Comment: Crazy Four Tiers
The Chinese EB5 market has a four-tier price structure. Paying the lowest price for capital, about 10% of capital raised, are those RCs with good 829 track records. The second tier is those RCs without 829 records, but who have good 526 records, these pay about 17.5% of capital raised. The third tier, which is everyone else, the vast, overwhelming majority of wannabes, are RCs without any track record, these pay about 25% of capital raised as intermediary fees. There is also a fourth tier - which is a mish-mash of individual connections, direct investments, one-off special deals, etc., where prices are all over the map.

How the EB5 market got to this stage is important in understanding where it will go in 2015. This four-tiered structure arises from a misunderstanding, among US immigration attorneys and Chinese migration agents alike, that the standard for judging RCs is the immigration track record. As 2015 will likely show all too clearly, this is NOT the case in the real world. A missing element in the calculation is project quality - the true factor that underwrites jobs which are the foundation of the EB5 program. The vast majority of projects funded so far are rather poor in quality, and the next economic downturn in America will see many of these projects and RCs turn turtle - and what will US immigration attorneys and Chinese migration agents do then? However, 2015 gives every sign of being a real boom year in the USA, so this fear, at least, is far away, and not of practical import at the moment. There is however, another missing element, even more important than project quality, that will likely come home to roost in 2015, and that is securities compliance. Until recently, RCs and US immigration lawyers have regarded securities compliance as a kind of "check-the-box" item, a mere after thought once the real issues (such as jobs calculations, TEA designation, etc.) were worked out. As to Chinese migration agents, their attitude toward US securities laws appears to be equal parts amusement and consternation, but their actions clearly betray a belief that US securities compliance is never to be taken seriously. A $5 billion securities market cannot function under such a regime as EB5 has suffered for the last 5+ years, a regime that can only be characterized as a joke, and a bad one at that, since the lives and futures of so many families are at stake. USCIS and SEC alike have been asleep at the wheel - and this is not just a matter of outright fraud. A few bad apples will always exist in every market, such is the human condition, and regulators cannot be blamed for an occasional fraud, no matter how painful it is to those who suffer the consequences. The point is that USCIS and SEC have permitted non-securities-compliant practices to take root, to grow and to thrive, across the length and breadth of the EB5 market. We believe that USCIS and SEC are finally taking note that serious action is needed in 2015.

The ultimate source of this crazy 4-tier market is something quite different, and rooted deeply in Chinese culture. China's capital markets, such as they are (and they are not much by standards such as the West's and even India's), do not boast much trust among market participants - trust is NOT China's forte (though China has many strengths to its glory and credit). In an atmosphere of mistrust, sophistication in financial instruments becomes an early casualty. Even such a key distinction as debt as compared to equity is lost on the bulk of China's millionaires. Complex capital stacks, common in US real estate deals, are pure gobbledygook to most wealthy Chinese, the idea that if a project goes south, some parties may lose nothing while others lose all, appears to the Chinese a dirty American trick, and one that is deeply dishonest. Their preference in judging project quality is not a spreadsheet, but photographs of project sponsors with a Governor or Mayor. While larger Chinese migration agents have now acquired US-educated financial analysts, and we are willing to bet that all top Chinese migration agents now have staff who actually know what a subordination clause is, the damage has already been done. China's woefully inadequate regulatory apparatus has forced migration agents, who are superb immigration intermediaries, into the role of financial intermediaries, a role that they are singularly inept at. The best solution would be for China to require that no EB5 project be sold in China without the active involvement of major Chinese financial institutions such as banks, while still leaving an immigration role for China's army of migration agents. Willy nilly, the market will gradually evolve in this direction, even absent Chinese initiative. Once USCIS and SEC awaken from their slumber, it is entirely possible that US broker dealers will be required for each and every EB5 transaction - such a US requirement will, in time, lead to the inclusion of Chinese financial intermediaries, and the exclusion of Chinese migration agents, from the EB5 equation.

We believe that SEC and USCIS are gearing up for significant enforcement action in 2015, one that will shake the EB5 market even more than Izummi ever did. Many old players will likely fall by the way side, and a new, cleaner, EB5 market may well rise to take the place of the old, troubled one. Stay tuned to Immigration Daily for the latest in EB5.

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Focus: The PERM Book 3rd Edition
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Headline: U.S. Republicans struggle to block Obama immigration moves Click here
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Help Wanted: Immigration Paralegal
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Help Wanted: Immigration Paralegal
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Chinese EB-5 Marketing
EB-5 Supermarket is one of the top Chinese media and marketing companies that specializes in the EB-5 immigrant investment market. It is a direct gateway between the U.S. EB-5 project developers, EB-5 Regional centers, EB-5 professionals, U.S. immigration attorneys, Chinese immigration agencies and Chinese investors in China. If you are planning to promote your EB-5 projects or services to China market, EB-5 Supermarket is the only one you need to talk with. We offer an one-stop marketing plan for doing business in China, including bilingual marketing collateral, online/offline national promotion, interpretation and coordination with your authorized Chinese immigration agencies, brokers and other services provider to promote your investment projects in China. Moreover, our top-notch marketing team as well as the strong network in China will bring you unbelievable value. Our special working process will condense all the advantages and deliver the highlights of your project in the most effective and efficient way! Please contact us contact our Chicago office at (630)701-6163 or Email: Website:

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ComingsNGoings: Immigration Event
January 27, 2015, 3 - 4pm (Eastern), the Office of the Citizenship and Immigration Service Ombudsman will hold a teleconference on Deferred Action for Childhood Arrivals (DACA) renewal issues. Ombudsman Maria Odom will be joined by stakeholders to discuss applicant's experience with requests for DACA renewal. The teleconference will focus on renewal processing issues only and will not discuss the recent executive actions, which will expand DACA and have not yet become effective. Please RSVP with "DACA Renewal" in the subject line by January 21 to Teleconference call-in information will be provided upon RSVP.

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