House Bill No. 287
Introduced By _______________________________________________________________________________
A Bill for an Act entitled: "An Act generally revising security laws; adding to the list of exempt exchanges; increasing the commissioner's authority to condition the exemption of a security and the registration of salespersons; providing for the service of an order or notice; permitting the denial of registration of a security for any violation of state security law including acts in connection with previous offerings; providing for the offer and sale of federal covered securities; regulating the activities of federal covered advisers; exempting Montana from the provisions of the Philanthropy Protection Act; and amending sections 30-10-103, 30-10-104, 30-10-107, 30-10-110, 30-10-201, 30-10-202, 30-10-207, 30-10-209, and 30-10-303, MCA."
Be it enacted by the Legislature of the State of Montana:
Section 1. Section 30-10-103, MCA, is amended to read:
"30-10-103. Definitions. When used in parts 1 through 3 of this chapter, unless the context requires otherwise, the following definitions apply:
(1) (a) "Broker-dealer" means any person engaged in the business of effecting transactions in securities for the account of others or for the person's own account.
(b) The term does not include:
(i) a salesperson, issuer, bank, savings institution, trust company, or insurance company; or
(ii) a person who does not have a place of business in this state if the person effects transactions in this state exclusively with or through the issuers of the securities involved in the transactions, other broker-dealers, or banks, savings institutions, trust companies, insurance companies, investment companies as defined in the Investment Company Act of 1940, pension or profit-sharing trusts, or other financial institutions or institutional buyers, whether acting for themselves or as trustee.
(2) "Commissioner" means the securities commissioner of this state.
(3) (a) "Commodity" means:
(i) any agricultural, grain, or livestock product or byproduct;
(ii) any metal or mineral, including a precious metal, or any gem or gem stone, whether characterized as precious, semiprecious, or otherwise;
(iii) any fuel, whether liquid, gaseous, or otherwise;
(iv) foreign currency; and
(v) all other goods, articles, products, or items of any kind.
(b) Commodity does not include:
(i) a numismatic coin with a fair market value at least 15% higher than the value of the metal it contains;
(ii) real property or any timber, agricultural, or livestock product grown or raised on real property and offered and sold by the owner or lessee of the real property; or
(iii) any work of art offered or sold by an art dealer at public auction or offered or sold through a private sale by the owner.
(4) "Commodity Exchange Act" means the federal statute of that name as amended on the effective date of this subsection.
(5) "Commodity futures trading commission" means the independent regulatory agency established by congress to administer the Commodity Exchange Act.
(6) (a) "Commodity investment contract" means any account, agreement, or contract for the purchase or sale, primarily for speculation or investment purposes and not for use or consumption by the offeree or purchaser, of one or more commodities, whether for immediate or subsequent delivery or whether delivery is intended by the parties and whether characterized as a cash contract, deferred shipment or deferred delivery contract, forward contract, futures contract, installment or margin contract, leverage contract, or otherwise. Any commodity investment contract offered or sold, in the absence of evidence to the contrary, is presumed to be offered or sold for speculation or investment purposes.
(b) A commodity investment contract does not include a contract or agreement that requires, and under which the purchaser receives, within 28 calendar days after the payment in good funds of any portion of the purchase price, physical delivery of the total amount of each commodity to be purchased under the contract or agreement. The purchaser is not considered to have received physical delivery of the total amount of each commodity to be purchased under the contract or agreement when the commodity or commodities are held as collateral for a loan or are subject to a lien of any person when the loan or lien arises in connection with the purchase of each commodity or commodities.
(7) (a) "Commodity option" means any account, agreement, or contract giving a party to the account, agreement, or contract the right but not the obligation to purchase or sell one or more commodities or one or more commodity contracts, whether characterized as an option, privilege, indemnity, bid, offer, put, call, advance guaranty, decline guaranty, or otherwise.
(b) The term does not include an option traded on a national securities exchange registered with the U.S. securities and exchange commission.
(8) (a) "Federal covered adviser" means a person who is:
(i) registered under section 203 of the Investment Advisers Act of 1940; or
(ii) excluded from the definition of "investment adviser" under section 202(a)(11) of the Investment Advisers Act of 1940.
(b) A person acting as a federal investment adviser who has not promptly remedied the nonpayment or underpayment of the fee required in 30-10-209 after receiving written notification of the nonpayment or underpayment from the commissioner is not a federal covered adviser.
(9) (a) "Federal covered security" means a security that is a covered security under section 18(b) of the Securities Act of 1933 or rules promulgated by the commissioner.
(b) A security for which a fee required by Title 30, chapter 10, parts 1 through 3, has not been paid or has been underpaid and the nonpayment or underpayment has not been promptly remedied after written notification from the commissioner has been received is not a federal covered security.
(8)(10) "Guaranteed" means guaranteed as to payment of principal, interest, or dividends.
(9)(11) (a) "Investment adviser" means a person who, for compensation, engages in the business of advising others, either
directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing,
or selling securities or who, for compensation and as a part of a regular business, issues or promulgates analyses or reports
concerning securities.
(b) The term includes a financial planner or other person who:
(i) as an integral component of other financially related services, provides the investment advisory services described in
subsection (9)(a) (11)(a) to others for compensation, as part of a business; or
(ii) represents to any person that the financial planner or other person provides the investment advisory services described
in subsection (9)(a) (11)(a) to others for compensation.
(c) Investment adviser does not include:
(i) an investment adviser representative;
(ii) a bank, savings institution, trust company, or insurance company;
(iii) a lawyer or accountant whose performance of these services is solely incidental to the practice of the person's profession or who does not accept or receive, directly or indirectly, any commission, payment, referral, or other remuneration as a result of the purchase or sale of securities by a client, does not recommend the purchase or sale of specific securities, and does not have custody of client funds or securities for investment purposes;
(iv) a registered broker-dealer whose performance of services described in subsection (9)(a) (11)(a) is solely incidental to
the conduct of business and for which the broker-dealer does not receive special compensation;
(v) a publisher of any newspaper, news column, newsletter, news magazine, or business or financial publication or service, whether communicated in hard copy form or by electronic means or otherwise, that does not consist of the rendering of advice on the basis of the specific investment situation of each client;
(vi) a person whose advice, analyses, or reports relate only to securities exempted by 30-10-104(1);
(vii) an engineer or teacher whose performance of the services described in subsection (9)(a) (11)(a) is solely incidental to
the practice of the person's profession; or
(viii) a federal covered adviser; or
(viii)(ix) other persons not within the intent of this subsection (9) (11) as the commissioner may by rule or order designate.
(10)(12) (a) "Investment adviser representative" means any partner of, officer of, director of, or a person occupying a
similar status or performing similar functions, or other individual employed by or associated with an investment adviser,
except clerical or ministerial personnel, who:
(i) makes any recommendation or otherwise renders advice regarding securities to clients;
(ii) manages accounts or portfolios of clients;
(iii) solicits, offers, or negotiates for the sale or sells investment advisory services; or
(iv) supervises employees who perform any of the foregoing.
(b) Investment adviser representative does not include a salesperson registered pursuant to 30-10-201(1) whose
performance of the services described in subsection (10)(a) (12)(a) is solely incidental to the conduct of business as a
salesperson and for which the salesperson does not receive special compensation other than fees relating to the solicitation
or offering of investment advisory services of a registered investment adviser.
(11)(13) "Issuer" means any person who issues or proposes to issue any security, except that with respect to certificates of
deposit, voting-trust certificates, or collateral-trust certificates or with respect to certificates of interest or shares in an
unincorporated investment trust not having a board of directors, (or persons performing similar functions), or of the fixed,
restricted management, or unit type, the term "issuer" means the person or persons performing the acts and assuming the
duties of depositor or manager pursuant to the provisions of the trust or other agreement or instrument under which the
security is issued.
(12)(14) "Nonissuer" means not directly or indirectly for the benefit of the issuer.
(13)(15) "Person", for the purpose of parts 1 through 3 of this chapter, means an individual, a corporation, a partnership, an
association, a joint-stock company, a trust in which the interests of the beneficiaries are evidenced by a security, an
unincorporated organization, a government, or a political subdivision of a government.
(14)(16) "Precious metal" means the following, in coin, bullion, or other form:
(a) silver;
(b) gold;
(c) platinum;
(d) palladium;
(e) copper; and
(f) other items as the commissioner may by rule or order specify.
(15)(17) "Registered broker-dealer" means a broker-dealer registered pursuant to 30-10-201.
(16)(18) (a) "Sale" or "sell" includes each contract of sale of, contract to sell, or disposition of a security or interest in a
security for value.
(b) "Offer" or "offer to sell" includes each attempt or offer to dispose of or solicitation of an offer to buy a security or interest in a security for value.
(c) Any security given or delivered with or as a bonus on account of any purchase of securities or any other thing is considered to constitute part of the subject of the purchase and to have been offered and sold for value. A purported gift of assessable stock is considered to involve an offer and sale. Each sale or offer of a warrant or right to purchase or subscribe to another security of the same or another issuer, as well as each sale or offer of a security that gives the holder a present or future right or privilege to convert into another security of the same or another issuer, is considered to include an offer of the other security.
(17)(19) "Salesperson" means an individual other than a broker-dealer who represents a broker-dealer or issuer in effecting
or attempting to effect sales of securities. A partner, officer, or director of a broker-dealer or issuer is a salesperson only if
the person otherwise comes within this definition. Salesperson does not include an individual who represents:
(a) an issuer in:
(a)(i) effecting a transaction in a security exempted by 30-10-104(1), (2), (3), (8), (9), (10), or (11);
(b)(ii) effecting transactions exempted by 30-10-105, except when registration as a salesperson, pursuant to 30-10-201, is
required by 30-10-105 or by any rule promulgated under 30-10-105; or
(iii) effecting transactions in a federal covered security described in section 18(b)(4)(D) of the Securities Act of 1933 for a qualified purchaser as defined in section 18(b)(3) of the Securities Act of 1933; or
(c)(iv) effecting transactions with existing employees, partners, or directors of the issuer if no commission or other
remuneration is paid or given directly or indirectly for soliciting any person in this state; or
(b) a broker-dealer in effecting in this state solely those transactions described in section 15(h)(2) of the Securities Exchange Act of 1934.
(18)(20) "Securities Act of 1933", "Securities Exchange Act of 1934", "Public Utility Holding Company Act of 1935",
"Investment Advisors Act of 1940", and "Investment Company Act of 1940" mean the federal statutes of those names as
amended before or after July 1, 1961.
(19)(21) (a) "Security" means any note; stock; treasury stock; bond; commodity investment contract; commodity option;
debenture; evidence of indebtedness; certificate of interest or participation in any profit-sharing agreement; collateral-trust
certificate; preorganization certificate or subscription; transferable shares; investment contract; voting-trust certificate;
certificate of deposit for a security; certificate of interest or participation in an oil, gas, or mining title or lease or in
payments out of production under a title or lease; or, in general, any interest or instrument commonly known as a security,
any put, call, straddle, option, or privilege on any security, certificate of deposit, or group or index of securities, including
any interest in a security or based on the value of a security, or any certificate of interest or participation in, temporary or
interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase any of the foregoing.
(b) Security does not include an insurance or endowment policy or annuity contract under which an insurance company promises to pay a fixed sum of money either in a lump sum or periodically for life or some other specified period.
(20)(22) "State" means any state, territory, or possession of the United States, as well as the District of Columbia and
Puerto Rico.
(21)(23) "Transact", "transact business", or "transaction" includes the meanings of the terms "sale", "sell", and "offer"."
Section 2. Section 30-10-104, MCA, is amended to read:
"30-10-104. Exempt securities. Sections 30-10-202 through 30-10-207 do not apply to any of the following securities:
(1) any security, (including a revenue obligation), issued or guaranteed by the United States, any state, any political
subdivision of a state, or any agency or corporate or other instrumentality of one or more of the foregoing; provided,
however, 30-10-202 through 30-10-207 apply to a security issued by any of the foregoing that is payable solely from
payments to be received in respect of property or money used under a lease, sale, or loan arrangement by or for a
nongovernmental industrial or commercial enterprise, unless such the enterprise or any security of which it is the issuer is
within any of the exemptions enumerated in subsections (2) through (14) (15) of this section;
(2) any security issued or guaranteed by Canada, any a Canadian province, any a political subdivision of any such a
province, or any an agency or corporate or other instrumentality of one or more of the foregoing or any other foreign
government with which the United States currently maintains diplomatic relations if the security is recognized as a valid
obligation by the issuer or guarantor;
(3) any security issued by and representing an interest in or a debt of or guaranteed by any a bank organized under the laws
of the United States or any a bank, savings institution, or trust company organized and supervised under the laws of any
state;
(4) any security issued by and representing an interest in, or a debt of, or guaranteed by any a federal savings and loan
association or any a building and loan or similar association organized under the laws of any state and authorized to do
business in this state;
(5) any security issued or guaranteed by any a federal credit union or any a credit union, industrial loan association, or
similar association organized and supervised under the laws of this state;
(6) any security issued or guaranteed by any a railroad, other common carrier, public utility, or holding company which is:
(a) subject to the jurisdiction of the interstate commerce commission;
(b) a registered holding company under the Public Utility Holding Company Act of 1935 or a subsidiary of such a
registered holding company within the meaning of that act;
(c) regulated in respect of its rates and charges by a governmental authority of the United States or any state or municipality; or
(d) regulated in respect to the issuance or guarantee of the security by a governmental authority of the United States, any
state, Canada, or any Canadian province; also equipment trust certificates in respect to equipment conditionally sold or
leased to a railroad or public utility if other securities issued by such the railroad or public utility would be exempt under
this subsection;
(7) any security that meets all of the following conditions:
(a) if the issuer is not organized under the laws of the United States or a state, it has appointed a duly authorized agent in
the United States for service of process and has set forth the name and address of such the agent in its prospectus;
(b) a class of the issuer's securities is required to be and is registered under section 12 of the Securities Exchange Act of
1934 and has been so registered for the 3 years immediately preceding the offering date;
(c) neither the issuer nor or a significant subsidiary has not had a material default during the last 7 years, (or during the
issuer's existence if that period is less than 7 years), in the payment of:
(i) principal, interest, dividend, or sinking fund installment on preferred stock or indebtedness for borrowed money; or
(ii) rentals under leases with terms of 3 years or more;
(d) the issuer has had consolidated net income, (before extraordinary items and the cumulative effect of accounting
changes,) of at least $1 million in 4 of its last 5 fiscal years, including its last fiscal year; and if the offering is of
interest-bearing securities, has had for its last fiscal year such net income, but before deduction for income taxes and
depreciation, of at least 1 1/2 times the issuer's annual interest expense, giving effect to the proposed offering and the
intended use of the proceeds. "Last fiscal year", as used in this subsection (7)(d), means the most recent year for which
audited financial statements are available, provided that such the statements cover a fiscal period ended not more than 15
months from the commencement of the offering.
(e) if the offering is of stock or shares, other than preferred stock or shares, such the securities have voting rights and such
rights include including the right to have at least as many votes per share and the right to vote on at least as many general
corporate decisions as each of the issuer's outstanding classes of stock or shares, except as otherwise required by law;
(f) if the offering is of stock or shares, other than preferred stock or shares, such the securities are owned beneficially or of
record on any date within 6 months prior to the commencement of the offering by at least 1,200 persons and on such that
date there are at least 750,000 such of the shares outstanding with an aggregate market value, based on the average bid
price for that day, of at least $3,750,000. In connection with the determination of the number of persons who are beneficial
owners of the stock or shares of an issuer, the issuer or broker-dealer may rely in good faith for the purposes of this section
upon written information furnished by the record owners.
(8) any security issued by any person organized and operated not for private profit but exclusively for religious,
educational, benevolent, charitable, fraternal, social, athletic, or reformatory purposes if the issuer pays a fee of $50 and
files with the commissioner 20 days prior to the offering a written notice specifying the terms of the offer and the
commissioner does not disallow the exemption in writing within such the 20-day period;
(9) any commercial paper which that arises out of a current transaction or the proceeds of which have been or are to be
used for the current transaction and which that evidences an obligation to pay cash within 9 months of the date of issuance,
exclusive of days of grace, or any renewal of such the paper which is likewise limited or any guarantee of such the paper or
of any such renewal, when such the commercial paper is sold to banks or insurance companies;
(10) any investment contract issued in connection with an employee's stock purchase, savings, pension, profit-sharing, or similar benefit plan;
(11) any security for which the commissioner determines by order that an exemption would better serve the purposes of 30-10-102 than would registration. The fee for this exemption must be as prescribed in 30-10-209(4).
(12) any security listed or approved for listing upon notice of issuance on the New York stock exchange, the American
stock exchange, the Pacific stock exchange, the Midwest stock exchange, the Chicago board of options exchange, the
Philadelphia stock exchange, the Boston stock exchange or any other stock exchange registered with the federal securities
and exchange commission and approved by the commissioner; any other security of the same issuer that is of senior or
substantially equal rank; any security called for by subscription rights or warrants so listed or approved; or any warrant or
right to purchase or subscribe to any of the foregoing. The commissioner may by rule or order limit, restrict, or otherwise
condition the terms under which any security may be exempt under this subsection;.
(13) any national market system security listed or approved for listing upon notice of issuance on the national association of
securities dealers automated quotation system or any other national quotation system approved by the commissioner; any
other security of the same issuer that is of senior or substantially equal rank; any security called for by subscription rights
or warrants so listed or approved; or any warrant or right to purchase or subscribe to any of the securities listed in this
subsection. The commissioner may by rule or order limit, restrict, or otherwise condition the terms under which any
security may be exempt under this subsection;.
(14) any security issued by and representing an interest in, or a debt of, or any security guaranteed by any insurer organized and authorized to transact business under the laws of any state;
(15) any security for which an offer or sale is not directed to or received by a person in this state, and the issuer does not maintain a place of business in the state."
Section 3. Section 30-10-107, MCA, is amended to read:
"30-10-107. Administration. (1) The administration of the provisions of parts 1 through 3 of this chapter shall must be
under the general supervision and control of the state auditor, the ex officio securities commissioner. The commissioner
may, from time to time, make, amend, and rescind such rules and forms as are necessary to carry out the provisions of parts
1 through 3 of this chapter. No A rule or form may not be made adopted unless the commissioner finds that the action is
necessary or appropriate in the public interest or for the protection of investors and consistent with the purposes fairly
intended by of the policy and provisions of parts 1 through 3 of this chapter. In prescribing rules and forms the
commissioner may cooperate with the securities administrators of the other states and the securities and exchange
commission with a view to effectuating the policy of parts 1 through 3 of this chapter to achieve maximum uniformity in
the form and content of registration statements, applications, and reports wherever practicable.
(2) It is unlawful for the commissioner or any of his the commissioner's officers or employees to use for personal benefit
any information which is filed with or obtained by the commissioner and which is not made public. No provision The
provisions of parts 1 through 3 of this chapter authorizes do not authorize the commissioner or any of his the
commissioner's officers or employees to disclose any such information or the fact that any investigation is being made,
except among themselves or when necessary or appropriate in a proceeding or investigation under parts 1 through 3 of this
chapter.
(3) No provision The provisions of parts 1 through 3 of this chapter imposing any liability applies do not apply to any act
done or omitted in good faith in conformity with any rule, form, or order of the commissioner, notwithstanding that the rule
or form may later be amended or rescinded or be determined by judicial or other authority to be invalid for any reason.
(4) Every hearing in an administrative proceeding shall must be public unless the commissioner in his discretion grants a
request joined in by all the respondents that the hearing be conducted privately.
(5) A document is filed when it is received by the commissioner. The commissioner shall keep a register of all applications
for registration and registration statements which that are or have ever been effective under parts 1 through 3 of this chapter
and all denial, suspension, or revocation orders which that have ever been entered under parts 1 through 3 of this chapter.
The register shall must be open for public inspection. The information contained in or filed with any registration statement,
application, or report may be made available to the public under such rules as the commissioner prescribes.
(6) Upon request and at such a reasonable charges as he prescribes charge, the commissioner shall furnish to any person
photostatic or other copies, (certified under his seal of office if requested,) of any entry in the register or any document
which that is a matter of public record. In any proceeding or prosecution under parts 1 through 3 of this chapter, any
certified copy so certified is prima facie evidence of the contents of the entry or document certified.
(7) To serve the purposes of 30-10-102, the commissioner may cooperate with the securities and exchange commission, the commodity futures trading commission, the securities investor protection corporation, any national securities exchange, or national securities association registered under the Securities Exchange Act of 1934, any national or international organization of securities officials or agencies, and any governmental agency, corporation, or body.
(8) Except as specifically provided in this title, an order or notice may be given to a person by personal delivery or by mail addressed to that person at the person's last recorded principal place of business on file at the commissioner's office. An order or notice that is mailed is considered to have been given at the time it is mailed."
Section 4. Section 30-10-110, MCA, is amended to read:
"30-10-110. Scope. (1) Sections 30-10-201(1), 30-10-202, 30-10-301(1), 30-10-303, and 30-10-307 apply to persons who sell or offer to sell when an offer to sell is made in this state or an offer to buy is made and accepted in this state.
(2) Sections 30-10-201(1), 30-10-301(1), and 30-10-303 apply to persons who buy or offer to buy when an offer to buy is made in this state or an offer to sell is made and accepted in this state.
(3) For the purpose of this section, an offer to sell or buy is made in this state, whether or not either party is then present in
this state, when the offer either originates from this state or is directed by the offeror to this state and received at the place
to which it is directed or at any post office in this state in the case of a mailed offer, but for the purpose of 30-10-202, an
offer to sell which is not directed to or received by the offeree in this state is not made in this state.
(4) For the purpose of this section, an offer to buy or sell is accepted in this state when acceptance is communicated to the offeror in this state and acceptance has not previously been communicated to the offeror, orally or in writing, outside this state. Acceptance is communicated to the offeror in this state, whether or not either party is then present in this state, when the offeree directs it to the offeror in this state, reasonably believing the offeror to be in this state, and it is received at the place to which it is directed or at any post office in this state in the case of a mailed acceptance.
(5) An offer to sell or to buy is not made in this state when:
(a) the publisher circulates or there is circulated on his the publisher's behalf in this state any bona fide newspaper or other
publication of general, regular, and paid circulation which that is:
(i) not published in this state; or
(ii) published in this state but has had more than two-thirds of its circulation outside this state during the past 12 months; or
(b) a radio or television program originating outside this state is received in this state.
(6) Sections 30-10-201(3), 30-10-301(2) and (3), and 30-10-303, as far as investment advisers and investment adviser representatives are concerned, apply when any act instrumental in effecting prohibited conduct is done in this state, whether or not either party is then present in this state."
Section 5. Section 30-10-201, MCA, is amended to read:
"30-10-201. Registration and notice filing requirements of broker-dealers, salespersons, investment advisers, and investment adviser representatives. (1) It is unlawful for a person to transact business in this state as a broker-dealer or salesperson, except as provided in 30-10-105, unless the person is registered under parts 1 through 3 of this chapter.
(2) It is unlawful for a broker-dealer or issuer to employ a salesperson to represent the broker-dealer or issuer in this state, except in transactions exempt under 30-10-105, unless the salesperson is registered under parts 1 through 3 of this chapter.
(3) It is unlawful for any person to transact business in this state as an investment adviser or as an investment adviser representative unless:
(a) the person is so registered under parts 1 through 3 of this chapter;
(b) the person is registered as a broker-dealer under parts 1 through 3 of this chapter;
(c)(b) the person does not have a place of business in the state and the person's only clients in this state are:
(i) investment companies, as defined in the Investment Company Act of 1940, or insurance companies;
(ii) other investment advisers;
(iii) federal covered advisers;
(iii)(iv) broker-dealers;
(iv)(v) banks;
(v)(vi) trust companies;
(vi)(vii) savings and loan associations;
(vii)(viii) employee benefit plans with assets of not less than $1 million;
(viii)(ix) governmental agencies or instrumentalities, whether acting for themselves or as trustees with investment control;
or
(ix)(x) other institutional investors as are designated by rule or order of the commissioner; or
(d)(c) the person does not have a place of business in this state and during any 12 consecutive months does not direct
business communications in this state in any manner to more than five present or prospective clients, other than those
specified in subsection (3)(c), whether or not the person or any of the persons to whom the communications are directed are
then present in this state the preceding 12-month period the person has not had more than five clients who are residents of
this state.
(4) Except for advisers whose only clients are clients listed in subsection (3)(b), it is unlawful for a federal covered adviser to conduct advisory business in this state unless the federal covered adviser complies with the provisions of subsection (6)(b).
(5) (a) It is unlawful for a person required to be registered as an investment adviser under Title 30, chapter 10, parts 1 through 3, to employ an investment adviser representative unless the investment adviser representative is registered or exempt from registration under Title 30, chapter 10, parts 1 through 3.
(b) It is unlawful for a federal covered adviser to employ, supervise, or associate with an investment adviser representative who maintains a place of business in this state unless the investment adviser representative is registered or exempt from registration under Title 30, chapter 10, parts 1 through 3.
(4)(6) (a) A broker-dealer or a salesperson, acting as an agent for an issuer or as an agent for a broker-dealer in the offer or
sale of securities for an issuer, or an investment adviser or investment adviser representative may apply for registration by
filing an application in the form that the commissioner prescribes and payment of the fee prescribed in 30-10-209. A
salesperson acting as agent for an issuer or broker-dealer who is not currently in compliance with the financial
responsibility requirements prescribed by the Securities Exchange Act of 1934 and by regulations adopted under it, may, in
the discretion of the commissioner, be required to file with the commissioner a bond of a surety company duly authorized
to transact business in this state. The bond must be in an amount determined by the commissioner, payable to the state of
Montana and conditioned upon the faithful compliance with the provisions of parts 1 through 3 of this chapter, and provide
that upon failure to comply, the salesperson is liable to any and all persons who may suffer loss by reason of a failure to
comply.
(b) Except for a federal covered adviser whose only clients are those listed in subsection (3)(b), a federal covered adviser shall, prior to acting as a federal covered adviser in this state, pay the fee prescribed in 30-10-209 and shall file with the commissioner copies of any documents filed with the securities and exchange commission that the commissioner requires by rule or order.
(5)(7) The application must contain whatever information the commissioner requires. A registration application of a
broker-dealer, salesperson, investment adviser, or investment adviser representative may not be withdrawn before the
commissioner approves or denies the registration, without the express written consent of the commissioner.
(6)(8) When the registration requirements are met, the commissioner shall make the registration effective. An effective
registration of a broker-dealer, salesperson, investment adviser, or investment adviser representative may not be withdrawn
or terminated without the express written consent of the commissioner.
(7)(9) Except as provided in subsection (6), registration Registration of a broker-dealer, salesperson, investment adviser, or
investment adviser representative:
(a) is effective until December 31 following the registration or any other time as the commissioner may by rule adopt; and
(b) may be renewed pursuant to subsection (11).
(8)(10) (a) The registration of a salesperson is not effective during any period when the salesperson is not associated with
an issuer or a registered broker-dealer specified in the application. When a salesperson begins or terminates a connection
with an issuer or registered broker-dealer, the salesperson and the issuer or broker-dealer shall promptly notify the
commissioner.
(9)(b) The registration of an investment adviser representative is not effective during any period when the person is not
associated with an investment adviser registered under this act and specified in the application. When an investment adviser
representative begins or terminates a connection with an investment adviser, the investment adviser shall promptly notify
the commissioner. When an investment adviser representative begins or terminates a connection with a federal covered
adviser, the investment adviser representative shall promptly notify the commissioner.
(10)(11) Registration of a broker-dealer, salesperson, investment adviser, or investment adviser representative or notice
filing for a federal covered adviser may be renewed by filing, prior to the expiration of the registration or notice filing, an
application containing information as the commissioner may require to indicate any material change in the information
contained in the original application or any renewal application for registration as a broker-dealer, salesperson, investment
adviser, or investment adviser representative filed by the applicant or notice filing, and payment of the prescribed fee
prescribed by 30-10-209. , and, in the case of a A broker-dealer who is not a member of NASD, inc., by filing is required to
file a financial statement showing the financial condition of the broker-dealer as of a date within 90 days of the end of the
broker-dealer's fiscal year, except as provided in section 15 of the Securities Exchange Act of 1934. A registered
broker-dealer or investment adviser may file an application for registration of a successor, to become effective upon
approval of the commissioner.
(11)(12) (a) Except as provided in section 15 of the Securities Exchange Act of 1934 in the case of a broker-dealer and
section 222 of the Investment Advisers Act of 1940 in the case of an investment adviser, every Every registered
broker-dealer and investment adviser shall make and keep accounts and other records, except with respect to securities
exempt under 30-10-104(1), as may be prescribed by the commissioner by rule or order. All required records of an
investment adviser must be preserved for 3 years unless the period the commissioner prescribes otherwise for particular
types of records by rule or order. All the records of a registered broker-dealer or investment adviser are subject at any time
or from time to time to reasonable periodic, special, or other examinations, within or outside this state, by representatives of
the commissioner, as the commissioner considers necessary or appropriate in the public interest or for the protection of
investors.
(b) The commissioner may require investment advisers to furnish or disseminate certain information as necessary or appropriate in the public interest or for the protection of investors and advisory clients.
(c) If information contained in any document filed with the commissioner is, or becomes, inaccurate or incomplete in any material respect, the registrant or federal covered adviser must promptly file a correcting amendment.
(12)(13) The commissioner may by order deny, suspend, or revoke registration of any broker-dealer, salesperson,
investment adviser, or investment adviser representative if the commissioner finds that the order is in the public interest and
that the applicant or registrant or, in the case of a broker-dealer or investment adviser, any partner, officer, director, person
occupying a similar status or performing similar functions, or person directly or indirectly controlling the broker-dealer or
investment adviser:
(a) has filed an application for registration under this section that, as of its effective date or as of any date after filing in the case of an order denying effectiveness, was incomplete in any material respect or contained any statement that was, in the light of the circumstances under which it was made, false or misleading with respect to any material fact;
(b) has willfully violated or willfully failed to comply with any provision of parts 1 through 3 of this chapter or a predecessor law or any rule or order under parts 1 through 3 of this chapter or a predecessor law;
(c) has been convicted of any misdemeanor involving a security or any aspect of the securities business or any felony;
(d) is permanently or temporarily enjoined by any court of competent jurisdiction from engaging in or continuing any conduct or practice involving any aspect of the securities business;
(e) is the subject of an order of the commissioner denying, suspending, or revoking registration as a broker-dealer, salesperson, investment adviser, or investment adviser representative;
(f) is the subject of an adjudication or determination, within the past 5 years, by a securities or commodities agency or administrator of another state or a court of competent jurisdiction, that the person has violated the Securities Act of 1933, the Securities Exchange Act of 1934, the Investment Advisors Act of 1940, the Investment Company Act of 1940, or the Commodity Exchange Act or the securities or commodities law of any other state;
(g) has engaged in dishonest or unethical practices in the securities business;
(h) is insolvent, either in the sense that the person's liabilities exceed the person's assets or in the sense that the person
cannot meet obligations as they mature, but the commissioner may not enter an order against a broker-dealer or investment
adviser under this subsection (12)(13) without a finding of insolvency as to the broker-dealer or investment adviser;
(i) has not complied with a condition imposed by the commissioner under this section or is not qualified on the basis of such factors as training, experience, or knowledge of the securities business;
(j) has failed to pay the proper filing fee, but the commissioner may enter only a denial order under this subsection
(12)(13), and the commissioner shall vacate any order when the deficiency has been corrected; or
(k) has failed to reasonably supervise the person's salespersons or employees or investment adviser representatives or employees to assure their compliance with this act.
(13)(14) The commissioner may not institute a suspension or revocation proceeding on the basis of a fact or transaction
known to the commissioner when registration became effective unless the proceeding is instituted within 30 days after the
date on which the registration became effective.
(14)(15) The commissioner may by order summarily postpone or suspend registration pending final determination of any
proceeding under this section.
(15)(16) Upon the entry of the order under subsection (12) (13) of this section, the commissioner shall promptly notify the
applicant or registrant, as well as the employer or prospective employer if the applicant or registrant is a salesperson or
investment adviser representative, that it has been entered and of the reasons for the order and that if requested by the
applicant or registrant within 15 days after the receipt of the commissioner's notification the matter will be promptly set for
hearing. If a hearing is not requested within 15 days and none is ordered by the commissioner, the order will remain in
effect until it is modified or vacated by the commissioner. If a hearing is requested or ordered, the commissioner, after
notice of and opportunity for hearing, may modify or vacate the order or extend it until final determination.
(16)(17) If the commissioner finds that any registrant or applicant for registration is no longer in existence or has ceased to
do business as a broker-dealer, salesperson, investment adviser, or investment adviser representative or is subject to an
adjudication of mental incompetence or to the control of a committee, conservator, or guardian or cannot be located after
reasonable search, the commissioner may by order cancel the registration or application.
(17)(18) The commissioner may, after suspending or revoking registration of any broker-dealer, salesperson, investment
adviser, or investment adviser representative, impose a fine not to exceed $5,000 upon the broker-dealer, salesperson,
investment adviser, or investment adviser representative. The fine is in addition to all other penalties imposed by the laws
of this state and must be collected by the commissioner in the name of the state of Montana and deposited in the general
fund. Imposition of any fine under this subsection is an order from which an appeal may be taken pursuant to 30-10-308. If
any broker-dealer, salesperson, investment adviser, or investment adviser representative fails to pay a fine referred to in this
subsection, the amount of the fine is a lien upon all of the assets and property of the broker-dealer, salesperson, investment
adviser, or investment adviser representative in this state and may be recovered by suit by the commissioner and deposited
in the general fund. Failure of a broker-dealer, salesperson, investment adviser, or investment adviser representative to pay
a fine also constitutes a forfeiture of the right to do business in this state under parts 1 through 3 of this chapter.
(18)(19) A sole proprietor registered as a broker-dealer or investment adviser who does not employ other salespersons or
investment adviser representatives, other than the sole proprietor, is not required to register as both a broker-dealer and a
salesperson or as an investment adviser and an investment adviser representative if the sole proprietor meets the
examination requirements established by the commissioner by rule.
(19)(20) A person who is subject to the provisions of this section and who has passed the general securities principal's
examination is not required to also pass the uniform investment adviser law examination. The commissioner shall by rule
provide for a form that a person who passes the general securities principal's examination shall file with the commissioner
as a verification of having passed the examination unless the commissioner can verify electronically that the person has
passed the exam."
Section 6. Section 30-10-202, MCA, is amended to read:
"30-10-202. Registration of securities. It is unlawful for any person to offer or sell any security in this state, except securities exempt under 30-10-104 or when sold in transactions exempt under 30-10-105, unless:
(1) such the security is registered by notification, coordination, or qualification under parts 1 through 3 of this chapter; or
(2) for a federal covered security, the security has been filed with the commissioner pursuant to [section 10] and the fee prescribed in 30-10-209 has been paid."
Section 7. Section 30-10-207, MCA, is amended to read:
"30-10-207. Denial, suspension, and revocation of registration of securities. (1) The commissioner may issue an order
denying effectiveness to, or suspending or revoking the effectiveness of, any registration statement if he finds that the order
is in the public interest and that:
(a) the registration statement, as of its effective date or as of any earlier date in the case of an order denying effectiveness,
is incomplete in any material respect or contains any statement which that was, in the light of the circumstances under
which it was made, false or misleading with respect to any material fact;
(b) any provision of parts 1 through 3 of this chapter or any rule, order, or condition lawfully imposed under parts 1
through 3 of this chapter has been willfully violated, in connection with the offering, by:
(i) the person filing the registration statement;
(ii) the issuer, any partner, officer, or director of the issuer, any person occupying a similar status or performing similar functions, or any person directly or indirectly controlling or controlled by the issuer, but only if the person filing the registration statement is directly or indirectly controlled by or acting for the issuer; or
(iii) any underwriter;
(c) the security registered or sought to be registered is the subject of a permanent or temporary injunction of any court of competent jurisdiction entered under any other federal or state law applicable to the offering, but:
(i) the commissioner may not institute a proceeding against an effective registration statement under this subsection (1)(c) more than 1 year from the date of the injunction relied on; and
(ii) he may not enter an order under this subsection (1)(c) on the basis of an injunction entered under any other state law
unless that order or injunction was based on facts which that would currently constitute a ground for an order under this
section;
(d) the issuer's enterprise or method of business includes or would include activities which that are illegal where
performed;
(e) the offering has worked or tended to work a fraud upon purchasers or would so operate;
(f) when a security is sought to be registered by notification, it is not eligible for such registration by notification;
(g) when a security is sought to be registered by coordination, there has been a failure to comply with the undertaking required by 30-10-204(1)(g);
(h) the applicant or registrant has failed to pay the proper registration fee, but the commissioner may enter only a denial
order under this subsection, and he shall vacate any such denial order when the deficiency has been corrected; or
(i) the offering has been or would be made with unreasonable amounts of underwriters' and sellers' discounts, commissions, or other compensation, or promoters' profits or participation, or unreasonable amounts or kinds of options.
(2) The commissioner may not enter a suspension or revocation order against an effective registration statement on the
basis of a fact or transaction known to him the commissioner when the registration statement became effective.
(3) Upon the entry of an order under subsection (1) of this section, the commissioner shall promptly notify the issuer of the
securities and the applicant or registrant that an order has been entered and of the reasons therefor for the order and that, if
requested by the issuer or registrant within 15 days after the receipt of the commissioner's notification, the matter will be
set promptly down for hearing. If no a hearing is not requested within 15 days and none is ordered by the commissioner, the
order will remain in effect until it is modified or vacated by the commissioner. If a hearing is requested or ordered, the
commissioner, after notice of and opportunity for hearing, may affirm, modify, or vacate the order."
Section 8. Section 30-10-209, MCA, is amended to read:
"30-10-209. Fees. The following fees must be paid in advance under the provisions of parts 1 through 3 of this chapter:
(1) (a) For the registration of securities by notification, coordination, or qualification, or for notice filing of a federal
covered security, there must be paid to the commissioner for the first initial year of registration or notice filing a
registration fee of $200 for the first $100,000 of initial issue or portion thereof of the first $100,000 in this state, based on
offering price, plus 1/10 of 1% for any excess over $100,000, with a maximum fee of $1,000.
(b) Each succeeding year, a registration of securities or a notice filing of a federal covered security may be renewed, prior
to its termination date, for an additional year upon consent of the commissioner and payment of an additional registration a
renewal fee to be computed at 1/10 of 1% of the aggregate offering price of the securities that are to be offered in this state
during that year, even though the maximum fee was paid the preceding year. The additional registration renewal fee may
not be less than $200 or more than $1,000. The registration statement for the securities or the notice filing may be amended
to increase the amount of securities to be offered.
(c) If a registrant sells securities in excess of the aggregate amount registered for sale in this state, the registrant may file an amendment to the registration statement to include the excess sales. If the registrant fails to file an amendment before the expiration date of the registration order, the registrant shall pay a filing fee for the excess sales of three times the amount calculated in the manner specified in subsection (1)(b). Registration of the excess securities is effective retroactively to the date of the existing registration.
(d) Each series, portfolio, or other subdivision of an investment company or similar issuer is treated as a separate issuer of securities. The issuer shall pay a portfolio registration fee to be calculated as provided in subsections (1)(a) through (1)(c). The portfolio registration fee collected by the commissioner must be deposited in the state special revenue account provided for in 30-10-115.
(2) (a) For registration of a broker-dealer or investment adviser, the fee is $200 for original registration and $200 for each annual renewal.
(b) For registration of a salesperson or investment adviser representative, the fee is $50 for original registration with each employer, $50 for each annual renewal, and $50 for each transfer. A salesperson who is dually registered as an investment adviser representative with a broker-dealer dually registered as an investment adviser is not required to pay the $50 fee to register as an investment adviser representative.
(c) For a federal covered adviser the fee is $200 for the initial notice filing and $200 for each annual renewal.
(3) For certified or uncertified copies of any documents filed with the commissioner, the fee is the cost to the department.
(4) For a request for an exemption under 30-10-105(15), the fee must be established by the commissioner by rule. For a request for any other exemption or an exception to the provisions of parts 1 through 3 of this chapter, the fee is $50.
(5) All fees are considered fully earned when received. In the event of overpayment, only those amounts in excess of $10 may be refunded.
(6) Except for portfolio registration fees established in this section, all fees, examination charges, miscellaneous charges, fines, and penalties collected by the commissioner pursuant to parts 1 through 3 of this chapter and the rules adopted under parts 1 through 3 of this chapter must be deposited in the general fund."
Section 9. Section 30-10-303, MCA, is amended to read:
"30-10-303. Unlawful representation concerning registration or exemption. Neither the (1) The fact that an
application for registration under 30-10-201(4)(6) or a registration statement under 30-10-203, 30-10-204, or 30-10-205 has
been filed nor or the fact that a person or security is effectively registered constitutes does not constitute a finding by the
commissioner that any document filed under parts 1 through 3 of this chapter is true, complete, and not misleading.
(2) Neither any such The fact that an application for registration has been filed or a person or security effectively registered
as provided in subsection (1) or nor the fact that an exemption or exception is available for a security or a transaction means
does not mean that the commissioner has passed in any way upon the merits of, qualifications of, or recommended or given
approval to, any person, security, or transaction. It is unlawful to make or cause to be made to any prospective purchaser,
customer, or client any representation inconsistent with this section."
NEW SECTION. Section 10. Federal covered securities. (1) The commissioner may require an issuer to file any or all of the following documents with respect to a federal covered security provided for in section 18(b)(2) of the Securities Act of 1933:
(a) documents that are part of a current federal registration statement filed with the securities and exchange commission or amendments to a current registration statement filed with the securities and exchange commission;
(b) a consent to the service of process signed by the issuer and payment of the fee required in 30-10-209; and
(c) annual or periodic reports of the value of the federal covered securities offered or sold in this state.
(2) The commissioner may require the issuer of a federal covered security under 18(b)(4)(D) of the Securities Act of 1933 to file within 15 days after the first sale in this state a notice on a form prescribed by the commissioner and a consent to service of process and may require the issuer to pay the notice filing fee prescribed in 30-10-209.
(3) The commissioner may require the filing of any document filed with the securities and exchange commission under the Securities Act of 1933, with respect to a federal covered security under section 18(b)(3) or (4) of the Securities Act of 1933, and may require payment of the notice filing fee prescribed in 30-10-209.
(4) The commissioner may issue a cease and desist order suspending the offer and sale of a federal covered security if the commissioner finds that the order is in the public interest and there is a failure to comply with any requirement of this section.
(5) The commissioner may waive any of the provisions of this section.
NEW SECTION. Section 11. Exemption. The state of Montana is exempt from the provisions of the Philanthropy Protection Act of 1995, Public Law 104-62, pursuant to section 6(c) of that act.
NEW SECTION. Section 12. Codification instruction. (1) [Section 10] is intended to be codified as an integral part of Title 30, chapter 10, part 2, and the provisions of Title 30, chapter 10, part 2, apply to [section 10].
(2) [Section 11] is intended to be codified as an integral part of Title 30, chapter 10, and the provisions of Title 30, chapter 10, apply to [section 11].
NEW SECTION. Section 13. Severability. If a part of [this act] is invalid, all valid parts that are severable from the invalid part remain in effect. If a part of [this act] is invalid in one or more of its applications, the part remains in effect in all valid applications that are severable from the invalid applications.
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