17-12a306.   Denial, suspension and revocation ofsecurities registration.(a) Stop orders. The administrator may issue astop order denying effectiveness to, or suspending or revoking theeffectiveness of, a registration statement if the administratorfinds that the order is in the public interest and that:

      (1)   The registration statement as of its effective date orbefore the effective date in the case of an order denyingeffectiveness, an amendment underK.S.A. 17-12a305(j), andamendmentsthereto, as of its effective date, or a report underK.S.A. 17-12a305(i), and amendments thereto, is incomplete in a materialrespect orcontains a statement that, in the light of the circumstances under which it wasmade, was false or misleading with respect to amaterial fact;

      (2)   this act or a rule adopted or order issued under this actor a condition imposed under this act has been willfully violated,in connection with the offering, by:

      (A)   The person filing the registration statement, but only if suchperson is directly or indirectly controlled by or acting for theissuer;

      (B)   the issuer, a partner, officer, or director of the issueror a person having a similar status or performing a similarfunction;

      (C)   a promoter of the issuer;

      (D)   a person directly or indirectly controlling or controlledby the issuer; or

      (E)   an underwriter;

      (3)   the security registered or sought to be registered is thesubject of a permanent or temporary injunction of a court ofcompetent jurisdiction or an administrative stop order or similarorder issued under any federal, foreign, or state law other thanthis act applicable to the offering, but the administrator may notinstitute a proceeding against an effective registration statementunder this paragraph more than one year after the date of the orderor injunction on which it is based, and the administrator may notissue an order under this paragraph on the basis of an order orinjunction issued under the securities act of another state unlessthe order or injunction was based on conduct that would constitute,as of the date of the order, a ground for a stop order under thissection;

      (4)   the issuer's enterprise or method of business includes orwould include activities that are unlawful where performed or inthis state;

      (5)   with respect to a security sought to be registered underK.S.A. 17-12a303, and amendments thereto, there has been a failuretocomply with the undertaking required byK.S.A. 17-12a303(b)(4), andamendments thereto;

      (6)   the applicant or registrant has not paid the filing fee,but the administrator shall void the order if the deficiency iscorrected;

      (7)   the offering:

      (A)   Will work or tend to work a fraud upon purchasers or wouldso operate;

      (B)   has been or would be made with unreasonable amounts ofunderwriters' and sellers' discounts, commissions, or othercompensation, or promoters' profits or participations, orunreasonable amounts or kinds of options; or

      (C)   is being made on terms that are unfair, unjust, orinequitable;

      (b)   Enforcement of subsection (a)(7). To the extentpracticable, the administrator by rule adopted or order issuedunder this act shall publish standards that provide notice of conduct thatviolates subsection (a)(7).

      (c)   Institution of stop order. The administrator may notinstitute a stop order proceeding against an effective registrationstatement on the basis of conduct or a transaction known to theadministrator when the registration statement became effectiveunless the proceeding is instituted within 30 days after theregistration statement became effective.

      (d)   Summary process. The administrator may summarily revoke,deny, postpone, or suspend the effectiveness of a registrationstatement pending final determination of an administrativeproceeding. Upon the issuance of the order, the administratorshall promptly notify each person specified in subsection (e) thatthe order has been issued, the reasons for the revocation, denial,postponement, or suspension, and that within 15 days after thereceipt of a request in a record from the person the matter will bescheduled for a hearing. If a hearing is not requested and none isordered by the administrator, within 30 days after the date ofservice of the order, the order becomes final. If a hearing isrequested or ordered, the administrator, after notice of andopportunity for hearing for each person subject to the order, maymodify or vacate the order or extend the order until finaldetermination.

      (e)   Procedural requirements for stop order. (1) A stop ordermay not be issued under this section without:

      (A)   Appropriate notice to the applicant or registrant, the issuer, and theperson on whose behalf the securities are to be orhave been offered;

      (B)   an opportunity for hearing; and

      (C)   findings of fact and conclusions of law in a record.

      (2)   Any proceeding under this section shall be done inaccordance with the Kansas administrative procedure act.

      (f)   Modification or vacation of stop order. The administratormay modify or vacate a stop order issued under this section if theadministrator finds that the conditions that caused its issuancehave changed or that it is necessary or appropriate in the publicinterest or for the protection of investors.

      History:   L. 2004, ch. 154, § 16; July 1, 2005.