Broker-dealers provide a service to EB-5 project issuers, regional centers, and EB-5 investors by performing initial due diligence on EB-5 projects, and assessing the likelihood of a project’s success. After completion of thorough project due diligence, the broker-dealer may present project documents including marketing and subscription materials, such as investor questionnaires, project operating agreements, and private placement memorandums, which describe the entire investment proposition in detail. A broker-dealer may also manage the process of investor subscriptions to an EB-5 project, beginning with the receipt of subscription documents from the investors, through financing the project with the EB-5 investor’s capital.
EB-5 broker-dealers can be engaged by both regional centers and investors in several capacities. Investors sometimes hire broker-dealers to provide them with vetted information on potential EB-5 projects. Broker-dealers can answer investors’ questions about the financial strength of the investment, the risk level with respect to capital repayment, the accuracy of job-creation projections, and other aspects of project due diligence. Regional centers can also hire broker-dealers on a project-by-project basis to find potential investors through referrals. Regional centers may also seek broker-dealer registration, purchase a broker-dealer firm, or otherwise affiliate with a broker-dealer.
The Financial Industry Regulatory Authority (FINRA) is an independent organization which regulates broker-dealers. It is also mandatory for all FINRA members to perform due diligence on represented projects. Investors and regional centers may verify a broker-dealer’s registration status on www.finra.org.