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A01826 Summary:

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.
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A01826 Text:

                STATE OF NEW YORK
                               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.

        A. 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.
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