May
    27

    No Legislative Reform, Now What? A Roundtable with EB-5 Experts

    Roundtabel HeadshotAs the recent legislative efforts by EB-5 stakeholders have yet to bring the lasting predictability that the EB-5 program needs, let alone the reform that is desired, left standing is the Investor Program Office (IPO) at USCIS and its numerous recent statements about implementing change even without action by Congress. These IPO statements are found in recent congressional testimony, stakeholder sessions, and liaison meetings. Depending on which of the varying pronouncements one credits, IPO’s program change would be instituted via new regulations, revised Forms, and/or policy memoranda. In order to gain a better handle on what is reasonably likely in terms of USCIS action in the near future, RCBJ polled three EB-5 expert lawyers on the American Immigration Lawyers Association National EB-5 Committee – Michele Franchett, Carolyn Lee, and David Morris.

    Question 1:

    In various public statements USCIS has indicated it is drafting new regulations, working on policy memos, and revising EB-5 practice Forms. Any one of these, if ever finalized and implemented, could have substantial substantive impact on EB-5 practice. How would you rate the likelihood of these initiatives becoming a reality this calendar year?

    Carolyn:

    It seems USCIS is actively working on all three initiatives, though, the real question is when we’re likely to see any fruit. As among the three, revising the Form I-924A is a priority to collect more accurate job creation data as the GAO report recommended.

    Michele:

    There is a reasonable likelihood we will see a final version of the August 10, 2015 draft policy memorandum concerning I-829 petition adjudications and sustainment of investments.

    David:

    As for new regulations before the end of the year, I handicap this at less than one percent. The process of making regulatory changes can be measured in years and not months.

    Question 2: 

    What specifically is USCIS working on in terms of revising I-526 and I-829 forms? IPO Chief Colucci mentioned more disclosures from regional centers, what do you expect in a revised I-924A?

    David:

    Revising current USCIS forms and the attendant instructions provides IPO with a second vehicle for implementing EB-5 program policy changes. This process, however, requires a notice and comment period. IPO recently pursued program changes via forms/instructions in December 2015 to Form I-924 and Form I-924A, and in September 2014 to Form I-829. The time may be ripe for IPO to attempt a change in the Form I-526 by the end of the year – so be on the lookout.

    Carolyn:

    Over the past few years, USCIS has requested public comments on all these forms. So it seems the agency is keen on revising all these forms. USCIS recently revised the Form I-829, soliciting pages of additional data as well as controversial attorney attestations. It’s not entirely clear to me, however, that the revisions to that form do more to deter/detect fraud or to solicit more accurate job counting. On the Forms I-526, I-924 and I-924A, we have yet to see any revision, despite – somewhat mysteriously – USCIS soliciting comments on these forms more than once without interim revision. That tells me that revisions are “in the works,” but the agency appears to be encumbered by numerous factors.

    Michele:

    USCIS intends to require greater disclosures by regional centers in the annual filing of Form I-924A, without further action from Congress. Stakeholders, including both IIUSA and AILA’s EB-5 Committee, have already provided comments to USCIS. Absent new legislation, however, it is not clear what authority USCIS would have to terminate regional centers for reasons other than the failure to file Form I-924A or the failure to promote economic growth. Based on public comments, USCIS may expand the scope of inquiry in Forms I-924 and I-924A to track the integrity provisions in the Flake Bill (H.R. 4530). The new forms may request details about fees the regional center will pay to agents, finders, and broker/dealers. Revised forms might also inquire about any changes in the regional center management or ownership, and require disclosures from principals concerning any criminal or civil violations involving fraud or deceit, convictions resulting in a sentence of 1 year or more of imprisonment, and final orders pertaining to securities law violations, etc. Revised forms might even inquire about foreign ownership interests. However, based on the comments of IPO Chief Colucci at the February 2, 2016 Judiciary Committee hearing, I would not expect the revised forms to require a certification of compliance with securities laws, since he stated that USCIS believes it lacks authority to require such certification.

    Carolyn:

    As for revising the Form I-924A specifically, it is a priority to collect more accurate job creation data as the GAO report recommended. In recent stakeholder guidance, USCIS expressed strong interest in gathering more robust reporting on job creation. The current Form I-924A is quite limited and some of the requests are vague, which USCIS recognizes. The job creation reporting will need to be more mathematical in the vein of requiring mini economic impact analyses for each reported project.

    Question 3: 

    What specifically would you expect to see from USCIS in terms of actual final (not draft) policy memos? What further policy memo topics, not already included in the August 2015 draft memo, would you expect to see in the near future?

    David:

    The issuance of a new policy memorandum is likely the easiest and the fastest option for IPO to implement EB-5 program change. Note the May 2013 policy memorandum was accomplished without regulation. I expect that by October 2016 USCIS will issue a final version of its draft August 2015 policy memorandum. Given the political climate and pressures for program integrity enhancements, I would not be surprised if IPO attempts to issue further draft policy memos before the end of the year.

    Michele:

    It does seem likely USCIS will issue a final version of its August 10, 2015 draft policy memorandum concerning I-829 petition adjudications and sustainment of investments. Clarifying guidance in this regard would be helpful to the EB-5 industry as it grapples with a visa backlog in the China EB-5 category. In particular, many will welcome a final form of the draft memo’s ameliorative provisions indicating there will be no need to present evidence the jobs still exist at the time of the I-829 petition filing, so long as the jobs were created. A key question also is whether USCIS will clarify its statements in the draft memo regarding the re-deployment of capital after the JCE has repaid a loan from the NCE.

    Question 4: 

    What is your sense of the USCIS focus in its writing of new regulations? Is the regulation writing by USCIS a mirror image of its technical assistance to congressional committees? IPO Chief Colucci testified to potential new regulations concerning the minimum capital requirement as well as TEA standards, what are your expectations?

    Carolyn:

    I don’t think the regulations will be an exact mirror image of USCIS’s technical assistance to Congress because USCIS appears to have set beliefs about the limits of its authority under current statute. The technical assistance, we may infer from the draft legislation, reflected USCIS’s “wish list.” That wish list is expressed in DHS Secretary Jeh Johnson’s April 2015 letter to Senators Grassley and Leahy. USCIS appears to have concluded that it cannot execute all the items on the wish list on its own – for example, regulation of individuals involved with regional center operations.

    Michele:

    As for new regulations, USCIS has stated publicly – most recently at the February 2, 2016 hearing before the full Judiciary Committee – that it is contemplating new regulations pertaining to the designation of targeted employment areas, and that it intends to raise the minimum required investment amount. The government may well publish proposed regulations for comment this calendar year, but my view is it is highly unlikely final regulations will be published this year. The Johnson letter states that USCIS proposes limiting TEAs to a specified number of contiguous census tracts, providing for closed military bases, raising the minimum investment amount, and linking the minimum investment thresholds to widely accepted inflation indices.

    Carolyn:

    Promulgating more “objective” TEA guidance is a priority for USCIS. Given the significant pressure the Judiciary Committees of both chambers of Congress are now applying to USCIS, perhaps these regulations will be fast-tracked.

    David: 

    I suspect IPO will propose regulations raising the minimum investment. This objective was raised by the DHS Secretary, by various legislators, and by the GAO. I suspect IPO would propose tracking the investment language set forth in S.1501 seeking to increase investments from $500,000 to $800,000 for TEAs, and from $1 million to $1.2 million in non-TEA areas. Also, I anticipate regulations proposing to transfer TEA authority from the states back to USCIS.

    Carolyn: 

    We may see regulations concerning regional center termination and impact on investors at various stages in their immigration process. Revised regulations may also elaborate on the bases for regional center termination – that is, they may provide more guidance on the level and kind of economic activity required for maintaining designation. The current regulations are unclear on the impact of termination and we need greater clarity as USCIS is poised to terminate more regional centers. If USCIS moves in that direction, I hope we will see reasonable treatment of good faith innocent investors. I’m not talking about risk of a project’s economic failure, which is a part the framework, but risk of fraud or poor regional center governance. Investors should be reasonably protected.

    David:

    USCIS will make it a regulatory priority to expand or clarify its authority to terminate regional centers. IPO claims they have restrictions on RC termination actions. They also claim the need for greater powers with respect to enforcing integrity provisions. I would expect both of these would be incorporated into new regulations.

    Michele: 

    Secretary Johnson also stated that USCIS intends to draft new regulations “to require regional centers to file investment proposals with business plans and other organizational documents in advance of individual investor filings”.

    David: 

    My own wish list for regulations includes: Removal of conditions for EB-5 investors who acted in good faith where the RC was terminated or where the NCE failed to create all jobs within a reasonable time; retention of priority date for EB-5 investors who are required to file a new I-526 petition because of material change or other project-based reasons; elimination of “material change” objections, allowing for petitions to remain valid if they were bona fide at time of filing; and enhanced CSPA protections in light of China backlog issues.

    Question 5: 

    Will we see electronic filing of any of the EB-5 related petitions any time soon?

    David:

    The USCIS Office of Transformation Coordination (OTC) is responsible for the agency’s move from paper to electronic filings. In 2014, OTC worked with IPO to develop the ELIS program as a means of electronic filing of I-526 petitions and to establish “document libraries” for regional centers. While I was very hopeful this system would create enormous efficiencies, the program was a bust. OTC eventually announced the decommissioning of EB-5/ ELIS programs. Recently, OTC unofficially advised that a new electronic I-526 filing option is scheduled for release in mid-2017.

    Question 6: 

    Do the processing times posted by USCIS for EB-5 cases appear to be accurate? While USCIS appears to focus on the need for more staffing, and they are in hiring mode, when in the future do you believe USCIS would be significantly reducing their processing times?

    David: 

    IPO reported processing times for I-526 and I-829 cases do appear to be generally accurate. However, the reported time for I-924 processing continues to be dramatically different from the actual times we are experiencing. In February 2016, IPO reported I-924 processing time at 7.6 months. In my experience, that time should be doubled, at minimum. Accuracy in reporting processing times is important due to the impacts on all stakeholders. Inaccuracy undermines confidence in the system, and also triggers unnecessary USCIS Ombudsman and U.S. Congressional liaison inquiries.

    Michele: 

    As of February 3, 2016, Mr. Colucci reported that IPO has 113 staff members, and its approved staffing level for FY 2016 has been increased to 171 – a 51% increase. At the same time, USCIS statistics on I-526 filings, for example, reflect a 31% increase from 2014 to 2015. Once IPO hires and trains additional staff to bring its staffing up to 171 it should be in a position to begin reducing processing times, but I would not expect a rapid improvement in processing times.

    Carolyn:

    Given the approximately 22,000 I-526 petitions in the pipeline, and given that there are just about 100+ examiners currently, AND given that USCIS plans to hire and train an additional 70 or so by the year’s end, we will see longer processing times before we see them shorten. As for when we’ll see “significant” reduction of processing times, I think this solution will require much more than just staffing up. We need “blanket L” style adjudication of common project elements, stored preferably electronically, and not redundant paper filings of voluminous project documents. We need expert, highly skilled adjudicators dedicated to examining project eligibility. We need a separate corps of adjudicators who then come on line to just adjudicate the investor side of the case, lawful source of funds and background checks. We need much better coordination of I-924s and associated I-526 filings in the interim; it’s clear that one hand of IPO doesn’t necessarily track what the other hand is doing and much efficiency is lost this way. Finally, we need USCIS to hold to its deference policy. The failure to do so raises both serious due process and efficiency concerns. There will be faster processing with confidence in deference.

    Question 7: 

    USCIS remarks about consequences for EB-5 investors who are invested in a commercial enterprise tied to a terminated regional center have suggested some flexibility in later I-829 adjudications, but these remarks remain vague. What do you expect to see in terms of a USCIS standard?

    Michele:

    This is a burning question for many in the industry, and guidance from USCIS would help reduce what many perceive as an area of unpredictability in the program. Hopefully USCIS will take some action this year, and issue a draft policy memorandum that adopts a balanced and reasonable approach – one that minimizes the collateral damage of regional center terminations. Regional center investors in particular have little if any control over the conduct of and business relationships between NCEs and regional centers. If USCIS were to engage in traditional liaison activities with the Bar, this would be one of the items at the top of our agenda.

    David:

    The recent Congressional efforts to extend the program have showed stakeholders and the USCIS that integrity reform is a top priority. Every integrity bill focuses on the conduct of regional centers and their operators, with the most severe consequence of non-compliance being termination. Not waiting for legislation, IPO has commenced its own efforts to sanction bad actor regional centers. Such efforts include termination through the I-924A process, or by making referrals to other agencies such as the SEC and FBI for investigations. As a result, stakeholders will continue to see a rise in the number of terminated regional centers. What remains critical and largely missing, however, is clarity from IPO on impacts to EB-5 investors associated with a terminated regional center. My hope is that IPO will issue policies that track “good faith” themes found in S.1501, which proposed to allow these innocent EB-5 investors to move from a terminated regional center to another in good standing, without a loss in their immigration status. Like in marriage-based cases for removal of conditions, USCIS should allow EB-5 investors an opportunity to win lifting of conditions in instances where they followed the rules, invested and otherwise acted in good faith. That should be the basis for new EB-5 policy on terminated RCs but also in the larger context of I-829 adjudication.

    Question 8: 

    Absent congressional mandates concerning site visits for the EB-5 industry, what are your expectations about the level or frequency of site visits under ASVVP in the immediate future?

    David: 

    I expect IPO will commence site visits in the coming months. The USCIS already is well acquainted with the site inspection process and procedures from the H-1B and L-1 visa programs. Expanding this to the EB-5 visa program is an easy move for IPO. All regional centers should be prepared for a site visit, although it is very unclear what the auditor would want or expect to see.

    May
    26

    Advocacy Alert: New Interactive EB-5 Project & Policy Mapping Tool

    SealIIUSA Releases EB-5 Project & Policy Mapping Tool

    IIUSA is pleased to present the Beta version of a new interactive mapping tool that plots the location of over 470 EB-5 projects from a wide variety of industries and located in diverse communities across the U.S. It will be an essential tool for industry and policy analysis, especially when it comes to Targeted Employment Areas (TEAs). IIUSA created the interactive mapping tool below for members and industry stakeholders to use as a tool to help inform a meaningful discussion and consideration of the TEA proposal presented in a hearing before the Senate Committee on the Judiciary on April 13, 2016 by Dan Healy, CEO of Civitas Capital Group, and Director at IIUSA. Further details on the proposal can be found on pages 11-14 of the written testimony.

    This map is not provided or intended as an endorsement by IIUSA of any particular policy proposal, but as a way to stimulate discussion on this important topic. IIUSA is committed to providing essential policy analysis tools to carefully consider proposals and seek consensus from diverse interests that share the goal of effective and workable reform that is part of long term reauthorization of the Program. Information included on this map is for discussion purposes only and offered based on publicly available information from sources including but not limited to: media reports, websites, and marketing materials. Any details or other information regarding particular EB-5 projects should not be viewed as complete information. Projects shown on this map include a non-comprehensive sample that are known to IIUSA which include past projects as well as current, ongoing EB-5 projects and again are not inclusive of all relevant data.

    View Map and Analysis 

    Both Congress and U.S. Citizenship & Immigration Services have stated intent on reforming the EB-5 Regional Center Program including TEA policy, making it essential to long term reauthorization of the Program. Whether reform occurs via legislation or regulation, designing effective policy requires clear information and data showing anticipated results from the implementation of new policy – especially on a multi-billion dollar industry like EB-5 that relies on predictability and certainty to achieve the policy goals of job creation.


    TEA Policy Review & Online Resources

    IIUSA Policy Consideration Process: Update on TEAs

    IIUSA is committed to an open and transparent policy process, starting with you, our members. This year we have released the results of detailed policy polls and professionally moderated focus groups which will continue going forward. This ongoing quantitative and qualitative feedback informs our policy making process. Furthermore, we welcome and continue to solicit feedback via email to advocacy@iiusa.org and on the Feedback page at IIUSA.org.

    The feedback received from these various forums will be important considerations for the IIUSA Public Policy’s Subcommittee on TEAs. This Subcommittee will be working diligently to provide an option(s) to the Public Policy Committee for consideration that will result in a recommendation to the Board of Directors. Members will have the opportunity to provide feedback on the committee’s recommendation to the Board of Directors before it considers taking action. This process is all part of IIUSA’s commitment to member engagement and transparent consideration of policy issues.

    Please e-mail advocacy@iiusa.org with your feedback on TEA policy

    May
    25

    IIUSA Data Report: U.S. Citizenship and Immigration Services (USCIS) New Fee Rules Related to EB-5 Petitions and Applications

    On May 4, 2016 United States Citizenship and Immigration Services (USCIS) proposed significant increases in EB-5 Program filling fees for projects and investors.

    USCIS published a notice of proposed rulemaking in the Federal Register inviting public comment (through 7/5/16) on the proposed Services Fee Schedule: Read More

    The proposed fee increase are as follow:

    • Form I-924A (to be titled “Annual Certification of Regional Center”): new $3,035 fee
    • Form I-924 application for regional center designation or amendment: increase from $6,230 to $17,795
    • Form I-526 immigrant petition: increase from $1,500 to $3,675
    • Form I-829 petition to remove conditions: no change (still $3,750)

    Read the Full Report (Members Only) 

     

    USCIS Fee Increase

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    999

    May
    23

    IIUSA Board to Consider Several Committee Recommendations at Meeting on Wednesday (5/25)

    SealOn Wednesday April 25th the IIUSA Board of Directors will be considering recommendations from four IIUSA Committees. The recommendations are as follow:

    Public Policy Committee recommendation: 

    Best Practices Committee recommendations:

    Compliance Committee recommendation:

    Membership Committee recommendation:

    All IIUSA members are welcome to provide comments on any of the above recommendations. Please submit any feedback, by close of business Monday May 23, to info@iiusa.org.

     

    May
    20

    RCBJ Retrospective: THE COMING INTEGRITY ACT: WHAT DILIGENCE IS DUE?

    homeirerThe Coming Integrity Act: What Due Diligence is Due? 

    by Michael G. Homeier, Esq., Founding Shareholder, Homeier & Law, P.C.

    Senate Bill 2415, the “EB-5 Integrity Act of 2015” (the “Act”), was introduced on December 17, 2015 to revise the EB-5 Regional Center Program (the “Program”), followed two months later by introduction in the House of Representatives of the very similar companion bill H.R. 4530. The Act remains a work in progress, pending passage by both houses of Congress and eventual signing by the President. With the anticipated circus of the upcoming electoral season, only the most optimistic observers believe passage might occur before a new Congress, and new President, take up a re-introduced Act in early 2017 (after the Program is again extended beyond Sept. 30, 2016).

    Nevertheless, the Act as currently introduced remains highly significant to EB-5 participants. Improvements and corrections proposed by industry stakeholders and successfully negotiated into the prior legislation before it was shelved in mid-December 2015 remain in the Act. The Act addresses primarily the securities and corporate aspects of that prior legislation. Stakeholders can look to the Act to see what additional requirements Congress seems bent on adding to the Program. Depending upon how successful are presently-ongoing efforts to improve the Act, clarify its terms and application, and avoid unintended adverse consequences that could cripple or kill the EB-5 Program, it seems safe to assume the process will end up with Program changes more or less along the lines proposed in the Act presently.

    The crosshairs of the Act’s focus are squarely set on regional centers (“RCs”). This no doubt reflects the popular misconception of the Program as uniquely fraught with fraud, criminal activity, and terrorist drug-running investors laundering millions of ill-gotten dollars through EB-5 investment, with the thinking evidently being that if only RCs could be enlisted (or compelled) to become more actively involved in policing the EB-5 process, all those ill effects could be eliminated. So it is entirely unsurprising that among the primary changes contained in the current Act is the imposition of a certification requirement on RCs, that they attest that they, the projects they sponsor, and the people with whom they work are all in compliance with the securities laws (federal and state). This is not a one-time certification requirement, instead it is imposed on every RC at numerous stages of the EB-5 process, including as part of the application for regional center designation, the application for project pre-approval, and the filing of regional center annual statements as to bona fides of involved persons, as to securities law compliance, as to third-party promoters, and as to “associated new commercial enterprises” (as defined in the Act).

    The securities laws impose compliance obligations on “issuers,” the companies that actually “issue” (sell) the investment opportunities that are acknowledged to be securities. Usually in the EB-5 industry, the issuer is an entity legally separate and distinct from the RC entity, even if they may share common ownership or control. The determining factor is not what an entity calls itself, instead it is what the entity does. If an RC sells its own ownership interests, it is an issuer in addition to being an RC, and bears the issuer compliance obligations; but if the RC does not sell its own interests, the issuer obligations are not imposed by the securities laws.
    This is where the Act breaks new ground: to involve RCs more actively in oversight of the EB-5 industry, the Act adds its compliance certification requirement to impose “issuer-like” obligations on what are technically non-issuers—the RC that is not a securities seller. This is a “sea-change” in the risks attaching to participation in the Program: where previously only actual issuers bore securities-level risk, for engaging in the sale of their securities, now non-issuers (RCs) will carry such risk, even though not actually engaged in selling securities—and not under the securities laws, but under the Act. Although the RCs’ risk may still be less than that borne by an actual issuer, it is far more than the current minimal risk of performing only the RC function. To avoid this, many RCs may simply get out of the industry altogether.

    Returning to the new certification obligations themselves, they require that the certifier speaking on behalf of a regional center is to make his certification “to the best of the certifier’s knowledge, after a due diligence investigation.” To understand what this certification requirement means, it must be broken into its constituent parts.

    “Certify” is a term of art in the legal profession. It is commonly defined to mean “to authenticate or vouch for a thing in writing; to attest as being true or as represented.” Similarly, “certification” is defined as “the formal assertion in writing of some fact; the act of certifying or state of being certified.” To maximize its authoritative nature, many times the assertion is required to be given under oath: “I declare under penalty of perjury under the laws of the State of California that the foregoing [statements are] true and correct,” as but one example. The Act itself is silent as to whether its certifications must be given under oath sometimes, always, or never. (Note that the administrative agencies involved (including U.S. Citizenship and Immigration Services and the Department of Homeland Security) have broad rulemaking authority, and could add an oath even if the Act itself as finally adopted was to remain silent on the point.)

    The term “certifier” is defined in the Act. As to all Act provisions imposing the certification requirement on RCs, the certifier is someone speaking for (on behalf of) the RC.

    As to the concept of “best knowledge,” that concept is nowhere explained in the Act. So again, to understand what might reasonably be meant by an undefined term, we look elsewhere for guidance by implication. In the legal profession broadly, allowing a person’s statement to be limited to only what the person knows about is called a “knowledge qualifier.” Formally, a knowledge qualifier “qualifies” or limits a statement so that it only applies to what the speaker knows, and the speaker would only be liable for a false statement if he had actual contrary knowledge about the fact. In the case of the Act’s proposed requirement, if the speaker didn’t know when he gave his certification that what he said was untrue, he would not have acted wrongly if he turns out to be wrong.

    There is a vigorous debate in the legal world disputing the proverbial number of angels dancing on the head of the pin, in this case whether or not the phrase “to the best of one’s knowledge” differs at all from “to one’s knowledge.” Some lawyers assert it is repetitiously redundant and adds nothing, because logically “to the best of X’s knowledge” means exactly the same thing as “to X’s knowledge.” Others argue that adding “the best of” is a significant (and dangerous) modification, because it could support an assumption that it implies some sort of heightened level of knowledge, perhaps involving a duty to investigate. The language of the Act renders this dispute moot for our purposes: the certification is explicitly to be based on “a due diligence investigation.” The knowledge that the certifier will be held to have and upon which he must make his statements, and perhaps give his oath, is that which would be produced by such an investigation.

    How much diligence is due under the Act? The Act doesn’t say. No provision specifies what is required as the necessary “due diligence investigation” upon which the certifier’s certification may properly be based. Once again, to understand what the Act requires, in the absence of added explanation or court interpretation, we must look outside the Act for guidance.

    “Due diligence” as a legal concept is commonly understood as referring to an investigation into the facts of something. In practice, what diligence is due differs according to the transaction or situation. The type and extent of diligence due in the case of a purchase or sale of an existing business involves different considerations and an investigation appropriate for that kind of situation. The same investigation would not be appropriate to a case involving the offer of securities financing a real estate development. In legislation focused on the latter kind of transaction, determining what kind of inquiry is typical in a securities law context should illuminate what Congress intends to require by the Act.

    As introduced earlier, in an offering situation, the securities issuer and its principals must comply with the existing legal duty under the securities laws to exercise reasonable care to ensure that all material information about the issuer’s investment opportunity is disclosed accurately and completely to prospective investors, so that their investment decision can be an informed one. Securities law due diligence is the process of undertaking a reasonable investigation to confirm that the offering statements, documents, financial statements, and all other information provided to potential investors are complete and omit no material information.

    Due diligence of an EB-5 securities transaction typically involves the issuer engaging qualified professionals from the various areas involved in such transactions, including immigration lawyers, economists, accountants, engineers, and financial, marketing, and other consultants. It may also involve engaging qualified outside or third-party experts (including U.S. registered broker-dealers, contributing one of their “value-adds” when brought into a project) to double-check information, detect red flags, or objectively evaluate the reasonableness of claims made in the offering documents.

    Due diligence is an active, not passive, activity. It must be customized and tailored to the facts and circumstances of each particular offering: it is “impossible to lay down a rigid rule suitable for every case defining the extent to which such verification must go. It is a question of degree, a matter of judgment in each case.” Since the adequacy of due diligence is determined on a case-by-case basis, each due diligence investigation stands or falls on the thoroughness of the investigation, and its appropriateness to that offering. It is an ongoing and dynamic process, and even after the conclusion of an investigation, it might need to be resumed anew if conditions change.

    Specifically, a securities due diligence investigation typically involves establishment of a due diligence team of lawyers, accountants, and other experts to engage in, among other information-gathering and –confirming actions: interviews of management employees about the business; interviews of suppliers, distributors, customers, accountants, and counsel; physical inspection of plants, factories, laboratories, and project sites; review of company documentation and financial statements; examination of primary contracts; analysis of ongoing, pending, and threatened litigation; analysis of the business plan and economist reports for consistency and absence of obvious calculation errors; even the examination of trade journals and similar publications about conditions in the issuer’s industry. Pre-formed checklists may be useful in crafting a list of questions and identifying issues, but no list will satisfy the duty of due diligence in every situation, and rigidly following a checklist does not automatically establish the adequacy of due diligence.

    It might seem self-evident, but bears reminding: all documents, statements, and other information resulting from the investigation must actually be read. Due diligence cannot adequately be performed by simply taking statements and information at face value and relying on their veracity, and then merely reporting that date accurately. The reviewing team must be wary of red flags or any information which would or should otherwise strip those reviewers of their confidence in the accuracy of the offering documents.

    This due diligence requirement imposed on issuers under the securities laws is obviously complicated, involves many moving pieces, and is definitely expensive to conduct properly. Many issuers involved in the Program conduct limited diligence, because of time and cost, while others completely ignore the requirement altogether. They do so at their peril: ignoring the due diligence obligation carries a significant liability risk, one that is imposed on the principals owning and managing the issuer personally, rather than on the entity itself.

    In adding “issuer-like” securities compliance obligations on RCs, the Act seeks to impose an additional due diligence obligation on RCs, separate and apart from that already existing under the securities laws imposed on issuers. This revives the question of, how much diligence will be due from an RC under the Act? Which in turn raises a prior question: about what, exactly, is the RC to certify?

    As stated above, the various certifications to be required of RCs under the Act apply either to certifying compliance with securities laws broadly, or compliance with requirements under the Act specifically (such as the bona fides promoters, and agent requirements).

    As to the former, it seems logical to guess that the due diligence standard applicable to offerings would also be applicable to RC certifications confirming broad securities law compliance. In turn, this raises the next question: must the RC conduct its own independent full-blown securities law-level due diligence investigation, or may it instead satisfy its due diligence obligation by reliance on the due diligence conducted by the issuer, at least in part? Practically, the RC may lack the capacity or be too far removed to conduct as thorough an investigation of a complex offering as required of the issuer, and may lack the resources or knowledge to do so effectively. Thus, it would seem sensible to allow RCs to be able to reasonably rely to a significant degree on due diligence conducted by the issuer, so long as the issuer’s diligence was itself reasonable. However, if RCs are permitted to do so, it is likely that such reliance can be neither absolute nor passive, there must still be some active review of both the offering itself and the issuer’s own due diligence efforts conducted by the RC to qualify reliance as reasonable.

    Similarly, as to certifying the narrower issues of compliance with other requirements of the Act, such as bona fides (no “bad actors” involved), promoters (brokers and other non-issuer sellers), and agents (prohibition of foreign government involvement), if the RC’s inquiry is reasonably crafted and conducted to investigate the issue thoroughly, that should suffice. There will likely still be interviews or written Q&A, inspections of contracts and records, background checks, and licensing confirmations, but more narrowly drawn to the specific point targeted. Given the more limited scope, cost and capability should be much less problematic.

    Presently, alas, all of these potential resolutions, no matter how sensible, remain mere conjecture. As negotiations continue over the provisions of the Act, stakeholders (especially those hailing from the securities and corporate law areas) should pursue clarification of exactly what is Congress’ intent as to the due diligence requirements, and the addition of language requiring that reasonable diligence will be all, and everything, that is due under the Act to help confirm the credibility, safeguard the benefits, and ensure the integrity of the Program.

    May
    19

    Visit the IIUSA Marketplace to Access Webinar and Conference Presentation Recordings OnDemand!

    EB-5 Advocacy Conference Video Recordings Now Available OnDemand! DC-2016-IIUSA-Logo (png)

    Video recordings on the 2016 EB-5 Advocacy Conference are now available for unlimited streaming at the IIUSA Marketplace. Recordings are available for $99 dollars/video for members and $198/video for non-members (to view the member discount code please see here).

    • EB-5 Regulations & Policy Guidance- Historical Review & What Comes NextRecording
    • Interactive Roundtable Discussion- The EB-5 Crystal BallRecording 
    • Potential Solutions to EB-5 Visa Backlog- More Visas & Investor Market DiversificationRecording 
    • What Can the EB-5 Industry Learn from Alternative Finance Capital MarketsRecording 

    2016 Webinar Series

    webinar

    • April 7-EB-5 Regional Center Compliance: A Systemic Approach to Long Term Success (Purchase Here)

    On this webinar, panelists review current compliance requirements and practices of EB-5 Regional Centers. Our expert panel provides examples of how EB-5 Regional Centers and other EB-5 stakeholders can best ensure long term regional center compliance. The discussion also includes EB-5 compliance legislation and its potential implications, a review of key areas of securities law compliance when marketing an EB-5 offering, and the “back office” steps that a Regional center should undertake to effectively and efficiently maintaining proper documentation.

    • January 28-Securities & EB-5: Regional Center Project Case Studies & SEC Enforcement Actions (Purchase Here)

    Over the past calendar year, the EB-5 industry saw more legal actions from the Securities and Exchange Commission (SEC) than in any period in the Program’s history. On this webinar our panelists review SEC enforcement actions against EB-5 stakeholders to date and discuss the ways in which increased federal oversight of the Program may have serious ramifications on how EB-5 projects are marketed to investors.

    • January 7- EB-5 & Data Security – Risk Management and Insurance Considerations (Purchase Here)

    On this webinar, panelists review the domestic and international legal framework which establishes liability for Regional Centers relating to the transfer and storage of sensitive information. Our expert panel provides recommendations to Regional Centers and other EB-5 stakeholders on how to mitigate risk in an EB-5 transaction. Moreover,  the latest trends for data breaches and what Regional Centers can do from a technological standpoint to minimize risk are discussed. Lastly, descriptions of what insurance products will work when it comes to transferring the costs associated with a data breach to an insurance carrier and what major legal/technological protocols are of importance to an insurance carrier are presented.

    Purchase Your 2016 All-Access PassAAP

    Members: Take Advantage of the All Access Pass (read more here) and pay one flat fee for our entire library of webinars and conference panel recordings!

    Webinars: Automatic registration for all 2015 webinars on topics such as government affairs, securities laws, due diligence, economic modeling, targeted employment areas (TEAs), leveraging other economic development tools, adjudication trends and more. Leading up to each webinar, pass holders will automatically receive details on how to attend.

    Multimedia: Access IIUSA’s extensive library containing dozens of hours of audio and video including presentations from IIUSA annual meetings, advocacy conferences and international forums from 2010 through 2015. Gain insight into the past, present and future of the EB-5 Program as foremost industry experts impart their wisdom on wide-ranging topics that are inform the EB-5 industry of today.

    Research/Analysis: Examine thousands of pages of well-organized data compiled by IIUSA through government disclosures via the Freedom of Information Act (FOIA). This raw data is the basis of IIUSA’s EB-5 industry reports, such as the Economic Impacts Report of the EB-5 Regional Center Program and I-526/I-829 adjudication trends. In addition to the raw data, Pass holders will automatically receive copies of industry reports that are usually on sale. Additionally, pass holder can view articles from previous IIUSA publications including conference handbooks, quarterly magazines and more.

    May
    18

    Drive the Conversation, Join an EB-5 Focus Group on May 24th

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    Dear IIUSA Member,

    With the EB-5 Program “sunset date” of September 30th on the horizon, IIUSA’s is committed to making sure that our membership has the opportunity to voice their concerns and opinions about legislation and the current state of the EB-5 industry. The results of this deliberative process will inform policy deliberations at the committee and board levels in the weeks and months to come.

    I would like to encourage you to participate in a professionally-moderated virtual focus group conversation next Tuesday May 24th on the topic of EB-5 policy reforms.  There is no cost to participate. RSVP here.

    What you need to know:
      There will be 3 focus group sessions with 6-8 people per session.  All sessions will be held on Tuesday May 24th via teleconference at the following times:
        1. 10:00 am – 11:30 am
        2. 12:00 pm – 1:30 pm
        3. 2:00 pm – 3:30 pm

    At IIUSA’s EB-5 Advocacy Conference this April in Washington, DC, IIUSA hosted four sets of focus groups. The results from these those focus groups as a well as findings from our online policy poll and interactive policy poll during the meeting can be found in our comprehensive Member Engagement Report.

    IIUSA stands in a position of influence because of its members. The leadership and staff do not forget this important fact.  Your participation in our annual events, committee work, surveys, and other outreach efforts endues life and passion into our organization.

    Thank you in advance to your continued engagement and we look forward to taking action on the insight provided by your feedback.

    Sincerely,
    Allen Wolff
    Associate Director, Marketing & Communications
     
    On behalf of IIUSA Membership Committee:
    Kristen Laughlin (Chair), Jillian Fortuna (Secretary), Seth Chandler, David Enterline, Laura Kelly, Kelvin Ma, Bernard Wolfsdorf, Kevin Wright, Richard Biegel, Craig Kammholz, Yale Kim, Michael Schoenfeld, Rachel Snethan, Abteen Vaziri
    May
    17

    New IIUSA Report on Membership Engagement Now Available!

     

    Last month’s EB-5 Advocacy Conference in Washington, D.C. featured a familiar mix of grassroots advocacy, advanced education, industry networking and the opportunity to hear from the federal government on the future of the EB-5 Program. However, what made this year’s conference truly unique were the robust member engagement initiatives that placed an emphasis on consensus building around the statutory, regulatory and policy direction of the EB-5 Regional Center industry.

    IIUSA has compiled a comprehensive report (Members-Only) of our findings, which include results from our online policy poll, interactive policy poll hosted at the Annual General Meeting in April 20th and focus group deliberations.

    View Report Here

     

    Conference

    On April 20th, IIUSA hosted its 11th Annual General Membership Meeting (AGM) emphasizing consensus building around the statutory, regulatory and policy direction of the EB-5 Regional Center industry.

     

    Join Free Member-only Advocacy Webinar “Review of EB-5 Policy Poll and Focus Groups Results” this Thursday (5/19, 3pm est)

    Sign Up Here! 

    Join us on Thursday afternoon for the first IIUSA advocacy webinar of 2016. On this webinar, we will discuss IIUSA’s polling and focus group results (see report above), review IIUSA deliberative processes for membership engagement and policy making and take questions from members.

    In addition, IIUSA’s government affairs team will review state of play and the outlook on Program reauthorization prior to the September 30, 2016 “sunset date”.

    There is no cost to attend but we ask you to sign up here.

    Join a Virtual EB-5 Focus Group on May 24th

    IIUSA encourages its members to participate in a 90-minute virtual focus group conversations on Tuesday May 24th. These focus groups allow members to provide their opinions on EB-5 reform policy priorities.

    Focus groups will be held on May 24th at the following times (all EST):

    • 10am-11:30am
    • 12:00pm-1:30pm
    • 2:00pm-3:30pm

    Sign Up for a Focus Group Here

     

    May
    16

    Bill Gresser Appointed IIUSA Director Emeritus

    GresserIIUSA is proud to announce that William P. Gresser, President of EB-5 New York State Regional Center, has been tabbed as IIUSA’s newest Director Emeritus. Mr. Gresser served the IIUSA Board with class and honor between 2010 and 2016 and will serve as Public Policy Committee chair this year.

    President K. David Andersson, had this to say of his appointment of Mr. Gresser, “IIUSA reserves the status of Director Emeritus to those who have made significant contributions to the organization and without those continued contributions, IIUSA would lose valuable institutional memory and expertise. Bill Gresser has served as IIUSA Director since 2010 and his expertise and guidance have been invaluable for the growth of IIUSA as well as the success of the EB-5 Industry. Bill’s continued leadership and voice will assuredly continue to be essential as IIUSA and the EB-5 Program continues to grow and evolve.”

     

     

    May
    13

    IIUSA Publishes First Ever Annual EB-5 Investor Market Report

    EB-5 Investor Markets ReportEB-5 Regional Center Industry Trade Group Report Details Industry Trends, Emerging Markets

    WASHINGTON, D.C. (PRWEB) MAY 12, 2016

    Invest in the USA (IIUSA), the national not-for-profit industry trade association for the EB-5 Regional Center Program (the “Program”), recently published the first-of-its kind EB-5 Investor Markets Report, a quantitative and qualitative analysis of established and emerging EB-5 investor markets. The report will be updated annually going forward.

    “As the EB-5 Program has come of age in the last decade, it has established a track record of success for foreign investors that have participated. As investor confidence in the program has grown, so have the opportunities to develop new markets to bring even more job-creating capital to the U.S.,” said IIUSA Executive Director Peter D. Joseph. “We are excited about the publication of this report and believe it will help further the emerging discourse around emerging investor markets by providing a comprehensive analysis of markets since the beginning of EB-5.”

    The EB-5 Investor Markets Report is the first comprehensive analysis of investor market demand, bringing into focus the countries and regions poised for growth in the years ahead. IIUSA has accumulated a complete historical dataset for 1992-2014. Every country in the world with market data is assigned a “growth score”, allowing objective trend comparisons of various countries and regions against the average growth of the industry over various time spans.

    “This new annual report will help EB-5 stakeholders draw important conclusion that can lead to actionable steps to bring new investors into the Program,” said IIUSA Investor Markets Committee Chair Lili Wang. “With the current backlog of numbers for Mainland Chinese EB-5 visa applicants, it is more important than ever to cultivate investor markets in other parts of the world.”

    Since 2008, EB-5 has contributed over $13 billion in foreign direct investment to the U.S. that supports tens of thousands of jobs and transforming communities across the country through successful regional economic development projects. The newly published Investor Markets Report will further the industry’s understanding of the factors driving international market growth and highlights the markets that will continue to drive U.S. economic development all at no cost to the U.S. taxpayer.

    The EB-5 Investor Markets Report is available for download for free at IIUSA.org. To download the report, click here.

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    Founded in 2005, IIUSA is the national not-for-profit trade association for the EB-5 Regional Center industry with a mission of advocacy, education, industry development, and research. The organization represents more than 275 Regional Centers and 200 Associate members, collectively representing big and small projects, urban and rural economic development, and industry sectors ranging from real estate and manufacturing to energy and infrastructure. IIUSA’s members are engines of economic growth and job creation, accounting for over 95 percent of capital flowing through the Program. Learn more at IIUSA.org.