Big News From the SEC for Filmmakers

By Brandon Blake, entertainment attorney at Blake & Wang P.A.

Great news for everyone looking to begin promoting feature film, television, and music projects to investors this year. The SEC has been working extremely slowly in enacting the Jumpstart Our Business Startups (JOBS) Act, which was passed in April of 2012, but things are finally starting to move forward.

The SEC just voted 4 to 1 in favor of implementing section 201(a) of the JOBS Act, known as Title II, which lifts the ban on general solicitation and permits filmmakers, television producers and music labels, among others, to openly advertise that they are raising money in private offerings.

What does all this mean for independent entertainment producers? It is a big deal, because for 80 years the SEC has prohibited any kind of public advertising of small offerings. Because of this limitation the only way to approach new potential investors was through the use of stockbrokers or, more clandestinely, finders. Now after all of these years, the era of investor "introductions" is over and producers can finally do things like buy Internet and radio advertising, use mailing lists, and even promote offerings on television.

However, this is certainly not going to be a free-for-all and there are some important limitations left in place by the SEC to keep producers honest while marketing small offerings.

First, the SEC still requires that small offerings be filed for exemption through the SEC. That means that before producers can start advertising their offerings they will have to prepare the same limited offering materials that have been required for years, and there are now additional reporting requirements with the SEC. The SEC is going to require filing 15 days before the start of general solicitation, and also within 30 days of completion of general solicitation. Both of these are new requirements and will require use of the new EDGAR filing system.

Second, state law is not going to be pre-empted, so producers will have to be even more careful planning their marketing strategy and making sure that their limited offerings are tailored to the particular states where the best investor prospects exist. Nationwide advertising campaigns will still be limited by what each State will allow under the new regulations.

Third, the SEC will restrict the investment to accredited investors only, which are high net worth individuals, companies and a few other types of investors. So the tradeoff on general advertising will be the requirement to only allow more sophisticated investors to buy in.

So how will all this impact raising money online? The good news is that once you have an offering filed with the SEC, you can openly promote the investment online, including through your own website. Sites like Kickstarter are still strictly off-limits, however. The reason is that the SEC has not enacted the crowdfunding portion of the JOBS Act, which is referred to as Title III. This is the more controversial and complicated portion of the bill and it might well be another year or more before it is enacted.

A special note of caution: The general solicitation ban will not be lifted until September of 2013, and an offering and filing must be in place before the start of advertising. The SEC has been extremely strict about deadlines and has sanctioned a wave of early JOBS Act claimants, so please do not act on this without legal guidance.

Our firm has been handling PPMs, limited offerings and investment companies for the film, television and music industry for 13 years. Feel free to contact us for a quote for affordable, high quality legal service.

- By Brandon Blake, Entertainment Attorney

About the Editor:
Brandon A. Blake is an entertainment lawyer and producer who works with Academy Award winning actors, directors and filmmakers. A complete biography is available online.

About the Entertainment Lawyer Q&A:
The Entertainment Lawyer Q&A does not create an attorney-client relationship, nor is the information treated as confidential. Responses to selected questions will be made public and shared with our subscribers. All entertainment law information is informational in nature and is not intended to be acted on without entertainment lawyer counsel.