WSR 15-05-002 PROPOSED RULES DEPARTMENT OF FINANCIAL INSTITUTIONS (Securities Division) [Filed February 4, 2015, 2:30 p.m.]
Original Notice.
Preproposal statement of inquiry was filed as WSR 14-03-063.
Title of Rule and Other Identifying Information: The securities division is proposing to amend WAC 460-80-300 to explicitly allow for delivery of Franchise Disclosure Documents over the internet or by other electronic means, or in machine-readable media.
Hearing Location(s): Department of Financial Institutions (DFI), 150 Israel Road S.W., Tumwater, WA 98501, on March 25, 2015, at 10:00 a.m.
Date of Intended Adoption: March 26, 2015.
Submit Written Comments to: Michelle Webster, Securities Division, 150 Israel Road S.W., Tumwater, WA 98501, e-mail michelle.webster@dfi.wa.gov, fax (360) 704-6491, by March 25, 2015.
Assistance for Persons with Disabilities: Contact Carolyn Hawkey, P.O. Box 9033, Olympia, WA 98507, by March 18, 2015, TTY (360) 664-8126 or (360) 902-8760.
Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: The Washington Franchise Investment Protection Act requires delivery of a franchise disclosure document at least fourteen calendar days prior to the execution by the prospective franchisee of any binding franchise or other agreement, or at least fourteen calendar days before the prospective franchisee signs a binding agreement with, or makes any payment to, the franchisor or an affiliate in connection with the proposed franchise sale. Neither the Washington State Franchise Investment Protection Act nor the securities division's rules explicitly allow a franchisor to provide the Franchise Disclosure Document electronically to prospective franchisees. On September 14, 2003, the North American Securities Administrators Association (NASAA) approved a Statement of Policy Regarding Electronic Delivery of Franchise Disclosure Documents. On January 22, 2007, the Federal Trade Commission (FTC) adopted amendments to its franchise rule that explicitly allowed electronic delivery of Franchise Disclosure Documents.
The securities division recognizes that explicitly allowing for electronic disclosure of Franchise Disclosure Documents may benefit prospective franchisees by making Franchise Disclosure Documents more readily available and more readable. Allowing electronic disclosure also benefits franchisors by reducing costs associated with reproduction and delivery of disclosure materials. As the amendments considered by the division reflect the language of the NASAA statement of policy, and the FTC rules similarly allow for electronic delivery of Franchise Disclosure Documents, the amendments under consideration would better coordinate the securities division's rules with other federal and state laws that regulate the offer and sale of franchises. The proposed amended rule also reflects franchisors' practice in delivering electronic disclosure in reliance on the federal E-SIGN Act.
Statutory Authority for Adoption: RCW 19.100.080, 19.100.250.
Statute Being Implemented: Chapter 19.100 RCW.
Rule is not necessitated by federal law, federal or state court decision.
Name of Proponent: DFI, securities division, governmental.
Name of Agency Personnel Responsible for Drafting: Michelle Webster, 150 Israel Road S.W., Tumwater, WA 98501, (360) 902-8736; Implementation: Scott Jarvis, Director, DFI, 150 Israel Road S.W., Tumwater, WA 98501, (360) 902-8760; and Enforcement: William Beatty, Director, Securities, 150 Israel Road S.W., Tumwater, WA 98501, (360) 902-8760.
No small business economic impact statement has been prepared under chapter 19.85 RCW. If any costs are borne by businesses in connection with the proposed rule, these costs will be no more than minor. As such, the agency is not required to prepare a small business economic impact statement under RCW 19.85.030.
A cost-benefit analysis is not required under RCW 34.05.328. DFI is not an agency identified in RCW 34.05.328.
February 4, 2015
Scott Jarvis
Director
AMENDATORY SECTION (Amending WSR 09-22-050, filed 10/29/09, effective 11/29/09)
WAC 460-80-300 Delivery and receipt of offering circular.
(1) Each person that sells a franchise that is registered or required to be registered pursuant to RCW 19.100.020 shall ensure that the Franchise Disclosure Document and other required documents are delivered to each offeree in accordance with RCW 19.100.080 and shall obtain a signed receipt therefore in the form prescribed by the director.
(2) A franchisor may deliver a Franchise Disclosure Document over the internet or by other electronic means, or in machine-readable media, provided:
(a) The Franchise Disclosure Document:
(i) Is delivered as a single, integrated document or file;
(ii) Has no extraneous content beyond what is required or permitted by law and by the 2008 Franchise Registration and Disclosure Guidelines promulgated by NASAA, but which may include customary devices for manipulating electronic documents in machine readable form and tools, or access to tools, that may be necessary or convenient to enable the recipient to receive and view the Franchise Disclosure Document;
(iii) Has no links to or from external documents or content;
(iv) Is delivered in a form that intrinsically enables the recipient to store, retrieve, and print the Franchise Disclosure Document; and
(v) Conforms as to its content and format to the requirements of law.
(b) The franchisor:
(i) Can prove that it delivered the Franchise Disclosure Document electronically in compliance with this section, and that it did so at or before the time required by law; and
(ii) Keeps records of its electronic delivery of Franchise Disclosure Documents and makes those records available on demand by the administrator.
(3) "Delivery" requires that the Franchise Disclosure Document be conveyed to and received by the prospective franchisee, or that the storage media in which the Franchise Disclosure Document is stored be physically delivered to the prospective franchisee in accordance with subsection (2)(a) of this section.
(4) This section does not change or waive any other requirement of law concerning registration or presale disclosure of franchise offerings.
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