If you are thinking about joining a multilevel marketing plan, you should know that Maryland has a Maryland Multilevel Distribution Companies Law, Title 14, Subtitle 3, Business Regulation Article, Annotated Code of Maryland (2004 Repl. Vol.) (the “Maryland Multilevel Marketing Law”). Mul-tilevel marketing plans also are known as “multilevel distribution companies,” “MLMs,” or “network” or “matrix marketing programs.”

Multilevel marketing plans generally pro-vide a way of selling goods or services through distributors. Th ese programs typically distributors. Th ese programs typically promise you that if you sign up as a promise you that if you sign up as a distributor, you can earn commissions distributor, you can earn commissions from sales of products or services that from sales of products or services that you make, and from sales made by you make, and from sales made by other people that you recruit to join other people that you recruit to join the program. Multilevel marketing the program. Multilevel marketing plans often promise to pay commissions plans often promise to pay commissions through two or more levels of recruits, through two or more levels of recruits, called the distributor’s “downline.”called the distributor’s “downline.”

Be Careful of Unlawful Be Careful of Unlawful Pyramid Schemes

If you are considering par- If you are considering par-ticipating in a multilevel market-ticipating in a multilevel market-ing plan, be aware that some mul-ing plan, be aware that some mul-tilevel marketing plans, in reality, tilevel marketing plans, in reality, may be illegal pyramid schemes if may be illegal pyramid schemes if participants earn money primarily participants earn money primarily from the recruitment of others into from the recruitment of others into the plan, rather than from the the plan, rather than from the

sale of a product or service. Pyramid schemes are il-legal in Maryland and every other state. Anyone who establishes, promotes or advertises an illegal pyramid scheme in Maryland is committing a crime that may result in a fi ne or a prison sentence, or both. Th e Maryland Securities Division publishes a brochure entitled “Pyramid Schemes: Investor Beware!” http://www.oag.state.md.us/Securities/PyramidBrochure.pdf with more information about how to distinguish an illegal pyramid scheme from a multilevel marketing plan.

Th e Maryland Multilevel Law’s RequirementsTh e Maryland Multilevel Law’s Requirements

Under the Maryland Multi- Under the Maryland Multi-level Law, a multilevel market-level Law, a multilevel market-ing company must allow a ing company must allow a participant to participant to cancel his or cancel his or cancelher contract her contract for any reasonwithin the fi rst 3 months within the fi rst 3 months after receiving any goods or after receiving any goods or

services.services.

If participants are required to If participants are required to purchase products or services in order purchase products or services in order

to participate in a multilevel market-to participate in a multilevel market-ing plan, the Maryland Multilevel Law ing plan, the Maryland Multilevel Law requires the company to requires the company to repurchase, at 90% of the original purchase price, at 90% of the original purchase price, all resalable goodsall resalable goods within 3 months of all resalable goods within 3 months of all resalable goodsdelivery.

Th e Maryland Multilevel Law also Th e Maryland Multilevel Law also prohibits a multilevel marketing prohibits a multilevel marketing company from making any earnings company from making any earnings representations or projectionsrepresentations or projections to representations or projections to representations or projections

200 St. Paul Place • Baltimore, MD 21202 • 410-576-6360www.oag.state.md.us/Securities

Multilevel Marketing Plans

Investor EducationSecurities Division, Maryland Attorney General’s Office

prospective participants, unless the representations or projections accurately refl ect the average earn-ings of a substantial number of participants who are similarly situated to the prospective participant.

Remedies for Law Violations by Multilevel Marketing Plans

Multilevel marketing companies are not required to be registered in Maryland. Further, no Maryland governmental agency “approves” or reviews any multilevel marketing plan for legal compliance before it is off ered in this state. For those reasons, it is diffi cult for this Offi ce to give advice about the legality of specifi c multilevel market-ing companies. Potential participants should be aware that in many cases, a multilevel marketing company may have written documentation describing how its plan is intended to operate, but individuals off er-ing the plan to the public may be doing so contrary to the written description. Th e Maryland Attorney General’s Offi ce or your county’s State’s Attorney’s General’s Offi ce or your county’s State’s Attorney’s Offi ce, after conducting a thorough investigation, Offi ce, after conducting a thorough investigation, may go to court to stop a company from violating a may go to court to stop a company from violating a provision of the Maryland Multilevel provision of the Maryland Multilevel Law. If you participate in a multilevel market-ing program and then have a dispute with the company, you may need an attorney to handle your case. Only a judge can order a company that is violat-ing the law to return any money.

For more infor-mation or to check on any investment opportu-nity, contact the Maryland nity, contact the Maryland Securities Division, by calling 410-576-6360 or by calling 410-576-6360 or by e-mailing securities@oag.e-mailing securities@oag.state.md.us.

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