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What are the disclosure liabilities for EB-5 projects?

If the contract of a project contains provisions to pay a certain percentage of its net profit as commissions to a broker, does this information have to be disclosed? Whom should it be disclosed to? What are the procedures?

Answers

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    Julia Roussinova

    Immigration Attorney
    Answered on

    This should generally be disclosed in a private placement memorandum. Consult a securities lawyer.

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    Ed Beshara

    Immigration Attorney
    Answered on

    The USCIS and securities law policies require the disclosure of what commissions or finders fees are paid and from what sources. Clarity and transparency to the investors is the current policy.

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    BoBi Ahn

    Immigration Attorney
    Answered on

    There is no provision as of now that requires disclosure of broker commissions that we are aware of.

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    Lynne Feldman

    Immigration Attorney
    Answered on

    This is an SEC question.

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    Salvatore Picataggio

    Immigration Attorney
    Answered on

    The offering documents, like the private placement memorandum, should disclose things like this. But opinions seem to differ as to the level of detail that needs to be disclosed. If you are uncomfortable, talk with the project, get independent opinions and proper legal counsel.

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    Charles Foster

    Immigration Attorney
    Answered on

    There is no specific requirement disclosing the commission arrangement, but given the fact that EB-5 offering is treated as a security, it would be better to err on the side of full disclosure in the Private Placement Memorandum.

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    Bernard P Wolfsdorf

    Immigration Attorney
    Answered on

    It is not clear that a contract of a project paying a percentage of its profit to a broker needs to be disclosed under current rules. Proposed legislation and regulations may change this. The private placement memorandum must describe the entity selling the securities, the terms of the offering, and the risks of the investment, amongst other things. But it is not clear if broker fees must be disclosed in detail.

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    A Olusanjo Omoniyi

    Immigration Attorney
    Answered on

    This type of profit sharing agreement term and condition is very rare. At the very least, this type of information must be disclosed to the investors at the onset of the subscription agreement and must be in writing.

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    Marko Issever

    EB-5 Broker Dealer
    Answered on

    Absolutely. There is a disclosure requirement on potential compensation to be paid to various brokers, migration agents. Generally, you can find this information in the subscription documents and certainly in the private placement memorandum.

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    Jinhee Wilde

    Immigration Attorney
    Answered on

    This is a really good question and it would be good to have the investors (limited partners) know who is being paid what and when for total transparency. However, I am not aware of any regional centers or projects that make this information open to their investors. The broker and migration agents probably would not want to disclose how much money they are making on each investor, as it is very substantial. There is some movement within the government agencies, USCIS and SEC to limit the amount of the commission like they do with U.S. investment transactions, or at least make the projects or regional centers to disclose the fees paid to agents. This is part of the ongoing discussions on much-needed integrity measures to root out bad actors within EB-5 world.

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    Phuong Le

    Immigration Attorney
    Answered on

    Yes, fees and commissions paid to people involved in the sale of the EB-5 offering should be disclosed to prospective investors. It can be included as part of the appendix of the PPM.

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    Dale Schwartz

    Immigration Attorney
    Answered on

    Yes, it must be disclosed to the investor and his/her lawyer. If the money was paid to the lawyer or the investment advisor of the investor, it is fraud and highly unethical.

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