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What are the alternatives to an EB-5 broker-dealer?

With few EB-5 broker-dealers registered with FINRA (nor even FINRA providing a list of same), is it prudent to engage an immigration law firm that specializes in its representation of the developer of a large direct express investment project? Can they perform some of the same functions that a broker-dealer would perform? What other alternatives are out there?

Answers

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    Julia Roussinova

    Immigration Attorney
    Answered on

    Immigration attorneys may not generally perform functions of broker-dealers. If you are looking for EB-5 investors, you should work with a licensed broker-dealer or foreign brokers.

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    Michael A Harris

    Immigration Attorney
    Answered on

    Immigration attorneys, even board certified specialists in immigration law , need to be careful in referring their clients to EB-5 commercial projects in the fashion that a broker-dealer does. A FINRA broker-dealer is allowed to accept a finder fee in connection with their placement of an investor with an investment offering. An immigration attorney can accept a legal fee from a client. But when a referral fee is paid by the developer to an attorney who also represents the investor (who may be paying a legal fee as well), this may be a conflict of interest for the attorney under his or her state bar rules of professional responsibility. Other alternatives might be working with a foreign migration agent who may be able to market to foreign investors.

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    Ed Beshara

    Immigration Attorney
    Answered on

    The questions you propose require the advice and direction of an experienced SEC attorney who has expertise in the EB-5 area. It is important to realize that the services provided by an EB-5 immigration attorney will usually be different from the services provide by a broker-dealer.

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    Kyle Barella

    Immigration Attorney
    Answered on

    EB-5 often involves a team of professionals. With the SEC paying more attention to EB-5 projects, it is important to remain compliant. If you are looking to pay finder fees to U.S. citizens or permanent residents, then they will need to hold the proper securities license and be registered with a broker-dealer firm. Investors and projects are now utilizing the services of an EB-5 investment advisor to review projects (we have one in-house). This helps to ensure compliance.

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    John Tishler

    Securities Attorney
    Answered on

    The SEC has been clear about its views of the need for persons who perform capital finding services and who receive transaction-based compensation (that is, a success fee) to be registered as broker-dealers, with the only potential exception being brokers that have no physical presence in the United States. It is less clear that the SEC can prevail on such a stern view in court. It is safe to say that persons who offer capital-raising services to issuers or to investors while physically in the U.S. are at significant risk for SEC enforcement actions and private litigation. There are a number of broker-dealer firms active in the EB-5 space and more with applications are at FINRA. Business models, services offered and capacity vary amongst participants. I can provide you referrals if your posting did not produce direct offers from broker-dealers. An immigration firm cannot legally perform the services of a broker-dealer. The exception in SEC Rule 3a4-1 for attorneys will not apply to attorneys that are receiving compensation directly tied to finding or referring investors. In short, in the view of the SEC Staff, the only legal way to pay transaction-based compensation for EB-5 capital is to pay such compensation to a registered broker-dealer or to pay such compensation only to foreign brokers that do not engage in business while physically present in the United States.

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