808 KAR 10:480. Books and records of firms employing issuer

agents.

 

      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.

 

      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;

      (c) Copies of any written

responses to complaints; and

      (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. (37 Ky.R. 2509; 2850;

7-1-11.)