Announcement

Collapse
No announcement yet.

Article: EB-5 Regional Center Certification Requirements By Gregory White, Osvaldo Torres and Kurt Reuss (Moderator

Collapse
X
Collapse

  • Article: EB-5 Regional Center Certification Requirements. By Gregory White, Osvaldo Torres and Kurt Reuss (Moderator)

    EB-5 Regional Center Certification Requirements

    by


    Kurt: Certifications in the Integrity Act of 2015 require regional centers to have policies and procedures in place to monitor New Commercial Entities (NCE) and the Job-Creating Enterprises (JCE) to ensure they comply with all immigration laws, all federal securities laws, all applicable state securities laws and to describe their due diligence procedures. Greg, could you talk a little about the implications of this bill.

    Greg: What the bill does, without getting too far into the weeds, is address a “new view” of how to regulate the EB5 industry. That is, without relying on the New Commercial Enterprise (NCE) as the only entity responsible for compliance, due diligence and meeting the terms of the EB5 program.

    For that matter, the securities laws are also not going to rely on the JCE or the developer because these entities are not, strictly speaking, "the issuers” of the securities being offered to foreign investors. The concept is, from a USCIS standpoint, that we've given a license to the regional center. So USCIS is saying to the regional centers “We need you to be the sheriff. We're going to put these responsibilities on you.

    We're going to require you to achieve compliance, to do due diligence, to certify compliance and actually to tell us when people are not complying.”

    There's an affirmative obligation to do these things and USCIS is going to look to the regional centers for accountability. This proposed legislation would significantly extend the liabilities associated with these deals specifically and in a clear statutory manner, to the regional centers.

    Essentially, USCIS is going to ensure that the regional centers are the focus of ongoing compliance.

    As the sponsor of the EB5 deals, the regional center’s failure to abide by these terms and responsibilities could have serious and numerous repercussions. Those repercussions range from fines to “disbarment.”

    Ultimately, for a more egregious violation, the USCIS has the right to kick you out. What it all boils down to is a whole new ball game for regional centers. They will have to become more professional.

    They will have to be aware that they have potential liabilities which could lead to fines equal to 10% of the amount raised. They are being made vicariously liable for compliance by third parties. They're being made primarily liable in other ways.

    Now, that’s not to say that regional centers shouldn't have been doing all these things all along anyway, but that's just my take-away.

    Kurt: Obviously, we are at an interesting stage in EB5. In last week’s webinar we talked about how both FINRA and the SEC have identified EB5 as an examination priority this year.

    Apparently, we, the EB5 industry, haven't done a great job complying with securities laws as FINRA and the SEC sees it. This, then, is an attempt to find a way to do that.

    Ozzie, clearly this is going to be a problem for the “Rent-A-Center” model. What do you think about that?

    Ozzie: I don't think it's out of line to suggest that we should have policies and procedures in place which would ensure that there are systems that we’ll monitor, and at least try to ensure compliance from the entities that are under our control, which could include a “rent-a-center” model.

    As we delve further into regional centers, annual certifications and the re-issuance of certifications, I think it becomes a little more problematic for the rent-a-center to certify that an NCE has complied with securities laws.

    Kurt: Let's say this was the law tomorrow. What would you tell your regional center clients? How would they best start to develop the policies and procedures in order to provide the certifications that they'd be required to?

    Ozzie: It would take a lot, honestly, to get the current regional centers on-board with developing the necessary policies and procedures. I think it would take quite a lot of labor, as well. It is revolutionizing the regional center model right now, in terms of a rent-a-center. Now, of course, it is the licensee of an economic zone. There should be obligations imposed on it that would ensure that nobody's running amok, as it were.

    Currently, there are sufficient laws in place that do effectively regulate securities compliance. I think that any regional center that's involved in a deal that went bad is going to find itself in the cross-hairs. The question really becomes, does the regional center incur issuer liability when, in fact, it is not the issuer? I think that's the crux of the matter right now.

    Kurt: I agree. As we know, USCIS issues licenses for regional centers. Greg, do you think it's reasonable for USCIS to turn to an entity that really isn't involved in the offering, that isn't the issuer in many cases, and hold them responsible for all these things?

    Greg: A part of this multi-faceted bill, this Integrity Bill, is transferring liability that normally sits with an issuer, to the regional center. I suggest that there are two separate liabilities for regional centers that I foresee could crop up. The first is that the regional center could be fined or sanctioned for failure of the issuer (the NCE).

    To some extent, that seems to me to be a pointless endeavor. I think that what is going to happen is that regional centers are going to try to contract or work around this requirement by obtaining indemnities and contribution agreements.

    In essence, they’ll try to pass that risk back to the issuer, contractually. Now, whether those indemnities and agreements will be lawful or not, I don't know. I think that is probably unnecessary to have the issuer risk passed over to the regional center. I'm just not sure that we need to do that.

    There's another risk or another type of liability which is liability for being negligent; that is, for the regional center itself not keeping records, not monitoring what the issuer is doing, not doing due diligence, and so on.

    I think it is, to a degree, reasonable and fair to put the onus for failure to do these things on the regional centers, because they are gatekeepers. I don't know where exactly to draw the line between those two types of liability.

    I do think Ozzie makes a good point on shifting issuer liability to the regional center, especially given that monetary penalties could be 10% of the amount raised. For example, in a $500 million deal, as a regional center, you could find yourself owing $50 million because of some kind of fraud or whatever committed by a third party.

    Ozzie: Gregory, I completely agree with you. Again, you already have a set of laws where, if I'm responsible for a particular activity and I let bad actors into that activity, I’m at fault. I think good regional centers do that, now, anyway.

    We check to ensure that we know who the parties are on the other end. We run due diligence on them. We certainly wouldn't let in a criminal or someone who's been banned.

    You already have “not-bad actors” certifications with Reg D. It might not be issuer liability, but certainly I think that it is good that we check, and certainly the regional center would be responsible for permitting a bad actor to conduct an offering in its economic zone.

    NOTE FROM AUTHOR: Each of today's panelists are part of a larger group of EB5 securities attorneys who are currently working to improve the current version of “The Integrity Bill of 2015”.

    This post originally appeared on EB5 Diligence. Reprinted with permission


    About The Author

    Gregory White Gregory L. White is a Partner in Seyfarth Shaw LLP’s Corporate Practice Group, a Steering Committee member of its Capital Markets Practice Group, and also co-chairs the firm’s EB-5 Immigrant Investment Specialty Team. Mr. White’s practice focuses on the representation of corporations, private equity funds, venture capital firms, and corporations in financing, technology and M&A transactions.




    Osvaldo Torres Osvaldo Torres has over 25 years of corporate, securities and media law experience. Mr. Torres’ extensive experience qualifies him to handle a wide variety of challenging matters, including those where the interests of the client extend into or originate from Latin America and other territories. Some of the types of transactions on which Mr. Torres served as lead counsel include: registration of debt and equity securities; tender offers; purchase and sale of television stations and cable networks; the $773 million merger pursuant to which Telemundo was acquired by affiliates of Sony, Liberty Media and others; and hundreds of licensing and distribution agreements involving Latin American and U.S. based companies.

    Kurt Reuss Kurt Reuss provides all his clients with free access to due diligence reports as a licensed broker dealer representative with Primary Capital. Mr. Reuss co-founded EB5 Diligence as a way to provide his clients with the most thorough due diligence reports possible and works closely with investors to assist them in selecting a suitable EB-5 investment.


    The opinions expressed in this article do not necessarily reflect the opinion of ILW.COM.

      Posting comments is disabled.

    Categories

    Collapse

    article_tags

    Collapse

    There are no tags yet.

    Latest Articles

    Collapse

    • Article: Immigration Judges’ Union Fights for Judicial Independence By Karolina Walters
      ImmigrationDaily
      Immigration Judges’ Union Fights for Judicial Independence by Karolina Walters The National Association of Immigration Judges (NAIJ), the union that represents the nation’s immigration judges, is challenging the government’s decision to remove an immigration judge from a well-known case and replace him with a judge who immediately ordered the immigrant in the case deported. NAIJ’s grievance addresses the treatment of one immigration judge, but its resolution will have implications for judicial independence throughout the entire immigration court system. The grievance was filed on behalf of Philadelphia-based immigration judge Steven A. Morley, who was presiding over the case of Mr. Reynaldo Castro-Tum. Castro-Tum’s case rose to national importance earlier this year when Attorney General Jeff Sessions chose to refer the case to himself to reconsider the Board of Immigration Appeals’ previous decision in the case. In reconsidering the decision, Sessions effectively eliminated judges’ use of administrative closure, a docket management tool. Sessions sent Castro-Tum’s case back to Judge Morley, noting that the immigration court order Castro-Tum removed if he did not appear at his next hearing. Castro-Tum did not appear at the next hearing. However, Judge Morley continued the case to resolve whether Castro-Tum received adequate notice of the hearing. Due process requires, at a minimum, that an individual be given notice of proceedings and an opportunity to be heard by a judge. But before the next hearing could take place, the Executive Office for Immigration Review (EOIR) replaced Judge Morley with an Assistant Chief Immigration Judge who ordered Castro-Tum removed when he did not appear at court again. In their grievance, NAIJ asserts that the decision to remove Judge Morley from Castro-Tum’s case and reassign many other cases from his docket resulted in unacceptable interference with judicial independence. The grievance specifically claims that EOIR’s actions violate immigration judges’ authority under the regulations to exerci...
      08-17-2018, 11:12 AM
    • Article: Indirect Refoulement: Why the US Cannot Create a Safe Third Country Agreement with Mexico By Sophia Genovese
      ImmigrationDaily
      Indirect Refoulement: Why the US Cannot Create a Safe Third Country Agreement with Mexico by Sophia Genovese The Trump Administration is seeking to create and implement a safe third country agreement with Mexico . Under this agreement, asylum seekers arriving at the US border who have travelled through Mexico would be denied the ability to file their asylum claims in the US. Such an agreement would trample on the rights of asylum-seekers, violating both international and US asylum law. In particular, the US would be violating the international principle of non-refoulement , which provides that no State “shall expel or return (“refouler”) a refugee in any manner whatsoever to the frontiers of territories where his [or her] life or freedom would be threatened,” where Mexico has a proven track record of being anything but safe for asylum seekers . The US has also codified Article 33(1) of the Refugee Convention into Section 208(a)(2)(A) of the Immigration and Nationality Act (INA) which provides that it will not return an asylum seeker to his or her country of origin, but may, at the determination of the Attorney General, remove the asylum seeker to a “safe third country… where the [asylum seeker] would have access to a full and fair procedure for determining a claim to asylum or equivalent temporary protection.” Although Mexican officials have not yet indicated whether they would sign a safe third country agreement with the US, asylum advocates should proactively seek to prevent such a devastating policy with a country that lacks adequate asylum protections. As reported by Human Rights First and Amnesty International , 75 percent of asylum seekers apprehended and detained by the National Institute of Migration (INM), the Mexican immigration enforcement agency, were not informed of their right to seek asylum. Even if asylum seekers are able to make their claims, only 30% of the asylum proceedings are ever concluded , and even fewer are granted, leaving many bona fide asylum seekers stranded without a resolution. The treatment of unaccompanied minors’ asylum claims in Mexico are even more dismal. Of the 35,000 minors apprehended by the INM in the first half of 2016, only 138 were able to apply for asylum , of which only 77 were granted protection. Beyond the failing asylum system in Mexico, asylum seekers are also in extreme danger of kidnapping, murder, rape, trafficking, and other crimes by INM officers and civilians. A safe third country agreement with Mexico would violate the United States’ international obligations under the 1967 Optional Protocol to the Refugee Convention, to which we are a signatory, which adopts by incorporation the obligations outlined in the 1951 Refugee Convention, to which the US is not a signatory. Take the example of an asylum-seeker, Mrs. H, who is fleeing politically-motivated violence in Honduras. Her husband, Mr. H, was a vocal political activist who opposed the National Party and members of the Honduran government. Mr. H began to receive death threats due to his political beliefs and reported such threats to the authorities. The authorities, however, di...
      08-16-2018, 02:32 PM
    • Article: Flawed Statistics Undermine USCIS/ICE/SEVP’s Restriction of D/S for Unlawful Presence By Eugene Goldstein, Esq.
      ImmigrationDaily

      Flawed Statistics Undermine USCIS/ICE/SEVP’s Restriction of D/S for Unlawful Presence

      by


      On August 9, 2018 USCIS published a “Policy Memorandum” restricting the 20-year-old calculation of Duration of Status (D/S) for F-1, J-1 and M-1 entrants (and their derivative families). https://www.uscis.gov/sites/default/...immigrants.pdf

      USCIS also published an announcement (hereinafter “announcement”) “USCIS Issues Revised Guidance on Unlawful Presence for Students and Exchange Visitors https://www.uscis.gov/news/uscis-iss...hange-visitors , and a general discussion “Unlawful Presence and Bars to Admissibility” ...

      08-15-2018, 12:57 PM
    • Article: Update On Express Entry Immigration To Canada By Edward C. Corrigan and Selvin Mejia
      ImmigrationDaily
      Update On Express Entry Immigration To Canada by Edward C. Corrigan and Selvin Mejia On January 1, 2015 the Federal Conservatives introduced significant changes to Canada’s economic immigration program. Formerly called the Skilled Worker program the new program was re-branded as Express Entry which included Skilled Workers, the Federal Skilled Trades program, and the In-Canada Experience Program. Canada modelled its revamped economic immigration program on New Zealand’s. There is also an Atlantic Immigration program. In addition there is a separate Live-In Caregiver program where individuals can apply for Permanent Residence after two years employment in this category. EXPRESS ENTRY The initial object of the changes was to create a list of Applicants where the Federal Government could select the best and the brightest from the list of Applicants. The Express Entry was supposed have applicants who had an approved Labour Market Impact Assessment (LMIA) and a valid job offer from an approved Canadian Employer. Under the Comprehensive Ranking System (CRS) candidates were award 600 points for having an approved job offer. Applicants would have achieved a point score of around 1,000 with the 600 points for having a valid offer of employment under the CRS. The provinces in Canada were also allowed to select Applicants according to their economic needs and these applicants that were selected through the respective provincial nominee programs by a province were awarded 600 points to be added to their score. Ontario also has a program where graduates from an Ontario University with a Master’s or who were in a PhD. program would be approved and awarded 600 points which virtually assured that they would be approved and provided with an invitation to apply. There is a quota that governs this graduate program. LABOUR MARKET IMPACT ASSESSMENTS Things did not go according to plan with Federal Express Entry. Very few Applicants were able to attai...
      08-14-2018, 12:50 PM
    • Article: USCIS Finalizes Unlawful Presence Policy Putting F, J and M Nonimmigrants In Great Jeopardy By Cyrus D. Mehta
      ImmigrationDaily
      USCIS Finalizes Unlawful Presence Policy Putting F, J and M Nonimmigrants In Great Jeopardy by Cyrus D. Mehta The USCIS finalized its unlawful presence policy for F, J and M nonimmigrants on August 9, 2018. The final policy makes no significant changes from the draft policy of May 10, 2018. My earlier blog noted the flaws in the draft policy, which persist in the final policy. The final policy incorrectly breaks down the distinction between violating status and being unlawfully present in the US. As of August 9, 2018, F, J and M nonimmigrants who have failed to maintain nonimmigrant status will start accruing unlawful presence. Individuals who have accrued more than 180 days of unlawful presence during a single stay, and then depart, may be subject to 3-year or 10-year bars to admission, depending on how much unlawful presence they accrued before they departed the United States. See INA § 212(a)(9)(B)(i)(I) & (II) . Individuals who have accrued a total period of more than one year of unlawful presence, whether in a single stay or during multiple stays in the United States, and who then reenter or attempt to reenter the United States without being admitted or paroled, are permanently inadmissible. See INA § 212(a)(9)(C)(i)(1). Prior to August 9, 2018, foreign students (F nonimmigrants) and exchange visitors (J nonimmigrants) who were admitted for, or present in the United States in, Duration of Status started accruing unlawful presence on the day after USCIS formally found a nonimmigrant status violation while adjudicating a request for another immigrant benefit or on the day after an immigration judge ordered the applicant excluded, deported, or removed (whether or not the decision was appealed), whichever came first. F and J nonimmigrants, and foreign vocational students (M nonimmigrants), who were admitted until a specific date certain accrued unlawful presence on the day after their Form I-94 expired, on the day after USCIS formally found a nonimmigrant status violation while adjudicating a request for another immigration benefit, or on the day after an immigration judge ordered the applicant excluded, deported, or removed (whether or not the decision was appealed), whichever came first. This will no longer be the case. Under the new policy effective August 9, 2018, any status violation will start the accrual of unlawful presence. The nonimmigrant will not be provided with any formal notice of a status violation, and any violation from the past that has been discovered would have already started the accrual of unlawful presence. According to the pol...
      08-14-2018, 10:51 AM
    • Article: PERM Book Practice Tip - Maintenance of Status in PERM Cases By Joel Stewart, Editor PERM Book III
      ImmigrationDaily
      PERM Book Practice Tip - Maintenance of Status in PERM Cases by Joel Stewart, Editor PERM Book III Before beginning a PERM case, an employer must always check the immigration history of the foreign national to confirm that he or she is eligible to receive permanent residency, and whether the applicant may expect to apply by Adjustment of Status or by Consular Processing. Focus must be placed on determining that the foreign national has always maintained status in the United States – whether it by as a temporary visitor for pleasure, business, as a student or in an authorized category of work. In addition to the Resume and Diplomas of the foreign worker, it is recommended to ask the worker to provide a time line to prove maintenance of status. This can be done by establishing an unbroken line of authorized stay and status in the US, and by confirming that the applicant has not worked without authorization by proving the monthly income from the time of first entering the United States. The issue of maintenance of status is more acute for vi...
      08-13-2018, 02:21 PM
    Working...
    X