Articles Posted in EB-5 Financing

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The EB-5 investment community is now facing a new challenge, as many of the more seasoned EB-5 investment projects begin to mature and the original investment capital is returned by the project owner to the new commercial enterprise.  USCIS has clearly stated its policy that EB-5 investment capital is required to remain “at risk” in the new commercial enterprise until each EB-5 investor’s I-829 petition is adjudicated.  However, USCIS has provided no guidance on what requirements that new investment is required to meet, other than that it must meet the definition of “at risk.”

The authors of this White Paper have undertaken the task of proposing a set of standards and guidelines for redeployment of EB-5 investment capital.  It is our hope that the principles of redeployment stated in this White Paper will be accepted by USCIS and by the EB-5 investment community.  We believe that the standards expressed in this White Paper should meet the “at risk” requirements established by USCIS, and should also meet the requirements of federal securities laws and the fiduciary duties of the general partner or manager of each new commercial enterprise when making a decision to redeploy their investment capital in a new investment.  We acknowledge that this is an evolving issue and that new developments may occur that require changes in these proposed standards and guidelines.  At the same time, we believe it is important to the EB-5 community that these standards and guidelines be offered as a model now, so that new commercial enterprises have a basis for analyzing their options when the need to redeploy their investment capital becomes a reality.

— Catherine DeBono Holmes

This article is co-authored by Daniel B. Lundy, Esq., of Klasko Immigration Law Partners, LLP. His Firm’s blog is available here.

Standards and Guidelines for Redeployment of EB-5 Investment Funds

A White Paper Prepared by:

Klasko Immigration Law Partners, LLP
Arnstein & Lehr LLP
Jeffer Mangels Butler & Mitchell LLP

This White Paper sets forth a legal framework for establishing the standards and guidelines for redeployment of investment funds by a “new commercial enterprise” (“NCE”) received from investors (“EB-5 Investors“) seeking to qualify for visas pursuant to the EB-5 Immigrant Investor Program under Section 203(b)(5) of the Immigration and Nationality Act (“INA”), (8 U.S.C. § 1153(b)(5)) (the “EB-5 Program“). This White Paper assumes that the initial investment was made by the NCE in a “job creating entity” (“JCE”), the investment funds have been utilized by the JCE in accordance with a business plan approved by United States Citizenship and Immigration Services (“USCIS”) and then repaid by the JCE to the NCE after the requisite 10 jobs per EB-5 Investor have been created.  Here we conclude that a redeployment by the NCE into a portfolio of publicly traded U.S. securities managed by a registered investment adviser, or into a new real estate investment, with appropriate due diligence and oversight of the new investment, together with NCE fund administration provided by a third-party fund administrator, would reflect industry best practices for compliance with USCIS policy, securities laws and fiduciary duties of the general partner or manager of the NCE. Continue reading →

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This article is co-authored by Daniel B. Lundy, Esq., of Klasko Immigration Law Partners, LLP. His Firm’s blog is available here.


By: Catherine DeBono Holmes, Esq., Daniel B Lundy, Esq. and Jeffrey E. Brandlin, CPA, CIRA, CFF

Managers and Investors in EB-5 Investment Funds should regularly monitor their investments in EB-5 Projects and be ready to take protective actions if their EB-5 Projects show signs of trouble.

It is vitally important for managers and investors in EB-5 investment funds[1] to stay informed of the status of their EB-5 projects[2], because EB-5 investors must demonstrate that the projects in which they invested were completed and, in some cases, that those projects are operating in accordance with projections, in order to qualify for approval of their I-829 petitions to remove conditions to their residence.  If the manager or EB-5 investors in an EB-5 investment fund discover signs that their EB-5 project may be experiencing financial distress or other difficulties that could prevent the project from being completed or operated in accordance with the original business plan for the project, the manager, the investors or their representatives need to evaluate whether there are any actions that could be taken to save the project, so that the EB-5 investors will ultimately qualify for approval of their I-829 petitions.  The manager or investors are in a far better position to take protective actions before the problems with their EB-5 project result in litigation, foreclosure, or SEC enforcement action, although it is still possible to take protective actions after one of these events occurs.  This article is the first of a series of articles that will describe how managers or investors can monitor their EB-5 projects to discover potential problems before they become a crisis, and the protective actions that may be taken to protect EB-5 investors if their EB-5 projects are in trouble.

Both managers and investors in EB-5 investment funds should continuously monitor and evaluate the progress of their EB-5 projects, and collect documentation of transfers of EB-5 funds, payments of project expenditures, and other financial records that will be required as part of the I-829 petitions.  An unwillingness to provide such documentation, which is mostly generated in the normal course of business, can be a red flag indicating that something is wrong.  The manager of each EB-5 investment fund is the primary party responsible for monitoring the EB-5 fund’s investment in the EB-5 project.  However, in cases in which the manager is affiliated with the EB-5 project developer, or the manager is not fulfilling its obligation to properly supervise and monitor the EB-5 project, the EB-5 investors should have their own independent representatives monitor the EB-5 project and evaluate if and when protective actions are necessary to protect the E-5 investors.  The manager of an EB-5 investment fund, or third party service provider where the manager is affiliated with the developer, should provide regular reports (preferably on a quarterly basis) to the EB-5 investors in the fund regarding the status of construction and financing of the project, payments made to the EB-5 investment fund and whether or not the EB-5 project is in compliance with the terms of the investment made by the EB-5 investment fund in the project.  EB-5 investors should insist that the manager of their EB-5 investment fund make these periodic reports if the manager is not already doing so.  If EB-5 investors do not receive these reports, they should engage an independent representative to meet with the manager, review the EB-5 project and advise the EB-5 investors directly regarding the status of the project and any problems that are discovered as a result of the review.  In the paragraphs below, we provide further information regarding how that may be done. Continue reading →

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This article is co-authored by Daniel B. Lundy, Esq., of Klasko Immigration Law Partners, LLP. His Firm’s blog is available here.

The USCIS stated in a stakeholder call on July 28, 2016 that minors can be primary applicants on I-526 petitions for visas under the EB-5 Program, but bear the burden of proving by a preponderance of the evidence that they have entered into a valid investment contract that is not voidable.

This acknowledgement by USCIS provides an opportunity for EB-5 sponsors to adopt a policy of accepting minor investors in EB-5 investment funds in a manner that can be proven to create a valid investment contract that is not voidable by the investor. The General Principles of the Civil Law of the Peoples Republic of China (“PRC“) provide one potential means of entering into a valid contract under PRC law. However, some EB-5 sponsors are reluctant to rely upon laws of the PRC as the basis for admission of minor investors, in part because of the uncertainty of what evidence would be necessary to prove that a contract is valid under the laws of the PRC to the satisfaction of the USCIS. For EB-5 sponsors seeking to rely on laws of the United States, the Uniform Transfers to Minors Act (“UTMA“) may provide the best means of establishing the validity of an investment contract with a minor investor.

UTMA has been adopted by nearly every state, and establishes a legal method to make a gift to a minor by using the required designation of ownership.

UTMA was drafted by the National Conference of Commissioners on Uniform State Laws in 1986, as an expansion and replacement for the Uniform Gifts to Minors Act (“UGMA“). UTMA has subsequently been adopted by every state except South Carolina, which still follows the Uniform Gifts to Minors Act. UTMA has also been adopted by the District of Columbia and U.S. Virgin Islands, but not by Puerto Rico. Under UTMA, any form of property, including securities, may be indefeasibly transferred to a minor by any transferor, simply by using the following designation of ownership: “_______________ [name of custodian], as custodian for ____________________ (name of minor) under the [name of Enacting State] Uniform Transfers to Minors Act.” Continue reading →

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The EB-5 Securities Law Roundtable, a group of securities lawyers from several different law firms around the United States, has been working jointly to provide comments to legislation that we expect will be proposed by Congress to improve the integrity of the EB-5 program. The focus of the Roundtable has been to recommend changes that we believe will conform the proposed legislation to existing securities laws, and will clearly define the roles and responsibilities of EB-5 regional centers, sponsors and issuers.

The Roundtable supports efforts by Congress to strengthen the integrity of the EB-5 program by establishing procedures that will assist in detecting and preventing potential fraud in offerings made under the EB-5 program. Lawmakers could do a great service to the many U.S. employees, businesses and investors who benefit from the EB-5 program by aligning the integrity requirements of the EB-5 program with existing U.S. securities law.

The Roundtable issued a press release on August 29, 2016 announcing its analysis and comments on the proposed legislation, a copy of which may be obtained, along with the comments of the Roundtable on the legislation, at the following website:

The comments of the Roundtable do not address immigration policy and eligibility aspects of proposed EB-5 legislation, such as the minimum investment amount, defining targeted employment areas, visa availability, effective dates or length of program authorization. This is because the goal of the Roundtable is to focus on those aspects of the legislation that concern the application of securities laws to the EB-5 program, and the role of each industry participant to assure compliance with those laws.

About the EB-5 Securities Roundtable
The EB-5 Securities Law Roundtable is an informal, independent group of leading EB-5 Securities Attorneys from law firms including Arnstein & Lehr; Baker, Donelson, Bearman, Caldwell & Berkowitz; Homeier Law PC; Jeffer Mangels Butler & Mitchell; Kutak Rock; Phillips Lytle; Sheppard Mullin Richter & Hampton; and Torres Law, organized to facilitate best practices in the offerings of EB-5 securities. The Roundtable is not affiliated with any EB-5 industry organization, regional center, offeror of EB-5 securities or job-creating recipient of EB-5 funds, and it receives no outside financial contributions. The comments of the Roundtable represent consensus views of the individual participants and do not necessarily represent the views of any individual participant, their respective law firms or clients of their law firms. The comments of the Roundtable do not represent legal advice.

Catherine DeBono Holmes, a partner of Jeffer Mangels Butler & Mitchell LLP and chair of its Investment Capital Law Group, is a member of the EB-5 Securities Law Roundtable and a contributor to the comments developed by the Roundtable on the legislation. She regularly represents EB-5 regional centers, issuers of EB-5 securities and developers of projects who receive EB-5 financing. She has written more than 30 articles on topics relating to the EB-5 program, and is designated one of EB5 Investors magazine’s Top 25 Securities Attorneys.

Cathy HolmesCatherine DeBono Holmes is the chair of JMBM’s Investment Capital Law Group, and has practiced law at JMBM for over 30 years. She specializes in EB-5 immigrant investment offerings and hotel and real estate transactions made by Chinese investors in the U.S. Within the Investment Capital Law Group, Cathy focuses on business formations for entrepreneurs, private securities offerings, structuring and offering of private investment funds, and business and regulatory matters for investment bankers, investment advisers, securities broker-dealers and real estate/mortgage brokers. Contact Cathy at or 310.201.3553.


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By: Catherine DeBono Holmes, Esq. and Bernard P. Wolfsdorf, Esq.

The delay in processing EB-5 immigrant visas caused by the increasing waiting line commonly referred to as “retrogression” is causing an increase in demand by parents in China to have their minor children named as the primary applicant on I-526 petitions.

With estimated delays of five to six years for the processing of EB-5 immigrant visas or green cards for applicants subject to the Peoples Republic of China (“PRC”) quota, many parents are concerned their children will “age out” by reaching the age of 21 before their final green card interviews are scheduled. As a result, the children may be ineligible to immigrate as derivative beneficiaries and may be unable to join their parents and younger siblings when immigrating. Since many PRC parents are primarily motivated to obtain green cards under the EB-5 Program for the benefit of their children, these parents are requesting EB-5 investment funds to accept their minor children as investors, so that the child can file the I-526 petition as the principal applicant. Continue reading →

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Catherine DeBono Holmes, Chair of JMBM’s Investment Capital Law Group, will be speaking at the 2015 AILA EB-5 Investors Summit, at the Venetian Resort Hotel Casino in Las Vegas, which takes place August 27-28, 2015.

The conference is focused on “Representing EB-5 Investors & Regional Centers”. Cathy will participate on the panel “Business Considerations for Your Client in Regional Centers: Understanding the Capital Transaction” which will address:

  • Understanding the Deal Structure—The Regional Center, New Commercial Enterprise, and Job Creating Entity
  • Understanding the Capital Stack and Different Sources of Capital
  • Identifying and Managing Investment and Immigration Risk Factors

Questions answered by panelists include:

  • How exactly is the new commercial enterprise investing in the job creating entity? As an equity or preferred equity investor? As a lender making a loan? If so, what kind of loan— first deed of trust, second lien, or mezzanine?
  • When are EB-5 funds made fully available to the JCE and how?
  • What is the relationship of EB-5 funds to all other capital in the JCE and why does it matter?
  • What loan provisions will most influence NCE investment risk and immigration compliance?

Additional faculty for this panel include: David M. Morris (DL), AILA EB-5 Investors Liaison Committee Chair, Washington, DC; Danielle A. Katzir, Real Estate Attorney, Los Angeles; M. Jay Yurow, Business & Real Estate Attorney, Washington, DC.

Click here for the full conference program and registration information

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By Catherine DeBono Holmes, Esq.

On June 23, 2015, the Securities and Exchange Commission (“SEC”) announced that it had entered into an Offer of Settlement with Ireeco, LLC and Ireeco Limited, finding that their activities constituted a violation of Section 15(a)(1) of the Securities Exchange Act of 1934 (the “Exchange Act”) because they acted without registration as a broker-dealer with the SEC.  By entering into an Offer of Settlement, the Ireeco entities waived their rights to an administrative hearing, and without admitting or denying the findings, they consented to the entry of the Order.  The Order requires that the Ireeco entities cease and desist from committing or causing any further violations of Section 15(a), censures the Ireeco entities, and orders further proceedings to determine whether to require disgorgement of ill-gotten gains and/or civil penalties, and if so, the amount of such disgorgement or penalties.

The Order provides several important insights into the SEC’s views of what constitutes marketing activities that require broker-dealer registration in the EB-5 investment market.  We offer our analysis of these issues here.

According to the Order, the SEC found that the following activities violated the Securities Exchange Act:

  • Ireeco LLC was formed in 2006 as a U.S. entity with an office in the U.S., where a small staff of 4 to 5 people worked, including the two principal owners, Stephen Parnell and Andrew Bartlett.  They operated primarily through a website,, which offered to help foreign individuals determine if the EB-5 Visa Program would work for them and to help them find EB-5 regional centers and projects.
  • Ireeco Limited was formed in 2012 as a Hong Kong entity, and replaced Ireeco, LLC as the company that solicited foreign investors for EB-5 investments. It listed a “U.S. Admin Office” address for the company in Greenville, South Carolina, and continued to rely on the same small staff of 4 to 5 people located in the U.S., including Parnell and Bartlett, that operated Ireeco, LLC.
  • In at least 10 instances, potential investors were already residing in the U.S. on some other type of temporary visa when they were solicited by Ireeco, LLC or Ireeco Limited.
  • Ireeco would give each investor one or more EB-5 regional center projects as possible choices, and claimed to perform “due diligence” on each of the regional centers it selected for its customers.
  • Ireeco would give each investor one or more EB-5 regional center projects as possible choices, and claimed to perform “due diligence” on each of the regional centers it selected for its customers.
  • After each investor identified which regional center they wanted to work with, Ireeco would “register” the investors with the regional center. The investors then dealt mostly with the regional center, received offering documents from them, and only occasionally dealt with Ireeco after that.
  • Ireeco LLC and Ireeco Limited had “referral partner agreements” with regional centers, who compensated them for each registered investor who invested funds in an EB-5 offering, which was generally $35,000 per investor paid through the Administrative Fee.

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By Catherine DeBono Holmes, Esq. and Victor T. Shum, Esq.

The proposed Senate Bill reauthorizing the EB-5 Regional Center Program would restrict the types of projects that can be funded with EB-5 financing and amount of funds that can be raised with EB-5 financing.

The Senate Bill, entitled “American Job Creation and Investment Promotion Reform Act of 2015,” which was introduced on June 4, 2015, contains some provisions that would strengthen the oversight of the EB-5 Program, but the Bill also contains some provisions that would effectively disqualify many construction projects seeking to obtain financing through the EB-5 Program, and reduce the amount of EB-5 financing that could be obtained for many other construction projects.  In particular, these provisions would change the ways in which jobs are counted for purposes of determining which projects qualify for EB-5 financing, and how many jobs are credited for each project.  There is no explanation in the Bill or by the Senators proposing these changes as to the reasons why they believe these changes are necessary, or in what way they believe these changes would improve the EB-5 Program.  In fact, we believe these changes are unwise and should be removed from the Bill because it is counter to the original intent of EB-5 program by reducing foreign investment and job growth and by hurting small and medium sized American businesses from accessing much needed capital.

The proposal to allow only 90% of the requirements for job creation to be satisfied through indirect jobs would effectively eliminate EB-5 financing for all construction projects to be completed in two years or less which are not associated with operating businesses following completion.

One of the provisions of the Bill states that up to 90% of the jobs required to be created in order to qualify for EB-5 financing may be created indirectly through investment.  The EB-5 Program currently has no requirement that any portion of the jobs created be direct or indirect jobs, and requires simply that at least 10 new jobs be created for every investor.  If the Bill is passed with this provision, it would mean that at least 10% of the jobs for every EB-5 project must be direct jobs.  It is not clear in the Bill if that means that the entity in which EB-5 investors invest their funds must have direct employees (i.e. W-2 employees), or that the project must include direct effect employees, as calculated by an economic model such as RIMS II or IMPLAN.  We assume it means the latter, because if it meant that the entity in which the EB-5 investors invested must have its own employees, that would be an extremely severe restriction, because most EB-5 investment entities are formed as financing vehicles for specific projects, and are not themselves employers of any employees.

Even if this provision is intended to mean that the project must include direct effect employees from an economic model, it would automatically exclude many construction projects.  This is because EB-5 regulations currently do not allow any construction project that will be completed in under two years to count any direct construction jobs for EB-5 purposes.  Therefore, this provision requiring at least 10% direct employees would automatically exclude any multi-family, condominium, office or other construction project that took under two years to build and was not part of an operating business.  This requirement of at least 10% direct employees could be met by developers of real estate intended to be used for an operating business, such as hotel, restaurant, or assisted living facility, because those projects would have direct employees in their operating phase.  In addition the requirement could be met by a construction project that would take over two years to build, because those projects are allowed to count direct construction jobs.  However, it is unclear why the requirement for at least 10% direct jobs should be required at all, given that its effect would be to automatically shut out of any EB-5 financing construction projects to be completed within two years for multi-family, condominium, office or other types of commercial development. Moreover, since smaller, short-term projects which are completed in less than two years are the most viable types of projects in economically disadvantaged communities, this requirement would appear to be counter to the intent of the EB-5 program of promoting job growth and economic stimulus.

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Hotelier Roadmap to EB-5 Financing for New Hotel Construction, Expansion or Renovation: Ten Steps to a Successful EB-5 Offering

This article was first published in EB5 Investors Magazine.

The EB-5 investor visa program allows non-U.S. persons to invest $500,000 (or $1,000,000) in a business that is expected to create at least 10 new permanent jobs per investor, and to obtain a conditional visa upon review and approval by the United States Citizenship and Immigration Service (“USCIS”).  Hotel projects are one of the best investment categories for EB-5 investors, because they tend to create more operating jobs than many other businesses, they are investments in real estate, which tend to be more stable in value than some other forms of investment that qualify for EB-5 financing, their business model is easy for investors to understand, and they are often operated by or under franchise licenses with hotel brands such as Hilton, Hyatt, Intercontinental, Starwood and Wyndham that are known around the world by potential EB-5 investors.

For those hotel developers seeking to access EB-5 financing, here are our recommended steps on the road to a successful EB-5 financing:

1.  Determine if the project has the necessary characteristics to successfully raise financing through the EB-5 program. The sponsors of EB-5 investment offerings are always looking for good new projects, but the market is competitive, and to be successful, a project will need to have some key markers that demonstrate the project will be attractive to EB-5 investors. It is not necessary that all of these elements exist immediately, but the more of them that do exist when a developer first approaches potential EB-5 sponsors, the better the developer’s chances will be of attracting the most experienced and successful EB-5 sponsors:

  • Project preliminary work —  The developer should have completed a significant amount of the preliminary project work, such as obtaining a hotel market feasibility study, preparing preliminary plans and budgets for the project, obtaining franchise approval or a hotel management agreement or letter of intent, acquiring the property and determining zoning and permit requirements.
  • Developer with Financial Strength and Track Record – The most successful EB-5 projects are those with experienced and financially strong developers.  EB-5 sponsors and investors alike want projects run by strong companies with a history of success in developing similar projects.
  • Developer Equity Commitment – EB-5 sponsors and investors favor projects where the developer has a financial commitment of its own equity invested in the project – 20% equity or more is expected.  There are some EB-5 projects where the developer has less than 20% equity in a project, but these are often more difficult to sell to investors unless there are other counterbalancing factors.
  • Commitments to Fund Entire Project Cost– EB-5 investors know that the success of a development will often depend on the developer’s ability to obtain a senior loan or other financing in addition to EB-5 capital, and having a committed senior loan or other financing shows that other lenders or investors have underwritten the project and determined that it has the potential to succeed.  If a developer does not have committed capital, it may help to show that the developer is actively seeking this financing and has obtained some indications of interest.

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The Basic Rules of Website Advertising for EB-5 Securities Offerings

By Catherine DeBono Holmes, Esq. and Victor T. Shum, Esq.

EB-5 securities issuers, sponsors and others who market EB-5 securities often want to use websites to provide information to potential investors regarding their past and current EB-5 projects.  When using these websites, it is important to understand the U.S. securities laws that apply to internet marketing of securities within and outside the U.S.  The purpose of this article is to provide a brief explanation of these securities laws and guidelines to consider when using websites to identify or market EB-5 securities offerings.

  • Using websites to advertise EB-5 offerings is considered a form of “general solicitation” under U.S. securities laws, unless guidelines to restrict access to non-U.S. persons are followed.  Since 1995, the Securities and Exchange Commission (“SEC”) has held the position that posting offering materials on a website in a way that can be accessed by any viewer is a general advertisement or general solicitation, unless some restrictive access measures are implemented to allow access only to permitted persons.  In 1998, the SEC issued an interpretation on the use of internet websites to offer or advertise securities outside the U.S., providing guidance on specific measures that can be taken to retain the Regulation S exemption for offerings made to non-U.S. persons outside the U.S., and concurrently retain the right to make an offering under Regulation D to persons located in the U.S. at the time of the offering.  The guidelines provided in this article are derived in part from that SEC release.


  • If an EB-5 securities issuer intends to accept any U.S. investor, it is necessary to meet the requirements of Regulation D, including the restrictions on use of websites to advertise the offering.  Although EB-5 securities offerings are generally offered to investors outside the United States, it is not unusual that some investors making an EB-5 investment will be located in the United States at the time they receive information about an EB-5 offering, or they receive or sign EB-5 offering documents.  Such investors may be international students attending university in the U.S. or other temporary U.S. visa holders.  All of those types of persons are considered “U.S. Persons” under Regulation S, and issuers are not qualified to rely on the Regulation S exemption with respect to EB-5 securities sold to those U.S. Persons.  For that reason, most EB-5 offerings rely on SEC Regulation S for investors who are outside the U.S. when they are solicited, or they receive or sign offering documents, or on SEC Regulation D for sales to U.S. Persons.  When an issuer of EB-5 securities intends to rely on Regulation D to accept some investors who are “U.S. Persons,” the issuer and its agents must take care to assure that all websites used to promote the EB-5 offering – including those of the issuer and those of all of the agents promoting the offering – will meet the requirements of Regulation D.


  • Regulation D now has two options: use general solicitation with verification of “accredited investor” status for all U.S. Person investors or use no general solicitation for U.S. Person investors.   In July 2013, the SEC implemented aspects of the Jumpstart Our Business Startups Act (JOBS Act) and amended Regulation D under Rule 506(c) to allow the use of general solicitation for investors who are U.S. Persons, if the issuer requires verification of every U.S. Person investor’s status as an “accredited investor,” by requiring that investors submit copies of their tax returns, bank statements or other recognized means of verification.  However, the SEC also allows issuers to follow the old Regulation D requirements under Rule 506(b), which do not require verification of accredited investor status from U.S. Person investors, as long as no general solicitation is used for the offering. This means that if an EB-5 securities issuer wants to use general solicitation with no restriction, including no restrictions on websites offering the securities, it can do that, as long as it required every U.S. Person investor to provide one of the recognized means of verification of their status as an “accredited investor.”

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