EB5 Investors Magazine - Page 42

The Anatomy of an SEC Investigation by Jeff Ansley, Greg Kelminson & Karen-Lee Pollak The Securities and Exchange Commission (SEC) is entrusted by the public to protect investors by investigating, and when necessary, enforcing federal securities law. Despite the fact that most people associate the term “securities” with publicly traded stock, the term is much broader. The United States Code defines “security” to include any note, stock and investment contract, in addition to numerous other evidence of indebtedness. The Supreme Court in SEC v. W.J. Howey Co. established a test for determining whether a product, such as an EB-5 program is a security under federal law. To pass the test, the following three elements must be met: (1) an investment of money has been made; (2) in a common enterprise; and (3) the investor has an expectation of profits, which profits are expected to arise solely or substantially from the efforts of the promoter or third party. 40 EB5 INVESTORS MAGAZINE