AN ACT to amend the Indiana Code concerning trade regulations; consumer sales and
credit.
SECTION 1. IC 23-2-2.5-7 IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JULY 1, 2001]: Sec. 7. (a) Upon the entry
of a stop order under section 6 of this chapter, the commissioner shall
notify the applicant franchisor:
(1) of that the entry and of the stop order;
(2) of the reasons therefor for the stop order; and
(3) that, upon receipt of a written request, the matter will be set
down for hearing to commence within fifteen (15) days after
receipt of such request, unless the applicant franchisor consents
to a later date.
(b) If no hearing is requested or none is ordered by the
commissioner, the stop order is effective until it is modified or vacated
by the commissioner.
(c) If a hearing is requested or ordered, the commissioner, after
notice and hearing, may modify or vacate the stop order.
SECTION 2. IC 23-2-2.5-10.5 IS ADDED TO THE INDIANA
CODE AS A NEW SECTION TO READ AS FOLLOWS
[EFFECTIVE JULY 1, 2001]: Sec. 10.5. (a) A person who wants to
offer for sale a franchise in Indiana and who is not exempt under
sections 3 through 5 of this chapter shall register the franchise by
notification to the commissioner on a notification form prescribed
by the commissioner. The notification shall include the following:
(1) The name of the franchisor.
(2) The name or names under which the franchisor intends to
do business.
(3) The franchisor's principal business address.
(b) The following items shall be filed with the notification:
(1) One (1) copy of the disclosure statement required under
section 13 of this chapter.
(2) The consent to service of process required under section 24
of this chapter, unless consent has previously been filed by the
person.
(3) The registration fee required under section 43 of this
chapter.
(c) A franchisor may register only one (1) franchise for each
notification.
(d) The registration of a franchise under this section is effective
upon the commissioner's receipt of the notification. The
notification is effective for one (1) year from the date of the
commissioner's receipt of the notification.
(e) During the one (1) year registration period, a person is not
required to file with the commissioner any supplemental
information, including any amendments to the disclosure
statement, unless the commissioner, acting under the
commissioner's authority to suspend or revoke a registration under
section 14 of this chapter, requests the information.
SECTION 3. IC 23-2-2.5-11 IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JULY 1, 2001]: Sec. 11. Applications for
Registration notification forms, registration renewal statements,
forms, and amendments thereto, shall be signed and verified by the
franchisor.
SECTION 4. IC 23-2-2.5-12 IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JULY 1, 2001]: Sec. 12. If the commissioner
finds that:
(1) the applicant franchisor has failed to demonstrate that
adequate financial arrangements have been made to fulfill
obligations to provide real estate, improvements, equipment,
inventory, training, or other items included in the offering; and
(2) the escrow or impoundment of franchise fees is necessary
and appropriate to protect prospective franchisees;
the commissioner may by rule or order require the escrow or
impoundment of franchise fees and other funds paid by the franchisee
until no later than the time of opening of the business of the franchisee.
if he finds that such requirement is necessary and appropriate to protect
prospective franchisees.
SECTION 5. IC 23-2-2.5-13 IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JULY 1, 2001]: Sec. 13. The application for
A registration notification form filed under section 10.5 of this
chapter shall be accompanied by the fee prescribed in section 43 of
this chapter and by three (3) copies one (1) copy of a disclosure
statement. which shall contain the information set forth in the
application for registration, as specified by rule or order of the
commissioner, and such additional disclosures as the commissioner
may require. The commissioner shall not require disclosure in the
disclosure statement of information submitted under subsection (e) (1)
of section 10. The disclosure statement shall recite in bold type that
registration does not constitute approval, recommendation or
endorsement by the commissioner and shall contain such other legends
or statements as the commissioner shall by rule or order prescribe. The
disclosure statement shall be in a form prescribed by the
commissioner or in a form permitted under 16 CFR 436, as
amended.
SECTION 6. IC 23-2-2.5-14 IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JULY 1, 2001]: Sec. 14. (a) The
commissioner may, without a hearing, issue a stop order denying the
effectiveness of or suspending or revoking the effectiveness of a
registration if he the commissioner finds that it the issuance of the
order is in the public interest and also finds that:
(a) that (1) there has been a failure to comply with any of the
provisions of this chapter or the rules or orders of the
commissioner pertaining thereto; to this chapter;
(b) that (2) the offer or sale of the franchise would constitute
misrepresentation to, or deceit or fraud on, the purchasers or
offerees;
(c) (3) that the applicant franchisor has failed to comply with any
rule promulgated or order issued pursuant to section 12 of this
chapter; or
(d) (4) that any person identified in the application has been
convicted of an offense referred to in subsection (e) of section 10,
or is subject to an order, or has had a civil judgment entered
against him as referred to in subsection (e) of section 10, and the
involvement of such person in the sale or management of the
franchise creates an unreasonable risk to prospective franchisees.
the franchisor, or the franchisor's predecessor, or any of the
franchisor's directors, trustees, general partners, chief
executives, financial officers, accounting officers, franchise
sales officers, or other principal officers, or, if the franchisor
is a limited liability company, any member or manager of the
franchisor:
(A) during the ten (10) year period immediately preceding
the date of registration, has:
(i) been convicted of a felony;
(ii) pleaded nolo contendere to a felony charge; or
(iii) been held liable in a civil action by final judgment;
if the felony or civil action involved fraud, embezzlement,
misappropriation of property, or the violation of any state
or federal statute involving the offer or sale of securities or
franchises;
(B) is subject to any currently effective order affecting the
franchise resulting from a proceeding or pending action
brought by any individual or public agency or department;
(C) is a defendant in any pending criminal or material civil
proceeding;
(D) during the ten (10) year period immediately preceding
the date of registration, has been the defendant against
whom a final judgment was entered in any material civil
action; or
(E) is the franchisor or a principal executive officer or
general partner of the franchisor and has, during the ten
(10) year period immediately preceding the date of
registration, reorganized due to insolvency or been
adjudicated as a bankrupt.
(b) An order issued under this section based on a finding by the
commissioner under subsection (a)(4)(A) must include a
description of the charge, violation, or judgment referred to in
subsection (a)(4)(A). An order issued under this section based on
a finding by the commissioner under subsection (a)(4)(B) must
include a copy of the order referred to in subsection (a)(4)(B). An
order issued under this section based on a finding by the
commissioner under subsection (a)(4)(D) must include a
description of the judgment referred to in subsection (a)(4)(D). An
order issued under this section based on a finding by the
commissioner under subsection (a)(4)(E) must include a
description of the insolvency or adjudication referred to in
subsection (a)(4)(E).
SECTION 7. IC 23-2-2.5-15 IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JULY 1, 2001]: Sec. 15. (a) Upon the entry
of a stop order under section 14 of this chapter, the commissioner
shall notify the applicant franchisor:
(1) of that the entry and of the stop order;
(2) of the reasons therefor for the stop order; and
(3) that, upon receipt of a written request, the matter will be set
down for hearing to commence within fifteen (15) days after
receipt of such request, unless the applicant franchisor consents
to a later date.
(b) If no hearing is requested or none is ordered by the
commissioner, the stop order is effective until it is modified or vacated
by the commissioner.
(c) If a hearing is requested or ordered, the commissioner, after
notice and hearing, may modify or vacate the stop order.
SECTION 8. IC 23-2-2.5-17 IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JULY 1, 2001]: Sec. 17. If no stop order
under section 14 of this chapter is in effect, registration of the offer by
notification takes effect at 12 o'clock noon, of the thirtieth day after the
filing of the application for registration or the last amendment thereto,
or at such earlier time as the commissioner determines. upon the
commissioner's receipt of the notification form. A registration by
notification is effective for a period of one (1) year.
SECTION 9. IC 23-2-2.5-18 IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JULY 1, 2001]: Sec. 18. A registration by
notification may be renewed by submitting to the commissioner an a
application for registration renewal of the registration form no later
than thirty (30) days prior to the expiration of the registration unless
that thirty (30) day period is waived by the commissioner. If no stop
order or other order under section 14 of this chapter is in effect,
registration of the offer is renewed at the time the registration would
have expired. A renewal is effective for a period of one (1) year unless
the commissioner specified a shorter period.
SECTION 10. IC 23-2-2.5-19 IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JULY 1, 2001]: Sec. 19. The application for
renewal of a A registration renewal form shall be in the form and
contain the content prescribed by the commissioner and shall be
accompanied by three (3) copies one (1) copy of the proposed
disclosure statement. Each such registration renewal application form
shall be accompanied by the fee prescribed in section 43 of this
chapter.
SECTION 11. IC 23-2-2.5-22 IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JULY 1, 2001]: Sec. 22. The commissioner
may accept and act upon the opinions, appraisals, or reports of any
experts which may be presented by an applicant a franchisor or any
interested party, on any question of fact concerning the franchises
proposed to be offered or sold. The commissioner may also have any
or all matters concerning those franchises investigated, appraised,
passed upon or certified to him the commissioner by any experts
selected by him, the commissioner, at the expense of the applicant.
franchisor.
SECTION 12. IC 23-2-2.5-23 IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JULY 1, 2001]: Sec. 23. (a) Neither:
(1) the fact that an application for a registration under this chapter
renewal form has been filed or a registration notification form
has been submitted to the commissioner under section 10.5 of
this chapter; nor
(2) the fact that such registration has become effective;
constitutes a finding by the commissioner that any document filed
under this chapter is true, complete, or not misleading. Neither any
such fact nor the fact that an exemption is available for a transaction
means that the commissioner has passed in any way upon the merits or
qualifications of, or recommended or given approval to, any person,
franchise or transaction.
(b) A person may not make or cause to be made to any prospective
purchaser or offeree any representation inconsistent with subsection
(a). of this section.
SECTION 13. IC 23-2-2.5-24 IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JULY 1, 2001]: Sec. 24. Every applicant for
registration of an Before a person may offer to sell franchises under
this chapter, the person shall file with the commissioner, in the form
that the commissioner by rule or order prescribes, an irrevocable
consent appointing the secretary of state or any successor secretary of
state to be the applicant's person's attorney to receive service of any
lawful process in any noncriminal suit, action, or proceeding against
the applicant person or the applicant's person's successor, executor,
or administrator that arises under this chapter or any rule or order under
this chapter after the consent has been filed with the same force as if
served personally on the person filing the consent. A person who has
filed a consent with the commissioner for a previous registration
or exemption under this chapter is not required to file another
consent. The person's previous consent shall remain effective for
all subsequent registrations or exemptions filed by the person
under this chapter. Service shall be made in accordance with the
Indiana Rules of Civil Procedure.
SECTION 14. IC 23-2-2.5-43 IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JULY 1, 2001]: Sec. 43. (a) All fees and
funds of whatever character accruing from the administration of this
chapter shall be:
(1) accounted for by the secretary of state;
(2) paid into the state treasury monthly; and
(3) placed in the same account of the state general fund as
established by IC 23-2-1-15(c), from which all compensation and
expenses shall be paid for the administration of this chapter.
(b) The fee for filing an application for a form for registration by
notification of the sale of franchises under section 9 10.5 of this
chapter is five hundred dollars ($500).
(c) The fee for filing an application for renewal of a registration
renewal form under section 18 of this chapter is two hundred fifty
dollars ($250).
(d) When an application a registration notification form or
registration renewal form is denied or withdrawn, the commissioner
shall retain one hundred fifty dollars ($150) of the fee.
(e) The fee for filing a posteffective amendment to a valid
registration under section 20 of this chapter is fifty dollars ($50).
SECTION 15. IC 23-2-2.5-48 IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JULY 1, 2001]: Sec. 48. (a) All applications,
registration notification forms, registration renewal forms,
applications to amend registrations, reports, and other papers and
documents filed with the commissioner under this chapter shall be
open to public inspection. The commissioner may in his discretion,
publish any information filed with him or obtained by him. the
commissioner. No provision of this chapter authorizes the
commissioner or any of his the commissioner's assistants, clerks, or
deputies to disclose any information withheld from public inspection
except among themselves or when necessary or appropriate in a
proceeding or investigation under this chapter or to other federal or
state regulatory agencies. No provision of this chapter either creates or
derogates from any privilege which exists at common law or otherwise
when documentary or other evidence is sought under a subpoena
directed to the commissioner or any of his the commissioner's
assistants, clerks, or deputies.
(a) (b) It is unlawful for the commissioner or any of his the
commissioner's assistants, clerks, or deputies to use for personal
benefit any information which is filed with or obtained by the
commissioner and which is not then generally available to the public.
(b) (c) Upon request, and at such reasonable charges as he the
commissioner prescribes by rule, the commissioner shall furnish to
any person photostatic or other copies (certified by him the
commissioner if certification is requested) of any document which is
retained as a matter of public record, except that he the commissioner
shall not charge or collect any fee for photostatic or other copies of any
document furnished to public officers for use in their official capacity.
(c) (d) The commissioner may destroy any registration applications,
notification forms, together with the files and folders, as useless or
obsolete, four (4) years after the date of registration; provided that a
permanent record shall be maintained of any disciplinary action taken
by the commissioner and of all orders issued under this chapter.
(d) (e) Copies on microfilm or in other form which may be retained
by the commissioner in his discretion of any records destroyed under
this section shall be accepted for all purposes as equivalent to the
original when certified by the commissioner.
SECTION 16. IC 23-2-2.5-10 IS REPEALED [EFFECTIVE JULY
1, 2001].