How To Violate Securities Laws In Hollywood Without Even Trying

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Here’s how you could violate the securities laws (replete with prison time and personal responsibility for the repayment of the investment) without even considering:

1. Inability to grasp the broad swath of “securities,” generally when someone gives money to another person and hopes to receive more money later through a payment to the person or through selling the investment. Yes, it’s comprehensive. Here are a few examples many people aren’t aware of as Securities (assume that all funds are used to fund the production of a film):

a. An unpaid loan by a friend which is due in more than nine months, even if the film secures it

b. Any contract that allows investment in exchange for a portion of the profits, even though the investor doesn’t get any ownership interest in the company or film. They could be referred to as “investment contract,” Co-Production Agreement,” Co-Financing Agreement” as well as any number of other terms;

c. The issue of “digital coins,” fungible tokens,” or perhaps “utility tokens” when they are believed to be exchangeable or redeemable to cash. The SEC has filed 42 enforcement actions in the past two years, based on this particular category alone as well as

The word “d” means—membership participation within or shares in an LLC or shares of a company.

In reality, it’s easier to categorize what are not securities. And the primary classes are bank loans and investments in which the investor is granted the right to manage and control (and not only minor vote rights).

2. Make a payment to a non-profit “finder” to secure funding, provided that the finder is a registered broker-dealer.

3. Fundraise more than $1 million, and include an additional investment that is not “accredited investors” which is restricted to (a) people who have more than $1 million in net assets (excluding their home) or more than $200,000 in annual income ($300,000 when married) or (b) companies that have more than $5 million of total assets.

4. Failure to divulge all vital information regarding the investment, for example, in the absence of an official memorandum of a private placement that covers all risk factors.

5. Provide investors with projections of the possibility of profit without explaining in depth why the predictions may not be realized. Do not also inform the investors that they might be unable to recover all or a part or all of the investment in writing.

6. It is not clear that the responsibility is on the shoulders of every “promoter,” which generally includes anyone advertising the investment. The positive side is that investors aren’t responsible for any securities laws violations that promoters commit. Investors should be hoping that no violations are not engaged, as they grant investors the right to “put” right if the investment fails.

If you come after these rules, you too could benefit from the use of a free bed and breakfast (in jail) and the satisfaction of being personally responsible for repaying investors.

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Adam Collins
Adam writes about technology, business and economics. With master's degree in Economics, he's presented six papers in international conferences. As a solivagant in the constant state of fernweh, curiosity is the main weapon in his arsenal.

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