Source: https://leg.mt.gov/bills/1997/Bills/House/HB0287_03.htm
Timestamp: 2018-07-17 17:22:01
Document Index: 254869184

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Introduced By Wiseman, R. Johnson, Ewer
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, 30-10-206, 30-10-207, 30-10-209, 30-10-301, and 30-10-303, MCA."
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.
(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)(A) registered under section 203 of the Investment Advisers Act of 1940; or
(ii)(B) 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:
(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, EXCEPT CLERICAL OR MINISTERIAL PERSONNEL, 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;
(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:
(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:
(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;
(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;
(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:
(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;
(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;.
(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.
(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, OTHER THAN THOSE CLIENTS SPECIFIED IN SUBSECTION (3)(B).
(4) Except for FEDERAL COVERED 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) OR (3)(C), 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 WHO ARE REGISTERED OR REQUIRED TO BE REGISTERED 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;
(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;
(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 30-10-206, MCA, IS AMENDED TO READ:
"30-10-206. General provisions regarding registration of securities. (1) A registration statement may be filed by the issuer, any other person on whose behalf the offering is to be made, or a registered broker-dealer. The commissioner may by rule or otherwise permit the omission of any item of information or document from any registration statement.
(2) (a) The commissioner may require as a condition of registration by qualification or coordination:
(i) that the following securities be deposited in escrow:
(A) any security issued within the past 3 years or to be issued to:
(I) a promoter for a consideration substantially different from the public offering price; or
(II) any person for a consideration other than cash; and
(B) any security issued or to be issued to a promoter while a corporation is still in a promotional or developmental stage; however, if shares were issued by a corporation while it was in a promotional or developmental stage and it no longer is in such that stage, then this condition does not apply; and
(ii) that the proceeds from the sale of the registered security in this state be impounded until the issuer receives a specified amount from the sale of the security either in this state or elsewhere.
(b) The commissioner may determine the conditions of any escrow or impounding required hereunder, but he may not reject a depository solely because of location in another state.
(3) When securities are registered by notification, coordination, or qualification, they may be offered and sold by the issuer, any other person on whose behalf they are registered, or by any registered broker-dealer. Every A registration shall must remain effective for a period of 1 year unless it is revoked by the commissioner, terminated upon request of the registrant with the consent of the commissioner, or renewed under 30-10-209(1)(b);. however However, said the registration shall must be automatically suspended upon a stop order or suspension proceedings being instituted by the securities and exchange commission relative to said the securities and shall must continue to be suspended so long as such the proceedings are pending and until the registration or filing with the securities and exchange commission is effective. All outstanding securities of the same class as a currently registered security are considered to be registered for the purpose of any nonissuer transaction. A registration statement which has become effective may not be withdrawn for 1 year from its effective date if any securities of the same class are outstanding. Subject to the provisions of 30-10-104 and 30-10-105, a salesperson who offers or sells registered securities must be registered pursuant to 30-10-201.
(4) The commissioner may require the person who filed the registration statement to file reports to keep reasonably current the information contained in the registration statement and to disclose the progress of the offering with respect to registered securities which: that
(a) are issued by a face-amount certificate company or a redeemable security issued by an open-end management company or unit investment trust as those terms are defined in the Investment Company Act of 1940; or
(b) are being offered and sold directly by or for the account of the issuer.
(5) No A securities registration statement may not be withdrawn, whether or not such the statement has become effective, without the express written consent of the commissioner."
Section 8. 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
(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;
(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 9. 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 OR ISSUER OF FEDERAL COVERED SECURITIES sells securities in excess of the aggregate amount registered for sale in this state, OR FOR WHICH A NOTICE FILING HAS BEEN SUBMITTED, the registrant OR ISSUER may file an amendment to the registration statement OR NOTICE FILING to include the excess sales. If the registrant OR ISSUER OF A FEDERAL COVERED SECURITY fails to file an amendment before the expiration date of the registration order OR NOTICE, 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 of the excess securities is effective retroactively to the date of the existing registration OR NOTICE.
(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 NOTICE FILING fee to be calculated as provided in subsections (1)(a) through (1)(c). The portfolio registration NOTICE FILING fee collected by the commissioner must be deposited in the state special revenue account provided for in 30-10-115.
(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.
(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 10. SECTION 30-10-301, MCA, IS AMENDED TO READ:
"30-10-301. Fraudulent and other prohibited practices. (1) It is unlawful for any person, in connection with the offer, sale, or purchase of any security, directly or indirectly, in, into, or from this state, to:
(c) engage in any act, practice, or course of business which that operates or would operate as a fraud or deceit upon any person.
(ii) to engage in any act, practice, or course of business which that operates or would operate as a fraud or deceit upon the other person; or
(iii) without disclosing to the client in writing before the completion of the transaction the capacity in which he the person is acting and obtaining the consent of the client to the transaction:
(A) acting as principal for his the person's own account, to knowingly sell any security to or purchase any security from a client; or
(B) acting as agent for a person other than such the client, to knowingly effect the sale or purchase of any security for the account of such the client.
(b) The prohibitions of subsection (2)(a)(iii) do not apply to any transaction with a customer of a broker-dealer if the broker-dealer is not being compensated for rendering investment advice in relation to such the transaction.
(a) the investment adviser shall may not be compensated on the basis of a share of capital gains upon or capital appreciation of the funds or any portion of the funds of the client;
(b) no an assignment of the contract may not be made by the investment adviser without the consent of the other party to the contract; and
(5) Subsection (4)(a) does not prohibit an investment advisory contract which that provides for compensation based upon the total value of a fund averaged over a definite period or as of definite dates or taken as of a definite date. "Assignment", as used in subsection (4)(b), includes any direct or indirect transfer or hypothecation of an investment advisory contract by the assignor or of a controlling block of the assignor's outstanding voting securities by a security holder of the assignor; but if the investment adviser is a partnership, no an assignment of an investment advisory contract is not considered to result from the death or withdrawal of a minority of the members of the investment adviser having only a minority interest in the business of the investment adviser or from the admission to the investment adviser of one or more members who, after admission, will be only a minority of the members and will have only a minority interest in the business.
(a) the commissioner by rule prohibits such custody; or
(b) in the absence of rule, the investment adviser fails to notify the commissioner that he the investment adviser has or may have such custody."
Section 11. 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), A NOTICE FILING UNDER [SECTION 12], 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 OR A COMPLETE NOTICE FILING HAS BEEN MADE 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 OR A NOTICE FILING has been filed or a person or security IS effectively registered OR A COMPLETE NOTICE FILING HAS BEEN MADE 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 12. 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:
(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.
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 13. Codification instruction. (1) [Section 10 12] 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 12].
(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].