Legal Memorandum: Securities Registration Requirements in MT

Issue: Whether the sale of a corporation’s debenture bonds is exempt from registration requirements under Montana’s blue sky law.

The Securities Act of Montana sets forth the provisions that address securities registration requirements.  As a general matter, it is unlawful to offer or sell a security in Montana unless the security is registered, is a filed federal-covered security, or is exempt.  Mont. Code § 30-10-202.

Although there appears to be an exemption applicable, a securities examiner in the Montana Commissioner of Securities & Insurance office stated that a company with stock traded on NASDAQ and with debenture bonds of senior rank to the stock would not be automatically exempt from registration.

Among the exempted securities the Securities Act lists*FN1 are the following securities:

     (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 listed or approved for listing as provided in this subsection, 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.  

Mont. Code § 30-10-104(13) (emphasis added).  However, in a telephone discussion Securities Examiner Al Ludwig, 406-444-2040, stated that subparagraph 13 of § 30-10-104 […]