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or separate offering websites should not be contained in the
issuer’s general website. In addition, the generic or separate
offering websites can be established and maintained by the
issuer or a third-party provider, provided that the issuer has
sufficient controls over any such third-party provider. Both of
these approaches will allow an issuer to use general advertising,
such as a mass email to a large list of potential EB-5 investors or
a web-based advertisement, while limiting the content the site
visitor will be able to access in order to maintain compliance
with both exemptions.
Under both of these methods for setting up the website, an
opening page can contain information that may be conveyed to
potential investors both within the United States and offshore.
In the adopting release of Regulation S, the SEC stated that isolated, limited contact within the United States, disseminating
routine information normally published by a company will not
constitute a directed selling effort (SEC Release No. 33-6863
(Apr. 24, 1990) (“Offshore Offers and Sales”)). Regulation S is
not intended to hinder the flow of press releases, news stories, or
other journalistic activities. Thus, any information falling within these categories should not cause the issuer to fear violation
of the provisions of Regulation S, if posted to the website.
“…the definition of directed selling efforts
excludes tombstone advertisements, if
less than 20 percent of its circulation
is in the United States. It is advisable
that a website created for an offshore
offering comply with that limitation…”
Additionally, the definition of directed selling efforts excludes
tombstone advertisements, if less than 20 percent of its circulation is in the United States. It is advisable that a website created
for an offshore offering comply with that limitation, following
the form of a tombstone advertisement (see Rule 135 under the
Securities Act, regarding information that can be communicated in a proposed offering) in regards to the information posted
on the opening page of the website. Generic information, such
as the issuer’s name, the address, phone number and email
address of the issuer’s principal offices, the issuer’s country of
organization, and the geographic areas in which it conducts
business, can safely be posted on the opening page of a website
without violating the directed selling efforts provision.
Questionnaires
Regardless of whether the issuer elects to set up two separate
websites or a single website with two separate portals, a questionnaire feature should be included on the opening page of the
site. (See e.g., REIFRC.com, http://www.reifrc.com/resources/
REIF-RC/REIF-Investor-Questionaire.pdf (for an example of a
questionnaire that is used to determine the status of potential
investors)). The questionnaire should be aimed at determining
whether or not the site visitor is a “U.S. person” according to
the definition under Rule 902(k) or an “accredited investor”
under Rule 501(a). Information that will indicate whether a site
visitor is a U.S. person is the address of their current residence,
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phone number, employment information, the geographic location where they are accessing the website and the URL being
used. Importantly, offers and sales made to non-U.S. persons,
even if physically present in the United States, are deemed to be
offshore transactions; a transient in the United States for a short
period of time accessing content for the Regulation S offering
will not constitute a directed selling effort.
“By including a questionnaire on the opening
page of the website, the issuer can determine
the content that may be appropriate for a
particular potential investor to access.”
The questionnaire should also include a check box for the
visitor to explicitly state whether they are not a U.S. person
or an accredited investor. This will help to protect the issuer
from liability for any attempt to evade the relevant exemption
restrictions. Also, because the investment opportunity is
through the EB-5 program, it may be pertinent to ask visitors
claiming to be within the United States to give the status of
their residency. This may entail asking whether they are attending an educational institution in the United States, or the name
of their employer if they are in the country on a work visa. By
including a questionnaire on the opening page of the website,
the issuer can determine the content that may be appropriate
for a particular potential investor to access.
Password Protections
After the potential investor answers the questionnaire, there
should be a waiting period in which the issuer can verify the
information provided on the questionnaire. After adequately
verifying whether the potential investor would be classified as
a U.S. person or an accredited investor, the issuer should then
provide a password to the potential investor that will allow
access to the appropriate content. This may safeguard against
misrepresentation by the website visitor as well. For instance,
for a website visitor claiming to be within the United States and
providing a U.S. phone number on the questionnaire, an issuer
could ask for consent to send the password in a text message to
the number provided.
Any indication by the website visitor that they are misrepresenting their status under the definition of a U.S. person or
accredited investor should cause the issuer to verify the potential
investor’s status before providing the password to any content.
The SEC has indicated that if the issuer takes adequate measures
to ensure that U.S. persons are not able to access offshore offers,
then it would not view the offer as having been targeted at the
United States. The end goal of password protections should be
to demonstrate that the issuer has undertaken “adequate procedures” to identify the status of the prospective investor and that
the issuer has made a “good faith effort” to comply with the
provisions of the exemptions.
Disclaimers
Placing prominent disclaimers in strategic areas on the website that will alert potential investors that the issuer only intends
for certain information to reach certain individuals will further
demonstrate the good faith efforts of the issuer to comply with
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