Mich. Admin. Code (Attorney General) | Michigan Administrative Code — Department of Attorney General

Consumer Protection and Charitable Trusts Division Consumer Protection and Charitable Trusts Division

R 14.11 to R 14.17 Charitable Trusts

Mich. Admin. Code R 14.11 Enforcement of rules {#sec-r-14.11 omnilex-key=us-mi-regs-official--dept-attorney-general--R 14.11}

DEPARTMENT OF ATTORNEY GENERAL

CONSUMER PROTECTION AND CHARITABLE TRUSTS DIVISION

CHARITABLE TRUSTS

(By authority conferred on the department of the attorney general by sections 6, 7, and 10 of Act No. 101 of the Public Acts of 1961, as amended, and section 52 of Act No. 380 of the Public Acts of 1965, being SS14.256, 14.257, 14.260, and 16.152 of the Michigan Compiled Laws)

Rule 1. These rules shall be enforced by the attorney general and his representatives to protect the interests of the people of this state in the administration, operation and disposition of the assets of all charitable trusts in this state.

History

History: 1979 AC.

Mich. Admin. Code R 14.12 Registration statements {#sec-r-14.12 omnilex-key=us-mi-regs-official--dept-attorney-general--R 14.12}

Rule 2. A trustee subject to Act No. 101 of the Public Acts of 1961, as amended, within 2 months after receiving possession or control of property for charitable purposes, shall file with the attorney general a registration statement on a form which shall be supplied by the attorney general on request. Such trustee shall also file with the attorney general a copy of the instrument providing for its title, powers or duties and an inventory of the assets of the charitable trust.

History

History: 1979 AC.

Mich. Admin. Code R 14.13 Annual reports {#sec-r-14.13 omnilex-key=us-mi-regs-official--dept-attorney-general--R 14.13}

Rule 3. (1) A trustee of a charitable trust subject to Act No.101 of the Public Acts of 1961, as amended, which solicits money from the public, within 6 months after the close of its fiscal year, shall file with the attorney general a copy of its certified audit report for such year, containing a balance sheet, a statement of receipts and disbursements, and a list of assets including securities held. In lieu of a certified audit report, such a trustee may file its sworn statement setting forth such information in accordance with the form prescribed by the attorney general.

(2) A trustee, except a trustee of a charitable trust which solicits money from the public, subject to Act No. 101 of the Public Acts of 1961, as amended, shall file with the attorney general annual periodic written reports, in accordance with the form prescribed by the attorney general. A copy of the account filed in any court having jurisdiction of the charitable trust, if the account is substantially the same as such form, may be filed as an annual periodic report.

(3) The first annual periodic report of a charitable trust shall cover the first calendar or fiscal year ending after the trust became subject to such act. The first annual periodic report shall be due on or before the expiration of 6 months after the close of the first calendar year or fiscal year after the trust became subject to the act. Thereafter, subsequent annual periodic reports shall be due on or before the expiration of 6 months after the close of the charitable trust calendar or fiscal year.

(4) A charitable trust required to file annual periodic written reports with the attorney general may file in lieu thereof an audit certified as being true and correct and in accordance with generally accepted accounting principles by a certified public accountant and containing substantially the information required on the annual periodic report form of the attorney general.

(5) A statement indicating whether or not a creator of the trust or a contributor to the trust or a trustee, in his individual capacity, or a person related either by consanguinity or by affinity to such creator, contributor or trustee, has entered into any transaction involving the purchase, sale, transfer or loan of any of the trust's assets, shall accompany the annual periodic report.

(6) Complete details regarding all transactions in which a trustee, employees of a trustee, or persons related to a trustee, or related to employees of a trustee, either by consanguinity or by affinity, have personally benefitted from operating and management of the trust or received any part of the income or corpus of the trust, other than the normal and reasonable trustee fee, shall be disclosed in a statement accompanying the report.

History

History: 1979 AC.

Mich. Admin. Code R 14.14 Suspension of annual reports {#sec-r-14.14 omnilex-key=us-mi-regs-official--dept-attorney-general--R 14.14}

Rule 4. A trustee of a charitable trust may be granted a suspension from the requirement of filing annual periodic reports on written application supported by good and sufficient reasons. If a suspension is granted, reports may be required on the happening of specified events or contingencies or at stipulated future report dates. Ordinarily a suspension will not be granted when reports on the operation of the charitable trust are required to be made to a court or to other governmental agencies.

History

History: 1979 AC.

Mich. Admin. Code R 14.15 Investigations {#sec-r-14.15 omnilex-key=us-mi-regs-official--dept-attorney-general--R 14.15}

Rule 5. Either the attorney general or an assistant attorney general designated by the attorney general may hear information under oath and receive books, memoranda, papers, documents of title and evidence of assets, liabilities, receipts or disbursements produced pursuant to an order of the attorney general issued by the attorney general as provided by the act.

History

History: 1979 AC.

Mich. Admin. Code R 14.16 Inspection of records {#sec-r-14.16 omnilex-key=us-mi-regs-official--dept-attorney-general--R 14.16}

Rule 6. The charitable trust register, copies of instruments and the reports filed with the attorney general shall be available for inspection during regular business hours at the charitable trust division of the office of the attorney general in Lansing, Michigan, subject to the following requirements:

(a) An individual desiring to inspect the register, copies of instruments and the reports filed with the attorney general shall submit a request in writing setting forth his name, address and indicating his interest in the charitable trust records desired to be reviewed. If such request is approved by the attorney general, the authorized review of the register, copies of instruments and reports filed with the attorney general shall be made in the presence of the attorney general or his representative.

(b) If the charitable trust is to be used for both private and charitable purposes, only those portions of the documents pertaining to charitable purposes, and only if such charitable purposes have matured and come into being, shall be available for public inspection.

History

History: 1979 AC.

Mich. Admin. Code R 14.17 Repeal {#sec-r-14.17 omnilex-key=us-mi-regs-official--dept-attorney-general--R 14.17}

Rule 7. Sections 1 to 5 of the rules relating to charitable trusts, being R 14.1 to R 14.5 of the Michigan Administrative Code, and appearing on pages 2757 to 2759 of the 1963 Annual Supplement to the Code, are repealed.

History

History: 1979 AC.

Financial Crimes Division Financial Crimes Division

R 14.21 to R 14.29 Financial Exploitation Prevention Act

Mich. Admin. Code R 14.21 Definitions {#sec-r-14.21 omnilex-key=us-mi-regs-official--dept-attorney-general--R 14.21}

DEPARTMENT OF ATTORNEY GENERAL

PUBLIC ADMINISTRATION DIVISION

FINANCIAL EXPLOITATION PREVENTION ACT

(By authority conferred on the department of attorney general by section 5 of the financial exploitation prevention act, 2020 PA 344, MCL 487.2085)

Rule 21. As used in these rules:

(a) “Act” means the financial exploitation prevention act, 2020 PA 344, MCL 487.2081 to 487.2091.

(b) “County prosecutor” means the duly elected or appointed county prosecutor, or the county prosecutor’s designee.

History

History: 2021 AACS.

Mich. Admin. Code R 14.22 Notification to county prosecutor by adult protective services; content {#sec-r-14.22 omnilex-key=us-mi-regs-official--dept-attorney-general--R 14.22}

Rule 22. The notification to the county prosecutor by adult protective services must:

(a) Be provided in writing.

(b) Be provided on a form titled “FEPA Adult Protective Services or Law Enforcement Notice to Prosecutor.”

(d) Include the name and contact information for the adult protective services employee in charge of the investigation.

(e) Include a copy of the financial institution’s report submitted to or committed to written form by adult protective services.

(i) When the report from the financial institution is committed to written form by an adult protective services employee, the report from the financial institution may be contained within the report prepared by the adult protective services, and need not be submitted as an additional report.

(f) Include a description of the response to or actions taken by adult protective services based on the report from the financial institution.

(g) Include names and contact information of individuals that possess information about the alleged covered financial exploitation within a written report prepared by an adult protective services employee.

(h) Include a summary or brief description of the alleged covered financial exploitation if not contained in any report attached to the form titled “FEPA Adult Protective Services or Law Enforcement Notice to Prosecutor.”

History

History: 2021 AACS.

Mich. Admin. Code R 14.23 Notification to county prosecutor by law enforcement; content {#sec-r-14.23 omnilex-key=us-mi-regs-official--dept-attorney-general--R 14.23}

Rule 23. The notification to the county prosecutor by law enforcement must:

(a) Be provided in writing.

(b) Be provided on a form titled “FEPA Adult Protective Services or Law Enforcement Notice to Prosecutor.”

(d) Include the name of the law enforcement agency and the name and contact information of the officer in charge of the investigation.

(e) Include a copy of the financial institution’s report submitted to or committed to written form by the law enforcement agency.

(f) Include a description of the response to or actions taken by law enforcement based on the report from the financial institution.

(g) Include names and contact information of individuals that possess information about the alleged covered financial exploitation within a written report prepared by a law enforcement officer.

History

History: 2021 AACS.

Mich. Admin. Code R 14.24 Notification to county prosecutor by financial institutions; content {#sec-r-14.24 omnilex-key=us-mi-regs-official--dept-attorney-general--R 14.24}

Rule 24. The notification to the county prosecutor by a financial institution must:

(a) Be provided in writing.

(b) Be submitted on a form titled “FEPA Financial Institution Notice to Prosecutor.”

Supporting documentation may be attached to the form by the financial institution.

(c) Include a description of efforts by the financial institution to contact law enforcement or adult protective services, and an indication of whether any contact has been made.

(d) Include a description of whether any contact has previously been made with the county prosecutor’s office regarding this same matter.

(e) Indicate whether written notification was received from law enforcement or adult protective services stating whether the reported alleged covered financial exploitation is under investigation or has been referred to law enforcement, within 10 business days after a financial institution employee made a report of alleged covered financial exploitation to law enforcement or adult protective services.

(f) Include the name and contact information for the financial institution’s designated contact for communication with the county prosecutor, law enforcement, or adult protective services.

(g) Include the name and contact information of the alleged perpetrator, if that information is known by the financial institution making the report.

(h) Include the name and contact information of the alleged victim, if known by the financial institution making the report.

(i) Include a description of the relationship between the alleged perpetrator and the victim, if known by the financial institution making the report.

History

History: 2021 AACS.

Mich. Admin. Code R 14.25 Notification to county prosecutor; determining county of contact {#sec-r-14.25 omnilex-key=us-mi-regs-official--dept-attorney-general--R 14.25}

Rule 25. The financial institution shall use the following sequential steps to determine the appropriate prosecutor to contact:

(a) Contact adult protective services or law enforcement as follows:

(i) To contact adult protective services, a financial institution shall call the 24-hour intake telephone line maintained by the department of health and human services to contact adult protective services to provide notification under the act. If adult protective services develops other contact methods, utilizing those contact methods complies with these rules.

(ii) To contact law enforcement, if the victim’s county of residence is known, the financial institution shall contact law enforcement in the county of the victim’s residence.

If the victim’s county of residence is unknown, the financial institution shall contact law enforcement in the county in which the alleged covered financial exploitation was observed, or in the county where the financial institution is located if the alleged covered financial exploitation took place in another state. The financial institution may also contact law enforcement in the county in which the alleged covered financial exploitation is observed, regardless of the victim’s county of residence, if the alleged covered financial exploitation is actively taking place on-site at the financial institution.

(A) The financial institution shall contact law enforcement by calling the central dispatch office in the county in which law enforcement is to be notified, or by making a written report if the central dispatch office has the capability to accept written reports as follows:

(1) The financial institution shall dial 911 to contact central dispatch if the matter is determined to be an emergency by the financial institution, or if the alleged covered financial exploitation is actively taking place on-site at the financial institution at the time the contact is being made.

(2) If the matter is determined not to be an emergency by the financial institution and is not actively taking place on-site at the financial institution, the financial institution shall call the non-emergency telephone number for central dispatch or make a written report if the central dispatch office has the capability to accept written reports. If central dispatch has the capability to accept written reports, the financial institution may make the written report to central dispatch by emailing, faxing, or hand-delivering a written report.

(b) Contact the county prosecutor as follows:

(i) If the financial institution has been unable to contact adult protective services or law enforcement to provide notification under the act, the financial institution shall determine if the victim’s county of residence is known and do 1 of the following:

(A) If the victim’s county of residence is known, the financial institution shall contact the prosecutor in the county of the victim’s residence.

(B) If the victim’s county of residence is unknown, the financial institution shall contact the prosecutor in the county in which the alleged covered financial exploitation was observed, or in the county where the financial institution is located if the alleged covered financial exploitation took place in another state.

(ii) If the financial institution employee has contacted adult protective services, the financial institution shall contact the county prosecutor’s office in the county in which the assigned adult protective services employee is stationed, if known by the financial institution. If the financial institution does not know where the adult protective services employee is stationed, the financial institution shall determine if the victim’s county of residence is known and do 1 of the following:

(A) If the victim’s county of residence is known, the financial institution shall contact the prosecutor in the county of the victim’s residence.

(iii) If the financial institution has contacted law enforcement, the financial institution shall contact the county prosecutor’s office in the county in which the assigned law enforcement officer is stationed, if known by the financial institution. If the financial institution does not know where the law enforcement officer is stationed, the financial institution shall determine if the victim’s county of residence is known and do 1 of the following:

(A) If the victim’s county of residence is known, the financial institution shall contact the prosecutor in the county of the victim’s residence.

(B) If the victim’s county of residence is unknown or cannot be determined, the financial institution shall contact the prosecutor in the county in which the alleged covered financial exploitation was observed, or in the county where the financial institution is located if the alleged covered financial exploitation took place in another state.

History

History: 2021 AACS.

Mich. Admin. Code R 14.26 Notification to county prosecutor by adult protective services, law enforcement, and financial institutions; obtaining contact information {#sec-r-14.26 omnilex-key=us-mi-regs-official--dept-attorney-general--R 14.26}

Rule 26. The contact information for the county prosecutor’s office shall be obtained by adult protective services, law enforcement, and financial institutions by referencing an electronic directory compiled by the Prosecuting Attorneys Association of Michigan (PAAM) that is available on PAAM’s website. This directory will include the name and contact information for the contact designated to receive notifications under the act at each county prosecutor’s office, and the primary phone number for the county prosecutor’s office. If unable to contact the specific employee listed in the directory, the financial institution should contact the office of the county prosecutor using the primary phone number for the office and request instruction for sending the written notification required under the act.

History

History: 2021 AACS.

Mich. Admin. Code R 14.27 Notification to county prosecutor adult protective services, law enforcement, and financial institutions; method of contact {#sec-r-14.27 omnilex-key=us-mi-regs-official--dept-attorney-general--R 14.27}

Rule 27. The notifications under the act to the county prosecutor’s office must be made as follows:

(a) Be in writing.

(b) Be made using the form referenced in these rules.

If the contact is made by email or by fax, the agency or financial institution making the report shall request an acknowledgement of receipt.

(d) When notification is made to the county prosecutor’s office by a law enforcement agency, reports should be made by any law enforcement agency that receives a copy of a notification of alleged covered financial exploitation by a financial institution under the act.

(e) When notification is made to the county prosecutor’s office by the financial institution, a copy of the notification may, but is not required to be, sent by the financial institution to the department of attorney general.

History

History: 2021 AACS.

Mich. Admin. Code R 14.28 Notification to county prosecutor by adult protective services or law enforcement; form {#sec-r-14.28 omnilex-key=us-mi-regs-official--dept-attorney-general--R 14.28}

Rule 28. The purpose of this rule is to prescribe the form of the notification to the county prosecutor by adult protective services or law enforcement as required by the act.

History

History: 2021 AACS.

Mich. Admin. Code R 14.29 Notification to county prosecutor by financial institution; form {#sec-r-14.29 omnilex-key=us-mi-regs-official--dept-attorney-general--R 14.29}

Rule 29. The purpose of this rule is to prescribe the form of the notification to the county prosecutor by the financial institution as required by the act.

History

History: 2021 AACS.

R 14.31 to R 14.39 Uniform Securities Act (2002)

Mich. Admin. Code R 14.31 Definitions {#sec-r-14.31 omnilex-key=us-mi-regs-official--dept-attorney-general--R 14.31}

DEPARTMENT OF ATTORNEY GENERAL

FINANCIAL CRIMES DIVISION

UNIFORM SECURITIES ACT (2002) MANDATORY REPORTING OF

FINANCIAL EXPLOITATION

(By authority conferred on the department of attorney general by section 535 of the uniform securities act (2002), 2008 PA 551, MCL 451.2535)

Rule 31. (1) As used in these rules:

(a) “Act” means article 5A of the uniform securities act (2002), 2008 PA 551, MCL 451.2531 to 451.2543.

(b) “County prosecutor” means the duly elected or appointed county prosecutor, or the county prosecutor’s designee.

(2) Terms defined in the act have the same meanings when used in these rules.

History

History: 2025 AACS.

Mich. Admin. Code R 14.32 Notification to county prosecutor by adult protective services; content {#sec-r-14.32 omnilex-key=us-mi-regs-official--dept-attorney-general--R 14.32}

Rule 32. The notification to the county prosecutor by adult protective services must comply with all of the following:

(a) Be provided in writing.

(b) Be provided on a form titled “Uniform Securities Act Adult Protective Services or Law Enforcement Notice to Prosecutor.” A notification provided on a substitute form titled, “FEPA Adult Protective Services or Law Enforcement Notice to Prosecutor” also complies with this rule.

(d) Include the name and contact information for the adult protective services employee in charge of the investigation.

(e) Include a copy of the broker-dealer’s or investment adviser’s report submitted to or committed to written form by adult protective services. If the report from the broker-dealer or investment adviser is committed to written form by an adult protective services employee, the report from the broker-dealer or investment adviser may be contained within the report prepared by adult protective services and need not be submitted as an additional report.

(f) Include a description of the response to or actions taken by adult protective services based on the report from the broker-dealer or investment adviser.

(g) Include names and contact information of individuals who possess information about the alleged covered financial exploitation within a written report prepared by an adult protective services employee.

(h) Include a summary or brief description of the alleged covered financial exploitation if not contained in any report attached to the form titled “Uniform Securities Act Adult Protective Services or Law Enforcement Notice to Prosecutor.”

History

History: 2025 AACS.

Mich. Admin. Code R 14.33 Notification to county prosecutor by law enforcement; content {#sec-r-14.33 omnilex-key=us-mi-regs-official--dept-attorney-general--R 14.33}

Rule 33. The notification to the county prosecutor by law enforcement must comply with all of the following:

(a) Be provided in writing.

(d) Include the name of the law enforcement agency and the name and contact information of the officer in charge of the investigation.

(e) Include a copy of the broker-dealer’s or investment adviser’s report submitted to or committed to written form by the law enforcement agency.

(f) Include a description of the response to or actions taken by law enforcement based on the report from the broker-dealer or investment adviser.

(g) Include names and contact information of individuals who possess information about the alleged covered financial exploitation within a written report prepared by a law enforcement officer.

History

History: 2025 AACS.

Mich. Admin. Code R 14.34 Notification to county prosecutor by broker-dealers or investment advisers; content {#sec-r-14.34 omnilex-key=us-mi-regs-official--dept-attorney-general--R 14.34}

Rule 34. If a broker-dealer or investment adviser elects to notify the county prosecutor as allowed by section 535 of the act, MCL 451.2535, the notification to the county prosecutor by a broker-dealer or investment adviser must comply with all of the following:

(a) Be provided in writing.

(b) Be submitted on a form titled “Uniform Securities Act Broker-Dealer or Investment Adviser Notice to Prosecutor.” Supporting documentation may be attached to the form by the broker-dealer or investment adviser.

(c) Include a description of efforts by the broker-dealer or investment adviser to contact law enforcement or adult protective services, and an indication of whether any contact was made.

(d) Include a description of whether any contact has previously been made with the county prosecutor’s office regarding this matter.

(e) Indicate whether written notification was received from law enforcement or adult protective services stating whether the reported alleged covered financial exploitation is under investigation or was referred to law enforcement, within 15 business days after a broker-dealer or investment adviser made a report of alleged covered financial exploitation to law enforcement or adult protective services.

(f) Include the name and contact information for the broker-dealer or investment adviser’s designated contact for communication with the county prosecutor, law enforcement, or adult protective services.

(g) Include the name and contact information of the alleged perpetrator, if that information is known by the broker-dealer or investment adviser making the report.

(h) Include the name and contact information of the alleged victim, if known by the broker-dealer or investment adviser making the report.

(i) Include a description of the relationship between the alleged perpetrator and the victim, if known by the broker-dealer or investment adviser making the report.

History

History: 2025 AACS.

Mich. Admin. Code R 14.35 Notification to county prosecutor; determining county of contact {#sec-r-14.35 omnilex-key=us-mi-regs-official--dept-attorney-general--R 14.35}

Rule 35. If a broker-dealer or investment adviser elects to notify the county prosecutor, the broker-dealer or investment adviser shall use the following sequential steps to determine the appropriate prosecutor to contact:

(a) Contact adult protective services or law enforcement as follows:

(i) To contact adult protective services, a broker-dealer or investment adviser shall call the 24-hour intake telephone line maintained by the department of health and human services to contact adult protective services to provide notification under the act. If adult protective services develops other contact methods, utilizing those contact methods complies with this rule.

(ii) To contact law enforcement, if the victim’s county of residence is known, the brokerdealer or investment adviser shall contact law enforcement in the county of the victim’s residence. If the victim’s county of residence is unknown, the broker-dealer or investment adviser shall contact law enforcement in the county where the alleged covered financial exploitation was observed, or in the county where the broker-dealer or investment adviser is located if the alleged covered financial exploitation took place in another state. The broker-dealer or investment adviser may also contact law enforcement in the county where the alleged covered financial exploitation is observed, regardless of the victim’s county of residence, if the alleged covered financial exploitation is actively taking place in the presence of the broker-dealer or investment adviser. The broker-dealer or investment adviser shall contact law enforcement by calling the central dispatch office in the county where law enforcement is to be notified, or by making a written report if the central dispatch office has the capability to accept written reports, as follows:

(A) The broker-dealer or investment adviser shall dial 911 to contact central dispatch if the matter is determined to be an emergency by the broker-dealer or investment adviser or if the alleged covered financial exploitation is actively taking place in the presence of the broker-dealer or investment adviser at the time the contact is being made.

(B) If the matter is determined not to be an emergency by the broker-dealer or investment adviser and is not actively taking place in the presence of the broker-dealer or investment adviser, the broker-dealer or investment adviser shall call the non-emergency telephone number for central dispatch or make a written report if the central dispatch office has the capability to accept written reports. If central dispatch has the capability to accept written reports, the broker-dealer or investment adviser may make the written report to central dispatch by emailing, faxing, or hand-delivering a written report.

(b) Contact the county prosecutor as follows:

(i) If the broker-dealer or investment adviser is unable to contact adult protective services or law enforcement to provide notification under the act and if the broker-dealer or investment adviser elects to notify the county prosecutor, the broker-dealer or investment adviser shall determine if the victim’s county of residence is known and do 1 of the following:

(A) If the victim’s county of residence is known to the broker-dealer or investment adviser, the broker-dealer or investment adviser shall contact the prosecutor in the county of the victim’s residence.

(B) If the victim’s county of residence is unknown to the broker-dealer or investment adviser, the broker-dealer or investment adviser shall contact the prosecutor in the county where the alleged covered financial exploitation was observed, or in the county where the broker-dealer or investment adviser is located if the alleged covered financial exploitation took place in another state.

(ii) If the broker-dealer or investment adviser has contacted adult protective services, the broker-dealer or investment adviser shall contact the county prosecutor’s office in the county where the assigned adult protective services employee is stationed, if known by the broker-dealer or investment adviser. If the broker-dealer or investment adviser does not know where the adult protective services employee is stationed, the broker-dealer or investment adviser shall determine if the victim’s county of residence is known and do 1 of the following:

(B) If the victim’s county of residence is unknown or cannot be determined by the broker-dealer or investment adviser, the broker-dealer or investment adviser shall contact the prosecutor in the county where the alleged covered financial exploitation was observed, or in the county where the broker-dealer or investment adviser is located if the alleged covered financial exploitation took place in another state.

(iii) If the broker-dealer or investment adviser has contacted law enforcement, the brokerdealer or investment adviser shall contact the county prosecutor’s office in the county where the assigned law enforcement officer is stationed, if known by the broker-dealer or investment adviser. If the broker-dealer or investment adviser does not know where the law enforcement officer is stationed, the broker-dealer or investment adviser shall determine if the victim’s county of residence is known and do 1 of the following:

History

History: 2025 AACS.

Mich. Admin. Code R 14.36 Notification to county prosecutor by adult protective services, law enforcement, and broker-dealer or investment adviser; obtaining contact information {#sec-r-14.36 omnilex-key=us-mi-regs-official--dept-attorney-general--R 14.36}

Rule 36. The contact information for the county prosecutor’s office must be obtained by adult protective services, law enforcement, and broker-dealers or investment advisers by referencing an electronic directory compiled by the Prosecuting Attorneys Association of Michigan (PAAM) that is available on PAAM’s website. This directory includes the name and contact information for the contact designated to receive notifications under the act at each county prosecutor’s office, and the primary phone number for the county prosecutor’s office. If unable to contact the specific employee listed in the directory, the broker-dealer or investment adviser should contact the office of the county prosecutor using the primary phone number for the office and request instruction for sending the written notification required under the act.

History

History: 2025 AACS.

Mich. Admin. Code R 14.37 Notification to county prosecutor by adult protective services, law enforcement, and broker-dealers or investment advisers; method of contact {#sec-r-14.37 omnilex-key=us-mi-regs-official--dept-attorney-general--R 14.37}

Rule 37. The notifications under the act to the county prosecutor’s office must comply with all of the following:

(a) Be in writing.

(b) Be made using the forms referenced in these rules.

If the contact is made by email or by fax, the agency or broker-dealer or investment adviser making the report shall request an acknowledgement of receipt.

(d) When notification is made to the county prosecutor’s office by a law enforcement agency, reports must be made by any law enforcement agency that receives a copy of a notification of alleged covered financial exploitation by a broker-dealer or investment adviser under the act.

(e) When notification is made to the county prosecutor’s office by the broker-dealer or investment adviser, a copy of the notification may be, but is not required to be, sent by the broker-dealer or investment adviser to the department of attorney general.

History

History: 2025 AACS.

Mich. Admin. Code R 14.38 Notification to county prosecutor by adult protective services or law enforcement; form {#sec-r-14.38 omnilex-key=us-mi-regs-official--dept-attorney-general--R 14.38}

Rule 38. The purpose of this rule is to prescribe the form of the notification to the county prosecutor by adult protective services or law enforcement as required by the act.

History

History: 2025 AACS.

Mich. Admin. Code R 14.39 Notification to county prosecutor by broker-dealer or investment adviser; form {#sec-r-14.39 omnilex-key=us-mi-regs-official--dept-attorney-general--R 14.39}

Rule 39. The purpose of this rule is to prescribe the form of the notification to the county prosecutor by the broker-dealer or investment adviser as required by the act.

History

History: 2025 AACS.

Consumer Protection and Charitable Trusts Division Consumer Protection and Charitable Trusts Division

R 14.51 to R 14.62 Charitable Trust - General Rules

Mich. Admin. Code R 14.51 Definitions {#sec-r-14.51 omnilex-key=us-mi-regs-official--dept-attorney-general--R 14.51}

DEPARTMENT OF ATTORNEY GENERAL

CONSUMER PROTECTION AND CHARITABLE TRUSTS DIVISION

GENERAL RULES

(By authority conferred on the attorney general by section 3 of Act No. 331 of the Public Acts of 1976, being S445.903 of the Michigan Compiled Laws)

Rule 1. As used in these rules:

(a) "Act" means the Michigan consumer protection act.

(b) "Attorney general" means the elected attorney general or an assistant attorney general.

History

History: 1979 AC.

Mich. Admin. Code R 14.52 Consumer protection division; enforcement and administration of fact; location; assistant attorney general in charge; powers and duties; investigative agent {#sec-r-14.52 omnilex-key=us-mi-regs-official--dept-attorney-general--R 14.52}

Rule 2. (1) The Michigan consumer protection act shall be regularly enforced and administered by the department of attorney general, consumer protection division, or such other division of the department as from time to time is authorized by the attorney general.

(2) The consumer protection division is located at the Law Building, Lansing, Michigan 48913.

(3) The consumer protection division shall be headed by the assistant attorney general in charge thereof as appointed by the attorney general, which assistant in charge shall have the care, custody, and control of the files and records of the division. In addition, the assistant attorney general in charge shall administer the act and approve all applications for subpoenas, initiation of investigations, commencement and disposition of actions, acceptance of assurances of discontinuances, and promulgation of rules pursuant to the consumer protection act. In the absence of, or when designated by, the assistant in charge, the first assistant attorney general of the consumer protection division may act in the place of the assistant in charge. The assistant in charge is hereby authorized to delegate to such persons within the division such other duties, functions, and responsibilities under the act as he determines from time to time to be appropriate.

(4) Any investigative agent of the attorney general, prosecuting attorney, or any person selected by the officers described in sections 17 to 21 of the act have authority and power to serve a subpoena or other process.

History

History: 1979 AC.

Mich. Admin. Code R 14.53 Notice of intended action; "positive action to cease and desist" defined {#sec-r-14.53 omnilex-key=us-mi-regs-official--dept-attorney-general--R 14.53}

Rule 3. (1) Unless otherwise waived by the court upon good cause shown, the attorney general shall 10 days prior to the commencement of an action under section 5 of the act, serve a notice of intended action upon the person or persons named therein which shall advise the person or persons:

(a) Of the opportunity to confer with the attorney general in person or by other authorized representative or a stated member of the staff, or (b) Of the opportunity to cease and desist or take positive action to cease and desist from the alleged unlawful methods, acts, or practice, and, (c) Than an action is about to be commenced against the person or persons named in the notice.

(2) The 10-day period shall begin to run from the time the person or persons receive the notice.

(3) A notice may be served upon a person either personally or by certified mail, return receipt requested.

(4) A notice shall be followed by either the commencement of an action, an assurance of discontinuance, or a determination of no cause for action.

(5) For the purposes of this rule, "Positive action to cease and desist" means that the person to whom the notice is directed shall immediately upon receipt begin a course of conduct leading to the complete and total cessation of the alleged methods, acts, and practices; and, in fact, such cessation actually occurs within a reasonable period of time.

History

History: 1979 AC.

Mich. Admin. Code R 14.54 Investigation; subpoena; confidentiality of information; disclosure; copies of documents and reported testimony; representation by counsel of person compelled to appear; investigative agent; powers and duties; "investigative agent" defined {#sec-r-14.54 omnilex-key=us-mi-regs-official--dept-attorney-general--R 14.54}

Rule 4. (1) Investigations of a violation of the act may be initiated by the attorney general, or by other governmental agencies or persons specified in sections 15, 17, 18, 19, 20, and 21 of the act.

(2) Any person may request the attorney general to institute an investigation in respect to any matter over which the attorney general has jurisdiction. Such request may be in the form of a signed statement setting forth the alleged violation of the act with such supporting information as is available and the name and address of the person or persons complained of. No forms or formal procedures are required. A complaint from the public may also be treated by the attorney general as a request for an investigation.

(3) The attorney general or prosecuting attorney may make an application for a subpoena in aid of an investigation under the act.

(4) The receipt of testimony or documentary material pursuant to a subpoena is hereby designated as an investigational proceeding, which shall be either electronically or stenographically recorded or identified in case of documentary material.

(5) All information obtained as the result of a subpoena shall be confidential to the office of the attorney general or prosecuting attorney. A request for disclosure by such persons as are authorized access thereto shall be in writing setting forth the description of the information sought, the persons to whom it relates, and the use to which it will be put.

The attorney general or prosecuting attorney may decline access upon determination that disclosure is not in the public interest. Upon a determination that the information may be disclosed to such authorized persons, the attorney general or prosecuting attorney may require that the actual costs of reproduction thereof be borne by the person seeking access.

An order of the court of competent jurisdiction requiring access and disclosure shall be presumed to be in the public interest.

(6) Upon determination by the attorney general that disclosure to an authorized person is appropriate under the act, the attorney general shall notify the person who supplied the information or materials pursuant to a subpoena of the identity of the person seeking the information and materials, and that it shall be disclosed to that person 10 days from the date of the notice. The notice shall be given by certified mail, return receipt requested.

(7) Any person compelled to produce documentary material or to testify in response to a subpoena may retain or, on payment of prescribed costs of copying, procure a copy of any document submitted by him and of his own testimony as reported.

(8) Any person compelled to appear in person may be accompanied, represented, and advised by counsel as follows:

(a) The counsel for a person shall file with the attorney general an appearance setting forth that the attorney is representing that person.

(b) Counsel for a person may advise his client, in confidence and upon the initiative of either himself or the person, with respect to any question asked of the person, that the person refuse to answer a question. Then counsel may briefly state on the record that he has advised the person not to answer the question and the legal grounds for such refusal.

(c) Where it is claimed that the testimony or other evidence sought from a person is outside the scope of the subpoena or investigation, or that the person is privileged to refuse to answer the question or to produce other evidence, counsel for the person may object on the record to the question or requirement and may state briefly and precisely the grounds therefor.

(d) Following the completion of an examination of a person, the person may on the record be given an opportunity to clarify answers which may need clarification, in order that they may not be left equivocal or incomplete.

(9) For the purposes of conducting an investigation pursuant to section 7 of the act, an investigative agent of the attorney general is hereby authorized to administer oaths and affirmations and conduct investigations, including taking of testimony and receiving documentary material produced by a person.

(10) An "investigative agent" means a regular civil service employee appointed by the attorney general as an investigator whose duties, functions, and responsibilities include the investigation of any civil or criminal law.

History

History: 1979 AC.

Mich. Admin. Code R 14.55 Assurance of discontinuance {#sec-r-14.55 omnilex-key=us-mi-regs-official--dept-attorney-general--R 14.55}

Rule 5. (1) When the attorney general or prosecuting attorney has information indicating that a person or persons may have engaged, are engaging, or are about to engage in a method, act, or practice which may involve violation of the act, and if he deems the public interest shall be fully safeguarded thereby, may afford such person or persons the opportunity to negotiate informally an assurance of discontinuance.

(2) In determining whether the public interest shall be safeguarded by such assurance, the attorney general or prosecuting attorney shall consider:

(a) The nature and gravity of the alleged violation.

(b) The prior record and good faith of the parties involved.

(3) An assurance of discontinuance is accepted and final upon signing by the attorney general or prosecuting attorney.

(a) It shall include:

(i) A description of the methods, acts, and practices which a person agrees to permanently discontinue.

(ii) A reference to the provisions of the act or these rules as are applicable.

(iii) A statement that the person does not admit any issue of law or fact.

(b) In addition, the assurance may include:

(i) An agreement to pay the cost of investigation.

(ii) An agreement to hold in escrow an amount pending the outcome of litigation.

(iii) An agreement for an amount of restitution to an aggrieved person.

(4) An assurance may not be introduced in any other proceeding brought by a person other than the parties to the assurance who may introduce it in a proceeding to modify its terms or to enforce its terms in whole or in part.

History

History: 1979 AC.

Mich. Admin. Code R 14.56 Prosecuting attorney; powers and duties {#sec-r-14.56 omnilex-key=us-mi-regs-official--dept-attorney-general--R 14.56}

Rule 6. A prosecuting attorney may initiate and conduct investigations, make ex parte application to the circuit court for a subpoena, and seek such relief as provided in sections 5, 6, 7, 8, 10, and 15 of the act in the same manner and subject to the same restrictions as the attorney general, provided:

(a) Prior to making the application for the subpoena, or the filing of an action, the prosecutor gives to the attorney general 15 days' notice that he, the prosecutor, intends to make such an application or file an action. The 15-day notice may be waived by the attorney general.

(b) The notice shall contain:

(i) The identity of the person or persons against whom the action is to be commenced or the subpoena is to be served or enforced.

(ii) A description of the alleged violation of the act or these rules.

(iii) A brief statement of the relief to be sought.

(iv) If known, a statement of any past or pending actions or subpoenas brought or served against such person under the act.

(c) A legal action shall not be commenced with respect to any course of action taken in good faith reliance upon the ruling, where all relevant facts were fully, completely, and accurately presented to the attorney general.

History

History: 1979 AC.

Mich. Admin. Code R 14.57 Declaratory ruling {#sec-r-14.57 omnilex-key=us-mi-regs-official--dept-attorney-general--R 14.57}

Rule 7. (1) Any person may request a ruling from the attorney general as specified in section 63 of Act No. 306 of the Public Acts of 1969, being S24.263 of the Michigan Compiled Laws, with respect to a course of action to determine whether the action is in compliance with the act or these rules. It is the policy of the attorney general to consider such requests and, where practical, make such a ruling. A request for a ruling shall ordinarily be considered inappropriate where:

(a) The same, or substantially the same, course of action is under investigation or is, or has been, the subject of a current action, order, judgment, or decree initiated or obtained by the attorney general, a prosecuting attorney, or another governmental agency.

(b) The course of action, or its effects, may be such that an informed decision thereon cannot be made or could be made only after extensive investigation, clinical study, testing, or collateral inquiry.

(2) A request for a ruling shall be submitted in writing to the attorney general and include full and complete information regarding the course of action. Citations of legal authority supporting the theory or position of the requester may accompany the request.

(3) Any ruling given is without prejudice to the right of the attorney general to reconsider the questions involved, and where the public interest requires, to prospectively change the ruling. Sixty days' notice of prospective change shall be given to the requester so that the person may discontinue the course of action taken in reliance upon the ruling.

History

History: 1979 AC.

Mich. Admin. Code R 14.58 Request for evidence of facts on which claims made to consumers are based {#sec-r-14.58 omnilex-key=us-mi-regs-official--dept-attorney-general--R 14.58}

Rule 8. To implement section 5(2) of the act, in connection with a determination to issue a notice of intended action or initiation of an investigation pursuant to a determination of violation of a provision of the act or these rules, the attorney general or a prosecuting attorney may make written request to a person doing business in Michigan, or in whose behalf claims are made to consumers in Michigan, to provide to the attorney general or prosecuting attorney making the request evidence of the facts on which such claims are based, if such claims:

(a) Purport to be based on factual, objective, or clinical evidence, or that (b) Compare that product's or service's characteristics, ingredients, uses, benefits, effectiveness, price, or safety to that of other products or services, except to the extent such claims are statements of opinion.

History

History: 1979 AC.

Mich. Admin. Code R 14.59 Complaint {#sec-r-14.59 omnilex-key=us-mi-regs-official--dept-attorney-general--R 14.59}

Rule 9. (1) Any person may complain to the attorney general or prosecuting attorney, alleging an actual or suspected violation of the act or these rules. The complaint shall be in writing on the form prescribed or approved by the attorney general. A person, upon signing the complaint, verifies that the facts set forth therein are true to the best of his information, knowledge, and belief.

(2) A complaint form shall include:

(a) The name, address, telephone number, and zip code of the complainant and respondent.

(b) A space for the identification of the subject matter of the complaint, by violation code number.

(d) A space for the identification of the property or services involved, by a standard keyword.

(e) The name and address of the agency receiving the complaint.

(3) A complaint, or a record thereof, filed with a prosecuting attorney shall be promptly duplicated and a copy shall be forwarded to the attorney general, consumer protection division.

(4) A complaint filed with a prosecuting attorney shall be a public record and be open for inspection in the same manner as public records of the attorney general and as provided in these rules.

History

History: 1979 AC.

Mich. Admin. Code R 14.60 Publication of information; subscription; fees; waiver {#sec-r-14.60 omnilex-key=us-mi-regs-official--dept-attorney-general--R 14.60}

Rule 10. (1) The consumer protection division shall publish, on a subscription basis, the following information:

(a) Rules promulgated pursuant to the act.

(b) Copies of final judgments rendered under the act, provided to the division by clerks of the courts pursuant to section 12(1) of the act.

(d) Declaratory rulings rendered by the attorney general.

(e) Forms prescribed by the attorney general.

(2) A person desiring to subscribe to the information set forth in subrule (1) shall forward to the consumer protection division a written request therefor setting forth therein the material to which subscription is sought, and accompanying the request a fee in the appropriate amount, which fee shall be determined by reference to subrule (3). The division shall determine the correctness of the fee and may advise the person as to the correct fee. Failure to pay the correct fee shall be sufficient grounds to reject the request for subscription.

(3) The following fees shall be paid by a person annually:

(a) One of the items in subrule (1).................... $ 25.00 (b) Two of the items in subrule (1).................... $ 50.00 (c) Three of the items in subrule (1).................. $ 75.00 (d) Four of the items in subrule (1)................... $100.00 (e) All material described in subrule (1).............. $125.00

History

History: 1979 AC.

Mich. Admin. Code R 14.61 Investigation by regulatory board or officer {#sec-r-14.61 omnilex-key=us-mi-regs-official--dept-attorney-general--R 14.61}

Rule 11. (1) Whenever a regulatory board or officer identified in sections 17 to 21 of the act proposes to conduct an investigation, requiring the use of a subpoena to be issued under the act, of a method, act, or practice for which the board or officer has probable cause to believe there is a violation of the act or a rule promulgated thereunder, the regulatory board or officer shall:

(a) File with the attorney general an application therefor, stating in substance:

(i) The person or persons to be subpoenaed.

(ii) A reasonably precise description of the documentary material to be produced.

(iii) A reasonably precise description of the method, act, or practice to be investigated.

(iv) The pertinent provisions of the act or rule which the method, act, or practice violates.

(v) What steps have been taken to secure the recordation or transcription of testimony taken and who shall bear the costs thereof.

(vi) What safeguards shall be undertaken to keep confidential any documentary material or information obtained, describing what procedures shall be followed to prevent such material or information from being disclosed to any other person than the board or officer or the attorney general.

(b) Designate from among the staff of the board or officers an investigating officer or officers who shall be in charge of conducting the investigation pursuant to the subpoena.

(c) Take such steps and procure, if necessary, such devices to secure from public inspection or copying any material or information obtained under subpoena, except as otherwise provided in section 7(6) of Act No. 331 of the Public Acts of 1976, being S445.907(6) of the Michigan Compiled Laws.

(2) A regulatory board or officer specified in sections 17 to 21 of Act No. 331 of the Public Acts of 1976 shall not disclose any documentary material or information to any person, unless consented to by the attorney general.

(3) Upon conclusion of an investigation, the regulatory board or officer specified in sections 17 to 21 of Act No. 331 of the Public Acts of 1976 shall make a full report to the attorney general, which report shall contain as a minimum:

(a) The identity of the person or persons investigated.

(b) A summary of the information obtained, or in lieu thereof, complete and legible copies of all transcriptions, reports, and documentary material.

(c) A concise statement of any alleged violations of the act, together with a reference to any support therefor, found in any testimony or documentary material.

(d) A concise statement of a proposed course of action.

(e) Recommendation for action.

History

History: 1979 AC.

Mich. Admin. Code R 14.62 Public records {#sec-r-14.62 omnilex-key=us-mi-regs-official--dept-attorney-general--R 14.62}

Rule 12. (1) All records compiled, received, or maintained by the consumer protection division are public records, except those otherwise exempt pursuant to Act No. 331 of the Public Acts of 1976 and Act No. 442 of the Public Acts of 1976.

(2) Upon submitting an oral or written request which describes the record sufficiently to enable the appropriate staff member of the attorney general to find the record, a person has the right to inspect, copy, or receive copies of the record.

(3) A person may subscribe to future issuances of public records which are issued on a regular basis. A subscription shall be valid for 6 months and shall be renewable.

(4) Records may be inspected during regular office hours at a place designated by the attorney general, which shall, as far as possible, be convenient to the person who wishes to inspect the record.

(5) Where a request to inspect a public record is made, the attorney general may, with consent of the party requesting the record, provide the person with a copy of the record without charge in lieu of providing a place for inspection. Where a person requests 1 or more copies of a public record and the cost of providing copies is substantial, a reasonable fee may be imposed, but such fee shall not exceed the maximum charges allowable by section 4 of Act No. 442 of the Public Acts of 1976, being S15.234 of the Michigan Compiled Laws.

(6) Where more than 1 person wishes to inspect the same public record at the same time, the attorney general may limit the number of persons who may inspect the record at 1 time to a reasonable number.

(7) A person inspecting a record shall not write anything upon the record nor fold nor mutilate it. Violation of this requirement shall subject a person to criminal penalties imposed by section 491 of Act No. 328 of the Public Acts of 1931, as amended, being S750.491 of the Michigan Compiled Laws.

(8) A person inspecting a public record shall promptly return the record to the custodian after completion of the inspection.

History

History: 1979 AC.

R 14.201 to R 14.211 Pricing and Advertising of Consumer Items

Mich. Admin. Code R 14.201 Definitions {#sec-r-14.201 omnilex-key=us-mi-regs-official--dept-attorney-general--R 14.201}

DEPARTMENT OF ATTORNEY GENERAL

CONSUMER PROTECTION AND CHARITABLE TRUSTS DIVISION

PRICING AND ADVERTISING OF CONSUMER ITEMS

(By authority conferred on the attorney general by section 9(6) of Act No. 449 of the Public Acts of 1976, being S445.359(6) of the Michigan Compiled Laws)

Rule 1. As used in these rules:

(a) "Act" means Act No. 449 of the Public Acts of 1976, being S445.351 et seq. of the Michigan Compiled Laws.

(b) "Clearance sale" means an offer by a person to sell all offered in-stock consumer items at a price reduced from that person's regular price if the person intends to sell out all such items during the advertised period of sale, but will nevertheless reorder the same or substantially similar items to be again sold by that person not less than 90 days after the reorder.

(c) "Close out sale" means an offer by a person to sell offered in-stock consumer items at a price reduced from the person's regular price if consumer items will not be offered by that person again due to various factors, such as:

(i) The item is no longer manufactured.

(ii) The source of supply is out of business.

(iii) The person unilaterally refuses to carry the item.

(d) "Raincheck" means a written guarantee to deliver a specific consumer item.

(e) "Sale price" means a price offer for a consumer item appearing in advertising by use of the word "sale" or words of similar meaning, which suggest to a reader, listener, or viewer that the consumer item is being offered for purchase at a reduction in price, at a bargain price, or at a savings compared with some other person's or the advertiser's regular or customary higher price.

History

History: 1979 AC.

Mich. Admin. Code R 14.202 Sale or reduced price advertisements; disclosures {#sec-r-14.202 omnilex-key=us-mi-regs-official--dept-attorney-general--R 14.202}

Rule 2. An offer of a consumer item, except baked goods, fresh fruit, and fresh vegetables as provided in section 5(4) of the act, for retail sale at a sale price, special price, or at a price reduced by an amount or proportion, by means of an advertisement disseminated in the trade area served by any of the advertisers' retail outlets covered by the advertisement, shall disclose clearly and conspicuously, in conjunction therewith, either of the following:

(a) The dates the consumer item is available for purchase.

(b) The numerical quantity available for each consumer item, and where there is a limitation on how many of the advertised consumer items may be purchased by any 1 person, a statement in numerical amount of how many a consumer may buy of each advertised consumer item.

History

History: 1979 AC.

Mich. Admin. Code R 14.203 Disclosing exceptions, limitations, or restrictions rainchecks and substitutions {#sec-r-14.203 omnilex-key=us-mi-regs-official--dept-attorney-general--R 14.203}

Rule 3. (1) If an advertisement does not state the quantity of a consumer item available, and the consumer item cannot be sold throughout the advertised period of sale, the advertisement shall disclose all the seller's exceptions, limitations, or restrictions with respect to stores, consumer items, or prices otherwise included in the advertisement, and the advertiser shall make available a raincheck which obligates the advertiser to deliver and sell to the consumer in possession of the raincheck the consumer item specified in the raincheck, at the advertised price stated in the raincheck, and at the future date stated in the raincheck, not in excess of 90 days, or at an earlier time upon notification to the consumer by the advertiser. After notification to the consumer is given, the advertiser may dispose of the item upon failure of the consumer to pick up the item in the time specified in section 5(2) of the act.

(2) An advertiser, instead of providing the consumer with a raincheck, may substitute for the unavailable advertised consumer item a similar consumer item of equal or greater monetary value. This rule does not modify a person's obligations under section 5(3) of the act.

(3) If an advertiser elects to substitute a consumer item of equal or greater monetary value because the advertiser is unable to redeem a raincheck due to the unavailability of the advertised consumer item, the advertiser may substitute either a similar item bearing a substantially equivalent regular price at the advertised lower price, or a similar item bearing a higher regular price at a price equal to the regular price of the higher-priced item, less the percentage reduction offered for the unavailable consumer item.

Example: An advertisement indicates a consumer item regularly sells for $50.00, but is on this week for does not disclose the quantity available. The advertiser runs out of the advertised item during the period of sale and knows that the item cannot be obtained again to redeem a raincheck. The advertiser may then offer to a consumer either of the following substitute similar items:

(a) Another similar $50.00 item at $30.00.

(b) Another similar item regularly selling for $75.00 at a comparable savings or reduction in price; that is, 40% off or $45.00.

(4) An advertiser shall not limit the obligation to redeem a raincheck by including a date in a raincheck less than 90 days from the date of the raincheck. For example, a raincheck which provides for its redemption on or before a date less than 90 days thereafter is insufficient compliance with the act if the purpose of the earlier date is to evade compliance in the event the guarantee cannot be honored in the shorter time. An advertiser may, however, redeem the raincheck earlier than 90 days upon notification to the consumer.

(5) A raincheck shall contain, but not be limited to, the following:

(a) Space for a description of the unavailable item.

(b) Space for the price to be paid for the unavailable item of the consumer.

(6) The raincheck shall be executed in duplicate, 1 copy to be given to the consumer, the other to be retained by the merchant.

History

History: 1979 AC.

Mich. Admin. Code R 14.204 Successive advertisements {#sec-r-14.204 omnilex-key=us-mi-regs-official--dept-attorney-general--R 14.204}

Rule 4. Where an advertiser disseminates successive advertisements, either to the same or different consumer groups, and each advertisement contains the disclosures required by section 5 of the act and these rules, the advertiser is not obligated to recount or redetermine the quantity of consumer items then remaining available for each successive advertisement if the advertiser clearly and conspicuously discloses that the consumer items advertised and available in the quantities stated are subject to prior sale due to previous advertising during prior periods of time, and states the date the advertising first appeared.

History

History: 1979 AC.

Mich. Admin. Code R 14.205 Determination of violation {#sec-r-14.205 omnilex-key=us-mi-regs-official--dept-attorney-general--R 14.205}

Rule 5. In determining whether a violation of the act has occurred, the following shall be considered:

(a) All circumstances surrounding nondelivery of advertised consumer items which were actually ordered in quantities sufficient to meet, or are reasonably related to the intended response to, the advertisement, but were not delivered due to circumstances beyond the advertiser's control.

(b) All circumstances surrounding failure to make advertised consumer items conspicuously and readily available for sale at or below the advertised prices if the consumer items were not made available at those prices due to circumstances beyond the control of the advertiser. In such cases, the making available of a raincheck shall be considered; however, the mere existence of a "policy" to provide a raincheck, in and of itself, does not constitute compliance.

(c) Whether the advertiser instructed each of the advertiser's employees, agents, or servants of theexistence of a raincheck; whether the advertiser required those persons to inform consumers of its availability; whether, upon learning of the unavailability of a particular consumer item, the advertiser posted a notice, proximate to the location of the unavailable item, stating the procedure for obtaining a raincheck; and whether the advertiser posted, in a clear and conspicuous central location in the advertiser's store, a notice respecting the store's obligations to deliver a raincheck or substitute.

History

History: 1979 AC.

Mich. Admin. Code R 14.206 Catalogs, media commercials, circulars, or newspaper inserts prepared prior to dissemination {#sec-r-14.206 omnilex-key=us-mi-regs-official--dept-attorney-general--R 14.206}

Rule 6. (1) When an advertiser prepares, or causes to be prepared, an advertisement in the form of a catalog, television or radio commercial, circular, or an insert to a newspaper, which advertisement must be printed or submitted not less than 10 days prior to its dissemination to the public, and the advertisement offers to sell consumer items at a sale price, a special price, or at a price reduced by an amount or proportion, and the consumer items are readily and conspicuously made available for sale at a price other than the advertised sale price, special price, or reduced price during the interim period between the time of printing and the dissemination of the advertisement to the public, the advertiser is not required to disclose in the advertisement the numeric quantity available if the advertiser:

(a) Clearly and conspicuously discloses the period of time the consumer items are available for sale.

(b) Makes available a raincheck to any person who seeks to purchase the consumer item during the advertised period of sale, or substitutes an equal or greater monetary value for the advertised item, if the consumer items are not intended to be liquidated as part of a clearance or close out sale, or a sale of similar import or meaning.

(2) Where the consumer items are not made readily and conspicuously available for sale during the interim period, the advertiser may, instead of subrule(1)(a) and (b) above, disclose the numeric quantity available at time of sale.

History

History: 1979 AC.

Mich. Admin. Code R 14.207 Clearance and close out sales {#sec-r-14.207 omnilex-key=us-mi-regs-official--dept-attorney-general--R 14.207}

Rule 7. (1) In connection with advertising offering consumer items pursuant to either a clearance or close out sale, where the advertiser is, or will be, unable to either give a raincheck or substitute an item of equal or greater monetary value, the advertiser shall disclose the quantity on hand and available during a disclosed period of sale. However, where the sale is announced in an advertisement required to be produced not less than 10 days prior to publication, the numeric quantity to be disclosed is that amount on hand at the time of preparation of the advertisement if the sale items are in fact made readily and conspicuously available for sale during the interim period between preparation and publication and the advertisement discloses as of what date that numeric quantity was determined; but if the sale items are not made readily and conspicuously available during the interim period, then the numeric quantity stated in the advertisement shall be equal to the greater of those actually on hand at time of preparation of the advertisement or actually on hand at time of publication.

(2) In connection with a "clearance" or "close out" sale, an advertiser with more than 1 store, branch, or outlet participating in the sale shall make readily and conspicuously available in each store, branch, or outlet a reasonable number of each consumer item subject to the sale, unless a disclaimer, as provided in R 14.208(2)(a) or (b), is set forth.

History

History: 1979 AC.

Mich. Admin. Code R 14.208 General and specific disclaimers; evasions of act or rules {#sec-r-14.208 omnilex-key=us-mi-regs-official--dept-attorney-general--R 14.208}

Rule 8. (1) General disclaimers in advertising relating to product availability shall not constitute compliance with the disclosure provisions of the act or these rules where the disclaimers, when used, are relied upon by a participating dealer or store to evade the obligations imposed by the act or these rules. Examples of such "general disclaimers" include the following:

(a) "Not all items available at all stores."

(b) "Available at most stores."

(2) Specific disclaimers in advertising relating to consumer item availability only in certain stores are in compliance with the disclosure requirements of the act and these rules.

Examples of a specific disclaimer include the following:

(a) "Available only at stores featuring delicatessen departments."

(b) "Available at the following participating stores: (name and address of each)."

(3) In determining whether a clearance or close out sale is used as a device to evade the act or these rules, the following criteria shall be considered:

(a) Whether the advertiser regularly or repeatedly uses the terms "clearance sale" or "close out sale" in connection with advertising of consumer items.

(b) Whether the advertiser has in fact made readily and conspicuously available for sale all of the consumer items offered as part of the clearance or close out sale.

(c) Whether the clearance or close out sale is merely a temporary reduction in prices, and there is an increase in prices on the same consumer items after the sale.

(d) Whether the advertiser has, prior to or during the sale, ordered or acquired all or part of the advertised consumer items, other than from existing inventory, for the purposes of the sale.

(e) Whether the advertiser has reordered the consumer items which are the subject of the sale for the purposes of replacing the inventory of sold items so as to make them available for sale within 90 days of the advertised clearance or close out sale.

(4) In order to avoid leading a consumer to believe, in connection with an advertisement disclosing numerical quantities where more than 1 store, outlet, or dealership is participating, that each store, outlet or dealership has in fact the numerical quantity listed for the consumer item, and in fact there is a variance in quantity among such store, outlets, or dealerships, the advertiser may do either of the following:

(a) Have readily and conspicuously available in each store, outlet, or dealership a reasonable number of each consumer item subject to the sale advertising.

(b) Provide to each store, outlet, or dealership a quantity of consumer items equal to the quantity disclosed for each item.

History

History: 1979 AC.

Mich. Admin. Code R 14.209 Enforcement and administration of act and rules {#sec-r-14.209 omnilex-key=us-mi-regs-official--dept-attorney-general--R 14.209}

Rule 9. (1) The act and rules shall be enforced and administered by the department of attorney general, consumer protection division, or such other division of the department as from time to time is designated by the attorney general.

(2) The consumer protection division is located at the Law Building, Lansing, Michigan 48913.

History

History: 1979 AC.

Mich. Admin. Code R 14.210 Assurance of discontinuance {#sec-r-14.210 omnilex-key=us-mi-regs-official--dept-attorney-general--R 14.210}

Rule 10. (1) When the attorney general or prosecuting attorney has information indicating that a person may have engaged, is engaging, or is about to engage in a method, act, or practice which may involve violation of the act, and if he deems the public interest shall be fully safeguarded thereby, the attorney general or prosecuting attorney may afford the person the opportunity to negotiate informally an assurance of discontinuance.

(2) In determining whether the public interest is safeguarded by an assurance of discontinuance, the attorney general shall consider:

(a) The nature and gravity of the alleged violation.

(b) The prior record and good faith of the parties involved.

(3) An assurance of discontinuance is accepted and final upon signing by the attorney general or prosecuting attorney.

(4) An assurance of discontinuance shall include:

(a) A description of the methods, acts, and practices which a person agrees to permanently discontinue.

(b) A reference to applicable provisions of the act or these rules.

(5) An assurance of discontinuance may include:

(a) An agreement to pay the costs of investigation.

(b) An agreement to hold in escrow an amount pending the outcome of litigation.

(6) An assurance of discontinuance shall not be introduced in a proceeding by a person other than a party to the assurance, who may introduce it in the proceeding to modify its terms or to enforce its terms in whole or in part.

History

History: 1979 AC.

Mich. Admin. Code R 14.211 Declaratory ruling {#sec-r-14.211 omnilex-key=us-mi-regs-official--dept-attorney-general--R 14.211}

Rule 11. (1) A person may request a declaratory ruling from the attorney general as specified in section 63 of Act No. 306 of the Public Acts of 1969, being S24.263 of the Michigan Compiled Laws, with respect to determining whether a course of action is in compliance with the act or these rules. The attorney general shall consider the requests and, where practical, make a declaratory ruling. A request for a declaratory ruling is inappropriate where:

(a) The same, or substantially the same, course of action is under investigation, or is, or has been, the subject of a current action, order, judgment, or decree initiated or obtained by the attorney general.

(b) The course of action, or its effects, may be such that an informed decision thereon cannot be made, or can be made only after extensive investigation, clinical study, testing, or collateral inquiry.

(2) A request for declaratory ruling shall be submitted in writing to the attorney general, and shall include full and complete information regarding the course of action. Citations of legal authority supporting the theory or position of the requester may accompany the request.

(3) A declaratory ruling given by the attorney general is without prejudice to the right of the attorney general to reconsider the questions involved, and, where the public interest requires, to prospectively change the ruling. Sixty days' notice of a prospective change in a declaratory ruling shall be given to the requester so that a person may discontinue a course of action taken in reliance upon the ruling.

History

History: 1979 AC.

R 400.241 to R 400.245a Soliciting Agencies

Mich. Admin. Code R 400.241 Sound financial accounting; use of funds {#sec-r-400.241 omnilex-key=us-mi-regs-official--dept-attorney-general--R 400.241}

DEPARTMENT OF ATTORNEY GENERAL

CONSUMER PROTECTION AND CHARITABLE TRUSTS DIVISION

SOLICITING AGENCIES

(By authority conferred on the department of social services by section 6 of Act No. 280 of the Public Acts of 1939, as amended, being S400.6 of the Michigan Compiled Law.)

Rule 241. The charitable organization must show sound financial accounting, and show that all moneys expended have been applied to the carrying out of the announced purpose for which the agency is organized, or for which the solicitation was held. Where the amount received from solicitations during the fiscal year of the charitable organization is less than $15,000.00, the report of audit submitted in connection with an application for the annual license may be a detailed statement sworn to by 2 or more officers of the organization. In all other cases, an audit of the complete operation of the charitable organization by a certified public accountant and certified, as to correctness, by him is required. The organization must adopt controls of income to make it possible for the certified public accountant to attest to the correctness of the amount shown as received, or including all receipts.

History

History: 1944 AC; 1954 AC; 1979 AC.

Mich. Admin. Code R 400.242 Purpose of agency {#sec-r-400.242 omnilex-key=us-mi-regs-official--dept-attorney-general--R 400.242}

Rule 242. All soliciting materials and appeals used shall clearly indicate the full purpose of the charitable organization and the purpose of the solicitation.

History

History: 1944 AC; 1954 AC; 1979 AC.

Mich. Admin. Code R 400.243 Michigan certificate of authority for foreign corporations {#sec-r-400.243 omnilex-key=us-mi-regs-official--dept-attorney-general--R 400.243}

Rule 243. No license will be granted to a charitable organization, institution, or association incorporated under the laws of another state to make public solicitations in Michigan unless it has obtained a certificate of authority to do business in Michigan issued by the Michigan corporation and securities comission.

History

History: 1979 AC.

Mich. Admin. Code R 400.244 "Formed for a charitable purpose"; restrictions as to membership of controlling board {#sec-r-400.244 omnilex-key=us-mi-regs-official--dept-attorney-general--R 400.244}

Rule 244. No organization, institution, association, or corporation, regardless of its statement of purpose, shall be considered as formed for a charitable purpose where more than 1/3 of the members of the board of directors or trustees consists of persons who either are receiving remuneration from the organization, institution, association, or corporation or have spouses, parents, or children so receiving.

History

History: 1979 AC.

Mich. Admin. Code R 400.245 Same; restrictions as to dividends; dissolution {#sec-r-400.245 omnilex-key=us-mi-regs-official--dept-attorney-general--R 400.245}

Rule 245. No organization, institution, association, or corporation, regardless of its statement of purpose, shall be considered as formed for a charitable purpose if dividends are distributed to members or stockholders or if, upon dissolution, the net assets are to be so distributed in whole or in part.

History

History: 1979 AC.

Mich. Admin. Code R 400.245a Definitions {#sec-r-400.245a omnilex-key=us-mi-regs-official--dept-attorney-general--R 400.245a}

Rule 245a. (1) The meaning of the word "charitable" in the phrase "charitable purpose" shall include "philanthropic," "social service," "benevolent," and "patriotic."

(2) A church is an ecclesiastical corporation, or an association organized primarily for public worship and protected in its organization by a specific Michigan statute.

(3) A charitable organization is church-sponsored where a single church has legal control of the organization or contractual control of the solicitation.

History

History: 1979 AC.

R 445.101 to R 445.901 Franchises

Mich. Admin. Code R 445.101 Definitions and explanations of terms {#sec-r-445.101 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.101}

DEPARTMENT OF ATTORNEY GENERAL

CONSUMER PROTECTION AND CHARITABLE TRUSTS DIVISION

FRANCHISES

(By authority conferred on the department of commerce by section 41 of Act No. 269 of the Public Acts of 1974, being S445.1541 of the Michigan Compiled Laws)

PART 1. GENERAL PROVISIONS

Rule 101. (1) "Act" means Act No. 269 of the Public Acts of 1974, being S445.1501 et seq. of the Michigan Compiled Laws. Terms defined in the act have the same meanings when used in these rules. Terms defined and explained herein have the same meanings when used in either the act or these rules.

(2) The words "fee or charge" as used in section 3(1) of the act include, but are not limited to:

(a) Present payments, deferred payments, and royalty payments required of the franchisee by the franchisor arising from sales of goods or services offered by the franchisee or its agents or affiliates, or payments as a condition to maintaining the franchise relationship other than payment for goods at a bona fide wholesale price.

(b) Payments for a lease or sale of real property in excess of a fair rental or market value.

Among the criteria for evaluation of fair rental or market value shall be the location of the property, the physical attributes of the property, and what other lessees or purchasers have paid for similar property in comparable locations.

(c) Payments for services. These payments are presumed to be in part for the right granted to the franchisee to engage in the franchise business. Ideas, instruction, training, and other programs are services and not goods, irrespective of whether offered, distributed, or communicated by word of mouth, through instructions or lectures, in written or printed form, by record or tape recording, or any combination thereof.

(d) Payments for ownership. These payments include transfer of a controlling interest in a business entity which holds a franchise, except those transfers where the franchise held is not the principal asset of the transferor and not part of a plan of distribution of franchises.

(e) Minimum purchase or minimum inventory requirements other than at a bona fide wholesale price for which there is a well-established market in this state.

(3) "Initial and deferred franchise fee" means the amount of the franchise fee charged at the time of entry into the business, whether paid in full upon commencement or paid on a deferred basis. For purposes of R 445.801, it does not include royalties or other franchise fees measure by the amount of goods or services sold during the operation of the franchise.

(4) "Prescribed in substantial part by the franchisor," as used in section 2(3)(a) of the act, shall be interpreted in light of the following:

(a) A marketing plan may be determined to be prescribed if the franchise or other written or oral agreement, the nature of the franchise business, or other circumstances permit or require the franchisee to follow an operating plan or standard operating procedure, or their substantial equivalent, promulgated by or for the franchisor. An operating plan or standard operating procedure includes required procedures, prohibitions against certain business practices, or recommended or offered practices, whether or not enforceable with economic sanctions.

(b) A marketing plan may be determined to be prescribed without regard to whether the franchisee is an independent contractor and not the agent of the franchisor, and notwithstanding provisions of a franchise or other agreement purporting to grant the franchisee complete freedom in operating his business.

(c) The presence of any of these factors, among others, indicates that a marketing plan or system is prescribed in substantial part by the franchisor:

(i) Representations by, or requirements of, the franchisor that the franchisee operate a business which can purchase a substantial portion of its goods solely from sources designated or approved by the franchisor.

(ii) Representations by, or requirements of, the franchisor that the franchisee follow an operating plan, standard procedure, training manual, or its substantial equivalent promulgated by the franchisor in the operation of the franchise, violations of which may, under the terms of the agreement, permit the franchisor to terminate or refuse to renew the agreement.

(iii) Representations by, or requirements of, the franchisor that the franchisee is limited as to type, quantity, or quality of any product or service the franchisee may sell, or that limit the franchisee as to the persons or accounts to which he may sell the franchisor's product or service.

(iv) Representations by, or requirements of, the franchisor that the franchisor aid or assist the franchisee in training or in obtaining locations or facilities for operation of the franchisee's business, or in marketing the franchisor's product or service.

(5) A franchisee's business is "substantially associated," as used in section 2(3)(b) of the act, with the franchisor's trademark, service mark, trade name, logotype, advertising, or other commercial symbol designating the franchisor or its affiliate if the franchise or other agreement, the nature of the franchise business, or other circumstances permit or require the franchisee to identify its business to its customers primarily under that trademark, service mark, trade name, logotype, advertising, or other commercial symbol, hereinafter referred to collectively as the "franchisor's mark," or to otherwise use the franchisor's mark in a manner likely to convey to the public that it is an outlet of or represents directly or indirectly the franchisor. The following factors, among others, indicate that the business of a franchisee is substantially associated with the franchisor's mark:

(a) The identification of the franchisor's mark is utilized either by the franchisor or the franchisee to enhance the chances of the franchisee's success in respect to the franchisee's transactions with persons dealing in, or purchasing, the franchisor's products or services.

(b) An agreement or procedure providing for the franchisee to directly or indirectly contribute a portion of its operating revenue to the franchisor for advertising expenses.

(6) "Bona fide wholesale price," as used in section 3(1)(a) of the act, refers to a price which constitutes a fair payment for goods purchased at a comparable level of distribution, and no part of which constitutes a payment for the right to enter into, or continue in, the franchise business. Goods sold at a bona fide wholesale price may include, but are not limited to, goods sold to the franchisee for resale, as well as fixtures, equipment, raw materials, supplies, and other goods used by the franchisee in the conduct of the franchise business. The price charged for a trademarked product does not exceed its bona fide wholesale price merely because the price exceeds the wholesale price of nontrademarked products of comparable quality and specifications. If the trademarked product commands a premium price by virtue of the trademark it carries, the premium does not necessarily constitute the payment of a franchise fee. A payment made directly or indirectly by the franchisee to or for the benefit of the franchisor in excess of the bona fide wholesale price constitutes a franchise fee. Services, rental payments, and the lease of real or personal property are not within the category of "goods," irrespective of whether payment for the services or property constitutes a fair payment for comparable services or property. In a determination as to whether the price of goods arising from a marketing plan or system of a manufacturer, licensor, or a franchisor is a bona fide wholesale price, relevant cost, marketing, pricing, or payment information, among other factors, may be considered.

(7) The existence of a "well-established market," as used in section 3(1)(a) of the act, is a question of fact determined by the presence, among other factors, of the following:

(a) A number of presently existing wholesale and retail outlets of the franchisor or competitors in a similar line of business.

(b) The quantity and price of like or similar products presently sold in an existing geographical area in Michigan.

(c) The ability of the purchaser to resell at the suggested retail price of the manufacturer or wholesaler or at a reasonable markup over the purchaser's cost.

(d) The ability of the purchaser to return any unsold portion of the product without penalty.

(8) The existence of the following factors, among others, which shall be interpreted by considering the previous operating history of the franchisor and its existing franchisees, indicates an offer the terms of which would create an "unreasonable risk" of loss of investment or failure of a franchisee's business as used in section 13(c) of the act to a prospective franchisee:

(a) Offerings whereby a franchisor or an affiliated person has received, or will receive, a substantial portion of his income from the sale of franchises rather than from the sale of goods, services, or continuing royalties relating to the operation of the franchise, and it appears to the administrator that the success of the franchisor's program is based on the sale of franchises rather than the sale of goods and services by the franchisee.

(b) Offerings where the natural person as a franchisor, or the officers, directors, partners, or affiliates of a franchisor, have received or will receive unreasonable front-end compensation from the payment of franchise fees in relation to the present and future services to be provided or the value of the franchise right prior to the establishment of the franchise.

(c) Offerings which permit the franchisor to directly or indirectly convey, assign, or otherwise transfer its responsibility to fulfill contractual obligations to franchisees unless the commitments to establish the franchise have been met or provided for and adequate provision has been made for providing further required contractual services, and the agreement shall so state.

(d) Offerings in which the franchisor is a shell or an undercapitalized corporation.

(e) Offerings which provide excessive compensation to a franchisor in relation to the services, goods, or value provided and their likely profit to the franchisee.

(f) Offerings which involve excessive sales commissions in relation to the likely profit to the franchisee.

(g) Offerings which provide that a franchisor may unilaterally, during the term of the franchise agreement, require unlimited or excessive increases in a royalty payment or require increases in price of goods and services other than on a uniform basis to all persons similarly situated.

(h) Offerings which permit or provide the opportunity for an excessive or improper conflict of interest between the franchisor and franchisee. Dual distribution systems shall not per se be construed as a conflict of interest.

(i) Offerings which permit or provide that the franchisor may receive from the franchisee, or arrange for third parties to receive a note or series of notes, singularly or in combination, not exceeding $15,000.00, without reserving to the franchisee a defense arising out of a default by the franchisor.

(j) Offerings which fail to provide that a franchisor shall, upon demand, furnish the franchisee an accurate annual financial statement, unless the franchisor is filing annual reports pursuant to the securities exchange act of 1934 or is registered under the Michigan franchise investment law.

(9) "Material change," as used in section 19 of the act, includes, but is not limited to:

(a) The termination, closing, or failure to renew, during a 3-month period, of the lesser of 10 or 10% of the franchises of a franchisor, regardless of location, except that franchisors with an excess of 200 existing franchises shall file a report only upon the termination, closing, or nonrenewal of 5% or more of its franchises, or the termination, closing, or failure to renew, during a 3-month period, of the greater of 3 or 10% of the franchises of a franchisor located in the state.

(b) A purchase of franchises by the franchisor in excess of 5% of its existing franchises during 6 consecutive months.

(d) A significant adverse change in any of the following:

(i) The obligations of the franchisee to purchase items from the franchisor or its designated sources.

(ii) The limitations or restrictions on the goods or services which the franchisee may offer to its customers.

(iii) The obligations to be performed by the franchisor.

(iv) The franchise contract or agreement, including amendments thereto.

(v) The franchisor's accounting system resulting in a 5% or greater change in its net profit or loss in any 6-month period.

(vi) The service, product, or model line.

(10) "Net worth," as used in section 6(2)(a) of the act, means the excess of assets over liabilities, which is derived by the use of generally accepted accounting principles consistently applied and documented in the form of a balance sheet, with the exception that:

(a) Intangible assets shall include only the liquidation value of the intangibles.

(b) Receivables of a franchisor due from its franchisees shall be stated with an appropriate asset offset or reserve for losses.

(c) Lump sum franchise fee receipts, or a portion thereof, shall be offset by a "liability" for accrued obligations to be performed in the future in consideration for receipt of the fees.

(11) "Officer" means the president, vice president, secretary, or treasurer of a corporation, or a person occupying a similar status or performing similar functions.

(12) "Specified number of days" means calendar days, including Saturdays, Sundays, and holidays, unless the act or rule specifically indicates that business days are intended.

(13) Wherever the context of these rules requires, in order to conform to the intent of the act, the term "franchisor," as used herein, shall include subfranchisor.

(14) "Administrator," as used in these rules, means the director of the department of commerce or the director of the corporation and securities bureau.

(15) For the purposes of regulations, agents shall be divided into 2 categories:

(a) Franchise agents who represent only 1 franchisor and who are regulated pursuant to part 6 of these rules.

(b) Franchise agents who represent more than 1 franchisor or who employ persons to assist in the sale of a franchise and who are regulated pursuant to part 7 of these rules.

(i) A person effecting transactions in a franchise exempted by sections 6(2)(c), (d), (e), (f), (g), (h), (j), or (k) of the act.

(ii) A partner, officer, or director of a franchisor whose personal history is described in the prospectus and who represents the franchisor in effecting the offer or sale of a franchise.

(iii) Other persons excluded by order in the discretion of the administrator from all or part of the requirements of part 6 or 7 of these rules if:

(A) The contact of such person with prospective franchisees is minimal and does not involve a solicitation to purchase a franchise, or (B) The person is registered under the Michigan uniform securities act, acting with written approval of his registered broker-dealer.

(d) A franchise agent may only be a natural person.

PART 2. REGISTRATION REQUIREMENTS

History

History: 1979 AC.

Mich. Admin. Code R 445.201 Documents accompanying application for registration or notification of exemption {#sec-r-445.201 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.201}

Rule 201. Without limiting the administrator's power to require additional information under section 8(t) of the act, an application for registration of a franchise, or a notification of an exemption pursuant to section 6(2)(a) or (b) of the act, shall be accompanied by:

(a) Upon request of the administrator, a copy of the current articles of incorporation and annual reports and amendments thereto, except that in the case of a partnership, the certificate of co-partnership shall be submitted. In the case of doing business under an assumed name, the assumed name certificate shall be submitted.

(b) A copy of any contractual agreement between the franchisor and franchise brokeragent relating to the sale of a franchise.

(d) A copy of the operations manual and policy manual, or their equivalent. The administrator shall, upon request, retain those portions of the document containing trade or business secrets as a confidential document. The administrator may, in its discretion, return an operations manual and policy manual, or their equivalent, if a determination is made that the document does not contain information necessary to establish legal or economic relationships between the franchisee and franchisor. The administrator may require delivery of portions to each prospective franchisee at least 1 week prior to sale. The franchisor may require execution by that prospective franchisee of an agreement of confidentiality on a form acceptable to the administrator.

(e) Other documents or information necessary to establish the legal and economic relationships to be created between the franchisee and franchisor.

(f) Documents or information filed with the federal trade commission under its franchise disclosure requirements.

(g) An irrevocable consent to service of process, pursuant to the act, in the prescribed form, or in a uniform form satisfactory to the administrator containing substantially the same provisions.

History

History: 1979 AC.

Mich. Admin. Code R 445.202 Offering prospectus {#sec-r-445.202 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.202}

Rule 202. The offering prospectus shall be in the format and contain the information prescribed by the administrator. The form shall be available to the applicant at the administrator's office.

History

History: 1979 AC.

Mich. Admin. Code R 445.203 Periodic reports of sales {#sec-r-445.203 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.203}

Rule 203. When the administrator deems necessary to assure compliance with sections 5 or 6 of the act, it may by order require that a registrant or person exempt pursuant to section 6(2)(a) or (b) of the act file periodic reports of sales in a format prescribed by the administrator.

History

History: 1979 AC.

Mich. Admin. Code R 445.204 Conditions regarding sales {#sec-r-445.204 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.204}

Rule 204. In lieu of entry of a stop order pursuant to section13 of the act, the administrator may impose conditions regarding the sale of franchises as necessary for the protection of the public.

History

History: 1979 AC.

Mich. Admin. Code R 445.205 List of franchisees and current business addresses {#sec-r-445.205 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.205}

Rule 205. The franchisor shall at all times maintain a list of franchisees with current business addresses and provide the list to the administrator promptly upon request.

History

History: 1979 AC.

Mich. Admin. Code R 445.206 Reports required {#sec-r-445.206 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.206}

Rule 206. Pursuant to the authority granted by sections 8(g), (r), and (t) of the act, the administrator may require franchisors, directly or indirectly offering to sell or selling franchises in this state under section 6(1) of the act, to file with the administrator, within a period of 120 days from the last date of its fiscal year, both of the following:

(a) A copy of their annual report, if any, and audited certified financial statements, or unaudited financial statements prepared by a certified public accountant if the requirement for audited financial statements has been waived by the administrator.

(b) A graphic representation of specific geographical sites sold to franchisees in Michigan in the last fiscal year, either by the franchisor or with franchisor approval of location.

History

History: 1979 AC.

Mich. Admin. Code R 445.207 Failure to process application {#sec-r-445.207 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.207}

Rule 207. For purposes of section 13(h) of the act, an applicant has failed to diligently process an application when 7 consecutive months have elapsed since the submission of an application that has not become effective.

History

History: 1979 AC.

Mich. Admin. Code R 445.208 Revising, amending, or supplementing prospectus or operations manual; review {#sec-r-445.208 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.208}

Rule 208. (1) If the prospectus, operations manual, or a part thereof becomes misleading as to a material fact, or omits to state a material fact necessary in order to make the statement made, in the light of the circumstances under which they are made, not misleading, it shall be revised or supplemented, and the revision or supplement shall be submitted to the administrator prior to use.

(2) The administrator shall promptly review the amendment and advise the registrant when the administrator's objection to the use of the amended prospectus ceases. An offer or sale shall not be made prior to notification by the administrator.

(3) If the registration renewal statement, or an amendment to an application for registration or notification of an exemption, alters the text of the offering prospectus, or of an item, exhibit, or other document previously filed as a part of an application for registration, or notification of an exemption, the changes in the text shall be indicated by means of underscoring or in some other appropriate manner.

History

History: 1979 AC.

Mich. Admin. Code R 445.209 Permissible omissions {#sec-r-445.209 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.209}

Rule 209. The administrator may permit the omission of an item of information or document from a registration statement.

History

History: 1979 AC.

Mich. Admin. Code R 445.210 Fees {#sec-r-445.210 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.210}

Rule 210. (1) The fee for filing an application for registration with the department shall be $500.00. The annual renewal registration fee shall be $250.00. The payment shall be in the form of check or money order made payable to the "State of Michigan" and shall not be postdated.

(2) The fee for filing a notification of exemption with the department for a transaction exempted from registration shall be $100.00 and shall be in the form of check or money order payable to the "State of Michigan" and shall not be postdated. The fee for filing a notification of exemption pursuant to section 6(2)(h), 6(2)(j), or 7 of the act shall be $10.00.

(3) If a company offers 2 or more franchises which are sufficiently similar in nature that it is feasible, in the opinion of the administrator, to combine the required application document and prospectus in a single application for registration, it may, at the request of the franchisor, authorize the filing of a single application for registration covering the similar franchises and the payment of a single filing fee covering the franchises.

(4) If a company offers 2 or more franchises which are sufficiently dissimilar that a single registration would tend to confuse prospective franchisees, the administrator may require separate registrations for each franchise and the payment of a separate fee for each franchise.

History

History: 1979 AC.

Mich. Admin. Code R 445.211 Effectiveness of first filings {#sec-r-445.211 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.211}

Rule 211. (1) A franchise offering which becomes effective between January 13, 1975, and June 30, 1975, shall be registered, unless the administrator approves a different period of registration, for period determined according to the following schedule:

If the Franchisor's Name The Franchise Offering is Registered Commences With: or Exeempted for a Period of:

A through H 15 months from the effective date of registration or exemptions I through P 14 months from the effective date of registration or exemptions Q through Z 13 months from the effective date of registration or exemptions (2) This rule shall not be of force and effect on or after October 1, 1976.

PART 3. ESCROW

History

History: 1979 AC.

Mich. Admin. Code R 445.301 Imposition of escrow {#sec-r-445.301 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.301}

Rule 301. If the department finds that the applicant failed to demonstrate that adequate financial arrangements were made to fulfill obligations to provide real estate, improvements, equipment, inventory, training, or other items included in an offering, the administrator may impose, as a condition to registration or exemption, an escrow of not more than 100% of the franchise fees and other funds paid by the franchisee or subfranchisor until these obligations are fulfilled.

History

History: 1979 AC.

Mich. Admin. Code R 445.302 Escrow requirements {#sec-r-445.302 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.302}

Rule 302. When an escrow is imposed in connection with the registration or exemption of a franchise offering, the account shall comply with the following requirements:

(a) Checks shall be made payable to the depository approved by the administrator.

(b) The account shall be established in a bank or trust company acceptable to the administrator, and the funds shall be kept and maintained in an account separate and apart from the franchisor's business and personal accounts.

(c) All proceeds so deposited shall remain the property of the franchisee and shall not be subject to any liens or charges by the escrow agent, or judgments, garnishments, or creditor's claims against the franchisor until released to the franchisor as hereinafter provided. This escrow is for the benefit of each franchisee in the amount paid by each franchisee.

(d) At the administrator's discretion, a statement indicating the status of the escrow shall be furnished by the bank or trust company to the administrator.

(e) A trust or escrow agreement shall be entered into between the bank or trust company, and the franchisor, which shall state that its purpose is to protect the franchisee or subfranchisor and shall authorize the administrator to inspect the records of the bank or trust company, as trustee, relating thereto, and shall state that, upon order of the administrator or a court of competent jurisdiction, the trustee shall release and pay over the funds, or a portion thereof, to the franchisor, subfranchisor, or franchisee, as directed.

(f) The department, by its administrator, shall execute an acknowledgment on the face of each escrow or trust agreement. This acknowledgment indicates approval on the form and content of the agreement, but shall not be construed to make the department a party thereto.

History

History: 1979 AC.

Mich. Admin. Code R 445.303 Purchase receipts {#sec-r-445.303 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.303}

Rule 303. When an escrow is imposed, the franchisor shall deliver to each franchisee or subfranchisor a purchase receipt in a form approved by the administrator. Purchase receipts shall be consecutively numbered and prepared in quadruplicate: The original given to the franchisee or subfranchisor, the first copy to the depository together with the payment received, the second copy retained by the franchisor, and the third copy sent to the administrator.

History

History: 1979 AC.

Mich. Admin. Code R 445.304 Release of escrowed funds {#sec-r-445.304 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.304}

Rule 304. (1) The administrator shall authorize the depository to release to the franchisor those amounts of the escrowed funds applicable to a specified franchisee or subfranchisor upon a showing satisfactory to the administrator that the franchisor has fulfilled its obligations under the franchise agreement to establish the franchise, or that the escrow is not required for the protection of the franchisee.

(2) An application for an order of the administrator authorizing the release of escrowed funds to the franchisor shall be verified and shall contain:

(a) A statement of the franchisor that required proceeds from the sale of franchises have been placed with the depository in accordance with the terms and conditions of the escrow agreement.

(b) A franchisee's verified statement of completion of franchisor's obligations for release of funds from escrow.

(c) A statement of the depository signed by an appropriate officer setting forth the aggregate amount of escrowed funds placed with the depository when required by the administrator.

(d) The names of each franchisee or subfranchisor and the amount held in escrow for the account of the franchisee or subfranchisor.

(e) A showing that the franchisor, with respect to a franchise, the funds for which are sought to be released, has completely performed obligations, cited by reference to the franchise agreement and its provisions, to provide real estate, improvements, equipment, inventory, training, or other items.

(f) Other information the administrator may reasonably require.

(3) If the administrator finds that any conditions of this agreement have not been satisfied or that any provisions of the Michigan franchise investment law or rules have not been complied with, or the registration of the franchises has been revoked, then the administrator may withhold such authorization for release of funds by the escrow agent to the franchisor and may direct the full return of funds by the escrow agent to the franchisees.

History

History: 1979 AC.

Mich. Admin. Code R 445.305 Surety bond in lieu of escrow {#sec-r-445.305 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.305}

Rule 305. (1) In lieu of the imposition of an escrow, a franchisor at his option may post a surety bond of a surety company in the amount required by the administrator as protection of the franchisees requires.

(2) The surety company must be authorized to transact business in Michigan.

(3) The administrator shall take into consideration the amount of the franchise fees and other fees to be charged as well as the number of franchises to be offered, granted, or sold in determining the initial amount of the surety bond and shall amend the amount as public interest requires, using the same factors.

(4) Should the franchisor fail to complete the obligations under the franchise contract to provide real estate, improvements, equipment, inventory, training, or other items included in the offering, the surety company may pay the appropriate money to the administrator or his designee, as obligee, for the benefit of all franchises in accordance with their contribution of franchise and other fees or amounts.

(5) If the surety bond expires or is canceled and the franchisor is still under an obligation to provide real estate, improvements, equipment, inventory, training, or other items, the franchisor at his option may either post another surety bond or have an escrow of franchise and other fees imposed by the administrator. Until another surety bond acceptable to the administrator is purchased or escrow is imposed, the franchisor shall not make any new sales.

(6) The state may be a party to the surety bond and shall, through the administrator, review its form and content.

PART 4. EXEMPT TRANSACTIONS

History

History: 1979 AC.

Mich. Admin. Code R 445.401 Exemptions based on franchisor's net worth or initial investment {#sec-r-445.401 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.401}

Rule 401. (1) Franchisors relying on the exemptions provided by section 6(2)(a) or (b) of the act shall file the information required on the form and accompanying instructions currently prescribed by the administrator, as well as the documents listed in R 445.201.

(2) A franchisor seeking to claim the exemption provided by section 6(2)(a) or (b) of the act shall so state on the cover of its prospectus and agree to abide by the prospectus delivery requirements of section 16 of the act.

History

History: 1979 AC.

Mich. Admin. Code R 445.402 Exemptions based on limited number of offerees {#sec-r-445.402 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.402}

Rule 402. The exemption provided by section 6(2)(k) of the act shall pertain to only those franchisors who:

(a) Do not have more than 1 existing franchise within or without the state prior to the offer of a franchise under this part, and (b) Provide disclosure to the franchisee offeree as required in sections 5(1)(b) and 5(2) of the act.

History

History: 1979 AC.

Mich. Admin. Code R 445.403 Reports to be filed {#sec-r-445.403 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.403}

Rule 403. (1) Franchisors, directly or indirectly offering to sell or selling franchises in this state under section 6(2)(a) or (b) of the act, shall file with the administrator, within a period of 120 days from the last day of its fiscal year, a copy of their annual report, if any, and an audited certified financial statement or unaudited financial statement prepared by a certified public accountant if the requirement for submission of an audited financial statement has been waived by the administrator.

(2) A franchisor, directly or indirectly offering to sell or selling franchises in this state under section 6(2)(a), (b), or (j) of the act, shall file with the administrator, within a period of 120 days from the last day of its fiscal year, graphic representations of the geographical locations sold to the franchisees in the state in the last fiscal year.

History

History: 1979 AC.

Mich. Admin. Code R 445.404 Material changes to be reported {#sec-r-445.404 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.404}

Rule 404. Franchisors whose franchises are exempted under section 6(2)(a) or (b) of the act shall be required, as a condition of maintenance of the exemption after confirmation thereof as required by the act, to notify the administrator, in writing, within 30 days after the occurrence of any material fact or material change affecting the franchisor.

History

History: 1979 AC.

Mich. Admin. Code R 445.405 Sales and offers by existing franchisees {#sec-r-445.405 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.405}

Rule 405. (1) A franchisee seeking to offer or sell a franchise for his own account, whose franchisor is currently registered or exempted under section 6(2)(a) or (b) of the act, shall comply with the following disclosure requirements by providing:

(a) The offeree with a copy of the franchisor's current prospectus.

(b) Full access to the books and records of the franchise in the actual or constructive possession of the franchisee.

(c) Full disclosure relating to the risks of the franchise of which the selling franchisee knows and which are not readily apparent to an offeree considering the purchase of that franchise.

(d) Additional material information relating to the franchisor known to the present franchisee.

(2) A franchisee seeking to offer or sell a franchise for his own account, whose franchisor is not currently registered under the act but was so registered or exempted under section 6(2)(a) or (b) of the act in the past, shall comply with the following disclosure requirements by providing:

(a) The offeree with the most recent prospectus of the franchisor used in this state or elsewhere.

(b) The offeree with access to the material reports and correspondence in the actual or constructive possession of the franchisee, from the franchisor, relating to the economic or legal relationship between the franchisee and the franchisor, from the date of the last prospectus to the present.

(d) Full access to the books and records of the franchise in the actual or constructive possession of the franchisee.

(e) Full disclosure relating to the risks of the franchise of which the selling franchisee knows and which are not readily apparent to an offeree considering purchase of that franchise.

(3) A franchisee seeking to offer or sell a franchise for his own account, whose franchisor is not now and has not been registered or exempted under section (6)(2)(a) or (b) of the act, shall comply with the following disclosure requirements by providing:

(a) Full access to the books and records of the franchise in the actual or constructive possession of the franchisee.

(b) Full disclosure relating to the risks of the franchise of which the selling franchisee knows and which are readily apparent to an offeree considering purchase of that franchise.

(4) The franchisee shall, if requested by the franchisor, furnish an affidavit that he has complied with the above disclosure requirements.

(5) The exemptions provided by this section shall not be available to a franchisee who wishes to divide or subdivide his territory, exclusive or otherwise, and sell more than 1 portion or division, except upon written authorization of the administrator.

PART 5. FINANCIAL STATEMENTS

History

History: 1979 AC.

Mich. Admin. Code R 445.501 Accounting principles {#sec-r-445.501 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.501}

Rule 501. A financial statement required to be filed in connection with an application for registration under section 6(1) of the act or for an exemption under section 6(2)(a) or (b) of the act shall be prepared in accordance with generally accepted accounting principles. A financial statement shall be audited by an independent certified public accountant, except when the particular form or these rules permit the use of an unaudited statement for an interim period or generally.

History

History: 1979 AC.

Mich. Admin. Code R 445.502 Balance sheet; profit and loss statement; audit; auditor's opinion {#sec-r-445.502 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.502}

Rule 502. (1) The financial statement required to be filed by a franchisor refers to:

(a) A balance sheet as of a date within 90 days prior to the date of the application.

(b) A profit and loss statement for each of the 3 fiscal years preceding the date of the balance sheet and for the period, if any, between the close of the last of the fiscal years and the date of the balance sheet, unless this requirement is waived or modified by the administrator.

(2) If the balance sheet referred to in subrule (1)(a) is not audited, there shall be filed, in addition, an audited balance sheet as of the end of the franchisor's last fiscal year, unless such last fiscal year ended within 90 days of the date of the application, in which case there shall be filed an audited balance sheet as of the end of the franchisor's next preceding fiscal year.

(3) The profit and loss statement shall be audited up to the date of the last audited balance sheet filed, if any, unless this requirement is waived or modified by the administrator.

(4) The auditor's opinion shall be filed with the statement when an audited financial statement filing is required.

History

History: 1979 AC.

Mich. Admin. Code R 445.503 Waiver of audit; conditions and restrictions {#sec-r-445.503 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.503}

Rule 503. (1) The administrator may, in his discretion, waive the requirement of audited statements:

(a) For small franchisors when a certified financial statement is not required for protection of the public, and the franchisor agrees to furnish a certified audit within a reasonable time.

(b) In extraordinary cases, if the statements have been prepared by an independent certified public accountant, and the administrator is otherwise satisfied as to the reliability of the statements and as to the ability of the franchisor to perform future commitments.

(2) A waiver shall ordinarily be granted only upon a showing that the franchisor has not had prior audited statements; that the close of the most recent or current fiscal year is so near the time of filing of the application that it would be unreasonably costly or impractical to provide audited statements with the application; and that audited statements shall be furnished within a reasonable time after the end of the most recent or current fiscal year.

In those cases, the administrator may impose an impound condition and other conditions and restrictions, as in his discretion, he deems appropriate.

(3) The use of an unaudited financial statement as provided herein does not relieve the applicant or any person from liability for false and misleading statements contained in a financial statement.

(4) In all instances in which the requirement for audited financial statements has been waived for a specified period of time, a franchisee who purchases a franchise during that period shall be entitled to damages or rescission under the same terms as provided under section 31 of the act if, upon availability of audited financial statements or any other valid basis, it is revealed that material adverse financial conditions existed at the time of the purchase which were not disclosed, and the prospectus shall so state.

History

History: 1979 AC.

Mich. Admin. Code R 445.504 Exempt franchisor {#sec-r-445.504 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.504}

Rule 504. A financial statement of a franchisor exempt from registration under section 6(2)(a), (b), or (j) of the act shall be certified and audited by an independent certified public accountant, unless that requirement is waived by the administrator as not in the public interest or for the protection of investors.

History

History: 1979 AC.

Mich. Admin. Code R 445.505 Disclosure {#sec-r-445.505 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.505}

Rule 505. (1) Whenever an unaudited financial statement is utilized pursuant to this rule, it shall be accompanied by the following written disclosure or a substantially equivalent statement, immediately adjacent thereto, in 10-point type:

"This financial statement is prepared without an audit. Investors in or sellers of franchises should be advised that a certified public accountant has not audited these figures or expressed his opinion with regard to their contents or form."

(2) If an unaudited financial statement is referred to orally, it shall be accompanied by an oral statement containing a caveat approximating the language in subrule (1).

History

History: 1979 AC.

Mich. Admin. Code R 445.506 Delays; updated statement or information {#sec-r-445.506 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.506}

Rule 506. (1) If amendments or other delays cause a financial statement to become more than 4 months old as of the effective date of the registration statement:

(a) An updated financial statement, as of a date within 4 months of the effective date, shall be filed if the franchisor fails to have an established record of earnings or is currently showing losses or a weak financial condition.

(b) A paragraph containing later information as to sales, net income, and financial condition may be added in lieu of updating the financial statement, in the discretion of the administrator, when the franchisor has an established record of earnings and is in sound financial condition.

(2) A financial statement shall be not more than 6 months old as of the effective date of the registration statement.

(3) If a delay carries the effective date beyond the end of the franchisor's fiscal year, and by applying due diligence the registrant and accountant may complete the audit prior to the effective date, a certified statement shall be filed as of the end of the fiscal year.

History

History: 1979 AC.

Mich. Admin. Code R 445.507 Certified public accountant's opinion {#sec-r-445.507 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.507}

Rule 507. The certified public accountant's opinion shall comply with the following requirements:

(a) The opinion filed with the administrator shall be dated and manually signed, and shall identify the financial statement covered by the opinion.

(b) The opinion shall state whether the audit was made in accordance with generally accepted auditing standards, and shall disclose auditing procedures generally recognized as normal or deemed necessary under the circumstances of the particular case which have been omitted, and the reasons for the omission.

(i) The opinion of the accountant with respect to the financial statement covered by the report and the accounting principles and practices reflected therein.

(ii) The opinion of the accountant as to any changes in accounting principles or practices which have a material effect on the financial statement.

(d) The opinion shall state, specifically and clearly, matters to which the accountant takes exception, and, to the extent practicable, the effect of each exception on the related financial statement, given either in the auditor's opinion or in a footnote to the financial statement.

History

History: 1979 AC.

Mich. Admin. Code R 445.508 Certified public accountant's statement {#sec-r-445.508 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.508}

Rule 508. A financial statement filed with the administrator shall include a manually signed and dated statement of the certified public accounting firm approving the use of its name and its opinion in the prospectus and registration statement.

History

History: 1979 AC.

Mich. Admin. Code R 445.509 Change in accountants {#sec-r-445.509 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.509}

Rule 509. If the independent certified public accountant who has been engaged as the principal accountant to audit the franchisor's financial statements was not the principal accountant for the franchisor's most recently filed certified financial statements:

(a) The franchisor shall furnish the administrator with a statement of the date when the current independent accountant was engaged and whether, in the 18 months preceding the engagement, there were any disagreements with the former principal accountant on a matter of accounting principals or practices financial statement disclosure, or auditing procedure, which, if not resolved to the satisfaction of the former accountant, would have caused that accountant to make reference in connection with its opinion to the subject matter of the disagreement.

(b) The franchisor shall request the former accountant to furnish the franchisor with a letter stating whether it agrees with statements contained in the letter of the franchisor and, if not, stating the respects in which it does not agree.

History

History: 1979 AC.

Mich. Admin. Code R 445.510 Disclosure of accountant's interest {#sec-r-445.510 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.510}

Rule 510. When a report pursuant to this act or these rules is prepared by an independent public accountantor certified public accountant who holds, or intends to acquire, a position or interest in the applicant or registrant covered by the report, full disclosure thereof shall be made to the administrator and, where appropriate, full disclosure shall be made in the prospectus.

History

History: 1979 AC.

Mich. Admin. Code R 445.511 Consolidated and separate statements {#sec-r-445.511 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.511}

Rule 511. (1) When a franchisor owns, directly or beneficially, a controlling financial interest in another corporation, the financial statement required to be filed shall reflect, on a consolidated basis, the financial condition of the franchisor and each of its subsidiaries.

(2) A separate financial statement shall be required for each franchisor or subfranchisor filing for registration or exemption in this state.

(3) A company controlling 80% or more of a franchisor shall be required to file its financial statement for review by the administrator, and the financial statement shall not be included as part of the prospectus except as provided by R 445.512.

(4) A consolidated and separate financial statement shall be prepared in accordance with generally accepted accounting principles.

History

History: 1979 AC.

Mich. Admin. Code R 445.512 Statement of controlling company {#sec-r-445.512 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.512}

Rule 512. A complete financial statement of a company controlling the franchisor shall be required when the controlling company guarantees to assume the duties and obligations of the franchisor under the franchise agreement. If the franchisor wishes to file a controlling company financial statement, the controlling company shall guarantee the obligations of the franchisor or post an acceptable surety bond at the discretion of the franchisor. Such surety bond must be purchased from a surety company authorized to transact business in the state of Michigan and in an amount required by the administrator as protection of the public requires. The amount may be amended by the administrator on the basis of the amount of fees and the number of franchises sold. If the surety bond is terminated or canceled while the franchisor is still under an obligation to provide real estate, improvements, equipment, inventory, training or other items, another surety bond acceptable to the administrator must be purchased or a guarantee acceptable to the administrator of the franchisor's obligations must be given before additional sales can be made.

History

History: 1979 AC.

Mich. Admin. Code R 445.513 Books and records {#sec-r-445.513 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.513}

Rule 513. (1) The franchisor, unless exempt pursuant to section 6(2)(e) or (k) of the act, shall make and keep current the following books and records relating to the purchase or sale of franchises:

(a) Records of original entry containing an itemized daily record of purchases and sales of franchises, receipts of cash, other debits and credits.

(b) Copies of contracts of purchase or sale.

(c) Records of payments made to persons, directly or indirectly, in connection with the offer, sale, or purchase of a franchise, itemizing the persons to whom payments were made, the date and amount of each payment, the reason for the payment, and the transaction from which payment arose.

(d) Individual registration records for each franchisee, with name and address, aggregate amount to be paid, and terms of the payments.

(2) A franchisor shall preserve these records for not less than 6 years.

History

History: 1979 AC.

Mich. Admin. Code R 445.514 Special financial reports {#sec-r-445.514 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.514}

Rule 514. The administrator may at any time require the filing of a special financial report by a franchisor currently registered under section 6(1) of the act or exempt under section 6(2)(a) or (b) of the act if it finds that the filing is in the public interest.

PART 6. FRANCHISE AGENTS

History

History: 1979 AC.

Mich. Admin. Code R 445.601 Registration required; limitation on representation; agent as natural person {#sec-r-445.601 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.601}

Rule 601. (1) A franchise agent may not participate in the offer or sale of a franchise currently registered or exempted under section 6(1) or 6(2)(a) or (b) of the act, unless the franchise agent is registered with the administrator on the appropriate forms filed by the franchisor or a franchise agent. A franchise agent, except an agent working exclusively for another franchise agent pursuant to part 7, may not represent more than 1 franchisor, unless the administrator specifically authorized by order the multiple employment on terms and conditions as are appropriate to the public interest.

(2) A franchise agent may only be a natural person.

History

History: 1979 AC.

Mich. Admin. Code R 445.602 Application for registration; examination; registration order {#sec-r-445.602 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.602}

Rule 602. (1) An application for franchise agent registration shall be on the form and contain the information specified by the administrator. In the alternative, a uniform form, with any necessary supplement satisfactory to the administrator, may be submitted.

(2) An application for franchise agent registration shall be accompanied by a completed fingerprint record on a form prescribed by the administrator, unless this requirement is waived by the administrator.

(3) An applicant for registration as a franchise agent may be required to pass a written examination, testing his knowledge of the franchise investment law and other appropriate laws or rules. This examination and the minimum passing grade may be varied for any class of applicants.

(4) A registration order shall be issued to the franchisor or franchise agent registered pursuant to part 7. Upon termination of employment for any cause, the order shall promptly be returned to the administrator for cancellation.

History

History: 1979 AC.

Mich. Admin. Code R 445.603 Failure to complete, or withdrawal of, application {#sec-r-445.603 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.603}

Rule 603. If an applicant for agent registration fails to complete, or withdraw, an application within 3 months of the date of filing, the administrator may deny the application. The administrator may deny a request to withdraw an application.

History

History: 1979 AC.

Mich. Admin. Code R 445.604 Agent registration or application; denial, suspension, or revocation {#sec-r-445.604 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.604}

Rule 604. The administrator may, by order, deny, suspend, or revoke an agent registration or application if it finds that the applicant or franchise agent has engaged in conduct set forth in R 445.704.

History

History: 1979 AC.

Mich. Admin. Code R 445.605 Effective date of registration; expiration; renewal {#sec-r-445.605 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.605}

Rule 605. (1) A franchise agent's registration may become effective on any date during the year.

(2) A franchise agent's registration expires on the date of the expiration of the registration or exemption of the franchisor, or on the date of the expiration of the franchise agent registration pursuant to part 7, whichever is applicable.

(3) An agent's registration may be renewed if the franchisor or subfranchisor provides to the administrator, on the form prescribed by the administrator, a list of all franchise agents, including therewith current home and business addresses and telephone numbers, or may be renewed by a franchise agent as provided in R 445.705.

History

History: 1979 AC.

Mich. Admin. Code R 445.606 Sales on behalf of multiple franchisors {#sec-r-445.606 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.606}

Rule 606. In the event that a company controls more than 1 franchisor, franchise agents of these companies may offer franchises on behalf of each franchisor if the agent files an application for franchise agent registration to act on behalf of each franchisor.

History

History: 1979 AC.

Mich. Admin. Code R 445.607 Concurrent registration {#sec-r-445.607 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.607}

Rule 607. A franchise agent may not be concurrently registered with a franchisor or subfranchisor and a franchise agent pursuant to part 7 except as provided herein.

History

History: 1979 AC.

Mich. Admin. Code R 445.608 Franchise compliance officer {#sec-r-445.608 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.608}

Rule 608. (1) A franchisor, subfranchisor, or franchise agent employing franchise agents shall designate a franchise compliance officer, whose responsibility it shall be to:

(a) Determine that the activities of its franchise agents are in compliance with the statutes and rules of the state.

(b) Prepare and forward to the administrator a compliance manual which shall thereafter be distributed to each franchise agent.

(2) The compliance manual shall consist of a copy of the act, rules, and instructions necessary to relate the statutes and rules to the franchise being offered and the procedures of the offering.

(3) Should an agent be terminated by a franchisor, or voluntarily terminate his employment due to actions involving a violation of the franchise investment law or rules thereunder, the franchise compliance officer shall promptly report the termination and the cause therefor on the form prescribed by the administrator.

PART 7. FRANCHISE AGENTS

History

History: 1979 AC.

Mich. Admin. Code R 445.701 Registration order as condition to commencing activities; expiration of registration; effective date of renewal registration {#sec-r-445.701 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.701}

Rule 701. A franchise agent pursuant to this part shall receive a registration order from the administrator prior to commencing those activities which constitute that person to be a franchise agent. Registrations expire on March 31, following effectiveness, unless otherwise ordered by the administrator. A renewal registration is effective on the date prescribed by the administrator by order.

History

History: 1979 AC.

Mich. Admin. Code R 445.702 Initial or renewal registration; filing and contents of application {#sec-r-445.702 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.702}

Rule 702. (1) A franchise agent may obtain an initial or renewal registration by filing with the administrator an application, together with a consent to service of process on the form prescribed by the administrator. This application shall contain the information the administrator requires relating to the following:

(a) The qualifications and business history of the applicant and its partners, officers, directors, or other persons occupying similar status or performing similar functions or a person, directly or indirectly, controlling the franchise agent.

(b) The applicant's financial condition.

(d) Past misconduct on the part of the applicant or its partners, officers, or directors.

(e) Other information necessary for the protection of the public.

(2) An application for franchise agent registration shall be accompanied by a complete fingerprint record of the partners, officers, and directors of the franchise agent who shall be engaged in offers or sales of franchises in this state, the principal officer of the franchise agent, and the compliance officer on a form prescribed by the administrator, unless this requirement is waived or modified by the administrator.

History

History: 1979 AC.

Mich. Admin. Code R 445.703 Failure to complete, or withdrawal of, application {#sec-r-445.703 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.703}

Rule 703. If an applicant for franchise agent registration fails to complete, or withdraws, an application within 3 months of the date of filing, the administrator may deny the application. The administrator may deny a request to withdraw an application.

History

History: 1979 AC.

Mich. Admin. Code R 445.704 Denial, suspension, or revocation of registration {#sec-r-445.704 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.704}

Rule 704. The administrator may, by order, deny, suspend, or revoke a registration of a franchise agent if the administrator finds that the order is in the public interest and the applicant or registrant or a person directly or indirectly controlling the applicant or registrant:

(a) Has filed an application for registration which, as of its effective date or as of any date after filing in the case of an order denying effectiveness, was incomplete in a material respect or contained a statement which was, in light of the circumstances under which it was made, false or misleading with respect to a material fact.

(b) Has violated or failed to comply with the act, or a rule or an order under the act.

(d) Is the subject of a final administrative order of a state or federal agency relating to, or is permanently or temporarily enjoined by a court of competent jurisdiction from engaging in or continuing any conduct or practice involving any aspect of, the securities, franchise, real estate, or insurance business.

(e) Is the subject of an order of the administrator denying, suspending, or revoking registration as a broker-dealer, agent, investment advisor, or franchise agent under part 6 or 7 of these rules or other similar registration.

(f) Is the subject of an order entered by the securities or franchise administrator of another state, or by the securities and exchange commission, denying or revoking registration as a broker-dealer, agent, or investment advisor, or the substantial equivalent of these terms, or is the subject of an order of the securities and exchange commission suspending or expelling that person from a national securities exchange or national securities association registered under the securities exchange act of 1934, or is the subject of a United States post office fraud order.

(g) Has engaged in dishonest or unethical business practices, including, but not limited to, the following practices:

(i) Recommending to a franchisee the purchase, sale, or exchange of a franchise without reasonable grounds to believe that the recommendation is suitable for the person.

(ii) Acting as agent for both buyer and seller without fully disclosing the relationship to both parties.

(iii) Charging the franchisee or franchisor more than a reasonable commission in connection with the sale.

(iv) Personally borrowing money from a present or prospective franchisee.

(v) Effecting transactions not reported to the franchisor.

(vi) Operating an account under a name not registered with the administrator.

(vii) Representing to a franchisee that, as a condition of realizing significant earnings from the franchise, the franchisee may have to recruit others who may likewise invest in a franchise or distributorship, or require that the franchisee shall so recruit.

(h) Is insolvent, either because liabilities exceed assets or because obligations cannot be met as they mature.

(i) Is not qualified on the basis of factors such as training, experience, or knowledge of the franchise business.

(j) Has failed to supervise franchise agents in its employment as defined in part 6 to insure that sales are made only to persons for whom the franchise is a suitable investment.

(k) Has failed to pay the proper filing fee. The administrator may enter only a denial order under this subdivision, and it shall vacate the order when the deficiency has been corrected.

History

History: 1979 AC.

Mich. Admin. Code R 445.705 Renewal of registration {#sec-r-445.705 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.705}

Rule 705. A franchise agent pursuant to this part may apply for renewal of its registration by filing with the administrator a complete list of franchise agents pursuant to part 6 employed, including therewith current home and business addresses and telephone numbers, a report of activities in the form designated by the administrator, and a statement of financial condition prepared in accordance with generally accepted accounting principles.

History

History: 1979 AC.

Mich. Admin. Code R 445.706 Records {#sec-r-445.706 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.706}

Rule 706. Every franchise agent pursuant to this part shall make and keep current the following books and records relating to his business:

(a) Records of original entry detailing the sale of the franchise, to whom sold, the aggregate price, the initial payment, the installment payments, if any, and the commission paid to the franchise agent or its employees.

(b) An individual registration record for each franchisee, including name, home and business address, telephone numbers, occupation, aggregate amount paid, terms of payment, and the name of its selling franchise agent employee.

(c) A copy of advertising used by the agent in the offer of franchises, including, but not limited to, radio, newspapers, TV, letters and brochures.

(d) The records, books, and memoranda that relate to a franchise sale, and the records required to be kept under the act and rules, for a period of not less than 6 years after the sale.

History

History: 1979 AC.

Mich. Admin. Code R 445.707 Special financial reports {#sec-r-445.707 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.707}

Rule 707. The administrator may, at any time, require the filing of a special financial report by a franchise agent if it finds that the filing is in the public interest.

History

History: 1979 AC.

Mich. Admin. Code R 445.708 Surety bond {#sec-r-445.708 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.708}

Rule 708. (1) A franchise agent whose net worth, derived by the use of generally accepted accounting principles, does not exceed $100,000.00 shall file with the administrator a surety bond in the amount of $25,000.00 on a form provided by the administrator, and shall maintain the bond in that amount at all times while registered as a franchise agent.

(2) If a franchise agent fails to maintain the minimum net worth of $100,000.00, or fails to file or to maintain its bond, the franchise agent shall immediately cease business and notify the administrator of this failure.

(3) If a suit is brought to enforce liability on the bond, the franchise agent shall promptly notify the administrator thereof. If the bond principal amount is reduced by any recovery against it, the bond shall be immediately restored to $25,000.00.

(4) Prior to the disbursement of funds, a court shall require a claimant to publicize the claim against the franchise agent's bond in a manner reasonably calculated to inform other franchisees of the pendency of the action and to permit intervention and filing of claims.

(5) The bond shall also be for the use and benefit of persons who may have a cause of action in this state by reason of embezzlement, defalcation, or misappropriation of securities or funds by the principal, its agents, and employees.

(6) The administrator may exempt a registered franchise agent from this bond requirement, or may vary its terms, only if justified and appropriate under special circumstances.

History

History: 1979 AC.

Mich. Admin. Code R 445.709 Notification of agent's termination {#sec-r-445.709 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.709}

Rule 709. Within 7 days after an agent for a franchise agent terminates his employment or is terminated, notice of termination shall be filed by the franchise agent on a form prescribed by the administrator, setting forth fully the reasons for termination. If an agent is terminated for cause, including a violation of the act or rules, the notice shall set forth the cause of termination.

History

History: 1979 AC.

Mich. Admin. Code R 445.710 Escrow account {#sec-r-445.710 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.710}

Rule 710. The franchise agent shall not receive funds from franchise sales or other business conducted on behalf of the franchisor or subfranchisor. Payments from the sale of a franchise shall be made only to an escrow account designated by the franchisor or the subfranchisor for deposit.

PART 8. ADVERTISING

History

History: 1979 AC.

Mich. Admin. Code R 445.801 Contents of advertisement {#sec-r-445.801 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.801}

Rule 801. (1) Pursuant to section 24 of the act, advertising, as defined in section 2(1) of the act, to be used to offer a franchise shall be filed in the office of the administrator in duplicate not less than 10 business days prior to the publication.

(2) An advertisement shall not contain a statement or inference that a purchase of a franchise is a safe investment or that failure, loss, or default is impossible or unlikely, or that earnings or profits are assured.

(3) An advertisement, other than the offering prospectus used pursuant to section 6(1) or 6(2)(a) or (b) of the act, shall not contain a projection of future franchisee earnings, unless the projection is:

(a) Based on a past earning record, over a reasonable period of time, of all franchisees operating under conditions, including location, substantially similar to conditions affecting the franchise being offered, including terminations, cancellations, reacquisitions, nonrenewals, and other operational failures, together with existing operational franchise data.

(b) For a reasonable period only.

(d) Accompanied by a chart showing the estimated break-even point of the franchise operation.

(e) Accompanied by appropriate caveats relating to the projection.

(f) Based upon reasonable assumptions clearly set out immediately adjacent to the projection.

(4) An advertisement shall contain the name and address of the person responsible for sponsoring or placing the advertisement, and shall identify the franchisor.

(5) If the advertisement contains an indorsement or recommendation of the franchise by a public figure, whether express or implied, the advertisement shall state that the celebrity has received, or shall receive, consideration to indorse this franchise, unless the name of the celebrity appears in the title of the franchise and the title is prominently disclosed.

(6) An advertisement of a franchise offered pursuant to exemptions under section 6(2)(c), (d), (e), (f), (g), (h), (j), or (k) of the act shall disclose fairly and accurately the relevant facts concerning the liabilities created thereunder as are necessary to make the advertisement not misleading in light of the advertising and other material to be furnished by the franchisor to the franchisee prior to the sale of the franchise.

(7) An advertisement which refers to a registered franchise under section 6(1), or to an exempted franchise under section 6(2)(a) or (b) of the act, shall contain, in letters of not less than 8-point type, the following legend:

"PURSUANT TO THE MICHIGAN FRANCHISE INVESTMENT LAW, SALES

MAY NOT BE MADE UNLESS A PROSPECTUS HAS BEEN DELIVERED 1 WEEK

PRIOR TO ENTERING INTO A FRANCHISE AGREEMENT OR PAYING

CONSIDERATION."

(8) The franchisor shall disclose in any advertising placed in the communications media the required total initial and deferred franchise fee, or range of fees.

History

History: 1979 AC.

Mich. Admin. Code R 445.802 Exempt communications; contents {#sec-r-445.802 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.802}

Rule 802. (1) A notice, circular, or other communication which is published or transmitted only after a registration or exemption pursuant to section 6(2)(a) or (b) of the act need not be filed with the administrator if the franchise is effective and the notice, circular, or communication contains only the statements required or permitted to be included therein by the following provisions of this rule.

(2) A communication shall include, subject to the requirements of these rules, the following items of information which need not follow the numerical sequence of this subrule:

(a) The name of the franchisor.

(b) An identification of the type of business to be conducted by the franchisee.

(c) The total initial and deferred franchise fee required to be made on a franchise purchase or, if the amount of the fee varies, the method of its determination or the probable price range.

(d) The name and address of the sender of the communication.

(e) The logotype or symbol of the franchisor, if desired by the franchisor.

(f) A statement, in letters of not less than 8-point type, that:

"PURSUANT TO THE MICHIGAN FRANCHISE INVESTMENT LAW, SALES

MAY NOT BE MADE UNLESS A PROSPECTUS HAS BEEN DELIVERED 1 WEEK

PRIOR TO ENTERING INTO A FRANCHISE AGREEMENT OR PAYING

CONSIDERATION."

(g) The correct legal name and address of the individual or organization from whom an offering prospectus may be obtained.

(3) A franchisor making an offer in reliance upon the exemptions of section 6(2)(e) or (f) of the act need not file advertising with the administrator unless this exemption is revoked by order of the administrator.

History

History: 1979 AC.

Mich. Admin. Code R 445.803 False, fraudulent, misleading, and deceptive advertising {#sec-r-445.803 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.803}

Rule 803. (1) The following practices shall constitute, without limitation, false, fraudulent, misleading, and deceptive advertising in connection with the offer or sale of a franchise:

(a) Failure to disclose in any communications media advertising the required total initial and deferred franchise fee for the franchise, or misrepresent, in any way, the fee.

(b) Misrepresentation of the training or management assistance available to the franchisee. The failure to disclose that little or none is provided, unless this requirement is waived by the administrator, constitutes a misrepresentation.

(c) Misrepresentation or causing confusion or misunderstanding regarding the source, sponsorship, approval, or certification of franchised goods or services.

(d) Dissemination of an advertisement in a language other than English without including therein the required disclosures or limitations on the offer advertised in the language principally used in the advertisement.

(e) Obtaining leads to prospective franchisees by placing classified advertisements designated or captioned "men wanted to train for . . . ," "help wanted," "employment,"

"business opportunities," or by words or terms of similar import, so as to represent directly or by implication that employment is being offered when, in fact, it is not.

(f) Designation or reference to sale representatives as "registrars," "counselors,"

"advisors," or words of similar import that misrepresent, in any manner, the titles, qualifications, training, experience, or status of salesmen, agents, employees, or other representatives.

(g) Representation in an advertisement that a person receive goods or services "free,"

"without charge," or any other term of similar import when the product or service is not, in fact, free.

(2) An advertisement of a guarantee or warranty relating to the sale of franchised goods and services to the franchisee, or relating to the repurchase of the goods, shall clearly and conspicuously disclose the following:

(a) The nature and extent of the guarantee, including disclosure of the following:

(i) The product or service being guaranteed.

(ii) The characteristics or properties of the designated product or service covered by or excluded from the guarantee.

(iii) The conditions one claiming under the guarantee shall meet before the guarantor will fulfill its obligation under the guarantee.

(b) The manner in which the guarantor will perform.

(3) A franchisor shall not advertise or represent that a product is guaranteed, or that it shall repurchase the product for a specified price, when it cannot promptly fulfill its obligations under the guarantee.

(4) Deceptive price advertising in connection with the offer or sale of a franchise includes, among other practices, the following:

(a) Falsely representing, in any manner, that goods or services are offered for sale at a reduction.

(b) Representing that prices being charged are a reduction by "comparing" prices of goods of like kind and quality, where the comparison being made is not with other goods of essentially similar quality, obtainable in the area, and at an established price.

(c) Advertising a special price or limited offer to persons when, in fact, the offer is not limited and is being made to many persons on a mass advertising or marketing basis, or when the price is the same as that charged to those occupying a status similar to that of a franchisee.

History

History: 1979 AC.

Mich. Admin. Code R 445.804 Modification and republication of advertisement {#sec-r-445.804 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.804}

Rule 804. The administrator may, by order, require modification of an advertisement deemed false, fraudulent, misleading, or deceptive, and may require, prior to publication of a subsequent advertisement, publication of an advertisement in all media previously used by the franchisor, retracting the prior advertisement. A retraction, in language approved by the administrator, shall be in an advertisement at least as large as that originally used, and shall be as prominently displayed in the media as previously advertised.

PART 9. DECEPTIVE OR FRAUDULENT PRACTICES

History

History: 1979 AC.

Mich. Admin. Code R 445.901 Enumeration of deceptive or fraudulent practices {#sec-r-445.901 omnilex-key=us-mi-regs-official--dept-attorney-general--R 445.901}

Rule 901. Deceptive or fraudulent practices committed, directly or indirectly, in connection with the offer, sale, or purchase of a franchise include, but are not limited to, the following practices:

(a) Misrepresentation of, or failure to disclose, the required total initial and deferred franchise fee for the franchise.

(b) Misrepresentation of the training and management assistance available to the franchisee, or failure to disclose that little or none is available.

(c) Misrepresentation or failure to disclose that the franchisor does not have significant experience in the sale of the franchised product or service in this state.

(d) Failure to disclose that the franchisor does not have material information about the existence of a market for the product or service, if such is the case, or misrepresentation of that information.

(e) Misrepresentation of, or failure to disclose, the franchisor's efforts to sell or establish more franchises than it is reasonable to expect the market or market area for the particular franchise to sustain.

(f) Misrepresentation of the quantity or quality of the products or services to be sold or distributed through the franchise.

(g) Misrepresentation, or causing confusion or misunderstanding, regarding the source, sponsorship, approval, or certification of franchised goods or services.

(h) Representation that goods are new if they are deteriorated, altered, reconditioned, used, or secondhand, or failure to disclose such a condition.

(i) Misrepresentation of the number of franchisees the franchisor shall appoint or designate to operate within a given territory or shall locate within a given territory, or representation that a franchisee shall be or is the only franchisee appointed or located within a specified franchise territory when, in fact, the franchisee is not.

(j) Misrepresentation by failure to disclose, or otherwise, the termination, cancellation, reacquisition, transfer, or renewal provisions of a franchise agreement.

(k) Falsely claiming or inferring that a primary marketer, other than franchisor of trademark products or services, sponsors or participates directly or indirectly, in the franchise operation, or that the offeror has an affiliation, or connection with, or is attributed some special status by, the marketer.

(l) Representation that locations for the franchised business, facilities, machines, or other devices are secured, or shall be secured, by the franchisor when, in fact, they are not or shall not be.

(m) Representation that machines, equipment, products, or displays of a brand or kind are of a specific ability or nature when, in fact, they are not.

(n) Misrepresentation or failure to disclose that a person is being offered a franchise in a business, trade, or profession which requires a registration or license to conduct.

(o) Representation, in any manner, that goods or services are offered for sale at a reduced price when they are not.

(p) Representation of a reduction of prices charged by "comparing" prices of goods of like kind and quality, where the comparison being made is not with other goods of essentially similar quality and obtainable in the area.

(q) Representing a special price or limited offer to persons when, in fact, the offer is not limited and is being made to many persons on a mass advertising or marketing basis, or the price is the same as that charged to those occupying a status similar to that of the franchisee.

History

History: 1979 AC.