The EB-5 visa is a popular immigration visa for investors looking to permanently move to America. For more information on what the EB-5 visa is, check out this video or go to About the EB-5 Visa
EB-5 Immigration Laws
The EB-5 visa has been around since 1990 when the United States Congress established the Immigration Act of 1990 (IMMACT90), Congress established the EB-5 program to stimulate the U.S. economy by giving foreign entrepreneurs the opportunity to permanently live in America after they have invested in an American commercial enterprise. This is what is known today as ‘direct EB-5’. It wasn’t until an update to the program in 1993 that Congress created the Immigrant Investor Pilot Program to increase interest in the EB-5 visa program. This new pilot program established EB-5 Regional Centers. Today, investment through regional centers accounts for 98% of all EB-5 investment. The laws governing EB-5 today for both direct and regional center investments can be found in the Immigration and Nationality Act Section 203(b)(5) and 8 C.F.R. Section 204.6.
It is important to note that while the EB-5 program is permanent, the Immigrant Investor Pilot Program still requires re-authorization by Congress. Without re-authorization, regional center EB-5 investments would stop. We can see from the image below – Regional Center re-authorization has become a frequent affair on a potential EB-5 investor’s calendar.
The next re-authorization is due September 30 as part of the Government Budget Omnibus Bill. The re-authorizations have always been approved. Partially, because they are wrapped up in the Omnibus but also because immigration is such a hotbed for debate. Immigration laws and reform have not changed since the establishment of the Immigration Act of 1990 and because it requires Democrats and Republicans to vote, it is unlikely to change anytime soon.
EB-5 Immigration Policies
As well as the laws that govern EB-5, The United States Citizenship and Immigration Services (USCIS) sets and controls policies and procedures that dictate requirements for potential EB-5 investors. USCIS’s policies are around things like minimum investment amounts, source of funds requirements, Regional Center requirements, required investment time frames, targeted employment areas (TEA) etc.
It has been announced that USCIS’s policies surrounding EB-5 have been changed and will be effective for any investors on November 21, 2019, and after. This was after a two year process, with many submissions, committees, and reviews. The main changes to these policy updates are an increase in the investment amount. The investment amount will increase from $500,000 to $900,000 for TEA investments and $1Mill to $1.8Mill for non-TEA investments.
Regional Center Requirements
USCIS’s policies require a Regional Center to be accredited before they can operate. This is a relatively easy task with over 800 Regional Centers accredited for the EB-5 program. Unfortunately for potential EB-5 investors, there are no further requirements for an entity to become a Regional Center.
A quick search on google will uncover many horror stories with EB-5 investors losing their investment or being tricked into high-risk investments with no adequate financial returns. While this is the minority of EB-5 investors, a lot of the cases could have been avoided with more adequate requirements put on those participating in the EB-5 program.
Typically in America, all investment activities are scrutinized by the U.S. Securities and Exchange Commission (SEC) as well as the Financial Industry Regulatory Authority (FINRA). Taken from the SEC website:
“The mission of the SEC is to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation. The SEC strives to promote a market environment that is worthy of the public’s trust.”
EB-5 Regional Centers and entities are able to get around these SEC and FINRA requirements. This has made it easier for some people working in the EB-5 industry to take advantage of investors, either with high-fees, selling risky investments, or even outright fraud. But not all Regional Center’s are out to spite investors, a few are voluntarily registered and compliant with the SEC and known as ‘Broker-Dealers’. Some that aren’t, will bring in a third party Broker-Dealer who helps to make sure the Regional Center’s offering is in compliance with SEC laws and regulations. As well as the required compliance, certifications etc, there is a responsibility to act in the client’s best interest. With this responsibility, a potential EB-5 investor can expect conflicts of interest to be disclosed, standards of conduct to be impeccable, and any investment advice given must be more than suitable for that potential investor’s needs.
As EB-5 investors are becoming more educated, an increased number of Regional Centers are becoming or using Broker-Dealers to help reflect their commitment to the EB-5 investors. EB-5 investors should look cautiously at Regional Centers that are not a Broker-Dealer and do not use one for their EB-5 projects.