Summary of New FINRA Rule 2040- Payments to Unregistered Persons Including Foreign Finders

    Summary of New FINRA Rule 2040- Payments to Unregistered Persons, Including Foreign Finders

    by Osvaldo F. Torres, Torres Law, PA (bio)

    Effective as of Monday, August 24, 2015, the Financial Industry Regulation Authority (“FINRA”) implemented Rule 2040, which prohibits FINRA member firms from making payments to persons who are not registered as broker-dealers. Rule 2040 serves to modify existing rules that govern payments to unregistered persons, and expressly aligns with Section 15(a) of the Exchange Act and its related guidance on whether registration as a broker-dealer is required for certain persons to receive transaction-related compensation.

    Rule 2040 does not, however, eliminate altogether the so-called “foreign finder exemption,” which allows certain payments to unregistered persons referring foreign customers to FINRA members. Instead, Rule 2040 permits such payments to unregistered persons (i) if both the finder and the customer are foreign nationals and (ii) the FINRA member (A) determines that there is “reasonable support” to conclude that the recipient of the transaction-related payment would not be required to register as a broker-dealer solely by virtue of receiving the payment; and (B) further assures itself that the compensation arrangement does not violate applicable foreign law.

    Rule 2040 permits the FINRA members to derive support for their determination by reasonably relying on published SEC no-action letters, other interpretations that apply to their circumstances, or by seeking a SEC no-action letter of their own. Reasonable support may also be derived by obtaining a legal opinion from an independent U.S.-licensed counsel knowledgeable in the area. However, the foregoing methods for making a reasonable determination are not exclusive, and members may rely, for example, on in-house counsel or even foreign counsel. In any event, a member’s determination must be reasonable under the circumstances, and should be reviewed periodically if payments to unregistered persons are ongoing in nature.

    Finally, foreign customers must also receive a descriptive document, similar to that required by Rule 206(4)-3(b) of the Investment Advisers Act, which discloses the compensation being paid to finders. Customers will be required to provide a written acknowledgment as to the existence of the compensation arrangement. FINRA also requires such acknowledgment to be retained in the member’s records, and made available for inspection by FINRA. Additionally, any records reflecting payments to finders, as well the actual agreements in connection therewith, must be maintained on the member’s books, and be made available for inspection by FINRA. The confirmation of each transaction must also indicate that a referral or finder’s fee is being paid pursuant to an agreement.

    USCIS Published 2015-Q3 Adjudication Data Reveals Another Record Quarter for the EB-5 Program

    On July 28, 2015, United States Citizenship and Immigration Services (USCIS) published its third quarter report on I-526 and I-829 petition adjudication data. As always, IIUSA is here to provide a detailed summary with charts and graphs comparing recent and historical trends. Read the IIUSA press release here.


    I-526 petitions – To View the IIUSA Data Report Click Here 

    (Full Report for IIUSA Members Only)


    EB-5 investment contributed over $1.4 billion in Foreign Direct Investment (FDI) to the U.S. economy in Q3 of FY2015. This is a 45% increase from Q2 of this year.

    526 statistics

    According to United States Citizenship and Immigration Services (USCIS) published third quarter data, there were a total of 2,868 I-526 petition approvals, a 45% growth from Q2 of this year.

    Data points to know: 


    1. I-526 approval rates grew 45% from Q2 and 153% year-over-year in addition EB-5 contributed over $1.4 billion FDI in Q3 of 2015.
    2. The number of I-526 receipts remains strong – 7% growth from Q2, but dropped slightly year-over-year. With a strong Q4, FY2015 could still be a record year for the EB-5 Program.
    3. The number of pending I-526 petitions dropped to slightly from 13,663 to 13,117.
    4. The I-526 approval rate increased slightly from Q2 (88%) and remains over 90%.


    I – 829 petitions – To view the IIUSA Data Report  Click Here



    According to United States Citizenship and Immigration Services (USCIS) published third quarter data, the number of I-829 petition receipts grew 10% compared to 2015-Q2 data and 15% year-over-year.

    Data points to know: 


    1. I-829 receipts grew 10% compared Q2 and 15% year-over-year.
    2. I-829 approvals, denials, approval rate are all pretty much the same (+/- less than 1%) compared to the Q2.
    3. The number of I-829 petitions pending grew to over 4,000 (14% increase from Q2).

    IIUSA: Register For Tomorrow’s Webinar – EB-5 Litigation: Strategies & Trends (3:00pm EST/12:00pm PST)

    Panelists (Click Photos For Bios):
    Michael G. Homeier
    Founding Shareholder, Homeier & Law, P.C. 
    Ira J. Kurzban
    Partner, Kurzban Kurzban Weinger Tetzeli & Pratt P.A.
    Carolyn S. Lee
    Partner, MIller Mayer LLP
    John P. Pratt
    Partner, Kurzban Kurzban Weinger Tetzeli & Pratt P.A.
    John Roth
    Managing Principal, EB5 Analytics

    EB-5 Litigation: Strategies & Trends

    When: Thursday  September 3, 2015

    Time: 3:00 PM EST/ 12:00 PM PST*

    *Note: Registration will be cut-off  the day of the webinar at 1:00pm est. 

    Topic: When other administrative options have been exhausted, EB-5 Regional Centers and petitioners may resort to resolving their cases through court proceedings.

    Litigation in the EB-5 context has arisen in the form of mandamus, review of I-526 and I-829 petition denials, review of regional center denials and defense of securities law violations. With the inherent complexity of the EB-5 Program with commercial, economic, securities, corporate and immigration issues tied into the disputes in each and every case, it is likely that ligation will continue to be an avenue for EB-5 Regional Centers and petitions to entertain.

    Join our expert panelists on September 24th to review previous instances of litigation in the EB-5 context, why some strategies worked and others did not and discuss how and in what circumstances could litigation be an option for you.

    USCIS EB-5 Adjudication Trends: I-526/I-829 Petitions & I-924 Applications
    September 24, 2015 (3pm est/12pm pst)

    In fiscal year 2014, the volume of I-526 petitions (used by an entrepreneur who wishes to immigrate to the United States) and I-829 petitions (the removal of conditions) reached an all-time high. This webinar will highlight these growth trends as well as the analysis of large data sets of I-526 and I-829 RFEs/Denials that inform us to what issues are coming up in the adjudication of these petitions. Additionally, this webinar will assess recent processing trends and any issues pertaining to a backlog of petitions. All of these issues will be looked at from the perspective of EB-5 Regional Centers and project developers, investors, and other EB-5 industry stakeholders.

    On August 20th, come take a closer look at how the adjudication of petitions continues to evolve the EB-5 Program.

    *For more on member benefits and services, contact IIUSA Associate Director of Marketing/Communications Coordinator Allen Wolff at or call 202-795-9669.

    USCIS Adds Protocol Webpage for Processing of EB-5 Petitions, Applications and Stakeholder Communications

    United States Immigration and Citizenship Services (USCIS) has recently added a new webpage called “EB-5 Resources” to the EB-5 section of its website. The new page currently has training materials on the EB-5 Protocols, “Ethics and Integrity: Protocols for Processing of EB-5 Immigrant Investor Visa Petitions and the EB-5 Regional Center Applications, Incduing Stakeholder Communications”, published on April 30, 2015.

    These protocols apply to all DHS and USCIS employees and contractors involved in policymaking, evaluation, or review of the EB-5 program or the adjudication of any particular EB-5-related petition or application.

    The protocols focus on the guiding principles of EB-5 processing, procedures for leadership intervention in specific EB-5 petition or Regional Center application decision and procedures for stakeholder contact regarding specific EB-5 petitions or applications.

    The webpage includes links to the USCIS employee “EB-5 Protocols Training Slideshow” which details:
    • The Purpose of EB-5 Protocols
    • Guiding Principles for EB-5 Processing
    • Procedures for Stakeholder Contacts Regarding Specific Petitions or Applications
    • Leadership Intervention in Specific EB-5 Petition or Regional Center Application Decisions/Adjudications
    • Expediting Requests
    • Reporting a Suspected Violation of EB-5 Protocols, Ethics Rules, or any Statue, Regulation or Policy.
    Click Here to View the New Webpage
    Click Here to View the EB-5 Protocols




    Early Bird Deadline for the EB-5 Market Exchange Ends Today! Sign Up Now & Save!

    Register Now!

    *Schedule, agenda & speakers will be updated in the coming weeks. Stay tuned!

    This Year’s Guest of Honor:

     Jon M. Huntsman, Jr. began his career in  public service as a staff assistant to President Ronald  Reagan. He has since served four U.S. Presidents in  critical roles around the world including Ambassador  to Singapore, Deputy Assistant Secretary of  Commerce for Asia, U.S. Trade Ambassador and most  recently U.S. Ambassador to China.

    Twice elected as Utah’s Governor, Huntsman brought about strong economic reforms, tripled the states rainy day fund and helped bring unemployment rates to historic lows. During his tenure Utah was named the best managed state in America and best state in which to do business.

    Recognized by others for his service, Huntsman was elected as chairman of the Western Governors Association, serving 19 states throughout the region. Huntsman most recently ran as a candidate for the Republican Presidential nomination. He left the race in early 2012 following a third place finish in the New Hampshire primary.

    He currently serves as the chairman of the Atlantic Council and co-founder and honorary co-chair of No Labels, as well as serving on the boards of Ford Motor Company, Caterpillar Corporation, Chevron Corporation, Huntsman Corporation, the U.S. Naval Academy Foundation and the University of Pennsylvania. In addition he serves as a distinguished fellow at the Brookings Institute, a trustee of the Carnegie Endowment for International Peace, a trustee of the Reagan Presidential Foundation, and chairman of The Huntsman Cancer Foundation.

    He has served as a visiting fellow at Harvard’s John F. Kennedy School of Government as well as a distinguished lecturer at Duke University’s Sanford School of Public Policy. He is a graduate of The University of Pennsylvania and has seven honorary doctorate degrees.


    Interested in Sponsoring or Exhibiting?

    Less Than 10 Exhibit Booths Remaining!
    Sponsors & exhibitors at this year’s event will have 2+ days to showcase their services to a wide variety of EB-5 stakeholders and service providers. There are over 40 total booth available that will be decided on a first-come-first-serve based on sponsorship level. The booth selection process will take place in September. 

    Each 8′ x 8′ booth will be set with 8′ high blue back drape, 36″ high blue side dividers, one 6′ x 30″ beige skirted table, two chairs, one wastebasket, and a 7″ x 44″ identification sign. WIFI will be provided. Platinum sponsors have a total exhibit space of 10′ x 8′ which will be centrally located in the exhibit hall. 

    Non-exhibiting sponsorship opportunities such as wifi, multimedia, mobile app & EB-5 101 sponsors are also available.


    Support EB-5 Program Reauthorization by Signing Onto Our Letter Today!

    The EB-5 Regional Center Program (the “Program”) is due to “sunset” on September 30, 2015 absent Congressional action with American jobs on the line. Stand with IIUSA and the EB-5 Regional Center industry by encouraging your peers and colleagues to sign onto our letter of support for permanent authorization of the Program so it can continue creating American jobs at no cost to the taxpayer! Simply re-tweet the numerous industry and state specific tweets on IIUSA’s Twitter account (@EB5IIUSA).


    The time has come for this letter be delivered to its intended recipient, the United States Congress. With less than a month until the sunset date, it is imperative that we demonstrate the broad support of the Program that reaches far beyond just those in the industry.

    With that, we are making a last call for signatories on the letter until September 15th.

    You can view the full list of our nearly 750+ signatories and sign on by clicking here

    (All IIUSA members have already signed-on to the letter)


    Call for Advertisements in the Q3 Issue of the “Regional Center Business Journal”

    Deadline for Advertising in the Next Issue of the RCBJ is September 11th! 

    Q2 Issue of the Regional Center Business Journal Available Online
    The July 2015 issue of the Regional Center Business Journal- EB-5: The Data, Projects & People Behind Record-Breaking Economic Impactis now available online.

    This issue aims to highlight the profound benefit and impact of the EB-5 industry on American communities. Articles explore past economic impact based of scientific analyses, methodologies for measuring that impact, and the economic fundamentals that should inform prudent policy making. Given the current legislative and political climate for the EB-5 Program, this edition also features what IIUSA is doing to engage, inform and rally grass roots support.

    With a little over a month remain until the EB-5 Program “sunset” date on September 30th, these numbers, and more importantly the stories of regional economic development behind these numbers, are the ones law makers should be tuning in to.  

    This October, IIUSA will publish its 11th issue of the Regional Center Business Journal, a quarterly magazine designed to keep IIUSA members and other key EB-5 Regional Center program stakeholders “in the know” on the latest industry developments and provide in-depth analysis of industry trends.

    IIUSA welcomes you to advertise in the October 2015 (Q3) issue of the Regional Center Business Journal. Please note that all artwork must be submitted by  Friday September 11th for inclusion in Q3 issue.

    You can have your company represented in the industry’s premier publication for as little as $375 per issue. Special pricing exists for purchasing a “bundle” or ad space in four consecutive issues. To view the IIUSA’s 2015 Media Kit (PDF), click here.

    To purchase your advertisement today, visit the IIUSA Marketplace

    We appreciate your consideration and thank you for your continued support of IIUSA!

    Report on August 13th USCIS EB-5 Stakeholder Meeting by Robert C. Divine

    divineReport on August 13, 2015 EB-5 Stakeholder Meeting
    by Robert C. Divine, Vice President, IIUSA; Shareholder, Baker, Donelson, Bearman, Caldwell, & Berkowitz, P.C. 

    The August 14, 2015 stakeholder meeting provided some useful “take aways” for the industry. I have followed up with the Investor Program Office and the Office of Public Engagement asking them to publish the essential conclusions from the meeting, especially since the audio quality for those listening by phone was quite poor.

    Mr. Colucci said IPO has 108 on staff and expects another 20 soon. He said IPO has been completing 1,000 I-526s per month and in the quarter March to June IPO adjudicated 1100 more than received. He gave these statistics:

    I-526: received 7,723 526 (5% increase), approved 6,498, denied 663.
    I-829: 2,268 received (47% increase), approved 606, denied 5
    I-924: received 252 (30% increase), approved 187, denied 31.

    Mr. Colucci reported that USCIS has initiated an integrity program with dedicated resources, and apparently one of its first actions has been to publish the recent email notice to stakeholders a warning that any regional center continuing to use the words “United States, U.S., or Federal” in its name would be reported to the Federal Trade Commission. A stakeholder pointed out that uses of such names by very well-known companies exist, such as US Bank and Federal Express, but USCIS seems to believe those are subject to governmentally recognized exceptions not applicable in the regional center context.

    Mr. Colucci reported that he and some other USCIS personnel recently visited China for a week and interacted with the relevant national and provincial police agencies that oversee immigrant investment agencies there. He said that the Chinese agency provided useful information to USCIS in detecting fraud in source of funds documents. He said the USCIS personnel also visited with State Department officials and watched some EB-5 immigrant visa issues. They spoke with consular fraud personnel about local (in China) site visits relating to source of funds verification.

    Julia Harrison discussed the “first in first out” modified by grouping of some projects. She said they are working hard to catch up on some longstanding petitions that have fallen out of order. She mentioned the phenomenon of expediting without explaining how USCIS approaches types of expediting as a practical matter. She acknowledged that USCIS on its own expedited electronically filed petitions when it discontinued ELIS system. She also said that USCIS will not review compact disks or other electronic media in a filing. She said USCIS will publish guidance in the next several weeks about what will happen if the regional center program legislation expires.

    Lori Henson invited stakeholders to send in comments about the draft memo on job creation and sustainment of investment published this week, particularly on issues that need to be further clarified.

    The question and answer component of the meeting yielded the following essential lessons, which I have asked IPO and OPE to compile in writing with any others they deem appropriate:

    Sale subject to an EB-5 loan (i.e., preserving the loan) is OK. (we hope that USCIS will please publish what a USCIS lawyer had written and the speaker read).
    Conditional residence ends, for purposes of the requirement to sustain the investment, upon the timely filing of the I-829, and it would be inappropriate for USCIS to require an investor to show sustainment beyond the time of filing.

    An NCE can use proceeds from a JCE liquidation/repayment to pay off investors who already reached the end of conditional residence, even if proceeds for other investors need to be reinvested (see draft memo on “sustainment” just published). It is permissible for a JCE to place operational profits in a sinking fund for later distribution to investors after the end of their conditional residence. [it was not clear to me whether Mr. Lyons meant that the funds could be transferred to the NCE before the end of conditional residence or must be held in some account by the JCE, and that should be clarified.]

    USCIS has authority to prioritize RC-sponsored petitions over non-RC petitions, but it has not deliberately exercised that authority, and it intends to get processing times of non-RC closer to on-par with RC-sponsored petitions.

    USCIS does not and will not hold in abeyance I-526s related to projects other than ones for which an I-924 is filed.

    To Listen to the Full Recording of the Event, Please Click Here (Members Only)

    Call for Comments on USCIS Draft Policy Memorandum-602-0121 Due By September 8th

    Last week United States Citizenship and Immigration Services (USCIS) issued a draft policy memorandum, PM-602-0121, to provide guidance on the “Job Creation Requirement and Attainment of the Investment for EB-5 Adjudication of Form I-526 and Form I-829″. To read a full analysis of the draft memorandum please see here.

    USCIS has called for comments on the draft memorandum. Below is the USCIS notification reprinted in full.

    Dear Stakeholder,

    USCIS has posted the following draft policy memorandum for your review:

    Comment Process: Please email all comments to byTuesday, September 8, 2015. Please include the following to make your comments clear:

    • State the title of the relevant memo in the subject line of your message:
    • Refer to a specific portion of the memo:
    • Explain the reason for any recommended change; and
    • Include data, information, or authority that supports the recommendation.
    For complete information on the comment process, visit the Feedback Opportunitiessection of

    If you are unable to access the memorandum through the links provided above, please do the following:

    1. Go to
    2. Select “Feedback Opportunities” on the left side of the page
    Kind Regards,
    USCIS Public Engagement Division


    IIUSA Supports Legal Action to Protect Investors, Integrity of EB-5 Program

    Invest In the USA (IIUSA), the non-profit trade association representing more than 275 EB-5 Regional Centers, fully supports recent action taken by the U.S. Securities and Exchange Commission (SEC) to stop a Washington company from allegedly misusing investor funds.

    Our position is clear:  efficient and effective enforcement of U.S. securities and anti-fraud laws is as essential for the EB-5 program as it is for any investment vehicle.   We welcome active oversight of the program by federal and state securities regulators to protect investors and maintain confidence in the program.  This latest action by the SEC makes clear that federal authorities are taking appropriate and active steps to deter fraudulent activity.

    The EB-5 program is an increasingly important economic development tool that successfully spurs U.S. job creation by attracting foreign direct investment in the United States.  A comprehensive, peer-reviewed economic study found that during fiscal year 2013, $ 1.98 billion was invested through the program, contributing $3.58 billion to GDP and supporting over 41,000 jobs. And, foreign direct investment through EB-5 totaled $1.8 billion in the first two quarters of fiscal year 2015, putting the program on track to nearly double the FDI from fiscal year 2013.

    IIUSA has a track record of working cooperatively with the SEC, USCIS and other regulatory agencies to strengthen the integrity of the program.   We regularly provide our members with opportunities to hear from experts in securities and immigration law – including representatives from federal and state regulatory agencies — to better understand program requirements and support their compliance.  And, IIUSA filed an amicus brief supporting SEC action to stop a Regional Center and developer in Chicago from making misleading claims about investment opportunities.

    As Congress considers legislation to reauthorize the program, we look forward to a productive dialogue on measures to further enhance program integrity.