UNLICENSED EB-5 BROKER-DEALERS UNDER FIRE: SEC DRAWS A BRIGHT LINE AND ENFORCEMENT IS CATCHING UP— BY STAFF
EB-5 BROKER-DEALER: THE RED FLAG CHECKLIST
Do your activities require a license? Check for these warning signs based on SEC guidance.
Soliciting investors physically present in the U. S.( any nationality)
Soliciting U. S. citizens or permanent residents anywhere in the world
Operating from within the U. S. to source EB-5 investors
Receiving transaction-based or success-contingent compensation
Using digital platforms( social media, webinars) to reach U. S.-based investors
WARNING
IF YOU CHECKED ANY RED FLAGS, A BROKER-DEALER LICENSE IS LIKELY MANDATORY. SUBSTANCE OVER FORM APPLIES.
Source: SEC enforcement actions & FINRA rules. Not legal advice. are compliant and investors are looked after," says Andrew Wall, Founder and Managing Partner of Dynaxe Capital, a registered representative of Dalmore, which is regulated by FINRA.
“ WAITING TO BE CAUGHT” IS NOT A STRATEGY One of the most dangerous assumptions among unlicensed EB-5 intermediaries is that delayed enforcement implies tolerance. It does not.
SEC investigations are frequently retrospective, triggered by whistleblowers, audits, payment trails, or scrutiny of affiliated parties. Once
initiated, enforcement actions often reach back years, capturing emails, contracts, wire records, WhatsApp messages, and digital marketing content.
“ Enforcement is delayed rather than immediate, which creates the illusion that the practice is tolerated,” Wall warns. Digital solicitation creates permanent records. Jurisdiction is established the moment solicitation reaches a U. S. investor or occurs from within the United States— even if the intermediary is overseas.
THE CONSEQUENCES ARE PERSONAL AND SEVERE Unlicensed broker-dealer activity exposes individuals and entities to:
• SEC civil enforcement actions
• Full disgorgement of all commissions earned
• Significant monetary penalties
• Permanent bars from the securities industry
• Reputational damage that follows indefinitely
• Immigration consequences for non-U. S. persons under INA §§ 212 and 237 There is no upside to operating illegally and no safe harbor.
ISSUERS AND REGIONAL CENTERS ARE NOT IMMUNE Regional centers and issuers that engage unlicensed
The theme is consistent: solicitation plus compensation without registration equals a violation
intermediaries face their own exposure, including:
• Investor rescission claims
• Multi-million-dollar regulatory settlements
• Heightened USCIS scrutiny over“ at-risk” determinations
• Loss of credibility with institutional partners
“ Both groups face significant exposure with no legal upside,” Wall adds.
ENFORCEMENT HISTORY CONFIRMS THE PATTERN The SEC has repeatedly acted in the EB-5 space, including:
• 2015: Ireeco LLC entities charged for acting as unregistered brokers for over 150 EB-5 investors, collecting approximately $ 35,000 per investor
• 2018: Edwin Shaw LLC charged for unregistered brokering of EB-5 investments, receiving $ 5,000 –$ 50,000 per transaction
• 2018: An Illinois regional center and affiliates settled charges exceeding $ 11 million for unregistered sales and transaction-based compensation involving U. S. persons
The theme is consistent: solicitation plus compensation without registration equals a violation.
THE COMPLIANCE FORK IN THE ROAD Every EB-5 intermediary ultimately faces a binary choice: Operate lawfully
• Place foreign investors from abroad
• Partner with or affiliate under a registered broker-dealer
• Accept oversight and transparent compensation OR Accept enforcement risk
• Operate unlicensed
• Receive transaction-based fees
• Leave a permanent digital trail
• Face inevitable regulatory action There is no compliant middle ground.
FINAL WARNING The EB-5 industry has matured. The legal framework is settled. Digital evidence is permanent. Enforcement momentum is accelerating. Unlicensed broker-dealer activity in EB-5 is not a gray area, a loophole, or a business risk, it is a known violation with predictable outcomes.
Those who continue to operate outside the law should not ask if enforcement will occur, but when.
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