EB5 Investors Magazine Volume 1 Issue 1 | Page 20

Continued from page 19 Summary of Exemptions Under Rule 506 & Reg S Rule 506 Reg S Amount that may be raised No limit No limit Number of investors allowed Up to 35 unaccredited investors; No limit on “accredited” investors No limit Investor qualifications Unaccredited investors must be “sophisticated” None Disclosure requirements 4 No disclosures required for “accredited” investors; Detailed disclosures required if investors include unaccredited investors None, other than legends Filing Requirements Form D, filed electronically, within 15 days of first sale of the securities in an offering None General solicitation and advertising Prohibited; All sales must be private 5 Permitted so long as no “directed selling efforts” are made in the United States Resale restrictions Yes Yes State securities laws Preempts state securities laws, but states are permitted to require notice filings and charge a fee Must register/qualify securities with applicable states or find an exemption Conclusion The EB-5 Regional Center Program is an exciting mechanism for promoting investment in the American economy and the creation of jobs while providing qualified immigrants with a chance to obtain a green card in the United States. Nevertheless, Regional Centers must be aware of U.S. federal and state laws affecting securities offerings and take proper steps to comply with those that apply to them, as the cost of failing to do so could be catastrophic. There exist definite strategies for Regional Centers to minimize their exposure to liability from securities-related claims, whether those claims arise from government, or investors. Regional Centers should carefully control the securities offering process, including exercising careful oversight of those parties conducting and/or assisting with the offering, to ensure a successful and legal EB-5 capital raise. Jor Law, Esquire, is a business and corporate attorney and a founding shareholder of the Los Angeles law firm of Homeier & Law, P.C. Copyright © 2013 All Rights Reserved. No legal advice is provided in this article. Please consult your own professional advisors for advice applicable to your particular circumstances. Jor Law, Esq. 1. From SEC website, as of January 31, 2013: http://www.sec.gov/about/laws. shtml 2. Note, however, that the preemption does not affect all types of securities or all types of person. 3. Additionally, while an issuer may not have to register or qualify the securities under the various states’ blue sky laws, it may still be required by some states to pay certain fees and make notice filings. 4. Anti-fraud provisions of various securities laws still apply. 5. The JOBS Act lifts the prohibition on general solicitation and advertising for Rule 506 deals made exclusively to “accredited investors,” but final rules have not yet been adopted by the SEC. 20 E B 5 I n v e s to r s M ag a z i n e