Arnstein & Lehr Miami Partner Ronald Fieldstone recently authored, “Significant Risks Related to EB-5 Disclosure Documents – Guidance Concerning Disclosure Obligations,” which was published in EB5 Investors Magazine’s 2014 Special Edition. In his article, Mr. Fieldstone focuses on some of the key disclosures required in EB-5 offerings and how to navigate the risk assessment and manner of disclosure related to such disclosures. Below are excerpts and essential takeaways from Mr. Fieldstone’s article. To read the article in full, please click here. All professionals, as well as regional centers, involved with any private offerings of securities (“Offering”) in connection with the EB-5 program need to be sensitive to key disclosures and risk factors must be addressed in connection with the preparation of offering documents. Role of the regional center A regional center that sponsors an EB-5 offering, which enables the sponsor company to utilize nor only direct jobs, but also indirect and induced jobs, plays a key role in the EB-5 program and it is extremely important to clarify the role of the regional center in a particular transaction. Generally, a regional center can play the following three roles in any EB-5 transaction, among others:

  1. Sponsoring the project.
  2. Serving as manager/general partner of new commercial enterprise.
  3. Assisting with marketing.

[Read the three roles in full detail.] Identify unique risks of a specific project It is not sufficient to provide generic risk factors that do not otherwise take into account the specific risk factors that are unique to the project in question. By definition, each project has unique risk factors that need to be addressed, which take into account the following factors:

  1. Nature of the industry.
  2. Collateral.
  3. Analysis of real capital/equity invested by project company.
  4. Disclosure regarding senior debt.
  5. Potential for cost overrun.
  6. Unique immigration risk factors.
  7. Failure to raise entire EB-5 capital amount.
  8. Unique securities-law-related risks.

[Read the eight factors in full detail.]