Section 17b from EB 5 investments perspective
John, could you talk just a moment, about Section 17b of the Securities Act.
John Tishler: This a specialty issue and while it is not going to apply to some EB5 marketing materials or EB-5 Investment offerings it will apply to some and I think it’s worth bringing up. In EB5, Section 17b is relatively unknown. Let me first give you some background on Section 17b which is also known as the “Anti Tout Rule.”
Just about everyone has received an email or a piece of junk mail that hypes some stock or offering, you know—it’s the next Apple stock or something like that, trading for pennies now, but destined for big bucks.
Now, if you look at the really fine print, it might say, “The person putting out this notice was paid by the issuer,” or, “We were paid $50,000 for mailing this and we received a million and a half warrants in this company.” That’s the disclaimer; it’s there because it’s required by law and that law was designed to get at exactly these kinds of things called tout sheets. With a tout sheet, people are touting a security; they’re not offering the security, per se.
The rule basically says that if you publish something about a security, not necessarily an offer in and of itself but as it relates to a security and if you are getting compensated for doing that, then that must be disclosed. The person who publishes it has to disclose that they’re being compensated and the exact amount of the compensation. Let’s now talk about how that might show up in EB5.