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maximum of $10,000 in any 12-month period.
However, the SEC is in the process of review
ing the JOBS Act and will issue additional
rules and regulations at some point in the
next year (they have until Jan. 1, 2013), at
which point the JOBS Act will go into effect.
While the JOBS Act has sparked excite
ment in the music industry, not everyone is
comfortable with the changes in securities
regulations. Detractors view the exceptions
created by the JOBS Act as an opportunity for
scam artists to prey on unwitting individuals.
Palmer
%
Although as noted above, the JOBS Act does
place some restrictions on how much an indi
vidual can invest in a given year, it is unclear
what sort of oversight there will be on the
process.
Another concern over the JOBS Act is how
exactly artists soliciting investments will
account to their investors. If individuals are
investing in the work of an artist with an
expectation of a return on that investment,
then a fiduciary relationship has been cre
ated and the artist is subject to certain duties
imposed by law, the breach of which could
result in messy lawsuits that could effectively
end a promising career before it even begins.
After all, if Kickstarter entrepreneurs already
have a reputation for hot mailing out the
rewards they promise, then imagine how dif
ficult it will be for them to issue accurate
accountings and dividends to what could be
thousands of investors.
If your band only needs to raise a modest
sum of money, then the Kickstarter donation
model is still available to you, and it has
proven to be lucrative given the right project
and marketing. However, artists who have
business plans that require the funding of
venture capital may soon.have a friend in the
JOBS Act Let's hope they also have a friend in
a good accountant As for music fans seeking
to raise funds, select your investment opportu
nities carefully, or risk losing your investment.
John Seay
JOBS Act
« •
Become Invested in Your
vorite Band’s Career
n this time next year, you could own a
KV share in the success of your favorite
HI artists. On April 5, 2012, President
Obama signed into law the Jumpstart our
Business Startups Act or JOBS Act At
least partially inspired by the popularity of
"crowd-funding" websites like Kickstarter and
Indiegogo, the JOBS Act encourages creative
funding of privately owned small businesses
by significantly easing existing securities
regulations, and enabling entrepreneurs of
all stripes to raise venture capital by offering
shares to the general public.
Crowd-funding—which occurs I
when individuals pool together
their financial resources in order
to fund projects they care about—
is a popular method for fund
ing creative ventures. Recently,
Amanda Palmer, former bandleader
of The Dresden Dolls, raised over
$360,000 in a mere 48 hours via
Kickstarter, shattering the previous
Kickstarter record for music fund
raising, and fully funding Palmer's
next album and tour.
' Kickstarter will always serve
a purpose in the entertainment
industry, but for artists lacking the
worldwide acclaim of an Amanda
Palmer, it can be difficult to raise
significant capital using its exist- \
ing platform. Kickstarter operates *
on a donation model Artists offer
fans a series of "rewards" that cor
respond to various donation levels.
White many of those rewards are
nice ($500 for a performance by
the band in your living room, for
example), they are nevertheless
basically tokens of appreciation— Amanda
the equivalent of National Public
Radio's free tote bag. Once the JOBS Act takes
effect artists will have the opportunity to
actually sell shares in the success of a given
project thereby giving fans an opportunity to
either prosper or perish along with the artist.
Compared to existing securities regulations,
the JOBS Act is a verifiable game changer.
With only a handful of narrow exceptions,
existing securities regulations prevent entre
preneurs from offering returns on investments
unless the investment opportunity, or "secu
rity," has been filed with the Securities and
Exchange Commission (SEC) and the investor
is properly "accredited" (i.e., wealthy enough
to bear the risk of investing). Not surprisingly,
the cost of proper registration with the SEC is
fairly high, especially where an entrepreneur
seeks tt> offer shares to investors located in
multiple states. And as an added bonus, if you
don't file your securities, you may be subject
to civil and criminal penalties.
By contrast, the JOBS Act will exempt
certain types of small public offerings from
the filing requirement Under the JOBS Act,
websites like Kickstarter can morph into
government-sanctioned and registered "fund
ing portals" that small businesses—including
artists—will be able to use to sell up to a mil
lion dollars worth of shares in a project to any
potential investor—accredited or not—during
a 12-month period. The only major restriction
on sales of shares is that no single investor
may contribute more than $2,000 or 5 percent
of their annual income or net worth up to a
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f THE FUL6P0U OFFICE WILL BE CLOSED 1
| MONDAY, MAY 28* FOR MEMORIAL DAY!
IT’S
TIME TO
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14 FLAGPOLE.COM MAY 23,2012
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