Comment on USCIS SEC Engagement
April 3, 2013 7 Comments
Today’s EB-5 Engagement with the Securities and Exchange Commission and USCIS featured representatives from the SEC Division of Corporate Finance, Division of Trading and Markets, Division of Investment Management, and Division of Enforcement. The panelists discussed EB-5 offerings as securities and conditions for exemption from securities registration, individuals involved in EB-5 as broker-dealers or investment advisers and associated registration issues and exemptions, and SEC enforcement with particular reference to the recent Chicago case. Two passing comments from Barbara of the Division of Investment Management stand out to me as a summary of the call: “you need to be worried,” and “it does get very complicated.” As a non-attorney I would have liked to hear “just do it this way and you’re safe” but instead I heard something like: here are some of the many lines to avoid crossing, and if in doubt you’re probably not compliant, but the issues are fact-specific so consult a good lawyer. Rob Silvers opened the call by noting that USCIS has been engaging with the SEC at the programmatic and case-specific level, but did not comment on the results of this engagement. The call declined to tell us whether this joint review of actual cases has identified endemic or repeated practices in the EB-5 program that are problematic from the SEC perspective (though Robert Divine did ask the question). I hope that USCIS and/or the SEC and/or securities attorneys in the EB-5 industry can come up with a set of basic practical “dos and don’ts” that focus on the positive (how to get it right) and also highlight the relative black and white amidst all the grey areas. Panelists at meetings like this tend to hedge their statements so much that we non-attorneys can get lulled into thinking that the fine print rules are too ambiguous to be a serious guide or threat. We struggle to distinguish between practices that may raise issues in 15% of situations and those that are problematic 99.9% of the time. Obviously false statements and schemes to defraud are always wrong, but beyond that what do offerors most need to know when structuring and promoting investments? Who will help us identify and publicize any commonly-used practices in EB-5 deal structure and marketing that are almost certainly problematic, securities-wise? Or reassure us about what is most likely okay, for that matter? We want to keep our job-creating American business people safe from litigation. We don’t want EB-5 to become the new asbestos, or to fade based on unfounded fears.
That said, the call was substantive and helpful, and I would recommend it to everyone involved in an EB-5 offering. You are welcome to download my recording of the call from Dropbox.
Update: USCIS has published an Executive Summary of the call.
Update: See also “Investor Alert: Investment Scams Exploit Immigrant Investor Program” (10/1/2013). Published at http://www.sec.gov/investor/alerts/ia_immigrant.htm.
Update: I’ve added a section of securities compliance links to my Resources page.