Session of 2023
SENATE BILL No. 51
By Committee on Financial Institutions and Insurance
1-18
AN ACT concerning financial institutions; relating to the technology-
enabled fiduciary financial institutions act; definitions; authorizing the
state bank commissioner to accept state and national criminal history
record checks from private entities; amending K.S.A. 9-2301 and 9-
2302 and repealing the existing sections.
Be it enacted by the Legislature of the State of Kansas:
Section 1. K.S.A. 9-2301 is hereby amended to read as follows: 9-
2301. (a) The provisions of K.S.A. 9-2301 through 9-2327, and
amendments thereto, shall be known and may be cited as the technology-
enabled fiduciary financial institutions act. The technology-enabled
fiduciary financial institutions act shall be a part of and supplemental to
chapter 9 of the Kansas Statutes Annotated, and amendments thereto.
(b) For purposes of the technology-enabled fiduciary financial
institutions act:
(1) "Act" means the technology-enabled fiduciary financial
institutions act;
(2) "alternative asset" means professionally managed investment
assets that are not publicly traded, including, but not limited to, private
equity, venture capital, leveraged buyouts, special situations, structured
credit, private debt, private real estate funds and natural resources,
including any economic or beneficial interest therein;
(3) "alternative asset custody account" means an account created by
the owner of an alternative asset that designates a fiduciary financial
institution as custodian or agent and into which the owner transfers,
electronically or otherwise, content, materials, data, information,
documents, reports and contracts in any form, including, without
limitation, evidence of ownership, subscription agreements, private
placement memoranda, limited partnership agreements, operating
agreements, financial statements, annual and quarterly reports, capital
account statements, tax statements, correspondence from the general
partner, manager or investment advisor of the alternative asset, an
investment contract as defined in K.S.A. 17-12a102(28)(E), and
amendments thereto, and any digital asset as defined in K.S.A. 58-4802,
and amendments thereto, whether such information is in hard copy form or
a representation of such information that is stored in a computer readable
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format;
(4) "charitable beneficiaries" means one or more charities,
contributions to which are allowable as a deduction pursuant to section
170 of the federal internal revenue code that are designated as
beneficiaries of a fidfin trust;
(5) "custodial services" means the safekeeping and management of an
alternative asset custody account, including the execution of customer
instructions, serving as agent, fund administrative services and overall
decision-making and management of the account by a fiduciary financial
institution and "custodial services" shall be deemed to involve the exercise
of fiduciary and trust powers;
(6) "director" means a person designated as a member of the board
of directors pursuant to K.S.A. 9-2306, and amendments thereto;
(7) "economic growth zone" means an incorporated community with
a population of not more than 5,000 people located within one of the
following counties: Allen, Anderson, Barber, Bourbon, Brown, Chase,
Chautauqua, Cherokee, Cheyenne, Clark, Clay, Cloud, Coffey, Comanche,
Decatur, Doniphan, Edwards, Elk, Ellsworth, Gove, Graham, Grant, Gray,
Greeley, Greenwood, Hamilton, Harper, Harvey, Haskell, Hodgeman,
Jackson, Jewell, Kearny, Kingman, Kiowa, Labette, Lane, Lincoln, Linn,
Logan, Marion, Marshall, Meade, Mitchell, Montgomery, Morris, Morton,
Nemaha, Neosho, Ness, Norton, Osborne, Ottawa, Pawnee, Phillips, Pratt,
Rawlins, Republic, Rice, Rooks, Rush, Russell, Scott, Sheridan, Sherman,
Smith, Stafford, Stanton, Stevens, Sumner, Trego, Thomas, Wabaunsee,
Wallace, Washington, Wichita, Wilson or Woodson;
(7)(8) "excluded fiduciary" means a fiduciary financial institution in
its capacity as trustee of a fidfin trust, provided that a fiduciary financial
institution shall only be deemed an "excluded fiduciary" to the extent the
fiduciary financial institution is excluded from exercising certain powers
under the instrument that may be exercised by the trust advisor or other
persons designated in the instrument;
(8)(9) "fidfin," "fidfin services" or "fidfin transactions" means the
financing of a fidfin trust or the acquisition of alternative assets on behalf
of and through a fidfin trust, or both, as provided in K.S.A. 9-2311, and
amendments thereto, including loans, extensions of credit and direct
investments;
(9)(10) "fidfin trust" means a trust created to facilitate the delivery of
fidfin services by a fiduciary financial institution;
(10)(11) "fiduciary" means a trustee, a trust advisor or a custodian of
an alternative asset custody account appointed under an instrument that is
acting in a fiduciary capacity for any person, trust or estate;
(11)(12) "instrument" means any document creating a fidfin trust or
alternative asset custody account;
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(13) "officer" means a person who participates or has authority to
participate, other than in the capacity of a director, in major policymaking
functions of the bank, trust company or fiduciary financial institution,
whether or not the officer has an official title or if the officer is serving
without salary or other compensation. "Officer" includes the chairperson
of the board, president, vice president, cashier, secretary and treasurer of
a bank, trust company or fiduciary financial institution;
(14) "organizer" means a person who filed the fiduciary financial
institution formation documents;
(12)(15) "out-of-state bank" means a national or state bank, savings
and loan association or savings bank not incorporated under the laws of
Kansas;
(13)(16) "out-of-state financial institution" means an out-of-state
bank or an out-of-state trust company;
(14)(17) "out-of-state trust company" means a national or state trust
company not incorporated under the laws of Kansas;
(18) "private entity" means an entity other than the Kansas bureau of
investigation or the federal bureau of investigation that can provide a
state or national criminal history record check;
(15)(19) (A) "qualified investment" means the purchase or
development, in the aggregate, of at least 10,000 square feet of
commercial, industrial, multiuse or multifamily real estate in the economic
growth zone where the fiduciary financial institution maintains its
principal office pursuant to K.S.A. 9-2309, and amendments thereto,
provided that such community has committed to develop the necessary
infrastructure to support a "qualified investment." A "qualified
investment":
(i) May include, as part of satisfying the square footage requirements,
the suitable office space of such fiduciary financial institution, as provided
in K.S.A. 9-2309, and amendments thereto, if owned by the fiduciary
financial institution;
(ii) shall be exempt from the provisions and limitations of K.S.A. 9-
1102, and amendments thereto;
(iii) may be retained by a fiduciary financial institution for as long as
the fiduciary financial institution operates in this state; and
(iv) may be sold, transferred or otherwise disposed of, including a
sale or transfer to an affiliate of the fiduciary financial institution, if the
fiduciary financial institution continues to maintain its principal office in
an economic growth zone pursuant to K.S.A. 9-2309, and amendments
thereto;
(B) notwithstanding the foregoing provisions, if a fiduciary financial
institution leases any portion of a qualified investment made by another
fiduciary financial institution as the lessee fiduciary financial institution's
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suitable office space:
(i) The lessee fiduciary financial institution shall make, or cause to be
made, a qualified investment in an economic growth zone other than the
economic growth zone where such fiduciary financial institution maintains
its principal office;
(ii) the leased square footage shall count toward the square footage
requirement applicable to a qualified investment under this section, if such
lease has an initial term of not less than five years; and
(iii) the square footage requirement otherwise applicable to a
qualified investment of the lessee fiduciary financial institution shall be
reduced from 10,000 square feet to 5,000 square feet;
(16)(20) "technology-enabled fiduciary financial institution" or
"fiduciary financial institution" means any limited liability company,
limited partnership or corporation that:
(A) Is organized to perform any one or more of the activities and
services authorized by this act;
(B) has been authorized to conduct business as a fiduciary financial
institution under this chapter pursuant to the provisions of K.S.A. 9-2302,
and amendments thereto;
(C) has made, committed to make or caused to be made a qualified
investment; and
(D) has committed, in or as a part of the application provided in
K.S.A. 9-2302, and amendments thereto, to conduct any fidfin transactions
in accordance with K.S.A. 9-2311, and amendments thereto, including the
distributions required therein;
(17)(21) "trust" means a trust created pursuant to the Kansas uniform
trust code, K.S.A. 58a-101 et seq., and amendments thereto, or created
pursuant to the Kansas business trust act of 1961, K.S.A. 17-2707 et seq.,
and amendments thereto;
(18)(22) "trust advisor" means a fiduciary granted authority by an
instrument to exercise, consent, direct, including the power to direct as
provided in K.S.A. 58a-808, and amendments thereto, or approve all or
any portion of the powers and discretion conferred upon the trustee of a
fidfin trust, including the power to invest the assets of a fidfin trust or
make or cause distributions to be made from such fidfin trust; and
(19)(23) the definitions of K.S.A. 9-701, and amendments thereto,
apply to fiduciary financial institutions except as otherwise provided in
this act.
Sec. 2. K.S.A. 9-2302 is hereby amended to read as follows: 9-2302.
(a) No fiduciary financial institution shall be organized under the laws of
this state nor engage in fidfin transactions, custodial services or trust
business in this state until the application for such fiduciary financial
institution's organization and the application for certificate of authority
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have been submitted to and approved by the state banking board. The form
for making any such application shall be prescribed by the state banking
board and any application made to the state banking board shall contain
such information as the state banking board shall require. Except as
provided in K.S.A. 9-2325, and amendments thereto, the state banking
board shall not approve any application until the Beneficient conditional
charter has been converted to a full charter and the commissioner has
completed a regulatory examination.
(b) (1) No Kansas-chartered state bank, Kansas-chartered state trust
company or fiduciary financial institution shall engage in fidfin
transactions in this state unless an application has been submitted under
this act and approved by the state banking board.
(2) Except as otherwise provided by this subsection, any trust
company whose application has been approved in accordance with this
section and any out-of-state trust company engaging in fidfin transactions
in this state shall be considered a fiduciary financial institution for the
purposes of this act, shall have all rights and powers granted to a fiduciary
financial institution under this act and shall owe all duties and obligations
imposed on fiduciary financial institutions under this act, including, but
not limited to, the fiduciary duties imposed under K.S.A. 9-2311 and 9-
2313, and amendments thereto, and the requirements of K.S.A. 9-2302(c)
(5) and (6), and amendments thereto.
(3) Any bank whose application has been approved in accordance
with this section and any out-of-state bank that engages in fidfin
transactions in this state shall have a separate department for handling
fidfin transactions. Except as otherwise provided by this subsection, such
separate department shall be considered a fiduciary financial institution for
the purposes of this act, shall have all rights and powers granted to a
fiduciary financial institution under this act and shall owe all duties and
obligations imposed on fiduciary financial institutions under this act,
including, but not limited to, the fiduciary duties imposed under K.S.A. 9-
2311 and 9-2313, and amendments thereto, and the requirements of K.S.A.
9-2302(c)(5) and (6), and amendments thereto.
(4) Notwithstanding the provisions of paragraphs (2) and (3):
(A) A bank or trust company whose application has been approved in
accordance with this section or an out-of-state financial institution that
engages in fidfin transactions in this state shall not be subject to the
provisions of K.S.A. 9-2305, 9-2306 or 9-2308, and amendments thereto;
and
(B) the commissioner shall not examine or require applications,
reports or other filings from an out-of-state financial institution that is
subject to oversight of such financial institution's fidfin transactions by a
governmental agency of the jurisdiction that chartered the out-of-state
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financial institution.
(c) The state banking board shall not accept an application for a
fiduciary financial institution unless the:
(1) Fiduciary financial institution is organized by at least one person;
(2) name selected for the fiduciary financial institution is different or
substantially dissimilar from any other bank, trust company or fiduciary
financial institution doing business in this state;
(3) fiduciary financial institutions' articles of organization contain the
names and addresses of the fiduciary financial institution's members and
the number of units subscribed by each. The articles of organization may
contain such other provisions as are consistent with the Kansas revised
limited liability company act, Kansas revised uniform limited partnership
act or Kansas general corporation code;
(4) fiduciary financial institution has made, committed to make or
caused to be made a qualified investment as defined in K.S.A. 9-2301, and
amendments thereto;
(5) fiduciary financial institution has committed to structure any
fidfin transactions to ensure that qualified charitable distributions, as
defined in K.S.A. 2022 Supp. 79-32,283, and amendments thereto, are
made each calendar year that the fiduciary financial institution conducts
fidfin transactions; and
(6) fiduciary financial institution has consulted or agrees to consult
with the department of commerce regarding the economic growth zones to
be selected for purposes of paragraphs (4) and (5).
(d) The state banking board may deny the application if the state
banking board makes an unfavorable determination with regard to the:
(1) Financial standing, general business experience and character of
the organizers; or
(2) character, qualifications and experience of the officers of the
proposed fiduciary financial institution.
(e) The state banking board shall not make membership in any federal
government agency a condition precedent to the granting of the authority
to do business.
(f) (1) The state banking board or the commissioner may require
fingerprinting of any officer, director or organizer of the proposed a
fiduciary financial institution. Such fingerprints may be submitted to the
Kansas bureau of investigation and the federal bureau of investigation for
a state and national criminal history record check. The fingerprints shall be
used to identify the person and to determine whether the person has a
record of arrests and convictions in this state or other jurisdictions. The
state banking board or the commissioner may use information obtained
from fingerprinting and the criminal history for purposes of verifying the
identification of the person and in the official determination of the
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qualifications and fitness of the persons associated with the applicant
fiduciary financial institution to be issued a charter. Whenever the state
banking board or the commissioner requires fingerprinting, any associated
costs shall be paid by the applicant or the parties to the application.
(2) (A) The state banking board or the commissioner shall not
authorize receipt of a state and national criminal history record check
from a private entity unless the Kansas bureau of investigation or the
federal bureau of investigation is unable to supply such state and national
criminal history record check through the Kansas central repository of
criminal history records or any subsequent repository system provided for
by law. The state banking board or the commissioner shall not disclose or
use a state and national criminal history record check for any purpose
except as provided for in this section. Unauthorized use of a state or
national criminal history record check shall constitute a class A nonperson
misdemeanor.
(B) Each state and national criminal history record check shall be
confidential, not subject to the open records act, K.S.A. 45-215 et seq., and
amendments thereto, and shall not be disclosed to any fiduciary financial
institution. The provisions of this subparagraph providing for the
confidentiality of public records shall expire on July 1, 2028, unless the
legislature reviews and reenacts such provisions in accordance with K.S.A.
45-229, and amendments thereto, prior to July 1, 2028.
(g) The state banking board or the commissioner shall notify a
fiduciary financial institution of the approval or disapproval of an
application. Any final action of the state banking board approving or
disapproving an application shall be subject to review in accordance with
the Kansas judicial review act.
(h) (1) In the event such application is approved, the fiduciary
financial institution shall be issued a charter upon compliance with any
requirements of this act and upon demonstrating to the satisfaction of the
commissioner that an applicable distribution has been made. For purposes
of this section, "applicable distribution" means a distribution of cash,
beneficial interests or other assets having an aggregate value equal to the
greater of:
(A) 2.5% of the aggregate financing balances to be held by the
fiduciary financial institution immediately upon issuance of the fiduciary
financial institution's charter, as reflected in the fiduciary financial
institution's application filed pursuant to this section; or
(B) $5,000,000 in accordance with subsection (i), except that if a
fiduciary financial institution is chartered to provide only custodial
services, the applicable distribution amount shall be $500,000.
(2) If the amount provided in paragraph (1)(B) exceeds the amount
provided in paragraph (1)(A), the fiduciary financial institution shall be
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entitled to a credit against the amount distributable under K.S.A. 9-
2311(f), and amendments thereto, in an amount equal to such excess.
(i) The applicable distribution required under subsection (h) shall be
distributed as follows:
(1) (A) To the department of commerce:
Applicable distribution amountPercentage to department of commerce
$0 to $500,000 90%
$500,001 to $1,000,000 50%
Above $1,000,000 10%
(B) the amounts specified in subparagraph (A) shall apply to
fiduciary financial institutions chartered prior to January 1, 2023. For
fiduciary financial institutions chartered after such date, the department of
commerce may publish one or more schedules in the Kansas register as the
department of commerce deems reasonably necessary to facilitate
economic growth and development in one or more economic growth
zones. No such schedule shall be effective until after its publication in the
Kansas register. The department of commerce shall timely submit to the
commissioner any schedule published under this section. The
commissioner shall provide a copy of such schedule to any applicant for a
fiduciary financial institution charter prior to the issuance of such charter.
A fiduciary financial institution shall be subject to the schedule in
existence on the date such fiduciary financial institution's charter is issued
and shall not be subject to any schedules published after such date;
(C) the department of commerce shall remit all distributions under
this subsection to the state treasurer in accordance with the provisions of
K.S.A. 75-4215, and amendments thereto. Upon receipt of each such
remittance, the state treasurer shall deposit the entire amount in the state
treasury to the credit of the technology-enabled fiduciary financial
institutions development and expansion fund established in K.S.A. 9-2324,
and amendments thereto; and
(2) the balance of the applicable distribution required under
subsection (h) shall be distributed to one or more qualified charities as
defined in K.S.A. 2022 Supp. 79-32,283, and amendments thereto, as shall
be selected by the fiduciary financial institution. Nothing in this section
shall preclude a distribution to one or more qualified charities in excess of
the amounts provided in this section. An economic growth zone or
qualified charity shall have no obligation to repay any distributions
received under this act or to make any contributions to a fiduciary
financial institution.
Sec. 3. K.S.A. 9-2301 and 9-2302 are hereby repealed.
Sec. 4. This act shall take effect and be in force from and after its
publication in the Kansas register.
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