EB-5 Law and Practice Following the JOBS Act
The SEC's proposed rules under the JOBS Act will change the practice of law relating to EB-5 offerings. Regional centers and other EB-5 issuers (“direct investments”) will have more latitude with respect to general solicitations and general advertisements. However, the effort and cost to comply with securities law will increase significantly due to the “reasonable steps” requirement. Proof of “reasonable steps" taken to verify accredited investor status will now be a condition to the availability of the exemption under Rule 506 (c). Lawyers working in this field will need some familiarity with both securities law and EB-5 law.
The most commonly used exemption in EB-5 offerings is Regulation D (private placements). Regulation S offshore offerings exemptions are far less frequently used. Without either exemption, issuers must register their offerings with the SEC and disclose information similar to what public offerings require. Failure to comply subjects an issuer to prohibitive penalties and fines and entitles EB-5 investors to recover their full investment.
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