A lot has changed since the enactment of the EB-5 Reform and Integrity Act of 2022 (RIA) for the EB-5 industry as a whole, but it has affected regional centers and developers in unique ways. One way is with Form I-956F (Application for Approval of an Investment in a Commercial Enterprise), which a designated regional center uses to request approval of each particular investment offering through an associated new commercial enterprise (NCE). This article highlights some of the broad I-956F issues we have encountered in USCIS adjudications during the past two years.
COMPLIANCE WITH U.S. SECURITIES LAWS
The Form I-956F requires regional centers to submit documents filed with the Securities and Exchange Commission (SEC) under the Securities Act of 1933 or with state securities regulator(s) if applicable. If USCIS' records indicate that there are immigrant petitions filed by investors associated with the NCE, USCIS frequently conducts a public search on the SEC's EDGAR system to confirm if a Form D has been filed with the SEC for the NCE's offering, and if information reported to the SEC is consistent with the offering documents submitted in the I-956F filing. Regional centers and EB-5 projects are advised to retain securities counsel to ensure ongoing compliance with U.S. securities laws.
I-956F ISSUES WITH BRIDGE FINANCING
If the project utilizes bridge financing prior to receipt of EB-5 investment capital, USCIS requires the bridge financing to be short-term, temporary, and contemplated to be replaced by more permanent financing such as EB-5 in order for jobs created by the bridge financing to be credited to EB-5 investors. As such, USCIS generally disfavors bridge financing with a fluid structure and may require evidence such as bridge loan/equity agreements, a purported bridge financing disbursement and repayment schedule, to ensure the bridge financing conforms to EB-5 program requirements.
REQUEST FOR ADDITIONAL I-956H FILINGS
USCIS frequently requests additional individuals and entities associated with the project to file Form I-956H, Bona Fides of Persons Involved with Regional Center Program. Questions arise as to whether such individuals or entities, despite their titles or ownership in the Regional Center/NCE/JCE, actually meet the statutory definition of "involved" under INA 203(b)(5)(H)(v), which requires the substantive authority to make operational or managerial decisions over pooling, securitization, investment, release, acceptance, or control or use of EB-5 funding.
INVESTOR OVERSUBSCRIPTION
If, based on USCIS' records, more immigrant petitions are filed by investors associated with the NCE than envisaged in the business plan, USCIS may question the credibility of the business plan and therefore the economic impact analysis. USCIS' position is, if the business plan is not credible, then it is not sufficient to establish that enough jobs will likely be created. If the EB-5 offering amount is increased subsequent to the I-956F filing, regional centers and EB-5 projects are again advised to consult with securities counsel to ensure adequate disclosure in their offering documents.
CAPITAL STACK
To establish that the business plan is credible, USCIS may require evidence that the project has secured, or at least has a solid plan to secure, all the other non-EB-5 financing in the capital stack. This is to ensure the project can move forward as envisioned. Compliance has become even more crucial and complex for regional centers after the enactment of the RIA, which is clearly evidenced by the pattern of I-956F issues we have seen through our extensive work counseling regional centers and projects. These additional requirements put in place by the RIA are to protect investors and to ensure regional centers and their projects are carefully navigating federal agency requirements to meet securities and immigration regulations.
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