As indicated above, investment adviser analysis applies
not only to the Advisers Act, but also to state adviser laws,
depending on assets under management or otherwise, registration may be required thereunder.
Conclusion
If possible, new commercial enterprises should analyze and
consider having all potential future Redeployment scenarios
made part of the initial investment decision and having
the general partner or managing member, as the case may
be, determine the action to be taken if a Repayment and
Redeployment occurs without the necessity for an investor
vote or consent to such action. Thus, the initial offering
document and the applicable organizational document should
be drafted to include the general parameters for an investment
in an Additional EB-5 Project and clearly provide that the
general partner or managing member has wide latitude in any
Redeployment in order to satisfy the requirements of the EB-5
program and securities law issues.
For purposes of the 1940 Act, if applicable, a Repayment
and Redeployment will require a fact intensive analysis to
ensure a continued exemption thereunder. Likewise, such an
analysis will also be required to ensure compliance with the
Advisers Act.
The SEC has not provided direct guidance on the 1933 Act
or Adviser Act consequences of a new investment decision
being made in the context of a Repayment and subsequent
Redeployment into an Additional EB-5 Project. However,
existing precedents in other similar situations provide
guidance to issuers that should be strongly considered by new
commercial enterprises when investors are asked to make new
investment decisions after their initial investment decision has
been made. A new investment decision may pose significant
securities law issues under the 1933 Act and the Adviser Act
on the basis of the precedents discussed above; therefore,
thoughtful planning, structuring, and disclosure are necessary.
1 https://www.uscis.gov/green-card/green-card-processes-and-procedures/visa-availability-priority-dates/
visa-retrogression
2 See Draft PM-602-0121 USCIS Policy Memorandum posted August 10, 2015, Subject: Guidance on the
Job Creation Requirement and Sustainment of the Investment for EB-5 Adjudication of Form I-526 and Form
I-829
3 It should be noted that investments in Additional EB-5 Projects present many non-securities law issues that
are not discussed in this article, such as the availability and timing of qualifying projects, the amount of funds
available versus the amount of funds needed for investment in the Additional EB-5 Projects, investment term
issues, and conflicts of interest in identifying Additional EB-5 Projects.
Mariza McKee is a partner at Kutak Rock LLP.
She focuses her practice on the structure,
negotiations and documentation of EB-5
filings. She works with developers, private
equity funds, regional centers, lenders, issuers,
investment banks, borrowers, and mortgage
lenders.
Her expertise focuses on registration and
exemptions for investment advisers, brokerdealers, and investment
companies. She is skilled in
handling matters related to
federal and state securities
exemptions and compliance.
Robert Ahrenholz is a partner in the
Denver, Colo. Office of Kutak Rock LLP. He is a
corporate and securities attorney with more
than 35 years of experience. His practice is
geared towards securities, corporate finance,
securitizations and structured finance.
Ahrenholz has served as securities counsel
for numerous EB-5 offerings and has assisted
developers extensively on documenting and
structuring EB-5 offering programs. His EB-5
expertise include drafting private placement
memoranda, subscription agreements,
organizational documents,
foreign placement consultant
agreements and related
documents.
4 Assessments are basically calls on investors to pay additional amounts of money to an issuer for the purpose
of completing projects undertaken by the issuer that were either (a) contemplated in the original offering materials
or (b) not so contemplated but relate generally to the purpose for which the issuer was formed.
5 The SEC has provided some guidance on this issue in the form of Rules 136 and 145 under the 1933 Act,
as well as the SEC’s analysis of voluntary assessments in the context of oil and gas offerings. Rule 136 relates to
assessable securities being deemed to be the offer and sale of securities and Rule 145 relates to certain situations
where offers or sales occur when investors elect what is in substance a new investment decision. Voluntary
assessments have traditionally been viewed by the SEC as no t being part of the initial investment decision made
when acquiring assessable securities, as opposed to mandatory assessments, which are generally deemed part
of the initial investment decision. Thus, whether or not to pay a voluntary assessment is a new investment
decision involving the sale of a new security. Likewise, a decision whether to dissolve an entity or to make a new
investment in another project has also been considered a new investment decision by the courts. See, Goodman v.
Epstein, 582 F. 2d 388 (7th Cir. 1978) and Ingenito v. Bermec Corp., 376 F. Supp. 1154 (S.D.N.Y. 1974).
6 Latham & Watkins, SEC No-Action Letter (August 24, 1998).
WWW.EB5INVESTORS.COM
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