SENATE BILL NO. 349
INTRODUCED BY J. TESTER
BY REQUEST OF THE STATE AUDITOR
A BILL FOR AN ACT ENTITLED: "AN ACT GENERALLY REVISING SECURITIES LAWS FOR THE PURPOSE OF PROMOTING CAPITAL FORMATION BY CREATING AN ADDITIONAL TRANSACTIONAL EXEMPTION FOR MONTANA-BASED BUSINESSES; INCREASING THE NUMBER OF TRANSACTIONS THAT ARE EXCLUDED FROM THE DEFINITION OF "SALESPERSON"; ALLOWING CANADIAN BROKER-DEALER FIRMS TO DO NOTICE FILING IN THIS STATE UPON THE PAYMENT OF A FEE; AND AMENDING SECTIONS 30-10-103, 30-10-105, AND 30-10-209, 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.
(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 registered under section 203 of the Investment Advisers Act of 1940.
(b) The term does not include a person who would be exempt from the definition of investment adviser pursuant to subsection (11)(c)(i), (11)(c)(ii), (11)(c)(iii), (11)(c)(iv), (11)(c)(v), (11)(c)(vi), (11)(c)(vii), or (11)(c)(ix).
(9) "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.
(10) "Guaranteed" means guaranteed as to payment of principal, interest, or dividends.
(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 (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 (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 (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 (11)(a) is solely incidental to the practice of the person's profession;
(viii) a federal covered adviser; or
(ix) other persons not within the intent of this subsection (11) as the commissioner may by rule or order designate.
(12) (a) "Investment adviser representative" means:
(i) any partner of, officer of, director of, or a person occupying a similar status or performing similar functions, or other individual, except clerical or ministerial personnel, employed by or associated with an investment adviser who:
(A) makes any recommendation or otherwise renders advice regarding securities to clients;
(B) manages accounts or portfolios of clients;
(C) solicits, offers, or negotiates for the sale or sells investment advisory services; or
(D) supervises employees who perform any of the foregoing; and
(ii) with respect to a federal covered adviser, any person who is an investment adviser representative with a place of business in this state as those terms are defined by the securities and exchange commission under the Investment Advisers Act of 1940.
(b) The term does not include a salesperson registered pursuant to 30-10-201(1) whose performance of the services described in subsection (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 or of a federal covered adviser who has made a notice filing under parts 1 through 3 of this chapter.
(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.
(14) "Nonissuer" means not directly or indirectly for the benefit of the issuer.
(15) "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.
(16) "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.
(17) "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.
(18) "Registered broker-dealer" means a broker-dealer registered pursuant to 30-10-201.
(19) "Sale" or "sell" includes each contract of sale of, contract to sell, or disposition of a security or interest in a security for value.
(20) "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:
(i) effecting a transaction in a security exempted by 30-10-104(1), (2), (3), (8), (9), (10), or (11);
(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;
(iii) effecting transactions in a federal covered security described in section 18(b)(4)(D) of the Securities Act of 1933 or effecting transactions for a qualified purchaser as defined in section 18(b)(3) of the Securities Act of 1933; or
(iv) effecting transactions with existing employees, partners, or directors of the issuer if no a commission or other
remuneration is not 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.
(21) "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.
(22) (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.
(23) "State" means any state, territory, or possession of the United States, as well as the District of Columbia and Puerto Rico.
(24) "Transact", "transact business", or "transaction" includes the meanings of the terms "sale", "sell", and "offer"."
Section 2. Section 30-10-105, MCA, is amended to read:
"30-10-105. Exempt transactions -- rulemaking. Except as expressly provided in this section, 30-10-201 through 30-10-207 and 30-10-211 do not apply to the following transactions:
(1) a nonissuer isolated transaction, whether effected through a broker-dealer or not. A transaction is presumed to be isolated if it is one of not more than three transactions during the prior 12-month period.
(2) (a) a nonissuer distribution of an outstanding security by a broker-dealer registered pursuant to 30-10-201 if:
(i) quotations for the securities to be offered or sold (or the securities issuable upon exercise of any warrant or right to purchase or subscribe to the securities) are reported by the automated quotations system operated by the national association of securities dealers, inc., or by any other quotation system approved by the commissioner by rule; or
(ii) the security has a fixed maturity or a fixed interest or dividend provision and there has been no default during the current fiscal year or within the 3 preceding fiscal years or if the issuer and any predecessors have been in existence for less than 3 years and there has been no default in the payment of principal, interest, or dividends on the security.
(b) The commissioner may by order deny or revoke the exemption specified in subsection (2)(a) with respect to a specific security. Upon the entry of an order, the commissioner shall promptly notify all registered broker-dealers that it has been entered and give the reasons for the order and shall notify them that within 15 days of the receipt of a written request, the matter will be set for hearing. If a hearing is not requested and is not ordered by the commissioner, the order remains 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 to all interested persons, may modify or vacate the order or extend it until final determination. An order under this subsection may not operate retroactively. A person may not be considered to have violated parts 1 through 3 of this chapter by reason of any offer or sale effected after the entry of an order under this subsection if the person sustains the burden of proof that the person did not know and in the exercise of reasonable care could not have known of the order.
(3) a nonissuer transaction effected by or through a registered broker-dealer pursuant to an unsolicited order or offer to buy, but the commissioner may require that the customer acknowledge upon a specified form that the sale was unsolicited and that a signed copy of each form be preserved by the broker-dealer for a specified period;
(4) a transaction between the issuer or other person on whose behalf the offering is made and an underwriter or between underwriters;
(5) a transaction by an executor, administrator, sheriff, marshal, receiver, trustee in bankruptcy, guardian, or conservator in the performance of official duties;
(6) a transaction executed by a bona fide pledgee without any purpose of evading parts 1 through 3 of this chapter;
(7) an offer or sale to a bank, savings institution, trust company, insurance company, investment company as defined in the Investment Company Act of 1940, pension or profit-sharing trust, or other financial institution or institutional buyer or to a broker-dealer, whether the purchaser is acting for itself or in a fiduciary capacity;
(8) (a) a transaction pursuant to an offer made in this state directed by the offeror to not more than 10 persons, (other
than those designated in subsection (7)), during any period of 12 consecutive months, if:
(i) the seller reasonably believes that all the buyers are purchasing for investment; and
(ii) a commission or other remuneration is not paid or given directly or indirectly for soliciting a prospective buyer. However, a commission may be paid to a registered broker-dealer if the securities involved are registered with the United States securities and exchange commission under the federal Securities Act of 1933, as amended.
(b) any transaction pursuant to an offer made in this state directed by the offeror to not more than 25 persons, other than those designated in subsection (7), during any period of 12 consecutive months if:
(i) the seller reasonably believes that all the buyers are purchasing for investment;
(ii) a commission or other remuneration is not paid or given directly or indirectly for soliciting a prospective buyer; however, a commission may be paid to a registered broker-dealer if the securities involved are registered with the United States securities and exchange commission under the federal Securities Act of 1933, as amended; and
(iii) the offeror applies for and obtains the written approval of the commissioner prior to making any offers in this state and pays a filing fee that must accompany the application for approval. The commissioner may deny an application.
(c) a transaction pursuant to a sale made in this state directed by the issuer to not more than 35 purchasers, other than those designated in subsection (7), during any period of 12 consecutive months if:
(i) the issuer has its corporate headquarters or principal place of business in this state;
(ii) the issuer reasonably believes that all purchasers are purchasing for investment;
(iii) the issuer does not solicit purchasers through general solicitation or advertisement;
(iv) a commission or other remuneration is not paid or given directly or indirectly for soliciting a prospective buyer; however, a commission may be paid to a registered broker-dealer if the securities involved are registered with the securities and exchange commission under the federal Securities Act of 1933, as amended; and
(v) the issuer, within 15 days of the first sale, files with the commissioner notice of the offering on a form prescribed by the commissioner to obtain a written notification from the commissioner, pays the applicable fee provided in 30-10-209, and files a consent to service of process in the manner described in 30-10-208. Failure to file the required notice, pay the fee, and file the consent to service within the allotted time period will result in a tripling of the fee, but will not invalidate the availability of the exemption. An issuer who fails to file the notice, pay the fee, or file the consent to service within 15 days after demand by the commissioner loses the use of this exemption.
(c)(d) For the purpose of the exemptions provided for in this subsection (8), an offer to sell is made in this state,
whether or not the offeror or any of the offerees are then present in this state, if 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).
(9) an offer or sale of a preorganization certificate or subscription if:
(a) a commission or other remuneration is not paid or given directly or indirectly for soliciting a prospective subscriber;
(b) the number of subscribers does not exceed 25; and
(c) a payment is not made by a subscriber;
(10) a transaction pursuant to an offer to existing security holders of the issuer, including persons who at the time of the transaction are holders of convertible securities, nontransferable warrants, or transferable warrants exercisable within not more than 90 days of their issuance, if:
(a) a commission or other remuneration, (other than a standby commission,) is not paid or given directly or indirectly
for soliciting any security holder in this state; or
(b) the issuer first files a notice specifying the terms of the offer and the commissioner does not by order disallow either subsection (10)(a) or the notice specifying the terms of the offer;
(11) an offer, but not a sale, of a security for which registration statements have been filed under both parts 1 through 3 of this chapter and the Securities Act of 1933 if a stop, refusal, denial, suspension, or revocation order is not in effect and a public proceeding or examination looking toward an order is not pending under either law;
(12) an offer, but not a sale, of a security for which a registration statement has been filed under parts 1 through 3 of this chapter and the commissioner does not disallow the offer in writing within 10 days of the filing;
(13) the issuance of a security dividend, whether the corporation distributing the dividend is the issuer of the security or not, if nothing of value is given by security holders for the distribution other than the surrender of a right to a cash dividend when the security holder can elect to take a dividend in cash or in securities;
(14) a transaction incident to a right of conversion, a statutory or judicially approved reclassification, or a recapitalization, reorganization, quasi-reorganization, stock split, reverse stock split, merger, consolidation, or sale of assets;
(15) a transaction in compliance with rules that the commissioner may adopt to serve the purposes of 30-10-102. The commissioner may require that 30-10-201 through 30-10-207 and 30-10-211 apply to any transactional exemptions adopted by rule.
(16) a transaction in the securities of a certified Montana capital company or a certified Montana small business investment capital company, as defined in 90-8-104, if the company first files all disclosure documents, along with a consent to service of process, with the commissioner. The commissioner may not charge a fee for the filing.
(17) the sale of a commodity investment contract traded on a commodities exchange recognized by the commissioner at the time of sale;
(18) a transaction within the exclusive jurisdiction of the commodity futures trading commission as granted under the Commodity Exchange Act;
(19) a transaction that:
(a) involves the purchase of one or more precious metals;
(b) requires, and under which the purchaser receives within 7 calendar days after payment in good funds of any portion of the purchase price, physical delivery of the quantity of the precious metals purchased. For the purposes of this subsection, physical delivery is considered to have occurred if, within the 7-day period, the quantity of precious metals, whether in specifically segregated or fungible bulk, purchased by the payment is delivered into the possession of a depository, other than the seller, that:
(i) (A) is a financial institution, meaning a bank, savings institution, or trust company organized under or supervised pursuant to the laws of the United States or of this state;
(B) is a depository the warehouse receipts of which are recognized for delivery purposes for any commodity on a contract market designated by the commodity futures trading commission; or
(C) is a storage facility licensed by the United States or any agency of the United States; and
(ii) issues, and the purchaser receives, a certificate, document of title, confirmation, or other instrument evidencing that the quantity of precious metals has been delivered to the depository and is being and will continue to be held on the purchaser's behalf, free and clear of all liens and encumbrances other than:
(A) liens of the purchaser;
(B) tax liens;
(C) liens agreed to by the purchaser; or
(D) liens of the depository for fees and expenses that previously have been disclosed to the purchaser.
(c) requires the quantity of precious metals purchased and delivered into the possession of a depository, as provided in subsection (19)(b), to be physically located within Montana at all times after the 7-day delivery period provided in subsection (19)(b), and the precious metals are in fact physically located within Montana at all times after that delivery period;
(20) a transaction involving a commodity investment contract solely between persons engaged in producing, processing, using commercially, or handling as merchants each commodity subject to the contract or any byproduct of the commodity;
(21) an offer or sale of a security to an employee of the issuer, pursuant to an employee stock ownership plan qualified under section 401 of the Internal Revenue Code; or
(22) (a) an offer or sale of securities by a cooperative association organized under the provisions of Title 35, chapter 15 or 17, or under the laws of another state that are substantially the same as the provisions of Title 35, chapter 15 or 17, if the offer and sale are only to members of the cooperative association or the purchase of the securities is necessary or incidental to establishing membership in the cooperative association;
(b) a cooperative organized under the laws of another state may not take advantage of the exemption created by this subsection (22) unless, not less than 10 days before the issuance or delivery of the securities, the cooperative has furnished the commissioner with a general written description of the transaction and any other information the commissioner may require by rule or otherwise. The commissioner shall promulgate rules establishing a list of states whose laws are considered substantially the same as Title 35, chapter 15 or 17, for the purposes of this subsection (22)."
Section 3. 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, or for a filing pursuant to 30-10-105(8)(c), there must be paid to the commissioner for the initial year of
registration, or notice filing, or filing a fee of $200 for the first $100,000 of initial issue or portion 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 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. The renewal fee may not be less than $200 or more than $1,000. The registration or the notice filing may be amended to increase the amount of securities to be offered.
(c) If a registrant, or issuer of federal covered securities, or issuer proceeding under the provisions of 30-10-105(8)(c)
sells securities in excess of the aggregate amount registered for sale in this state, or for which a notice filing has been
submitted, or for which a filing pursuant to 30-10-105(8)(c) has been submitted, the registrant or issuer may file an
amendment to the registration statement, or notice filing, or form filed pursuant to 30-10-105(8)(c) to include the excess
sales. If the registrant, or issuer of a federal covered security, or issuer proceeding under 30-10-105(8)(c) fails to file an
amendment before the expiration date of the registration order, or notice, or filing under 30-10-105(8)(c), the registrant or
issuer shall pay a filing fee for the excess sales of three times the amount calculated in the manner specified in subsection
(1)(b). Registration, or notice, or amended filing under 30-10-105(8)(c) of the excess securities is effective retroactively to
the date of the existing registration, or notice, or filing.
(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 notice filing fee to be calculated as provided in subsections (1)(a) through (1)(c). The portfolio notice filing 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.
(d) For a Canadian broker-dealer firm, the fee to notice file 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 notice filing 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."
- END -
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