Wednesday, June 27, 2007

NASAA OKs State Registration of Franchise Disclosures Prepared Under New FTC Rule

Starting on July 1, franchisors may register franchise disclosure documents prepared pursuant to the new FTC franchise rule in all states requiring registration.

An interim statement of policy adopted on June 22 by the North American Securities Administrators Association (NASAA) approved the new FTC disclosure format, with the addition of a new state cover page.

Previously, the 13 states with franchise registration laws required franchisors to prepare disclosure documents pursuant to the Uniform Franchise Offering Circular (UFOC) Guidelines, a format issued by NASAA.

The new FTC franchise disclosure rule, issued January 23, 2007, adopted disclosure requirements that closely track the UFOC Guidelines. The new FTC rule comes into effect on July 1, 2007, but allows the use of the 1979 rule through July 1, 2008.

“The new FTC format is not yet required, of course,” said Dale E. Cantone, Maryland franchise administrator and Chair of the NASAA Franchise Project Group. “States will continue to accept and process franchise disclosures that follow the UFOC Guidelines until July 1, 2008.”

Tips for Using New Format

The NASAA Franchise Project Group issued the following tips for franchisors that choose to file disclosure documents using the new FTC rule format instead of the UFOC Guidelines:

 In the cover letter accompanying the filing, clearly indicate the type of disclosure format being used.

 Do not mix and match formats.

 Be sure to use the new state cover page prescribed under the NASAA statement of policy.

 Check the FTC’s Frequently Asked Questions on the new franchise rule at

 Continue to file with each state franchise agency the same application forms required under the current UFOC Guidelines (and any state specific forms) and the same filing instructions.

 Continue to include with your disclosure document state-specific provisions required under applicable state laws (by addenda if appropriate).

 If filing an amendment or renewal, do not forego a redlined copy showing changes from a previously-filed document and please check it for accuracy. (Examiners are reporting a surprising number of problems with redlined copies.)

The June 22 interim statement of policy will soon be posted on the NASAA web site ( In the meantime, it appears on the Maryland Attorney General's website.

Extensive materials on the new FTC disclosure rule, including full text and expert commentary, appear in the CCH Business Franchise Guide.

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