What is an “Accredited Investor” for Film & What Does it Mean?
Securing adequate financing for your film is certainly one of the most challenging tasks you’ll face throughout the course of production. Whether you’re entirely new to the industry, or you’ve been involved in the film industry for quite some time, you’re going to have to know the rules of investment financing and what the various types of investors mean for your production. Particularly, what is an accredited investor for film? And what does it mean for your project?
What is an Accredited Investor for Film?
You’ve been told that you should find an “accredited investor” but what does this even mean?
According to federal securities laws, the term ‘Accredited investor’ includes an investor that a:
- Is a bank, insurance company or other investment company that is registered with the SEC;
- Is an employee benefit plan;
- Charitable organization or a corporation person or partnership that has assets exceeding $5M.
- Business in which all equity owners are accredited investors.
- Person who has an individual net worth exceeding $1M.
- Person with income over $200K in two most recent tax years or joint income with a spouse of $300K.
- Trust that includes assets in excess of $5M.
Less Risk
As you can see, the general requirements of the SEC when it comes to finding an accredited investor. Basically show that these individuals have the ability to invest into projects without the risk being too much for them to handle.
Why Should I Seek an Accredited Investor for Film Projects that I Own?
Wondering why you’ve been told to seek accredited investors for the film projects that you’re involved in? It’s actually simple. You can secure accredited investor financing and in doing so you can have the peace of mind in knowing that you are abiding by SEC regulations.
Some SEC regulations, particularly certain exemptions that many filmmakers will take when it comes to seeking investment financing, will require that securities registration offerings only be made to accredited investors.
If you’re a filmmaker that isn’t aware of what constitutes an accredited investor in film industry terms, then you could find yourself in a lot of trouble with the SEC.
Pertinent Rules
Thus, as a producer, if you’re thinking about raising film capital through the sale of securities. And you’ve managed to get an SEC Exemption?
Then you’re going to need to fully understand what accredited investors are. As well as other pertinent rules regarding the SEC and how investments work.
In Summation
For this reason, we always recommend that filmmakers work closely with a production attorney that understands Securities and Exchange Commission laws, investment financing, and film financing in particular before moving forward.
You certainly don’t want to land yourself in trouble with the SEC. And your failure to familiarize yourself with the laws that apply could result in this happening.
Thus, in order to stay safe, it’s important to work closely with legal counsel that understands film investments. To ensure that you fully understand what it means to be an accredited investor in film and the legal implications involved with securities.
