Montana Attorney General Opinion 17-139

Opinion No. 139. Investments-Blue Sky Act. HELD: Where it appears from the prospectus. the by-laws and the appli- cation for license being inconclusive, that the purpose of an association or- ganized in this state is educational rather than profit. it is exempt from the provisions of the State Blue Sky Act. August 7, 1937. H on. John J. Holmes State Auditor and Ex-officio r nsurance Commissioner The Capitol Dear Mr. Holmes: You have asked my opinion on the question whether or not "The Educa- tional Co-operative Publishing Com- pany of Montana," organized under the laws of Montana, is exempt from the provisions of the State "Blue Sky" Act. Section 4028, R. C. M. 1935, lists the securities to which the Blue Sky Act does not apply. Among the others listed are "securities of any domestic corporation not organized tor profi~" (Subdivision 5). The questIOn then IS whether this association is organized for profit. In the application for li- cense File No. 43236, Secretary of State"s Office, it is stated that the pur- pose of the association is to engage in a "general printing and publishing busi- ness." 'liVe are unable to determine con- c1usiveiy from the application whether the association is organized for profit. While the by-laws (Article VI) make provision for the distribution of earn- ings and dividends (if there should be any~, we do not thi~lk they are con- clUSIve on the questIOn. It is apparent from a reading of the prospectus issued by the association. attached to the by-laws. that the real purpose of the association is not to make a profit but rather educational. Its purpose, as th~rein state~,: fr.at:JkIY is to offset what IS termed 1l1sldlOUS propaganda." Its plan of financing is by state-wide sale of stock "to insure the raising of sufficient capital and to develop general public interest." It is proposed to enlist the aid of the Farm- ers Union locals and the Labor Union locals in each community, and, as stated on page 4. "generally, the plan for the financing drive will follow the methods used hy the Red Cross and other organizations. The directors be- lieve that the people of the State are convinced that a real emergency exists, and' that if this proposed reilledy is presented to them they will be willing to make sarrific~s to accomplish its purpose." (Underscoring ours.) There- fore. it would seem from the pros- pectus. which states the avowed pur- pose of the association. that the real purpose is educational rather than finan- cial profit. and that the subscribers are really called UDon to make sacrifices rather than to invest with the hope of profit. If the real purpose of the asso- ciation is thus presented to the public from which subscriptions are sought. those Durchasing stock are not de- ceived into thinking that they are mak- in"! an investment for profit. I t is my opinion. therefore, that the purpose of the association must be de- termined from all the facts and that the 154 OPINIONS OF THE ATTORNEY GENERAL inquiry should not be limited to the by-laws and the application for license. I t is my opinion further, from all the facts presented to us, that the real purpose of the association is not finan- cial profit but "educational."