EB5 Investors Magazine Volume 2 Issue 1 | Page 62

Avoiding an SEC Visit by

Elizabeth Krukova
Though USCIS is the body that approves regional centers , USCIS approval does not mean that the regional center has been vetted for securities compliance . In an attempt to warn against fraud , and to remind investors to perform due diligence , USCIS and the SEC issued a joint alert in October 2013 , stating that “ the fact that a business is designated as a regional center by USCIS does not mean that USCIS , the SEC , or any other government agency has approved the investments offered by the business , or has otherwise expressed a view on the quality of the investment .” 1
USCIS ’ s interest in deterring fraud and the SEC ’ s sharper focus are likely to change how regional centers conduct business , especially since USCIS reaffirmed its commitment to fighting fraud in its most recent draft of the EB-5 adjudications policy memo . 2 This stated that its teams are collaborating with USCIS ’ s Fraud Detection and National Security directorate . The North American Securities Administrators Association , which tracks securities fraud and manages collaborations of state securities agencies , listed EB-5 schemes as one of its top investor threats in 2012 , due to the false guarantees made by its less scrupulous promoters . The Financial Industry Regulatory Authority , Inc . ( FINRA ), the largest independent regulator for securities firms in the United States , also appears interested in securities regulatory compliance in the EB-5 program .
The SEC has demonstrated that it will not shy away from scrutinizing EB-5 cases . In a recent case , SEC v . Marco A . Ramirez , et al ., the SEC and USCIS worked together to stop an alleged investment scam in which the SEC claims that the defendants , including the USA Now Regional Center , falsely promised investors a 5 percent return on their investment and an opportunity to obtain an EB-5 visa , plainly contravening EB-5 regulations . The SEC alleged that the defendants misused the funds of investors , which were to be held in escrow until USCIS approved the business as eligible for EB-5 . 3 In another case , SEC v . A Chicago Convention Center , et al ., the SEC alleged that the defendants used false and misleading information to solicit investors in the hotel and conference center in Chicago , including falsely claiming that the business had acquired all necessary building permits and that the project was backed by several major hotel chains . 4 With all eyes on EB-5 , it is all the more important for regional centers to ensure that they are running their business in compliance with securities laws and USCIS regulations .
http :// www . sec . gov / investor / alerts / ia _ immigrant . htm
http :// www . uscis . gov / sites / default / files / USCIS / Laws / Memoranda / 2013 / May / EB-5 % 20Adjudications % 20PM % 20 ( Approved % 20as % 20final % 205-30-13 ). pdf
http :// www . sec . gov / News / PressRelease / Detail / PressRelease / 1370539854731
4 http :// www . sec . gov / litigation / litreleases / 2013 / lr22615 . htm
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