The U.S. Securities and Exchange Commission (SEC) enforces investment laws and regulations to protect both companies and investors from fraudulent and damaging investment activity in the market.
Generally, regulations require investment opportunities, known as securities, to be registered with the SEC.
However, securities marketed to certain kinds of investors may be exempted from registration requirements.
In the EB-5 investor visa context, most regional centers work exclusively with accredited investors to avoid what they view as burdensome securities registration requirements.
What is an Accredited Investor?
An accredited investor is someone who meets a specific set of standards created by the U.S. SEC.
Accredited investors generally have more freedom when investing in U.S. companies.
Your accredited investor status is separate from the EB-5 program, but could help your ability to immigrate with EB-5 investor visa.
Who Qualifies as an Accredited Investor?
In order to qualify as an accredited investor, you will need to meet certain standards.
These standards can be found in Rule 501 of Regulation D of the Securities Act of 1933.
- Any organization described in section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5,000,000.
- Directors, executive officers, or general partners of the issuer of the securities being offered or sold, or any director, executive officer, or general partner of a general partner of that issue.
- Any natural person whose individual net worth, or joint net worth with that person’s spouse, exceeds $1,000,000, primary residence excluded as an asset.
- Any natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person’s spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year.
- Trusts, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person.
- Entities in which all of the equity owners are accredited investors.
These are not the only groups that fit the standards to have accredited investor status.
Rule 501 includes types of investors created by laws other than the Securities Act of 1933.
Accredited Investor Status and EB-5 Visas
Technically accredited investor status is not a part of the EB-5 investor visa program, nor is it required by the USCIS.
It is likely, however, that to qualify for your investor visa you will need to also qualify as an accredited investor.
U.S. law provides for accredited investor status and its standards to protect the investor from making uninformed decisions.
The purpose of accredited investor status is to prevent fraudulent investments with illegally obtained capital.
Regulation D of the Securities Act of 1933
Regulation D of the Securities Act of 1933 defines many of the rules of investment for immigrants.
Two rules to know are Rule 501 (from earlier) and Rule 506.
Rule 506 basically covers exemptions from registering your business when you invest in a non-public offering.
If you are unsure about what exemptions apply to you, refer to this helpful chart and contact a securities or immigration attorney who can help explain the process to you.
Another exemption that some businesses and investors use instead of Rule 506 is Regulation S.
Regulation S states that offerings and sales of securities that take place only outside of the United States do not have to register with the SEC under Section 5 of the Securities Act.
An accredited investor is someone who meets specific standards created by the U.S. SEC.
While accredited investor status is not required to apply for an EB-5 investor visa, regional centers may want to work only with accredited investors.
If you have questions or need help with your application process, don’t hesitate to ask an attorney for help.
Speaking with an experienced attorney can speed your application process up and help you navigate the EB-5 visa process.