What are the rules for short-term investments in funds not related to the NCE or JCE?
If a project has received the full amount of investor funds, but has not yet put those monies into the EB-5 project, is it allowable to put the investor money into a short-term (e.g. 18 or 24 month) investment vehicle so that the regional center can earn some operational cash while waiting for project approvals? How much leeway does the regional center have to try and create a return on investor cash while waiting for governmental or project approvals? If none, isn''t that tantamount to a loss (due to inflation)? But if it''s unrestricted, doesn''t this allow a regional center to essentially gamble with investor money on something that has nothing to do with the agreed-upon project?
There is not much leeway for short-term investment that is deviated from the way how the project (NCE or JCE) should proceed described in the comprehensive business plan. USCIS is very strict with sticking to the business plan. The short-term investment you stated could be deemed as material change, therefore risking the EB-5 investors'' immigration applications being denied due to changed circumstances. On another note, this could also lead the regional center to fiduciary duty violation.
Your question concerns rules on the use of qualified investments in a regional center. I am assuming that, in asking about rules, you are asking if there is a law or regulation that restricts how a regional center uses the foreign national''s investment. Laws created by the U.S. Congress and regulations created by the delegated agency (Department of Homeland Security) control the eligibility of a foreign national to obtain U.S. lawful permanent residency through an EB-5 investment. The law regarding regional centers is a subdivision of the law generally applicable to EB-5 investments. The law requires that the qualified immigrant enters the United States with a purpose of engaging in a new commercial enterprise in which such alien has invested the requisite amount. Two elements are present. The investment must be in the new enterprise and that enterprise must be the one in which the immigrant will actively participate. Further, that same enterprise must benefit the U.S. economy and create the requisite 10 full-time jobs. Regulations implementing the law distinguish a qualifying investment from prospective investment arrangements entailing no present commitment. Without the present commitment, a prospective arrangement for investing in the new enterprise apparently is not a qualified EB-5 investment. Your question referred to the "project" of a regional center, impliedly a separate enterprise from the regional center. Presumably, the documentation, accompanying the investment held in escrow for the "project," committed the money to the new enterprise in which the investor would participate and which would generate the requisite jobs. If the regional center does not invest the funds in that specific new enterprise, there would be a breach of the commitment and, without the commitment, the money fails to satisfy the purpose and requirements that qualify the foreign national to U.S. permanent residency. However, if the regional center were, itself, the new enterprise, the answer to your question might be different. A regional center, itself the new enterprise, might invest and if there were a loss, so be it because the investment qualified when made and was at risk. However, if the regional center, which is not the new enterprise, makes an investment incurring a loss so that the requisite dollar value was lacking, there would no longer be a qualified EB-5 investment. Enforcement or suits would likely follow. I hope the above is of help to you.
USCIS does allow for the use of escrow accounts to hold investor money until the I-526 is filed or approved (depending on the project''s wishes), but the investment must be made into a new commercial enterprise that will itself create jobs or loan the funds to a job creating entity. The path of funds is documented in the required business plan, so making other investments would likely be impermissible.
Kenneth C Wright
The investment documents should specify. Unless the investors clearly agree otherwise in writing, the funds should only be invested in risk free securities, i.e., liquid obligations insured or guaranteed by the U.S. government.
What a recipient can do with an investor funds is contingent on the PPM and the disclosures made. The regional center will be responsible for any shortfall if they have invested in a non-job creating entity pending the approval.