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24oz · 04-26-2007, 09:34 AM

Call me lazy, but I posted a request to check globalfilmfund in another forum and this is what they answered:

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The only fact that they are offering such structure and the high referral commissions should already be a red flag.

But let's get into investments clubs legislation

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Are investment clubs regulated by the SEC?

Investment clubs usually do not have to register, or register the offer and sale of their own membership interests, with the SEC. But since each investment club is unique, each club should decide if it needs to register and comply with securities laws.

We'll discuss two securities laws that might apply to investment clubs:

* Under the Securities Act of 1933, membership interests in the investment club may be securities. If so, the offer and sale of membership interests could be subject to Federal regulation.

* Under the Investment Company Act of 1940, an investment club may be an investment company, and regulated.

When does an investment club have to register the offer and sale of its membership interests with the SEC under the Securities Act of 1933?

Since the Securities Act requires the registration of the offer and sale of most securities, the investment club must first decide if its membership interests are "securities." Generally, a membership interest is a security if it is an "investment contract."

Generally, a membership interest is an investment contract if members invest and expect to make a profit from the entrepreneurial and managerial efforts of others.

If every member in an investment club actively participates in deciding what investments to make, the membership interests in the club would probably not be considered securities. If the club has any passive members, it may be issuing securities.

Sometimes offers and sales of securities do not have to be registered because they are exempt under the law. For example, a non-public offering is exempt.
When does an investment club have to register with the SEC as an investment company under the Investment Company Act of 1940?

An investment club must register with the SEC as an investment company under the Investment Company Act of 1940 if all of the following three conditions apply:

1. the club invests in securities,

2. The club issues membership interests that are securities (see above), and

3. The club is not able to rely on an exclusion from the definition of investment company.

For example, a "private investment company" may not need to register with the SEC. To qualify, an investment club

* must not make, nor propose to make, a public offering of its securities, and

* must not have more than 100 members.

How do you know if an investment club is making a public offering?

An announcement that a club is looking for new members might be considered a public offering, but this is determined on a case-by-case basis. An attorney with experience in securities law can help the club determine if its membership interests are securities, and if the club is making a public offering of those securities.
Do securities laws apply to a person who provides advice to an investment club?

If the adviser is compensated for providing the advice regarding the club's investments, the adviser may need to register according to the Investment Advisers Act of 1940. Also, if one person selects investments for the club, that person may have to register as an investment adviser.

In general, a person who has $25 million or more in assets under management is required to register with the SEC under the Investment Advisers Act of 1940.

A person managing less than $25 million may be required to register under the securities laws of the state or states in which the adviser transacts business.

Both the Investment Advisers Act of 1940 and many state laws do not require registration for advisers with a small number of clients.
Source: Investment Clubs and the SEC

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So this offering as is presented MUST be registered with the SEC under the securities law of 1933, reason:
In this program the members are going to be paid an interest (membership interest) which they are going to obtain from the entrepreneurial and managerial efforts of others, which is exactly one of the reasons why an Investment Club MUST be registered as you can see in the above extract from SEC website.

In the other hand the program manager has just changed the restriction of "A private investment club does not need to be registered is does not exceed the 25 Million", this is completelly FALSE as you can see in the above source from the SEC. because the 25 million restriction applies to the investment club's adviser, if the club's investment adviser manages funds in exceed of 25 million, he needs to be registered if not he doesnt need, but under no cirscunstance this restriction applies to investment club's, they have changed the restriction to look legit.

So as you can see from the above the program is illegal by all means in the US, so even if the program manager has a good business plan (which I doubt after seeing his manipulation of the law to look legit, the programs structure and the return) investors are in high risk of having the funds frozen.