Internet Web site; or
6. Hold, manage, possess, or handle purchaser funds or securities.
(5) Each application filed pursuant to subsection (3) of this section shall be accompanied by the filing fee established by the commissioner and a surety bond filed with the application in an amount satisfactory to the commissioner, but no less than fifty thousand dollars ($50,000). The surety bond shall be in favor of the Commonwealth and shall secure payment of costs, fines, and damages to any person determined by the commissioner, after a hearing conducted in accordance with KRS Chapter 13B, to be aggrieved by an Internet Web site operator’s violation of this section and KRS § 292.411.
(6) Registration as an Internet Web site operator shall expire annually. Subsequent registration may be issued upon filing of a written renewal application, on a form prescribed by the commissioner and upon payment of the renewal fee established by the commissioner.
(7) Each Internet Web site operator registered pursuant to the section shall make and keep all accounts, correspondence, memoranda, papers, books, and other records which the commissioner prescribes by administrative regulation or order. All required records shall be:
(a) Preserved for three (3) years, unless the commissioner, by administrative regulation or order, prescribes otherwise for specified types of records; and
(b) 1. Kept within this state; or
2. At the request of the commissioner be made available at any time for examination by the department in the principal office of the registrant, or by production of exact copies to the department.
(8) The commissioner may conduct examinations of any Internet Web site operator registered pursuant to this section:
(a) 1. At a date and time specified by the commissioner; and
2. Within the scope determined by the commissioner; (b) Without prior notice to the Internet Web site operator; and
(c) The Internet Web site operator shall pay the reasonable expense attributable to any examination, not to exceed an amount prescribed by the commissioner by administrative regulation.
(9) If any change occurs that results in an Internet Web site operator no longer meeting the minimum requirements for registration as set forth in this section, the Internet Web site operator shall provide notice of such change to the commissioner as soon as practicable after discovery. Within thirty (30) days of delivery of the notice provided in this subsection, the Internet Web site operator shall, unless otherwise
permitted or directed by the commissioner, cease and desist from operating an
Internet Web site operator pursuant to KRS § 292.411(1)(r).
(10) The commissioner may deny, refuse to renew, condition, limit, suspend, or revoke the registration of an Internet Web site operator for any of the grounds set forth in KRS § 292.337, which are applicable to a broker-dealer, agent, investment adviser, or investment adviser representative.
(11) Except as provided in subsection (12) of this section, the commissioner shall not issue an order pursuant to subsection (10) of this section without appropriate notice to the applicant or registrant, opportunity for a hearing, and written findings of fact and conclusions of law in accordance with KRS Chapter 13B.
(12) The commissioner may take emergency action against an applicant or registrant, in accordance with the provisions set forth in KRS § 13B.125, if such action is in the public interest and there is substantial evidence of a violation of law that constitutes an immediate danger to the public health, safety, or welfare.
Effective: June 24, 2015
History: Created 2015 Ky. Acts ch. 24, sec. 2, effective June 24, 2015.
Legislative Research Commission Note (6/24/2015). 2015 Ky. Acts ch. 24, sec. 3 provides that this statute and KRS § 292.411 created in 2015 Ky. Acts ch. 24, secs. 1 and 2 shall be known and may be referred to as the “Kentucky Intrastate Crowdfunding Exemption.”
292.411(1)(r).
Terms Used In Kentucky Statutes 292.412
- Action: includes all proceedings in any court of this state. See Kentucky Statutes 446.010
- 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. See Kentucky Statutes 292.310
- Broker-dealer: means any person engaged in the business of effecting transactions in securities for the account of others or for his own account. See Kentucky Statutes 292.310
- Conviction: A judgement of guilt against a criminal defendant.
- Damages: Money paid by defendants to successful plaintiffs in civil cases to compensate the plaintiffs for their injuries.
- Department: means the Department of Financial Institutions of the Commonwealth of Kentucky. See Kentucky Statutes 292.310
- Discovery: Lawyers' examination, before trial, of facts and documents in possession of the opponents to help the lawyers prepare for trial.
- Evidence: Information presented in testimony or in documents that is used to persuade the fact finder (judge or jury) to decide the case for one side or the other.
- Investment adviser representative: means an individual employed by or associated with an investment adviser or covered adviser and who makes any recommendations or otherwise gives investment advice regarding securities, manages accounts or portfolios of clients, determines which recommendations or advice regarding securities should be given, provides investment advice or holds himself or herself out as providing investment advice, receives compensation to solicit, offer, or negotiate for the sale of or for selling investment advice, or supervises employees who perform any of the foregoing. See Kentucky Statutes 292.310
- 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" 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, and except that with respect to fractional undivided interests in oil, gas, or other mineral rights, the term "issuer" means the owner of any such right or of an interest in such right, whether whole or fractional, who creates fractional interests therein for the purpose of distribution. See Kentucky Statutes 292.310
- Person: means an individual, a limited liability company, a corporation, a partnership, a limited partnership, an association, a joint-stock company, a trust where the interests of the beneficiaries are evidenced by a security, an unincorporated organization, a government, or a political subdivision of a government. See Kentucky Statutes 292.310
- regulation: means either or both administrative rules or administrative regulations promulgated by any governmental or other regulatory or self-regulatory entity, as the context requires. See Kentucky Statutes 292.310
- 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 certificate or subscription, transferable share, investment contract, life settlement investment, voting-trust certificate, certificate of deposit for a security. See Kentucky Statutes 292.310
- State: when applied to a part of the United States, includes territories, outlying possessions, and the District of Columbia. See Kentucky Statutes 446.010
- Statute: A law passed by a legislature.
(2) Broker-dealers registered pursuant to KRS § 292.330 and operating an Internet Web site, pursuant to KRS § 292.411(1)(r), shall make an annual notice filing with the department on a form prescribed by the commissioner, but shall be otherwise exempt from the provisions of this section.
(3) In lieu of the registration requirements of KRS § 292.330, a person may apply for registration with the department as an Internet Web site operator by filing an application on a form prescribed by the commissioner that shall include the following:
(a) The Internet Web site operator is a business entity organized pursuant to the laws of Kentucky, authorized to do business in Kentucky, and engaged exclusively in intrastate offers and sales of securities in Kentucky;
(b) The Internet Web site operator is solely engaged in the business of operating an Internet Web site in accordance with this section and KRS § 292.411(1)(r);
(c) The identity, location, and contact information for the Internet Web site operator and any director, executive officer, general partner, managing member, or other person with management authority designated by the commissioner;
(d) A statement that the Internet Web site operator or any director, executive officer, general partner, managing member, or other person with management authority of the Internet Web site operator has never been subject to any conviction, order, judgment, decree, or other action specified in the Securities Act of 1933 Rule 17 C.F.R. § 230.506(d); and
(e) Any other documents, certifications, or information the commissioner may require to administer and enforce the requirements of this section.
(4) (a) An Internet Web site operator registered pursuant to this section shall:
1. Charge a fee to an issuer for an offering of securities on the Internet Web site only in a:
a. Fixed amount for each offering;
b. Variable amount based on the length of time that securities are offered on the Internet Web site; or
c. Combination of the fixed and variable amounts; and
2. Comply with any other requirements that the commissioner, by administrative regulation or order, determines is necessary or appropriate in the public interest or for the protection of investors.
(b) An Internet Web site operator registered pursuant to this section shall not:
1. Offer investment advice or recommendations;
2. Solicit purchases, sales, or offers to buy the securities offered or displayed on its Internet Web site;
3. Compensate employees, agents, or other persons for the solicitation of securities or the sale of securities displayed or referenced on the Internet Web site;
4. Be compensated based on the amount of securities sold;
5. Identify, promote, or otherwise refer to any individual security offered on its Internet Web site in any advertising for the Internet Web site; or
6. Hold, manage, possess, or handle purchaser funds or securities.
(5) Each application filed pursuant to subsection (3) of this section shall be accompanied by the filing fee established by the commissioner and a surety bond filed with the application in an amount satisfactory to the commissioner, but no less than fifty thousand dollars ($50,000). The surety bond shall be in favor of the Commonwealth and shall secure payment of costs, fines, and damages to any person determined by the commissioner, after a hearing conducted in accordance with KRS Chapter 13B, to be aggrieved by an Internet Web site operator’s violation of this section and KRS § 292.411.
(6) Registration as an Internet Web site operator shall expire annually. Subsequent registration may be issued upon filing of a written renewal application, on a form prescribed by the commissioner and upon payment of the renewal fee established by the commissioner.
(7) Each Internet Web site operator registered pursuant to the section shall make and keep all accounts, correspondence, memoranda, papers, books, and other records which the commissioner prescribes by administrative regulation or order. All required records shall be:
(a) Preserved for three (3) years, unless the commissioner, by administrative regulation or order, prescribes otherwise for specified types of records; and
(b) 1. Kept within this state; or
2. At the request of the commissioner be made available at any time for examination by the department in the principal office of the registrant, or by production of exact copies to the department.
(8) The commissioner may conduct examinations of any Internet Web site operator registered pursuant to this section:
(a) 1. At a date and time specified by the commissioner; and
2. Within the scope determined by the commissioner; (b) Without prior notice to the Internet Web site operator; and
(c) The Internet Web site operator shall pay the reasonable expense attributable to any examination, not to exceed an amount prescribed by the commissioner by administrative regulation.
(9) If any change occurs that results in an Internet Web site operator no longer meeting the minimum requirements for registration as set forth in this section, the Internet Web site operator shall provide notice of such change to the commissioner as soon as practicable after discovery. Within thirty (30) days of delivery of the notice provided in this subsection, the Internet Web site operator shall, unless otherwise
permitted or directed by the commissioner, cease and desist from operating an
Internet Web site operator pursuant to KRS § 292.411(1)(r).
(10) The commissioner may deny, refuse to renew, condition, limit, suspend, or revoke the registration of an Internet Web site operator for any of the grounds set forth in KRS § 292.337, which are applicable to a broker-dealer, agent, investment adviser, or investment adviser representative.
(11) Except as provided in subsection (12) of this section, the commissioner shall not issue an order pursuant to subsection (10) of this section without appropriate notice to the applicant or registrant, opportunity for a hearing, and written findings of fact and conclusions of law in accordance with KRS Chapter 13B.
(12) The commissioner may take emergency action against an applicant or registrant, in accordance with the provisions set forth in KRS § 13B.125, if such action is in the public interest and there is substantial evidence of a violation of law that constitutes an immediate danger to the public health, safety, or welfare.
Effective: June 24, 2015
History: Created 2015 Ky. Acts ch. 24, sec. 2, effective June 24, 2015.
Legislative Research Commission Note (6/24/2015). 2015 Ky. Acts ch. 24, sec. 3 provides that this statute and KRS § 292.411 created in 2015 Ky. Acts ch. 24, secs. 1 and 2 shall be known and may be referred to as the “Kentucky Intrastate Crowdfunding Exemption.”