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What are the requirements for regional centers that are no longer raising capital?

EB-5 business plan writer Suzanne Lazicki has reviewed the Reform and Integrity Act (RIA) to determine which requirements should be fulfilled by regional centers only working with pre-RIA investors and projects. Current designation is vital for these regional centers as termination would have “devastating investor consequences.” Requirements related to solicitation should not apply, but those related to investment management should.

The USCIS EB-5 engagement is only weeks away, March 20, 2023. The Immigration Service has invited industry stakeholders and the public to comment on regional center operations. 

As a long-time industry professional with a keen understanding of EB-5 policy, Lazicki has made a comment to the agency about the impact of the new regulations on older regional centers which do not wish to solicit new projects or investors but still should continue to maintain designation in order to “shepherd” past projects and investors.

As such, the following review is a recommendation to USCIS only and not a summary of official agency policy.

Work with experienced regional centers and EB-5 professionals.

Why keeping regional center designation is vital 

“Devastating investor consequences” would arise from the termination of regional centers only working with pre-RIA investors, Lazicki warns. 

The RIA’s section “(M) Treatment of good faith investors following program noncompliance” states that if a regional center is terminated, associated I-526 petitions will be denied and conditional permanent residency that has already been granted shall be terminated 180 days after the notification of termination for a regional center, new commercial enterprise (NCE), or job-creating entity — unless certain conditions are fulfilled.

In the event of regional center termination, to avoid investor denial, one of two events must occur. The NCE must associate with a different regional center in approved standing, regardless of geographic location. Or, the investor makes a new investment in a different NCE.

However, Lazicki points out that these conditions are very difficult to fulfill for investors. There is “no guarantee” that an investor or NCE can find another regional center to work with; such an arrangement depends on unpredictable real world factors, such as a new regional center willing to accept the terms, the willingness of the terminated business to hand over the investment capital to the new regional center, and the documents required for such a transfer. 

“The risky, uncertain prospect is hardly solace or protection for investors who already have a good sponsor responsibly managing their investment,” says Lazicki.

In short, the termination of a regional center for no other reason other than choosing to no longer raise new funds under the RIA will mean all pending investors associated with these entities will be denied. 

And Lazicki points out that the denial of past investors due to new regulations is something the RIA aims to prevent in Section 108: Protection from Expired Legislation.

RIA forms relating to solicitation requirements should not apply

In order to fairly accommodate pre-RIA investors, Lazicki recommends that regional centers only dealing with such investors “could reasonably be held to RIA requirements that apply to shepherding investment, and not held to RIA requirements specific to soliciting investment.”

As such, the following forms should not apply:

  1. I-956, Application for Regional Center Designation, the request approval of each particular investment offering through an associated new commercial enterprise. The most recent Behring lawsuit settlement states that this form is only for sponsoring new projects and new investors.

  2. I-956F, Application for Approval of an Investment in a Commercial Enterprise, the request for project approval (similar to the old Form I-924) should not apply.

  3. Portions of Form I-956G,  Regional Center Annual Statement, should not apply. This should mean dismissing requirements related to the I-956 and I956F applications, and to capital-raising activities.

Lazicki goes further to review specific RIA requirements and to comment if they should apply to regional centers that are only sponsoring pre-RIA investors.

Record keeping and audits should apply

These are “apparently applicable,” observes Lazicki, but she goes on to clarify that the rules for record keeping should be those that were in effect at the time of annual-report filing.

Business plans should not apply

These requirements do not apply to regional centers not sponsoring new projects and investors as Form I-956F only applies to post-RIA projects.

Site visits should apply

These regulations apply to old regional centers who are not sponsoring new projects and investors too — if the NCE and JCE are still engaged in job creation. 

Redeployment should apply

These requirements should still apply to pre-RIA investments that must still be maintained at risk.

Certain RIA annual reporting requirements should not apply

Regional centers still managing pre-RIA investments should be required to fulfill some ongoing reporting requirements and ignore others. They should not have to fulfill I-956G, Regional Center Annual Statement, requirements associated with Forms I-956 and I-956F and capital-raising, Lazicki tells us. While the RIA does not define reporting requirements for pre-RIA regional centers with no new investors, “USCIS might reasonably request such RCs to continue to file I-924.”

Bona fides should not apply

These requirements should not apply to regional centers not sponsoring post-RIA projects or investors as these requirements relate to persons of substantive authority involved with fund raising. Further, regional centers are not allowed change persons involved with capital raising that occurred in the past.

Compliance with securities laws should not apply

While this may be surprising, such compliance is not required with regional centers no longer raising capital. Securities laws deal with the sales of securities and providing investment advice — activities that these older regional centers no longer actively conduct.

Direct and third-party promoters should not apply

Again, these requirements do not apply as the regional centers we are discussing are no longer promoting investments.

Threats to national interest should apply

Applicable to all regional centers, regardless of whether or not they are sponsoring new projects and investors

Fraud and misrepresentation should apply

Applicable to all regional centers.

Fund administration should not apply

Not applicable to regional centers with only pre-RIA projects and investors, as these entities have already deposited and deployed investment capital.

See the Suzanne Lazicki blog “RIA impact on pre-RIA Regional Centers and investors (comment)"

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