Request By:
Barbara J. Bryant
Assistant Attorney General
Consumer Protection Division
209 St. Clair Street
Frankfort, Kentucky 40601
Opinion
Opinion By: Steven L. Beshear, Attorney General; Carl T. Miller, Jr., Assistant Attorney General
You have requested an official opinion on the following statement of facts:
"On January 20, 1982, the Department of Banking and Securities, Division of Securities, and the Office of the Attorney General entered into an agreement whereby the Office of the Attorney General, Division of Consumer Protection agreed to review materials submitted by firms and individuals who wish to offer a business opportunity within the Commonwealth in order to determine whether that firm or individual is subject to the registration procedures of KRS 367.801 et seq. In order for the Division of Consumer Protection to make this determination, it is necessary that the firm or individual submit a detailed description of the opportunity they wish to offer. This description usually contains ideas and operating techniques that have been devised by these firms or individuals. If after a review of these materials the Division of Consumer Protection determines that registration is necessary, a registration form is sent to the firm or individual. This form, when completed, is filed with the Division of Securities. All materials that have been previously submitted are retained by the Division of Consumer Protection. It should be noted, that the completed application/registration form does not usually contain as detailed an account of the specifics of the opportunity as does the information provided this Office. It should also be noted, that KRS 367.813(1) requires that the information on the application/registration form be furnished prospective consumers.
My question is whether the information provided the Division of Consumer Protection so that it might make a determination as to registration under KRS 367.801 et seq. is subject to the open records provision of KRS 61.870 et seq. Could these documents be distinguished from the disclosure form that is filled out by the company and which contains information that the statute requires must be given to consumers?
As is obvious from the above, offerors are fearful that by sending us a complete detailed description of their operations they are making the programs they have developed available to competitors. In order to make the necessary determinations, it is absolutely essential that we have complete, detailed information."
KRS 61.878 provides a number of exemptions from the requirement of mandatory public inspections. We believe that the exemption which applies to your question is KRS 61.878 (1)(b) which reads as follows:
The following public records are excluded from the application of KRS 61.870 to 61.884 and shall be subject to inspection only upon order of a court of competent jurisdiction:
* * *
(b) Records confidentially disclosed to an agency and compiled and maintained for scientific research, in conjunction with an application for a loan, the regulation of commercial enterprise, including mineral exploration records, unpatented, secret commercially valuable plans, appliances, formulae, or processes, which are used for the making, preparing, compounding, treating, or processing of articles or materials which are trade commodities obtained from a person and which are generally recognized as confidential, or for the grant or review of a license to do business and if openly disclosed would permit an unfair advantage to competitors of the subject enterprise. This exemption shall not, however apply to records the disclosure or publication of which is directed by other statute.
As you have pointed out in the above-quoted portion of your letter KRS 367.813 requires that a potential consumer/ investor must be furnished a copy of the material required to be furnished the Division of Securities when registering pursuant to KRS 367.805. The exemptions in the Open Records Law are inoperative as to records containing the information required under KRS 367.805(1). Any additional information gathered by the Division of Consumer Protection, however, may be exempt from mandatory disclosure if it is covered by one of the exemptions in KRS 61.878. We believe that "ideas and operating techniques that have been devised by these firms or individuals", and which are not required to be disclosed by KRS 367.805, come under the exemptions provided by KRS 61.878(1)(b). We note particularly the provision which exempts information which is confidentially disclosed to an agency "for the grant or review of a license to do business and if openly disclosed would permit an unfair advantage to competitors of the subject enterprise."
A precise delineation of what records and information come under the exception will have to be made on a case-by-case basis, but it is our opinion that KRS 61.878(1)(b) generally applies.