Session of 2024
HOUSE BILL No. 2562
By Committee on Financial Institutions and Pensions
Requested by Eric Turek on behalf of the Kansas Insurance Department
1-22
AN ACT concerning securities; enacting the protect vulnerable adults from
financial exploitation act; requiring reporting of instances of suspected
financial exploitation under certain circumstances; providing civil and
administrative immunity to individuals who report such instances;
amending K.S.A. 17-12a412 and repealing the existing section.
Be it enacted by the Legislature of the State of Kansas:
New Section 1. Sections 1 through 9, and amendments thereto, shall
be known and may be cited as the protect vulnerable adults from financial
exploitation act.
New Sec. 2. As used in the protect vulnerable adults from financial
exploitation act:
(a) "Act" means the protect vulnerable adults from financial
exploitation act.
(b) "Agent" means the same as defined in K.S.A. 17-12a102, and
amendments thereto.
(c) "Broker-dealer" means the same as defined in K.S.A. 17-12a102,
and amendments thereto.
(d) "Commissioner" means the securities commissioner of Kansas.
(e) "Eligible adult" means an elder person or dependent adult as
defined in K.S.A. 21-5417, and amendments thereto.
(f) "Financial exploitation" means the unlawful or improper use,
control or withholding of an eligible adult's property, income, resources or
trust funds by any other person or entity in a manner that is not for the
profit of or to the advantage of the eligible adult. "Financial exploitation"
includes, but is not limited to, the:
(1) Use of deception, intimidation, coercion, extortion or undue
influence by a person or entity to obtain or use an eligible adult's property,
income, resources or trust funds in a manner for the profit of or to the
advantage of such person or entity;
(2) breach of a fiduciary duty, including, but not limited to, the
misuse of a power of attorney, trust or a guardianship or conservatorship
appointment, as it relates to the property, income, resources or trust funds
of the eligible adult; or
(3) obtainment or use of an eligible adult's property, income,
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resources or trust funds, without lawful authority, by a person or entity
who knows or clearly should know that the eligible adult lacks the
capacity to consent to the release or use of such eligible adult's property,
income, resources or trust funds.
(g) "Investment adviser" means the same as defined in K.S.A. 17-
12a102, and amendments thereto.
(h) "Investment adviser representative" means the same as defined in
K.S.A. 17-12a102, and amendments thereto.
(i) "Person reasonably associated with the eligible adult" means:
(1) A person authorized to transact business on the account of the
eligible adult;
(2) an eligible adult's spouse, child, parent or sibling;
(3) a person who was previously designated by the eligible adult to
receive information under a customer agreement;
(4) a legal guardian or conservator of the eligible adult;
(5) a trustee, co-trustee or successor trustee of the account of the
eligible adult;
(6) a person named as a beneficiary on an account of the eligible
adult;
(7) an agent under a power of attorney of the eligible adult; or
(8) any other person permitted to be notified under existing state or
federal law, regulation or the rules of a self-regulatory organization, as
defined in K.S.A. 17-12a102, and amendments thereto.
(j) "Protective agencies" means the commissioner and the Kansas
department for children and families.
(k) "Qualified person" means any agent, broker-dealer, investment
adviser, investment adviser representative or person who serves in a
supervisory, compliance or legal capacity for a broker-dealer or investment
adviser.
New Sec. 3. If a qualified person reasonably believes that financial
exploitation of an eligible adult may have occurred, may have been
attempted or is being attempted, the broker-dealer or investment adviser
shall promptly report the matter to the protective agencies, which may
further report the matter as permitted or required by law.
New Sec. 4. A qualified person who, in good faith and exercising
reasonable care, makes a disclosure of information pursuant to section 3,
and amendments thereto, shall be immune from administrative and civil
liability that might otherwise arise from such disclosure or for any failure
to notify the eligible adult of such disclosure.
New Sec. 5. A qualified person who, in good faith and exercising
reasonable care, makes a disclosure of information pursuant to section 3,
and amendments thereto, may notify any person reasonably associated
with the eligible adult of the disclosure, unless the qualified person
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suspects that such person reasonably associated with the eligible adult has
committed or attempted financial exploitation of such eligible adult.
New Sec. 6. A qualified person who, in good faith and exercising
reasonable care, complies with the provisions of section 5, and
amendments thereto, shall be immune from any administrative and civil
liability that might otherwise arise from such disclosure.
New Sec. 7. (a) A broker-dealer or investment adviser may delay a
transaction associated with or disbursement from an account of an eligible
adult or an account on which an eligible adult is a beneficiary if:
(1) A qualified person reasonably believes, after initiating an internal
review of the requested transaction or disbursement and the suspected
financial exploitation, that the requested transaction or disbursement may
further financial exploitation of an eligible adult; and
(2) the broker-dealer or investment adviser:
(A) Immediately, and in no event more than two business days after
the date that a requested transaction or disbursement is delayed, provides
written notification of the delay and the reason for such delay to all parties
authorized to transact business on the account, unless such qualified
person reasonably believes that any such party is engaged in suspected or
attempted financial exploitation of the eligible adult;
(B) immediately, and in no event more than two business days after
the requested transaction or disbursement is delayed, notifies the
protective agencies; and
(C) continues such internal review of the suspected or attempted
financial exploitation of the eligible adult, as necessary and reports the
results of such investigation to the protective agencies upon request.
(b) Any delay of a transaction or disbursement authorized by this
section shall expire upon the soonest of:
(1) A determination by the broker-dealer or investment adviser that
the transaction or disbursement will not result in financial exploitation of
the eligible adult; or
(2) 15 business days following the date on which the broker-dealer or
investment adviser first delayed the transaction or disbursement, unless
either of the protective agencies requests that the broker-dealer or
investment adviser extend the delay, in which case the delay shall expire
not more than 25 business days after the date on which the broker-dealer
or investment adviser first delayed the transaction or disbursement if not
terminated sooner or further extended by either of the protective agencies
or an order of a court of competent jurisdiction.
(c) A court of competent jurisdiction may enter an order extending
the delay of the transaction or disbursement or may order other protective
relief based on the petition of either of the protective agencies, the broker-
dealer or investment adviser that initiated the delay under this section or
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another interested party.
New Sec. 8. A broker-dealer or investment adviser that, in good faith
and exercising reasonable care, complies with the provisions of section 7,
and amendments thereto, shall be immune from any administrative and
civil liability that might otherwise arise from such delay of a transaction or
disbursement in accordance with this act.
New Sec. 9. (a) A broker-dealer or investment adviser shall provide
access to or copies of records that are relevant to the suspected or
attempted financial exploitation of an eligible adult to the protective
agencies and to law enforcement agencies, either as part of a referral to the
protective agencies or to law enforcement agencies or upon request of
either protective agency or law enforcement agency pursuant to an
investigation. The records may include historical records and records
relating to the most recent transaction or transactions that may constitute
financial exploitation of an eligible adult.
(b) No record made available to the commissioner or other agencies
under this act shall be considered a public record under the open records
act, K.S.A. 45-215 et seq., and amendments thereto. The provisions of this
subsection providing for the confidentiality of public records shall expire
on July 1, 2029, unless the legislature reviews and acts to continue such
provisions in accordance with K.S.A. 45-229, and amendments thereto,
prior to July 1, 2029.
(c) Notwithstanding any provision of law to the contrary, the
protective agencies shall respond to reasonable inquiries from the
notifying qualified person and may disclose to the notifying qualified
person the general status or final disposition of any investigation that arose
from a report made by such qualified person.
(d) Nothing in this act shall limit or otherwise impede the authority of
the commissioner to access or examine the books and records of broker-
dealers and investment advisers as otherwise provided by law.
Sec. 10. K.S.A. 17-12a412 is hereby amended to read as follows: 17-
12a412. (a) Disciplinary conditions — applicants. An order issued under
this act may deny an application, or may condition or limit registration of
an applicant to be a broker-dealer, agent, investment adviser, or investment
adviser representative if the administrator finds that the order is in the
public interest and that there is a ground for discipline under subsection (d)
against the applicant or, if the applicant is a broker-dealer or investment
adviser, against any partner, officer, director, person having a similar status
or performing similar functions, or person directly or indirectly controlling
the broker-dealer or investment adviser.
(b) Disciplinary conditions — registrants. An order issued under this
act may revoke, suspend, condition, or limit the registration of a registrant
if the administrator finds that the order is in the public interest and that
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there is a ground for discipline under subsection (d) against the registrant
or, if the registrant is a broker-dealer or investment adviser, against any
partner, officer, or director, any person having a similar status or
performing similar functions, or any person directly or indirectly
controlling the broker-dealer or investment adviser. However, the
administrator:
(1) May not institute a revocation or suspension proceeding under
this subsection based on an order issued by another state that is reported to
the administrator or designee later than one year after the date of the order
on which it is based; and
(2) under subsection (d)(5)(A) and (B), may not issue an order on the
basis of an order under the state securities act of another state unless the
other order was based on conduct for which subsection (d) would
authorize the action had the conduct occurred in this state.
(c) Disciplinary penalties — registrants. If the administrator finds
that the order is in the public interest and that there is a ground for
discipline under subsection (d)(1) through (6), (8), (9), (10), (12) or (13)
against a registrant or, if the registrant is a broker-dealer or investment
adviser, against any partner, officer, or director, any person having similar
functions, or any person directly or indirectly controlling the broker-dealer
or investment adviser, then the administrator may enter an order against
the registrant containing one or more of the following sanctions or
remedies:
(1) A censure;
(2) a bar or suspension from association with a broker-dealer or
investment adviser registered in this state;
(3) a civil penalty up to $25,000 for each violation. If any person is
found to have violated any provision of this act, and such violation is
committed against elder or disabled persons, as defined in K.S.A. 50-676,
and amendments thereto, in addition to any civil penalty otherwise
provided by law, the administrator may impose an additional penalty not to
exceed $15,000 for each such violation. The total penalty against a person
shall not exceed $1,000,000;
(4) an order requiring the registrant to pay restitution for any loss or
disgorge any profits arising from a violation, including, in the
administrator's discretion, the assessment of interest from the date of the
violation at the rate provided for interest on judgments by K.S.A. 16-204,
and amendments thereto;
(5) an order charging the registrant with the actual cost of an
investigation or proceeding; or
(6) an order requiring the registrant to cease and desist from any
action that constitutes a ground for discipline, or to take other action
necessary or appropriate to comply with this act.
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(d) Grounds for discipline. A person may be disciplined under
subsections (a) through (c) if the person:
(1) Has filed an application for registration in this state under this act
or the predecessor act within the previous 10 years, which, as of the
effective date of registration or as of any date after filing in the case of an
order denying effectiveness, was incomplete in any material respect or
contained a statement that, in light of the circumstances under which it was
made, was false or misleading with respect to a material fact;
(2) willfully violated or willfully failed to comply with this act or the
predecessor act or a rule adopted or order issued under this act or the
predecessor act within the previous 10 years;
(3) has been convicted of a felony or within the previous 10 years has
been convicted of a misdemeanor involving a security, a commodity future
or option contract, or an aspect of a business involving securities,
commodities, investments, franchises, insurance, banking, or finance;
(4) is enjoined or restrained by a court of competent jurisdiction in an
action instituted by the administrator under this act or the predecessor act,
a state, the securities and exchange commission, or the United States from
engaging in or continuing an act, practice, or course of business involving
an aspect of a business involving securities, commodities, investments,
franchises, insurance, banking, or finance;
(5) is the subject of an order, issued after notice and opportunity for
hearing by:
(A) The securities, depository institution, insurance, or other financial
services regulator of a state or by the securities and exchange commission
or other federal agency denying, revoking, barring, or suspending
registration as a broker-dealer, agent, investment adviser, federal covered
investment adviser, or investment adviser representative;
(B) the securities regulator of a state or by the securities and
exchange commission against a broker-dealer, agent, investment adviser,
investment adviser representative, or federal covered investment adviser;
(C) the securities and exchange commission or by a self-regulatory
organization suspending or expelling the registrant from membership in
the self-regulatory organization;
(D) a court adjudicating a United States postal service fraud order;
(E) the insurance regulator of a state denying, suspending, or
revoking the registration of an insurance agent; or
(F) a depository institution regulator suspending or barring a person
from the depository institution business;
(6) is the subject of an adjudication or determination, after notice and
opportunity for hearing, by the securities and exchange commission, the
commodity futures trading commission, the federal trade commission, a
federal depository institution regulator, or a depository institution,
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insurance, or other financial services regulator of a state that the person
willfully violated the securities act of 1933, the securities exchange act of
1934, the investment advisers act of 1940, the investment company act of
1940, or the commodity exchange act, the securities or commodities law of
a state, or a federal or state law under which a business involving
investments, franchises, insurance, banking, or finance is regulated;
(7) is insolvent, either because the person's liabilities exceed the
person's assets or because the person cannot meet the person's obligations
as they mature, but the administrator may not enter an order against an
applicant or registrant under this paragraph without a finding of insolvency
as to the applicant or registrant;
(8) refuses to allow or otherwise impedes the administrator from
conducting an audit or inspection under K.S.A. 17-12a411(d), and
amendments thereto, refuses access to a registrant's office to conduct an
audit or inspection under K.S.A. 17-12a411(d), and amendments thereto,
fails to keep or maintain sufficient records to permit an audit disclosing the
condition of the registrant's business, or fails willfully and without cause to
comply with a request for information by the administrator or person
designated by the administrator in conducting investigations or
examinations under this act;
(9) has failed to reasonably supervise an agent, investment adviser
representative, or other individual, if the agent, investment adviser
representative, or other individual was subject to the person's supervision
and committed a violation of this act or the predecessor act or a rule
adopted or order issued under this act or the predecessor act within the
previous 10 years;
(10) has not paid the proper filing fee within 30 days after having
been notified by the administrator of a deficiency, but the administrator
shall vacate an order under this paragraph when the deficiency is
corrected;
(11) after notice and opportunity for a hearing, has been found within
the previous 10 years:
(A) By a court of competent jurisdiction to have willfully violated the
laws of a foreign jurisdiction under which the business of securities,
commodities, investment, franchises, insurance, banking, or finance is
regulated;
(B) to have been the subject of an order of a securities regulator of a
foreign jurisdiction denying, revoking, or suspending the right to engage in
the business of securities as a broker-dealer, agent, investment adviser,
investment adviser representative, or similar person; or
(C) to have been suspended or expelled from membership by or
participation in a securities exchange or securities association operating
under the securities laws of a foreign jurisdiction;
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(12) is the subject of a cease and desist order issued by the securities
and exchange commission or issued under the securities, commodities,
investment, franchise, banking, finance, or insurance laws of a state;
(13) has engaged in dishonest or unethical practices in the securities,
commodities, investment, franchise, banking, finance, or insurance
business within the previous 10 years;
(14) is not qualified on the basis of factors such as training,
experience, and knowledge of the securities business. However, in the case
of an application by an agent for a broker-dealer that is a member of a self-
regulatory organization or by an individual for registration as an
investment adviser representative, a denial order may not be based on this
paragraph if the individual has successfully completed all examinations
required by subsection (e). The administrator may require an applicant for
registration under K.S.A. 17-12a402 or 17-12a404, and amendments
thereto, who has not been registered in a state within the two years
preceding the filing of an application in this state to successfully complete
an examination; or
(15) lacks sufficient character or reputation to warrant the public
trust; or
(16) was required to report information under the protect vulnerable
adults from financial exploitation act and knowingly failed to make such a
report or knowingly caused such report not to be made within the previous
10 years.
(e) Examinations. A rule adopted or order issued under this act may
require that an examination, including an examination developed or
approved by an organization of securities regulators, be successfully
completed by a class of individuals or all individuals. An order issued
under this act may waive, in whole or in part, an examination as to an
individual and a rule adopted under this act may waive, in whole or in part,
an examination as to a class of individuals if the administrator determines
that the examination is not necessary or appropriate in the public interest
and for the protection of investors.
(f) Summary process. In accordance with the Kansas administrative
procedures procedure act, the administrator may use summary or
emergency proceedings to suspend or deny an application; restrict,
condition, limit, or suspend a registration; or censure, bar, or impose a civil
penalty or cease and desist order on a registrant before final determination
of an administrative proceeding. If a hearing is not requested and none is
ordered by the administrator within 30 days after the date of service of the
order, the order becomes final by operation of law. If a hearing is requested
or ordered, the administrator, after notice of and opportunity for hearing to
each person subject to the order, may modify or vacate the order or extend
the order until final determination.
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(g) Procedural requirements. (1) An order issued may not be issued
under this section, except under subsection (f), without:
(A) Appropriate notice to the applicant or registrant;
(B) opportunity for hearing; and
(C) findings of fact and conclusions of law in a record.
(2) Proceedings under this subsection shall be conducted in
accordance with the Kansas administrative procedures procedure act.
(h) Control person liability. A person that controls, directly or
indirectly, a person not in compliance with this section may be disciplined
by order of the administrator under subsections (a) through (c) to the same
extent as the noncomplying person, unless the controlling person did not
know, and in the exercise of reasonable care could not have known, of the
existence of conduct that is a ground for discipline under this section.
(i) Limit on investigation or proceeding. The administrator may not
institute a proceeding under subsection (a), (b), or (c) based solely on
material facts actually known by the administrator unless an investigation
or the proceeding is instituted within one year after the administrator
actually acquires knowledge of the material facts.
Sec. 11. K.S.A. 17-12a412 is hereby repealed.
Sec. 12. This act shall take effect and be in force from and after its
publication in the statute book.
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