How can investors best vet EB-5 regional centers following RIA? -

How can investors best vet EB-5 regional centers following RIA? Staff

By Anayat Durrani

With the changes that came with the EB-5 Reform and Integrity Act of 2022 (RIA), it is important that investors understand the impact on regional centers, and in particular how to vet regional centers.

“Investors must conduct the vetting of regional centers during the project selection process in conjunction with the project due diligence. They must have a checklist to ensure they are selecting a project that meets most of their requirements,” says Marko Issever, Chief Executive Officer, America EB5 Visa, LLC.

The checklist should include: conducting research and comparing EB-5 projects, selecting an experienced regional center that has a documented track record, ensuring it is a USCIS-designated regional center and looking for any red flags of EB-5 fraud, among other things.

“One place to start is the USCIS EB-5 website. While the website mostly provides general information about the EB-5 program, an investor can confirm that a regional center is approved by the USCIS to operate in a certain state,” says Nicolai Hinrichsen, partner at Miller Mayer.

He says potential investors should directly contact regional centers they have interest in to request more information about the regional center and its prior projects.

What factors should EB-5 investors consider when selecting a regional center?

Issever says investors often do not know what the requirements should be to ensure they are choosing the right project.  For those investors, he recommends they work with an un-conflicted broker-dealer or other professional to guide them throughout the process.

“Reading and understanding the PPM and all the other transaction-related documents could be cumbersome and complicated for investors,” says Issever.

Apart from other considerations, he says investors always want to know when they can receive their capital back.

“This duration is a function of both USCIS processing times and provisions in the PPM. Aside from a mandamus action, there isn’t much an investor could do about the slow processing times affecting the timing of their capital payback,” says Issever. “However, they could ensure that documents provide payback eligibility after their sustainment period once they file for their permanent green card.”

Issever says investors should not seek project selection guidance from immigration attorneys that are not licensed to provide investment advice.

“Most immigration attorneys who used to previously direct their EB-5 clients directly to one or more regional centers have stopped that practice and are now opting to introduce their clients to broker-dealers who can present a menu of options with due diligence on the regional centers and the project or projects they are promoting,” says Issever.

Impact of RIA on EB-5 regional centers

The RIA brought many changes for regional centers, including stricter regional center responsibilities, indirect job limits, redeployment and administration of funds.

“The RIA has significantly increased oversight and reporting requirements of regional centers,” says Hinrichsen. “Among other things, it requires regional centers to disclose certain information about the individuals involved in running the regional center and limits individuals that can be involved with regional centers to U.S. citizens and permanent residents.”

Hinrichsen says the RIA also placed requirements on regional centers to administer its EB-5 funds through a fund administrator or by performing yearly audits of its funds.

“RCs must make broad certifications regarding securities and immigration law compliance, and disclose marketing fees paid to agents and finders,” says Hinrichsen.

Issever says inactive small regional centers will not survive in the new RIA environment with compliance and integrity measures that are costly and onerous, and adds, “The only way they could economically justify this is by being active.”

“Most likely, only the big players will remain in a few years, creating a safer environment for investors, given their track record,” says Issever.

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