U.S. Securities Law
Did I break any laws by investing in a non-compliant offshore fund?
No. U.S. securities law views investors in non-compliant offshore funds as victims, not wrongdoers. There are no adverse legal or criminal consequences for a U.S. investor simply for subscribing to a fund that fails to meet U.S. regulatory standards.
Many funds proudly share that they are regulated in their jurisdiction, such as by CMVM in Portugal and CONSOB in Italy. When a fund accepts U.S. investors, however, the fund must comply with the rules of the U.S. SEC, either through a full registration ("going public") or by a properly filed exemption from registration and full adherence to the regulations for that exemption. This is a major point of failure in the Golden Visa marketplace.
If a foreign fund failed to register its offering in the U.S., worked with unlicensed brokers, or made misleading claims, those are violations by the fund manager and its agents. U.S. securities law provides remedies to investors in this situation, including rescission (the right to get your money back) and damages, but you have to affirmatively claim them within statutory time limits and sue to enforce them.
Then why should I be concerned?
Because U.S. tax authorities treat the same facts very differently from the SEC, and you are probably overpaying taxes under a regime that does not apply to your investment.
Recent rulings in Reyes (2026) and Horowitz (2020), both FBAR cases, have established that reckless conduct satisfies the "willfulness" standard for enhanced civil penalties. The logic that can extend from there is alarming: if the offshore fund was not compliant with U.S. securities law, how could a U.S. investor reasonably assume that the same fund would produce tax documents that comply with U.S. tax law?
Failure to fully investigate the tax reporting requirements associated with the foreign investment could be seen as reckless disregard for one's obligations, and per Reyes, reckless disregard now equates with willfulness. The fund's securities law violations become evidence against the investor's reasonable cause tax defense. Securities law says you're a victim. Tax rulings say you should have known better. Same investor, same fund, same facts, opposite conclusions. The consequences that should fall on the foreign fund managers for violating U.S. securities law are in position to fall on you, the U.S. taxpayer, through the IRS.
Where does that leave the investors?
Investor protection through forensic, adversarial, defensible U.S. tax exposure reporting is the best option currently available. Cross-border legal enforcement is complex, and U.S. tax authorities can reach U.S. investors far more easily than they can reach foreign fund managers. The SEC Cross-Border Investment Fraud Task Force, launched in September 2025, may one day play a role in holding non-compliant fund managers accountable.
That means documenting your diligence, understanding your exposure, and making informed decisions about remediation before the IRS makes them for you.
My fund says it's regulated by CMVM. Doesn't that cover U.S. compliance?
No. CMVM regulation means the fund complies with Portuguese law. When a fund accepts U.S. investors, it must separately comply with U.S. securities law, including SEC registration or a valid exemption. Portuguese compliance and U.S. compliance are separate regulatory regimes with separate requirements. One does not satisfy the other.
While no law requires a foreign fund to produce U.S.-compliant tax documents, many funds promise PFIC support to U.S. investors. If the fund's reporting does not meet U.S. standards, the investor's tax filings built on that reporting may be incorrect. U.S. investors remain obligated to report their foreign fund holdings under U.S. tax law regardless of what the fund provides with regard to PFIC support.
My fund says it's "registered with the SEC." Doesn't that mean it's compliant?
Almost certainly not. Funds that claim SEC registration are typically referring to a Regulation D filing (Form D), which is a notice filing for an exemption from registration, not registration itself. An SEC filing number does not mean the SEC has reviewed, approved, or blessed the offering. Many funds in the Golden Visa market have not even filed a proper Form D.
If your fund manager is telling you the fund is "registered with the SEC," or "SEC approved," I would welcome the opportunity to verify that claim. In every case I have examined, it has not held up.
Do I have rescission rights if my fund was not SEC-compliant?
If the fund's offering was not properly registered with the SEC or did not qualify for a valid exemption, you may have a statutory right to rescind the transaction and recover your purchase price under Sections 5 and 12 of the Securities Act of 1933. Separately, if the fund or its agents made material misstatements or omissions during the sale process, you may have a claim for damages under Rule 10b-5 of the Securities Exchange Act of 1934.
These rights are subject to statutory deadlines. Rescission rights for unregistered securities must generally be exercised within one year of the violation. Fraud claims under Rule 10b-5 must be brought within two years of discovery, subject to a five-year statute of repose. Cross-border enforcement adds complexity but does not eliminate the rights. A forensic analysis documenting what was disclosed, what was omitted, and what was misrepresented is the factual foundation for any securities claim.
What are the statutory deadlines for rescission and fraud claims?
Three deadlines apply, depending on the type of claim.
For rescission of an unregistered securities offering under Section 12(a)(1) of the Securities Act of 1933: the lawsuit must be filed within one year of the violation, and no later than three years after the security was first offered.
For rescission based on material misstatement or omission under Section 12(a)(2): the lawsuit must be filed within one year of discovery of the misstatement, and no later than three years after the sale.
For damages based on fraud under Rule 10b-5 of the Securities Exchange Act of 1934: the lawsuit must be filed within two years of discovery of the violation, subject to a five-year absolute deadline (statute of repose).
These deadlines are strict. If you suspect your fund's offering was non-compliant, the window to preserve your rights may already be narrowing.
Does a federal SEC exemption clear the fund in my state?
Not necessarily. In addition to federal Regulation D filings, funds must generally comply with state-level securities laws, commonly called "Blue Sky Laws." This often requires the fund to file a notice and pay a fee in the investor's home state within 15 days of the sale.
Many offshore funds neglect these filings due to cost or ignorance. If a fund fails to comply with the investor's home state securities laws, the investor may have a statutory right of rescission, allowing them to force the fund to return their principal plus interest. State-level rescission rights sometimes provide a longer window than federal rights.
Is it legal for "promoters" or migration agents to sell me a fund or to receive a commission for introducing me to a fund manager?
Generally, no. Under Section 15(a) of the Securities Exchange Act of 1934, any person engaged in the business of effecting transactions in securities for the account of others must be registered with the SEC as a broker-dealer. Many funds in the Golden Visa market rely on "finders," "introducers," migration agents, or foreign lawyers to solicit U.S. capital. If these individuals receive transaction-based compensation and are not registered U.S. broker-dealers, the fund is likely aiding and abetting a violation of U.S. law.
Investors sold by unregistered finders may have a statutory right of rescission, allowing them to demand a full refund of their capital plus interest, regardless of the fund's performance.
What is “reverse solicitation” and does it protect the fund manager from SEC enforcement action?
Reverse solicitation is a claim by offshore fund managers that their fund is exempt from U.S. securities law because the American investor contacted them first. This is typically incorrect. The SEC does not recognize "reverse solicitation" as a broad safe harbor.
If a fund can be found online, maintains a website accessible to U.S. persons, or has marketing materials that reach U.S. audiences, the fund is likely engaged in general solicitation. Claiming that an American investor "found and contacted them first" does not erase the fund's obligation to comply with U.S. securities law. Relying on the reverse solicitation excuse often signals a weak compliance culture.
What is the "100 Investor Rule"?
Under the U.S. Investment Company Act of 1940, foreign funds generally rely on the 3(c)(1) exemption to avoid registering as a U.S. investment company. This exemption limits the fund to no more than 100 U.S. beneficial owners.
Many Portuguese funds are generally avoidant of U.S. regulations, and the larger funds risk exceeding this cap. If a fund exceeds 100 U.S. investors, it may lose legal exemptions, potentially forcing it to unwind operations or creating legal liability for all participants.
U.S. investors deserve clarity, competence, care, and compliance.
You didn’t create this problem. Misleading marketing practices, fund structure, gaps in reporting, and the professional infrastructure around it created this problem. But under U.S. tax law, the consequences land on you unless you act. The window to mitigate them is limited.