EB5 Investors Magazine - Page 16

The bar is set high for regional center and project approvals. Martin Lawler, an experienced EB-5 immigration lawyer, is up to the task. With his sophisticated clients, he leads the team of top economists, business plan writers, market analysts and securities lawyers needed to help clear EB-5 hurdles. no more than 100 investors and the C-5 Exemption whereby the NCE is engaged in a transaction that involves real estate collateral either directly or through a first mezzanine pledge that could otherwise qualify as a mortgage-backed collateral loan. • Equestrian b. Broker/dealer registration. To the extent that securities are being offered through the instrumentality of the United States commerce or otherwise involving “directed selling efforts” within the United States, and assuming that transactional compensation is paid and there is not otherwise a reliance upon an issuer exemption, then broker-dealer registration would be required under the Securities Act of 1934 (the “1934 Act”). Any violations of this condition could impose a right of rescission by investors. Martin Lawler www.aboutvisas.com 415-391-2010 c. Investment advisor registration. Similar to the brokerdealer registration requirements of the 1934 Act, there is also registered investment advisor registration requirements under the Investment Advisers’ Act of 1940 for providing investment advice in connection with the trading of securities, which needs to be addressed in the offering documents. • Set up many regional centers • I-526 exemplars • Hundreds of EB-5 filings • Immigration book author See Martin on CNBC news about EB-5 at classic.cnbc.com/id/37357190 Staff fluent in Mandarin, Cantonese, Spanish & French. All services provided by or under the direction of a California licensed attorney. Continued from page 13 7. Failure to raise entire EB-5 capital amount. What may seem obvious, but is not necessarily always disclosed in other offerings, is the risk factor of failing to raise the maximum capital in the EB-5 offering, and whether the smaller EB-5 raise would still enable the project to be completed. In this regard, it is important to describe what mechanisms are in place to bridge the difference between the actual amount of the EB-5 capital required and the maximum offering amount. It should be disclosed that additional capital may be generated by additional senior indebtedness or other funding sources or equity and mezzanine financing, since it is not acceptable to commence development without all the capital stack sources identified. 8. Unique securities-law-related risks. As briefly noted above, each EB-5 offering has unique securities related risks that, in part, depend upon the size of the offering and the manner in which the NCE is marketing the sale of the securities. Generally, the following are the securities issues that need to be addressed. a. Investment Company Act of 1940. Although not specifically highlighted, the Securities and Exchange Commission (“SEC”) has taken the position that the creation of an NCE to undertake the loan program involves the Investment Company Act of 1940 (the “IC ACT”) and potential registration thereunder. In order to be exempt from registration, there are generally two significant exempt ions that are undertaken; one is the so-called C-1 Exemption which involves an offering to 14 d. Registration of securities. There are typically two exemptions from registration of securities in offerings. Regulation D applies to an exemption for domestic sales and Regulation S applies to an exemption for offshore sales. Each of these exemptions should be disclosed and a determination should be made as to whether the EB-5 offering entails both exemptions. In connection with all of the above, there should be clear disclosure as to the total amount of potential compensation paid and a description as to what parties will be sharing in such compensation so that there is proper disclosure as required under the 1934 Act. Conclusion Risk factor disclosures in an offering are complicated and, as demonstrated above, not uniform in EB 5 offerings. Great care must be taken to properly analyze the unique factors of each EB 5 offering, with proper disclosures and independent verifications obtained to support the factual positions taken in the offering. ★ Ronald R. Fieldstone EB5 INVESTORS MAGAZINE Ronald Fieldstone is a partner at Arnstein & Lehr LLP’s Miami office, where he focuses on corporate/securities and taxation law. Mr. Fieldstone has been active in the EB-5 industry since 2009 and has represented regional centers and developers in over 125 projects. He is a frequent author and lecturer on EB-5 and securities matters.