Montana

Montana Multilevel Statute and Registration Rules

30-10-216. Registration requirements for multilevel distribution companies. (1) It is unlawful for a person to transact business in this state as a multilevel distribution company unless the person is:

     (a) registered under this section; or 
     (b) a member of the direct selling association. 
     (2) A multilevel distribution company may apply for registration by filing an application in the form prescribed by the commissioner. An application must be submitted to the department by certified mail. 
     (3) The commissioner shall issue an order making a registration effective when the registration requirements are met. An effective registration of a multilevel distribution company may not be withdrawn or terminated without the express written consent of the commissioner. 
     (4) Registration of a multilevel distribution company: 
     (a) is effective until December 31 following the registration; and 
     (b) may be renewed pursuant to subsection (5). 
     (5) Registration of a multilevel distribution company may be renewed by filing, prior to the expiration of the registration, an application containing information that the commissioner may require to indicate any material change in the information contained in the original application or any material change in a renewal application for registration. The renewal application must be submitted to the department by certified mail. 
     (6) The commissioner may by order deny, suspend, or revoke registration of any multilevel distribution company if the commissioner finds that the order is in the public interest and that the applicant or registrant or person directly or indirectly controlling the applicant or registrant: 
     (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 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 this part; 
     (c) is permanently or temporarily enjoined by any court of competent jurisdiction from transacting business as a multilevel distribution company; 
     (d) is the subject of an order of the commissioner denying, suspending, or revoking registration as a multilevel distribution company; 
     (e) has engaged in dishonest or unethical business practices; 
     (f) 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 multilevel distribution company without a finding of insolvency as to the multilevel distribution company; or 
     (g) has not complied with a condition imposed by the commissioner under this section.

30-10-324. Definitions. As used in 30-10-301, 30-10-324, 30-10-325, and 30-10-327, the following definitions apply:

     (1) (a) "Compensation" means the receipt of money, a thing of value, or a financial benefit. 
     (b) Compensation does not include: 
     (i) payments to a participant based on the sale of goods or services by the participant to third persons when the goods or services are purchased for actual use or consumption; or 
     (ii) payments to a participant based on the sale of goods or services to the participant that are used or consumed by the participant. 
     (2) (a) "Consideration" means the payment of money, the purchase of goods or services, or the purchase of intangible property. 
     (b) Consideration does not include: 
     (i) the purchase of goods or services furnished at cost that are used in making sales and that are not for resale; or 
     (ii) a participant's time and effort expended in the pursuit of sales or in recruiting activities. 
     (3) "Direct selling association" means the nonprofit entity incorporated in the state of Delaware and recognized by the department as the direct selling association. 
     (4) "Multilevel marketing company" means a person that: 
     (a) sells, distributes, or supplies goods or services through independent agents, contractors, or distributors: 
     (i) at different levels of distribution; or 
     (ii) pursuant to a formula for compensating participants in whole or in part based on purchases of sales by or recruitment of other participants; 
     (b) permits participants to recruit other participants in the company; and 
     (c) provides for commissions, cross-commissions, override commissions, bonuses, refunds, dividends, or other consideration that is or may be paid as a result of the sale of goods or services or the recruitment of or the performance or actions of other participants. 
     (5) "Participant" means a person involved in a sales plan or operation. 
     (6) "Person" means an individual, corporation, partnership, limited liability company, or other business entity. 
     (7) (a) "Pyramid promotional scheme" means a sales plan or operation in which a participant gives consideration for the opportunity to receive compensation derived primarily from obtaining the participation of other persons in the sales plan or operation rather than from the sale of goods or services by the participant or the other persons induced to participate in the sales plan or operation by the participant. 
     (b) A pyramid promotional scheme includes a Ponzi scheme, in which a person makes payments to investors from money obtained from later investors, rather than from any profits or other income of an underlying or purported underlying business venture. 
     (c) A pyramid promotional scheme does not include a sales plan or operation that: 
     (i) subject to the provisions of subsection (7)(c)(iv), provides compensation to a participant based primarily on the sale of goods or services by the participant, including goods or services used or consumed by the participant or other participants, and not primarily for obtaining the participation of other persons in the sales plan or operation; 
     (ii) does not require a participant to purchase goods or services in an amount that unreasonably exceeds an amount that can be expected to be resold or consumed within a reasonable period of time; 
     (iii) (A) provides each person joining the sales plan or operation with a written agreement containing or a written statement describing the material terms of participating in the sales plan or operation; 
     (B) allows a person at least 15 days to cancel the person's participation in the sales plan or operation; and 
     (C) provides that if the person cancels participation within the time provided and returns any items given to the person to assist in marketing goods or services under the plan, the person is entitled to a refund of any consideration given to participate in the sales plan or operation; and 
     (iv) (A) on the request of a participant deciding to terminate participation in the sales plan or operation, provides for the repurchase, at not less than 90% of the amount paid by the participant, of any currently marketable goods or services sold to the participant within 12 months of the request that have not been resold or consumed by the participant; and 
     (B) if disclosed to the participant at the time of purchase, provides that goods or services are not considered currently marketable if the goods have been consumed or the services rendered or if the goods or services are seasonal, discontinued, or special promotional items. Sales plan or operation promotional materials, sales aids, and sales kits are subject to the provisions of this subsection (7)(c)(v) if they are a required purchase for the participant or if the participant has received or may receive a financial benefit from their purchase. 
     (8) "Transacting business" means to directly or indirectly: 
     (a) offer, sell, distribute, or supply goods or services through independent agents, contractors, or distributors at different levels of distribution; or 
     (b) recruit or attempt to recruit participants in a multilevel distribution company.

     (2) A person who willfully violates the provisions of subsection (1) shall, for each participant giving consideration, be fined an amount not more than $100,000 or be imprisoned for not more than 10 years, or both. 
     (3) A person who violates the provisions of subsection (1) shall, for each participant giving consideration, be assessed a civil penalty in an administrative proceeding in an amount not to exceed $10,000. History: En. Sec. 3, Ch. 74, L. 1999; amd. Sec. 2, Ch. 322, L. 2001.

MONT CODE ANN § 30-10-326 : Montana Code - Section 30-10-326: Notice of activity -- consent to service

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 (1) A multilevel distribution company with a participant that is a resident of this state shall file with the securities commissioner on a form prescribed by the commissioner:
(a) an annual notice of the company's operation in this state; and
(b) an irrevocable consent designating the commissioner as its agent for service of process for any alleged violation of 30-10-325.
(2) Compliance with this section may not by itself subject a company to the provisions of any other statute of this state or to any taxes, licenses, or fees.
(3) (a) The commissioner may require a multilevel distribution company to disclose the following substantive information:
(i) the names, home or business addresses, social security numbers and birth dates, and titles of the multilevel distribution company's officers, directors, and trustees;
(ii) the corporate name; the headquarters street, mailing, and e-mail addresses, as well as telephone and telefax numbers; and the state of domicile and state of incorporation of the multilevel distribution company; and
(iii) a detailed description of the levels of distribution in the multilevel distribution company, the manner of compensating participants, and the compensation structure of the marketing plan.
(b) The commissioner may not release to the public the social security numbers of officers, directors, or trustees of a multilevel distribution company.
(4) This section does not preclude the commissioner from obtaining additional information required of participants or multilevel distribution companies during the course of an investigation or proceeding initiated under this chapter.
(5) Compliance with this chapter does not confer upon a multilevel distribution company any license or registration or signify that the state has sanctioned, approved, or endorsed a multilevel distribution company or its sales plan or operation.
(6) A multilevel distribution company or any individual or entity affiliated with a multilevel distribution company may not represent that the multilevel distribution company, individual, or entity is licensed, registered, sanctioned, approved, or endorsed in this state by virtue of compliance with 30-10-325 and this section.
(7) A multilevel distribution company or any individual or entity affiliated with a multilevel distribution company that violates subsection (6) is subject to the fines, injunctions, and other remedies specified in 30-10-305.
History: En. Sec. 3, Ch. 74, L. 1999; amd. Sec. 2, Ch. 322, L. 2001.

30-10-327. Multilevel marketing company -- notice of activity -- consent to service. (1) A multilevel marketing company shall file with the commissioner on forms prescribed by the commissioner:

     (a) prior to obtaining a participant that is a resident of this state: 
     (i) a notice that the company intends to operate in this state; and 
     (ii) an irrevocable consent designating the commissioner as its agent for service of process for any alleged violation of 30-10-325; and 
     (b) following the initial filing under subsection (1)(a), an annual notice of the company's operations in this state. 
     (2) The forms in subsection (1) must include, at a minimum: 
     (a) the names, home or business addresses, dates of birth, and titles of the multilevel marketing company's officers, directors, and trustees; 
     (b) the multilevel marketing company's corporate name, state of domicile and state of incorporation, and headquarters mailing address, e-mail address, and telephone and telefax numbers; and 
     (c) a detailed description of the levels of distribution in the multilevel marketing company, the manner of compensating participants, and the compensation structure of the marketing plan. 
     (3) Compliance with this section does not confer on a multilevel marketing company any license or registration or signify that the state has sanctioned, approved, registered, or endorsed a multilevel marketing company or its sales plan or operation. 
     (4) A multilevel marketing company or any individual or entity affiliated with a multilevel marketing company may not represent that the multilevel marketing company, individual, or entity is licensed, sanctioned, approved, registered, or endorsed in this state by virtue of compliance with 30-10-325 and this section. 
     (5) The requirements of subsections (1) and (2) do not apply to a direct selling association member.

Commissioner of Securities and Insurance website:

Multi-level Marketing Firms

Multi-level marketing firms sell goods or services through independent agents. The compensation structure of these firms rewards participants primarily for the sales they generate and also for recruiting others to participate in the sales plan or operation by giving them a portion of the sales commission generated by the recruited individual.

Multi-level marketing firms who want to do business in Montana must file with our office. This filing requirement is for the company itself. Participants and people selling on behalf of the MLM do not have to file. The form for filling is MLD-1.

Mail completed forms to:
Montana State Auditor’s Office
Securities Department
840 Helena Avenue
Helena, MT 59601

http://csimt.gov/securities/multi-level-marketing-firms/

Monica J. Lindeen

Commissioner of Securities & Insurance Montana State Auditor

840 Helena Ave. · Helena, MT 59601 Phone: 406.444.2040 or 800.332.6148

Fax: 406.444.3497 · Web: www.csimt.gov

NOTICE FILING REQUIREMENTS FOR MULTI-LEVEL MARKETING COMPANIES

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