The
Anatomy
of an SEC
Investigation
by Jeff Ansley, Greg Kelminson & Karen-Lee Pollak
The Securities and Exchange Commission (SEC) is entrusted by the public to protect investors by
investigating, and when necessary, enforcing federal securities law. Despite the fact that most people
associate the term “securities” with publicly traded stock, the term is much broader. The United
States Code defines “security” to include any note, stock and investment contract, in addition to
numerous other evidence of indebtedness. The Supreme Court in SEC v. W.J. Howey Co. established
a test for determining whether a product, such as an EB-5 program is a security under federal law.
To pass the test, the following three elements must be met: (1) an investment of money has been
made; (2) in a common enterprise; and (3) the investor has an expectation of profits, which profits
are expected to arise solely or substantially from the efforts of the promoter or third party.
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EB5 INVESTORS MAGAZINE