NEWS ALERT: The SEC's formal announcement of its enforcement action in the EB-5 industry concerning receipt of unlawful broker fees is imminent. I have warned for some time on my blog (http://eb5-expert.blogspot.com/) that the SEC has been conducting a wide-ranging investigation into the ILLEGAL payment of fees by EB-5 regional centers to immigration attorneys and other persons not registered as securities brokers, in return for sourcing investors for the regional centers. This practice was widespread since 2008, and as a Certified Fraud Examiner, I always opined that receipt of such fees by unlicensed persons would probably violate the broker registration rules. As warned, the SEC is now bringing enforcement actions against a number of those attorneys who deliberately aided and abetted regional centers in defrauding EB-5 visa investors and violating securities laws. It appears that the SEC targeted lawyers are being required to disgorge the payments they unlawfully received dating back for the five years of the standard statute of limitations, or to January 1, 2010, plus interest and penalties amounting to $1 Million or more, for each lawyer. This spate of prosecutions is only the beginning of the SEC’s enforcement actions on this issue and it is obvious that the SEC will use these actions as a basis for bringing forth enforcement actions against EB-5 issuers and regional centers for “aiding and abetting” unregistered brokering activity by engaging and paying unregistered intermediaries.
The SEC has publicly and prominently announced on several occasions that securities law enforcement is a top priority, and the impending announcement of its action in EB-5 clearly demonstrates their resolve. Further enforcement action is expected, in particular as to legacy practices by industry participants. EB-5 securities issuers have ignored their duty to strictly comply with all applicable securities laws and regulations, including but not limited to the illegal broker fee issue, for far too long and now the SEC will be sending a loud and clear message that there will be meaningful consequences when regional centers deliberately violate securities laws and commit securities fraud.
Investigations and prosecutions such as these only serve to underline the obvious fact that regional centers will be removed from the EB-5 visa program after September 2015, and EB-5 visa investors need to invest in Genuine Direct Investment Businesses in order to get their green card in safe and usually profitable manner.
If you are an EB-5 visa investor, please contact us for more details.
Mohammed Shaikh, MBA, CFE, Licensed Business & RE Broker (CA & FL)
Online: http://www.smartbusinessbroker.com
Blog: http://eb5-expert.blogspot.com/
Phone: +1 407 535 0616
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