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Education/research

Lessons Learned From Securities Litigation in EB-5

MICHAEL G. HOMEIER

FOUNDING SHAREHOLDER AT HOMEIER & LAW, P.C.

L

itigation in the securities law arena is rapidly accelerating in the EB-5 industry. As of the date of this article, shortly before the reauthorization deadline of September 30, 2015, the SEC has filed eight SEC

OSVALDO F. TORRES

MANAGING PARTNER, TORRES LAW, PA

actions impacting the EB-5 industry. The Chicago Convention Center case, filed in February 2013, was the first civil enforcement action brought by the SEC involving actual EB-5 investors. Since then, the SEC filed

DATE

CASE

two actions in 2013, another two in 2014, and four more actions thus far in 2015. The following table lists the SEC cases to date:

TYPE OF ACTION

2/16/13

SEC v A Chicago Convention Center, et al

Civil enforcement case

9/30/13

SEC v Ramirez et al (USA Now)

Civil enforcement case

8/27/14

United States v Sethi

Criminal case (felony) (derived from Chicago)

9/3/14

SEC v Justin Lee, et al

Civil enforcement case

6/23/15

Matter of Ireeco, &c

SEC administrative proceeding

7/6/15

SEC v Luca, &c

Civil enforcement case

7/6/15

Matter of Wisteria Global

SEC administrative proceeding (related to Luca)

8/24/15

SEC v. Path America

Civil enforcement case

LESSONS FROM THE SEC CASES: AVOIDING MISTAKES It is vital that EB-5 principals and their professional teams be aware of these SEC cases. Under-standing what the SEC, the Department of Justice, and private litigators base their litigation causes of action on will help regional centers and project principals avoid the same mistakes. In acting to protect them-

VOL. 3, ISSUE #3, OCTOBER 2015

selves, usually involving closer understanding of and compliance with the securities law requirements, RC and project principals will end up better protecting investors, helping minimize their injury and lessening the government’s need to intervene to safeguard investors and stop and prevent future harm. The fundamental securities law imperative is that prospective investors have disclosed to them all material facts prior to their making

an investment decision. Such access to material information will assist the investor in making the most informed decision possible. Issuers have a duty to inform investors (before they actually make an “investment decision”) of the risks as well as hoped-for benefits of each investment opportunity, without omitting any material information. Importantly, once investors subscribe and the project is

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