For most EB-5 projects, regulatory concerns typically relate to the period between pre-marketing and depositing funds in escrow. But during that time, multiple government agencies, regulatory entities and laws play a role.
As Invest In The USA reports in the January issue of its magazine, “Regional Center Business Journal,” the investor life cycle can have various levels of complexity when it comes to regulatory considerations. Before, during and after the investment stage of an EB-5 project, a number of government agencies and groups can become involved. In addition to U.S. Citizenship and Immigration Services, regulatory oversight can include:
- S. Department of State.
- S. Customs and Border Protection.
- USCIS Ombudsman.
- S. Department of Commerce.
- S. Department of Health and Human Services Office of Inspector General.
- S. Securities and Exchange Commission.
- S. Immigration & Customs Enforcement.
- State securities regulators.
- Financial Industry Regulatory Authority.
Monitoring Marketing Efforts
A portion of the investor timeline that should be of particular concern is the pre-marketing phase. Special attention should be given to selecting the individuals or companies to be involved in marketing efforts and to monitoring the ways in which marketing efforts are conducted.
Under Section 15 of the Securities Exchange Act of 1934, anyone engaging in securities transactions typically must register as a broker-dealer with the SEC. Using broker-dealers who are not registered — including the use of “finders” in foreign countries — can result in serious consequences for an EB-5 project. The risks of using foreign finders include possible regulatory sanctions, including criminal penalties, fines and loss of exemptions in securities registrations.
If an EB-5 project is unsuccessful or if investors ultimately do not receive a U.S. permanent resident card, commonly known as a green card, fraud may be alleged. In some cases, investors may claim that they did not receive sufficient disclosure regarding important information and risks relating to offerings. They also may claim that a project or issuer did not act according to the disclosures.
The number of civil enforcement actions against regional centers for fraud has increased recently, with one criminal indictment to date.
Multiple regulations and laws apply to the EB-5 immigrant investor program. An EB-5 attorney can assist with understanding the many complexities of applicable U.S. securities and immigration law. To schedule a consultation with an attorney, please contact David Hirson & Partners, LLP, at 1-949-383-5358.