+1-800-997-1228
Questions & Answers

How will increased EB-5 securities compliance retroactively affect investors?

With the SEC and FINRA taking a closer look at EB-5 securities law, what will happen to individuals who previously accepted EB-5 finders fees without being registered as broker-dealers? Can the SEC take retroactive action against these people? Will there be any problems for the EB-5 investors who were recruited by non-broker-dealers?

Answers

  • Avatar

    J Bruce Weinman

    Immigration Attorney
    Answered on

    Most laws are not retroactive, but until the issue is actually decided: all we can do is speculate.

  • Avatar

    Ed Beshara

    Immigration Attorney
    Answered on

    The current feedback from the SEC and FINRA all indicate that any actions by a U.S. person which amount to the actions of a licensed broker/dealer cannot receive finders fees by the project.

  • Avatar

    John J Downey

    Immigration Attorney
    Answered on

    A new regulation prohibiting a practice should not have a retroactive effect, but I would not bet on it. We seem to have a fourth branch of government known as the bureaucracy. I think the popularity of the program and the large number of regional centers and projects may prevent them from a look back.

  • Avatar

    Oliver Huiyue Qiu

    Immigration Attorney
    Answered on

    If the SEC and FINRA enforce the rule regarding registered broker-dealers in EB-5 transactions, it will not be retroactive. The law was there even before most EB-5 brokers came into the business. It is just that the enforcement in EB-5 field has been lax, but now it could be different. If you are a broker-dealers, your better option is to seek professional advice from securities attorneys. As for the EB-5 investors, enforcement of this kind is unlikely to affect them.

  • Avatar

    Fredrick W Voigtmann

    Immigration Attorney
    Answered on

    I do not think anyone knows for certain the answers to these questions. What is clear is that there are compliance/enforcement actions pending and it stands to reason that most, if not all, of these have to do with activities by non-broker dealers or other individuals that have already taken place.

  • Avatar

    Robert J Ahrenholz

    Securities Attorney
    Answered on

    Investors may be impacted both directly and indirectly if securities are sold by unregistered broker-dealers. Under the Securities Exchange Act of 1934, an investor that purchases securities form an unregistered b/d may have the right to rescind the transaction with the issuer. Also, if the issuer has a contingent liability to repurchase securities, the issuer may have accounting issues regarding the disclosure of that liability. Also, the various state security laws would have to be considered, and many states would also allow for rescission or for damages if the security has been resold. Generally, no actions will be taken against EB-5 investors, but they essentially have a put right regarding the securities purchased for some period of time. As noted, if an investor retains his/her securities, the issuer of those securities may have a liquidity problem in rescinding any sales, thus potentially causing harm to non-rescinding investors. As far as the unregistered b/ds go, the SEC and the states can bring an action against them and can seek a variety of remedies.

  • Avatar

    Salvatore Picataggio

    Immigration Attorney
    Answered on

    They may be subpoenaed by the SEC, but any actual SEC actions are all speculative at this time.

  • Avatar

    Robert Cornish

    Securities Attorney
    Answered on

    There are a host of issues. Your notion of retroactivity implies that EB-5 activity was exempt from the securities laws, which is 100 percent incorrect. The securities laws have always applied, and it is incumbent upon those involved in the capital markets subject to U.S. law to comply with U.S. law. The SEC is supposedly performing investigations of many people who have received finder's fees without being registered, which most likely means they were operating as unregistered broker-dealers or unregistered agents. These finders will likely have to return their fees to the investors' fund (not the regional center itself). The main issues you have with these registration matters relate to the concept of "rescission." If someone is involved in the placement or sale of a security without proper registration, the investor in many instances can demand rescission of their investment for the full amount invested. This is the case not only with the SEC, but state securities regulators as well. And given the SEC's reach in matters overseas, it is my opinion that it is a matter of time before overseas finders are the subject of scrutiny.

Add your comment

Use a Facebook account to add a comment, subject to Facebook's Terms of Service and Privacy Policy. Your Facebook name, photo & other personal information you make public on Facebook will appear with your comment.