Powers of the Corporations Commissioner

Title 4, Division 5, Part 4, Chapter 2 of the Corporations Code deals with the powers of the Corporations Commissioner for enforcement of the Franchise Investment Law in California.

Section 31400 provides that, whenever it appears to the commissioner that any person has engaged or is about to engage in any act or practice constituting a violation of any provision of this law or any rule or order, the commissioner may bring an action, or the commissioner may request the Attorney General to bring an action, to enjoin the acts or practices or to enforce compliance with this law or any rule or order hereunder.

Upon a proper showing a permanent or preliminary injunction, restraining order or writ of mandate is to be granted and a receiver or conservator may be appointed for the defendant or the defendant’s assets. If the commissioner determines it is in the public interest, the commissioner may include in any action a claim for ancillary relief.

Section 31400.1 allows the court to prohibit, conditionally or unconditionally, and permanently or for a period of time as it determines from acting as an officer or director of any franchisor if the person’s conduct demonstrates unfitness to serve as an officer or director of the franchisor.

Section 31401 authorizes the commissioner to make public or private investigations within or outside of this state as he deems necessary to determine whether any person has violated or is about to violate any provision of this law or any rule or order and to publish information concerning the violation of this law or any rule or order hereunder.

(c) In case of contumacy by, or refusal to obey a subpoena issued to, any person, the superior 

Section 31402 states that, if in the opinion of the commissioner, the offer of any franchise is subject to registration under this law and it is being, or it has been, offered for sale without the offer first being registered, the commissioner may order the franchisor or offeror of that franchise to desist and refrain from the further offer or sale of that franchise unless and until the offer has been duly registered under this law.

Section 31403 states that if, in the opinion of the commissioner, the offer of any franchise exempt from registration under this law is being or has been offered for sale without complying applicable laws, the commissioner may order the franchisor or offeror of the franchise to desist and refrain from the further offer or sale of the franchise unless and until the offer is made in compliance with this law.

Section 31404 authorizes the commissioner to refer evidence that is available concerning any violation of this law or of any rule or order hereunder to the district attorney of the county in which the violation occurred, who may, with or without such a reference, institute appropriate criminal proceedings under this law.

Section 31405 provides that any person who violates any provision of this law, or who violates any rule or order made under this law, is liable for a civil penalty not to exceed $10,000 for each violation, which is to be assessed and recovered in a civil action brought in the name of the people of the State of California by the commissioner in any court of competent jurisdiction.

Section 31406 specifies that if, upon inspection or investigation, based upon a complaint or otherwise, the commissioner has cause to believe that a person is violating or has violated any provision of this division or any rule or order, the commissioner may issue a citation to that person in writing describing with particularity the basis of the citation.

Section 31407 states that if, after examination or investigation, the commissioner has reasonable grounds to believe that any person is conducting or has conducted business in violation of any provision of this division or related rule or order binding upon it, the commissioner may, by written order addressed to the person, direct the discontinuance of the violation.

Section 31408 states that, if the commissioner determines it is in the public interest, the commissioner may include in any administrative action brought under this division, including a stop order, a claim for ancillary relief, including a claim for rescission, restitution or disgorgement or damages on behalf of the persons injured by the act or practice constituting the subject matter of the action, and the administrative law judge shall have jurisdiction to award additional relief. The person affected may be required to attend remedial education, as directed by the commissioner.