SEC Charges Companies with Unregistered Broker-Dealer Activity Related to EB-5 Investment

On June 23, 2015, the Securities and Exchange Commission (SEC) charged two companies with unregistered broker activity related to EB-5 visa investments. SEC alleged that the companies brokered more than $79 million in EB-5 investments by acting as unregistered brokers. The companies allegedly used their website to solicit EB-5 investors and promised to help investors choose the right regional center to invest in. The companies allegedly directed the investors to the same handful of regional centers which paid them commission of about $35,000 per investor once USCIS approved the investor’s EB-5 petition.

The companies did not admit or deny the allegations when they settled the charges. They agreed to be censured and to cease and desist from committing or causing similar violations in the future. They also agreed to administrative proceedings to determine whether they should be ordered to return their allegedly ill-gotten gains, pay penalties or both based on their violations.

The EB-5 visa program affords foreign nationals who invest $500,000 or $1 million (depending on the structure of the investment) and create U.S. jobs the opportunity to obtain permanent residence. The manner in which an EB-5 investment is structured is very important not only to secure a successful immigration result, but also to avoid violations of relevant federal and state laws.

Two important lessons can be taken away from the SEC charges discussed above. First, companies that solicit EB-5 investments should consult with experienced legal professionals to ensure that they are not acting in violation of SEC and other laws.  Second, because of the detailed and complex nature of the EB-5 visa application, it is not recommended that individuals pursue EB-5 without the close assistance of an experienced team of professionals.

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