Paying referral or finder's fees to unregistered
broker-dealers could create risks for developers in an EB-5
transaction. A few of my colleagues at Mintz Levin, Jeremy Glaser,
Steve Ganis and Jake Romero, authored a relevant article last year
on the risks associated with unregistered broker-dealers:
"Using Finders to Assist in Financings: Understanding the
Risks Associated with Unregistered Broker-Dealers."
This article is important reading for developers seeking capital
through the EB-5 program. Every developer should know about the
risks associated with unregistered broker-dealers before marketing
an EB-5 project.
What risks could developers face for engaging unregistered
broker-dealers in an EB-5 transaction? First, an unregistered
broker-dealer in an EB-5 transaction could trigger rescission
rights in favor of an EB-5 investor under state or federal law.
Second, even if an EB-5 investor cannot bring a successful
rescission claim against a developer, the use of an unregistered
broker-dealer in an EB-5 transaction could have ramifications with
respect to a developer's future disclosure obligations and
financings. These are all important factors to consider in
developing any policy on EB-5 referral fees for a project,
particularly in a climate of increased enforcement of securities
laws by the Securities and Exchange Commission.
While the facts in every case must be carefully reviewed to
assess whether a securities violation has occurred, EB-5 developers
should be cautious when approached with referrals from unregistered
broker-dealers. Commonly, immigration attorneys act as unregistered
broker-dealers in an EB-5 transaction, with an expectation of a
referral or finder's fee. Paying referral or finder's fees
to immigration attorneys in this context is risky business. All
parties should consult counsel before agreeing to such an
arrangement. In addition, attorneys accepting referral fees from
EB-5 projects or developers could face civil or even criminal
penalties and allegations of professional misconduct by a state
The explosion of new EB-5 projects in the past three to four
years has resulted in a substantial increase in EB-5 advertising by
attorneys. Developers relying on immigration attorneys or other
unregistered agents to source investors for EB-5 projects should
beware of the risks.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
Specific Questions relating to this article should be addressed directly to the author.
On March 8, United States Citizenship and Immigration Services (USCIS) issued a revised Form I-9, Employment Eligibility Verification, bearing an edition date of March 8, 2013, for immediate use by employers.
A bipartisan group of eight U.S. senators has introduced the Border Security, Economic Opportunity and Immigration Modernization Act of 2013, an 844-page bill that aims to bolster border security and seeks to provide some of the nation's 11 million undocumented people with a path to citizenship.