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EB 5 projects due diligence checklist

Posted by Kurt Reuss on December 21, 2016

Making an investment of $500,000 - $1,000,000 in one of the EB-5 projects that ultimately fails, jeopardizes both the investor’s funds and the U.S. residency of the investor’s family, therefore every investor would be wise to know as much as possible about the investments they’re considering.

What is EB5 due diligence?

Due diligence is an investigation of an investment prior to signing a contract. Due diligence contributes significantly to informed decision making by enhancing the amount and quality of information available to the investor allowing him or her to better understand the benefits and risks.

What is included in an EB-5 Immigrant Visa due diligence review?

Due diligence begins with a thorough analysis of the investment documents including the capital structure, project viability, exit strategy and job creation potential as it relates to the the USA investor visa program.

The due diligence review should also identify risk mitigation strategies that have been implemented by the Manager or General Partner to protect investors. These include use of a fund administrator to oversee all transfers of investor funds, and construction monitoring to ensure transfers to the Developer are in-line with construction progress.

EB-5 Source of Funds for EB-5 investment visa

Posted by Kurt Reuss on May 07, 2016

EB-5 source of funds

A primary requirement to apply for an EB 5 visa is an initial investment in a new commercial enterprise. That investment must be $500,000 (USD) in a Targeted Employment Area or else $1 million. Proving the primary source and path of these funds, therefore, is vital to the EB-5 application. As per United States Citizenship and Immigration Services (USCIS) EB5 visa requirements, investors must provide appropriate documentation to show EB5 investment funds have been obtained or earned through lawful means.

SEC Rule 10b-5 and the scienter requirement

Posted by Kurt Reuss on October 31, 2015

John Tishler: SEC Rule 10b-5 is what I’d call the primary rule of liability we’re concerned about in EB5 offerings or EB5 projects. It applies to any offering of securities that has any jurisdictional nexus to the United States. Jurisdictional nexus simply means that some mode of interstate commerce was used: the telephone, an email, postal delivery. I think it is impossible to imagine an EB5 transaction taking place that did not somehow avail itself of the means of interstate commerce in the United States.

In any event, 10b-5 is going to apply and what it says is that it’s unlawful for any person in connection with the offer or sale of securities to omit or misstate a material fact or to state a fact that, in the context in which it is stated, is misleading and that’s considered to be a fraud. When people talk about securities fraud, Rule 10b-5 is what they’re referring to. 

In terms of the commonly used word “fraud” and the common sense understanding of it, lets discuss what it means to commit fraud. The standard for securities fraud is quite a bit lower than the common sense understanding of fraud. 

Fraud also includes an intent to omit a fact or to state a fact that wasn’t complete in its context. Rule 10b-5 has what’s called a “scienter requirement” in relation to the omission of facts from which means there has to have been intent. 

EB 5 Process - Step by Step

Posted by Kurt Reuss on January 01, 2014

There are four steps in the EB5 process that an immigrant investor must complete in order to become a U.S. permanent resident through the USCIS EB 5 visa program (though we suggest you start by interviewing and retaining an experienced EB-5 immigration attorney).
Once these four steps have been completed, the EB5 investor, his or her spouse, and their unmarried children under the age of 21 will be eligible to become permanent residents of the United States.