SEC And FINRA Scrutinize EB-5 Broker-Dealers

The U.S. Securities Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) are going after unregistered EB-5 broker-dealers who are earning commissions from regional centers.

The EB-5 Programs attracts foreigners from all over the globe. These foreigners invest a minimum of $500,000 in an EB-5 new commercial enterprise or a regional center in exchange for a U.S. greencard. Broker-dealers are often brought in as advisers to help assist foreign EB-5 investors in finding a regional center and project to invest in as well as helping them place their capital into the investment project.

EB-5 regional centers are considered securities; and therefore, in order for broker-dealers to legally accept commissions for their work they must be registered as broker-dealers.FINRA and the SEC are cracking down on immigration attorneys who are not registered broker-dealers, but who are advising EB-5 investors on regional centers and projects in exchange for commissions from regional centers.When EB-5 investors seek out immigration attorneys to help with the process of filing Form I-526 petitions some immigration attorneys see an opportunity to generate more money by also taking on the role of a EB-5 broker-dealer. The SEC is investigating many law firms who were receiving compensation from regional centers for referrals.Registered EB-5 broker-dealers are important advisers for EB-5 investors who are trying to invest a lot of money into a project in a foreign land where they probably do not speak the language, know the laws, or know the ins and outs of the escrow process.In order to legally accept these commissions, broker-dealers need to be registered through FINRA, and additionally, they must abide by the guidelines. If you are a potential EB-5 Investor, here are 2 reasons why finding a registered broker-dealer is so important:

  1. Unregistered broker-dealers are referring regional centers and projects not because they would be a good fit for you, but because they get compensated from the regional centers.
  2. It's illegal for unregistered broker-dealers to refer and advice on EB-5 projects and they may not know the regulations and requirements like a registered broker-dealer would.

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