EB5 Investors Magazine - Page 58

Continued from page 55 or separate offering websites should not be contained in the issuer’s general website. In addition, the generic or separate offering websites can be established and maintained by the issuer or a third-party provider, provided that the issuer has sufficient controls over any such third-party provider. Both of these approaches will allow an issuer to use general advertising, such as a mass email to a large list of potential EB-5 investors or a web-based advertisement, while limiting the content the site visitor will be able to access in order to maintain compliance with both exemptions. Under both of these methods for setting up the website, an opening page can contain information that may be conveyed to potential investors both within the United States and offshore. In the adopting release of Regulation S, the SEC stated that isolated, limited contact within the United States, disseminating routine information normally published by a company will not constitute a directed selling effort (SEC Release No. 33-6863 (Apr. 24, 1990) (“Offshore Offers and Sales”)). Regulation S is not intended to hinder the flow of press releases, news stories, or other journalistic activities. Thus, any information falling within these categories should not cause the issuer to fear violation of the provisions of Regulation S, if posted to the website. “…the definition of directed selling efforts excludes tombstone advertisements, if less than 20 percent of its circulation is in the United States. It is advisable that a website created for an offshore offering comply with that limitation…” Additionally, the definition of directed selling efforts excludes tombstone advertisements, if less than 20 percent of its circulation is in the United States. It is advisable that a website created for an offshore offering comply with that limitation, following the form of a tombstone advertisement (see Rule 135 under the Securities Act, regarding information that can be communicated in a proposed offering) in regards to the information posted on the opening page of the website. Generic information, such as the issuer’s name, the address, phone number and email address of the issuer’s principal offices, the issuer’s country of organization, and the geographic areas in which it conducts business, can safely be posted on the opening page of a website without violating the directed selling efforts provision. Questionnaires Regardless of whether the issuer elects to set up two separate websites or a single website with two separate portals, a questionnaire feature should be included on the opening page of the site. (See e.g., REIFRC.com, http://www.reifrc.com/resources/ REIF-RC/REIF-Investor-Questionaire.pdf (for an example of a questionnaire that is used to determine the status of potential investors)). The questionnaire should be aimed at determining whether or not the site visitor is a “U.S. person” according to the definition under Rule 902(k) or an “accredited investor” under Rule 501(a). Information that will indicate whether a site visitor is a U.S. person is the address of their current residence, 56 phone number, employment information, the geographic location where they are accessing the website and the URL being used. Importantly, offers and sales made to non-U.S. persons, even if physically present in the United States, are deemed to be offshore transactions; a transient in the United States for a short period of time accessing content for the Regulation S offering will not constitute a directed selling effort. “By including a questionnaire on the opening page of the website, the issuer can determine the content that may be appropriate for a particular potential investor to access.” The questionnaire should also include a check box for the visitor to explicitly state whether they are not a U.S. person or an accredited investor. This will help to protect the issuer from liability for any attempt to evade the relevant exemption restrictions. Also, because the investment opportunity is through the EB-5 program, it may be pertinent to ask visitors claiming to be within the United States to give the status of their residency. This may entail asking whether they are attending an educational institution in the United States, or the name of their employer if they are in the country on a work visa. By including a questionnaire on the opening page of the website, the issuer can determine the content that may be appropriate for a particular potential investor to access. Password Protections After the potential investor answers the questionnaire, there should be a waiting period in which the issuer can verify the information provided on the questionnaire. After adequately verifying whether the potential investor would be classified as a U.S. person or an accredited investor, the issuer should then provide a password to the potential investor that will allow access to the appropriate content. This may safeguard against misrepresentation by the website visitor as well. For instance, for a website visitor claiming to be within the United States and providing a U.S. phone number on the questionnaire, an issuer could ask for consent to send the password in a text message to the number provided. Any indication by the website visitor that they are misrepresenting their status under the definition of a U.S. person or accredited investor should cause the issuer to verify the potential investor’s status before providing the password to any content. The SEC has indicated that if the issuer takes adequate measures to ensure that U.S. persons are not able to access offshore offers, then it would not view the offer as having been targeted at the United States. The end goal of password protections should be to demonstrate that the issuer has undertaken “adequate procedures” to identify the status of the prospective investor and that the issuer has made a “good faith effort” to comply with the provisions of the exemptions. Disclaimers Placing prominent disclaimers in strategic areas on the website that will alert potential investors that the issuer only intends for certain information to reach certain individuals will further demonstrate the good faith efforts of the issuer to comply with EB5 INVESTORS MAGAZINE