CROWDFUNDING IN WONDERLAND: ISSUER AND INVESTOR RISKS IN NON-FRAUDULENT CREATIVE ARTS CAMPAIGNS UNDER THE JOBS ACT

• Published in: American University Business Law Review 2017-01, Vol.6 (1), p.1-29
• Main Authors: Epstein, Michael M, Hashemi, Nazgole
• Format: Article
• Language: English
• Subjects: Accreditation; Artists; Crowdfunding; Employment; Equity; Fraud; Investments; JOBS Act-2012; Motion picture directors & producers; Older people; Regulation D; Women
• ISSN: 2168-6890; 2168-6904

The harder cases are those where the disclosures are not fraudulent because they require a detailed, objective analysis of the relevant subjective capabilities and circumstances of each issuer/project. [...]while fiduciary duty claims create recourse against incompetent artists, they could also lead to lengthy and expensive litigation against competent artists. "101 The same goes for regulations affecting misleading, noncommercial speech. Because these regulations foreclose charmels of communication, more careful review is appropriate.102 According to Antony Page and Katy Yang, plaintiffs rarely, if ever, challenged the securities laws under First Amendment grounds when they first emerged.103 It seemed inherent that "preserving the integrity of the capital markets" relied on "the government's ability to mandate the full and fair disclosure of information by a company. [...]the U.S. Supreme Court has upheld a regulation of commercial speech even where the government failed to show that it served a substantial interest other than preventing deception.148 However, the SEC may have trouble creating regulations that are limited enough so as not to impede on the noncommercial speech that is inextricably intertwined in a creative arts solicitation. Whatever the solution may be, government and industry need to act soon. Since the JOBS Act became law in 2012, crowdfunding has nearly doubled year by year,185 and the number of crowdfimding platforms has also steadily increased worldwide.186 If this trend continues, predictions estimate a $90 billion crowdfimding industry by 2017.187 Although the number of, or increase in, creative arts campaigns alone is unclear, what remains clear is that creative artists have a legitimate need for crowdfunding that the JOBS Act advances effectively but not always fairly. 1.Jumpstart Our Business Startups Act (JOBS Act), Pub.