Tag: Immigration

Department Of State Releases September 2015 Visa Bulletin

Cutoff dates for EB-2 China and India retrogress to January 1, 2006. Cutoff dates for EB-3 China, India, and the Philippines advance to December 22, 2004.

The US Department of State (DOS) has released its September 2015 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 statuses to that of permanent residents or to obtain approval of immigrant visas at a US embassy or consulate abroad, provided that their priority dates are prior to the respective cutoff dates specified by the DOS.

What Does The September 2015 Visa Bulletin Say?

The September 2015 Visa Bulletin shows a large retrogression of visa numbers for EB-2 China and India, and an advancement of six and a half months for the EB-3 China, Philippines, and India allotments. The cutoff date for F2A applicants in China, India, Philippines, and the worldwide categories will advance by two and a half months in September. The cutoff date for F2A applicants from Mexico will advance by three months.

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

EB-2: The cutoff date for applicants in the EB-2 category chargeable to China will retrogress by nearly eight years, and the cutoff date for applicants in the EB-2 category chargeable to India will retrogress by two years and nine months. For both categories, the cutoff date has been set at January 1, 2006. The EB-2 category for all other countries will remain current.

EB-3: The cutoff date for applicants in the EB-3 category chargeable to the worldwide category and Mexico will advance by one month to August 15, 2015. The cutoff date for applicants in the EB-3 category chargeable to China, India, and the Philippines will advance by six and a half months to December 22, 2004.

EB-5: The cutoff date for applicants in the EB-5 category chargeable to China will advance by three weeks to September 22, 2013. The cutoff dates for applicants in the EB-5 category chargeable to the worldwide category remain current.

The relevant priority date cutoffs for foreign nationals in the EB-2 category are as follows:

China: January 1, 2006 (retrogression of 2,905 days)
India: January 1, 2006 (retrogression of 1,004 days)
Mexico: Current
Philippines: Current
Rest of the World: Current

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

China: December 22, 2004 (forward movement of 204 days)
India: December 22, 2004 (forward movement of 204 days)
Mexico: August 15, 2015 (forward movement of 31 days)
Philippines: December 22, 2004 (forward movement of 204 days)
Rest of the World: August 15, 2015 (forward movement of 31 days)

The relevant priority date cutoffs for foreign nationals in the EB-5 category are as follows:

China: September 22, 2013 (forward movement of 21 days)
Rest of the World: Current

Developments Affecting The Eb-2 Employment-Based Category

Mexico, the Philippines, and the Rest of the World

The EB-2 category for applicants chargeable to all countries other than China and India has been current since November 2012. The September Visa Bulletin indicates no change to this trend. This means that applicants in the EB-2 category chargeable to all countries other than China and India may continue to file AOS applications or have applications approved through September 2015.

China

The August Visa Bulletin indicated a cutoff date of December 15, 2013 for EB-2 applicants chargeable to China. The September Visa Bulletin indicates a cutoff date of January 1, 2006, reflecting a retrogression of 2,905 days (nearly eight years). This means that applicants in the EB-2 category chargeable to China with a priority date prior to January 1, 2006 may file AOS applications or have applications approved in September 2015.

India

The August Visa Bulletin indicated a cutoff date of October 1, 2008 for EB-2 applicants chargeable to India. The September Visa Bulletin indicates a cutoff date of January 1, 2006, a retrogression of two years and nine months. This means that applicants in the EB-2 category chargeable to India with a priority date prior to January 1, 2006 may file AOS applications or have applications approved in September 2015.

Developments Affecting The Eb-3 Employment-Based Category

China

The August Visa Bulletin indicated a cutoff date of June 1, 2004 for EB-3 applicants chargeable to China. In September, the cutoff date for EB-3 applicants chargeable to China will advance by six and a half months to December 22, 2004. This means that applicants in the EB-3 category chargeable to China with a priority date prior to December 22, 2004 may file AOS applications or have applications approved in September 2015.

India

The August Visa Bulletin indicated a cutoff date of June 1, 2004 for EB-3 applicants chargeable to India. In September, the cutoff date for EB-3 applicants chargeable to China will advance by six and a half months to December 22, 2004. This means that applicants in the EB-3 category chargeable to India with a priority date prior to December 22, 2004 may file AOS applications or have applications approved in September 2015.

The Philippines

The August Visa Bulletin indicated a cutoff date of June 1, 2004 for EB-3 applicants chargeable to the Philippines. In September, the cutoff date for EB-3 applicants chargeable to China will advance by six and a half months to December 22, 2004. This means that applicants in the EB-3 category chargeable to the Philippines with a priority date prior to December 22, 2004 may file AOS applications or have applications approved in September 2015.

Mexico

The August Visa Bulletin indicated a cutoff date of July 15, 2015 for EB-3 applicants chargeable to Mexico. The September Visa Bulletin indicates a cutoff date of August 15, 2015, reflecting forward movement of one month. This means that applicants in the EB-3 category chargeable to Mexico with a priority date prior to August 15, 2015 may file AOS applications or have applications approved in September 2015.

Rest of the World

The August Visa Bulletin indicated a cutoff date of July 15, 2015 for EB-3 applicants chargeable to the worldwide category. The September Visa Bulletin indicates a cutoff date of August 15, 2015, reflecting forward movement of one month. This means that applicants in the EB-3 category chargeable to the worldwide category with a priority date prior to August 15, 2015 may file AOS applications or have applications approved in September 2015.

Developments Affecting The F2a Family-Sponsored Category

The August Visa Bulletin indicated a cutoff date of December 15, 2013 for F2A applicants from Mexico. The September Visa Bulletin indicates a cutoff date of February 1, 2014, an advancement of three months. This means that applicants from Mexico with a priority date prior to February 1, 2014 may file AOS applications or have applications approved in September 2015.

The August Visa Bulletin indicated a cutoff date of December 15, 2013 for F2A applicants from all other countries. The September Visa Bulletin indicates a cutoff date of March 1, 2014, reflecting forward movement of two and a half months. This means that F2A applicants from all other countries with a priority date prior to March 1, 2014 may file AOS applications or have applications approved in September 2015.

Developments In The Coming Months

It is anticipated that EB-2 visa numbers for China and India will advance again at the start of the 2016 fiscal year (October).

Regarding the Diversity Visa (“DV”) program, the US Department of State has warned that “[e]ntitlement to immigrant status in the Diversity Visa (“DV”) category lasts only through the end of the fiscal (visa) year for which the applicant is selected in the lottery. The year of entitlement for all applicants registered for the DV-2015 program ends as of September 30, 2015. . . Numbers could be exhausted prior to September 30.”

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, 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 September 2015 Visa Bulletin in its entirety, please visit the DOS Website.

ARTICLE BY Eleanor Pelta & Eric S. Bord of Morgan, Lewis & Bockius LLP

Copyright © 2015 by Morgan, Lewis & Bockius LLP. All Rights Reserved.

Spring Forward, but Fall Behind: The September 2015 Visa Bulletin Brings Unwelcome News for Indian and Chinese “Green Card” Applicants in the Employment-Based Second Preference Category

Today, the Department of State (DOS) released the last visa bulletin for the 2015 fiscal year. Notably, major retrogressions are seen in the employment-based second preference category (EB-2) for both India and China. The EB-2 India category has retrogressed from October 1, 2008 toJanuary 1, 2006. The EB-2 China category has retrogressed almost eight years, from December 15, 2013 to January 1, 2006.

The employment-based third preference category (EB-3) for Mexico and Worldwide advances by one month. EB-3 China advances by six months and EB-3 India also saw an almost six- month advancement as well.

September is the last month of the government’s fiscal year and DOS has evaluated how many visa numbers are left to be issued. After performing this calculation, DOS adjusts the cutoff dates accordingly. Over the past six months, we have seen significant forward movement in the EB-2 category for India and China, and as such more petitions were filed and numbers were used. The retrogression stops this forward momentum for September, however once the new fiscal year begins October 1st more visa numbers should become available.

ARTICLE BY Michele D. Frangella of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

©1994-2015 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.

USCIS issued Draft Requests for Evidence Template for L-1B Petitions

USCISIn recent years, the USCIS has issued an increasing number of denials and Requests for Evidence (RFE) for L-1B specialized knowledge employees. As defined by regulations, specialized knowledge is special knowledge possessed by an individual of the petitioning organization’s product, service, research, equipment, techniques, management, or other interests and its application in international markets, or an advanced level of knowledge or expertise in the organization’s processes and procedures. The RFEs were extensive and appeared to be “boiler-plate,” sometimes with no indication in the request issued that the examiner had reviewed the evidence that was submitted with the initial filing. The trend added burden to employers with the extra time and cost associated with responding to the extensive RFEs, which could result in unforeseen delays severely affecting projects and impeding on U.S. employer’s ability to conduct business or fulfill projects, contracts, and deadlines.

Currently, there is no standardized L-1B template for RFEs. In March 2015, USCIS issued guidance on the adjudication process for L-1B petitions in an L-1B Adjudications Policy Memorandum, PM-602-0111 (hereinafter L-1B Policy Memo). The March L-1B Policy Memo itself is a draft and is not set to go into effect until Aug. 31, 2015. Despite the fact that the L-1B Policy Memo is not yet finalized, USCIS subsequently requested comments (which were due on July 31, 2015) on the draft RFE Template for L-1B petitions. The draft RFE Template reflects changes outlined in the March L-1B Policy Memo and includes a list of evidence that could be used to established that the beneficiary has gained specialized knowledge as well as other threshold criteria for L-1B petitions including evidence that the beneficiary has met the one year of qualifying employment abroad; both the U.S. and foreign entities have a qualifying relationship and are actively doing business; and guidance on how to determine whether a beneficiary assigned to an off-site worksite with an unaffiliated employer remains eligible for L-1 classification.

The RFE Template indicates that merely stating the beneficiary’s knowledge is not as strong as providing documentary evidence to establish the beneficiary possesses specialized knowledge. The employer has the burden of providing documentary evidence to show that the beneficiary attained the specialized knowledge through prior education, training, and employment and comparing the beneficiary’s knowledge to that of other employees and workers in the same field. The list of “other evidence” as outlined in the RFE Template includes:

· An explanation of the beneficiary’s knowledge or expertise. Please identify the beneficiary’s knowledge as either “special” and/or “advanced.”

· Documentation of training, work experience, or education establishing the number of years the individual has been utilizing or developing the claimed specialized knowledge as an employee of the organization or in the industry;

· Evidence of the impact, if any, the transfer of the individual would have on the organization’s U.S. operations;

· Evidence that the alien is qualified to contribute to the U.S. operation’s knowledge of foreign operating conditions as a result of knowledge not generally found in the industry or the petitioning organization’s U.S. operations;

· Contracts, statements of work, or other documentation that shows that the beneficiary possesses knowledge that is particularly beneficial to the organization’s competitiveness in the marketplace;

· Evidence, such as correspondence or reports, establishing that the beneficiary has been employed abroad in a capacity involving assignments that have significantly enhanced the organization’s productivity, competitiveness, image, or financial position;

· Personnel or in-house training records that establish that the beneficiary’s claimed specialized knowledge normally can be gained only through prior experience or training with that employer;

· Curricula and training manuals for internal training courses, financial documents, or other evidence that may demonstrate that the beneficiary possesses knowledge of a product or process that cannot be transferred or taught to another individual without significant economic cost or inconvenience;

· Evidence of patents, trademarks, licenses, or contracts awarded to the organization based on the beneficiary’s work, or similar evidence that the beneficiary has knowledge of a process or a product that either is sophisticated or complex, or of a highly technical nature, although not necessarily proprietary or unique to the petitioning organization;

· Payroll documents, federal or state wage statements, resumes, organizational charts, or similar evidence documenting the positions held and the wages paid to the beneficiary and parallel employees in the organization; and

· Any other evidence that shows the beneficiary has specialized knowledge.

ARTICLE BY Kristin Bolayir & Ian R. Macdonald of Greenberg Traurig, LLP

©2015 Greenberg Traurig, LLP. All rights reserved.

H-1B Update – New Petition Required When Work Location Changes – the World is Global, but U.S. Immigration is Local

While the 21st Century is a time of globalization, a time where with telecommuting and virtual offices there is a re-examination of whether there is still significance to your geographical location, United States Citizenship and Immigration Services (USCIS) is decidedly “retro” in firmly planting its feet in the 20th Century, pursuant to an AAO decision (Matter of Simeio Solutions, LLC) published April 9, 2015, which declares that any worksite change which triggers the requirement to obtain a labor condition attestation requires an employer to amend the underlying H-1B petition.

The real irony is that this was never USCIS or former INS policy, even during such times when geographical location was more meaningful than it is now.

USCIS initially intended to apply this policy retroactively. However, it backed off and in guidance published on July 21, 2015, coyly announced that it would “generally not take adverse action against employers that failed to file amended petitions”, so you as an employer are now left to decide what “generally” means. The guidance provides a new deadline of January 15, 2016 for those that decide to file amended petitions and for those where the geographical location change occurs between April 9, 2015 to August 19, 2015.

I guess those companies that have a high volume of geographical changes will do the cost benefit analysis and rely on “generally” and not amend. Other companies where volume of change is much more modest may likely choose to play it safe and file amended petitions.

This is a sorry state of affairs where a government agency relies on “ambiguity” as a tool of enforcement. USCIS has always had a hard time finding a way to deal with change and what constitutes a material change and it is understandable that as an agency, it feels that the difficulty in tracking where an H-1B employee undercuts its enforcement prerogatives, such as its FDNS “site visit” program.

The Simeio case itself involved an FDNS site visit where the H-1B beneficiary was not found at the designated site, accidentally discovered, only because of the site visit.

However, distorting the H-1B program by requiring the filing of an amended petition every time an employee moves from one location to the other seems to be a clumsy, cumbersome and inefficient way to notify USCIS of a geographical change in light of the burden of this process, including filing fees, legal fees, and document preparation. All this just to notify USCIS of a relatively simple, routine change in the course of business!

The AR-11 Model

Ironically, USCIS already has a program in place, which requires nonimmigrants in the United States to notify the agency when they change geographic locations via a simple form completed on paper or online, Form AR-11. The program works quite well. I see no reason why this very same concept cannot be adopted to a notification requirement for an H-1 job location change, avoiding the disproportionate burden placed upon all by insisting on an H-1B amendment every time a there is a change in job locations .

Maybe then, USCIS can protect its enforcement prerogative while still remaining a citizen of the 21st Century!

ARTICLE BY David Grunblatt of Proskauer Rose LLP
© 2015 Proskauer Rose LLP.

“3-Year” Deferred Action for Childhood Arrivals EADs Must Be Returned: Immigration

USCIS announced that Deferred Action for Childhood Arrivals (DACA) recipients of employment authorizations documents (EAD) after February 16, 2015, with validity longer than two years, were “likely mistakenly issued and must be returned.” According to a USCIS Factsheet:

“Individuals who are required to return three-year EADs and have not done so will be contacted by USCIS by phone or in-person. For the purpose of retrieving these three-year EADs, USCIS may visit the homes of those individuals who have not yet returned their invalid 3-year EAD or responded to USCIS. When contacting individuals in person, the USCIS employees will show the individuals their credentials. USCIS will make every attempt to call the individual in advance of the visit…

The reason for this action is that, after a court order in Texas v. United States, No. B-14-254 (S.D. Tex.) was issued, USCIS could approve DACA deferred action requests and related employment authorization applications only for two-year periods.”

EADs mailed before February 16, 2015 are not subject to this requirement as they were issued before the court injunction.

Further information and contact details can be found on the USCIS factsheet.

ARTICLE BY Immigration Practice Mintz Levin of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
©1994-2015 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.

Customs and Border Protection to Begin Collecting Exit Data on Certain Foreign Nationals

U.S. Customs and Border Protection (CBP) has announced that it will begin collecting biographic and biometric data from some foreign national travelers in a test program when they depart the United States at Atlanta’s Hartsfield-Jackson International Airport

The biometric and departure data will be collected through use of an “enhanced mobile device” that will allow CBP to record exit information efficiently and streamline inspection queries for foreign national travelers. All test passengers will have their fingerprints and passports scanned by a CBP Officer using the mobile device on the loading bridge of selected flights departing the U.S. Each traveler’s departure data will be matched to the digital biometrics information that was collected when he or she arrived in the country. This information will be stored and managed by the U.S. Department of Homeland Security (DHS). Only non-U.S. citizens will have their information collected and processed.

The test program is expected run through June 2016, eventually expanding beyond Atlanta into the following major air travel ports: Chicago, Dallas, Houston, Los Angeles, Miami, Newark, New York, San Francisco, and Washington-Dulles.

ARTICLE BY Sujata Ajmera of Jackson Lewis P.C.
Jackson Lewis P.C. © 2015

August Visa Bulletin – Monthly ‘Check-In’ with Charlie Oppenheim, Chief of the Visa Control and Reporting Division, DOS

Charles Oppenheim, chief of the Visa Control and Reporting Division of the U.S. Department of State, held his monthly meeting with AILA to shed light on the data in the recently released August Visa Bulletin.  Among the highlights of meeting are the following:

1. China EB-3 Retrogression.  The August Visa Bulletin shows that the EB-3 China category will have a cut-off date of June 1, 2004, a retrogression of seven years.  One reason for this retrogression is that earlier in the year the EB-3 China category had advanced which generated sufficient demand to bring the overall number within the allowable annual limit.  According to Charlie, the good news is that this category will progress forward in the beginning of the new fiscal year to a 2010 or maybe even a 2011 cut-off date.

2. Other EB-3 News.  EB-3 Other Worker will retrogress to Jan. 1, 2004 (an additional two-year retrogression from where it is currently).  There is a potential that the EB-3 category for China, India and the Philippines will move slightly forward (a few months) in September.  EB-3 Worldwide and Mexico, Charlie predicts, will continue to advance in September, but hold steady for a few months at the beginning of the new fiscal year in October 2015.

3. EB-2 China and India. As predicted earlier by Charlie, EB-2 India remained unchanged and is not likely to change until October.  EB-2 China moved forward to Dec. 15, 2003, a move of 2 1/2 months.  This date is likely to move slightly forward or remain unchanged for September

4. F-2A Worldwide.  Due to lack of demand in this category (Spouses and Children of Permanent Residents), the cut-off date for F-2A worldwide is advancing and is likely to continue to advance until demand increases.  The worldwide August cut-off date for this category is Dec. 15, 2013

ARTICLE BY Shaoul Aslan of Greenberg Traurig, LLP

©2015 Greenberg Traurig, LLP. All rights reserved.

White House Releases ‘Modernizing & Streamlining Our Legal Immigration System for the 21st Century’

The White House has just released a new report titled “Modernizing & Streamlining our Legal Immigration System for the 21st Century,” which builds on the President’s executive actions of Nov. 21, 2014. This report provides for plans to improve the immigration system to modernize and streamline the processes for certain visa categories and to address security issues. The report also calls for plans to strengthen the United States’ humanitarian system by providing benefits for certain individuals.

The report specifically addresses the EB-5 program in important ways. The White House acknowledges that the U.S. Immigration and Citizenship Services (USCIS) has undergone significant changes in an effort to enhance the program’s processes and to improve its integrity, including the creation of a new team with expertise in economic analysis and specific EB-5 components, as well as the issuance of updated policy guidance to provide better clarity as to program requirements.

The White House recognizes that there is a need for additional enhancements and improvements to address the integrity and impact of the EB-5 program. Specifically, the White House recommends additional measures including enhancements to avoid fraud, abuse, and criminal activity; measures to ensure that the program is reaching its full potential in terms of job creation and economic growth; and recommendations to streamline the program to make it efficient and stable for participants in the program, including petitioners and Regional Centers.

The report announces that Homeland Security Secretary Jeh Johnson has adopted the creation of a new protocol, announced previously, intended to insulate the EB-5 program from “the reality or perception of improper outside influence.” Further, the report reiterates the Secretary’s recommendations to Congress to provide the department with authority to deny or revoke cases based upon serious misconduct; prohibit individuals with past criminal or securities-related violations from program participation, and a mechanism to ensure regional center compliance with securities laws. It is notable that these recommendations are included in the bill that Senator Leahy and Senator Grassley introduced on June 3, 2015.

The report makes two specific recommendations. First, it announces that DHS will pursue rulemaking to improve program integrity, including conflict-of-interest disclosures by Regional Center principals, enhanced background checks and public disclosure requirements, and an increase in the minimum qualifying level of investment. The department will also pursue new regulations to improve adjudication of Regional Center applications. Second, the report announces that the State Department will amend guidance in the Foreign Affairs Manual to permit potential EB-5 investors to obtain visitor visas for the purpose of evaluating investment.

In addition, DHS will propose a parole program for entrepreneurs who “provide a significant public benefit.” The examples of “significant public benefit” include innovation and job creation through new technology development.

ARTICLE BY Kristen W. Ng & Matthew Virkstis of Greenberg Traurig, LLP

©2015 Greenberg Traurig, LLP. All rights reserved.

White House Releases ‘Modernizing & Streamlining Our Legal Immigration System for the 21st Century’

The White House has just released a new report titled “Modernizing & Streamlining our Legal Immigration System for the 21st Century,” which builds on the President’s executive actions of Nov. 21, 2014. This report provides for plans to improve the immigration system to modernize and streamline the processes for certain visa categories and to address security issues. The report also calls for plans to strengthen the United States’ humanitarian system by providing benefits for certain individuals.

The report specifically addresses the EB-5 program in important ways. The White House acknowledges that the U.S. Immigration and Citizenship Services (USCIS) has undergone significant changes in an effort to enhance the program’s processes and to improve its integrity, including the creation of a new team with expertise in economic analysis and specific EB-5 components, as well as the issuance of updated policy guidance to provide better clarity as to program requirements.

The White House recognizes that there is a need for additional enhancements and improvements to address the integrity and impact of the EB-5 program. Specifically, the White House recommends additional measures including enhancements to avoid fraud, abuse, and criminal activity; measures to ensure that the program is reaching its full potential in terms of job creation and economic growth; and recommendations to streamline the program to make it efficient and stable for participants in the program, including petitioners and Regional Centers.

The report announces that Homeland Security Secretary Jeh Johnson has adopted the creation of a new protocol, announced previously, intended to insulate the EB-5 program from “the reality or perception of improper outside influence.” Further, the report reiterates the Secretary’s recommendations to Congress to provide the department with authority to deny or revoke cases based upon serious misconduct; prohibit individuals with past criminal or securities-related violations from program participation, and a mechanism to ensure regional center compliance with securities laws. It is notable that these recommendations are included in the bill that Senator Leahy and Senator Grassley introduced on June 3, 2015.

The report makes two specific recommendations. First, it announces that DHS will pursue rulemaking to improve program integrity, including conflict-of-interest disclosures by Regional Center principals, enhanced background checks and public disclosure requirements, and an increase in the minimum qualifying level of investment. The department will also pursue new regulations to improve adjudication of Regional Center applications. Second, the report announces that the State Department will amend guidance in the Foreign Affairs Manual to permit potential EB-5 investors to obtain visitor visas for the purpose of evaluating investment.

In addition, DHS will propose a parole program for entrepreneurs who “provide a significant public benefit.” The examples of “significant public benefit” include innovation and job creation through new technology development.

ARTICLE BY Kristen W. Ng & Matthew Virkstis of Greenberg Traurig, LLP

©2015 Greenberg Traurig, LLP. All rights reserved.

Sunlight is the best disinfectant: SEC charges oil company for fraud on EB-5 investors

In a recent action, SEC v. Luca International Group, LLC et al. (“SEC v. Luca“), the Securities and Exchange Commission (SEC) has charged a California-based oil and gas company and its CEO with violations of securities laws in connection with a $68 million Ponzi scheme and affinity fraud. The target of the fraud was the Chinese American community. Additionally, a portion of the funds raised by the defendants came from EB-5 investors seeking green cards through the EB-5 Program. The SEC issued both a press release and cease and desist order this week in connection with this most recent action. We think that this case highlights two important and relevant points for our readership, and that the SEC exposing the defendant schemers/fraudsters in SEC v. Luca is good for the EB-5 industry and integrity of the EB-5 program.

Prosecution efforts are going global– government agencies in Hong Kong and China assisted the SEC’s efforts 

Now more than ever before, the SEC is on the path to closing down actors in the EB-5 context that engage in deception and fraud. We are in a new era of enforcement, with the SEC becoming more familiar with the EB-5 Program. We think that this enforcement trend will move at an even faster clip as the SEC and United States Citizenship and Immigration Services (USCIS) become more agile in cooperating and responding to credible allegations of fraud.

EB-5 regional centers and issuers need to put into place sound and workable policies to ensure that marketing practices are in line with securities laws. Note that in SEC v. Luca, there was cooperation with the SEC and two foreign agencies, namely the Hong Kong Securities and Futures Commission and the China Securities and Regulatory Commission. Enforcement and prosecution efforts in this context are going global. Regional centers and issuers should ensure that any offshore sales efforts are in compliance with the laws of the countries in which sales activities are performed.

Overlooked federal and state investment adviser registration requirements  

SEC v. Luca is a reminder that investment adviser requirements may apply broadly in EB-5 transactions and require federal or state registration by regional centers, issuers and/or EB-5 deal facilitators. In SEC v. Luca, the SEC asserted that the defendants acted as “investment advisers” within the meaning of Section 202(a)(11) of the U.S. Investment Advisers Act of 1940 (“Advisors Act”) [15 U.S.C. Section 80(b)-2(a)(11), but had no registrations with the Commission. Confusion over investment adviser registration requirements is a commonplace problem in the EB-5 space. In SEC v. Luca, the defendants were in the business of providing investment advice concerning securities for compensation. According to the SEC, these key facts triggered registration requirements under the Advisers Act.

We will soon be providing an extensive alert with regulatory advice to EB-5 regional centers and issuers on the applicability of both federal and state investment adviser registration requirements. The applicability of such requirements should be made on a case-by-case with qualified securities counsel. There is no “one size fits all” advice. States have their own considerations in interpreting investment adviser registration requirements. And the SEC has its own interpretive guidance on the parameters of the registration requirements of the Advisers Act apply.

Conclusion

The egregious pattern of unlawful behavior by the defendants in SEC v. Luca included deceit in the marketing process, fraud in offering materials, comingling and misappropriation of funds, and violation of registration requirements. These are issues not just in the EB-5 context, but with private placements generally. Affinity fraud is also common in private placements.

EB-5 stakeholders should be aware that we are seeing a visible uptick in securities related prosecutions. No issuer, regional center or deal facilitator is immune from scrutiny. The SEC and USCIS are also working together more nimbly with foreign securities agencies. Sound policies, securities compliance and meaningful due diligence by experts are important in EB-5 offerings.

Sunlight is the best disinfectant. This adage is true for the EB-5 program. Stakeholders who promote a transparent and strong EB-5 program should applaud the SEC’s efforts.

ARTICLE BY Douglas Hauer of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
©1994-2015 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.