Securities Frequently Asked Questions
Securities Registration or Exemptions
How can a person determine whether they are offering securities when seeking capital for their business or organization?
K.S.A. 17-12a102(28) provides the definition of a security. The definition is very broad and includes those things everyone knows as securities, such as notes, stocks, bonds, and options, but also includes much broader concepts through the inclusion of the term “investment contract.” Generally speaking, any interest that is included in the laundry list provided in the definition of security or any interest that does not allow for the active participation of the investor is security. If you have further questions about the definition, please contact the Office of the Kansas Securities Commission staff for consultation.
Which exemptions from securities registration or "federal covered securities" require a notice filing and fee?
Most exemptions from securities registration under K.S.A. 17-12a201 and K.S.A. 17-12a202 are “self-executing exemptions” and do not require a notice filing and fee, and most securities defined as “federal covered securities” do not require a notice filing and fee.
Only the following federal covered securities (FCS) and exemptions from securities registration require a notice filing and fee:
- Rule 506 offerings (FCS) as required by K.A.R. 81-5-15, unless the issuer can comply with a self-executing exemption under K.S.A. 17-12a202, such as the limited offering exemption under subsection (14) of that statute, as provided under K.A.R. 81-5-15(c). If no other exemption can be claimed, then a Form D and fee are required as specified by K.A.R. 81-5-15 (a) and (b).
- The Accredited Investor Exemption under K.A.R. 81-5-13, which requires the filing of a notice on Form D and a fee of $250 specified by K.A.R. 81-5-8(a)(2).
- The Agricultural Associations Exemption as specified by K.A.R. 81-5-18, which requires a notice with documents listed under paragraph (1) of that regulation, and a filing fee of $250 as required by K.A.R. 81-5-8(a)(3).
- Mutual Funds and Unit-Investment-Trusts (FCS) as required by K.A.R. 81-5-14. A Form NF is required before offers and sales of these investment company securities in Kansas, but no Form U-2 is required unless requested in writing by KSC staff.
- The Invest Kansas Exemption (IKE) provided by K.A.R. 81-5-21 requires a notice filing on Form IKE, but no filing fee is required.
Are amendments to Form D required to be filed for a Rule 506 offering?
Although K.A.R. 81-5-15 does not specify requirements for filing an amended Form D, the instructions on page five of Form D should be followed for a few types of corrections or changes that would be necessary by filing an amended Form D with KSC. Generally, amendments to Form D are only necessary for correcting identifying information for the issuer or descriptions of the offering. The instructions on page five of Form D also indicate when an amendment is not required for various changes or updates of information on the original Form D. That guidance should also be followed for filings with KSC. Annual filings are not required in Kansas for continuous offerings.
What are the requirements for requesting a “No Action” or “Interpretive Opinion” letter?
Requests for no action or an interpretive opinion can be filed with respect to proposed transactions under circumstances or conditions such that determinations of compliance with exemptions on a self-executing basis are relatively difficult or unclear. K.A.R. 81-5-8(b) requires a fee of $250 with requests. The request should be filed by letter to the KSC general counsel and the letter should include an extensive description of the proposed transaction along with all relevant facts and related documents. It is recommended that requests be prepared by securities counsel for the issuer and that the request include an analysis of regulatory treatment and arguments for no action or interpretation by counsel for consideration by legal staff at KSC.
Is it ok to place ads in print, on the web, use telemarketers or use mass mailings to attract investors in Kansas to raise capital?
Generally, not until after a securities offering is registered with KSC. With very few exceptions described below, no advertising or general solicitation of investors should occur in Kansas before registering a securities offering with KSC and possibly other states and the U.S. Securities and Exchange Commission. Advertising and general solicitation would cause an offering to be a public offering rather than private. And generally, offerings must be made privately to certain persons known by persons offering the securities in order to comply with exemptions from registration, such as the limited offering exemption under K.S.A. 17-12a202(14) or exemption under rule 506(b) of federal Regulation D.
Exceptions from the general prohibition on advertising before registration of securities are as follows:
- A general announcement is allowable for offerings to Accredited Investors only under the Accredited Investor Exemption and may contain only the information listed in K.A.R. 81-5-13(d).
- The Invest Kansas Exemption (IKE) allows for general solicitation if conditions under K.A.R. 81-5-21(a)(7) are met, including the filing of a notice with KSC prior to use of any advertisement or other general solicitation.
- General solicitation would be permissible for offers to Institutional Investors under K.S.A. 17-12a202(13), however, as a practical matter, it is questionable whether that approach would be effective for attracting the interest of Institutional Investors.
- General solicitation would be possible for a company whose securities are listed or approved for listing on a major stock exchange or the national market as provided by K.A.R. 81-5-7. However, as a practical matter, new or development stage companies would not be able to meet the listing standards to qualify for the Exchange Exemption. Ordinarily, companies would register an initial public offering with the SEC and KSC before meeting the listing requirements.
- Rule 506(c) of federal Regulation D allows general solicitation if the offering is made only to Accredited investors.
Please contact the Corporate Finance staff at KSC with any questions regarding the use of advertising or general solicitation methods.
Are securities issued by not-for-profit organizations exempt from registration?
Debt securities issued by not-for-profit organizations are not exempt from securities registration based on provisions of K.S.A. 17-12a201(7)(C) and K.A.R. 81-4-4 and would need to be registered before offers and sales are made in Kansas, unless a transactional exemption under K.S.A. 17-12a202 can be claimed. The limited offering exemption under subsection (14) of K.S.A. 17-12a202 may be possible for nonprofit issuers to sell securities to not more than 25 Kansas purchasers within a 12-month period if no general solicitation is used and no commissions are paid to unregistered persons.
Also, the Invest Kansas Exemption (IKE) as specified by K.A.R. 81-5-21 may be possible for nonprofit corporations organized and operating in Kansas to issue up to $1,000,000 in debt securities if sales to each Kansas investor are limited to no more than $5,000 unless they qualify as an accredited investor as defined by SEC Rule 501 under Regulation D.
How can an investment offering be made to family and friends to raise start-up capital for a new business in Kansas?
If an exemption from registration is not feasible, what is required for registration of securities in Kansas?
Please review the information on the Registration of Securities webpage.
If officers of a company (the issuer) will be actively involved in soliciting investors and making offers and sales of securities, do they need to be registered with KSC as agents?
If agents of an issuer do not receive any direct or indirect compensation in connection with offers and sales of the issuer’s securities, then those individuals would be exempt from registration as agents under provisions of K.S.A. 17-12a402(b). However, if any of their compensation is based on securities transactions, in addition to a salary for performing various other duties for an issuer, then registration would be necessary. Please contact corporate finance staff at KSC for questions regarding agents of issuers.
Can persons planning a securities offering call, email, or meet with KSC staff to learn more about exemption or registration requirements for a securities offering?
Certainly, in fact, such consultation in the planning stages is highly recommended to avoid violations of exemption requirements or problems or delays during the registration process. See Consultation with Staff for more information. It is also recommended that issuers and persons offering securities should confer with a securities attorney who is familiar with both state and federal securities laws and regulations.
Can KSC staff recommend an experienced securities lawyer to assist a company and officers with securities law compliance?
No, the KSC cannot recommend any particular attorneys, but recommends contacting bar associations to obtain names of attorneys who indicate securities or corporate finance as one of their practice areas. It is also possible to obtain a listing of attorneys in particular cities in Kansas or other states who have served as correspondents and filed applications for registration or exemption notices on behalf of issuer clients.
How long are securities registrations effective, and what is required for renewal of registrations?
Securities registrations are effective for one year unless extended for an additional year based on provisions of K.S.A. 17-12a305(h) and compliance with the following requirements specified by K.A.R. 81-4-1(d):
- A current prospectus with updated disclosures and financial statements for the issuer’s latest fiscal year, unless the latest available prospectus was already filed as an amendment during the previous registration period.
- A filing fee at the rate of 0.0025% of the aggregate amount to be registered in Kansas for the extended year of registration, with a minimum fee of $50 and a maximum fee of $750.
- Form KSC-1
The due date for filing the items above is 10 business days before the expiration of the effective registration.
I found an old stock certificate. How do I find out if it still has any value?
- Contact the Secretary of State’s office in the state where the business was incorporated to verify that the company is still in business. If the company has gone out of business, the stock likely has no value. However, if the company has merged with another company or simply changed its name, the stock may still have value.
- Check with a broker-dealer to see if they have any information about the issuing company or visit Scripophily.com
- Visit the reference section of your local public library and ask for a book entitled Directory of Obsolete Securities. The Securities and Exchange Commission has also compiled a list of resources that may be helpful in researching old stock certificates.
I lost my stock certificate. What do I do?
Contact the broker-dealer from whom you purchased the stock.
There has been a delay in receiving my stock certificate. What can I do?
Contact your broker-dealer or issuer. Today, many stock investments are held in “street name” at the broker-dealer. Your purchase confirmation and account statements are your evidence of ownership (along with the broker-dealer’s records). If you still wish to have a stock certificate, contact your broker-dealer or issuer.
Broker-Dealers & Agents
Are the registration requirements listed on your website?
Yes, go to the Broker-Dealer Registration Requirements section.
What exemptions from registration are available for Broker-Dealers?
Exemptions from registration available to broker-dealers may be found at K.S.A. 17-12a401(b).
Is there a de minimis exemption?
There is no de minimis exemption for broker-dealers located within Kansas. Out-of-state broker-dealers with no more than three Kansas customers in the past 12 months are not required to register with the KSC if they meet the conditions specified by K.S.A.17-12a401(b)(1)(G).
Do broker-dealers and agents need to renew annually?
Yes, but all renewals are done through the online Central Registration Depository (CRD) system. You do not need to file anything directly with the Office of the Kansas Securities Commissioner.
Do broker-dealers need to file their annual audited financial statements with your office?
No. These are to be filed only upon request by the Office of the Kansas Securities Commissioner, and then within five days of the request. See Kansas Securities Regulation 81-3-7(b).
What are the initial registration fees for broker-dealers and agents?
The initial registration fee for broker-dealer firms is $100.
The initial registration fee for agents is $30.
What are the registration renewal fees?
The cost for a renewal of your broker-dealer firm’s registration is $100.
The cost for a renewal of your agent’s registration is $30.
Does Kansas require branch office registration?
Kansas does not require registration or notice of branch offices located in the state.
What are the examination requirements for agents of broker-dealers?
The Series 63 or Series 66 examination is required in addition to at least one other examination as required by the Financial Industry Regulatory Authority (FINRA), pursuant to K.A.R. 81-3-1(c)(1)(C). Agent applicants must be sponsored to take the FINRA examination by their employing broker-dealer. The Office of the Kansas Securities Commissioner will not sponsor an applicant to take a FINRA exam.
Can an agent be registered simultaneously with more than one broker-dealer (dual registration)?
Dual registration is not permitted unless the broker-dealers are affiliated by direct or indirect common control as required by K.S.A. 17-12a402(e).