Kan. Admin. Regs. § 81-3-7 - Supervisory, financial reporting, recordkeeping, net capital, and operational requirements for broker-dealers
(a) Supervision.
(1) Annual review. Each broker-dealer shall
conduct a review, at least annually, of the businesses in which it engages. The
review shall be reasonably designed to assist in detecting and preventing
violations of and achieving compliance with the act, these regulations, and
other applicable laws, regulations, and rules of self-regulatory
organizations.
(2) Supervisory
procedures. Each broker-dealer shall establish and maintain supervisory
procedures that shall be reasonably designed to assist in detecting violations
of, preventing violations of, and achieving compliance with the act, these
regulations, and other applicable laws, regulations, and rules of
self-regulatory organizations. In determining whether supervisory procedures
are reasonably designed, relevant factors including the following may be
considered by the administrator:
(A) The
firm's size;
(B) the organizational
structure;
(C) the scope of
business activities;
(D) the number
and location of offices;
(E) the
nature and complexity of products and services offered;
(F) the volume of business done;
(G) the number of agents assigned to a
location;
(H) the presence of an
on-site principal at a location;
(I) the specification of the office as a
non-branch location; and
(J) the
disciplinary history of the registered agents.
(3) Supervision of non-branch offices. The
procedures established and the reviews conducted shall provide sufficient
supervision at remote offices to ensure compliance with all applicable
securities laws and regulations and self-regulatory organization rules. Based
on the factors specified in paragraph (a)(2), certain non-branch offices may
require more frequent reviews or more stringent supervision.
(4) Failure to supervise. If a broker-dealer
fails to comply with this subsection, the broker-dealer may be deemed to have
"failed to reasonably supervise" its agents under K.S.A. 17-12a412(d)(9), and
amendments thereto.
(b)
Annual reports. Each broker-dealer registered under the act shall make and
maintain an annual report for the broker-dealer's most recent fiscal year.
(1) Filing. Each broker-dealer shall file the
annual report with the administrator within five days of a request by the
administrator or the administrator's staff.
(2) Contents of annual report. Each annual
report shall contain financial statements that include the following:
(A) A statement of financial condition and
notes to the statement of financial condition presented in conformity with
GAAP; and
(B) disclosure of the
broker-dealer's net capital, which shall be calculated in accordance with
subsection (c).
(3)
Auditing. Unless otherwise permitted, an independent CPA shall audit the
financial statements in accordance with generally accepted auditing
standards.
(4) Recognition of
federal standards. For purposes of uniformity, a copy of audited financial
statements in compliance with SEC rule 17a-5(d), 17 C.F.R. 240.17a-5(d), as
adopted by reference in K.A.R. 81-2-1, shall be deemed to comply with
paragraphs (b)(2) and (b)(3).
(c) Books and records. Each registered
broker-dealer shall maintain and preserve records in compliance with SEC rule
17a-3, 17 C.F.R. 240.17a-3, and SEC rule 17a-4, 17 C.F.R. 240.17a-4, which are
adopted by reference in K.A.R. 81-2-1.
(d) Minimum net capital requirements.
(1) Each broker-dealer registered under the
act shall comply with SEC rule 15c3-1, 17 C.F.R. 240.15c3 - 1, SEC rule 15c3-3,
17 C.F.R. 240.15c3 - 3, and SEC rule 15c3-3a, 17 C.F.R. 240.15c3 - 3a, as
applicable, as adopted by reference in K.A.R. 81-2-1.
(2) Each registered broker-dealer shall
comply with SEC rule 17a-11, 17 C.F.R. 240.17a-11, as adopted by reference in
K.A.R. 81-2-1, and shall simultaneously file with the administrator copies of
notices and reports required by that rule.
(e) Confirmations. At or before completion of
each transaction with a customer, the broker-dealer shall give or send to the
customer a written notification that conforms with SEC rule 10b-10, 17 C.F.R.
240.10b-10, as adopted by reference in K.A.R. 81-2-1.
Notes
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