808 KAR | Title 808 KAR — Public Protection Cabinet - Department of Financial Institutions

Chapter 1 Administration

808 KAR 1:060 Automated teller machines {#sec-808-kar-1-060 omnilex-key=us-ky-regs-official--title-808--808 KAR 1:060}

Section 1. Definition. "Financial institution" means a state chartered bank, savings and loan association, or credit union.

Section 2. A financial institution may receive and act upon a communication from a customer transmitted through an automated teller machine. The communication may:

(1) Request the withdrawal of funds either from the customer's deposit account or from a previously authorized line of credit;

(2) Instruct the institution to receive funds or to transfer funds for the customer's benefit;

(3) Make a balance inquiry;

(4) Instruct the financial institution to receive cash or a check; or

(5) Request the financial institution to dispense cash to the customer at the location of the automated teller machine.

Section 3. A transaction initiated by an automated teller machine shall be subject to verification by the financial institution.

Section 4. A financial transaction effected by use of an automated teller machine shall be deemed to be transacted at the institution and not at the automated teller machine. The automated teller machine shall not be considered to be a branch, branch office, or service facility.

History

RELATES TO: KRS 286.3-180, 286.5-061, 286.6-055
STATUTORY AUTHORITY: KRS 286.1-020(1), 286.5-702, 286.6-070
NECESSITY, FUNCTION, AND CONFORMITY: KRS 286.1-020(1) authorizes the commissioner to promulgate administrative regulations necessary to implement KRS Chapter 286. This administrative regulation provides for the use of an automated teller machine by a financial institution and specifies that an automated teller machine is not a branch or service facility of the financial institution.
History: 2 Ky.R. 140; Am. 266; eff. 11-12-75; 8 Ky.R. 19; eff. 8-5-81; 12 Ky.R. 40; eff. 8-13-85; 25 Ky.R. 1182; eff. 1-19-99; TAm eff. 4-17-2007; 45 Ky.R. 2192, 2904; eff. 5-3-2019; Crt eff. 4-7-2026.

808 KAR 1:140 Fees {#sec-808-kar-1-140 omnilex-key=us-ky-regs-official--title-808--808 KAR 1:140}

Section 1. Definitions.

(1) "Applicant" means a person or institution submitting a written application, plan, or notice pursuant to KRS Chapter 286.3.

(2) "Extraordinary services performed" means:

(a) Review of a request for approval of a change of control made pursuant to KRS 286.3-095(1), unless the request was made concurrently with an application made pursuant to KRS 286.3-905; or

(b) A special examination.

(3) "Institution" means an institution that is subject to examination pursuant to KRS 286.3-450 or KRS 286.3-530.

(4) "Special examination" means:

(a) An abbreviated on-site review conducted to determine an institution's progress in achieving compliance with laws, administrative regulations, or a formal or informal enforcement action to address unsafe and unsound banking practices;

(b) An off-site review of progress reports submitted by an institution to the commissioner in conjunction with a formal or informal enforcement action; or

(c) A second examination conducted within the twenty-four (24) month timeframe set forth in KRS 286.3-450(1) that results from an institution failing to comply with laws or administrative regulations relating to banks or trust companies or from an institution engaging in unsafe and unsound banking practices.

Section 2. Hourly Examination Fees.

(1) The hourly fee for each examiner conducting an examination or investigation of a state chartered bank or trust company shall be fifty-five (55) dollars.

(2) The hourly fee for each examiner conducting an examination or investigation of all other department licensees shall be forty-two (42) dollars.

(3) In addition to the hourly fee, reasonable costs may be charged if the examination or investigation involves travel expenses or other incidental out-of-pocket costs.

Section 3. Determination of Bank Assets Subject to Assessment.

(1) Each state chartered bank shall pay an annual assessment fee to the department based on its assets as reported on the 31st day of December of the previous calendar year.

(2) The assets subject to the annual assessment shall not include assets held by the bank or branch in a fiduciary capacity.

(3) The annual assessment shall be paid by April 1, unless the department and bank agree in writing to a later date due to extraordinary circumstances.

Section 4. Bank Assessment Fee Schedule.

Section 5. Bank-related Services. An applicant or institution shall pay the department a fee for the services identified in the following table:

Section 6. Payment Terms.

(1) Except for hourly fees, a fee shall be paid by the applicant at the time a written application, plan, or notice is made.

(2) An hourly fee shall be paid within thirty (30) days of the date a fee invoice is transmitted to the applicant or institution.

(3) Except for clerical errors, a fee paid pursuant to this administrative regulation shall be nonrefundable.

Section 7. Credit Unions.

(1) Each state-chartered credit union shall pay an annual assessment fee to the department, based on the assets reported on December 31 of the previous calendar year.

(2) The annual assessment fee shall be paid by April 1.

(3) The annual assessment fee schedule shall be as follows:

Section 8.

(1) A check casher licensee shall pay the examination fee established in Section 2 of this administrative regulation within thirty (30) days of the date of billing. The date of billing shall be the date the bill was deposited in the mailroom at the department for delivery through the United States Mail.

(2) If the fee is not paid within the thirty (30) day time period, the office shall send the licensee a notice of failure to pay the examination fee and demand for immediate payment.

(3) If the licensee does not pay the examination fee within thirty (30) days from the date of receipt of the notice of failure to pay the examination fee and demand for immediate payment, the licensee shall be:

(a) Subject to the penalties established in KRS 286.9-110; and

(b) Remain liable for the payment of all owed examination fees.

Section 9.

(1) A mortgage loan company or mortgage loan broker shall pay the fee established in Section 2 of this administrative regulation within thirty (30) days of the date of the fee bill sent following the examination or investigation.

(2) If the fee is not paid within the thirty (30) day time period, the department shall send the mortgage loan company or mortgage loan broker a notice of failure to pay the fee and a demand for immediate payment.

(3) If the mortgage loan company or mortgage loan broker does not pay the fee within thirty (30) days from the date of demand for immediate payment, the mortgage loan company or mortgage loan broker and its control persons shall:

(a) Be subject to the penalties established in KRS 286.8-090 and 286.8-046;

(b) Remain liable for the payment of all owed fees; and

History

RELATES TO: KRS 286.3-010, 286.3-020, 286.3-050, 286.3-095, 286.3-135, 286.3-140, 286.3-145, 286.3-146, 286.3-170, 286.3-172, 286.3-174, 286.3-180, 286.3-185, 286.3-450, 286.3-480, 286.3-530, 286.3-820, 286.3-905, 286.3-920, 286.6-100, 286.8-046, 286.8-090, 286.9-110
STATUTORY AUTHORITY: KRS 286.1-020(1), 286.3-145, 286.3-146, 286.3-480(1)(b), 286.6-100(1)(d)
NECESSITY, FUNCTION, AND CONFORMITY: KRS 286.1-020(1) authorizes the commissioner to promulgate administrative regulations to interpret and carry out the provisions and intent of KRS Chapter 286. KRS 286.3-145 and 286.3-146 authorize the commissioner to prescribe filing fees for trust companies that want to establish or acquire and maintain a trust office or trust representative office. KRS 286.3-480 requires the commissioner to establish fees for certain investigations, applications, examination of assets, and extraordinary services performed for any financial institution. KRS 286.3-480(1)(b) requires each state bank to pay an annual assessment based on the assets of the bank or branch. KRS 286.6-100(1)(d) requires each credit union subject to supervision and examination by the commissioner to pay an annual fee to the commissioner based on the assets of the credit union and any fees for extraordinary services performed by the department for a particular credit union. This administrative regulation establishes examination fees, assessment fee schedules, and fees for related services for banks, credit unions, check casher licensees, and mortgage loan companies and brokers.
History: 26 Ky.R. 918; Am. 1160; eff. 12-16-1999; TAm eff. 4-21-2007; 45 Ky.R. 2194, 2904; eff. 5-3-2019; Crt to Am 4-7-2026; filing deadline 10-7-2027.

808 KAR 1:170 Licensing and registration {#sec-808-kar-1-170 omnilex-key=us-ky-regs-official--title-808--808 KAR 1:170}

Section 1. Definitions.

(1) "Audited financial statement" means a financial statement prepared by a certified public accountant in accordance with generally accepted accounting principles.

(2) "Nationwide Multistate Licensing System and Registry" is defined by KRS 286.8-010(20).

(3) "Surety bond" means a bond provided by a surety company authorized to conduct business in Kentucky.

Section 2. Consumer Loan Company Licensure. A person applying for licensure as a consumer loan company shall submit:

(1) A completed NMLS Company Form available online at http://mortgage.nationwidelicensingsystem.org;

(2) A completed NMLS Individual Form available online at http://mortgage.nationwidelicensingsystem.org;

(3) A Form CL-4, State License Confirmation Form completed by each state or jurisdiction in which the person is licensed or registered if the person applying for licensure as a consumer loan company is licensed or registered in any other state or jurisdiction to operate a business making loans of $15,000 or less at the time of application;

(4) The nonrefundable application investigation fee established in KRS 286.4-440(1); and

(5) The annual license fee established in KRS 286.4-440(2).

Section 3. Check Cashing and Deferred Deposit Service Business Licensure.

(1) Initial Application. A person applying for an initial check cashing license shall submit:

(a) A completed NMLS Company Form available online at http://mortgage.nationwidelicensingsystem.org;

(b) A completed NMLS Individual Form available online at http://mortgage.nationwidelicensingsystem.org for each control person designated on the "direct owners and executive officers" section of the NMLS Company Form;

(d) Form COMB-1, State License Confirmation Form for Check Cashing License or Deferred Deposit Service Business License, incorporated by reference in 808 KAR 9:050, if the applicant has a license, registration, or claim of exemption related to the financial services industry in any other state;

(e) An audited financial statement, which shall include a balance sheet, income statement, statement of cash flows, and all relevant notes, dated as of the previous year end. If the applicant is a startup company, an initial statement of condition and a proforma income statement shall be submitted instead of the income statement and statement of cash flows;

(f) Evidence that the applicant has complied or will comply with all workers' compensation and unemployment compensation laws of Kentucky; and

(g) One (1) of the following, which shall be deposited with and made payable to the commissioner:

An irrevocable letter of credit in an amount required by KRS 286.9-040(1)(a);
An Electronic Surety Bond, available online at http://mortgage.nationwidelicensingsystem.org, in an amount required by KRS 286.9-040(1)(b). The name of the principal insured on the bond shall match exactly the full legal name of the applicant; or
Form COMB-3, Escrow Agreement for Check Cashing License or Deferred Deposit Service Business License, incorporated by reference in 808 KAR 9:050, accompanied by:

a. Evidence that the applicant has established an account in a federally insured financial institution in Kentucky and has deposited money of the United States in an amount required by KRS 286.9-040(1)(c); or

b. A savings certificate of a federally insured financial institution in Kentucky established by the applicant that is not available for withdrawal except by direct order of the commissioner in an amount required by KRS 286.9-040(1)(d).

(2) Renewal Application. A licensee applying for renewal of a check cashing license or deferred deposit service business license pursuant to KRS 286.9-080(1) shall complete and submit the following on or before December 31 of each year:

(a) The required updates and attestation ensuring the accuracy of all information in the person's record maintained by the http://mortgage.nationwidelicensingsystem.org; and

(b) The nonrefundable license fee established in KRS 286.9-080(1).

(3) Reinstatement Application. A licensee applying for reinstatement of a check cashing license or deferred deposit service business license pursuant to KRS 286.9-080(2) shall complete and submit the following prior to January 31 of the year that the renewal application was due:

(a) The required updates and attestation ensuring the accuracy of all information in the person's record maintained by the http://mortgage.nationwidelicensingsystem.org;

(b) The nonrefundable license fee established in KRS 286.9-080(1); and

Section 4. Licensure as a Mortgage Loan Company or Mortgage Loan Broker.

(1) Initial Application. A person applying for licensure as a mortgage loan company or mortgage loan broker shall submit:

(a) A completed NMLS Company Form as available online at http://mortgage.nationwidelicensingsystem.org;

(b) A completed NMLS Individual Form as available online at http://mortgage.nationwidelicensingsystem.org for each control person designated on the "direct owners and executive officers" section of the NMLS Company Form;

(c) An audited financial statement, which includes a balance sheet, income statement, statement of cash flows, and all relevant notes, dated the previous year end to the date of submission of the NMLS Company Form. If the applicant is a startup company, an initial statement of condition and a proforma income statement shall be submitted instead of the income statement and statement of cash flows;

(d) An Electronic Surety Bond available online at http://mortgage.nationwidelicensingsystem.org in an amount not less than the amount required by KRS 286.8-060(1). The name of the principal insured on the bond shall match exactly the full legal name of the applicant;

(e) A certified copy of:

If a corporation, the Corporate Charter or Articles of Incorporation and Bylaws;
If a limited liability company, the Articles of Organization and Operating Agreement; or
If a partnership of any form, the Partnership Agreement;

(f) A Certificate of Authority or a Certificate of Good Standing issued by the Kentucky Secretary of State dated not more than sixty (60) days prior to the submission of the NMLS Company Form;

(g) If applicant will be operating in Kentucky under a name other than its legal name, a file-stamped copy of the Certificate of Assumed Business Name issued by the Kentucky Secretary of State;

(h) If required to do so by KRS 286.8-032(6), documentation that a managing principal designated by applicant has successfully completed the educational training established in KRS 286.8-260(1);

(i) If the principal office will be located in a residence, a completed Form ML-6, Disclosure of Location at a Residence Form; and

(j) The fees established in KRS 286.8-034(1).

(2) Renewal Application.

(a) A person applying for renewal of a mortgage loan company or mortgage loan broker license prior to December 1 shall submit:

The required updates and attestation ensuring that all information in the person's record maintained by the NMLS operated by the State Regulatory Registry, LLC is correct as available online at http://mortgage.nationwidelicensingsystem.org; and
The fee established in KRS 286.8-034(3).

(b) A person applying for renewal of a mortgage loan company or mortgage loan broker license through reinstatement shall submit all materials required by paragraph (a) of this subsection and the reinstatement fee required by KRS 286.8-034(6).

(c) The fee established in KRS 286.8-034(3) shall be calculated based on data filed by the licensee on the Mortgage Call Reports (MCRs), which shall be submitted through the NMLS, for the twelve (12) month period ending September 30. The licensee shall submit the MCR no later than November 1st of each year. The department shall apply the criteria established in subparagraphs 1. through 3. of this paragraph if the licensee has not submitted four (4) quarters of data.

If a licensee has not held a license with the department for twelve (12) months, the fee shall be based on the volume of loans originated and closed in Kentucky during the time frame the licensee has held a license in Kentucky.
If a licensee does not file the third quarter MCR, which contains data as of September 30, on or before November 1, the department shall:

a. Estimate the twelve (12) month loan volume based on previously filed MCR reports by annualizing the loan volume contained in the prior three (3) quarterly MCR report;

b. Recalculate the actual renewal fee owed once the third quarter MCR is filed; and

c. Send a subsequent fee bill to the licensee for any renewal fee owed based on the actual loan volume reported on the MCR data versus the amounted estimated by the department using the annualized loan volume in established in clause a. of this subparagraph.

Pursuant to KRS 286.8-044, the commissioner may pursue an administrative action against any licensee that:

a. Fails to file a timely and accurate MCR; or

b. Submits inaccurate filings of MCR reports resulting in insufficient renewal fee payments.

(3) Change of address, name, control, or agent for service.

(a) A licensee changing its address, name, or agent for service of process shall notify the commissioner at least:

Ten (10) days prior to the change of address or name; and
Five (5) days prior to the change of agent for service of process.

(b) A licensee that wants to engage in a transaction resulting in a change of control shall notify the commissioner at least thirty (30) days in advance with the information necessary for the commissioner to determine if the requirements of KRS Chapter 286.8 will be satisfied upon the change of control. The commissioner shall notify the licensee if the request is approved or denied within thirty (30) days of a completed submission of the notice of change of control.

(c) A licensee changing its address, name, control, or agent for service of process shall update this information in NMLS within the same time periods established in this section.

Section 5. Registration of a Mortgage Loan Company Branch.

(1) A mortgage loan company branch shall not be approved unless it is controlled, managed, and supervised by the applicant's principal office.

(2)

(a) A person applying for registration of a branch shall submit:

A completed NMLS Branch Form as available online at http://mortgage.nationwidelicensingsystem.org;
A copy of the lease or deed for the branch;
A completed Form ML-7, Branch Authorization Form; and
If the branch will be located in a residence, a Form ML-6, Disclosure of Location at a Residence Form.

(b) An additional fee for branch registration shall not be required by the department.

(3) A person applying for renewal of a branch registration through reinstatement shall submit all materials required by Section 4(2)(a)1. of this administrative regulation.

Section 6. Registration of a Mortgage Loan Originator.

(1) Initial registration. A person applying for registration as a mortgage loan originator pursuant to KRS 286.8-255(2) shall submit:

(a) A completed NMLS Individual Form as available online at http://mortgage.nationwidelicensingsystem.org;

(b) A request to submit a Federal Bureau of Investigation background records check and a credit report to the department;

(d) The fee established in KRS 286.8-255(2)(b).

(2) Renewal registration.

(a) A person applying for renewal of a mortgage loan originator registration pursuant to KRS 286.8-255(4) shall submit:

The required updates and attestation ensuring that all information in the person's record maintained by the NMLS operated by the State Regulatory Registry, LLC is correct as available online at http://mortgage.nationwidelicensingsystem.org;
A request to submit a Federal Bureau of Investigation background records check and a credit report to the department;
Certification that applicant has successfully completed all education and testing required by KRS 286.8-255 and 286.8-260; and
The fee established in KRS 286.8-255(4).

(b) A person applying for renewal of a mortgage loan originator registration through reinstatement shall submit all materials required by paragraph (a) of this subsection and the reinstatement fee required by KRS 286.8-255(5)(c).

(3) The cost of any Federal Bureau of Investigation background records check or credit report required by this section shall be borne by the applicant.

Section 7. Mortgage Loan Originator Bond Requirements. In addition to the requirements established in this administrative regulation, an applicant applying for registration, renewal, or renewal through reinstatement as a mortgage loan originator shall provide proof that the mortgage loan originator holds or is covered by a bond. If the mortgage loan originator is procuring his or her own bond, the applicant shall submit an Electronic Surety Bond available online at http://mortgage.nationwidelicensingsystem.org in an amount determined by annual loan origination as follows:

(1) If the annual loan volume of the applicant is less than $10,000,000, the surety bond shall be in an amount not less than $15,000; or

(2) If the annual loan volume of the applicant is $10,000,000 or more, the surety bond shall be in an amount not less than $20,000.

Section 8. Factors Used to Determine Approval or Disapproval of an Application.

(1) A mortgage loan originator applicant seeking registration, renewal, or renewal through reinstatement under KRS 286.8-255 shall demonstrate the financial responsibility, character, and general fitness to command the confidence of the community and to warrant a determination that the applicant will operate honestly, fairly, lawfully, and efficiently within the purposes of KRS Subchapters 286.8 and 286.9.

(2) An applicant shall authorize the commissioner to obtain a credit report containing a credit score to aid in making this determination.

(3) The applicant shall have met the requirement of financial responsibility if he or she possessed a credit score of 600 or higher at the time of application. If the applicant possesses a credit score of less than 600, the commissioner shall review the applicant's credit report for the following information to make this determination:

(a) Any outstanding judgments, excluding judgments arising solely from medical expenses for the applicant or an immediate family member;

(b) Outstanding tax liens or other governmental liens, if any;

(d) Bankruptcies occurring within five (5) years of the date of application or renewal, if any; and

(e) Delinquent accounts occurring within five (5) years of the date of application or renewal, if any.

(4) The factors of character and general fitness shall be determined by the commissioner after review of all relevant information, including information shown on the applicant's credit report, the applicant's criminal history, and any administrative or civil actions taken against the applicant.

Section 9. Electronic Submission of Filings and Fees through the NMLS Operated by the State Regulatory Registry, LLC.

(1) A person applying for licensure, registration, renewal, or renewal through reinstatement pursuant to Sections 2 through 7 of this administrative regulation shall electronically submit the following with the State Regulatory Registry, LLC, at http://www.stateregulatoryregistry.org/NMLS, as part of the NMLS:

(a) All forms, updates, attestations, and requests required by Sections 2 through 7 of this administrative regulation, as applicable;

(b) Fingerprints and any other information or authorizations necessary to obtain the background records checks and credit reports established in Section 6 of this administrative regulation; and

(2) All forms, documentation, fees, or information that are not available for electronic submission directly through the nationwide Multistate Licensing System and Registry operated by the State Regulatory Registry, LLC shall be submitted directly to the department.

(3) Fees assessed by the State Regulatory Registry, LLC, to process the electronic submissions established in subsection (1) of this section shall be borne by the applicant.

Section 10. Abandoned Applications. If an applicant fails to provide or respond to a request for additional information from the department within ninety (90) days, the application shall be deemed incomplete and abandoned. An applicant seeking licensing or registration after its application has been abandoned shall reapply and resubmit all required information.

Section 11. Inactive Status for Members of the Armed Forces.

(1) In addition to the provisions of KRS 12.357, a member of the Armed Forces who holds a license or registration in good standing under this administrative regulation may request that the commissioner place the license or registration in inactive status during the period of time that the member is mobilized or deployed, and for a period of six (6) months following termination of the mobilization or deployment.

(2) To request inactive status for a license or registration, a person shall complete Form ML-8, Request for Inactive Status Due to Military Service, and submit it along with proof of mobilization or deployment to the commissioner for approval.

(3) A person whose license or registration has been placed in inactive status shall not engage in the activity requiring the license or registration under KRS Subchapter 286.8.

(4) The fee established in KRS 286.8-255(4) shall not accrue against a person whose license or registration is in inactive status.

(5) A person may reactivate an inactive license or registration by submitting a written request to the commissioner and attaching proof of compliance with KRS 286.8-255(10) and 286.8-260, if applicable. Upon receipt of a written request and confirmation of compliance with KRS 286.8-255(10) and 286.8-260, the commissioner shall issue an approval for reactivation.

Section 12. Incorporation by Reference.

(1) The following material is incorporated by reference:

(a) Form CL-4, "State License Confirmation Form", updated December 2019;

(b) Form ML-6, "Disclosure of Location at a Residence Form", updated December 2019;

(d) Form ML-8, "Request for Inactive Status Due to Military Service", updated December 2019.

(2) This material may be inspected, copied, or obtained, subject to applicable copyright law, at the Department of Financial Institutions, 500 Mero St 2SW19, Frankfort, Kentucky 40601, Monday through Friday, 8 a.m. to 5 p.m. This material may also be obtained from the department's Web site at http://www.kfi.ky.gov.

History

RELATES TO: KRS 12.357, Subchapter 286.4, 286.8-010, 286.8-020, 286.8-030(1), 286.8-032, 286.8-034, 286.8-036, 286.8-060, 286.8-070, 286.8-080, 286.8-090(1), 286.8-140(2)(b), 286.8-255, 286.8-260, 286.8-290, 286.9-010, 286.9-020, 286.9-030, 286.9-040, 286.9-050, 286.9-060, 286.9-071, 286.9-073, 286.9-080
STATUTORY AUTHORITY: KRS 286.4-420, 286.4-425, 286.4-430, 286.4-440, 286.4-450(1)(b), 286.4-480, 286.4-610(1), 286.8-032, 286.8-034, 286.8-100, 286.8-140(1), (4), 286.8-255, 286.8-285, 286.9-050, 286.9-060, 286.9-070, 286.9-090(1), 286.9-107
NECESSITY, FUNCTION, AND CONFORMITY: KRS 286.4-610(1) authorizes the commissioner to promulgate administrative regulations for the proper conduct of the consumer loan businesses licensed under KRS Chapter 286.4. KRS 286.4-430(1) authorizes the commissioner to establish the form of the application for a license under KRS Chapter 286.4. KRS 286.8-140(1) authorizes the commissioner to promulgate administrative regulations necessary to accomplish the basic purposes of KRS Chapter 286.8. KRS 286.9-090(1) authorizes the commissioner to promulgate reasonable administrative regulations for the enforcement of KRS Chapter 286.9. KRS 286.9-050 and 286.9-060 authorize the commissioner to establish the form and materials required to apply for a license under KRS Chapter 286.9. This administrative regulation establishes licensing and registration requirements for consumer loan companies, check cashing and deferred deposit service businesses, mortgage loan companies, mortgage loan brokers, mortgage loan branches, and mortgage loan originators, and procedures for using the Nationwide Multistate Licensing System (NMLS) and Registry.
History: 45 Ky.R. 2261, 2906; eff. 5-3-2019; 46 Ky.R. 699, 1126; eff. 11-1-2019; TAm eff. 12-3-2019; 49 Ky.R. 1184, 2291; eff. 9-5-2023.

Chapter 3 Credit Unions

808 KAR 3:050 Conduct of credit unions {#sec-808-kar-3-050 omnilex-key=us-ky-regs-official--title-808--808 KAR 3:050}

Section 1. Definition. A "corporate credit union" means a credit union that:

(1) Is operated primarily for the purpose of serving other credit unions;

(2) Is designated by the National Credit Union Administration as a corporate credit union; and

(3) Limits natural person members to the minimum required by state or federal law to charter and operate the credit union.

Section 2. Refund of Interest. When an interest refund is authorized by the board of directors under KRS 286.6-225(3), it shall be recorded in the books of the credit union as a reduction of interest income from loans for that year or period.

Section 3. Fidelity Bond.

(1) The minimum blanket fidelity bond required by KRS 286.6-225(2) shall be as follows:

(2) The board of directors of every credit union shall review their blanket fidelity bond coverage at least once each year to ascertain its adequacy.

Section 4. Stocks and Bonds. A credit union may invest a maximum of five (5) percent of members' shares in:

(1) Stock of a corporation rated A+ by Standard and Poor's at the date of acquisition of the stock; and

(2) A corporate bond rated AAA or higher by Standard and Poor's, or rated AAA by Moody's at the date of acquisition of the bond.

Section 5. State-chartered credit unions may invest their funds in any investment that is permissible for a federally chartered credit union under 12 C.F.R. Part 703.

Section 6. Risk Asset. For the purpose of establishing the regular reserve, an asset shall be a risk asset except for the following:

(1) Cash on hand;

(2) A share or deposit in a federally or state-insured bank, savings and loan association, or credit union that has a remaining maturity of five (5) years or less;

(3) An asset, including a collateralized mortgage obligation that is comprised of government guaranteed mortgage loans, that has a remaining maturity of five (5) years or less and is insured by, is fully guaranteed as to principal and interest by, or is due from the U.S. Government, its agencies, the Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, or the Government National Mortgage Association;

(4) A loan to another credit union that has a remaining maturity of five (5) years or less;

(5) A student loan that has a remaining maturity of five (5) years or less and that is insured under the provisions of Title IV, Part B of the Higher Education Act of 1965 (20 U.S.C. 1071, et seq.) or similar state insurance programs;

(6) A loan that has a remaining maturity of five (5) years or less and that is fully insured or guaranteed by the federal or a state government or any agency of either;

(7) A share or deposit in a corporate credit union that has a remaining maturity of five (5) years or less, other than a Membership Capital Share Deposit account as defined in 12 C.F.R. Part 704;

(8) A common trust investment, including a mutual fund, which deals exclusively in investments authorized by the Federal Credit Union Act, 12 U.S.C. 1751 et seq., that are either carried at the lower cost or market, or are marked to market value monthly;

(9) A prepaid expense;

(10) Accrued interest on a non-risk investment;

(11) A loan fully secured by a pledge of shares in the lending credit union, equal to and maintained to at least the amount of the loan outstanding;

(12) A loan purchased from a liquidating credit union and guaranteed by the National Credit Union Administration;

(13) A National Credit Union Share Insurance Fund Guaranty Account established with the authorization of the National Credit Union Administration under the authority of Section 203(a)(1) of the Federal Credit Union Act;

(14) An investment in shares of the National Credit Union Administration Central Liquidity Facility;

(15) An asset included in subsections (2), (3), (4), (5), (6), and (7) of this section with a maturity greater than five (5) years, is not a risk asset if the asset is being carried on the credit union's records at the lower of cost or market, or is being marked to market value monthly;

(16) An asset included in subsections (2), (3), (4), (5), (6), and (7) of this section, with a remaining maturity of greater than five (5) years, is not a risk asset, whether or not the asset is being carried on the credit union's records at the lower of cost or market or is being marked to market value monthly, provided the asset meets the criteria established in paragraphs (a) through (c) of this subsection.

(a) The interest rate shall be reset at least annually.

(b) The interest rate of the instrument shall be less than the maximum allowable interest rate for the instrument on the date of the required reserve transfer.

(c) The interest rate of the instrument varies directly (not inversely) with the index upon which it is based and is not reset as a multiple of the change in the related index;

(17) A fixed asset that includes an office, branch office, suboffice, service center, parking lot, or real estate in which the credit union transacts or will transact business; and office furnishing, office machine, computer hardware and software, automated terminal, and heating and cooling equipment; and

(18) A deposit in the National Credit Union Share Insurance Fund representing a federally insured credit union's capitalization account balance of one (1) percent of insured shares.

Section 7. Charitable Contribution. Only the board of directors shall have the power to authorize a contribution to a civic, charitable, or service organization.

Section 8. Conversion. A state-chartered credit union may convert to another charter.

(1) The board of directors shall first put the question of conversion to a vote of the members. Written notice of the proposed conversion shall be given to all members, which shall include a statement including the reasons for the proposed conversion. The notice shall be mailed to the last known address or hand delivered to the members. The notice shall state the date and place for the meeting called to vote on the proposed conversion, which shall be at least fifteen (15) days after the date of the notice.

(2) Approval of the proposed conversion shall be by a vote of the majority of the members who vote on the proposed conversion, in person or by absentee ballot if the bylaws of the credit union allow voting by absentee ballot.

(3) A statement of the results of the vote, verified by the president and secretary, shall be filed with the commissioner.

(4) The commissioner shall issue an order to the effect that, on the effective date of the conversion, the credit union is no longer incorporated under the laws of Kentucky. A copy of the order shall be forwarded to the Secretary of State.

History

RELATES TO: KRS 286.6-095, 286.6-100, 286.6-225, 286.6-585, 286.6-715, 12 C.F.R. Part 704, 20 U.S.C. 1071
STATUTORY AUTHORITY: KRS 286.1-020, 286.6-070, 286.6-100
NECESSITY, FUNCTION, AND CONFORMITY: KRS 286.6-070 authorizes the Department of Financial Institutions to promulgate administrative regulations necessary for the proper conduct and regulation of credit unions. This administrative regulation establishes requirements to ensure the proper conduct of credit unions.
History: 9 Ky.R. 92; Am. 340; eff. 8-11-1982; 11 Ky.R. 266; eff. 9-11-1984; 12 Ky.R. 1380; eff. 3-4-1986; 14 Ky.R. 71; eff. 8-5-1987; 25 Ky.R. 1183; eff. 1-19-1999; 44 Ky.R. 1410, 1858; eff. 3-9-2018; 45 Ky.R. 2196, 2908; eff. 5-3-2019; Crt eff. 4-7-2026.

Chapter 6 Consumer Loans

808 KAR 6:095 Mandatory availability for repayment {#sec-808-kar-6-095 omnilex-key=us-ky-regs-official--title-808--808 KAR 6:095}

Section 1.

(1) Every licensee shall maintain a place of business to which the general public shall have free access and where all obligations entered into shall be payable.

(2) For the purposes of doing business with the general public, the acceptance of payments from borrowers, and to permit the commissioner or any person designated by the commissioner to examine the books, accounts, records and files of licensees and to enter complaints, each licensed office shall be open not less than four (4) consecutive hours between 8 a.m. and 6 p.m. on any four (4) days of each week, except legal holidays generally observed in the community in which the licensed office is located.

History

RELATES TO: KRS 286.4-460, 286.4-490
STATUTORY AUTHORITY: KRS 286.4-610
NECESSITY, FUNCTION, AND CONFORMITY: KRS 286.4-610(1) authorizes the commissioner to promulgate administrative regulations to enforce the provisions of KRS Chapter 286.4. This administrative regulation promotes the proper conduct of business pursuant to KRS Chapter 286.4 by requiring minimum time frames during which the general public shall have access to consumer loan company licensee places of business.
History: SLL-17; 1 Ky.R. 890; eff. 6-11-1975; TAm eff. 4-21-2007; 45 Ky.R. 2199, 2910; eff. 5-3-2019; Crt eff. 4-7-2026.

808 KAR 6:125 Monetary inducements prohibited {#sec-808-kar-6-125 omnilex-key=us-ky-regs-official--title-808--808 KAR 6:125}

Section 1. No licensee shall pay or offer to pay any borrower or any prospective borrower any monetary inducement by means of which any person will be encouraged to become a borrower. No licensee shall endeavor to solicit any business through any person, firm, or corporation, other than a regular salaried employee of the licensee, by paying or offering to pay such business recommended to the licensee by any such person, firm or corporation.

History

RELATES TO: KRS Chapter 286.4
STATUTORY AUTHORITY: KRS 286.4-610
NECESSITY, FUNCTION, AND CONFORMITY: To promote the proper conduct by licensees of the consumer loan business.
History: SLL-25; 1 Ky.R. 891; eff. 6-11-75; TAm eff. 5-2-2007; Crt eff. 2-27-2020.

Chapter 9 Check Cashing

808 KAR 9:010 Deferred deposit database compliance {#sec-808-kar-9-010 omnilex-key=us-ky-regs-official--title-808--808 KAR 9:010}

Section 1. Closed Deferred Deposit Service Transactions. The Commissioner deems the following occurrences as closed deferred deposit service transactions pursuant to KRS 286.9-010(7)(e):

(1) The customer's payment instrument was unpaid and the licensee has sold the underlying debt to a non-affiliated third party without recourse;

(2) The underlying debt represented by the customer's payment instrument has been discharged in bankruptcy;

(3) The database provider has designated the deferred deposit transaction concerning the customer's payment instrument as closed pursuant to KRS 286.9-140(7); or

(4) The licensee has reported to the database provider that the deferred deposit transaction concerning the customer's payment instrument is closed following being held open pursuant to KRS 286.9-140(7).

Section 2. Deferred Deposit Database Requirements.

(1) A licensee shall institute procedures and maintain an accounting system designed to:

(a) Prevent the licensee from entering into transactions with a customer in violation of KRS 286.9-100(9), including procedures for:

Maintaining a record of all current transactions with the licensee; and
Checking the record of current transactions with the database prior to issuance of a new transaction; and

(b) Generate reports that will readily permit examination and verification of compliance with KRS 286.9-100(9), KRS 286.9-140, and this section by department examiners.

(2) For each deferred deposit transaction, a licensee shall submit:

(a) The customer's date of birth;

(b) The check number of the payment instrument, if applicable;

(d) The service fee charged to the customer; and

(e) The date the payment instrument was deposited or otherwise presented for payment.

(3) A licensee shall indicate in the database whether the customer entered into the deferred deposit transaction in person, electronically, or by telephone.

(4) A licensee shall not cause a closed deferred deposit transaction to be reopened in the database unless:

(a) The deferred deposit transaction was closed by reason of clerical error by the licensee;

(b) The licensee caused the deferred deposit transaction to be reopened on or before the close of business on the business day after the transaction was closed; and

(c) Reopening the transaction would not cause the customer to exceed the transaction limits set forth in KRS 286.9-100(9).

(5) A licensee shall not accept, collect, or seek payment on a deferred deposit transaction that is designated as closed in the database.

(6) A licensee that has reported to the database provider that a deferred deposit transaction is open beyond the maturity date pursuant to KRS 286.9-140(7) shall immediately notify the database provider when the transaction becomes closed.

(7) A new licensee or an existing licensee applying for an additional location shall establish an account with the database provider for each location prior to the time of application.

History

RELATES TO: KRS 286.9-010(7), 286.9-075, 286.9-100(1), (7), (9), (10), (18), (19), 286.9-140
STATUTORY AUTHORITY: KRS 286.9-090(1), 286.9-100, 286.9-140(1)
NECESSITY, FUNCTION, AND CONFORMITY: KRS 286.9-100(9) prohibits licensees from having more than two (2) deferred deposit transactions from any one (1) customer at any one (1) time and limits the total proceeds received by a customer from all deferred deposit transactions to $500. KRS 286.9-140(1) requires the commissioner to implement a common database with real-time access through an internet connection accessible to the department and licensees to verify whether any deferred deposit transactions are outstanding for a particular person and authorizes the commissioner to promulgate administrative regulations to administer and enforce KRS 286.9-140. This administrative regulation establishes requirements for licensee use of the database established pursuant to KRS 286.9-140.
History: 27 Ky.R. 1707; Am. 2788; eff. 4-9-2001; TAm eff. 5-2-2007; 41 Ky.R. 2634; 42 Ky.R. 686; eff. 9-22-2015; 45 Ky.R. 2220; eff. 5-3-2019; 51 Ky.R. 793, 1486, 1657; eff. 3-12-2025.

808 KAR 9:040 Customer account transfers {#sec-808-kar-9-040 omnilex-key=us-ky-regs-official--title-808--808 KAR 9:040}

Section 1. In connection with a deferred deposit transaction, a licensee shall deposit or present for payment a customer's actual check to the customer's bank or other financial institution unless that check is redeemed or bought back by the customer.

Section 2. Upon nonpayment by the customer's bank or other financial institution of the customer's actual check, a licensee may use electronic debits of customer accounts in its collection efforts.

History

RELATES TO: KRS 286.9-010, 286.9-100
STATUTORY AUTHORITY: KRS 286.9-090
NECESSITY, FUNCTION, AND CONFORMITY: KRS 286.9-090 authorizes the commissioner to promulgate administrative regulations for the enforcement of subtitle KRS 286.9. This administrative regulation establishes that licensees may only use electronic debits of customer accounts in collection efforts if there is nonpayment by the customer's bank or other financial institution of the customer's check.
History: 30 Ky.R. 525; Am. 868; eff. 10-31-2003; TAm eff. 5-2-2007; 45 Ky.R. 2202, 2911; eff. 5-3-2019.

808 KAR 9:050 Licensee change of control {#sec-808-kar-9-050 omnilex-key=us-ky-regs-official--title-808--808 KAR 9:050}

Section 1. Pursuant to the moratorium on the deferred deposit service business license in KRS 286.9-071, a license issued prior to July 2, 2009, shall be a deferred deposit service business license.

Section 2. Interpretation of KRS 286.9-030(3). A person shall be deemed principally engaged in the business of cashing checks and not principally engaged in the retail sale of goods or services at any particular location if the location's gross annual check cashing receipts exceed more than fifty (50) percent of the location's annual revenue.

Section 3. Change of Control. A licensee requesting a change of control pursuant to KRS 286.9-070(5) shall submit:

(1) A completed Change of Control form, available online at http://mortgage.nationwidelicensingsystem.org;

(2) A nonrefundable investigation fee of $500, if the person obtaining control of the licensee is not a licensee;

(3) If the person obtaining control of the licensee has a license, registration, or claim of exemption related to the financial services industry in any other state, a Form COMB-1, State License Confirmation Form for Check Cashing License or Deferred Deposit Service Business License for the person obtaining control of the licensee;

(4) An audited financial statement for the person obtaining control of the licensee prepared by a certified public accountant in accordance with generally accepted accounting principles as of the previous year end that includes:

(a) A balance sheet;

(b) Income statement;

(d) All notes.

(5) If the person obtaining control of the licensee is a startup company or new entity, an initial statement of condition and a proforma income statement shall be submitted instead of the income statement and statement of cash flows;

(6) Evidence that the person obtaining control of the licensee has complied or will comply with all workers' compensation and unemployment compensation laws of Kentucky; and

(7) One (1) of the following, which shall be deposited with and made payable to the commissioner:

(a) An irrevocable letter of credit in an amount required by KRS 286.9-040(1)(a);

(b) An Electronic Surety Bond available online at http://mortgage.nationwidelicensingsystem.org. The name of the principal insured on the bond shall match exactly the full legal name of the person obtaining control of the licensee;

(c) Evidence that the person obtaining control of the licensee has established an account in a federally insured financial institution in Kentucky and has deposited money of the United States in an amount required by KRS 286.9-040(1)(c), with an escrow agreement submitted on Form COMB-3, Escrow Agreement for Check Cashing License or Deferred Deposit Service Business License; or

(d) A savings certificate of a federally insured financial institution in Kentucky established by the person obtaining control of the licensee that is not available for withdrawal except by direct order of the commissioner in an amount required by KRS 286.9-040(1)(d), with an escrow agreement submitted on Form COMB-3, Escrow Agreement for Check Cashing License or Deferred Deposit Service Business License.

Section 4. Incorporation by Reference.

(1) The following material is incorporated by reference:

(a) Form COMB-1, "State License Confirmation Form for Check Cashing License or Deferred Deposit Services Business License", December, 2019; and

(b) Form COMB-3, "Escrow Agreement for Check Cashing License or Deferred Deposit Services Business License", December, 2019;

(2) This material may be inspected, copied, or obtained, subject to applicable copyright law, at the Kentucky Department of Financial Institutions, 500 Mero St 2SW19, Frankfort, Kentucky 40601, Monday through Friday, 8 a.m. to 4:30 p.m. This material may also be obtained from the department's Web site at http://www.kfi.ky.gov.

History

RELATES TO: KRS 286.9-010, 286.9-020, 286.9-030, 286.9-040, 286.9-050, 286.9-060, 286.9-070, 286.9-071, 286.9-073, 286.9-080, 286.9-104
STATUTORY AUTHORITY: KRS 286.9-050, 286.9-060, 286.9-070, 286.9-090(1), 286.9-104
NECESSITY, FUNCTION, AND CONFORMITY: KRS 286.9-090(1) authorizes the commissioner to adopt reasonable administrative regulations for the enforcement of KRS Chapter 286.9. KRS 286.9-050 and 286.9-060 authorize the commissioner to prescribe the form and materials required to apply for a license under KRS Chapter 286.9. KRS 286.9-070 requires licensees to file a written request for a change of control and to pay the cost incurred by the commissioner in investigating the change of control request. This administrative regulation establishes the required filing procedures for change of control by check cashing licensees.
History: 42 Ky.R. 2852; 43 Ky.R. 25; eff. 8-5-2016; 45 Ky.R. 2203; eff. 5-3-2019; 46 Ky.R. 703; eff. 11-1-2019; TAm eff. 12-3-2019.

Chapter 10 Securities

808 KAR 10:010 Forms for application, registration, notice filing, reporting and compliance {#sec-808-kar-10-010 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:010}

Section 1.

(1) Pursuant to KRS 292.331(1), Form BD, Uniform Application for Broker-Dealer Registration, shall be completed to register as a broker-dealer in Kentucky.

(2) Pursuant to KRS 292.331(1), Form U-4, Uniform Application for Securities Industry Registration or Transfer, shall be completed to:

(a) Register as an agent or an investment adviser representative in Kentucky; or

(b) Transfer an agent's or representative's registration to another broker-dealer, issuer, or investment adviser.

(3) Pursuant to KRS 292.331(5), Form 33-e-1, Application for Renewal of Issuer Agent Registration, shall be completed to renew registration as an issuer agent in Kentucky.

(4) Pursuant to KRS 292.331(1) and 292.332, Form ADV, Uniform Application for Investment Adviser Registration, shall be completed electronically to register or notice file as an investment adviser or covered adviser in Kentucky.

(5) Pursuant to KRS 292.350(2), 292.360(2), and 292.370(2), Form U-1, Uniform Application to Register Securities, shall be completed to register a security for sale in Kentucky by coordination, qualification, or notification.

(6) Pursuant to KRS 292.327(1), Form NF, Uniform Investment Company Notice Filing, shall be completed to make a notice filing in Kentucky.

(7) Pursuant to KRS 292.327(2), Form D, Notice of Exempt Offering of Securities, under Section 18(b)(4)(D) of the Securities Act of 1933, shall be completed to file for an exemption or register an offering under 808 KAR 10:280, Section 2(1).

(8) Pursuant to KRS 292.430(1) and (2), Form U-2, Uniform Consent to Service of Process, shall be completed by an issuer required to file a consent to service of process.

(9) Pursuant to KRS 292.334(5), Form BDW, Uniform Request for Broker-Dealer Withdrawal, shall be completed if a broker-dealer withdraws his registration in Kentucky.

(10) Pursuant to 808 KAR 10:280, Form U-7, Small Company Offering Registration, shall be completed by a company who:

(a) Meets the eligibility requirements established in that administrative regulation; and

(b) Wants to register an offering pursuant to that administrative regulation.

(11) Pursuant to KRS 292.334(5), Form U5, Uniform Termination Notice for Securities Industry Registration, shall be completed to terminate registration as an agent or investment adviser representative.

Section 2. Incorporation by Reference.

(1) The following material is incorporated by reference:

(a) "Form BD, Uniform Application for Broker-Dealer Registration", December, 2019;

(b) "Form U4, Uniform Application for Securities Industry Registration or Transfer", December, 2019;

(d) "Form ADV, Uniform Application for Investment Adviser Registration", December, 2019;

(e) "Form U-1, Uniform Application to Register Securities", December, 2019;

(f) "Form NF, Uniform Investment Company Notice Filing", December, 2019;

(g) "Form D, Notice of Exempt Offering of Securities", December, 2019;

(h) "Form U-2, Uniform Consent to Service of Process", December, 2019;

(i) "Form BDW, Uniform Request for Broker-Dealer Withdrawal", December, 2019;

(j) "Form U-7, Small Company Offering Registration", December, 2019; and

(k) "Form U5, Uniform Termination Notice for Securities Industry Registration", December, 2019.

(2) This material may be inspected, copied, or obtained, subject to applicable copyright law, at the:

(a) Department of Financial Institutions, 500 Mero St 2SW19, Frankfort, Kentucky 40601, Monday through Friday, 8 a.m. to 4:30 p.m.; or

(b) Financial Industry Regulatory Authority (FINRA), 1735 K Street, N.W., Washington, D.C. 20006, or a regional FINRA office.

(3) Form ADV may also be obtained from the Securities and Exchange Commission, Branch of BD and IA Registration, 100 F Street, NE, Washington, D.C. 20549

History

RELATES TO: KRS 292.327, 292.330, 292.331, 292.332, 292.333, 292.334, 292.350(2), 292.360(2), 292.370(2), 292.380(2), 292.410(1)(q), 292.430(1), (2)
STATUTORY AUTHORITY: KRS 292.327(1), 292.330, 292.331(1), (5), (6), 292.332, 292.333, 292.334, 292.350(2), 292.360(2), 292.370(2), 292.410(1)(q), 292.430(1), 292.500(3)
NECESSITY, FUNCTION, AND CONFORMITY: KRS 292.327(1), 292.331(1), (5), (6), 292.332, 292.333, 292.334, 292.350(2), 292.360(2), 292.370(2), 292.410(1)(q), and 292.430(1) and (2) require the commissioner to prescribe the required forms for registration or renewal registration, for a notice filing, for a registration exemption, and for withdrawal of registration. This administrative regulation establishes the required forms and incorporates by reference those forms.
History: SR 500(3)-1; 1 Ky.R. 1092; eff. 6-11-75; Am. 8 Ky.R. 523; 879; eff. 2-1-82; 9 Ky.R. 613; eff. 12-1-82; 11 Ky.R. 1903; eff. 7-9-85; 18 Ky.R. 199; 701; eff. 9-6-91; 3238; eff. 7-4-92; 24 Ky.R. 2172; 25 Ky.R. 83; eff. 6-25-98; 32 Ky.R. 1784; 2015; eff. 6-2-2006; 37 Ky.R. 2482; 2836; eff. 7-1-11; TAm eff. 12-3-2019; Crt eff. 2-27-2020.

808 KAR 10:020 Capital, records and reporting requirements of broker-dealers {#sec-808-kar-10-020 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:020}

Section 1. A broker-dealer, municipal security dealer, government security broker, or government security dealer shall:

(1) Be deemed to have complied with the requirements established in KRS 292.330 relating to capital, custody, margin, financial responsibility, making and keeping records, bonding, or financial or operational reporting if:

(a) The person is:

Registered with the United States Securities and Exchange Commission pursuant to 15 USC 78o; and
In compliance with the rules and regulations enacted by the United States Securities and Exchange Commission pursuant thereto;

(b) A copy of the information kept or provided to the United States Securities and Exchange Commission is made available or provided to the office as required by the executive director; and

(2) Comply with a reasonable request made by the executive director or a designated employee of the office for the assembly and production of information required to conduct an examination pursuant to KRS 292.330 or an investigation pursuant to KRS 292.460.

History

RELATES TO: KRS 292.330, 292.460, 15 U.S.C. 78o(h)
STATUTORY AUTHORITY: KRS 292.500(3), 15 U.S.C. 78o(h)
NECESSITY, FUNCTION, AND CONFORMITY: KRS 292.500(3) authorizes the executive director to promulgate administrative regulations necessary to carry out the provisions of KRS Chapter 292. 15 USC 78o(h) prohibits a state from establishing capital, custody, margin, financial responsibility, making and keeping records, bonding, or financial or operational reporting requirements for a broker, dealer, municipal dealer, government security broker, or government security dealer that differs from, or are in addition to, the federal requirements. This administrative regulation establishes the state requirements for a person registered pursuant to the federal requirements established in 15 USC 78o.
History: SR 330(5)-1, 2, 3, 4, 5, 6, 7; 1 Ky.R. 1092; eff. 6-11-75; Am. 11 Ky.R. 1904; eff. 7-9-85; 24 Ky.R. 2173; 25 Ky.R. 84; eff. 6-25-98; Crt eff. 2-27-2020.

808 KAR 10:030 Conduct of broker-dealers, agents, and employees; investment advisers and representatives {#sec-808-kar-10-030 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:030}

Section 1. Definitions.

(1) "Current brochure" or "current brochure supplement" means the most recent revision of the brochure or brochure supplement, including all amendments to date.

(2) "Sponsor of a wrap fee program" means an investment adviser that is compensated under a wrap fee program for:

(a) Sponsoring, organizing, or administering the program; or

(b) Selecting, or providing advice to clients regarding the selection of, other investment advisers in the program.

(3) "Wrap fee program" means an advisory program under which a specified fee or fees not based directly upon transactions in a client's account is charged for:

(a) Investment advisory services, which may include portfolio management or advice concerning the selection of other investment advisers; and

(b) The execution of client transactions.

Section 2. Suitability. A broker-dealer, agent, investment adviser, or investment adviser representative who recommends to a customer the purchase, sale or exchange of a security shall have reasonable grounds to believe that the recommendation is not unsuitable for the customer on the basis of:

(1) Information furnished by the customer after reasonable inquiry concerning the customer's investment objectives, financial situation and needs; and

(2) Other information known by the broker-dealer, agent, investment adviser or investment adviser representative.

Section 3. Supervision of Broker-dealer Agents.

(1) Each agent shall be subject to the supervision of a supervisor designated by the broker-dealer employing the agent. The responsibilities of a designated supervisor with respect to each agent under his supervision shall include the prompt review and written approval of:

(a) The opening of each new customer account by the agent;

(b) Each securities transaction by the agent;

(d) All advertising, sales literature, and seminars; and

(e) The handling of any customer complaint.

(2) Either a registered principal of the broker-dealer or an agent's designated supervisor shall:

(a) Review outside business activity by the agent;

(b) Review any brokerage account owned by the agent;

(d) Regularly inspect the records of the agent at the agent's place of business.

Section 4. Written Supervisory Procedures.

(1) Broker-dealers.

(a) Each broker-dealer shall establish, maintain and enforce written procedures that:

Are reasonably designed to detect and prevent violations of:

a. KRS Chapter 292, 808 KAR Chapter 10, and orders issued under that chapter;

b. The rules promulgated by the Securities and Exchange Commission pursuant to 15 U.S.C. 78w; and

c. If the broker-dealer is a member of a self-regulatory organization as defined in 15 U.S.C. 78c(a)(26), the rules of the self-regulatory organization pursuant to 15 U.S.C. 78s(b); and

Include the procedures adopted by the broker-dealer to comply with the requirements of Section 3 of this administrative regulation.

(b) The broker-dealer shall keep a copy of the procedures required by paragraph (a) of this subsection in each office where an agent transacts business in securities.

(2) Investment advisers.

(a) Except as provided in paragraph (b) of this subsection, each investment adviser shall:

Establish, maintain, and enforce written procedures that are reasonably designed to detect and prevent violations of KRS Chapter 292, 808 KAR Chapter 10, and orders issued under that chapter; and
Keep a copy of the procedures in each office where a representative provides investment advice to a client.

(b) The requirements established in paragraph (a) of this subsection shall not apply to an investment adviser that:

Has its principal place of business in a state other than Kentucky if the investment adviser is registered in that state and is in compliance with that state's written supervisory procedures requirements; or
Has two (2) or fewer persons registered as an investment adviser representative of the investment adviser.

Section 5. Brochure and Brochure Supplement.

(1) An investment adviser shall:

(a) Deliver to a client or prospective client a current brochure and, if applicable, current brochure supplement for a supervised person. The current brochure and current brochure supplement shall:

Contain all information required by Part 2 of Form ADV as incorporated by reference in 808 KAR 10:010; and
Be delivered before or at the time of entering into an investment advisory contract with that client;

(b) Deliver to each client annually, within 120 days after the end of the investment adviser's fiscal year and without charge:

A current brochure; or
The summary of material changes to the brochure as required by Item 2 of Form ADV, Part 2A that offers to provide the current brochure without charge, accompanied by the Web site address (if available) and an e-mail address (if available) and telephone number by which a client may obtain the current brochure, and the Web site address for obtaining information about the investment adviser through the Investment Adviser Public Disclosure (IAPD) system; and

(c) Deliver the following to each client promptly after creating an amended brochure or brochure supplement, as applicable, if the amendment constitutes a material revision:

The amended brochure or brochure supplement, as applicable, along with a statement describing the material revision; or
A statement describing the material revision.

(2)

(a) If an investment adviser is a sponsor of a wrap fee program, then the brochure that this section requires the investment adviser to deliver to a client or prospective client of the wrap fee program shall be a wrap fee program brochure containing all the information required by Part 2A, Appendix 1 of Form ADV. Any additional information in a wrap fee program brochure shall be limited to information applicable to wrap fee programs that the investment adviser sponsors.

(b) An investment adviser does not have to deliver a wrap fee program brochure if another sponsor of the wrap fee program delivers, to the client or prospective client of the wrap fee program, a wrap fee program brochure containing all the information required by Part 2A, Appendix 1 of Form ADV.

(c) A wrap fee program brochure shall not take the place of any brochure supplements that the investment adviser is required to deliver under this section.

(3) If an investment adviser provides substantially different advisory services to different clients, the investment adviser may provide them with different brochures, if each client receives all information about the services and fees that are applicable to that client. The brochure delivered to a client may omit any information required by Part 2A of Form ADV if the information does not apply to the advisory services or fees that are provided or charged, or that are proposed to be provided or charged, to that client.

(4) This section shall not relieve an investment adviser from an obligation, pursuant to a provision of KRS Chapter 292, 808 KAR Chapter 10, or other federal or state law, to disclose information to its advisory clients or prospective advisory clients not specifically required by this section.

Section 6. Multiple Registration.

(1) A person shall not be concurrently registered as an agent of more than one (1) broker-dealer or issuer unless the person obtains prior written consent from the commissioner.

(2) A person shall not be concurrently registered as an investment adviser representative of more than one (1) investment adviser unless the person obtains prior written consent from the commissioner.

(3) A request for multiple registration shall be in writing and shall contain a statement by each employer that the employer:

(a) Consents to the multiple employment of the agent or representative; and

(b) Agrees to assume joint and several liability with all other employers for an act or omission of the agent or representative during the employment period that violates KRS Chapter 292, 808 KAR Chapter 10, or orders issued under that chapter.

(4) The commissioner shall consent to multiple registration pursuant to a request under subsection (3) of this section if the commissioner finds that:

(a) The multiple registration does not impair a determination of the supervisory responsibilities of each employer with respect to the employee; and

(b) The disciplinary histories of the person and each employer are not unfavorable.

(5) The commissioner may consent to multiple registration in other cases if the commissioner finds that the multiple registration does not impair determination of the respective supervisory responsibilities of each employer with respect to the employee.

History

RELATES TO: KRS 292.330
STATUTORY AUTHORITY: KRS 292.336(6), 292.500(3)
NECESSITY, FUNCTION, AND CONFORMITY: KRS 292.500(3) authorizes the commissioner to promulgate administrative regulations necessary to carry out the provisions of KRS Chapter 292. KRS 292.336(6) authorizes the commissioner to promulgate administrative regulations regulating the conduct of business by broker-dealers and investment advisers. This administrative regulation establishes requirements relating to the conduct of a broker-dealer, agent, investment adviser, or representative.
History: SR 330(11)(f)-2; 1 Ky.R. 1094; eff. 6-11-75; 24 Ky.R. 2174; 25 Ky.R. 85; eff. 6-25-98; 26 Ky.R. 2042; 27 Ky.R. 770; eff. 9-11-2000; 37 Ky.R. 2484; 2837; eff. 7-1-11; Crt eff. 2-27-2020.

808 KAR 10:042 Use of senior certifications and designations {#sec-808-kar-10-042 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:042}

Section 1. Definition. "Financial Services Regulatory Agency" means an agency that regulates broker-dealers, investment advisors, or investment companies as defined under the Investment Company Act of 1940, 15 U.S.C. 80a.

Section 2. Misleading Use of Certification of Designation is Prohibited. As set forth in Section 2 of this administrative regulation, the use of a senior specific certification or designation that indicates or implies that the user has special certification or training in advising or servicing senior citizens or retirees shall be a fraudulent, deceptive, dishonest, or unethical practice in the securities business within the meaning of KRS 292.320(1)(c), 292.320(2)(b), or 292.337(2)(h), if used by any person in connection with:

(1) The offer, sale, or purchase of securities; or

(2) The provision of advice:

(a) As to the value of or the advisability of investing in, purchasing, or selling securities, either directly or indirectly or through publications or writings; or

(b) By issuing or promulgating analyses or reports relating to securities.

Section 3. Prohibited Uses of a Certification or Designation. The prohibited use of a senior specific certification or professional designation in the securities business shall include the following:

(1) Use of a certification or professional designation by a person who has not actually earned or is otherwise ineligible to use such certification or designation;

(2) Use of a nonexistent or self-conferred certification or professional designation;

(3) Use of a certification or professional designation that indicates or implies a level of occupational qualifications obtained through education, training, or experience that the person using the certification or professional designation does not have; and

(4) Use of a certification or professional designation that was obtained from a designating or certifying organization that:

(a) Is primarily engaged in the business of instruction in sales or marketing;

(b) Does not have reasonable standards or procedures for assuring the competency of its designees or certificants;

(c) Does not have reasonable standards or procedures for monitoring and disciplining its designees or certificants for improper or unethical conduct; or

(d) Does not have reasonable continuing education requirements for its designees or certificants in order to maintain the designation or certificate.

Section 4. Rebuttable Presumption for Certifications or Designations Issued by Accredited Organizations. Solely for purposes of Section 3(4) of this administrative regulation there shall be a rebuttable presumption that a designating or certifying organization is not disqualified if the organization has been accredited by:

(1) The American National Standards Institute;

(2) The National Commission for Certifying Agencies; or

(3) An organization that is on the United States Department of Education's list entitled "Accrediting Agencies Recognized for Title IV Purposes" and the designation or credential issued from that organization does not primarily apply to sales or marketing.

Section 5. Certifications and Designations Indicating Special Training. In determining whether a combination of words, or an acronym standing for a combination of words, constitutes a certification or professional designation indicating or implying that a person has special certification or training in advising or servicing senior citizens or retirees, factors to be considered shall include:

(1) Use of one (1) or more words such as "senior", "retirement", "elder", or like words, combined with one (1) or more words such as "certified", "registered", "chartered", "adviser", "specialist", "consultant", "planner", or like words, in the name of the certification or professional designation; and

(2) The manner in which those words are combined.

Section 6. Rebuttable Presumption for Certain Job Titles. For purposes of this administrative regulation, there shall be a rebuttable presumption that a certification or professional designation does not include a job title within an organization that is licensed or registered by a state or federal financial services regulatory agency, if that job title:

(1) Indicates seniority or standing within the organization; or

(2) Specifies an individual's area of specialization within the organization.

Section 7. This administrative regulation shall not limit the commissioner's authority to enforce existing provisions of law.

History

RELATES TO: KRS 292.320(1)(c), 292.320(2)(b), 292.337(2)(h), 292.470, 292.530(1)(a)
STATUTORY AUTHORITY: KRS 229.336(6), 292.500(3)
NECESSITY, FUNCTION, AND CONFORMITY: KRS 292.500(3) authorizes the commissioner to promulgate administrative regulations necessary to carry out the provisions of KRS Chapter 292. KRS 229.336(6) authorizes the commissioner to promulgate administrative regulations for the conduct of business by broker-dealers and investment advisors. KRS 292.337(2)(h) authorizes the commissioner to take legal action against an applicant or registrant if the person has engaged in dishonest or unethical practices in the securities business. This administrative regulation sets forth practices that are fraudulent or deceptive within the meaning of KRS 292.320 or dishonest and unethical within the meaning of KRS 292.337(2)(h).
History: 35 Ky.R. 1373; Am. 1744; eff. 2-6-09; TAm eff. 11-7-2012; Crt eff. 2-27-2020.

808 KAR 10:050 Application withdrawal {#sec-808-kar-10-050 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:050}

Section 1. An application for registration as agent, broker-dealer, investment adviser, or investment adviser representative shall be presumed to have been withdrawn if the applicant takes no affirmative action to consummate the registration for a period in excess of ninety (90) days from the date the application is received by the commissioner.

History

RELATES TO: KRS 292.331
STATUTORY AUTHORITY: KRS 292.331(6), 292.500(3)
NECESSITY, FUNCTION, AND CONFORMITY: KRS 292.331(6) authorizes the commissioner to promulgate administrative regulations that impose conditions on the registration of broker-dealers, investment advisers, investment adviser representatives, or agents. This administrative regulation establishes application withdrawal procedures for applicants for registration as agents, broker-dealers, investment advisers, and investment adviser representatives.
History: SR 330(3)-1; 1 Ky.R. 1094; eff. 6-11-75; 37 Ky.R. 2487; 2839; eff. 7-1-11; Crt eff. 2-27-2020.

808 KAR 10:060 Abandoned applications {#sec-808-kar-10-060 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:060}

Section 1. When a registration statement, or a preeffective amendment to such a statement, has been on file with the commissioner for a period of nine (9) months and has not become effective, the commissioner may, in his discretion proceed in the following manner to determine whether such registration statement or amendment has been abandoned by the registrant:

(1) A notice will be sent to the registrant and to the agent for service named in the registration statement by registered or certified mail, return receipt requested, addressed to the most recent address for the registrant and the agent for service reflected in the registration statement. Such notice will inform the registrant and the agent for service that the registration statement or amendment is out of date and must be either amended to comply with the applicable requirements of the Act and the rules and regulations thereto, or be withdrawn within thirty (30) days after the date of such notice.

(2) If the registrant or the agent for service fails to respond to such notice by filing a substantive amendment or withdrawing the registration statement or does not furnish a satisfactory explanation as to why he has not done so within such thirty (30) days, the commissioner may, declare the registration statement or amendment abandoned. Fees will be deemed to be forfeited and will not be returned.

Section 2. If the registration statement has been amended, otherwise than for the purpose of delaying the effective date thereof, or if the preeffective amendment has been amended, the nine (9) month period shall be computed from the date of the latest such amendment.

History

RELATES TO: KRS Chapter 292
STATUTORY AUTHORITY: KRS 292.500(3)
NECESSITY, FUNCTION, AND CONFORMITY: To permit the office to insure that all applications for registration are being actively pursued and to provide administrative due process of law when applicants encounter legitimate unavoidable delay.
History: SR 380(6)-1; 1 Ky.R. 1095; eff. 6-11-1975; Am. 11 Ky.R. 1908; eff. 7-9-1985; TAm eff. 11-7-2012; Crt eff. 2-27-2020.

808 KAR 10:090 Issuer's reports {#sec-808-kar-10-090 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:090}

Section 1. The person who files a registration statement pursuant to KRS 292.360 shall keep the registration statement current by filing the following:

(1) A copy of the issuer's annual report on Form 10-K as filed with the Securities and Exchange Commission pursuant to 15 U.S.C. 78m or 78o(d), or a document containing the information required by 15 U.S.C. 78m or 78o(d);

(2) A statement of the aggregate amount of securities sold in the state of Kentucky during the preceding twelve (12) month period; and

(3) A posteffective amendment to the issuer's federal registration statement not already on file with the office.

History

RELATES TO: KRS 292.360, 15 U.S.C. 78m, 78o(d)
STATUTORY AUTHORITY: KRS 292.500(3)
NECESSITY, FUNCTION, AND CONFORMITY: KRS 292.500(3) authorizes the commissioner to promulgate administrative regulations necessary to carry out the provisions of KRS Chapter 292. KRS 292.360 establishes procedures by which a security for which a federal registration statement has been filed in connection with the same offering to register by coordination. This administrative regulation establishes a procedure for an issuer to keep the registration statement current beyond the one (1) year period of registration.
History: SR 380(7)-3; 1 Ky.R. 1095; eff. 6-11-75; Am. 9 Ky.R. 46; eff. 8-11-82; 11 Ky.R. 1909; eff. 7-9-85; 24 Ky.R. 2178; 25 Ky.R. 87; eff. 6-25-98; TAm eff. 11-7-2012; Crt eff. 2-27-2020.

808 KAR 10:110 Records of investment advisers {#sec-808-kar-10-110 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:110}

Section 1.

(1) Pursuant to KRS 292.336(1)(a), an investment adviser who maintains his principal place of business in Kentucky shall:

(a) Meet the recordkeeping requirements established in 15 U.S.C. 80b-3; and

(b) Maintain his books and records in accordance with the applicable federal regulations, including 17 C.F.R. 275.204-2.

(2) The requirements established in subsection (1) of this section shall apply to an investment adviser subject to the provisions of KRS Chapter 292.

(3) The commissioner may upon application for good cause shown relieve an investment adviser of compliance with the requirements established in subsection (1) of this section if the action is in the public interest.

History

RELATES TO: KRS 292.336(1)(a), 17 C.F.R. 275.204-2, 15 U.S.C. 80b-3
STATUTORY AUTHORITY: KRS 292.336(1)(a), 292.500(3)
NECESSITY, FUNCTION, AND CONFORMITY: KRS 292.500(3) authorizes the commissioner to promulgate administrative regulations necessary to carry out the provisions of KRS Chapter 292. KRS 292.336(1)(a) requires an investment adviser who maintains his principal place of business in Kentucky to make and keep records required by the commissioner. KRS 292.336(1)(d)establishes separate requirements for an investment adviser who maintains his principal place of business in a state other than Kentucky. This administrative regulation establishes the recordkeeping requirements for an investment adviser who maintains his principal place of business in Kentucky.
History: SR 330(11)(a)3; 1 Ky.R. 1096; eff. 6-11-75; Am. 24 Ky.R. 2179; 2728; 25 Ky.R. 87; eff. 6-25-98; TAm eff. 11-7-2012; Crt eff. 2-27-2020.

808 KAR 10:120 Registration files {#sec-808-kar-10-120 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:120}

Section 1. Every registered broker-dealer and investment adviser shall promptly amend its registration file upon the happenings of any of the following events:

(1) Any change in the registrant's certifying accountant and a detailed statement of the reasons therefor.

(2) Any change in the registrant's net capital position which would result in a violation of the minimum net capital requirements.

(3) Any change in the control of the registrant.

(4) The institution of any material legal proceeding to which the registrant is a party.

(5) Any change in the address of the registrant or of any branch offices to the registrant.

(6) Any material change on the operations of the registrant.

History

RELATES TO: KRS Chapter 292
STATUTORY AUTHORITY: KRS 292.500(3)
NECESSITY, FUNCTION, AND CONFORMITY: To require that broker-dealer registration files are kept current.
History: SR 330(11)(c)-1; 1 Ky.R. 1097; eff. 6-11-75; Am. 11 Ky.R. 1909; eff. 7-9-85; Crt eff. 2-27-2020.

808 KAR 10:130 Amendments to registration statement {#sec-808-kar-10-130 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:130}

Section 1. An amendment to a registration statement filed pursuant to KRS 292.360 or 292.370 shall be marked in a manner to show each change from the last amendment filed.

History

RELATES TO: KRS 292.360, 292.370
STATUTORY AUTHORITY: KRS 292.500(3)
NECESSITY, FUNCTION, AND CONFORMITY: KRS 292.500(3) authorizes the commissioner to promulgate administrative regulations necessary to carry out the provisions of KRS Chapter 292. KRS 292.360 and 292.370 establish requirements for filing a registration statement. This administrative regulation establishes requirements for an amendment to a registration statement filed pursuant to KRS 292.360 or 292.370.
History: SR 360(2)(g)-1; 1 Ky.R. 1097; eff. 6-11-75; Am. 11 Ky.R. 1910; eff. 7-9-85; 24 Ky.R. 2180; 25 Ky.R. 88; eff. 6-25-98; TAm eff. 11-7-2012; Crt eff. 2-27-2020.

808 KAR 10:150 Registration exemptions {#sec-808-kar-10-150 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:150}

Section 1.

(1) Pursuant to KRS 292.410(1)(q), a security that is issued by a professional service corporation, a professional limited liability company, or a professional limited liability partnership and that meets the requirements established in subsection (3) of this section shall:

(a) Be exempt from KRS 292.340 to 292.390; and

(b) Not be required to file a claim of exemption with the office.

(2) A person who receives a commission or other remuneration in connection with a sale made pursuant to the exemption established in subsection (1) of this section shall not be relieved of compliance with the requirements of KRS 292.330.

(3) The exemption established in subsection (1) of this section shall apply if:

(a) The security is issued by a professional service corporation organized under KRS Chapter 274 or substantially similar legislation enacted in another state, a professional limited liability company organized under KRS Chapter 275 or substantially similar legislation enacted in another state, or a professional limited liability partnership organized under KRS Chapter 362 or substantially similar legislation enacted in another state that complies with the ownership and retransfer restrictions established by applicable laws;

(b) The security is sold to a professional person;

(d) Each professional is provided access to information concerning the professional service corporation or other entity.

History

RELATES TO: KRS 292.410(1)(q)
STATUTORY AUTHORITY: KRS 292.410(1)(q), 292.500(3)
NECESSITY, FUNCTION, AND CONFORMITY: KRS 292.500(3) authorizes commissioner to promulgate administrative regulations necessary to carry out the provisions of KRS Chapter 292. KRS 292.410(1)(q) authorizes the commissioner to exempt from KRS 292.330 to 292.390 a transaction for which the commissioner finds that registration is not necessary or appropriate in the public interest or for the protection of an investor. This administrative regulation establishes an exemption for a qualified professional service corporation from the requirements established in KRS 292.340 to 292.390.
History: 8 Ky.R. 35; Am. 149; eff. 8-5-81; 1456; eff. 7-7-82; 9 Ky.R. 613; eff. 12-1-82; 11 Ky.R. 1912; eff. 7-9-85; 24 Ky.R. 2181; 25 Ky.R. 88; eff. 6-25-98; TAm eff. 11-7-2012; Crt eff. 2-27-2020.

808 KAR 10:160 Definitions for 808 KAR Chapter 10 {#sec-808-kar-10-160 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:160}

Section 1. Definitions.

(1) "Current financial statement" means:

(a) A balance sheet of the issuer as of a date within four (4) months prior to the filing of the claim of exemption;

(b) A profit and loss statement audited by an independent, certified public accountant for the latest fiscal year presented for:

The three (3) fiscal years preceding the date of the balance sheet;
The period between the close of the last fiscal year and the date of the balance sheet; or
The period of the issuer's and its predecessor's existence if less than three (3) years; or

(c) If a part of the proceeds of the offering is to be applied to the purchase of a business, the same financial statements that would be required if that business were the issuer.

(2) "Investment intent" or "purchasing for investment" means that:

(a) The security shall:

Be kept by the purchaser as an investment without a disposition for a period of at least one (1) year;
Not be purchased with a view to, or for resale in connection with, a distribution; and
Not be disposed of if the security is not either registered or exempt from registration under KRS Chapter 292; and

(b) The purchaser of the security:

Shall be prepared to bear the economic risk of the investment for an indefinite period of time; and
Has no need for liquidity of the investment.

(3) "Promotional company" means:

(a) A corporation which does not have:

A substantial public market for its shares as evidenced by the number of market makers and the trading volume; and
Significant earnings; or

(b) A corporation which does not have:

A public market for its shares; and
Justification for its proposed public offering price on the basis of past earnings.

(4) "Significant subsidiary" means a subsidiary meeting one (1) of the following conditions:

(a) The assets of the subsidiary, or the investments in and advances to the subsidiary by the issuer and the issuer's other subsidiaries, if any, exceed ten (10) percent of the assets of the issuer and its subsidiaries on a consolidated basis;

(b) The sales and operating revenues of the subsidiary exceed ten (10) percent of the sales and operating revenues of the issuer and its subsidiaries on a consolidated basis; or

(c) The subsidiary is in control of or can significantly influence one (1) or more other subsidiaries and, together with those subsidiaries would, if considered in the aggregate, constitute a significant subsidiary.

(5) "Subsidiary" means an affiliate controlled or significantly influenced by the issuer directly or indirectly through one (1) or more intermediaries.

History

RELATES TO: KRS Chapter 292
STATUTORY AUTHORITY: KRS 292.500(3)
NECESSITY, FUNCTION, AND CONFORMITY: KRS 292.500(3) authorizes the commissioner to promulgate administrative regulations necessary to carry out the provisions of KRS Chapter 292. This administrative regulation establishes the definitions for terms used in 808 KAR Chapter 10.
History: 8 Ky.R. 183; eff. 10-7-81; Am. 20 Ky.R. 649; eff. 11-8-93; 24 Ky.R. 2182; 89; eff. 6-25-98; TAm eff. 11-7-2012; Crt eff. 2-27-2020.

808 KAR 10:170 Exemption claims from securities registration; form {#sec-808-kar-10-170 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:170}

Section 1. The provisions of this section shall apply to a matter relating to an exemption from registration pursuant to KRS 292.400(9).

(1) The claim of exemption required to be filed pursuant to KRS 292.415(1) shall contain the following:

(a) A declaration that the KRS 292.400(9) exemption shall be relied upon;

(b) A sample copy of the security that will be issued;

(d) A prospectus, offering circular, or memorandum making full disclosure of material facts, including a discussion of all salient risk factors;

(e) A representation that an offeree or purchaser shall have access to information concerning the issuer;

(f) Copies of all advertising or other material to be distributed in connection with the offering;

(g) A copy of the subscription agreement or other similar agreement;

(h) A copy of a proposed agreement or proposed form of agreement with a securities broker-dealer or underwriter;

(i) A copy of the preliminary or definitive Trust Indenture or trust agreement, if any;

(j)

Attesting to the authority of the issuer to offer and sell the security; and
Stating that after the sale the security shall be a valid, binding obligation of the issuer in accordance with the issuer's governing documents; and

(k) A representation that a commission or other remuneration to be paid in connection with the offer or sale of the security shall be paid to a person licensed pursuant to KRS 292.330.

(2) For a one (1) time offering of securities pursuant to KRS 292.400(9) by a church or other nonprofit entity, the commissioner shall apply the North American Securities Administrators Association's Statement of Policy Regarding Church Bonds.

(3) For a continuing offering of securities by a church or other nonprofit entity, the commissioner shall apply the North American Securities Administrators Association's Statement of Policy Regarding Church Extension Fund Securities.

Section 2. In a matter relating to an exemption from registration pursuant to KRS 292.400(12), the claim of exemption required to be filed pursuant to KRS 292.415(1) shall contain the following:

(1) The filing fee of $250 as required by KRS 292.420(3), payable to the Kentucky State Treasurer;

(2) A declaration that the KRS 292.400(12) exemption shall be relied upon;

(3) A sample copy of the security that will be issued;

(4) A copy of the articles of incorporation and bylaws of the issuer or the equivalent governing instruments;

(5) A prospectus, offering circular, or memorandum making full disclosure of material facts, including a discussion of all salient risk factors;

(6) A representation that an offeree or purchaser shall have access to information concerning the issuer;

(7) Current financial statements of the issuer;

(8) A copy of the subscription agreement or other similar agreement;

(9) A statement as to how the proceeds of the issue will be used; and

(10) A representation that a commission or other remuneration to be paid in connection with the offer or sale of the security shall be paid to a person licensed pursuant to KRS 292.330.

Section 3. Incorporation by Reference.

(1) The following material is incorporated by reference.

(a) "The North American Securities Administrators Association's Statement of Policy Regarding Church Bonds", April 2002 edition; and

(b) "The North American Securities Administrators Association's Statement of Policy Regarding Church Extension Fund Securities", April 2002 edition.

(2) This material may be inspected, copied, or obtained, subject to applicable copyright law, at the Department of Financial Institutions, 1025 Capital Center Drive, Frankfort, Kentucky 40601, Monday through Friday, 8 a.m. to 4:30 p.m.

History

RELATES TO: KRS 292.400(9), (12), 292.415(1), 292.420(3)
STATUTORY AUTHORITY: KRS 292.415(1), 292.500(3)
NECESSITY, FUNCTION, AND CONFORMITY: KRS 292.500(3) authorizes the commissioner to promulgate administrative regulations necessary to carry out the provisions of KRS Chapter 292. KRS 292.415(1) requires that before a security may be issued as an exempt security under KRS 292.400(9) or (12), a claim of exemption shall be filed with the commissioner in the form prescribed by the commissioner. This administrative regulation establishes the form and content of the claim of exemption that shall be filed in order to claim an exemption under KRS 292.400(9) or (12).
History: 8 Ky.R. 184; eff. 10-7-81; Am. 11 Ky.R. 1914; eff. 7-9-85; 24 Ky.R. 2183; 25 Ky.R. 90; eff. 6-25-98; 33 Ky.R. 2212; 2954; eff. 4-6-07; TAm eff. 11-7-2012; Crt eff. 2-27-2020.

808 KAR 10:200 Investment advisers' minimum liquid capitalization; bond {#sec-808-kar-10-200 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:200}

Section 1. Definitions.

(1) "Custody" means holding, directly or indirectly, client funds or securities, or having any authority to appropriate them or obtain possession, in accordance with the requirements established in Section 2 of this administrative regulation.

(2) "Independent party" means a person that:

(a) Is engaged by the adviser to act as a gatekeeper for the payment of fees, expenses and capital withdrawals from the pooled investment;

(b) Does not control, is not controlled by, and is not under common control with the adviser; and

(3) "Independent representative" means a person who:

(a)

For an advisory client, acts as an agent; or
For a pooled investment vehicle:

a. Acts as an agent for the limited partners of a limited partnership, for members of a limited liability company, or for other beneficial owners of another type of pooled investment vehicle; and

b. By law or contract is obligated to act in the best interests of the advisory client or the limited partners, members, or other beneficial owners;

(b) Does not control, is not controlled by, and is not under common control with the adviser; and

(4) "Net worth" means an excess of assets over liabilities as determined by generally-accepted accounting principles, but shall not include as assets:

(a) Deferred charges, goodwill, franchise rights, organizational expenses, patents, copyrights, marketing rights, unamortized debt discount and expense, or any other intangible asset;

(b) Home, home furnishings, automobiles, and any other items not readily marketable, if the adviser is an individual;

(c) Advances or loans to stockholders and officers or related parties of stockholders or officers, if the adviser is a corporation;

(d) Advances or loans to partners or related parties of partners, if the adviser is a partnership; and

(e) Advances or loans to members or related parties of members, if the adviser is a limited liability company.

(5) "Qualified custodian" means any of the following institutions or entities not controlling and not controlled by, nor under common control with, the adviser:

(a) A bank or savings association that has deposits insured by the Federal Deposit Insurance Corporation;

(b) A registered broker-dealer holding the client assets in customer accounts;

(c) A registered futures commission merchant under Section 4f(a) of the Commodity Exchange Act, 7 U.S.C. 6f(a), holding the client funds in customer accounts, but only with respect to the client funds and futures contracts in those accounts or other securities incidental to transactions in the purchase or sale of a commodity for future delivery or options thereon; and

(d) A foreign financial institution that customarily holds financial assets for its customers, if the foreign financial institution keeps the advisory client's assets in customer accounts segregated from the institution's proprietary assets.

Section 2. Custody Standards.

(1) Custody shall include:

(a) Possession of client funds or securities unless the funds or securities are:

Received inadvertently; and
Returned to the sender within three (3) business days of the receipt of the funds or securities;

(b) Receipt of a check drawn by a client and made payable to an unrelated third party unless:

The check is forwarded to the third party within twenty-four (24) hours of receipt; and
The adviser maintains appropriate records to document the preceding;

(c) Any arrangement, including a general power of attorney, under which the adviser is authorized or permitted to withdraw client funds or securities maintained with a custodian that are not excluded under subsection (2) of this section;

(d) Any capacity that gives the adviser access or legal ownership to client funds or securities, including if the adviser is a general partner of a limited partnership, managing member of a limited liability company, or holds a comparable position for another type of pooled investment vehicle, or is trustee of a trust; or

(e) Any advance fee arrangement in which an adviser receives payment in excess of $500 for work not to be completed within six (6) months of receipt of the payment from the client.

(2) Custody shall not include an arrangement for direct deduction of fees from a client account held with a qualified custodian if the adviser provides the following safeguards:

(a) The adviser has written authorization from the client to deduct advisory fees from the account;

(b) Each time a fee is directly deducted from a client account, the adviser concurrently:

Sends the qualified custodian notice of the amount of the fee to be deducted; and
Sends the client an invoice itemizing the fee, including the formula used to calculate the fee, the amount of assets under management that the fee is based on, and the time period covered by the fee; and

(c) At least quarterly, the qualified custodian sends to the client an account statement identifying the amount of funds and each security in the account at the end of the period and setting forth all transactions in the account during that period.

Section 3. Capital Requirements. An investment adviser registered or required to register pursuant to the Securities Act of Kentucky, KRS Chapter 292, shall meet the net worth requirements established in this section:

(1) An adviser who has custody of client funds or securities, except an adviser having custody due entirely to advising pooled investment vehicles and complying with Section 4(5) or 5(3) of this administrative regulation, shall maintain a minimum net worth as follows:

(a) For advisers with assets under management of $25,000,000 or less, the minimum net worth required shall be $35,000.

(b) For advisers with assets under management in excess of $25,000,000, the minimum net worth required shall be fifteen-hundredths of one percent (.0015) of assets under management.

(c) An adviser may substitute all but $10,000 of the net worth required under paragraphs (a) and (b) of this subsection with a surety bond for the substituted amount issued by a bonding company that is qualified to do business in Kentucky.

(2) An adviser who requires prepayment of advisory fees six (6) months or more in advance and in excess of $500 per client shall also maintain capital as required in subsection (1) of this section.

(3) An adviser who has discretionary authority over client funds or securities, but does not have custody of client funds or securities shall maintain a net worth as follows:

(a) For advisers with assets under management of $25,000,000 or less, the minimum net worth required shall be $10,000.

(b) For advisers with assets under management in excess of $25,000,000, the minimum net worth required shall be one-tenth of one percent (.001) of assets under management.

(c) An adviser may substitute, for any part of the net worth required under paragraphs (a) and (b) of this subsection, a surety bond for the substituted amount issued by a bonding company that is qualified to do business in Kentucky.

(4) An adviser shall maintain a positive net worth at all times.

(5) The commissioner may require that a current appraisal be submitted to establish the value of any material asset.

(6) An adviser shall compute its net worth at least once every month at the end of the month and shall maintain a record of each computation along with supporting documentation for a period of two (2) years. Each computation shall be accompanied by documentation of the assets under management for the adviser at that point in time.

(7) If the computation of net worth results in an amount that is less than required by subsections (1) through (4) of this section, the adviser shall by the close of business on the next business day following the determination of a deficiency, notify the commissioner by facsimile or electronic mail. After transmittal of this notice, the adviser shall promptly file with the commissioner a report of its financial condition, including a balance sheet, a year-to-date income statement and copies of supporting documentation.

(8) An adviser shall not be deemed to be exercising discretion if the adviser places trade orders with a broker-dealer pursuant to a third party trading agreement if:

(a) The investment advisory contract specifically states that the client does not grant discretionary authority to the adviser and the adviser in fact does not exercise discretion with respect to the account; and

(b) A third party trading agreement is executed between the client and a broker-dealer which specifically limits the adviser's authority in the client's broker-dealer account to the placement of trade orders and deduction of adviser fees.

(9) An adviser that has its principal place of business in a state other than Kentucky shall maintain the minimum capital as required by the state in which the adviser maintains its principal place of business, if the adviser is licensed in that state and is in compliance with that state's minimum capital requirement.

Section 4. Custody of Client Funds or Securities. An investment adviser registered or required to register pursuant to the Securities Act of Kentucky, KRS Chapter 292, shall comply with the requirements established in this section, if the adviser has custody of client funds or securities.

(1) The funds and securities shall be maintained by a qualified custodian:

(a) In a separate account for each client under that client's name; or

(b) In accounts that contain only the client's funds and securities, under the adviser's name as agent or trustee for the client.

(2) The adviser shall notify the client in writing of the qualified custodian's name, address, and the manner in which the funds or securities are maintained promptly when the account is opened and following any changes to this information.

(3)

(a) Account statements shall be sent to the client, either:

By the qualified custodian and the adviser shall have a reasonable basis for believing that the custodian sent an account statement, at least quarterly, to each of the adviser's clients for which it maintains funds or securities, identifying the amount of funds and each security in the account at the end of the period and setting forth all transactions in the account during that period; or
By the adviser, if the following conditions are met:

a. The adviser shall send an account statement, at least quarterly, to each client for whom the adviser has custody of funds or securities, identifying the amount of funds and each security of which it has custody at the end of the period and setting forth all transactions during the period;

b. An independent certified public accountant shall verify all client funds and securities by actual examination on an annual basis. The adviser shall file a copy of the accountant report and financial statements with the commissioner within thirty (30) days of the completion of the examination, along with a letter from the accountant stating that it has examined the funds and securities and describing the nature and extent of the examination; and

c. The adviser, upon notice from the certified public accountant of finding any material discrepancies during the course of the examination, shall notify the commissioner within one (1) business day of the finding, by means of a facsimile transmission or electronic mail, followed by certified first class mail.

(b) If the adviser is a general partner of a limited partnership, managing member of a limited liability company, or holds a comparable position for another type of pooled investment vehicle, the account statement required by paragraph (a) of this subsection shall be sent to each limited partner, member, other beneficial owner, or their independent representative.

(4) A client may designate an independent representative to receive on his behalf notices and account statements as required under subsections (2) and (3) of this section.

(5) An adviser who has custody and who does not meet the exception established in Section 5(3) of this administrative regulation shall, in addition to the safeguards established in subsections (1) through (4) of this section, comply with the following:

(a) Hire an independent party to review all fees, expenses, and capital withdrawals from the pooled accounts; and

(b) Send all invoices or receipts to the independent third party detailing the amount of the fees, expenses, or capital withdrawals and the method of calculation so that the independent party can:

Determine that the payment is in accordance with the pooled investment vehicle standards; and
Present to the qualified custodian approval for payment of the invoice with a copy provided to the adviser.

Section 5. Exceptions to Custody Requirements. The custody requirements in Section 4 of this administrative regulation shall not apply to the exceptions listed in this section:

(1) Shares of mutual funds. With respect to shares of an open-end company as defined in Section 5(a)(1) of the Investment Company Act of 1940, 15 U.S.C. 80a-5(a)(1), the adviser may use the company's transfer agent in lieu of a qualified custodian for purposes of complying with Section 4 of this administrative regulation.

(2) Certain privately offered securities.

(a) An adviser shall not be required to comply with the custody requirements with respect to securities that are:

Acquired from the issuer in a transaction or chain of transactions not involving a public offering;
Uncertificated, and ownership thereof is recorded on the books of the issuer or its transfer agent in the name of the client; and
Transferable only with prior consent of the issuer or holders of the outstanding securities of the issuer.

(b) The exception provided in paragraph (a) of this subsection shall not be available with respect to securities held for the account of a limited partnership, limited liability company, or other pooled investment vehicle, unless the entity is audited on an annual basis. The adviser shall distribute the audited financial statements as required by subsection (3) of this section.

(3) Limited partnerships subject to annual audit. An adviser shall not be required to comply with Section 4(5) of this administrative regulation with respect to the account of a limited partnership, limited liability company, or other type of pooled investment vehicle that is subject to an annual audit and distributes its audited financial statements prepared in accordance with generally accepted accounting principles to all limited partners, members, or other beneficial owners, within 120 days of the end of its fiscal year.

(4) Registered investment companies. The adviser shall not be required to comply with Section 4 of this administrative regulation with respect to the account of an investment company registered under the Investment Company Act of 1940, 15 U.S.C. 80a-1 to 80a-64.

(5) Beneficial trusts. An adviser having custody due entirely to serving as trustee for a trust, the beneficial owner of the trust being a parent, grandparent, spouse, sibling, child, or grandchild of that person, including blood or step relationships in these categories, shall not be deemed as having custody of the trust funds for purposes of being required to comply with the safekeeping requirements of Section 4 of this administrative regulation or the net worth requirements of Section 3(1) of this administrative regulation. This exclusion shall not apply to any other trust not expressly excepted for which this person is serving as trustee. Any trust not expressly exempted and its trustees shall be in compliance with this administrative regulation. This exclusion shall inure to the benefit of the employer of the registered person while an employment relationship exists.

History

RELATES TO: KRS 292.331(4), 292.336(6), 7 U.S.C. 6f
STATUTORY AUTHORITY: KRS 292.331(4), 292.336(6), 292.500(3)
NECESSITY, FUNCTION, AND CONFORMITY: KRS 292.500(3) authorizes the commissioner to promulgate administrative regulations necessary to carry out the provisions of KRS Chapter 292. KRS 292.331(4) authorizes the commissioner to require a minimum liquid net capital for investment advisers. KRS 292.336(6) authorizes the commissioner to prescribe rules for the conduct of business by investment advisers. This administrative regulation establishes the requirements for minimum liquid capitalization and bonding for an investment adviser.
History: 8 Ky.R. 579; eff. 3-1-82; Am. 24 Ky.R. 2185; 25 Ky.R. 91; eff. 6-25-98; 32 Ky.R. 1482; 2017; eff. 6-2-2006; 3 Ky.R. 2488; 2842; eff. 7-1-11; Crt eff. 2-27-2020.

808 KAR 10:210 Registration exemptions - Federal Regulation D {#sec-808-kar-10-210 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:210}

Section 1.

(1) Pursuant to KRS 292.410(1)(q), an offer or sale of a security offered or sold in compliance with 17 C.F.R. 230.504 or 230.505, or an offer or sale made exempt by 17 C.F.R. 230.508(a) shall be exempt from KRS 292.340 to 292.390 if the offer or sale meets the requirements established in subsections (3) and (4) of this section.

(2) A person who receives a commission, finder fee, or other remuneration in connection with a sale of a security made pursuant to the exemption established in subsection (1) of this section shall not be relieved of compliance with the requirements of KRS 292.330.

(3) The exemption established in subsection (1) of this section shall apply if:

(a) The issuer does not offer or sell the security by means of a form of general advertisement or general solicitation except as permitted by 17 C.F.R. 230.504. The following shall not constitute "general solicitation" within the meaning of this paragraph:

Solicitation of an indication of interest in accordance with the applicable terms and conditions; or
An offer to sell a security and the dissemination of written offering material in accordance with the terms of this administrative regulation at least thirty (30) days after the withdrawal of an application by the issuer to register the same class of securities;

(b)

The issuer reasonably believes that each purchaser of the securities in Kentucky is:

a. Acquiring the security for investment; and

b. Aware of the restrictions imposed on transferability and resale of a security.

The basis for reasonable belief may include:

a. Obtaining a written representation signed by the purchaser that the purchaser is acquiring the security for the purchaser's own investment and is aware of the restrictions imposed on the transferability and resale of the security; and

b. Placement of a legend on the certificate or other document that evidences the security stating that the security have not been registered under KRS Chapter 292, and setting forth or referring to the restrictions on transferability and sale of security.

(c)

The issuer shall file with the office a notice on Form D (17 C.F.R. 239.500):

a. No later than fifteen (15) days after the first sale of a security from or into Kentucky in the case of a transaction pursuant to 17 C.F.R. 230.505; or

b. At least ten (10) business days prior to the first sale of a security from or into Kentucky in the case of a transaction pursuant to 17 C.F.R. 230.504.

During the time specified in subparagraph 1 of this paragraph, the office shall not have determined that the exemption provided by this administrative regulation is not available.
A notice on Form D shall be manually signed by a person duly authorized by the issuer.

a. Information furnished by the issuer to an offeree shall be filed with the notice required by subparagraph 1 of this paragraph.

b. If the information is altered in a material way during the course of the offering, the office shall be notified of the amendment within fifteen (15) days after an offer using the amended information.

At the time of filing of the notice on Form D, the issuer shall pay to the commissioner a filing fee of $250.
If the issuer files an additional document with the United States Securities and Exchange Commission subsequent to its initial filing, a copy of the document shall be filed with the office.

(d)

An issuer selling a security in reliance on this exemption furnishes written information to a prospective investor to comply with the antifraud provisions of KRS Chapter 292 and applicable federal law.
In an offering in reliance on 17 C.F.R. 230.504 to a person who is not an accredited investor, the office shall consider the information provided to a prospective investor in determining whether the exemption established by this administrative regulation is available; and

(e) In a sale to a nonaccredited investor pursuant to 17 C.F.R. 230.504, the issuer and a person acting on his behalf shall have reasonable grounds to believe, and after making reasonable inquiry shall believe, that the purchaser either alone or with his purchaser representative has the knowledge and experience in financial and business matters that he is capable of evaluating the merits and risk of the prospective investment.

(4)

(a) Except as provided in paragraph (b) of this subsection, the exemption established in subsection (1) of this section shall not apply if the issuer or a person described in 17 C.F.R. 230.262:

Has filed a registration statement which is the subject of a currently effective stop order entered pursuant to a federal or state law within five (5) years prior to the commencement of the offering;
Has been convicted within five (5) years prior to commencement of the offering of a felony or misdemeanor in connection with the purchase or sale of a security or a felony involving fraud or deceit including forgery, embezzlement, obtaining money under false pretenses, larceny or conspiracy to defraud;
Is currently subject to a federal or state administrative order or judgment entered by that state's securities administrator within five (5) years prior to reliance on this exemption or is subject to a state's administrative order or judgment in which fraud or deceit was found and the order or judgment was entered within five (5) years of the expected offer and sale of a security in reliance upon this exemption;
Is currently subject to a state's administrative order or judgment which prohibits the use of an exemption from registration in connection with the purchase or sale of a security; or
Is subject to an order, judgment or decree of a court of competent jurisdiction temporarily or preliminarily restraining or enjoining, or is subject to an order, judgment or decree of a court of competent jurisdiction, entered within five (5) years prior to the commencement of the offering permanently restraining or enjoining, the person from engaging in or continuing a conduct or practice in connection with the purchase or sale of a security or involving the making of a false filing with a state.

(b) The prohibitions of paragraph (a)1, 2, 3 and 5 of this subsection shall not apply if:

The person subject to the disqualification is duly licensed or registered to conduct securities related business in the state in which the administrative order or judgment was entered against the person; or
The broker-dealer employing the person is licensed or registered in Kentucky and the Form BD filed with Kentucky discloses the order, conviction, judgment or decree relating to the person.

(c) A disqualification pursuant to paragraph (a) of this subsection shall be automatically waived if the state which created the basis for disqualification determines upon a showing of good cause that it is not necessary under the circumstances that the exemption be denied.

(d) It shall be a defense to a violation of paragraph (a) of this subsection if the issuer sustains the burden of proof to establish that he did not know, and in the exercise of reasonable care could not have known, that a disqualification under paragraph (a) of this subsection existed.

(5) A failure to comply with a term, condition or requirement established in subsection (2) or (3)(c) or (d) of this section shall not result in loss of the exemption for a new offer or sale to a particular individual or entity if the person relying on the exemption shows:

(a) The failure to comply did not pertain to a term, condition or requirement directly intended to protect that particular individual or entity;

(b) The failure to comply was insignificant with respect to the offering as a whole; and

(c) A good faith and reasonable attempt was made to comply with all applicable terms, conditions and requirements of this section.

(6) If an exemption is established only through reliance upon subsection (5) of this section, the failure to comply shall be actionable by the commissioner.

(7)

(a) An offer or sale which is exempt pursuant to this administrative regulation shall not be combined with an offer or sale exempt under another administrative regulation or KRS Chapter 292.

(b) If an offer or sale fails to comply with all the conditions for this exemption, the issuer may claim the availability of another applicable exemption.

(8) This exemption shall not relieve an issuer or a person acting on behalf of an issuer from the requirement to provide disclosure to a prospective investor to satisfy the antifraud provisions established within KRS Chapter 292.

(9) In a proceeding involving this administrative regulation, the burden of proving the exemption or an exception from a definition or condition shall be upon the person claiming it.

(10) The exemption established in this administrative regulation shall not be available to an issuer for a transaction which is:

(a) In technical compliance with the requirements of this administrative regulation; and

(b) Part of a plan or scheme to evade registration or the requirements of this administrative regulation.

Section 2. Adoption Without Change. The offer or sale of a security offered or sold pursuant to Federal Regulation D is governed by:

(1) 17 C.F.R. 230.262, August 13, 1992;

(2) 17 C.F.R. 230.501, March 20, 1989;

(3) 17 C.F.R. 230.504, June 14, 1996;

(4) 17 C.F.R. 230.505, August 13, 1992; and

(5) 17 C.F.R. 230.508, August 13, 1992.

Section 3. Incorporation by Reference.

(1) Form B-D, "Application for Registration as Broker-Dealer", July 1988 edition, is incorporated by reference.

(2) It may be inspected, copied, or obtained at the Department of Financial Institutions, 1025 Capital Center Drive, Suite 200, Frankfort, Kentucky, 40601, Monday through Friday, 8 a.m. to 4:30 p.m.

(3) A copy may also be obtained from the National Association of Securities Dealers (NASD), 1735 K Street, N.W., Washington, D.C., 20006, or a regional NASD office.

History

RELATES TO: KRS 292.410(1)(q), 17 C.F.R. 230.262, 230.501, 230.504, 230.505, 230.508, 239.500
STATUTORY AUTHORITY: KRS 292.500(3), 17 C.F.R. 230.262, 230.501, 230.504, 230.505, 230.508
NECESSITY, FUNCTION, AND CONFORMITY: KRS 292.500(3) authorizes the commissioner to promulgate administrative regulations necessary to carry out the provisions of KRS Chapter 292. KRS 292.410(1)(q) authorizes the commissioner to exempt from KRS 292.330 to 292.390 a transaction for which the commissioner finds that registration is not necessary or appropriate in the public interest or for the protection of an investor. This administrative regulation establishes an exemption for an offer or sale of a security that complies with specified federal regulations and the requirements established in the administrative regulation.
History: 11 Ky.R. 1969; eff. 7-9-85; Am. 12 Ky.R. 358; eff. 10-8-85; 1762; eff. 6-10-86; 13 Ky.R. 1112; eff. 1-13-87; 16 Ky.R. 53; 543; eff. 10-8-89; 24 Ky.R. 2186; 25 Ky.R. 91; 313; eff. 6-25-98; TAm eff. 11-7-2012; Crt eff. 2-27-2020.

808 KAR 10:225 Administrative hearing procedures {#sec-808-kar-10-225 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:225}

Section 1. Definitions.

(1) "Administrative hearing" is defined by KRS 13B.010(2).

(2) "Commissioner" is defined by KRS 292.310(4).

(3) "Department" means the Department of Financial Institutions.

(4) "Hearing officer" is defined by KRS 13B.010(7).

(5) "Party" is defined by KRS 13B.010(3).

(6) "Person" is defined by KRS 292.310(10).

Section 2. Complaint and Answer.

(1) The office attorney may file a written complaint against a person if:

(a) The attorney believes that the person is violating or has violated a provision of KRS Chapter 292; and

(b) The commissioner has not entered an order against the person based on the same conduct or allegation.

(2) The complaint shall:

(a) Describe the allegation made against the person;

(b) Request the commissioner to enter an appropriate order; and

(3) A person shall respond to the complaint by filing a written answer with the office. If an answer is not filed in accordance with subsection (4) of this section, the office attorney shall seek a final order from the commissioner granting the relief requested in the complaint.

(4) An answer shall:

(a) Be filed within twenty (20) days of service of the complaint;

(b) Respond to each allegation in the complaint; and

Does not agree that there has been a violation of KRS Chapter 292; or
Believes that the requested action is not appropriate.

(5) If requested, an administrative hearing shall be held pursuant to the provisions of KRS Chapter 13B and this administrative regulation. The notice of hearing required by KRS 13B.050 shall be sent to the parties after the request for an administrative hearing has been received.

Section 3. Attorney Representation.

(1) An attorney who represents a party shall send written notification to the office, the hearing officer, and each party stating:

(a) That the attorney is representing the party; and

(b) The name, address, telephone number, and, if applicable, the facsimile number of the attorney and the client.

(2) If there is a change in the information provided in the notice, the attorney shall send written notification of the change to the office, the hearing officer, and each party.

(3) Withdrawal. An attorney who wishes to withdraw shall submit written notification stating that:

(a) The attorney is withdrawing;

(b) The client has been informed of the withdrawal; and

Section 4. Hearing Officers. If a hearing officer is disqualified, the commissioner shall assign another hearing officer within ten (10) days of the disqualification.

Section 5. Filings.

(1) Each document filed with the office for an administrative hearing shall include a certificate of service. The certificate of service shall:

(a) Certify that the document was served as required by KRS 13B.080(2);

(b) Identify the method of service; and

(2) Pursuant to KRS 13B.080(2), a document sent by facsimile machine shall be considered served on a party on the date of the facsimile transmission if the:

(a) Document contains a statement that the:

Document was served by facsimile machine; and
Original of the document will be mailed to each party within five (5) business days of the date the facsimile was sent; and

(b) Party mails the original to the office within five (5) business days of the date the facsimile was sent.

Section 6. Motions.

(1) A request for a hearing officer to take or refrain from taking an action shall be made by an oral or written motion.

(2) A motion shall state the basis for the motion, including a citation to or description of the legal authority in support of the requested action, if applicable.

(3) A party shall be given an opportunity to respond to a motion.

Section 7. Consolidation and Severance.

(1) A hearing officer may consolidate cases assigned to his docket upon a finding by the hearing officer that:

(a) There are:

Common questions of law or fact; or
Identical issues or witnesses; and

(b) Consolidation is appropriate.

(2) A hearing officer may sever consolidated cases or claims in an administrative action upon a finding that the requirements for consolidation established in subsection (1) of this section are not met.

History

RELATES TO: KRS Chapter 13B, 292.330, 292.460, 292.470, 292.500(1), (3), (9)
STATUTORY AUTHORITY: KRS 292.500(1), (3)
NECESSITY, FUNCTION, AND CONFORMITY: KRS 292.337(1), 292.390(3), and 292.410(2) authorize the commissioner to order the denial, suspension, or revocation of a registration or registration exemption of a broker-dealer, agent, investment adviser, investment adviser representative, or issuer agent for a violation of KRS Chapter 292. KRS 292.500(9) requires that an administrative hearing be conducted in accordance with KRS Chapters 13B and 292. KRS 292.500(3) authorizes the commissioner of the office to promulgate administrative regulations to implement the provisions of KRS Chapter 292. This administrative regulation establishes supplemental administrative hearing procedures for matters relating to a broker-dealer, agent, investment adviser, investment adviser representative, issuer agent, or security.
History: 23 Ky.R. 3459; Am. 24 Ky.R. 368; eff. 8-11-97; 2188; eff. 6-25-98; TAm 11-7-2012; Crt eff. 2-27-2020.

808 KAR 10:240 Registration exemptions - sale of business {#sec-808-kar-10-240 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:240}

Section 1. Definition. "Legal entity" means a business organization of any type, such as a corporation, a partnership, a limited partnership, an association, or a limited liability company.

Section 2. Pursuant to KRS 292.410(1)(q), the offer or sale of 100 percent of the ownership interest in a legal entity shall be exempt from the requirements established in KRS 292.330 to 292.390 if:

(1) 100 percent of the ownership interest in the legal entity is either offered or sold; and

(2) The ownership interest is sold to one (1) individual or preexisting legal entity.

History

RELATES TO: KRS 292.410(1)(q)
STATUTORY AUTHORITY: KRS 292.410(1)(q), 292.500(3)
NECESSITY, FUNCTION, AND CONFORMITY: KRS 292.500(3) authorizes the commissioner to promulgate administrative regulations necessary to carry out the provisions of KRS Chapter 292. KRS 292.410(1)(q) authorizes the commissioner to exempt from KRS 292.330 to 292.390 a transaction for which the commissioner finds that registration is not necessary or appropriate in the public interest or for the protection of an investor. This administrative regulation establishes an exemption for a sale of a business that meets the specified requirements.
History: 12 Ky.R. 1806; eff. 6-10-86; Am. 24 Ky.R. 2190; 25 Ky.R. 94; eff. 6-25-98; 37 Ky.R. 2492; 2842; eff. 7-1-11; Crt eff. 2-27-2020.

808 KAR 10:260 Examination requirement for individuals advising the public on securities, broker-dealers, and agents {#sec-808-kar-10-260 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:260}

Section 1. Except as provided in Section 2 of this administrative regulation, to register in Kentucky as an investment adviser or an investment adviser representative, an individual shall demonstrate competence in the law of securities by providing the commissioner with proof of obtaining a passing score, as determined by the Financial Industry Regulatory Authority (FINRA), on:

(1) The Uniform Investment Advisor Law Examination (Series 65 examination); or

(2) Both:

(a) The General Securities Representative Examination (Series 7 examination); and

(b) The Uniform Combined State Law Examination (Series 66 examination).

Section 2. The following individuals shall not be required to take and pass the examinations referenced in Section 1 of this administrative regulation:

(1) An individual who registered as an investment adviser or investment adviser representative in a state on or before January 1, 2000 and has been continuously registered since that date, except that the commissioner may require the examinations identified in Section 1 of this administrative regulation for an individual found to have violated a state or federal securities law as a condition of continued registration;

(2) An individual who currently holds one (1) of the following professional designations and is in compliance with all continuing education and other requirements of good standing for the designation:

(a) Certified Financial Planner (CFP) issued by the Certified Financial Planner Board of Standards, Inc.;

(b) Chartered Financial Consultant (ChFC) issued by The American College, Bryn Mawr, Pennsylvania;

(d) Chartered Financial Analyst (CFA) granted by the Association for Investment Management and Research; or

(e) Certified Investment Management Analyst (CIMA) awarded by the Investment & Wealth Institute;

(3) An individual who:

(a) Was registered as a broker-dealer agent prior to January 1, 1988;

(b) Has been continuously registered since that date; and

(4) An individual who was registered as an investment advisor representative, relying on the professional designation of Chartered Investment Counselor (CIC) prior to January 1, 2025, has been continuously registered since that date and has no reportable disclosures on Form U-4, as incorporated by reference in 808 KAR 10:010.

Section 3. An individual not required to take and pass any examination because of holding a designation specified in Section 2(2) of this administrative regulation may be required to take the examination if that individual fails to maintain the designation in good standing.

Section 4. A registered investment adviser shall not employ an individual as an investment adviser or as an investment adviser representative unless that individual has complied with this administrative regulation.

Section 5.

(1) To register in Kentucky as an agent, the applicant shall:

(a) Pass the FINRA Securities Industry Essentials (SIE) and an appropriate examination, which depending on the proposed business, shall be one (1) of the following FINRA examinations: Series 4, 6, 7, 9, 10, 11, 14, 16, 17, 22, 23, 24, 26, 27, 28, 39, 50, 51, 52, 53, 54, 57, 79, 82, 86, 87, or 99; and

(b) Pass the North American Securities Administrators Association (NASAA) Series 63 or Series 66 examination.

(2) To register in Kentucky as a broker-dealer, the applicant shall employ an individual who:

(a) Has passed the appropriate examinations listed in subsection (1) of this section; and

(b) Is to be deemed a principal of the broker-dealer.

Section 6.

(1) Except as provided in subsections (2) and (3) of this Section, an individual who has been unregistered for a period of time in excess of two (2) years shall be required to take and pass the examinations specified in Sections 1 and 5 of this administrative regulation unless the commissioner grants a waiver for good cause shown in response to a written request by the investment adviser, broker-dealer, or issuer which the individual will represent.

(2) An individual who has been unregistered as an agent in any state for a period of time in excess of two (2) years but less than five (5) years, shall be deemed in compliance with the examination requirements of Section 5 of this administrative regulation if:

(a) The individual has elected to participate in the FINRA Maintaining Qualifications Program (FINRA MQP) pursuant to FINRA Rule 1240(c);

(b) The individual's FINRA qualifying examinations remain valid pursuant to participation in the FINRA MQP; and

(c) The individual elects to participate in the NASAA Examination Validity Extension Program (NASAA EVEP) within two (2) years of agent registration termination.

(3) An individual who terminates his or her registration as an investment adviser representative may, for purposes of compliance with the examination requirements of Section 1 of this administrative regulation, maintain the validity of his or her Series 65/Uniform Investment Adviser Law Examination, or the investment adviser representative portion of the Series 66/Uniform Combined State Law Examination, as applicable, without being employed by or associated with an investment adviser or a federally covered investment adviser for a maximum of five (5) years following the termination of the individual's investment adviser representative registration if the individual:

(a) Previously passed the examination for which the individual seeks to maintain validity under this administrative regulation;

(b) Was registered as an investment adviser representative for at least one (1) year immediately preceding the termination of the investment adviser representative registration;

(c) Was not subject to a statutory disqualification, as defined in 15 U.S.C. sec. 78c(a)(39), while registered as an investment adviser representative or at any period after termination of the registration;

(d) Elects to participate in the NASAA EVEP under this paragraph within two (2) years from the effective date of the termination of the investment adviser representative registration;

(e) Does not have a deficiency under KRS 292.338 at the time the investment adviser representative registration becomes ineffective; and

(f)

Completes annually, not later than December 31 of each calendar year in which the person participates in the investment adviser representative NASAA EVEP and for each calendar year that elapses after the individual's investment adviser representative registration became ineffective, regardless of when the individual elects to participate in NASAA EVEP, the continuing education requirements set forth in KRS 292.338(2)[][][].
An individual who complies with the FINRA MQP under FINRA Rule 1240(c) shall be deemed in compliance with KRS 292.338(2)(b).

History

RELATES TO: KRS 292.310, 292.330, 292.331(3), 292.337, 292.338, 292.500(3), 15 U.S.C sec. 78c
STATUTORY AUTHORITY: KRS 292.331(3), 292.500(3)
NECESSITY, FUNCTION, AND CONFORMITY: KRS 292.331(3) authorizes the commissioner to require an examination as evidence of knowledge of the securities business as a condition of registration. KRS 292.500(3) authorizes the commissioner to classify securities, persons, and matters within his or her jurisdiction and prescribe different requirements for different classes. This administrative regulation requires an individual who advises the public regarding securities to successfully complete a written examination that demonstrates knowledge of the requirements of the securities laws and exempts certain individuals from the examination requirement. This administrative regulation also sets the examination requirements for agents who participate in the FINRA Maintaining Qualifications Program (FINRA MQP) pursuant to FINRA Rule 1240(c) and investment adviser representatives who participate in the NASAA Examination Validity Extension Program (NASAA EVEP).
History: 18 Ky.R. 244; 702; eff. 9-6-1991; 23 Ky.R. 2286; 2738; eff. 1-9-1997; 24 Ky.R. 2190; 25 Ky.R. 94; eff. 6-25-1998; 26 Ky.R. 901; 1160; eff. 12-16-1999; 29 Ky.R. 2159; 2468; eff. 4-11-2003; 37 Ky.R. 2493; 2842; eff. 7-1-2011; Cert eff. 2-27-2020; 50 Ky.R. 2316; 51 Ky.R. 280, 667; eff. 9-17-2024

808 KAR 10:280 Qualifications, eligibility, and restrictions on the use of Form U-7, Small Corporate Offering Registration {#sec-808-kar-10-280 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:280}

Section 1. Qualification for Use of Form. To be eligible to use Form U-7, as incorporated by reference in 808 KAR 10:010, a company shall comply with each of the following requirements:

(1) The company shall be a legal entity organized under the laws of one of the states or possessions of the United States which engages in or proposes to engage in a business other than petroleum exploration or production or mining or other extractive industries. "Blind pool" offerings and other offerings for which the specific business or properties cannot now be described shall not be eligible to use Form U-7.

(2) The securities may be offered and sold only on behalf of the company, and Form U-7 shall not be used by any selling security-holder (including purchase underwriters in a firm commitment underwriting) to register the securities for resale.

(3)

(a) The following prices shall be equal to or greater than five (5) dollars:

The offering price for a share or other ownership interest;
The exercise price, if the securities are options, warrants, or similar rights; and
The conversion price, if the securities are convertible into shares or other ownership interests.

(b) Execution of the application and filing of the form U-7 shall constitute agreement by the company that the company shall not dilute the value below five (5) dollars by any issuance of new shares or other ownership interests for two (2) years after the conclusion of the registration.

(4) The company may engage selling agents to sell the securities. Commissions, fees, or other remuneration for soliciting any prospective purchaser in this state in connection with this offering shall only be paid to persons who, if required to be registered, the company believes, and has reason to believe, are appropriately registered in this state.

(5) This form shall not be available for the securities of any company if the company or any of its officers, directors, persons with a ten (10) percent ownership interest (or persons occupying similar status or performing similar functions), promoters or any selling agents of the securities to be offered, or any officer, director, or partner (or person occupying similar status or performing similar functions) of the selling agent:

(a) Has filed a registration statement which is the subject of a currently effective registration stop order entered pursuant to any state's securities law within (5) years prior to the filing of the application for registration;

(b) Has been convicted within ten(10) years prior to the filing of the application for registration of any felony or misdemeanor in connection with the offer, purchase, or sale of any security or any felony involving fraud or deceit, including, but not limited to, forgery, embezzlement, money laundering, obtaining money under false pretenses, larceny, or conspiracy to defraud;

(c) Is currently subject to any state administrative enforcement order or judgment entered by that state's securities department within five (5) years prior to the filing of the application for registration or is subject to any state's administrative enforcement order or judgment in which fraud or deceit, including but not limited to making untrue statements of material facts and omitting to state material facts, was found and the order or judgment was entered within five (5) years prior to the filing of the application for registration;

(d) Is subject to any state's administrative enforcement order or judgment which prohibits, denies, or revokes the use of any exemption from registration in connection with this offer, purchase, or sale of securities;

(e) Is currently subject to any order, judgment, or decree of any court of competent jurisdiction temporarily or preliminarily restricting or enjoining, or is subject to any order, judgment or decree from any court of competent jurisdiction, permanently restraining or enjoining, the party from engaging in or continuing any conduct or practice in connection with the purchase or sale of any security or involving the making of any false filing with the state entered within five (5) years prior to the filing of the application for registration;

(f) The prohibitions of paragraphs (a) through (c) and (e) of this subsection shall not apply if the person subject to the disqualification is duly licensed or registered to conduct securities related business in the state in which the administrative order or judgment was entered against the person or if the broker-dealer employing the party is licensed or registered in this state and the Form B-D, as incorporated by reference in 808 KAR 10:010, filed with this state discloses the order, conviction, judgment, or decree relating to the person. A person qualified under this subsection shall not act in a capacity other than that for which the person is licensed or registered; and

(g) Any disqualification caused by this section shall be automatically waived if the state securities department or agency of the state which created the basis for disqualification determines upon a showing of good cause that it is not necessary under the circumstances that registration be denied. If any of the circumstances in paragraph (c) or (e) of this subsection has occurred more than five (5) years from the date of the application for registration, these circumstances shall be described in response to Question 45 of Form U-7 as a Miscellaneous Factor.

(6) Use of the Form U-7 is available to any offering of securities by a company, the aggregate offering price of which within or outside this state shall not exceed $1,000,000, less the aggregate offering price for all other securities sold within the twelve (12) months before the start of, and during the offering of, these securities. The Form U-7 shall not be available to a company that is an investment company (including mutual funds) or other pooled investment vehicle, or is subject to the reporting requirements of section 13 or section 15(d) of the Securities Exchange Act of 1934.

Section 2. General Requirements for Use of Form.

(1) The fully completed Form U-7 shall be accompanied by:

(a) A letter stating:

That registration is sought under 808 KAR 10:280;
That the applicant meets the qualifications specified in Section 1;
The total dollar amount of the securities to be sold anywhere in connection with this offering; and
The total dollar amount of the securities to be sold in this state;

(b) A consent to service of process, Form U-2 as incorporated by reference in 808 KAR 10:010;

(c) An opinion by an attorney licensed to practice in a state or territory of the United States that the securities to be sold in the offering have been duly authorized and when issued, upon payment of the offering price, will be legally and validly issued, fully paid, and nonassessable and binding on the company in accordance with their terms; and

(d) A check payable to the Kentucky State Treasurer for the amount specified as the filing fee in KRS 292.380(5) which consists of a registration fee and an examination fee.

(2) The Form U-7 constitutes the offering circular or prospectus. The Form U-7 shall be delivered to each investor before a sale is made.

(3) The registration, once declared effective in this state, shall be effective for either the period specified in the Form U-7 or one (1) year, whichever is shorter. If the offering is not yet concluded after the initial one (1) year period, the registration may be renewed by payment of a new registration fee and filing of an updated Form U-7.

(4) After the registration has been declared effective, and while the offering is still in progress, if any portion of the Form U-7 needs to be changed or revised because of an event concerning the company or the offering to make the Form U-7 accurate and complete, it shall be changed, revised, or supplemented. An updated Form U-7, clearly marked to show the changes from the previously filed version, shall be filed and cleared with the office of this state before use. If any of the changes or revisions are of such significance that they are material to the making of an investment decision, and if the minimum proceeds have not been raised, the updated Form U-7 shall be recirculated to persons in this state that have previously subscribed, and they shall be given the opportunity to either rescind or reconfirm their investment.

(5) Options, warrants, and similar rights to purchase securities shall constitute a continuous offering of the underlying securities during the exercise period and shall require the securities to be registered and the Form U-7 to be kept continuously current throughout the exercise period through the use of the procedure set forth in subsection (4) of this section or by means of a supplement, as appropriate. Upon any change, revision, or supplement to the Form U-7, a copy shall be promptly furnished to the holders of options, warrants, and similar rights.

(6) Any supplemental literature or advertisements announcing the offering shall be cleared by the department prior to use. Advertisements and announcements mentioning the offering shall be governed by the guidelines for "tombstone" style statements generally used in registered offerings and shall contain a statement to the effect that "this announcement does not constitute an offer to sell or the solicitation of an offer to buy" the securities and that the offer shall be made only by an official disclosure document. Any materials meeting the requirements of 808 KAR 10:380, Section 1(d), shall be acceptable.

History

RELATES TO: KRS Chapter 292, 15 U.S.C. 78a
STATUTORY AUTHORITY: KRS 292.500(3)
NECESSITY, FUNCTION, AND CONFORMITY: KRS 292.500(3) authorizes the commissioner of the Department of Financial Institutions to promulgate administrative regulations, forms, and orders as are necessary to carry out the provisions of KRS Chapter 292, including administrative regulations and forms governing registration statements, applications, notice filings, and reports. This administrative regulation sets forth the qualifications, eligibility requirements, and restrictions upon legal entities desiring to use Form U-7 to register securities.
History: 19 Ky.R. 1273; eff. 1-4-93; 37 Ky.R. 2494; 2843; eff. 7-1-11; Crt eff. 2-27-2020.

808 KAR 10:300 Registration exemptions - pension plans {#sec-808-kar-10-300 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:300}

Section 1.

(1) The registration provisions of KRS 292.330 to 292.390 and the notice filing provisions of KRS 292.395 shall not apply to an offer or sale of a security by an issuer pursuant to a written compensatory benefit plan including, without limitation, a purchase, savings, option, bonus, stock appreciation, profit sharing, thrift, incentive, pension or similar plan, or an interest in a plan, if the offer or sale qualifies for the registration exemption of 17 C.F.R. 230.701.

(2) In order to provide an exemption from the registration requirements of KRS 292.330 to 292.390 and from the notice filing provisions of KRS 292.395 for a security issued in an employee compensatory circumstance, this exemption shall not apply to a plan or scheme to circumvent that purpose, including one to raise capital. In those cases, registration or another exemption from registration shall be required.

(3) A filing with the office shall not be necessary to claim the exemption.

History

RELATES TO: KRS 292.330-292.390, 292.395, 292.400(11), 292.410(1)(q), 17 C.F.R. 230.701
STATUTORY AUTHORITY: KRS 292.400(11), 292.410(1)(q), 292.500(1), (3)
NECESSITY, FUNCTION, AND CONFORMITY: KRS 292.400(11) exempts from the registration requirements of KRS 292.340 to 292.390 an investment contract issued in connection with certain employee benefit plans, but not the securities in the plan. KRS 292.410(1)(q) exempts from the registration requirements of KRS 292.330 to 292.390 a transaction for which the commissioner finds registration is not necessary or appropriate in the public interest or for the protection of investors. This administrative regulation exempts an offer or sale of a security within the above-referenced employee benefit plans from the registration requirements.
History: 23 Ky.R. 2371; Am. 2739; eff. 1-9-97; 24 Ky.R. 2191; 25 Ky.R. 95; eff. 6-25-98; TAm eff. 11-7-2012; Crt eff. 2-27-2020.

808 KAR 10:320 Broker-dealer books and records requirements {#sec-808-kar-10-320 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:320}

Section 1.

(1) Pursuant to KRS 292.336(1)(a), a broker-dealer shall:

(a) Meet the recordkeeping requirements established in 15 U.S.C. 78q; and

(b) Maintain his books and records in accordance with the applicable federal regulations, including 17 C.F.R. 240.17a-3 and 17 C.F.R. 240.17a-4.

(2) The requirements established in subsection (1) of this section shall apply to a broker-dealer subject to the provisions of KRS Chapter 292.

(3) The commissioner may upon application for good cause shown relieve a broker-dealer of compliance with the requirements established in subsection (1) of this section if the action is necessary or appropriate in the public interest; or for the protection of an investor.

History

RELATES TO: KRS 292.336(1)(a), 17 C.F.R. 240.17a-3, 240.17-a-4, 15 U.S.C. 78q
STATUTORY AUTHORITY: KRS 292.336(1)(a), 292.500(3)
NECESSITY, FUNCTION, AND CONFORMITY: KRS 292.500(3) authorizes the commissioner to promulgate administrative regulations necessary to carry out the provisions of KRS Chapter 292. KRS 292.336(1)(a) requires a registered broker-dealer to make and keep records required by the commissioner. This administrative regulation establishes the recordkeeping requirements for a broker-dealer.
History: 24 Ky.R. 2264; Am. 25 Ky.R. 95; eff. 6-25-98; TAm 11-7-2012.

808 KAR 10:340 Registration exemption for certain limited offerings made exclusively to accredited investors {#sec-808-kar-10-340 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:340}

Section 1. Definition. "Accredited investor" is defined in 17 C.F.R. 230.501(a).

Section 2. An offer or sale of a security by an issuer in a transaction that meets the requirements established in this administrative regulation shall be exempt from KRS 292.340 through 292.390.

(1) To qualify for this exemption, the sale of a security shall be made exclusively to a person who is an accredited investor.

(2) The exemption shall not be available to an issuer that:

(a) Issues interests in an oil, gas, or mineral enterprise; or

(b)

Is in the development stage; and

a. Has no specific business plan or purpose; or

b. Has indicated that its business plan is to engage in a merger or acquisition with an unidentified company or companies, or other entity or person.

(3) The issuer shall reasonably believe that each purchaser is purchasing for investment and not with a view to or for sale in connection with a distribution of the security.

(a) A resale of a security sold in reliance on this exemption within twelve (12) months of sale, except a resale to an accredited investor or pursuant to a registration statement effective under KRS 292.340 through 292.390, shall be presumed to be with a view to distribution and not for investment.

(b) If resold, a security issued under this exemption shall be resold pursuant to registration or an exemption under KRS Chapter 292.

(4)

(a) Except as provided in paragraph (b) of this subsection, this exemption shall not be available to an issuer if the issuer, any of the issuer's predecessors, any affiliated issuer, any of the issuer's directors, officers, general partners, beneficial owners of ten (10) percent or more of any class of its equity securities, any of the issuer's promoters, promoters presently connected with the issuer in any capacity, any underwriter of the securities to be offered, or any partner, director or officer of the underwriter:

Within the last five (5) years, has filed a registration statement which is the subject of a currently effective registration stop order entered by a state securities administrator or the United States Securities and Exchange Commission;
Within the last five (5) years, has been convicted of a criminal offense in connection with the offer, purchase or sale of a security, or involving fraud or deceit;
Is currently subject to a state or federal administrative enforcement order or judgment, entered within the last five (5) years, finding fraud or deceit in connection with the purchase or sale of a security; or
Is currently subject to an order, judgment or decree of a court of competent jurisdiction, entered within the last five years, temporarily, preliminarily or permanently restraining or enjoining the party from engaging in or continuing to engage in a conduct or practice involving fraud or deceit in connection with the purchase or sale of a security.

(b) Paragraph (a) of this subsection shall not apply if:

The party subject to the disqualification is licensed or registered to conduct securities related business in the state in which the order, judgment or decree creating the disqualification was entered against the party; or
Before the first offer under this exemption, the state securities administrator, or the court or regulatory authority that entered the order, judgment, or decree, waives the disqualification.

(5)

(a) The issuer may make a general announcement of the proposed offering through the use of electronic media or other means of communication.

(b) The general announcement shall state only the following information, unless the commissioner determines that additional information is in the public interest:

The name, address and telephone number of the issuer of the securities;
The name, a brief description and price (if known) of the security to be issued;
A brief description of the business of the issuer in twenty-five (25) words or less;
The type, number and aggregate amount of securities being offered;
The name, address and telephone number of the person to contact for additional information; and
A statement that:

a. A sale shall exclusively be made to an accredited investor;

b. Money or other consideration shall not be solicited or accepted; and

c. The security:

(i) Has not been registered with or approved by a state securities agency or the United States Securities and Exchange Commission; and

(ii) Is being offered and sold pursuant to an exemption from registration.

(6) The issuer, in connection with an offer, may provide information in addition to the general announcement under subsection (5) of this section, if the information:

(a) Is delivered through an electronic database that is restricted to persons who have been prequalified as accredited investors; or

(b) Is delivered after the issuer reasonably believes that the prospective purchaser is an accredited investor.

(7) A telephone solicitation shall not be made unless prior to placing the call, the issuer reasonably believes that the prospective purchaser to be solicited is an accredited investor.

(8) Dissemination of the general announcement of the proposed offering to a person who is not an accredited investor shall not disqualify the issuer from claiming the exemption under this administrative regulation.

(9) Within fifteen (15) days after the first sale in this state, the issuer shall file with the commissioner:

(a) A notice transaction;

(b) A consent to service of process;

(d) A fee in the amount of $250 as required by KRS 292.420(3).

Section 3. Adoption Without Change.

(1) 17 C.F.R. 230.501(a), as effective April 19, 1989, is adopted without change.

(2) This federal regulation may be inspected, copied, or obtained from the Department of Financial Institutions, 1025 Capital Center Drive, Suite 200, Frankfort, Kentucky 40601, Monday through Friday, 8 a.m. to 4:30 p.m.

History

RELATES TO: KRS 292.410(1)(q), 292.420(3), 17 C.F.R. 230.501
STATUTORY AUTHORITY: KRS 292.410(1)(q), 292.500(3)
NECESSITY, FUNCTION, AND CONFORMITY: KRS 292.500(3) authorizes the commissioner to promulgate administrative regulations necessary to carry out the provisions of KRS Chapter 292. KRS 292.410(1)(q) authorizes the commissioner to grant exemptions for any transaction which the executive director by rule or order finds registration is not necessary or appropriate in the public interest or for the protection of investors. This administrative regulation establishes the requirements for claiming the registration exemption for a limited offering made exclusively to an accredited investor.
History: 24 Ky.R. 2266; Am. 25 Ky.R. 96; eff. 6-25-98; 26 Ky.R. 1208; 1560; eff. 2-14-2000; TAm eff. 11-7-2012; Crt eff. 2-27-2020.

808 KAR 10:350 Internet advertising {#sec-808-kar-10-350 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:350}

Section 1. Securities industry personnel, including a broker-dealer, investment adviser, broker-dealer agent, or investment adviser representative, shall not be subject to the registration requirements established in KRS 292.330 for using the Internet to distribute information on an available product or service if:

(1) The Internet communication contains a legend clearly stating that the securities industry personnel in question may only transact business in those states where they are registered or otherwise excluded or exempted from state registration requirements;

(2) The Internet communication contains a mechanism which reasonably ensures that any subsequent interaction between prospective customers or clients residing in states where the securities industry personnel are not registered is limited so as to not trigger state registration or licensing requirements or securities registration requirements. State registered securities industry personnel shall not be relieved from their obligation to observe applicable securities registration requirements in any state in which they transact business;

(3) The Internet communication:

(a) Does not involve the actual offering of securities trades, or the rendering of personalized investment advice for compensation over the Internet; and

(b) Is limited to the dissemination of information on a product or service; and

(4) In case of a broker-dealer agent or investment adviser representative:

(a) The agent's or investment adviser representative's affiliation with the broker-dealer or investment adviser is prominently disclosed within the Internet communication;

(b) The broker-dealer or investment adviser with whom the agent or investment adviser representative is associated retains responsibility for reviewing and approving the content of the agent's or investment adviser representative's Internet communication;

(c) The broker-dealer or investment adviser with whom the agent or investment adviser representative is associated authorizes the agent's or representative's Internet distribution of information on the particular product or service and

(d) In disseminating information on the Internet, the agents or investment adviser representatives are acting within the scope of their authority with the broker-dealer or investment adviser.

Section 2. This administrative regulation shall:

(1) Extend to the registration requirements established in KRS 292.330; and

(2) Not excuse compliance with applicable antifraud provisions of KRS 292.320.

History

RELATES TO: KRS 292.320, 292.330
STATUTORY AUTHORITY: KRS 292.500(3)
NECESSITY, FUNCTION, AND CONFORMITY: KRS 292.500(3) authorizes the commissioner to promulgate administrative regulations necessary to carry out the provisions of KRS Chapter 292. KRS 292.330 requires a person to be registered or exempt from registration before transacting business involving a security in Kentucky. This administrative regulation establishes requirements governing the use of the Internet to distribute information on an available product or service by securities industry personnel.
History: 24 Ky.R. 2268; Am. 25 Ky.R. 97; eff. 6-25-98; TAm eff. 11-7-2012; Crt eff. 2-27-2020.

808 KAR 10:360 Safe harbor for limited liability company membership interests {#sec-808-kar-10-360 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:360}

Section 1. A membership interest in a limited liability company shall not be considered an investment contract, if the aggregate number of members of the limited liability company, after all membership interests are sold, does not exceed thirty-five (35) and at least one (1) of the following requirements are met:

(1) Each member of the limited liability company is actively engaged in the management of the limited liability company;

(2) The articles of organization or operating agreement of the limited liability company vest management of the limited liability company in a manager who is a member and the articles or operating agreement provide that the managing member may be replaced by any other member, by an affirmative vote of a simple majority of all members; or

(3) Each member is authorized to act for and bind the limited liability company under applicable law or under the articles of organization or operating agreement of the limited liability company.

Section 2. In determining if the criteria set forth in Section 1(1) of this administrative regulation are met, evidence that members vote or have the right to vote, have the right to information concerning the business and affairs of the limited liability company, or have the right to participate in the management of the limited liability company, shall not alone establish that all members are actively engaged in the management of the limited liability company.

History

RELATES TO: KRS 292.310(19)
STATUTORY AUTHORITY: KRS 292.400(14), 292.500(3)
NECESSITY, FUNCTION, AND CONFORMITY: KRS 292.500(3) authorizes the commissioner to promulgate administrative regulations necessary to carry out the provisions of KRS Chapter 292. This administrative regulation establishes a safe harbor for membership interests in a limited liability company. If a membership interest meets the criteria of the safe harbor, the interest shall not be considered an investment contract within the definition of security, and therefore, shall not be subject to the provisions of the Securities Act of Kentucky, KRS Chapter 292.
History: 8 Ky.R. 579; eff. 3-1-1982; Am. 24 Ky.R. 2185; 25 Ky.R. 91; eff. 6-25-98; 32 Ky.R. 1484; 1892; eff. 5-5-2006; TAm eff. 11-7-2012; Crt eff. 2-27-2020.

808 KAR 10:370 Securities offered on the Internet but not sold in Kentucky {#sec-808-kar-10-370 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:370}

Section 1. An attempt to offer or dispose of, or a solicitation of an offer to purchase, a security, or an interest in a security for value, made via the Internet, including a communication on a proprietary or "common carrier" electronic delivery system, the World Wide Web or the Internet, shall be considered an "offer" of a security under KRS Chapter 292.

Section 2. Registration shall not be required for a security that will be:

(1) Offered by an issuer on the Internet; and

(2) Not sold in Kentucky.

Section 3. A security offered by an issuer on the Internet shall be exempt from the registration requirements established in KRS 292.340 through 292.390 if:

(1) The offer indicates, directly or indirectly, that the security shall not be sold to a person in Kentucky;

(2) The offer is not otherwise specifically directed to a person in Kentucky by, or on behalf of, the issuer; and

(3) A sale of the issuer's security shall not be made in Kentucky as a result of the offer until:

(a)

The offering has been registered and declared effective; and
The final prospectus or Form U-7 has been delivered to the investor prior to the sale; or

(b) The sale is exempt from registration.

Section 4. Reliance on the exemption from registration established under this administrative regulation shall not preclude an issuer from relying on another exemption available under KRS Chapter 292.

Section 5. Incorporation by Reference.

(1) Form U-7, "Small Corporate Offerings Registration", December, 2019, North American Securities Administrators Association, Inc, is incorporated by reference.

(2) It may be inspected, copied, or obtained at the Department of Financial Institutions, 500 Mero St 2SW19, Frankfort, Kentucky, 40601, Monday through Friday, 8 a.m. to 4:30 p.m.

(3) A copy may also be obtained from the National Association of Securities Dealers (NASD), 1735 K Street, N.W., Washington, D.C., 20006, or a regional NASD office.

History

RELATES TO: KRS 292.410(1)(q)
STATUTORY AUTHORITY: KRS 292.500(3)
NECESSITY, FUNCTION, AND CONFORMITY: KRS 292.500(3) authorizes the commissioner to promulgate administrative regulations necessary to carry out the provisions of KRS Chapter 292. KRS 292.340 requires registration for a nonexempt security. KRS 292.410(1)(q) authorizes the commissioner to create exemptions from the registration requirements established in KRS 292.340. This administrative regulation establishes requirements for determining if the transmission of information via the Internet concerning a security offering requires registration pursuant to KRS 292.340.
History: 24 Ky.R. 2270; Am. 25 Ky.R. 98; eff. 6-25-1998; TAm eff. 11-7-2012; TAm eff. 12-3-2019; Crt eff. 2-27-2020.

808 KAR 10:380 Solicitations of interest prior to the filing of a registration statement {#sec-808-kar-10-380 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:380}

Section 1.

(1) Pursuant to KRS 292.410(1)(q), a written document, oral communication, Internet communication, or the dissemination of a scripted radio or television broadcast, made by or on behalf of an issuer for the sole purpose of soliciting an indication of interest in receiving an offering circular (or its equivalent) for an offering of a security in this state shall be exempt from the requirements established in KRS 292.330 to 292.390 if:

(a) The issuer:

Is or will be a business entity organized under the laws of one (1) of the states or possessions of the United States or one (1) of the provinces or territories of Canada;
Is engaged in or proposes to engage in a business other than petroleum or natural gas exploration or production or mining or other extractive industries; and
Is not a development stage company that either has:

a. No specific business plan or purpose; or

b. Indicated that its business plan is to merge with an unidentified company or companies;

(b) The solicitation of interest is not for a blind pool offering or other offering for which the specific business in which to be engaged or property to be acquired cannot be described at the time of the solicitation;

(c) The issuer intends to register the securities in this state and conduct its offering pursuant to 15 U.S.C. 77c(a)(11), 17 CFR 230.147, 230.251, or 230.504;

(d) The written document, Internet communication, or script of the broadcast:

States that the solicitation is not an offering of a security for sale, and that a public offering to be made shall be made by means of an offering circular that:

a. May be obtained from the issuer; and

b. Will contain detailed information about the company and management, as well as financial statements;

States that no money or other consideration is being solicited, and if sent in response, shall not be accepted;
States that a sale of a security shall not be made or a commitment to purchase shall not be accepted until:

a. A registration statement is filed with the commissioner and becomes effective; or

b. An appropriate exemption from registration is available and utilized;

States that an indication of interest made by a prospective investor shall not involve an obligation or commitment; and
Identifies the chief executive officer of the issuer and briefly and in general describes its business and products;

(e) Five (5) business days prior to the initial solicitation of interest under this administrative regulation, the issuer submits a copy of a written document, a written transcript of the Internet communication, or the script of a broadcast to be used in reliance upon this section to the commissioner. The document, transcript, or broadcast script shall contain or be accompanied by the name and telephone number of a person able to answer questions about the document or the broadcast. The issuer shall also submit solicitation of interest material that contains substantive changes from or additions to previously submitted material;

(f) An oral communication with a prospective investor or other broadcast shall not be made until after submission of the written document or script of the broadcast to the commissioner as required by paragraph (e) of this subsection;

(g) A written document, script, advertisement or other material which the issuer has been notified by the commissioner not to distribute shall not be used to solicit an indication of interest;

(h) Except for a scripted broadcast and except to the extent necessary to obtain information needed to provide a solicitation of interest document, the issuer shall not communicate with a prospective investor about the contemplated offering unless the prospective investor is provided with a written document containing the disclosures required by paragraph (d) of this subsection at or before the time of the communication or within five (5) calendar days after the communication;

(i) During the solicitation of interest period, the issuer shall not solicit or accept money or other consideration, or a commitment, binding or otherwise, to purchase a security from a prospective investor in reliance upon this section;

(j) A sale shall not be made until a registration statement is effective pursuant to KRS Chapter 292 with respect to the offering, or an appropriate exemption from registration is available and utilized; and

(k)

Except as provided in subparagraph 2 of this paragraph, the issuer does not know, and in the exercise of reasonable care could not know, that the issuer, any of the issuer's officers, directors, general partners or beneficial owners of ten (10) percent or more of any class of its equity securities, any promoter presently connected with the issuer in any capacity, or any person paid or given, directly or indirectly, a commission, fee or other remuneration for soliciting an indication of interest pursuant to this administrative regulation:

a. Has filed a registration statement which is the subject of a currently effective registration stop order entered pursuant to a federal or state securities law within five (5) years prior to the submission of the written document or broadcast script to the commissioner as required by paragraph (e) of this subsection;

b. Has been convicted within five (5) years prior to the submission of the written document or broadcast script to the commissioner as required by paragraph (e) of this subsection of a felony or misdemeanor in connection with the offer, purchase or sale of a security or a felony involving fraud or deceit, including forgery, embezzlement, obtaining money under false pretense, larceny or conspiracy to defraud;

c. Is currently subject to a federal or state administrative enforcement order or judgment entered by a state securities administrator or the Securities and Exchange Commission within five (5) years prior to the submission of the written document or broadcast script to the commissioner as required by paragraph (e) of this subsection, or is subject to a federal or state administrative enforcement order or judgment entered within five (5) years prior to the submission of the written document or broadcast script to the commissioner as required by paragraph (e) of this subsection, in which fraud or deceit, including making an untrue statement of material fact or omitting to state a material fact, was found;

d. Is subject to a federal or state administrative enforcement order or judgment which prohibits, denies or revokes the use of an exemption from registration in connection with the offer, purchase or sale of a security; or

e. Is currently subject to an order, judgment or decree of a court of competent jurisdiction temporarily or preliminarily restraining or enjoining, or is subject to an order, judgment or decree of a court of competent jurisdiction permanently restraining or enjoining, the party from engaging in or continuing a conduct or practice in connection with the purchase or sale of a security or involving the making of a false filing with the state entered within five (5) years prior to the submission of the written document or broadcast script to the commissioner as required by paragraph (e) of this subsection.

The prohibitions established in subparagraph 1 of this paragraph shall not apply if:

a. The person subject to the disqualification is duly licensed or registered to conduct securities related business in the state in which the administrative order or judgment was entered against the person;

b. The broker-dealer employing the party is licensed or registered in Kentucky and the Form BD filed with Kentucky discloses the order, conviction, judgment or decree relating to the person.

A person disqualified under subparagraph 1 of this paragraph shall not act in a capacity other than that for which the person is licensed or registered.
A disqualification pursuant to subparagraph 1 of this paragraph shall be automatically waived if the agency which created the basis for disqualification determines upon a showing of good cause that it is not necessary under the circumstances that the exemption be denied.
It shall be a defense to a violation of subparagraph 1 of this paragraph if the issuer sustains the burden of proof that it did not know, and in the exercise of reasonable care could not have known, that a disqualification under subparagraph 1 of this paragraph existed.

(2)

(a) A communication with a prospective investor shall not be made in reliance on this administrative regulation after a registration statement is filed in this state.

(b) A sale shall not be made pursuant to an effective registration statement until at least twenty (20) calendar days after the last communication made in reliance on this administrative regulation.

(3)

(a) Except as provided in paragraph (b) of this subsection, a failure to comply with a condition established in subsection (1) of this section shall not result in the loss of the exemption from the requirements of KRS 292.340 through 292.390 for an offer to a particular individual or entity if the issuer shows:

The failure to comply did not pertain to a condition directly intended to protect that particular individual or entity;
The failure to comply was insignificant with respect to the offering as a whole; and
A good faith and reasonable attempt was made to comply with all applicable conditions of subsection (1) of this section.

(b) If an exemption is established only through reliance upon the provisions of paragraph (a) of this subsection, the failure to comply shall:

Be actionable as a violation of KRS Chapter 292 by the commissioner under KRS 292.470; and
Constitute grounds for denying or revoking the exemption as to a specific security or transaction.

(4) A written document or Internet communication used in reliance upon this administrative regulation may include a coupon returnable to the issuer or an Internet email link to the issuer, which shall:

(a) Indicate interest in a potential offering;

(b) Reveal the name, address and telephone number of the prospective investor;

The indication of interest shall not be binding; and
Money shall not be sent; and

(d) Not request information about the financial profile of the investor, including income, assets or investment history.

(5)

(a) The commissioner shall waive a condition of this exemption in writing, upon application by the issuer if the issuer shows good cause for the exemption.

(b) The compliance or attempted compliance with the requirements of this administrative regulation, or the absence of an objection or order by the commissioner with respect to an offer of a security undertaken pursuant to this administrative regulation, shall not be deemed to be a:

Waiver of a condition of this administrative regulation; or
Confirmation by the commissioner of the availability of the exemption authorized by this administrative regulation.

(6) An offer made in reliance on this administrative regulation shall not result in a violation of KRS 292.340 by virtue of being integrated with a subsequent offer or sale of a security unless the subsequent offer or sale would be integrated under an applicable federal security law.

(7) If an issuer has a bona fide change of intention and decides to pursue an exempt offering pursuant to KRS 292.410(1)(i) or 808 KAR 10:210 after following the process established by this administrative regulation without having filed a registration statement, the issuer may proceed with the exempt offering if:

(a) At least thirty (30) calendar days have elapsed between the last solicitation of interest pursuant to this administrative regulation and the first sale of a security pursuant to the exempt offering; and

(b) The issuer has complied with all of the conditions of the applicable exemption, including the provision of all solicitation of interest documents submitted to the commissioner.

(8) A communication made in reliance on this administrative regulation shall be subject to the antifraud provisions of KRS Chapter 292.

(9) A commission, fee or other remuneration shall not be paid or given, directly or indirectly, to a person for soliciting a prospective investor in this state unless the person is:

(a) Appropriately registered in this state pursuant to KRS 292.330; or

(b) Exempt from registration.

Section 2. If an indication of interest is solicited in reliance upon this administrative regulation by an agent of the issuer, the person shall be exempt from the agent registration requirements of KRS 292.330 if all of the conditions established in Section 1(1) of this administrative regulation are satisfied.

Section 3. Incorporation by Reference.

(1) Form B-D, "Application for Registration as Broker-Dealer", July 1988 edition, is incorporated by reference.

(2) It may be inspected, copied, or obtained at the Department of Financial Institutions, 1025 Capital Center Drive, Suite 200, Frankfort, Kentucky, 40601, Monday through Friday, 8 a.m. to 4:30 p.m.

(3) A copy may also be obtained from the National Association of Securities Dealers (NASD), 1735 K Street, N.W., Washington, D.C., 20006, or a regional NASD office.

History

RELATES TO: KRS 292.330, 292.340, 292.410(1)(i), (q), 292.470
STATUTORY AUTHORITY: KRS 292.500(3)
NECESSITY, FUNCTION, AND CONFORMITY: KRS 292.500(3) authorizes the commissioner to promulgate administrative regulations necessary to carry out the provisions of KRS Chapter 292. KRS 292.330 requires registration for a nonexempt security. KRS 292.410(1)(q) authorizes the commissioner to create exemptions from the registration requirements established in KRS 292.330. This administrative regulation establishes requirements for determining if a solicitation of interest prior to the filing of a registration statement requires registration pursuant to KRS 292.330.
History: 24 Ky.R. 2271; Am. 25 Ky.R. 99; eff. 6-25-98; TAm eff. 11-7-2012; Crt eff. 2-27-2020.

808 KAR 10:390 Confidentially disclosed documents {#sec-808-kar-10-390 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:390}

Section 1. Pursuant to KRS 292.500(18), the commissioner may disclose confidential information if the requirements established in this section are met.

(1) The commissioner may disclose the content of an investigation, examination report, preliminary examination report or results, or other matter relating to the preceding, to another governmental or regulatory authority, including the U.S. Securities and Exchange Commission, the NASD, a state securities regulator, a state or federal criminal agency, or a criminal prosecutorial body, if:

(a) The agency receiving the information agrees in writing to hold it confidential; or

(b) The commissioner reasonably believes a legitimate governmental purpose is served by the disclosure regardless of the ability of the other agency to ensure the confidentiality of the disclosed material.

(2) The materials, documentation or other information referred to in subsection (1) of this section shall lose their confidential status upon the termination of an investigation or enforcement action where the information has been utilized by this or another regulatory body against or with respect to the entity or person that initially provided the materials to the office.

(3) Except as necessary for the office to enforce the provisions of KRS Chapter 292, a consumer complaint or other information relative to an investigation or examination shall remain confidential pursuant to the provisions of KRS 292.500(19) and exempt from public disclosure after the documents would otherwise lose their confidential status pursuant to the provisions of subsection (1) or (2) of this section, if the public disclosure would:

(a) Jeopardize the integrity of another active investigation, examination or proceeding;

(b) Reveal the name, address, telephone number, Social Security number, or other identifying number or information of a complainant, customer, or account holder;

(d) Disclose investigative techniques or procedures; or

(e) Reveal a trade secret.

(4) After five (5) years the commissioner may destroy discarded or obsolete materials, documentation or other information.

History

RELATES TO: KRS 292.500(17)
STATUTORY AUTHORITY: KRS 292.500(3)
NECESSITY, FUNCTION, AND CONFORMITY: KRS 292.500(3) authorizes the commissioner to promulgate administrative regulations necessary to carry out the provisions of KRS Chapter 292. KRS 292.500(18) authorizes the commissioner to share information gained pursuant to an examination, investigation, filing, or other source, with a governmental agency, jurisdiction, or governmental or self-regulating organization or entity to the extent the commissioner determines that the sharing of information is or will be reasonably necessary or useful to the office or agency in carrying out its regulatory responsibilities. This administrative regulation establishes the requirements for release of confidential information pursuant to KRS 292.500(17).
History: 24 Ky.R. 2273; Am. 25 Ky.R. 101; eff. 6-25-98; TAm eff. 11-7-2012; Crt eff. 2-27-2020.

808 KAR 10:400 Examination fees and criteria {#sec-808-kar-10-400 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:400}

Section 1. Investment Adviser. The fee for an examination of an investment adviser shall be:

(1) Seventy-five (75) dollars for an investment adviser with assets under management of one (1) million dollars or less;

(2) $150 for an investment adviser with assets under management of more than one (1) million dollars but not more than five (5) million dollars;

(3) $250 for an investment adviser with assets under management of more than five (5) million dollars but not more than ten (10) million dollars;

(4) $300 for an investment adviser with assets under management of more than ten (10) million dollars but not more than twenty (20) million dollars;

(5) $350 for an investment adviser with assets under management of more than twenty (20) million dollars but not more than thirty (30) million dollars;

(6) $450 for an investment adviser with assets under management of more than thirty (30) million dollars but not more than forty-five (45) million dollars;

(7) $550 for an investment adviser with assets under management of more than forty-five (45) million dollars but not more than sixty (60) million dollars;

(8) $650 for an investment adviser with assets under management of more than sixty (60) million dollars but not more than seventy-five (75) million dollars; and

(9) $750 for an investment adviser with assets under management of more than seventy-five (75) million dollars.

Section 2. Broker-Dealer and Issuers. The fee for an examination of a broker-dealer or a firm employing issuer agents shall be thirty-five (35) dollars per working hour with the total fee not to exceed $1,000. A fee shall not be charged for training hours on an examination.

Section 3. Application of Industry Standards to Examination Criteria. When not in conflict with Kentucky law, a Department of Financial Institution examiner shall apply the recordkeeping, supervisory, and conduct rules promulgated by:

(1) The Securities and Exchange Commission pursuant to 15 U.S.C. 78w; or

(2) If the broker-dealer is a member of a self-regulatory organization as defined in 15 U.S.C. 78c(a)(26), the self-regulatory organization pursuant to 15 U.S.C. 78s(b).

History

RELATES TO: KRS 292.336(4), 15 U.S.C. 78s(b), 15 U.S.C. 78w
STATUTORY AUTHORITY: KRS 292.336(4)(b)
NECESSITY, FUNCTION, AND CONFORMITY: KRS 292.336(4)(b) provides that the commissioner may make periodic examinations of broker-dealers, firms employing issuer agents, and investment advisers and may charge a reasonable fee for the examination. This administrative regulation establishes the schedule of fees.
History: 26 Ky.R. 668; Am. 1008; eff. 11-15-1999; 38 Ky.R.1667; 1858; eff. 6-1-2012; Crt eff. 2-27-2020.

808 KAR 10:430 Required filing for oil, gas, and mineral securities offerings relying upon the registration exemption in KRS 292.410(1)(i) {#sec-808-kar-10-430 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:430}

Section 1. Notice of Claim of Registration Exemption; Filing Requirements. To claim a registration exemption pursuant to KRS 292.410(1)(i) for any security that otherwise has available the securities registration exemption in KRS 292.410(1)(i) and evidences an oil, gas, or mineral interest, a person shall file a Notice of Claim of Exemption with the Office of Financial Institutions. The Notice of Claim of Exemption shall include the following:

(1) A letter containing:

(a) A declaration that the KRS 292.410(1)(i) exemption will be relied upon;

(b) A statement as to which condition in KRS 292.410(1)(i)3 is satisfied;

(c) A representation that persons who receive commissions, finders fees, or other remuneration in connection with sales of securities are in compliance with KRS 292.330;

(d) A representation that the seller believes that all the buyers are purchasing for investment;

(e) A representation that each buyer will sign an appropriate "investment intent" letter, a copy of which shall be included with the claim of exemption, stating in part that the buyer is not taking with a view to distribution;

(f) A representation that the securities to be issued will bear an appropriate restrictive legend, a copy of which shall be submitted with the claim of exemption;

(g) A representation that the offerees and purchasers shall have access to information concerning the issuer and any persons significant to the success of the undertaking; and

(h) A representation that public advertising or solicitation shall not be employed in effecting the proposed transaction.

(2) A copy of the articles of incorporation, bylaws, limited partnership agreement, or other organizational document which reflects the security holders' rights;

(3) A prospectus, offering circular or memorandum making full disclosure of material facts, including a discussion of all salient risk factors, unless the document was not prepared, because the transaction satisfies the condition in KRS 292.410(1)(i)3a; and

(4) Current financial statements of the issuer, which shall be filed with the notice and shall be contained in any disclosure document.

History

RELATES TO: KRS 292.410(1)(i)
STATUTORY AUTHORITY: KRS 292.410(1)(i)5
NECESSITY, FUNCTION, AND CONFORMITY: KRS 292.410(1)(i)5 authorizes the commissioner to impose additional conditions and requirements for a particular class of issuers if appropriate in furtherance of the intent of KRS Chapter 292. The Commissioner of the Department of Financial Institutions has found that securities evidencing interests in oil, gas, and other minerals have resulted in numerous losses for investors and a significant rise in enforcement actions. The requirement of a filing to claim an exemption from registration will allow the Commissioner of the Department of Financial Institutions to become aware of offerings of securities of oil, gas, and minerals and provide investor protection by becoming involved earlier in the process. This administrative regulation establishes the filing requirements for a registration exemption for oil, gas, and mineral securities.
History: 32 Ky.R. 1500; 1893; eff. 5-5-2006; TAm eff. 11-7-2012; Crt eff. 2-27-2020.

808 KAR 10:440 Examples of dishonest or unethical practice for broker-dealers and agents {#sec-808-kar-10-440 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:440}

Section 1. Broker-dealers shall observe high standards of commercial honor and just and equitable principles of trade in their dealings with customers and the conduct of their business. The following acts and practices shall constitute violations of those standards and principles and shall be considered to be dishonest and unethical practices that may result in a fine, suspension, or revocation in proportion to the seriousness of the offense, pursuant to KRS 292.337(1):

(1) Engaging in a pattern of unreasonable and unjustifiable delays in the delivery of securities purchased by any of its customers or in the payment of free credit balances reflecting completed transactions of any of its customers;

(2) Failing or refusing to furnish a customer, upon reasonable request, information to which the customer is entitled, or to timely respond to a formal written demand or complaint by a customer;

(3) Attempting to enforce a condition, stipulation, or provision against a customer in Kentucky if the result would:

(a) Leave the customer without the choice of a forum for dispute resolution in the state of Kentucky; or

(b) Limit the timeliness of an action to a period less than that established in KRS 292.480;

(4) Failing to segregate a customer's securities held in safekeeping;

(5) Hypothecating a customer's securities without having a lien thereon unless the broker-dealer secures from the customer a properly executed written consent promptly after the initial transaction, except as permitted by rules of the Securities and Exchange Commission;

(6) Charging unreasonable and inequitable fees for services performed, including:

(a) Collection of monies due for principal;

(b) Dividends or transfer of securities;

(d) Safekeeping; or

(e) Custody of securities and other services related to its securities business;

(7) Offering to buy from or sell to any person any security at a stated price unless the broker-dealer is prepared to purchase or sell at the price and under the conditions as are stated when the offer is made;

(8) Representing that a security is being offered to a customer "at the market" or a price relevant to the market price unless the broker-dealer knows or has reasonable grounds to believe that a market for the security exists other than that made, created, or controlled by the broker-dealer, or by any person for whom the broker-dealer is acting or with whom the broker-dealer is associated in the distribution, or any person controlled by, controlling, or under common control with the broker-dealer;

(9) Failing to disclose in writing that the broker-dealer is controlled by, controls, is affiliated with, or is under common control with the issuer of any security, the existence of this control before entering into any binding contract with or for a customer for the purchase or sale of the security;

(10) Failing to make a bona fide public offering of all the securities allotted to the broker-dealer for distribution, whether acquired directly as an underwriter or a selling group member or indirectly from an entity participating in the distribution as an underwriter or selling group member;

(11) Inducing trading in a customer's account which is excessive in size or frequency in view of the financial resources and character of the account;

(12) Switching, churning, overtrading, or reloading of a security in a customer's account for the purpose of accumulating or increasing a commission;

(13) Recommending to a customer the purchase, sale, or exchange of any security without reasonable grounds to believe that the transaction or recommendation is suitable for the customer based upon a reasonable inquiry concerning the customer's investment objectives, financial situation and needs, and any other relevant information known by the broker-dealer;

(14) Failing to furnish to a customer purchasing securities in an offering, no later than the due date of confirmation of the transaction, either a formal prospectus or a preliminary prospectus and an additional document, which together include all information set forth in the final prospectus;

(15) Participating in the solicitation or offer for sale of a security without the use of an offering document or prospectus, if required, or making a statement contrary to or inconsistent with disclosure contained in the offering document or prospectus;

(16) Making a false, misleading, deceptive, or exaggerated representation or prediction in the solicitation or sale of a security, including:

(a) That the security will be resold or repurchased;

(b) That the security will be listed or traded on an exchange or established market;

(c) That the security will result in an assured, immediate, or material increase in value, future market price, or return on an investment;

(d) That there is a guarantee against risk of loss; or

(e) Any statement with respect to an issuer's financial condition, anticipated earnings, potential growth, or success not supportable by information in the offering document or prospectus;

(17) Engaging or aiding in boiler room operations such as the use of high pressure tactics to promote a speculative offering or promotion of a security in an intensive campaign in which the prospective purchaser is encouraged to make a hasty decision to buy a security irrespective of the purchaser's investment needs, objectives, or understanding of the security being offered;

(18) Executing a transaction on behalf of a customer without authorization to do so;

(19) Exercising any discretionary power effecting a transaction for a customer's account without first obtaining written discretionary authority from the customer, unless the discretionary power relates solely to the time or price for the executing of orders;

(20) Executing any transaction in a margin account without securing from the customer a properly executed written margin agreement;

(21) Entering into a transaction with or for a customer at a price not reasonably related to the current market price of the security or receiving an unreasonable commission or profit;

(22) Effecting any transaction in, or inducing the purchase or sale of, any security by means of any manipulative, deceptive, or fraudulent device, practice, plan, program, design or contrivance, including:

(a) Effecting any transaction in a security which involves no change in the beneficial ownership;

(b)

Entering an order or orders of substantially the same size, time, and price, for the sale of any security that has been or will be entered by or for the same or different parties for the purpose of creating a false or misleading appearance:

a. Of active trading in the security; or

b. With respect to the market for the security.

This subsection shall not prohibit a broker-dealer from entering bona fide agency cross transactions for its customers; or

(c) Effecting, alone or with one (1) or more other persons, a series of transactions in any security creating actual or apparent active trading in the security or raising or depressing the price of the security, for the purpose of inducing the purchase or sale of the security by others;

(23) Guaranteeing a customer against loss in any securities account of the customer carried by the broker-dealer or in any securities transaction effected by the broker-dealer;

(24) Publishing or circulating, or causing the publication or circulation of, any notice, circular, advertisement, newspaper article, investment service, or communication of any kind which purports to:

(a) Report any transaction as a purchase or sale of any security unless the broker-dealer reasonably believes that the transaction was a bona fide purchase or sale of the security; or

(b) Quote the bid price or asked price for any security, unless the broker-dealer reasonably believes that the quotation represents a bona fide bid or offer;

(25) Using any advertising or conducting any sales practice in a deceptive or misleading manner;

(26) Entering into an agreement for a concession, discount, commission, or allowance as consideration for a service in connection with the distribution or sale of a security in Kentucky with a broker-dealer, agent, investment adviser, or investment adviser representative who is not either:

(a) Registered in Kentucky; or

(b) Exempted from the registration requirements for conducting a securities business in Kentucky;

(27) Lying to or otherwise misleading representatives of the Department of Financial Institutions conducting an authorized examination or investigation;

(28) Failing to make requested records available to or otherwise impeding a representative of the Department of Financial Institutions conducting an authorized examination or investigation;

(29) Failing to respond within the specified time period to a written request from an authorized representative of the Department of Financial Institutions for:

(a) Information;

(b) An explanation of practices or procedures;

(d) A response to a written statement of findings from an examination;

(30) Committing any act involving a customer, a customer's account, or any business records which would constitute a criminal offense;

(31) Failing to pay and fully satisfy any final order, final judgment, or arbitration award resulting from an investment-related, customer-initiated arbitration or court proceeding, unless:

(a) There is a written agreement for alternative payment arrangements between the customer and the broker-dealer or broker-dealer agent; and

(b) The broker-dealer or broker-dealer agent complies with the terms of the alternative payment arrangement;

(32) Attempting to avoid payment of any final order, final judgment, or arbitration award resulting from an investment-related, customer-initiated arbitration or court proceeding, unless:

(a) There is a written agreement for alternative payment arrangements between the customer and the broker-dealer or broker-dealer agent; and

(b) The broker-dealer or broker-dealer agent complies with the terms of the alternative payment arrangements; or

(33) Failing to pay and fully satisfy any fine, civil penalty, order of restitution, order of disgorgement, or similar monetary payment obligation imposed upon the broker-dealer or agent by the Securities and Exchange Commission, the securities or other financial services regulator of any state or province, or any self-regulatory organization.

Section 2. Broker-dealer agents shall observe high standards of commercial honor and just and equitable principles of trade in their dealings with customers. The following acts and practices shall constitute violations of those standards and principles and shall be considered to be dishonest and unethical practices that may result in a fine, suspension, or revocation in proportion to the seriousness of the offense, pursuant to KRS 292.337(1):

(1) Sharing in profits or losses in the account of a customer without the written authorization of the customer and the broker-dealer which the agent represents;

(2) Establishing or maintaining an account containing fictitious information in order to execute transactions which would otherwise be prohibited;

(3) Effecting securities transactions not recorded on the regular books and records of the broker-dealer which the agent represents, unless the transactions are authorized in writing by the broker-dealer prior to execution of the transaction;

(4) Engaging in the practice of lending to or borrowing from a customer either money or securities;

(5) Acting as custodian of a customer's money, securities, or an executed stock power; or

(6) Engaging in conduct specified in Section 1(11) through (33) of this administrative regulation.

Section 3. Issuer agents shall observe high standards of commercial honor and just and equitable principles of trade in their dealings with customers. The following acts and practices shall constitute violations of those standards and principles and shall be considered to be dishonest and unethical practices that may result in a fine, suspension, or revocation in proportion to the seriousness of the offense, pursuant to KRS 292.337(1):

(1) Engaging in conduct specified in Section 1(2), (13), (15) through (18), or (25) through (33) of this administrative regulation; or

(2) Engaging in conduct specified in Section 2(3) or (4).

Section 4. The commissioner may determine that an activity not included in the examples identified in Sections 1 through 3 of this administrative regulation constitutes a dishonest or unethical practice if the activity is similar to an enumerated activity.

History

RELATES TO: KRS 292.337, 292.480
STATUTORY AUTHORITY: KRS 292.336(7), (8), 292.337, 292.500(3)
NECESSITY, FUNCTION, AND CONFORMITY: KRS 292.500(3) authorizes the commissioner of the Department of Financial Institutions to promulgate administrative regulations necessary to carry out the provisions of KRS Chapter 292. KRS 292.336(7) and (8) authorize the commissioner to promulgate administrative regulations prohibiting unreasonable charges, profits, commissions, or other compensation for broker-dealers and agents and prescribing standards for the conduct of business by broker-dealers and agents which the commissioner finds appropriate in the public interest and for the protection of investors. This administrative regulation establishes requirements concerning dishonest and unethical practices by broker-dealers and agents and states the consequences of engaging in unacceptable conduct or practices.
History: 35 Ky.R. 1108; Am. 1775; eff. 2-6-2009; 37 Ky.R. 2500; 2847; eff. 7-1-2011; Cert eff. 2-27-2020; 49 Ky.R. 1676, 21000; eff. 8-1-2023.

808 KAR 10:450 Examples of dishonest or unethical practice for investment advisers and investment adviser representatives {#sec-808-kar-10-450 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:450}

Section 1. Definitions.

(1) "Advertisement" means any notice, circular, letter, or other written communication addressed to more than one (1) person, or any notice or other announcement in any electronic or paper publication, by radio or television, or by any other medium, that offers any one (1) of the following:

(a) Any analysis, report, or publication concerning securities;

(b) Any analysis, report, or publication that is to be used in making any determination as to when to buy or sell any security or which security to buy or sell;

(c) Any graph, chart, formula, or other device to be used in making any determination as to when to buy or sell any security, or which security to buy or sell; or

(d) Any other advisory service regarding securities.

(2) "Investment adviser solicitor" means a person or entity that, directly or indirectly, solicits a prospective client for, or refers a prospective client to, an investment adviser.

Section 2. A person who is an investment adviser or an investment adviser representative shall be a fiduciary and shall have a duty to act primarily for the benefit of the person's clients. An investment adviser or investment adviser representative shall not engage, either directly or indirectly, in unethical or dishonest practices. The following acts and practices shall constitute a breach of fiduciary duty or a dishonest and unethical practice, and violations may result in a fine, suspension, or revocation in proportion to the seriousness of the offense:

(1) Recommending to a client to whom investment advisory, management, or consulting services are provided the purchase, sale, or exchange of any security without reasonable grounds to believe that the recommendation is suitable for the client based on information furnished by the client after reasonable inquiry concerning the client's investment objectives, financial situation and needs, and any other information known by the investment adviser;

(2) Exercising any discretionary power in placing an order for the purchase or sale of securities for a client without obtaining written discretionary authority from the client within ten (10) business days after the date of the first transaction placed pursuant to oral discretionary authority, unless the discretionary power relates solely to the price at which, or the time when, an order involving a definite amount of a specified security shall be executed, or both;

(3) Inducing trading in a client's account that is excessive in size or frequency in view of the financial resources, investment objectives, and character of the account considering that an investment adviser or investment adviser representative may directly benefit from the number of securities transactions effected in a client's account;

(4) Placing an order to purchase or sell a security for the account of a client without authority to do so;

(5) Placing an order to purchase or sell a security for the account of a client upon instruction of a third party without first having obtained a written third-party trading authorization from the client;

(6) Borrowing money or securities from a client unless the client is a broker-dealer, an affiliate of the investment adviser, or a financial institution engaged in the business of loaning funds;

(7) Loaning money or securities to a client unless the investment adviser is a financial institution engaged in the business of loaning funds or the client is an affiliate of the investment adviser;

(8)

(a) Misrepresenting to any advisory client, or prospective advisory client, the qualifications of the investment adviser or any employee of the investment adviser;

(b) Misrepresenting the nature of the advisory services being offered or fees to be charged for the service; or

(c) Omitting to state a material fact necessary to make the statements made regarding qualifications, services, or fees, in light of the circumstances under which they were made, not misleading;

(9) Providing a report or recommendation to any advisory client prepared by someone other than the adviser without disclosing that fact;

(10) Charging a client an unreasonable advisory fee in light of the fee charged by other investment advisers providing similar services;

(11) Failing to disclose to clients in writing before any advice is rendered any material conflict of interest relating to the adviser, or any of its employees, including:

(a) Compensation arrangements connected with advisory services to clients which are in addition to compensation from these clients for advisory services; or

(b) The amount of any commissions to be received for executing transactions pursuant to advice given;

(12) Failing to disclose to clients in writing all potentially conflicting divisions of loyalty in connection with a transaction, and failing to obtain the written consent of the client to proceed with the transaction in accordance with the following requirements:

(a) Any transaction in which a person acts as an investment adviser for one (1) party to that transaction and in which the person (or any person controlling, controlled by, or under common control with the adviser) acts as a broker-dealer for both the advisory client and another person on the other side of the transaction shall be subject to this disclosure and consent requirement, and the client shall be provided a written confirmation for each transaction, which contains the following:

A statement of the nature of the transaction;
The date of the transaction;
An offer to furnish, upon written request, the time of the transaction; and
The source and amount of any other remuneration the adviser received or will receive in connection with the transaction. If the investment adviser is not participating in a distribution when the advisory client is purchasing the security or a tender offer when the advisory client is selling the security, the confirmation may state that the investment adviser has been or will be receiving other remuneration and that the source and the amount of this remuneration will be furnished upon the client's written request;

(b) The disclosure and consent requirements of subsection (12)(a) of this section apply to each contemplated transaction and shall be complied with every time the transaction occurs unless the adviser complies with the provisions of subsection (12)(c) of this section;

(c) If the disclosure and consent requirements of subsection (12)(a) of this section prospectively cover more than one (1) transaction, the adviser is responsible for ensuring that the client receives at least annually, with or as part of a written statement or summary of the client's account, written disclosure of the following:

The total number of these transactions since the date of the last statement or summary;
The total amount of all commissions or other remuneration the adviser received or will receive in connection with the transactions; and
A conspicuous statement that the client may revoke the written consent previously given by providing written notice of the revocation to the adviser; and

(d) Any transaction in which the same adviser recommended the transaction to both a seller and a purchaser of a security shall be a dishonest or unethical practice regardless of any disclosure and consent;

(13) Failing to disclose to clients in writing before any advice is rendered any material fact with respect to the financial and disciplinary information required to be disclosed by 17 C.F.R. 275.206(4)-4 (SEC Rule 206(4)4);

(14) Guaranteeing a client that a specific result will be achieved with advice which will be rendered;

(15) Using any advertisement that does the following:

(a) Refers to any testimonial of any kind concerning any advice, analysis, report, or other service rendered by the adviser or representative unless it meets the following requirements:

The testimonial clearly discloses whether the person giving the testimonial is a client or promoter;
The testimonial clearly discloses whether the person giving the testimonial is compensated;
An adviser or representative using a testimonial provided by a promoter has entered into a written agreement with a promoter; and
The adviser or representative and testimonial comply with all provisions of 17 C.F.R. 275.206(4)-1 Rule 206(4)-1 of the Investment Advisers Act of 1940, commonly known as the SEC marketing rule, effective December 22, 2020;

(b) Refers to past specific recommendations of the adviser or representative that were or would have been profitable, except that an adviser or representative may furnish or offer to furnish a list of all recommendations made by the adviser or representative within the immediately preceding period of not less than one (1) year if the list also includes the following:

The name of each security recommended, the date and nature of each recommendation, the market price at that time, the price at which the recommendation was to be acted upon, and the most recently available market price of each security; and
A legend on the first page in prominent print or type that states that recommendations made in the future may not be as profitable as the securities on the list;

(c) Represents that any graph, chart, formula, or other device being offered can in and of itself be used to determine which securities to buy or sell, or when to buy or sell them;

(d) Represents that any graph, chart, formula, or other device being offered will assist any person in making that person's own decisions without prominently disclosing in the advertisement the limitations and the difficulties with respect to its use;

(e) Represents that any report, analysis, or other service will be furnished for free or without charge, unless the report, analysis or other service actually is or will be furnished free and without any direct or indirect condition or obligation;

(f) Represents that the Department of Financial Institutions has approved any advertisement; or

(g) Contains any untrue statement or omission of a material fact, or that is otherwise false or misleading;

(16) Disclosing the identity, affairs, or investments of any client unless required by law to do so, or unless consented to in writing by the client;

(17) Taking any action, directly or indirectly, with respect to those securities or funds in which any client has any beneficial interest, if the investment adviser has custody or possession of the securities or funds when the adviser's action is subject to and does not comply with the provisions of 808 KAR 10:020 relating to the custody;

(18) Entering into, extending, or renewing an advisory contract unless the contract is in writing and discloses the following:

(a) The nature of the advisory services to be provided;

(b) The time period that the contract remains in effect;

(d) The amount of the prepaid fee to be returned if there is contract termination or nonperformance;

(e) Whether the contract grants discretionary power to the adviser and, if so, the terms of the discretionary power;

(f) Whether the contract grants custody of client funds to the adviser and, if so, the terms of the custody; and

(g) That the adviser shall not assign the contract without the prior written consent of the client;

(19) Including in an advisory contract any condition, stipulation, or provision binding any client to waive compliance with any provision of the Securities Act of Kentucky, KRS Chapter 292, 808 KAR Chapter 10, or of the Investment Advisors Act of 1940, 15 U.S.C. 80b;

(20) Paying compensation, directly or indirectly, to an investment adviser solicitor unless the investment adviser makes the payment in accordance with the requirements of 17 C.F.R. 275.206(4)-3) (SEC Rule 206(4)-3);

(21) Engaging in any act, practice, or course of business which is fraudulent, deceptive, or manipulative contrary to the provisions of Section 206(4) of the Investment Advisors Act of 1940, 15 U.S.C. 80b-6(4), whether or not the investment adviser is registered or required to be registered under 15 U.S.C. 80b-3;

(22) Failing to provide all material information with respect to any dealings with or recommendations to any advisory client in violation of KRS 292.320;

(23) Committing any act involving a client, the client's assets, or any business records which would constitute a criminal offense;

(24) Lying to or otherwise misleading a representative of the Department of Financial Institutions conducting an authorized examination or investigation;

(25) Failing to make requested records available to or otherwise impeding a representative of the Department of Financial Institutions conducting an authorized examination or investigation;

(26) Failing to respond in a timely manner to a written request from an authorized representative of the Department of Financial Institutions for:

(a) Information;

(b) An explanation of practices or procedures;

(d) A response to a written statement of findings from an examination.

(27) Failing to pay and fully satisfy, or attempting to avoid payment of, any final order, judgment, or arbitration award resulting from an investment-related, client or customer-initiated arbitration or court proceeding, unless alternative payment arrangements are agreed to, in writing, and complied with between:

(a) The client and the investment adviser or investment adviser representative; or

(b) Between the customer and the broker-dealer or the broker-dealer agent; or

(28) Failing to pay and fully satisfy any fine, civil penalty, order of restitution, order of disgorgement, or similar monetary payment obligation imposed upon the investment adviser or investment adviser representative by the Securities and Exchange Commission, the securities or other financial services regulator of any state or province, or any self-regulatory organization.

Section 3. The provisions of this administrative regulation shall apply to federally covered advisers, as defined in KRS 292.310, operating in Kentucky to the extent that the conduct alleged is fraudulent or deceptive, or as otherwise permitted by the National Securities Market Improvement Act of 1996, 15 U.S.C. 78, and the Investment Advisors Act of 1940, 15 U.S.C. 80b.

Section 4. The commissioner may determine that an activity not included in the examples identified in Section 2 of this administrative regulation constitutes a dishonest or unethical practice if the activity is similar to an enumerated activity.

History

RELATES TO: KRS Chapter 292, 17 C.F.R. 275.206(4), 15 U.S.C. 78, 80b
STATUTORY AUTHORITY: KRS 292.336(7), (8), 292.337, 292.500(3)
NECESSITY, FUNCTION, AND CONFORMITY: KRS 292.500(3) authorizes the commissioner of the Department of Financial Institutions to promulgate administrative regulations necessary to carry out the provisions of KRS Chapter 292. KRS 292.336(7) and (8) authorize the commissioner to promulgate administrative regulations prohibiting unreasonable charges or other compensation of investment advisers and prescribing standards for the conduct of business by investment advisers and investment adviser representatives which the commissioner finds appropriate in the public interest and for the protection of investors. This administrative regulation establishes requirements concerning dishonest and unethical practices by investment advisers and investment adviser representatives and clarifies the consequences of engaging in unacceptable conduct or practices.
History: 35 Ky.R. 1110; Am. 1777; eff. 2-6-2009; 37 Ky.R. 2503; 2849; eff. 7-1-2011; Cert eff. 2-27-2020; 49 Ky.R. 1679, 2102; eff. 8-1-2023.

808 KAR 10:460 Request for Approval of Change in Control {#sec-808-kar-10-460 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:460}

Section 1. Definitions.

(1) "Control" means the power, directly or indirectly, to direct the management or policies of an entity, whether through ownership of securities, by contract, or otherwise.

(2) "Reportable event" means an event that is required to be reported in Items 11A-11H of the Form BD or Item 11 of the Form ADV.

Section 2. Presumption of Control. A person shall be presumed to control an entity if the person:

(1) Is an officer, director, general partner, or managing member of the entity or is a person occupying a similar status or performing similar functions;

(2) Has the right, directly or indirectly, to vote twenty-five (25) percent or more of the voting securities of the entity; or

(3) Is entitled to receive twenty-five (25) percent or more of its profits.

Section 3. Requirement for Approval of Change in Control. A registered broker-dealer or investment adviser shall submit a request for approval of a change in the control of the broker-dealer or investment adviser if control is to be acquired by any person who:

(1) Is not currently registered in Kentucky as a broker-dealer or investment adviser; or

(2) Has had a reportable event in the previous ten (10) years.

Section 4. Request for Approval of Change in Control.

(1) A registered broker-dealer or investment adviser required to submit a request for approval of a change in control shall file a letter of request along with an amended Form BD or Form ADV indicating the proposed change in the control of the broker-dealer or investment adviser.

(2) A request for approval shall be submitted at least thirty (30) days prior to the proposed change in control.

Section 5. Incorporation by Reference.

(1) The following material is incorporated by reference:

(a) "Form BD", May, 2002; and.

(b) "Form ADV", April 7, 2006.

History

RELATES TO: KRS 292.330(13)(a)
STATUTORY AUTHORITY: KRS 292.330(12)(f), 292.500(3)
NECESSITY, FUNCTION, AND CONFORMITY: KRS 292.500(3) authorizes the executive director to promulgate administrative regulations necessary to carry out the provisions of KRS Chapter 292. KRS 292.330(12)(f) authorizes the commissioner to promulgate administrative regulations for the conduct of business by broker-dealers and investment advisers. KRS 292.330(13)(a) authorizes the commissioner to deny, suspend, or revoke the registration of a broker-dealer or investment adviser if the registrant or any person, directly or indirectly controlling the registrant has engaged in certain activities. This administrative regulation requires registrants to submit a request for a change in the control of the registrant so that the commissioner may review the background of the acquiring person.
History: 35 Ky.R. 1374; Am. 1778; eff. 2-6-09; TAm eff. 12-3-2019; Crt eff. 2-27-2020.

808 KAR 10:480 Books and records of firms employing issuer agents {#sec-808-kar-10-480 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:480}

Section 1. Every firm employing issuer agents, who are either registered or required to be registered under the provisions of KRS Chapter 292, to effect transactions in its securities shall make and keep accurate, complete, and current the following books and records relating to these securities transactions:

(1) Records that track all receipts of funds from purchasers of the securities and all disbursements of those funds. The disbursement records shall provide sufficient detail to prepare an actual "Use of Proceeds" tabular display for comparison with the proposed "Use of Proceeds" tabular display required by the Offering Document Guidelines adopted by the department in April 2009. Records shall include bank statements which keep cash receipts and disbursements related to the securities offering separate from other receipts and disbursements of the issuer;

(2) Current financial statements, prepared according to generally accepted accounting principles, for the issuer for the most recent three (3) years (or the life of the issuer if less than three (3) years). These statements shall not be required to be audited, but shall be verified as true and accurate within the actual knowledge of the issuer's chief financial officer (or chief executive officer if the issuer has no specified financial officer);

(3) Employment contracts with agents, if any;

(4)

(a) For any unregistered employees of the firm who contact investors or potential investors, documentation of the manner in which the employee is compensated.

(b) If the employee is compensated by salary and bonus, documentation of the factors used in determining the amount of the bonus;

(5)

(a) Copies of any scripts or other materials used to train agents in the selling of the securities.

(b) Copies of any materials used to train unregistered employees who contact investors or potential investors;

(6)

(a) Copies of any scripts or other materials prepared for use by agents in discussing the securities with potential purchasers.

(b) Copies of materials prepared for use by unregistered employees who contact investors or potential investors;

(7) Copies of any general advertising or promotional material utilized by the issuer during the period of the offering whether or not related directly to the securities offering;

(8) Copies of any prospectus or similar offering document used in the offer or sale of the issuer's securities and, if any document was revised during the offering period, copies of all versions of the document with notation of the dates during which each document was utilized;

(9) All material contracts related to the offering (such as leases, employment contracts, supplier or vendor contracts, turnkey contracts, etc.);

(10) Any professional opinion letters related to the offering (such as those from attorneys, accountants, experts, etc.);

(11) All subscription (or other requests to purchase) materials completed by offerees;

(12) All correspondence to or from potential investors;

(13) Customer files that document contact information for all purchasers of the issuer's securities and containing copies of all correspondence either received from or sent to these purchasers. These files shall also contain any other information necessary to determine that the sales complied with all requirements of any exemptions from registration of the securities claimed by the issuer and with any other applicable administrative regulations, including that the investment is suitable for the purchaser;

(14) A file documenting compliance with the securities laws of all relevant jurisdictions (including the Securities and Exchange Commission if the offering is across state lines) both in the offering and selling of the securities, and in the payment of compensation to the agents; and

(15) A complaint file for the offering which shall contain:

(a) Copies of any written (including electronic transmissions) complaints related to the offering of securities;

(b) A written summary of any oral complaint related to the offering with contact information for the complainant;

(d) A written summary of the disposition of each complaint.

Section 2. All books and records required under Section 1 of this administrative regulation shall be readily available for inspection by representatives of the department upon request without notice.

Section 3. The books and records required under Section 1 of this administrative regulation shall be maintained in a readily accessible format for a period of at least three (3) years after the conclusion of the securities offering.

Section 4. Incorporation by Reference.

(1) "Offering Document Guidelines", revised April 2009, is incorporated by reference.

(2) This material may be inspected, copied, or obtained, subject to applicable copyright law, at the Department of Financial Institutions, 1025 Capital Center Drive, Suite 200, Frankfort, Kentucky 40601, Monday through Friday, 8 a.m. to 4:30 p.m.

History

RELATES TO: KRS 292.336(1)(a), (b)
STATUTORY AUTHORITY: KRS 292.500(3)
NECESSITY, FUNCTION, AND CONFORMITY: KRS 292.500(3) authorizes the commissioner to promulgate administrative regulations necessary to carry out the provisions of KRS Chapter 292. This administrative regulation establishes the books and records a firm employing issuer agents must maintain.
History: 37 Ky.R. 2509; 2850; eff. 7-1-2011; Crt eff. 2-27-2020.

808 KAR 10:490 Procedures for distributing and using funds from the Securities Fraud Prosecution and Prevention Fund {#sec-808-kar-10-490 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:490}

Section 1. Definitions.

(1) "Commissioner" is defined by KRS 292.310(4).

(2) "Department" is defined by KRS 292.310(7).

(3) "Outside agency" means:

(a) The office of the Kentucky Attorney General;

(b) The office of the United States Attorney;

(d) Any other state or federal regulatory or criminal enforcement agency.

(4) "Securities Fraud Prosecution and Prevention Fund" means the account established under KRS 292.322(1).

Section 2. Authorization for Use of Funds.

(1) The commissioner may disburse funds held in the Securities Fraud Prosecution and Prevention Fund to cover the expenses of the department or an outside agency for the purposes of prosecuting or aiding the prosecution of fraudulent securities-related activities, whether arising from an investigation initiated or conducted by the department or from the independent investigation of an outside agency. In addition, the funds may be used to cover the expenses for training related to the prevention, detection, or investigation of securities-related fraud, and for consumer education aimed at preventing victimization by securities-related fraud.

(2) Authorized expenses may relate to the following:

(a) Training and equipment;

(b) Investigation;

(d) Witness expenses;

(e) Travel expenses;

(f) Sentencing;

(g) Appeal; or

(h) Consumer education initiatives.

Section 3. Application and Approval for Disbursement of Funds.

(1) The department may utilize any of the following for application, approval, and disbursement of funds to an outside agency:

(a) A written agreement or memorandum of understanding with an outside agency covering actual expenses for a set period of time or the actual expenses for a particular prosecution, investigation, training, or initiative. Each agreement or memorandum of understanding shall be signed by the commissioner and an authorized representative of the outside agency and shall identify:

The effective period;
The expenses to be covered;
The dollar limit, if any; and
The manner and form of billing expenses and the process for disbursement of funds.

(b) A written application submitted to the department for payment of prosecution-related or other authorized expenses shall include the following information:

The agency applicant name, address, and contact information;
A detailed description and estimated amount of the expenses sought to be covered, or if expenses have already been incurred, proof of incurrence of these expenses;
A detailed description of the cases, persons, and crimes being considered for prosecution, if applicable; and
A detailed description of the expenses, training, or initiative being proposed or sought for reimbursement.

(c) For funds sought to be utilized for the purposes set forth in Section 2 of this administrative regulation, the commissioner shall maintain an accounting and memorandum of all these expenditures which shall include the information required under paragraph (b) of this subsection.

(2) The commissioner shall approve or deny the application for funds in writing. The approval shall contain the terms of disbursement including the maximum amount to be reimbursed, the billing process to be implemented, and reporting requirements for the disbursement of funds.

(3) A completed invoice or voucher in a form acceptable to the commissioner shall be submitted for all expenses for which payment or reimbursement from the account is sought.

Section 4. Funding Criteria. Allocation of funds by the commissioner to other agencies shall be based on funds available in the account established under the provisions of KRS 292.322 and the following criteria:

(1) The likelihood that any investigation or inquiry will lead to criminal prosecution;

(2) Whether criminal prosecution is imminent; or

(3) A demonstration of need for funds to accomplish the purposes set forth in Section 2 of this administrative regulation.

Section 5. Disbursement Limitation. The commissioner shall not be required to disburse any funds unless the Securities Fraud Prosecution and Prevention Fund contains sufficient funds to cover the agreed disbursements. The commissioner and the department shall not be required to make disbursements from the department's own operating funds.

Section 6. Confidentiality of Information Provided in Funding Applications. The commissioner shall keep confidential and withhold from public inspection all information provided by outside agencies that:

(1) Is furnished to the department on the express condition that the information remain confidential; or

(2) The commissioner determines is necessary to withhold to protect the public welfare by avoiding the premature or unwarranted disclosure of information concerning any criminal investigation, prosecution, or litigation.

History

RELATES TO: KRS 292.322
STATUTORY AUTHORITY: KRS 292.322(6)
NECESSITY, FUNCTION, AND CONFORMITY: KRS 292.322(6) requires the commissioner to promulgate administrative regulations, in consultation with the Attorney General and local prosecutors, for the use of money in the Securities Fraud Prosecution and Prevention Fund. This administrative regulation establishes the procedures for distributing and using the money from the Securities Fraud Prosecution and Prevention Fund.
History: 37 Ky.R. 2511; 2851; eff. 7-1-11; Crt eff. 2-27-2020.

808 KAR 10:501 Required forms, fees, filing procedures, and recordkeeping requirements for persons operating pursuant to KRS 292.411 and KRS 292.412, the Kentucky Intrastate Crowdfunding Exemption; and notice filing requirements for federal crowdfunding offerings {#sec-808-kar-10-501 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:501}

Section 1. Definitions.

(1) "Commissioner" is defined by KRS 292.310(4).

(2) "Completion of an offering" means the occurrence of one (1) of the following:

(a) The date upon which the offering deadline expires;

(b) The date upon which the transaction becomes void pursuant to KRS 292.411(1)(i); or

(3) "Internet Web site operator" means a person registered as an Internet Web site operator pursuant to KRS 292.412.

Section 2. Issuer Notice Filings. An issuer making a submission pursuant to KRS 292.411(1)(f) shall complete and submit the following:

(1) Form CF 1, Kentucky Intrastate Crowdfunding Exemption Issuer Notice Filing Form with all required attachments;

(2) Form CF 2, Final Report of Sales Form no later than thirty (30) days after the completion of an offering conducted pursuant to KRS 292.411; and

(3) A filing fee of $500.

Section 3. Registration of Internet Web Site Operators.

(1) A person applying for registration as an Internet Web site operator shall complete and submit the following:

(a) Form CF 3, Internet Web Site Operator Registration Form with all required attachments;

(b) Form CF 4, Internet Web Site Operator Surety Bond Form; and

(2) An Internet Web site operator applying to renew its registration for the following calendar year pursuant to KRS 292.412(6) shall complete and submit the following between December 1 and December 15 of the preceding calendar year:

(a) Form CF 3, Internet Web Site Operator Registration Form with all required attachments; and

(b) A renewal fee of $250.

(3) Except as provided in subsection (4) of this section, an initial registration shall be effective until December 31 of the year in which the initial registration is approved by the commissioner.

(4) An initial registration approved after November 30 shall be effective until December 31 of the following calendar year.

Section 4. Broker-dealer Notice Filings.

(1) Form CF 5, Broker-Dealer Internet Web Site Operator Notice Filing Form shall be completed by a broker-dealer making a notice filing pursuant to KRS 292.412(2).

(2) The notice filing shall be filed before the broker-dealer operates an Internet Web site pursuant to KRS 292.411(1)(r).

(3) Except as provided in subsection (4) of this section, a notice filing made pursuant to this section shall be effective until December 31 of the year in which the filing is made.

(4) A notice filing made between December 1 and December 31 of the year in which a previous notice filing expires shall be effective for the subsequent calendar year.

Section 5. Recordkeeping Requirements.

(1) An issuer shall accurately make and keep the following books and records relating to any offer or sale made pursuant to KRS 292.411:

(a) All forms and documents that are required by KRS 292.411 or this administrative regulation to be filed with the commissioner;

(b) Evidence of residency from each purchaser in any offering made by the issuer as required by KRS 292.411(1)(o);

(c) Evidence of accredited investor status for each purchaser making an investment exceeding $10,000 as required by KRS 292.411(1)(e) and (o);

(d) Evidence reflecting all offers made by the issuer;

(e) Evidence reflecting all sales made by the issuer;

(f) Manually or electronically signed copies of all purchaser certifications as required by KRS 292.411(1)(n);

(g) All limited notices distributed in accordance with KRS 292.411(1)(r)7.;

(h) All notices of cancellation of commitment to invest pursuant to KRS 292.411(1)(j);

(i) All notices of closing of an offering prior to the offering deadline delivered pursuant to KRS 292.411(1)(k);

(j) Quarterly reports made pursuant to KRS 292.411(1)(t); and

(k) All other communications with purchasers in the offering.

(2) An Internet Web site operator shall accurately make and keep the following books and records:

(a) Records of fees received pursuant to KRS 292.412(4)(a);

(b) All agreements with issuers offering securities through the Internet Web site operator's Web site;

(c) All information provided to the Internet Web site operator by an issuer to establish that the issuer is organized under the laws of Kentucky and authorized to do business in Kentucky as required by KRS 292.411(1)(r)1.;

(d) Evidence reflecting the limitation of Web site access as required by KRS 292.411(1)(r)3.;

(e) All correspondence or other communications with issuers, prospective purchasers, or purchasers;

(f) All information made available through the Internet Web site relating to an offering; and

(g) Any other information provided by or through the Internet Web site operator to issuers, prospective purchasers, or purchasers.

Section 6. Kentucky Intrastate Crowdfunding Examination Fees. The fee for a routine examination of an Internet Web site operator shall be fifty (50) dollars per working hour. A fee shall not be charged for examination work by an examiner-trainee.

Section 7. Federal Crowdfunding Notice Filing Provisions.

(1) The following provisions apply to offerings made under the federal Regulation Crowdfunding (17 C.F.R Part 227) and Sections 4(a)(6) and 18(b)(4)(C) of the Securities Act of 1933 (15 U.S.C.77d(a)(6) and 15 U.S.C.77r(b)(4)(C)):

(a) For an issuer that either (1) has its principal place of business in this state or (2) sells fifty (50) percent or greater of the aggregate amount of the offering to residents of this state, the issuer shall file the following with the commissioner:

A completed Form U-CF, Uniform Notice of Federal Crowdfunding Offering form, or copies of all documents filed with the Securities and Exchange Commission;
A consent to service of process on Form U-2 if not filing on Form U-CF; and
A filing fee of $250;

(b) For an issuer that has its principal place of business in this state, the filings required under paragraph (a) of this subsection shall be filed with the commissioner when the issuer makes its initial Form C filing concerning the offering with the Securities and Exchange Commission; and

(c) For an issuer that does not have its principal place of business in this state, but where residents of this state have purchased fifty (50) percent or greater of the aggregate amount of the offering, the filing required under paragraph (a) of this subsection shall be filed when the issuer becomes aware that such purchases have met this threshold, and in no event later than thirty (30) days from the date of completion of the offering.

(2) The initial notice filing required under subsection (1) of this section is effective for twelve months from the date of the filing with the commissioner.

(3) For each additional twelve-month period in which the same offering is continued, an issuer conducting an offering under 17 C.F.R Part 227 and Sections 4(a)(6) and 18(b)(4)(C) of the Securities Act of 1933 (15 U.S.C.77d(a)(6) and 15 U.S.C.77r(b)(4)(C)) shall renew the initial notice filing required under subsection (1) of this section by filing the following on or before the expiration of the initial notice filing:

(a) A completed Form U-CF marked "renewal" ora cover letter requesting renewal; and

(b) A renewal fee of $250.

Section 8. Incorporation by reference.

(1) The following material is incorporated by reference:

(a) "Form CF 1, Kentucky Intrastate Crowdfunding Exemption Issuer Notice Filing Form", September 2023;

(b) "Form CF 2, Final Report of Sales Form", September, 2023;

(d) "Form CF 4, Internet Web Site Operator Surety Bond Form", September 2023; and

(e) "Form CF 5, Broker-Dealer Internet Web Site Operator Notice Filing Form", September 2023.

(f) "Form U-2, Uniform Consent to Service of Process, September 2023

(g) "Form U-CF, Uniform Notice of Federal Crowdfunding Offering", September 2023

(2) This material may be inspected, copied, or obtained, subject to applicable copyright law, at the Department of Financial Institutions, 500 Mero St 2SW19, Frankfort, Kentucky 40601, Monday through Friday, 8 a.m. to 4:30 p.m. This material may also be obtained at kfi.ky.gov.

History

RELATES TO: KRS 292.327, 292.330-292.390, 292.411, 292.412, 15 U.S.C. 77d, 15 U.S.C. 77r, 17 C.F.R. Part 227
STATUTORY AUTHORITY: KRS 292.500(3)
NECESSITY, FUNCTION, AND CONFORMITY: KRS 292.500(3) authorizes the commissioner to promulgate administrative regulations necessary to carry out the provisions of KRS Chapter 292. KRS 292.411(1)(f) and (s) require the commissioner to prescribe the notice filing form to be used, the filing fee to be paid, and the records to be kept by an issuer. KRS 292.412(2) requires the commissioner to prescribe the filing procedure and form to be used by registered broker-dealers operating an Internet Web site pursuant KRS 292.411(1)(r). KRS 292.412(3), (5), (6), (7), and (8) require the commissioner to prescribe filing procedures and forms for applications and renewal applications, the filing fees to be paid, the records to be kept, and the examination fees for Internet Web site operators. This administrative regulation establishes the required forms, fees, filing procedures, and recordkeeping requirements for persons operating pursuant to KRS 292.411 and KRS 292.412, the Kentucky Intrastate Crowdfunding Exemption, and notice filing requirements for federal crowdfunding offerings.
History: 50 Ky.R. 998, 1690; eff. 5-7-2024.

Chapter 12 Mortgage Loan Companies and Mortgage Loan Brokers

808 KAR 12:020 Claims of exemption {#sec-808-kar-12-020 omnilex-key=us-ky-regs-official--title-808--808 KAR 12:020}

Section 1.

(1) A person filing a claim of exemption under KRS 286.8-020(3) shall:

(a) Submit a completed application for a claim of exemption as required by subsection (2) of this section; and

(b) Enclose with the application documentation that supports the applicant's claim of exemption, as set forth in the applicable application form.

(2)

(a) If relying on an exemption as a non-profit organization that has affordable housing as a primary purpose of its operations under KRS 286.8-020(1)(i), the person shall file a notarized Form ML-9, Application for a Mortgage Loan Company or Mortgage Loan Broker Exemption (Non-Profit Exemption).

(b) If relying on an exemption as a mortgage loan company or mortgage loan broker approved and regulated by the United States Department of Housing and Urban Development under KRS 286.8-020(2)(a)-(b), the person shall file a notarized Form ML-10, Application for a Mortgage Loan Company or Mortgage Loan Broker Exemption (HUD Exemption).

Section 2. Within ten (10) days of the change, a person who submits an application under Section 1 of this administrative regulation shall notify the commissioner:

(1) Of a change of address of the applicant; or

(2) That the applicant has ceased to do business in Kentucky.

Section 3. Incorporation by Reference.

(1) The following material is incorporated by reference:

(a) Form ML-9, "Application for a Mortgage Loan Company or Mortgage Loan Broker Exemption (Non-Profit Exemption)", December, 2019; and

(b) Form ML-10, "Application for a Mortgage Loan Company or Mortgage Loan Broker Exemption (HUD Exemption)", December, 2019.

(2) This material may be inspected, copied, or obtained, subject to applicable copyright law, at the Department of Financial Institutions, 500 Mero St 2SW19, Frankfort, Kentucky 40601, Monday through Friday, 8 a.m. to 5:00 p.m. This material may also be obtained from the department's Web site at http://www.kfi.ky.gov.

History

RELATES TO: KRS 286.8-010, 286.8-020, 286.8-030, 286.8-044, 286.8-048, 286.8-090
STATUTORY AUTHORITY: KRS 286.8-020(3), 286.8-140(1)
NECESSITY, FUNCTION, AND CONFORMITY: KRS 286.8-140(1) authorizes the commissioner to promulgate administrative regulations necessary to accomplish the basic purposes of KRS Chapter 286.8. KRS 286.8-020(3) requires a person relying upon an exemption established in KRS 286.8-020(1)(i) or (2)(a)-(2)(b) to file with the commissioner a written application for a claim of exemption. This administrative regulation establishes the procedure for filing a written application pursuant to KRS 286.8-020(3).
History: 16 Ky.R. 2811; eff. 10-14-1990; Am. 25 Ky.R. 1185; 1602; eff. 1-19-1999; 41 Ky.R. 2636; 42 Ky.R. 687; eff. 9-22-2015; TAm eff. 12-3-2019; Cert. eff. 9-16-2022.

808 KAR 12:050 Processing and closing charges for real estate loans to consumers {#sec-808-kar-12-050 omnilex-key=us-ky-regs-official--title-808--808 KAR 12:050}

Section 1. All fees paid to or collected by a mortgage loan company or a mortgage loan broker in connection with a mortgage loan shall be disclosed as being paid to the mortgage loan company or mortgage loan broker, or lender on the closing disclosure for the mortgage loan. The disclosure shall clearly and unambiguously disclose the identity of the recipient of each fee.

Section 2.

(1)

(a) A mortgage loan company or mortgage loan broker shall not mark up the cost of services performed or goods provided by another settlement service provider if no work, nominal work, or duplicative work is performed.

(b) Services that may not be marked up shall include:

Appraisal fees;
Surveyor fees; and
Credit reporting fees.

(2) The following fees may be paid by the lender:

(a) Premiums to loan companies and brokers; and

(b) Yield spread premiums to loan companies and brokers.

Section 3.

(1) If a mortgage loan company, mortgage loan broker, lender, or the stockholder of any of these entities owns any portion of or controls an entity, or entities, that perform services, provide goods, or receive payment for goods or services provided in connection with a mortgage loan, each entity shall be treated as a separate entity, as if not owned or controlled, for purposes of disclosure to the borrower.

(2) The existence of any ownership or control and the extent and nature of the ownership or control shall be clearly and unambiguously disclosed to the borrower.

(3) The disclosure shall meet the requirements as set out in the federal Real Estate Settlement Procedures Act, C.F.R. Part 1024.1 through 1024.41 ("RESPA"), and follow the prescribed disclosure format as set out in Appendix D of Part 1024 RESPA.

History

RELATES TO: KRS 286.8-120(1), (2), (6)
STATUTORY AUTHORITY: KRS 286.8-120, 286.8-140(1)
NECESSITY, FUNCTION, AND CONFORMITY: KRS 286.8-120(1) and (2) authorize a mortgage loan company to require a borrower to pay all necessary and reasonable expenses incurred in connection with a loan and all other necessary and incidental services rendered by the mortgage loan company or others. This administrative regulation requires the disclosure of fees paid, prohibits markups on certain services, and requires disclosure of ownership and control.
History: 29 Ky.R. 2401; Am. 2901; 30 Ky.R. 284; eff. 8-13-2003; 45 Ky.R. 2206, 2911; eff. 5-3-2019; Crt eff. 4-7-2026.

808 KAR 12:055 Uniform standards for mortgage loan processor applicant employee background checks {#sec-808-kar-12-055 omnilex-key=us-ky-regs-official--title-808--808 KAR 12:055}

Section 1. Definitions.

(1) "Adverse action" means a denial of employment based in whole or in part on information obtained from an employee background check conducted pursuant to KRS 286.8-255(9) and this administrative regulation.

(2) "Consumer report" is defined by section 603(d) of the federal Fair Credit Reporting Act, 15 U.S.C. 1681a(d).

(3) "Control person" means the following:

(a) A director, general partner, managing member, or executive officer;

(b) Any person who:

Directly or indirectly has the right to vote ten (10) percent or more of a class of a voting security; or
Has the power to sell or direct the sale of ten (10) percent or more of a class of voting securities;

(c) In the case of a partnership or limited liability company, any person that has the right to receive upon dissolution ten (10) percent or more of the capital; or

(d) Any person that exercises control.

(4) "Governmental agency" means any executive, legislative, or judicial agency, department, authority, political subdivision, or instrumentality of a state, the United States, or a foreign government.

(5) "Licensee" is defined by KRS 286.8-010(15).

(6) "Mortgage loan processor" is defined by KRS 286.8-010(22).

(7) "Mortgage loan processor applicant" means a person making an application with a licensee to be employed by the licensee as a mortgage loan processor.

(8) "Nationwide consumer reporting agency" means a consumer reporting agency that compiles and maintains files on consumers on a nationwide basis as defined by section 603(p) of the federal Fair Credit Reporting Act, 15 U.S.C. 1681a(p).

Section 2. Uniform Standards for Mortgage Loan Processor Employee Background Checks.

(1) Each background check conducted by a licensee pursuant to KRS 286.8-255(9) shall:

(a) Be in writing;

(b) Be conducted no earlier than six (6) months prior to hiring a mortgage loan processor applicant; and

A consumer report compiled by a nationwide consumer reporting agency that includes information reflecting the mortgage loan processor applicant's credit history;
A report detailing the search for any publicly available criminal records of the mortgage loan processor applicant involving felonies in Kentucky and in all other states or foreign jurisdictions where the mortgage loan processor applicant has resided or worked and any records found or obtained; and
A report detailing the search for any publicly available criminal records of the mortgage loan processor applicant involving misdemeanors of which an essential element is fraud, breach of trust, or dishonesty in Kentucky and in all other states or foreign jurisdictions where the mortgage loan processor applicant has resided or worked for the five (5) years preceding the date of application and any records found or obtained.

(2) In obtaining the information required by subsection (1) of this section, a licensee may reasonably rely upon written reports, statements, or records obtained from any of the following:

(a) A governmental agency;

(b) A nationwide consumer reporting agency; or

Conducts background investigations in accordance with all applicable law; and
Produces a written investigative report that contains the date the report was prepared, the scope of the search, the results of the search, and a statement indicating that the report is accurate and complete to the best of the firm's knowledge and belief.

(3) When conducting the employee background check and making the determinations required by KRS 286.8-255(9) and this administrative regulation, each licensee shall comply with the Fair Credit Reporting Act, 15 U.S.C. 1681, et seq., and all other applicable state or federal laws.

Section 3. Factors Used to Make the Determinations Required by KRS 286.8-255(9).

(1) A licensee shall determine whether a mortgage loan processor applicant has demonstrated financial responsibility pursuant to KRS 286.8-255(9)(b) after review of:

(a) All information obtained from the mortgage loan processor applicant; and

(b) The mortgage loan processor applicant's consumer report for the following information:

Any outstanding judgments, excluding judgments arising solely from medical expenses for the mortgage loan processor applicant or an immediate family member;
Any outstanding tax liens or other governmental liens;
Any foreclosures occurring within five (5) years of the date of the consumer report;
Any bankruptcies occurring within five (5) years of the date of the consumer report; and
Any delinquent accounts occurring within five (5) years of the date of the consumer report.

(2) A licensee shall determine whether a mortgage loan processor applicant has demonstrated character and general fitness pursuant to KRS 286.8-255(9)(b) after review of all information obtained from the mortgage loan processor applicant and the employee background check conducted in accordance with this administrative regulation, including information shown on the mortgage loan processor applicant's consumer report.

(3) Prior to conducting the reviews required by subsections (1) and (2) of this section, and in accordance with subsection (4) of this section, the licensee, at a minimum, shall obtain the following information and disclosures from the mortgage loan processor applicant:

(a) A complete residential and employment history for the ten (10) years preceding the date of application;

(b) Whether a bonding company has ever denied, paid, or revoked a bond for the following:

The mortgage loan processor applicant; or
An entity in which the mortgage loan processor applicant acted as a control person if the denial, payment, or revocation was based on acts that occurred while the mortgage loan processor applicant exercised control;

(c) Whether the mortgage loan processor applicant has ever been convicted of, pled guilty to, or pled nolo contendere to the following in any domestic, foreign, or military court:

Any felony during the seven (7) year period preceding the date of application made with the licensee;
Any felony, regardless of the date of conviction or pleading, if the felony involved an act of fraud or dishonesty, a breach of trust, or money laundering; or
Any misdemeanor for which an essential element is fraud, breach of trust, or dishonesty during the five (5) year period preceding the date of application made with the licensee;

(d) Whether there are any pending charges against the mortgage loan processor applicant involving a crime referenced in paragraph (c) of this subsection;

(e) Whether any domestic or foreign court ever found, or there is pending in any court an action alleging, that the mortgage loan processor applicant violated or was involved in a violation of a financial services-related statute or regulation;

(f) Whether any governmental agency or self-regulatory organization ever entered an order or made a finding determining, or there is pending an action initiated by any agency or organization alleging, that the following person or entity made a false statement, engaged in dishonest, unfair, or deceptive conduct or practices, engaged in fraudulent conduct, or violated or was involved in the violation of a financial services-related statute or regulation:

The mortgage loan processor applicant; or
An entity in which the mortgage loan processor applicant acted as a control person if the order, finding, or action was based on acts that occurred while the mortgage loan processor applicant exercised control;

(g) Whether the following person or entity has had a license, registration, or claim of exemption related to the financial services industry denied, suspended, or revoked under the laws of any state or the United States, or has surrendered or terminated any license, registration, or claim of exemption issued by any state or the United States under threat of administrative action:

The mortgage loan processor applicant; or
An entity in which the mortgage loan processor applicant acted as a control person if the denial, suspension, revocation, or termination was based on acts that occurred while the mortgage loan processor applicant exercised control;

(h) Whether the mortgage loan processor applicant has ever been named as a respondent or defendant in a financial services-related consumer-initiated arbitration or civil action that resulted in an arbitration award, civil judgment, or settlement involving the payment of money or taking of corrective action by the mortgage loan processor applicant;

(i) Whether the mortgage loan processor applicant has ever been found to have violated or is the subject of a pending investigation involving the violation of any rule of conduct for test takers of the S.A.F.E. Mortgage Loan Originator Test administered by the Nationwide Multistate Licensing System and Registry; and

(j) Complete details of all events and proceedings disclosed by the mortgage loan processor applicant.

(4) Any conviction, plea, denial, suspension, revocation, surrender, termination, order, or finding that has been formally vacated or set aside shall not be deemed a conviction, plea, denial, suspension, revocation, surrender, termination, order, or finding for the purposes of subsection (3) of this section.

Section 4. Mortgage Loan Processor Applicant's Right to Review and Submit. If information is discovered or obtained by a licensee concerning a mortgage loan processor applicant that may result or contribute to an adverse action by the licensee concerning the mortgage loan processor applicant, the mortgage loan processor applicant shall be given a minimum of ten (10) days to do the following prior to the making of a final employment decision by the licensee:

(1) Review the information and any documents relating to the information;

(2) Dispute the accuracy of the information; and

(3) Submit additional, corrected, or mitigating explanation, information, or documents for the licensee's review.

History

RELATES TO: KRS 286.8-010, 286.8-255(9), 15 U.S.C. 1681, et seq.
STATUTORY AUTHORITY: KRS 286.8-140(1), 286.8-255(9)
NECESSITY, FUNCTION, AND CONFORMITY: KRS 286.8-140(1) authorizes the commissioner to promulgate administrative regulations necessary to accomplish the basic purposes of KRS Chapter 286.8. Prior to hiring a mortgage loan processor applicant, KRS 286.8-255(9) requires licensees to perform an employee background check in accordance with uniform standards established by the commissioner demonstrating that the mortgage loan processor applicant has not been convicted of, pled guilty to, or pled nolo contendere to certain felonies and that the mortgage loan processor applicant has demonstrated financial responsibility, character, and general fitness sufficient to command the confidence of the community and to warrant a determination that the mortgage loan processor applicant will operate honestly, fairly, lawfully, and efficiently within the purposes of KRS Chapter 286.8. This administrative regulation establishes the uniform standards for these employee background checks.
History: 43 Ky.R. 155, 548; eff. 11-4-2016; 45 Ky.R. 2207; eff. 5-3-2019; TAm eff. 10-14-2022; Crt eff. 4-7-2026.

Chapter 14 Administrative Hearings

808 KAR 14:010 Record retention {#sec-808-kar-14-010 omnilex-key=us-ky-regs-official--title-808--808 KAR 14:010}

Section 1. Definition. "Record" means any books of account or other books, journals, ledgers, statements, instruments, documents, files, messages, writings, or other internal data or information, made or received by a financial institution in the regular course of the financial institution's business or otherwise, regardless of the mode in which it is recorded.

Section 2. Preservation Period for Records.

(1) Unless a longer period is required by federal law or federal regulation, a Kentucky Revised Statute, or an administrative regulation, licensees shall maintain records in accordance with the Record Retention Schedule.

(2) Credit Unions' Record Retention Schedule.

(a) Unless a longer retention period is required by subsection (b) of this section or other law, credit unions shall comply with the records retention requirements in Appendix A to 12 C.F.R. Part 749.

(b) A credit union shall retain all records for at least twenty-four (24) months after the close of the calendar year during which the record was generated.

Section 3. Form of Records. All records required to be retained by licensees shall be:

(1) Current and accurate;

(2) Retained in a format capable of being transmitted or reproduced; and

(3) Immediately accessible and retrievable for examination upon request by the commissioner or any person designated by the commissioner for examination, investigation, or other authorized purposes.

Section 4. Loan Licensee Records.

(1) Industrial loan and consumer loan licensees shall keep and maintain the following specific accounting records:

(a) Loan register or its equivalent record, which shall be the book of original entry and permanent record, and shall properly identify each account by:

Number;
Date of loan; and
Amount of loan;

(b) An individual account ledger card with borrowers that shall:

Show the name and address of the borrower, the loan number, the amount and date of the loan and of its maturity, rate of interest, terms of repayment, the nature of the security, if any, for the loan, and the dates of receipt and payment of recording fees together with the amount;
Provide separate columns for payments of principal;
Be kept in a manner that clearly shows the balance due on principal;
Have all payments credited promptly;
Have loan or payment cards for consumer loans, industrial loans, and sales finance loans maintained in separate files at all times; and
If an error is made on the individual account ledger or card, be appropriately corrected without erasures;

(c) An appropriate filing system, which shall contain all the current evidences of indebtedness or security that have been signed by the borrower; and

(d) An individual index record that shall be maintained for every endorser, accommodation comaker, or surety, except a spouse listed on the record of the borrower.

(2) If a note has been reduced to judgment by a consumer loan company, the face of the account ledger or card shall show the:

(a) Name of court;

(b) Date of judgment;

(d) Court costs; and

(e) Defendant against whom judgment obtained.

(3) In case of the sale of mortgaged property by a consumer loan company:

(a) The face of the account ledger or card shall show:

How possession of security was obtained, and when; and
When and how sold (public or private sale), including:

a. If all the security is sold; and

b. Proper identification of all credits from proceeds of sale;

(b) The files of the licensee shall include:

A copy of the notice of the sale;
A copy of the statement of final account, the original of which shall have been sent to the borrower after the sale; and
If the property is abandoned and the address of the borrower is uncertain or unknown, notice of sale and statement of final accounting sent to the last known address by certified mail or registered mail, return receipt requested.

Section 5. Cessation of Business. At least ten (10) days prior to the cessation of business, a mortgage loan licensee shall submit a completed Notification of Cessation of Business, Location of Physical Records and Records of Custodian Disclosure. The information in the disclosure shall be kept current for at least as established in the Mortgage Licensee Record Retention Schedule.

Section 6. Incorporation by Reference.

(1) The following material is incorporated by reference:

(a) "The Record Retention Schedule", July 1, 2006;

(b) The "Notification of Cessation of Business, Location of Physical Records and Records of Custodian Disclosure", 08/2010; and

(2) This material may be inspected, copied, or obtained, subject to applicable copyright law, at the Office of Financial Institutions, 500 Mero St 2SW19, Frankfort, Kentucky 40601, Monday through Friday, 8 a.m. to 4:30 p.m.

History

RELATES TO: KRS Chapter 286, 12 C.F.R. Part 749
STATUTORY AUTHORITY: KRS 286.1-020(1), 286.3-375, 286.4-610(1), (3), 286.6-070, 286.7-530, 286.8-140(1), 286.8-160(2)
NECESSITY, FUNCTION, AND CONFORMITY: KRS 286.3-375(4) requires the commissioner to promulgate an administrative regulation classifying all records kept by a bank and prescribing the time period for which records of each class shall be retained. KRS 286.1-020(1) and 286.6-070 authorize the commissioner to promulgate administrative regulations for the proper conduct and regulation of credit unions. KRS 286.8-160(2) authorizes the commissioner to promulgate administrative regulations establishing preservation requirements for records governed by KRS Chapter 286.8. KRS 286.4-610(1) authorizes the commissioner to promulgate administrative regulations for the proper conduct of the consumer loan businesses licensed under KRS Chapter 286.4. KRS 286.7-530 authorizes the commissioner to promulgate administrative regulations for the proper conduct of the industrial loan corporations licensed under KRS Chapter 286.7. This administrative regulation establishes recordkeeping requirements for department licensees.
History: 45 Ky.R. 2275, 2912; eff. 5-3-2019; TAm eff. 12-3-2019; Crt eff. 4-7-2026.

808 KAR 14:020 Annual reporting {#sec-808-kar-14-020 omnilex-key=us-ky-regs-official--title-808--808 KAR 14:020}

Section 1. Consumer Loan Licensees. A person filing an annual report pursuant to KRS 286.4-590 shall complete and submit the following on or before January 30 of each year:

(1) Form CL-2, Annual Report to the Department of Financial Institutions; and

(2) If the person has more than one (1) licensed location and chooses to complete Form CL-2 as a composite report for all locations, a Form CL-3, Supplement to the Annual Report to the Department of Financial Institutions for each licensed location.

Section 2. Incorporation by Reference.

(1) The following material is incorporated by reference:

(a) "Annual Report to the Department of Financial Institutions", Form CL-2, March 2015; and

(b) "Supplement to the Annual Report to the Department of Financial Institutions", Form CL-3, March 2015.

History

RELATES TO: KRS 286.4-590
STATUTORY AUTHORITY: KRS 286.4-590, 286.4-610(1)
NECESSITY, FUNCTION, AND CONFORMITY: KRS 286.4-610(1) authorizes the commissioner to promulgate administrative regulations for the proper conduct of the consumer loan businesses licensed under KRS Chapter 286.4. This administrative regulation establishes the forms on which a licensee shall submit annual reports pursuant to KRS 286.4-590.
History: 45 Ky.R. 2277; eff. 5-3-2019; TAm eff. 12-3-2019; Crt eff. 4-7-2026.

Chapter 15 General

808 KAR 15:010 Exceptions to bank lending limits {#sec-808-kar-15-010 omnilex-key=us-ky-regs-official--title-808--808 KAR 15:010}

Section 1. Definition. "Excess funds transaction" means a transaction between commercial banks involving the adjustment of their legal reserve positions through the short term transfer of reserve deposits.

Section 2. Excess funds transactions between state banks, and between state and national banks shall be regarded as the interbank transfer of reserve deposits.

Section 3. The lending limits and reserve requirements set forth by KRS 286.3-280 and 286.3-300 shall not apply to:

(1) Excess fund transactions;

(2) Loans or extensions of credit secured by:

(a) Bonds, notes, certificates of indebtedness, treasury bills, and other direct obligations of the United States; or

(b) General obligations of the Commonwealth of Kentucky.

Section 4. To qualify for the exemption set forth in Section 3(2) of this administrative regulation, government obligations shall have a face value at least equal to the total of the principal of the loan or extension of credit, and shall mature within five (5) years of the date of the loan or extension of credit.

History

RELATES TO: KRS 286.3-280, 286.3-290, 286.3-300
STATUTORY AUTHORITY: KRS 286.1-011, 286.1-020, KRS 286.3-290(2)
NECESSITY, FUNCTION, AND CONFORMITY: KRS 286.1-011(2) requires the Department of Financial Institutions to exercise all administrative functions of the state in relation to the regulation, supervision, chartering, and licensing of banks. KRS 286.1-020(1) authorizes the commissioner to promulgate administrative regulations as are necessary to interpret and carry out the provisions and intent of KRS Chapter 286.1. KRS 286.3-290(2) establishes exceptions to the maximum debt to banks and authorizes the commissioner to make, alter, and repeal administrative regulations respecting the total liabilities of any person which meets the requirements of KRS 286.3-290(2)(a) through 2(c). This administrative regulation establishes the status of excess funds (federal funds) transactions so as to ensure the maintenance of competitive equality between state and national banks in Kentucky, and provides for an exception to the bank lending limits for excess funds transactions and loans, or extensions of credit secured by certain types of government obligations.
History: 45 Ky.R. 2278, 2913; eff. 5-3-2019; Crt to Am 4-7-2026; filing deadline 10-7-2027.

808 KAR 15:020 Stay of notice of intention to remove from office {#sec-808-kar-15-020 omnilex-key=us-ky-regs-official--title-808--808 KAR 15:020}

Section 1. To obtain a stay of a Notice of Intention to Remove from Office, issued by the Commissioner pursuant to KRS 286.3-690(8), parties shall follow the procedures set forth in Civil Rule 65 of the Kentucky Rules of Civil Procedure.

History

RELATES TO: KRS 286.3-690(10)
STATUTORY AUTHORITY: KRS 286.1-011, 286.1-020
NECESSITY, FUNCTION, AND CONFORMITY: KRS 286.1-011(2) requires the Department of Financial Institutions to exercise all administrative functions of the state in relation to the regulation, supervision, chartering, and licensing of banks. KRS 286.1-020(1) authorizes the commissioner to promulgate administrative regulations as are necessary to interpret and carry out the provisions and intent of KRS Chapter 286.1.This administrative regulation sets forth the procedure to apply for a stay of a notice of intention to remove from office an officer or director of a bank pursuant to KRS 286.3-690(10), which affords a ten (10) day period for such application.
History: 45 Ky.R. 2279, 2913; eff. 5-3-2019; Crt to Am 4-7-2026; filing deadline 10-7-2027.

808 KAR 15:030 Bank branches, offices, and loan production offices {#sec-808-kar-15-030 omnilex-key=us-ky-regs-official--title-808--808 KAR 15:030}

Section 1. Permitted Activities Without Commissioner Approval. A bank that meets the criteria set forth in Section 2 of this administrative regulation and provides the notices required in Section 3 of this administrative regulation may do any of the following in any county of the state, whether or not already located in the county, without commissioner approval:

(1) Establish a branch;

(2) Establish a loan production office; or

(3) Relocate its main office or branch office.

Section 2. Criteria to Act Without Commissioner Approval. The following criteria shall be satisfied before a bank may undertake the activities described in Section 1 of this administrative regulation without commissioner approval:

(1) The bank shall have received its bank charter at least three (3) years prior to undertaking the activities;

(2) The bank shall be well-capitalized:

(a) As defined in 12 C.F.R. Part 324 by the Federal Deposit Insurance Corporation, if the bank is a nonmember bank; or

(b) As defined in 12 C.F.R. 208.43(b)(1) by the Federal Reserve Board of Governors, if the bank is a member bank of the Federal Reserve System;

(3) The bank shall have received a CAMELS composite rating of one (1) or two (2) on its most recent state or federal regulatory examination;

(4) The bank shall have received a management rating of one (1) or two (2) on its most recent state or federal regulatory examination;

(5) The bank shall not be a party to any formal or informal enforcement action initiated by a state or federal regulatory agency; and

(6) The bank's activity shall not cause the bank to exceed the fixed asset limitation established in KRS 286.3-100.

Section 3. Required Notices. A bank that desires to engage in the activities described in Section 1 of this administrative regulation without commissioner approval shall submit the notices required by this section, except that the notice requirement of subsection (2) of this section shall not apply to a bank that desires to establish a loan production office.

(1) A notice shall be sent to the department within thirty (30) days after the bank's board of directors approves the activity. The notice shall provide as follows:

(a) The address of the new location where the bank intends to establish or relocate its new branch, office, or loan production office;

(b) The expected date the new branch, office, or loan production office shall open; and

(c) A statement by the bank that it satisfies the criteria set forth in Section 2 of this administrative regulation signed by an authorized officer or agent of the bank.

(2) A notice shall be sent to any state bank with its main office located in the county where the new branch or office, but not a loan production office, will be located within thirty (30) days after the bank's board of directors approves the activity. The notice shall provide as follows:

(a) The address of the new location where the bank intends to establish or relocate its new branch or office; and

(b) The expected date the new branch or office shall open.

(3) A notice shall be sent to the department within thirty (30) days after the bank has opened its branch, office, or loan production offices, at the new location advising the department of the opening.

Section 4. Effect of Subsequent Noncompliance with Criteria. If, subsequent to the establishment or relocation of an office, a branch, or a loan production office without commissioner approval, the bank no longer meets the requirements established in Section 2 of this administrative regulation, the bank shall obtain commissioner approval prior to establishing or relocating any additional offices, branches, or loan production offices until the bank again meets the criteria. The establishment or relocation already completed by the bank shall not be rendered ineffective.

Section 5. A bank's board of directors may by resolution establish maximum dollar limits on the lending authority of officers located at a loan production office, and if the designated limits are consistent with bank wide limits on lending authority, the department will consider loans made by those officers under those limits to be approved at the principal office for the purpose of KRS 286.3-820(1)(a). An officer at a loan production office may accept a loan application and act upon it without further action by the principal office.

Section 6. A bank may maintain a transaction account at the principal office into which funds representing loan proceeds earmarked for loan production office loans are deposited, and an officer at a loan production office may draw instruments on that account in order to disburse loan proceeds. The department then will consider funds to have been disbursed at the principal office for purposes of KRS 286.3-820(1)(a) and (b).

Section 7. Loans originated at a loan production office may be closed at that loan production office. No loan payments, whether the loan originated at the loan production office, a main or branch bank office, or another loan production office, may be received at a loan production office.

Section 8. A bank customer may receive information at the loan production office on any lending account which that customer may have with the bank whether or not the loan was originated at that loan production office.

History

RELATES TO: KRS 286.3-102, 286.3-180, 286.3-185, 286.3-820, 12 C.F.R. 208.43, 325
STATUTORY AUTHORITY: KRS 286.1-020, 286.3-180(2), 286.3-185, 286.3-820
NECESSITY, FUNCTION, AND CONFORMITY: KRS 286.3-180(2) and 286.3-185 authorize the Department of Financial Institutions to designate those banks that do not have to apply for approval of the commissioner for permission to establish a branch or to relocate their principal office or branch. KRS 286.3-820(2) authorizes the Department of Financial Institutions to designate those banks that do not have to apply for approval of the commissioner to establish a loan production office. KRS 286.3-102 authorizes a qualified state bank to engage in any banking activity in which the bank could engage in other states if the bank meets specified conditions. Other states permit statewide branching as part of their authorized banking activities. This administrative regulation establishes criteria for a bank to meet in order to be designated as not having to obtain commissioner approval to establish a branch or loan production office, or relocate a principal office or branch, and clarifies what banking operations may or may not be conducted at a loan production office.
History: 45 Ky.R. 2281, 2913; eff. 5-3-2019; TAm eff. 12-9-2024; Crt to Am 4-7-2026; filing deadline 10-7-2027.

808 KAR 15:040 Multibank Companies {#sec-808-kar-15-040 omnilex-key=us-ky-regs-official--title-808--808 KAR 15:040}

Section 1.

(1) KRS 286.3-095(1), (2), and KRS 286.3-905 shall not apply to transactions involving applications filed with the Federal Reserve Board for prior approval to become a one-bank holding company.

(2) KRS 286.3-905 shall apply to transactions involving:

(a) Applications by a bank holding company to acquire control of a state-chartered bank or to acquire control of a bank holding company that controls a state-chartered bank;

(b) Applications by a bank holding company that controls a state-chartered bank to acquire control of a national bank or bank holding company that controls a national bank;

(c) Applications by a bank holding company that controls a state-chartered bank to acquire control of a bank or bank holding company not having its principal place of business in this state; and

(d) Applications by a bank holding company not having its principal place of business in this state to acquire control of a state-chartered bank or bank holding company that controls a state-chartered bank.

(3) If a proposed change occurs in the outstanding voting stock of a state-chartered bank subject to KRS 286.3-095 or 286.3-905 and a bank holding company application or change of control notice is required by federal regulatory agencies, the concurrent filing of a copy of the application or notice submitted to the federal regulatory agency with the commissioner shall fulfill the documentation requirement of KRS 286.3-095 or 286.3-905.

(4) The original bank holding company application shall be filed with the commissioner concurrently with the application filed with the Federal Reserve Board and shall be on the same application form used by the Federal Reserve Board. All subsequent information furnished by the applicant to the Federal Reserve Board shall be concurrently filed with the department.

(5) A complete application is which includes all information necessary for the commissioner to make a decision to approve or disapprove the application pursuant to KRS 286.3-905(1) and has been accepted for processing by the Federal Reserve Board.

Section 2. Filing Fee. Each application shall include a nonrefundable investigation fee of $2,500. The fee assessed by the commissioner shall be paid prior to approval of the application by the commissioner.

Section 3. Examination Fees. If the commissioner examines or elects to participate in a joint examination with the applicable federal regulatory agency of any holding company that controls a state-chartered bank, the examination fee assessed against the company examined shall be based upon fair compensation for time and actual expenses.

Section 4. Publication of Notice. Publication of notice of intention of a bank holding company to acquire control of a state-chartered bank or to acquire control of a bank holding company which controls a state-chartered bank shall be the responsibility of the applicant pursuant to Regulation Y issued by the Federal Reserve Board (12 C.F.R. 225, as revised effective December 28, 2004).

Section 5. Hearings. The department shall not hold hearings on any application or notice. Hearings, if any, shall be conducted by the Federal Reserve Board in accordance with Regulation Y or by the appropriate federal banking agency pursuant to the federal Bank Change in Control Act of 1978, as amended (12 U.S.C. 1817(j)).

Section 6. Nonbank Activities and Acquisitions. Nonbank activities and acquisitions for bank holding companies are regulated by the Federal Reserve Board in accordance with Regulation Y.

Section 7. Coordination with Federal Reserve Board. The commissioner shall coordinate the application process for acquisition of control of state-chartered banks and bank holding companies which control a state-chartered bank with the Federal Reserve Board to ensure that no unreasonable delays occur in the approval process.

History

RELATES TO: KRS 286.3-095, 286.3-905
STATUTORY AUTHORITY: KRS 286.1-011(2), 286.3-020
NECESSITY, FUNCTION, AND CONFORMITY: KRS 286.1-011(2) requires the Department of Financial Institutions to exercise all administrative functions of the state in relation to the regulation, supervision, chartering, and licensing of banks. KRS 286.3-020 authorizes the commissioner to approve applications for a bank or trust company charter. KRS 286.3-095 and 286.3-905 set forth statutory procedures for filing applications by a bank holding company or individual to acquire control of a state-chartered bank or bank holding company that controls a state-chartered bank; the setting of filing and examination fees; and the examination of any holding company that controls a state-chartered bank. This administrative regulation establishes the procedures to be used in the application and examination processes.
History: 45 Ky.R. 2283, 2914; eff. 5-3-2019; Crt eff. 4-7-2026.

808 KAR 15:050 Out-of-state trust companies operating in Kentucky {#sec-808-kar-15-050 omnilex-key=us-ky-regs-official--title-808--808 KAR 15:050}

Section 1. An out-of-state trust company shall submit a completed "Notification by Out-of-State Trust Company of Business Activity" Form to the department at least thirty (30) days prior to commencing business pursuant to KRS 286.3-146(2) in Kentucky.

Section 2. Incorporation by Reference.

(1) Form B-1, "Notification by Out-of-State Trust Company of Business Activity", December 2024, is incorporated by reference.

(2) This material may be inspected, copied, or obtained, subject to applicable copyright law, at the Department of Financial Institutions, 500 Mero St 2SW19, Frankfort, Kentucky 40601, Monday through Friday, 8:00 a.m. to 5:00 p.m. This material may also be obtained from the department's Web site at https://kfi.ky.gov/new_docs.aspx?cat=56.

History

RELATES TO: KRS 286.3-146
STATUTORY AUTHORITY: KRS 286.1-020(1), KRS 286.3-146(2)(a)2
NECESSITY, FUNCTION, AND CONFORMITY: KRS 286.1-020(1) authorizes the commissioner to promulgate administrative regulations to interpret and carry out the provisions and intent of KRS Chapter 286. KRS 286.3-146(2)(a)2 authorizes the commissioner to promulgate an administrative regulation to prescribe the form and format of filings required by KRS 286.3-146(2). This administrative regulation establishes the procedure by which an out-of-state trust company may comply with KRS 286.3-146(2).
History: 47 Ky.R. 2768; 48 Ky.R. 800; eff. 11-30-2021; 48 Ky.R. 3041; 49 Ky.R.563; eff. 12-6-2022; TAm eff. 12-6-2022; 51 Ky.R. 439, 1287; eff. 4-2-2025.

Chapter 16 Student Education Loan Servicing

808 KAR 16:010 Licensing, registration, renewals and fees {#sec-808-kar-16-010 omnilex-key=us-ky-regs-official--title-808--808 KAR 16:010}

Section 1. Definitions.

(1) "Applicant" is defined by KRS 286.12-010(2).

(2) "Commissioner" is defined by KRS 286.1-010(1).

(3) "Department" is defined by KRS 286.1-010(2).

(4) "Federal student education loan" is defined by KRS 286.12-020(1).

(5) "Student education loan servicer" and "servicer" are defined by KRS 286.12-010(13).

Section 2. Initial Application and Notice.

(1) A person providing notice to the commissioner as a federal student education loan servicer doing business in Kentucky as of July 14, 2022, shall submit:

(a) A completed NMLS Company Form available online at http://mortgage.nationwidelicensingsystem.org; and

(b) A completed NMLS Individual Form available online at http://mortgage.nationwidelicensingsystem.org;

(2) Federal student education loan servicers that begin conducting business in Kentucky after July 14, 2022, non-federal student education loan servicers, and federal student education loan servicers that also service non-federal student education loans shall submit:

(a) A completed NMLS Company Form available online at http://mortgage.nationwidelicensingsystem.org;

(b) A completed NMLS Individual Form available online at http://mortgage.nationwidelicensingsystem.org;

(c) All documents required on the New Application Checklist available online at http://mortgage.nationwidelicensingsystem.org;

(d) Either:

An audited financial statement prepared by a certified public accountant (CPA), in accordance with generally accepted accounting principles (GAAP), verifying a minimum net worth of at least$250,000; or
The following CPA prepared financial statements, if the request is made by the applicant and is deemed reasonable by the Commissioner based on the size, structure, and complexity of the applicant:

a. A Reviewed financial statement; or

b. A Compiled financial statement;

(e) An Electronic Surety Bond online at http://mortgage.nationwidelicensingsystem.org, which shall:

Include the name of the principal insured, which shall match the full legal name of applicant;
Be to the benefit of the department; and
Be in an amount of the lessor of:

a. $100,000; or

b. 0.01 percent(.0001) of the amount of the Kentucky servicing portfolio; and

(f) A nonrefundable investigation fee of $5,000.

Section 3. Renewal Applications - All Licensees.

(1) A licensee applying for an annual renewal of a student education loan servicer license, on or before December 1st, shall:

(a) Submit required updates and attestations verifying that all information in the licensee's record, maintained in the NMLS operated by the State Regulatory Registry, LLC, is correct and available online at http://mortgage.nationwidelicensingsystem.org; and

(b) Pay the annual assessment fee to be established by commissioner's order pursuant to KRS 286.12-070(2). The minimum assessment fee shall be$5,000 and the maximum assessment fee shall be$20,000.

(2) The commissioner shall not approve an application for renewal of a student education loan servicer license if the fees, materials, or any information required by subsection (1) of this section is not received on or before December 1st.

(3) A licensee applying to reinstate a student education loan servicer license after December 1st shall submit all fees, materials, and information required by subsection (1) of this section.

(4) A licensee applying to reinstate a student education loan servicer license after December 31st shall:

(a) Submit all fees, materials, and information required by subsection (1) of this section; and

(b) Pay a late filing fee of $1,000 before January 31st of the following year that the renewal application was due.

(5) The commissioner shall not approve an application for reinstatement if the application, fees, or any required information is not received before January 31st of the following year that the renewal application was due.

(6) If a licensee submits an application or fees for renewal or reinstatement of a student education loan servicer license, but fails to timely complete the application and submit the fees as required by this section, the license shall automatically terminate as of January 31 of the following year that the renewal application was due.

Section 4. Change of address, name, control, or agent for service-All Licensees.

(1) A licensee that intends to change its address, name, or agent for service of process shall notify the commissioner in writing at least:

(a) Ten (10) days prior to the change of address or name; and

(b) Five (5) days prior to the change of agent for service of process.

(2) A licensee that intends to file for a change of control, as defined by KRS 286.12-010(6), shall notify the commissioner in writing within fifteen (15) days after learning of the proposed change of control and thirty (30) days prior to the effective date of the change of control and shall submit:

(a) For an existing licensee acquiring another licensee, a change of control fee of $1,000; or

(b) For all non-licensed entities, a change of control fee of $5,000.

(3) A licensee changing its address, name, control, or agent for service of process shall update this information in NMLS within the same time periods set forth in this section.

Section 5. Annual Report - All Licensees. Each licensee shall file an annual report electronically with the commissioner, on Form SLSCR-Student Loan Servicer Call Report, on or before November 1st of each year.

Section 6. Electronic Submission of Filings and Fees through the Nationwide Multistate Licensing System Operated by the State Regulatory Registry, LLC.

(1) A person applying for licensure, registration, renewal, or reinstatement pursuant to Sections 2, 3, or 4 of this administrative regulation shall electronically submit the following to NMLS, at http://mortgage.nationwidelicensingsystem.org, as part of the nationwide multi-state licensing system:

(a) All forms, updates, attestations, reports, and documentation required by Sections 2, 3, and 4 of this administrative regulation, as applicable; and

(b) All fees referenced in this administrative regulation.

(2) Any fees assessed by NMLS, to process the electronic submissions referenced in Sections 2, 3, or 4 of this administrative regulation shall be paid by the applicant.

Section 7. Incorporation by Reference.

(1) "SLSCR-Student Loan Servicer Call Report", January 2023, is incorporated by reference.

History

RELATES TO: KRS 286.1-010, 286.12-010, 286.12-020, 286.12-030, 286.12-040, 286.12-060, 286.12-070
STATUTORY AUTHORITY: KRS 286.1-011, 286.1-020, 286.12-030, 286.12-040, 286.12-070, 286.12-090
NECESSITY, FUNCTION, AND CONFORMITY: KRS 286.1-020(1) authorizes the commissioner to promulgate, amend, and repeal any administrative regulations, forms, and orders as are necessary to interpret and carry out the provisions and intent of this chapter. KRS 286.12-030(2)(a) authorizes the commissioner to prescribe the form and materials required to apply for a license under KRS Chapter 286.12. This administrative regulation establishes licensing and registration requirements for student education loan servicers and procedures for using the Nationwide Multi-state Licensing System (NMLS).
History: 49 Ky.R. 1713; 2104; 50 Ky.R. 664; eff. 8-1-2023.

808 KAR 16:020 Recordkeeping requirements; unfair, deceptive, or predatory practices {#sec-808-kar-16-020 omnilex-key=us-ky-regs-official--title-808--808 KAR 16:020}

Section 1. Definitions.

(1) "Best financial interest of the borrower" means reducing the total cost of a student loan, including principal balance, interest, and fees to the borrower.

(2) "Commissioner" is defined by KRS 286.1-010(1).

(3) "Necessary information" includes:

(a) A schedule for all transactions credited or debited to the student loan account;

(b) A copy of the promissory note for the student loan;

(c) Notes created by a student loan servicer's personnel reflecting communication with the borrower regarding the student loan account;

(d) A report of the data fields relating to the borrower's student loan account created by the student loan servicer's electronic systems in connection with servicing practices;

(e) Copies of electronic records or any information or documents provided by the borrower to the student loan servicer;

(f) Usable data fields with information necessary to assess qualification for forgiveness, including public service loan forgiveness, if applicable; and

(g) Any information necessary to compile payment history.

(4) "Negative financial consequences" includes:

(a) Negative credit reporting;

(b) Loss or denial of eligibility for a borrower benefit or protection established under federal law or by contract; and

(5) "Qualified request" means a request made by a borrower to a student loan servicer in which the borrower either:

(a) Requests specific information from the student loan servicer; or

(b) Reports what the borrower believes to be an error regarding the borrower's account.

(6) "Student education loan servicer" and "servicer" are defined by KRS 286.12-010(13).

Section 2. A student loan servicer shall:

(1) Process student loan payments pursuant to the servicer's established payment processing policies, which shall be disclosed and readily accessible to borrowers;

(2) Credit student loan payments to the borrower's account in accordance with the following:

(a) A payment received before 11:59 p.m. on the date on which that payment is due, in the amount, manner, and location indicated by the servicer, shall be credited as effective on the date on which the payment was received by the servicer. A servicer shall treat a payment received from the borrower on the borrower's due date as an on-time payment;

(b) If a payment is made by check, a servicer shall credit the payment on the date the check was received by the servicer regardless of the date of processing;

Within ten (10) days, determine to which account and loan the payment should be credited and credit the payment as of the date it was received by the servicer; and
Update the borrower's online account within one (1) business day of the determination made under paragraph (a) of this subsection;

(d) If the borrower submits an overpayment to the student loan servicer, the servicer shall inquire of a borrower, either through electronic communication or in writing, to which account the borrower prefers to apply an overpayment. A borrower's direction regarding application of an overpayment to a student loan account shall be effective with respect to future overpayments during the term of a student loan, until the borrower provides to the servicer written alternative instructions regarding overpayment. In the absence of a direction provided by a borrower, the student loan servicer shall allocate an overpayment in a manner consistent with the best financial interest of the borrower; and

(e) If the borrower submits a partial payment, except as otherwise provided by a student loan agreement, comply with the direction provided by a borrower, regarding which account to allocate a partial payment. In the absence of a direction provided by a borrower, the student loan servicer shall allocate a partial payment in a manner consistent with the best financial interest of the borrower;

(3) Not assess negative financial consequences related to the material change by a servicer of the mailing address, office, or procedures for handling borrower payments causing a delay in the crediting of a borrower payment;

(4) Supervise and monitor actions of service providers, including maintaining policies and procedures to oversee compliance by third-party service providers engaged in all aspects of student loan servicing;

(5) Manage and process loan accounts and paperwork, consistent with existing federal requirements, and maintain records ensuring the servicer's personnel have received:

(a) Training on the management and processing of accounts and corresponding paperwork; and

(b) Access to necessary account information regarding forms and applications that have been approved, denied, or are in process, applications for income-driven repayment plans, and all forms required to access benefits and protections for federal student loans, pursuant to 20 U.S.C. secs. 1070 et seq., as amended;

(6) Unless a longer period of time is stipulated by a student loan agreement or by federal law, maintain all records regarding a borrower's account for the period of time during which a servicer performs student loan servicing and for a minimum of three (3) years after the loan serviced has been paid in full or assigned to collections, or the servicing rights have been transferred;

(7) Institute and maintain policies and procedures permitting a borrower who is dissatisfied with the outcome of an initial qualified request to escalate the borrower's concern to a supervisor or higher level of review;

(8) Not take actions resulting in negative financial consequences that are directly related to the issue identified in a borrower's qualified request, until that request has been resolved;

(9) Not take actions resulting in negative financial consequences that are directly related to a sale, assignment, transfer, system conversion, or payment made by the borrower to the original student loan servicer consistent with the original student loan servicer's policy;

(10) If a sale, assignment, or other transfer of the servicing of a student loan, results in a change in the identity of the party to whom the borrower is required to send payments or direct any communications concerning the student loan account, notify the borrower, in writing, fifteen (15) days prior to the date the borrower's payment is due on the student loan account, of the following:

(a) If applicable, the license number issued by the commissioner of the new student loan servicer;

(b) The name and address of the new student loan servicer to whom subsequent payments or communications are to be sent;

(d) The effective date of the sale, assignment, or transfer;

(e) The date on which the current student loan servicer will stop accepting payments on the borrower's student loan account; and

(f) The date on which the new student loan servicer will begin accepting payments on the borrower's student loan;

(11) Transfer all necessary information regarding a borrower, a borrower's account, and a borrower's complete student loan history to any new student loan servicer within forty-five (45) calendar days of the effective date of the sale, assignment, or transfer;

(12) Provide and maintain a record of specialized training for customer service personnel to inform:

(a) Military borrowers about student loan repayment benefits and protections;

(b) Borrowers working in public service about student loan repayment benefits and protections;

(c) Older borrowers about the risks specifically applicable to older borrowers to ensure that, once identified, older borrowers are informed about student loan repayment benefits and protections, including discharge or loan forgiveness programs for private and federal loans, if applicable; and

(d) Borrowers with disabilities about student loan repayment benefits and protections, including disability discharge programs for private and federal loans;

(13) Respond to a qualified request by:

(a) Acknowledging, in writing or through electronic communication, receipt of the request within ten (10) business days; and

(b) Within thirty (30) business days of receipt of the request, providing information relating to the status of the request and, if applicable, either the action the student loan servicer will take to correct the account or an explanation for a determination that the borrower's account is correct.

The thirty (30) day period set out in subsection (13)(b) of this Section may be extended for fifteen (15) days if, before the end of the thirty (30) day period, the servicer notifies the borrower of the extension and the reason for the delay in responding; and
A servicer is required to send a borrower up to three (3) subsequent notices stating there will be no response to a qualified request if the borrower has previously submitted the same request and received a complete response, and no new information is submitted in subsequent, duplicative qualified requests;

(14) Respond within ten (10) business days to communications from the Commissioner;

(15) Provide information to borrowers, in writing, about the availability of loan forgiveness programs and income-driven repayment plan opportunities;

(16) Maintain on its Web site, free of charge, complete information and account records for each borrower, which shall:

(a) Be accessible to the borrower only, through a secure log-in system;

(b) Include a consolidated account report for each borrower, and a loan history for each student loan serviced; and

(c) Be available to borrowers at all times, except for occasional, short periods of time when the student loan servicer's system is not available because the system is undergoing routine maintenance or is blocked for security reasons.

The consolidated account report required under this subsection shall include:

a. Borrower name;

b. Number of student loan(s) serviced for each borrower;

c. Loan number, for each student loan;

d. Loan type, whether Direct Loan, FFELP Loan, Perkins Loan, or private student loan;

e. Loan disbursement amount and date, for each student loan;

f. Interest rate(s) and maturity date, or number of monthly payments required to repay the loan, for each student loan;

g. Loan balance and status, for each student loan;

h. Cumulative balance owing for each borrower;

i. Whether the borrower has an application pending for, or is repaying under, an alternative repayment plan, and listing the plan chosen by the borrower; and

j. Whether the borrower has an application pending for any loan forgiveness, cancellation, or discharge benefit and current status of the application; and

The loan history required under this subsection shall include the following information, including the corresponding dates or data range, for each:

a. Disbursement;

b. Interest accrual;

c. Fee;

d. Late charge;

e. Any other miscellaneous amount charged to the borrower;

f. Payment received;

g. Payment toward loan forgiveness programs; and

h. Borrower's repayment plan;

(17) Upon request by a borrower, within (7) days, provide a borrower, free of charge, a complete and accurate payoff statement. The statement shall clearly indicate the date on which it was prepared, the relevant time frame for submission of the payoff amount, and any circumstances which may change the amount required to pay off the loan account. A student education loan servicer is required to provide one (1) payoff statement per quarter, at no charge to the borrower, upon request. Thereafter, the student loan servicer may charge the borrower the actual cost to produce a physical copy of the account record.

History

RELATES TO: KRS 286.12-050, 286.12-080
STATUTORY AUTHORITY: KRS 286.1-011, 286.1-020, 286.12-050, 286.12-080
NECESSITY, FUNCTION, AND CONFORMITY: KRS 286.1-020(1) authorizes the commissioner to promulgate administrative regulations as are necessary to interpret and carry out the provisions and intent of KRS Chapter 286. KRS 286.12-080 prohibits a student education loan servicer from engaging in unfair, deceptive, abusive, or predatory practices towards any borrower, or from misrepresenting or omitting any material information in connection with servicing a student education loan. This administrative regulation establishes standards that a licensee shall abide by to maintain accurate records and prevent unfair, deceptive, or predatory practices.
History: 49 Ky.R. 1716, 2105; eff. 8-1-2023.

Title 808 KAR — Public Protection Cabinet - Department of Financial Institutions

Chapter 1 Administration

808 KAR 1:060 Automated teller machines {#sec-808-kar-1-060 omnilex-key=us-ky-regs-official--title-808--808 KAR 1:060}

808 KAR 1:140 Fees {#sec-808-kar-1-140 omnilex-key=us-ky-regs-official--title-808--808 KAR 1:140}

808 KAR 1:170 Licensing and registration {#sec-808-kar-1-170 omnilex-key=us-ky-regs-official--title-808--808 KAR 1:170}

Chapter 3 Credit Unions

808 KAR 3:050 Conduct of credit unions {#sec-808-kar-3-050 omnilex-key=us-ky-regs-official--title-808--808 KAR 3:050}

Chapter 6 Consumer Loans

808 KAR 6:095 Mandatory availability for repayment {#sec-808-kar-6-095 omnilex-key=us-ky-regs-official--title-808--808 KAR 6:095}

808 KAR 6:125 Monetary inducements prohibited {#sec-808-kar-6-125 omnilex-key=us-ky-regs-official--title-808--808 KAR 6:125}

Chapter 9 Check Cashing

808 KAR 9:010 Deferred deposit database compliance {#sec-808-kar-9-010 omnilex-key=us-ky-regs-official--title-808--808 KAR 9:010}

808 KAR 9:040 Customer account transfers {#sec-808-kar-9-040 omnilex-key=us-ky-regs-official--title-808--808 KAR 9:040}

808 KAR 9:050 Licensee change of control {#sec-808-kar-9-050 omnilex-key=us-ky-regs-official--title-808--808 KAR 9:050}

Chapter 10 Securities

808 KAR 10:010 Forms for application, registration, notice filing, reporting and compliance {#sec-808-kar-10-010 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:010}

808 KAR 10:020 Capital, records and reporting requirements of broker-dealers {#sec-808-kar-10-020 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:020}

808 KAR 10:030 Conduct of broker-dealers, agents, and employees; investment advisers and representatives {#sec-808-kar-10-030 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:030}

808 KAR 10:042 Use of senior certifications and designations {#sec-808-kar-10-042 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:042}

808 KAR 10:050 Application withdrawal {#sec-808-kar-10-050 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:050}

808 KAR 10:060 Abandoned applications {#sec-808-kar-10-060 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:060}

808 KAR 10:090 Issuer's reports {#sec-808-kar-10-090 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:090}

808 KAR 10:110 Records of investment advisers {#sec-808-kar-10-110 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:110}

808 KAR 10:120 Registration files {#sec-808-kar-10-120 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:120}

808 KAR 10:130 Amendments to registration statement {#sec-808-kar-10-130 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:130}

808 KAR 10:150 Registration exemptions {#sec-808-kar-10-150 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:150}

808 KAR 10:160 Definitions for 808 KAR Chapter 10 {#sec-808-kar-10-160 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:160}

808 KAR 10:170 Exemption claims from securities registration; form {#sec-808-kar-10-170 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:170}

808 KAR 10:200 Investment advisers' minimum liquid capitalization; bond {#sec-808-kar-10-200 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:200}

808 KAR 10:210 Registration exemptions - Federal Regulation D {#sec-808-kar-10-210 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:210}

808 KAR 10:225 Administrative hearing procedures {#sec-808-kar-10-225 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:225}

808 KAR 10:240 Registration exemptions - sale of business {#sec-808-kar-10-240 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:240}

808 KAR 10:260 Examination requirement for individuals advising the public on securities, broker-dealers, and agents {#sec-808-kar-10-260 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:260}

808 KAR 10:280 Qualifications, eligibility, and restrictions on the use of Form U-7, Small Corporate Offering Registration {#sec-808-kar-10-280 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:280}

808 KAR 10:300 Registration exemptions - pension plans {#sec-808-kar-10-300 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:300}

808 KAR 10:320 Broker-dealer books and records requirements {#sec-808-kar-10-320 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:320}

808 KAR 10:340 Registration exemption for certain limited offerings made exclusively to accredited investors {#sec-808-kar-10-340 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:340}

808 KAR 10:350 Internet advertising {#sec-808-kar-10-350 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:350}

808 KAR 10:360 Safe harbor for limited liability company membership interests {#sec-808-kar-10-360 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:360}

808 KAR 10:370 Securities offered on the Internet but not sold in Kentucky {#sec-808-kar-10-370 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:370}

808 KAR 10:380 Solicitations of interest prior to the filing of a registration statement {#sec-808-kar-10-380 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:380}

808 KAR 10:390 Confidentially disclosed documents {#sec-808-kar-10-390 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:390}

808 KAR 10:400 Examination fees and criteria {#sec-808-kar-10-400 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:400}

808 KAR 10:430 Required filing for oil, gas, and mineral securities offerings relying upon the registration exemption in KRS 292.410(1)(i) {#sec-808-kar-10-430 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:430}

808 KAR 10:440 Examples of dishonest or unethical practice for broker-dealers and agents {#sec-808-kar-10-440 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:440}

808 KAR 10:450 Examples of dishonest or unethical practice for investment advisers and investment adviser representatives {#sec-808-kar-10-450 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:450}

808 KAR 10:460 Request for Approval of Change in Control {#sec-808-kar-10-460 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:460}

808 KAR 10:480 Books and records of firms employing issuer agents {#sec-808-kar-10-480 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:480}

808 KAR 10:490 Procedures for distributing and using funds from the Securities Fraud Prosecution and Prevention Fund {#sec-808-kar-10-490 omnilex-key=us-ky-regs-official--title-808--808 KAR 10:490}

Chapter 12 Mortgage Loan Companies and Mortgage Loan Brokers

808 KAR 12:020 Claims of exemption {#sec-808-kar-12-020 omnilex-key=us-ky-regs-official--title-808--808 KAR 12:020}

808 KAR 12:050 Processing and closing charges for real estate loans to consumers {#sec-808-kar-12-050 omnilex-key=us-ky-regs-official--title-808--808 KAR 12:050}

808 KAR 12:055 Uniform standards for mortgage loan processor applicant employee background checks {#sec-808-kar-12-055 omnilex-key=us-ky-regs-official--title-808--808 KAR 12:055}

Chapter 14 Administrative Hearings

808 KAR 14:010 Record retention {#sec-808-kar-14-010 omnilex-key=us-ky-regs-official--title-808--808 KAR 14:010}

808 KAR 14:020 Annual reporting {#sec-808-kar-14-020 omnilex-key=us-ky-regs-official--title-808--808 KAR 14:020}

Chapter 15 General

808 KAR 15:010 Exceptions to bank lending limits {#sec-808-kar-15-010 omnilex-key=us-ky-regs-official--title-808--808 KAR 15:010}

808 KAR 15:020 Stay of notice of intention to remove from office {#sec-808-kar-15-020 omnilex-key=us-ky-regs-official--title-808--808 KAR 15:020}

808 KAR 15:030 Bank branches, offices, and loan production offices {#sec-808-kar-15-030 omnilex-key=us-ky-regs-official--title-808--808 KAR 15:030}

808 KAR 15:040 Multibank Companies {#sec-808-kar-15-040 omnilex-key=us-ky-regs-official--title-808--808 KAR 15:040}

808 KAR 15:050 Out-of-state trust companies operating in Kentucky {#sec-808-kar-15-050 omnilex-key=us-ky-regs-official--title-808--808 KAR 15:050}

Chapter 16 Student Education Loan Servicing

808 KAR 16:010 Licensing, registration, renewals and fees {#sec-808-kar-16-010 omnilex-key=us-ky-regs-official--title-808--808 KAR 16:010}

808 KAR 16:020 Recordkeeping requirements; unfair, deceptive, or predatory practices {#sec-808-kar-16-020 omnilex-key=us-ky-regs-official--title-808--808 KAR 16:020}

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