Who is affected?

The rule applies to all who make available to others a business opportunity where the purchaser makes a payment or provides other consideration to the seller and the seller, expressly or by implication, orally or in writing makes an "earnings claim" or represents that the seller or seller's agent will provide the purchaser with "business assistance." Business assistance means the offer of material advice, information, or support to a prospective purchaser in connection with the creation of a new business. Earnings claims are oral, written, or visual representations to a prospective purchaser that convey, expressly or by implication, a specific level or range of actual or potential sales, or gross or net income or profits. Earnings claims include (I) any chart representing possible results and (2) any statements to a prospective purchaser that could reasonably be viewed as inferring that he or she will earn a minimum level of income (e.g., "earn enough to buy a Porsche," "earn a six-figure income," or "earn your investment back within one year").

The Disclosures Required

Any person who makes available to others a business opportunity will be guilty of deceptive advertising, a violation of section 5 of the Federal Trade Commission Act, if he or she fails to furnish every prospective purchaser with a federal disclosure form and fails to make the following disclosures:

(1) His or her name, business address, phone number, and date when the disclosure document was furnished to the prospect.

(2) An Earnings Claims Statement that presents substantiation for each earnings claim made that corroborates the claim as of the time it is made. The statement must provide: (a) the name of the person making the claim: (b) the earnings claim: (c) the beginning and ending dates when the earnings were achieved; (c) the number and percentage of all purchasers who achieved at least the stated level of earnings; (d) any characteristics of the purchasers who achieved the earnings that may differ materially from those of the prospective purchasers; (e) a statement that substantiation for earnings will be made available upon request; and (f) a written update of any material changes affecting the relevance or reliability of the information in the earnings claim statement.

(3) Legal Actions. A disclosure of all legal charges brought against the seller, any affiliate or prior business of the seller, any of the seller's officers, directors, sales managers or people performing similar functions who has been the subject of any civil or criminal "action" for misrepresentation, fraud, securities law violations, or unfair or deceptive acts or practices in the 10 years immediately preceding the date the business opportunity is offered. The term "action" means a criminal information, indictment, cross-claim, counterclaim, or third party complaint in a judicial action or proceeding; arbitration; or any governmental administrative proceeding, including, but not limited to, an action to obtain or issue a cease and desist order, and an assurance of voluntary compliance.