WSR 14-03-063

PREPROPOSAL STATEMENT OF INQUIRY

[Filed January 13, 2014, 3:22 p.m.]

Subject of Possible Rule Making: The securities division is considering amending 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, subject to certain requirements.

Statutes Authorizing the Agency to Adopt Rules on this Subject: RCW 19.100.250, which authorizes the director to make, amend and rescind such rules, forms and orders as are necessary to carry out the provisions of the Washington Franchise Investment Protection Act, chapter 19.100 RCW.

Reasons Why Rules on this Subject may be Needed and What They Might Accomplish: 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. This statement of policy provided text for proposed state regulation regarding electronic delivery by franchisors of franchise disclosure documents to franchisees. 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. Accordingly, the securities division is exploring amending its regulations regarding delivery and receipt of franchise disclosure documents to allow for electronic delivery.

Other Federal and State Agencies that Regulate this Subject and the Process Coordinating the Rule with These Agencies: The amendments under consideration by the securities division affect the regulation of franchise offerings. Franchise offerings are also subject to regulation by the FTC under federal law, and subject to regulation by other jurisdictions that have adopted the NASAA model rule. 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 or state agencies.

Process for Developing New Rule: The division is soliciting comments from interested persons and will adopt rules only after the consideration of public comments.

Interested parties can participate in the decision to adopt the new rule and formulation of the proposed rule before publication by contacting Michelle Webster, Associate General Counsel, Department of Financial Institutions, Securities Division, P.O. Box 9033, Olympia, WA 98507-9033, phone (360) 902-8736, fax (360) 704-6491, e-mail michelle.webster@dfi.wa.gov.

January 13, 2014

William M. Beatty

Securities Administrator