Registration of securities is a legal requirement that costs investment funds time and money. It is important to stay compliant with all applicable securities laws, so if registration is not financially or logistically feasible, be sure that you have a recognized exemption from the registration requirement. These exempt offerings are designated as “EB-5” under United States securities laws. EB-5 is also a designation used for the visa a foreign investor must obtain in order to invest in an EB-5 fund. EB-5 investments are also called private placements or unregistered offerings. Learn more about some of the common legal issues that arise with EB-5 offerings, as well as how investors and offering companies can protect themselves from financial and legal liabilities in relation to them.
Relying On Exemptions From Registration From Securities Laws
SEC Rules 504, 505, and 506 establish exemptions from the registration requirement for certain securities. These rules specify how much equity may be sold by an offering entity in a twelve-month period, how much money may be raised, and whether the investors must be accredited in order to maintain the offering’s eligibility for exemption from the registration requirement. These rules also specify the manner of advertising that may be used for the offering. Each of these rules provides specific legal guidelines that must be met exactly. Failure to meet the exemption requirements can subject a business to fines, penalties, legal liability, and administrative requirements (such as limits of offering securities in the future).
So how does a business know if its offering is eligible for exemption from the registration requirement? It is not always clear just how the rules may apply to your unique situation. An experienced securities lawyer will know exactly how these rules have been applied by both the SEC and courts in the past. Be sure to consult with a California securities attorney before relying on an exemption from securities registration requirements.
Issues With Retrogression
In recent years, the United States has experienced an increasing backlog of EB-5 visa applicants, fueled by increased demand for the program – especially for those investors who are citizens of mainland China, which makes up the majority of EB-5 applicants. The amount of an EB-5 investment must remain “at-risk” during the entire length of the EB-5 visa. Because this period starts before the EB-5 application is adjudicated, and the adjudication period can now take months or even years, this creates an immigration problem for investors who are attempting to time their investment with their EB-5 visa. This problem is known as “retrogression.” While the federal government has explored different possibilities, none of them have taken effect yet, and there remains a great deal of uncertainty for EB-5 investors who must time their investments with their immigration adjudication period. Be sure to consult with a securities lawyer before filing an EB-5 application. A lawyer can help provide as much guidance as possible in this complicated area of the law.
Experienced Securities Lawyers For California Financing Issues
Call (408) 441-7500 to schedule a consultation with one of the experienced California securities lawyers at Structure Law Group or contact us online.