Marc Jacobson Archives

December 24, 2020

Filmmakers May Soon Be Allowed To Legally Employ Finders On A Success Fee Basis

Proposed Securities and Exchange Commission Exemptive Order makes Finders who follow new proposed rules eligible for success-based fees.

By Marc Jacobson

How Filmmakers Currently Raise Capital

Often, when a filmmaker starts raising money for a film, she enters into one or more finder's fee agreements. These agreements typically provide that the finder, an unlicensed individual, will receive a fee of between 3-5% of the sums invested in the picture. The finder will also receive a share of the net profits, along with a credit, such as Executive Producer or Co-Executive Producer. Importantly, these agreements, which are often completed without the benefit of counsel, usually violate the United States securities laws. The violation exists because they are "transaction based" and result in payment to the finder if the transaction closes. As such, they violate the Broker-Dealer laws of the Exchange Act of 1934.

When relying on a finder under this kind of agreement, the filmmaker and the finder face potentially significant liability. Let's assume that an investment is made through a typical finder's fee agreement. If the film's revenue does not cause the investor to receive a complete return of her investment, the investor has a very good claim against the finder and the filmmaker for 100% of the investment made by the investor in the project. This risk, coupled with the likelihood that the film will not recoup its investment for its investors, makes this form of fund raising especially challenging.

As a result of this challenge, for decades, filmmakers tried to create workarounds, all of which likely violate the law, regardless. Agreeing to pay an executive producer fee to a finder when the project goes into production may appear to solve the problem, but that agreement will only be funded if the investment is made, thus probably making it "transaction based". If the filmmaker agrees to make the finder's fee payment pursuant to an oral agreement, is still an agreement to pay the finder a fee that is "transaction based". Nevertheless, success fee agreements like this for raising money for films are as prevalent as ever, whether lawful or not.

In my practice, and in the practice of others I know, we routinely advise our filmmaker clients not to pay success fees for financing. Not surprisingly, the advice may result in the client seeking out another lawyer who is willing to work with the filmmaker and that finder on the "transaction-based" agreement. The liability on the finder and the filmmaker will exist regardless of the lawyer's position.

Notice of Proposed Exemptive Order

In October of this year, the Securities and Exchange Commission (SEC) proposed issuing an Exemptive Order, which, if adopted, would permit finders to receive "transaction-based" compensation. The Notice of Proposed Exemptive Order (Notice) states that: "Concerns have been raised that "identifying potential investors is one of the most difficult challenges for small businesses trying to raise capital...[yet] companies that want to play by the rules struggle to know in what circumstances they can engage a 'finder' or a platform that is not registered as a Broker-Dealer." This difficulty, plus a recognition that "Finders may also help bridge gaps between traditionally underrepresented founders, such as women and minorities and VC [Venture Capital] and startup capital," caused the SEC to issue the Notice and a request for comment on this subject.

The proposed order will allow natural people - not companies or LLCs - to act as finders, if certain steps were followed: The Notice issued after a 3-2 vote of the commissioners and generated 92 written comments and four meetings with SEC officials on the issue to date. (A review of the substance of these comments is beyond the scope of this blog.) It is unknown whether any further action will be taken with regard to the Notice, and if so, what that action will be.

Tier I Finders

The Notice contemplates two tiers of finders, both of which would be permitted to accept "transaction based" financing. This would create a safe harbor for the finders and the filmmakers so that their actions would not violate the Exchange Act. If the finder were to work only on one picture, for example, the finder could qualify under Tier I of the proposal. The role of a Tier I finder is very limited. A Tier I finder may only work on an exempt offering from a non-reporting company. A Tier I finder may only identify a potential investor to the filmmaker, and the finder may not communicate directly with the investor about this potential investment.

Tier I finders are basically restricted to giving the filmmaker a name, phone number, and email and physical address. Tier I finders are not required to provide written disclosure to the investors, while Tier II finders are so obligated. If the finder holds herself out as a Tier I finder for a film, then any further activity in support of the fund raising for that film will violate the exemption. It would seem likely, if the proposed rules were violated, that liability to the investor on the filmmaker and the finder would be available to the investor who lost her money on the film.

Tier II Finders

Tier II finders also must only work on private, non-reporting companies, must only work on exempt offerings, and must also be a natural person. These finders would be permitted to (a) provide investor contact information to the filmmaker, (b) identify, screen, and contact potential investors, (c) distribute issuer/filmmaker offering materials to investors, (d) discuss issuer/filmmaker information included in offering materials, (e) arrange or participate in meetings between the investor and the issuer/filmmaker, and (f) participate in more than one capital raising transaction within a 12 month period. The filmmakers I know would not want the finder to do more than what is permitted under the Tier II proposal.

The finder would still not be permitted to do the following acts, which Registered Brokers are eligible to perform:

1. structure the transaction or negotiate the terms of the offering,
2. engage in a general solicitation,
3. handle customer funds or securities,
4. have the power to bind the issuer or the investor,
5. participate in the preparation of sales materials,
6. perform independent analysis of the sale,
7. engage in due diligence activities,
8. assist or provide financing for investment purchases, or
9. provide advise as to the valuation or financial advisability of the investment.

In all instances, for both Tier I and II finders, the investors must be accredited investors. The filmmaker must be relying on an exemption from registration under the Exchange Act in issuing its securities, and the finder may not be associated with a Broker-Dealer or otherwise disqualified under the statute.

Although the Notice does not place a limit on the amount of money that finders may find for the filmmaker/issuer, it does make special mention of the requirement that the finder must still abide by all applicable laws, including the antifraud provisions of the Securities Act and the Exchange Act, such as the obligations under Section 10(b) and Rule 10b-5 under the Exchange Act and state law. Further, an exemption from the Broker-Dealer requirement does not insulate a person from the registration requirements of the Advisor's Act, if the person is acting as an investment advisor, or any other applicable law. This Notice, if adopted, would conflict with a much stricter level of exemption extant in New York State. There is no indication that the Notice is intended to pre-empt state regulation.


I understand why those who are registered Broker-Dealers would want to protect their positions as the gatekeepers between entrepreneurs and the capital they need. They work hard for their licenses and must maintain and protect them. However, in the film community, I think it is extremely rare for a Broker-Dealer to assist any filmmaker in any manner in the raising of capital for one or more films or TV shows. The Broker-Dealers largely ignore this market, and as such permitting finders to work on "transaction based" agreements would likely ease the formation of capital pools, create more content to fill the ever-growing number of pipes of content into the home, and in turn create more jobs. My clients are always advised to only accept investment from accredited investors in any event.

Permitting finders to accept transaction-based financing in the film business will speed the formation of capital and in my view, will not take a dollar away from Broker-Dealers. I support the adoption of the Proposed Exemptive Order.

June 21, 2021

Should I register my script at the WGA or the Copyright Office? Why?

By Marc Jacobson, Esq.

I am asked this question all the time. My answer is registration at the Copyright Office is much better, and significantly more valuable. With apologies to my friends and colleagues who work at the WGA, I wouldn't bother registering at the WGA East or West, but I would take the time to file a claim to copyright in the Copyright Office. Here's why:

First, the script you seek to register is the culmination of hours and hours of research, writing, revising, listening, and otherwise creating a valuable story. Aside from confirming that the story has a beginning, a middle and an end, that the characters evolve, and the reader or viewer will care about the characters, the script needs to be protected from those who might take it from you without permission. Given the investment made in creating the script itself, a proper final investment in protecting it, and providing the means to bring infringers to justice is important.

Registering at the WGAE, WGAW or Copyright Office will not prevent someone stealing all or part of your work. Just as locking the doors and windows to your car when parking on the street does not guarantee that the car will not be stolen, it is the reasonable thing to do to protect your car. Registering your work with the Copyright Office and including proper copyright notice on your work is the most you can do to protect your work if it is stolen.

The differences between the WGA registration and copyright registration are many.


  • Registration at the WGA must be renewed every five years. If you don't renew your registration at the five-year mark, the copy held by the Guild will be destroyed, and then the Guild will not be able to submit your work as evidence in any Guild-related or legal proceeding.
  • Copyright registration lasts for the life of the author(s) plus 70 years. If your script is unpublished, then the copyright office will retain the work for 120 years. If the script is published, the work will be retained for 20 years. For an extra fee, the Copyright Office will keep published works for the full term of copyright.


  • The fee for a non-WGA member to register a work at the WGA is $25. A WGA member can register a work for $10. Renewals are required every five years. Only electronic filings are allowed, no paper filings are permitted.
  • In the Copyright Office, the fee to register a claim to copyright electronically is $45 if the work is by a single author, the copyright claimant is the same as the author, the work was not created as a work for hire, and the claim is for one work. If any one of those qualifications are not satisfied, such as there are two authors, the fee for registering electronically is $65. Paper filings are permitted, but the fee is $125.

Legal Effect

  • At the WGA, they state that registration would "potentially discourage others from using your work without your permission. ... the Registry... can produce the registered material as well as confirm the date of registration. Registering your work creates legal evidence for the material that establishes a date for the material's existence..." (Emphasis added.)
  • In the Copyright Office, the date a properly completed application is received by the Copyright Office, along with the appropriate fee is the effective date of registration. Receipt of the certificate will happen in about four to six months. Certainly, the effective date of registration will establish the existence of the script on that date.

Filing a claim for infringement

  • If your work is infringed, and you have a WGA registration, you must still file a claim to copyright before bringing a suit against the infringer. While for many years there was an open question whether simply completing the application and filing suit after the application was completed, but before the certificate was issued would be sufficient, the U.S. Supreme Court cleared that up in 2019. The Supreme Court held that the registration certificate must be in hand before commencing the suit. Fourth Estate Public Benefit Corporation v., LLC, 586 US ___ (2019) (Docket No. 17-571).
  • If your work is infringed, and you have a copyright registration certificate in hand, you are holding the keys to the courthouse, and an infringement case may be brought. 17 USC §411(a). However, if you elect not to file suit in federal court, and instead elect to sue in the Copyright Claims Board (CCB), you need not have a registration certificate in hand. Instead, the CCB will hear your case based upon a completed application. In either event, the CCB can award damages of up to $30,000, for actual or statutory damages, while a federal court can award an unlimited amount for actual damages, and up to $150,000 per infringement for willful statutory damages. If you do not register your work within 90 days of its authorized publication, the maximum damage award available under the CCB is limited to $7,500. The CCB is expected to begin working on December 27, 2021.

Effect on Credit

  • Under the WGA Basic Agreement, if an employer engages a WGA member to write one of the drafts of a screenplay, all writers of all drafts of the screenplay are subject to the Credit Arbitration rules of the WGA, even if one or more such writers are not a WGA member. When the picture is completed, a notice of tentative writing credits must be circulated by the producer to all the writers. If there is an objection to the proposed credits, the Guild will determine all the writing credits to be issued on a picture. The WGA acknowledges that registration generally does not help in determining writing credit. "However, if there is a dispute as to authorship or sequencing of material by date, then registration may be relevant."
  • If the only effect that WGA registration has on credit is clarifying the date a particular version existed, then copyright registration does the same thing. If a writer was engaged by a producer to create a screenplay, whether an original, revised, or polished screenplay, it would be very unusual for that screenplay to be anything other than a work made for hire, and the date of delivery of that version of the script would be clear.

Proper Notice

  • The WGA Basic Agreement, Article 37, provides for the content of a cover page, with multiple writers, to include:
  • Name of project By (Name of first writer) (Based on, if any) Revisions by (Names of subsequent writers, in order of work performed) Current revisions by (Current writer, date) Name, address, and telephone number of Company, if applicable.
  • The Copyright Act does not require that a work of original authorship include a copyright notice, but including a proper copyright notice may deter an infringer from stealing the work. It is unlawful to remove a notice with intent to facilitate infringement. The presence of the notice will also remove an infringer's defense of "innocent infringement" because the infringer was not aware of the owner's claim to copyright. 17 USC §401(b). An innocent infringer may not be subject to statutory damages, if found to infringe.
  • A proper copyright notice has three elements. First, the C in a circle symbol ©, or the word Copyright or the abbreviation Copr. is one element of the notice. The second element is the year of creation or publication, and third the name of the copyright owner. 17 USC §401 (b). The notice must be placed in a location on the work to give "reasonable notice of the claim to copyright." 17 USC §401 (c). By simply adding a proper notice below the name address and telephone number of the Company, significant protections are created for the owner. A sample notice appears at the end of this blog post.

Surely, registration at the WGA is cheaper, but it is far less valuable, and merely establishes the existence of the work on a particular date. The same thing will be established with a copyright registration certificate, and that certificate will be the keys to the courthouse in the unlikely and unfortunate event you think your script is infringed.
Marc Jacobson is an entertainment attorney in New York NY. He is admitted to practice in NY, CA and FL, is the founding chairman of the NYS Bar Association Section on Entertainment, Arts and Sports Law, and is listed in Best Lawyers in the USA, Chambers USA, and SuperLawyers.
© 2021 Marc Jacobson.

June 28, 2021

What is a Sub-publisher? Do I Need One?

By Marc Jacobson

With more songwriters administering their own catalogs, and the growth of the music publishing industry generally, songwriters and publishers should be aware of their responsibilities and opportunities for sub-publishing. It may be even more important to know the consequences of not having a subpublisher on your team.

To get the full picture, we need to review the basic streams of revenue in the music publishing industry. They are:

  • Mechanical income, which is income derived from copies of the composition which can be perceived with the aid of a mechanical device. The first mechanical royalty in the U.S. was paid in connection with "piano rolls", which only the player piano could "read", and in so reading make the composition perceptible. Today, mechanical income is generated from, among other uses, the manufacture and distribution of cassette tapes, vinyl records, downloads, and on demand streams. Non-interactive streams, such as internet or terrestrial radio, do not generate mechanical income. Mechanical income is typically collected in the U.S. by for on demand streams and outside the U.S. by a performing rights society. The Harry Fox Agency may also collect mechanical income for physical copies of the composition. In the U.S., the rate paid for mechanical royalties is fixed by Congress and the Copyright Royalty Board, in regular hearings.
  • Performance income, which is generally generated and paid by local collecting societies, such as performing rights societies. In the U.S. those societies include ASCAP, BMI, SESAC, and Global Media Rights (GMR). ASCAP and BMI are available for anyone to join, while SESAC and GMR are by invitation only. In most of the remaining countries of the world, each country has a single collecting society that collects performing rights. These societies, like their sister societies around the world, collect income in respect of public performances of musical compositions in each local territory, such as on television, radio, the internet, and live venues. In the U.S., no performance income is derived from the public performance of music in a movie theater, while in much of the rest of the world, royalties are due for the public performance of musical compositions in a motion picture theatrical release. The rates are set by tariff or negotiations, depending on the country and its legal structure. The principle is that in each territory, each competing business making the same use of music rights pays at the same rate as any other competitive business.
  • Print income, as you might imagine, is income in respect of printed copies of the composition. In the U.S., there are only a few larger companies that offer "sheet music" from a store or online. Often, only successful songs can find a "print deal" with the likes of Alfred Music, Hal Leonard Music, or other print publishers.
  • Synchronization income is income derived from the licensing of a musical composition to be used in timed relation with an audio-visual image. Think about music in a TV commercial or TV show, movie, or other audio-visual work. (Of course, when the audio-visual work is publicly performed, additional performance income is generated.)
  • Grand rights income is income in respect of the songs when used in a performance before a live audience and when the songs help advance the story. This is not an area in which revenue is common, as it only applies to those songs used in a live play. Grand rights are not implicated in concert performances.

A music publisher's job is to:

  • be sure that the compositions are properly registered at each collecting society, for performance and mechanical income, so that when revenue is earned in the local territory, it is paid out to the proper party, in the proper amounts.

  • to promote the composition in a manner which helps or assists the composition in generating revenue, increasing its value, and otherwise enhancing or increasing the revenue stream from the composition.

  • secure cover recordings of the composition in the local language, thereby also increasing revenue on the composition.

  • secure synchronization licenses for the composition, thereby increasing the revenue stream and the value of the composition.

  • generally, promote the words and music of each composition in an effort to generate more revenue.

Bearing in mind that copyright is territorial in nature, and each country that has a copyright law enacts its own laws, which differ from others, often in material ways, it makes sense that to properly administer and promote copyrights in many territories, a local publisher would be valuable in each territory. Major multi-national companies, like Universal Music Group, Sony Music Publishing, and Warner Chappell Music Publishing frequently have local subsidiaries in each territory assigned to administer and promote the repertoire to the local industry.

Publishing collecting societies typically have reciprocal agreements with other collecting societies around the world. If a composition is originally registered in the U.S. and with BMI, and is then broadcast in a local territory, and there is no local subpublisher, the local society will pay royalties to BMI, which in turn makes a distribution to the publishers and songwriters. Those distributions by BMI are scheduled throughout the year, and it may be an extended period before funds earned from foreign performances are actually paid to the publishers and songwriters in the original territory, if there is no local subpublisher.

If a local subpublisher is in place, then the local collecting society will pay the local subpublisher, which will in turn account to the original publisher directly. This allows the revenue to be received by the original publisher in a much shorter timeline.

Further, a U.S. based administrator, which relies solely upon the U.S. collection societies, loses the opportunity to have local people promote the composition in the individual territories around the world. A U.S. hit can spawn local covers in many territories, and lots of other potential exploitations.

Ultimately, a local subpublisher performs the same job as the original publisher, except that the subpublisher is focused on its local territory. The local subpublisher also expedites the payment of royalties to the publisher and songwriters. Indeed, for example, a German publisher may need a U.S. subpublisher as much as a U.S. subpublisher needs a German subpublisher.

Marc Jacobson is an entertainment attorney in New York, NY. He is admitted to practice in NY, CA and FL and is the Founding Chairman of the NYS Bar Association Section on Entertainment, Arts and Sports Law. He is listed in Best Lawyers in the USA, Chambers USA, and SuperLawyers.
© 2021 Marc Jacobson.

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