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How can an admin fee for aggregating EB-5 investors be accepted?

My friend owns a large firm in China that aggregates EB-5 investors. However, he can only accept an annual percentage from the regional center and not the admin fee. He offered me, a U.S. citizen, the admin fee in exchange for helping out with emails, arranging calls, etc. If I set up an LLC to accept this admin fee, do I need to be a registered broker-dealer? I am thinking I do not because I am not the regional center or the person aggregating the EB-5 investors. Also, if the EB-5 investor creates two escrow accounts, one for the EB-5 investment and one for the admin fee, can the admin fee be released from escrow directly to the LLC I set up? Or does it have to pass through the regional center first and then is passed to the LLC?

Answers

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    Steffanie J Lewis

    Immigration Attorney
    Answered on

    The administrative fees charged by a regional center are typically governed by the regional center's securities documents and business plan to cover some of the costs of putting the project together, to offset some of the regional center's fees for legal documents, marketing and other expenses and market driven forces, i.e. the need to be competitive in the EB-5 marketplace. Since your friend is not part of a regional center, more likely a market promoter for the regional center, your friend is unable to offer you any administrative fees which are charged and collected by the regional center. Your friend may hire and pay you wages for your services but if you are paid per transaction, i.e. from an administration fee accompanying an investment, you may be acting as a broker and would need a license.

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    J Bruce Weinman

    Immigration Attorney
    Answered on

    From this brief description it seems like you will probably need to be registered as a broker-dealer...but you should sit down with a securities attorney and speak in more detail.

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    Oliver Huiyue Qiu

    Immigration Attorney
    Answered on

    From what you describe, you are likely to be considered the front for your friend who operates in China. You mention you would work to earn your fee, but anyone with a right mind can tell what the admin fee would be far exceeds the market rate for what your assistance is worth, i.e., helping sending the emails, even for a very important person, does not usually command such money. More importantly, it would expose you, a U.S. citizen, to potential SEC sanctions for taking commission payment that is only legitimate if you are a licensed broker.

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    Salvatore Picataggio

    Immigration Attorney
    Answered on

    When it comes to receiving fees like this, registering as a broker dealer would be essential, as is consulting an EB-5 attorney and securities law attorney. With the EB-5 program, it is better to be safe than sorry, and trying to find loopholes (for lack of a better term) could be a quick way to denied I-526 petitions, SEC subpoenas, and the potential for lots of legal trouble.

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    John J Downey

    Immigration Attorney
    Answered on

    I am not clear on this. The regional center usually receives the admin fee; what admin fee is your friend in China speaking about? I would be very careful before taking any fees - the SEC is now looking into EB-5 and we do not know where they draw lines regarding broker-dealers.

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