SESSION OF 2024
SUPPLEMENTAL NOTE ON HOUSE BILL NO. 2562
As Recommended by House Committee on
Financial Institutions and Pensions
Brief*
HB 2562 would create the Protect Vulnerable Adults
from Financial Exploitation Act (Act), which would, among
other things, require a broker-dealer or investment adviser to
promptly report to designated protective agencies instances
in which the financial exploitation of an eligible adult may
have occurred or has or is being attempted. The bill would
also allow a broker-dealer or investment adviser to delay a
transaction with or disbursement from an account of an
eligible adult, including account beneficiaries, when financial
exploitation is expected. In addition, the bill would amend the
Kansas Uniform Securities Act (KUSA) to include within
provisions governing grounds for discipline a knowing failure
to make a report required under the Protect Vulnerable Adults
from Financial Exploitation Act.
Definitions (New Section 2)
The bill would establish several definitions within the Act,
including:
●“Agent,” would be assigned its definition from the
KUSA and would mean an individual, other than a
broker-dealer, who represents a broker-dealer in
effecting or attempting to effect purchases or sales
of securities or represents an issuer in effecting or
attempting to effect purchases or sales of the
issuer’s securities;
____________________
*Supplemental notes are prepared by the Legislative Research
Department and do not express legislative intent. The supplemental
note and fiscal note for this bill may be accessed on the Internet at
http://www.kslegislature.org ●“Broker-dealer,” also would be assigned its
definition from the KUSA and would mean a person
engaged in the business of effecting transactions in
securities for the account of others or for the
person’s own account. [Note: Under this uniform
act, “broker-dealer” does not include an agent; an
issuer; certain banks, savings institutions, or trusts
that meet specified conditions in the federal
Securities Exchange Act of 1934; an international
banking institution; or persons excluded by a rule
or order adopted under the KUSA.]
●“Eligible adult” would mean an elder person or
dependent adult as defined in a statute in the
Kansas Criminal Code pertaining to the
mistreatment of a dependent adult and the
mistreatment of an elder person;
○Under the Criminal Code provisions, an elder
adult means a person 60 years of age or
older; and
○A dependent adult means an individual 18
years of age or older who is unable to protect
the individual’s own interest.
– This term also includes an individual
who is (1) a resident of an adult care
home; (2) an adult cared for in a private
residence; (3) an individual kept, cared
for, treated, boarded, confined, or
otherwise accommodated in a medical
care facility; (4) an individual with
intellectual disability or a developmental
disability receiving services through a
community facility for people with
intellectual disability or residential facility;
(5) an individual with a developmental
disability receiving services provided by a
community service provider as provided
in the Developmental Disability Reform
Act; or (6) an individual kept, cared for,
2- 2562 treated, boarded, confined, or otherwise
accommodated in a state psychiatric
hospital or state institution for people with
intellectual disability.
●“Financial exploitation” would mean 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 to obtain or use an
eligible adult’s property, income, resources, or trust
funds in a manner that is not for the profit of or
advantage of the eligible adult.
This term would include, but not be limited to:
○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;
○Breach of a fiduciary duty, including, but not
limited to, the misuse of a power of attorney,
trust, or a guardianship or conservator
appointment, as it relates to property, income,
resources, or trust funds of the eligible adult;
or
○Obtainment or use of an eligible adult’s
property, income, 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.
●“Investment adviser” would be assigned its
definition from the KUSA and would mean a person
that, for compensation, engages in the business of
advising others, either directly or through
publications or writings, as to the value of
securities or the advisability of investing in,
3- 2562 purchasing, or selling securities or that, for
compensation and as a part of a regular business,
issues or promulgates analyses or reports
concerning securities. The term includes a financial
planner or other person that, as an integral
component of other financially related services,
provides investment advice to others for
compensation as part of a business or that holds
itself out as providing investment advice to others
for compensation.
Under the KUSA, “investment adviser” does not
include an investment adviser representative; a
lawyer, accountant, engineer, or teacher whose
performance of investment advice is solely
incidental to the practice of the person’s profession;
a broker-dealer or its agents whose performance of
investment advice is solely incidental to the
conduct of business as a broker-dealer and that
does not receive special compensation for the
investment advice; a publisher of a bona fide
newspaper, news magazine, or business or
financial publication of general and regular
circulation; a federally regulated investment
adviser; a bank, savings institution, or trust
company; any other person excluded by the federal
Investment Advisers Act of 1940 from the definition
of investment adviser; or any other person
excluded by rule adopted or order issued under the
KUSA;
●“Protective agencies” would mean the state
Securities Commissioner (Commissioner) and the
Kansas Department for Children and Families; and
●“Qualified person,” would mean 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.
4- 2562 The bill would also define the terms “act,”
“commissioner,” “investment adviser representative,” and
“person reasonably associated with the eligible adult.”
Governmental Disclosures; Immunity for Such
Disclosures (New Sections 3-4)
The bill would provide that 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 as permitted or required by
law. [Note: KSA 38-1431 requires certain persons or entities
to report instances when the person or entity has reasonable
cause to suspect or believe that an adult is in need of
protective services or being harmed as a result of abuse,
neglect, or financial exploitation. Bank trust officers and other
officers of financial institutions are required to make such
reports. That act does not currently include those defined
persons in the bill that are subject to regulation under the
KUSA and the Commissioner.]
The bill would also provide that a qualified person who,
in good faith and exercising reasonable care, makes a
disclosure of information as required by the bill’s provisions
(section 3), 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 this disclosure .
Third-party Disclosures; Immunity for Such Disclosures
(New Sections 5-6)
The bill would provide that any person who, in good faith
and exercising reasonable care, makes a disclosure of
information as required by the bill’s provisions (section 3) may
notify any person reasonably associated with the eligible
adult of the disclosure, unless the qualified person suspects
that such person reasonably associated with the eligible adult
5- 2562 has committed or attempted financial exploitation of such
eligible adult.
The bill would also provide that a qualified person who,
in good faith and exercising reasonable care, complies with
the bill’s provisions (section 5) shall be immune from any
administrative and civil liability that might otherwise arise from
such disclosure.
Delaying of Transactions and Disbursements; Immunity
for Delaying (New Section 7-8)
The bill would permit a broker-dealer or investment
adviser to delay a transaction associated with or a
disbursement from an account of an eligible adult or an
account on which the eligible adult is a beneficiary if:
●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 the
financial exploitation of an eligible adult; and
●The broker-dealer or investment adviser:
○Immediately, and within two business days
after the date for the request to delay the
transaction or disbursement, 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;
○Immediately, and within two business days
after the requested transaction or
6- 2562 disbursement is delayed, notifies the
protective agencies; and
○Continues such internal review of the
suspected or attempted financial exploitation
of the eligible adult, as necessary, and reports
the result of this investigation to the protective
agencies upon request.
The bill would also provide that any authorized delay of
a transaction or disbursement would expire on the soonest of:
●A determination by the broker-dealer or investment
adviser that the transaction or disbursement will
not result in financial exploitation of the adult; or
●Fifteen 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;
○If the delay is extended, it shall expire not
more than 25 business days after the date on
which the transaction or disbursement was
first delayed if not terminated sooner or
further extended by either of the protective
agencies or a court of competent jurisdiction.
The bill would permit a court of competent jurisdiction to
enter an order extending the delay of the transaction or
disbursement of 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, or
another interested party.
Immunity
The bill would provide that a broker-dealer or investment
adviser that, in good faith and exercising reasonable care,
7- 2562 complies with the bill’s provisions (section 7), 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.
Records (New Section 9)
The bill would require a broker-dealer or investment
adviser to 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 or 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 could
include historical records and records relating to the most
recent transaction or transactions that may constitute
financial exploitation of an eligible adult.
The bill would specify that no record made available to
the Commissioner or other agencies under this act will be
considered a public record under the Kansas Open Records
Act (KSA 45-215 et seq.). The provisions pertaining to
confidentiality of public records will expire on July 1, 2029,
unless the Legislature reviews and acts to continue such
provisions.
The bill would require the protective agencies,
notwithstanding any provision of law to the contrary, to
respond to reasonable inquiries from the notifying qualified
person and allow disclosure to the notifying qualified person
of the general status or final disposition of any investigation
that arose from a report made by such qualified person.
The bill would further state that 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.
8- 2562 Kansas Uniform Securities Act Amendments — Grounds
for Discipline (Section 10)
The bill would amend provisions in the KUSA applying to
discipline of applicants and registrants to add criteria to the
criteria provided for grounds for discipline, which includes
censure; a bar or suspension with a broker-dealer or
investment adviser registered in the state; and a civil penalty
up to $25,000 for each violation. The bill also would add a
knowing failure to make a report required under the Protect
Vulnerable Adults from Financial Exploitation Act or knowingly
causing such report to not be made within the previous ten
years.
Background
The bill was introduced by the House Committee on
Financial Institutions and Pensions at the request of a
representative of the Kansas Insurance Department.
[Note: In January 2016, the North American Securities
Administrators Association (NASAA) approved its Model Act
to Protect Vulnerable Adults from Financial Exploitation
(Model Act). According to written testimony submitted by
NASAA for the hearing on HB 2562, as of January 2024, 38
jurisdictions have state laws that informed, or are inspired by,
the Model Act.]
House Committee on Financial Institutions and Pensions
In the House Committee hearing, proponent testimony
was provided by representatives of the Kansas Insurance
Department, AARP Kansas, the Kansas Association of Area
Agencies on Aging and Disabilities, and the National
Association of Insurance and Financial Advisers of Kansas.
The Kansas Insurance Department representative indicated
the bill is integrated with existing regulatory and criminal
protections and would give financial professionals addition
9- 2562 tools to promote their clients’ best interests when they are
subjected to unlawful financial exploitation. The bill would
make it easier for these professionals to report financial
exploitation and grant ability to slow down a requested
transaction or disbursement to allow time for verification of its
legitimacy. Proponents addressed concerns regarding the
need to enact additional safeguards to address certain risks
and influences on vulnerable persons.
Written-only proponent testimony was submitted by
representatives of AE Wealth Management, LLC and AE
Financial Services, LLC; the Department for Children and
Families (DCF); the Kansas Council on Developmental
Disabilities; NASAA; the Public Investors Advocate Bar
Association; and the Securities Industry and Financial
Markets Association. These proponents highlighted the
concerns of financial exploitation and the need for tools to
permit a “report and hold,” allowing investment entities to
report and place temporary holds on suspicious transactions
and disbursements. The DCF testimony expressed concern
about a provision pertaining to reporting the status of an
investigation or the results of an investigation and current
notification and reporting requirements on the agency.
No other testimony was provided.
Fiscal Information
According to the fiscal note prepared by the Division of
the Budget, enactment of the bill would have no effect on
several state agencies and some effect as outlined by the
Office of Judicial Administration. The fiscal note also
addresses the bill’s fiscal effect on local governments.
The Kansas Insurance Department states that even
though the bill would increase reports of financial exploitation
of elder and dependent adults, the agency has sufficient
resources to be able to receive and investigate the reports.
10- 2562 Therefore, the bill would not have a fiscal effect on the
agency.
DCF states that the bill would not have a fiscal effect but
could result in premature applications for Medicaid. DCF
currently works with the Department of Health and
Environment Medicaid eligibility staff when vulnerable adults
have been victims of financial exploitation, which occurs in
approximately 125 cases per year. This is current practice,
and therefore no additional expenditures are anticipated.
The Office of Judicial Administration states that the bill
could increase the number of cases filed in district courts
because it authorizes certain civil or administrative court
actions. The bill would allow for judicial review and
administrative action for the failure-to-report violations, which
would increase the time spent by district court judicial and
nonjudicial personnel in processing, researching, and hearing
cases. The bill could also result in the collection of docket
fees that would be deposited into the State General Fund.
However, the agency cannot estimate the overall fiscal effect
of the bill.
The Office of the Attorney General states the bill would
not have a fiscal effect on the agency.
Any fiscal effect associated with enactment of the bill is
not reflected in The FY 2025 Governor’s Budget Report.
The Kansas Association of Counties indicates that the
bill would not have a fiscal effect on counties unless current
resources are not adequate to handle additional prosecution
and court needs. The League of Kansas Municipalities states
the bill would not have a fiscal effect on cities.
Vulnerable persons; Protect Vulnerable Adults from Financial Exploitation Act;
financial exploitation; eligible adults; broker-dealers; investment advisers; delay of
transaction or disbursement; records and reporting; Department for Children and
Families; Securities Commissioner; Kansas Uniform Securities Act
11- 2562