EB5 Investors Magazine "Top 25 Awards Edition" Volume 8 Issue 1 - Page 101

a resurgence of new mainland China-born applicants, they will be well-advised to work with licensed broker- dealers who can provide full disclosure and protect their rights. the potential risk of the transaction is suitable for the investor. Unless there are exemptions, the broker-dealers will ensure that they are not breaking any security laws. Again, as a result, everyone wins. It is a requirement for broker-dealers to offer investors a menu of investment options. If regional centers ask them to represent projects that seem quite risky, they are under no obligation to include them in their offerings. B r o ke r - d e al e r s w i th ex pa nsi ve p o r t fo li o s p e r fo r m rigorous due diligence of each project before they even present them to the potential EB-5 investors. 7 Although not guaranteed, this due diligence exercise may protect the investors from getting involved with projects that will either most likely fail by not fulf illing the requisite minimum job creation requirement or experience capital loss. By keeping these kinds of riskier projects off the EB-5 market, broker-dealers may also help the issuers mitigate their litigation risk. They could also offer these issuers alternative-funding methods with a different risk-return profile, in case the EB-5 market is not a suitable one to complete their projects. As a result, everyone wins. REDEPLOYMENT OF EB-5 FUNDS One aspect of each project that EB-5 broker-dealers add value to all the EB-5 stakeholders is the redeployment strategy. At the beginning of each project, the new commercial enterprise (NCE) invests the EB-5 capital with the job-creating enterprise (JCE). Redeployment needs to occur if the EB-5 investor is not ready to receive the funds back that the JCE pays back to the NCE when they are due. In the past, before USCIS published the redeployment policy on June 14, 2017, the industry practice was to deposit such funds in escrow until the investors could receive back their capital. NCE’s can no longer do that. They need to redeploy the funds. "Broker-dealers with expansive portfolios perform rigorous due diligence of each project before they even present them to the potential EB-5 investors" Broker-dealers also have to adhere to strict know your customer (K YC) rules. This way, they make sure that According to the updated general policy of USCIS, the EB-5 investor can receive back their capital at the end of the sustainment period, defined as the end of the two-year conditional green card holding period. 8 Therefore, the NCE needs to reinvest the funds until the filing of the I-829. In the past, before USCIS published this repayment policy, the unders tanding was that the NCE could only return the EB-5 capital upon I-829 approval. Re c e n tl y, U S CI S ame nde d i ts re de ploy me n t p olicy and brought some clarity to the obligations of NCE’s. Essentially, now regional centers have to redeploy funds within a year defined to be a reasonable time for finding a suitable investment. 9 They further added that they could deploy capital into any commercial activity consistent with the purpose of the NCE to engage in the “ongoing conduct of lawful business” evidenced in any amendments to the offering documents made to describe the further deployment into such activities. 10 11 Consistent with precedent case decisions and existing regulator y re quire me nts , fur the r de ploy me nt mus t continue to meet all applicable eligibility requirements within the framework of the initial bases of eligibility, including the same NCE and regional center. 12 13 14 Besides, because a regional center has “jurisdiction over a limited geographic area,” further deployment must occur within the regional center ’s geographic area, including any amendments to its geographic area approved before the further deployment. 15 The redeployment does not need to remain with the same (or any) job-creating entity or in a targeted employment area (TEA), even if the original investment was in a TEA. EB5INVESTORS.COM 101