American Job Creation and Investment Promotion Reform Act

Check out what’s new in the EB-5 world, where a team of securities lawyers are at work offering to help lawmakers understand complex legal provisions of proposed EB-5 integrity legislation. The group is called the EB-5 Securities Roundtable (the “Roundtable”) and is made up of securities attorneys (the author of this blog posting included) who represent a broad range of stakeholders in EB-5 deals such as regional centers, recipients of EB-5 funds and lenders.

Anticipating more action from lawmakers on the EB-5 integrity front, the Roundtable has proposed technical language solutions to securities law provisions that may come into any final version of an EB-5 integrity bill. The group is aiming not to lobby but to serve as a resource to help lawmakers line EB-5 reform efforts up with existing securities laws, regulations and policies. Securities law is a very complicated area with its own universe of terminology. We think the Roundtable’s resource will be welcome by lawmakers, industry groups and others who have a stake in EB-5 reform. 

One of the goals of the Roundtable, which Mintz Levin co-founded with several firms across the country, is to regularize EB-5 securities law practice. This is an important goal. EB-5 needs to be a more normative form of financing in the toolkit of lawyers. This starts with the securities lawyers in the field — gatekeepers of EB-5 in every sense of the word — giving sound advice to clients and promoting best practices.

Right now the EB-5 Program is still on the margins of the securities industry despite the fact that EB-5 financing benefits emerging businesses seeking capital across sectors, particularly in industries where construction and hard development costs are high. The Roundtable can have an impact as the EB-5 Program develops and becomes more institutionalized.

What is the future of EB-5?

We hope the EB-5 Program becomes established, permanent and normative. But Congress needs to act soon. We are about a month away from the Program lapsing.

Lawmakers are right on to insist on integrity reforms with any extension of the Program. The EB-5 Program has been plagued by bad actors, fraud and loose practices since it became more popularized in 2008. But lawmakers don’t need to reinvent a whole new legal structure to fix this.

Added integrity provisions are a sensible move by Congress. This is in step with current law. But changes to the law should be aligned with our existing securities laws, which are effective. Specifically, the United States has a very strong anti-fraud legal infrastructure in place when it comes to the purchase and sale of securities, including Section 10(b) of the Securities and Exchange Act of 1934, and Rule 10b-5, codified at 17 C.F.R. 240.10b-5, which is one of the most important rules targeting securities fraud promulgated by the U.S. Securities and Exchange Commission. These laws work. Congress does not need to re-write our securities laws in an effort to make EB-5 more sound and secure. The core integrity provisions for EB-5 are for the most part already in place. The technical guidance from the Roundtable can help lawmakers ensure that integrity provisions do not inadvertently create confusion, or conflict with existing obligations of issuers of EB-5 securities.

The Securities Law Roundtable has offered lawmakers a technical resource in the EB-5 reform process

Hopefully lawmakers will consider comments of the Roundtable when finalizing a draft of any legislation.

We’d like to continue to have EB-5 financing as an option in our toolkit to help clients. Many of our firm’s clients have been the recipients of EB-5 financing for projects ranging from the creation of a small media business to large-scale hotels, resorts and mixed-use real estate development. Congress making strategic moves to bring an increased level of integrity to the Program will benefit all. The Roundtable’s contribution to this broader effort is an important step forward, and will ensure that securities provisions in any new law are informed and workable. 

On August 11, 2016, USCIS published new processing times for I-829 petitions. The news is not good for EB-5 investors. USCIS is now taking in excess of 21 months to adjudicate I-829 petitions. This means that EB-5 investors may wait more than one or even two years for final approval of an I-829 from USCIS. The delays are unconscionable.

For those less familiar with EB-5 terminology, the term I-829 refers to the form number of the petition that an EB-5 investor files within 90 days of the expiration of his or her conditional green card status. An investor’s I-829 is supported by proof that, among other things, there has been sufficient job creation to support his or her green card case. At the I-829 stage of the process, an investor must also evidence that his or her investment has been sustained. For thousands of investors, what should be a relatively ministerial process of verifying facts has turned into a bottleneck. Continue Reading I-829 Delays Reach All-Time Record: Thousands of EB-5 Investors in Limbo at USCIS

The EB-5 regional center program is set to expire today. But the program will get a temporary reprieve through December 11 if, as expected, Congress passes a Continuing Resolution today to fund the government through that date. Read our Client Alert for the latest. While the extension is good news, be prepared for change on the EB-5 legislative front. We expect Congress to press for broad-sweeping reforms of the EB-5 program. My prediction is more regulation by USCIS, higher fees for regional centers to combat fraud, a crack-down on so-called gerrymandering or tailoring of targeted employment areas, an increase in investment amounts and more interagency cooperation.

 

 

There is speculation on the Hill that lawmakers will not take on reforming or improving the EB-5 Program until January 2016. But don’t think for a second that lawmakers will simply pass an extension of the Program and indefinitely shelve refashioning EB-5. Last month, the General Accounting Office (GAO) published a report on the Program (Immigrant Investor Program: Additional Actions Needed to Better Assess Fraud Risks and Report Economic Benefits). Congress is reading this report, which is a 58 page “gotcha” on EB-5. With recent SEC actions targeting EB-5 fraud, the EB-5 industry is at a point of inflection. Continue Reading GAO Report on EB-5 a Possible Blueprint for Lawmakers and New Legislation

The Wall Street Journal recently published two articles about the EB-5 Regional Center Program: a blog entry and a front page editorial-like review of the program. Both articles highlight gerrymandering of targeted employment areas, purported use of the EB-5 Program as cheap financing, lobbying and special interests, and abuses of the Program. This picture is both incomplete and cluttered. The EB-5 Regional Center Program brings millions of dollars of foreign investment into the US. The Program’s positive attributes counterbalance its challenges.

Let’s set the EB-5 record straight

The EB-5 Regional Center Program is good for the US economy.

Here are five points that were overlooked and that give a more robust view of the EB-5 Program: Continue Reading EB-5 Financing Matters: 5 Things The Wall Street Journal Did Not Mention about Real Estate Finance and the EB-5 Program

Change is on the EB-5 horizon. With the Regional Center Program nearing its expiration and recent legislative efforts coming from lawmakers, we may see some action by Congress or the Senate before the end of September. But with the Iran deal taking center stage on Capitol Hill, how much time lawmakers will spend on EB-5 changes is simply up in the air.

One issue that we are asked about every day is whether a project or regional center should consider an exemplar filing for a new deal before September 30th, which is when a new law might take effect. The issue is relevant because any changes to the law will impact the already saturated and competitive EB-5 marketplace. Regional centers and projects are concerned that any new EB-5 legislation that is ultimately enacted might very well contain provisions regarding an increase in minimum per investor amounts for projects. This is a real concern.

This brief alert addresses strategic considerations of filing an exemplar petition for a new EB-5 project with United States Citizenship and Immigration Services (USCIS) before substantive changes to the EB-5 Program take effect on the legislative front, perhaps as early as the end of September. Continue Reading Filing EB-5 exemplar petitions before September 30, 2015: strategic considerations