Mont. Admin. R. 6.10.301 - MONTANA LIMITED OFFERING EXEMPTION

(1) By the authority delegated to the commissioner in 30-10-105, MCA, an offer or sale of securities offered or sold in compliance with Securities Act of 1933, Regulation D, Rules 230.501 through 230.503 and 230.505 ( 17 CFR 230.501, 230.502, 230.503 and 230.505 (1998)), is exempt from the registration requirements of 30-10-202, MCA.

(2) Each person who offers or sells securities in this state to nonaccredited and/or accredited investors, as defined in Securities Act of 1933, Regulation D, Rule 230.501(a)(5) through 230.501(a)(7), shall be registered in accordance with 30-10-201, MCA.

(3) An exemption under this rule is not available for the securities of an issuer if any of the parties described in Securities Act of 1933, Regulation A, Rule 230.262:

(a) has filed a registration statement that is the subject of a currently effective registration stop order entered pursuant to a state's securities law within five years prior to the filing of the notice required under this exemption;

(b) has been convicted within five years prior to the filing if the notice required under this exemption of a felony or misdemeanor in connection with the offer, purchase, or sale of a security or a felony involving fraud or deceit, including but not limited to forgery, embezzlement, obtaining money under false pretenses, larceny, or conspiracy to defraud;

(c) is currently subject to a state administrative enforcement order or judgment entered by that state's securities administrator within five years prior to the filing of the notice required under this exemption or is subject to a state's administrative enforcement order or judgment in which fraud or deceit, including but not limited to making untrue statements of material facts and omitting to state material facts, was found and the order or judgment was entered within five years prior to the filing of the notice required under this exemption;

(d) is subject to a state's administrative enforcement order or judgment that prohibits, denies, or revokes the use of an exemption from registration in connection with the offer, purchase, or sale of securities; or

(e) is currently subject to an order, judgment, or decree of a court of competent jurisdiction temporarily or preliminarily restraining or enjoining, or is subject to an order, judgment, or decree of a court of competent jurisdiction, permanently restraining or enjoining the party from engaging in or continuing any conduct or practice in connection with the purchase or sale of a security or involving the making of a false filing with the state entered within five years prior to the filing of the notice required under this exemption.

(4) The prohibitions of (3)(a) through (3)(c) and (3)(e) do not apply if the person subject to the disqualification is licensed or registered to conduct securities-related business in the state in which the administrative order or judgment was entered against the person, or if the person subject to the disqualification is registered to conduct securities-related business by the Securities and Exchange Commission and the order or judgment was entered against the person by the Securities and Exchange Commission, or if the broker-dealer employing the person is registered in this state and the form BD as adopted by the North American Securities Administrators Association, Inc., and filed with this state discloses the order, conviction, judgment, or decree relating to the person. A person disqualified under this rule may not act in a capacity other than that for which the person is registered.

(5) A disqualification caused by this rule is automatically waived if the Securities and Exchange Commission, state securities administrator, or agency of the state which created the basis for disqualification determines, upon a showing of good cause, that it is not necessary to deny the exemption under the circumstances.

(6) The issuer shall file with the commissioner

(a) a notice on an original, manually signed form D ( 17 CFR 239.500 ) at least ten days prior to an offer or sale being made to a person in this state, annually until completion and upon completion of the offer or sale, and at all such other times and in the form required under Securities Act of 1933, Regulation D, Rule 230.503, to be filed with the Securities and Exchange Commission. The notice must contain an undertaking by the issuer to furnish to the commissioner, upon written request, the information furnished by the issuer to offerees, unless the commissioner, by order, requires that the information be filed at the time with the filing of the notice.

(b) a consent to service of process included with or in the initial notice;

(c) the filing fee prescribed, for the initial registration of securities, in 30-10-209, MCA; and

(d) the name and address of each person who will offer or sell, in this state, a security under this rule.

(7) In all sales to nonaccredited investors in this state, the issuer and each person acting on its behalf shall have reasonable grounds to believe, and after making reasonable inquiry shall believe, that one of the following conditions is satisfied:

(a) the investment is suitable for the purchaser upon the basis of the facts, if any, disclosed by the purchaser as to the purchaser's other securities holdings, financial situation, and needs. For the purpose of this condition only, it may be presumed that, if the investment does not exceed 10% of the investor's net worth, it is suitable.

(b) the purchaser either alone or with the purchaser's representative has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of the prospective investment.

(8) A transaction that is exempt under this rule may not be combined with an offer and sale exempt under any other rule implementing or a section of the Securities Act of Montana. However, nothing in this limitation acts as an election. If the offer and sale fail to comply with all of the conditions for this exemption, the issuer may claim the availability of any other applicable exemption.

(9) The commissioner may, by order, increase the number of purchasers or waive any other conditions of this exemption.

(10) In the case of offerings of direct participation programs as defined in section 2810 of Financial Industry Regulatory Authority, Inc., (FINRA) conduct rules, each person who offers or sells securities in this state under this rule shall deliver a disclosure document containing the information required by Securities Act of 1933, Regulation D, Rule 230.502(b), to individuals covered by Securities Act of 1933, Regulation D, Rules 230.502(a)(5), 230.502(a)(6), and 230.502(a)(7).

(11) The commissioner may by order revoke, deny, or further condition the use of this exemption with respect to a particular offering when the commissioner finds that such an order is necessary to protect the investor or a person engaged in securities transactions and is in the public interest.

(12) An issuer using the Montana limited offering exemption shall file such other information as the commissioner may require.

Notes

Mont. Admin. R. 6.10.301

NEW, 1984 MAR p. 19, Eff. 1/13/84; AMD, 1988 MAR p. 1803, Eff. 8/12/88; AMD, 1996 MAR p. 1133, Eff. 4/26/96; AMD, 1999 MAR p. 56, Eff. 1/15/99; TRANS and AMD, from ARM 6.10.120, 2008 MAR p. 2046, Eff. 9/26/08.

30-10-105, 30-10-107, MCA; IMP, 30-10-104, 30-10-202, 30-10-211, MCA;