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( i ) The company cannot use general solicitation or advertising to market the securities ;
( ii ) The company may sell its securities to an unlimited number of “ accredited investors ,” and up to 35 other purchasers . However such other purchaser must be “ sophisticated ”— that is , he must have sufficient knowledge and experience in financial and business matters to make him capable of evaluating the merits and risks of the prospective investment ; and
( iii ) Companies must comply with few other basic requirements , including the disclosure requirements .
While companies using a Reg . D exemption do not have to register their securities , and usually do not have to file reports with the SEC , they must file what is known as a “ Form D ” when they first sell their securities . Form D is a brief notice that includes the names and addresses of the company ’ s executive officers and stock promoters , but contains very little information about the company . Filing a Form D , as opposed to going through the process of a full-blown securities registration , saves regional centers the hassle that may otherwise discourage the use of EB-5 funds .
Conclusion
All of these rules are drafted with investor protection in mind . The SEC Office of Investor Education and Advocacy is becoming more aware of investment scams targeting foreign nationals seeking to become lawful permanent residents . On the other hand , USCIS emphasizes the detection of fraud in EB-5 program , as the agency is embarrassed that another government agency has to oversee its programs . So , we are likely to see more actions against regional centers that violate the rules . However , the emphasis will likely be on fraudulent practices over regulatory non-compliance .
Regional centers and investors alike should pay close attention to the regulatory requirements of federal and state securities laws if the goal is to achieve permanent residency for the investors and avoid an SEC visit . While USCIS and SEC regulations can protect foreign investors from fraud and misrepresentation of EB-5 projects , they can also become a burden on regional centers who want to sell securities to foreign investors . To avoid trouble with the SEC , regional centers should take care to register the sale of their securities , or else qualify for exemptions to this rule .
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Elizabeth Krukova
Attorney and the founder of National Capital Legal Services , Elizabeth Krukova , Esq . is licensed to practice family , civil and corporate law in N . Y ., Md ., Va ., and D . C ., and immigration law — in all 50 states . Attorney Krukova is an expert in investment-based immigration ( including green cards through employment , intracompany transfers , EB-5 investor visas , legal representation throughout immigration processes ), cross-border transactions , and corporate law ( full scope of services for international corporations in the United States ).
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