Global Investigations and Compliance > EB-5 Business Services

Created by Congress in 1990, the EB-5 program has quickly emerged as an important economic development tool that has successfully spurred substantial U.S. job creation by attracting foreign direct investment in the United States. From 2005 to 2016, the program yielded almost $17 billion in capital investment in support of more than 337,000 U.S. jobs. Parallel to its growth and demand, the program has become simultaneously subject to escalating scrutiny by members of Congress, federal regulators, the media and third-party stakeholders. Given this environment, it is vital for investment firms and companies utilizing EB-5 capital to have a partner who can advise on the full spectrum of accompanying requirements and potential trouble points.

With offices and experience in domestic and international regions critical to the program, Akin Gump Strauss Hauer and Feld LLP has a cross-border team that offers comprehensive services to regional centers, investment firms and businesses utilizing assets procured through the EB-5 program, including investment management, transactional and real estate support, regulatory compliance counseling, policy advocacy and, if necessary, representation in any internal or government-facing proceedings. We have counseled clients—those just exploring the EB-5 program, as well as veteran participants—through the entire process of working with investors all over the world, including in China, Singapore, the UAE, Brazil, Canada and France and are well-versed in the nuanced considerations of successful participation in the EB-5 program. Our honed and extensive experience includes services in the below areas, which optimally are deployed in concert with one another.

Regulatory Compliance

Our clients’ EB-5 investments are achieved through private placements. Like all private placements, which are used by companies to raise capital in a number of contexts, EB-5 private placements are governed by federal and state securities laws and regulations, and often involve the use of broker-dealers. We advise our clients on the myriad issues associated with complying with the U.S. Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) rules and regulations, encouraging a preemptive and proactive approach. In this vein, we work in tandem with the corporate and investment funds teams from the outset to confirm that all deal structures and fund formation documents satisfy regulatory requirements, troubleshooting and making adjustments for various ensuing (and usually complex) scenarios. We also draw upon our EB-5 team members with prior federal enforcement experience, either with the SEC or the Department of Justice (DOJ) to ensure that clients are protected through a reasonable compliance framework.

We also design and implement comprehensive compliance and training programs that foresee and account for any hazards that emerge in the constantly growing and changing EB-5 landscape. This strategy provides wide-ranging guides for our clients and their employees to navigate the maze of both domestic and foreign laws and regulations affecting the EB-5 industry, mitigates for future exposure and helps prevent fraudulent activity. These compliance measures include drafting or reviewing policies and procedures related to:

  • domestic and foreign sales and solicitation best practices, including direct-selling efforts and the use of consultants or market agents
  • requirements for the use of broker-dealers and compliance with SEC and FINRA rules for registration and compensation of same
  • creation and review of pertinent agreements, including with domestic and foreign consultants and market agents, broker-dealers, employees, managers and investors
  • party/agent due diligence, including FCPA and anti-corruption compliance and evaluating the legitimacy of any entities with which our clients contract
  • investor due diligence, including anti-money laundering and Bank Secrecy Act compliance
  • compliance with securities laws and other regulations of foreign jurisdictions, including registration requirements, private placement regulations, and sales and solicitation parameters
  • guidance through navigating obligations of foreign third-party agent partnerships; crafting business models and structures that further our clients’ business goals while functioning within the existing frameworks
  • cybersecurity preparedness, including domestic and foreign cybersecurity obligations and implementation of appropriate incident response plans.

Investigations and Enforcement

With the growth and expansion of the EB-5 program, the DOJ, SEC, FINRA and Congress have rapidly started to take note. Guidance in this area had been murky and slow-coming but has recently accelerated. This is further complicated by the fact that, while the EB-5 program does not fit squarely within current regulatory frameworks, authorities are particularly concerned about offering fraud, given the occasion for abuse and confusion when dealing with foreign investors, in a different country, with language barriers. Principal areas of current oversight relating to the EB-5 industry include:

  • use of proceeds fraud, through which an issuer uses the money contrary to its offering representations
  • false statements and guarantees regarding investment returns
  • misrepresentations concerning prospects and performance of the EB-5 project
  • payment of fees to unregistered broker-dealers
  • payment of referral fees to attorneys in the EB-5 industry
  • Government Accountability Office investigations
  • Committee on Foreign Investment (CIFIUS) compliance.

Our leading government investigations and compliance team includes a distinguished roster of former federal law enforcement officials from the SEC and the DOJ, including many prosecutors at United States Attorneys’ Offices across the country as well as DOJ leadership. The EB-5 defense team understands what government regulators are looking for when they initiate an investigation. We assist clients by devising an efficient and effective streamlined internal investigation plan that focuses time and effort on the issues that matter. As needed, we vigorously and strategically defend clients in proceedings and litigation, including civil and criminal investigations and enforcement actions.

Investment Management

Our market-leading investment funds practice guides managers and sponsors of private equity funds, which raise the capital from EB-5 investors and invest it in job-creating projects, through the highly complex fund formation process. We collaborate with these managers and sponsors from day one to understand the specific makeup of investors that the fund is tailored to attract, the capital structure of the potential project, the fund’s intended role in the project and any third parties involved in the project so that we can structure the fund to both achieve our clients’ objectives and ensure that the funds comply with the securities laws in this highly regulated space. Once the fund structure has been decided, we provide the full range of services from the initial fund formation throughout the life of the fund.

Real Estate and Real Estate Finance

The most common types of projects utilizing EB-5 capital involve the construction and development of real estate. Our real estate and real estate finance teams actively engage in all phases of land acquisition and financing, with an eye toward EB-5 issues. Our real estate team conducts in-depth due diligence reviews of the land, land entitlement and development documentation, as well as diligent and efficient execution of the closing process. This includes land, title and survey review, as well as drafting of all legal documents and instruments necessary to protect the clients’ interests. Our real estate finance team assumes lead roles in drafting and negotiating the finance documentation necessary to protect the stakeholders’ interests as lenders (whether senior or mezzanine) or equity investors (whether preferred or common) in the various EB-5 capital structures. Examples of EB-5 projects handled by our team include multitier financing and equity structures involving hotels, senior living facilities, multi-family apartment complexes and mixed-used developments, with retail, restaurant and office components.

Corporate & Tax

Our corporate team has broad EB-5 experience and advises our private equity EB-5 clients on their business and transactional needs. From inception through closing, our specialists counsel our clients in all aspects of the EB-5 process, including fundraising, financing, documentation and governance. The corporate team also has extensive experience helping negotiate and structure EB-5 loans that are deployed by EB-5 funds. When applicable, we call upon the experience of practitioners across Akin Gump’s full-service platform, including tax, ERISA, labor, real estate, investment funds, environmental, antitrust, regulatory and policy specialists. For our clients, this means efficient, effective counsel that balances risk mitigation with results.

Political Advocacy

Our bipartisan public law and policy practice, which is consistently ranked as one of the top government relations practices in Washington, D.C., has extensively advocated before Congress on the EB-5 program. We have been instrumental in shepherding through the recent reauthorizations into law during a difficult political environment for immigration matters. We are currently working with stakeholders on reauthorization of the program to ensure that EB-5 projects can continue across the United States.

And of equal importance, we have worked to help both Congress and the media understand the nature and benefit of the EB-5 visa program. Through these efforts, we have proved critical in preserving the tenets of the program so the provisions continue to be favorable to our clients’ business interests. As the next reauthorization looms, we are actively monitoring relevant issues, with our clients’ operational, organizational and financial health as our primary priority.