808 KAR 10:310. Broker-dealer agent de minimis rules.

 

      RELATES TO: KRS 292.330(4)(b), 292.330, 15 U.S.C. 78o(h)(2), (3)

      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(4)(b) provides that the term "agent" shall not include an individual who represents a broker-dealer in effecting a transaction described in 15 U.S.C. 78o(h)(2). 15 U.S.C. 78o(h)(2) establishes the federal prohibition for a de minimis transaction by an agent and 15 U.S.C. 78o(h)(3) defines a described transaction. This administrative regulation establishes an exemption from the registration requirements established in KRS 292.330 for an agent of a broker-dealer if the agent is engaged in a described transaction.

 

      Section 1. An agent of a broker-dealer who engages in a described transaction pursuant to Section 2 of this administrative regulation shall be exempt from the registration requirements established in KRS 292.330 if:

      (1) The agent is not ineligible to register in Kentucky for a reason other than engaging in the described transaction;

      (2) The agent is registered with a registered securities association and at least one (1) state; and

      (3) The broker-dealer with which the agent is employed is registered with the state identified in subsection (2) of this section.

 

      Section 2. Described Transactions. (1) A transaction shall be considered a described transaction if:

      (a) The transaction is effected:

      1. On behalf of a customer that, for thirty (30) days prior to the day of the transaction, maintained an account with the broker-dealer; and

      2. By an agent of the broker-dealer:

      a. To which the customer was assigned for fourteen (14) days prior to the day of the transaction; and

      b. Who is registered with a state in which the customer was a resident or was present for at least thirty (30) consecutive days during the one (1)-year period prior to the day of the transaction; or

      (b) The transaction is effected:

      1. On behalf of a customer that, for thirty (30) days prior to the day of the transaction, maintains an account with the broker-dealer; and

      2. During the period beginning on the date on which the agent files an application for registration with the Commonwealth of Kentucky and ending on the earlier of:

      a. Sixty (60) days after the date on which the application is filed; or

      b. The date on which the office notifies the agent that it has denied the application for registration or has stayed or suspended the pendency of the application for cause.

      (2) For purposes of subsection (1)(a)2 of this section:

      (a) Each of up to three (3) agents of a broker-dealer who are designated to effect transactions during the absence or unavailability of the principal agent for a customer may be treated as an agent to which the customer is assigned; and

                (b) If the customer is present in another state for thirty (30) or more consecutive days or has permanently changed his or her residence to another state, a transaction shall not be considered described in this paragraph, unless the agent of the broker-dealer files an application for registration with the other state not later than ten (10) business days after the later of the date of the transaction, or the date of the discovery of the presence of the customer in the other state for thirty (30) or more consecutive days or the change in the customer's residence. (24 Ky.R. 2263; Am. 25 Ky.R. 95; eff. 6-25-98; TAm 11-7-2012.)