SEC Charges EB-5 Fund Operators and Finders - Seyfarth Management Alert, July 13, 2015

"The Securities and Exchange Commission (the “Commission” or “SEC”) has become increasingly active in enforcing alleged violations of U.S. securities laws arising under the EB-5 Immigrant Investor visa program.  EB-5 transactions — which are designed to result in the issuance of the much-coveted U.S. “green card” to foreign investors (and certain of their immediate family members) who place at least $500,000 of capital at risk in a U.S. business which creates 10 or more jobs — typically involve the issuance of securities.

Although immigration legislation creating the EB-5 program was first enacted in 1990, SEC enforcement activities in connection with EB-5 financings only began in earnest during the last few years.  These new developments are noteworthy because — in addition to allegations of garden-variety fraud leveled against a small number of participants — the Commission has begun to focus on the full array of securities laws and rules, charging persons with the sale of unregistered securities and with acting as broker-dealers and investment advisors without proper registration.

... The SEC’s actions against various participants in EB-5 transactions make it clear that, whether or not an offering involves alleged fraud, offerors of EB-5 project securities and other persons participating in the promotion of such projects must be careful to comply with all aspects of the applicable securities laws, including either registering or securing exemptions for the offering of the securities and complying with the broker-dealer and investment adviser rules." - Gregory L. White, Christopher F. Robertson, Mark A. Katzoff - Seyfarth Shaw LLP, July 13, 2015.