• Material Changes According to the memo, material changes will no longer result in automatic denial. The new policy allows investors to explain material changes( see memo for definition) when applying for removal of conditions( I-829).
The timing of a material change will impact a project:
• If the material change occurs after conditional permanent resident status is obtained and during the conditional residency two year term, the investor can remove conditions as long as investment has been sustained and required jobs generated.
• If the material change occurs between approval of the I-526 but before adjustment of status or admission as a conditional resident, no changes may be made. A new I-526 will have to be filed.
• If the material change occurs before the I-526 has been approved, the investor must file a new I-526 with the changed circumstances. This creates the risk that an investor’ s child / children could age out and not allow an aged out child to remain under the parent’ s application.
• Job Creation The memo states that adjudication of cases will no longer be reliant on North American Industry Classification System( NAICS) codes. NAICS codes will still be used as a reference by economists to verify credibility of assumptions for job creation. Investors should still establish that requisite direct or indirect jobs will be created. The jobs created need to be in“ substantial compliance” and show creation“ within a reasonable time.”
• Bridge Financing A developer or principal, either directly or through a separate job creating entity, may utilize interim, temporary or bridge financing prior to receipt of EB-5 capital. The developer or principal may still receive credit for job creation for the EB-5 investors. Generally, replacement of bridge-financing with EB-5 investor capital should have been contemplated prior to acquiring non-EB-5 financing and the investors must prove their capital has been put into the project.
Good Practice Point: Have the following or similar wording be included in the initial loan documents and / or promissory note for the bridge financing:“ The lender acknowledges and agrees that the loan may be reduced in part or in full by utilizing EB-5 source funds.” While this is not a mandatory requirement, it will obviate any intent issues that may arise.
The Adjudications Memo Dated May 30, 2013 The 27 page May 30, 2013 Policy Memorandum,“ EB-5
Adjudications Policy,” PM-602-0083 can be located at:
http:// www. uscis. gov / USCIS / Laws / Memoranda / 2013 / May / EB-5 % 20Adjudications % 20PM % 20( Approved % 20as % 20 final % 205-30-13). pdf The policy memo is solely for the training of USCIS personnel and does not create any right or benefit outside of the USCIS; applicants, petitioners, appellants, and litigators, as well as counsel, may not use this policy memo to establish a case against the USCIS.
U. S. Securities and Exchange Commission( SEC) Implementing regulations under portion of the JOBS Act
On July 10, 2013 the SEC issued regulations implementing the portion of the Jumpstart Our Business Startups Act( JOBS Act), enacted in April 2012, allowing an issuer enjoying exemption from registration under Rule 506 of Regulation D under the Securities Act of 1933 to engage in general solicitation and advertising, even in the United States. The SEC news release, with links to the regulations and related discussion, can be found at http:// www. sec. gov / news / press / 2013 / 2013-124. htm. The regulations took effect September 23, 2013.
This ruling will have several implications on the EB-5 industry. The new exemption is separate from the existing and continuing Regulation D exemption that prohibits general solicitation, but does not dictate specific methods for verifying accreditation status.
• The rules do not require confirming that potential investors are accredited before soliciting them through general means; instead they require verification of purchasers before they actually subscribe.
• The issuer must also take reasonable steps to verify that purchasers of securities are accredited investors.
• Determining how to verify the accredited status of foreign investors, few of whom would have filed U. S. tax forms or would be susceptible to a meaningful credit report from a U. S. credit reporting agency, will be one of the most significant challenges for EB-5 issuers.
• Allowing general solicitation under Regulation D does not exempt issuers from prohibitions on using unregistered brokers.
• Many EB-5 issuers who have become accustomed to using foreign sales agents under the Regulation S exemption for purely foreign offerings may be tempted to use those same or other unregistered agents for general solicitation for investors who will not qualify under Regulation S. This is prohibited.
• In a separate final rule, the SEC now bans any person that is a“ bad actor” or who is affiliated with a bad actor from relying on the regulation exemption. The disqualification applies only for events that occur after the effective date of the rule, but events occurring before that date must be disclosed to investors.
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