Yesterday, December 7, 2015, the SEC announced settlements and the filing of one law suit against US immigration attorneys for allegedly acting as unregistered brokers in violations of the Federal securities laws. The timing could not have been more poignant. Both behind the scenes and occasionally in public articles and letters, there is a pitched battle being fought for the future of the EB-5 program. One on side are those who support the immediate and meaningful reform of the EB-5 program currently contemplated for inclusion in the Omnibus spending bill. On the other are generally larger real estate based Regional centers who want nothing more than to continue the business as usual of enhancing their wealth with sometimes blatant disregard of the rule of law and the societal purpose to create jobs for Americans who need them the most.
This action by the SEC is the case in point showing that reform is needed and it is needed now. Beyond the enhanced securities laws provisions contained in the reform bill, reform would send the clear and convincing message that those who participate in the EB-5 program must do so in a more compliant, more policy consistent manner than before. For the last ten years or more, the largest EB-5 sponsors have benefitted from the use of billions of dollars of essentially subsidized capital by virtue of the EB-5 program. It is time at long last, to reform the EB-5 program, so that those who cannot or will not play by the rule, so that those who do not deliver their fair share to America, simply get out of the EB-5 program.
If Regional Centers want to pay lawyers or Chinese agents as brokers, that is fine, so long as they comply with Federal Securities Laws. As the Regional Center is the sponsoring organization that allows the New Commercial Enterprise to gain the benefits of the EB-5 program, it should be responsible for the conduct of those it allows to operate under its wing. By the same logic, the Regional Centers should be responsible for making sure the NCEs have policies and procedures that help ensure the NCEs are fulfilling their obligations under Labor Laws (a point which many of the objectors pushed back on as an excuse for delaying the current reform efforts). A fair counterbalance to receiving the benefits is to be obligated by the burdens.
The EB-5 program was created ONLY to benefit American workers. Not lawyers, not sponsors/developers, not even the immigrant investors. The entire policy from giving the investors Green Cards, to effectively encouraging them to invest capital for the use by developers at discounted rates of return with long hold periods, was all wisely designed to result in true job creation and structural economic improvement for America. In the last several years, during the rapid growth of the program, greed has pushed many to break the law or pursue projects that did not really provide the benefits they were supposed to. It is time we raised the bar by embracing the reforms. They are not perfect, as no law ever is, but it is a vast improvement over the current regime and will clearly signal to all in the EB-5 community that the game is changed. It is time to do better. Please support the reforms so that time can be now.
About The Author
Matt Gordon is a noted policy expert in the visa-based investments field and is an authority on structuring visa-based investments. Mr. Gordon’s career spans business operations, finance and law. He is the editor of the EB-5 Book, the legal treatise on the EB-5 program and a frequent lecturer to immigration attorneys. Mr. Gordon has participated in policy events, including those hosted by the White House and Harvard University’s Kennedy School of Government. Prior to founding E3iG, Mr. Gordon was an investment banker for a decade and ran the US division of a Swiss multi-national corporation. Mr. Gordon is a licensed attorney, having practiced mergers and acquisitions law at the beginning of his career with the largest and most reputable Wall Street firms including Fried Frank and Sullivan & Cromwell. Mr. Gordon received his B.S. in Policy Analysis from Cornell University and his J.D., cum laude, from the University of Pennsylvania School of Law.