About that SEC v. Banco Espírito Santo case...
The SEC exposure parallels are striking. I hope the story ends differently.
I was interviewed for an article published by Expresso, written by Gonçalo Almeida and Raquel Moleiro, and I’d like to share more than what made it into the piece.
The article discusses how Golden Visa holders feel betrayed by Portugal’s new nationality law, which does not carve out immigrants already in process from the new, longer timelines for eligibility for nationality.
I was quoted in the general ballpark of my feedback, but the direct quote attributed to me isn’t quite what I said. So I thought I’d share the questions I was asked and how I answered them here.
But first, two parts of the Expresso piece deserve more attention than they got.
The first is the quote from CMVM, the Portuguese Securities Market Commission, which, when asked whether Golden Visa fund managers and promoters are exposed for failure to disclose that the “5 year path to citizenship” — that so many of them advertised — was subject to change and retroactive effects, stated: “the judicial route can secure contract annulment or compensation, as well as penalties and the return of commissions.”
And so it can. That answer matters because it recognizes that the issue is not merely investor disappointment with a change in public law; it may also be a private disclosure and compensation problem. It’s also worth noting that these remedies are similar to those available under U.S. law for investors who were misled when making an investment, as I pointed out in a piece published on April 5th.
The second is that anyone who is curious whether financial actors outside of the U.S. are outside the reach of the long arm of U.S. law has only to reference the direct precedent of SEC v. Banco Espírito Santo (2011), wherein the Commission pursued one of Portugal's largest banks under legal theories analogous to issues observable in parts of the Golden Visa fund market today. To be clear, the BES precedent is not about Portuguese nationality law and did not arise from the current Golden Visa dispute. Its relevance is that it shows Portuguese financial institutions are not categorically beyond U.S. securities enforcement when their conduct reaches U.S. investors.
Banco Espírito Santo, long controlled by the Espírito Santo family and led by Ricardo Salgado, who was widely known in Portugal as “DDT,” short for “Dono Disto Tudo” or “owner of all this,” paid nearly $7 million in disgorgement, prejudgment interest, and penalties for unregistered offerings, unregistered broker-dealer activity, unregistered investment adviser activity, and related violations involving U.S. investors.
Just three years later, in 2014, Banco Espírito Santo suffered a €10 billion collapse, affecting over 30,000 private and institutional lenders worldwide.The Portuguese state stepped in just as the bank was on the brink of total failure in August 2014 and performed a "resolution," splitting it in two: bad bank, which kept the debt and toxic assets and where shareholders and junior bond holders lost everything, and new bank, which took the healthy assets and deposits. New bank is “Novo Banco.” The Portuguese state has injected over €7B into Novo Banco to keep it solvent in the years since: a €3.9B loan to a Resolution Fund to capitalize Novo Banco in 2014 and another €3.4B from 2017 - 2021 to cover losses from the "toxic legacy" of the old BES assets it still carried despite Prime Minister Pedro Passos Coelho promising that the resolution would cost taxpayers "nem um cêntimo" (not one cent).
That support ultimately placed substantial public and quasi public resources behind the rescue of a bank whose collapse cost retail investors their savings. A core issue is that thousands of retail investors, many reportedly retirees and small savers, were allegedly misled into buying commercial paper from BES as a means of investing their life savings.Bank managers at BES branches reportedly told elderly clients that this paper was as safe as a savings account or a term deposit. In reality, it was unsecured debt tied to failing Espírito Santo group entities. When the bank collapsed, these people lost their entire life savings. For years, "lesados do BES" held weekly protests in front of the Bank of Portugal and Novo Banco branches, often carrying signs that read "Where is our savings?" and "Thieves."
The BES collapse remains a raw, visceral issue for the Portuguese public. It is also a landmark event in European financial history. The collapse threatened the Portuguese economy, the very same economy that Golden Visa investments are meant to stimulate, in the same country where many retail victims of BES remained uncompensated or only partially compensated for years.
We will have to wait and see whether the Portuguese securities regulator will bring enforcement action to a fund market that is now at risk due to misleading claims, when the root of those claims itself lies with the Portuguese government and its ongoing administrative failures that caused years-long delays in various stages of an investment-based immigration program.
We will also have to wait and see whether the U.S. securities regulator will bring enforcement action to a foreign fund market at risk due to misleading claims, but also due to soliciting the U.S. market broadly in ways that appear to be outside of U.S. regulatory alignment.
In the meantime, U.S. investors have statutory rights they should not overlook in both jurisdictions.
The legal analysis below explains what U.S. law actually provides. The history above explains why investors should not expect Portugal to fill any gaps.
And so, the questions from Expresso and the answers I gave, with gratitude for the invitation:
Question 1 — Jurisdiction
“How solid is the legal basis for U.S. courts to claim jurisdiction over Portuguese-domiciled funds and intermediaries, and under what circumstances could that jurisdiction extend to actions involving the Portuguese state itself?”
The legal basis is well established. Offerings made to U.S. persons, or conducted through U.S. mail, wires, U.S. based events, U.S. facing websites, U.S. intermediaries, or other U.S. solicitation channels, can fall within the reach of U.S. securities law even where the issuer is domiciled abroad. That is especially true where U.S. investors were solicited, subscription documents were transmitted through U.S. channels, or transaction based compensation was paid to intermediaries for raising U.S. capital.
Two enforcement paths exist: private actions by investors in U.S. federal or state court and regulatory enforcement action by the SEC, which is civil, and by the DOJ, which may be criminal. The core federal provisions in play include:
Sections 5 and 12 of the Securities Act of 1933, addressing registration and rescission
Rule 10b-5 under the Securities Exchange Act of 1934, addressing fraud and material omissions
Section 15(a) of the 1934 Act paired with Section 29(b), addressing unregistered broker-dealer activity and voidable contracts
Sections 7 and 47(b) of the Investment Company Act of 1940, addressing unregistered investment company activity and rescission rights; and
Sections 203 and 206 of the Investment Advisers Act of 1940, addressing unregistered adviser activity and antifraud, with rescission available under Section 215(b).
State securities laws, often called “blue sky” laws, vary by jurisdiction but may provide lower thresholds for investor claims, including in some cases strict liability for unregistered offerings. They operate alongside federal claims, not in place of them.
Private action can enforce rescission rights or damage claims, and regulatory action could bring penalties and disgorgement of fees. Neither will manifest a Portuguese passport for the investor or erase U.S. tax exposure, which remains durable if rescission does not occur within the same tax year as the original transaction. Legal action can, however, address the additional risk, fees, tax exposure, and holding period costs created by the extended timeline.
The current market answer now being promoted by some fund managers and migration agents is that permanent residency remains available after five years and therefore preserves the investor’s exit path. That answer is incomplete. Permanent residency may remain legally available after five years, but for investors who have not relocated to Portugal, obtaining it presents practical obstacles, including limited AIMA appointment availability and the requirement to show proof of housing in Portugal. Permanent residency is therefore not a clean substitute for the citizenship pathway investors were sold. Unless these issues are resolved, investors may be unable to exit after five years of temporary residence and may instead be forced to carry added investment risk, management fees, tax exposure, and fund-level uncertainty beyond the six to eight year timelines around which many FCRs were economically designed.
Jurisdiction over the Portuguese state itself is a separate question. The Foreign Sovereign Immunities Act generally bars suits against foreign sovereigns, with limited exceptions for commercial activity. U.S. courts do not need jurisdiction over Portugal to adjudicate claims when Portuguese legislative action, such as the nationality law amendment, is the factual predicate for a misrepresentation claim against private parties. The court would not review Portugal’s sovereign acts. It would determine whether fund managers, distributors, advisers, or promoters misrepresented or omitted material legislative and administrative risk to U.S. investors.
Given the well documented administrative delays at SEF/AIMA, a true five year pathway to Portuguese citizenship has not existed in practice for quite some time, regardless of the nationality law amendment. In this light, such claims were already vulnerable, and the nationality law change makes the risk much harder to minimize or dismiss.
Question 2 — SEC enforcement
“To what extent could the SEC realistically pursue enforcement actions against foreign fund managers and migration agents involved in the Portuguese Golden Visa ecosystem, and what would trigger such intervention?”
The SEC has clear statutory authority to pursue foreign fund managers, distributors, advisers, and migration agents where their conduct reaches U.S. investors. Whether it does so depends on enforcement priorities, evidence, investor harm, and the visibility of the misconduct.
Several signals are relevant. The SEC announced the formation of a Cross Border Task Force in September 2025, focused on potential U.S. federal securities law violations involving foreign based companies and gatekeepers that access U.S. investors or U.S. capital markets. Common triggers include investor complaints, demonstrable investor harm, patterns of U.S. solicitation, transaction based compensation paid to unregistered intermediaries, and issuers operating without any U.S. regulatory footprint.
Interagency information sharing is significant here. FATCA reporting reveals U.S. investors holding interests in Portuguese funds, while corresponding U.S. regulatory filings for those funds, and the regulated private placement agreements that would accompany a compliant U.S. offering, are largely absent.
A separate concern is the use of U.S. retirement assets. Some Golden Visa fund managers have actively solicited IRA capital. The differences between U.S. common law trust frameworks and Portuguese civil law titling customs raise substantial concerns that IRA funded subscriptions could constitute prohibited transactions under IRC § 4975. That could disqualify the IRA’s tax protected status and subject the capital to applicable U.S. tax regimes. U.S. policy has historically taken aggressive postures toward conduct that endangers American retirement savings.
There is also direct precedent. In SEC v. Banco Espírito Santo (2011), the Commission pursued a Portuguese institution for unregistered offerings, unregistered broker-dealer activity, and related violations involving U.S. investors. The legal theories are analogous to issues observable in parts of the Portuguese Golden Visa fund market.
Question 3 — Liability exposure
“If U.S. investors successfully argue that the “5-year pathway to citizenship” was a material misrepresentation, who is most exposed to liability under U.S. securities law — fund managers, distributors, legal advisers, or all of them?”
The “five year pathway to citizenship” misrepresentation is the most visible claim, but it is not the only one. Rule 10b-5 reaches material misrepresentations and omissions made in connection with the purchase or sale of securities. The Portuguese Golden Visa fund market presents several additional categories of concern, including failure to disclose the U.S. tax consequences of investing in offshore structures, including PFIC, CFC, FATCA/FBAR, and IRA prohibited transaction risks. In some cases, investors also appear to have received incorrect or unusable tax documentation that may have caused inaccurate U.S. tax filings.
Tax related misstatements or omissions can become part of the securities law analysis where they were material to the investor’s decision, made in connection with the sale, and caused identifiable harm. The financial significance of this category should not be underestimated. Under several of the U.S. tax regimes that apply to subscriptions to Golden Visa funds, the cumulative tax, interest, and penalty exposure for an unprepared U.S. investor can approach or exceed the original investment amount. Damage claims sized to actual tax harm, rather than to the subscription amount alone, materially change the economics of investor recovery.
Exposure spans the entire distribution chain, with different theories applying to different actors.
Fund managers face primary liability for fraudulent or misleading statements and material omissions, misstatements in offering materials, operating as unregistered advisers, and engaging unregistered broker-dealers as promoters. The contractual relationship is direct between the fund manager and the investor. Thus, the fund manager is generally the primary private action counterparty.
Distributors and migration agents who received transaction based compensation for soliciting U.S. investors face exposure for unregistered broker-dealer activity. Resulting contracts may be voidable under strict statutory liability that does not require proof of fraudulent intent.
Legal advisers face exposure where they acted as promoters, received compensation tied to fund subscriptions, or made representations on which investors reasonably relied.
Fund managers appear to carry the broadest liability, but distributors and agents face clear statutory exposure, and advisers are exposed where their role crossed from counsel into promotion.
Golden Visa investors should not treat legal eligibility, administrative feasibility, and investment viability as separate problems. They converge.
This material has been prepared for information and educational purposes only. It is not intended to provide, nor should it be relied upon for, tax, legal, or investment advice. Each investor should consult appropriate tax, legal, and financial professionals regarding individual circumstances.