JTC’s Reid Thomas outlines how Regional Centers can use the current program lapse to improve compliance systems as they focus on helping investors and preparing for the future

The EB-5 Immigrant Investment Program was dealt a blow on June 22, 2021 when the Regional Center program was not renewed. We’ve discussed before how Regional Centers can retain clients during this time and the possibility of offering direct investment, but no one knew just how long this period of uncertainty would last.

As the program lapse has lasted longer than expected, what should Regional Centers do now? Should they prepare for reauthorization and hope for the best? Should they take actions to advocate for reauthorization? Should they pivot to accepting direct investment?

In an article for IIUSA’s Regional Center Business Journal titled, “And The Compliance Beat Goes On,” Reid Thomas, Chief Revenue Officer and Managing Director of JTC Americas, advocates a different way of thinking. Direct investment projects, he argues, may not be the best way for some Regional Centers to invest their time.

“Because of the nature of direct deal requirements, the amount of capital that could be raised for a project would be significantly less than in a regional center offering,” he writes. Instead, Thomas argues, Regional Centers not busy with the more than 20,000 investors who will be eligible to have their I-829 petitions adjudicated within the next 24 months can expend their energy focusing on an important area of EB-5: compliance.

Addressing compliance is an important issue for this period not only to offer better service to current investors, but in anticipation of a potential wave of new investment that may occur once the Regional Center program is reauthorized.

“It is likely that the reinstated program will include expanded and more rigorous compliance regulations,” writes Thomas. “Therefore, Regional Centers would be wise to use the time and capacity available during the program shutdown to focus on the key areas of compliance.”

The complex nature of EB-5 means an intricate system of oversight, and when working to improve their practices, Regional Centers must take a holistic approach. Thomas divides compliance into three key areas that must be considered, and breaks down the particulars of each. The first, Immigration Compliance for Existing Investors, involves ensuring all documents for I-829 petitions are organized and readily available for filing.

“If unsure as to what supporting documentation might be required, or if the information is not currently organized in the most effective manner, Regional Centers can turn to service providers within the EB-5 ecosystem that can help perform an initial audit and provide services to identify, assemble, organize and store information in the most effective way,” writes Thomas.

The second is Ongoing Regional Center and NCE Compliance, which is vital to retaining a Regional Center designation and involves proving that job-creating activity has been consistent with the goals of EB-5. This has been made more challenging with the termination of the RC program, as filings must be made on the same schedule despite uncertainty surrounding many Regional Center projects.

The third area of compliance, Integrity Measures, was meant to be addressed in the proposed EB-5 Reform and Integrity Act of 2021, but since it didn’t pass, the concepts that informed that bill should be examined by Regional Centers as guideposts for what will be expected in future iterations of the program. Thomas provides an explanation of some of these measures, including the use of third-party fund administration and how it can provide greater security and transparency for investors.

As a leading EB-5 administrator, JTC Americas takes an integrated approach to administering the entire EB-5 program life cycle, from navigating multi-faceted escrow and depositary requirements to providing audit trails for issuers, investors and regulators. We help our clients ensure they’re not just meeting current requirements, but employing industry-leading practices that make them stand out to investors.

“Whether you believe the lapse in the program will be brief, long, or even permanent, Regional Centers still have significant work to do to meet their compliance obligations and to ensure their investors have every opportunity for success,” concludes Thomas. “There has never been a better time to focus on internal operations to make them as organized, professional, and efficient as possible.”

Together We Learn

To read the full article by Reid Thomas, click here.