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FTC Rule Requires Disclosures for Certain Business Recruitment Practices

February 20, 2012

February 20, 2012

Brokerages that actively solicit salespeople and promise tangible assistance (such as a customer list) in its solicitations to the salesperson in exchange for a required payment should be aware of new Federal Trade Commission (FTC) regulations that take effect March 1, 2012. In a rule that has been in the making since 1978 as part of the FTC's Franchise Rule, the FTC requires full disclosures from those offering business opportunities with certain earnings potentials and promises of assistance. The FTC specifically targets work-at-home business offerings and other "too good to be true" solicitations for people to purchase business opportunities. The rule will likely not impact the business operations of most brokerages. Still, brokerages should familiarize themselves with the Business Opportunity Rule (BOR) if they actively solicit salespeople to insure that their practices are outside the regulatory definitions or that they provide the required disclosures if their practices are covered by the rule.