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What licenses are required to operate an EB-5 regional center?

I would like to confirm to what extent the SEC requires registration of a regional center in general, on individual projects, and/or of individuals. Further, is there any specific SEC (or other) licensing required to operate? Beyond the requirement by the SEC, is it advisable to seek licensing and/or registration if for no other reason than as a best business practice? If so, what licenses should we seek?

Answers

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    Ed Beshara

    Immigration Attorney
    Answered on

    The regional center is designated by the USCIS and not by the SEC. Furthermore, the SEC does not give permission to the regional center to operate. However, the SEC does control the finders fees paid by the regional center or the EB-5 project. That is, a licensed broker/dealer can accept finders fees paid by the project.

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    Fredrick W Voigtmann

    Immigration Attorney
    Answered on

    There is no license requirement to operate an EB-5 regional center. Some regional centers choose to work with registered broker/dealers who may have various SEC licenses and approvals. Any offering of a security (EB-5 offerings are securities) is regulated by the SEC; whether or not you or your partners require a license will depend upon the specific activities contemplated. It is best to seek specific advice from a securities lawyer.

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    Barbara Suri

    Immigration Attorney
    Answered on

    The securities laws of the United States require that brokers, dealers and their representatives, as well as investment advisers and their agents, be registered with the U.S. Securities and Exchange Commission (SEC) and with the appropriate U.S. state securities or “blue sky” laws. If your regional center adviser is a SEC registered broker/dealer representative (most, currently, are not), you, the investor, are protected by conduct rules for registered representatives mandated by the SEC, state securities laws, and FINRA (Financial Industry Regulatory Authority). Aside from the above, licensing requirements would depend upon the purpose of the particular regional center project.

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    Salvatore Picataggio

    Immigration Attorney
    Answered on

    The regional center entity needs to be incorporated and obtain designation from USCIS through the I-924 application process. SEC registration would depend on the relationship between the regional center and its New Commercial Enterprises.

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    John J Downey

    Immigration Attorney
    Answered on

    So far, the SEC has only been interested in the offerings of an EB-5 project - do unlicensed people act as brokers, advising investors on the pros and cons of investing in the stock subscription. What the future holds I can only guess.

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    Robert Cornish

    Securities Attorney
    Answered on

    The SEC has no specific guidelines on regional centers per se. But what you do have to comply with are (a) offering exemptions and the forms required to claim them, (b) investment adviser registration and (c) broker-dealer registration. Most EB-5 investments are structured as private equity type fund vehicles. Depending on to whom your investments are offered and where, you may be able to claim an exemption from your fund being registered. This generally falls into something called Regulation D. There are also many people who believe, in my view incorrectly, that Regulation S applies in the EB-5 context. If you think you will never, ever have an investor who is physically in the United States but not a citizen invest, do not rely on Regulation S. The next thing to consider is whether your regional center or fund general partner is acting as an "investment adviser" or can claim an exemption. This is not an easy task with the limited information you have provided. In short, there is a melding of state and federal regulation that will require you to speak with counsel on your specifics. In some instances, a GP may need to register with the state in which it is based as an investment adviser. In other cases, it will also include where people may live within the United States. Even if you are not required to register as an investment adviser, you will be subject to it. The biggest issue in EB-5 is whether the GP is deemed to have "custody" over client investments. Given how this term is interpreted, it is recommended that those running EB-5 funds hire an independent fund administrator to guide them. Then, there is the issue of broker/dealer registration. If you are paying anyone to place your deal with others, you are likely falling into broker/dealer territory. The key here is to find a broker/dealer to serve as a "distributor" so you do not have to form your own broker/dealer. There are limited exemptions for broker/dealer registration, but sales practice issues are the ones that are most likely to be raised by disgruntled investors. In that regard, using a broker/dealer to distribute your fund makes your work a lot easier. None of this deals with the registration issues in other countries. One problem at present with EB-5 is the placement of these deals in Western Europe, where there is a protocol called "AIFM." AIFM may prevent you from placing the fund in certain European countries unless you comply with very onerous reporting and registration rules. And of course, you always have to comply with the securities laws of the countries in which your deal is placed.

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