International Law

NASAA Releases Proposed Commentary to Franchise Registration and Disclosure Guidelines

This posting was written by John W. Arden.

A proposed Commentary to the 2008 Franchise Registration and Disclosure Guidelines was released for internal and public comment on September 23 by the Franchise and Business Opportunities Project Group of the North American Securities Administrators Association.

The 2008 Commentary contains ?practical guidance about complying with the new Franchise Registration and Disclosure Guidelines and addresses questions of interpretation that have arisen about those Guidelines,? according to NASAA.

In the 2008 Franchise Registration and Disclosure Guidelines, NASAA adopted the new disclosure requirements of the FTC?s Amended Franchise Rule, with a new state cover page, new filing instructions, and new application forms.

?As of the date of this Commentary, state franchise examiners have reviewed thousands of Franchise Disclosure Documents prepared under the new disclosure requirements, and those examiners and franchisors have raised questions of interpretation,? the Introduction to the Commentary states.

?Although the FTC staff has provided guidance by posting a number of ?Frequently Asked Questions? (?FAQs?) about the Amended FTC Franchise Rule and has published a Compliance Guide, some practice issues remain.?

The commentary addresses issues such as:

--Whether a franchisor may add clarifying information when disclosing the total investment necessary to begin operation of a franchise (Answer: no);

--Whether a franchisor can present information on numerous parent companies in a chart for Item 1 purposes (Answer: yes);

--Are felonies of all kinds required to be disclosed in Item 3 (Answer: yes);

--Does Item 10 require disclosure of financing arrangements requiring payments within 30 days on open account financing? (Answer: no);

--How must franchisees be listed in an exihibit for Item 20? (Answer: alphabetically by state, with cities in alphabetical order, and franchisees within each city in alphabetical order.

--Must international outlets be listed in Item 20? (Answer: no)

Text of the notice of request for comments appears here and the proposed commentary appears here on the NASAA website.

The internal and public comment period will remain open through October 23, 2008. Written comments should be sent to Dale E. Cantone, Chair of the Franchise and Business Opportunities Project Group, and to the NASAA Legal Department:

Dale E. Cantone, Deputy Securities Commissioner
Maryland Securities Division
200 St. Paul Place
Baltimore, MD 21202-2020
Telephone: 410-576-6368
e-mail: dcatone@oag.state.md.us

with a copy to:

Lesley Walker
Associate Council
NASAA
750 First Street NE, Suite 1140
Washington, DC 20002-4251
Telephone: 202-737-0900
e-mail: lw@nasaa.org

Full post as published by Trade Regulation Talk on September 23, 2008 (boomark / email).