regulated by federal and state securities laws, an RIA stands
for the interest of an investor and owes the following fiduciary
duties:
1. to put clients’ interests first;
2. to act with utmost good faith;
3. to provide full and fair disclosure of all material facts;
4. not to mislead clients;
5. to expose any conflicts of interest to clients.
How to Choose a RIA?
Because of an RIA’s role in the investment process, an investor
has to be very careful when choosing an RIA. Before an
investor makes a decision, he or she should do the following:
•
Check the status of the RIA on SEC/NASAA website;
•
Read brochure (ADV Form) and make sure EB-5 is listed
as a specialty;
•
Make sure in company brochure (ADF Form) and
advisory contract that the RIA is not allowed to receive
compensation from the issuer, to confirm independency;
•
Be aware of potential conflicts of interest, i.e. the RIA
firm is affiliated with any EB-5 deal sponsors (Regional
Centers etc.) or Broker- Dealers;
•
Ask for a sample due diligence report; make sure the
person who prepares due diligence report has specific
industry experience as well as knowledge in EB-5.
Benefits to Regional Centers
There is no agreement between an investment adviser and
a Regional Center. The RIA simply introduces a project to
investor and conducts due diligence on behalf of the investor.
As the transaction does not incur commission expense for the
issuer, the EB-5 investor typically requests a waiver or discount
of the administrative fee. From an economic, not securities
law perspective, the investor, regional center, and investment
adviser share the commission/finder fee savings. The RIA is
not considered an unregistered Broker-Dealer because an RIA’s
compensation is predetermined and not transaction-based.2
If an investor develops a serious interest in the deal, they
will ask the RIA to conduct a complete due diligence. An
RIA should be reasonable about document requests, honor a
high standard of confidentiality duties, and give respect to the
Regional Center and other players of the EB-5 community.
Continued to page 30
650 Business Plans
550 Economic Impact Studies
170 Regional Centers Designated
WWW.EB5INVESTORS.COM
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