SB414: Bill Text

LRB-4021/3

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2001 - 2002 LEGISLATURE

2001 Senate BILL 414

February 4, 2002 - Introduced by Senators Baumgart, Schultz and Wirch, cosponsored by Representatives Gronemus, Pettis, Hahn, Ryba, Miller, Albers, Lassa and Seratti. Referred to Committee on Economic Development and Corrections.

SB414,1,3 An Act to create 20.115 (1) (jg) and 100.298 of the statutes; relating to: the regulation of business opportunity plans, granting rule-making authority, making an appropriation, and providing a penalty.

Analysis by the Legislative Reference Bureau

This bill imposes requirements and restrictions on businesses that sell or lease business opportunity plans. Under the bill, a business opportunity plan is defined as an agreement under which a person sells or leases products to another after having made certain types of representations. These representations include statements that the purchaser may earn an amount that is in excess of the purchaser's investment by reselling and releasing the products that are the subject of the plan and that there is a market for these products. Under the bill, a business engaged in selling or leasing these plans must provide the purchasers a written disclosure, which includes a statement that there is no guarantee of the amount to be earned under the plan. To be subject to these provisions, a business engaged in selling or leasing these plans must have sold or leased at least five plans within the 24 months immediately before making an offer to sell or lease the plan or must represent that it intends to sell or lease at least five plans within the 12 months following the date of the sale or lease of the plan being offered.

Under the bill, a business selling or leasing these plans must register the business opportunity plan with the department of agriculture, trade and consumer protection (DATCP) and pay a registration fee of $300 for the plan. The registrant must also file a bond with DATCP. The bill imposes a minimum of $75,000 on the amount of the bond and requirements on the type of bond and the qualification of the surety company endorsing the bond, but allows DATCP to promulgate rules to eliminate or change these requirements concerning the type of bond, the surety company, and the minimum amount.

The bill exempts various sales or leases and other transactions from these requirements. These exemptions include sales or leases of securities and franchises and certain real estate transactions. Also, a license granted by a business selling or leasing these plans that allows the sale or lease of products under the business's trademark or trade name are exempt if the business has been continually doing business in this state for five years, if the business as well as the license grantee sells or leases the products directly to the public, and if during the previous 12 months the amount of gross receipts from the sale and lease of these products to the general public through a business opportunity plan has equaled at least 50% of the total fair market value of the products that were sold or leased to all of the purchasers participating in the plan. Also exempted is a sale or lease to a purchaser who has been purchasing other products from the business offering the plan for at least six months and who has recouped in the reselling or releasing of these products a gross amount that is equal to the purchaser's investment.

The bill authorizes DATCP to bring suit to enforce these provisions. The bill also imposes forfeitures for the violation of these provisions and also authorizes a court to impose a fine or imprisonment or both if the violation involves an intent to defraud.

For further information see the state and local fiscal estimate, which will be printed as an appendix to this bill.

The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

SB414, s. 1 Section 1. 20.115 (1) (jg) of the statutes is created to read:

SB414,2,4 20.115 (1) (jg) Business opportunity plan regulation. All moneys received from the fees collected under s. 100.298 (2) (c) for the regulation of business opportunity enterprises under s. 100.298.

SB414, s. 2 Section 2. 100.298 of the statutes is created to read:

SB414,2,7 100.298 Regulation of business opportunity plans. (1) Definitions. In this section:

SB414,3,3 (a) "Business opportunity enterprise" means a person or persons engaged in the business of offering business opportunity plans to, or entering into business opportunity plans with, purchasers.

SB414,3,6 (b) "Business opportunity plan" means an agreement under which a business opportunity enterprise sells or leases products to a purchaser after the business opportunity enterprise has made any of the following representations:

SB414,3,9 1. That the business opportunity enterprise may purchase any item made, grown, bred, modified, or developed by the purchaser using any of the products sold or leased under the business opportunity plan.

SB414,3,12 2. That the purchaser may earn an amount by selling or leasing the products subject to the business opportunity plan that is in excess of the purchaser's investment.

SB414,3,15 3. That there is a market for the product or anything made, grown, bred, modified, or developed by the purchaser using any of the products that are subject to the business opportunity plan.

SB414,3,18 (c) "Business opportunity plan group" means all of the purchasers who have entered into business opportunity plans with the same business opportunity enterprise to purchase the same product under the same terms and conditions.

SB414,3,19 (d) "Products" means goods, services, or training or any combination thereof.

SB414,3,21 (e) "Purchaser" means a person who is solicited to enter into or who enters into a business opportunity plan with a business opportunity enterprise.

SB414,3,24 (f) "Purchaser's investment" means any consideration given by or on behalf of the purchaser to a business opportunity enterprise to buy or lease products that are subject to a business opportunity plan.

SB414,4,3 (2) Registration requirements. No business opportunity enterprise or its employee or agent may offer or enter into, in this state, any business opportunity plan unless all of the following apply:

SB414,4,6 (a) The business opportunity enterprise has registered the business opportunity plan with the department at least 30 days before offering the business opportunity plan. The registration shall include the following information:

SB414,4,10 1. The official name, address, and places of business of the business opportunity enterprise. If the business opportunity enterprise is a partnership, limited liability company, or association, the name and address of each member. If the business opportunity enterprise is a corporation, the name and address of each of its officers.

SB414,4,11 2. A copy of the articles of incorporation, if applicable.

SB414,4,13 3. The name under which the business opportunity enterprise intends to do business.

SB414,4,16 4. Any trademarks, trade names, service marks, advertising symbols, or other commercial symbols that identify the products to be sold or leased under the business opportunity plan.

SB414,4,20 5. The name of any business opportunity plan in which the business opportunity enterprise has been involved within the 5 years immediately before the date on which the business opportunity enterprise submits the registration to the department.

SB414,4,21 6. A factual description of the business opportunity plan.

SB414,4,24 7. A statement specifying the amount that the purchaser must pay to the business opportunity enterprise as the purchaser's investment in order to enter into the business opportunity plan.

SB414,5,3 8. A statement specifying any amounts, in addition to the purchaser's investment, that the purchaser must pay to the business opportunity enterprise under the business opportunity plan.

SB414,5,6 9. A record of any conviction, civil order or judgment, administrative order, or other legal proceeding that relates to or affects the business practices of the business opportunity enterprise.

SB414,5,7 10. Any other information required by the department by rule.

SB414,5,9 (b) The business opportunity enterprise files a bond or other security with the department as required under sub. (2m).

SB414,5,12 (c) The business opportunity enterprise pays a registration fee of $300 for the business opportunity plan being registered, unless the department by rule establishes a different amount.

SB414,5,16 (2m) Bond or surety requirements. (a) Except as provided in par. (b), the department shall require, for purposes of sub. (2) (b), a continuous surety bond payable to the department, on a form approved by the department and endorsed by a surety company licensed to do business in this state.

SB414,5,19 (b) The department may promulgate rules changing or eliminating any of the requirements under par. (a) relating to the type of security, the type of form used, or the qualifications of surety companies.

SB414,5,22 (c) The department shall set the bond or other security to be filed under sub. (2) (b) in an amount that is equal to at least $75,000, unless the department by rule sets a different minimum amount.

SB414,6,2 (3) Disclosure requirements. (a) If a business opportunity enterprise or its employee or agent makes any statement concerning the amount or range of earnings or receipts that may be made by a purchaser under a business opportunity plan, the business opportunity enterprise or its employee or agent shall provide a written disclosure that reads as follows:

SB414,6,3 Disclosure

SB414,6,8 No guarantee of earning or range of earnings through this business opportunity plan can be made. The number of purchasers who have earned, through this business opportunity plan, an amount in excess of the amount of their purchasers' investments is at least ...., which represents ....% of the total number of purchasers of the business opportunity plan.

SB414,6,11 (b) Before providing a written disclosure under par. (a), the business opportunity enterprise or its employee or agent shall enter the appropriate calculations on the blanks on the disclosure.

SB414,6,14 (3m) Applicability. This section applies only to business opportunity plans that are offered or entered into by business opportunity enterprises or by their employees or agents to which any of the following applies:

SB414,6,17 (a) The business opportunity enterprise has entered into 5 or more business opportunity plans within the 24 months immediately before the date of the offer of the business opportunity plan.