In EB-5 Visa Transactions, Immigration attorneys can reduce their exposure to SEC enforcement investigations adhering to the following tips:

1.      Don’t Be on Both Sides of EB-5 Visa Transactions. EVERY Regional Center EB-5 Investment Opportunity Is a Securities Transaction.  Whether or not:

• the clients have waived conflicts in writing and applicable Bar rules are complied with;
• having only one attorney involved saves both parties legal fees and may be more efficient;
• you are fully familiar  with all aspects of the Regional Center and its capital investment activities;
• the Regional Center’s interest and the immigrant investor’s interests appear to be aligned in a win-win transaction;

attorneys that represent both a regional center and the immigrant investor investing in the regional center increase their personal liability exposure above and beyond the total amount of the offering being conducted pursuant to the remedies available to the SEC under the federal securities laws or to the investors under the blue sky laws.

If you represent both parties, you become the fiduciary of the investor and the fiduciary of Regional Center (the securities issuer); however, the securities laws generally protect the investors and not the issuers. As the agent of the Regional Center, it may not be in your client’s strategic interest to disclose all known problems or potential problems to the prospective investor.  Particularly if you have had repeat representations of the Regional Center, you may have developed a knowledge level that is greater or different than the quantity or quality of information disclosed in the offering memorandum. However, you as the fiduciary to the investor continue to owe a full duty of disclosure to the investor of all material facts that you have learned from the Regional Center. This duty does not dissipate just because the conflict of interest has been waived. If the investor-client or the SEC develops a cause of action under the securities laws against the Regional Center, the attorney who represented both the Regional Center and the investor in the eb-5 visa transaction can be directly liable for any non-disclosure, misrepresentation, or securities registration violation associated with the conduct of the Regional Center.

2.      Compensation for Non-Legal Services May Result in Civil or Criminal Liability

Attorneys may or may not be prohibited from receiving referral fees by their bar associations, but Regional Centers often offer financial incentives for the referral of prospective investors.  Don’t take the money.  Here is what Regional Center referral fee payments look like to the SEC and FBI: kickbacks, undisclosed broker compensation, material non-disclosure in connection with the offer and sale of securities, and possibly mail or wire fraud.  There is no upside in the long run for those who have served as compensated domestic referral agents.  If you feel the need to connect investors with investment opportunities, don’t take a fee for doing it, and don’t wrap the fee into your legal fee.  The regulatory laws are designed to capture all variations of activity designed to avoid compliance, and even when you have acted unknowingly, the agent licensing requirements can apply to your activities on a strict liability basis.  If you do not receive a benefit of some kind directly or indirectly for a referral, you are more likely to avoid suspicions of violations of the securities laws and other interstate criminal statutes.

3.            The Cost/Benefit Analysis  

Each and every federal securities statute and regulation and every state securities statute and regulation is dually enforceable on a civil and criminal basis.  Consider whether it is worth the extra fees to risk subjecting yourself to a long and expensive reputation and career threatening securities investigation?

For further information, contact our office at 786.888.4567. We defend attorneys and securities issuers from SEC and other governmental investigations and plaintiff-investors.