President Obama signed the JOBS ACT into law on April 5th, 2012. Called the ‘‘Jumpstart Our Business Startups Act,’’ the goal is to increase American job creation and economic growth by improving access to the public capital markets for emerging growth companies. It will make it easier for small businesses to raise money so they can create jobs and rebuild the American economy by amending the Securities Act of 1933. It can have a profound impact on the independent filmmaking industry.
Slava Rubin of popular filmmaking crowdfunding site Indiegogo.com, and very active in the process of crafting the Crowdfunding part of the JOBS ACT, expects this bill to create more startups and jobs for indie filmmaking.This is the first major change in securities regulations in about 80 years,” says Rubin of the landmark law signed today by President Obama.
Slava’s part in helping craft this law over the past couple years led to his invitation to be at the White House today when President Obama signed the Act. Slava Rubin of popular filmmaking crowdfunding site Indiegogo.com, and very active in the process of crafting the Crowdfunding part of the JOBS ACT, expects this bill to create more startups and jobs for indie filmmaking. “This is the first major change in securities regulations in about 80 years,” says Rubin of the landmark law signed today by President Obama. Slava’s part in helping craft this law over the past couple years led to his invitation to be at the White House today when President Obama signed the Act.
...One part of the JOBS ACT, its Title III, Crowdfunding part, is an expansion of the current crowdfunding concept that has already invigorated parts of indie filmmaking.
While crowdfunding is the sexy environment of the moment for filmmakers, the politicians building on it for the new method of equity investment created the tortuous and unsexy acronym, “Capital Raising Online While Deterring Fraud and Unethical Non-Disclosure Act of 2012.” We’ll call it, simply, the Crowdfunding Act.
New Opportunity of Equity Crowdfunding
There is a difference between the current popular Non-Equity Crowdfunding and the new Equity Crowdfunding that was signed into law today.
The common dream of aspiring filmmakers often began with a script and some actors, and then an effort to raise money to make the movie by asking everybody to invest in their project. Ads were placed, bulletins posted, and Internet messages were spread asking for people to invest. The aspiring filmmakers then would be told how illegal that is, shocked to learn that they were offering “securities” which had to be registered with the SEC. They learned that any offering to the public of any kind of ownership in future possible profits is a security. That’s “equity.”
Michael Shuman, an economist, described it this way: “The real reason small public offerings and local stock exchanges do not flourish today is that the Securities and Exchange Commission (SEC) has essentially banned them. Existing laws place huge restrictions on the investment choices of small, “unaccredited” investors—a category in SEC vernacular that includes all but the richest two percent of Americans.
In order to offer equity shares in their project, it appears filmmakers will need to provide a traditional Business Plan and Financial Projection, which was common before the collapse of the independent film industry, that includes the purpose for the offering and the target offering amount and its deadline, as well as the description of the ownership and capital structure of the issuer. The Business Plan and Financial Projection will also include the name, legal status, physical address, and website address of the issuer; the names of the directors and officers and anyone with more than 20 percent of the shares of the issuer. A description of the financial condition of the issuer including all other offerings of the issuer within the preceding 12-month period is also required. The filmmaker will need to make regular updates about progress meeting the target offering amount. There will be rules about describing the price, value, terms and class of the securities offered. Annual reports will be required.