§ 80-4-601 — Commodity Dealer License Requirements -- Financial Responsibility

80-4-601 . Commodity dealer license requirements -- financial responsibility. (1) A person may not engage in the business of a commodity dealer in this state without first having obtained a license issued by the department.
(2) An application for a license to engage in business as a commodity dealer must be filed with the department and must be on a form prescribed by the department.
(3) (a) A license application must include the following:
(i) the name of the applicant;
(ii) the names of the officers and directors if the applicant is a corporation;
(iii) the names of the partners if the applicant is a partnership;
(iv) the location of the principal places of business;
(v) a sufficient and valid bond as specified in 80-4-604 , plus the bond specified in subsection (5)(a)(i) or (5)(a)(ii) if applicable, or as specified in subsection (5)(a)(iii);
(vi) a complete financial statement prepared by a certified public accountant according to generally accepted accounting principles, setting forth the applicant's cost of all commodities purchased in Montana, assets, liabilities, and equity; and
(vii) any other reasonable information the department finds necessary to carry out the provisions and purpose of this part.
(b) In determining the value of assets for the purposes of commodity dealer licensing:
(i) the value of the assets must be shown at original cost less depreciation, except that upon written request filed with the department, the director may allow asset valuations in accordance with a competent appraisal; and
(ii) credit may be given for insurable property, such as buildings, machinery, equipment, and merchandise inventory, only to the extent that the insurable property is protected against loss or damage by fire by insurance in the form of lawful policies issued by one or more insurance companies authorized to do business and subject to service of process in suits brought in this state.
(4) Except as provided in subsection (5), in order to receive and retain a commodity dealer's license, a commodity dealer shall have and maintain:
(a) equity of $50,000;
(b) positive working capital; and
(c) the bond required under 80-4-604 .
(5) (a) An applicant for a commodity dealer's license:
(i) that meets the condition specified in subsection (4)(c) and has maintained positive equity but does not meet the condition specified in subsection (4)(a) shall provide the department with additional bonding in the amount of $2,000 for each $1,000 or fraction of $1,000 that the applicant's equity is less than $50,000; and
(ii) that meets the condition specified in subsection (4)(c) but does not meet the condition specified in subsection (4)(b) shall provide the department with additional bonding in the amount of $2,000 for each $1,000 or fraction of $1,000 that the applicant's current liabilities exceed the applicant's current assets; or
(iii) that cannot or chooses not to meet the requirements of subsections (4)(a), (4)(b), and (4)(c) may, at the applicant's discretion and with the consent of the department, provide the department with a bond in the amount of 110% of the value of commodities the applicant or dealer intends to purchase during the term of the license or 110% of the value of commodities the dealer purchased during the preceding 12 months, whichever is greater. The minimum bond is $20,000.
(b) An applicant or commodity dealer that provides a bond under subsection (5)(a)(iii) is exempt from the bonding requirement in 80-4-604 (2).
(c) If a commodity dealer posts a bond or equivalent under subsection (5)(a)(iii) and at any time has unpaid contracts that exceed 90% of the dealer's bond or equivalent, the dealer shall either pay off contracts of sufficient value or increase the bond amount so that the total value of the unpaid contracts is less than 90% of the bond or equivalent.
(6) A company may post a bond required by this part for a subsidiary company if the corporate bonds are rated as Aa3 or better by Moody's investors service, inc., or as AA- or better by Standard and Poor's financial services and are issued with the full credit of the parent corporation.
(7) (a) A company or its subsidiary may request that the department waive the requirement to file a complete financial statement pursuant to subsection (3)(a)(vi) for a licensing year, the deficit bonding requirements in 80-4-405 (1), or both, if the company:
(i) has been licensed for 1 year;
(ii) has corporate bonds rated as Baa3 or better by Moody's investors service, inc., as BBB- or better by Standard and Poor's financial services, or as investment grade by an equivalent rating system as determined by department rule; and
(iii) posts the maximum bond amount required by 80-4-405 .
(b) The director shall grant or deny the request within 14 days.
(8) (a) A company or its subsidiary may request that the department waive the requirement of subsection (4)(a) or (4)(b), or both, if the company:
(i) has been licensed for 1 year;
(ii) posts the maximum bond amount required by 80-4-405 ; and
(iii) includes a profit or loss statement from the company's or subsidiary's previous fiscal year that shows operational income equal to or in excess of the value of commodities intended to be purchased during the term of the commodity dealer license.
(b) The director shall grant or deny the request within 14 days.
(9) A company whose business structure includes one or more subsidiary locations may file the parent company's financial statement to meet the requirement of subsection (3)(a)(vi). Financial statements are not required for each subsidiary location.
(10) The department shall adopt rules relating to the form and time of filing of financial statements. The department may require additional information or verification regarding the financial resources of the applicant and the applicant's ability to pay producers for agricultural commodities purchased from them.

Legislative History

En. Sec. 47, Ch. 539, L. 1983; amd. Sec. 5, Ch. 578, L. 1985; amd. Sec. 2, Ch. 157, L. 1989; amd. Sec. 7, Ch. 175, L. 2011; amd. Sec. 23, Ch. 169, L. 2015; amd. Sec. 3, Ch. 302, L. 2019.