Arranging and participating in meetings with the issuer
A Tier II finder would need to satisfy disclosure and
recordkeeping requirements, and the arrangement would be
required to be documented in an agreement. The finder would
not be permitted to:
• Be involved in structuring the transaction or negotiating
the terms of the investment.
• Handle funds or securities or have the power to bind
the issuer or investor.
• Participate in the preparation of any sales materials.
• Perform any independent analysis of the sale.
• Engage in any due diligence activities.
• Assist or provide financing.
• Provide advice as to the valuation or financial
advisability of the investment.
WHAT’S INCLUDED IN THE FINDER’S
EXEMPTION FOR EB-5?
of the 1934 Act, all in support of objectives to facilitate capital
The SEC’s proposal would create two types of finders, both
of which appear to be of limited use in the context of EB-5
Tier I finders would be limited to providing the contact
information of potential investors in connection with a single
transaction by a single issuer within a 12-month period and
may not solicit investors on behalf of an issuer. This proposal
is not a sea change to current practice,
as it essentially codifies the SEC’s
often criticized guidance in its much-
maligned Paul Anka No-Action Letter,
1991 SEC No-Act. LEXIS 925 (July
24, 1991). This is more or less a safe-
harbor for mailing lists providers to the
Tier II finders would be allowed to
solicit investors, but their activities
would be restricted to:
Issuers eligible to hire a finder would be those, among others,
those engaged in an exempt offering not involving general
solicitation under Rule 506(c). The proposed exemption would
apply only to natural persons, and not to entities. The utility
of this proposed exemption initially appears quite useful, but
a closer look tells a different story. There does not appear to
be any safe harbor under this proposal to address the nuances
of Regulation S transactions. Immigration agents and other
intermediaries outside of the United States could arguably be
prohibited from handling “funds,” which could arguably include
administrative fees. Such individuals in practice also would
tend to discuss their views of the actual offering with investors,
which would render this exemption useless.
This proposed exemption also must be viewed in the context
of the prohibition of sales materials preparation. Would the
prohibition on due diligence preclude
a finder from obtaining a prepared
report or analysis? Equally important
would be the willingness of individuals
who are finders to submit to potential
SEC scrutiny without the protection of
a corporate veil while subject to OFAC
and other foreign currency transfer
"Tier I finders would
be limited to providing
the contact information
of potential investors in
connection with a single
transaction by a single
• Identifying, screening and
• Distributing offering materials.
• Discussing the contents of offering materials
without advising on valuation or attractiveness of the
WITH SEC’S PROPOSED
The lack of clarity of these proposals is evident. Their
complexity vis-à-vis state securities laws makes their adoption
even more problematic. For example, under Section 201(a)
of the Massachusetts Uniform Securities Act, it is illegal for
anyone to transact business in Massachusetts as a broker-
dealer or agent unless the person is registered under the