Bway Producers Might Violate Law - and Not Even Know It!

[zainmax]

Posted: 1/10/19 at 8:43pm

Interesting piece @ Forbes about Broadway fundraising. Anyone see investment opps. on Facebook or Twitter?

https://www.forbes.com/sites/marchershberg/2019/01/10/broadway-financing-practice-may-violate-law/#7da140a439bb

Also, thoughts, HoganHero?

[LightsOut90]

Posted: 1/10/19 at 9:31pm

It is incredibly annoying that broadway productions operate like stock offerings (vomit) 

[itsjustmejonhotmailcom]

Posted: 1/10/19 at 10:14pm

zainmax said: "Interesting piece @ Forbes about Broadway fundraising. Anyone see investment opps. on Facebook or Twitter?

https://www.forbes.com/sites/marchershberg/2019/01/10/broadway-financing-practice-may-violate-law/#7da140a439bb

Also, thoughts, HoganHero?"

Most lead producers will stop working with a co producer if they find they are soliciting investors. There are certainly co pros that send cold emails, post online etc, but not the more established co producers both know better and don't need to.

[zainmax]

Posted: 1/10/19 at 10:16pm

I'm curious what happens to the bad apples. Do they simply work for other leads?

[CapnHook]

Posted: 1/10/19 at 10:29pm

I hope Ken Davenport is registered!

[zainmax]

Posted: 1/10/19 at 10:35pm

CapnHook said: "I hope Ken Davenport is registered!"

Haha! As a lead producer, I don't think that he needs to be concerned. But, I'm no securities lawyer!

[HogansHero]

Posted: 1/10/19 at 10:36pm

well, just off the top of my head... yes, there is a right way and a wrong way to do everything, and in the theatre there are plenty of people who do things the wrong way. So here we have an uncritical article that does a book report on a law review article written by a kid who graduated from law school a few months ago, that likely oversells  his thesis by several degrees. But it's all good. 

@LightsOut90 do you have an alternative means of financing multi-million dollar shows to suggest? 

Updated On: 1/10/19 at 10:36 PM

[LightsOut90]

Posted: 1/10/19 at 10:52pm

the thing that just bothers me is the accredited investor rule

 

[HogansHero]

Posted: 1/11/19 at 12:57am

can you explain what about it bothers you? is it that you think unsophisticated people should be allowed to lose money they can't afford to lose freely in an unregulated environment? Or is it something else? I realize there is a variant of libertarianism that believes this.

[kdogg36]

Posted: 1/11/19 at 8:52am

HogansHero said: "I realize there is a variant of libertarianism that believes this."

I acknowledge that I fall into that category. In a world with daily drone murders and people spending life in prison for possessing plant products, this doesn't even register as a problem for me, but in theory I think people should be able to do stupid things with their money if they want to. In almost all states adults can spend all of their savings on lottery tickets if they choose to; I don't see why this should be different, as long as producers aren't actually lying to them about the risks.

[HogansHero]

Posted: 1/11/19 at 10:07am

well, not to go off on this tangent too far, but the rationale for the rule in this context is that these securities are not reviewed by the SEC (as regulated securities are) so there is no check on whether producers might be lying. That said, there are folks, maybe you, who don't think the government should tell an elderly couple living on social security that they cannot invest the food money on a Broadway show. (To take it to the extreme. )

[haterobics]

Posted: 1/11/19 at 10:25am

I think most people know what they're doing, just a matter of if they're not going to get called out on it, who cares?

[HogansHero]

Posted: 1/11/19 at 11:22am

haterobics said: "I think most people know what they're doing, just a matter of if they're not going to get called out on it, who cares?"

I assume you are referring to the people referred to in the article as co-producers. FWIW I spoke to a former colleague who does not think there is anything actionable here except at the margins and those folks are likely to be one hit wonders. 

[antonijan]

Posted: 1/11/19 at 2:54pm

Did Alexander Hamilton have anything to do about this?

[zainmax]

Posted: 1/11/19 at 2:57pm

HogansHero said: "haterobics said: "I think most people know what they're doing, just a matter of if they're not going to get called out on it, who cares?"

I assume you are referring to the people referred to in the article as co-producers. FWIW I spoke to a former colleague who does not think there is anything actionable here except at themargins and those folks are likely to be one hit wonders."

What do you mean? There are only a few bad apples out there?

[zainmax]

Posted: 1/11/19 at 2:58pm

antonijan said: "Did Alexander Hamilton have anything to do about this?"

Not sure what the connection is to Hamilton, other than the success of Hamilton getting more people interested in investing/producing.

[HogansHero]

Posted: 1/11/19 at 3:51pm

zainmax said: "What do you mean? There are only a few bad apples out there?"

Well we all know there are a few bad apples out there. However I think it is more a case of dumb apples than bad ones (though there are of course people who have tried to scam etc.) There are unquestionably people who are saying things they shouldn't either because they are not authorized or because what they are saying is wrong. There are also folks doing things on social media and the like that just don't get the nature of what's involved. The thesis of the paper, however, is that co-producers are broker dealers and that's not really possible because they are not selling anything. This is an over-simplification but they are in the nature of bird dogs who are bringing potential investors into contact with a producer, much like an agent might introduce a playwright to a producer. That's not being a broker dealer, as I understand it. The exceptions, I think, are people who (mostly out of ignorance I'd like to think) are not structuring what they do correctly. This is not something the SEC is going to look at and say OMG we have to get on this! If anyone here sees this differently, I'd be interested in reading. 

[Niles Silvers]

Posted: 1/11/19 at 5:45pm

Rules were put in place to not only protect the public from scam artists but to protect the entity from lawsuits by burned and angry investors.  I once tried to buy stock in the original offering of a famous company and was rebuffed because I answered a question truthfully about not being a very experienced investor at the time.  People are all for laissez faire government until something untoward happens to them.  

[zainmax]

Posted: 1/11/19 at 6:30pm

Niles Silvers said: "Rules were put in place to not only protectthe public from scam artistsbut to protect the entity from lawsuits by burned and angry investors. I once tried to buy stock in theoriginal offering of a famous company and was rebuffed because I answered a question truthfully about not being a very experienced investor at the time. People are all for laissezfaire government until something untoward happens to them."

Do co-producers actually do any due diligence to see whether or not investors are sophisticated or accredited? Or, are the forms simply accepted?

[itsjustmejonhotmailcom]

Posted: 1/11/19 at 7:00pm

zainmax said: "Niles Silvers said: "Rules were put in place to not only protectthe public from scam artistsbut to protect the entity from lawsuits by burned and angry investors. I once tried to buy stock in theoriginal offering of a famous company and was rebuffed because I answered a question truthfully about not being a very experienced investor at the time. People are all for laissezfaire government until something untoward happens to them."

Do co-producers actually do any due diligence to see whether or not investors are sophisticated or accredited? Or, are the forms simply accepted?"

A good co-producer shouldn't make an intro to an investor they have a valid reason to believe isn't accredited, but ultimately that is up to the lead producer to decide and is mostly based on the questionnaire they fill out that is part of the investment documents. 

[temms]

Posted: 1/11/19 at 7:15pm

They can also raise funds from a limited number of non-accredited investors so long as they can show sophistication that makes them able to assess the risk of the offering - a college degree, other investment or business experience, etc. But its a fixed number - something like 30 or thereabouts. So common folk arent completely shut out from investing, but the lead producer needs to be smart about using the limited number available to him/her.

[zainmax]

Posted: 1/11/19 at 7:19pm

Are there any non-accredited real investors on Bway? I would think that the producers play with the big dogs.