WSR 18-06-075

PREPROPOSAL STATEMENT OF INQUIRY

[Filed March 6, 2018, 8:02 a.m.]

Subject of Possible Rule Making: The securities division is considering mandating the filing of applications for registration of franchise offerings and franchise brokers, as well as for franchise exemption notice filings, through the securities division's electronic franchise filing system.

Statutes Authorizing the Agency to Adopt Rules on this Subject: RCW 19.100.250.

Reasons Why Rules on this Subject may be Needed and What They Might Accomplish: In 2013, the securities division announced the availability of its online electronic franchise filing system (efiling system). The efiling system was intended to facilitate electronic submission of franchise registration and renewal applications, and post-effective amendments online, eliminating the need to make any paper or other physical submissions to the securities division. Since then, the securities division has expanded its efiling system capabilities to accept franchise broker and franchise exemption filings.

A significant number of applicants have utilized the efiling system since its inception. In 2017 alone, the securities division received nine hundred ninety-one franchise registration filings through the efiling system. Although the securities division currently accepts filings through the efiling system and paper submissions, paper submissions require the securities division to manually receive, process and scan the filings, which may result in delays to the applicant receiving any follow-up correspondence or notice of effective registration. Requiring franchisors and franchise brokers to use the efiling system will eliminate inefficiencies and result in a streamlined process for both applicants and the securities division.

Other Federal and State Agencies that Regulate this Subject and the Process Coordinating the Rule with These Agencies: The Federal Trade Commission (FTC) requires franchisors to provide prospective franchisees with certain disclosure. The securities division requires a franchisor to prepare a disclosure document that coordinates with FTC required disclosures. FTC does not, however, require registration or filings in connection with franchise offerings. A handful of states regulate franchise offerings and franchise brokers, however, no coordination is necessary to require franchisors to use the securities division's efiling system.

Process for Developing New Rule: The securities 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, Esq., P.O. Box 9033, Olympia, WA 98507-9033, phone 360-902-8760, fax 360-902-0524, TTY 360-664-8126, email michelle.webster@dfi.wa.gov, web site https://dfi.wa.gov/securities.

March 5, 2018

William M. Beatty

Securities Administrator