A. 1826 Summary:
|SAME AS||No Same As|
|Add Art 32-A §§676 - 677-e, Gen Bus L|
|Regulates the conducting of business of multilevel distribution companies and their participants; grants the department of law the authority to regulate and oversee the operation of such companies.|
A. 1826 Text:
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STATE OF NEW YORK ________________________________________________________________________ 1826 2017-2018 Regular Sessions IN ASSEMBLY January 13, 2017 ___________ Introduced by M. of A. MOYA -- read once and referred to the Committee on Consumer Affairs and Protection AN ACT to amend the general business law, in relation to regulating multilevel distribution companies The People of the State of New York, represented in Senate and Assem- bly, do enact as follows: 1 Section 1. The general business law is amended by adding a new article 2 32-A to read as follows: 3 ARTICLE 32-A 4 MULTILEVEL DISTRIBUTION 5 COMPANIES 6 Section 676. Definitions. 7 677. Disclosure requirements. 8 677-a. Contract requirements. 9 677-b. Recruitment and sales materials. 10 677-c. Supervision. 11 677-d. Penalties. 12 677-e. Rules and regulations. 13 § 676. Definitions. As used in this article: 14 1. "Department" means the department of law. 15 2. "Multilevel distribution company" means any person, firm, partner- 16 ship, limited liability company, corporation or other business entity 17 which sells, distributes or supplies for valuable consideration goods or 18 services through independent agents, contractors or distributors at 19 different levels: 20 (a) whereby such independent agents, contractors and distributors may 21 recruit prospective independent agents, contractors and distributors; 22 and 23 (b) wherein commissions, bonuses, refunds, discounts, dividends or 24 other considerations are or may be paid to such independent agents, 25 contractors and distributors for the sale of such goods and services EXPLANATION--Matter in italics (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD07229-01-7A. 1826 2 1 and/or for the recruitment, actions or performance of other independent 2 agents, contractors and distributors. 3 3. "Participant" means an independent agent, contractor or distributor 4 of a multilevel distribution company. 5 § 677. Disclosure requirements. 1. Every multilevel distribution 6 company shall, on or before March first of each year, file with the 7 department a financial disclosure statement, written in plain and under- 8 standable English, which shall include the following information for the 9 preceding calendar years: 10 (a) the name of the multilevel distribution company, the name under 11 which such company is doing or intends to do business, and the name of 12 any parent or affiliated company that will engage in business trans- 13 actions with participants; 14 (b) the multilevel distribution company's principal business address 15 and the name and address of its participants in this state authorized to 16 receive process; 17 (c) a statement as to whether the multilevel distribution company and 18 its principals, officers, partners, directors, or any other person iden- 19 tified in the application for registration: 20 (1) Has been convicted of a felony, or pleaded nolo contendere to a 21 felony charge, or held liable or enjoined in a civil action by a final 22 judgment if such civil action involved fraud, embezzlement, fraudulent 23 conversion or misappropriation of property. 24 (2) Is subject to any currently effective order of the United States 25 securities and exchange commission or the securities administrator of 26 any state denying the registration of or barring, revoking or suspending 27 the registration of such person as a securities broker or dealer, or 28 investment advisor, or securities agent or registered representative, or 29 is subject to any currently effective order of any national securities 30 association or national securities exchange, as defined in the Securi- 31 ties and Exchange Act of 1934, suspending or expelling such person from 32 membership in such association or exchange. 33 (3) Is subject to a currently effective order or ruling of the federal 34 trade commission. 35 (4) Is subject to any currently effective injunctive or restrictive 36 order relating to business activity as a result of an action brought by 37 a public agency or department, including, without limitation, actions 38 affecting a license as a real estate broker or salesman. 39 Such statement shall set forth the court, date of conviction or judg- 40 ment, any penalty imposed or damages assessed, or the date, nature and 41 issuer of such order; 42 (d) the total number of participants such company has in the state; 43 (e) the total number of new participants of such company during the 44 calendar year; 45 (f) the total sales of such company in the state; 46 (g) the percent of sales in the state generated by sales to partic- 47 ipants of such company; 48 (h) the percent of sales in the state that are generated by sales to 49 persons who are not participants of such company; and 50 (i) the average and median commissions earned by participants of such 51 company. 52 2. A cover page disclaimer shall be attached to each disclosure state- 53 ment filed pursuant to this section. Such disclaimer shall state that 54 the state of New York does not recommend the multilevel distribution 55 company, nor does the state confirm that it has verified the information 56 in the disclosure statement.A. 1826 3 1 § 677-a. Contract requirements. 1. No multilevel distribution company 2 shall enter into any contract or agreement with a prospective partic- 3 ipant, unless and until such prospective participant shall have been 4 provided with a statement, in the prospective participant's primary 5 language, and in clear and easily understandable language, of the bene- 6 fits, risks and actual effects of each product, service or business 7 opportunity that may be provided pursuant to the financial disclosure 8 statement approved by the department pursuant to section six hundred 9 seventy-seven of this article. 10 2. A copy of such contract or agreement and disclosure statement shall 11 be provided to a prospective participant not less than five days prior 12 to the signing of the contract or agreement. 13 § 677-b. Recruitment and sales materials. No pamphlet, circular, form 14 letter, advertisement, presentation, or other recruitment or sales 15 literature or communication addressed to or intended for prospective 16 participants shall be issued or distributed by any multilevel distrib- 17 ution company until the disclosure statement has been submitted to the 18 department. 19 § 677-c. Supervision. Each multilevel distribution company shall 20 provide support to its participants to ensure compliance with the 21 provisions of the article, and to prevent fraudulent, deceptive and 22 unlawful acts by such participants. 23 § 677-d. Penalties. Any multilevel distribution company which knowing- 24 ly violates any provision of this article or any rule or regulation 25 promulgated pursuant thereto, shall be subject to a fine of not less 26 than five hundred dollars nor more than one thousand dollars for each 27 such violation for a first offense; and a fine of not less than one 28 thousand dollars nor more than five thousand dollars for each such 29 violation for a second offense within a period of one year; and a fine 30 of not less than five thousand dollars nor more than ten thousand 31 dollars for each such violation for a third or subsequent offense within 32 a period of one year. 33 § 677-e. Rule and regulations. The attorney general is authorized and 34 directed to promulgate any such rules and regulations as shall be neces- 35 sary to implement the provisions of this article. 36 § 2. This act shall take effect on the first of January next succeed- 37 ing the date on which it shall have become a law; provided, however 38 that, effective immediately, the addition, amendment and/or repeal of 39 any rule or regulation necessary for the implementation of this act on 40 its effective date are authorized and directed to be made and completed 41 on or before such effective date.