FOR PUBLICATION UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT U.S. SECURITIES & EXCHANGE No. 17-56522 COMMISSION, Plaintiff-Appellee, D.C. No. 2:15-cv-09420- v. CBM-SS HUI FENG; LAW OFFICES OF FENG AND ASSOCIATES PC, OPINION Defendants-Appellants. Appeal from the United States District Court for the Central District of California Consuelo B. Marshall, District Judge, Presiding Argued and Submitted May 16, 2019 Pasadena, California Filed August 23, 2019 Before: Kermit V. Lipez, * Kim McLane Wardlaw, and Andrew D. Hurwitz, Circuit Judges. Opinion by Judge Lipez * The Honorable Kermit V. Lipez, United States Circuit Judge for the First Circuit, sitting by designation. 2 USSEC V. FENG SUMMARY ** Securities & Exchange Commission The panel affirmed the district court’s summary judgment in favor of the U.S. Securities and Exchange Commission (“SEC”) in its civil complaint filed against Hui Feng and his law firm, alleging securities fraud. The U.S. Immigrant Investor Program, also known as the EB-5 program, provides legal permanent residency in the United States to foreign nationals who invest in U.S.-based projects. Multiple foreign investors may pool their money in the same enterprise, and these pooled investments are made through “regional centers” which are regulated by the U.S. Citizenship and Immigration Services. Feng legally represented clients through the EB-5 process, and entered into marketing agreements with regional centers. The basis of the agreements between the regional centers and Feng’s investors were known as private placement memoranda (“PPMs”). The panel agreed with the district court that the EB-5 investments in this case constituted “securities” in the form of investment contracts. The panel rejected Feng’s argument that the transactions were not “securities” because his clients did not expect profits from their investments. Specifically, the panel held that the PPMs’ identification of the investments as securities, the form of the investment entity ** This summary constitutes no part of the opinion of the court. It has been prepared by court staff for the convenience of the reader. USSEC V. FENG 3 as a limited partnership, and the promise of a fixed rate of return all indicated that the EB-5 transactions were securities. The panel rejected Feng’s contention that the administrative fees upended the expectation of profits. The panel also rejected Feng’s assertion that his clients lacked an expectation of profit because they were motivated to participate in the EB-5 program by the promise of visas, not by profit. Concerning the cause of action that Feng failed to register as a broker in violation of Section 15(a) of the Securities and Exchange Act of 1934, the panel agreed with the district court’s conclusion that Feng was acting as a broker and violated the registration requirement. The panel held that the district court properly made its broker determination by utilizing the totality-of-the-circumstances approach by relying on the so-called Hansen factors. The panel rejected Feng’s arguments that the broker registration requirement should not apply to his circumstances. The panel affirmed the district court’s finding that Feng engaged in securities fraud in violation of Section 17(a) of the ...
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