_________ Bill No. _______
Introduced By _______________________________________________________________________________
By Request of the State Auditor
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; 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; exempting Montana from the provisions of the Philanthropy Protection Act; and amending sections 30-10-104, 30-10-107, 30-10-110, and 30-10-207, MCA."
Be it enacted by the Legislature of the State of Montana:
Section 1. 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;
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) of this section;
(2) any security issued or guaranteed by Canada, any Canadian province, any political subdivision of any
province, or any 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 bank organized under the laws of the United States or any 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 federal savings and loan association or any 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 federal credit union or any 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 railroad, other common carrier, public utility, or holding company
(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
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
(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 an 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 under section 12 of the Securities Exchange Act of 1934 for the 3 years immediately
preceding the offering date;
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
those rights include 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 that is likewise limited or any guarantee of such the
paper or of any such the 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 that is not directed to or received by a person in this state."
Section 2. 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 be is
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 whenever 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 that has not been 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
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 that 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 elsewhere 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 that it is mailed."
Section 3. 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 4. 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 the commissioner:
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
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
(d) the issuer's enterprise or method of business includes or would include activities
which that are illegal where when
(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 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 must
be set promptly down for hearing. If no a hearing is not requested within 15 days and none is not 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."
NEW SECTION. Section 5. 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 6. Codification instruction. [Section 5] 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 5].