The EB-5 Program requires that investments be made in new commercial enterprises, which are entities started after November 29, 1990, for the purpose of conducting lawful commercial business activity. Nearly any legitimate business qualifies (from any industry) including real estate development, hotel operations, assisted living, manufacturing, research and development, retail, or services (see About the EB-5 Visa Classification – https://www.uscis.gov/working-united-states/permanent-workers/employment-based-immigration-fifth-preference-eb-5/about-eb-5-visa-classification to find out more).

In order for a business to be a realistic candidate for the EB-5 Program, it must be able to create or save at least 10 full-time jobs for U.S. workers for each EB-5 investor. “USCIS” requires an economic report that demonstrates the new EB-5 project will have a likelihood of creating the required jobs and will not cause other jobs in the area to be lost, the EB-5 application to the “USCIS” (Please see Important Disclosure Information below).

The immigrant investor must establish that he or she is the legal owner of the capital invested. Funds may come from legal business, salary, investments, property sales, inheritance, gifts, loans, or other lawful means. All capital shall be valued at fair-market value in United States dollars. Assets acquired, directly or indirectly, by unlawful means (such as criminal activities) shall not be considered capital for the purposes of section 203(b)(5) of the Act.

EB-5 visa applicant must have invested or be in the process of investing the requisite amount of lawfully obtained capital at the time of filing their I-526 petition. It is not enough to demonstrate that the investment is fully committed. The I-526 investor petition must be accompanied by evidence establishing that the capital has been placed at risk. There is no precise definition of “at risk” in the statute. The general understanding of what is meant by “at risk” is that the funds must be committed with no guarantee of a return or redemption. When the evidence demonstrates that the investor faces both a risk of loss and a chance of gain, the investment is considered to be at risk.

An Accredited Investor would receive a Private Placement Memorandum (“PPM”). This document discloses critical information to potential investors ensuring they are properly informed regarding the company’s operations, investment risks, SEC disclosures, and offering terms prior to investing. A private placement memorandum will also have Exhibits to disclose additional needed information critical to the investment decision such as historical and projected financials, subscription documents, related contracts, company bylaws, and other pertinent supporting data. (Please see Important Disclosure Information below).

All EB-5 private placement investment products are available, generally, to Accredited Investors, who are financially sophisticated investors.

To be considered an Accredited Investor, one must have a net worth of at least US$1,000,000, excluding primary residence, or have income at least $200,000 each year for the last two years (or $300,000 combined income if married), and the expectation to make the same amount the following year.

Updating the Accredited Investor Definitions

Aug. 26, 2020

The Securities and Exchange Commission adopted amendments to update and improve the definition of “accredited investor” in the Commission’s rules.  The amendments to the accredited investor definition add new categories of qualifying natural persons and entities and make certain other modifications to the existing definition.

The amendments to the accredited investor definition in Rule 501(a):

• add a new category to the definition that permits natural persons to qualify as accredited investors based on certain professional certifications, designations or credentials or other credentials issued by an accredited educational institution, which the Commission may designate from time to time by order.  In conjunction with the adoption of the amendments, the Commission designated by order holders in good standing of the Series 7, Series 65, and Series 82 licenses as qualifying natural persons.  This approach provides the Commission with flexibility to reevaluate or add certifications, designations, or credentials in the future.  Members of the public may wish to propose for the Commission’s consideration additional certifications, designations or credentials that satisfy the attributes set out in the new rule;
• include as accredited investors, with respect to investments in a private fund, natural persons who are “knowledgeable employees” of the fund;
• clarify that limited liability companies with $5 million in assets may be accredited investors and add SEC- and state-registered investment advisers, exempt reporting advisers, and rural business investment companies (RBICs) to the list of entities that may qualify;
• add a new category for any entity, including Indian tribes, governmental bodies, funds, and entities organized under the laws of foreign countries, that own “investments,” as defined in Rule 2a51-1(b) under the Investment Company Act, in excess of $5 million and that was not formed for the specific purpose of investing in the securities offered;
• add “family offices” with at least $5 million in assets under management and their “family clients,” as each term is defined under the Investment Advisers Act; and
• add the term “spousal equivalent” to the accredited investor definition, so that spousal equivalents may pool their finances for the purpose of qualifying as accredited investors.

The amendment to Rule 215 replaces the existing definition with a cross reference to the definition in Rule 501(a). See https://www.sec.gov/news/press-release/2020-191 for more information.