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 →