The One Way Back from Historical Non-Compliance with U.S. Securities Law
Regulatory compliance in an foreign jurisdiction is not U.S. regulatory compliance. Portuguese fund managers operating in violation of U.S. securities law risk SEC enforcement.
Regulatory compliance in Portugal and/or the EU is not a surrogate for regulatory compliance in the United States. Compliance with the rules of Portugal's Comissão do Mercado de Valores Mobiliários (CMVM), or with the EU's MiFID II framework supervised by the European Securities and Markets Authority (ESMA), has no bearing on whether an offer complies with U.S. law.
For issuers with offerings that were made in the U.S. market in violation of U.S. law, including offers that neither filed a registration statement with the SEC nor met the conditions for a valid exemption from registration with the SEC, notably Section 4(a)(2) or Regulation D Rule 506(b) or Rule 506(c), there is only one way to remedy historical non-compliance.
Step One: Compliant Full Return of Capital, Plus Interest
When an offshore issuer raises capital in violation of U.S. securities law, the violations cannot be reversed at a future date. Violations are durable. The legal exposure cannot be erased. There’s one specific solution that can meaningfully reduce the issuer’s exposure: offering the full return of capital plus statutory interest to the investors.
That’s it. There is no Step Two.
There is a bit more to Step One, admittedly. A rescission offer is considered by the SEC to be an offer of securities. Therefore, the rescission offer must either completely satisfy a valid private placement exemption (like Regulation D)—which could be a challenge when the offer was non-compliant on the way in—or be fully registered with the SEC using a formal registration statement, a process that is costly (footnote 1). State laws add their own requirements.
I would be happy to make introductions to qualified U.S. Securities counsel for any fund manager seeking to address historical non-compliance with U.S. law and to establish full compliance moving forward.
SEC Enforcement Priorities
Now that the SEC has reformed the Retail Fraud Working Group in addition to the Cross-Border Task Force launched in September 2025, fund managers operating without robust U.S. compliance risk the attention of the enforcement arm of the SEC. According to Cleary Enforcement Watch (footnote 2), Enforcement Director Woodcock, who took office in May 2026, has stated a priority to focus on cases involving systemic harm to retail investors including retail-facing private fund offerings.
“The private fund space is also always subject to close attention. … We continue to bring cases involving offering frauds that have caused significant losses to investors. … We are attuned to potential risks relating to liquidity, fees, valuations, and conflicts of interest—not only at the private fund adviser level but throughout the distribution chain. Firms must ensure their representatives understand the products they sell and the investment profiles, risk tolerance, and liquidity needs of their clients.” SEC Enforcement Director Woodcock
Investigating fraud involving foreign companies and potential violations by underwriters, auditors, and other gatekeepers who facilitate a foreign company’s access to U.S. markets for fraudulent purposes is also a current priority in the SEC Division of Enforcement (footnote 3).
“The [Cross-Border] task force is examining potential securities law violations related to companies from foreign jurisdictions, such as China, where governmental control and other factors pose unique risks to investors.” SEC Enforcement Director Woodcock
The Notice Failure is Fixable; the Violations are Not
Form D signals to the SEC that an issuer is relying on a Regulation D exemption from registration and wishes to conduct the offering with the Reg D safe harbor on the federal and state levels. Form D is meant to be filed within 15 days of the first sale of the security to an American buyer. Adhering to the conditions of the exemption, for example Rule 506(b) or Rule 506(c), are what keep the exemption valid.
Failing to file Form D is a notice failure, not a condition of the exemption itself. Complying with the requirements of a valid exemption is what makes an exemption valid. A fund manager that complied with the requirements for a valid exemption from registration with the SEC but somehow missed the Form D filing can make that filing now to correct that error on the federal level and potentially resolve state-level filing requirements. Those who are eligible would do well to do that.
In the U.S., states have securities laws that may differ from federal laws. A valid federal exemption provides a powerful safe harbor exemption from state-level registration processes. However, states still require the federal Form D as a notice filing, along with timely paid fees for offerings made in the state. Failing to file the Form D doesn’t preclude safe harbor from state registration, but it does leave an issuer open to state late fees and administrative penalties. Eligible issuers who missed filing Form D can file late and pay the relevant states’ penalty fees.
Issuers who relied on a Section 4(a)(2) private placement exemption rather than a Regulation D exemption have cover only if they have zero evidence of general solicitation. No website that reaches the U.S., no road shows, no webinars, no promoter agreements with anyone that interacts with the U.S. market. Notably, Statutory Section 4(a)(2) does not provide any federal preemption from state laws. Issuers who relied on Section 4(a)(2) exemptions and subscribed U.S. investors were required to register the offering or qualify for an exemption in the home states of those U.S. investors.
What’s more applicable to the Portuguese Golden Visa market is this: no late Form D filing or amount of compliance paperwork can resolve blown exemptions from registration with the SEC. No hurry-up-and-try-to-paper-over-this blasts from fund managers to subscribed investors requesting accredited investor or qualified purchaser paperwork resolve past infractions. No claim of the mythological reverse solicitation exception (relevant in the EU but not a recognized safe harbor under U.S. law) can absolve the issuers who made offerings in violation of U.S. federal and state law. What’s done is done and what remains is full return of capital, enforcement action, or both.
What § 12(a)(1) of the Securities Act Requires ⚖️
Once an unregistered, non-exempt sale has been made to a U.S. investor, § 5 of the Securities Act has been violated, and the investor holds a claim under § 12(a)(1): strict liability, no fraud required, remedy is rescission. The issuer does not get to choose between fixing that and disclosing it. The investor already has the right regardless of what the issuer does next. The § 12(a)(1) claim runs on a short clock under § 13 of the Securities Act: one year from the violation, and in no event more than three years after the security was bona fide offered to the public. That period runs from the violation, not from discovery. If an investor misses it, the § 5 violation still stands as exposure the SEC can act on, and any Exchange Act violation in the same offering supports a separate § 29(b) claim, which I cover below with the finder commissions.
While a statute of limitations can close the window for a federal claim by an investor, it does not expire exposure for the issuer. The SEC can take action on a non-compliant offering whenever it chooses to do so. Disgorgement timing now runs under 15 U.S.C. § 78u(d)(8), added by the 2021 NDAA, rather than under § 2462. The SEC has five years for most violations and ten years for violations that require scienter, such as fraud and knowing conduct. Under § 78u(d)(9), any period the defendant spends outside the United States tolls that clock. For offshore fund managers whose conduct carries evidence of knowledge, both the ten-year prong and the offshore tolling can hold the window open well past five years.
For a deeper dive on applicable U.S. Securities law, see my piece from April 2026:
Portugal Just Changed the Deal. U.S. Securities Law Has Something to Say About That.
The Bounty Problem That Sinks All Ships 💰
The bulk of Golden Visa qualifying investment offerings solicited their U.S. investor base both publicly through websites and webinars and through commissioned intermediaries: migration agents, Golden Visa consultants, sometimes immigration attorneys, all paid a bounty: a percentage of the capital they brought in, sometimes through SPVs, sometimes into SPVs to obscure the non-compliant transactions. Commission rates in this market commonly run 2% to 10% of subscription capital and could be in addition to advisory fees paid by the investors to the agents.
If these were salaried employees or referral partners working for a flat fee on compliant offerings, the arrangements would have a chance at legal soundness. That is not the case. At issue are commissions paid to unregulated broker-dealers, often known as “promoters” or “finders” in securities parlance, that are paid by the fund manager or an associated entity per investor and, more commonly, per dollar raised.
U.S. Law 🇺🇸
Under U.S. law, anyone paid transaction-based compensation for soliciting securities purchases is acting as a broker, and § 15(a) of the Securities Exchange Act requires that person to be registered. And even though the Securities Act of 1933, which governs registrations and exemptions, and the Securities Exchange Act of 1934, which governs broker-dealers, are separate bodies of law, paying commissions to unregistered broker-dealers can signal a violation of the terms of an exemption from registration.
To maintain a valid Section 4(a)(2) or 506(b) exemption, the issuer must prove the offering did not involve any form of public distribution. This includes their own activity and that of any associated unregistered intermediaries, because the issuer is legally responsible for the actions of its agents. Unregistered intermediaries often source investors by blast-emailing networks, cold-calling, or using wide-reaching platforms like social media, websites, and webinars. Any general solicitation or broad outreach conducted by the issuer or an associated unregistered broker-dealer can destroy a Section 4(a)(2) or 506(b) exemption.
Exemptions under Rule 506(c) that apply to offerings made only to accredited investors are less exposed because Rule 506(c) legally permits general solicitation. Therefore, an issuer or intermediary's broad marketing won't compromise that specific aspect of the exemption. However, if the SEC brings an enforcement action directly against the issuer or its management for securities law violations such as aiding and abetting an unlicensed intermediary or paying illegal transaction-based compensation, any resulting cease-and-desist order or injunction can trigger the Regulation D Bad Actor disqualification rules, barring the issuer from enjoying future Regulation D exemptions in the U.S. This can also result in significant civil fines.
On a state level, many individual states have explicit statutory provisions that deny state-level notice filing status if commissions are paid to unregistered persons. If a state determines that an issuer paid an unlicensed finder to bring in their residents, they can declare the issuer’s Blue Sky safe harbor void within that state and bring local regulatory enforcement separate from the SEC. Such action could require a rescission offer.
Beyond their impact on exemptions from registration, commission payments to unregistered broker-dealers are durable violations of U.S. law that carry consequences. Section 29(b) allows a contract made in violation of the Exchange Act to be voided at the investor’s election. A subscription agreement signed when an unregistered broker stands to be paid to solicit the sale is exposed on this basis alone. Investors have one year after discovery to file a claim under § 29(b), and can bring claims absolutely no more than three years after the violation occurred.
U.S. investors who worked with an agent to subscribe to a Portuguese fund may find their discovery date is today. Swift action is warranted.
To my best knowledge, none of the intermediaries paid to bring American investors into the Golden Visa offerings reviewed to-date were registered U.S. broker-dealers or affiliates thereof. How do I know? Because I approached the market as an affiliate of a U.S. broker-dealer offering compliant U.S. placements. The issuers I spoke with were not concerned with U.S. compliance.
Perhaps the issuers are more concerned now that the SEC has had an active Cross-Border Task Force since September 2025 (footnote 4) and has added a Retail Fraud Working Group, reformed on July 7, 2026 (footnote 5). It was, after all, primarily retail investors who were targeted by the non-compliant offerings.
Can concern after the fact resolve the issue? Não. Fund managers must stop paying non-compliant commissions, offer a return of capital plus interest to U.S. investors, and reorient their approach to the U.S. market to align with U.S. law going forward.
In my last piece, I wrote about the parallels between the compliance failures of Portugal’s Golden Visa market and the SEC’s current stated priorities.
U.S. SEC Announces Retail Fraud Working Group
"Nothing motivates enforcement staff more than protecting those who invest their savings in our markets,” said David Woodcock, Director of the SEC's Division of Enforcement. "The Retail Fraud Working Group will bring focused energy and resources to that mission — generating cases, building partnerships with our regulatory counterparts, and using data and technology to find and stop those who seek to take advantage of retail investors. I am proud to see this initiative move forward."
Portuguese Law 🇵🇹
To my best understanding, commission payments to unregistered broker-dealers are a violation of Portuguese law in addition to U.S. law. The Portuguese Securities Code (Código dos Valores Mobiliários) mandates that only authorized financial intermediaries, such as banks, investment firms, and tied agents registered with the CMVM can provide investment services or receive transaction-based compensation (footnote 6). Portuguese civil law does not contain a “casual broker” or “unlicensed finder” loophole for financial instruments. If an entity acts as a middleman to secure investors for a transaction and takes a success fee, they are legally considered to be practicing unauthorized financial intermediation (exercício ilícito de intermediação financeira).
As stated in the Portuguese Civil Code (Código Civil) Article 294, Negócios celebrados contra a lei / Transactions concluded against the law, any legal act or contract that violates a mandatory statutory prohibition is entirely void. Under Article 253, Dolo/Fraud, if a fund manager conceals an illegal practice, such as using an unauthorized broker, to induce you into signing an investment contract, it constitutes legal deception. The remedy is under Article 254, Efeitos do dolo / Effects of Fraud. Investors have the right to annul the contract. Once declared void by a court, the investment contract has retroactive effects (efeito retroativo). The fund cannot simply offer the “current market value” if the fund has lost money; they must restore the investor’s position to exactly how it was before the contract was signed, resulting in a full refund of initial principal.
Operating as an unauthorized broker, or knowingly facilitating that work by paying them (itself a breach of statutory fiduciary duty) is classified as a contraordenação muito grave / very serious infraction by the CMVM. CMVM has the power to freeze the fund’s marketing, issue administrative fines up to €5M against the manager, and strip the management company of its operating license.
EU Law 🇪🇺
Taking it one level further to EU law, MiFID II sets very strict rules on 'inducements': commissions, fees, or monetary benefits paid to or by a third party. MiFID II is EU legislation, and ESMA is the authority that supervises and issues guidance under it. Firms are banned from paying or receiving commissions unless the payment directly enhances the quality of the service to the client and does not create a conflict of interest. Paying an unregistered middleman does not appear to meet this standard.
The EU Unfair Commercial Practices Directive may apply as well. If a financial entity hides material legal risks, like engaging an unauthorized broker to manage or solicit the transaction, it could be considered a misleading omission that invalidates the consumer or investor’s consent. The MiFID II violation feeds CMVM enforcement against the firm, and the UCPD violation, through Article 14 of Decreto-Lei n.º 57/2008, gives the investor a separate nullity claim against the contract itself.
The Cure (See Step One)
The real mechanism for resolving a blown U.S. Regulation D exemption is not paper-over documentation. In fact, such efforts could be considered as further evidence of non-compliance. The mechanism for resolving the failure to meet the conditions of a valid exemption is a valid, compliant rescission offer: the fund returns the investor’s capital, plus interest, and the investor is given a genuine choice to accept it. Done properly, this is the only path that meaningfully resolves the underlying exposure, even though legal exposure cannot be fully cured. Anything else is an attempt to obscure or an effort to manage future exposure. That’s worthwhile. Issuers absolutely should come into compliance and manage future exposure. They also must remedy past violations.
Rescission offers are expensive and require the fund manager to admit the violation. Understandably, that’s a bitter pill to swallow. It’s likely far less bitter than SEC enforcement action which can bring disgorgement, civil penalties, injunctions, and bad actor disqualification from future Regulation D exemptions.
U.S. Investors in Non-Compliant Foreign Funds
As of this writing, multiple PFIC Help clients have secured full make-whole exits with full return of capital from Golden Visa issuers that operated in violation of U.S. securities law. In some cases, the process can take months of documented forensic work and engagement with counsel. In others, the fund managers understood their exposure and did a limited version of the right thing more quickly.
None of the unwinds involved a fund discovering the problem on its own and reaching for investor restitution. May that day soon come.
U.S. investors in Portuguese Golden Visa funds have rights under U.S. securities law, Portuguese securities law, and EU law. The U.S. rights, most familiar to these investors, carry statutes of limitations. Investors who act swiftly retain the advantage. A wait-and-see approach runs down the clock and may leave investors outside of the statutes of limitations for U.S. legal action while incurring mounting tax exposure. Patiently waiting for foreign issuers to come into compliance does not pay.
___________________________________________________________________________________________________________________
This material is 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.
Amy Short is the Principal of PFIC Help, a forensic tax exposure diagnostic practice serving U.S. investors in Portuguese Golden Visa funds. She holds a Series 7 FINRA registration and is pursuing an MS in Taxation. PFIC Help does not provide legal advice, prepare tax returns, or sell investments.
___________________________________________________________________________________________________________________
1 Pillsbury Winthrop Shaw Pittman LLP, “Rescission Offers Under Regulation D,” https://www.pillsburylaw.com/a/web/1057/RescissionOffersUnderRegulationD.pdf
5 https://www.sec.gov/newsroom/press-releases/2026-63-sec-forms-new-retail-fraud-working-group
6 Decreto-Lei n.º 486/99 (Código dos Valores Mobiliários), https://diariodarepublica.pt/dr/legislacao-consolidada/decreto-lei/1999-34575175