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USCIS-SEC Call Highlights Complexities of EB-5 Program

U.S. Citizenship and Immigration Services (USCIS) and the Securities and Exchange Commission (SEC) invited interested individuals to participate in a stakeholder teleconference on April 3, 2013, to discuss the EB-5 immigrant investor program. During the call, subject matter experts from the SEC’s Divisions of Corporate Finance, Trading and Markets, Investment Management, and Enforcement discussed securities law compliance in the context of EB-5 regional centers and investments.

Among other things, an SEC representative noted that the definition of a "security" is broad and includes partnership interests. She said it is likely that an EB-5 investment is a security. Offers and sales of securities must be registered unless an exemption applies. Whether registered or not, federal securities law still applies, especially the antifraud provisions, she noted.

Regarding broker-dealer requirements, another SEC representative noted that if a person facilitates EB-5 investments in a U.S. business, he or she is probably engaged in brokerage activities. This means that the person would be subject to the broker-dealer rules, even if the investment is outside the United States. A case-by-case analysis is necessary to determine whether someone needs to register as a broker-dealer. For example, if you solicit the investment or get paid based on the investment, you are a broker-dealer. The same is true for advertising. If you are paid for finding investors, or have a "salesman's stake," you might be subject to broker-dealer rules.

If you are not a broker-dealer, you might still be an investment advisor if you are providing investment advice for compensation, another SEC representative noted. Depending on how regional centers are structured, they may have to be registered under the Investment Company Act (ICA), which is very broad. Any issuer that invests or trades in securities through pooled investors may be an investment company and be required to register under the ICA. There are exemptions, so the SEC recommended getting good professional advice from a qualified attorney.

The SEC did not comment on specific scenarios raised by participants or on particular EB-5 practices to avoid. The SEC advised listeners to seek advice from a securities attorney on specific issues.

RECORDING OF CALL (DROPBOX)

USCIS OMBUDSMAN'S EXECUTIVE SUMMARY

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