Broker Dealer: I’m seeing more and more EB5 Agents open up offices in the US. I personally know and have met with a handful of agents who have offices in New York. What’s the implication of these agents now having rep offices in the US?
Robert Cornish: I’m not exactly sure how these people are being compensated or what they’re doing. Suffice it to say, if they are engaged in the offer of placing of securities and they’re doing it for compensation, i.e. transaction-based, then there are issues. If the securities are Reg S exempt, the sales activities going on in the United States are certainly not conducive to claiming a Reg S exemption.
If you’re claiming Reg S, it’s probably a good idea to claim Reg D as well, simply because that gives you a fallback position in the event that you do have marketing activity going on within the US.
John Tishler: I agree. In theory, the SEC could use a means of interstate commerce test to decide who needs to be subject to broker dealer regulation. By that standard, anybody who ever sent an email to the United States would be subject to broker dealer regulation.
The SEC’s approach to determining broker dealer regulation is what’s called a territorial approach, which they adopted in the late 1980s. Under a “territorial approach,” the SEC looks to see whether people are physically present in the United States while they’re conducting activity that would require broker dealer regulation.