§ 437.4. Earnings claims.
459 words·~2 min read·
/us/cfr/t16/s§ 437.4·A research copy — for the controlling text, always check the official state or federal source. Not legal advice.
In connection with the offer for sale, sale, or promotion of a business opportunity, it is a violation of this Rule and an unfair or deceptive act or practice in violation of Section 5 of the FTC Act, for the seller to:
(a)Make any earnings claim to a prospective purchaser, unless the seller:
(1)Has a reasonable basis for its claim at the time the claim is made;
(2)Has in its possession written materials that substantiate its claim at the time the claim is made;
(3)Makes the written substantiation available upon request to the prospective purchaser and to the Commission; and
(4)Furnishes to the prospective purchaser an earnings claim statement. The earnings claim statement shall be a single written document and shall state the following information:
(i)The title "EARNINGS CLAIM STATEMENT REQUIRED BY LAW" in capital, bold type letters;
(ii)The name of the person making the earnings claim and the date of the earnings claim;
(iii)The earnings claim;
(iv)The beginning and ending dates when the represented earnings were achieved;
(v)The number and percentage of all persons who purchased the business opportunity prior to the ending date in paragraph (a)(4)(iv) of this section who achieved at least the stated level of earnings;
(vi)Any characteristics of the purchasers who achieved at least the represented level of earnings, such as their location, that may differ materially from the characteristics of the prospective purchasers being offered the business opportunity; and
(vii)A statement that written substantiation for the earnings claim will be made available to the prospective purchaser upon request.
(b)Make any earnings claim in the general media, unless the seller:
(1)Has a reasonable basis for its claim at the time the claim is made;
(2)Has in its possession written material that substantiates its claim at the time the claim is made;
(3)States in immediate conjunction with the claim:
(i)The beginning and ending dates when the represented earnings were achieved; and
(ii)The number and percentage of all persons who purchased the business opportunity prior to the ending date in paragraph (b)(3)(i) of this section who achieved at least the stated level of earnings.
(c)Disseminate industry financial, earnings, or performance information unless the seller has written substantiation demonstrating that the information reflects, or does not exceed, the typical or ordinary financial, earnings, or performance experience of purchasers of the business opportunity being offered for sale.
(d)Fail to notify any prospective purchaser in writing of any material changes affecting the relevance or reliability of the information contained in an earnings claim statement before the prospective purchaser signs any contract or makes a payment or provides other consideration to the seller, directly or indirectly, through a third party.
Connections2 cite this
Cited by 2 sections
Citation graph
cites case law
§ 437.4
Earnings claims.
Fed. Reg.×2
Cites 0Cited by 2 across 1 source