EB5 Investors Magazine "Top 25 Awards Edition" Volume 8 Issue 1 | Page 104

• ensuring that the regional centers conduct the same due diligence in the reinvestment process as the original structuring of the transaction to prevent the reinvestment diluting the collateral backing the EB-5 after redeployment. The investors would then feel much more protected. When a regional center seeks consent from the investors, those investors could get an unbiased opinion from the broker-dealers on the redeployment strategy. disclose the salient risk characteristics outlined in the offering documents of the projects they market. From a redeployment point of view, broker-dealers can act as the unbiased third-party verification agent that ensures that the NCE’s follow the rules outlined in the offering memorandums. Overall, their presence in the process adds value to both the investors and the regional centers. All players have a lot to gain from their active involvement and participation. HOW CAN BROKER-DEALERS PROTECT NCE’S FROM LITIGATION RISK? Broker-dealers could help regional centers in the deal structuring and the redeployment phases by employing best practices. In the deal-structuring, broker-dealers could recommend them a redeployment strategy that is fair, equitable, and appealing to EB-5 investors. With a sound redeployment strategy, their offering would undoubtedly become more competitive and successful. As impar tial third par ties , broke r- deale rs , c omfor t investors that their reinvestment options are compliant with the criteria outlined in the offering documents. The presence of broker-dealers grossly reduces litigation risk resulting from the unforeseen losses due to reinvested funds. 22 Let’s hope that the EB -5 program, now scheduled to expire by June 30, 2021, will be reauthorized. Unlike in the previous years, the program is no longer part of the omnibus budget bill. In December 2020, when congress passed a $900 billion COVID-relief package and a $1.4 trillion government funding package, they secured federal agency operations through September 2021. 23 However, this time, they left the EB-5 outside this extension. The repercussion of an expired program for EB-5 applicants bet ween now and June 2021 is significant. Broker- dealers could explain this risk to them and shield all the EB-5 stakeholders such as regional centers, NCE’s, JCE’s, developers, to name a few, from costly litigation due to nondisclosure. Investors invest in the projects at different times during the subscription period. Their exit dates depend on several factors, including retrogression considerations. T he re gional c e n te r s should have suf f ic ie n t fu nds to return capital on a timely basis to investors from countries experiencing no retrogression. They should also have redeployment options for the others who need to stay invested. While the NCE’s perform this portfolio management function, having the advice and verification service of independent broker-dealers is crucial. 24 B r o ke r - d e a l e r s a r e n o t g l o r i f i e d m i g r a ti o n a g e n t s w h o d i r e c t i nve s to r s to p r o j e c t s a c c o r d i n g to t h e compensation they receive. On the contrary, they have to present alternative vet ted investment options to clients, among projects for which they have conducted rigorous due diligence. They are responsible to fully 104 EB5 INVESTORS MAGAZINE Marko Issever is the founder and Chief Executive Officer of America EB5 Visa, a firm that connects international investors with EB-5 issuers. Issever leads the firm’s EB-5 capital-related activities at the Riverside Management Group. He recently launched CBP Invest that promotes second country citizenship services for E-2 visa-seeking non- treaty nationals. Previously, Issever was a managing director at BNY Mellon, leading the firm’s financial institutions derivative sales business globally. Issever earned his Master’s in Business Administration in finance from The Wharton School of the University of Pennsylvania. He is a graduate of Bogazici University and Robert College in Istanbul. Sources: 1 https://iiusa.org/blog/wp-content/uploads/2019/07/A-Broker-Dealer-Perspective-on-How-EB-5- Issuers-Can-Safely-and-Effectively-Work-with-Sales-Intermediaries.pdf 2 https://therealdeal.com/issues_articles/eb-5s-gatekeepers/ https://www.theatlantic.com/business/archive/2015/09/should-congress-let-wealthy-foreigners- buy-citizenship/406432/ 3 4 https://www.eb5daily.com/2019/11/fy-2019-top-countries-of-eb-5-number-use-more/ https://medium.com/henley-partners/the-changing-face-of-the-eb-5-how-emerging-markets-are- the-new-driving-force-94d7b10619e0 5 6 https://www.sec.gov/news/press-release/2018-253 https://www.finra.org/rules-guidance/guidance/reports/2018-report-exam-findings/reasonable- diligence-private-placements 7 8 https://www.uscis.gov/policy-manual/volume-6-part-g-chapter-5#footnote-4 https://www.uscis.gov/policy-manual/volume-6-part-g-chapter-2#footnote-34 10 https://www.uscis.gov/policy-manual/volume-6-part-g-chapter-2#footnote-36 11 https://www.uscis.gov/policy-manual/volume-6-part-g-chapter-2#footnote-37 12 https://www.uscis.gov/policy-manual/volume-6-part-g-chapter-2#footnote-38 13 https://www.uscis.gov/policy-manual/volume-6-part-g-chapter-2#footnote-39 14 https://www.uscis.gov/policy-manual/volume-6-part-g-chapter-2#footnote-40 15 https://www.uscis.gov/policy-manual/volume-6-part-g-chapter-2#footnote-41 16 https://www.sec.gov/smallbusiness/exemptofferings 17 https://fas.org/sgp/crs/misc/IF11256.pdf 18 https://www.uscis.gov/policy-manual/volume-6-part-g-chapter-2 19 https://www.lexology.com/library/detail.aspx?g=fc5371da-be22-4b33-bb69-461001b39415 20 https://www.uscis.gov/eb-5 21 https://www.federalregister.gov/documents/2019/07/24/2019-15000/eb-5-immigrant-investor- program-modernization 9 22 https://www.mintz.com/insights-center/viewpoints/2841/2018-02-limiting-securities-litigation- risks-eb-5-offerings-what 23 https://www.eb5investors.com/magazine/article/redeployment-lessons-learned-how-to-protect- eb-5-investors-and-reduce-litigation-risks-to-eb-5-sponsors 24 https://www.eb5investors.com/magazine/article/redeployment-lessons-learned-how-to-protect- eb-5-investors-and-reduce-litigation-risks-to-eb-5-sponsors