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The EB-5 Immigrant Investor Program offers foreign nationals the opportunity to gain permanent U.S. residency by investing in qualifying job-creating projects. EB-5 has become a popular way for immigrants to seek green cards without visa lotteries or employment restrictions.
Because of the program’s popularity, investors can pick from many options when deciding which job-creating project they want to invest in. Investors want to get their invested capital back and receive their green cards, but a lack of familiarity with the program and its complexities can make it difficult to know which project to select.
To increase their chances of a successful visa petition, many investors are now seeking projects that use a third-party fund administrator to provide additional oversight.
What is required for an EB-5 investment
EB-5 investors must invest at least $800,000 in an approved project (or more, depending on the type and location of the project). This capital must be put “at risk” for at least two years, meaning there must be the potential for loss or gain. The project must create at least 10 full-time jobs per EB-5 investor, and these jobs must be carefully documented.
Most investors choose to work with a Regional Center, which helps oversee the investment and connects them to the job-creating project. The choice of Regional Center is as important as the choice of project because it’s the Regional Center that the investor will be dealing with. Because the Regional Center is such an important part of the process, there are specific compliance requirements that they and the developer must follow.
The RIA and EB-5 compliance measures
With so many parties involved and investors putting significant capital at risk, EB-5 has attracted many bad actors over the years. For a time, the program had a reputation for fraud and mismanagement of funds. That’s why Congress passed the EB-5 Reform and Integrity Act of 2022, known in the industry as the RIA.
The RIA instituted new compliance requirements, including the mandatory use of a third-party fund administrator to co-sign on all transactions. The fund administrator is also responsible for recordkeeping and ensuring investors receive updates on the status of their investments.
It’s possible for Regional Centers to receive a waiver for the fund administration requirement if they perform an annual audit of accounting practices. While audits are beneficial, they can only identify issues after the fact, when it’s too late to fix things. A good fund administrator can catch problems as they happen and initiate fixes to keep projects working and ensure investor petitions are on track.
What can happen if rules are broken
Violation of EB-5 rules can result in a loss of investor capital. EB-5 funds are put at risk, which means that if they are mismanaged, there is a real chance investors could lose their savings.
Penalties for violators can include termination of the Regional Center. When that happens, investors may have the opportunity to redeploy capital to another job-creating project – but that’s only if they’re able to get their initial investment back. And if violations aren’t caught until later in the process, it can result in denial of the investor’s visa petition.
How a third-party fund administrator can help
The most important function of an independent fund administrator is to provide third-party oversight. By only signing off on transactions that are in accordance with the project offering documents, the fund administrator can protect against fraud or mismanagement of funds.
A fund administrator can also provide additional transparency. If the fund administrator has an online portal that provides 24/7 access, investors can easily view the status of their investments and access the information they need for their visa petitions.
Most importantly, as an independent a third party, the fund administrator can identify issues and fix problems that could lead to visa denial. While investors may be new to the process and developers are focused on the project, the fund administrator’s duty is EB-5 compliance. By choosing a project that works with an experienced fund administrator, EB-5 investors can get dedicated help to protect their investments and set themselves up for immigration success.
Source: https://www.financialexpress.com/business/investing-abroad-how-third-party-fund-administrators-protect-eb-5-investors-to-safeguard-their-investments-3724784/
