<section article="gbr" article_name="Business Regulation" number="14-101" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="1" subtitle_name="Business Opportunities"> <level label="a"> <text>In this subtitle the following words have the meanings indicated.</text> </level> <level label="b"> <text>“Business opportunity” means an arrangement between a buyer and seller in which:</text> <level label="1"> <text>the seller or a person recommended or referred by the seller provides to the buyer products, equipment, supplies, or services that enable the buyer to start a business;</text> </level> <level label="2"> <text>the buyer is required to pay the seller or a person recommended or referred by the seller $300 or more during the period beginning any time before commencing operations and ending 6 months after commencing operations of the business; and</text> </level> <level label="3"> <text>the seller represents, directly or indirectly, orally or in writing, that:</text> <level label="i"> <text>the seller or a person recommended or referred by the seller will help the buyer in finding locations for the use or operation of vending machines, racks, display cases, or other similar devices on premises that are not owned or leased by the buyer or seller;</text> </level> <level label="ii"> <text>the seller or a person recommended or referred by the seller will help the buyer in finding outlets or accounts for the buyer’s products or services;</text> </level> <level label="iii"> <text>the seller or a person specified by the seller will buy products made, produced, fabricated, grown, bred, or modified by the buyer;</text> </level> <level label="iv"> <text>the seller guarantees that the buyer will receive from the business income an amount that exceeds the price paid to the seller;</text> </level> <level label="v"> <text>if the buyer is not satisfied with the business, the seller will refund all or part of the price paid to the seller, or repurchase any of the products, equipment, or supplies provided by the seller or a person recommended or referred by the seller; or</text> </level> <level label="vi"> <text>the seller will provide a marketing plan.</text> </level> </level> </level> <level label="c"> <text>“Buyer” means a person who buys or leases products, equipment, supplies, or services in connection with a business opportunity.</text> </level> <level label="d"> <text>“Commissioner” means the Securities Commissioner in the Office of the Attorney General.</text> </level> <level label="e"> <text>“Marketing plan” means advice or training that a seller or a person recommended or referred by the seller provides to the buyer, relating to the sale of any products, equipment, supplies, or services, and the advice or training includes preparing or providing:</text> <level label="1"> <text>promotional literature, brochures, pamphlets, or advertising materials;</text> </level> <level label="2"> <text>training regarding the promotion, operation, or management of the business opportunity; or</text> </level> <level label="3"> <text>operational, managerial, or financial guidelines or assistance.</text> </level> </level> <level label="f"> <text>“Seller” means a person who sells or leases products, equipment, supplies, or services in connection with a business opportunity.</text> </level> </section> <section article="gbr" article_name="Business Regulation" number="14-102" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="1" subtitle_name="Business Opportunities"> <text>The General Assembly finds that:</text> <level label="1"> <text>the sale of business opportunities is a field in which investment problems and deceptive practices are common; and</text> </level> <level label="2"> <text>this subtitle is needed to regulate this field adequately and prevent these deceptive practices.</text> </level> </section> <section article="gbr" article_name="Business Regulation" number="14-103" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="1" subtitle_name="Business Opportunities"> <level label="a"> <text>This subtitle applies to an offer to sell or sale of a business opportunity if:</text> <level label="1"> <text>the offeree or buyer is a resident of the State;</text> </level> <level label="2"> <text>the business opportunity will be or is operated in the State;</text> </level> <level label="3"> <text>the offer to sell is made in the State; or</text> </level> <level label="4"> <text>the offer to buy is accepted in the State.</text> </level> </level> <level label="b"> <level label="1"> <text>For purposes of this section, an offer to sell is made in the State, whether or not either party is then present in the State, if the offer:</text> <level label="i"> <text>originates from the State; or</text> </level> <level label="ii"> <text>is directed by the offeror to the State and is received at:</text> <level label="1"> <text>the place to which it is directed; or</text> </level> <level label="2"> <text>a post office in the State.</text> </level> </level> </level> <level label="2"> <text>For purposes of this section, an offer to sell is not made in the State only because the publisher circulates or there is circulated on the publisher’s behalf in the State:</text> <level label="i"> <text>a newspaper or other publication of general, regular, and paid circulation that:</text> <level label="1"> <text>is not published in the State; or</text> </level> <level label="2"> <text>is published in the State but has had more than two-thirds of its circulation outside the State during the past 12 months; or</text> </level> </level> <level label="ii"> <text>a radio or television program that originates outside the State and is received in the State.</text> </level> </level> <level label="3"> <text>For purposes of this section, an offer to buy is accepted in the State if acceptance:</text> <level label="i"> <text>is communicated to the offeror in the State; and</text> </level> <level label="ii"> <text>has not been communicated previously to the offeror, orally or in writing, outside the State.</text> </level> </level> <level label="4"> <text>For purposes of this section, acceptance is communicated to the offeror in the State, whether or not either party is then present in the State, if:</text> <level label="i"> <text>the offeree directs acceptance to the offeror in the State reasonably believing the offeror to be in the State; and</text> </level> <level label="ii"> <text>the acceptance is received at:</text> <level label="1"> <text>the place to which it is directed; or</text> </level> <level label="2"> <text>a post office in the State.</text> </level> </level> </level> </level> </section> <section article="gbr" article_name="Business Regulation" number="14-104" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="1" subtitle_name="Business Opportunities"> <level label="a"> <text>This subtitle does not apply to:</text> <level label="1"> <text>a sale of an ongoing business if the owner of the business sells and intends to sell only that one business opportunity;</text> </level> <level label="2"> <text>a not-for-profit sale, for less than $500, of sales demonstration equipment, materials, or samples;</text> </level> <level label="3"> <text>an offer to sell or sale of a franchise registered or exempt from registration under Subtitle 2 of this title;</text> </level> <level label="4"> <text>an offer to sell or sale of a business if the offer or sale is regulated under the Maryland Gasohol and Gasoline Products Marketing Act or the federal Petroleum Marketing Practices Act;</text> </level> <level label="5"> <text>an offer to sell or sale of a business opportunity with a marketing plan made in conjunction with the licensing of a federally registered trademark or service mark, provided that the seller has a minimum net worth of $1,000,000 as determined on the basis of the seller’s most recent audited financial statement prepared within 13 months of the first offer that the seller makes in the State; or</text> </level> <level label="6"> <text>any other sale or transaction if the Commissioner:</text> <level label="i"> <text>exempts the sale or transaction, by regulation or order, as not being within the purposes of this subtitle; and</text> </level> <level label="ii"> <text>finds the registration of the sale or transaction to be unnecessary, inappropriate, not in the public interest, or not for the protection of investors.</text> </level> </level> </level> <level label="b"> <text>Net worth may be determined on a consolidated basis if:</text> <level label="1"> <text>at least 80% of the seller is owned by one person; and</text> </level> <level label="2"> <text>the person that owns at least 80% of the seller expressly guarantees the obligations of the seller with regard to the offer or sale of a business opportunity that the seller seeks to exclude under this paragraph.</text> </level> </level> </section> <section article="gbr" article_name="Business Regulation" number="14-105" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="1" subtitle_name="Business Opportunities"> <text>The Commissioner may delegate any power or duty of the Commissioner under this subtitle.</text> </section> <section article="gbr" article_name="Business Regulation" number="14-106" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="1" subtitle_name="Business Opportunities"> <text>To enforce this subtitle, the Commissioner may pass orders and adopt regulations and forms.</text> </section> <section article="gbr" article_name="Business Regulation" number="14-107" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="1" subtitle_name="Business Opportunities"> <text>The Commissioner may:</text> <level label="1"> <text>publish information about violations of this subtitle and of regulations adopted and orders passed under it;</text> </level> <level label="2"> <text>report to the appropriate law enforcement officer information about violations of this subtitle; and</text> </level> <level label="3"> <text>help, develop, and hold programs of public education and information about this subtitle.</text> </level> </section> <section article="gbr" article_name="Business Regulation" number="14-108" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="1" subtitle_name="Business Opportunities"> <text>The Commissioner may investigate in or outside the State to:</text> <level label="1"> <text>determine if a person has violated this subtitle;</text> </level> <level label="2"> <text>adopt regulations or forms under this subtitle; or</text> </level> <level label="3"> <text>enforce this subtitle.</text> </level> </section> <section article="gbr" article_name="Business Regulation" number="14-109" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="1" subtitle_name="Business Opportunities"> <level label="a"> <text>The Commissioner may hold public hearings in connection with an investigation under this subtitle.</text> </level> <level label="b"> <text>Unless otherwise provided in this subtitle or in regulations adopted under it, the Commissioner shall hold hearings authorized by this subtitle in accordance with Title 10 of the State Government Article.</text> </level> </section> <section article="gbr" article_name="Business Regulation" number="14-110" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="1" subtitle_name="Business Opportunities"> <level label="a"> <level label="1"> <text>Whenever the Commissioner determines that a person has engaged or is about to engage in an act or practice that constitutes a violation of this subtitle or a violation of a regulation adopted or order passed under this subtitle, the Commissioner may, without a prior hearing, pass a summary order directing the person to cease and desist from engaging in the activity that constitutes a violation.</text> </level> <level label="2"> <text>The summary order shall provide:</text> <level label="i"> <text>notice of the opportunity for a hearing before the Commissioner to determine whether the cease and desist order should be vacated, modified, or entered as final; and</text> </level> <level label="ii"> <text>notice that the Commissioner shall enter the order as final if the person subject to the cease and desist order fails to request a hearing within 15 days after the receipt of the cease and desist order.</text> </level> </level> <level label="3"> <text>Whenever the Commissioner determines after notice and a hearing that a person has engaged in any act or practice constituting a violation of this subtitle, the Commissioner may in the discretion of the Commissioner and in addition to taking any other action authorized under this subtitle:</text> <level label="i"> <text>pass a final cease and desist order against the person;</text> </level> <level label="ii"> <text>bar the person from engaging in the offer and sale of business opportunities in the State; or</text> </level> <level label="iii"> <text>take any combination of the actions specified in this section.</text> </level> </level> </level> <level label="b"> <level label="1"> <text>The person subject to the cease and desist order may waive the right to a hearing.</text> </level> <level label="2"> <text>If a person subject to a cease and desist order waives the right to a hearing, the Commissioner is not required to hold a hearing to take any action under subsection (a)(3) of this section.</text> </level> </level> <level label="c"> <level label="1"> <text>Whenever the Commissioner determines that any person has engaged in or is about to engage in an act or practice constituting a violation of this subtitle or a violation of a regulation or order under this subtitle, the Commissioner may sue in the circuit court to obtain one or more of the following remedies:</text> <level label="i"> <text>a temporary restraining order;</text> </level> <level label="ii"> <text>a temporary or permanent injunction;</text> </level> <level label="iii"> <text>a declaratory judgment;</text> </level> <level label="iv"> <text>the appointment of a receiver or conservator for the defendant or the defendant’s assets;</text> </level> <level label="v"> <text>a freeze of the defendant’s assets;</text> </level> <level label="vi"> <text>a civil penalty up to a maximum amount of $5,000 for any single violation of this subtitle;</text> </level> <level label="vii"> <text>restitution;</text> </level> <level label="viii"> <text>rescission; or</text> </level> <level label="ix"> <text>any other relief as the court finds just.</text> </level> </level> <level label="2"> <text>The Commissioner may not be required to post a bond in any action under this section.</text> </level> </level> </section> <section article="gbr" article_name="Business Regulation" number="14-111" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="1" subtitle_name="Business Opportunities"> <text>In connection with a hearing, investigation, or other proceeding under this subtitle, the Commissioner may:</text> <level label="1"> <text>administer oaths;</text> </level> <level label="2"> <text>receive evidence; and</text> </level> <level label="3"> <text>issue subpoenas for the attendance of witnesses to testify or to produce evidence.</text> </level> </section> <section article="gbr" article_name="Business Regulation" number="14-112" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="1" subtitle_name="Business Opportunities"> <level label="a"> <text>A person is not excused from attending, testifying, or producing evidence before the Commissioner, in a proceeding brought by the Commissioner, or in obedience to a subpoena of the Commissioner on the ground that the testimony or evidence may:</text> <level label="1"> <text>tend to incriminate the person; or</text> </level> <level label="2"> <text>subject the person to a penalty or forfeiture.</text> </level> </level> <level label="b"> <level label="1"> <text>If a person claims the privilege against self-incrimination as to a specific subject, and is then compelled to testify or produce evidence on that subject, the person may not be prosecuted or subjected to a penalty or forfeiture in connection with that subject.</text> </level> <level label="2"> <text>A person who testifies is not exempt from prosecution and punishment for perjury or contempt committed while testifying.</text> </level> </level> </section> <section article="gbr" article_name="Business Regulation" number="14-113" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="1" subtitle_name="Business Opportunities"> <text>A person may not sell or offer to sell any business opportunity in the State or to any prospective buyer in the State unless the business opportunity is registered under this subtitle.</text> </section> <section article="gbr" article_name="Business Regulation" number="14-113.1" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="1" subtitle_name="Business Opportunities"> <level label="a"> <text>In order to register a business opportunity, the seller shall file with the Commissioner one of the following disclosure documents:</text> <level label="1"> <text>a uniform franchise offering circular prepared in accordance with the guidelines adopted by the North American Securities Administrators Association, Inc., as amended through January 1, 1996;</text> </level> <level label="2"> <text>a disclosure document prepared in accordance with the Federal Trade Commission rule entitled “Disclosure Requirements and Prohibitions Concerning Franchising and Business Opportunity Ventures” under 16 C.F.R. Part 436;</text> </level> <level label="3"> <text>a disclosure document prepared in accordance with § 14-114 of this subtitle; or</text> </level> <level label="4"> <text>any other document that the Commissioner specifies by regulation or order.</text> </level> </level> <level label="b"> <text>The seller shall attach to the disclosure document filed in accordance with subsection (a) of this section:</text> <level label="1"> <text>the cover sheet required under § 14-114(b) of this subtitle;</text> </level> <level label="2"> <text>the consent to service of process required under subsection (c) of this section; and</text> </level> <level label="3"> <text>the filing fee required under subsection (d) of this section.</text> </level> </level> <level label="c"> <level label="1"> <text>Every seller shall file, in a form that the Commissioner requires, an irrevocable consent appointing the Commissioner as the seller’s registered agent in any noncriminal suit, action, or proceeding against the seller or the successor or personal representative of the seller that arises under this subtitle.</text> </level> <level label="2"> <text>After the consent has been filed, the consent has the same force and validity as if served personally on the person filing the consent.</text> </level> <level label="3"> <text>Service may be made by delivering a copy of the process to the office of the Commissioner.</text> </level> <level label="4"> <text>Service made under paragraph (3) of this subsection is not effective unless:</text> <level label="i"> <text>the plaintiff or petitioner, who may be the Commissioner, promptly sends notice of the service and a copy of the process by registered or certified mail to the defendant or respondent, at the address on file with the Commissioner; and</text> </level> <level label="ii"> <text>the plaintiff’s affidavit of compliance under this subsection is filed in the noncriminal suit, action, or proceeding on or before the return date of the process, if any, or within further time as the court allows.</text> </level> </level> </level> <level label="d"> <text>The initial fee to file an application to register a business opportunity offering is $250.</text> </level> <level label="e"> <level label="1"> <text>A business opportunity offering registration becomes effective at midnight on the 10th business day after the day on which the seller files all required documents for registration, provided that no order has been passed or proceeding is pending under § 14-119 of this subtitle.</text> </level> <level label="2"> <text>By order, the Commissioner:</text> <level label="i"> <text>may waive or reduce the time period between the date of the filing and the date that the registration is effective if the seller has filed all required documents for registration; or</text> </level> <level label="ii"> <text>may postpone the date that the registration becomes effective at midnight on the 10th business day after the day on which the seller files an amendment to the registration.</text> </level> </level> </level> <level label="f"> <text>The registration is effective for 1 year from the date of effectiveness.</text> </level> <level label="g"> <text>The Commissioner may by regulation require the filing of all proposed literature or advertising prior to its use.</text> </level> <level label="h"> <text>The Commissioner may by regulation require the filing of sales reports.</text> </level> </section> <section article="gbr" article_name="Business Regulation" number="14-114" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="1" subtitle_name="Business Opportunities"> <level label="a"> <text>A person may not sell or offer to sell a business opportunity unless a written disclosure document, filed under § 14–113.1(a) of this subtitle, is delivered to the buyer at least 10 full business days before the buyer executes a contract or an agreement that imposes a binding legal obligation on the buyer or the payment by a buyer of any consideration in connection with the sale or offer to sell a business opportunity.</text> </level> <level label="b"> <text>The disclosure statement shall include a cover sheet that contains only:</text> <level label="1"> <text>a heading, in boldface capital letters in 10–point or larger type, that states “disclosure required by Maryland law”;</text> </level> <level label="2"> <text>under the heading, in 10–point or larger type, the following statement: “The State of Maryland has not reviewed and does not approve, recommend, endorse, or sponsor any business opportunity. The information in this disclosure statement has not been verified by the State. If you have any questions about this investment, see an attorney before you sign a contract or contact the Division of Securities in the Office of the Attorney General. You are to be given 10 business days to review this document before signing any contract or agreement or making any payment to the seller or the seller’s representative.”; and</text> </level> <level label="3"> <text>the current address and telephone number of the Division of Securities.</text> </level> </level> <level label="c"> <text>After the cover sheet, the disclosure statement shall include the following information:</text> <level label="1"> <text>the name and address of the seller;</text> </level> <level label="2"> <text>whether the seller is doing business as an individual, partnership, or corporation;</text> </level> <level label="3"> <text>the names under which the seller has done, is doing, or intends to do business;</text> </level> <level label="4"> <text>the name of any parent or affiliated company that will engage in business transactions with buyers or that takes responsibility for statements of the seller;</text> </level> <level label="5"> <text>the name, address, and title of each of the seller’s officers, directors, trustees, general partners, general managers, principal executives, and others responsible for the seller’s activities that relate to the sale of business opportunities;</text> </level> <level label="6"> <text>the names and residential addresses of the salespersons who engage in the sale or offer to sell a business opportunity in the State;</text> </level> <level label="7"> <text>prior business experience of the seller relating to business opportunities, including:</text> <level label="i"> <text>the name, address, and a description of any business opportunity previously offered by the seller;</text> </level> <level label="ii"> <text>the length of time the seller has offered each business opportunity; and</text> </level> <level label="iii"> <text>the length of time the seller has conducted the business opportunity currently being offered to the buyer;</text> </level> </level> <level label="8"> <text>a full and detailed description of the acts and services that the seller agrees to perform for the buyer;</text> </level> <level label="9"> <level label="i"> <text>whether the seller or any person described in item (5) of this subsection has been convicted of a felony, has pleaded nolo contendere to a felony charge, or has been adjudged liable in a civil action, if the felony or civil action involved fraud, embezzlement, fraudulent conversion, or misappropriation of property; and</text> </level> <level label="ii"> <text>if so, the court, date of the conviction or the judgment, and any penalty imposed or damages assessed;</text> </level> </level> <level label="10"> <level label="i"> <text>whether the seller or any person described in item (5) of this subsection is subject to:</text> <level label="1"> <text>a currently effective order of the Federal Trade Commission; or</text> </level> <level label="2"> <text>a currently effective order that enjoins or restricts business activity as a result of an action brought by a public agency, including an action that affects a license as a real estate broker, associate real estate broker, or real estate salesperson; and</text> </level> </level> <level label="ii"> <text>if so, the date, nature, and issuer of the order and any penalty imposed;</text> </level> </level> <level label="11"> <text>whether the seller or any person identified in item (5) of this subsection has filed for bankruptcy, been adjudged bankrupt, been reorganized due to insolvency, or was an owner, principal officer, or general partner of any other person that has filed bankruptcy, been adjudged bankrupt, or was reorganized due to insolvency during or within the last 7 years;</text> </level> <level label="12"> <text>a copy of the form of agreement proposed;</text> </level> <level label="13"> <text>the conditions of any financing arrangement offered directly or indirectly by the seller or an agent or affiliate of the seller;</text> </level> <level label="14"> <text>whether the buyer receives an exclusive territory;</text> </level> <level label="15"> <text>a complete description of any training that the seller promises, including the length of the training;</text> </level> <level label="16"> <text>a complete description of:</text> <level label="i"> <text>any services that the seller promises will be performed in connection with the placement of the buyer’s products, equipment, or supplies at various locations; and</text> </level> <level label="ii"> <text>the kind of agreement to be made with the owner or manager of each location;</text> </level> </level> <level label="17"> <text>a complete description of any licenses or permits that are necessary in order for the buyer to operate or engage in the business opportunity;</text> </level> <level label="18"> <text>if the seller gets a surety bond under § 14–115 of this subtitle, the following statement, or a similar statement required by the Commissioner: “As required by Maryland law, the seller has secured a bond issued by _____� (name and address of surety company), a surety company authorized to do business in the State. Before signing a contract to buy this business opportunity, you should ask the surety company about the current status of the bond.”;</text> </level> <level label="19"> <text>if the seller establishes a trust account under § 14–115 of this subtitle, the following statement, or a similar statement required by the Commissioner: “As required by Maryland law, the seller has established a trust account _____� (account number) with _____� (name and address of bank or savings institution). Before signing a contract to buy this business opportunity, you should ask the bank or savings institution about the current status of the trust account.”;</text> </level> <level label="20"> <text>the following statement: “If the seller fails to deliver the products, equipment, or supplies necessary to begin substantial operation of the business within 45 days after the delivery date stated in your contract, you may notify the seller in writing and demand that the contract be canceled.”;</text> </level> <level label="21"> <text>if the seller makes a statement about sales, earnings, or range of sales or earnings that may be made through the business opportunity, a statement of:</text> <level label="i"> <text>the total number of buyers who have bought from the seller, within 3 years before the date of the disclosure statement, business opportunities that involve the products, equipment, supplies, or services being offered; and</text> </level> <level label="ii"> <text>to the seller’s knowledge, the total number of those buyers who have actually received earnings in the amount or range specified;</text> </level> </level> <level label="22"> <text>a statement of:</text> <level label="i"> <text>the total number of business opportunities that are the same or similar in nature to those that have been sold or organized by the seller;</text> </level> <level label="ii"> <text>the names and addresses of buyers who have requested a refund or rescission from the seller within the last 12 months and the number of those buyers who have received the refund or rescission; and</text> </level> <level label="iii"> <text>the total number of business opportunities that the seller intends to sell in the State within the next 12 months;</text> </level> </level> <level label="23"> <text>a copy of the most recent audited financial statement of the seller, prepared within 13 months after the date of the first offer in the State, together with a statement of any material changes in the financial condition of the seller from the date of the most recent audited financial statement;</text> </level> <level label="24"> <text>a list of states in which this business opportunity is registered;</text> </level> <level label="25"> <text>a list of states in which the disclosure statement is on file;</text> </level> <level label="26"> <text>a list of states that have denied, suspended, or revoked the registration of this business opportunity;</text> </level> <level label="27"> <text>a section entitled “Risk Factors” containing a series of concise statements summarizing the principal factors that make this business opportunity a high risk or of a speculative nature, each statement including a cross–reference to the page on which further information regarding that risk factor may be found in the disclosure document; and</text> </level> <level label="28"> <text>any other information that the Commissioner requires by regulation or order.</text> </level> </level> </section> <section article="gbr" article_name="Business Regulation" number="14-115" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="1" subtitle_name="Business Opportunities"> <level label="a"> <text>If a seller guarantees that a buyer will derive from a business opportunity income that will exceed the price paid for the business opportunity or represents that the seller will refund all or part of the price paid or repurchase the products, equipment, or supplies sold or leased by the seller if the buyer is not satisfied with the business opportunity, the seller shall:</text> <level label="1"> <text>get a surety bond in favor of the State from a surety company authorized to do business in the State; or</text> </level> <level label="2"> <text>establish a trust account in favor of the State with an insured bank or savings institution in the State.</text> </level> </level> <level label="b"> <text>The amount of the bond or trust account shall be at least $50,000.</text> </level> <level label="c"> <level label="1"> <text>A person may bring an action against the bond or trust account to recover damages resulting from:</text> <level label="i"> <text>a violation of this subtitle; or</text> </level> <level label="ii"> <text>the seller’s breach of the contract for the sale of a business opportunity.</text> </level> </level> <level label="2"> <text>The surety or trustee is liable only for actual damages up to the amount of the bond or trust account.</text> </level> </level> </section> <section article="gbr" article_name="Business Regulation" number="14-116" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="1" subtitle_name="Business Opportunities"> <text>The seller shall:</text> <level label="1"> <text>file with the Commissioner an amendment to the documents previously submitted to the Commissioner whenever a material change in the required information occurs; and</text> </level> <level label="2"> <text>pay a fee of $50 for filing the amendment.</text> </level> </section> <section article="gbr" article_name="Business Regulation" number="14-117" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="1" subtitle_name="Business Opportunities"> <level label="a"> <text>Unless the registration of a business opportunity is renewed for a 1-year term as provided in this section, the registration expires on the first anniversary of its effective date.</text> </level> <level label="b"> <text>Before the registration expires, the registrant periodically may renew it for an additional 1-year term, if the registrant:</text> <level label="1"> <text>files with the Commissioner:</text> <level label="i"> <text>a renewal application on the form that the Commissioner provides;</text> </level> <level label="ii"> <text>a current disclosure document along with any other documents or information that the Commissioner may require by order or regulation; and</text> </level> <level label="iii"> <text>proof that the seller has satisfied the bond and trust account requirements under § 14-115 of this subtitle; and</text> </level> </level> <level label="2"> <text>pays a renewal fee of $100.</text> </level> </level> <level label="c"> <text>The Commissioner shall renew the registration of a business opportunity if the registrant complies with the requirements of this section.</text> </level> </section> <section article="gbr" article_name="Business Regulation" number="14-118" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="1" subtitle_name="Business Opportunities"> <level label="a"> <text>Each contract for the sale of a business opportunity shall be in writing.</text> </level> <level label="b"> <text>The contract shall include:</text> <level label="1"> <text>the terms and conditions of payment;</text> </level> <level label="2"> <text>a full and detailed description of the acts or services that the seller agrees to perform for the buyer;</text> </level> <level label="3"> <text>the address of the seller’s principal office;</text> </level> <level label="4"> <text>the name and address of the seller’s resident agent; and</text> </level> <level label="5"> <text>the approximate date that the seller will deliver to the buyer any products, equipment, or supplies.</text> </level> </level> <level label="c"> <text>When a buyer signs a contract for the sale of a business opportunity, the seller shall give the buyer a copy of the contract.</text> </level> </section> <section article="gbr" article_name="Business Regulation" number="14-119" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="1" subtitle_name="Business Opportunities"> <level label="a"> <text>The Commissioner may pass an order denying effectiveness to, or suspending or revoking the effectiveness of, any registration if the Commissioner finds that the order is in the public interest and that:</text> <level label="1"> <level label="i"> <text>the registration as of its effective date, or as of any earlier date in the case of an order denying effectiveness, is incomplete in any material respect or contains any statement made that was, in light of the circumstances under which it was made, false or misleading with respect to any material fact;</text> </level> <level label="ii"> <text>an amendment as of its effective date is incomplete in any material respect or contains any statement made that was, in light of the circumstances under which it was made, false or misleading with respect to any material fact; or</text> </level> <level label="iii"> <text>a report is incomplete in any material respect or contains any statement made that was, in light of the circumstances under which it was made, false or misleading with respect to any material fact;</text> </level> </level> <level label="2"> <text>any provision of this subtitle or any order or condition lawfully imposed under this subtitle has been violated, in connection with the business opportunity by:</text> <level label="i"> <text>the person filing the registration;</text> </level> <level label="ii"> <text>a seller, any partner, officer, or director of the seller, or any person occupying a similar status or performing similar functions as the seller; or</text> </level> <level label="iii"> <text>a person that directly or indirectly controls or is controlled by the seller if the person filing the registration is directly or indirectly controlled by or acting for the seller;</text> </level> </level> <level label="3"> <text>except as provided in paragraph (4) of this subsection, the business opportunity registered or sought to be registered is the subject of an order denying, suspending, or revoking a registration or a permanent or temporary injunction of any court of competent jurisdiction;</text> </level> <level label="4"> <text>the seller’s enterprise or method of business, or that of the business opportunity, includes or would include activities that are illegal where performed;</text> </level> <level label="5"> <text>the business opportunity or the offering of a business opportunity has worked or tended to work a fraud upon purchasers or would so operate;</text> </level> <level label="6"> <text>there has been a failure to file any documents or information required by § 14-113.1 of this subtitle; or</text> </level> <level label="7"> <text>the seller’s literature or advertising is misleading, incorrect, incomplete, or deceptive.</text> </level> </level> <level label="b"> <level label="1"> <text>The Commissioner may enter a denial order if the Commissioner finds that the order is in the public interest and the seller has failed to pay the proper registration fee.</text> </level> <level label="2"> <text>The Commissioner shall vacate any such order when the deficiency has been corrected.</text> </level> </level> <level label="c"> <text>The Commissioner may not:</text> <level label="1"> <text>institute a proceeding against an effective registration under subsection (a)(3) of this section more than 1 year after the date of the order or injunction relied on; or</text> </level> <level label="2"> <text>pass an order under subsection (a)(3) of this section on the basis of an order or injunction entered under any other state act unless that order or injunction was based on facts which would currently constitute grounds for an order under this section.</text> </level> </level> <level label="d"> <text>By order, the Commissioner summarily may postpone or suspend the effectiveness of the registration pending final determination of any proceeding under this section.</text> </level> <level label="e"> <text>Upon the entry of the order, the Commissioner shall promptly notify the seller:</text> <level label="1"> <text>that the order has been entered;</text> </level> <level label="2"> <text>the basis for the order; and</text> </level> <level label="3"> <text>that within 15 days after the day on which the Commissioner receives a written request by the seller, the matter will be set down for a hearing.</text> </level> </level> <level label="f"> <text>If the seller fails to request a hearing and the Commissioner fails to order a hearing, the order shall remain in effect until the Commissioner modifies or vacates the order.</text> </level> <level label="g"> <text>If the seller requests a hearing or the Commissioner orders a hearing, the Commissioner, after providing notice of an opportunity for hearing to the seller, may modify or vacate the order or extend it until final determination.</text> </level> <level label="h"> <text>The Commissioner may not enter an order described under subsection (b) of this section without first providing to the seller notice in accordance with subsection (e) of this section, an opportunity for hearing, and written findings of fact and conclusions of law.</text> </level> <level label="i"> <text>If the Commissioner finds that the conditions which prompted its entry have changed or that it is otherwise in the public interest, the Commissioner may vacate or modify an order passed under this section.</text> </level> </section> <section article="gbr" article_name="Business Regulation" number="14-120" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="1" subtitle_name="Business Opportunities"> <text>In connection with an offer to sell or sale of a business opportunity, a person may not make any untrue statement of a material fact or omit to state a material fact necessary in order to make the statement made, in light of the circumstances under which it is made, not misleading.</text> </section> <section article="gbr" article_name="Business Regulation" number="14-121" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="1" subtitle_name="Business Opportunities"> <text>In connection with an offer to sell or sale of a business opportunity, a person may not engage in any act, practice, or course of business or employ any device, scheme, or artifice to defraud that operates or would operate as a fraud or deceit on another person.</text> </section> <section article="gbr" article_name="Business Regulation" number="14-122" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="1" subtitle_name="Business Opportunities"> <text>In connection with an offer to sell or sale of a business opportunity, a person may not represent that the business opportunity provides income or earning potential of any kind unless:</text> <level label="1"> <text>the seller has documentation to substantiate the representation; and</text> </level> <level label="2"> <text>the person discloses the documentation to the prospective buyer when the representation is made.</text> </level> </section> <section article="gbr" article_name="Business Regulation" number="14-123" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="1" subtitle_name="Business Opportunities"> <text>In connection with an offer to sell or sale of a business opportunity, a person may not use the trademark, service mark, trade name, logotype, advertising, or other commercial symbol of a business unless:</text> <level label="1"> <text>the business controls the ownership interest in the seller;</text> </level> <level label="2"> <text>the business accepts responsibility for each representation that the seller makes about the business opportunity; or</text> </level> <level label="3"> <text>it is clear from the circumstances that the owner of the commercial symbol is not involved in the sale of the business opportunity.</text> </level> </section> <section article="gbr" article_name="Business Regulation" number="14-124" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="1" subtitle_name="Business Opportunities"> <text>In connection with an offer to sell or sale of a business opportunity, a person may not make or authorize making a reference to compliance with this subtitle in an advertisement or other contact with prospective buyers other than by use of the disclosure statement or other disclosure documents required by this subtitle.</text> </section> <section article="gbr" article_name="Business Regulation" number="14-125" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="1" subtitle_name="Business Opportunities"> <level label="a"> <text>In connection with an offer to sell or sale of a business opportunity, a person may not fail to deliver products, equipment, or supplies necessary to begin substantial operation of the business within 45 days after the delivery date stated in the contract for the sale of the business opportunity.</text> </level> <level label="b"> <text>This section does not apply if the Commissioner or a court in a civil proceeding finds that the failure is due to the conditions stated in § 2-615 of the Commercial Law Article.</text> </level> </section> <section article="gbr" article_name="Business Regulation" number="14-126" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="1" subtitle_name="Business Opportunities"> <level label="a"> <level label="1"> <text>If a seller violates a provision of §§ 14-120 through 14-125 of this subtitle, the buyer, within 1 year after the date of a contract for the sale of a business opportunity:</text> <level label="i"> <text>may void the contract; and</text> </level> <level label="ii"> <text>is entitled to receive from the seller a refund of any money paid to the seller.</text> </level> </level> <level label="2"> <text>On receipt of the refund, the buyer shall make available to the seller any products, equipment, or supplies received from the seller at:</text> <level label="i"> <text>the buyer’s address; or</text> </level> <level label="ii"> <text>the place where the products, equipment, or supplies were located when notice to void the contract was given.</text> </level> </level> <level label="3"> <text>However, the buyer may not be unjustly enriched by exercising a remedy under this subsection.</text> </level> </level> <level label="b"> <text>A buyer may sue for damages, including reasonable attorney’s fees, if the buyer is injured by:</text> <level label="1"> <text>a violation of this subtitle; or</text> </level> <level label="2"> <text>the seller’s breach of a contract for the sale of a business opportunity.</text> </level> </level> <level label="c"> <text>On complaint that a seller has violated this subtitle, the circuit court may enjoin the seller from further violation.</text> </level> <level label="d"> <text>The remedies in this section are in addition to any other remedy provided by law or in equity.</text> </level> </section> <section article="gbr" article_name="Business Regulation" number="14-127" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="1" subtitle_name="Business Opportunities"> <level label="a"> <text>A person who sells a business opportunity may not, in a disclosure statement or amendment to it, willfully make a false or misleading statement of a material fact or willfully omit to state a material fact required or necessary to make the statements in a disclosure statement not misleading.</text> </level> <level label="b"> <text>A person who violates this section is guilty of a felony and, on conviction, is subject for each violation to a fine not exceeding $10,000 or imprisonment not exceeding 5 years or both.</text> </level> </section> <section article="gbr" article_name="Business Regulation" number="14-128" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="1" subtitle_name="Business Opportunities"> <text>A person who violates this subtitle is guilty of a misdemeanor and, unless another criminal penalty is specifically provided elsewhere, on conviction, is subject to a fine not exceeding $1,000 or imprisonment not exceeding 1 year or both.</text> </section> <section article="gbr" article_name="Business Regulation" number="14-129" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="1" subtitle_name="Business Opportunities"> <text>This subtitle is the Maryland Business Opportunity Sales Act.</text> </section> <section article="gbr" article_name="Business Regulation" number="14-201" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="2" subtitle_name="Franchises"> <level label="a"> <text>In this subtitle the following words have the meanings indicated.</text> </level> <level label="b"> <text>“Advertisement” means a communication that:</text> <level label="1"> <text>is published in connection with an offer to sell or sale of a franchise; and</text> </level> <level label="2"> <text>is:</text> <level label="i"> <text>written or printed;</text> </level> <level label="ii"> <text>made by means of a recorded telephone message; or</text> </level> <level label="iii"> <text>spoken on radio, television, or similar communications media.</text> </level> </level> </level> <level label="c"> <text>“Area franchise” means an agreement between a franchisor and subfranchisor in which, for consideration, the subfranchisor is granted the right to sell or negotiate the sale of franchises in the name of or for the franchisor.</text> </level> <level label="d"> <text>“Commissioner” means the Securities Commissioner in the Office of the Attorney General.</text> </level> <level label="e"> <level label="1"> <text>“Franchise” means an expressed or implied, oral or written agreement in which:</text> <level label="i"> <text>a purchaser is granted the right to engage in the business of offering, selling, or distributing goods or services under a marketing plan or system prescribed in substantial part by the franchisor;</text> </level> <level label="ii"> <text>the operation of the business under the marketing plan or system is associated substantially with the trademark, service mark, trade name, logotype, advertising, or other commercial symbol that designates the franchisor or its affiliate; and</text> </level> <level label="iii"> <text>the purchaser must pay, directly or indirectly, a franchise fee.</text> </level> </level> <level label="2"> <text>“Franchise” includes an area franchise.</text> </level> </level> <level label="f"> <level label="1"> <text>“Franchise fee” means a charge or payment that a franchisee or subfranchisor is required or agrees to pay for the right to enter into a business under a franchise agreement.</text> </level> <level label="2"> <text>“Franchise fee” includes payment for goods or services.</text> </level> <level label="3"> <text>“Franchise fee” does not include:</text> <level label="i"> <text>the purchase of or agreement to purchase goods at a wholesale price;</text> </level> <level label="ii"> <text>the payment of a reasonable service charge to the issuer of a credit card by an establishment that accepts the credit card;</text> </level> <level label="iii"> <text>the amount paid to a licensed trading stamp company by a person issuing trading stamps in connection with the retail sale of goods or services;</text> </level> <level label="iv"> <text>the purchase of or agreement to purchase goods on consignment, if the proceeds remitted by the franchisee from the sale are the wholesale price of the goods;</text> </level> <level label="v"> <text>the repayment by a franchisee of a bona fide loan that the franchisor has made to the franchisee;</text> </level> <level label="vi"> <text>the purchase of or agreement to purchase goods at a retail price subject to a commission or compensation plan that in substance is a wholesale transaction;</text> </level> <level label="vii"> <text>the purchase of or agreement to purchase, at their fair market value, supplies or fixtures that are needed to enter into the business or continue the business under a franchise agreement;</text> </level> <level label="viii"> <text>the purchase or lease of or agreement to purchase or lease, at its fair market value, real property that is needed to enter into the business or continue the business under a franchise agreement; and</text> </level> <level label="ix"> <text>the amount paid for sales demonstration material and equipment, sold at no profit by the seller, for use in making sales and not for resale.</text> </level> </level> </level> <level label="g"> <text>“Franchisee” means a person to whom a franchise is granted.</text> </level> <level label="h"> <text>“Franchisor” means a person who grants a franchise.</text> </level> <level label="i"> <text>“Subfranchisor” means a person to whom an area franchise is granted.</text> </level> </section> <section article="gbr" article_name="Business Regulation" number="14-202" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="2" subtitle_name="Franchises"> <level label="a"> <text>The General Assembly finds that:</text> <level label="1"> <text>franchising has played a role in the State’s economy by enabling residents to open and operate businesses in the State;</text> </level> <level label="2"> <text>the widespread sale of franchises, while offering opportunities to State residents, also involves complex agreements and substantial investments that can create and have created many investment and business risks for franchisees, franchisors, and subfranchisors; and</text> </level> <level label="3"> <text>franchisees may suffer losses when the franchisee has not been given complete and accurate information about:</text> <level label="i"> <text>the nature of the franchisor–franchisee relationship;</text> </level> <level label="ii"> <text>the terms and obligations of the franchise agreement; and</text> </level> <level label="iii"> <text>the business experience and operational practices of the franchisor or its representative.</text> </level> </level> </level> <level label="b"> <text>The intent of this subtitle is to:</text> <level label="1"> <text>give each prospective franchisee necessary information about any franchise offer;</text> </level> <level label="2"> <text>promote honesty, transparency, and accountability in the offer and sale of franchises;</text> </level> <level label="3"> <text>prevent practices that would result in fraud or a likelihood that the franchisor’s representations would not be fulfilled;</text> </level> <level label="4"> <text>protect the franchisor–franchisee relationship; and</text> </level> <level label="5"> <text>support the continued growth of franchising as a business model in the State.</text> </level> </level> </section> <section article="gbr" article_name="Business Regulation" number="14-203" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="2" subtitle_name="Franchises"> <level label="a"> <text>This subtitle applies to an offer to sell or sale of a franchise if:</text> <level label="1"> <text>the franchisee must pay a franchise fee of more than $100; and</text> </level> <level label="2"> <level label="i"> <text>the offeree or franchisee is a resident of the State;</text> </level> <level label="ii"> <text>the franchised business will be or is operated in the State;</text> </level> <level label="iii"> <text>the offer to sell is made in the State; or</text> </level> <level label="iv"> <text>the offer to buy is accepted in the State.</text> </level> </level> </level> <level label="b"> <level label="1"> <text>For purposes of this section, an offer to sell is made in the State if the offer:</text> <level label="i"> <text>originates from the State; or</text> </level> <level label="ii"> <text>is directed by the offeror to the State and is received at the place to which it is directed.</text> </level> </level> <level label="2"> <text>For purposes of this section, an offer to sell is not made in the State only because the franchisor circulates or there is circulated on the franchisor’s behalf in the State an advertisement in:</text> <level label="i"> <text>a newspaper or other publication of general, regular, and paid circulation that has had two-thirds of its circulation outside the State during the past 12 months; or</text> </level> <level label="ii"> <text>a radio or television broadcast that originates outside the State and is received in the State.</text> </level> </level> <level label="3"> <text>For purposes of this section, an offer to buy is accepted in the State when acceptance is communicated to the offeror in the State.</text> </level> <level label="4"> <text>For purposes of this section, acceptance is communicated to the offeror in the State when:</text> <level label="i"> <text>the offeree directs acceptance to the offeror in the State reasonably believing the offeror to be in the State; and</text> </level> <level label="ii"> <text>the acceptance is received at the place to which it is directed.</text> </level> </level> </level> <level label="c"> <text>This subtitle does not apply to the renewal or extension of an existing franchise if there is no interruption in the operation of the franchised business.</text> </level> </section> <section article="gbr" article_name="Business Regulation" number="14-204" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="2" subtitle_name="Franchises"> <text>The powers, remedies, procedures, and penalties of this subtitle are in addition to and not in limitation of any other powers, remedies, procedures, and penalties provided by law.</text> </section> <section article="gbr" article_name="Business Regulation" number="14-205" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="2" subtitle_name="Franchises"> <text>The Commissioner may delegate any power or duty of the Commissioner under this subtitle.</text> </section> <section article="gbr" article_name="Business Regulation" number="14-206" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="2" subtitle_name="Franchises"> <text>The Commissioner may adopt and enforce regulations to administer and enforce this subtitle.</text> </section> <section article="gbr" article_name="Business Regulation" number="14-207" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="2" subtitle_name="Franchises"> <level label="a"> <text>The Commissioner may publish information about violations of this subtitle.</text> </level> <level label="b"> <text>Under regulations that the Commissioner adopts, the Commissioner may make available to any person any information submitted to the Commissioner.</text> </level> </section> <section article="gbr" article_name="Business Regulation" number="14-208" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="2" subtitle_name="Franchises"> <text>The Commissioner may:</text> <level label="1"> <text>investigate in or outside the State to:</text> <level label="i"> <text>determine if a person has violated this subtitle or a regulation adopted or order passed under it;</text> </level> <level label="ii"> <text>adopt regulations or forms under this subtitle; or</text> </level> <level label="iii"> <text>enforce this subtitle; and</text> </level> </level> <level label="2"> <text>require or allow a person to submit a written statement, under oath or otherwise as the Commissioner determines, about the matter being investigated.</text> </level> </section> <section article="gbr" article_name="Business Regulation" number="14-209" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="2" subtitle_name="Franchises"> <level label="a"> <text>On request, the Commissioner may issue an interpretive opinion.</text> </level> <level label="b"> <level label="1"> <text>A request for an interpretive opinion shall be in writing.</text> </level> <level label="2"> <text>The requester shall pay a fee of $100.</text> </level> </level> </section> <section article="gbr" article_name="Business Regulation" number="14-210" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="2" subtitle_name="Franchises"> <level label="a"> <level label="1"> <text>Whenever the Commissioner finds that a person has violated or is about to violate this subtitle or a regulation adopted or order passed under it, the Commissioner may order the person to cease and desist from the further offer to sell or sale of the franchise until the offer or sale complies with this subtitle.</text> </level> <level label="2"> <text>After passage of a cease and desist order, the alleged violator may submit to the Commissioner a written request for a hearing.</text> </level> <level label="3"> <text>The hearing shall begin:</text> <level label="i"> <text>within 15 business days after the Commissioner receives the request for a hearing; or</text> </level> <level label="ii"> <text>at a later date, with the consent of the alleged violator.</text> </level> </level> <level label="4"> <text>Unless there is a timely hearing, the cease and desist order is rescinded.</text> </level> </level> <level label="b"> <level label="1"> <text>Whenever the Commissioner finds that a person has violated or is about to violate this subtitle or a regulation adopted or order passed under it, the Commissioner may sue in the circuit court to enjoin the violation or enforce this subtitle or the regulation or order.</text> </level> <level label="2"> <text>The court shall:</text> <level label="i"> <text>determine if a violation of this subtitle has been or is about to be committed; and</text> </level> <level label="ii"> <text>if so, pass any order the court considers necessary to prevent the violation or remove the effects of the violation and prevent it from continuing or being renewed in the future.</text> </level> </level> <level label="3"> <text>The court may exercise all equitable powers necessary for this purpose, including:</text> <level label="i"> <text>injunction;</text> </level> <level label="ii"> <text>revocation, forfeiture, or suspension of the charter authority or privileges of a business organization operating under the laws of the State;</text> </level> <level label="iii"> <text>dissolution of a corporation or association organized under the laws of the State;</text> </level> <level label="iv"> <text>suspension or termination of the right of a corporation or association organized under the laws of another state or country to do business in the State;</text> </level> <level label="v"> <text>restitution;</text> </level> <level label="vi"> <text>restraining order;</text> </level> <level label="vii"> <text>award of damages to be paid by a franchisor or subfranchisor to a person injured by a violation of this subtitle; and</text> </level> <level label="viii"> <text>appointment of a receiver or conservator.</text> </level> </level> <level label="4"> <text>The court may not require the Commissioner to post bond.</text> </level> </level> <level label="c"> <text>The Commissioner may not exercise a power under this section more than 5 years after the violation occurs.</text> </level> </section> <section article="gbr" article_name="Business Regulation" number="14-211" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="2" subtitle_name="Franchises"> <level label="a"> <level label="1"> <text>The Commissioner may refer to the State’s Attorney evidence of a criminal violation of this subtitle.</text> </level> <level label="2"> <text>With or without the referral of evidence, a State’s Attorney may bring appropriate criminal proceedings under this subtitle.</text> </level> </level> <level label="b"> <text>A criminal proceeding may not be brought more than 3 years after the alleged violation.</text> </level> </section> <section article="gbr" article_name="Business Regulation" number="14-212" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="2" subtitle_name="Franchises"> <text>In connection with an investigation or proceeding under this subtitle, the Commissioner may:</text> <level label="1"> <text>administer oaths;</text> </level> <level label="2"> <text>receive evidence; and</text> </level> <level label="3"> <text>issue subpoenas for the attendance of witnesses to:</text> <level label="i"> <text>testify; or</text> </level> <level label="ii"> <text>produce evidence.</text> </level> </level> </section> <section article="gbr" article_name="Business Regulation" number="14-213" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="2" subtitle_name="Franchises"> <level label="a"> <text>A person is not excused from attending, testifying, or producing evidence before the Commissioner, in a proceeding brought by the Commissioner, or in obedience to a subpoena of the Commissioner on the ground that the testimony or evidence may:</text> <level label="1"> <text>tend to incriminate the person; or</text> </level> <level label="2"> <text>subject the person to a penalty or forfeiture.</text> </level> </level> <level label="b"> <level label="1"> <text>If a person claims the privilege against self-incrimination as to a specific subject, and is then compelled to testify or produce evidence on that subject, the person may not be prosecuted or subjected to a penalty or forfeiture in connection with that subject.</text> </level> <level label="2"> <text>A person who testifies is not exempt from prosecution and punishment for perjury or contempt committed while testifying.</text> </level> </level> </section> <section article="gbr" article_name="Business Regulation" number="14-214" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="2" subtitle_name="Franchises"> <level label="a"> <text>Except as otherwise provided in this subtitle, a person must register the offer of a franchise with the Commissioner before the person offers to sell, through advertisement or otherwise, or sells the franchise in the State.</text> </level> <level label="b"> <text>The registration requirement of this section does not apply to:</text> <level label="1"> <text>a transaction by an executor, administrator, sheriff, receiver, trustee in bankruptcy, guardian, or conservator;</text> </level> <level label="2"> <text>an offer to sell or sale of a franchise that is substantially similar to a franchise already owned by the offeree or buyer; and</text> </level> <level label="3"> <text>any other transaction that the Commissioner exempts by regulation because:</text> <level label="i"> <text>the transaction is not within the purpose of this subtitle; and</text> </level> <level label="ii"> <text>the registration of the transaction is not necessary or appropriate in the public interest or for the protection of investors.</text> </level> </level> </level> <level label="c"> <level label="1"> <text>The registration requirement of this section does not apply to the offer to sell or sale of a franchise by a franchisee for the franchisee’s own account, or the offer to sell or sale of the entire area franchise owned by a subfranchisor for the subfranchisor’s own account.</text> </level> <level label="2"> <text>A sale is not effected by or through a franchisor merely because a franchisor has a right to approve or disapprove a different franchisee.</text> </level> </level> <level label="d"> <level label="1"> <text>The Commissioner may require by regulation that a franchisor or subfranchisor who claims under subsection (b)(3) of this section to be exempt from the registration requirements of this section:</text> <level label="i"> <text>file with the Commissioner a notice of claim of exemption in the form that the Commissioner requires; and</text> </level> <level label="ii"> <text>pay a fee of $250.</text> </level> </level> <level label="2"> <text>The franchisor or subfranchisor shall sign and verify the notice of claim of exemption.</text> </level> </level> </section> <section article="gbr" article_name="Business Regulation" number="14-215" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="2" subtitle_name="Franchises"> <level label="a"> <text>Except as otherwise provided in this section, an applicant for registration shall:</text> <level label="1"> <text>file with the Commissioner:</text> <level label="i"> <text>an application in the form that the Commissioner requires; and</text> </level> <level label="ii"> <text>a prospectus for the franchise; and</text> </level> </level> <level label="2"> <text>pay an application fee of $500.</text> </level> </level> <level label="b"> <text>Instead of the application for registration and prospectus described in subsection (a) of this section, the Commissioner may accept an application for registration and prospectus that:</text> <level label="1"> <text>are found by the Commissioner to include disclosure requirements similar to those of this subtitle; and</text> </level> <level label="2"> <text>are:</text> <level label="i"> <text>required by a unit of the federal government or another state government; or</text> </level> <level label="ii"> <text>approved by an association of administrators of state franchise laws.</text> </level> </level> </level> <level label="c"> <text>The applicant shall sign and verify the application for registration.</text> </level> </section> <section article="gbr" article_name="Business Regulation" number="14-216" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="2" subtitle_name="Franchises"> <level label="a"> <text>The prospectus shall contain:</text> <level label="1"> <text>the material information set forth in the application for registration, as required by regulation of the Commissioner; and</text> </level> <level label="2"> <text>any other disclosures that the Commissioner requires.</text> </level> </level> <level label="b"> <text>The prospectus shall state, in 10-point or larger bold type, that registration is not approval, recommendation, or endorsement by the Commissioner.</text> </level> <level label="c"> <text>The prospectus shall include the following information:</text> <level label="1"> <text>the name of the franchisor;</text> </level> <level label="2"> <text>the name under which the franchisor does or intends to do business;</text> </level> <level label="3"> <text>the name of any parent or affiliated company that engages in business transactions with franchisees;</text> </level> <level label="4"> <text>the address of the principal office of the franchisor;</text> </level> <level label="5"> <text>the name and address of the resident agent of the franchisor;</text> </level> <level label="6"> <text>whether the franchisor does business as an individual, partnership, or corporation;</text> </level> <level label="7"> <text>information about the identity and business experience of persons affiliated with the franchisor, as the Commissioner requires;</text> </level> <level label="8"> <level label="i"> <text>whether any person identified in the prospectus has been convicted of a felony, has pleaded nolo contendere to a felony charge, or has been adjudged liable in a civil action by final judgment, if the felony or civil action involved fraud, embezzlement, fraudulent conversion, or misappropriation of property; and</text> </level> <level label="ii"> <text>if so, the court, date of the conviction or the judgment, and any penalty imposed or damages assessed;</text> </level> </level> <level label="9"> <level label="i"> <text>whether any person identified in the prospectus is subject to:</text> <level label="1"> <text>a currently effective order of the Securities and Exchange Commission, or the securities administrator of a state, that denies registration to or suspends or revokes the registration of the person as a securities broker, securities dealer, or investment adviser;</text> </level> <level label="2"> <text>a currently effective order of a national securities association or national securities exchange, as defined in the Securities and Exchange Act of 1934, that suspends or expels the person from membership in the Association or Exchange;</text> </level> <level label="3"> <text>a currently effective order of the Federal Trade Commission; or</text> </level> <level label="4"> <text>a currently effective order that enjoins or restricts business activity as a result of an action brought by a public agency, including an action that affects a license as a real estate broker, associate real estate broker, or real estate salesperson; and</text> </level> </level> <level label="ii"> <text>if so, the date, nature, and issuer of the order and any penalty imposed;</text> </level> </level> <level label="10"> <text>the length of time the franchisor has:</text> <level label="i"> <text>conducted business of the type to be operated by a franchisee;</text> </level> <level label="ii"> <text>granted franchises for that business; and</text> </level> <level label="iii"> <text>granted franchises in other lines of business;</text> </level> </level> <level label="11"> <text>a recent financial statement of the franchisor and a statement of each material change in the financial condition of the franchisor since the financial statement was made;</text> </level> <level label="12"> <text>a copy of the typical franchise agreement used or proposed for use in the State;</text> </level> <level label="13"> <text>the franchise fee or, if the franchise fee is not the same in each case, the formula that the franchisor uses to set the amount of the franchise fee and the way the franchisor will apply the franchise fee;</text> </level> <level label="14"> <text>any payment other than a franchise fee that the franchisee or subfranchisor must pay to the franchisor, including any royalty or payment that the franchisor collects wholly or partly for a third party;</text> </level> <level label="15"> <text>the conditions under which the franchisor may terminate, refuse to renew, or repurchase the franchise;</text> </level> <level label="16"> <text>a description of all goods, fixtures, and services that, under the franchise agreement or by practice, the franchisee or subfranchisor must buy from the franchisor or a designee of the franchisor;</text> </level> <level label="17"> <text>whether, under the franchise agreement or by practice, the franchisee is limited in the goods or services that the franchisee may offer to customers;</text> </level> <level label="18"> <text>the conditions of any financing arrangement offered directly or indirectly by the franchisor or an agent or affiliate of the franchisor;</text> </level> <level label="19"> <text>any past or present practice or any intent of the franchisor to sell, assign, or discount to a third party, wholly or partly, a note, contract, or other obligation of the franchisee or subfranchisor;</text> </level> <level label="20"> <text>a copy of any statement of estimated or projected franchisee earnings prepared for presentation to prospective franchisees, subfranchisors, or others and a statement of the information on which the estimation or projection is based;</text> </level> <level label="21"> <text>any compensation or other benefit given or promised to a public figure that arises wholly or partly from:</text> <level label="i"> <text>the use of the public figure in the name or symbol of the franchise; or</text> </level> <level label="ii"> <text>the endorsement or recommendation of the franchise by the public figure;</text> </level> </level> <level label="22"> <text>the number of franchises currently operating or proposed to be sold, as the Commissioner requires by regulation;</text> </level> <level label="23"> <text>whether franchisees or subfranchisors receive an exclusive territory or area franchise;</text> </level> <level label="24"> <text>an authorization for the Commissioner to examine the applicant’s financial records that relate to the sale of franchises;</text> </level> <level label="25"> <text>an irrevocable consent to be sued in the State;</text> </level> <level label="26"> <text>appointment of the Commissioner as attorney to receive service of process for the franchisor;</text> </level> <level label="27"> <text>any other information that the franchisor wants to give; and</text> </level> <level label="28"> <text>any other information that the Commissioner reasonably requires.</text> </level> </level> <level label="d"> <text>If the applicant is a subfranchisor, the application shall include the same information about the subfranchisor as is required from the franchisor under this section.</text> </level> <level label="e"> <text>The Commissioner by regulation may:</text> <level label="1"> <text>set the form and content of financial statements required under this subtitle;</text> </level> <level label="2"> <text>state the circumstances under which consolidated financial statements may be submitted; and</text> </level> <level label="3"> <text>state the circumstances under which financial statements shall be audited by an independent certified public accountant or other public accountant.</text> </level> </level> </section> <section article="gbr" article_name="Business Regulation" number="14-217" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="2" subtitle_name="Franchises"> <level label="a"> <text>If the Commissioner finds that it is necessary and appropriate for the protection of prospective franchisees or subfranchisors because a franchisor has not made adequate financial arrangements to fulfill the franchisor’s obligations under an offering, the Commissioner may require the franchisor to escrow franchise fees or other money paid by a franchisee or subfranchisor until the obligations have been satisfied.</text> </level> <level label="b"> <level label="1"> <text>At the option of the franchisor, the franchisor may post an adequate surety bond as provided by regulations of the Commissioner.</text> </level> <level label="2"> <text>The total liability of the surety under the bond may not exceed the penal sum of the bond.</text> </level> </level> </section> <section article="gbr" article_name="Business Regulation" number="14-218" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="2" subtitle_name="Franchises"> <level label="a"> <text>The Commissioner shall register an offer of a franchise if it meets the requirements of this subtitle.</text> </level> <level label="b"> <text>Unless a stop order is in effect, registration of the offer of a franchise automatically takes effect at:</text> <level label="1"> <text>noon on the 30th business day after an application for registration or the last amendment to it is filed; or</text> </level> <level label="2"> <text>an earlier time that the Commissioner sets.</text> </level> </level> </section> <section article="gbr" article_name="Business Regulation" number="14-219" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="2" subtitle_name="Franchises"> <level label="a"> <level label="1"> <text>Unless registration of an offer of a franchise is renewed for a 1-year term as provided in this section, the registration expires on the first anniversary of its effective date.</text> </level> <level label="2"> <text>However, the Commissioner by regulation or order may set a different term of registration.</text> </level> </level> <level label="b"> <level label="1"> <text>Before registration expires, the registrant periodically may renew it for an additional 1-year term, if the registrant:</text> <level label="i"> <text>at least 15 business days before the expiration of registration files with the Commissioner:</text> <level label="1"> <text>a renewal application on the form that the Commissioner provides; and</text> </level> <level label="2"> <text>a prospectus;</text> </level> </level> <level label="ii"> <text>otherwise is entitled to be registered; and</text> </level> <level label="iii"> <text>pays a renewal fee of $250.</text> </level> </level> <level label="2"> <text>The registrant shall sign and verify the renewal application.</text> </level> <level label="3"> <text>The Commissioner by order may allow a registrant to submit a renewal application after the 15th business day before expiration of the registration.</text> </level> </level> <level label="c"> <text>The Commissioner shall renew the registration of an offer of a franchise if it meets the requirements of this section.</text> </level> <level label="d"> <text>Unless a stop order or other order is in effect under this subtitle, renewal of the registration of the offer of a franchise automatically takes effect at:</text> <level label="1"> <text>noon on the day when the previous registration is due to expire; or</text> </level> <level label="2"> <text>an earlier time that the Commissioner sets.</text> </level> </level> </section> <section article="gbr" article_name="Business Regulation" number="14-219.1" effective_note="EFFECTIVE UNTIL SEPTEMBER 30, 2032 PER CHAPTERS 413 AND 414 OF 2026" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="2" subtitle_name="Franchises"> <level label="a"> <text>In this section, “Program” means the Maryland Franchise Disclosure Document Renewal Fast–Track Review Pilot Program.</text> </level> <level label="b"> <level label="1"> <text>There is a Maryland Franchise Disclosure Document Renewal Fast–Track Review Pilot Program.</text> </level> <level label="2"> <text>The Commissioner shall administer the Program.</text> </level> </level> <level label="c"> <level label="1"> <text>The Commissioner shall establish a standard for the review and approval of incomplete franchise disclosure documents, including franchise disclosure documents that were not submitted for participation in the Program.</text> </level> <level label="2"> <text>The Commissioner may use a technology system to assist the review of documents as required under this section.</text> </level> </level> <level label="d"> <text>The Commissioner shall adopt regulations to carry out this section, including regulations establishing requirements and procedures for the submission and approval of franchise disclosure documents.</text> </level> <level label="e"> <text>On or before September 30, 2031, the Commissioner shall, in accordance with § 2–1257 of the State Government Article, submit to the Senate Finance Committee and the House Economic Matters Committee and post on the website of the Office of the Attorney General a report that includes:</text> <level label="1"> <text>the number of franchise disclosure documents submitted by franchisors under the Program;</text> </level> <level label="2"> <text>the number of franchisors that participated in the Program;</text> </level> <level label="3"> <text>the amount of time required to administer the Program;</text> </level> <level label="4"> <text>an analysis of whether there was any impact on franchise disclosure documents submitted outside the Program, including the amount of time required for the analysis of franchise disclosure documents that were rejected;</text> </level> <level label="5"> <text>a description of programs in other states that address exemptions for established franchisors, including the eligibility standards by which the appropriate authority makes determinations regarding established franchisors;</text> </level> <level label="6"> <text>an analysis of whether, and the extent to which, the Program maintains or enhances the protections afforded to prospective franchisees under the Maryland Franchise Registration and Disclosure Law, including:</text> <level label="i"> <text>an evaluation of whether the expedited review of franchisor registration applications under the Program diminishes the efficacy of the disclosure requirements and review standards; and</text> </level> <level label="ii"> <text>a description of any franchisee protection benefits that may result from a more timely and efficient registration process; and</text> </level> </level> <level label="7"> <text>information regarding the efficiency of the review of franchise disclosure documents submitted for participation in the Program and franchise disclosure documents that were not submitted for participation in the Program, including information concerning:</text> <level label="i"> <text>commentary periods;</text> </level> <level label="ii"> <text>amendment periods;</text> </level> <level label="iii"> <text>the time for completion of submission and review of franchise disclosure documents;</text> </level> <level label="iv"> <text>the number of reviewers; and</text> </level> <level label="v"> <text>the average number of franchise disclosure documents submitted each year.</text> </level> </level> </level> </section> <section article="gbr" article_name="Business Regulation" number="14-220" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="2" subtitle_name="Franchises"> <level label="a"> <text>If there is a material change in the information that a registrant previously filed with the Commissioner, the franchisor shall:</text> <level label="1"> <text>file promptly with the Commissioner an application to amend the registration; and</text> </level> <level label="2"> <text>pay a fee of $100.</text> </level> </level> <level label="b"> <text>The registrant shall sign and verify the application to amend the registration.</text> </level> <level label="c"> <text>The Commissioner by regulation may state:</text> <level label="1"> <text>what constitutes a material change; and</text> </level> <level label="2"> <text>the circumstances under which a revised prospectus shall accompany an application to amend the registration.</text> </level> </level> <level label="d"> <text>If the Commissioner approves the amendment to the registration, the amendment takes effect on the date the Commissioner sets after considering the public interest and the protection of franchisees.</text> </level> </section> <section article="gbr" article_name="Business Regulation" number="14-221" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="2" subtitle_name="Franchises"> <text>The Commissioner summarily may pass a stop order to deny, suspend, or revoke a registration if the Commissioner finds that:</text> <level label="1"> <text>there has been a violation of this subtitle or a regulation adopted under it;</text> </level> <level label="2"> <text>the offer to sell or sale of the franchise would constitute misrepresentation to, deceit of, or fraud on the buyer;</text> </level> <level label="3"> <text>a person identified in an application has been convicted of an offense or has had a civil judgment entered against the person as described in § 14-216(c)(8) of this subtitle or is subject to an order described in § 14-216(c)(9) of this subtitle, and the involvement of the person in the sale or management of the franchise creates an unreasonable risk to prospective franchisees;</text> </level> <level label="4"> <text>the prospectus or amendment to it is incomplete or inaccurate in any material respect;</text> </level> <level label="5"> <text>the prospectus or amendment to it includes a false or misleading statement of a material fact or omits to state a material fact required to be stated in the prospectus or amendment or necessary to make the statements in the prospectus or amendment not misleading;</text> </level> <level label="6"> <text>in connection with an offer to sell or sale of a franchise, a person in the State is engaging or is about to engage in a false, fraudulent, or deceptive practice or in a device, scheme, or artifice to defraud; or</text> </level> <level label="7"> <text>the financial condition of the franchisor affects or will affect the ability of the franchisor to meet an obligation under the franchise or other agreement and the franchisor is not able or willing to comply or has failed to comply with a regulation, order, or administrative determination of the Commissioner under § 14-217 of this subtitle.</text> </level> </section> <section article="gbr" article_name="Business Regulation" number="14-222" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="2" subtitle_name="Franchises"> <level label="a"> <text>After passing a stop order, the Commissioner promptly shall send to the applicant or registrant a notice that:</text> <level label="1"> <text>states that the stop order has been passed;</text> </level> <level label="2"> <text>states the reasons for the stop order; and</text> </level> <level label="3"> <text>informs the applicant or registrant of the right to a hearing under this section.</text> </level> </level> <level label="b"> <level label="1"> <text>The applicant or registrant may submit to the Commissioner a written request for a hearing on the stop order.</text> </level> <level label="2"> <text>The Commissioner shall schedule a hearing within 15 business days after the Commissioner receives the request unless the applicant or registrant consents to a later date.</text> </level> <level label="3"> <text>The Commissioner may schedule a hearing even if the applicant or registrant does not request a hearing.</text> </level> </level> <level label="c"> <level label="1"> <text>If a hearing is not requested and is not scheduled by the Commissioner and therefore is not held, the stop order remains in effect until the Commissioner modifies or vacates it.</text> </level> <level label="2"> <text>If a hearing is held, after the hearing, the Commissioner may modify or vacate the stop order or extend it until the Commissioner makes a final determination.</text> </level> <level label="3"> <text>The Commissioner may modify or vacate a stop order if the Commissioner finds that:</text> <level label="i"> <text>conditions have changed; or</text> </level> <level label="ii"> <text>it is otherwise in the public interest to vacate or modify the stop order.</text> </level> </level> </level> </section> <section article="gbr" article_name="Business Regulation" number="14-223" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="2" subtitle_name="Franchises"> <text>A franchisor may not sell a franchise in the State without first giving a prospective franchisee a copy of the offering prospectus and a copy of each proposed agreement that relates to the sale of the franchise at the earlier of:</text> <level label="1"> <text>14 calendar days before the execution by the prospective franchisee of any binding agreement with the franchisor;</text> </level> <level label="2"> <text>14 calendar days before payment of any consideration that relates to the franchise relationship; or</text> </level> <level label="3"> <text>a reasonable request by a prospective franchisee to receive a copy of the offering prospectus.</text> </level> </section> <section article="gbr" article_name="Business Regulation" number="14-224" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="2" subtitle_name="Franchises"> <text>Each franchisor or subfranchisor shall keep a complete set of records of each sale of a franchise.</text> </section> <section article="gbr" article_name="Business Regulation" number="14-225" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="2" subtitle_name="Franchises"> <text>A person may not publish an advertisement offering to sell a franchise subject to registration under this subtitle unless:</text> <level label="1"> <text>the person submits a copy of the advertisement to the Commissioner for review at least 7 business days before the first publication of the advertisement unless the Commissioner by regulation or order allows a later submission; or</text> </level> <level label="2"> <text>the advertisement is exempted from review by regulation of the Commissioner.</text> </level> </section> <section article="gbr" article_name="Business Regulation" number="14-226" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="2" subtitle_name="Franchises"> <text>As a condition of the sale of a franchise, a franchisor may not require a prospective franchisee to agree to a release, assignment, novation, waiver, or estoppel that would relieve a person from liability under this subtitle.</text> </section> <section article="gbr" article_name="Business Regulation" number="14-227" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="2" subtitle_name="Franchises"> <level label="a"> <text>This section applies only to:</text> <level label="1"> <text>a franchisee who is a resident of the State; or</text> </level> <level label="2"> <text>a franchised business that operates or will be operated in the State.</text> </level> </level> <level label="b"> <level label="1"> <text>A person who sells or grants a franchise is civilly liable to the person who buys or is granted a franchise if the person who sells or grants a franchise offers to sell or sells a franchise:</text> <level label="i"> <text>without the offer of the franchise being registered under this subtitle; or</text> </level> <level label="ii"> <text>by means of an untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading, if the person who buys or is granted a franchise does not know of the untruth or omission.</text> </level> </level> <level label="2"> <text>In determining liability under this subsection, the person who sells or grants a franchise has the burden of proving that the person who sells or grants a franchise did not know and, in the exercise of reasonable care, could not have known of the untruth or omission.</text> </level> </level> <level label="c"> <text>The person who buys or is granted a franchise may sue under this section to recover damages sustained by the grant of the franchise.</text> </level> <level label="d"> <text>A court may order the person who sells or grants a franchise to:</text> <level label="1"> <text>rescind the franchise; and</text> </level> <level label="2"> <text>make restitution to the person who buys or is granted a franchise.</text> </level> </level> <level label="e"> <level label="1"> <text>Joint and several liability under this section extends to:</text> <level label="i"> <text>each person who directly or indirectly controls a person liable under this section;</text> </level> <level label="ii"> <text>each partner in a partnership liable under this section;</text> </level> <level label="iii"> <text>each principal officer or director of a corporation liable under this section;</text> </level> <level label="iv"> <text>each other person that has a similar status or performs similar functions as a person liable under this section; and</text> </level> <level label="v"> <text>each employee of a person liable under this section, if the employee materially aids in the act or transaction that is a violation under this subtitle.</text> </level> </level> <level label="2"> <text>However, liability under this subsection does not extend to a person who did not have knowledge of or reasonable grounds to believe in the existence of the facts by which the liability is alleged to exist.</text> </level> </level> <level label="f"> <text>An action under this section must be brought within the earlier of:</text> <level label="1"> <text>4 years after the grant of the franchise; or</text> </level> <level label="2"> <text>2 years after the date the franchise opened to the public.</text> </level> </level> </section> <section article="gbr" article_name="Business Regulation" number="14-228" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="2" subtitle_name="Franchises"> <level label="a"> <text>Except as otherwise provided in this subtitle, a person may not offer to sell, through advertisement or otherwise, or sell a franchise in the State unless the offer of the franchise has been registered under this subtitle.</text> </level> <level label="b"> <text>A person who willfully sells a franchise knowingly violating this section is guilty of a felony and, on conviction, is subject for each violation to a fine not exceeding $10,000 or imprisonment not exceeding 5 years or both.</text> </level> </section> <section article="gbr" article_name="Business Regulation" number="14-229" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="2" subtitle_name="Franchises"> <level label="a"> <text>In connection with an offer to sell or sale of a franchise, a person, directly or indirectly, may not:</text> <level label="1"> <text>employ a device, scheme, or artifice to defraud;</text> </level> <level label="2"> <text>make an untrue statement of a material fact or omit to state a material fact necessary in order to make the statement made, in light of the circumstances under which it is made, not misleading; or</text> </level> <level label="3"> <text>engage in an act, practice, or course of business that operates or would operate as a fraud or deceit on another person.</text> </level> </level> <level label="b"> <text>A person who willfully sells a franchise knowingly violating this section is guilty of a felony and, on conviction, is subject for each violation to a fine not exceeding $10,000 or imprisonment not exceeding 5 years or both.</text> </level> </section> <section article="gbr" article_name="Business Regulation" number="14-230" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="2" subtitle_name="Franchises"> <level label="a"> <text>In a prospectus or amendment to it, a person may not willfully make a false or misleading statement of a material fact or willfully omit to state a material fact required to be stated in the prospectus or amendment or necessary to make the statements in the prospectus or amendment not misleading.</text> </level> <level label="b"> <text>A person who violates this section is guilty of a felony and, on conviction, is subject for each violation to a fine not exceeding $10,000 or imprisonment not exceeding 5 years or both.</text> </level> </section> <section article="gbr" article_name="Business Regulation" number="14-231" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="2" subtitle_name="Franchises"> <level label="a"> <text>A person may not make or cause to be made an untrue statement of a material fact or omit to state a material fact in an application for registration, to amend registration, or for renewal or in a notice or report filed with the Commissioner under this subtitle.</text> </level> <level label="b"> <text>A person who willfully sells a franchise knowingly violating this section is guilty of a felony and, on conviction, is subject for each violation to a fine not exceeding $10,000 or imprisonment not exceeding 5 years or both.</text> </level> </section> <section article="gbr" article_name="Business Regulation" number="14-232" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="2" subtitle_name="Franchises"> <level label="a"> <text>A person may not fail to notify the Commissioner promptly of a material change as required by § 14-220 of this subtitle.</text> </level> <level label="b"> <text>A person who willfully sells a franchise knowingly violating this section is guilty of a felony and, on conviction, is subject for each violation to a fine not exceeding $10,000 or imprisonment not exceeding 5 years or both.</text> </level> </section> <section article="gbr" article_name="Business Regulation" number="14-233" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="2" subtitle_name="Franchises"> <level label="a"> <text>All franchisees have the right to join a trade association consisting of other franchisees of the same franchise and to participate in the trade association for any lawful purpose.</text> </level> <level label="b"> <text>A franchisor may not, directly or indirectly, through any officer, agent, or employee:</text> <level label="1"> <text>restrict or inhibit the right of a franchisee to join a trade association consisting of other franchisees of the same franchise; or</text> </level> <level label="2"> <text>prohibit the right of free association among franchisees for any lawful purpose.</text> </level> </level> <level label="c"> <level label="1"> <text>A person who violates subsection (b) of this section may be sued in circuit court for:</text> <level label="i"> <text>temporary or permanent injunctive relief;</text> </level> <level label="ii"> <text>damages, if any; and</text> </level> <level label="iii"> <text>costs of the suit, including any reasonable attorney’s fees.</text> </level> </level> <level label="2"> <text>The injunctive relief may be sought from the circuit court in the county where the franchisee resides or the franchise affected by the violation conducts business.</text> </level> <level label="3"> <text>When seeking an injunction under this section, the plaintiff may not be required to allege or prove actual damages suffered to obtain injunctive relief.</text> </level> <level label="4"> <text>An action under this subsection must be brought within the earlier of:</text> <level label="i"> <text>2 years after the alleged violation occurred; or</text> </level> <level label="ii"> <text>1 year after the discovery by the plaintiff of the facts of the alleged violation.</text> </level> </level> </level> </section> <section article="gbr" article_name="Business Regulation" number="14-234" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="2" subtitle_name="Franchises"> <text>This subtitle is the Maryland Franchise Registration and Disclosure Law.</text> </section> <section article="gbr" article_name="Business Regulation" number="14-301" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="3" subtitle_name="Multilevel Distribution Companies"> <text>In this subtitle, “multilevel distribution company” means a person who, for consideration, distributes goods or services through independent agents, contractors, or distributors at different levels of distribution with rates of pricing or discounting that differ from 1 level to another.</text> </section> <section article="gbr" article_name="Business Regulation" number="14-302" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="3" subtitle_name="Multilevel Distribution Companies"> <level label="a"> <text>A multilevel distribution company may not require a participant in its marketing program to buy goods or services or pay any other consideration to participate in the marketing program unless the multilevel distribution company agrees to repurchase the goods:</text> <level label="1"> <text>that are in resalable condition; and</text> </level> <level label="2"> <text>that the participant has been unable to sell 3 months after receipt of the goods first ordered.</text> </level> </level> <level label="b"> <text>A multilevel distribution company shall state in writing in each contract of participation in its marketing program that:</text> <level label="1"> <text>a participant may cancel the contract for any reason within 3 months after the date of receipt of goods or services first ordered by written notice to the multilevel distribution company; and</text> </level> <level label="2"> <text>on cancellation, the multilevel distribution company shall repurchase the goods.</text> </level> </level> <level label="c"> <text>The repurchase price shall be at least 90% of the original price paid by the participant.</text> </level> </section> <section article="gbr" article_name="Business Regulation" number="14-303" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="3" subtitle_name="Multilevel Distribution Companies"> <text>A multilevel distribution company may not represent directly or indirectly that participants in its marketing program may or will earn a stated gross or net amount or represent in any way the past earnings of participants unless the stated gross amount, net amount, or past earnings:</text> <level label="1"> <text>are those of a substantial number of participants in the community or geographic area where the representation is made; and</text> </level> <level label="2"> <text>accurately reflect the average earnings of participants under circumstances similar to those of the participant or prospective participant to whom the representation is made.</text> </level> </section> <section article="gbr" article_name="Business Regulation" number="14-304" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="3" subtitle_name="Multilevel Distribution Companies"> <level label="a"> <text>The Attorney General or a State’s Attorney may sue to enjoin, wholly or partly, the activities of a multilevel distribution company that violate this subtitle.</text> </level> <level label="b"> <text>At least 10 days before seeking injunctive relief, the Attorney General or State’s Attorney shall send written notice of the alleged violation by certified mail to the principal place of business of the multilevel distribution company.</text> </level> </section> <section article="gbr" article_name="Business Regulation" number="14-305" title_number="14" title_name="Business Opportunities, Franchises, and Multilevel Distribution Companies" subtitle_number="3" subtitle_name="Multilevel Distribution Companies"> <level label="a"> <text>A person who violates this subtitle is guilty of a misdemeanor and, on conviction, is subject to a fine not exceeding $10,000.</text> </level> <level label="b"> <text>Each officer and each director of a corporation that violates this subtitle, each partner of a partnership that violates this subtitle, and the owner of a sole proprietorship that violates this subtitle is also subject to the penalty under this section.</text> </level> </section>