BILL NUMBER: AB 1830 CHAPTERED
BILL TEXT
CHAPTER 595
FILED WITH SECRETARY OF STATE SEPTEMBER 21, 1998
APPROVED BY GOVERNOR SEPTEMBER 18, 1998
PASSED THE ASSEMBLY AUGUST 20, 1998
PASSED THE SENATE AUGUST 17, 1998
AMENDED IN SENATE JUNE 9, 1998
AMENDED IN ASSEMBLY MAY 27, 1998
AMENDED IN ASSEMBLY APRIL 16, 1998
INTRODUCED BY Assembly Member Davis
FEBRUARY 12, 1998
An act to amend Sections 1812.203 and 1812.206 of the Civil Code,
relating to business regulation.
LEGISLATIVE COUNSEL'S DIGEST
AB 1830, Davis. Seller assisted marketing plans.
(1) Existing law governing seller assisted marketing plans
requires a seller to provide, prior to the execution of the plan
contract or the receipt of any consideration, a prospective purchaser
of this plan with prescribed information. A seller must give
information regarding the criminal background and civil liability of
the seller's officers, directors, trustees, and general or limited
partners and individuals who have management responsibilities in
connection with the seller's business activities. The seller must
also give information regarding currently effective injunctions or
restrictive orders relating to business activity as a result of an
action brought by a public agency or department. Existing law
provides that it is a crime for a person to willfully violate these
provisions.
This bill would require this disclosure to include information
regarding the criminal background and civil liability of the seller's
owners. This bill would also require disclosure of information
regarding currently effective agreements relating to business
activity as a result of an investigation brought by a public agency
or department. By changing the definition of a crime, this bill
would impose a state-mandated local program.
(2) Existing law requires the seller to annually file with the
Attorney General a copy of the above-described disclosure statements
and requires the first filing to be made at least 30 days prior to
placing any advertisement or making any other representation to
prospective purchasers.
This bill would provide that the seller may not make any
advertisement or representation to prospective purchasers until a
notice of filing has been issued by the Attorney General.
(3) The California Constitution requires the state to reimburse
local agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 1812.203 of the Civil Code is amended to read:
1812.203. (a) The seller of any seller assisted marketing plan
shall pay an annual fee in the amount of one hundred dollars ($100)
and annually file with the Attorney General a copy of the disclosure
statements required under Sections 1812.205 and 1812.206, as well as
a list of the names and resident addresses of those individuals who
sell the seller assisted marketing plan on behalf of the seller. The
first filing shall be made at least 30 days prior to placing any
advertisement or making any other representations to prospective
purchasers. The first filing shall not be deemed to be effective
until a notice of filing has been issued by the Attorney General.
The seller may not make any advertisement or other representation to
prospective purchasers until a notice of filing has been issued by
the Attorney General. The disclosure statements on file shall be
updated through a new filing and payment of a fee in the amount of
thirty dollars ($30), whenever material changes occur during the year
following the annual filing and the updated filing shall include all
disclosure statements required by Sections 1812.205 and 1812.206 and
a list of the names and resident addresses of all current
salespersons and all salespersons who have acted on behalf of the
seller since the previous filing, whether the annual filing or an
updated filing, indicating which salespersons are still active and
which no longer act on behalf of the seller. Each seller of a seller
assisted marketing plan shall file the annual renewal filing,
whether or not any update filings have been made, at least 10 days
before one year has elapsed from the date of the notice of filing
issued by the Attorney General, and at least 10 days before the same
date every year thereafter. The annual renewal filing shall include
all disclosure statements required by Sections 1812.205 and 1812.206
and a list of the names and addresses of the residences of all
current salespersons and all salespersons who have acted on behalf of
the seller since the previous filing (whether the annual filing or
an updated filing), indicating which salespersons are still active
and which no longer act on behalf of the seller. The annual renewal
filing fee shall be one hundred dollars ($100). If an annual renewal
filing is not filed as required, the previous filing shall be deemed
to have lapsed and the seller shall be prohibited from placing any
seller assisted marketing plan advertisements or making any other
representations to prospective purchasers of seller assisted
marketing plan until a new annual filing is made and a new notice of
filing has been issued by the Attorney General.
(b) The Attorney General may send by certified mail to the address
set forth in the seller assisted marketing plan filing an intent to
issue a stop order denying the effectiveness of or suspending or
revoking the effectiveness of any filing if he or she finds the
following:
(1) That there has been a failure to comply with any of the
provisions of this title.
(2) That the offer or sale of the seller assisted marketing plan
would constitute a misrepresentation to, or deceit of, or fraud on,
the purchaser.
(3) That any person identified in the filing has been convicted of
an offense under paragraph (1) of subdivision (b) of Section
1812.206, or is subject to an order or has had a civil judgment
entered against him or her as described in paragraphs (2) and (3) of
subdivision (b) of Section 1812.206, and the involvement of that
person in the sale or management of the seller assisted marketing
plan creates an unreasonable risk to prospective purchasers.
(c) The notice referred to shall include facts supporting a
suspension or revocation. If the seller assisted marketing plan does
not submit to the Attorney General, under penalties of perjury
signed by an owner or officer of the seller assisted marketing plan,
within 10 days of receipt of the intent to issue a stop order, a
refutation of each and every supporting fact set forth in the notice,
and each fact not refuted shall be deemed, for purposes of issuance
of the order, an admission that the fact is true. If, in the opinion
of the Attorney General, and based upon supporting facts not refuted
by the seller assisted marketing plan, the plan is offered to the
public without compliance with this title, the Attorney General may
order the seller to desist and refrain from the further sale or
attempted sale of the seller assisted marketing plan unless and until
a notice of filing has been issued pursuant to this section. Until
that time, the registration shall be void. The order shall be in
effect until and unless the seller assisted marketing plan files a
proceeding in superior court pursuant to Section 1085 or 1094.5 of
the Code of Civil Procedure or seeks other judicial relief and serves
a copy of the proceeding upon the Attorney General.
SEC. 2. Section 1812.206 of the Civil Code is amended to read:
1812.206. At least 48 hours prior to the execution of a seller
assisted marketing plan contract or agreement or at least 48 hours
prior to the receipt of any consideration, whichever occurs first,
the seller or his or her representative shall provide to the
prospective purchaser in writing a document entitled "SELLER ASSISTED
MARKETING PLAN INFORMATION SHEET." The seller may combine the
information required under this section with the information required
under Section 1812.205 and, if done, shall utilize the single title
"DISCLOSURES REQUIRED BY CALIFORNIA LAW," and the title page required
by Section 1812.205. If a combined document is used, it shall be
given at the time required by Section 1812.205, provided that this
time meets the 48-hour test of this section. The information sheet
required by this section shall contain the following:
(a) The name of and the office held by the seller's owners,
officers, directors, trustees and general or limited partners, as the
case may be, and the names of those individuals who have management
responsibilities in connection with the seller's business activities.
(b) A statement whether the seller, any person identified in
subdivision (a), and any other company managed by a person identified
in subdivision (a):
(1) Has been convicted of a felony or misdemeanor or pleaded nolo
contendere to a felony or misdemeanor charge if the felony or
misdemeanor involved an alleged violation of this title, fraud,
embezzlement, fraudulent conversion or misappropriation of property.
(2) Has been held liable in a civil action by final judgment or
consented to the entry of a stipulated judgment if the civil action
alleged a violation of this title, fraud, embezzlement, fraudulent
conversion or misappropriation of property or the use of untrue or
misleading representations in an attempt to sell or dispose of real
or personal property or the use of unfair, unlawful or deceptive
business practices.
(3) Is subject to any currently effective agreement, injunction,
or restrictive order, including, but not limited to, a "cease and
desist" order, an "assurance of discontinuance," or other comparable
agreement or order, relating to business activity as the result of an
action or investigation brought by a public agency or department,
including, but not limited to, an action affecting any vocational
license.
The statements required by paragraphs (1), (2) and (3) of this
subdivision shall set forth the terms of the agreement, or the court,
the docket number of the matter, the date of the conviction or of
the judgment and, when involved, the name of the governmental agency
that initiated the investigation or brought the action resulting in
the conviction or judgment.
(4) Has at any time during the previous seven fiscal years filed
in bankruptcy, been adjudged a bankrupt, been reorganized due to
insolvency, or been a principal, director, officer, trustee, general
or limited partner, or had management responsibilities of any other
person, as defined in subdivision (b) of Section 1812.201, that has
so filed or was so adjudicated or reorganized, during or within one
year after the period that the individual held that position. If so,
the name and location of the person having so filed, or having been
so adjudged or reorganized, the date thereof, the court which
exercised jurisdiction, and the docket number of the matter shall be
set forth.
(c) The length of time the seller:
(1) Has sold seller assisted marketing plans.
(2) Has sold the specific seller assisted marketing plan being
offered to the purchaser.
(d) If the seller is required to secure a bond or establish a
trust account pursuant to the requirements of Section 1812.204, the
information sheet shall state either:
(1) "Seller has secured a bond issued by
______________________________________________________________,
(name and address of surety company)
a surety company admitted to do business in this state. Before
signing a contract to purchase this seller assisted marketing plan,
you should check with the surety company to determine the bond's
current status," or
(2) "Seller has deposited with the office of the Attorney General
information regarding its trust account. Before signing a contract
to purchase this seller assisted marketing plan, you should check
with the Attorney General to determine the current status of the
trust account."
(e) A copy of a recent, not more than 12 months old, financial
statement of the seller, together with a statement of any material
changes in the financial condition of the seller from the date
thereof. That financial statement shall either be audited or be
under penalty of perjury signed by one of the seller's officers,
directors, trustees or general or limited partners. The declaration
under penalty of perjury shall indicate that to the best of the
signatory's knowledge and belief the information in the financial
statement is true and accurate; the date of signature and the
location where signed shall also be indicated. Provided, however,
that where a seller is a subsidiary of another corporation which is
permitted by generally accepted accounting standards to prepare
financial statements on a consolidated basis, the above information
may be submitted in the same manner for the parent if the
corresponding financial statement of the seller is also provided and
the parent absolutely and irrevocably has agreed to guarantee all
obligations of the seller.
(f) An unexecuted copy of the entire seller assisted marketing
plan contract.
(g) For purposes of this section, "seller's owners" means any
individual who holds an equity interest of at least 10 percent in the
seller.
SEC. 3. No reimbursement is required by this act pursuant to
Section 6 of Article XIIIB of the California Constitution because the
only costs that may be incurred by a local agency or school district
will be incurred because this act creates a new crime or infraction,
eliminates a crime or infraction, or changes the penalty for a crime
or infraction, within the meaning of Section 17556 of the Government
Code, or changes the definition of a crime within the meaning of
Section 6 of Article XIIIB of the California Constitution.
Notwithstanding Section 17580 of the Government Code, unless
otherwise specified, the provisions of this act shall become
operative on the same date that the act takes effect pursuant to the
California Constitution.