SDLRC - Codified Law 37-25A-15 - Form and content of disclosure statement.

37-25A-15. Form and content of disclosure statement.

The disclosure document shall have a cover sheet entitled, in at least ten-point bold type, "DISCLOSURE REQUIRED BY SOUTH DAKOTA." Under the title shall appear the statement in at least ten-point type that "THE REGISTRATION OF THIS BUSINESS OPPORTUNITY DOES NOT CONSTITUTE APPROVAL, RECOMMENDATION OR ENDORSEMENT BY SOUTH DAKOTA. THE INFORMATION CONTAINED IN THIS DISCLOSURE DOCUMENT HAS NOT BEEN VERIFIED BY THIS STATE. IF YOU HAVE ANY QUESTIONS OR CONCERNS ABOUT THIS INVESTMENT, SEEK PROFESSIONAL ADVICE BEFORE YOU SIGN A CONTRACT OR MAKE ANY PAYMENT. YOU ARE TO BE PROVIDED TEN (10) BUSINESS DAYS TO REVIEW THIS DOCUMENT BEFORE SIGNING ANY CONTRACT OR AGREEMENT OR MAKING ANY PAYMENT TO THE SELLER OR THE SELLER'S REPRESENTATIVE." The seller's name and principal business address, along with the date of the disclosure document shall also be provided on the cover sheet. No other information may appear on the cover sheet. The disclosure document shall contain the following information unless the seller uses a disclosure document as provided in subdivision 37-25A-8 (1):

(1) The names and residential addresses of those salespersons who shall engage in the offer or sale of the business opportunity in this state;

(2) The name of the seller, whether the seller is doing business as an individual, partnership or corporation, the names under which the seller has done, is doing or intends to do business, and the name of any parent or affiliated company that shall engage in business transactions with purchasers or which shall be responsible for statements made by the seller;

(3) The names, addresses and titles of the seller's officers, directors, trustees, general managers, principal executives, agents and any other person charged with responsibility for the seller's business activities relating to the sale of the business opportunity;

(4) Prior business experience of the seller relating to business opportunities including: the name, address and a description of any business opportunity previously offered by the seller; the length of time the seller has offered each such business opportunity; and the length of time the seller has conducted the business opportunity currently being offered to the purchaser;

(5) With respect to a person identified in subdivision (3) of this section, a description of the person's business experience for the ten-year period preceding the filing date of this disclosure document. The description of business experience shall list principal occupations and employers, and a listing of the educational and professional background including, the names of schools attended and degrees received, and any other information that demonstrates sufficient knowledge and experience to perform the services proposed;

(6) Whether the seller or any person identified in subdivision (3) of this section:

(a) Has been convicted of any felony, or pleaded nolo contendere to a felony charge, or has been the subject of any criminal, civil or administrative proceedings alleging the violation of any business opportunity law, securities law, commodities law, franchise law, fraud or deceit, embezzlement, fraudulent conversion, restraint of trade, unfair or deceptive practices, misappropriation of property or comparable allegations;

(b) Has filed bankruptcy, been adjudged bankrupt, been reorganized due to insolvency, or was an owner, principal officer or general partner or any other person that has so filed or was so adjudged or reorganized during or within the last seven years.

(7) The name of any person identified in subdivision (6) of this section, nature of and parties to the action or proceeding, court or other forum, date of institution of the action, docket references to the action, current status of the action or proceeding, terms and conditions or any order of decree, the penalties or damages assessed and terms of settlement;

(8) The initial payment required, or if the exact amount cannot be determined, a detailed estimate of the amount of the initial payment to be made to the seller;

(9) A detailed description of the actual services the seller agrees to perform for the purchaser;

(10) A detailed description of any training the seller agrees to provide for the purchaser;

(11) A detailed description of services the seller agrees to perform in connection with the placement of equipment, products or supplies at a location, as well as any agreement necessary in order to locate or operate equipment, products or supplies on a premises neither owned nor leased by the purchaser or seller;

(12) A detailed description of any license or permit that is necessary in order for the purchaser to engage in or operate the business opportunity;

(13) The business opportunity seller who is required to secure a bond pursuant to § 37-25A-23, shall state in the disclosure document "As required by the State of South Dakota, the seller has secured a bond issued by (insert name and address of surety company), a surety company, authorized to do business in this state. Before signing a contract or agreement to purchase this business opportunity, you should check with the surety company to determine the bond's current status.";

(14) Any representations made by the seller to the purchaser concerning sales or earnings that may be made from this business opportunity, including, but not limited to:

(a) The bases or assumptions for any actual, average, projected or forecasted sales, profits, income or earnings;

(b) The total number of purchasers who, within a period of three years of the date of the disclosure document, purchased a business opportunity involving the product, equipment, supplies or services being offered to the purchaser; and

(c) The total number of purchasers who, within three years of the date of the disclosure statement, purchased a business opportunity involving the product, equipment, supplies or services being offered to the purchaser who, to the seller's knowledge, have actually received earnings in the amount or range specified;

(15) Any seller who makes a guarantee to a purchaser shall give a detailed description of the elements of the guarantee. Such description shall include, but is not limited to, the duration, terms, scope, conditions, and limitations of the guarantee;

(16) A statement of:

(a) The total number of business opportunities that are the same or similar in nature to those that have been sold or organized by the seller;

(b) The names and addresses of purchasers who have requested a refund or rescission from the seller within the last twelve months and the number of those who have received the refund or rescission; and

(17) A statement describing any contractual restrictions, prohibitions, or limitations on the purchaser's conduct. Attach a copy of all business opportunity and other contracts or agreements proposed for use or in use in this state including, without limitation, all lease agreements, option agreements and purchase agreements;

(18) The rights and obligations of the seller and the purchaser regarding termination of the business opportunity contract or agreement;

(19) A statement accurately describing the grounds upon which the purchaser may initiate legal action to terminate the business opportunity contract or agreement;

(20) A copy of the most recent audited financial statement of the seller, prepared within thirteen months of the first offer in this state, together with a statement of any material changes in the financial condition of the seller from that date. The director may allow the seller to submit a limited review in order to satisfy the requirements of this subdivision;

(21) A list of the states in which this business opportunity is registered;

(22) A list of the states in which this disclosure document is on file;

(23) A list of the states which have denied, suspended or revoked the registration of this business opportunity;

(24) A section entitled "Risk Factors" containing a series of short concise statements summarizing the principal factors which make this business opportunity a high risk or one of a speculative nature. Each statement shall include a cross-reference to the page on which further information regarding that risk factor can be found in the disclosure document;

(25) Any additional information as the director may require by rule or order.

Source: SL 1985, ch 305, § 15.