Text of July 31, 1990 Advisory Interpretation

Re: X Corporation ("X") - Applicability of Sections 36-504(6)(C) [now Section 36b-61(6)(C)] and 36-504(6)(D) [now Section 36b-61(6)(D)] of Chapter 662a [presently Chapter 672c] of the Connecticut General Statutes, the Connecticut Business Opportunity Investment Act (the "Act")
Editorial Note: Statutory section numbers in the ensuing text have been updated to May 2000.

Dear Mr. _______:

This department is in receipt of your letter dated April 20, 1990 to Daniel F. Scudder, Senior Administrative Attorney previously with this department, concerning the above captioned matter. The department is also in receipt of your letter dated June 20, 1990 and accompanied by X's training materials (the "Training Materials"). The information contained in your correspondence is incorporated by reference herein.

Your letter raises the issue of whether Sections 36b-61(6)(C) and 36b-61(6)(D) of the Act are applicable to the opportunities being offered by X. Section 36b-61(6) of the Act defines the term "business opportunity" to mean:

[T]he sale or lease, or offer for sale or lease of any products, equipment, supplies or services which are sold or offered for sale to the purchaser-investor for the purpose of enabling the purchaser-investor to start a business, and in which the seller represents … © that the seller guarantees, either conditionally or unconditionally, that the purchaser-investor will derive income from the business opportunity … or (D) that the seller will provide a sales program or marketing program to the purchaser-investor ….

In your correspondence you stated that, "it is clear that you have a relatively sound understanding as to what the marketing literature of X states. The problem is, however, that your understanding as to the extent of services provided by X is not completely accurate." At the department's request, the Training Materials were submitted for review to clarify the department's understanding of the services provided by X.

Again, your correspondence raises the issue of whether X's representations that it will provide advertising materials to purchaser-investors and that it will train purchasers on how to attract clients constitute representations that X will provide a "sales program" or "marketing program" within the meaning of Section 36b-61(6)(D) of the Act. Neither the legislative history of Section 36b-61 of the Act nor relevant case law provide a clear definition or construction of the terms "sales program" or "marketing program." The department takes the position that the terms "sales program" or "marketing program" means [sic] advice or training pertaining to the sale of any products, equipment, supplies or services which advice or training is provided to the purchaser-investor by the seller or a person recommended by the seller, and which includes but is not limited to, preparing and providing (1) promotional literature, brochures, pamphlets or advertising materials; (2) training regarding the promotion, operation or management of the business opportunity, or (3) operational, managerial, technical or financial guidelines or assistance.

In its Purchase Agreement and order, X states that "X will also provide Trainee with suggested advertising materials, which Trainee may revise as needed." In your correspondence, you represent that these advertising materials are merely examples and not standard forms to be used by purchasers of the opportunity. It appears to be X's position that examples of advertising materials would not come within the meaning of a "sales program" or "marketing program." Based upon the department's application of those terms, it appears that any advertising materials that are prepared and provided by the seller, such as those X's trainer provides, would come within those terms as defined above.

Furthermore, on page 6-2 of the Training Materials, under the heading "Approaching Prospective Clients and Who Are They?", X indicates that it will demonstrate how to approach and make a presentation to prospective clients. Such activity would appear to be included within the term "sales program" or "marketing program." While we continue to debate whether Section 36b-61(6)(C) of the Act applies to X's activities, based upon the foregoing, it is still the opinion of this department that Section 36b-61(6)(D) of the Act clearly applies and that registration of the business opportunity is necessary.

Should you have any further questions concerning this matter, please do not hesitate to contact the undersigned.

Howard B. Brown
Banking Commissioner

By Doniel Kitt
Administrative Attorney

July 31, 1990

Business Opportunity Registration