We know many regional centers that have redeployed
funds outside their geographic area. The fact that USCIS
plans to apply this policy retroactively for all existing I-526
and I-829 applications is unfortunate. That said, if the
redeployment outside the regional center’s geographic
area has occurred after the sustainment period, this
policy change should not be material. It will only be
problematic if the redeployment occurred before I-829
filing within the conditional residency period.
Many inves tors , whose regional ce nte r re de ploye d
ou tside the region , could receive R FE ’s or s traight
out denials if USCIS does not retract its new policy’s
requirement to reinvest the funds within the limited
geographic jurisdiction of the regional center. Broker-
dealers disclose the redeployment policy at the time of
the initial investment. Therefore, those regional centers
that use the services of a broker-dealer could avoid such
potential costly litigation.
DISCLOSURE REQUIREMENTS
B r o ke r - d e a l e r s a r e r e s p o n s i b l e fo r r e v i e w i n g a n d
approving the of fering documents. No es tablished
issuer would ever consider tapping the capital markets
without the active involvement and participation of a
broker-dealer or an investment-banking firm. Exemption
from registration requirements cannot be an excuse for
nondisclosure of material information. 16 17
Security counsels make sure that offering documents
disclose material information. Yet, it is the responsibility
of the broker- dealer to check that the disclosure is
adequate and prominent. Security counsels worry about
the rollover project not being disclosed in the initial
p r i va te p lac e m e n t m e m o r a n d u ms (P P M ’s) b eyo n d
generalizations like “similar to the initial EB-5 Project,”
or “another real estate development with the same
or similar developer ” or whatever, but still without a
separate PPM of its own detailing the potential upside
and risks of the reinvestment.
Broker-dealers do not implicitly endorse any offerings
that they are marketing to the investors. That said, they
could choose to walk away from an offering due to
inadequate disclosure. In many instances, the broker-
dealers could also work with issuers to reengineer the
offering by, for example:
• making changes to the
priority of payments in the
waterfall
• increasing the equity
contribution of the project
owners
• decreasing the debt amount
senior to the EB5 investors
These are some concrete examples
as to how the broker- dealers
c an e nsu re that th e r isk- re tu r n
profile of the offering aligns better
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EB5 INVESTORS MAGAZINE
against other offerings in the marketplace. As a result,
the active involvement early on of a broker-dealer creates
a win-win situation for all par ties involved. Investors
win because they get an unbiased, regulated entit y
whose responsibility is adequate disclosure. Issuers win
because they can get their offering structured with a
fully disclosed risk/return profile. They achieve efficient
exe c u tio n an d avoid c os tl y li tiga tio ns by u n ha p py
investors and their attorneys.
REDEPLOYMENT CONSIDERATIONS
POST-NOVEMBER 21, 2019
When an EB -5 project is completed and sold or
refinanced, such that the JCE or its affiliates can pay-
off the loans extended to it by the NCE or its affiliates,
the funds cannot sit idle in an escrow account, as they
ne e d to b e at- risk . 18 O the r wise ,
the investors could jeopardize the
whole immigration benefit of their
EB-5 application. A well-thought-
ou t re de ploy me n t s tr ate g y is a
way to fulfill the “capital at- risk
requirement.” 19
"Many investors conduct
rigorous due diligence at
the initial stage of project
selection but are unaware
of the redeployment risk
until they can get their
capital back"
Many investors conduct rigorous
due diligence at the initial stage of
project selection but are unaware
of the redeployment risk until they
can get their capital back. Without