EB-5 Due Diligence Matters

by Mintz
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Private placement offerings are an increasingly active part of the securities business. One especially complicated and emerging area of private placements is the EB-5 Investor Visa Regional Center Program. Under the current rules of the program, an investor interested in a U.S. green card may place $500,000 or $1 million into an at-risk investment, issued by or affiliated with a United States Citizenship and Immigration Services (USCIS) designated regional center.[1] If job creation requirements are met as anticipated in the investment deal, an investor will be eventually eligible to secure lawful permanent residence in the U.S. This program is spiking in popularity along with other citizenship-by-investment programs around the globe.

As with many forms of illiquid investments, EB-5 deals offer an exit strategy premised on an entity or business stabilizing and having funds to pay back investors. Investors who lose their money may well file lawsuits against issuers and any other party who induced them into a deal, including lawyers, brokers, or regional centers. Additionally, SEC complaints (with their Section 17(a) negligence standard) are almost a daily occurrence with respect to private placements. Given the likelihood that we will continue to see litigation and regulatory actions in this area, due diligence is essential. Investors seek due diligence for reassurance that a deal is sound, even if risky. Issuers, regional centers, and broker-dealers will find due diligence helpful in future litigation or investigations. Regardless of where you stand in a deal, due diligence is more important now than ever before in EB-5 transactions.

This article talks about why due diligence matters to various parties in EB-5 offerings. We will also provide strategic guidance about EB-5 due diligence to practitioners, regional centers, and issuers of EB-5 related securities.

Background

While the rules of SEC regulation applicable to all securities offerings are somewhat relaxed in a private placement context, a proper and thorough due diligence investigation is still required in a deal.

In a standard private placement transaction, issuers don’t always know how to go about performing due diligence. Because many entities, including EB-5 regional centers, issuers of an EB-5 security, or broker-dealers who control the marketing and sales efforts of a deal (hereinafter, “underwriters” which we are using in the broadest meaning of the word), are unaware of the exact level of due diligence required of them (and their counsel), they may choose to rely on pre-made checklists purporting to cover everything required of them, or on declarations from a service or counsel that “due diligence”[2] has been performed. This same confusion is magnified in the EB-5 space. EB-5 issuers and regional centers can be equally unsure about how to ensure that due diligence is performed. 

There is no “one size fits all” checklist for adequate due diligence investigations, and given the fact that an underwriter is responsible for its agent’s inadequate investigation, it is worth discussing what is required of regional centers and issuers in undertaking due diligence investigations in the EB-5 context.

Private Placement Offerings

To set the stage for a discussion about due diligence, let’s first review some basics on private placement offerings. Typically, securities are sold or otherwise offered in accordance with the Securities Act of 1933 (“1933 Act”), which regulates the public offering of securities. Offerings under the 1933 Act must generally be registered with the Securities and Exchange Commission (“SEC”) according to the provisions of Section 5 of the 1933 Act, which states that, among other things, it is unlawful for any person to sell or deliver unregistered securities or to fail to file a registration statement along with a sale of securities. These provisions generally exist to protect unaccredited, ordinary investors from being taken advantage of in the offering of securities by a far more sophisticated entity.

Private placement offerings are an exemption from the general rule of registration with the SEC. Private placement offerings occur pursuant to Regulation D of the 1933 Act, which contains SEC Rules 504, 505, and 506, which essentially allow the issuer of the securities to sell them without registering the sale with the SEC. EB-5 private placements sold within the U.S. almost always rely on Rule 506. Many EB-5 issuers also rely on Regulation S, which is an exemption from SEC registration for an offering conducted abroad to non-U.S. persons. 

Private placement offerings are unregulated and sometimes risky, as they are devoid of all of the protections offered to ordinary buyers through SEC registration. These risks are heightened in today’s EB-5 industry. Fees paid to deal facilitators and brokers, investors unfamiliar with the U.S. investment system, and aggressive business tactics only increase the risk level of EB-5 deals.

As a result of risks in the broader context of private placements pursuant to Regulation D, the rules generally allow for private placement sales only to sophisticated investors who have enough knowledge and experience in financial and business matters to evaluate an investment. In Regulation S transactions, the investors may be unsophisticated. Foreign investors coming into an EB-5 deal pursuant to Regulation S may have very little understanding of American business transactions, investments, or laws. This raises the stakes for due diligence.

In offerings relying on Regulation S or D and geared at a foreign investment market such as EB-5, substantial protections flow to investors, issuers, and regional centers from sound due diligence. This begs three questions: (1) What is due diligence? (2) How does a party in an EB-5 transaction go about ensuring that due diligence is performed? and (3) How does due diligence protect one from private or SEC litigation?

Due Diligence Generally

Pursuant to the federal securities laws, an issuer, and any parties acting for that issuer, must exercise reasonable care in ensuring that the information given to the offerees and purchasers is complete and accurate. “Due diligence” is, in simplest terms, the process of ensuring – to the best of the investigator’s ability – that the statements, documents, and other information passing from the issuer to the purchasers are correct and devoid of any false or misleading information, to the same degree that the investigator would if evaluating his own property.

Statutory Authority

Analogous statutes provide helpful language regarding what constitutes due diligence. These all advance our assessment of due diligence as a concept in EB-5 deals. Section 11 of the 1933 Act (15 U.S.C. § 77k) offers a bit of guidance on due diligence. The statute provides for civil liability of experts, underwriters, accountants, directors, and generally every person who signs a registration statement, in the event of a suit for alleging misstatements or omissions of material facts in the registration statement. Pursuant to Section 11(b), the above parties can raise a due diligence defense to such a suit, provided they meet the requirements outlined in the statute. It is worth noting that the issuer of a registration statement may not raise a due diligence defense, and is thus not covered by Section 11(b). 

Section 11(b)(3) has a few different due diligence prongs, depending on whether the registration statement in question was purportedly made under expert authority, and whether the person attempting to avoid liability is an expert under whose authority the registration statement was made. The first states that a person (again, other than the issuer) is exempt from liability for the release of a registration statement that does not purport to have been made on the authority of an expert which contains an untrue statement of material fact or omission of the same, if the individual can prove that he or she had, “after reasonable investigation, reasonable ground to believe and did believe, at the time such part of the registration statement became effective, that the statements therein were true and that there was no omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading.”

While Section 11 is speaking to due diligence in the public company context, there are some fine points for us to glean when we talk about EB-5 due diligence. We think that the standard of proof of a “reasonable investigation” sheds light into how a court might construe due diligence in an EB-5 litigation controversy. An investigation has to be reasonable. Statements in a private placement memorandum also have to be reasonable. This means that an EB-5 due diligence effort may require expertise of qualified professionals from various areas, including immigration law and other specialty law areas (e.g., oftentimes not just real estate law but also expertise in debt transactions) to probe whether the deal disclosures are accurate. Experts might also be needed to confirm that revenue projections are reasonable. Qualified outside experts in the investigation process are key to a due diligence effort, which should detect red flags or unreasonable assertions.

Practice Pointer: Integrate your due diligence team into your deal early. Coming into a deal after an investment prospectus has been drafted is a potential trap for a due diligence provider, particularly in a deal with related party transactions. Knowing first-hand the development of a business plan and prospectus enables a due diligence expert or professional to follow a deal, including facts that may be buried in a private placement memorandum or even excluded from the total mix of information that investors need to make a decision. By not being present with the team that conceived a business plan and deal documents, a lawyer or other expert is reviewing only selected data and only evidence that made the final cut into a deal.

Further helpful to our discussion on EB-5 due diligence is Section 12(a)(2) of the 1933 Act (15 U.S.C. §77l(a)(2)), which provides a reasonable care standard.[3]  The statute provides that “any person” who offers or sells a security by the use of any means of interstate commerce or the mails which includes “an untrue statement of a material fact or omits to state a material fact,” is liable to the person purchasing such security, unless he can prove that “he did not know, and in the exercise of reasonable care could not have known, of such untruth or omission.” The language of Section 12 states that any person is liable under the statute unless he or she can sustain the burden of proving reasonable care. This indicates that, unlike in civil suits brought under Section 11, an issuer may raise a due diligence defense to a suit brought under Section 12.

Due diligence is thus not only an investigation to ensure that disclosures are in line with what is required from a securities law standpoint. Due diligence can also be useful in future litigation, and therefore an important concept for any EB-5 regional center, issuer, or broker-dealer. Due diligence operates to mitigate risk in litigation. We think that regional centers and affiliated entities issuing securities may well be held to a reasonable care standard in litigation that develops in the EB-5 context. Having a due diligence process that reflects an issuer’s attempt to exercise reasonable care and to conduct an objectively reasonable investigation would also assist a party with a defense in a claim of securities fraud brought under Section 10(b) of the Securities Exchange Act of 1934 or SEC Rule 10b-5, which is codified at 17 C.F.R. 240.10b-5.

Practice Pointer: Issuers and regional centers should invest in due diligence to enhance their position in unforeseen litigation or regulatory actions and to protect against reputational harm that could flow from inadequate or insufficient investigation before a deal goes to market.

Case Law

The seminal case on the requirements and practical application of due diligence is Escott v. BarChris Construction Corporation, 283 F. Supp. 643 (S.D.N.Y. 1968) (“BarChris”). This case concerned the public offering of debentures by the Defendant, a builder of bowling alleys. At the time of the closing of the offering, BarChris was in dire financial straits, which it did not disclose in the prospectus. The lead underwriter for the offering conducted a due diligence review of the disclosure documents from BarChris, and also conducted a number of interviews with BarChris management. Both the documents and the statements from BarChris were fraught with inaccuracies. The underwriter also relied heavily on its contracted law firm to do due diligence. The law firm in this case sent a junior associate to do a review that was later found to have been inadequate.

The court found the underwriter to be liable for its failure to conduct adequate due diligence. It noted that the purpose of Section 11 of the 1933 Act (and, by extension, due diligence investigations in general) is to protect investors from misrepresentations and omissions by the issuer. The underwriter to an offering is responsible for the truth of the prospectus, and cannot merely rely on statements made by the issuer itself to determine whether the prospectus is accurate. Similarly, an underwriter – or any other party to an offering – cannot simply rely in good faith on counsel and escape liability. Counsel is an agent of the underwriter, so the underwriter is responsible for its counsel’s failures, if any. Thus, an underwriter to an offering, whether through counsel or not, is required to thoroughly understand the offering beyond the mere representations of the offeror, in order to adequately investigate the accuracy of the offering.

Perhaps most importantly, the court noted that it was “impossible to lay down a rigid rule” for every case defining the extent of verification required in a proper due diligence investigation. The idea that the adequacy of due diligence is determined on a case-by-case basis has seen a great deal of support in case law and other authorities in the time since BarChris

Practice Pointer: In EB-5 related due diligence, there is no simple formulaic definition of what rises to adequate due diligence. A regional center or issuer of an EB-5 security needs to work closely with qualified securities counsel to ascertain what is adequate on a deal-by-deal basis. In our view, due diligence also requires one to know what facts were omitted when deal documents were drafted and to assess that said facts need not be disclosed. The costs of excluding securities counsel and other experts to follow a deal could be high, if a material omission is uncovered later in an SEC investigation or lawsuit by investors.

Due diligence in EB-5 offerings should not be an afterthought. Rather, due diligence should be integrated into an offering process. One sound approach in our view is to have dedicated securities counsel follow the metamorphosis of a business plan and private placement memorandum, with additional experts and professionals introduced into the deal as specific issues arise.

What are the nuts and bolts of due diligence? Let’s review additional case law. In In re International Rectifier Securities Litig, 1997 US Dist. LEXIS 23966 (C.D. Cal. April 2, 1997), the plaintiffs (“IR”) alleged that the underwriters to an offering under Sections 11 and 12(a)(2) failed to discover a slowdown in customer demand in the weeks leading to a secondary stock offering and debenture call. The court concluded that the underwriters had done enough to satisfy due diligence requirements, specifically noting that the underwriters had:

  • Interviewed “eleven senior and middle management employees on a variety of subjects including IR’s management, operations, customer-base, technology, expenditures, and growth potential”; 
  • Interviewed “IR’s major customers, IR’s outside quality consultants, IR’s outside accountants, IR’s patent attorney, and IR’s outside environmental counsel”;
  • “Inspected IR’s major factories and reviewed IR’s internal financial forecasts”;
  • Through counsel, “examined IR’s key contracts and its compliance with applicable laws”;
  • “Reviewed IR’s preliminary prospectus line by line, maintaining contact with IR’s management as revisions were made”;
  • “Conducted their own independent analysis of IR’s business plan and created their own model of IR’s expected earnings”; and
  • Received “an oral confirmation from IR’s management that they believed the prospectus to be correct, a written confirmation from IR’s management stating the same, and a “cold comfort” letter from [IR’s auditor] representing that it knew of no material changes in IR’s financial position since its last audit.”

The court noted that the standard under which it measured the underwriter’s due diligence was “one of reasonableness, not perfection.” Thus, even if the underwriters were deficient in one area, “one judgment in error on the part of the underwriters, in light of the otherwise thorough due diligence investigation performed, should not alone negate the reasonableness of their investigation.” In other words, the court again confirmed that there is no hard and fast rule for reasonableness, and that instead each due diligence investigation would be thoroughly and specifically reviewed on its own merits.

Practice Pointer: Apply a multidisciplinary approach to EB-5 due diligence. In your due diligence process, ensure that key events such as interviews or examinations are memorialized.

Summary judgment was also granted in favor of the underwriters in Weinberger v. Jackson,1990 U.S. Dist. LEXIS 18394 (N.D. Cal. Oct. 12, 1990), where the court summarized the due diligence performed as follows:

“The underwriters reviewed the industry, the company, the company’s management, and the company’s past and projected manufacturing, sales and financial performance.  The underwriters had over twenty meetings with various management personnel, covering all aspects of the company’s business.  Company personnel were specifically questioned about the development and scheduled availability of products, related operating systems and applications software. The underwriters also contacted many of [the issuer’s] suppliers, customers, and distributors, who were asked extensive questions about the company’s operations. The underwriters reviewed company documents including operating plans, product literature, corporate records, financial statements, contracts, and lists of distributors and customers. They examined trade journals and other industry-related publications to ascertain industry trends, market trends, and competitive information. They also made physical inspections of the company’s facilities. When any negative or questionable information was developed . . . the underwriters discussed it with the appropriate persons.”

Similarly, in Competitive Assocs.v. Int’l Health Scis., Inc., 1975 U.S. Dist. LEXIS 14230 (S.D.N.Y. Jan. 22, 1975), due diligence was adequate in a suit brought under Section 11 in regards to the lead underwriters where they undertook a complete analysis of the issuer, including “its finances, management and future plans, as well as an analysis of the state of the industry,” The underwriters further made an extensive study of the relevant medical and health care fields, visited the issuer’s clinical laboratory, and acquainted themselves with the laboratory’s operation. The underwriters also held a due diligence meeting, where the issuer made a presentation discussing the company’s current status and its plans for the future. This due diligence process was reasonable even where it failed to uncover the conspiracy at issue, given that “the degree of investigation required to have unveiled the conspiracy was far greater than ‘that required of a prudent man in the management of his own property.’” (emphasis added)

Similarly, in In re ZZZZ Best Secs. Litig., 1994 U.S. Dist. LEXIS 19784 (C.D. Cal. Oct. 26, 1994), the syndicate members’ motion for summary judgment was denied where they failed to discover serious issues with the offering. The syndicate members admitted that they had a “passive role” in the offering and that they had nothing to do with the due diligence investigation of the issuer. They instead relied entirely on the due diligence investigation allegedly performed by the lead underwriter, and argued that, although said investigation was woefully inadequate, such reliance was “customary in the industry.” The court concluded that the underwriters’ “complete abdication [of] responsibility in investigating [the issuer and lead underwriter] provides a sufficient ground on which to assert a Rule 10b-5 violation.”

Practice Pointer: Do not commence marketing and sales efforts until you have completed your due diligence process. If you are a regional center or issuer of an EB-5 security, engage a qualified team with the right expertise to conduct due diligence before you recruit investors. Correcting deal documents is expensive and can have a chilling effect on potential investors.

While the case law strongly supports the conclusion that each due diligence investigation stands on its own merits, the SEC has codified a few of the factors that should be considered by reviewing authorities in determining the adequacy of a due diligence investigation. SEC Rule 176 (codified as 17 CFR 230.176) states that, in determining whether or not the conduct of a person constitutes a reasonable investigation or a reasonable ground for belief meeting the standard set forth in section 11(c) [of the 1933 Act], relevant circumstances include, with respect to a person other than the issuer:

  • The type of issuer;
  • The type of security;
  • The type of person;
  • The office held when the person is an officer;
  • The presence or absence of another relationship to the issuer when the person is a director or proposed director;
  • Reasonable reliance on officers, employees, and others whose duties should have given them knowledge of the particular facts (in light of the functions and responsibilities of the particular person with respect to the issuer and the filing);
  • When the person is an underwriter, the type of underwriting arrangement, the role of the particular person as an underwriter and the availability of information with respect to the registrant; and
  • Whether, with respect to a fact or document incorporated by reference, the particular person had any responsibility for the fact or document at the time of the filing from which it was incorporated.

Adequate Due Diligence Requirements

The takeaway from the cases and authorities dealing with adequate due diligence is that there is no broad, “one size fits all” approach to conducting due diligence. Rather, the due diligence activities will be determined by the facts, circumstances, industry, and customary business practices of the issuer. Content and customization matter and make due diligence effective and relevant. As the court in BarChris stated, “it is impossible to lay down a rigid rule suitable for every case defining the extent to which such verification must go. It is a question of degree, a matter of judgment in each case.” The authors of this article believe that this holds true in the EB-5 private placement context.

Given the complexities of judicial reviews of due diligence investigations, investors, underwriters, and any other parties responsible for conducting a due diligence review should be extremely wary of the practice of using pre-formed checklists to comply with the requirements of due diligence. While a checklist may be a helpful tool to remind investigators of the factors typically reviewed by the courts, it should never be solely relied upon.

The danger of using checklists in due diligence investigations is perhaps best illustrated by Financial Industry Regulatory Authority (“FINRA”) Regulatory Notice 10-22, released in April of 2010. The purpose of the release was to remind broker-dealers of their obligation to perform a reasonable investigation of the issuers and securities they recommend in offerings made under Regulation D. FINRA states that:

“A [broker-dealer]’s reasonable investigation must be tailored to each Regulation D offering in a manner that best ensures that it meets its regulatory responsibilities. Accordingly, a single checklist of possible practices for a [broker-dealer] engaged in a Regulation D offering will not suffice for every offering, and mechanical reliance upon a single checklist may result in an inadequate investigation.”

FINRA’s advice remains sound. In every review of a due diligence investigation, the investigation stands or fails on its adequacy and thoroughness in light of the particular facts and circumstances. No checklist can possibly account for every nuance and specific issue in every offering. Further, a formal checklist can cut against an investigator in a number of ways. If the checklist is functionally inadequate, as it almost certainly will be, it will be difficult for the investigator to argue that it complied with due diligence requirements by following an inadequate checklist to the letter. Conversely, the failure of an investigator to obey its own formally adopted checklist is strong evidence of the inadequacy of the investigation as a whole.  Simply put, there is no checklist that can be said to satisfy the duty of due diligence in each and every case. EB-5 issuers and regional centers should beware of commoditized services that streamline due diligence. The point is that due diligence is, by nature, fact-driven.

Practice Pointer: If costs are a constraint and prevent you or your client from paying for sufficient due diligence during a deal, consider the risks and costs of proceeding. Taking a deal to market without sufficient due diligence is risky business, particularly in industries where investors may not see a return of capital for many years, if at all. The inability to pay for proper due diligence guidance is a red flag.

Any party responsible for due diligence should avoid simply relying on the attestations of counsel that due diligence has been performed. Obviously, the assistance of counsel in undertaking the due diligence investigation process in an EB-5 offering can be helpful, if not outright necessary. However, it is extremely important for investigating parties to understand that hiring counsel to undertake a due diligence investigation will not satisfy a reviewing court if the investigation made by counsel was inadequate. An investigating party cannot simply rely on the word of counsel that “due diligence” has been performed. Instead, a party tasked with performing due diligence should participate in the investigation with counsel at every step, ensuring that the process is thorough, specific to the situation at hand, and generally adequate. Simply hiring counsel to perform a due diligence investigation will not help if an investigation is inadequate. Thus, EB-5 issuers and regional centers need to have an active role in a due diligence process.

Conclusion 

EB-5 regional centers, issuers and broker-dealers are doing business in an industry that is high risk from a securities law standpoint. Due diligence, when properly performed, can help mitigate risk.

First, every EB-5 due diligence investigation must be customized and tailored to the facts and circumstances of the offering. This means that you need to involve a team early on to follow your deal as it develops.

Second, a due diligence team should involve a range of people, beyond simply attorneys. A proper due diligence investigation likely requires highly experienced counsel, accountants, experts, and supervision by persons with in-depth knowledge of the subject matter and intricacies of the company and/or market being investigated. 

Third, based on case law and existing securities law doctrine, it is important to verify all documents, statements, and other information resulting from the investigation. As noted in BarChris, a reasonable investigation has to require more effort on the part of the underwriters than the “mere accurate reporting in the prospectus of data presented to them by the company” being investigated. In other words, due diligence cannot be adequately performed by simply taking statements and information from the party being investigated at face value and relying on their veracity.

Finally, a party performing due diligence should also be wary of any red flags, or any information which would (or should) otherwise “strip underwriters of their confidence in the accuracy of an offering memorandum premised on audited financial statements.” In re WorldCom, Inc. Sec. Litig., 346 F. Supp. 2d 628 (S.D.N.Y. 2004). As noted earlier, due diligence is an ongoing process in a private placement. Those involved in performing activities in a due diligence process should constantly be on alert for any changing conditions that may have an impact on their ultimate decision or conclusion in a matter. Due diligence is not a static process, but it is ongoing and dynamic. And for investors, regional centers, and issuers in an EB-5 transaction, due diligence matters.

Endnotes

Under current law, the per investor minimum for participation in the EB-5 Program is $500,000 for an investment in a new commercial enterprise capitalizing or facilitating a project based in a rural area or in a specific geographic location of high unemployment known as a “Targeted Employment Area” (TEA). This is a downward adjustment from the $1 million that is required in any area outside a TEA. See Immigration and Nationality Act (INA), Section 203(b)(5)(B).  

Known in the industry as “due diligence” checklists, we address due diligence decisions in this paper without dealing with the question of whether “reasonable care” might be a closer standard.

Section 4A of the Securities Act of 1933 – applying to crowdfunding – is similar to, if not broader in scope than, section 12(a)(2) of the 1933 Act. We anticipate efforts to enact 12(a)(2) equivalents to other private placements.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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  • Our Legal Basis for Processing: Generally, we rely on our legitimate interests in order to process your personal information. For example, we rely on this legal ground if we use your personal information to manage your Registration Data and administer our relationship with you; to deliver our Website and Services; understand and improve our Website and Services; report reader analytics to our authors; to personalize your experience on our Website and Services; and where necessary to protect or defend our or another's rights or property, or to detect, prevent, or otherwise address fraud, security, safety or privacy issues. Please see Article 6(1)(f) of the E.U. General Data Protection Regulation ("GDPR") In addition, there may be other situations where other grounds for processing may exist, such as where processing is a result of legal requirements (GDPR Article 6(1)(c)) or for reasons of public interest (GDPR Article 6(1)(e)). Please see the "Your Rights" section of this Privacy Policy immediately below for more information about how you may request that we limit or refrain from processing your personal information.
  • Your Rights
    • Right of Access/Portability: You can ask to review details about the information we hold about you and how that information has been used and disclosed. Note that we may request to verify your identification before fulfilling your request. You can also request that your personal information is provided to you in a commonly used electronic format so that you can share it with other organizations.
    • Right to Correct Information: You may ask that we make corrections to any information we hold, if you believe such correction to be necessary.
    • Right to Restrict Our Processing or Erasure of Information: You also have the right in certain circumstances to ask us to restrict processing of your personal information or to erase your personal information. Where you have consented to our use of your personal information, you can withdraw your consent at any time.

You can make a request to exercise any of these rights by emailing us at privacy@jdsupra.com or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

You can also manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard.

We will make all practical efforts to respect your wishes. There may be times, however, where we are not able to fulfill your request, for example, if applicable law prohibits our compliance. Please note that JD Supra does not use "automatic decision making" or "profiling" as those terms are defined in the GDPR.

  • Timeframe for retaining your personal information: We will retain your personal information in a form that identifies you only for as long as it serves the purpose(s) for which it was initially collected as stated in this Privacy Policy, or subsequently authorized. We may continue processing your personal information for longer periods, but only for the time and to the extent such processing reasonably serves the purposes of archiving in the public interest, journalism, literature and art, scientific or historical research and statistical analysis, and subject to the protection of this Privacy Policy. For example, if you are an author, your personal information may continue to be published in connection with your article indefinitely. When we have no ongoing legitimate business need to process your personal information, we will either delete or anonymize it, or, if this is not possible (for example, because your personal information has been stored in backup archives), then we will securely store your personal information and isolate it from any further processing until deletion is possible.
  • Onward Transfer to Third Parties: As noted in the "How We Share Your Data" Section above, JD Supra may share your information with third parties. When JD Supra discloses your personal information to third parties, we have ensured that such third parties have either certified under the EU-U.S. or Swiss Privacy Shield Framework and will process all personal data received from EU member states/Switzerland in reliance on the applicable Privacy Shield Framework or that they have been subjected to strict contractual provisions in their contract with us to guarantee an adequate level of data protection for your data.

California Privacy Rights

Pursuant to Section 1798.83 of the California Civil Code, our customers who are California residents have the right to request certain information regarding our disclosure of personal information to third parties for their direct marketing purposes.

You can make a request for this information by emailing us at privacy@jdsupra.com or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

Some browsers have incorporated a Do Not Track (DNT) feature. These features, when turned on, send a signal that you prefer that the website you are visiting not collect and use data regarding your online searching and browsing activities. As there is not yet a common understanding on how to interpret the DNT signal, we currently do not respond to DNT signals on our site.

Access/Correct/Update/Delete Personal Information

For non-EU/Swiss residents, if you would like to know what personal information we have about you, you can send an e-mail to privacy@jdsupra.com. We will be in contact with you (by mail or otherwise) to verify your identity and provide you the information you request. We will respond within 30 days to your request for access to your personal information. In some cases, we may not be able to remove your personal information, in which case we will let you know if we are unable to do so and why. If you would like to correct or update your personal information, you can manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard. If you would like to delete your account or remove your information from our Website and Services, send an e-mail to privacy@jdsupra.com.

Changes in Our Privacy Policy

We reserve the right to change this Privacy Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our Privacy Policy will become effective upon posting of the revised policy on the Website. By continuing to use our Website and Services following such changes, you will be deemed to have agreed to such changes.

Contacting JD Supra

If you have any questions about this Privacy Policy, the practices of this site, your dealings with our Website or Services, or if you would like to change any of the information you have provided to us, please contact us at: privacy@jdsupra.com.

JD Supra Cookie Guide

As with many websites, JD Supra's website (located at www.jdsupra.com) (our "Website") and our services (such as our email article digests)(our "Services") use a standard technology called a "cookie" and other similar technologies (such as, pixels and web beacons), which are small data files that are transferred to your computer when you use our Website and Services. These technologies automatically identify your browser whenever you interact with our Website and Services.

How We Use Cookies and Other Tracking Technologies

We use cookies and other tracking technologies to:

  1. Improve the user experience on our Website and Services;
  2. Store the authorization token that users receive when they login to the private areas of our Website. This token is specific to a user's login session and requires a valid username and password to obtain. It is required to access the user's profile information, subscriptions, and analytics;
  3. Track anonymous site usage; and
  4. Permit connectivity with social media networks to permit content sharing.

There are different types of cookies and other technologies used our Website, notably:

  • "Session cookies" - These cookies only last as long as your online session, and disappear from your computer or device when you close your browser (like Internet Explorer, Google Chrome or Safari).
  • "Persistent cookies" - These cookies stay on your computer or device after your browser has been closed and last for a time specified in the cookie. We use persistent cookies when we need to know who you are for more than one browsing session. For example, we use them to remember your preferences for the next time you visit.
  • "Web Beacons/Pixels" - Some of our web pages and emails may also contain small electronic images known as web beacons, clear GIFs or single-pixel GIFs. These images are placed on a web page or email and typically work in conjunction with cookies to collect data. We use these images to identify our users and user behavior, such as counting the number of users who have visited a web page or acted upon one of our email digests.

JD Supra Cookies. We place our own cookies on your computer to track certain information about you while you are using our Website and Services. For example, we place a session cookie on your computer each time you visit our Website. We use these cookies to allow you to log-in to your subscriber account. In addition, through these cookies we are able to collect information about how you use the Website, including what browser you may be using, your IP address, and the URL address you came from upon visiting our Website and the URL you next visit (even if those URLs are not on our Website). We also utilize email web beacons to monitor whether our emails are being delivered and read. We also use these tools to help deliver reader analytics to our authors to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

Analytics/Performance Cookies. JD Supra also uses the following analytic tools to help us analyze the performance of our Website and Services as well as how visitors use our Website and Services:

  • HubSpot - For more information about HubSpot cookies, please visit legal.hubspot.com/privacy-policy.
  • New Relic - For more information on New Relic cookies, please visit www.newrelic.com/privacy.
  • Google Analytics - For more information on Google Analytics cookies, visit www.google.com/policies. To opt-out of being tracked by Google Analytics across all websites visit http://tools.google.com/dlpage/gaoptout. This will allow you to download and install a Google Analytics cookie-free web browser.

Facebook, Twitter and other Social Network Cookies. Our content pages allow you to share content appearing on our Website and Services to your social media accounts through the "Like," "Tweet," or similar buttons displayed on such pages. To accomplish this Service, we embed code that such third party social networks provide and that we do not control. These buttons know that you are logged in to your social network account and therefore such social networks could also know that you are viewing the JD Supra Website.

Controlling and Deleting Cookies

If you would like to change how a browser uses cookies, including blocking or deleting cookies from the JD Supra Website and Services you can do so by changing the settings in your web browser. To control cookies, most browsers allow you to either accept or reject all cookies, only accept certain types of cookies, or prompt you every time a site wishes to save a cookie. It's also easy to delete cookies that are already saved on your device by a browser.

The processes for controlling and deleting cookies vary depending on which browser you use. To find out how to do so with a particular browser, you can use your browser's "Help" function or alternatively, you can visit http://www.aboutcookies.org which explains, step-by-step, how to control and delete cookies in most browsers.

Updates to This Policy

We may update this cookie policy and our Privacy Policy from time-to-time, particularly as technology changes. You can always check this page for the latest version. We may also notify you of changes to our privacy policy by email.

Contacting JD Supra

If you have any questions about how we use cookies and other tracking technologies, please contact us at: privacy@jdsupra.com.

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