Tips of the Trade:

Securities Issues

Video Tips

• Securities Issues

Since the Producer is seeking investment for a film, he is in fact offering a security. The good news is that most independent film projects do not have to engage in public stock offerings or IPOs. Securities issues for film investment involve exemptions from certain filing requirements that are generally found in Sections 504-506 of Regulation D of the Securities Act. Also, the individual states have their own particular securities laws. The Producer is required to comply with federal securities laws and the securities laws of any state from where the investor resides. This may involve the filing of certain "fill-in-the-blank" forms along with the other securities documents which are discussed hereinbelow. I refer these filing matters to a Securities Attorney.

As a general rule the exemptions found in securities laws will only allow for two types of investors. The first is known as an "Accredited Investor", who is generally an individual with a net worth of over $1,000,000, generates a consistent income of $250,000 - $300,000 and is an experienced investor. The Producers are also allowed, under certain circumstances, to obtain investments from "Unaccredited Investors", who are investors who do not meet these threshold financial requirements. Producers are limited in the amount of unaccredited investors from which they may receive funds. Additionally, if a Producer is proceeding under these exemptions, the Producer may not advertise or solicit.

A series of documents are generally presented to the investors. These documents are discussed in other "Tips of the Trade" sections. They are the Offering, Subscription Agreement and the Prospectus/Business Plan. These documents are usually provided to the potential investors along with the controlling agreement for the entity that shall be utilized for the project, whether it be an LLC, Limited Partnership or other structure.

However, a securities attorney should be consulted along with the entertainment attorney. There are far more restrictions that come into play, which cannot be discussed in this short article.