SEC Ireeco, State Dept, Economists, New & Removed RCs
June 24, 2015 3 Comments
I have a sleeve full of urgent articles on the nature of the Regional Center program, inspired by legislation debates, and also a desk full of yet more urgent business plans for clients worried about the legislation debates and eager to get their deals filed. So this blog is getting neglected, but here are a few updates.
SEC Action
The SEC has announced charges against a firm for acting as an unregistered broker for EB-5 investors. See the SEC’s press release SEC Charges Unregistered Brokers in EB-5 Immigrant Investor Program. Michael Homeier emailed some helpful commentary on this case and Cathy Holmes has written a helpful article. This kind of action is not a surprise. The rules are clear and the SEC has repeatedly stated that it has its eye out for unlicensed persons receiving placement fees for introducing investors to investment offerors. EB-5 is a good place to hunt for this kind of offender, since the field includes many players who know more about immigration than about investment and are thus vulnerable to tripping up on securities issues. This case does not involve fraud, just failure to register, but the consequences are still serious and a good wake-up call for everyone. Ignorance of the law is no excuse! Talk to your counsel and make sure that nothing you’re doing could put you afoul of registration requirements. And recall that paying an improper fee can be just as wrong as receiving it. People who allege that EB-5 is a free-for-all should also take note of this SEC announcement, which reflects the fact that EB-5 investments are indeed regulated just like any other security.
State Department Update
The cut-off date for mainland China-born EB-5 visa applicants moved from May 1, 2013 to September 1, 2013, as of the July Visa Bulletin. This is good news, and means more Chinese investors who’ve passed I-526 can get in the queue to receive visas.
USCIS Updates
USCIS has posted notes from the June 4 stakeholder engagement with economists. The most recent update to IPO processing times (posted July 15) shows a fractional dip in I-526 times (to 13.4 months) and slight increase to I-829 and I-924 times (to 13.1 and 12.2 months respectively). USCIS has officially suspended its Electronic Immigration System (ELIS) for Form I-526, and the Regional Center Document Library is now inactive — not a surprise, considering feedback from the people who struggled to use these tools. Also note that there’s a new and significantly expanded edition of the Form I-829 (dated 5/7/2015).
New and Removed RCs
Additions to the USCIS Regional Center List, 6/08/2015 to 6/23/2015
- Sun Corridor Regional Center, LLC (Arizona): www.pathwayseb5.com
- Anchor Solutions Regional Center, LLC (California)
- Inland Gateway Regional Center, Inc. (California)
- Central Florida EB5 Regional Center (Florida): www.centralfloridaeb5regionalcenter.com
- KCI Capital, Ltd. (Hawaii): www.kcicapital.net
- Live in America – Missouri/Kansas Regional Center LLC (Kansas and Missouri): www.liveinamerica.us
- Southwest Kansas Regional Center (Kansas): www.swkansaseb5.com
- Bluegrass International Fund Regional Center, LLC (Kentucky): www.bluegrass-fund.com
- Veria Regional Center, Inc. (New York)
- Live in America – Carolinas Regional Center LLC (North and South Carolina): www.liveinamerica.us
- RZ International Virginia Regional Center (Virginia): www.rzi-eb5.com
- Name change: Golden Lamp Regional Center, Inc. (formerly Utah High Country Regional Center Inc.) www.goldenlampregionalcenter.com
Additions to the USCIS Terminated Regional Center List 5/7/2015 to 6/9/2015
- SZNW (California)
- EB-5, MRC LLC (Michigan)
EB-5 Updates 
EB5 investment may not be securities per Supreme Court definition in US v. Howey and United Housing Foundation, Inc. v. Forman. To be securities, it must have a for profit motive and other benefits would not count as for profit. In most EB5 cases, what we have is clients’ interest in immigration benefits overcome their desire for profits. It is not genuine investment. In most EB5 regional center cases, the total cost of the investment plus management fees is more than whatever interest plus principal these clients will ever get out of the arrangement over the course of the contract. It is intellectually dishonest to call EB5 investments are real for profit investments. They are investments for immigration benefits not for profits. Since SEC’s jurisdiction is over securities, if EB5 investments are not securities, SEC should not get involved.
I will approve this comment because I appreciate that you took the time to write it. But I do not personally know anyone who agrees that EB-5 investments are not securities. And furthermore I don’t see any benefit to arguing that EB-5 investment is not genuine investment. If you showed USCIS that a given EB-5 investment was not a genuine investment, then USCIS would deny the petition as per regulations. If you convinced voters that EB-5 investment was not genuine investment, then voters would turn on the EB-5 program because we don’t like the idea of “buying a green card” – and what else would EB-5 be, if not investment? You can argue that various EB-5 offerings are better or worse as investments, or that fees charged by various agents and intermediaries drain off profits to the investor, but I don’t think there’s a good basis for saying these are not investments. I’ve certainly never written an EB-5 business plan that anticipated a profit-negative investment, and if I had it wouldn’t have been approved. A plus of this “not an investment” argument is ability to dodge the SEC, but that’s not really a plus either. The SEC is there to protect the integrity of transactions, and we need that. Who wants people on the loose claiming to give reliable advice that they’re not qualified to give, or charging Party A for “impartial” advice while getting paid for partiality by Party B? I’m glad the SEC is there to help police this kind of behavior (and much better the SEC, which has the expertise and regulations to handle investment issues with due process, than USCIS, which isn’t placed to police the investment side).
Shouldn’t the Regional Center that used IREECO to obtain investors also be penalized as well since it’s their job to do their due diligence on any companies that are bringing them investors. One look and they would have found that this company were not registered dealer-brokers. The other possibility is that IREECO mislead them. In any case, I’m wondering if the Regional Center as will be held to a degree of accountability as well.