The Federal Trade Commission (“FTC”) has enacted the Business Opportunity Rule (the “Rule” or the “BOR”) which became effective on March 1, 2012 (the text of the BOR can be found at http://ftc.gov/os/fedreg/2011/11/111122bizoppfrn.pdf). The Rule requires that certain disclosures be made by persons who sell or offer business opportunities to others. One of the FTC’s main objectives is to protect consumers. The FTC amended the existing interim Business Opportunity Rule to require expanded disclosure by those offering or selling a business opportunity to members of the public. The new and final Rule now covers a wider variety of business opportunities which on its face seems to extend to the solicitation of salespersons by brokerage firms. The Rule provides for a more simplified and straightforward disclosure process.
The Scope of the Business Opportunity Rule
The Rule applies to any commercial arrangements where: (1) a seller (for example, a brokerage firm) solicits a prospective purchaser to enter into a new business or offers a prospective purchaser a business opportunity; (2) a prospective purchaser of the business opportunity must make a ‘‘required payment’’ to the seller; and (3) the seller must represent that the seller or one or more designated persons will provide any of three types of business assistance. All three of the above conditions need to be met in order for the Rule to apply. The three types of business assistance are: (1) the seller provides locations for the purchaser’s use or operation of equipment, displays, vending machines or similar devices; (2) the seller provides the prospective purchaser outlets, accounts, or customers; or (3) the seller buys back any or all of the goods or services that the purchaser makes (see http://ftc.gov/os/fedreg/2011/11/111122bizoppfrn.pdf).
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