REGULATORY CONSIDERATIONS THROUGH THE INVESTOR LIFE CYCLE BY GREGORY L. WHITE PARTNER, SEYFARTH SHAW LLP
number of government and self-regulatory entities are either directly involved in administering the EB-5 program or laws applicable to the offering and sale of EB-5 investments to investors. The purpose of this brief summary to identify various regulatory organizations and the laws applicable to the process of offering and sale of EB-5 investments and the handling of funds and escrows. By “process” we mean the pre-investment, investment and post-investment stages of an EB-5 offering. This is not intended as a detailed discussion of all of these regulatory agencies or rules but rather to just set the stage for a broader discussion to follow. As the U.S. regulatory system is broad, this is not intended as an exhaustive list or summary.
GOVERNMENT AND SELF-REGULATORY ENTITIES ADMINISTERING THE EB-5 PROGRAM AND CERTAIN APPLICABLE LAWS U.S. Citizenship and Immigration Services (“USCIS”), a component of the Department of Homeland Security (“DHS”), is the primary agency with authority for EB-5 program oversight. Other federal immigration entities also play a role, including the State Department, U.S. consular officers abroad, USCIS’s Fraud Detection and National Security Directorate, other DHS components (U.S. Customs & Border Protection and U.S. Immigration & Customs Enforcement), among others. Banks which become involved in the process of escrow, funds management or reporting are also subject to state and federal oversight. Also involved in program support or enforcement are the U.S. Department of Commerce, the U.S. Securities and Exchange Commission (“SEC”), and, in the case of licensed brokerage firms and individuals, the Financial Industry Regulatory Authority (“FINRA”), a self-regulating body that oversees the conduct and compensation of registered brokers and
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dealers. Under the dual securities regulatory system, state securities law regulators and state securities laws also apply to EB-5 transactions and participants in addition to federal laws and regulations.
ROLES OF FEDERAL ENTITIES IN EB-5 ADMINISTRATION AND ENFORCEMENT Numerous federal departments and component agencies play a significant role in the EB-5 program. The principal government entities include: U.S. Citizenship and Immigration Services (“USCIS”), a component of the U.S. Department of Homeland Security (“DHS”) -- adjudicates EB-5 petitions as well as applications seeking immigration benefits such as an investor’s and family members’ applications for adjustment of status (“AOS”) to lawful permanent resident (green card status). USCIS also maintains a Directorate known as Fraud Detection and National Security (“FDNS”) which conducts site visits and investigates whether the facts represented in petitions and applications submitted are accurate and support the immigration benefit requested or granted. FDNS also conducts national security reviews. DHS, which stations personnel at U.S. consulates and embassies abroad to conduct similar investigations, has the authority to override the grant of an
immigrant of nonimmigrant visa by a U.S. consular officer. U.S. Department of State (“DOS” or “State”) through the Visa Office in the Bureau of Consular Affairs maintains the monthly calculation and allocation of the annual quota of immigrant visas, reporting the monthly usage data in its “Visa Bulletin.” The Immigration and Nationality Act (“INA”) requires that an immigrant visa be immediately available for use by U.S. consular officers at Embassies and Consulates around the world and by USCIS immigration officers before EB-5 investors and family members can be granted the benefit of U.S. lawful permanent residency. DOS issues Advisory Opinions on questions of law to consular officers. Under the doctrine of consular nonreviewability, however, consular-officer decisions made during the visa application process concerning questions of fact cannot be reviewed by the courts or the Executive Branch. Thus, an EB-5 visa applicant may be refused an immigrant visa if a consular officer adversely determines any question of material fact during a consular interview. State also maintains its Bureau of Diplomatic Security, another layer of law enforcement and investigative expertise that may address issues involving the EB-5 program.
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