Legal Memorandum: Exemption from Broker-Dealer Registration

Issue: Under Kansas blue sky securities laws, is an officer of the offering company exempt from the broker licensing requirements for the sale of debenture bonds?

As a general matter, in order to lawfully transact business as a broker-dealer in Kansas, a person must register as a broker-dealer under the Act.  Kan. Stat. § 17‑12a401(a) (2010).  However, among the persons exempt from registration is “[a] broker-dealer without a place of business in this state if its only transactions effected in this state are with [t]he issuer of the securities involved in the transactions.”  Id., § 17‑12a401(b)(1)(A) (2010). 

Although the language is awkward (its “only transactions effected” “are with the issuer”), this would appear to exempt an officer of the issuing company from registration in Kansas.*FN1

FOOTNOTES

*FN1 Nor would the officer be required to register as an agent because an officer of an issuer does not come within the definition of “agent.”  Under Kansas law,

“Agent” means an individual, other than a broker-dealer, who represents a broker-dealer in effecting or attempting to effect purchases or sales of securities or represents an issuer in effecting or attempting to effect purchases or sales of the issuer’s securities, but a partner, officer, or director of a broker-dealer or issuer, or an individual having a similar status or performing similar functions is an agent only if the individual otherwise comes within the term.…

Kan. Stat. § 17-12a102(2) (2010).  Furthermore, the statute also exempts officers from agent registration requirements:

            [A]n individual who represents an issuer with respect to an […]

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