WASHINGTON, D.C. – (May 13, 2024) – The North American Securities Administrators Association (NASAA) is seeking public comment on a proposed NASAA Model Franchise Broker Registration Act (Franchise Broker Act).
Franchise brokers have been the subject of complaints, including allegations of misrepresentations, hard sell tactics, and confusion about their role. Although franchisors are required to register with state franchise administrators in 15 states, currently only two states, New York and Washington, require franchise brokers to register with a state franchise administrator. Franchisors also are subject to certain disclosure obligations to prospective franchisees under the Federal Trade Commission Franchise Rule, but franchise brokers have no obligations under the Franchise Rule.
“NASAA’s proposed Franchise Broker Act, if adopted by the NASAA membership, would provide NASAA members with tools designed to strengthen the franchise marketplace through the regulation of franchise brokers and their representatives,” said NASAA President Claire McHenry. “I wish to thank the members of the Franchise and Business Opportunities Project Group for their work in developing this proposed model act and we look forward to receiving comments on the proposal.”
The Franchise Broker Act is loosely based on Washington State’s current franchise broker registration requirements and incorporates elements of broker-dealer and securities salesperson requirements. It includes prohibited practices, disclosure obligations, and recordkeeping obligations for franchise brokers. The proposed model act is applicable to all states and is not limited to those that register franchise offerings.
“Like any broker, the franchise broker has a financial interest in making a sale. Subjecting franchise brokers to registration and disclosure requirements protects franchisees by creating transparency in the franchise sales process and reducing the risk of fraudulent practices,” said Theresa Leets, Chair of the Franchise and Business Opportunities Project Group and Assistant Chief Counsel, Securities Regulation Unit, Legal Division, California Department of Financial Protection and Innovation.
The proposed model act is posted on the NASAA website with instructions to the public on how to submit comments. The deadline for submitting comments is June 13, 2024. Following the public comment process, the model act may be submitted to the NASAA membership for approval.
– NASAA–
About NASAA:
Organized in 1919, the North American Securities Administrators Association (NASAA) is the oldest international organization devoted to investor protection. NASAA is a voluntary association whose membership consists of the securities regulators in the 50 states, the District of Columbia, Puerto Rico, Guam, the U.S. Virgin Islands, the 13 provincial and territorial securities regulators in Canada, and the securities regulator in México. For more information, visit www.nasaa.org.
For More Information:
Fred Baldassaro, Director of Communications
fbaldassaro@nasaa.org | 202-737-0900
Karen Grajales, Manager, Communications and Investor Outreach
kgrajales@nasaa.org | 202-737-0900
