EB5 Investors Magazine Volume 1 Issue 1 | Page 20
Continued from page 19
Summary of Exemptions Under Rule 506 & Reg S
Rule 506
Reg S
Amount that may be raised
No limit
No limit
Number of investors allowed
Up to 35 unaccredited investors;
No limit on “accredited” investors
No limit
Investor qualifications
Unaccredited investors must
be “sophisticated”
None
Disclosure requirements 4
No disclosures required for “accredited”
investors; Detailed disclosures required if
investors include unaccredited investors
None, other than legends
Filing Requirements
Form D, filed electronically, within 15 days
of first sale of the securities in an offering
None
General solicitation
and advertising
Prohibited; All sales must be private 5
Permitted so long as no “directed selling efforts”
are made in the United States
Resale restrictions
Yes
Yes
State securities laws
Preempts state securities laws, but states
are permitted to require notice filings
and charge a fee
Must register/qualify securities with applicable
states or find an exemption
Conclusion
The EB-5 Regional Center Program is an exciting mechanism
for promoting investment in the American economy and the
creation of jobs while providing qualified immigrants with a
chance to obtain a green card in the United States. Nevertheless,
Regional Centers must be aware of U.S. federal and state laws affecting securities offerings and take proper steps to comply with
those that apply to them, as the cost of failing to do so could be
catastrophic. There exist definite strategies for Regional Centers
to minimize their exposure to liability from securities-related
claims, whether those claims arise from government, or investors. Regional Centers should carefully control the securities
offering process, including exercising careful oversight of those
parties conducting and/or assisting with the offering, to ensure a
successful and legal EB-5 capital raise.
Jor Law, Esquire, is a business and corporate
attorney and a founding shareholder of the
Los Angeles law firm of Homeier & Law,
P.C. Copyright © 2013 All Rights Reserved.
No legal advice is provided in this article.
Please consult your own professional advisors
for advice applicable to your particular
circumstances.
Jor Law, Esq.
1. From SEC website, as of January 31, 2013: http://www.sec.gov/about/laws.
shtml
2. Note, however, that the preemption does not affect all types of securities or
all types of person.
3. Additionally, while an issuer may not have to register or qualify the
securities under the various states’ blue sky laws, it may still be required by
some states to pay certain fees and make notice filings.
4. Anti-fraud provisions of various securities laws still apply.
5. The JOBS Act lifts the prohibition on general solicitation and advertising
for Rule 506 deals made exclusively to “accredited investors,” but final rules
have not yet been adopted by the SEC.
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E B 5 I n v e s to r s M ag a z i n e