SENATE BILL NO. 330
INTRODUCED BY D. MAHLUM, CHRISTIAENS, HALLIGAN, JUNEAU, MATTHEWS
AN ACT REVISING THE PROVISIONS RELATED TO MULTILEVEL DISTRIBUTION COMPANIES AND PYRAMID PROMOTIONAL SCHEMES; REMOVING THE REQUIREMENT THAT A MULTILEVEL DISTRIBUTION COMPANY FILE CONSENT TO SERVICE OF PROCESS ON AN ANNUAL BASIS; PROVIDING THAT THE SECURITIES COMMISSIONER MAY REQUEST ADDITIONAL INFORMATION FROM MULTILEVEL DISTRIBUTION COMPANIES; PROHIBITING A MULTILEVEL DISTRIBUTION COMPANY FROM REPRESENTING ITSELF AS LICENSED, REGISTERED, SANCTIONED, APPROVED, OR ENDORSED BY VIRTUE OF COMPLYING WITH STATE LAW; PROVIDING FOR A PENALTY; AND AMENDING SECTIONS 30-10-324 AND 30-10-326, MCA.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:
Section 1. Section 30-10-324, MCA, is amended to read:
"30-10-324. Definitions. As used in 30-10-324 through 30-10-326, the following definitions apply:
(1) (a) "Compensation" means the receipt of money, a thing of value, or a financial benefit.
(b) Compensation does not include:
(i) payments to a participant based upon the sale of goods or services by the participant to third persons when the goods or services are purchased for actual use or consumption; or
(ii) payments to a participant based upon the sale of goods or services to the participant that are used or consumed by the participant.
(2) (a) "Consideration" means the payment of money, the purchase of goods or services, or the purchase of intangible property.
(b) Consideration does not include:
(i) the purchase of goods or services furnished at cost that are used in making sales and that are not for resale; or
(ii) a participant's time and effort expended in the pursuit of sales or in recruiting activities.
(3) (a) "Multilevel distribution company" means a person that:
(i) sells, distributes, or supplies goods or services through independent agents, contractors, or distributors at different levels of distribution;
(ii) may recruit other participants in the company; and
(iii) is eligible for commissions, cross-commissions, override commissions, bonuses, refunds, dividends, or other consideration that is or may be paid as a result of the sale of goods or services or the recruitment of or the performance or actions of other participants.
(b) The term does not include an insurance producer, real estate broker, or salesperson or an investment adviser, investment adviser representative, broker-dealer, or salesperson, as defined in 30-10-103, operating in compliance with this chapter.
(4) "Participant" means a person involved in a sales plan or operation.
(5) "Person" means an individual, corporation, partnership, limited liability company, or other business entity.
(6) (a) "Pyramid promotional scheme" means a sales plan or operation in which a participant gives consideration for the opportunity to receive compensation derived primarily from obtaining the participation of other persons in the sales plan or operation rather than from the sale of goods or services by the participant or the other persons induced to participate in the sales plan or operation by the participant.
(b) A pyramid promotional scheme does not include a sales plan or operation that:
(i) does not compensate a participant solely for obtaining the participation of other persons in the sales plan or
operation;
(ii) subject to the provisions of subsection (6)(b)(vi)(v), provides compensation to a participant based primarily upon the
sale of goods or services by the participant, including goods or services used or consumed by the participant, and not
primarily for obtaining the participation of other persons in the sales plan or operation and that provides compensation to
the participant based upon the sale of goods or services by persons whose participation in the sales plan or operation has
been obtained by the participant;
(iii)(ii) does not require a participant to purchase goods or services in an amount that unreasonably exceeds an amount
that can be expected to be resold or consumed within a reasonable period of time;
(iv)(iii) is authorized to use a federally registered trademark or servicemark that identifies the company promoting the
sales plan or operation, the goods or services sold, or the sales plan or operation;
(v)(iv) (A) provides each person joining the sales plan or operation with a written agreement containing or a written
statement describing the material terms of participating in the sales plan or operation;
(B) allows a person at least 15 days to cancel the person's participation in the sales plan or operation plan; and
(C) provides that if the person cancels participation within the time provided and returns any required items, the person is entitled to a refund of any consideration given to participate in the sales plan or operation; and
(vi)(v) (A) provides for, upon the request of a participant deciding to terminate participation in the sales plan or
operation, the repurchase, at not less than 90% of the amount paid by the participant, of any currently marketable goods or
services sold to the participant within 12 months of the request that have not been resold or consumed by the participant;
and
(B) if disclosed to the participant at the time of purchase, provides that goods or services are not considered currently
marketable if the goods have been consumed or the services rendered or if the goods or services are seasonal, discontinued,
or special promotional items. Sales plan or operation promotional materials, sales aids, and sales kits are subject to the
provisions of this subsection (6)(b)(vi)(v) if they are a required purchase for the participant or if the participant has received
or may receive a financial benefit from their purchase."
Section 2. Section 30-10-326, MCA, is amended to read:
"30-10-326. Notice of activity -- consent to service. (1) A multilevel distribution company with a participant that is a
resident of this state shall file annually with the securities commissioner on a form prescribed by the commissioner:
(a) an annual notice of the company's operation in this state; and
(b) an irrevocable consent designating the commissioner as its agent for service of process for any alleged violation of 30-10-325.
(2) Compliance with this section may not by itself subject a company to the provisions of any other statute of this state or to any taxes, licenses, or fees.
(2)(3) (a) The commissioner may require a multilevel distribution company to disclose only the following substantive
information:
(a)(i) the names, home or business addresses, social security numbers and birth dates, and titles of the multilevel
distribution company's officers, directors, and trustees;
(b)(ii) the corporate name; the headquarters street, mailing, and e-mail addresses, as well as telephone and telefax
numbers; and the state of domicile and state of incorporation of the multilevel distribution company; and
(c)(iii) a detailed description of the levels of distribution in the multilevel distribution company, the manner of
compensating participants, and the compensation structure of the marketing plan.
(b) The commissioner may not release to the public the social security numbers of officers, directors, or trustees of a multilevel distribution company.
(3)(4) This section does not preclude the commissioner from obtaining additional information required of participants
or multilevel distribution companies during the course of an investigation or proceeding initiated under this chapter.
(5) Compliance with this chapter does not confer upon a multilevel distribution company any license or registration or signify that the state has sanctioned, approved, or endorsed a multilevel distribution company or its sales plan or operation.
(6) A multilevel distribution company or any individual or entity affiliated with a multilevel distribution company may not represent that the multilevel distribution company, individual, or entity is licensed, registered, sanctioned, approved, or endorsed in this state by virtue of compliance with 30-10-325 and this section.
(7) A multilevel distribution company or any individual or entity affiliated with a multilevel distribution company that violates subsection (6) is subject to the fines, injunctions, and other remedies specified in 30-10-305."
- END -
Latest Version of SB 330 (SB0330.ENR)
Processed for the Web on April 6, 2001 (4:19PM)
New language in a bill appears underlined, deleted material appears stricken.
Sponsor names are handwritten on introduced bills, hence do not appear on the bill until it is reprinted. See the status of this bill for the bill's primary sponsor.
Status of this Bill | 2001 Legislature | Leg. Branch Home
All versions of this bill (PDF Format)
Authorized print version w/line numbers (PDF format)
(406)444-3064