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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