EB-5 Immigrant Investor Program: SEC Cracking Down on Fraud

The SEC has brought approximately 20 litigated or agreed enforcement actions since February 2013 that have involved securities offerings that were made in connection with the EB-5 Program.

What is the EB-Program?

Congress created the EB-5 Program, which is sponsored by the U.S. Citizenship and Immigration Services (“USCIS”), in 1990 to stimulate the U.S. economy and to provide foreign investors with a potential path to US residency. To qualify to apply for residency under this program, a foreign investor is required to make a qualified capital investment in a new U.S. commercial enterprise or a business project designated by USCIS as a “regional center” that is designed to create or preserve at least 10 permanent, full-time jobs for U.S. workers.

Although the designation of a business opportunity as a “regional center” does not mean that either USCIS or the SEC approved of the quality of the investments that are offered by the business, the majority of EB-5 investments are made through one of these approved regional centers.

Making an investment in the EB-5 Program does not guarantee a path to residency. Upon investing, a foreign individual must petition for conditional lawful permanent residency. EB-5 Immigrant Investor Process. USCIS will review the petition on the basis of the evidence of investment, investment in a new commercial enterprise, management of the new commercial enterprise, job creation, and job preservation.

Upon approval of the investor’s petition for conditional lawful permanent residency, the investor must file an Application to Register Permanent Residence or Adjust Status or an Application for Immigrant Visa and Alien Registration. If the petition is approved, the foreign investor may then petition for the conditions to be removed after two years. USCIS will review that petition on the basis of the evidence of investment, job creation, and job preservation. If approved, the investor may live and work in the United States as a lawful permanent resident.

According to reports, the SEC has brought approximately 20 litigated or agreed enforcement actions since February 2013 that have involved securities offerings that were made in connection with the EB-5 Program.

These enforcement actions have primarily charged that EB-5 sponsors have engaged in some sort of offering fraud or that an EB-5 sponsor improperly acted as an unregistered broker-dealer in connection with the sale of securities. Not only is the SEC devoting enforcement resources to this area, but in 2016, the SEC’s Office of Compliance Inspections and Examinations also announced that it would allocate examination resources to a number of priorities, including private placements that involve the EB-5 Program.

A foreign individual who invests in a fraudulent securities offering may lose the opportunity to obtain legal residency (and her initial investment) if the investment does not result in the creation of any jobs. Therefore, the SEC and the USCIS are on high alert for these types of scams and, in an effort to stop these offerings, are cooperating to send the message that violators will be prosecuted.

The foregoing information is being provided by The White Law Group. The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Vero Beach, Florida. For more information on the firm and it’s representation of investors, visit https://whitesecuritieslaw.com.

For a free consultation with a securities attorney, please call the firm at 1-888-637-5510.