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SEC Charges Two Businesses for Acting as Unlicensed Broker-Dealers in EB-5 sales

Yesterday, the U.S. Securities and Exchange Commission (SEC) ordered a US-based foreign finder operation to cease and desist from operation as an unlicensed broker-dealer.  The charges are some of the first against brokers handling investments in the EB-5 Immigrant Investor Program and follow earlier SEC actions against fraudulent EB-5 offerings.

According to the SEC’s order, Ireeco LLC, of Boca Raton, Florida, and Ireeco Limited, a Hong Kong-based company operating in the U.S., were charged with acting as unregistered brokers for more than 150 EB-5 investors, which represents some $79 million of investments by foreigners seeking U.S. residency.  The SEC Order states that Ireeco LLC and Ireeco Limited used their website to solicit EB-5 investors, some of whom were already in the U.S. on a temporary visa.  Ireeco LLC and Ireeco Limited promised to help investors choose the right regional center to invest with, however most EB-5 investors were directed to a handful of regional centers that paid Ireeco LLC and Ireeco Limited commissions—about $35,000 per investor—once USCIS approved the investor’s petition for conditional residence.  Neither company was registered as a broker-dealer while receiving these commissions, in apparent violation of U.S. securities laws.  Without admitting or denying the SEC’s findings, Ireeco LLC and Ireeco Limited agreed to be censured and to cease and desist from committing or causing similar violations in the future.  Ireeco LLC and Ireeco Limited will now undergo an administrative proceeding to determine whether they will be required to return their allegedly ill-gotten gains, pay penalties, or both, based on their violations.

As discussed in an earlier post, regulatory activity in the EB-5 area is increasing dramatically.  Those with questions about compliance with the securities laws should seek advice from counsel before taking any action.  

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About this Author

William B. Mack, Greenberg Traurig Law Firm, New York, Finance Law Attorney

William B. Mack is part of the firm’s government affairs and financial regulatory and compliance groups. He is experienced in advising companies on regulatory and compliance matters relating to the Securities and Exchange Commission regulations, the Exchange Act, Anti-Money Laundering laws and Financial Industry Regulatory Authority (FINRA) rules.

William’s practice involves all aspects of broker-dealer regulation, including Self-Regulatory Organization (SRO) membership, supervision, employment, research, soft dollar arrangements, chaperoning of...