KRS 154.20-277: Annual examination of investment funds by authority and Department

of Revenue -- Other audits -- Department's powers of enforcement -- Notice of

noncompliance -- Examination, investigative, and enforcement powers of

securities regulatory organizations.

(1) Each year the annual financial statements and annual reports of the investment fund

shall be delivered to the authority within ninety (90) days after the end of the

investment fund's fiscal year.

(2) The authority and the Department of Re venue, individually or collectively, may

examine, under oath, any of the officers, trustees, partners, members, managers,

directors, agents, employees, or investors of an investment fund regarding the

affairs and business of the investment fund. The author ity and the Department of

Revenue, individually or collectively, may issue subpoenas and subpoenas duces

tecum and administer oaths. Refusal to obey such a subpoena or subpoena duces

tecum may be reported to the Franklin Circuit Court, which shall enforce the

subpoena or subpoena duces tecum according to the rules of civil or criminal

procedure, as applicable.

(3) In addition to the audits required by this section, the authority or the Department of

Revenue may audit one (1) or more investment funds or inve stment fund managers

in any year on a random basis or for cause. The authority or the Department of

Revenue may also audit, for cause, any small business in which an investment fund

has made a qualified investment. Nothing in this section shall be construe d to

prohibit the Department of Revenue from conducting any audit relating to the

administration or enforcement of the tax laws of the Commonwealth which the

Department of Revenue determines to be appropriate.

(4) If any audit conducted pursuant to this se ction discloses that an investment fund or

investment fund manager is not in compliance with the provisions of KRS 141.068

and KRS 154.20 -250 to 154.20 -284, the authority and the Department of Revenue

may consult with one another with respect to this nonco mpliance and the

Department of Revenue may exercise any of its powers to protect the

Commonwealth's interest and to enforce the provisions of KRS 141.068 and KRS

154.20-250 to 154.20-284.

(5) The authority may give an investment fund manager written notice of any

noncompliance with the provisions of KRS 154.20 -250 to 154.20-284 and specify a

period of time the investment fund manager shall have to cure any noncompliance.

Failure to cure any such noncompliance within the period of time specified by the

authority may result in further action by the authority pursuant to this section.

(6) Nothing in this section shall be construed to prohibit the Department of Financial

Institutions, Division of Securities, or any other securities regulatory organization or

body with jurisdiction over the activity of an investment fund or the investment

fund manager from conducting any examination or investigation relating to the

securities activities of the investment fund or investment fund manager. If any

examination or inves tigation conducted pursuant to any securities laws or

regulations discloses that an investment fund or investment fund manager is not in

compliance with any provision of any applicable securities laws or regulations, the

appropriate securities regulator ma y take whatever action it deems appropriate in

accordance with such securities laws and regulations to respond to the

noncompliance, notwithstanding any action the authority or the Department of

Revenue may or may not take with respect to the noncompliance.