SOURCE: Dinse, Knapp & McAndrew

Dinse, Knapp & McAndrew

March 19, 2010 13:50 ET

The EB-5 Program, Securities Law, and EB-5 Visa Cases: Insight and Ideas From Vermont Law Firm Dinse, Knapp & McAndrew, P.C.

BURLINGTON, VT--(Marketwire - March 19, 2010) - The EB-5 Visa program allows international investors to obtain permanent residency in the United States (green cards) for themselves and their immediate family by investing in a new or struggling business venture in the United States. With the current challenges in the U.S. economy, U.S. business interests are looking to EB-5 investors from outside the United States as a source of capital, and international investors are responding. The number of approved EB-5 Regional Centers has grown dramatically over the past year. In the Vermont Regional Center, the minimum EB-5 investment is $500,000 (except in the greater Burlington/South Burlington, Vermont area), rather than $1 million, and other favorable EB-5 program eligibility criteria apply. Several years ago, the State of Vermont approved and continues to administer one of the first EB-5 Regional Centers making it unique among EB-5 Regional Centers most of which are administered by private organizations. Jay Peak Resort was the only EB-5 project in the State of Vermont Regional Center for years, then Sugarbush Resort launched an EB-5 program a couple of years ago and now there are several other EB-5 programs in development in Vermont.

There are a number of compliance obligations and legal issues surrounding EB-5 programs. First, formation of an appropriate business entity and the preparation of investment agreements and protocols that qualify under EB-5 program regulations (Corporate law and Immigration law). Second, marketing and selling the EB-5 investment to potential investors (Securities law). Third, development of an immigration case to explain and document that the investor and the EB-5 investment qualify for permanent residency approval under EB-5 program eligibility criteria (Immigration law). The Corporate law and Immigration law aspects of an EB-5 project are often quite apparent. However, the Securities law aspects of projects that fall under the EB-5 program are not necessarily clear to lawyers practicing outside the Securities field or to developers and investors involved in EB-5 projects.

Many EB-5 projects offer a finder's fee to lawyers who refer international investors to the project. However, for a lawyer to accept a referral fee without providing legal services may violate attorney ethical rules. A finder's fee also can look like a commission paid to an investment broker-dealer which may trigger broker-dealer compliance obligations and liabilities under U.S. Securities law. As a result, our Vermont law firm, Dinse, Knapp & McAndrew, does not accept finder's fees.

As in any Securities offering, most of the marketing materials for EB-5 programs state "this is not an offering of securities" because, technically, only the Offering Memorandum is an "Offer of Securities" and only the Offering Memorandum can be relied upon by the investor in purchasing the security. By their very nature, EB-5 projects involve offering to sell ownership interests in a business organization (offering securities) to the international community (the public). Securities laws apply whenever there is an offer of securities to the public, so Securities laws apply to EB-5 transactions. Everyone involved in an EB-5 project must comply with federal and state Securities laws, including the project developer who solicits investments, the investor, and the attorneys who advise the investor and the project developer. A detailed explanation of applicable Securities laws and compliance obligations is beyond the scope of this article, but summary information is available to the public at the web site of the Securities and Exchange Commission,, and other online resources.

International investors considering applying for an EB-5 Visa, or immigration lawyers with a client interested in starting an EB-5 Program, should engage one of the many firms with expertise in Corporate law, Immigration law, and federal and state Securities laws.

Dinse, Knapp & McAndrew, P.C. is a Vermont law firm representing clients in legal matters including business, financing and corporate matters, immigration, securities compliance, employment law, education law, litigation and other. Learn more about Vermont law firm Dinse, Knapp & McAndrew, the EB-5 program, and our practice areas at

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