Late last month, Securities and Exchange Commission (SEC) Chairwoman Mary Schapiro announced to the House Oversight and Government Reform Subcommitte that the SEC was not prepared to meet the July 4 deadline on issuing new rules pursuant to the Jumpstart Our Business Startups (“JOBS Act”).  The JOBS Act provides for an ease in the stringent restrictions on advertising by companies currently engaged in a securities offering by directing the SEC to revise its rules under Regulation D’s safe harbor from Securities Act registration for certain unregistered offerings. 

Many regional centers rely on Regulation D’s safe harbor while offering securities either from the U.S. to foreign investors, or to investors in the United States, including both U.S. investors and foreign investors residing in the U.S. pursuant to lawful non-immigrant status such as F-1 students, H-1B Specialty Workers, E-2 treaties, and L-1 Multinational Managers and Executives and O-1 Extraordinary Ability aliens.  Currently, to rely on Regulation D’s safe harbor, regional centers cannot engage in a general solicitation or advertising in connection with the offering. Regulation D’s current ban on advertising covers television commercials, radio ads, dedicated seminars, magazine and newspaper advertisements, mailings and even websites.   

The JOBS act is a welcome change to many in the EB-5 community as a way to provide access to accredited investors already in the U.S. without needing to engage marketing agents abroad through a time-consuming and often expensive process.  However, until the SEC issues its rules detailing the terms and conditions under which the ban will be relaxed, there is also uncertainly in the community as to how great its impact will be.  For now, we know the revised rules must permit advertising where all purchasers in a Regulation D Rule 506 offering are “accredited investors” at the time of purchase.  Accredited investors are defined as those that have either $1 million net worth or at least $200,000 ($300,000 with their spouse) in annual income each of the past two years and who have a reasonable expectation to reach that same level this year.  Regulation D Rule 506 currently permits sales to an unlimited number of accredited investors and up to 35 non-accredited investors.  At this point, it is unclear what steps issuers will be required to take to confirm accredited investor status in reliance on revised Rule 506.

The SEC has also announced that it will hold an open meeting on August 22 to consider rules to eliminate the prohibition against general solicitation and general advertising in securities offerings conducted pursuant to Rule 506.  It is unknown how much longer after this hearing the EB-5 regional center community will have to wait for the SEC to issue its rules and implement the JOBS Act .  The meeting notice is available at: http://sec.gov/news/openmeetings/2012/ssamtg082212.htm

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Photo of Kate Kalmykov Kate Kalmykov

Kate Kalmykov Co-Chairs the Immigration & Compliance Practice. She focuses her practice on business immigration and compliance. She represents clients in a wide-range of employment based immigrant and non-immigrant visa matters including students, trainees, professionals, managers and executives, artists and entertainers, treaty investors

Kate Kalmykov Co-Chairs the Immigration & Compliance Practice. She focuses her practice on business immigration and compliance. She represents clients in a wide-range of employment based immigrant and non-immigrant visa matters including students, trainees, professionals, managers and executives, artists and entertainers, treaty investors and traders, persons of extraordinary ability and immigrant investors.

Kate has deep experience working on EB-5 immigrant investor matters. She regularly works with developers across a variety of industries, as well as private equity funds on developing new projects that qualify for EB-5 investments. This includes creation of new Regional Centers, having projects adopted by existing Regional Centers or through pooled individual EB-5 petitions. For existing Regional Centers, Kate regularly helps to prepare amendment filings, file exemplar petitions, address removal of conditions issues and ensure that they develop an internal program for ongoing compliance with applicable immigration regulations and guidance. She also counsels foreign nationals on obtaining greencards through either individual or Regional Center EB-5 investments, as well as issues related to I-829 Removal of Conditions.

Kate also works with various human resources departments on I-9 employment verification matters as well as H-1B and LCA compliance. She regularly counsels employers on due diligence issues including internal audits and reviews, as well as minimization of exposure and liabilities in government investigations.