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[HOT] SEC requirements and/or restrictions affecting EB-5 Regional Centers operation and marketing


For internal research purpose: SEC, exemptions, EB-5.

http://www.ppm.net/ppm-info/regulation-s/summary-of-sec-regulation-s/

Note the proposed SEC rule eliminating a prohibition against general solicitation and general advertising to securities offered under Rule 506 of Regulation D of the Securities Act. This proposed rule was mandated by the Jumpstart Our Business Startups Act, companies would be permitted to use general solicitation and general advertising to offer securities under Rule 506 of Regulation D of the Securities Act and Rule 144A of the Securities Act.

http://www.sec.gov/news/speech/2012/spch082912mls.htm

http://www.sec.gov/news/press/2012/2012-170.htm

http://www.sec.gov/rules/proposed/2012/33-9354.pdf

The Proposed Rules

Rule 506

Under the proposed rules, companies issuing securities would be permitted to use general solicitation and general advertising to offer securities, provided that:

The issuer takes reasonable steps to verify that the purchasers of the securities are accredited investors.

All purchasers of securities are accredited investors, because either:

They come within one of the categories of persons who are accredited investors under existing Rule 501.

The issuer reasonably believes that they meet one of the categories at the time of the sale of the securities.

Under Rule 501, a natural person qualifies as an accredited investor if he or she has individual net worth – or joint net worth with a spouse – that exceeds $1 million at the time of the purchase, excluding the value of the primary residence of such person. Or, if he or she has income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year.

In determining the reasonableness of the steps that an issuer has taken to verify that a purchaser is an accredited investor, the proposing release explains that issuers are to consider the facts and circumstances of the transaction. This includes, among other things, the following factors:

- The type of purchaser and the type of accredited investor that the purchaser claims to be.

- The amount and type of information that the issuer has about the purchaser.

- The nature of the offering, meaning:

- The manner in which the purchaser was solicited to participate in the offering.

- The terms of the offering, such as a minimum investment amount.

The SEC’s proposing release notes that proposing specific verification methods that an issuer must use “would be impractical and potentially ineffective in light of the numerous ways in which a purchaser can qualify as an accredited investor … We are also concerned that a prescriptive rule that specifies required verification methods could be overly burdensome in some cases, by requiring issuers to follow the same steps, regardless of their particular circumstances, and ineffective in others, by requiring steps that, in the particular circumstances, would not actually verify accredited investor status.”