EB5 Investors Magazine Volume 4 Issue 1 | Page 85

As indicated above, investment adviser analysis applies not only to the Advisers Act, but also to state adviser laws, depending on assets under management or otherwise, registration may be required thereunder. Conclusion If possible, new commercial enterprises should analyze and consider having all potential future Redeployment scenarios made part of the initial investment decision and having the general partner or managing member, as the case may be, determine the action to be taken if a Repayment and Redeployment occurs without the necessity for an investor vote or consent to such action. Thus, the initial offering document and the applicable organizational document should be drafted to include the general parameters for an investment in an Additional EB-5 Project and clearly provide that the general partner or managing member has wide latitude in any Redeployment in order to satisfy the requirements of the EB-5 program and securities law issues. For purposes of the 1940 Act, if applicable, a Repayment and Redeployment will require a fact intensive analysis to ensure a continued exemption thereunder. Likewise, such an analysis will also be required to ensure compliance with the Advisers Act. The SEC has not provided direct guidance on the 1933 Act or Adviser Act consequences of a new investment decision being made in the context of a Repayment and subsequent Redeployment into an Additional EB-5 Project. However, existing precedents in other similar situations provide guidance to issuers that should be strongly considered by new commercial enterprises when investors are asked to make new investment decisions after their initial investment decision has been made. A new investment decision may pose significant securities law issues under the 1933 Act and the Adviser Act on the basis of the precedents discussed above; therefore, thoughtful planning, structuring, and disclosure are necessary. 1 https://www.uscis.gov/green-card/green-card-processes-and-procedures/visa-availability-priority-dates/ visa-retrogression 2 See Draft PM-602-0121 USCIS Policy Memorandum posted August 10, 2015, Subject: Guidance on the Job Creation Requirement and Sustainment of the Investment for EB-5 Adjudication of Form I-526 and Form I-829 3 It should be noted that investments in Additional EB-5 Projects present many non-securities law issues that are not discussed in this article, such as the availability and timing of qualifying projects, the amount of funds available versus the amount of funds needed for investment in the Additional EB-5 Projects, investment term issues, and conflicts of interest in identifying Additional EB-5 Projects. Mariza McKee is a partner at Kutak Rock LLP. She focuses her practice on the structure, negotiations and documentation of EB-5 filings. She works with developers, private equity funds, regional centers, lenders, issuers, investment banks, borrowers, and mortgage lenders. Her expertise focuses on registration and exemptions for investment advisers, brokerdealers, and investment companies. She is skilled in handling matters related to federal and state securities exemptions and compliance. Robert Ahrenholz is a partner in the Denver, Colo. Office of Kutak Rock LLP. He is a corporate and securities attorney with more than 35 years of experience. His practice is geared towards securities, corporate finance, securitizations and structured finance. Ahrenholz has served as securities counsel for numerous EB-5 offerings and has assisted developers extensively on documenting and structuring EB-5 offering programs. His EB-5 expertise include drafting private placement memoranda, subscription agreements, organizational documents, foreign placement consultant agreements and related documents. 4 Assessments are basically calls on investors to pay additional amounts of money to an issuer for the purpose of completing projects undertaken by the issuer that were either (a) contemplated in the original offering materials or (b) not so contemplated but relate generally to the purpose for which the issuer was formed. 5 The SEC has provided some guidance on this issue in the form of Rules 136 and 145 under the 1933 Act, as well as the SEC’s analysis of voluntary assessments in the context of oil and gas offerings. Rule 136 relates to assessable securities being deemed to be the offer and sale of securities and Rule 145 relates to certain situations where offers or sales occur when investors elect what is in substance a new investment decision. Voluntary assessments have traditionally been viewed by the SEC as no t being part of the initial investment decision made when acquiring assessable securities, as opposed to mandatory assessments, which are generally deemed part of the initial investment decision. Thus, whether or not to pay a voluntary assessment is a new investment decision involving the sale of a new security. Likewise, a decision whether to dissolve an entity or to make a new investment in another project has also been considered a new investment decision by the courts. See, Goodman v. Epstein, 582 F. 2d 388 (7th Cir. 1978) and Ingenito v. Bermec Corp., 376 F. Supp. 1154 (S.D.N.Y. 1974). 6 Latham & Watkins, SEC No-Action Letter (August 24, 1998). WWW.EB5INVESTORS.COM 83