KY enacts surety bond requirement for sellers of online securities

Online Securities

As a result of the passing of House Bill 76, persons involved with the sale of online securities in Kentucky are now required to register with the Commission as well as post a surety bond. Prior to this enactment, there was no law in existence stating that individuals needed to show proof of having consumer financial security in their possession.

The required bond amount that needs to be posted should be no lesser or greater than $50,000. This amount was determined by the Commissioner of The Department of Financial Institutions.

The purpose of posting an online security sales surety bond is to ensure rightful and ethical services being performed by the Internet website’s operator (principal). The bond does not protect the principal, but rather all the consumers that the operator conducts business with. This bond secures the payment of costs, possible fines, and damages to any person who has suffered financial wrongdoings at the hand of the principal or who has been aggrieved by the sales operator.

Some examples of unlawful actions covered by this bond are as follows:

  • Offering investment advice or recommendations to consumers
  • Identify or promote individual securities on the website in any form of advertisement
  • Failing to follow all relevant conditions stated in the Securities Act of 1933
  • Possess or handle purchaser funds or securities
  • Compensate other employees and agents for solicitation of securities displayed or referenced on the website
  • Failing to maintain accurate recordkeeping of all necessary accounts, papers, and memoranda required by the Commissioner
  • And more

HB 76 amends Sections 292.410 through 291.415 of the Kentucky Revised Statutes. In addition to providing a new surety bond requirement, it also states that anyone acting as a seller of online securities must register with the Commissioner. In order to become properly registered, the applicant must complete the following steps:

  • Supply his/her identity, location, and contact information as well as the same information for any director or executive officer with managerial authority
  • Provide a statement affirming that the applicant has never been subject to conviction of any acts stated in the Securities Act of 1933
  • Present any documents or certifications required by the Commissioner
  • Submit the mandatory filing fee
  • And more

This bill becomes effective and recognized as a law in the commonwealth of Kentucky on June 24, 2015. Those looking to operate as online securities sellers should make sure that all new registration and bonding requirements are met before acting as such in order to eliminate avoidable legal conflictions. The experts at SuretyBonds.com are aware of these new regulations and are happy to answer any questions you may have regarding the bonding or licensing process.

Obtaining a surety bond is easy when you work with our dedicated team of agents at SuretyBonds.com. Our office is open 7am-7pm (CT) Monday through Friday. Give us a call today at 1 (800) 308-4358 or visit us online by submitting a bond request form now. We are here to help satisfy all your bonding needs!

About the Author

Emily Jo Pahl
Emily attends the University of Wisconsin - Stevens Point and is pursuing a degree in media communications and creative writing. She is a member of the marketing department and outreach team for SuretyBonds.com, a leading provider of online bonding for clients nationwide.