Immigration Investors’ Watch for U.S Security Laws

U.S Investment Immigration program, especially regional centers program, have been a hot topic among immigration investors and advisors. Majority attention as to do and don’t has been given to US immigration law. However, because when a regional center forms a limited partnership or limited liability company in which the EB-5 investor would become a limited partner, the regional center is offering a security, a regional center must comply with federal and state laws in conducting the offering of securities. 

Securities laws are designed to protect investors by providing accurate information about potential investments and punishing persons or entities who harm the investors and the financial markets. The investors should recognize that not every every investment is safe and not every professional who offers to helps through the process has necessary expertise. 

The securities Act requires that all securities sold must be registered with the SEC, unless exempted by the rules. Basically the law states that if all the investors are accredited investors then the regional center is exempted from registering information with SEC. However, if a regional center conducts general solicitation and advertisement, the regional center would be required to register the securities or find another another exemption. 

If a regional center is not exempted from the registration, the process would take three years of audited financials, or if it qualifies as a smaller reporting company, two years of comparative audited balance sheet data in annual financial statements. The regional center cannot offer or sell securities until the registration statement is effective. What this means to EB5 investors is that they cannot sign a subscription agreement until effectiveness of the registration statement. From a time perspective, the investor cannot afford to wait for the process of a registration statement to be prepared and filed with the SEC, and then for the SEC to declare the registration effective. 

Therefore, it is the regional center’s obligation to comply with the conditions under SEC laws. The investors will want to do his or her own due diligence to ensure the regional center is complying with all applicable securities laws.