Leigh Polk Cole, Esq.
The EB-5 program allows international investors to obtain permanent residency in the United States (green cards) for themselves and their immediate family by investing in a new or struggling business venture in the United States. The State of Vermont was approved one of the first Regional Centers some years ago. The Regional Center here is administered by the State of Vermont which is a unique feature compared to other Regional Centers in the nation which are administered by private organizations. With the current challenges in the U.S. economy, more and more U.S. business interests are looking to EB-5 investors from outside the United States as a source of capital, and international investors are responding.
EB-5s have become a hot topic in Vermont and across the nation, leading to a realization that investors, lawyers and EB-5 project sponsors are not necessarily aware of the related Securities law compliance obligations.
EB-5 projects involve (1) formation of an appropriate business entity and preparing investment agreements and protocols for investors that qualify under EB-5 regulations (Corporate law and Immigration law), (2) marketing and selling the EB-5 investment to potential investors (Securities law), and (3) development of an immigration case explaining and documenting that the investor and the EB-5 investment qualify for permanent residency approval under EB-5 eligibility criteria (Immigration law). The Corporate law and Immigration law aspects of such a project are apparent. But the Securities law aspects of these projects are not necessarily clear to lawyers practicing outside the Securities field or to developers and investors involved in EB-5 projects. Also, many EB-5 projects offer finders fees to lawyers who refer international investors to the project. For a lawyer to accept a referral fee without providing legal services appears to violate attorney ethical rules. A finders fee also looks like a commission paid to an investment broker-dealer, and accepting a finders fee may trigger broker-dealer compliance obligations and liabilities under U.S. securities law. So for a variety of reasons, our firm would never accept a finders fee.
By their very nature, EB-5 projects involve offering to sell ownership interests in a business organization (offering securities) to the international community (the public). Securities laws apply whenever there is an offer of securities to the public, so Securities laws apply to EB-5 transactions. Everyone involved in an EB-5 project must comply with federal and state Securities laws, including the project developer who solicits investments, the investor, and the attorneys who advise the investor and the project developer. Information about securities compliance is available to the public at the web site of the Securities and Exchange Commission, www.sec.gov, and other online resources.
So if you are an international investor considering an EB-5 investment, or if you are an immigration lawyer with a client interested in making an EB-5 investment, be sure to engage counsel with expertise in Corporate law, Immigration law, and federal and state Securities laws. Many firms including our own have knowledge and experience in all three of these areas. Some clients choose to engage several firms, each of which offers expertise in one or two of these areas, and the firms work together on the client’s EB-5 project.