Tag: Immigration Law

Canadians, the American Dream, and the EB-5 Investor Visa

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It’s that time of year when Canadians wintering south of the border begin to realize that fairly soon they will be packing their things and making the long trip north again. Some of them will do so willingly, eager to get back to friends and family, others will consider extending their stay by another couple of weeks or months, and still others will wonder if there is not some way to make a permanent move south.

The cliché of the Canadian “Snow Bird” exists, because it is a reality. Every winter thousands of Canadians travel south to places like Florida, Arizona, California and Hawaii. The majority retired, they may effectively spend half of their retirement Stateside.

Agreements between the US and Canada make this yearly passage possible. Under US immigration laws, Canadians are generally allowed entry as a visitor in the US for up to 6 months (180 days) at a time when they cross the US border by land, air or sea.

When it comes to taxes, the US Internal Revenue Service (“IRS”) has its own set of rules completely distinct from US immigration law. The US IRS allows Canadians to spend up to 182 days in the US under its “substantial presence” test over the course of 3 years before requiring Canadians to file a non-resident US tax return. Even then, the Canada-US tax treaty provides protections to facilitate this reporting and to keep Canadians on side with both the Canada Revenue Agency (“CRA”) and the IRS (see IRS Form 8833 Treaty Based Return Position Disclosure).

It is important for every Canadian spending time south of the border to make note of these separate, and sometimes conflicting, rules.

For those Canadians wishing to extend their stay in the US, they should look at both of these aforementioned rules to determine if this possibility exists for them. With the US and Canada announcing new initiatives to share information on the entry and exit of people across their shared border, it is possible that overstaying your 6 month entry to the US by even a few days could cause issues with US immigration next time you try to reenter the US. Additionally, for those who wish to avoid the hassle of US income tax filings, special care and attention should be given to the IRS’ “substantial presence” test.

What about those Canadians whose American Dream is not just passing October to April in the US, but rather relocating permanently?

While the US has various visa options available for those looking to work or start a business in the US, it does not have any retiree visa options, unless, perhaps, the applicant is closely related to a US citizen.

Those without a US citizen as a close relative who wish to immigrate to the US without the responsibility of working or starting a company may wish to consider the EB-5 Investor Visa.

The EB-5 Investor Visa was created by the Immigration Act of 1990, and it is a direct pathway to US permanent residency (also known as a US green card). Permanent residency allows you to live and work, or not work, in the US for as long as you would like. It also gives access to potential eligibility for programs such as US Social Security Insurance and Medicare.

To qualify for an EB-5 Investor Visa, the applicant is generally required to invest $1 Million USD in a business entity that creates or preserves at least 10 full-time jobs for US workers within 2 years. In exchange, the investor receives conditional permanent residency for the first two years, and full permanent residency at 2 years once he or she proves fulfillment of the visa requirements. It also allows the spouse and unmarried children under age 21 of the applicant to receive permanent residency.

For those who do not want or are not able to make a $1 Million USD investment, the US government will issue an EB-5 Investor Visa for investments of $500,000 USD in an approved “regional center” project, or if the passive investment is made in either a targeted low employment or rural area. Additionally, those who invest in regional centers receive the added benefit of being able to look to “indirect job creation” to fulfill the 10 full-time US jobs requirement.

Entrepreneurs starting an enterprise in the US may use the EB-5 visa, but it is equally accessible to passive investors looking for a way to make a permanent move to the US, especially when dealing with an approved regional center.

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United States Citizenship and Immigration Services (USCIS) Issues Final EB-5 Policy Memo

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On May 30, 2013, USCIS finally issued the much anticipated Final EB-5 Adjudications Policy Memorandum.  The Final EB-5 Adjudications Policy Memorandum makes significant changes to and provides clarifications for the EB-5 Program.  Here are some of the highlights:

  • Less Regional Center Amendments: The new memo states that USCIS does not require formal amendments to regional center designation when an RC changes its industries of focus, its geographic boundaries, its business plans, or its economic methodologies.  Previously, the I-924 listed “acceptable amendments” to include some of these. The memo clarifies the non-mandatory nature of these business changes.
  • An RC’s Geographic Area is Determined by Reasonableness:  For the first time, USCIS outlined that determinations on the geographic area of a regional center are based on the RC’s ability to establish by a preponderance of the evidence that the proposed economic activity will promote growth in the proposed area. This means that the RC must show that the proposed area contributes significantly to the supply chain and labor pool of the proposed projects.
  • Defines Hypothetical, Actual and Exemplar Projects: The memo states that if a project complies with the requirements of a Matter of Ho business plan, it is an “actual project.” If the project does not comply with Matter of Ho, it is “hypothetical.”  Additionally, an actual project requires more detail than a hypothetical. Finally, the memo defines an “exemplar” as an actual I-526 petition for a project that USCIS will review for EB-5 compliance, including all transactional documents (such as the offering materials).  This is important because if USCIS approves an “actual project,” USCIS will give deference to the later filed I-526s.  Hypothetical projects are not accorded deference at the I-526 stage.
  • We decided that already! Deference to Prior Decisions: Deference to already adjudicated matters is one of the most significant changes contained within the memo. For example, if USCIS approves an I-924’s Matter of Ho compliant business plan, it will give deference to this at the later I-526 stage.  I-924 approval notices should state whether a project has been approved as an exemplar or actual project, thereby being accorded deference in future adjudications.
  • Approved the Use of Escrow Accounts: USCIS explicitly approved investor’s use of escrow accounts as long as release of funds is immediate and irrevocable upon approval of the Form I-526 and acquisition of an immigrant visa or approval of Form 1-485 (adjustment of status).
  • Bridge financing Permitted If You Just Can’t Wait: If a developer uses bridge financing prior to receipt of the EB-5 capital, this will not affect the job creation calculation whether or not said financing was contemplated before the EB5 financing.  However, it is always a best practice to have contemporaneous evidence of the intent to use EB-5 capital.
  • USCIS Defers to State Adjudications of TEAs: USCIS will review state determinations of TEAs to see whether they used reasonable methodologies, but will otherwise defer to state determinations.
  • Eventual Acquisition of an Asset Does Not Count as “At Risk” Investment: If the investor is individually guaranteed the right to eventual ownership or use of a particular asset in consideration of the capital contribution, then the expected present value of the guaranteed ownership or use does not count toward total amount of the investor’s capital contribution in determining the amount of money truly at risk.
  • Restructure or Reorganization Means (probably) a Total Remodel or Significant Addition: Plans to convert a restaurant into a nightclub or add crop production to a livestock operation would constitute restructuring. This seems to mean USCIS wants a complete remodeling or significant addition to the existing business. “Reasonable time” to Create Jobs at I-829 is Not a Free Pass: Investors need not have created all the jobs at the I-829 stage, but need to be in “substantial compliance” and show that they will create jobs “within a reasonable time.”  This is not an open-ended allowance, but does provide some flexibility. After this time, jobs will not be considered unless there is a force majeure. 
  • Material changes at I-829 stage? Don’t Fret: An individual investor can proceed with their Form I-829 petition to remove conditions even if within the time between I-526 approval and submission of the Form I-829 a material change occurred to the business plan.  As long as the investor can show that they satisfy the conditions for removal of conditions, USCIS may still issue an approval.

Federal Contractors: The Federal Acquisition Regulation (FAR) E-Verify Clause Revisited – Critical Steps a Contractor Can Take To Foster E-Verify Compliance

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“Yes, we use E-Verify.” “Of course, our company is in compliance, we did an I-9 audit a few years ago – isn’t that the same as E-Verify?” “I know this is not an issue, because I remember being told we addressed all I-9 and E-Verify issues.” “No, the General Counsel’s office doesn’t handle immigration issues.”

You get the picture. Many companies simply do not take immigration compliance seriously. This failing usually does not come from a disinterest in compliance, but rather from a threshold failure to understand the intricacies involved in immigration issues or the potential exposure that could result from noncompliance. Only when faced with government investigations, public scrutiny, or other negative impacts on the business do the right people in the right places start to pay attention. When they learn that federal contractors can be suspended or debarred for failing to adhere to immigration and E-Verify related issues that attention is heightened.

It has been almost three years since the Federal Acquisition Regulation (FAR) E-Verify clause (FAR 52.222-54) for federal contractors went into effect in September of 2009. E-Verify is a free, internet-based system that electronically verifies the work eligibility of new employees by comparing the Form I-9 related information employees submit with the records of theSocial Security Administration (SSA) and the Department of Homeland Security (DHS). Close to 450,000 employers are now enrolled in E-Verify. While the Government does not charge contractors to use the program, companies should be cognizant of the operational costs associated with E-Verify, including costs connected to training, monitoring, and verifying compliance with the System. In the case of federal contractors, E-Verify must be used to verify all new employees as well as existing employees assigned to a contract. However, there is also an option available to verify an entire existing workforce upon receipt of a qualifying federal contract.

Not every federal contract, however, will be subject to the FAR E-Verify requirements. FAR 52.222-54 exempts federal contracts that include only commercially available off-the-shelf (COTS) items (or minor modifications to a COTS item) and related services; contracts of less than the simplified acquisition threshold (currently $150,000); contracts that have a duration of less than 120 days; and contracts where all work is performed outside the United States. As defined in FAR 2.101, a COTS item is: (i) a commercial item, (ii) that is sold in substantial quantities in the commercial marketplace, and (iii) that is offered to the Government without modification as the product is available in the commercial marketplace. There are other employee-related exemptions that federal contractors should be familiar with, including employees hired before November 7, 1986, employees with specific security clearances, and employees that have previously been processed through E-Verify by the federal contractor.

Compliance is Non-Negotiable

To date, the Government has been fairly lackadaisical in its review of compliance in the E-Verify arena. Accordingly, it is not surprising that E-Verify compliance may not fall very high on a federal contractor’s list of legal concerns. However, with a comprehensive immigration reform package, that includes a mandatory E-Verify provision and new laws percolating in the States, contractors should reconsider their priorities. Increased enforcement is likely and a proactive review of current E-Verify related processes, including sub-contractor flow down, and other policies is recommended.

In fact, U.S. Citizenship and Immigration Services (USCIS), the agency that runs the E-Verify program, has beefed up its Monitoring & Compliance Branch’s activity to review to detect, deter, and reduce misuse, abuse, and fraud. And who can blame it? The agency clearly wants to be in a position to provide detailed E-Verify data and good-looking numbers to Congress as the immigration debate heats up in Washington, DC. Fortunately for USCIS, ample funding has been designated for the program. As a result, participants have benefited not only from an extraordinary increase in E-Verify resources and training aides, but also from immensely improved technology used in the system.

It is no surprise that along with the increased funding comes increased monitoring of usage. In fact, USCIS site visits and desk reviews appear to have escalated. A number of companies recently have received calls informing them they are not in compliance with E-Verify procedures. The calls are friendly and are sometimes coupled with an “offer of assistance” in the form of a USCIS visit. By the way, it is an offer you cannot refuse without being viewed as uncooperative – not a good thing for a Government contractor.

Such visits and calls from the USCIS’ Monitoring & Compliance Branch are to be taken very seriously. Accordingly, federal contractors not only should review and revise, but truly understand, the processes they have in place for E-Verify as well as the entire Form I-9 process. Such processes also should be tested periodically for accuracy and efficacy. Federal contractors should want to know whether their E-Verify policies actually are working in the field the way they are written on the paper. Nothing a company is doing should be a surprise to the general counsel’s office, and nothing in the E-Verify reports should read like a foreign language to the individuals charged with overseeing the system.

History is Cyclical

The pace of E-Verify implementation picked up incredibly in June of 2010 when the GSA announced a mass modification of all Federal Supply Schedule (FSS) contracts that mandated the incorporation of E-Verify. Federal contractors continued to do their best to comply promptly, but oversights and omissions were inevitable.

Almost three years later, things are quieter on the E-Verify front, but the obligations and risks remain. While Immigration and Customs Enforcement(ICE) certainly reviews E-Verify matters, we have seen few if any reviews of federal contractor programs. But this soon will change. DHS likely will refocus and retool its worksite with a particular focus on E-Verify and other types of immigration compliance if the system is made mandatory for all U.S. employers. After all, USCIS no longer will have to sell its system. Everyone will buy it; there is no one else to buy it from, and there will be no choice but to buy it. It will be just a matter of when one buys. Government contractors, as the first purchasers of E-Verify, should expect to be among the first non-compliance “examples” when the time comes.

The Realities of E-Verify for Federal Contractors

There is no doubt that E-Verify is a best practice. However, it is not a replacement for background checks and other post-employment screenings and safeguards monitoring the system. In fact, the E-Verify system is still very much prone to identity theft, and must internally be monitored for misuse and overall compliance. While the Government agrees that E-Verify usage creates a “rebuttable presumption” that a company has not knowingly hired an unauthorized alien, there still can be problems. In fact, employers may face civil and criminal liability if, based upon the totality of the circumstances, it can be established that they knowingly hired or continued to employ unauthorized workers. Remember, a federal contractor’s participation in E-Verify does not provide a safe harbor from worksite enforcement. The Department of Justice’s Office of Special Counsel (OSC) also takes E-Verify violations very seriously and continues to open investigations involving abuse of the system. Unlike its sister agencies OSC has taken a keen interest in reviewing E-Verify related matters. Most notably, many of the OSC’s investigations do not involve malice in intent but rather accidental misuse of the system.

Best Practices for Federal Contractor’s

While not an all-inclusive list, federal contractors would be well served by considering the following proactive steps:

  1. Provide bi-annual training to anyone who is a user in the system. As E-Verify ramps up its site visits and desk reviews, compliance is more important than ever. Ensure your I-9 compliance is also in shape, as the I-9 data feeds into the E-Verify system.
  2. Verify your company has a viable policy established to flow down the E-Verify requirement to your sub-contractors, vendors. E-Verify usage is a “flow down” requirement; prime contractors are required to take steps to ensure that subcontractors for services or construction of more than $3,000 also implement the rules. Regardless of the size of your company, verify this process and take the extra step of seeing how it works in practice.
  3. Create a sub-contractor verification system. While the scope of a prime contractor’s “flow down” responsibilities to subcontractors and identifying which subcontracts are subject to E-Verify were not clearly defined in the FAR regulation, many believe merely having a copy of the “E-Verify Enrollment Page” of the subcontractor will not be enough when things go wrong.
  4. Carefully review the E-Verify exemptions. Limited exemptions for COTS contracts, contracts where work is performed outside of the United States, and for employees with specific active security clearances exist but are often harder to segregate and rely on then general usage of E-Verify. Consistency is key in deciding when to use E-Verify.
  5. Review overall immigration and visa compliance. In today’s world, it is simply not acceptable for employers, particularly large ones, to rely on an “off-the-shelf” compliance approach. Policies, electronic I-9 and E-Verify systems all must be vetted and monitored. Audits that review overall immigration compliance programs should address E-Verify compliance risk factors. Moreover, an independently audited immigration compliance program, preserves attorney client privilege and could protect employers from debarment or involuntary suspension from the E-Verify program. Specifically such a review should include the company’s Form I-9s, visa processes and E-Verify reports.
  6. Review E-Verify Usage. Do not assume everything is working the way it is supposed to. Someone needs to roll up their sleeves, and get dirty; ensure all users are closing case correctly and ensure all users know how to process Tentative Non-Confirmation notices. Reviewing E-Verify reports should be an ongoing, frequently completed task for someone in the organization. If you use an electronic I-9 system, it is even more important that you review the status of cases as well as historical data as often as possible. E-Verify only works well if a company first understands the importance of Form I-9 compliance.
  7. Review your Memorandum of Understanding (MOU) with the USCIS. The E-Verify program requires companies to agree to certain conditions upon enrolling in the system via the MOU. Do not take these responsibilities lightly. Ensure the specifics of the E-Verify agreement are accurate and up to date. For example, does the company still have two hiring sites? Is the company no longer performing E-Verify from the centralized location noted in the MOU? Almost three years after the FAR E-Verify clause went into effect, we still run across government contractors that are not enrolled in the E-Verify program or not correctly enrolled. We also routinely run across large prime contractors that have not adequately implemented their E-Verify program and flow-down procedures.
  8. Consider the impact of E-Verify as it pertains to any Union presence the company may have. A careful review of the National Labor Relations Board (NLRB) claim that use of E-Verify should be bargained is something to be carefully reviewed by federal contractors and their affiliates.
  9. Ensure you track employees assigned to contracts if your entire workforce was not E-verified at the onset. It is critical to have someone charged with knowledge of which employees are assigned to a contract within the meaning of the regulations and a system in place to E-Verify any legacy employees that have not previously undergone verification.
  10. Review E-Verify in the context of your current corporate structure or in terms of a merger, acquisition or other restructuring. A careful assessment of a federal contractor E-Verify related responsibilities and the associated timelines involved during any restructuring must be carefully considered. It is also important to analyze which affiliated entities are considered under government contract for purposes of the E-Verify clause. An affiliate or subsidiary with a different EIN may not necessarily be subject to the E-Verify provisions.

Debarments and Other Penalties

Federal contractors will continue to be responsible for E-Verify compliance for the foreseeable future. The consequences of a failure to use the E-Verify program leading to the loss of current and future federal contracts should not be downplayed. Federal contractor compliance with the E-Verify MOU is a performance requirement under the terms of the federal contact. As such, termination of the contract for failure to perform is one potential consequence of noncompliance with the MOU. Suspension or debarment, of course, also may be a potential consequence where the violation suggests the contractor is not responsible. Indeed, the E-Verify program’s suspension and debarment enforcement activities are being ramped up. DHS already ranks high on the agency list for debarment numbers, leading with a significant number of non-procurement FAR debarments. In FY12, ICE alone debarred 142 businesses and 234 individuals. Federal contractors need to take this enforcement activity seriously as it likely will increase in the face of mandatory E-Verify.

In short, now is the time for companies proactively to review internal polices, perform the necessary risk assessments, conduct the Form I-9 exposure as well as anti-discrimination audits, and then take ownership of any changes or improvements that need to be made.

Department of State Releases June 2013 Visa Bulletin

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EB-2 category for all chargeable areas other than China and India remains current, with considerable forward movement—but continued backlog—in the EB-3 category for a second month in a row.

The U.S. Department of State (DOS) has released its June 2013 Visa Bulletin. The Visa Bulletin sets out per country priority date cutoffs that regulate the flow of adjustment of status (AOS) and consular immigrant visa applications. Foreign nationals may file applications to adjust their status to that of permanent resident or to obtain approval of an immigrant visa at a U.S. embassy or consulate abroad, provided that their priority dates are prior to the respective cutoff dates specified by the DOS.

What Does the June 2013 Visa Bulletin Say?

EB-1: All EB-1 categories remain current.

EB-2: Foreign nationals in the EB-2 category from all countries other than China and India remain current. A cutoff date of July 15, 2008, reflecting minor forward movement, has been imposed for foreign nationals in the EB-2 category from China. A cutoff date of September 1, 2004 remains in effect for foreign nationals in the EB-2 category from India.

EB-3: There is continued backlog in the EB-3 category for all countries, with considerable forward movement for EB-3 individuals chargeable to countries other than India and the Philippines.

The relevant priority date cutoffs for foreign nationals in the EB-3 category are as follows:

China: September 1, 2008 (forward movement of 275 days)

India: January 8, 2003 (forward movement of 17 days)
Mexico: September 1, 2008 (forward movement of 275 days)

Philippines: September 22, 2006 (forward movement of 7 days)

Rest of the World: September 1, 2008 (forward movement of 275 days)

Developments Affecting the EB-2 Employment-Based Category

Mexico, the Philippines, and the Rest of the World

In November 2012, the EB-2 category for individuals chargeable to all countries other than China and India became current. This meant that EB-2 individuals chargeable to countries other than China and India could file an AOS application or have the application approved on or after November 1, 2012. The June Visa Bulletin indicates that the EB-2 category will continue to remain current for these individuals through June 2013.

China

The June Visa Bulletin indicates a cutoff date of July 15, 2008 for EB-2 individuals chargeable to China. This means that EB-2 individuals chargeable to China with a priority date prior to July 15, 2008 may file an AOS application or have the application approved on or after June 1, 2013.

India

Since October 2012, the cutoff date for EB-2 individuals chargeable to India has been September 1, 2004. The June Visa Bulletin indicates no movement of this cutoff date. This means that EB-2 individuals chargeable to India with a priority date prior to September 1, 2004 may file an AOS application or have the application approved through June 2013.

Developments Affecting the EB-3 Employment-Based Category

The May Visa Bulletin announced that the cutoff dates for EB-3 individuals chargeable to most countries had advanced significantly in an attempt to generate demand and fully utilize the annual numerical limits for the category. The June Visa Bulletin indicates that the cutoff dates for EB-3 individuals chargeable to most countries have advanced significantly for a second month in a row. The June Visa Bulletin notes that this forward movement is not indicative of what can be expected in the future, and that rapid forward movement in cutoff dates is often followed by a dramatic increase in demand for numbers within the following three to six months. If such demand materializes, such movement in cutoff dates may slow, or stop, for a period of time.

China

The May Visa Bulletin indicated a cutoff date of December 1, 2007 for EB-3 individuals chargeable to China. The June Visa Bulletin indicates a cutoff date of September 1, 2008 for these individuals, reflecting forward movement of 275 days. This means that EB-3 individuals chargeable to China with a priority date prior to September 1, 2008 may file an AOS application or have the application approved on or after June 1, 2013.

India

Additionally, the May Visa Bulletin indicated a cutoff date of December 22, 2002 for EB-3 individuals chargeable to India. The June Visa Bulletin indicates a cutoff date of January 8, 2003 for these individuals, reflecting forward movement of 17 days. This means that EB-3 individuals chargeable to India with a priority date prior to January 8, 2003 may file an AOS application or have the application approved on or after June 1, 2013.

Rest of the World

The May Visa Bulletin also indicated a cutoff date of December 1, 2007 for EB-3 individuals chargeable to the Rest of the World. The June Visa Bulletin indicates a cutoff date of September 1, 2008 for these individuals, reflecting forward movement of 275 days. This means that individuals chargeable to all countries other than China and India with a priority date prior to September 1, 2008 may file an AOS application or have the application approved on or after June 1, 2013.

How This Affects You

Priority date cutoffs are assessed on a monthly basis by the DOS, based on anticipated demand. Cutoff dates can move forward or backward or remain static. Employers and employees should take the immigrant visa backlogs into account in their long-term planning and take measures to mitigate their effects. To see the June 2013 Visa Bulletin in its entirety, please visit the DOS website here.

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Travel Alert: Students and H-1B Visa Cap

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Now that the stress and anxiety of H-1B cap is over, F-1 students whose H-1B petitions have been selected and are pending (or even approved) are likely wondering if they can travel this summer. It appears that the answer to that question is ‘no’ for F-1 students who are relying on the cap-gap provision. The cap-gap provision automatically extends F-1 status and employment authorization until October 1, 2013 for those F-1 students whose H-1B cap petition was filed before their F-1 status expired.

Current USCIS guidance indicates that F-1 students will lose cap-gap benefits if they travel internationally during the cap-gap period. This means that if an F-1 student travels outside the United States during the cap-gap extension period, he or she will not be able to return to the United States in valid F-1 status and will need to wait until September 2013 to re-enter the United States in H-1B status.

Because an H-1B beneficiary may enter the United States up to 10 days prior to the start date of their approved H-1B visa period, F-1 visa holders who wish to travel may take a trip in September so that they can apply for the H-1B visa at a U.S. consular post abroad and return to the United States on or after September 20. However, it should also be noted that the earliest that the foreign national can start employment in H-1B status is October 1, 2013.

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U.S. Citizenship and Immigration Services (USCIS) EB-5 Engagement with Securities and Exchange Commission

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On April 3, 2013, representatives from the Staff of the Securities and Exchange Commission (SEC) participated with the U.S. Citizenship and Immigration Services (USCIS) in an EB-5 stakeholder conference call opened by Rob Silvers, counsel to the USCIS Director Mayorkas.  Present from the Staff were representatives from four Divisions – Corporation Finance, Trading and Markets, Investment Management and Enforcement.  The call was intended to provide general information to stakeholders.

In general, the Staff members confirmed the application of various securities laws to EB-5 programs.  For many in the EB-5 industry, the views expressed will be unwelcome news, as many have been operating under the assumption that some or all of the securities laws that apply to other investment programs do not apply to EB-5 programs.  For experienced securities lawyers working on EB-5 programs, however, the call broke no new ground but did serve as a confirmation of the advice we have been giving our clients.

Some notes about SEC Staff Interpretations

The Staff members on the call provided the standard disclaimer given in every public talk — that the views expressed represented their own and not necessarily those of the Commission as a whole.  Despite this disclaimer, Staff members are careful in their public speaking, and generally speak only considered views that have been adopted by the senior leadership of the SEC.

When considering Staff interpretations, it is important to note the structure of United States securities laws.  Federal securities laws represent various statutes passed by Congress and amended from time to time.[1] These laws frequently call upon the SEC to adopt formal implementing regulations.  In addition, the SEC Staff routinely provides informal interpretations of the securities laws and the regulations through various means.  In addition, all fifty states have their own securities laws, known as blue sky laws, and except in limited instances of federal preemption, these blue sky laws apply in addition to the federal laws.  Experienced securities lawyers will advise clients based on all of these sources of law.  However, not all of these sources of law have the same legal weight, and in particular, the views of the Staff do not necessarily represent positions that would ultimately prevail in a civil lawsuit brought by the SEC or a private plaintiff, or in a criminal action brought by the Department of Justice.  Nonetheless, the Staff’s views are often persuasive in court, and at a minimum, one can expect substantial legal expenses and regulatory entanglement from operating in a manner contrary to Staff interpretations.

Various speaker notes

The Division of Corporate Finance representative confirmed that federal securities laws apply to transactions in securities.  The SEC noted that the definition of “securities” is very broad, and likely includes most if not all of the investment vehicles used in the EB‑5 program.  The Securities Act of 1933 provides that all offers and sales of securities must be registered with the SEC unless an exemption from registration applies.  EB-5 offerings are frequently conducted in accordance with two exemptions — Regulation D, applicable to private placements of securities, and/or Regulation S, applicable to sales to non-U.S. persons.[2] Each of these exemptions has a number of requirements that must be satisfied.  The representative discussed an important condition of Regulation D – the prohibition on general solicitation (for example, advertising, publicly accessible web sites or conducting seminars where the general public is invited).  The representative noted that the SEC has proposed regulations under the JOBS Act to lift the ban on general solicitation in certain circumstances, but until such regulations are adopted, general solicitation will disqualify an offering from Regulation D.  The representative could not predict when such regulations will be adopted.  The representative noted an important caveat that an exemption from registration requirements does not mean that the offering is exempt from other provisions of the securities laws.  In particular, exempt offerings are subject to the anti-fraud provisions of the securities laws.

The Trading and Market Division representative focused on the laws requiring persons engaged in the business of engaged in the business of effecting transactions in securities for the account of others to register as broker-dealers.  The representative expressed a broad view of the types of conduct that trigger the requirement to register as a broker-dealer.  The representatives stated that in general, if someone is involved in the sale and offering of EB-5 investments and is compensated based on the success of the offering – a “salesman’s interest” in the program – that person is most likely engaging in brokerage activities which trigger the obligation to register as a broker-dealer under the Securities Exchange Act of 1934 (1934 Act).  The representative also provided a very broad view of the jurisdiction of the SEC to enforce broker-dealer requirements for persons soliciting foreign investments.  In the view of the SEC Staff, any activities using United States means of commerce, such as telephone calls made from the U.S., are likely sufficient to invoke U.S. jurisdiction for activities that require broker-dealer registration, regardless of whether the investors are foreign persons.  In response to questions, the Staff representatives noted that:

  • the Staff does not believe that the Supreme Court’s decision in Morrison v. National Australia Bank, Ltd. limiting the extra-territorial application of another section of the 1934 Act is an impediment to their enforcement activities, and
  • the broker-deal registration laws apply equally to solicitation of issuers (as opposed to investors) from within the United States.

The Trading and Market Division representative also discussed the applicability of broker-dealer registration laws to persons employed by Regional Centers to conduct offerings for the account of the Regional Center, and the availability of Rule 3a4-1 as a non-exclusive exemption from registration requirements for such persons.

The Investment Management Division representative addressed applicability of the Investment Advisers Act of 1940 and the Investment Company Act of 1940 to EB-5 programs.  The representative noted that individuals and entities that do not fall into the broker-dealer category will often be required to register under the Investment Advisers Act if they provide investment advice for compensation.  The representative noted that anti-fraud provisions apply to investment advisors, and investment advisers have fiduciary duties to their clients, including the duty to disclose all conflicts of interest.

The representative also stated that Regional Centers which pool investments for third parties and that hold securities likely are investment companies that need to register under the Investment Company Act absent an available exemption.  The representative discussed three exemptions that might be available to Regional Centers:

  • the 3(c)(1) exemption for an investment company with no more than 100 investors that is not making a public offering;
  • the 3(c)(7) exemption for qualified purchases, who must meet a significantly higher net worth standard than accredited investors; and
  • the 3(a)(2) exemption for government securities, which may apply if the Regional Center is sponsored by a governmental agency.

The Division of Enforcement representative discussed the February 2013 enforcement action brought against the Chicago Convention Center project.  The representative focused on the allegations in that case that the defendants made false representations to USCIS as part of a scheme to defraud investors.  He noted that false statements about the ability of a project to create jobs may be fraudulent under the securities laws.  He also noted that anti-fraud provisions apply not only to misstatements but also to omissions of material information.

[1] Examples of amendments include the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Jumpstart Our Business Startups (JOBS) Act.

[2] The SEC did not speak about state blue sky laws, as those are outside the SEC’s jurisdiction.  However, we note that some states do not have any exemption for programs that are excluded from federal registration requirements under Regulation S.  This is currently a significant issue for programs that do not comply with Regulation D, such as by employing general solicitation in the offer and sale of the securities.

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Another Circuit Jumps on the Anti – “Departure Bar” Bandwagon

Published recently in The National Law Review an article regarding the “Departure Bar” by William J. Flynn, III of Fowler White Boggs P.A.:

Recently, the Tenth Circuit became the seventh circuit court to reject the“departure bar” to motions to reopen found at 8 C.F.R. § 1003.2(d). The departure bar essentially prohibits noncitizens from pursuing motions to reopen or reconsider in removal proceedings after having departed from the United States. The Tenth Circuit had been the only court to issue a precedent decision in favor of the bar, but overturned that decision in a recent rehearing en banc. Contreras-Bocanegra v. Holder, 629 F.3d 1170 (10th Cir. 2010).

The Third, Fourth, Sixth, and Ninth Circuits, among others, had all specifically found the bar unlawful. See e.g. Reyes-Torres v. Holder, 645 F.3d 1073 (9th Cir. 2011). These courts have held, and many immigrants’ rights groups have argued, that the regulation deprives immigration judges and the Board of Immigration Appeals the authority to adjudicate motions to remedy wrongfully executed deportations. Additionally, the regulation conflicts with a noncitizens’ statutory right to pursue reopening.

Although many courts have outright rejected the departure bar, the issue still remains open in many other circuits, the 11th included. The closest the Eleventh Circuit has come to making such a decision was in Ugokwe v. U.S. Attorney General, 453 F.3d 1325 (11th Cir. 2006), in which it held that the filing of a motion to reopen tolls the period of voluntary departure, so as to prevent a subsequent departure from invalidating the motion. Nevertheless, the Ugokwecourt did side with the prior, similar holdings of the Ninth and Third Circuits, and so there remains hope that the Eleventh Circuit could do the same with respect to the legality of the departure bar, should the issue arise.

The full text of the Contreras-Bocanegra decision can be found here.

©2002-2012 Fowler White Boggs P.A.

USCIS Introduces Redesigned Employment Authorization Document: Form I-766

Recently posted in the National Law Review an article by attorneys Eric S. Bord , A. James Vázquez-Azpiri , Lance Director Nagel, Lisa Stephanian Burton of Morgan, Lewis & Bockius LLP regarding a redesigned Form I-766, Employment Authorization Document:

 

U.S. Citizenship and Immigration Services (USCIS) has released a redesigned Form I-766, Employment Authorization Document, commonly referred to as an “EAD card.” Part of USCIS’s larger effort to eliminate document fraud, the redesign enhances the card’s security features to discourage tampering and misuse. The enhanced security measures include optically variable ink along the top of the card and a holographic image on the front of the card.

How does the redesigned EAD card affect employers’ Form I-9 compliance obligations?

The redesigned EAD card serves the same purpose as the prior version and will remain a “List A” document for employment verification purposes. “List A” documents establish a worker’s identity as well as his or her authorization to work in the United States.

An applicant for employment may still present a valid and unexpired prior version of Form I-766/EAD card to satisfy Form I-9 document requirements. The redesigned Form I-766 will be phased in incrementally. Foreign nationals in possession of the prior version will only receive the redesigned EAD card to replace a lost or stolen card or upon a card’s expiration. A foreign national can apply for a new card no more than 120 days prior to expiration date.

Copyright © 2011 by Morgan, Lewis & Bockius LLP. All Rights Reserved.

Department of State Releases October 2011 Visa Bulletin

Recently posted in the National Law Review an article by Eleanor Pelta, Eric S. Bord and A. James Vázquez-Azpiri of Morgan, Lewis & Bockius LLP regarding the DOS October 2011 Visa Bulletin:

The U.S. Department of State (DOS) has released its October 2011 Visa Bulletin. The Visa Bulletin sets out per country priority date cutoffs that regulate the flow of adjustment of status (AOS) and consular immigrant visa applications. Foreign nationals may file applications to adjust their status to that of permanent resident, or to obtain approval of an immigrant visa application at an American embassy or consulate abroad, provided that their priority dates are prior to the cutoff dates specified by the DOS.

What Does the October 2011 Bulletin Say?

EB-1: All EB-1 categories remain current.

EB-2: Priority dates remain current for foreign nationals in the EB-2 category from all countries except China and India.

The relevant priority date cutoffs for Indian and Chinese nationals are as follows:

China: July 15, 2007 (forward movement of three months)

India: July 15, 2007 (forward movement of three months)

EB-3: There is continued backlog in the EB-3 category.

The relevant priority date cutoffs for foreign nationals in the EB-3 category are as follows:

China: August 8, 2004 (forward movement of three weeks)

India: July 15, 2002 (forward movement of one week)

Mexico: December 8, 2005 (forward movement of two weeks)

Philippines: December 8, 2005 (forward movement of two weeks)

Rest of the World: December 8, 2005 (forward movement of two weeks)

How This Affects You

Priority date cutoffs are assessed on a monthly basis by the DOS, based on anticipated demand. Cutoff dates can move forward or backward, or remain static and unchanged. Employers and employees should take the immigrant visa backlogs into account in their long-term planning, and take measures to mitigate their effects. To see the October 2011 Visa Bulletin in its entirety, please visit the DOS website at http://www.travel.state.gov/visa/bulletin/bulletin_5560.html.

Copyright © 2011 by Morgan, Lewis & Bockius LLP. All Rights Reserved.

Department of State Releases September 2011 Visa Bulletin

Recently posted in the National Law Review an article by Eleanor Pelta, Eric S. Bord, A. James Vázquez-Azpiri, and Lance Director Nagel of Morgan, Lewis & Bockius LLP regarding DOS recent Visa Bulletin which sets out per country priority date cutoffs that regulate the flow of adjustment of status (AOS) and consular immigrant visa applications.

The U.S. Department of State (DOS) has released its September 2011 Visa Bulletin. The Visa Bulletin sets out per country priority date cutoffs that regulate the flow of adjustment of status (AOS) and consular immigrant visa applications. Foreign nationals may file applications to adjust their status to that of permanent resident, or to obtain approval of an immigrant visa application at an American embassy or consulate abroad, provided that their priority dates are prior to the cutoff dates specified by the DOS.

What Does the September 2011 Bulletin Say?

EB-1: All EB-1 categories remain current.

EB-2: Priority dates remain current for foreign nationals in the EB-2 category from all countries except China and India.

The relevant priority date cutoffs for Indian and Chinese nationals are as follows:

China: April 15, 2007 (no movement)
India: April 15, 2007 (no movement)

EB-3: There is continued backlog in the EB-3 category.

The relevant priority date cutoffs for foreign nationals in the EB-3 category are as follows:

China: July 15, 2004 (forward movement of one week)
India: July 8, 2002 (forward movement of five weeks)
Mexico: November 22, 2005 (forward movement of three weeks)
Philippines: November 22, 2005 (forward movement of three weeks)
Rest of the World: November 22, 2005 (forward movement of three weeks)

How This Affects You

Priority date cutoffs are assessed on a monthly basis by the DOS, based on anticipated demand. Cutoff dates can move forward or backward, or remain static and unchanged. Employers and employees should take the immigrant visa backlogs into account in their long-term planning, and take measures to mitigate their effects. To see the September 2011 Visa Bulletin in its entirety, please visit the DOS website at http://www.travel.state.gov/visa/bulletin/bulletin_5542.html.

Copyright © 2011 by Morgan, Lewis & Bockius LLP. All Rights Reserved.