On March 15, 2022, the EB-5 Reform and Integrity Act (RIA) was passed to increase investor protections and address the structural problems that allowed fraud and misappropriation of funds to proliferate. To increase regional center and interest group accountability, USCIS created reforms that would foster transparency, oversight, and significant consequences for non-compliance.
Accountability for regional centers
Under the RIA, regional centers must now increase communication with USCIS prior to making any changes to its structure and management. To comply with U.S. Securities and Exchange Commission requirements, annual financial reports must be submitted and investors must have access to such records. Doing so will allow investors to understand how funds are utilized and the function of key players in the regional center and job-creating entity.
Increased personnel transparency
Additionally, anyone involved with a regional center, new commercial enterprise, or affiliated job-creating entity must submit Form I-956H, Bona Fides of Persons Involved with Regional Center Program. Each individual involved must disclose any criminal or civil offenses in their I-956H applications.
Financial audits
USCIS aims to increase surveillance of regional centers through targeted and randomized auditing of activities to prevent fraud and misappropriation of funds. A third-party fund administrator is now required to track and monitor spending and use of funds. Alternatively, audited financial statements may be used to verify annual reports. Should improper activity be found, the regional center may face sanctions such as fines, suspension of program participation, and permanent barring from future regional center activity.
Project promoters
Any project promoters, including foreign agencies and subagents, must also register with USCIS. This change is a stark departure from past policies wherein investors were connected to projects by unknown actors who may not have been honest about a project’s details. Marketing materials may have claimed guarantees, dismissed the risk of investing, or may have misinformed investors about regional centers and government oversight. The RIA aims to correct this oversight to increase transparency and accountability. Should any promoter be found to falsify information, they may face legal prosecution and be barred from further involvement in the EB-5 program.
Reinvestment to preserve priority dates
Another important protection is that in case of regional center termination or debarment, good faith investors no longer simply have their applications canceled and therefore lose their priority dates. Instead, these investors have the option to reinvest in another regional center project within 180 days without losing their priority date. This news benefits Indian and Chinese investors who may have delays in receiving their green card due to visa retrogression.
Final thoughts
The EB-5 Reform and Integrity Act of 2022 marks a step forward in investor protections by promoting transparency, mitigating risk of fraud, and increasing surveillance over regional center actions. By implementing stringent oversight measures and imposing penalties for non-compliance, the RIA aims to instill confidence among investors and strengthen the integrity of the EB-5 investment pathway.
