CHAPTER 145
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1
CHAPTER 145
( SB 298 )
AN ACT relating to persons regulated under the Securities Act of Kentucky.
Be it enacted by the General Assembly of the Commonwealth of Kentucky:
Section 1. KRS 292.336 is amended to read as follows:
(1) (a) Every registered broker-dealer, firm employing issuer agents, and investment adviser shall make and
keep all accounts, correspondence, memoranda, papers, books, and other records which the
commissioner by rule or order prescribes.
(b) All records required shall be:
1. Preserved for three (3) years unless the commissioner, by administrative regulation or order,
prescribes otherwise for particular types of records; and[. All required records shall be ]
2. Kept within this state or shall, at the request of the commissioner, be made available at any time
for examination by him or her either in the principal office of the registrant or by production of
exact copies thereof in this state.
(c) If a broker-dealer is registered with the United States Securities and Exchange Commission, then the
books and records required by this section are limited to those that the Securities Exchange Act of 1934,
15 U.S.C. secs. 78a et seq., requires the broker-dealer to maintain.
(d) If an investment adviser has his or her principal place of business in another state, then the requirements
of this subsection[section] shall be limited to the books and records requirements of that state, if the
adviser is registered in that state and[ is] in compliance with its recordkeeping requirements.
(2) (a) Subject to paragraphs (b) and (c) of this subsection, every registered broker-dealer, investment
adviser, and firm employing issuer agents shall file any[such] reports[ as] required by the
commissioner through administrative regulation or order promulgated under this chapter.
(b) If a broker-dealer is registered with the United States Securities and Exchange Commission, then the
reports required by this subsection shall be[section are] limited to those required under the Securities
Exchange Act of 1934, 15 U.S.C. secs. 78a et seq.
(c) If an investment adviser has his or her principal place of business in another state, then the requirements
of this subsection[section] shall be limited to the reporting requirements of that state, if the adviser is
registered in that state and in compliance with its reporting requirements.
(3) (a) Subject to paragraph (b) of this subsection, if the information contained in any document filed is or
becomes inaccurate or incomplete in any material respect, then the broker-dealer, investment adviser, or
firm employing issuer agents, as applicable, shall promptly file a correcting amendment.
(b) In the case of a covered adviser, the adviser shall file only copies of those documents required to be
filed with the United States Securities and Exchange Commission.
(4) (a) The commissioner may conduct examinations, within or outside this state, of each broker-dealer, issuer
agent, or investment adviser at such times and in such scope as he or she determines.
(b) 1. Examinations of each broker-dealer, issuer agent, or investment adviser[,] may be made without
prior notice to the broker-dealer, issuer agent, or investment adviser.
2. The expense reasonably attributable to any[ such] examination shall be paid by the broker-dealer,
issuer agent, or investment adviser whose business is examined, but the expense so payable shall
not exceed an amount which the commissioner by administrative regulation prescribes.
(c) For the purpose of avoiding unnecessary duplication of examinations, the commissioner, insofar as he
or she deems it practicable in administering this subsection, may cooperate with securities
administrators of other states, the United States Securities and Exchange Commission, and any national
securities exchange or national securities association registered under the Securities Exchange Act of
1934, 15 U.S.C. secs. 78a et seq. ACTS OF THE GENERAL ASSEMBLY 2
(5) (a) Every investment adviser that is registered or required to be registered shall establish written
procedures relating to a business continuity and succession plan.
(b) The plan shall:
1. Be based upon the facts and circumstances of the investment adviser's business model,
including the size of the firm, types of services provided, and number of locations;
2. At a minimum, provide for:
a. The protection, backup, and recovery of books and records;
b. Alternate means of communication with customers, key personnel, employees, vendors,
service providers, including third-party custodians, and regulators, including but not
limited to providing notice of:
i. A significant business interruption;
ii. The death or unavailability of key personnel; and
iii. Other disruptions or cessations of business activities;
c. Office relocation in the event of temporary or permanent loss of a principal place of
business; and
d. Assignment of duties to qualified responsible persons in the event of the death or
unavailability of key personnel; and
3. Otherwise minimize service disruptions and client harm that could result from a sudden
significant business interruption.
(c) The investment adviser shall, at least annually, review the plan, and the review shall be documented
and maintained for three (3) years.
(6) (a) Every investment adviser that is registered or required to be registered shall establish and implement
written physical security and cybersecurity policies and procedures designed to ensure the
confidentiality, integrity, and availability of physical and electronic records and information.
(b) The policies and procedures shall:
1. Be tailored to the investment adviser's business model, taking into account the size of the firm,
types of services provided, and the number of locations;
2. At a minimum:
a. Protect against reasonably anticipated threats or hazards to the security or integrity of
client records and information;
b. Ensure that the investment adviser safeguards confidential client records and
information; and
c. Protect any records and information for which the release could result in harm or
inconvenience to any client; and
3. Cover at least the following five (5) functions:
a. Identification - development of organizational understanding to manage information
security risk to systems, assets, data, and capabilities;
b. Protection - development and implementation of appropriate safeguards to ensure
delivery of critical infrastructure services;
c. Detection - development and implementation of appropriate activities to identify the
occurrence of an information security event;
d. Response - development and implementation of appropriate activities to take action
regarding a detected information security event; and
e. Recovery - development and implementation of appropriate activities to maintain plans
for resilience and to restore any capabilities or services that were impaired due to an
information security event. CHAPTER 145
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(c) 1. The investment adviser shall, at least annually, review the policies and procedures to ensure
the adequacy of the security measures and effectiveness of their implementation.
2. The review shall be documented and previous versions of the policies and procedures shall be
maintained for three (3) years from the date of development.
(7) The commissioner may by administrative regulation prohibit unreasonable charges, profits, commissions, or
other compensation of broker-dealers and investment advisers.
(8)[(6)] The commissioner may promulgate administrative regulations to prescribe rules for the conduct of
business by broker-dealers and investment advisers which he or she finds appropriate in the public interest and
for the protection of investors.
(9)[(7)] The commissioner may enter into an arrangement, agreement, or other working relationship with
federal, other state, and self-regulatory authorities whereby documents may be filed and maintained in a
central depository system with the Financial Industry Regulatory Authority (FINRA) or other agencies or
authorities.
SECTION 2. A NEW SECTION OF KRS CHAPTER 292 IS CREATED TO READ AS FOLLOWS:
(1) As used in this section:
(a) "Approved IAR continuing education content" means the materials, written, oral, or otherwise:
1. That have been approved by NASAA or its designee; and
2. Which make up the educational program provided to an investment adviser representative
under this section;
(b) "Authorized provider" means a person that NASAA or its designee has authorized to provide
continuing education content required by this section;
(c) "Credit" means a unit that has been designated by NASAA or its designee as at least fifty (50)
minutes of educational instruction;
(d) "Ethics and professional responsibility content" means approved IAR continuing education content
that addresses an investment adviser representative's ethical and regulatory obligations;
(e) "FINRA" means the Financial Industry Regulatory Authority;
(f) "Home state" means a state, other than Kentucky, in which the investment adviser representative has
his or her principal office and place of business;
(g) "NASAA" means the North American Securities Administrators Association or a committee
designated by its board of directors;
(h) "Products and practice content" means approved IAR continuing education content that addresses
an investment adviser representative's continuing skills and knowledge regarding financial products,
investment features, and practices in the investment advisory industry; and
(i) 1. "Reporting period" means one (1) twelve (12) month period as determined by NASAA.
2. An investment adviser representative's initial reporting period commences the first day of the
first full reporting period after the individual is registered, or required to be registered, under
this chapter.
(2) Except as otherwise provided in this section, every registered investment adviser representative shall
complete the following continuing education requirements each reporting period:
(a) Six (6) credits of ethics and professional responsibility content offered by an authorized provider,
with at least three (3) hours covering the topic of ethics; and
(b) Six (6) credits of products and practice content offered by an authorized provider.
(3) An investment adviser representative shall be considered in compliance with subsection (2)(b) of this
section for each applicable reporting period if:
(a) The investment adviser representative:
1. Is also registered as an agent of a FINRA-member broker-dealer; and ACTS OF THE GENERAL ASSEMBLY 4
2 Complies with FINRA's continuing education requirements; and
(b) FINRA's continuing education content meets all of the following baseline criteria, as determined by
NASAA:
1. The content focuses on compliance, regulatory, ethical, and sales practices standards;
2. The content is derived from:
a. State and federal investment advisory statutes, rules, and regulations;
b. Securities industry rules and regulations; or
c. Accepted standards and practices in the financial services industry; and
3. The content requires that its participants demonstrate proficiency in the subject matter of the
educational materials.
(4) Continuing education credits completed by an investment adviser representative shall be considered to
comply with subsection (2) of this section for each applicable reporting period if:
(a) The investment adviser representative:
1. Is not required to pass a written examination by administrative regulation or order
promulgated pursuant to KRS 292.331(3);
2. Completes continuing education credits necessary for maintaining, and remaining in good
standing to hold, a professional designation identified by the commissioner by administrative
regulation or order; and
3. Is required to complete continuing education credits to maintain, and remain in good standing
to hold, the professional designation identified by the commissioner by administrative
regulation or order; and
(b) The continuing education content provided by the credentialing organization for the professional
designation identified by the commissioner by administrative regulation or order is approved IAR
continuing education content.
(5) An investment adviser representative registered or required to be registered in Kentucky who is registered as
an investment adviser representative in the individual's home state shall be considered in compliance with
this section if:
(a) The investment adviser representative's home state has continuing education requirements that are
at least as stringent as the NASAA Model Rule on Investment Adviser Representative Continuing
Education; and
(b) The investment adviser representative is in compliance with the home state's investment adviser
representative continuing education requirements.
(6) Every investment adviser representative shall be responsible for ensuring that the authorized provider
reports the investment adviser representative's completion of the approved IAR continuing education
content.
(7) An investment adviser representative who completes continuing education credits in excess of the amount
required for the reporting period may not carry forward excess credits to a subsequent reporting period.
(8) (a) An investment adviser representative who fails to comply with this section by the end of a reporting
period shall:
1. Be subject to registration renewal as "CE inactive" at the close of the calendar year in
Kentucky; and
2. Remain "CE inactive" until the investment adviser representative completes and reports all
required continuing education credits for all reporting periods as required by this section.
(b) An investment adviser representative who is "CE inactive" at the close of the next calendar year
shall not be eligible for:
1. Investment adviser representative registration; or
2. Renewal of investment adviser representative registration. CHAPTER 145
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(9) A person who was previously registered under this chapter as an investment adviser representative and
became unregistered shall complete approved IAR continuing education content for all reporting periods
that occurred between the time that the investment adviser representative became unregistered and the time
the person became registered again under this chapter unless the investment adviser representative makes a
subsequent application for registration and complies with any examination requirement under KRS
292.331(3).
(10) The commissioner may, in his or her discretion, waive any requirements of this section.
Section 3. This Act takes effect on January 1, 2023.
Signed by Governor April 8, 2022.