Foreign investors seeking to emigrate to the United States should consider the EB-5 visa program for lawful permanent residence. The program has resulted in the creation or maintenance of an estimated 80,000 to 100,000 jobs and $4 billion to $5 billion invested in the U.S. economy through 2013.

The program has concurrent goals of emigration to the United States through qualified investment into a commercial enterprise and job creation for U.S. citizens or lawful residents. Investors receive conditional residency after taking the risk in a qualified investment of their own creation or as part of a separate entity in a regional center. After two years of receiving such status, the investor may apply for removal of the conditional status and prove 10 qualifying, full-time positions per investor have been created—direct, indirect and/or induced jobs.

The required investment level is $1 million unless the investment is made in a business located in a “targeted employment area where unemployment is 150 percent or more of the national coverage, a rural region with of population less than 20,000 or a “troubled business enterprise” with at least a 20 percent decline in value over the past 12-24 months, permitting a reduced investment of $500,000.

Almost all EB-5 regional center programs involve a $500,000 investment since prospective investors have a choice in which projects to invest. Since an investor is seeking a permanent residency status and a return on the investment with minimal weighting to the profit to be received, the $500,000 investment base is far more attractive.

A substantial majority of the investors come from Asia, with China leading the way, accounting for approximately 80 percent of the investors during the last fiscal year.


The Securities Act of 1933, as amended, and its rules provide several transaction exemptions for private placements.

Regulation D requires a disclosure of material information to prospective investors and detailed compliance with the manner in which the offering is conducted. The Regulation D exemption is available only to the issuer of the securities and is not available for the resale of securities by a person who holds or owns the security.

Generally, investors must be accredited, meaning the investor has income for the past two years and projected for the current year of at least $200,000, a total of $300,000 per year when combined with a spouse or assets of $1 million or more excluding personal residences. Regulation D does not establish an exemption from the antifraud, civil liability or other provisions of the federal securities laws.

Regulation S is another exemption under the 1933 act which in effect provides that where an offering is undertaken entirely offshore or made to offshore investors, those investors no longer have to be accredited or otherwise comply with other restrictions applicable to Regulation D.

Most EB-5 offerings utilize the Regulation S exemption given the fact that the entire selling activities are undertaken outside of the United States. The key terminology is “directed selling efforts,” which means the instrumentality of U.S. commerce is not utilized in connection with the selling of the securities. The implications of this are significant since offering materials and direct communications with investors—including email, telephone calls or transmission of offering documents directly to investors—cannot take place within the United States to maintain the exemption.

An offering can contain both Regulation S and Regulation D exemptions since they are mutually exclusive. Investors can come within either the Regulation S or Regulation D exemption under the same offering.

Aggressive SEC

Best practices to avoid a Securities and Exchange Commission investigation or inquiry is to ensure that if the proposed transaction is exempt under Regulation S, steps need to be taken that absolutely no “directed selling efforts” take place from within the United States and that all marketing activities take place offshore.

If any sales are made from or within the United States, including its territories, compliance with Regulation D is required, including in general making sure investors are accredited. Commissions must only be paid to licensed broker-dealers subject to the isolated finder exception.

In connection with both a Regulation D and S offerings, the offering materials must accurately and completely disclose the terms and the attendant risks associated with the investment in the EB-5 program.

The SEC has taken a very aggressive position on investigating and overseeing activities conducted from the United States by parties who may potentially engage in interstate commerce with investors in or from the United States.