The bill is viewed by some  as a way to sabotage the American creative dream machine by slipping in a little poison” and “the death knell of American leadership in the world.”

Specifically, three provisions are of significant concern to those who rely on so-called “angel” capital.  These provisions would:

1. increase the financial thresholds for qualification as “accredited investors,” who are, generally speaking, wealthy investors whose investments are not subject to significant federal securities regulation;
2. allow the Securities and Exchange Commission (“SEC”) to make certain angel financing transactions subject to state regulation (previously, all so-called “Rule 506 offerings,” which were commonly used for angel financings, were preempted from state regulation); and
3. require that those “Rule 506 offerings” that remain preempted from state regulation nonetheless be subject to a 120 day review process with the federal SEC.

Word on Capitol Hill is that the  bill will undergo significant changes, but now is the time to contact your Senators and Representatives to voice your opposition to the above provisions.

Currently, an investor qualifies as “accredited if he or she has a net worth of $1 Million or more, or has an annual income over $200,000 ($300,000 for married couples).  Under Rule 506, sales of securities to such investors are largely unregulated.  This new bill would change that dramatically, increasing these limits, thus making it harder than ever to find qualified investors for high-risk investments like films, theatre projects or start-up ventures.

Source:  Proposed financial regulatory reform bill will adjust accredited investor thresholds (WTN News).

Hat tip to my colleague Peter Levitan for bringing this to my attention.

At best, these ‘notices’ are actually just cleverly disguised solicitations by companies that offer the service of filing the company’s Statement of Information.    According to the Secretary of State’s Alert about this situation, many of these notices contain arbitrary due-dates, and look verty similar to the real Statement of Information form.  Often, the file-number on the document is differnt from the company’s actual file number.  It’s easy to compare your file number, and the Secretary of State reminds that Statements of Information are always due on the last day of the month of formation.

If you’re a California corporation or LLC, and have received a form or ‘notice’ that you’re not sure about, please contact me before you send any money.  I’ll help you figure out whether it’s an official notice or one of these scams. 

The Secretary of State recommends that those who receive these solicitations, and those who’ve been victimized by the scams contact the office of the California Attorney General at PO Box 944255, Sacramento, CA 94244-2550

Andrew J. Contigula’s blog has a good summary of last week’s Supreme Court argument in  FCC v. Fox Television Stations.  The case is being closely followed by entertainment and communications lawyers, and  deals with the Federal Communications Commission’s enforcement efforts against ‘indecent’ speech and broadcasts containing “fleeting expletives”, such as those uttered by celebrities during awards broadcasts, etc.  Recent instances involved Cher, Nichole Richie, U2′s Bono, and others.

The case arose over Mr. Preston’s representation agreement with Alex Ferrer, known to TV Audiences as “Judge Alex“. When a dispute between the two arose over fees due to Preston, he began Arbitration proceedings, as required by the agreement. Ferrer petitioned the California Labor Commissioner to void the contract on grounds that Preston had acted as an unlicensed talent agent, in violation of the California Talent Agencies Act. The matter worked its way through the courts, eventually resulting in an order granting jurisdiction over the matter to the Labor Commissioner.This Appeal to the US Supreme Court followed.

The Court, in an opinion by Justice Ginsburg held that the Federal Arbitration Act declares a national policy favoring dispute resolution through arbitration, rather than through the courts or administrative agencies, determines who ultimately will decide whether Mr. Preston acted in violation of California’s Talent Agencies Act, and whether the contract in question will be voided by such actions.

Fee disputes between managers and their artist-clients often result in a petition to the Labor Commission similar to that filed by Ferrer.  Essentially, a manager who “procures employment” for a client, violates the Talent Agencies Act, which requires a license to engage in such activities.  If the Labor Commissioner finds that procurement did occur, the agreement between manager and client (which typically provides for the manager’s compensation in the form of a commission between 15-20% of the Artists income) will be deemed void. In the past, a voided contract resulted in forfeiture of ALL commissions earned by the manager… in many cases actually requiring the manager to disgorge commissions already received.

Where, as here, however, the agreement between manager and artist specifically provides for arbitration, the Labor Commissioner will no longer make the determination of whether procurement has occured. Instead, the question must be submitted to Arbitration. Assuming the Arbitrator finds that procurement did occur, it remains to be seen whether the Arbitrator will void the contract entirely, sever the unlicensed activity, or fashion some other remedy.

This case is the second in recent months to address questions surrounding the activities of managers in the entertainment industry. In January, the California Supreme Court decided the case of Marathon v. Blasi, in which a single act of unlicensed procurement was held not to void the entire contract, but to be “severed” from the rest of the agreement. The manager in that case was allowed to retain the commission earned on other jobs not tainted by the unlicensed activity.At this point, I think it’s fair to say that we’re all updating our management agreements to include arbitration clauses and ensure that a single, isolated act of procurement won’t void the entire agreement in the future. These two recent decisions go a long way to level the playing field for agent/manager relations, though some will argue that they are a blow to the very few protections artists have against unscrupulous managers.

Details of the proposed agreement were presented to meetings of Writers in New York and Los Angeles Saturday, and union management will meet again on Sunday before putting the deal to a vote of the membership.

I haven’t had a chance to see the terms of the proposed deal, but it stands to reason that Writers will receive a more meaningful share of “new media” revenues than originally proposed by the studios.  More details when I see the deal terms.