EB-5 Gets a Little Less Wild West with FINRA Rule 2111

EB-5 Gets a Little Less Wild West with FINRA Rule 2111

For the longest time, the EB-5 Program has been running with little clarification and guidance from the multitude of federal and state agencies involved which includes USCIS.



Overview

Investment-based immigration through the Immigrant Investor Program (“EB-5”) is one of the most bustling, complicated, and newest programs through which a noncitizen can receive LPR status, or a “green card.” For the longest time, the EB-5 Program has been running with little clarification and guidance from the multitude of federal and state agencies involved which includes USCIS.

The Financial Industry Regulatory Authority (“FINRA”) is not a traditional government agency, but as an independent regulator of securities firms doing business with the US public, it has a very large role in securities regulation. Recently, it issued some guidance on FINRA Rule 2111, regarding broker-dealer suitability, and how it applies to the EB-5 context.

The full text of the guidance on the rule quoted above can be found here. To summarize, the interpretative letter confirmed that EB-5 investments were securities and were subject to the securities laws of the United States. This should not come to a surprise to any experienced EB-5 consultant or EB-5 attorney, but this clarification could be a testament to the little cohesive guidance available regarding EB-5. The letter also stated that broker-dealers involved in EB-5, including EB-5 offerings functioning under the private placement exemption (Regulation D), is , inter alia, required to conduct a reasonable investigation concerning the issuer and its management; the business prospects of the issuer; the assets held by or to be acquired by the issuer; the claims being made; and the intended use of proceeds of the offering. The broker-dealer must also determine whether the private placement is consistent with the requirements of the EB-5 Program, such as whether it constitutes an investment in a domestic project that will create or preserve at least 10 jobs for U.S. workers.

After a broker-dealer has accomplished these due diligence duties, the next crucial step in the suitability analysis is to help ensure that the investment profile of the given EB-5 opportunity is well suited for the given investor. This includes both the financial risks and the immigration risks involved, which puts a unique spin to the duties of a broker-dealer. It is important to remember than an Immigration Attorney is ethically prohibited from advising his/her clients of the financial risks associated with the EB-5 venture.

Navigating ever-changing and complex areas of law involved with the EB-5 program usually requires the advice of an expert attorney. Contact our office if you need assistance with your EB-5 case or any other immigration issues today. Attorney Sweta Khandelwal is a Chartered Accountant, akin to a C.P.A which gives her the unique advantage of understanding the complexity of corporate and security laws.

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