RC Sanctioned $1M for Agent Payments
June 14, 2016 2 Comments
Last December, the Securities and Exchange Commission made examples of several parties (mostly immigration lawyers) found to have violated Section 15(a)(1) of the Exchange Act by acting as unregistered broker-dealers: helping to effect securities purchases in an EB-5 Regional Center, and receiving a commission for each investment they facilitated. Each respondent was ordered to disgorge the fees and interest plus pay a $25,000 fine. (If you’d like to be reminded of the circumstances, you can read the Cease and Desist orders for Bernstein, Wang, Manesh, Khorrami, Kaye, Bander, and Azarmehr). These actions reiterate the message that it’s wrong to act as an unregistered broker dealer. It’s equally impermissible to to pay an unregistered broker-dealer, and the SEC has picked a high-profile target to drive this point home: American Life, which must now pay a civil penalty of one million dollars for transaction-based compensation paid to certain EB-5 agents from 2011 to 2014. American Life has brought in more EB-5 investment and completed more good EB-5 projects than almost any other regional center in history, but the SEC found that it also wrongly “paid or caused to be paid transaction-based compensation to certain domestic EB-5 agents in connection with EB-5 securities, which caused those EB-5 agents’ violations of Section 15(a)(1) of the Exchange Act.” Pay attention, Regional Centers, to this warning shot! To avoid million dollar penalties of your own, be extremely careful about who acts as a finder for your investors, and how. If an immigration lawyer offers to help introduce investors, and expects be compensated accordingly, just say no! You may want to review IIUSA’s Best Practices for Engaging With Intermediaries.