Vermont is Becoming the Activist Regulator in EB-5

Last week Vermont Public Radio reported on its website that the Vermont Department of Financial Regulation suspended the Okemo Resort development project of its authority to solicit new investors.

The full text of the article can be found here.

The article reports that regulators are seeking changes to the project PPM as well as the escrow release terms of the project. The heighten scrutiny and active intervention of the State agency is a reaction to the threat and scandal of the Jay Peak project.

Following the changes, already invested investors will be notified and have the right to opt out. While the investors would have no claim for harm under a securities law perspective, having to pull their I-526 petitions and refile, given the increasing adjudication times would clearly come at a personal cost. If any families had a child in an age out situation (a child who has turned 21 since the filing), then there would be a monetary cost as well (although probably not easily actionable).

It is good to see the Department acting like a real regulator. Similar to what the SEC does with registered offerings on the Federal level, the Vermont Department is focused on the quality of the disclosure to investors. What is surprising is that they took things a step further in going after substantive changes around the escrow structure. This is very aggressive given that escrow is not legally required in EB-5 offerings at all.

Vermont clearly has a lot to lose if the EB-5 market loses faith in Vermont. The ski industry is of critical importance to the State and EB-5 has become a key financing vehicle for that industry. It will be interesting if other state regulators pick up on Vermont’s lead to more actively regulate Regional Center activity within their borders. It will also be interesting to see if and how this may affect the forthcoming rules recently announced by DHS. While a uniform national approach to EB-5 regulation makes a lot of sense, it is particularly frightening to thing about USCIS having to get involved with offerings at this level, both from a potential for delay and expertise standpoint. Worse perhaps is the continued vacuum on the Federal level that led Vermont and perhaps soon others to take a more affirmative role.

© 2016 Matt Gordon.


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.