EB-5 legislation and regulations
Jul 02, 2015
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Kurt Reuss
Kurt Reuss
Kurt Reuss is a registered securities broker who has been specializing in EB-5 since 2012. He offers advice on investment structuring and market conditions related to EB-5 investments.

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Do Exemplar Filings Need To Be 'Shovel Ready'?

I imagine that as EB5 regional centers and issuers rush to file project exemplars, we're probably going to see a lot projects that aren't fully baked when they get to USCIS. Is USCIS likely to have a threshold of what was or wasn't worthy of being filed prior to the enactment date? 

Ron Klasko: We really don't know. The procedure described in the bill is not an exemplar. The language is “approval of a business plan”, which seems to mean what we now call an exemplar and we don't know what standards would be applied. 

Traditionally the standard of an acceptable exemplar is that it is basically shovel ready. Assuming the exemplar is approved, it would mean that all the I-526`s would be immediately approvable. If there are any significant changes after the fact, then the exemplar would be of no further validity. Unfortunately, there's a catch 22 in all of this because the language of the bill does not grandfather other changes in the law, including significant changes to what counts for job creation. 

The bottom line is that we're going to see that there's a lot fewer jobs that may be available if this bill were to pass. It appears that those job creation restrictions would also apply to exemplars filed before the effective date of the new law, but not adjudicated until after the effective date, which presumably would be all of them.

This means that you're filing an exemplar based on the present law, structured in a way that complies with the present law that would no longer comply with the law once it's changed. What would happen with all of those? The short answer is, “we don't know”. We expect there will be changes in the bill before it passes to deal with a lot of this. In the meantime you can only do what you can do. I think filing the exemplar is the prudent course of action.

Kurt Reuss: Obviously this is a reset for the whole program and I'm sure that it is very complicated to please all the people who have been doing things a certain way as the legislature shifts the program in a new direction. Now there's also a one-year grandfathering for the EB5 regional centers after the enactment date. Is that right?

Ron Klasko: Yes exactly Kurt. We haven't talked about the effective date for all the regional center changes. I expect that probably my securities lawyer colleagues on this call will be going into a lot of that. There are all sorts of requirements relating to compliance and regional center amendments and project filing requirements and site visits and requirements for regional center principles and terminations of regional centers and agent and promoter requirements and marketing and securities that affect regional centers.

The effective date provisions on all of those apply to any regional center application that is pending on the date of enactment. However if you are already an EB5 regional center that is approved before the day of enactment, you have one year to put yourself into compliance with all of these changes. 

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