§482E-8 Duties of the director. (a) The director may issue a stop order prohibiting the sale of a franchise if the director finds that the order is in the public interest and that:

(1) The offering circular is incomplete in any material respect or contains any statement which in the light of the circumstances under which it is or may be made false or misleading with respect to any material fact.

(2) Any provision of this chapter or any rule or order or condition lawfully imposed under this chapter has been violated in connection with the sale of a franchise by the franchisor, any partner, officer or director of a franchisor, or any person occupying a similar status or performing similar functions or any person directly or indirectly controlling or controlled by the franchisor.

(3) The offer or sale of the franchise is the subject of a permanent or temporary injunction of any court of competent jurisdiction or an administrative order prohibiting offer or sale of the franchise entered under any federal or state act applicable to the franchise but the director may not enter an order under this subparagraph on the basis of an injunction entered under any other law unless that order or injunction is based on facts that currently constitute a ground for a stop order under this section.

(4) A franchisor's enterprise or method of business includes or would include activities which are illegal where performed.

(5) The offer or sale of the franchise has worked or tended to work a fraud upon purchasers or would so operate.

(6) The franchisor or subfranchisor has failed to demonstrate that adequate financial arrangements have been made to fulfill obligations to provide real estate improvements, equipment, training, or other items included in the offering; and the franchisor or subfranchisor is unable or unwilling to comply with an order of the director under subsection (e) of this section to escrow or impound franchise fees and other funds paid by the franchisee or subfranchisor, or to furnish a surety bond approved by the director.

(b) Upon the entry of a stop order under any part of subsection (a), the director shall promptly notify the franchisor or subfranchisor that the order has been entered and the reasons therefor and that within fifteen days after receipt of a written request, the matter will be set down for hearing. If no hearing is requested within fifteen days and none is ordered by the director, the director shall enter the director's written findings of fact and conclusions of law and the order will remain in effect until it is modified or vacated by the director. If a hearing is requested or ordered, the director after notice of an opportunity for hearings to the franchisor or subfranchisor shall enter the director's written findings of fact and conclusions of law and may modify or vacate the order. The director may modify or vacate a stop order if the director finds that the conditions which prompted the director's entry have changed or that it is otherwise in the public interest to do so.

(c) The director shall refer such evidence as may be available concerning violations of this chapter or any rule or order hereunder to the attorney general or the proper prosecuting attorney who may in the attorney general's or prosecuting attorney's discretion with or without such a reference institute the appropriate criminal proceeding under this chapter.

(d) The director may, in accordance with chapter 91, from time to time make, amend, and rescind such rules, forms, and orders as are necessary to carry out this chapter including rules and forms governing offering circulars and reports and defining any terms whether or not used in this chapter insofar as the definitions are consistent with this chapter.

(e) If the director finds that the applicant has failed to demonstrate that adequate financial arrangements have been made to fulfill obligations to provide real estate, improvements, equipment, inventory, training, or other items included in the franchise proposed to be sold, the director may require the escrow or impoundment of franchise fees and other funds paid by the franchisee or subfranchisor, until the obligations are fulfilled, or the furnishing of a surety bond approved by the director, if the director finds that the requirement is necessary and appropriate to protect prospective franchisees or subfranchisors. [L 1974, c 18, pt of §1; am L 1978, c 242, §9; gen ch 1985]