IIUSA Day 1 (USCIS, DOS, SEC, FINRA)

I’m at the IIUSA EB-5 Advocacy and Leadership Conference in Washington D.C., where the mood is mixed. The proposed legislation and congressional champions that we applauded at last year’s conference are now gone. Journalists who get paid for sensation and senators who didn’t get their way in confirmation hearings have had a heyday with EB-5, and there’s every incentive for the news to get worse as other officials with tangential EB-5 connections (e.g. Hilary Clinton) stand for election/roasting. (EB-5 makes a great political weapon if it looks inherently bad, so purple insinuation pays.) A few real-life scandals have happened besides the political mirage ones, not helping matters. Despite this gathering gloom, however, the tone here at the conference is not that depressed. The ballroom is full of people who are continuing to raise capital, who are seeing their own projects and investors succeeding and economic development happening in their own areas, and who know enough to put media reports in context. With this concentration of positive personal experience in the room, it’s easy to forget what’s outside. But we can’t be complacent, because the general public isn’t in our conference room, and scandal-mongering sounds louder than boring business success. Former DHS Secretary Michael Chertoff discussed the Regional Center program’s vulnerability and emphasized the need to convey a message that will give people confidence that EB-5 is good for America – a message that can be supported by solid and understandable job creation metrics, rigorous vetting of people and investments in the program, quality control in overseas marketing, and cooperation with local development agencies. (PS Membership Committee: This is also a time to push to increase IIUSA membership, aligning a greater number of concerned people with the best practices and education and message of IIUSA and broadening the financial base accordingly, not a time to redefine the association as an exclusive Big Boys Club effectively limited to those who make the most money from EB-5 Regional Centers.)

A few notes from today’s conference presentations…

USCIS Updates
The USCIS Investor Program Office did not provide a representative to this year’s meeting, but we did receive updates from Maria Odom and Fredrick Troncone from the CIS Ombudsman’s office. The Ombudsman is independent of USCIS but they liaise frequently with USCIS, have more power to extract information from the agency than we do, and ask the kind of questions we’d want asked. We got a preview of statistics that will be included in the Ombudsman’s annual report to Congress (forthcoming in June) and comments on staffing and retrogression. (The following are my notes from the live presentation, and I may need to correct some details after I can review a recording.)

• 329 I-924 Regional Center applications are currently pending at USCIS.
• I-526 investor petition filings showed a 50% increase in 2014 over 2013 (which had about as many receipts as 2012).
• In FY2015, USCIS received over 5,200 I-526 petitions by the end of March.
• As of the end of March, USCIS had 585 I-526 petitions with a Request for Evidence pending, 629 petitions with decision pending after response to RFE, and over 400 I-526 petitions with an outstanding Notice of Intent to Deny.
• USCIS currently averages, per month, about 800 I-526s received and 630 I-526s processed. That means that the backlog of I-526s awaiting adjudication — already at a faint-worthy 13,027 petitions – is growing as receipts regularly exceed decisions.
• USCIS’s plan to address the backlog, as reported to the Ombudsman, involves adding staff and approving overtime. Ms. Odom said that IPO presently has 54 adjudicators, 18 economists and 12 program analysts, and plans to add 25 more staff by the end of the year. (She also commented that this plan hardly seemed equal to really addressing the backlog). Ms. Odom noted the effect of USCIS’s Quality in the Workplace initiative, which replaced quantitative with qualitative goals – a good move for employee morale but creating challenges for setting goals related to number of petitions adjudicated.
• USCIS’s promised policy memo related to retrogression is reportedly in final process, but apparently, mysteriously, the memo will not focus on the specifics of retrogression but rather on the issue of what constitutes material change. Oh well, material change is an important issue too. Ms. Odom’s understanding is that the much-questioned 2.5 year job creation window, stated in the May 30, 2013 policy memo, will be reiterated in the forthcoming memo. No word on whether the new memo may cover questions related to sustaining the capital investment or priority dates and child status issues.
• We are reminded that the CIS Ombudsman serves as “an office of last resort” when there are EB-5 case problems. If you have a case that’s pending 60 days over posted processing times (or presents special issues) and you’ve already tried contacting USCIS about the problem, you can go to the Ombudsman. See http://www.dhs.gov/case-assistance.

DOS Updates
Charles Oppenheim, Chief of the Department of State’s Visa Controls Office, announced a May 1, 2013 cut-off date for mainland China-born EB-5 visa applicants. (You can also read this news, with commentary, in the Visa Bulletin for May 2015.) Per-country limits kick in when DOS foresees running out of visa numbers for the year – a new problem for the EB-5 program, which historically didn’t get close to using its annual allocation of around 10,000 visas. Now demand is up and we have our first cut-off date (affecting mainland China-born applicants, because they use a disproportionate number of EB-5 visas). Starting next month if you (and your spouse) were born in Mainland China and you get approval of an I-526 petition filed sometime after May 1, 2013, you can’t move forward in the visa stage of the process until DOS advances the cut-off date. (Everyone else is not affected.) Mr. Oppenheim anticipates advancing the cut-off date gradually, at least in conjunction with the new visa allocation that will come with the new fiscal year starting in October. It’s also possible that he might move the cut-off date back (which I learned is the only part of this process that’s accurately termed “retrogression”) if visa numbers prove even more limited than expected (which might happen if USCIS does improve its processing speed and volume). We’re encouraged to keep an eye on Item D in the monthly Visa Bulletin for periodic updates on movement of the cut-off date. The current cut-off date involves a wait of about two years (not terribly onerous, considering how long people have to wait for I-526 processing anyway), and demand trends suggest a wait of more like three years by the end of 2016. Panelists David Hirson and Bernard Wolfsdorf (and Robert Divine) pushed for clarification on procedural questions related to securing priority dates for child status protection, and Mr. Oppenheim promised that his legal department would be addressing such questions in a memo to be released in the next few days. (He may also have answered the question himself, but you’ll have to ask Mr. Hirson to translate into English!) Mr. Oppenheim also mentioned that visa usage is about 45% principals (investors) and 55% derivatives (spouse/children) – rather different from the 1/3 to 2/3 breakdown that I’ve heard previously. He warned specifically against trusting bloggers for visa advice, but nevertheless I’m repeating links to posts that I found helpful from Robert Divine and Ron Klasko.

SEC and FINRA
We got nice presentations from C. Joshua Felker (SEC Enforcement Division Assistant Director) and James Wrona (FINRA VP and Associate General Counsel) on the relevance of their agencies for EB-5 – but no breaking news that I could perceive. Felker mentioned five EB-5 enforcement actions but only named the three from 2013/2014. He did not discuss the forthcoming action involving some fee-taking immigration attorneys (see EB-5 Analytics for discussion of this important topic). The issue of whether/when a Regional Center may need to register as an investment adviser was also not really addressed (see Holmes & Shum’s recent article for discussion of this important topic). We got the usual reminders that SEC enforcement interests do cover registration issues as well as fraud, and that something that acts like a security is a security (and that acts like a broker, is a broker) regardless of what they’re called. I learned from Wrona that FINRA currently has about 60 broker-dealers engaged in EB-5 activity, a marked increase from previous years. The number of broker-dealers at the conference reflect this welcome trend. As we know, FINRA guidelines that particularly overlap with EB-5 include the suitability rule (which must consider both investment and immigration suitability for EB-5 per the Trustmont letter), the advertising rule, Bank Secrecy Act issues, and anti-fraud issues.