Understanding SEC Regulation D for Filmmakers

Acquiring the support of investors for your film project represents a key area of importance for an independent filmmaker to understand and master. Unless you’re going to tap into your own finances, or those of your closest friends and family, you’re going to have to step into the world of film finance. Specifically, you’re going to need investors. But before you can just take someone’s money, whether they are willing to provide it to you or not. You need to also follow specific legal guidelines, especially those set forth by the Securities and Exchange Commission (SEC). The SEC is responsible for regulating how shares in companies, such as an independent film business, are sold. Most importantly, SEC Regulation D offers key exemptions for filmmakers that could save you time, and money, if you’re familiar with how the exemptions work.

What is SEC Regulation D?

SEC Regulation D of the Securities Act of 1933 provides specific exemptions for some businesses. Allowing them to avoid registering their offerings with the SEC. For filmmakers that would generally form a business entity for the purpose of producing a movie.

LLC shares would then be offered in a public or private offering. As a means of gathering up funding from investors. Under SEC Regulation D, such offerings do not have to be registered. In the event that shares of an LLC representing the film are offered.

This all probably seems rather confusing to the average filmmaker. It’s important for you to have at least a foundation-level understanding of how SEC Regulation D works in favor of filmmakers.

Because the investors that you approach most certainly will understand how the Securities and Exchange Commission work. And how the legal aspects of offering shares of a business come into play.

3 Exemptions from Federal Registration 

Under SEC Regulation D three exemptions from federal registration are provided for film businesses. As well as for various other entities.

The exemptions are important to understand. Because they not only limit the expense that a filmmaker would otherwise be required to invest into the registration with the SEC. But they also save a lot of time as registration can take several weeks. 

In The Rules

Registration exemptions under SEC Regulation D permit filmmakers to offer and to sell their securities (shares of film business) without advance federal registration.

Under rules 504, 505 and 506 of Regulation D various exemptions are provided. Specifically, with Rule 504, film businesses can raise up to $5M without registering with the SEC.

Of course there are more rules involved than just the limit of $5M! But as a basis this is one of the ways that SEC Regulation D is helpful to filmmakers. Consulting with an entertainment lawyer in advance of your offering is not only advisable. But absolutely vital!

In Summation

As you can see, SEC Regulation D provides several benefits to film corporations that are offering share sales to investors. Specifically, it eliminates the need for registration of smaller offerings.

Such as those for films or movies. Which can save the business substantial amounts of time and money. But before you move forward with offering shares of your LLC to investors, or to others!

Make sure you’re working closely with an entertainment lawyer and a qualified accountant with a background in film. To ensure you’ve making the right moves from both a legal standpoint, and from a financial standpoint.