This month may be a game changer for US-based independent film investing. In the past those looking to raise funds for their films could not advertise to the public. The Securities and Exchange Commission (SEC) required them to only have individual meetings with potential investors one at a time. This of course was very time consuming and expensive. Now the SEC has voted to approve Title II of the JOBS Act, and lifted the ban on “General Solicitation.” Filmmakers will now be able to advertise their film investments, so long as they make reasonable efforts that investors financing the film are accredited. Filmmakers can promote their investments on websites, Twitter, Facebook, etc.
For 15 months now the independent film world has been eagerly awaiting the regulatory fine print on the JOBS Act that many believe will both broaden and quicken their fundraising efforts across the U.S. Now that the SEC has finally published those first rules that allow filmmakers and film startups to advertise their investment proposals to the public, some will have been intrigued by a new amendment that specifically disqualifies bad actors.
Before film critics all rise up in celebration, let’s be clear that America’s financial watchdog is not about to outlaw scenery-chewers, hams, stilted amateurs and all those glorious Raspberry Award winners from being pitched to millionaires. There would be too little film industry left to regulate. But the “bad actors” referred to here will be just as familiar to anyone who has done enough time in the film market trenches: financial miscreants.
Felons and those “subject to court or administrative sanctions for securities fraud or other violations of specified laws” will be barred from participating in private placements under Rule 506 of Regulation D – the exemption by which most American independent films try to raise money from private investors. This new prohibition, hard as it is to believe it wasn’t in place already, has to be welcomed despite the added burdens it will place on fundraising starting this September.