Back in July, the U.S. Securities and Exchange Commission's (SEC) voted on Title II of the JOBS Act in favor of lifting the ban on general solicitation for certain private securities offerings. And yesterday, it became law. This means that filmmakers can now market their fundraising as publicly as they want -- with a few stipulations. Read on for a breakdown of what the new law entails, as well as how you can qualify for general solicitation fundraising.
Slated published an article yesterday that detailed Title II of the JOBS Act and what lifting the ban on General Solicitation actually does for the filmmaker. Going off of Slated's easily understandable explanation of the new law (written in merciless legalese,) here are some steps that you need to take as the filmmaker to ensure that you, in fact, qualify for General Solicitation Fundraising.
Ensure investors are accredited
The major caveat to the ban is that, although advertising for fundraising can now be done publicly, filmmakers must make "reasonable efforts" to ensure financiers and investors are accredited. This falls under Rule 506c.
How is that done? Well, under the Securities Act of 1933, "a company that offers or sells its securities must register the securities with the SEC," so it's up to the filmmaker to verify that whoever is giving them money has been registered as accredited through the SEC. What does this look like? Slated says:
It is an onerous process that involves investors providing filmmakers with two years of tax returns, or relevant bank statements/brokering statements/credit reports and more.
Third parties are available to handle this sensitive information between the filmmaker and investor, if the investor isn't comfortable just handing it over to a filmmaker that may misuse it.
Don't Use Bad Actors
Not bad actors as in actors actors. I mean -- try not to use those bad actors, too, but I'm talking about individuals that are disqualified from participating in certain securities offerings. This includes felons, a person that is subject to court injunctions, restraining orders, cease and desist orders, and a few others. Here's a nice long document that breaks down who the disqualified parties are.
File a "Form D"
What filing Form D does is it tells the SEC that you's fundraising using an exemption. Also, the form needs to be filed 15 days after the first investment is made. And since the law is new, there are several future proposed rules, and amending and refiling Form D not once, not twice, but thrice, is one of them.
The future proposals state that the form must be filed:
- 15 days before you use the 506c exemption
- 15 days after the first investment is made
- 30 days following the termination of an offering - i.e. once the fundraising has closed
Make sure to give Slated's article a good and thorough read. They delve into topics you should be aware of that we didn't cover here, like additional proposed rules that you should know. Also, give the SEC's General Solicitation Fact Sheet a look. In fact, you should read up on all of the information the SEC has to offer regarding the new law -- you know, just for fun. Here's the document regarding the final ruling.
It's a great new day for filmmakers, surely, but make sure you know the rules enough to follow them, otherwise you could lose your fundraising exemption, lose your fundraised money, or even go to jail. So, get yourself a lawyer, brush up on the new law, and raise lots and lots of money for your projects!