New Rule Challenging for States, Not FTC

WASHINGTON, D.C. (Blue MauMau) - With the new Federal Trade Commission Franchise Rule fast approaching its mandatory date of July 1, 2008, state regulators are working hard to ensure a smooth transition for franchisors and practitioners.  According to Dale E. Cantone, Chair of the Franchise and Business Opportunities Project for NASAA (North American Securities Administrators Association), and Deputy Securities Commissioner in Maryland, the regulation states are implementing the rules the best they can at this point. He said, "For the most part, we are all getting used to the new filings and at the same time we're making judgments as the filings are made with us."

Cantone explained that a lot of franchisors file around this time of the year, unless they had a reason to do it beforehand. As far as whether franchisors have been filing the new Franchise Disclosure Document (FDD), he said, "We're seeing it throughout. We received our first filing in the summer, but believe it or not, we are still getting some under the old [UFOC] format." When it happens, he said they question it but sometimes franchisors have a legitimate reason for doing it. But most are using the new version.

In an interview with Craig Tregillus, FTC's interim Franchise Program Director, who replaced Steven Toporoff, he said franchisors should find the experience to be one with greater federal/state uniformity and regulation.  He confirmed, "What we are hearing from the states is that they are seeing new FDD at this point." Tregillus said they were working more closely with Dale Cantone and NASAA on issues and interpretations. And he added, "Steve and I work close together on advisory opinions on the old Rule and we expect to see a smooth transition."

Although Tregillus couldn't say exactly when he took over the reins at FTC, he did say it was after the first of the year. He explained that he was dealing with a lot of different things at that point, including the loss of his father in February. But Cantone revealed that he hadn't been aware that Tregillus had actually taken over, as it was reported on Blue MauMau this week. He did inject, "Certainly he can't replace Steve, not with his history, his knowledge and his background." According to Cantone, Toporoff is an amazing resource on the new Rule. "He has lived and breathed all of these new requirements for 10 years. That's hard to replace," he emphasized. But he said he is still around and they do talk on occasion. "We still tap his brain. He hasn't gone away from the FTC."

What the FTC has left to do that a lot of people are waiting on, is the compliance guides, according to Cantone. He said, "That's the "how to" on complying with the new Rule.  They have been working on them but they are still trying to resolve specific issues of interpretation that practitioners have raised."

Cantone admits, "It is definitely a challenge for the examiners because there are changes to the format we have been used to these last 13 or 14 years." But he says, "Of course the FTC doesn't see what's actually being done, and we do. We have to make the snap judgments right away if a certain disclosure requirement applies or not. So, we are in the field actually dealing with the documents." 

Related Reading:

• FTC Franchise Director Steven Toporoff Out; Craig Tregillus In 
• Cantone Statement 2002: “Twenty-three Years After Its Promulgation