ADMINISTRATIVE PROCEEDING BEFORE THE SECURITIES COMMISSIONER OF MARYLAND CONSENT ORDER

Transcription

1 ADMINISTRATIVE PROCEEDING BEFORE THE SECURITIES COMMISSIONER OF MARYLAND IN THE MATTER OF: * * Family Financial Centers, LLC, * Case No Respondent, * * * * * * * * * * * * * * CONSENT ORDER WHEREAS, the Maryland Securities Division (the Division ) initiated an investigation into the franchise-related activities of Family Financial Centers, LLC ( FFC ) under the authority granted under the Maryland Franchise Registration and Disclosure Law, Title 14, Subtitle 2, Business Regulation Article, Annotated Code of Maryland (2004 Repl. Vol. and Supp. 2007) (the "Maryland Franchise Law"); and WHEREAS, based on information presented by the Division, the Maryland Securities Commissioner (the Commissioner ) concluded that grounds existed to allege that FFC violated the registration and disclosure provisions of the Maryland Franchise Law, in relation to the offer and sale of a Family Financial Centers franchise in Maryland; and WHEREAS, before the holding of a hearing in this matter, without trial or final adjudication of any issue of fact or law, and without FFC admitting or denying any violation of law, the Commissioner and Respondent have reached an agreement to enter into this Consent Order; NOW, THEREFORE, IT IS HEREBY ORDERED AND DECREED:

2 I. JURISDICTION 1. The Commissioner has jurisdiction in this proceeding pursuant to Section (a) of the Maryland Franchise Law. II. STATEMENT OF FACTS 2. FFC is a Delaware limited liability company with a principal business address of 202 Farm Lane, Doyelstown, Pennsylvania FFC grants franchises for businesses that provide check cashing, money order, small short-term consumer loans, wire transfers, walk-in credit applications, and other financial services. 4. FFC has been registered with the Division to offer and sell franchises under the Maryland Franchise Law at various times between April 20, 2005 and September 14, FFC was not registered to offer and sell franchises in Maryland after September 14, On August 27, 2007, before FFC s franchise registration under the Maryland Franchise Law expired, FFC filed an application with the Division to renew FFC s then-effective franchise registration. 7. On September 11, 2007, the Division reviewed FFC s renewal application and sent FFC a comment letter outlining several deficiencies in FFC s franchise disclosure document, and advising FFC that its registration could not be made effective until those deficiencies were corrected. 8. On October 30, 2007, FFC responded to the Division s comment letter with a corrected registration application. 9. On November 13, 2007, the Division responded to FFC s revised application. In its 2

3 November 13, 2007 comment letter, the Division noted that FFC did not respond to several of the Division s comments seeking corrections to FFC s franchise disclosure document. In addition, because FFC s registration had lapsed as of September 14, 2007, the Division requested that FFC submit an undertaking that the franchisor had neither offered nor sold franchises in Maryland or to any Maryland residents after that date. 10. On March 19, 2008, FFC responded to the Division s November 13, 2007 comment letter. In that letter, FFC included an acknowledgment that FFC sold a Family Financial Centers franchise to Ronald Cooper ( Cooper ), a resident of Montgomery County, Maryland, on October 30, 2007, after FFC s franchise registration under the Maryland Franchise Law had expired. 11. FFC acknowledged that, after the Division requested an undertaking that the franchisor had not offered or sold franchises in Maryland after September 14, 2007, FFC rescinded Cooper s franchise agreement before advising the Division of that unregistered offer and sale. 12. Specifically, on February 4, 2008, FFC sought and obtained from Cooper an executed Rescission Agreement (the Rescission Agreement ), in which FFC agreed to return the $29,500 initial franchise fee that Cooper paid for his Family Financial Center franchise. The Rescission Agreement provided that FFC could repay the initial franchise fee to Cooper in three installments between February 8, 2008 and April 1, In addition, the Rescission Agreement provided that the parties released and discharged each other from all claims against the other, including all common laws claims (sic), claims arising under the Maryland Franchise Registration and Disclosure Law and any other statutory claims arising out of or relating to the parties relationship under the Franchise Agreement and/or the offer or sale of the Family Financial Center franchise (emphasis supplied). 13. FFC represents that, as of April 1, 2008, it has fully refunded the initial franchise fee 3

4 Cooper paid for his Family Financial Centers Franchise. 14. FFC also represents that Cooper paid no other fees and made no other payments to FFC for his Family Financial Centers franchise, other than the $29,500 initial franchise fee that FFC fully refunded. 15. FFC represents that it initially gave a franchise disclosure document to Cooper on April 10, 2007, when FFC was registered to offer franchises under the Maryland Franchise Law. FFC acknowledges, however, that when Cooper signed his franchise agreement with FFC, Cooper did not receive an updated franchise disclosure document that was registered under the Maryland Franchise Law as of the date of the sale. 16. FFC represents that it has ceased offering franchises in Maryland and to any Maryland residents. 17. FFC also represents that, other than the sale to Cooper, FFC did not offer or sell any Family Financial Centers franchise in Maryland or to any Maryland residents. IV. CONCLUSIONS OF LAW 18. By engaging in the above activities, the Commissioner has concluded that FFC violated and of the Maryland Franchise Law, and Maryland Franchise Regulations (COMAR) Section V. ORDER AND CONSENT 19. THE COMMISSIONER HEREBY ORDERS, AND FFC REPRESENTS AND CONSENTS THAT: A. FFC shall immediately and permanently cease and desist from the offer and sale of 4

5 franchises in violation of the Maryland Franchise Law; B. FFC shall send to Cooper an acknowledgment that FFC voluntarily rescinds and cancels the provision in the Rescission Agreement stating that Cooper waives any rights he may have to bring any claims arising under the Maryland Franchise Registration and Disclosure Law; C. FFC shall enroll an officer of FFC who is responsible for franchise compliance matters in the International Franchise Association s on-site ½ day training entitled Franchise Sales and Disclosure Law Compliance Training Program, or another franchise law compliance training program pre-approved in writing by the Division; D. FFC acknowledge that this Consent Order is a discloseable order as described under (c)(9)(i)(4) of the Maryland Franchise Law and Item 3 of the Uniform Franchise Offering Circular Guidelines and the Amended FTC Franchise Rule. VI. JURISDICTION RETAINED 20. Jurisdiction shall be retained by the Commissioner for such further orders and directions as may be necessary or appropriate for the construction or enforcement of the Consent Order. VII. CONSEQUENCES OF VIOLATING THIS CONSENT ORDER 21. If FFC fails to comply with any term of this Consent Order, the Division may bring administrative or judicial proceedings against it to enforce this Consent Order or to sanction it for violating an order of the Commissioner, and may take any other action authorized under the Maryland Franchise Law or any other applicable law. In any such proceeding in which, after an opportunity for a hearing, the Commissioner or a court finds that FFC has violated this Consent Order, the Statement of Facts and the violations of the Maryland Franchise Law alleged in the Consent Order shall be deemed admitted and may be introduced into evidence against FFC. 5

6 VIII. MODIFICATION OF CONSENT ORDER 22. The terms of this Consent Order may be modified only by a subsequent order issued by the Commissioner. BY CONSENT: SO ORDERED: Family Financial Centers, LLC /S/ BY: Paul Eckert, President Commissioner s Signature is on File with Original Document MELANIE SENTER LUBIN SECURITIES COMMISSIONER DATE OF THIS ORDER: June 5,