More specifically, ASO's said to prospective backers, "Your donation will enable the ASO Archives to purchase technology necessary to convert three videos of the Orchestra led by world-renowned former ASO Music Director Robert Shaw into digital form."
In return for their donations, ASO offered its $25 backers, "Special recognition on the ASO Archive website."More generous donors received additional tokens of appreciation, and one $1,000 backer got the same tokens of appreciation that all the others received plus, "2013-14 concert season program book signed by Music Director Robert Spano."
ASO's goal was to garner $5,000 in 30 days. It almost tripled the amount with $13,590 from 130 donors who were swayed by a video pitch, photos of the ASO performing at the Berlin Wall in 1988 and its 1996 performance at the opening of the Olympic Games.
If the ASO were a private company selling stock to equity investors, the transaction that I described would have been illegal and in violation of the U.S. Securities and Exchange Commission's rules. While donation crowd-funders are able to avoid oversight by SEC, equity crowdfunding falls under its regulations.
Mike Marshall, a lawyer with Atlanta-based Miller & Martin, says that the Securities Exchange Act of 1933 governs the issuance of new securities. "All offers and sales of a security must be either registered or exempt."
The Securities Exchange Act 1934 governs trading activities after the initial securities are sold and "among other provisions, it requires persons who effect transactions in securities to be registered as broker-dealers," Marshall says.
But all that is about to change as early as late September when equity crowdfunding will become exempt.
The JOBS Act, signed into law on April 5, 2012, exempts small businesses from complex and costly registration with equity crowdfunding. Instead, businesses will use licensed crowdfunding portals online for most people to invest up to $2,000 each. Companies may raise up to $1 million per year in equity.
Caron Beesley, the community moderator for the U.S. Small Business Administration's blog, says, "Previously, small businesses were also limited to seeking investment from SEC-accredited investors only."
These high income people that are more apt to understand what they are buying. "Change is coming, however, and soon the investors like you and I will be able to enter the crowdfunding market," Beasley says.
The initial deadline for SEC to finalize its rules and launch the program was set for Dec. 2012. But in an effort to prevent fraudsters from ripping off unaccredited investors, the agency labored with keeping them off the portals. At the same time, SEC did not want to tighten the rules so much that it becomes too costly for small-business owners to participate.
One rule in particular was problematic.
Unlike donation crowdfunding, all promotions and marketing for equity crowdfunding had to be done on the portals. The business owners were prohibited from contacting their friends directly, using social media or hiring professional marketers to drive prospects to the portals.
When the ASO was looking for donations, for example, it emailed me and other concertgoers and directed us to its Kickstarter site. "The Atlanta Symphony Orchestra's Kickstarter campaign ends tomorrow," it said. "Learn more about what we're doing to save the ASO's history on our Kickstarter page."
Meanwhile, author Heather Hackett, also running a Kickstarter campaign, was short of meeting her goal to get a children's book published. So she frantically increased her marketing efforts. "I was making phone calls, sending personal emails, chatting with friends on Facebook; you name it," she said. "I looked like I was hosting a Jerry Lewis Telethon; but in the final hours, we made it."
She met her goal and raised $7,575.
Realizing the importance of direct marking to drive investors to equity crowdfunding portals, SEC opened the doors to marketing outside of the portals. Furthermore, the agency posted its rules in the Federal Register on July 24 and asked for comments by Sept. 23.
SEC chairperson Mary Jo White said, "The Commission should act without any further delay." Her words are welcomed by small-business owners and their lawyers, accountants and marketers who are anxiously awaiting the launch of equity crowdfunding following SEC's comment period.
Jerry Chautin is a volunteer SCORE business mentor, business and real estate columnist, blogger and SBA's 2006 national "Journalist of the Year" award winner. He is a former entrepreneur, commercial mortgage banker, commercial real estate dealmaker and business lender. You can follow him at www.Twitter.com/JerryChautin
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