Monday, May 25, 2009

How Not to Use the Internet to Find Investors for Your Film

Entertainment Lawyer Gordon Firemark writes a very informative article on how filmmakers should not be using the Internet to find investors. Find the article "How Not to Use the Internet to Find Investors for Your Film or Theatre Project" here.

Firemark makes an excellent point that filmmakers are actually in violation of the
U.S. Securities and Exchange Commission (SEC) should they post advertisements for investors on the Internet. 

The function of the SEC is to help monitor the securities market (i.e. stocks, bonds, or other ownership investments) and protect investors. The SEC was established in the United States after the 1929 stock market crash. Prior to the formation of the SEC, there was no effective governing body regulating the securities market. Obviously it was needed in order to help keep businesses honest.

So, Congress acted quickly and passed the Securities Act of 1933 in order to help re-build investor confidence in the securities market. Then, the Securities Exchange Act of 1934 created the SEC as an organization to oversee the the securities industry. 

Normally, businesses must register their securities for sale to investors with the SEC and it is an incredibly tedious process. Most filmmakers don't have the time or resources to register their projects. 

Thus, the SEC does offer exemptions from registering for businesses through Regulation D. Film offerings are usually exempt and with the exempt status comes rules that must be followed. And one of these rules is that the offerings must be private. Calls for investors through ads on the Internet are not allowed. So you need to be careful how you put the word out for investors.

Luckily, Firemark also suggests unique ways of finding investors, while complying with the SEC rules. So give his article a read!