Poor Zach Braff. He’s catching so much guff, when all he really wants to do is strike the perfect balance between quirky and relatable.
But everyone’s pissed about the movie’s Kickstarter campaign. Mr. Braff is a big star, his detractors have argued. What’s he doing asking strangers for money when he’s got the connections to get big studios to invest in his movie?
Well, that was never going to happen. Big studios tend to invest mainly in bombastically crappy movies that they imagine will become blockbusters. Have we forgotten about The Lone Ranger already? (If you’re still not convinced, watch him explain it to Vanity Fair.)
And now that Mr. Braff has inked a $2.75 million distribution deal for Wish I Was Here, people are wondering if he’s going to recoup his Kickstarter investors’ contributions. Well, as it turns out, that’s currently illegal.
Why? It started when congress passed the Jump Start Our Business Startups (JOBS) Act in 2012, in part to allow for crowdfunding sites like Kickstarter to continue operating. That legislation outlined parameters for crowdfunding — but also stipulated that the people seeking cash couldn’t sell securities, or shares in their companies, via crowdfunding until the Securities and Exchange Commission passed guidelines regulating that exchange.
But the SEC still hasn’t passed those regulations. So short of issuing a ton of refunds, there’s no legal way for Mr. Braff to reward his investors with shares of his cash.
The SEC proposed a round of crowdfunding rules, but has to wait 90 days before they can review public comments and determine whether to adopt them. Coincidentally, the rules were proposed on Oct. 23, 2013, so they should be up for review again sometime within the next week or so.
As crowdfunding currently functions, it’s not used as a way to offer and sell securities. Offering a share of financial returns or profits from business activities would trigger the application of the federal securities laws and would need to be registered with the SEC, that organization points out. This is why you receive gifts like DVDs or T-shirts when you fund something on Kickstarter, rather than a share in hypothetical profits.
If a company were to start sharing its profits with small investors, it would basically be going public without all the hoopla that’s legally required to file an initial public offering. And we all know how long that takes.
So some rules need to be in place. The SEC’s proposition would basically allow people to to invest in and buy shares of companies that aren’t publicly traded, within limits.
Investors could contribute $2,000 or 5 percent of their net worth, whichever is greater, if their net worth and annual income are below $100,000.
Those with a net worth or annual income higher than $100,000 would be allowed to invest 10 percent of their annual income or net worth — as long as they don’t purchase more than $100,000 of securities through crowdfunding within a one-year period.
Also, companies would not be allowed to raise more than $1 million through crowdfunding offerings within a 12-month period.
But still, these parameters haven’t even been approved. So until they are, give Mr. Braff a break. Yes, he could give refunds to his investors — but his producer says that’s not in the cards. Anyway, the movie did rely on some big investments that didn’t come from Kickstarter, too, after it got going. We’re sure Mr. Braff will be concerned with paying back the people who donated millions to his efforts first.
In the meantime, Kickstarter investors were offered gifts like T-shirts, visits to the set, and their names in the credits, depending on how much they donated. And it’s not like they didn’t know how it worked before they signed up.