EB5 Investors Magazine | Page 18

E B - 5 B A S I C S Why Does EB-5 Compliance Matter? by Daniel B. Lundy With all the regulations, policies, and nuances in the EB-5 program, almost all new regional centers and first-time EB-5 project sponsors experience some growing pains while they learn the ropes. Many go on to be well-oiled and highly professional operators, but there is a lot to figure out at first. Probably the first thing that everyone who enters this industry learns is that there is a lot of paperwork, including forms for projects and individual investors. EB-5 is a unique mixture of private equity and development rolled up into an immigration program. As such, there are many rules to comply with, and many documents to collect to demonstrate compliance with those rules. When should you start an EB-5 Compliance Program? Ideally from the very beginning. Regional centers should start an EB-5 compliance program as soon as their regional center is approved, if not earlier. Project developers or sponsors should ideally have a plan for compliance before they go to market with a project. Investors investing directly in a business and not through a regional center should have a compliance plan from the time they choose and make the investment. If you are already past these points, the answer is as soon as possible. While there are clearly securities laws and regulations that project sponsors and regional centers need to comply with, the focus of this article is immigration compliance. After all, the driving force for EB-5 investors is the immigration benefit they receive from participating in the program, and as such, the immigration rules are of paramount importance. There are two main measures of compliance for a regional center or an EB-5 project, and those are the Form I-829, which is used to demonstrate that the investors have met the requirements to have the conditions on their residence removed so they can obtain permanent green cards, and the Form I-924A annual reporting form, which must be filed each year by regional centers wishing to maintain their approval with USCIS. We refer to the practice of meeting these requirements as part of EB-5 compliance. How do you start? Make a plan. Sit down with your team of professionals, including your immigration attorney, economist, securities attorney and accounting professionals, and figure out what information and documents you will need. Once you know what you will need, establish a system for collecting, organizing, and storing documents. There are various software solutions and service providers on the market that offer fund administration and accounting solutions, but your system can be as simple as maintaining spreadsheets, logs, and file folders (physical or digital, and have a backup in case of fire or other disaster). Establishing a procedure then sticking to it goes a long way. What is EB-5 compliance? At its most basic level, EB-5 compliance is simply a system or set of procedures for collecting and preserving documentation evidencing compliance with the EB-5 program rules and policies, both in general and for reporting purposes. This includes tracking the offering process, the flow of investor funds, the deployment of EB-5 capital into projects, tracking domestic investment in EB-5 projects, and ultimately proving job creation. Compliance is more than just preparing an I-829 or I-924A, however, and should be performed on an ongoing basis. While it is entirely possible hold off on assembling the necessary documents to prove investment and job creation until 90 days before the first I-829 needs to be filed, it is also an extremely stressful and unpleasant experience for you and your investors, and is likely to lead to requests for evidence and delays. Quality EB-5 compliance, on the other hand, means documenting as you go. Such a practice allows you to maintain vigilance over the progress of a project and spot trouble early on. It also gives your investors a measure of confidence that they will get their conditions removed because of this extra layer of scrutiny. And, not least of all, it allows you to avoid expending excess time, effort, and money in the immediate lead up to filing. 16 What do you need to collect and maintain?1 Fortunately, the information needed for the I-829 petitions and the I-924A filing is essentially the same (although the information on the I-924A is limited to a specific fiscal year rather than the life of a project). The types of information required can be separated into a few broad categories. Investor Information: There is a fair amount of information pertaining to the investors and their family members that needs to be collected and maintained. Typically this includes, but is not limited to the following: • Passports, conditional residence cards, approval notices, receipt notices and copies of filings for investors and their families; • The contact information for investors and their spouses; and • Notices, status reports, or other communications with investors. Flow of Funds: At the I-829 stage, the investor must show that he or sh B