FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

U.S. SECURITIES & EXCHANGE 

COMMISSION,

Plaintiff-Appellee,

v.

HUI FENG; LAW OFFICES OF FENG 

AND ASSOCIATES PC,

Defendants-Appellants.

No. 17-56522

D.C. No.

2:15-cv-09420-

CBM-SS

OPINION

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 Securities Act of 1933 and Section 10(b) of the Securities 

Exchange Act of 1934 based on two theories of fraud 

liability: material omissions, and schemes to defraud. 

Concerning material omissions, the panel held that where 

Feng worked as both a broker and an immigration attorney, 

he had fiduciary duties to his clients, including the obligation 

to disclose conflicts of interest. Here, there was a risk that 

Feng’s judgment would be swayed by the promise of a 

commission from the regional center, and this presented a 

conflict with Feng’s representation of a client, which he 

failed to disclose to his clients, and this failure was material. 

Concerning schemes to defraud, the panel affirmed the 

district court’s findings that Feng defrauded the regional 
4 USSEC V. FENG

centers that refused to pay commissions to U.S.-based 

attorneys not registered as brokers, and defrauded clients 

who sought a reduction in their administrative fees. 

Finally, the panel held that the district court did not abuse 

its discretion in entering a disgorgement order. The district 

court calculated that Feng received $1.268 million for 

commissions in connection with the EB-5 program, and 

ordered disgorgement of the entire amount.

COUNSEL

Andrew B. Holmes (argued) and Matthew D. Taylor, 

Holmes Taylor Scott & Jones LLP, Los Angeles, California, 

for Defendant-Appellant Law Offices of Feng & Associates.

Hui Feng (argued), Law Offices of Feng & Associates, 

Flushing, New York, for Defendant-Appellant Hui Feng.

Kerry J. Dingle (argued), Senior Counsel; Jeffery A. Berger, 

Senior Litigation Counsel; Michael A. Conley, Solicitor; 

Robert B. Stebbins, General Counsel; Securities & 

Exchange Commission, Washington, D.C.; for PlaintiffAppellee.
USSEC V. FENG 5

OPINION

LIPEZ, Circuit Judge:

This appeal requires us to decide whether certain 

investments made by participants in the U.S. Immigrant 

Investor Program are “securities” subject to regulation by the 

Securities and Exchange Commission (“SEC”) and, if so, 

whether appellant Hui Feng was a securities “broker” 

required to register with the SEC and whether he committed 

securities fraud in connection with the transactions.1 The 

district court granted summary judgment for the SEC. We 

affirm.

I.

A. The EB-5 Program

The U.S. Immigrant Investor Program, colloquially 

referred to as the EB-5 program, provides legal permanent 

residency in the United States to foreign nationals who 

invest in U.S.-based projects. See 8 U.S.C. 

§ 1153(b)(5)(A).2

 Generally, qualified immigrants may gain 

U.S. visas through direct investment of at least $1 million in 

a new commercial enterprise that creates at least ten fulltime jobs for U.S. workers. Id. § 1153(b)(5)(A), (C). 

Investment in a business in a “targeted employment area” 

1 Both Hui Feng and his law firm, the Law Offices of Feng & 

Associates P.C., are appellants in this matter. The parties’ arguments do 

not distinguish between the two, and so, as a matter of convenience, we 

refer to the appellants collectively as “Feng.”

2 By statute, the Immigrant Investor Program is the fifth preference 

in the employment-based visa category, which gave rise to the nickname 

“EB-5.” See 8 U.S.C. § 1153(b)(5)(A).
6 USSEC V. FENG

lowers the required capital investment amount to $500,000. 

Id. § 1153(b)(5)(C)(i), (ii).

Multiple foreign investors may pool their money in the 

same enterprise, provided that each invests the required 

amount and “each individual investment results in the 

creation of at least ten full-time positions.” 8 C.F.R. 

§ 204.6(g). Pooled investments are made through “regional 

centers,” which are regulated by the U.S. Citizenship and 

Immigration Services (“USCIS”). The regional centers offer 

specific projects to investors and manage the pooled 

investments. See id. § 204.6(e), (m).

A foreign national investing in an enterprise must file an 

I-526 application with the USCIS to prove that the 

investment will satisfy EB-5 program requirements. Id. 

§ 204.6(a), (j)(2). Approval results in conditional permanent 

resident status. Two years later, the investor may remove 

the conditions on lawful permanent resident status by filing 

an I-829 petition, demonstrating that the investment satisfied 

the EB-5 requirements and created, or will create within a 

reasonable period, ten qualifying jobs. Id. § 216.6.

B. Factual Background

Feng and the SEC largely agree on the facts. To the 

extent that they have differing views of the record, we draw 

all justifiable inferences in the light most favorable to Feng. 

Blankenhorn v. City of Orange, 485 F.3d 463, 470 (9th Cir. 

2007).

Feng conducts an immigration law practice in New York 

City. Between 2010 and 2016, he led approximately 

150 clients through the EB-5 process, substantially all of 

whom were Chinese nationals who did not speak English. 

Feng estimated that 80 percent of his clients found him 
USSEC V. FENG 7

through his website, which posted comparisons and 

recommendations of available EB-5 projects. Feng holds a 

law degree from Columbia University and an MBA from the 

Tuck School of Business at Dartmouth, and he touted his 

skill at investigating and determining the most reliable 

investment opportunities.

Feng charged his clients a $10,000 to $15,000 upfront 

fee. His services included serving as a liaison between 

clients and regional centers, explaining the English-language 

offering materials to his clients, negotiating with regional 

centers regarding administrative fees charged to the clients 

by the centers, and compiling and submitting his clients’ 

signed offering documents to regional centers. On three 

occasions, investors wired funds directly to Feng, who 

transferred the funds to the regional centers.

Feng also entered into marketing agreements with 

regional centers. Through these agreements, he reserved a 

number of the limited investor “spots” in certain EB-5 

projects, which he then promoted on his website and tried to 

fill within a set time period. If one of Feng’s clients made 

the required capital contribution to one of these regional 

centers, and if the USCIS approved the investor’s I-526 

petition, the regional center agreed to pay Feng commissions 

of $15,000 to $70,000. Although hundreds of regional 

centers participate in the EB-5 program, Feng procured 

investors only for ten centers, all of which agreed to pay 

commissions. Feng did not disclose to his clients the 

commissions he received from the regional centers unless 

they specifically asked about them.3

3 When the SEC’s investigation was pending, Feng revised his 

retainer agreement to state that regional centers may pay fees to an 
8 USSEC V. FENG

Payment of a commission is an EB-5 industry practice, 

but many regional centers refuse to pay a commission to a 

U.S.-based attorney who is not registered as a broker, to 

avoid causing or aiding and abetting a violation of the broker 

registration requirement in Section 15(a) of the Securities 

Exchange Act of 1934. See 15 U.S.C. § 78o(a). Several

regional centers offer a discount or rebate of a portion of the 

administrative fee charged to the investor if there is no 

referral commission for the attorney. Feng chose neither to 

register as a broker, nor to forego commissions.

When told by some regional centers that they could only 

pay commissions to overseas recruiters, Feng responded that 

he had referral partners in China who were finding investors. 

He entered into marketing agreements in which he promised 

to relay the commissions to those individuals. He also 

arranged agreements that were directly between the regional 

centers and the individuals. The referral partners included 

Feng’s wife, mother, and mother-in-law. Feng described 

these individuals in his deposition testimony as his 

“nominees,” whose role was to be “just a surrogate to receive 

the money.” They did not do the work of recruiting 

investors—Feng did that himself. After the regional centers 

paid commissions to the individuals, they transferred the 

funds to Feng. Feng asserts that the regional centers only 

asked for a foreign contact to pay and did not “care” who it 

was.

In 2014, Feng also created Atlantic Business Consulting 

Limited (“ABCL”), based in Hong Kong. According to 

Feng, this decision was “driven in part by regional centers 

informing me they needed an overseas entity to pay.” ABCL 

overseas company owned by Feng upon completion of the client’s visa 

approval.
USSEC V. FENG 9

entered into marketing agreements with regional centers, and 

its only source of revenue was EB-5 commissions. Feng did 

not inform the regional centers that he solicited and referred 

ABCL’s investors himself. All of Feng’s employees worked 

both for his law office and for ABCL. Feng’s mother, 

Xiuyuan Tan, signed agreements between ABCL and 

regional centers as ABCL’s “President,” but Feng admitted 

she played no role in ABCL. Feng also did not inform the 

regional centers that he was ABCL’s beneficial owner, with 

sole control of ABCL’s bank account. Representatives from 

the regional centers testified that they would have ceased 

their marketing agreements if they had known about Feng’s 

relationship with the individual referral agents and with 

ABCL.

In total, regional centers paid Feng and his overseas 

entities $1.268 million in commissions for investments made 

by Feng’s clients. At the time of the district court judgment, 

these entities were contractually entitled to an additional 

$3.45 million in commissions, pending the approval of his 

clients’ I-526 petitions.

The basis of the agreements between the regional centers 

and Feng’s investors was set forth in the regional centers’ 

offering materials, also known as private placement 

memoranda (“PPMs”). Many of the PPMs referred to the 

investments as “securities” and asserted that the investments 

were compliant with U.S. securities laws. The regional 

centers structured the investments as limited partnerships, in 

which the investors became limited partners and the regional 

center was the general partner. The regional centers 

promised investors a fixed, annual return on investment, 

which ranged across projects from 0.5 to 5 percent of the 

capital contribution, and investors received Schedule K-1 tax 

forms to report their investment income from the 
10 USSEC V. FENG

partnership. The partnerships all made construction loans or 

otherwise financed a specified construction project. At the 

end of the investment term, typically five to six years, the 

regional centers promised the investors a return of their 

capital contribution, subject to market risks.

The PPMs required that investors pay an administrative 

fee, which ranged across projects from $30,000 to $50,000, 

in addition to the capital contribution of $1 million or 

$500,000. The PPMs expressly stated that these 

administrative fees were for operating and marketing costs, 

were not part of the capital contribution, and did not earn 

interest.

Approximately 20 percent of Feng’s clients asked him to 

seek a reduced administrative fee from the regional centers. 

In those instances, Feng negotiated with regional centers and 

facilitated contracts between those regional centers and his 

clients for a rebate of a portion of the administrative fee. 

Feng did not disclose to these clients, however, that the 

administrative fees helped to fund his commissions, nor that 

the regional centers offset the clients’ administrative fee 

rebate with a reduction in the commissions to which he was 

contractually entitled. Indeed, Feng asked the regional 

centers not to inform the clients about either fact. Feng 

explained in his deposition that he wanted to create the 

appearance to his clients that he was advocating on their 

behalf with the regional center and also to “keep as much of 

the marketing fee as possible”—that is, his commission—

and to avoid further “haggl[ing]” with clients who might ask 

Feng to rebate more of the commission.4

4 For example, one client testified that Feng sent him a check for 

$15,000, which Feng explained as a return of charges from the regional 
USSEC V. FENG 11

C. Procedural Background

The SEC filed a civil complaint against Feng and his law 

firm on December 7, 2015. The first and second causes of 

action allege fraud under Section 17(a) of the Securities Act 

of 1933, 15 U.S.C. § 77q(a), and Section 10(b) of the 

Securities Exchange Act of 1934, 15 U.S.C. § 78j(b) (“the 

Exchange Act”), respectively. The third cause of action 

alleges failure to register as a broker-dealer under Section 

15(a) of the Exchange Act, 15 U.S.C. § 78o.

The defendants filed a motion for judgment on the 

pleadings, which the district court denied in August 2016. 

The parties subsequently filed cross-motions for summary 

judgment. Feng argued that the EB-5 investments were not 

“securities” because the investors had no expectation of 

profit—only of obtaining a green card. The SEC argued that 

the undisputed evidence showed that Feng acted as a 

“broker” of “securities” as a matter of law. The district court 

found no genuine dispute of material fact and granted 

summary judgment for the SEC on all three causes of action. 

In this appeal, Feng argues that the transactions were not 

“securities,” and so the district court erred by denying his 

motion for summary judgment and granting the SEC’s 

motion.

We review the district court’s decision on cross-motions 

for summary judgment de novo. Avery v. First Resolution 

Mgmt. Corp., 568 F.3d 1018, 1021 (9th Cir. 2009). 

Summary judgment is appropriate when there is no genuine 

dispute of material fact and the moving party is entitled to 

judgment as a matter of law. Fed. R. Civ. P. 56(a). We 

center without disclosing that Feng had received a $70,000 commission 

on the client’s $1 million investment.
12 USSEC V. FENG

consider cross-motions “separately, giving the nonmoving 

party in each instance the benefit of all reasonable 

inferences.” Zabriskie v. Fed. Nat’l Mortg. Ass’n, 912 F.3d 

1192, 1196 (9th Cir. 2019) (quoting ACLU of Nev. v. City of 

Las Vegas, 466 F.3d 784, 790–91 (9th Cir. 2006)).

II.

Feng contends that the district court erred in its threshold 

determination that the EB-5 investments at issue were 

“securities.” Because this finding is essential to all the 

causes of action, we begin by considering whether the 

district court properly made that determination as a matter of 

law.

The district court found that the EB-5 investments were 

securities because they were made through investment 

contracts between the regional centers and the investors. 

Section 3(a)(10) of the Securities Act defines the term 

“security” broadly, enumerating a long list of financial 

instruments, including “any . . . investment contract.” 

15 U.S.C. § 78c(a)(10). Although the Securities Act does 

not define the term “investment contract,” the parties agree 

that the applicable test, set forth in SEC v. W. J. Howey Co., 

requires “a contract, transaction or scheme whereby a person 

invests his money in a common enterprise and is led to 

expect profits solely from the efforts of the promoter or a 

third party.” 328 U.S. 293, 298–99 (1946). Courts applying 

Howey “conduct an objective inquiry into the character of 

the instrument or transaction offered based on what the 

purchasers were ‘led to expect,’” including an analysis of the 

promotional materials associated with the transaction. 

Warfield v. Alaniz, 569 F.3d 1015, 1021 (9th Cir. 2009) 

(quoting Howey, 328 U.S. at 298–99).
USSEC V. FENG 13

It is undisputed that Feng’s clients invested money in a 

common enterprise managed by a third party. Feng argues 

that the transactions nonetheless were not “securities” 

because the clients did not expect profits from their 

investments. He asserts that his clients would have 

recognized that the modest fixed return they were due from 

the regional centers would not exceed the significant 

administrative fees that they paid. He further maintains that 

the lack of expected profit was not a concern for his clients 

because their motivation for making an EB-5 investment was 

to obtain U.S. visas. We find Feng’s characterization of the 

EB-5 investments unpersuasive.

A. The PPMs

The regional centers promoted and described the EB-5 

investments in the PPMs. The PPMs repeatedly referred to 

the investments as “securities” and explained that the 

offerings were made pursuant to U.S. securities laws. 

Although “the name given to an instrument is not 

dispositive,” “most instruments bearing th[e] traditional 

titles [associated with securities] are likely to be covered by 

the statutes.” United Hous. Found., Inc. v. Forman, 421 U.S. 

837, 850 (1975). Further, “the use of a traditional name such 

as ‘stocks’ or ‘bonds’ [may] lead a purchaser justifiably to 

assume that the federal securities laws apply.” Id. That 

inference inevitably would be drawn “when the underlying 

transaction embodies some of the significant characteristics 

typically associated with the named instrument.” Id. at 851.

Such characteristics are evident and undisputed here. 

The EB-5 transactions were structured as investments in 

limited partnerships, with the promise of a fixed annual 

return on the investment, ranging from .5 to 5 percent. 

Investments in limited partnerships generally constitute 

investment contracts, see SEC v. Murphy, 626 F.2d 633, 640 
14 USSEC V. FENG

(9th Cir. 1980), and a return based on a fixed rate falls within

the broad definition of “profits,” SEC v. Edwards, 540 U.S. 

389, 394 (2004); see also id. at 396 (“[T]he commonsense 

understanding of ‘profits’ in the Howey test [is] simply 

‘financial returns on . . . investments.’” (quoting Forman, 

421 U.S. at 853)); Warfield, 569 F.3d at 1022 (holding that 

the investors had an expectation of profit where the 

promotional materials emphasized “long-term income 

production potential”). The Supreme Court has reasoned 

that the promise of a fixed rate of return should be viewed as 

triggering an expectation of profits because the securities 

laws are intended “to regulate all of the ‘countless and 

variable schemes devised by those who seek the use of the 

money of others on the promise of profits.’” Edwards, 

540 U.S. at 396 (quoting Howey, 328 U.S. at 299). The 

Court was wary that “unscrupulous marketers of 

investments” might otherwise “evade the securities laws by 

picking a rate of return to promise.” Id. at 394–95.

The PPMs’ identification of the investments as 

securities, the form of the investment entity as a limited 

partnership, and the promise of a fixed rate of return all 

indicate that the EB-5 transactions were securities.

B. The Administrative Fees

Feng insists, however, that the promised return is 

effectively nullified by the administrative fees. When an 

investor’s administrative fee and capital contribution are 

considered together, Feng contends, the investor could not 

have expected to make any profit. The record, however, 

does not support treating the administrative fee as part of the 

investment. The PPMs expressly distinguish those two 

categories of funds, describing the investment as the “capital 

contribution,” which would be “put at risk,” or utilized by, 

the regional center. By contrast, the PPMs explain that the 
USSEC V. FENG 15

administrative fee would be used to defray marketing and 

operating expenses.

Importantly, the separation between the capital 

contribution and the administrative fee is necessary to satisfy 

the EB-5 regulatory requirements. The USCIS requires that 

a qualifying EB-5 investment place capital “at risk for the 

purpose of generating a return on the capital placed at risk.” 

8 C.F.R. § 204.6(j)(2). In other words, to be eligible for the 

EB-5 program, the offering’s terms must include a possible 

return on the capital contribution. Hence, even if Feng is 

correct that, as a mathematical proposition, combining the 

capital contribution and administrative fee would eliminate 

a return on the investment, the PPMs make clear that the two 

categories of funds are to be viewed separately.

Feng himself confirmed these separate identities when 

the USCIS questioned whether one of his clients met the EB5 requirements. In a letter to the USCIS, Feng stated that the 

client’s capital contribution was separate from the 

administrative fee and was therefore put “at risk for the 

purpose of generating a return.” The client, Feng asserted, 

“made an at-risk capital investment of $500,000 . . . . No 

portion of an investor’s contribution has been or will be 

applied towards legal service fees or administrative fee[s], 

marketing costs or interest payment of [the regional center], 

which are paid from the separate $50,000 administrative 

fee.”

Feng thus attempts to characterize the administrative 

fees in two different ways to suit his own purposes. On the 

one hand, he explained that the administrative fee should be 

excluded from the “investment” to establish that the 

investment satisfies the EB-5 requirement of a possible 

return. On the other hand, he seeks to include the 

administrative fee in the securities analysis to show there is 
16 USSEC V. FENG

no possibility of generating the return as required by the 

Howey test. That inconsistent approach is plainly contrary 

to Congress’s intent in enacting the securities laws, as it 

would empower “unscrupulous marketers of investments” to 

structure deals to evade the designation of a security. 

Edwards, 540 U.S. at 394. Feng’s argument that the 

administrative fee upends the expectation of profits has no 

merit.

C. Motivation

We likewise find unsupportable Feng’s assertion that—

whatever the form of the investment and the rate of return—

his clients nonetheless lacked an expectation of profit 

because they were motivated to participate in the EB-5 

program by the promise of visas, not by profit. See Warfield, 

569 F.3d at 1021 (holding that the focus of Howey is the 

“objective inquiry” into “what the purchasers were offered 

or promised,” although the investors’ subjective intent “may 

have some bearing on the issue of whether they entered into 

investment contracts”). We do not doubt that the investors’ 

primary reason to participate in the EB-5 program was to 

gain U.S. visas. But Feng oversimplifies his clients’ 

motivations.

An EB-5 investor’s interest in a visa is inextricably tied 

to the financial success of the regional center’s project. The 

EB-5 program by design links the success of the investment 

to the investor’s success in obtaining a visa. An EB-5 

applicant must prove to the USCIS that an investment in fact 

led to the creation of at least ten full-time jobs. 8 U.S.C. 

§ 1153(b)(5)(A); 8 C.F.R. §§ 204.6, 216.6. Understanding 

the importance of a successful investment, Feng marketed 

his ability to evaluate the multitude of regional centers and 

recommend projects that were most likely to be sustained 

long enough to create the requisite jobs to qualify the 
USSEC V. FENG 17

investor for the EB-5 visa. The record also contains 

testimony from some of Feng’s client-investors who said 

that the likelihood of the regional center returning their 

capital contribution was important to them or that they 

sought EB-5 projects with higher rates of return. Feng’s 

argument thus relies on a false dichotomy between the visa 

and the success of the investment.5

We therefore agree with the district court that the 

investments in this case constitute securities in the form of 

investment contracts.

III.

Having resolved the threshold securities issue, we next 

consider Feng’s challenges to the grant of summary 

judgment for the SEC on each of the three causes of action 

brought against him.

A. Failure to Register as a Broker

Section 15(a)(1) of the Exchange Act makes it unlawful 

for a “broker . . . to induce or attempt to induce the purchase 

or sale of[] any security” without registering with the SEC. 

15 U.S.C. § 78o(a)(1). The statute defines “broker” as “any 

5 In a recent memorandum disposition, we rejected the argument that 

EB-5 investments do not constitute securities where the investors’ 

interest was to obtain visas rather than profits. SEC v. Liu, 754 F. App’x 

505, 507 (9th Cir. 2018). The facts in Liu mirror those in this case, with 

a series of $500,000 EB-5 investments and accompanying $45,000 

administrative fees. Id. The court held that the promise of an annual 

return of only 0.25 percent was enough to establish an expectation of 

profit, “[e]ven if it was not [the investors’] primary motivation.” Id.
18 USSEC V. FENG

person engaged in the business of effecting transactions in 

securities for the account of others.” Id. § 78c(a)(4)(A).

The district court concluded that the uncontroverted 

evidence establishes that Feng was acting as a broker and 

violated the registration requirement. We agree.

1. The Broker Determination

In making its broker determination, the district court 

utilized the totality-of-the-circumstances approach that other 

courts have used under Section 15(a)(1), relying on a set of 

factors first set forth in SEC v. Hansen, No. 83 Civ. 3692, 

1984 WL 2413, at *10 (S.D.N.Y. Apr. 6, 1984). See SEC v. 

Collyard, 861 F.3d 760, 766 (8th Cir. 2017); SEC v. George, 

426 F.3d 786, 797 (6th Cir. 2005); see also SEC v. Imperiali, 

Inc., 594 F. App’x 957, 961 (11th Cir. 2014) (per curiam) 

(quoting George, 426 F.3d at 797). Courts emphasize that 

the so-called Hansen factors are “nonexclusive.” Collyard, 

861 F.3d at 766.

In performing its inquiry, the district court considered 

whether Feng:

(1) is an employee of the issuer of the 

security;

(2) received transaction-based income such 

as commissions rather than a salary;

(3) sells or sold securities from other issuers;

(4) was involved in negotiations between 

issuers and investors;

(5) advertis[ed] for clients;
USSEC V. FENG 19

(6) gave advice or made valuations regarding 

the investment;

(7) was an active finder of investors; and

(8) regularly participates in securities 

transactions.

SEC v. Feng, No. 15-09420, 2017 WL 6551107, at *7–8 

(C.D. Cal. Aug. 10, 2017) (footnote omitted).6 The district 

court found that, although Feng was not an employee of the 

issuer, his conduct satisfied all the other factors. Id. at *8. 

He received commissions from regional centers, sought 

investors and clients through his website and other online 

forums, negotiated with regional centers about the terms of 

the projects, and gave advice about EB-5 projects’ likelihood 

of success.

Although Feng does not contest the facts underlying 

these conclusions, he objects to the factor-based analysis 

generally, arguing that the factors are so vague that they 

erroneously encompass individuals who are merely 

providing legal advice in the EB-5 context.7 To the contrary, 

6 The district court’s eight factors essentially tracked the 

considerations identified in Hansen. Feng, 2017 WL 6551107, at *7–8; 

Hansen, 1984 WL 2413, at *10.

7 Feng also argues that the district court’s factors omit the 

requirement that a broker must have authority or control over the 

accounts of others. But the caselaw cited by Feng does not impose such 

a requirement as a prerequisite for finding that someone is a broker. See 

SEC v. Kramer, 778 F. Supp. 2d 1320, 1339–40 (M.D. Fla. 2011) 

(discussing authority over an account as one of several factors); SEC v. 

M & A West, Inc., No. C-01-3376 VRW, 2005 WL 1514101, at *9 (N.D. 

Cal. June 20, 2005) (same); cf. SEC v. Mapp, 240 F. Supp. 3d 569, 592 
20 USSEC V. FENG

the application of the Hansen factors reveals that much of 

the work Feng performed for his clients, rather than being 

traditional legal work, aligns with the indicia of broker 

activity identified by those factors.

For example, Feng asserts that the factor “received 

transaction-based income such as commissions rather than a 

salary” is unclear and could improperly include an attorney’s 

contingent fee. However, Feng charged his clients a 

noncontingent, upfront fee. And it is undisputed that Feng 

and his nominees received $1.268 million in commissions 

from the regional centers—not his legal clients—for 

recruiting investors to the regional centers’ EB-5 projects. 

On these facts, the “commissions” factor does not threaten 

to mislabel traditional legal services as broker activity.

Similarly, Feng suggests that “involve[ment] in 

negotiations between issuers and investors” should not 

include his legal work explaining to clients aspects of legal 

compliance and regional center communications. Feng 

ignores, however, the evidence that he communicated 

extensively with the regional centers, posing numerous 

questions about the terms of the projects and negotiating the 

amount of the administrative fees.

In addition, Feng contends that the factor “gave advice 

or made valuations regarding the investment” should not 

include legal advice about the merits of the various EB-5 

projects. He claims that he was advising his clients about 

how to obtain legal permanent residency status, not about 

(E.D. Tex. 2017) (discussing but not deciding whether control over the 

account of others is an element or a nondispositive factor). Further, 

assuming that control is a pertinent factor, it is present here in the 

multiple instances in which client funds passed through Feng’s accounts.
USSEC V. FENG 21

how to make money. The record, however, indicates that 

Feng’s services included investment advice. He reviewed 

and promoted certain EB-5 projects based on their likelihood 

of success under the EB-5 requirements, with particular 

attention to the projects’ likely ability to create the requisite 

number of jobs over time to qualify the investor for an EB-5 

visa, as well as the likelihood the projects could return the 

investors’ capital contributions. This work goes beyond the 

traditional work of a lawyer.

Finally, Feng suggests that the factor “active finder of 

investors” improperly conflates seeking legal clients with 

seeking investors. This argument, too, is meritless. Feng 

sought a particular kind of client—one who would become 

an investor with a regional center with which he had a 

marketing agreement and a reserved investor slot. Feng’s 

150 clients invested more than $65 million. In this EB-5 

context, his legal clients and the regional center investors 

were, in fact, one and the same.

2. Feng’s Additional Arguments

Feng goes beyond the Hansen analysis to argue more 

generally that the broker registration requirement should not 

apply to his circumstances. First, he asserts that the 

requirement should apply only to individuals who trade 

securities on an exchange and not to those involved in 

transactions between private parties—deals commonly 

referred to as “over-the-counter.” It is well established, 

however, that “[t]he 1934 [Exchange] Act was intended 

principally to protect investors against manipulation of stock 

prices through regulation of transactions upon securities 

exchanges and in over-the-counter markets.” Ernst & Ernst 

v. Hochfelder, 425 U.S. 185, 195 (1976) (emphasis added) 

(citing S. Rep. No. 792, at 1–5 (1934)). Although the 

Exchange Act exempts brokers “whose business is 
22 USSEC V. FENG

exclusively intrastate and who do[] not make use of any 

facility of a national securities exchange,” Feng’s business 

was not “exclusively intrastate.” See 15 U.S.C. § 78o(a)(1).

Second, Feng argues that the broker registration 

requirement is unnecessary in his circumstances because 

registered-broker duties duplicate the fiduciary duties that 

apply to the attorney-client relationship. Feng analogizes to 

the registration exemption for lawyers under the Investment 

Advisers Act of 1940, which excludes from the definition of 

an investment adviser “any lawyer, accountant, engineer, or 

teacher whose performance of such services is solely 

incidental to the practice of his profession.” 15 U.S.C. 

§ 80b-2(a)(11)(B). Feng asserts—without citation—that the 

Investment Advisers Act exempts attorneys because of their 

heightened fiduciary duty to clients, and he urges us to apply 

“this rationale” to create an attorney exception to the broker 

registration requirement in the Exchange Act.

This argument fails for multiple reasons. As we have 

already explained, even if such an exemption existed, the 

record belies any claim that Feng’s activities were “solely 

incidental to the practice of [law].” Moreover, if an 

attorney’s fiduciary duty were the rationale for the 

exemption under the Investment Advisers Act, the incidental 

nature of the investment-related work would seem irrelevant 

because the fiduciary duty presumably would cover any 

work on behalf of clients. Feng essentially asks us to 

perform a legislative act by adding an exemption to one 

statute on the basis of a different statute for which Congress 

expressly provided an exemption. Self-evidently, we cannot 

do that.

In a last-ditch attempt to justify his failure to register, 

Feng argues that imposing the broker registration 

requirement on U.S.-based attorneys would “force” them 
USSEC V. FENG 23

“not to help these people.” This argument poses a false 

choice. Attorneys who provide only legal advice to clients 

about the EB-5 program are not required to register. 

Attorneys who act as brokers in the EB-5 context may 

legally do so only if they register with the SEC.

3. Conclusion 

Given the undisputed facts in the record, we agree with 

the district court that Feng, as a matter of law, was “engaged 

in the business of effecting transactions in securities for the 

account of others” and thus was required to register with the 

SEC as a broker. 15 U.S.C. §§ 78c(4)(A), 78o(a)(1).8

B. The Fraud Determinations

Feng argues that the district court erroneously found that 

he committed securities fraud in violation of Section 17 of 

the Securities Act and Section 10(b) of the Exchange Act, as 

implemented through Rule 10b-5. The district court’s 

determinations were based on two theories of fraud liability: 

material omissions and schemes to defraud. We review each 

in turn.

8 Feng also appeals the denial of his motion for judgment on the 

pleadings, arguing that the terms “security” and “broker” in Section 

15(a) of the Exchange Act are unconstitutionally vague. A word is not 

vague when it has a “settled legal meaning.” United States v. Williams, 

553 U.S. 285, 306 (2008). Section 15(a) was enacted 80 years ago, and 

it has been applied countless times by the courts. There was no error in 

the district court’s denial of the motion for judgment on the pleadings.
24 USSEC V. FENG

1. Material Omissions (Section 17(a)(2) and Rule 

10b-5(b))

The antifraud provisions of the Securities Act, Section 

17(a)(2), and the Exchange Act, Section 10(b), developed 

through Rule 10b-5(b), “forbid making a material 

misstatement or omission in connection with the offer or sale 

of a security by means of interstate commerce.” SEC v. Dain 

Rauscher, Inc., 254 F.3d 852, 856 (9th Cir. 2001). Under 

these provisions, it is unlawful for any person, in the offer or 

sale of securities, “to obtain money or property by means of 

any untrue statement of a material fact or any omission to 

state a material fact necessary in order to make the 

statements made, in light of the circumstances under which 

they were made, not misleading.” 15 U.S.C. § 77q(a)(2). 

The text of Rule 10b-5 largely mirrors the text of Section 

17(a).9

 Although there are differences in the state of mind 

requirements for Rule 10b-5(b) and Section 17(a)(2), a 

showing of intentional or knowing conduct satisfies both. 

See Aaron v. SEC, 446 U.S. 680, 695–97 (1980) (holding 

that scienter is an element of Section 10(b), Rule 10b-5, and 

Section 17(a)(1), but not Section 17(a)(2) or (3)).

A fiduciary duty to disclose certain information renders 

an omission of that information misleading. See United 

States v. Laurienti, 611 F.3d 530, 541 (9th Cir. 2010). In 

Laurienti, the court addressed a broker’s liability under Rule 

10b-5(b) for failure to disclose commissions to his clients. 

The court noted that, while the broker/client relationship 

9 Section 17(a) of the Securities Act prohibits fraud in the sale of 

securities. Rule 10b-5, adopted by the SEC pursuant to its authority 

under Section 10(b) of the Exchange Act, incorporates the operative 

language of Section 17(a) explicitly and also extends the prohibition to 

fraud committed in the purchase of securities. See Ernst & Ernst, 

425 U.S. at 212 n.32.
USSEC V. FENG 25

does not itself impose a fiduciary duty, circumstances may 

create “a relationship of trust and confidence.” Id. at 540. 

Often, a broker has a fiduciary duty when he has 

discretionary authority over a client’s account, “but we have 

recognized that particular factual circumstances may serve 

to create a fiduciary duty between a broker and his customer 

even in the absence of a discretionary account.” Id. (quoting 

United States v. Skelly, 442 F.3d 94, 98 (2d Cir. 2006)). The 

court held that, however the duty arises, “if a broker and a 

client have a trust relationship, . . . then the broker has an 

obligation to disclose all facts material to that relationship.” 

Id. at 541.

Here, as we have determined, Feng worked as both a 

broker and an immigration attorney. Indeed, Feng 

emphasizes his role as an attorney and acknowledges that, as 

such, he had fiduciary duties to his clients. Those duties 

included the obligation to disclose conflicts of interest. See

N.Y. Rules of Prof’l Conduct (22 NYCRR § 1200.0) 1.4 

(duty to communicate any information needed by the client 

to give informed consent), 1.7 (duty to disclose a conflict), 

1.8 (duty to disclose business relationships).

Feng’s argument that there is no conflict because his 

clients were not harmed applies the wrong standard. The 

conflict of interest rule addresses the risk of harm to clients, 

asking whether a “reasonable lawyer would conclude . . .

there is a significant risk that the lawyer’s professional 

judgment on behalf of a client will be adversely affected by 

the lawyer’s own financial, business, property or other 

personal interests.” N.Y. Rules of Prof’l Conduct 1.7(a). In 

these transactions, there was a risk that Feng’s judgment 

would be swayed by the promise of commissions—that, for 

example, he would prefer a regional center that paid a higher 

commission but had a slightly lower likelihood of success 
26 USSEC V. FENG

over a regional center that offered a lower commission but 

had a better opportunity for the client.

Indeed, when Feng was asked in his deposition whether 

the commission from the regional center and his 

representation of a client presented a conflict, he 

acknowledged that it did:

Yes. I see it as sort of like a conflict because 

we’re in between, between regional center 

and the client. I’m aware of getting legal fees 

from the client, but also, even though we are 

not issuer’s counsel, we are definitely not 

regional center’s counsel. But regional 

centers pay us after the 526 getting approved. 

Even though we realize there’s such a 

conflict, but our interest is first and foremost 

with the clients.

His assertion that he shared his clients’ goal of obtaining a 

green card does not eliminate the risk of the commission’s 

influence on his professional judgment. Further, the rules 

provide that only the client, fully informed of both the 

conflict and the risks stemming from the conflict, may make 

a judgment about whether to accept representation 

notwithstanding the conflict. N.Y. Rules of Prof’l Conduct 

1.4, 1.7.

“[E]ven in a trust relationship,” the duty is “to disclose 

only material facts.” See Laurienti, 611 F.3d at 541. 

Generally, an omission is material “if there is ‘a substantial 

likelihood that the disclosure of the omitted fact would have 

been viewed by the reasonable investor as having 

significantly altered the “total mix” of information made 

available.’” SEC v. Phan, 500 F.3d 895, 908 (9th Cir. 2007) 

(quoting Basic Inc. v. Levinson, 485 U.S. 224, 231–32 
USSEC V. FENG 27

(1988)). Here, the record includes statements of individual 

investors who said that if they had known about Feng’s 

commissions, they would have attempted to negotiate their 

administrative fees. Feng also testified that he concealed his 

commissions to avoid anticipated client requests for rebates. 

He said that he thought disclosure of his commissions would 

encourage the clients to ask for more reductions in their 

administrative fees, and he did not want to open the door to 

negotiations that would lower his clients’ costs but decrease 

his payout. We thus agree with the district court that Feng’s 

failure to disclose his conflict of interest was material. See 

TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 450 (1976) 

(holding that materiality may be resolved at summary 

judgment “if the established omissions are so obviously 

important to an investor[] that reasonable minds cannot 

differ on the question of materiality” (internal quotation 

marks omitted)).

Finally, Feng’s testimony establishes intent to deceive. 

Feng stated that he did not want to tell clients about his 

commissions from the regional centers because it would be 

costly. Feng’s brief similarly describes his choice not to 

disclose as a “business decision.”

2. Schemes to Defraud (Section 17(a)(1) and (3) and 

Rule 10b-5(a) and (c))

The securities fraud provisions also prohibit any person, 

in the offer or sale of securities, “to employ any device, 

scheme, or artifice to defraud” or “to engage in any 

transaction, practice, or course of business which operates or 

would operate as a fraud or deceit upon the purchaser.” 

15 U.S.C. § 77q(a)(1), (3); see also 17 C.F.R. § 240.10b5(a), (c). The state of mind requirement varies among these 

provisions, but a showing of intentional or knowing conduct 

clears all thresholds. See Aaron, 446 U.S. at 695–97.
28 USSEC V. FENG

The district court found that Feng defrauded the regional 

centers that refused to pay commissions to U.S.-based 

attorneys not registered as brokers. Feng evaded this 

restriction by informing the regional centers that he was 

affiliated with foreign referral agents and companies, 

holding himself out to the regional centers as a middleman. 

Feng furthered this scheme by setting up ABCL in China to 

receive commission payments, while maintaining control of 

both ABCL’s bank account and operations. Feng performed 

the recruitment services himself and received the 

commissions that regional centers believed they were paying 

to the affiliated recruiters. Feng recruited his mother to sign 

documents as ABCL’s president, even though she had no 

actual role in the company. Representatives from the 

regional centers testified they would have ceased this 

arrangement if they knew Feng’s relationship with either the 

agents or ABCL.

The district court also found that Feng engaged in a 

scheme to defraud clients who sought a reduction in their 

administrative fees. Generally, as noted, regional centers 

were willing to rebate a portion of the administrative fee that 

they charged investors if the regional center could also 

reduce the commission it paid for the recruitment of that 

investor. When a client asked Feng to negotiate with the 

regional center to reduce his administrative fee, Feng 

arranged with the regional center to lower the administrative 

fee by reducing the commission. He took measures to 

conceal this arrangement from his clients, however, because 

he wanted to “keep as much of the marketing fee as possible” 

and avoid further negotiation with clients, while also 

creating the appearance to his clients that he was prevailing 

on their behalf with the regional centers. Feng asked the 

regional centers to rebate a portion of the administrative fee 
USSEC V. FENG 29

but not to disclose that the funds were reallocated from a 

commission.

Feng challenges on two grounds the district court’s 

finding that his conduct violated the Securities and Exchange 

Acts. First, Feng asserts that the scheme-to-defraud 

allegations under Rule 10b-5(a) and (c) improperly duplicate 

the Rule 10b-5(b) material omission claim. We see no 

duplication. The district court addressed the fraud against 

the regional centers only as a scheme to defraud, not as a 

material omission. With regard to the fraud against the 

clients, the district court focused on Feng’s failure to 

disclose his conflict of interest to his clients as material 

omissions and, separately, on his efforts to conceal the 

source of the rebates as a scheme to defraud.

Second, Feng argues that his establishment of overseas 

entities and occasional arrangement of rebates for clients 

were not unlawful. But, deceptive conduct that is not 

“inherently unlawful” may form the basis of a scheme to 

defraud. SEC v. Wey, 246 F. Supp. 3d 894, 918 (S.D.N.Y. 

2017). In addition, Feng’s attempt to analogize the rebate 

scheme to a store proprietor giving a customer a discount is 

inapt. The fraudulent conduct was his scheme to make the 

rebate appear to come from his advocacy on behalf of the 

client, while concealing the relationship between the 

reduction and his undisclosed commission.

We accordingly affirm the district court’s finding that 

Feng engaged in securities fraud in violation of Section 17(a) 

and Section 10(b).

IV.

Finally, Feng challenges the district court’s 

disgorgement order. The district court calculated that Feng 
30 USSEC V. FENG

received $1.268 million for commissions in connection with 

the EB-5 program and ordered disgorgement of the entire 

amount. Feng contests the disgorgement of fees paid to his 

overseas entities, suggesting that some of the fees were used 

to cover expenses. He does not dispute that he controlled 

those overseas entities.

We review the court’s imposition of disgorgement for 

abuse of discretion. SEC v. JT Wallenbrock & Assocs., 

440 F.3d 1109, 1113 (9th Cir. 2006). A disgorgement 

calculation “should include ‘all gains flowing from the 

illegal activities,’” id. at 1114 (quoting SEC v. Cross Fin. 

Servs., 908 F. Supp. 718, 734 (C.D. Cal. 1995), and “requires 

only a ‘reasonable approximation of profits causally 

connected to the violation,’” id. at 1113–14 (quoting SEC v. 

First Pac. Bancorp, 142 F.3d 1186, 1192 n. 6 (9th Cir. 

1998)).

Feng used his overseas entities—ABCL and his other 

nominees—to advance his scheme to defraud the regional 

centers. The money paid by regional centers to Feng’s 

overseas entities is therefore exactly the focus of the fraud 

against the regional centers, such that the district court could 

find a “causal[] connect[ion]” through which the funds 

“flow[] from the illegal activities.” Id. at 1114. Feng should 

not have been collecting these commissions in the first place, 

and it would be unjust to permit him to retain some of the illgotten funds to cover his expenses. See id. (“[I]t would be 

unjust to permit the defendants to offset against the investor 

dollars they received the expenses of running the very 

business they created to defraud those investors into giving 

the defendants the money in the first place.”). We 

accordingly find no abuse of discretion in the disgorgement 

order.

AFFIRMED.