The government is getting tough on alleged fraud in the EB-5 Immigrant Investor Program. In recent months, the U.S. Securities and Exchange Commission has initiated legal action against both individuals and companies for the ways in which they have solicited foreign investors under the program. Observers expect the SEC to continue ramping up its prosecution efforts against broker dealers, issuers and regional centers exhibiting questionable behavior in EB-5 matters.
Although the recent cases involve allegedly egregious circumstances related to the improper handling of investor funds for personal use, the relevant securities laws potentially can be used to punish less flagrant offenses. Simply making misstatements due to negligence could result in liability under the law; an experienced EB-5 attorney can further explain the laws and how they may apply to your specific situation.
What Are the Most Common Violations?
Individuals promoting EB-5 projects should understand that the investments they offer to foreign citizens often are structured as securities that are governed by state and federal law. Specifically, securities as defined by U.S. law can include investment contracts, which the U.S. Supreme Court has interpreted as transactions in which someone invests money and is led to believe that profits will result from the efforts of a third party. Within that definition, most EB-5 investments qualify as a type of security; your EB-5 attorney can advise you on your specific investment.
Several types of cases are among those causing the most legal trouble for regional centers and issuers:
- Failing to divulge material facts about investments.
- Making false statements about how a business or a certain use of EB-5 funds is expected to perform.
- Withholding critical information from offering documents.
- Misappropriating EB-5 funds for personal uses.
- Diverting or misusing investor funds for projects that are not revealed to investors.
Decrease your Risk by Consulting with an EB-5 Attorney
Even regional centers and issuers that abide by the law may feel the effects of the SEC’s increase in enforcement efforts over the next year. It’s critical to consult with an experienced EB-5 attorney to ensure that you understand how to protect yourself. To speak with a qualified EB-5 attorney about how the SEC’s increased enforcement actions may affect you, contact the Law Offices of David Hirson & Partners, LLP at (949) 383-5358.