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37-25A BUSINESS OPPORTUNITIES
CHAPTER 37-25A

BUSINESS OPPORTUNITIES

37-25A-1      Definitions.
37-25A-2      Exclusions from definition of business opportunity.
37-25A-3      Exemptions.
37-25A-4      Revocation or denial of exemption--Procedure.
37-25A-5      Revocation or denial of exemption without hearing pending final determination--Notice--Request for hearing.
37-25A-6      Offer or sale without knowledge of order revoking or denying exemption.
37-25A-7      Offer or sale of opportunity not registered or exempt prohibited.
37-25A-8      Filings required to register opportunity.
37-25A-9      Appointment of director as agent for service of process--Procedure for service through director.
37-25A-10      Fee for registration.
37-25A-11      Effective date of registration.
37-25A-12      Term of registration--Renewal statement and fee--Sales report.
37-25A-13      Rule requiring filing of advertising and literature authorized.
37-25A-14      Delivery of written disclosure document to purchaser required.
37-25A-15      Form and content of disclosure statement.
37-25A-16      Business opportunity contract to be written--Copy to purchaser.
37-25A-17      Required contract provisions.
37-25A-18      Denial, revocation, or suspension of registration--Grounds.
37-25A-19      Limitation of revocation, suspension, or denial proceeding.
37-25A-20      Summary suspension or postponement of effectiveness of registration--Notice--Hearing--Modification.
37-25A-21      Prerequisites to entry of stop order.
37-25A-22      Vacation or modification of orders--Grounds.
37-25A-23      Net worth or bond requirements for use of income, refund, or repurchase representations.
37-25A-24      Period bond required--Notice required prior to lapse.
37-25A-25      Use or disclosure of information by director restricted.
37-25A-26      Investigatory powers of director--Publication of information concerning violations.
37-25A-27      Administration of oaths--Subpoena power--Taking evidence.
37-25A-28      Enforcement of subpoena.
37-25A-29      Privilege against self-incrimination not excusing witness--Prosecution of witness restricted.
37-25A-30      Cease and desist orders--Injunction actions--Reference of evidence for prosecution.
37-25A-31      Appeal of director's order.
37-25A-32      Promulgation of rules and forms.
37-25A-33      Findings required for adoption or change of rules--Cooperation with other jurisdictions.
37-25A-34      Liability not imposed on acts conforming to rule, form or order.
37-25A-35      Receipt by director as filing--Records maintained--Public inspection.
37-25A-36      Interpretive opinions by director--Fee.
37-25A-37      Sales and offers subject to chapter.
37-25A-38      Offers to sell made in this state.
37-25A-39      Offers to sell accepted in this state.
37-25A-40      Offers to sell not made in this state.
37-25A-41      Conduct constituting appointment of director as attorney for service of process.


37-25A-42      Continuances where process served under chapter.
37-25A-43      Fraud, deceit, and misleading statements and omissions prohibited in connection with offer or sale.
37-25A-44      False or misleading statements or omissions in proceedings or filings prohibited.
37-25A-45      Filing and registration not constituting finding of truthfulness or approval--Contrary representations prohibited.
37-25A-46      Advertising with misleading statements or omissions prohibited.
37-25A-47      Violations as felonies--Separate offenses.
37-25A-48      Civil liability for registration violations.
37-25A-49      Civil liability for representation violations.
37-25A-50      Action on bond.
37-25A-51      Liability of person aiding or controlling violator.
37-25A-52      Limitation of actions to enforce civil liability.
37-25A-53      Rights and remedies under chapter additional.
37-25A-54      Waiver of rights void.
37-25A-55      Civil penalty.


37-25A-1Definitions.

Terms used in this chapter, unless the context otherwise requires, mean:

(1)    "Advertising," any circular, prospectus, advertisement, or other material or any communication by radio, television, pictures, or similar means used in connection with an offer or sale of any business opportunity;

(2)    "Business opportunity," a contract or agreement, between a seller and purchaser, express or implied, orally or in writing, wherein it is agreed that the seller shall provide to the purchaser any products, equipment, supplies, or services enabling the purchaser to start a business and the seller represents that:

(a)    The seller shall provide or assist the purchaser in finding locations for the use or operation of vending machines, racks, display cases, or other similar devices, on premises neither owned nor leased by the purchaser or seller;

(b)    The seller shall provide or assist the purchaser in finding outlets or accounts for the purchaser's products or services;

(c)    The seller shall purchase any products made, produced, fabricated, grown, bred, or modified by the purchaser;

(d)    The seller guarantees that the purchaser shall derive income from the business which exceeds the price paid to the seller;

(e)    The seller shall refund all or part of the price paid to the seller, or repurchase any of the products, equipment, or supplies provided by the seller, if the purchaser is dissatisfied with the business; or

(f)    The seller shall provide a marketing plan;

(3)    "Director," the director of the Division of Insurance;

(4)    "Franchise," a contract or agreement as defined in § 37-5B-1;

(5)    "Franchisee," a person to whom a franchise is granted;

(6)    "Franchisor," a franchisor as defined in § 37-5B-1;

(7)    "Marketing plan," advice or training provided to the purchaser by the seller pertaining to the sale of any products, equipment, supplies, or services and the advice or training includes, but is not limited to, preparing or providing:

(a)    Promotional literature, brochures, pamphlets, or advertising materials;

(b)    Training regarding the promotion, operation, or management of the business opportunity; or

(c)    Operational, managerial, technical, or financial guidelines or assistance;

(8)    "Offer" or "offer to sell," includes every attempt to dispose of a business opportunity for value or solicitation of an offer to purchase a business opportunity;

(9)    "On-going business," an existing business that, for at least six months prior to the offer, has been operated from a specific location, has been open for business to the general public and has substantially all of the equipment and supplies necessary for operating the business;

(10)    "Person," an individual, corporation, trust, partnership, incorporated or unincorporated association or any other entity;

(11)    "Purchaser," a person who enters into a contract or agreement for the acquisition of a business opportunity or a person to whom an offer to sell a business opportunity is directed;

(12)    "Sale" or "sell," includes every contract or agreement of sale, contract to sell, disposition of a business opportunity or interest in a business opportunity for value;

(13)    "Seller," a person who sells or offers to sell a business opportunity or any agent or person who directly or indirectly acts on behalf of such person or a person recommended by the seller.

Source: SL 1985, ch 305, § 1; SL 2008, ch 203, § 55; SL 2017, ch 231 (Ex. Ord. 17-2), § 19, eff. Apr. 13, 2017.


37-25A-2Exclusions from definition of business opportunity.

For the purposes of this chapter, the term, business opportunity, does not include:

(1)    Any offer or sale of an on-going business operated by the seller and sold in its entirety;

(2)    Any offer or sale of a business opportunity to an on-going business if the seller provides products, equipment, supplies, or services which are substantially similar to the products, equipment, supplies or services sold by the purchaser in connection with the purchaser's on-going business;

(3)    Any offer or sale of a business opportunity which has notice filed or is exempt from notice filing pursuant to §§ 37-5B-1 to 37-5B-50, inclusive, or any offer or sale of a business opportunity that is excluded from the definition of business opportunity as set forth in 16 C.F.R. Part 437 as of January 1, 2008;

(4)    Any offer or sale of a business opportunity registered pursuant to chapter 47-31B;

(5)    Any offer or sale of a business opportunity involving a marketing plan made in conjunction with the licensing of a federally registered trademark or federally registered service mark if the seller had a minimum net worth of one million dollars as determined by the seller's most recent audited financial statement, prepared within thirteen months of the first offer in this state. Net worth may be determined on a consolidated basis if the seller is at least eighty percent owned by one person and that person expressly guarantees the obligations of the seller with regard to the offer or sale of any business opportunity claimed to be excluded under this subdivision;

(6)    Any offer or sale of a business opportunity by a personal representative, sheriff, marshal, receiver, trustee in bankruptcy, guardian, or conservator or a judicial offer or sale of a business opportunity.

Source: SL 1985, ch 305, § 2; SL 1989, ch 30, § 64; SL 2004, ch 278, § 63; SL 2008, ch 203, § 56.


37-25A-3Exemptions.

The following business opportunities are exempt from §§ 37-25A-7 to 37-25A-24, inclusive:

(1)    Any offer or sale of a business opportunity for which the immediate cash payment made by the purchaser for any business opportunity is at least twenty-five thousand dollars if the immediate cash payment does not exceed twenty percent of the purchaser's net worth as determined exclusive of principal residence, furnishings therein, and automobiles. However, the director of the Division of Insurance may, by rules adopted pursuant to chapter 1-26, withdraw or further condition the availability of this exemption;

(2)    Any offer or sale of a business opportunity for which the purchaser is required to make a payment to the seller or a person recommended by the seller that is less than five hundred dollars during the period from any time before commencing operation to within six months after commencing operation of the business opportunity;

(3)    Any offer or sale of a business opportunity if the seller has a net worth of not less than one million dollars as determined by the seller's most recent audited financial statement, prepared within thirteen months of the first offering in this state. Net worth may be determined on a consolidated basis if the seller is at least eighty percent owned by one person and that person expressly guarantees the obligations of the seller with regard to the offer or sale of any business opportunity claimed to be exempt under this subdivision. The director may, by rules adopted pursuant to chapter 1-26, withdraw or further condition the availability of this exemption;

(4)    Any offer or sale of a business opportunity if the purchaser is a bank, savings and loan association, trust company, insurance company, credit union, or investment company as defined by the Investment Company Act of 1940, pension or profit sharing trust, or other financial institution or institutional buyer or a dealer registered pursuant to chapter 47-31B, if the purchaser is acting for itself or in a fiduciary capacity;

(5)    Any offer or sale of a business opportunity which is defined as a franchise in subdivision 37-25A-1(4) if the seller delivers to each purchaser at least fourteen calendar days prior to the earlier of the execution by a purchaser of any contract or agreement imposing a binding legal obligation on the purchaser or the payment by a purchaser of any consideration in connection with the offer or sale of the business opportunity, a disclosure document as defined in § 37-5B-1 and notice filed with the Division of Insurance pursuant to §§ 37-5B-1 to 37-5B-50, inclusive, or any offer or sale of a business opportunity that is exempt from the disclosure requirements as set forth in 16 C.F.R. Part 437 as of January 1, 2008;

(6)    Any offer or sale of a business opportunity for which the cash payment made by a purchaser for any business opportunity does not exceed five hundred dollars and the payment is made for the not-for-profit sale of sales demonstration equipment, material, or samples, or the payment is made for product inventory sold to the purchaser at a bona fide wholesale price;

(7)    Any offer or sale of a business opportunity which the director exempts by order or a class of business opportunities which the director exempts by rule upon the finding that such exemption is not contrary to public interest and that registration is not necessary or appropriate for the protection of purchasers.

Source: SL 1985, ch 305, § 3; SL 1989, ch 30, § 65; SL 2003, ch 211, § 1; SL 2004, ch 278, § 64; SL 2008, ch 203, § 57; SL 2017, ch 231 (Ex. Ord. 17-2), § 19, eff. Apr. 13, 2017.


37-25A-4Revocation or denial of exemption--Procedure.

The director of the Division of Insurance may by order deny or revoke any exemption specified in § 37-25A-3, except the exemption provided in subdivision 37-25A-3(2), with respect to a particular offering of one or more business opportunities. No such order may be entered without appropriate prior notice to all interested parties, opportunity for hearing and written findings of fact and conclusions of law.

Source: SL 1985, ch 305, § 4; SL 2017, ch 231 (Ex. Ord. 17-2), § 19, eff. Apr. 13, 2017.


37-25A-5Revocation or denial of exemption without hearing pending final determination--Notice--Request for hearing.

If the public interest or the protection of purchasers so requires, the director of the Division of Insurance may by order deny or revoke without a hearing any of the specified exemptions, except the exemption provided in subdivision 37-25A-3(2), pending final determination of any proceedings under this chapter. Upon the entry of the order, the director shall promptly notify all interested parties that an order has been entered and of the reasons therefor and that within fifteen days of the receipt of a written request the matter shall be set for hearing. If no hearing is requested and none is ordered by the director, the order shall remain in effect until it is modified or vacated by the director. If a hearing is requested and none is ordered by the director, the order shall remain in effect until it is modified or vacated by the director. If a hearing is requested or ordered, the director, after notice of an opportunity for hearing to all interested persons, may not modify, vacate, or extend the order until a final determination has been made.

Source: SL 1985, ch 305, § 5; SL 2017, ch 231 (Ex. Ord. 17-2), § 19, eff. Apr. 13, 2017.


37-25A-6Offer or sale without knowledge of order revoking or denying exemption.

No person is considered to have violated § 37-25A-7 by reason of any offer or sale effected after the entry of an order under § 37-25A-5 if he establishes that he did not know and, in the exercise of reasonable care, could not have known, of the order.

Source: SL 1985, ch 305, § 6.


37-25A-7Offer or sale of opportunity not registered or exempt prohibited.

No person may offer or sell any business opportunity in this state unless the business opportunity is registered under this chapter or is exempt under § 37-25A-3.

Source: SL 1985, ch 305, § 7.


37-25A-8Filings required to register opportunity.

In order to register a business opportunity, the seller shall file with the director of the Division of Insurance one of the following disclosure documents with the appropriate cover sheet as required by § 37-25A-15, a consent to service of process as specified in § 37-25A-9 and the appropriate fee as required by § 37-25A-10:

(1)    A disclosure document prepared pursuant to § 37-25A-15; or

(2)    A disclosure document prepared pursuant to 16 C.F.R. Part 437 as of January 1, 2008.

Source: SL 1985, ch 305, § 8; SL 2008, ch 203, § 58; SL 2017, ch 231 (Ex. Ord. 17-2), § 19, eff. Apr. 13, 2017.


37-25A-9Appointment of director as agent for service of process--Procedure for service through director.

Every seller shall file, in a form the director of the Division of Insurance prescribes, an irrevocable consent appointing the director or the successor in office to be the seller's agent to receive service of any lawful process in any noncriminal suit, action or proceeding against the seller or the seller's successor or personal representative which arises under this chapter, with the same force and validity as if served personally on the person filing the consent. Service may be made by leaving a copy of the process in the office of the director, but is not effective unless the plaintiff or petitioner, who may be the director or the attorney general in a suit, action or proceeding, sends notice of the service and a copy of the process forthwith by registered mail to the defendant's or respondent's address on file with the director, and the plaintiff's affidavit of compliance with this section is filed in the case on or before the return date of the process, if any, or within such further time as the court allows.

Source: SL 1985, ch 305, § 9; SL 1995, ch 167, § 188; SL 2017, ch 231 (Ex. Ord. 17-2), § 19, eff. Apr. 13, 2017.


37-25A-10Fee for registration.

A registration fee of one hundred dollars shall accompany the application for registration.

Source: SL 1985, ch 305, § 10.


37-25A-11Effective date of registration.

A registration is automatically effective upon the expiration of the tenth full business day after a complete filing if no order is issued or proceeding is pending under § 37-25A-18. The director of the Division of Insurance may by order waive or reduce the time period prior to effectiveness if a complete filing is made. The director may by order defer the effective date until the expiration of the tenth full business day after the filing of any amendment.

Source: SL 1985, ch 305, § 11; SL 2017, ch 231 (Ex. Ord. 17-2), § 19, eff. Apr. 13, 2017.


37-25A-12Term of registration--Renewal statement and fee--Sales report.

The registration is effective for one year commencing on the date of effectiveness and may be renewed annually upon the filing of a current disclosure document accompanied by any document or information that the director of the Division of Insurance required. The registration renewal statement shall be in the form and content prescribed by the director and shall be accompanied by a renewal fee of fifty dollars. Failure to renew upon the close of the one-year period of effectiveness shall result in the expiration of the registration. The director may require the filing of a sales report.

Source: SL 1985, ch 305, § 12; SL 2017, ch 231 (Ex. Ord. 17-2), § 19, eff. Apr. 13, 2017.


37-25A-13Rule requiring filing of advertising and literature authorized.

The director of the Division of Insurance may by rule or order require the filing of all proposed literature or advertising prior to its use.

Source: SL 1985, ch 305, § 13; SL 2017, ch 231 (Ex. Ord. 17-2), § 19, eff. Apr. 13, 2017.


37-25A-14Delivery of written disclosure document to purchaser required.

No person may offer or sell any business opportunity required to be registered under this chapter unless a written disclosure document as filed under § 37-25A-8 is delivered to each purchaser at least ten business days prior to the execution by a purchaser of any contract or agreement imposing a binding legal obligation on the purchaser or the payment by the purchaser of any consideration in connection with the offer or sale of the business opportunity.

Source: SL 1985, ch 305, § 14.


37-25A-15Form and content of disclosure statement.

The disclosure document shall have a cover sheet entitled, in at least ten-point bold type, "DISCLOSURE REQUIRED BY SOUTH DAKOTA." Under the title shall appear the statement in at least ten-point type that "THE REGISTRATION OF THIS BUSINESS OPPORTUNITY DOES NOT CONSTITUTE APPROVAL, RECOMMENDATION OR ENDORSEMENT BY SOUTH DAKOTA. THE INFORMATION CONTAINED IN THIS DISCLOSURE DOCUMENT HAS NOT BEEN VERIFIED BY THIS STATE. IF YOU HAVE ANY QUESTIONS OR CONCERNS ABOUT THIS INVESTMENT, SEEK PROFESSIONAL ADVICE BEFORE YOU SIGN A CONTRACT OR MAKE ANY PAYMENT. YOU ARE TO BE PROVIDED TEN (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." The seller's name and principal business address, along with the date of the disclosure document shall also be provided on the cover sheet. No other information may appear on the cover sheet. The disclosure document shall contain the following information unless the seller uses a disclosure document as provided in subdivision 37-25A-8 (1):

(1)    The names and residential addresses of those salespersons who shall engage in the offer or sale of the business opportunity in this state;

(2)    The name of the seller, whether the seller is doing business as an individual, partnership or corporation, the names under which the seller has done, is doing or intends to do business, and the name of any parent or affiliated company that shall engage in business transactions with purchasers or which shall be responsible for statements made by the seller;

(3)    The names, addresses and titles of the seller's officers, directors, trustees, general managers, principal executives, agents and any other person charged with responsibility for the seller's business activities relating to the sale of the business opportunity;

(4)    Prior business experience of the seller relating to business opportunities including: the name, address and a description of any business opportunity previously offered by the seller; the length of time the seller has offered each such business opportunity; and the length of time the seller has conducted the business opportunity currently being offered to the purchaser;

(5)    With respect to a person identified in subdivision (3) of this section, a description of the person's business experience for the ten-year period preceding the filing date of this disclosure document. The description of business experience shall list principal occupations and employers, and a listing of the educational and professional background including, the names of schools attended and degrees received, and any other information that demonstrates sufficient knowledge and experience to perform the services proposed;

(6)    Whether the seller or any person identified in subdivision (3) of this section:

(a)    Has been convicted of any felony, or pleaded nolo contendere to a felony charge, or has been the subject of any criminal, civil or administrative proceedings alleging the violation of any business opportunity law, securities law, commodities law, franchise law, fraud or deceit, embezzlement, fraudulent conversion, restraint of trade, unfair or deceptive practices, misappropriation of property or comparable allegations;

(b)    Has filed bankruptcy, been adjudged bankrupt, been reorganized due to insolvency, or was an owner, principal officer or general partner or any other person that has so filed or was so adjudged or reorganized during or within the last seven years.

(7)    The name of any person identified in subdivision (6) of this section, nature of and parties to the action or proceeding, court or other forum, date of institution of the action, docket references to the action, current status of the action or proceeding, terms and conditions or any order of decree, the penalties or damages assessed and terms of settlement;

(8)    The initial payment required, or if the exact amount cannot be determined, a detailed estimate of the amount of the initial payment to be made to the seller;

(9)    A detailed description of the actual services the seller agrees to perform for the purchaser;

(10)    A detailed description of any training the seller agrees to provide for the purchaser;

(11)    A detailed description of services the seller agrees to perform in connection with the placement of equipment, products or supplies at a location, as well as any agreement necessary in order to locate or operate equipment, products or supplies on a premises neither owned nor leased by the purchaser or seller;

(12)    A detailed description of any license or permit that is necessary in order for the purchaser to engage in or operate the business opportunity;

(13)    The business opportunity seller who is required to secure a bond pursuant to § 37-25A-23, shall state in the disclosure document "As required by the State of South Dakota, the seller has secured a bond issued by (insert name and address of surety company), a surety company, authorized to do business in this state. Before signing a contract or agreement to purchase this business opportunity, you should check with the surety company to determine the bond's current status.";

(14)    Any representations made by the seller to the purchaser concerning sales or earnings that may be made from this business opportunity, including, but not limited to:

(a)    The bases or assumptions for any actual, average, projected or forecasted sales, profits, income or earnings;

(b)    The total number of purchasers who, within a period of three years of the date of the disclosure document, purchased a business opportunity involving the product, equipment, supplies or services being offered to the purchaser; and

(c)    The total number of purchasers who, within three years of the date of the disclosure statement, purchased a business opportunity involving the product, equipment, supplies or services being offered to the purchaser who, to the seller's knowledge, have actually received earnings in the amount or range specified;

(15)    Any seller who makes a guarantee to a purchaser shall give a detailed description of the elements of the guarantee. Such description shall include, but is not limited to, the duration, terms, scope, conditions, and limitations of the guarantee;

(16)    A statement of:

(a)    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;

(b)    The names and addresses of purchasers who have requested a refund or rescission from the seller within the last twelve months and the number of those who have received the refund or rescission; and

(c)    The total number of business opportunities the seller intends to sell in this state within the next twelve months;

(17)    A statement describing any contractual restrictions, prohibitions, or limitations on the purchaser's conduct. Attach a copy of all business opportunity and other contracts or agreements proposed for use or in use in this state including, without limitation, all lease agreements, option agreements and purchase agreements;

(18)    The rights and obligations of the seller and the purchaser regarding termination of the business opportunity contract or agreement;

(19)    A statement accurately describing the grounds upon which the purchaser may initiate legal action to terminate the business opportunity contract or agreement;

(20)    A copy of the most recent audited financial statement of the seller, prepared within thirteen months of the first offer in this state, together with a statement of any material changes in the financial condition of the seller from that date. The director may allow the seller to submit a limited review in order to satisfy the requirements of this subdivision;

(21)    A list of the states in which this business opportunity is registered;

(22)    A list of the states in which this disclosure document is on file;

(23)    A list of the states which have denied, suspended or revoked the registration of this business opportunity;

(24)    A section entitled "Risk Factors" containing a series of short concise statements summarizing the principal factors which make this business opportunity a high risk or one of a speculative nature. Each statement shall include a cross-reference to the page on which further information regarding that risk factor can be found in the disclosure document;

(25)    Any additional information as the director may require by rule or order.

Source: SL 1985, ch 305, § 15.


37-25A-16Business opportunity contract to be written--Copy to purchaser.

No person may offer or sell any business opportunity required to be registered unless the business opportunity contract or agreement is in writing and a copy of the contract or agreement is given to the purchaser at the time the purchaser signs the contract or agreement.

Source: SL 1985, ch 305, § 16.


37-25A-17Required contract provisions.

Any contract or agreement shall set forth in at least ten-point type or equivalent size, if handwritten, the following:

(1)    The terms and condition of any payments due to the seller;

(2)    The seller's principal business address and the name and address of the seller's agent in this state authorized to receive service of process;

(3)    The business form of the seller, whether corporate, partnership, or otherwise;

(4)    The delivery date or, if the contract provides for a periodic delivery of items to the purchaser, the approximate delivery date of the product, equipment, or supplies the seller is to deliver to the purchaser to enable the purchaser to start his business; and

(5)    Whether the product, equipment, or supplies are to be delivered to the purchaser's home or business address or are to be placed or caused to be placed by the seller at locations owned or managed by persons other than the purchaser.

Source: SL 1985, ch 305, § 17.


37-25A-18Denial, revocation, or suspension of registration--Grounds.

The director of the Division of Insurance may issue an order denying, suspending or revoking the effectiveness of any registration if the director finds that the order is in the public interest and that:

(1)    The registration as of its effective date or as of any earlier date in the case of an order denying effectiveness, or any amendment as of its effective date, or any report is incomplete in any material respect or contains any statement which was, in the light of the circumstances under which it was made, false or misleading with respect to any material fact;

(2)    Any provision of this chapter or any rule, order or condition lawfully imposed under this chapter has been willfully violated, in connection with the business opportunity by the person filing the registration; or by the seller, any partner, officer or director of the seller, any person occupying a similar status or performing similar functions, or any person directly or indirectly controlling or controlled by the seller, but only if the person filing the registration is directly or indirectly controlled by or acting for the seller;

(3)    The business opportunity registered or sought to be registered is the subject of an administrative order denying, suspending or revoking a registration or a permanent or temporary injunction of any court of competent jurisdiction; but the director:

(a)    May not institute a proceeding against an effective registration under this subdivision more than one year from the date of the order or injunction relied on; and

(b)    May not enter an order under this subdivision 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 a ground for an order under this section;

(4)    The seller's enterprise or method of business, or that of the business opportunity, includes or would include activities which are illegal where performed;

(5)    The business opportunity or the offering of a business opportunity has worked a fraud upon purchasers or would so operate;

(6)    There has been a failure to file any documents or information required by § 37-25A-8;

(7)    The seller has failed to pay the proper registration fee but the director may enter only a denial order under this subdivision and the director shall vacate any such order if the deficiency is corrected;

(8)    The seller's literature or advertising is misleading, incorrect, incomplete or deceptive.

Source: SL 1985, ch 305, § 18; SL 2017, ch 231 (Ex. Ord. 17-2), § 19, eff. Apr. 13, 2017.


37-25A-19Limitation of revocation, suspension, or denial proceeding.

The director of the Division of Insurance may not institute a proceeding under § 37-25A-18 against an effective registration on the basis of a fact or transaction known to the director when the registration became effective unless the proceeding is instituted within the next thirty days.

Source: SL 1985, ch 305, § 19; SL 2017, ch 231 (Ex. Ord. 17-2), § 19, eff. Apr. 13, 2017.


37-25A-20Summary suspension or postponement of effectiveness of registration--Notice--Hearing--Modification.

The director of the Division of Insurance may by order summarily postpone or suspend the effectiveness of the registration pending final determination of any proceeding under this chapter. Upon the entry of the order, the director shall promptly notify the seller that the order has been entered and of the reasons therefor and that within fifteen days after the receipt of a written request the matter shall be set for hearing. If no hearing is requested and none is ordered by the director, the order shall remain in effect until it is modified or vacated by the director. If a hearing is requested or ordered, the director, after notice of an opportunity for hearing to the seller, may modify, vacate, or extend the order until final determination.

Source: SL 1985, ch 305, § 20; SL 2017, ch 231 (Ex. Ord. 17-2), § 19, eff. Apr. 13, 2017.


37-25A-21Prerequisites to entry of stop order.

No stop order may be entered under any part of this chapter, except under § 37-25A-20, without appropriate prior notice to the seller, opportunity for hearing, and written findings of fact and conclusions of law.

Source: SL 1985, ch 305, § 21.


37-25A-22Vacation or modification of orders--Grounds.

The director of the Division of Insurance may vacate or modify an order issued under this chapter if the director finds that the conditions which prompted its entry have changed or that it is otherwise in the public interest to do so.

Source: SL 1985, ch 305, § 22; SL 2017, ch 231 (Ex. Ord. 17-2), § 19, eff. Apr. 13, 2017.


37-25A-23Net worth or bond requirements for use of income, refund, or repurchase representations.

In connection with the offer or sale of a business opportunity, no seller may make or use any of the representations set forth in subsections 37-25A-1(2)(d) and (2)(e) unless the seller has at all times a minimum net worth of twenty-five thousand dollars as determined in accordance with generally accepted accounting principles. In lieu of the minimum net worth requirement, the director of the Division of Insurance may by rule or order require a business opportunity seller to obtain a surety bond issued by a surety company authorized to do business in this state. The surety bond shall be in an amount not less than twenty-five thousand dollars and shall be in favor of this state for the benefit of any purchaser. The director may by rule or order increase the amount of the bond for the protection of purchasers and may require the seller to file reports of all sales in this state to determine the appropriate amount of bond.

Source: SL 1985, ch 305, § 23; SL 2017, ch 231 (Ex. Ord. 17-2), § 19, eff. Apr. 13, 2017.


37-25A-24Period bond required--Notice required prior to lapse.

If the seller is required to obtain a surety bond, the seller shall maintain a surety bond for the duration of the guarantee or representation giving rise to the surety bond requirement. Upon expiration of the period of the guarantee, the seller may allow the surety bond to lapse if the seller gives notice to the director and all business opportunity purchasers in this state at least thirty days prior to the lapse of the bond.

Source: SL 1985, ch 305, § 24.


37-25A-25Use or disclosure of information by director restricted.

The director of the Division of Insurance may not use for personal benefit any information which is filed with or obtained by the director and which is not made public. The director may not disclose any information except if necessary or appropriate in a proceeding or investigation under this chapter.

Source: SL 1985, ch 305, § 25; SL 2017, ch 231 (Ex. Ord. 17-2), § 19, eff. Apr. 13, 2017.


37-25A-26Investigatory powers of director--Publication of information concerning violations.

The director of the Division of Insurance may:

(1)    Make public or private investigations within or outside of this state to determine if any person has violated or is about to violate any provision of this chapter or any rule or order hereunder, or to aid in the enforcement of this chapter or in the prescribing of rules and forms hereunder;

(2)    Require or permit any person to file a statement, under oath or otherwise as the director determines, as to all the facts and circumstances concerning the matter to be investigated; and

(3)    Publish information concerning any violation of this chapter or any rule or order hereunder.

Source: SL 1985, ch 305, § 26; SL 2017, ch 231 (Ex. Ord. 17-2), § 19, eff. Apr. 13, 2017.


37-25A-27Administration of oaths--Subpoena power--Taking evidence.

For the purpose of any investigation or proceeding under this chapter, the director of the Division of Insurance or any officer designated by the director may administer oaths and affirmations, subpoena witnesses, compel the attendance of witnesses, take evidence and require the production of any books, papers, correspondence, memoranda, agreements, or other documents or records which the director considers relevant or material to the inquiry.

Source: SL 1985, ch 305, § 27; SL 2017, ch 231 (Ex. Ord. 17-2), § 19, eff. Apr. 13, 2017.


37-25A-28Enforcement of subpoena.

If any person refuses to obey a subpoena issued pursuant to § 37-25A-27, the circuit court upon application by the director of the Division of Insurance, may issue an order requiring such person to comply with the subpoena.

Source: SL 1985, ch 305, § 28; SL 2017, ch 231 (Ex. Ord. 17-2), § 19, eff. Apr. 13, 2017.


37-25A-29Privilege against self-incrimination not excusing witness--Prosecution of witness restricted.

No person may be excused from attending and testifying or from producing any document or record in any proceeding before the director of the Division of Insurance or any officer designated by the director on the grounds that the testimony or evidence, documentary or otherwise, required by the director may incriminate him or subject him to a penalty or forfeiture; but no individual may be prosecuted or subjected to any penalty or forfeiture on account of any transaction, matter, or thing for which he is compelled, after claiming his privilege against self-incrimination, to testify or produce evidence. However, the individual testifying is not exempt from prosecution and punishment for perjury or contempt committed in testifying.

Source: SL 1985, ch 305, § 29; SL 2017, ch 231 (Ex. Ord. 17-2), § 19, eff. Apr. 13, 2017.


37-25A-30Cease and desist orders--Injunction actions--Reference of evidence for prosecution.

If it appears to the director of the Division of Insurance that any person has engaged in or is about to engage in any act or practice constituting a violation of any provision of this chapter, the director may:

(1)    Issue an order directing the person to cease and desist from continuing the act or practice. Any person named in a cease and desist order issued by the director may, within fifteen days after the receipt of the order, file a written request for a hearing with the director. If the director does not receive a written request for a hearing within the time specified, the cease and desist order shall be permanent and the person named in the order has waived all rights to a hearing;

(2)    Bring an action in the circuit court to enjoin the acts or practices and to enforce compliance with this chapter. Upon a proper showing, a permanent or temporary injunction, restraining order, or writ of mandamus shall be granted and a receiver or conservator may be appointed for the defendant or the defendant's assets or the court may order rescission, which may include restitution plus the legal interest rate, for any sales of business opportunities determined to be unlawful under this chapter. The court may not require the director to post a bond;

(3)    The director may refer the evidence concerning violations of this chapter to the attorney general or to the state's attorney in the county where the violation occurred, who may institute proceedings under this section.

Source: SL 1985, ch 305, § 30; SL 2017, ch 231 (Ex. Ord. 17-2), § 19, eff. Apr. 13, 2017.


37-25A-31Appeal of director's order.

Any person aggrieved by a final order of the director of the Division of Insurance may obtain a review of the order in the circuit court pursuant to the provisions of chapter 1-26.

Source: SL 1985, ch 305, § 31; SL 2017, ch 231 (Ex. Ord. 17-2), § 19, eff. Apr. 13, 2017.


37-25A-32Promulgation of rules and forms.

The director of the Division of Insurance may promulgate rules pursuant to chapter 1-26 to carry out the provisions of this chapter including rules and forms governing disclosure documents, applications and reports, and defining any terms. For the purpose of rules and forms, the director may classify business opportunities, persons and matters within the director's jurisdiction, and prescribe different requirements for different classes.

Source: SL 1985, ch 305, § 32; SL 2017, ch 231 (Ex. Ord. 17-2), § 19, eff. Apr. 13, 2017.


37-25A-33Findings required for adoption or change of rules--Cooperation with other jurisdictions.

No rule, form, or order may be made, amended, or rescinded unless the director of the Division of Insurance finds that the action is necessary or appropriate in the public interest or for the protection of the purchaser. In prescribing rules and forms the director may cooperate with other jurisdictions in order to effectuate the policy of this chapter to achieve maximum uniformity in the form and content of disclosure statements, applications, and reports.

Source: SL 1985, ch 305, § 33; SL 2017, ch 231 (Ex. Ord. 17-2), § 19, eff. Apr. 13, 2017.


37-25A-34Liability not imposed on acts conforming to rule, form or order.

No provision of this chapter imposing any liability applies to any act done or omitted in good faith in conformity with any rule, form, or order of the director of the Division of Insurance, notwithstanding that the rule, form, or order may later be amended or rescinded or may be determined by judicial or other authority to be invalid for any reason.

Source: SL 1985, ch 305, § 34; SL 2017, ch 231 (Ex. Ord. 17-2), § 19, eff. Apr. 13, 2017.


37-25A-35Receipt by director as filing--Records maintained--Public inspection.

A document is filed when it is received by the director of the Division of Insurance. The director shall keep a register of all applications for registration and disclosure documents which are or have been effective under this chapter and all orders which have been entered under this chapter. The register shall be available for public inspection. Unless otherwise provided by law, any registration statement, filing, application, or report filed with the director shall be available for public inspection.

Source: SL 1985, ch 305, § 35; SL 2017, ch 231 (Ex. Ord. 17-2), § 19, eff. Apr. 13, 2017.


37-25A-36Interpretive opinions by director--Fee.

The director of the Division of Insurance may honor written requests from interested persons for interpretative opinions upon the payment of twenty-five dollars.

Source: SL 1985, ch 305, § 36; SL 2017, ch 231 (Ex. Ord. 17-2), § 19, eff. Apr. 13, 2017.


37-25A-37Sales and offers subject to chapter.

The provisions of this chapter concerning sales and offers to sell apply to persons who sell or offer to sell if:

(1)    An offer to sell is made in this state;

(2)    An offer to purchase is made and accepted in this state; or

(3)    The purchaser is domiciled in this state and the business opportunity is operated in this state.

Source: SL 1985, ch 305, § 37.


37-25A-38Offers to sell made in this state.

For the purpose of this chapter, an offer to sell is made in this state, whether either party is then present in this state, if:

(1)    The offer originates from this state; or

(2)    The offer is directed by the offeror to this state and received at the place to which it is directed or at any post office in this state in the case of a mailed offer.

Source: SL 1985, ch 305, § 38.


37-25A-39Offers to sell accepted in this state.

For the purpose of this chapter, an offer to sell is accepted in this state if acceptance:

(1)    Is communicated to the offeror in this state; and

(2)    Has not previously been communicated to the offeror, orally or in writing, outside this state; and acceptance is communicated to the offeror in this state, whether either party is then present in this state if the offeree directs it to the offeror in this state reasonably believing the offeror to be in this state and it is received at the place to which it is directed or at any post office in this state in the case of a mailed acceptance.

Source: SL 1985, ch 305, § 39.


37-25A-40Offers to sell not made in this state.

An offer to sell is not made in this state if:

(1)    The publisher circulates in this state any bona fide newspaper or other publication of general, regular and paid circulation which is not published in this state, or which is published in this state but has had more than two-thirds of its circulation outside this state during the past twelve months; or

(2)    A radio or television program originating outside this state is received in this state.

Source: SL 1985, ch 305, § 40.


37-25A-41Conduct constituting appointment of director as attorney for service of process.

If any person engages in conduct prohibited or made actionable by this chapter or any rule or order hereunder, and the person has not filed a consent to service of process and personal jurisdiction over the person cannot otherwise be obtained in this state, that conduct is equivalent to the person's appointment of the director of the Division of Insurance or the director's successor in office to be the person's attorney to receive service of any lawful process in any noncriminal suit, action, or proceeding against the person or the person's successor or personal representative which grows out of that conduct and which is brought under this chapter or any rule or order hereunder with the same force and validity as if served on the person personally. Service may be made by leaving a copy of the process in the office of the director and it is not effective unless:

(1)    The plaintiff in a suit, action, or proceeding instituted by the director, sends notice of the service and a copy of the process forthwith by registered mail to the defendant's or respondent's last known address or takes other steps which are reasonably calculated to give actual notice; and

(2)    The plaintiff's affidavit of compliance with this section is filed in the case on or before the return day of the process, if any, or within such further time as the court allows.

Source: SL 1985, ch 305, § 41; SL 1995, ch 167, § 188; SL 2017, ch 231 (Ex. Ord. 17-2), § 19, eff. Apr. 13, 2017.


37-25A-42Continuances where process served under chapter.

If process is served under this chapter, the court, or the director of the Division of Insurance in a proceeding before the director, shall order such continuance as necessary to afford the defendant or respondent reasonable opportunity to defend himself.

Source: SL 1985, ch 305, § 42; SL 2017, ch 231 (Ex. Ord. 17-2), § 19, eff. Apr. 13, 2017.


37-25A-43Fraud, deceit, and misleading statements and omissions prohibited in connection with offer or sale.

No person, in connection with the offer or sale of any business opportunity in this state, may:

(1)    Employ any device, scheme, or artifice to defraud;

(2)    Make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading; or

(3)    Engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person.

Source: SL 1985, ch 305, § 43.


37-25A-44False or misleading statements or omissions in proceedings or filings prohibited.

No person may make or cause to be made, in any document filed with the director of the Division of Insurance or in any proceeding under this chapter, any statement which is, at the time and in the light of the circumstances under which it is made, false or misleading in any material respect or, in connection with such statement, to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading.

Source: SL 1985, ch 305, § 44; SL 2017, ch 231 (Ex. Ord. 17-2), § 19, eff. Apr. 13, 2017.


37-25A-45Filing and registration not constituting finding of truthfulness or approval--Contrary representations prohibited.

Neither the fact that an application for registration has been filed nor the fact that a business opportunity is effectively registered constitutes a finding by the director of the Division of Insurance that any document filed under this chapter is true, complete and not misleading. Neither any such fact nor the fact that an exemption or exception is available for a business opportunity means that the director has passed upon the merits or qualifications of, or recommend or given approval to, any person or business opportunity. No person may make or cause to be made to any purchaser any representation inconsistent with the foregoing.

Source: SL 1985, ch 305, § 45; SL 2017, ch 231 (Ex. Ord. 17-2), § 19, eff. Apr. 13, 2017.


37-25A-46Advertising with misleading statements or omissions prohibited.

No person may, in connection with the offer or sale of any business opportunity in this state, publish, circulate, or use any advertising which contains an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading.

Source: SL 1985, ch 305, § 46.


37-25A-47Violations as felonies--Separate offenses.

Any person who willfully violates §§ 37-25A-7 to 37-25A-9, inclusive, 37-25A-14, 37-25A-16, 37-25A-23, 37-25A-24, 37-25A-43, 37-25A-45, and 37-25A-46 or who willfully violates any order of which the person has notice, or who violates § 37-25A-44 knowing that the statement made was false or misleading in any material respect is guilty of a Class 5 felony. Each of the acts specified constitutes a separate offense and a prosecution or conviction for any one of such offenses may not bar prosecution or conviction for any other offense.

Source: SL 1985, ch 305, § 47.


37-25A-48Civil liability for registration violations.

Any person who violates §§ 37-25A-7 to 37-25A-9, inclusive, 37-25A-14, 37-25A-16, 37-25A-23, and 37-25A-24 is liable to the purchaser who may sue either at law or in equity for rescission, for recovery of all money or other valuable consideration paid for the business opportunity and for actual damages, together with interest at the legal rate from the date of sale, reasonable attorney's fees and court costs.

Source: SL 1985, ch 305, § 48.


37-25A-49Civil liability for representation violations.

Any person who violates §§ 37-25A-43, 37-25A-45, and 37-25A-46 is liable to the purchaser who may sue either at law or in equity for rescission, for recovery of all money or other valuable consideration paid for the business opportunity and for actual damages, together with interest at the legal rate from the date of sale, reasonable attorney's fees and court costs.

Source: SL 1985, ch 305, § 49.


37-25A-50Action on bond.

Any person who violates §§ 37-25A-14, 37-25A-43, 37-25A-45, and 37-25A-46, or who breaches any business opportunity contract or agreement or any obligation arising under the contract or agreement, is liable to the purchaser who may sue the surety of the bond, either at law or in equity to recover all money or other valuable consideration paid for the business opportunity and actual damages, together with interest at the legal rate from the date of sale, reasonable attorney's fees and court costs. The liability of the surety may not exceed the amount of the bond.

Source: SL 1985, ch 305, § 50.


37-25A-51Liability of person aiding or controlling violator.

Any person who controls or materially aids a person liable under § 37-25A-46 or 37-25A-47 shall be liable jointly and severally with and to the same extent as the person committing the violation.

Source: SL 1985, ch 305, § 51.


37-25A-52Limitation of actions to enforce civil liability.

No action may be maintained under §§ 37-25A-47 to 37-25A-49, inclusive, unless commenced before the expiration of three years after the act of transaction constituting the violation.

Source: SL 1985, ch 305, § 52.


37-25A-53Rights and remedies under chapter additional.

The rights and remedies under this chapter are in addition to any other rights or remedies that may exist at law or in equity.

Source: SL 1985, ch 305, § 53.


37-25A-54Waiver of rights void.

Any condition, stipulation or provision binding any purchaser of a business opportunity to waive compliance with or relieving a person from any duty or liability imposed by or any right provided by this chapter or any rule or order issued pursuant to this chapter is void.

Source: SL 1985, ch 305, § 54.


37-25A-55Civil penalty.

The director may impose a civil penalty against a person named in an order issued under § 37-25A-30 for violation of §§ 37-25A-7, and 37-25A-43 to 37-25A-46, inclusive. The amount of the civil penalty may not exceed five thousand dollars for each act or omission that constitutes the basis for issuing the order. Any civil penalty collected pursuant to this section shall be deposited into the state general fund. The civil penalty may only be imposed:

(1)    Following an opportunity for a hearing under § 37-25A-30 if notice delivered to all named persons includes notice of the director's authority to impose a civil penalty under this section; or

(2)    As part of an order issued pursuant to subdivision 37-25A-30(1) if the order is stipulated to by each person subject to the civil penalty.

Source: SL 2008, ch 203, § 59.


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