Kurt: In EB-5 from January 2013 to 2015, the SEC received over 100 tips, complaints and referrals related to possible securities fraud violations. As of May 2015, the SEC and other enforcement agencies had 35 open investigations primarily involving securities fraud in EB-5. In 2016, the SEC Office of Compliance Examination listed EB-5 as one of its annual Examination Priorities.
There's obviously a need for more control and transprarency of EB-5 investor funds and the Account Transparency Requirement (Section P of HR 5992) is an attempt to address that need.
Account Transparency rules come into effect as soon as the EB-5 investor’s money gets deposited into either an escrow account or into the NCE 's account, and its protections continue until the funds are released into the JCE's account or into the project.
Some of the items addressed in the bill include: eliminating co-mingling of investor funds; preventing the premature release of investor funds from escrow; ensuring that investor fund transfers are first approved by an independent signatory.
And if the NCE is affiliated with either the JCE or the EB5 regional center then the signatory's role continues until all funds have been deployed into the project.
Reid: It's important to look at what's driving this to understand the intended scope of the provision.