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What is the role of a RIA versus a broker-dealer in EB-5?

What is the role of a registered investment advisor versus a broker-dealer in EB-5? Can RIAs help investors evaluate EB-5 projects and recommend selected projects to them to collect a finders fee? Or can only broker dealers perform this role? It is quite confusing when reading the SEC requirements.

Answers

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    Ed Beshara

    Immigration Attorney
    Answered on

    A securities attorney will be able to offer further assistance. Based upon our experience, the registered broker dealer can refer investors and receive a finders fee, the registered investment advisor can offer business and investment advice to the investor and receive a fee, and the EB-5 project can also offer opinions on the business viability of their own projects.

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    Salvatore Picataggio

    Immigration Attorney
    Answered on

    The involvement of a broker-dealer is more for the actual marketing and selling of the project to investors, and how those parties can receive payment for their work. For only a review of the project, an investment advisor can be involved.

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    John J Downey

    Immigration Attorney
    Answered on

    SEC regulations are confusing, especially since they just recently became interested in EB-5. I would advise that to be safe rather than sorry, use a registered broker dealer.

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    Robert Cornish

    Securities Attorney
    Answered on

    Your question would require a very lengthy answer dependent on a number of factors. But in general: RIAs do not have some special provision that allows them to act as finders. If any entity or individual is a finder, then they are subject to broker/dealer regulations both federally and in the states where the activity is conducted. An RIA can, however, if registered properly and when complying with all of the SEC regulations (asset custody, codes of ethics, personal trading, disclosure of conflicts, etc.) can certainly recommend investments and charge a fee for that service. A broker/dealer can generally offer investment advice "incidental" to their work as broker/dealers. Recommending an EB-5 investment for a finder's fee would not fall under this incidental exception. All has to be done in compliance with applicable state securities regulation, which differs from state to state.

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    Steffanie J Lewis

    Immigration Attorney
    Answered on

    A broker is licensed to transact securities for another person. A dealer is licensed to purchase securities to sell to another person. An investment adviser is registered with the federal or state securities Commission or Agency as a business to give advice about securities. You would need to compensate for those services. However, be careful if the issuer, EB-5 enterprise, is paying for the services and you are not; an unethical person may be selling you on a program to obtain the fee rather than to provide you with the best advice.

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