The MLC’s 2023 tax return exhibits that as of 12/31/23 the quango was holding $1,212,282,220 invested in publicly traded securities which is a fortune for a company that makes no cash and has no income. That implies that a method or one other, all of these holdings belong to another person. I think that the money is both black field cash for unmatched funds, royalties which were earned however not but distributed, or its unspent monies paid by music companies as a part of the “allocation” that companies utilizing the blanket license pay to cowl the MLC’s working prices. The MLC might imagine that the allocation cash belongs to them, and so they do have the correct to spend it in response to the Copyright Royalty Board’s allocation rulings–but when the CRB’s willpower of that possession consists of the correct to have interaction in securities buying and selling with it, I’d love for somebody to level it out to me.
As we’ve identified many instances, the MLC has did not disclose, the truth is I feel they’ve truly refused to reveal, who will get the upside for any buying and selling income made with these monies. Or maybe extra importantly within the present atmosphere, who bears the buying and selling losses.
Even supposing Members of Congress have raised this query a pair totally different instances, the Copyright Workplace has did not publicly train its oversight function and power the MLC to reveal what’s occurring with this cash. That inquiry consists of Congressman Fitzgerald’s inquiries in his latest letter to the Copyright Workplace demanding that the Workplace do this very factor together with demanding elevated transparency concerning the MLC’s funds normally. To my data, there was no reply and the Copyright Workplace’s redesignation course of to permit the MLC’s present regime to proceed working the collective has now entered its second yr. Look, everyone knows that the Workplace goes to bend the knee and adjust to the desires of the powers that be, however why is it taking so lengthy for them to take action publicly?
Nonetheless, the latest downturn available in the market brings new concentrate on the MLC’s unilateral determination that they’ve the correct to “make investments” what’s now over $1 billion {dollars} that the songwriter neighborhood sorely wants. That funding coverage additionally requires that the MLC preserve their holdings a secret, which may be very handy.
The Complement to the MLC’s 2023 tax return consists of this language:
In our Type 990 for 2023, we supplied info relating to funds we had been holding in banks and investments as of the start of 2023 and the tip of 2023. These included evaluation funds that we
subsequently use to fund our operations; royalty funds we weren’t but capable of distribute and on which we’re required to earn curiosity in accordance with the Music Modernization Act (MMA) of 2018; and royalty funds we had been holding pending distribution.
What the MMA truly says within the black field penalty language of 17 USC §115 (d)(3)(H)(ii) is:
Curiosity-bearing account.—Accrued royalties for unmatched works (and shares thereof) shall be maintained by the mechanical licensing collective in an interest-bearing account that earns month-to-month curiosity—
(I) on the Federal, short-term fee; and
(II) that accrues for the advantage of copyright homeowners entitled to cost of such accrued royalties.
The black field penalty in 17 USC §115 (d)(3)(H)(ii) is much like the late payment charged to licensees. The code creates an incentive for the MLC to pay out unmatched funds rapidly to keep away from the market share distribution of black field which might occur any minute now (notably for the reason that Copyright Workplace hasn’t accomplished the five-year evaluation it began over a yr in the past).
This language of 17 USC §115 (d)(3)(H)(ii) doesn’t “require” the MLC to “earn curiosity”, it requires them to PAY curiosity. As a result of it’s inextricably tied to job efficiency, it could not be a cost borne by the licensees as a part of the executive evaluation as a result of it could not be a part of the “collective whole prices.”
That’s why I feel it’s a penalty. It’s, for my part, completely false and deceptive to state in a matter below the jurisdiction of the federal authorities that the MLC is in compliance with a code part that doesn’t say what they are saying it says. And it’s not simply this one time, the CEO has mentioned nearly these precise phrases in testimony to the Home IP Subcommittee and that in supplemental written testimony to reply questions for the report from the Subcommittee.
Even if you wish to be beneficiant and settle for the MLC’s argument–and it’s simply an argument–that the MMA “requires” the MLC to “earn” curiosity, an “curiosity bearing account” merely doesn’t ponder “investing” different folks’s cash–your cash–in publicly traded securities by a inventory dealer. When requested direct questions on who bears the draw back and who will get the ups on their inventory buying and selling, the MLC has by no means answered the query.
The closest to a solution we get from the plain statutory language is that the MLC is required to pay curiosity on unmatched funds on the “federal quick time period fee” which is roughly 4.23%. Does that imply that if the MLC makes extra than a 4.23% return they preserve the upside? Or if the inventory brokers don’t obtain that return, does that imply the licensees cough up the distinction in extra administrative evaluation contributions? Unlikely, so would the MLC’s board members move the hat? I’ll imagine that once I see it.
Now that we’re seeing a world market crash with indices down round 10%, songwriters are greater than justified in asking how that portfolio is doing, and what occurs if the music stops–which means that the MLC has to pay out all the unmatched cash they’re holding? How will they cowl the losses? Or alternatively, what in the event that they wanted to make use of the executive evaluation funds they’re utilizing to play the market–sorry–I meant make investments very conservatively? If there’s a shortfall, what occurs then?
Properly, in response to the “Hoffa Clause” within the MMA (17 U.S.C. § 115 (d)(7)(C)), the MLC is allowed to dip into the black field to cowl prices in extra of the “Administrative Evaluation” paid by the licensees. Unusually sufficient, when the lobbyists drafted the Hoffa Clause, they by no means mentioned that the MLC needed to clarify why that they had a shortfall. There’s a giant distinction in a sudden improve in prices inflicting a shortfall nobody might anticipate in comparison with a sudden market shock inflicting a buying and selling loss for monies the MLC is obligated to pay out.
Do you suppose this is able to create an incentive to keep away from the black field curiosity penalty by accelerating your matching program? Or do you suppose that it’s equally or much more doubtless that no one goes to be in a giant hurry to incur a legal responsibility cost for the black field?
Properly, markets go up, markets go down, can’t decide a prime and may’t decide a backside. That’s positive when it’s your cash, however when it’s different folks’s cash, it’s not OK in any respect. We now have no approach of figuring out how a lot is within the MLC’s portfolio and what extra positive factors or losses have accrued since 2023 as a result of they received’t inform us.
After all, if the MLC was planning on pocketing the unfold between the rate of interest penalty and positive factors from buying and selling, they should clarify that, too. Simply sayin’.
Why received’t they disclose their holdings? They use the laughable excuse that they preserve it secret as a result of it’s a lot cash it’d transfer markets. I suppose that’s as a result of Warren Buffett is sitting by the telephone ready to search out out what the MLC goes to do earlier than he makes a transfer. This sort of bullshit may match with the Copyright Workplace, however it doesn’t work with anybody else. Notably when an estimate of the potential decline within the MLC’s portfolio on an identical proportion foundation in comparison with the present total inventory market may very well be properly north of $100,000,000. Of different folks’s cash.
The time to have compelled that disclosure was properly over a yr in the past as a result of this pattern has been in movement for the reason that MLC first began accumulating and spending different folks’s cash. It appeared so pure for them to undertake this insane coverage that it makes you marvel if HFA was doing the identical factor all these years.
