17-12a411.   Postregistration requirements.(a) Financial requirements. Subject to section15(h) of the securities exchange act of 1934 (15 U.S.C. section78o(h)) or Section 222 of the investment advisers act of 1940 (15U.S.C. section 80b-22), a rule adopted or order issued under thisact may establish minimum financial requirements for broker-dealersregistered or required to be registered under this act andinvestment advisers registered or required to be registered underthis act.

      (b)   Financial reports. Subject to section 15(h) of thesecurities exchange act of 1934 (15 U.S.C. section 78o(h)) orsection 222(b) of the investment advisers act of 1940 (15 U.S.C.section 80b-22), a broker-dealer registered or required to beregistered under this act and an investment adviser registered orrequired to be registered under this act shall file such financial reports asare required by a rule adopted or order issued under thisact. If the information contained in a record filed under thissubsection is or becomes inaccurate or incomplete in a materialrespect, the registrant shall promptly file a correcting amendment.

      (c)   Recordkeeping. Subject to section 15(h) of the securitiesexchange act of 1934 (15 U.S.C. section 78o(h)) or section 222 ofthe investment advisers act of 1940 (15 U.S.C. section 80b-22):

      (1)   A broker-dealer registered or required to be registeredunder this act and an investment adviser registered or required tobe registered under this act shall make and maintain the accounts,correspondence, memoranda, papers, books, and other records requiredby rule adopted or order issued under this act;

      (2)   broker-dealer records required to be maintained underparagraph (1) may be maintained in any form of data storageacceptable under section 17(a) of the securities exchange act of1934 (15 U.S.C. section 78q(a)) if they are readily accessible tothe administrator; and

      (3)   investment adviser records required to be maintained underparagraph (1) may be maintained in any form of data storage requiredby rule adopted or order issued under this act.

      (d)   Audits or inspections. The records of every person issuingor guaranteeing any securities subject to the provisions of this actand of every broker-dealer, agent, investment adviser or investmentadviser representative registered or required to be registered underthis act are subject to such reasonable periodic, special, or other audits orinspections by a representative of the administrator,within or without this state, as the administrator considersnecessary or appropriate in the public interest and for theprotection of investors. An audit or inspection may be made at anytime and without prior notice. The administrator may copy, andremove for audit or inspection copies of, all records theadministrator reasonably considers necessary or appropriate toconduct the audit or inspection. The administrator may assess areasonable charge for conducting an audit or inspection under thissubsection.

      (e)   Custody and discretionary authority bond or insurance.Subject to section 15(h) of the securities exchange act of 1934 (15U.S.C. section 78o(h)) or section 222 of the investment advisers actof 1940 (15 U.S.C. section 80b-22), a rule adopted or order issuedunder this act may require a broker-dealer or investment adviserthat has custody of or discretionary authority over funds orsecurities of a customer or client to obtain insurance or post abond or other satisfactory form of security. The administrator maydetermine the requirements of the insurance, bond, or othersatisfactory form of security. Insurance or a bond or othersatisfactory form of security may not be required of a broker-dealerregistered under this act whose net capital exceeds, or of aninvestment adviser registered under this act whose minimum financialrequirements exceed, the amounts required by rule or order underthis act. The insurance, bond, or other satisfactory form of security mustpermit an action by a person to enforce any liabilityon the insurance, bond, or other satisfactory form of security ifinstituted within the time limitations inK.S.A. 17-12a509(j)(2),andamendments thereto.

      (f)   Requirements for custody. Subject to section 15(h) of thesecurities exchange act of 1934 (15 U.S.C. section 78o(h)) orsection 222 of the investment advisers act of 1940 (15 U.S.C.section 80b-22), an agent may not have custody of funds orsecurities of a customer except under the supervision of a broker-dealer and aninvestment adviser representative may not have custodyof funds or securities of a client except under the supervision ofan investment adviser or a federal covered investment adviser. Arule adopted or order issued under this act may prohibit, limit, orimpose conditions on a broker-dealer regarding custody of funds orsecurities of a customer and on an investment adviser regardingcustody of securities or funds of a client.

      (g)   Investment adviser brochure rule. With respect to aninvestment adviser registered or required to be registered underthis act, a rule adopted or order issued under this act may requirethat information or other record be furnished or disseminated toclients or prospective clients in this state as necessary orappropriate in the public interest and for the protection ofinvestors and advisory clients.

      (h)   Continuing education. A rule adopted or order issued underthis act may require an individual registered underK.S.A. 17-12a402or 17-12a404, andamendments thereto, to participate in a continuing educationprogram approved by the securities and exchange commission andadministered by a self-regulatory organization or, in the absenceof such a program, a rule adopted or order issued under this act mayrequire continuing education for an individual registered underK.S.A. 17-12a404, and amendments thereto.

      History:   L. 2004, ch. 154, § 28; July 1, 2005.