How can regional center staff be engaged in EB-5 project selling?

There are several key points, but first, selling projects in the U.S. is generally prohibited, whereas marketing projects overseas generally provides broader scope. Second, it also depends on which SEC exemption was used, assuming they are unregistered securities. Since this is complicated, it is advisable to read this guidance from the SEC. The SEC Office of Investor Education and Advocacy is issuing this Investor Bulletin to educate investors about investing in unregistered securities offerings, or private placements, under Regulation D of the Securities Act. What is a private placement? It is a securities offering that is exempt from registration with the SEC and is sometimes referred to as a private placement or an unregistered offering. Under federal securities laws, a company may not offer or sell securities unless the offering has been registered with the SEC or an exemption from registration is available. Generally speaking, private placements are not subject to some of the laws and regulations that are designed to protect investors, such as the comprehensive disclosure requirements that apply to registered offerings. Private and public companies engage in private placements to raise funds from investors. As an individual investor, you may be offered an opportunity to invest in an unregistered offering. You may be told that you are being given an exclusive opportunity. The opportunity may come from a broker, acquaintance, friend or relative. You may have seen an advertisement regarding the opportunity. The securities involved may be, among other things, common or preferred stock, limited partnerships interests, a membership interest in a limited liability company, or an investment product such as a note or bond. Keep in mind that private placements can be very risky and any investment may be difficult, if not virtually impossible to sell.

The general rule is that anyone selling investment stocks must take a securities broker license examination and obtain a license as a broker-dealer in compliance with either state or federal securities laws. There are exemptions to this rule, but none is specifically designated for regional center employees. The rules and regulations of broker-dealer are generalized in nature and the boundary lines are not clearly defined. Therefore, it is highly advisable that you consult a securities attorney for effective compliance and guidance to avoid violating the law, even unwittingly.

Most EB-5 offerings are unregistered, but the project developers and regional centers avail themselves of one or more exemptions under SEC regulations. These exemptions relate to offering the security only to accredited investors and/or only offering to offshore investors. Most regional centers now either have a registered/licensed broker-dealer on staff or contract with one to handle their offerings. Stay away from any regional center project that does not or that appears to be skirting securities laws.

Best to check with the SEC on what you can and cannot do.

If you are a regional center you should retain securities counsel, as the SEC is looking very closely at the conduct of regional centers. Employees must be licensed if they are going to receive transaction-based compensation. However, I caution you to get proper counsel, as the consequences can be serious. If you are a regional center you are an issuer and will be responsible for any representations made by your employees.