Everything You Need to Know about Film Investment Regulation
Film investments have long been known for being incredibly risky. Many investors have been cheated or otherwise have lost out by investing in films that were probably never poised for distribution in the first place. As such, film investment regulation, including the protection of the SEC and other regulatory groups have become quite prominent. In fact, film financing law, and the SEC, together protect the rights and assets of investors. To ensure that filmmakers must take certain steps. Before they can seek the financial support of investors, banks, or other entities.
To help you understand how film investment regulation has mitigated some of the risks involved in investing into films. We’ve put together a list of the different steps and regulations that are in place to ensure the safest investment practices in the industry.
Although this hardly eliminates risk, film investment regulations can help investors to make more informed, lower-risk decisions about the film projects they invest their money into.
Full Disclosure
One of the ways that film investment regulation has set forth protections for investors is in full disclosure. Full disclosure represents Federal and State security laws.
Which have been put into place requiring film businesses that wish to secure investment financing in the form of securities sales such as the sale of stocks or other securities must register with the SEC or they must meet certain exemptions.
Registration with the SEC will require full disclosure of the risks involved in investing in a particular film company. Likewise, if a film business is exempt from registration, they will generally be required to file a PPM before they can sell securities to investors.
Moreover, this provides disclosure through the private placement memorandum offering investors similar details. To those which would be included in full disclosure with SEC registration.
Due Diligence
Film investment regulation requires that any investors with interest in investing into a film project or business use due diligence. To ensure that they have thoroughly investigated the reputation and track record of the filmmaker.
To ensure they are aware of the risks they are taking. Due diligence means that the investor has done his homework, researched the risks, and checked court records.
As well as other public data to determine whether the film company that they are considering an investment into is financially sound.
Arbitration Clauses
Another way that investments are regulated is through the use of arbitration clauses. Through an arbitration clause the contractual disputes of an investment can go through arbitration before they enter litigation.
Arbitration clauses are important for investors. As they provide a means of disputing any loss or other legal issues that arise between themselves and the film company.
In a fast, informal, and less expensive manner than traditional litigation. Most of the time, arbitration allows for the situation to be handled outside of court and in record time.
Registering Security Interest
Film investment regulation allows the investor to register security interest in the film projects that they invest in. In registering security interest in certain collateral of the film. Such as the master materials of the production or the film negative.
The investor stakes a claim against the collateral protecting their rights. Should the filmmaker potentially otherwise not follow through with the appropriate distribution. Or other strategy that would be most viable for the investor to gain a return.
As you can see, there are many ways that film investment regulation can be used. To ensure that the funds a film investor puts up for a project are not 100% lost. This is the goal of the SEC and other regulatory agencies in protecting the investments of those involved.
