URGENT UPDATE for filmmakers regarding the Crowdfunding Act of the JOBS ACT

The Securities and Exchange Commission is accepting comments on how it will formulate rules for the new equity CROWDFUNDING act that was included in the JOBS ACT. (See my story on ReelGrok.com at http://www.reelgrok.com/jobs-act-crowdfunding)

This is important for indie filmmakers, since the ability to reasonably raise up to $1,000,000 from investors could reinvigorate the indie film biz.

SEC rule-making in the spirit of the Act should protect investors without unreasonable burdens on the filmmakers. Right now, there is an assumption that the rules will follow the extremely stringent and anti-fundraising requirements of “Private Placement Memorandums” and other Reg D exemption requirements with their huge demands that cost filmmakers tens of thousands of dollars in legal fees and time and effort.

The SEC is accepting comments. Advocate for investor protection while not burdening filmmakers (and others) with the current standards the kill the hope of raising money from investors. The elements of the Crowdfunding Act — no “life savings” catastrophes, the intermediary Funding Portals to vet offerings, the proven metrics of desired involvement shown by crowdfunding success, the lack of fraud in the current crowdfunding environment, and the fact that disastrous schemes weasel through the incredibly dense protections now in place anyway (and for greater sums of money) — bring balance to the need to free up capital flow into indie filmmaking. This would legitimately allow potential flow of possible profits back to investors. (Current crowdfunding success shows that many people want to support indie filmmaking even when profits are not possible.)

Safety for investors well within acceptable risk:reward ratios that allow filmmakers to raise $1 million could save the entire indie film biz.

By the way, the limits are per year; that means a filmmaker could fund development and production in year one, and then fund marketing and distribution in year two. This would follow common timetables for indie film and be a strong boost to the indie film industry. Current methods of seat-of-the-pants filmmaking frequently do not include real wages, equipment rental, purchases of equipment, or payment for services. Realistic budgets enabled by realistic investment opportunity would rebuild the independent film business.

FILMMAKERS: join the advocacy!

Ask the SEC to protect investors while allowing filmmakers access to the Crowdfunding Act provisions (both in letter and spirit) without onerous restrictions. If the demands and expense common for the current “Private Placement Memorandum” continue, requiring tens of thousands of dollars and months of effort be spent prior to crowdfunding, the spirit of the CROWDFUNDING ACT will be thwarted for most indie filmmakers.

Ask the SEC to find ways to protect the investors without thwarting the filmmakers.

Your comments to the SEC can be made here.


4 thoughts on “URGENT UPDATE for filmmakers regarding the Crowdfunding Act of the JOBS ACT

  1. Pingback: PSU-Three Steps For Filmmaking Success « THE PLUGININ EXCHANGE

  2. President Obama signed last week the JOBS (Jumpstart Our Business Startups) Act, a collection of laws that dramatically relaxes regulations on raising capital for startup companies. The Act has provisions that for the first time will allow internet crowdfunding of small businesses, such as producing indie films. Crowdfunding is a method of raising capital by obtaining small amounts of money from a large number of investors. Although existing companies like kickstarter.com enable filmmakers to raise funding through donations (i.e. gifts), this new law, when it becomes effective, will allow filmmakers to raise up to one million dollars in equity investments by soliciting the general public without complying with the onerous security regulations currently in place.


  3. The major problem with film investments has always been their extreme risk and the expense involved in complying with the laws that regulate investments. Filmmakers were free to go after an unlimited number of high rollers they had relationships with, plus up to 35 middle class investors. But most aspiring indie filmmakers don’t hang around the craps table in Vegas and don’t know many wealthy individuals. So they often relied on friends and family, or their own resources, including borrowing money against one’s house, or at least in one celebrated instance, selling their blood. Other filmmakers used various subterfuges to reach potential investors and hoped the SEC would not notice. Most of the time the authorities paid them no mind as they had bigger fish to fry. I once spoke to a federal prosecutor on behalf of a client who had been defrauded of several hundred thousand dollars in a fraudulent film investment. The prosecutor confessed that unless at least a million dollars was at stake, the case was just too small for him to pursue. There are just too many bigger crooks out there.


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