SEC Begins Crackdown on Unregistered EB-5 Broker Dealers

Dallas, TX (Law Firm Newswire) August 13, 2015 – The U.S. Securities and Exchange Commission (SEC) is cracking down on unregistered broker dealers receiving commissions within the EB-5 Immigrant Investor Program.

The EB-5 program allows a foreign national to obtain a green card if he or she invests money in the United States, either in a new or existing business, or in a “regional center,” a third-party managed investment vehicle. Regional centers are permitted to charge the immigrant investors an administration fee for creating and developing investment projects, but as recent action by the SEC makes clear, companies, immigration attorneys and others may not accept finder’s fees from regional centers for securing EB-5 investments unless they are registered brokers.

The SEC recently ordered Ireeco, LLC, of Boca Raton, Florida, and Hong Kong-based Ireeco Limited to cease and desist operating as unlicensed broker-dealers. Previously, the SEC has taken action against companies which were accused of fraud in immigrant investor schemes.

“With the SEC’s action against Ireeco LLC based solely on being an unregistered broker dealer and without allegations of fraud, the SEC has signaled a new era of enforcement in the unregistered brokering of EB-5 transactions,” said Stewart Rabinowitz, a Dallas immigration attorney with Rabinowitz & Rabinowitz.

According to the SEC, the Ireeco companies used their website to solicit EB-5 investors, promising to help those investors choose a regional center in which to invest. But the Ireeco companies steered most of the investors toward regional centers that paid the Ireeco commissions for each investor after the investor received approval from the U.S. Citizenship and Immigration Services (USCIS) for conditional residence. The companies did not admit fault, but agreed to cease and desist from similar violations in the future, and now face administrative proceedings that could result in fines and the return of allegedly ill-gotten gains.

“Whether to immigration lawyers in the U.S., migration offices abroad or companies anywhere involved with finding investors, the message that the SEC wants to send is that the failure to comply with U.S. security laws will be costly,” said Rabinowitz.