The Role of Third-Party Fund Administrators Under the EB-5 Reform and Integrity Act of 2022

The EB-5 Reform and Integrity Act of 2022 (RIA) brought about many positive changes to the EB-5 investment program. A large portion of these changes revolves around implementing new transparency measures for registered investment advisors and regional centers that work with EB-5 funds. One such requirement specifies that new commercial enterprises (NCEs) must now retain a third-party administrator to act as an impartial liaison and oversee the management of the EB-5 fund.

What is the EB-5 Program?

The EB-5 investment program, also known as the Immigrant Investor Program, is a U.S. federal program that offers foreign investors the opportunity to obtain U.S. permanent residency by applying for an EB-5 visa, which entitles the approved applicant and their eligible immediate family members to Green Cards. In exchange, the foreign investor must make a capital investment in a U.S. business that creates a minimum of 10 jobs for American workers. The Immigrant Investor Program requires minimum capital investment of $1.05 million or $800,000 if the investment is made in a targeted employment area (TEA).

This opportunity has been popular among foreign investors from all over the world, as it provides a quicker pathway to obtaining U.S. residency and the many benefits that come with it, such as access to high-quality education and healthcare, job creation for U.S. workers, and becoming a long term part of the U.S. economy.

There are various EB-5 eligible commercial enterprise investment opportunities available. Some of the most popular are real estate development projects in rural TEAs, as they require a lower minimum investment, and come with the benefit of investing through a regional center rather than a direct investment, which may require your daily involvement.

What is the EB-5 Reform and Integrity Act of 2022 (RIA)?

In 2022 the RIA was passed and has subsequently implemented new transparency measures for registered investment advisors and regional centers that work with EB-5 investment funds. These measures are designed to provide greater transparency and accountability to investors, and to ensure that they are fully informed about the risks and rewards associated with EB-5 investments.

The passing of the RIA also enforced several appealing new benefits for foreign investors, such as quicker processing times for regional center program investments in rural TEAs, the ability to remain in the U.S. while awaiting your Green Card approval, and extra security measures.

One of the key elements of the new transparency measures is the requirement to appoint an EB-5 fund administrator.

What Is an EB-5 Fund Administrator?

As a fund administrator, one must carry out duties such as monitoring and confirming fund transfers, generating financial statements, documenting the allocation of income and expenses, keeping track of assets, producing reports for investors, ensuring regulatory compliance and administrative support, and coordinating financial accounting and audits.

The administrator is also responsible for overseeing the management of the EB-5 fund, and for ensuring that it complies with all applicable SEC regulations. This provides critical safeguards for all parties, and ensures that innocent mistakes nor intentional predatory practices can go unchecked.

The role of the EB-5 fund administrator is critical, as they are responsible for ensuring that the EB-5 fund is managed in accordance with all relevant SEC regulations and guidelines. They must also ensure that registered investment advisors are providing accurate and timely information to investors about the fund’s performance, investment strategies, and expected returns schedule.

In addition, the EB-5 fund administrator must have a clear understanding of the risks associated with EB-5 investments and be able to communicate these risks to investors in a clear, concise, and professional manner.

Who Can Be an EB-5 Fund Administrator?

The EB-5 fund administrator must be a third-party professional with expertise in EB-5 investments and must be independent of the registered investment advisors or regional center, and the EB-5 fund itself. The RIA requires a fund administrator to be a registered investment adviser, an immigration attorney, CPA, or a broker-dealer.

The EB-5 fund administrator must have a deep understanding of the EB-5 program and its regulations and must be able to advise the regional center on the best practices for compliance. They must also be familiar with the requirements of United States Citizenship and Immigration Services (USCIS), which is the government agency responsible for overseeing the EB-5 program. The EB-5 fund administrator must have a good working relationship with the USCIS and be able to communicate effectively with them on behalf of the regional center and the EB-5 fund.

In order to be considered for the role of EB-5 fund administrator, an individual must have a strong background in finance, investment management, and preferably, specifically EB-5 investments. They must also have a good understanding of the SEC’s regulations and guidelines for registered investment advisors, regional centers, and EB-5 funds, as well as a solid understanding of the EB-5 program and its requirements.

Additionally, the individual must have strong communication skills, as they will be required to communicate effectively with investors, the NCEs and regional centers, and the USCIS.

The EB-5 fund administrator must be an independent and impartial party, and must not have any conflicts of interest with the registered investment advisors, regional centers, or the EB-5 fund. This is essential to ensure that the fund is managed in the best interests of investors and that all regulations are followed. The EB-5 fund administrator must ultimately be committed to maintaining the highest levels of ethical and professional standards.

Choosing an EB-5 Fund Administrator

The appointment of an EB-5 fund administrator is a critical aspect of the new transparency measures for NCEs, registered investment advisors, and regional centers who work with EB-5 funds. The introduction of fund administrators can result in a program that runs more efficiently and with greater success overall, helping to eliminate fraudulent practices, and ensuring stronger investor security and transparency.

As an investor, it would be wise to consider making a capital investment through a regional center with a proven and successful history. Although the RIA now requires a fund administrator to be assigned to EB-5 projects, most reputable regional centers have made this a best practice long before it was a requirement. They will have already established relationships within the industry. Additionally, these seasoned regional centers should have expertise and experience in the EB-5 program and be equipped with technology solutions that enhance responsiveness and simplify the process for all parties involved.

It is crucial to understand that the EB-5 visa program is intricate, and seeking the advice of a knowledgeable immigration attorney is advisable to guarantee that your investment selection satisfies all legal requirements, including demonstrating the minimum job creation requirements and providing evidence of the source of all investment funds.

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