If a ch. 135 “dealer" is also a “franchisee" under ch. 553, the commissioner of securities may deny, suspend, or revoke a franchisor's registration or revoke its exemption if the franchisor has contracted to violate or avoid provisions of ch. 135. Ch. 135 expresses public policy and its provisions may not be waived. 66 Atty. Gen. 11.
Amendment to registration statement. 553.31(1)(1)
Except as provided in sub. (3)
, a franchisor shall within 30 days after the happening of any material event affecting a registered franchise notify the division in writing, by an application to amend the registration statement, of any material change in the information contained in the application as originally submitted, amended or renewed. The division may by rule further define what shall be considered a material change for such purposes, and the circumstances under which a revised offering prospectus must accompany such application.
An amendment filed after the effective date of the registration of the sale of franchises is effective upon receipt of the amendment by the division.
If a franchisor and prospective franchisee in the offer or sale of a franchise negotiate changes to the terms or conditions of a franchise that is the subject of an effective registration statement, the franchisor is not required to amend the registration statement for purposes of that offer or sale. If the changes are material with respect to prospective franchisees who were not involved in negotiating the changes, the franchisor shall amend the registration statement under sub. (1)
for purposes of offers or sales involving those prospective franchisees.
See also s. DFI-Sec 35.01
, Wis. adm. code.
FRAUDULENT AND PROHIBITED PRACTICES
Fraudulent and prohibited practices. 553.41(1)(1)
No person may make or cause to be made, in any document filed with the division or in any proceeding under this chapter, any statement which is, at the time and in the light of the circumstances under which it is made, false or misleading in any material respect or, in connection with any statement required to be made under s. 553.31 (1)
, omit to state a material fact necessary in order to make the statement made, in the light of the circumstances under which they are made, not misleading.
No person may violate any order of the division or condition therein of which the person has notice.
No person may offer or sell a franchise in this state by means of any written or oral communication not included in sub. (4)
that includes an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading.
No person may make any untrue statement of a material fact in any statement required to be disclosed in writing in a timely manner under s. 553.27
or omit to state in any such statement any material fact that is required to be stated in the statement.
No person may willfully represent to any prospective franchisee in this state that the division has passed in any way upon the merits of any franchise or that a franchise is registered or exempted when that is not the case.
History: 1971 c. 241
; 1981 c. 54
; 1995 a. 27
See also s. DFI-Sec 34.01
, Wis. adm. code.
ENFORCEMENT AND GENERAL PROVISIONS
Civil liability; sale in violation. 553.51(1)(1)
Any person who sells a franchise in violation of s. 553.27 (4)
, if the violation was material in the franchisee's or subfranchisor's decision to purchase the franchise, shall be liable to the franchisee or subfranchisor, who may bring an action for rescission.
Any person who violates s. 553.41 (3)
is liable for damages to any person who does not know or have cause to believe that the statement or representation was false or misleading and who, while relying upon the statement or representation, purchased a franchise, unless the defendant proves that the plaintiff knew the facts concerning the untruth or omission or that the defendant exercised reasonable care and did not know, or if the defendant had exercised reasonable care would not have known, of the untruth or omission.
Every person who directly or indirectly controls a person liable under sub. (1)
, every partner in a firm so liable, every principal executive officer or director of a corporation so liable, every person occupying a similar status or performing similar functions and every employee of a person so liable who materially aids in the act or transaction constituting the violation is also liable jointly and severally with and to the same extent as such person, unless the person who would otherwise be liable hereunder had no knowledge of or reasonable grounds to believe in the existence of the facts by reason of which the liability is alleged to exist.
No action may be maintained against any person to enforce any liability under this section unless it is brought before the expiration of 3 years after the act or transaction constituting the violation upon which the liability is based or 90 days after delivery to the franchisee of a written notice from or on behalf of that person that discloses any violation of this chapter and that is filed with the division, whichever first expires.
The rights and remedies under this chapter are in addition to any other rights or remedies that may exist at law or in equity.
A franchisor who illegally sold a franchise had no right to set off the value of “benefits conferred" upon the franchisee against the franchisor's liability for its illegal actions. Hiltpold v. T-Shirts Plus, Inc. 98 Wis. 2d 711
, 298 N.W.2d 217
(Ct. App. 1980).
Criminal penalties. 553.52(1)(1)
Any person who willfully violates s. 553.41 (2)
or any order of which the person has notice, or who violates s. 553.41 (1)
knowing or having reasonable cause to believe either that the statement made was false or misleading in any material respect or that the failure to report a material event under s. 553.31 (1)
was false or misleading in any material respect, is guilty of a Class G felony. Each of the acts specified is a separate offense, and a prosecution or conviction for any one of those offenses does not bar prosecution or conviction for any other offense.
Any person who employs, directly or indirectly, any device, scheme or artifice to defraud in connection with the offer or sale of any franchise or engages, directly or indirectly, in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person in connection with the offer or sale of any franchise is guilty of a Class G felony.
Nothing in this section limits the power of the state to punish any person for any conduct which constitutes a crime under any other statute.
The department of justice or any district attorney, upon informing the department of justice, may commence an action in circuit court in the name of the state to restrain by temporary or permanent injunction any act or practice constituting a violation of this chapter or any rule or order hereunder. The division may refer such evidence as is available concerning any violation to the district attorney of the county in which the violation occurred or to the attorney general who may institute proceedings under this section.
The court may, prior to the entry of final judgment, issue such orders or judgments as are necessary to restore to any person any pecuniary loss suffered because of the acts or practices involved in the action if proof of the pecuniary loss is submitted to the satisfaction of the court. Orders or judgments under this paragraph shall not provide restoration of any pecuniary loss to persons for whom recovery is sought where the defendant in the action establishes that the persons were in possession of knowledge which would defeat recovery by them in a private civil action under s. 553.51 (2)
. Persons liable for pecuniary losses under this paragraph are the same as provided under s. 553.51 (3)
Upon a proper showing, a temporary or permanent injunction or restraining order shall be granted and a receiver or conservator may be appointed for the defendant or the defendant's assets. The court shall not require the department of justice to post a bond.
The department of justice may subpoena persons, administer oaths, take testimony, require the production of books and other documents and may request the division to exercise the division's authority under s. 553.55
to aid in the investigation of alleged violations of this chapter. If a person fails to obey any subpoena issued by the department of justice, that person may be coerced under s. 885.12
, except that no person shall be required to furnish any testimony or evidence under this subsection which might tend to incriminate that person.
In lieu of instituting or continuing an action pursuant to this section, the division or the department of justice may accept a written assurance of discontinuance of any act or practice alleged to be a violation of this chapter from the person who has engaged in such act or practice. The acceptance of such assurance by either the division or the department of justice shall be deemed acceptance by other state officials if the terms of the assurance so provide. An assurance entered into pursuant to this subsection shall not be considered evidence of a violation of this chapter, however, a violation of such an assurance constitutes a violation of this chapter and shall be subject to all penalties and remedies provided therefor.
See also s. DFI-Sec 35.03
, Wis. adm. code.
Investigations and subpoenas. 553.55(1)(1)
The division may make such public or private investigations within or outside of this state as the division deems necessary to determine whether any person has violated or is about to violate this chapter or any rule or order hereunder or to aid in the enforcement of this chapter or in the prescribing of rules and forms hereunder, and publish information concerning the violation of this chapter or any rule or order hereunder.
For the purpose of any investigation or proceeding under this chapter, the division or any officer designated by the division 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 division deems relevant or material to the inquiry. Failure to obey a subpoena or give evidence may be dealt with under s. 885.12
No person is excused from attending and testifying or from producing any document or record before the division, or in obedience to the subpoena of the division or any officer designated by the division, or in any proceeding instituted by the division, on the ground that the testimony or evidence required of the person may tend to incriminate the person or subject the person to a penalty or forfeiture. No individual may be prosecuted or subjected to any penalty or forfeiture for or on account of his or her testimony or evidence, after claiming his or her privilege against self-incrimination, except that the individual testifying is not exempt from prosecution and punishment for perjury or contempt committed in testifying.
Hearings and judicial review. 553.56(1)(1)
Except as provided by sub. (2)
, no order may be entered by the division under s. 553.24
without appropriate prior notice to all interested parties, opportunity for hearing and written findings of fact and conclusions of law.
Within 30 days after the division has issued an order summarily, an interested party may apply to the division for a hearing in respect to any matters determined by the order. Within 10 days after an interested party files a written request with the division for a hearing the matter shall be noticed for a hearing, and a hearing shall be held within 60 days after notice unless extended by the division for good cause. During the pendency of any hearing requested under this subsection, the order issued summarily shall remain in effect unless vacated or modified by the division.
After a hearing, the division may issue a final order as appropriate. The final order may affirm, vacate or modify an order issued summarily in effect during the pendency of the hearing as appropriate, or may include such other sanctions as are provided for under s. 553.24
. An order issued summarily against a party becomes a final order if the party fails to request a hearing under sub. (2)
or if the party defaults after requesting a hearing.
Hearings and rehearings shall be public.
Orders and other official acts of the division are subject to judicial review under ch. 227
but orders originally entered without a hearing under s. 553.24
may be reviewed only if the party seeking review has requested a hearing within the time provided by sub. (2)
See also s. DFI-Sec 36.01
, Wis. adm. code.
Enforcement of criminal penalties.
The division may refer such evidence as is available concerning any violation of this chapter or of any rule or order hereunder to the district attorney of the county in which the violation occurred, or to the attorney general, who may, with or without any reference, institute the appropriate criminal proceedings under this chapter.
History: 1971 c. 241
; 1995 a. 27
Rules, forms and orders. 553.58(1)(1)
The division may make, amend and rescind any rules, forms and orders that are necessary to carry out this chapter, including rules and forms governing registrations and defining any terms, whether or not used in this chapter, insofar as the definitions are not inconsistent with this chapter. The division may define by rule false, fraudulent or deceptive practices in the offer and sale of franchises. For the purpose of rules and forms, the division may classify franchises, persons and matters within the division's jurisdiction and may prescribe different requirements for different classes. Rules shall be made and published and all administrative procedures, including hearings under s. 553.56
and issuance of orders, shall be in accordance with ch. 227
No rule, form or order may be made, amended or rescinded unless the division finds that the action is necessary or appropriate in the public interest or for the protection of investors. In adopting rules and forms the division may cooperate with official administrators of other states.
No provision of this chapter imposing any liability applies to any act done or omitted in good faith in conformity with any rule, form or order of the division, notwithstanding that the rule, form or order may later be amended or rescinded or be determined to be invalid for any reason.
All orders shall take effect when made and filed or at such later time as the division prescribes, and the division shall, upon making and filing such order, forthwith deliver personally or by mail a copy thereof to every person to whom such order relates at the person's last-known address as it appears on the records of the division and that delivery shall constitute notice thereof.
Scope of chapter. 553.59(1)(1)
The provisions of this chapter concerning sales and offers to sell apply when a sale is made in this state or when an offer to sell is made or accepted in this state, except that s. 553.21
does not apply to an offer to sell that is not directed to, or received by, the offeree in this state.
For the purpose of this section, an offer to sell is made in this state if the offer either originates in this state or is directed by the offeror to this state and received by the offeree in this state.
For the purpose of this section, an offer to sell is accepted in this state if acceptance is communicated to the offeror from this state.
An offer to sell is not made in this state if the publisher circulates or there is circulated on the publisher's behalf in this state any bona fide newspaper or other publication of general, regular and paid circulation that is not published in this state or if a radio or television program that originates outside this state is received in this state.
The division may by order summarily prohibit offers or sales of a franchise that are being, or have been, made in this state in violation of this chapter, unless the franchise is registered or exempted from registration under this chapter.
History: 1981 c. 54
; 1995 a. 27
Administrative assessments; investor education. 553.605(1)(1)
Imposing administrative assessment with certain orders. 553.605(1)(a)(a)
The division or any officer designated by the division may impose an administrative assessment in the amount provided in par. (b)
on any person who is subject to an order that is issued under s. 553.24
, 553.58 (1)
in any of the following circumstances:
Following a hearing under s. 553.56
if the notice delivered to all interested parties includes notice of the division's authority to impose an administrative assessment under this subsection.
Pursuant to an order that is issued under any of the sections referred to in this paragraph and that is stipulated to by each person subject to the administrative assessment.
The amount of an administrative assessment imposed on any person under this subsection may not exceed $5,000 for each act or omission that constitutes the basis for issuing the order under any of the sections referred to in par. (a)
, except that the amount of the administrative assessment may not exceed $50,000 for any person subject to the order.
The division shall include any administrative assessment imposed under this subsection in the order issued under any of the sections referred to in par. (a)
in the manner described in par. (a) 1.
Upon the request of the division, the department of justice may bring a civil action in the circuit court for Dane County to compel payment of any unpaid administrative assessment, unless payment of the administrative assessment is stayed under s. 227.54
The administrative assessment under this subsection is in addition to any other penalty, remedy or sanction under this chapter.
(2) Investor education.
All moneys collected from the administrative assessment under sub. (1)
shall be credited to the appropriation under s. 20.144 (1) (i)
. Subject to s. 20.144 (1) (i)
, the division shall use moneys credited to that appropriation to provide information to residents of this state about franchise investments to help investors and potential investors evaluate their investment decisions, protect themselves from false, fraudulent or deceptive practices in connection with the offer, sale or purchase of a franchise, be alert for false or misleading advertising or other harmful practices, and know their rights as investors.
History: 1987 a. 381
; 1995 a. 27
This chapter shall be administered by the division and by the department of justice when exercising its authority under s. 553.54
It is unlawful for the division or any of the division's officers or employees to use for personal benefit any information which is filed with or obtained by the division and which is not generally available to the public. Nothing in this chapter authorizes the division or any of the division's officers or employees to disclose any confidential information except among themselves or to other securities administrators or regulatory authorities or when necessary or appropriate in a proceeding or investigation under this chapter. 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 division or any of the division's officers or employees.
History: 1971 c. 241
; 1981 c. 54
; 1995 a. 27