South Dakota sets example for regulation streamlining.

In March, South Dakota Gov. Michael Rounds (R) signed into law Senate Bill 52, legislation endorsed by the International Franchise Association that brings state and federal franchise regulation into conformity in the best regulatory scheme in the nation. With respect to the state business opportunity law, the legislation also tracks the exemption for franchisors with federal regulation.

This bill passed the legislature with the guiding hand of the state Securities Division by unanimous votes entirely. There was debate, but state lawmakers understood the importance of this bold step in franchise regulation and the standard they hoped to set.

Among the key provisions of the new law, the notice filing requirement was streamlined and coordinated with the updated Federal Trade Commission's Franchise Rule. Other areas of coordinated regulation include rule exemptions, electronic disclosure and definitions. Under the new law, if the franchisor has a "going concern" limitation based on its financial condition, it must notify the division at the time of notice filing, which may trigger an escrow requirement. But other than such situations, or if there are violations of other sections of the law, all filings with the administrator are effective upon receipt.

Other provisions of the legislation include:

* New statute of limitations. Rescission is limited to one year on technical violations like failure to notice file. Damage claims can be brought within two years from the discovery or five years whichever occurs first;

* Arbitration agreements are clearly enforceable so long as they do not waive a statutory requirement;

* No filing of amendments; and

* Negotiated changes are allowed with no additional filing.

[ILLUSTRATION OMITTED]

Time will tell whether other states follow the lead of South Dakota. However, among the varied state regulatory structures around the country, the Mount Rushmore State/ certainly stands out for now as offering an excellent climate for franchising.

For more information on franchising in South Dakota

South Dakota Department of Revenue and Regulation

Securities Division Director Mr. Gall Sheppick

Anderson Building, 445 East Capitol Avenue

Pierre, South Dakota 57501-3185

Tel: 605-773-4823

Fax: 605-773-5953

E-mail: gail.sheppick@state.sd.us

Troy Flanagan is director of government relations for the International Franchise Association. He can be reached at 202-662-0792 or tflanagan@franchise.org.