John Tishler: SEC Rule 10b-5 is what I’d call the primary rule of liability we’re concerned about in EB5 offerings or EB5 projects. It applies to any offering of securities that has any jurisdictional nexus to the United States. Jurisdictional nexus simply means that some mode of interstate commerce was used: the telephone, an email, postal delivery. I think it is impossible to imagine an EB5 transaction taking place that did not somehow avail itself of the means of interstate commerce in the United States. 10b-5 is going to apply.
And what it says is that it’s unlawful for any person in connection with the offer or sale of securities to omit or misstate a material fact or to state a fact that, in the context in which it is stated, is misleading. And that’s considered to be a fraud. When people talk about securities fraud, Rule 10b-5 is what they’re referring to.
Comparing the commonly used word “fraud” and the common sense understanding of it, the standard for securities fraud is quite a bit lower than the common sense understanding of that term 'fraud'.
Fraud includes an intent to omit a fact or to state a fact that wasn’t complete in its context. Rule 10b-5 has what’s called a scienter requirement in relation to the omission of facts meaning there has to have been intent.