What is business owner responsible for when partnering with EB-5 investors?

You should check with a securities lawyer on the issue of "accredited investors." It has to do with certain exemptions from registering the securities offering. As for the business owner's responsibilities, there really are no separate laws or regulations that apply to you if you have EB-5 investors in your business as opposed to non-EB-5 investors in your business. All of the rules about proving that the capital was lawfully obtained apply to the EB-5 investors when they submit their immigration benefit petitions and applications.

Each EB-5 investor is responsible for meeting accredited investor requirements and lawful source of funds requirements. Your responsibility is to ensure the business is EB-5 compliant and when you sell a business interest (a security) to an EB-5 investor in exchange for his or her investment, you must either register or sell under an exemption pursuant to SEC regulations. A sale to accredited investors is a common exemption. Each investor must create at least 10 full-time permanent jobs. So the business will be responsible for job creation to ensure investors are able to remove conditions on their conditional green cards. It is advisable that you consult an experienced EB-5 immigration attorney and business counsel.

Accredited investor status is often something that the EB-5 business will confirm. This status is a Securities and Exchange Commission requirement that regulates how many investors a business can make their offering to (among other things beyond my knowledge as an immigration attorney). As for the lawful source of funds, that is part of the investor's petition to USCIS, and would be authenticated by the investor and his or her immigration attorney.

The investors have the responsibility to prove their status as accredited investors, source of funds, etc. It is not your responsibility. However you do have an interest in making sure that they can prove they are approvable. You should have an experienced business attorney draw up your agreements with them. If they are denied approval because of their inability to prove their status or cannot show the source of funds will they want to withdraw their investment? Be careful.

The EB-5 partnered business is issuing some form of a security for the funds invested in the business. As such, the business is the issuer of the security and under the laws and regulations of the Security & Exchange Commission (SEC). To protect the public, the SEC requires issuers to register their securities before selling them or only sell them under an exemption. A sale to an accredited investor is a most common exemption used by EB-5 businesses. Thus, the business has a responsibility to either register its securities or ensure that the investor meets accredited investor income requirements. The requirement that investment funds be traced is a material requirement of an EB-5 security sale. Tracing is required to prevent ill-gotten money from being laundered through a U.S. government program. If the business takes funds that cannot be traced, there is a risk that it might be involved in money laundering. Hence, there is a liability if the business does not trace money used in an EB5 investment.

If you are marketing to the investors then you may wish to verify this information.