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This entry was published on 2014-09-22
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Chain distributor schemes prohibited
General Business (GBS) CHAPTER 20, ARTICLE 23-A
§ 359-fff. Chain distributor schemes prohibited. 1. It shall be
illegal and prohibited for any person, partnership, corporation, trust
or association, or any agent or employee thereof, to promote, offer or
grant participation in a chain distributor scheme.

2. As used herein a "chain distributor scheme" is a sales device
whereby a person, upon condition that he make an investment, is granted
a license or right to solicit or recruit for profit or economic gain one
or more additional persons who are also granted such license or right
upon condition of making an investment and may further perpetuate the
chain of persons who are granted such license or right upon such
condition. A limitation as to the number of persons who may participate,
or the presence of additional conditions affecting eligibility for such
license or right to recruit or solicit or the receipt of profits
therefrom, does not change the identity of the scheme as a chain
distributor scheme. As used herein, "investment" means any acquisition,
for a consideration other than personal services, of property, tangible
or intangible, and includes without limitation, franchises, business
opportunities and services, and any other means, medium, form or channel
for the transferring of funds, whether or not related to the production
or distribution of goods or services. It does not include sales
demonstration equipment and materials furnished at cost for use in
making sales and not for resale.

3. A chain distributor scheme shall constitute a security within the
meaning of this article and shall be subject to all of the provisions of
this article.