Fraudulent and Prohibited Securities Activities

Corporations Code Title 4, Division 5, Part 3 deals with fraudulent and prohibited practices under the California Franchise Investment Law. Chapter 2 deals with fraudulent practices.

Section 31200 makes it unlawful for any person willfully to make any untrue statement of a material fact in any application, notice or report filed with the commissioner under this law, or willfully to omit to state in any application, notice, or report any material fact which is required to be stated.

Section 31201 makes it unlawful for any person to offer or sell a franchise in this state by means of any written or oral communication which 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.

Section 31202 makes it unlawful for any person willfully to make any untrue statement of a material fact in any statement required to be disclosed in writing, or willfully to omit to state in any such statement any material fact which is required to be stated.

Section 31203 makes it unlawful for any person to violate any order of the commissioner or condition to the effectiveness of the registration of the offer or sale of franchises.

Section 31204 makes it unlawful for any person to knowingly alter, destroy, mutilate, conceal, cover up, falsify, or make a false entry in any record, document, or tangible object with the intent to impede, obstruct, or influence the administration or enforcement of any provision of this division.

Chapter 2 deals with prohibits practices. Section 31210 makes it unlawful for any person to effect or attempt to effect a sale of a franchise in this state, except in transactions exempted, unless that person is any of four specified persons.

Section 31211 states that, if in the opinion of the commissioner any person is acting in violation of law, the commissioner may order the person to desist and refrain from further activity. If, after an order has been made, a request for a hearing is filed in writing by the person to whom such order was directed, a hearing is to be held, and the commissioner has all of the powers granted.

Section 31212 prohibits a franchisor from refusing to grant a franchise, or refuse to provide financial assistance, to a franchisee or prospective franchisee that has been granted or provided to other similarly situated franchisees or prospective franchisees based solely on any characteristic of the franchisee or prospective franchisee, or any characteristic of the composition of the neighborhood or geographic area where the franchise is located or the proposed franchise would be located.