How We Review Issuers

How We Screen (And Don’t Screen) Issuers

Under regulations issued by the SEC, we are required to:

• Have a “reasonable basis” for believing that every Issuer on our Platform is eligible to offer its Securities on our Platform and is complying with Title III. We might perform our own due diligence, but we are generally allowed to rely on the representations of the Issuer.

• Have a “reasonable basis” for believing that every Issuer on our Platform has established means to accurate records of the holders (owners) of its Securities. Again, we might perform our own due diligence, but we are generally allowed to rely on the representations of the Issuer.

• Deny access to the Platform to any Issuer if:

  • We have a “reasonable basis” for believing that an Issuer or any of its officers, directors, or beneficial owner of 20% or more of its outstanding voting securities is subject to disqualification under the rules discussed under “Disqualification of Issuers” below. We are not allowed to rely solely on the Issuer’s representations to form this “reasonable belief,” but must conduct background checks with third parties.

  • We have a “reasonable basis” for believing that the Issuer or the offering presents the potential for fraud or otherwise raises concerns about investor protection, or we can’t effectively assess the risk.

We will comply with all those requirements. But – and this is very important – we are not required to conclude that Issuers on our Platform represent good investments for investors. In fact, we are not even allowed to tell you if we think that one Issuer is a better investment than another Issuer. You have to make those decisions on your own.

Disqualification of Issuers

Title III may not be used if the Issuer or certain other people have been the subject of certain disqualifying events during the last 10 years.

The “certain other people” are:

• Any predecessor of the Issuer;

• Any director, officer, general partner, or manager of the Issuer;

• A person owning 20% or more of the Issuer’s voting power;

• Any promoter associated with the Issuer;

• Any person who will be paid for soliciting investors; and

• Any general partner, director, officer, or manager of such a solicitor.

The “certain disqualifying events” include a long list of events, all involving improper actions in the securities business – for example, the conviction of a felony or misdemeanor in connection with the purchase or sale of any security, or the loss of license of a securities broker for misconduct. As explained above, we will conduct background checks before allowing an Issuer to list on our Platform.

The Kinds of Securities We Will Offer

We expect that the Issuers on our Platform will be Delaware limited liability companies (“LLCs”) and that Investors will purchase equity shares, which are called limited liability company interests. Ownership of a limited liability company interest gives an Investor the right to share in the profits of the LLC, but typically will not give the Investor any right to vote or otherwise participate in management.

Each LLC will own the right to receive an income stream from the artist’s music. What kind of income stream and for which music will be described in the offering materials. As one possible example, an artist might grant to her LLC the right to receive all the streaming income (income from music streaming services like Spotify) from six of her songs for three years. An Investor might buy a limited liability company interest representing 4% of all the interests in the LLC. As a result, the Investor would have the right to receive distributions from the LLC based on 4% of the streaming income.