We previously warned that some individuals involved with arranging EB-5 investments may be required to register as broker-dealers (see "Immigrant Investor Program Raises SEC Broker Registration Issues" in the Summer 2014 Expect Focus and "SEC Charges EB-5 Brokers for Not Registering" in the Summer 2015 Expect Focus).
Now, an SEC administrative law judge has ordered Ireeco LLC and its Hong Kong-based parent to disgorge $3.2 million in referral fees received in connection with EB-5 investments. This is the first sanction the SEC has imposed for failing to register as a broker-dealer in such circumstances.
Importantly, the judge declined the SEC Enforcement Division’s request to impose civil penalties in addition to the disgorgement, stating that Ireeco had not deliberately or recklessly disregarded a regulatory requirement. The decision emphasized that, until the SEC charged Ireeco last summer, no firm or individual had been charged with failure to register as a broker-dealer in connection with EB-5 investments.
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