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Annual Reporting and Auditing of EB-5 Investments

Posted by Kurt Reuss on February 06, 2015

The EB-5 issuer is required to make reports to investors, to retain appropriate personnel to handle the bona fides of not only evaluating the investment, but to evaluate the internal controls of the manager.

Most of the time in a private placement memorandum (PPM) or in the operating agreement, an EB-5 fund will require some basis of an annual report to be provided to investors, either in the form of financials or in the form of a written report. But there's no state corporate laws requiring the issuance of annual reports, nor is there a requirement for audits.

When you review EB-5 offering documents you ought to concern yourself with:

  1. Are you being provided annual reports?
  2. Is there an audit?
  3. If there is an audit, who’s actually doing the audit. You clearly want people who are experienced in the fund business.

Is the Extensive Treasury Regulations Language in the NCE Agreement Relevant?

Posted by Kurt Reuss on February 05, 2015

Rupy Cheema: We typically see operating agreements and partnership agreements go to great lengths talking about possible tax allocations and treasury regulations language and these provisions are very confusing unless you're a tax expert and I can't imagine the typical investor understanding what those provisions are saying. 

Is this language relevant to EB-5 investors considering that in most cases investors are receiving 1/4% to 1% which is a trivial amount.

Robert Cornish: Those provisions are pretty important because they all relate to the investment vehicle as a partnership with flow-through tax treatment to the investors.