A N A L Y Z I N G
B I L L
S . 1 5 0 1
THE HEAT IS GETTING
TURNED UP ON
by Reid Thomas and Daniel B. Lundy
Regardless of how the proposed bill by Senator
Grassley and Senator Leahy evolves into law,
the bar on EB-5 compliance requirements is
going to be raised.
This should not be a surprise. EB-5 capital has evolved to be
a mainstream source of development financing. It consistently
finds a place in the capital stack along with more traditional
funding sources. These other financial instruments, and the
companies that provide them, are subject to significant regulatory compliance standards.
These requirements are implemented for good reasons. When
met, they provide additional security and transparency for
investors, help prevent fraud and abuse, and appropriately raise
industry standards.
Tracking investment activity and job creation is at the heart
of EB-5 compliance requirements. Regional centers must document initial due diligence, investor recruitment, immigrant petition filing, deployment of funds, job creation, I-829 petition
filing and repayment of investor funds.
Preparing the necessary data and evidence for successful I-829
filing is one of the main compliance requirements for EB-5
regional centers. Because the I-829 petition carries significant
data and reporting requirements, many issuers who did not
proactively track this information when the industry took off
a few years ago now find themselves scrambling to ensure their
investors’ filings will be compliant.
Between the increase in volume of I-829s and the new regulations looming, regional center compliance requirements are set
to expand dramatically.
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The proposed requirements include:
• Financial Reporting Compliance Requirements
- Annual reporting of all funds received
- Reporting of deployment of funds into NCE
- Reporting of deployment of investor funds into JCE
• Economic Development Compliance Requirements
- Annual accounting of all direct
jobs created or preserved
• Project Compliance Requirements
- Filings of material change
• Regional Center Operations Compliance
- Certification on status of regional center principals
- Payment of annual regulatory fund fee
- Status of any pending litigations
- Announced and unannounced site
visits and audits by DHS
• Securities Laws Compliance
- Report of all service providers receiving fees
- Securities compliance certification
- Maintenance of policies and procedures for affiliates
These requirements span the life of the project from the
subscription phase through development and return of capital,
a process that typically lasts about five years or longer. To remain compliant with the new requirements, implementing a
deliberate EB-5 compliance plan will be crucial.
EB5 INVESTORS MAGAZINE