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Max Bialystock and Leo Bloom Beware: Reg A+ and the Future of Film Finance

By Ross A. Carbone posted 06-24-2015 09:45 AM

  

One of the salient features of American securities law is investor protection.  The U.S. government does not want the unscrupulous businessman taking advantage of the uninformed financial backer.  This policy applies broadly across all industries, including Hollywood, preventing the Max Bialystocks and the Leo Blooms of the world (see Mel Brooks’ The Producers) from preying on unsuspecting investors. 

Due to the restrictive nature of federal securities law, some filmmakers rely on alternative methods of financing, such as crowdfunding, to avoid the regulatory requirements and expenses of issuing securities.  This creates a challenge for producers because they must rely on the altruism of others who contribute financially to a project without the possibility of a monetary return.  For example, Zach Braff’s Wish I Was Here received $3,105,473 in funding from 46,520 backers via Kickstarter.    

The Securities and Exchange Commission recently changed the landscape of film financing by passing Regulation A+ (or “Reg A+”), which will allow filmmakers an alternative way to offer securities.  As with many other American securities laws, there are limitations regarding the offering (it cannot exceed $50 million within a 12 month period) in addition to disclosure and reporting requirements that accompany the Reg A+ issuance; however, despite these regulatory hurdles, filmmakers now have a new avenue for film financing, in addition to those already available, such as Kickstarter.

To read more on these developments and the specific requirements of Reg A+, visit:

                http://www.hollywoodreporter.com/news/want-a-piece-movie-profits-797845

To read more about Zach Braff’s Kickstarter campaign, visit:

                https://www.kickstarter.com/projects/1869987317/wish-i-was-here-1

Ross A. Carbone, Esq. is an associate in the Corporate, Securities & Business Transactions practice group of the law firm of McCarter & English, LLP.   

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