SEC Clears Way to Attract EB-5 Immigrant Investors...Provided the New Rules are Strictly Adhered to

by Bernard P. Wolfsdorf and Adam Francoeur

Following the April passage of the Jumpstart Our Business Startups Act (“JOBS Act”), the Securities and Exchange Commission (SEC) announced the elimination of the ban against general solicitation for Regulation D offerings on July 10, 2013. This announcement will change how EB-5 Regional Centers seeking investors will conduct business and permit Regional Centers to engage in previously prohibited solicitation activities to attract and pool investors for Regional Center projects. This major shift signals a new era of “glasnost” for EB-5 adjudication and could prove monumental in how Regional Centers attract investors through the EB-5 green card program.

The SEC requires registration of ALL offers by a company to sell securities unless they meet certain exemptions. Offer registration is an expensive and lengthy process. The SEC provides certain exemptions to the general registration rule, and these exemptions are governed by SEC Regulation D (“Reg D”). Reg D exemptions generally intend to make access to capital markets possible for small companies for which the cost of SEC compliance often proves prohibitive.

Prior to the SEC’s July 10th announcement, Reg D offerings faced several onerous offer restrictions to ensure that small businesses were not targeting vulnerable consumers. One such onerous restriction was the prohibition against “general solicitation” for a Reg D offering. For EB-5 Regional Centers, the “general solicitation” prohibition proved a major hindrance to EB-5 investment strategies because announcing availability in a Regional Center for EB-5 applicants was considered to run afoul of Reg D offering limitations.

The SEC’s recent announcement has removed this “general solicitation” barrier, and in doing so, has provided immediate relief to EB-5 Regional Centers seeking interested investment opportunities for their capital and will likely lead to an uptick in demand within the EB-5 program, which is already red hot. While this news should be regarded with optimism, the new offering procedures will permit sponsors of EB-5 pooled investment vehicles to engage in general solicitation of investors and advertise their private offerings ONLY under certain terms and conditions, including a requirement that all purchasers in the offering are “accredited investors”. An “accredited investor” is defined as:

  • An individual with net worth (or joint net worth with a spouse) that exceeds $1million at the time of the purchase, excluding the value (and any related indebtedness) of a primary residence; or
  • An individual with an annual income that exceeded $200,000 in each of the two most recent years or a joint annual income with a spouse exceeding $300,000 for those years, and a reasonable expectation of the same income level in the current year.

Moreover, EB-5 Regional Centers engaging in general solicitation activities will be required to verify through “reasonable steps” that EB-5 investors are accredited. The SEC has not yet issued guidance on the steps necessary to satisfy the reasonableness requirement, however EB-5 Regional Centers engaging in general solicitation activities should be prepared to obtain guarantees of income requirements for all investors.

In short, the SEC’s latest announcement lifting the general solicitation prohibition for Reg D offerings is a welcomed sign and good news for EB-5 Regional Centers. However, the optimism surrounding this announcement must be tempered by the uncertainty surrounding “accredited investor” designation and the steps required to ensure compliance with this designation.

Our firm, Wolfsdorf Immigration Law Group, assists Regional Centers and individuals in filing EB-5 investor petitions. We invite you to participate in our Free Four-Part webinar series that will cover the essentials of the EB-5 program, as well as hot topics and setting up Regional Centers, examining immigration risks, due diligence for investors choosing Regional Center projects, and factors to consider when selecting such a project.

Please click here to REGISTER for our Free EB-5 webinars series, the first installment of which will be held on July 16, 2013 and will provide an overview of all aspects of EB-5 visas including “hot topics” and both Regional Center investments and direct/stand-alone EB-5s. This will be followed by the remaining three installments:

  • Intermediate Part 2 – Critical Issues in EB-5 practice, including Due Diligence, on August 14, 2013;
  • Advanced Part 3 – Setting-up and Operating Regional Centers on September 18, 2013; and
  • Hot Topics Part 4, including Securities Issues & Challenges, on November 19, 2013.

About The Authors

Bernard P. Wolfsdorf is the past President of the American Immigration Lawyers Association (AILA). Mr. Wolfsdorf has been named the "most highly rated immigration lawyer in the world" by his peers in the 2011 and 20100 editions of International Who's Who of Business Lawyers. "Mr. Wolfsdorf received more votes from clients and peers worldwide than any other lawyer." Mr. Wolfsdorf is a recipient of the AILA Service Excellence Award for providing outstanding volunteer services. The California Edition of Who's Who recognized Mr. Wolfsdorf as "one of the prestigious names in the field" who "knows his stuff back to front." The Chambers Global World's Leading Lawyers for Business guide noted Mr. Wolfsdorf's "outstanding consular law practice" and called him a "cutting-edge thinker." He is listed in 2011 editions of Best Lawyers in America, Martindale Hubbell's Pre-eminent Specialist Directory, Southern California Super Lawyers, Chambers USA and the Chambers Global World's Leading Lawyers for Business. Mr. Wolfsdorf is a California State Bar-Certified Specialist in Immigration and Nationality Law.


       Adam Francoeur is an Associate in the firm’s New York office. Mr. Francoeur represents clients in all areas of U.S. immigration law. Mr. Francoeur previously served as a staff attorney at the United States Court of Appeals for the Second Circuit, where he recommended judicial disposition to the judges on complex immigration issues such as relief from removal, federal civil procedure, and appellate procedure. In addition, Mr. Francoeur has experience advising corporate clients on immigration compliance issues. Mr. Francoeur previously served as the Policy Director of Immigration Equality, a not-for-profit organization that advocates for the advancement of LGBT and HIV-positive individuals’ rights under federal immigration law. Mr. Francoeur advocated for federal immigration legislation and was part of a coalition that secured the repeal of the HIV-ban to immigration admissibility. Mr. Francoeur is an active immigration advocate for LGBT and HIV-positive individuals and has published extensively on the subject.

The opinions expressed in this article do not necessarily reflect the opinion of ILW.COM.