Comment: EB5 Developments



3 issues characterize the EB5 Regional Center (RC) space currently, viz., increased competition, increased regulatory scrutiny and increased deal quality.

USCIS has been on a tear recently, approving several dozen RCs in the last few months. These newly minted RCs are making a splash, providing Chinese investors (and those from other countries) a plethora of choices. While this leads to some head-scratching in a space not known for a wide diversity and depth of offerings, increased competition portends increased self-regulation which all markets impose by dint of competition itself. In a sense, this increased competition is a feather in Congress's cap since it validates the complicated 3-part dance that is at the heart of the EB5 concept (jobs, greencard and investment), the trick now for USCIS is to regulate the exploding space in a fashion that continues growth while adhering to at least a modicum of the rules. Existing players on the project side must now learn to live in a more crowded space, and those on the investor side must grapple with the options now manifest.

Immigration Daily has learned that the SEC is active in the EB5 area, with multiple investigations currently underway. We suspect that USCIS's newly hired securities attorneys have not been idle either. Signs of increased agency scrutiny are evident in slight changes in conduct by almost all players - when the sheriff is in town, everyone is on their best behavior. This increased presence by the authorities portends well for the market, since the unchallenged existence of the Chicago fraudsters clearly implied a widespread disregard for the safety of the Chinese immigrants involved. We encourage SEC and USCIS to bring additional enforcement actions where immigrant investors have been harmed.

By far the biggest change is better deals coming to market - the days of 0% return on capital may be gone. It's not just return on capital - the EB5 concept posits a nexus between a successful enterprise (which can pay good ROI) and the jobs created by it - it is both of these that guarantee the prize sought by immigrant investors - a Green Card without conditions. Many old-school RC projects consist mainly of playing economics games with USCIS instead of real jobs that are readily apparent, the newer better quality deals now coming to market feature more conservative financial principles, including in the counting of jobs, and which frequently involve a variety of different funding mechanisms, including EB5, thus making the creation of jobs a much easier task. As post-829 investors demand redemption in coming years, the financial viability or lack thereof of RC projects will become clear - investing in expensive economists is not a substitute for running a business which creates jobs, even after conditions on the green card are lifted. Good practices in running a business are good practices in obtaining immigration benefits too.

EB5 is now the hottest spot in the immigration field, with many established law firms which have long shunned this area now entering the EB5 space. Immigration Daily will continue to keep you on top of the latest in EB5. Share your thoughts by writing to editor@ilw.com.









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ComingsNGoings: Immigration Reading

Guarding the Golden Door: American Immigration Policy and Immigrants since 1882 by Roger Daniels - Hill and Wang; First Edition (December 24, 2004) - 334 pp, ISBN: 0809053446, $14.75 - http://www.amazon.com/Guarding-Golde...gration+policy





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