Section 36b-60  (Formerly Sec. 36-503). Sections 36b-60 to 36b-80, inclusive, may be cited as "The Connecticut Business Opportunity Investment Act."

Sec. 36b-61  (Formerly Sec. 36-504). When used in sections 36b-60 to 36b-80, inclusive, as amended, unless the context otherwise requires:

(1) "Commissioner" means the commissioner of banking or any person appointed or designated by the commissioner of banking to administer said sections.

(2) "Person" means an individual, corporation, limited liability company, trust, partnership, incorporated or unincorporated association or any other legal entity.

(3) "Purchaser-investor" means a person who has purchased or is solicited for the purchase of a business opportunity.

(4) "Seller" means a person who is engaged in the business of selling or offering for sale business opportunities or any agent or representative of such person.

(5) (A) "Sale" or "sell" includes every contract of sale of, contract to sell, or disposition of a business opportunity or interest in a business opportunity for value. (B) "Offer" or "offer to sell" includes every attempt or offer to dispose of, or solicitation of an offer to buy, a business opportunity or interest in a business opportunity for value. Nothing in this subdivision shall limit or diminish the full meaning of the terms "sale," "sell," "offer" or "offer to sell" as construed by the courts of this state.

(6) "Business opportunity" means the sale or lease, or offer for sale or lease of any products, equipment, supplies or services which are sold or offered for sale to the purchaser-investor for the purpose of enabling the purchaser-investor to start a business, and in which the seller represents (A) that the seller will provide locations or assist the purchaser-investor in finding locations for the use or operation of vending machines, racks, display cases or other similar devices, or currency-operated amusement machines or devices, or any other devices within the intent of sections 36b-60 to 36b-80, inclusive, as amended, as the commissioner shall by regulation or order determine, on premises neither owned nor leased by the purchaser-investor or seller; or (B) that the seller will purchase any or all products made, produced, fabricated, grown, bred or modified by the purchaser-investor using in whole or in part, the supplies, services or chattels sold to the purchaser-investor; or (C) that the seller guarantees, either conditionally or unconditionally, that the purchaser-investor will derive income from the business opportunity, or that the seller will refund all or part of the price paid for the business opportunity, or repurchase any of the products, equipment, supplies or chattels supplied by the seller, if the purchaser-investor is unsatisfied with the business opportunity; or (D) that the seller will provide a sales program or marketing program to the purchaser-investor, provided sections 36b-60 to 36b-80, inclusive, as amended, shall not apply to the sale of a marketing program made in conjunction with the licensing of a registered trademark or service mark, provided (i) such trademark or service mark has been effectively registered under federal law; and (ii) for such trademark or service mark initially registered under federal law on or after October 1, 1996, the seller files with the commissioner a copy of the trademark or service mark certificate prior to any offer or sale in Connecticut, provided further that failure to file such certificate shall not, in and of itself, preclude reliance on this exclusion. "Business opportunity" does not include the sale of an ongoing business where the owner of that business sells and intends to sell only that one business opportunity; nor does it include the not for profit sale of sales demonstration equipment, materials or samples, for a total price of five hundred dollars or less to any one person.

(7) "Not for profit sale" means a sale in which the seller recovers only the actual costs of producing and shipping the goods or materials sold. A sale shall not qualify as a not for profit sale if the price to the purchaser-investor includes any commissions, rebates, fees or overrides.

(8) "Trademark" or "service mark" includes trademarks, trade names, service marks, logotypes, advertising or other commercial symbols.

Sec. 36b-62  (Formerly Sec. 36-505). (a) Prior to the sale or offer for sale of a business opportunity the seller shall register said business opportunity with the commissioner by: (1) Filing a copy of the disclosure statement required by section 36b-63; (2) furnishing a bond in accordance with the provisions of section 36b-64; (3) providing a sworn to and certified statement containing the information required by section 36b-65; (4) providing the commissioner in accordance with subsection (b) of this section with an irrevocable consent appointing the commissioner or his successor in office to be his attorney to receive service of any lawful process in any noncriminal suit, action or proceeding which arises under sections 36b-60 to 36b-80, inclusive, or any regulation or order adopted or issued under the provisions of said sections; and (5) submitting a nonrefundable registration fee of four hundred dollars.

(b) Every seller proposing to sell or offer for sale a business opportunity in this state or from this state through any person acting on an agency basis as determined by reference to principles of common law shall file with the commissioner, in such form as he by regulation or order prescribes, an irrevocable consent appointing said commissioner or his successor in office to be his attorney to receive service of any lawful process in any noncriminal suit, action or proceeding against him or his successor executor or administrator which arises under sections 36b-60 to 36b-80, inclusive, or any regulation or order adopted or issued under said sections after the consent has been filed, 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 commissioner, but such service shall not be effective unless (1) the plaintiff, who may be the commissioner in a suit, action or proceeding instituted by him, forthwith sends notice of the service and a copy of the process by registered mail to the defendant or respondent at his last address on file with the commissioner, and (2) the plaintiff's affidavit of compliance with this subsection 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.

(c) When any person, including any nonresident of this state, engages in conduct prohibited or made actionable by sections 36b-60 to 36b-80, inclusive, or any regulation or order adopted or issued under said sections, and he has not filed a consent to service of process under subsection (b) of this section and personal jurisdiction over him cannot otherwise be obtained in this state, that conduct shall be considered equivalent to his appointment of the commissioner or his successor in office to be his attorney to receive service of any lawful process in any noncriminal suit, action or proceeding against him or his successor executor or administrator which grows out of that conduct and which is brought under said sections or any regulation or order adopted or issued under said sections, with the same force and validity as if served on him personally. Service may be made by leaving a copy of the process in the office of the commissioner, but such service shall not be effective unless (1) the plaintiff, who may be the commissioner in a suit, action or proceeding instituted by him, forthwith sends notice of the service and a copy of the process by registered mail to the defendant or respondent at his last known address, and (2) the plaintiff's affidavit of compliance with this subsection 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.

(d) The registration of a business opportunity under this section shall become effective on order of the commissioner.

(e) (1) When any business opportunities have been sold or offered for sale without compliance with the registration provisions of sections 36b-60 to 36b-80, inclusive, the seller thereof may apply in writing on forms designated by the commissioner for the postsale registration of such business opportunities.

(2) A seller who seeks to register a business opportunity which has been sold or offered for sale without compliance with the registration provisions of sections 36b-60 to 36b-80, inclusive, shall submit the following to the commissioner.

(A) The documents, information and registration fee required by section 36b-62(a);
(B) A single document, signed and sworn to by an executive officer of the seller, which contains an explanatory statement and a statement of nonprejudice;

(i) The explanatory statement shall include the following information:

(aa) A statement that business opportunities were sold or offered for sale without compliance with the registration provisions of sections 36b-60 to 36b-80, inclusive;

(bb) A statement that, to induce each purchaser-investor to whom a business opportunity has been sold in violation of sections 36b-60 to 36b-80, inclusive, to sign the statement of nonprejudice, the document is being prepared for presentation to that purchaser-investor;

(cc) A full and complete statement of the remedies provided to the purchaser-investor under section 36b-74;

(dd) A statement containing any other material facts relating to the sale or offer for sale of the unregistered business opportunities; and

(ee) The most recent balance sheet and income statement of the seller.

(ii) The statement of nonprejudice shall provide:

(aa) That the purchaser-investor to whom a business opportunity was sold without compliance with the registration provisions of sections 36b-60 to 36b-80, inclusive, has read the explanatory statement;

(bb) That the purchaser-investor to whom a business opportunity was sold without compliance with the registration provisions of sections 36b-60 to 36b-80, inclusive, is satisfied that he or she will not be defrauded, damaged or prejudiced by the postsale registration of the business opportunity; and

(cc) That each purchaser-investor to whom a business opportunity has been sold without compliance with the registration provisions of sections 36b-60 to 36b-80, inclusive, has not waived any of his or her rights under said sections by signing the statement.

(3) The seller shall file the document containing both the explanatory statement and the statement of nonprejudice with the commissioner for review before the seller mails the document to each purchaser-investor to whom an unregistered business opportunity has been sold. The commissioner may object to the content of the document but shall in no way pass upon its truthfulness. Following review by the commissioner, the seller shall send the document by certified mail, return receipt requested, to each purchaser-investor to whom an unregistered business opportunity has been sold and shall submit copies of all return receipts to the commissioner. The seller shall certify that each purchaser-investor to whom an unregistered business opportunity was sold has signed the document, and shall return the signed documents to the commissioner. The seller shall also furnish the commissioner with a list of the names, addresses and telephone numbers of those purchaser-investors to whom business opportunities have been sold without compliance with the registration provisions of sections 36b-60 to 36b-80, inclusive, and the amount of payment furnished by each purchaser-investor for the business opportunity.

(4) If it appears to the commissioner that no person has been defrauded, prejudiced or damaged by such noncompliance or sale and that no persons will be defrauded, prejudiced or damaged by such postsale registration, the commissioner may permit those business opportunities to be registered upon the payment of fifty dollars plus the fees prescribed in section 36b-65. Registration under the provisions of this subsection shall not affect the prosecution of a violation of any provision of sections 36b-60 to 36b-80, inclusive.

Sec. 36b-63  (Formerly Sec. 36-506). (a) At least ten business days prior to the time the purchaser-investor signs a business opportunity contract, or at least ten business days prior to the receipt of any money or thing of value by the seller or any person designated by the seller to receive such money or thing of value, whichever occurs first, the seller shall provide the prospective purchaser-investor a written document, the cover sheet of which shall be entitled in at least ten-point boldface capital letters "DISCLOSURES REQUIRED BY CONNECTICUT LAW." Under this title shall appear the statement in at least ten-point type that "The State of Connecticut does not approve, recommend, endorse or sponsor any business opportunity. The information contained in this disclosure has not been verified by the state. If you have any questions about this investment, see an attorney before you sign a contract or agreement." Nothing except the title, the required statement, the name of the seller and the date of the disclosure document shall appear on the cover sheet. When, however, the seller uses a disclosure document in accordance with the provisions of the Federal Trade Commission's trade regulation rule entitled "Disclosure Requirements and Prohibitions Concerning Franchising and Business Opportunity Ventures", 16 C.F.R. 436, as amended from time to time, the cover sheet required by this subsection shall be placed immediately after the cover sheet required under such rule of the Federal Trade Commission.

(b) Except as provided in subsection (c) of this section, the disclosure document shall contain at least the following information which shall be presented in a single document in the order set forth in this subsection and shall include a comment which either positively or negatively responds to each disclosure item required to be in the disclosure document by use of a statement which fully incorporates the information required within such document:

(1) (A) The official name, address and principal place of business of the seller and of any parent or holding company of the seller, if any, or any affiliated firm or predecessor; whether such seller is doing business as an individual, partnership or corporation and the date and place of any such incorporation; (B) the name under which the seller is doing or intends to do business; and (C) trademarks and service marks which identify the product or products, equipment, supplies or services to be offered, sold or distributed by the prospective purchaser-investor, or under which the prospective purchaser-investor will be operating;

(2) The business experience during the past five years of each of the seller's current directors, executive officers, trustees, general partners, general managers, and any other persons charged with responsibility for the seller's business activities, including but not limited to, the chief operating officer and the financial, marketing, training and service officers. With regard to each such listed person, for the past five years, such person's principal occupations, nature and types of business in which such person was engaged, names of his employers, current addresses and titles shall be provided;

(3) The business experience of the seller and the seller's parent firm, holding company, affiliate or predecessor, if any, including the length of time each: (A) Has conducted a business of the type to be operated by the purchaser-investor; (B) has offered for sale or sold a business opportunity for such business; and (C) has offered for sale or sold business opportunities in any other line of business and a description of such other line of business;

(4) A statement disclosing who, if any, of such persons listed in subdivisions (1) and (2) of this subsection: (A) Has, at any time during the previous seven fiscal years, been convicted of a felony or pleaded nolo contendere to a felony charge if such felony involved fraud, including but not limited to, a violation of any business opportunity law, franchise law, securities law or unfair or deceptive practices law, embezzlement, fraudulent conversion, misappropriation of property or restraint of trade; (B) has, at any time during the previous seven fiscal years, been held liable in a civil action resulting in a final judgment or has settled out of court any civil action or is a party to any civil action (i) involving allegations of fraud, including but not limited to, a violation of any business opportunity law, franchise law, securities law or unfair or deceptive practices law, embezzlement, fraudulent conversion, misappropriation of property, or restraint of trade, or (ii) which was brought by a present or former purchaser-investor and which involves or involved the business opportunity relationship; (C) is subject to any currently effective state or federal agency or court injunctive or restrictive order, or is a party to a proceeding currently pending in which such order is sought, relating to or affecting business opportunity activities or the seller-purchaser-investor relationship, or involving fraud, including but not limited to, a violation of any business opportunity law, franchise law, securities law or unfair or deceptive practices law, embezzlement, fraudulent conversion, misappropriation of property or restraint of trade. The statement required by this subdivision shall include the identity and location of the court or agency; the date of conviction, judgment, or decision; the penalty imposed; the damages assessed; the terms of settlement or the terms of the order and the date, nature, and issuer of each such order or ruling. A seller may include a summary opinion of counsel as to any pending litigation but only if counsel's consent to use such opinion is included in the disclosure statement;

(5) A statement disclosing who, if any, of the persons listed in subdivisions (1) and (2) of this subsection at any time during the previous seven fiscal years has: (A) Filed in bankruptcy; (B) been adjudged bankrupt; (C) been reorganized due to insolvency; or (D) been a principal, director, executive officer or partner of any other person that has so filed or was so adjudged or reorganized, during or within one year after the period that such person held such position with such other person. If so, the seller shall set forth the name and location of the person having so filed or having been so adjudged or reorganized, the date and any other material facts;

(6) A factual description of the business opportunity offered to be sold by the seller including a full and detailed description of (A) the actual services and equipment that the business opportunity seller undertakes to perform for or supply to the purchaser-investor and (B) the actual services which the purchaser-investor undertakes to perform, including but not limited to, compliance with procedures established by the seller regarding the operation of the business;

(7) A statement of the total funds which shall be a sum certain and which the seller requires the purchaser-investor to pay to any specifically named person or any other person known to the seller who receives any consideration incident to such transaction, or which the seller, or any person affiliated with the seller collects in whole or in part on behalf of any party in order to obtain or commence the business opportunity operation such as initial fees, deposits, down payments, prepaid rent, and equipment and inventory purchases, provided the seller shall not be required to make such disclosures if the seller merely approves the purchaser-investor's decision to do business with any other person selected by the purchaser-investor. If all or part of these fees or deposits are returnable under certain conditions, the seller shall set forth these conditions, and if not returnable, the seller shall disclose this fact.

(8) A statement describing any recurring funds in connection with carrying on the business opportunity business the purchaser-investor is required to pay to any person, including, but not limited to, royalty, lease, advertising, training and sign rental fees and equipment or inventory purchases;

(9) A statement setting forth the name of each person, including the seller and its affiliates, with whom the seller directly or indirectly requires or advises the purchaser-investor to do business;

(10) A statement describing any real estate, services, supplies, products, inventories, signs, fixtures, or equipment relating to the establishment or the operation of the business opportunity business the seller directly or indirectly requires the purchaser-investor to purchase, lease or rent, and if such purchase, lease or rental shall be made from specific persons including the seller, a list of the names and addresses of each such person. Such list may be set forth in a separate document and delivered to the prospective purchaser-investor with the disclosure document if the existence of such separate document is disclosed in the disclosure document;

(11) A description of the basis for calculating, and, if such information is readily available, the actual amount of any revenue or other consideration to be received by the seller or persons affiliated with the seller from suppliers to the prospective purchaser-investor in consideration for goods or services which the seller requires or advises the purchaser-investor to obtain from such suppliers;

(12) (A) A statement of all material terms and conditions of any financing arrangement offered directly or indirectly by the seller or any person affiliated with the seller to the prospective purchaser-investor; and (B) a description of the terms by which any payment is to be received by the seller from (i) any person offering financing to a prospective purchaser-investor; and (ii) any person arranging for financing for a prospective purchaser-investor;

(13) A statement describing the material facts of whether under the terms of the business opportunity agreement or other device or practice the purchaser-investor is: (A) Limited in the goods or services he may offer for sale; (B) limited in the customers to whom he may sell such goods or services; (C) limited in the geographic area in which he may offer for sale or sell goods or services; or (D) granted territorial protection by the seller, by which, with respect to a territory or area, the seller will not establish another or more than a fixed number of business opportunity or company-owned outlets either operating under or selling, offering, or distributing the same or similar products, equipment, supplies or services currently being offered to purchaser-investors;

(14) A statement of the extent to which the seller requires or it is necessary that the purchaser-investor, or if the purchaser-investor is a corporation any person affiliated with the purchaser-investor, participates personally in the direct operation of the business opportunity;

(15) With respect to the business opportunity agreement and any related agreements, a statement disclosing: (A) The term or duration of arrangement, if any, of such agreement and whether such term is or may be affected by an agreement, including leases or subleases, other than the one from which such term arises; (B) the conditions under which the purchaser-investor may renew or extend; (C) the conditions under which the seller may refuse to renew or extend; (D) the conditions under which the purchaser-investor may terminate; (E) the conditions under which the seller may terminate; (F) the obligations, including lease or sublease obligations, of the purchaser-investor after termination of the business opportunity by the seller and the obligations of the purchaser-investor, including lease or sublease obligations, after termination of the business opportunity by the purchaser-investor and after the expiration of the business opportunity; (G) the purchaser-investor's interest upon termination of the business opportunity or upon refusal to renew or extend the business opportunity whether by the seller or by the purchaser-investor; (H) the conditions under which the seller may repurchase, whether by right of first refusal or at the option of the seller, and, if the seller has the option to repurchase the business opportunity, whether there will be an independent appraisal of the business opportunity, whether the repurchase price will be determined by a predetermined formula and whether there will be a recognition of good will or other such intangibles in such repurchase price; (I) the conditions under which the purchaser-investor may sell or assign all or any interest in the ownership of the business opportunity or of the assets of the business opportunity and the amount of consideration, if any, which shall be paid to the seller for such sale or assignment; (J) the conditions under which the seller may sell or assign, in whole or in part, its interest under such agreements; (K) the conditions under which the purchaser-investor may modify; (L) the conditions under which the seller may modify; (M) the rights of the purchaser-investor's heirs or personal representative upon the death or incapacity of the purchaser-investor; and (N) the provisions of any covenant not to compete;

(16) With respect to the seller and as to the particular named business being offered, a statement disclosing: (A) The total number of business opportunities operating within the calendar year immediately preceding, and as of a date thirty days prior to, the filing of information required by sections 36b-60 to 36b-80, inclusive; (B) the total number of company-owned outlets operating within the calendar year immediately preceding, and as of a date thirty days prior to, the filing of information required by said sections; (C) the names, addresses, and telephone numbers of (i) the ten business opportunity outlets of the named business opportunity business nearest the prospective purchaser-investor's intended location or (ii) all purchaser-investors of the seller, or (iii) all purchaser-investors of the seller in the state in which the prospective purchaser-investor lives or where the proposed business opportunity is to be located, provided there are more than ten such purchaser-investors. If the number of purchaser-investors to be disclosed exceeds fifty, the listing may be made in a separate document and delivered to the prospective purchaser-investor with the disclosure document if the existence of such separate document is disclosed in the disclosure document; (D) the number of business opportunities that, within the calendar year immediately preceding, and as of a date thirty days prior to, the filing of information required by said sections, were voluntarily terminated or not renewed by purchaser-investors within or at the conclusion of the term of the business opportunity agreement; (E) the number of business opportunities that, within the calendar year immediately preceding, and as of a date thirty days prior to, the filing of information required by said sections, the seller reacquired by purchase during the term of the business opportunity agreement and upon the conclusion of the term of the business opportunity agreement; (F) the number of business opportunities that, within the calendar year immediately preceding, and as of a date thirty days prior to, the filing of information required by said sections, were otherwise reacquired by the seller during the term of the business opportunity agreement and upon the conclusion of the term of the business opportunity agreement; (G) the number of business opportunities within the calendar year immediately preceding, and as of a date thirty days prior to, the filing of information required by said sections, in which the seller refused renewal of the business opportunity agreement or other agreements relating to the business opportunity; (H) the number of business opportunities that, within the calendar year immediately preceding, and as of a date thirty days prior to, the filing of information required by said sections, were cancelled or terminated by the seller during the term of the business opportunity agreement and upon conclusion of the term of the business opportunity agreement; and (I) with respect to the disclosures required by subparagraphs (D), (E), (F), (G) and (H) of this subdivision, the disclosure statement shall also include a general categorization of the reasons for such reacquisitions, terminations and refusals to renew and the number falling within each such category, including but not limited to the following categories: Failure to comply with quality control standards, failure to make sufficient sales, and other breaches of contract;

(17) (A) If the seller promises services to be performed in connection with site selection, a statement disclosing the full nature of those services, (B) for each agreement entered into within the calendar year immediately preceding, and as of a date thirty days prior to, the filing of information required by sections 36b-60 to 36b-80, inclusive, a statement disclosing the range of time that has elapsed between the signing of the business opportunity agreement or other agreement relating to the business opportunity and the site selection; (C) for each agreement entered into within the calendar year immediately preceding, and as of a date thirty days prior to, the filing of information required by said sections, if the seller is to provide operating business opportunity outlets, a statement disclosing the range of time that has elapsed between the signing of each business opportunity agreement or other agreement relating to the business opportunity and the commencement of the purchaser-investor's business, (D) with respect to the disclosures required by subparagraphs (B) and (C) of this subdivision, a seller may provide a distribution chart using meaningful classifications with respect to such ranges of time;

(18) If the seller offers an initial training program or informs the prospective purchaser-investor that it intends to provide such person with initial training, a statement disclosing: (A) The type and nature of such training; (B) the minimum amount, if any, of training that will be provided to such purchaser-investor; and (C) the amount, if any, such purchaser-investor shall pay for such training or for obtaining such training;

(19) If the name of a public figure is used in connection with a recommendation to purchase a business opportunity or as a part of the name of the business opportunity operation or if the public figure is stated to be involved with the management of the seller, a statement disclosing: (A) The nature and extent of the public figure's involvement and obligations to the seller, including but not limited to, the promotional assistance the public figure will provide to the seller and to the purchaser-investor; (B) the total investment of the public figure in the business opportunity operation; and (C) the amount of any fee or fees the purchaser-investor will be obligated to pay for such involvement or assistance provided by the public figure;

(20) If the seller intends to use estimated or projected business opportunity sales or earnings, a statement of such estimates or projections together with an explanation of the bases and assumptions underlying such estimates or projections and any supportive data. The seller shall clearly and conspicuously disclose the following statement together with information required by this subdivision in immediate conjunction with such representations and in not less than twelve point upper and lower case boldface type: "Caution: These figures are only estimates of what we think you may earn. There is no assurance you will do as well. If you rely upon our figures, you must accept the risk of not doing as well";

(21) If the seller makes any statement concerning sales or earnings or range of sales or earnings that may be made through this business opportunity, the document shall disclose: (A) For the three-year period prior to the date of the disclosure statement, the total number of purchaser-investors of business opportunities involving the products, equipment, supplies or services being offered who, to the seller's knowledge, have actually received earnings in the amount or range specified and the length of time it took such purchaser-investors to receive earnings in such amount or range; (B) for the three-year period prior to the date of the disclosure statement, the total number of purchaser-investors of business opportunities involving the products, equipment, supplies or services being offered. The seller shall clearly and conspicuously disclose the following statement together with the information required by this subdivision in immediate conjunction with such representations and in not less than twelve-point upper and lower case boldface type: "Caution: Some business opportunities have (sold) (earned) this amount. There is no assurance you will do as well. If you rely upon our figures, you must accept the risk of not doing as well";

(22) If the business opportunity seller is required to secure a bond or establish a trust deposit pursuant to section 36b-64, the document shall state either:

(A) "As required by Connecticut law, the seller has secured a bond issued by

. . . .

(Name and address of surety company)

a surety company authorized to do business in this state. Before signing a contract to purchase this business opportunity, you should check with the surety company to determine the bond's current status," or

(B) "As required by Connecticut law, the seller has established a trust account

. . . .

(Number of account)

with. . . .

(Name and address of bank or savings institution)

before signing a contract to purchase this business opportunity, you should check with the bank or savings institution to determine the current status of the trust account";

(23) The following statement: "If the seller fails to deliver the products, equipment or supplies or fails to render the services necessary to begin substantial operation of the business within forty-five days of the delivery date stated in your contract, you may notify the seller in writing and demand that the contract be cancelled";

(24) A financial statement as required by subsection (b) of section 36b-65;

(25) A table of contents shall be included within the disclosure document and shall immediately follow the cover page or pages of the disclosure document;

(26) The names of those persons who will represent the seller in offering or selling business opportunities in this state. With respect to each such person, a statement disclosing: (A) His or her business address and telephone number; (B) his or her present employer; (C) his or her employment or occupational history for the past ten years, including the names of his or her employers, positions held and starting and termination dates for each such position; (D) whether such person (i) has, at any time during the previous seven fiscal years, been convicted of a felony or pleaded nolo contendere to a felony charge if such felony involved fraud, including but not limited to, a violation of any business opportunity law, franchise law, securities law or unfair or deceptive practices law, embezzlement, fraudulent conversion, misappropriation of property or restraint of trade, or (ii) has, at any time during the previous seven fiscal years, been held liable in a civil action resulting in a final judgment or has settled any civil action out of court or is a party to any civil action involving allegations of fraud, including but not limited to a violation of any business opportunity law, franchise law, securities law or unfair or deceptive practices law, embezzlement, fraudulent conversion, misappropriation of property, or restraint of trade, or which was brought by a present or former purchaser-investor and which involves or involved the business opportunity relationship, or (iii) is subject to any currently effective injunctive or restrictive order issued by any state or federal court or administrative agency, or is a party to a proceeding currently pending in which such order is sought, relating to or affecting business opportunity activities or the seller-purchaser-investor relationship, or involving fraud, including but not limited to, a violation of any business opportunity law, franchise law, securities law or unfair or deceptive practices law, embezzlement, fraudulent conversion, misappropriation of property or restraint of trade. Such statement shall disclose the identity and location of the court or administrative agency; the date of conviction, judgment, order or decision; the penalty imposed; any damages assessed and the terms of settlement or the terms of the order;

(27) A section entitled "risk factors" containing a series of short concise captioned paragraphs summarizing the principal factors which make the business opportunity one of high risk or of a speculative nature. Such factors shall include, but not be limited to: The absence of profitable operations within the previous three years; an erratic financial position of the seller; the particular nature of the business in which the seller is engaged or proposes to engage; any adverse background information regarding executive officers and directors of the seller, including prior business failures, criminal convictions or personal adjudications of bankruptcy; limited experience or lack of experience of the seller's management with respect to the particular business; and the identity and relationship to the seller of any customers, the loss of any one of whom would have a material adverse effect on the seller. Where appropriate, reference shall be made to other sections of the disclosure document where more detailed information has been disclosed.

(c) The information contained in the disclosure document may be supplemented by more detailed information contained in other documents which shall be made a part of the disclosure document; provided, any such supplementary documents must be given to the purchaser-investor at the time the disclosure document is given to the purchaser-investor.

Sec. 36b-64  (Formerly Sec. 36-507). If the business opportunity seller makes any of the representations set forth in subparagraph (C) of subdivision (6) of section 36b-61, the seller shall have obtained a surety bond issued by a surety company authorized to do business in this state or shall have established a trust account with a licensed and insured bank or savings institution located in Connecticut. The amount of such bond or trust account shall be an amount not less than fifty thousand dollars, but the commissioner may require a greater amount if he believes it necessary for the protection of purchaser-investors. Such bond or trust account shall be in favor of the state of Connecticut. Any person who is damaged by any violation of sections 36b-60 to 36b-80, inclusive,, or by the seller's breach of the contract for the business opportunity sale or of any obligation arising under such contract may bring an action against the bond or trust account to recover damages suffered.

Sec. 36b-65  (Formerly Sec. 36-508). (a) Unless exempted by subsection (e) of this section, any person who advertises, sells, contracts, offers for sale or promotes any business opportunity in this state or from this state must register with the commissioner and file, in a form prescribed by said commissioner, an application which shall contain the following documents and information: (1) The official name and address and principal place of business of the seller and the parent firm or holding company of such seller, if any; (2) the business experience stated individually of each of the seller's directors and officers including the biographical data concerning all such persons; (3) the business experience of the seller, including the length of time such seller has conducted a business of the type to be operated by the purchaser-investor, has granted business opportunities for such business, and has granted business opportunities in other lines of business; (4) a copy of any contracts, agreements, brochures or other documents relating to the business opportunity; (5) a factual description of the business opportunity offered to be sold and of the services, training and assistance which will be provided by the seller to the purchaser-investor; (6) a statement describing any services, supplies, products, signs, fixtures or equipment relating to the establishment or the operating of the business opportunity which the purchaser-investor is required to purchase, lease or rent directly or indirectly from the seller; (7) a copy of the table of contents of any operations manual to be provided to the purchaser-investor; and (8) any other information the commissioner in his discretion reasonably requires. The application shall contain the seller's statement sworn to before a person qualified to administer oaths that the information contained in the application is true to the seller's knowledge.

(b) The seller shall file with the commissioner: (1) A balance sheet, income statement and statement of changes in financial condition of such seller as of a date not more than four months prior to the filing of the registration statement, which financial statements may be unaudited, provided if the seller has been in business for less than twelve months from the date of the filing of the registration statement, such financial statements shall be reviewed by an independent certified public accountant and shall include a written opinion from said accountant stating that he is not aware of any material modifications that should be made to the financial statements in order for them to be in conformity with generally accepted accounting principles; (2) a balance sheet of such seller, an income statement and statement of changes in financial position for the most recent fiscal year audited by an independent public accountant or an independent certified public accountant; and (3) a balance sheet and income statement and statement of changes in financial position for the prior two fiscal years reviewed by an independent certified public accountant who provides an opinion stating that he is not aware of any material modifications that should be made to the financial statements in order for them to be in conformity with generally accepted accounting principles. If any material changes in the financial condition of such seller occur after such statements are prepared, such seller shall disclose such changes and explain their significance to the operation of a business opportunity. If the seller is controlled by any person who absolutely and unconditionally guarantees to assume the duties and obligations of such seller under the business opportunity agreement should such seller become unable to perform, the commissioner may accept consolidated financial statements from such seller and such person. If the commissioner finds that a seller has failed to demonstrate that adequate financial arrangements have been made to fulfill the obligations set forth in the business opportunity agreement, the commissioner may require the escrow or impoundment of fees and other funds paid by the purchaser-investor or purchaser-investors until such obligations have been fulfilled, or, at the option of such seller, the furnishing of a surety bond as provided by regulation or order of the commissioner, if he finds that such requirement is necessary and appropriate to protect purchaser-investors.

(c) Upon satisfactory submission of the information and documents required by subsections (a) and (b) of this section and all the information and documents required by section 36b-64 and the payment of a registration fee of four hundred dollars, the commissioner shall issue a certificate stating that the business opportunity has been registered.

(d) The commissioner may accept the uniform franchise offering circular adopted by the Midwest Securities Commissioners Association on September 2, 1975, with associated guidelines amended by the North American Securities Administrators Association from time to time, in lieu of the disclosure document required by section 36b-63, provided that (1) the disclosure document contains the cover sheet required by subsection (a) of said section 36b-63, (2) any additional information required by said section 36b-63 which is not contained in the uniform franchise offering circular is included in an addendum to the disclosure document, and (3) the seller files a cross-reference sheet indicating the location of the disclosures required by said section 36b-63.

(e) The following business opportunities are exempt from subsections (a) and (b) of section 36b-62; sections 36b-63 and 36b-64; subsections (a), (b), (c), (d) and (f) of this section; 36b-66 and subdivisions (1), (2) and (3) of section 36b-67: (1) (A) Subject to the provisions of subparagraph (B) of this subdivision, any business opportunity for which the initial payment made by the purchaser-investor per business opportunity does not exceed two hundred dollars, if no representations are made that the seller guarantees, either conditionally or unconditionally, that the purchaser-investor will derive income from the business opportunity. For purposes of this subparagraph, "initial payment" means the total amount the purchaser-investor becomes obligated to pay to the seller or to any third party either prior to or at the time of delivery of the products, equipment, supplies or services or within one year of the commencement of operation of the business by the purchaser-investor. If payment is over a period of time, "initial payment" shall include the sum of the down payment and the total periodic payments. "Initial payment" does not include periodic payments where the amount or rate of the payment is based on net revenue or gross revenue generated by the business. (B) The commissioner may, by regulation or order as to any business opportunity or type of business opportunity or transaction exempt under subdivision (1)(A) of this subsection, modify, withdraw, further condition or waive such conditions, in whole or in part, conditionally or unconditionally, on a finding that such regulation or order is necessary and appropriate, in the public interest or for the protection of purchaser-investors; (2) any business opportunity sold in this state exclusively to purchaser-investors each of whom has a net worth of not less than one million dollars exclusive of principal residence, home furnishings, and personal automobiles; and (3) any other business opportunity that the commissioner by regulation or order may exempt, conditionally or unconditionally, if he finds that enforcement of all the provisions of sections 36b-60 to 36b-80, inclusive, with respect to such business opportunity is not necessary to protect the public interest, and for the protection of purchaser-investors due to the limited character of the business opportunity, or because such business opportunity is, in the judgment of the commissioner, adequately regulated by federal law. (4) The commissioner may by order deny, suspend or revoke any exemption with respect to a particular offering of one or more business opportunities in accordance with the provisions of section 36b-68. No order under this subdivision may operate retroactively. No person may be considered to have violated any order issued under this subdivision by reason of any offer or sale effected after the entry of such order if he sustains the burden of proof that he did not know, and in the exercise of reasonable care could not have known, of such order. (5) In any proceeding under this subsection, the burden of proving an exemption is upon the person claiming it.

(f) The seller shall immediately notify the commissioner of any material change in information contained in the application for registration, amend financial statements not less than quarterly and make appropriate amendment of the disclosure document.

Sec. 36b-66  (Formerly Sec. 36-509). (a) Every business opportunity contract or agreement shall be in writing and a copy shall be given to the purchaser-investor at the time he signs the contract.

(b) Every contract or agreement for a business opportunity shall include the following: (1) The terms and conditions of payment; (2) a full and detailed description of the acts or services that the business opportunity seller undertakes to perform for the purchaser-investor; (3) the seller's principal business address and the name and address of its agent in Connecticut authorized to receive service of process; and (4) the approximate delivery date of any product or products, equipment, supplies or operational guidelines the business opportunity seller is to deliver to the purchaser- investor and an approximate timetable for performance of services necessary to begin substantial operation of the business.

Sec. 36b-67  (Formerly Sec. 36-510). No person shall in connection with the sale or offer for sale of a business opportunity: (1) Sell or offer for sale a business opportunity in this state or from this state unless it has first been registered with the commissioner and declared effective by the commissioner in accordance with the provisions of section 36b-62; (2) represent that the business opportunity will provide income or earning potential of any kind unless the seller has documented data to substantiate the claims of income or earnings potential and discloses this data to the prospective purchaser-investor at the time such representations are made; (3) use the trademark, service mark, trade names, logotype, advertising or other commercial symbol of any business which does not either control the ownership interest in the seller or accept responsibility for all representations made by the seller in regard to the business opportunity, unless it is clear from the circumstances that the owner of the commercial symbol has knowledge of and consents to such use and is not involved in the sale of the business opportunity; (4) make or authorize the making of any reference to its compliance with sections 36b-60 to 36b-80, inclusive, in any advertisement or other contact with prospective purchaser-investors; (5) make any claim or representation in advertising or promotional material, or in any oral sales presentation, solicitation or discussion between the seller and a prospective purchaser-investor, which is inconsistent with the information required to be disclosed by sections 36b-60 to 36b-80, inclusive; (6) directly or indirectly (A) employ any device, scheme or artifice to defraud, (B) make any untrue statement of a material fact or 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 (C) engage in any act, practice or course of business which operates or would operate as a fraud or deceit upon any person.

Sec. 36b-68 (Formerly Sec. 36-511). (a) The commissioner may issue a stop order denying effectiveness to, or suspending or revoking the effectiveness of, any business opportunity registration if he finds: (1) That such order is in the public interest: (2) that such order is necessary for the protection of purchaser-investors or prospective purchaser-investors; (3) that the registration of the business opportunity is incomplete in any material respect but is not abandoned pursuasnt to subsection (e) of this section 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; or (4) that any provision of sections 36b-60 to 36b-80, inclusive, or any regulation, order or condition lawfully adopted, issued or imposed under said sections has been wilfully violated by any person.

(b) The commissioner may by order summarily postpone or suspend the effectiveness of the registration of a business opportunity pending final determination of any proceeding under this section. Upon the entry of such order, said commissioner shall promptly notify the registrant or applicant of the business opportunity that it has been entered and of the reasons for such entry and that within fifteen days after receipt by said commissioner of a written request the matter will be set down for a hearing. If no hearing is requested and none is ordered by the commissioner, such order will remain in effect until modified or vacated by said commissioner. If a hearing is requested, said commissioner may modify or vacate such order or extend it until final determination.

(c) No stop order may be entered under this section except as provided in subsection (b) of this section without: (1) Appropriate prior notice to the applicant or registrant of a business opportunity; (2) opportunity for a hearing; and (3) the issuance of written findings of fact and conclusions of law by the commissioner.

(d) The commissioner may vacate or modify a stop order if he finds that the conditions which prompted its entry have changed or that it is otherwise in the public interest to do so.

(e) Notwithstanding the provisions of this section, the commissioner may deem an application for registration of any business opportunity to be abandoned if the applicant fails to respond to any request for information required under sections 36b-60 to 36b-80, inclusive, or any regulations adopted pursuant to said sections. The commissioner shall notify the applicant in writing that if such information is not submitted within sixty days of such written notification, the application shall be deemed abandoned. Any registration fee paid prior to the date an application is deemed abandoned pursuant to this subsection shall not be refunded. Abandonment of an application pursuant to this subsection shall not preclude the applicant from submitting a new application for registration under this chapter. The hearing requirement in subsection (c) of this section shall not apply to abandonment pursuant to this subsection.

Sec. 36b-69  (Formerly Sec. 36-512). (a) The fact that an application for registration under section 36b-62 has been filed or the fact that a business opportunity is effectively registered shall not constitute a finding by the commissioner that any document filed under sections 36b-60 to 36b-80, inclusive, is true, complete and not misleading. No such fact shall mean that said commissioner has passed in any way upon the merits of, or recommended or given approval to any business opportunity.

(b) No person shall make or cause to be made any representation inconsistent with subsection (a) of this section to any prospective purchaser-investor.

Sec. 36b-70  (Formerly Sec. 36-513). Sections 36b-60 to 36b-80, inclusive, shall be administered by the commissioner.

Sec. 36b-71  (Formerly Sec. 36-514). (a) Subject to the provisions of chapter 3, the commissioner may: (1) Make such public or private investigations within or outside of this state as he deems necessary to determine whether any person has violated or is about to violate any provision of sections 36b-60 to 36b-80, inclusive, or any regulation or order adopted or issued under said sections, or aid in the enforcement of said sections or in the adoption of regulations and forms under said sections; (2) require or permit any person to file a statement in writing, under oath or otherwise as said commissioner determines, as to all the facts and circumstances concerning the matter to be investigated; and (3) publish information concerning any violation of sections 36b-60 to 36b-80, inclusive, or of any regulation or order adopted or issued under said sections.

(b) For the purpose of any investigation or proceeding under sections 36b-60 to 36b-80, inclusive, the commissioner or any officer designated by him may administer oaths and affirmations, subpoena witnesses, compel their attendance, take evidence and require the production of any books, papers, correspondence, memoranda, agreements or other documents or records which the commissioner deems relevant or material to the inquiry.

(c) In case of contumacy by, or refusal to obey a subpoena issued to, any person, the superior court for the judicial district of Hartford-New Britain, [On and after September 1, 1998, the phrase "judicial district of Hartford" shall be substituted for "judicial district of Hartford-New Britain".] upon application by the commissioner, may issue to such person an order requiring him to appear before the commissioner, or the officer designated by him there to produce documentary evidence if so ordered or to give evidence concerning the matter under investigation or in question. Failure to obey the order of the court may be punished by the court as a contempt of court.

Click here to keep reading