In August 2013, the Best Practices Committee of the Association to Invest in USA (IIUSA) identified and presented a list of 47 recommended Best Practices for Regional Centers. Not all of them relate directly to dealings with clients, but many of them do. I share them here with the same advice that IIUSA provided in its preamble to the practices:
A best practice is not meant to be a minimum legal or ethical
standard of conduct by which every Regional Center must abide
[and] is not meant to be considered a legal or ethical breach or
failure of the Regional Center [or] to be a list of legal
requirements. Rather, it is meant to provide guidance to Regional
Centers seeking to enhance their operations and provide
protection to themselves, investors, and other involved parties.”
· RCs should not express or imply endorsement by IIUSA or USCIS.
· RCs should be adequately funded, staffed, and equipped to monitor, report, and communicate with investors in a timely and accurate manner.
· RCs should implement record keeping and retention policies and procedures relative to investor transactions.
· RCs should not file I-526 petitions until any pending geographic or industry amendments have been approved.
· RCs should employ the services of impartial third-party experts to review all aspects of a proposed project. (This documentation will be useful when presenting a project to a prospective client.)
· As we have mentioned elsewhere, RCs should perform reasonable due diligence of their own relative to any project or developer.
· Documents that are presented to clients should indicate without ambiguity that any projections are based on assumptions reasonably and consistently applied.
· RCs should insist on the right to oversee a project, to ensure that it is aware of any changes in the project and to monitor whether the project is meeting its milestones. The RC must do so in order to ensure that the removal of conditions will occur and thus allow the investor permanent status.
· An RC should not function as a developer in a loan model.
· Any situation that could be deemed a conflict of interest should be documented and be presented to potential investors.
· EB-5 offerings should be registered with the U.S. Securities and Exchange Commission, unless a legitimate exemption can be claimed and approved. Preparation and use of offering documents should comply with SEC practices.
· RCs should obtain verification of investors’ actual net worth or income.
· RCs are responsible for the legal dissemination of offering documents to investors. Within this paragraph IIUSA suggests that RCs should implement document control processes, and ensure the integrity of Agencies that it works with.
· RCs should provide enough translated information adequate to enable a potential investor to determine if he requires a fully-translated versions. In all cases, documents should indicate that the original – as opposed to the translation – is the official version.
· RCs should give investors documents that disclose the exact amount of dollars that will go to the Regional Center and the Agency. For this practice IIUSA recommends at minimum disclosure of a range of compensation for each recipient of money in the process.
· Risk factors should not be generic, but be exclusive to the particular project.
· “Ideally, wherever possible, no material changes should be entertained post-execution” of offering documents. If such changes should occur, however, investors should be given rescission rights.
· RCs should give investors a report that clearly identifies all economic factors that must happen in order to meet the required job creation standard.
· Before presenting a project to investors, RCs should determine that the project has a reasonable “job cushion.” In other words, the expectation of the number of jobs that will be created should be more than the required ten per investor. In addition, since the projects are investor pools, an RC may want to consider some kind of job allocation agreement that protects the RC’s investors in the event that there are not enough jobs created to cover every investor.
· As a precautionary measure, RCs should issue written instructions to all of its representatives and Agents, stating that it expects complete compliance with the laws of both the U.S. and of their own country. As a courtesy, a copy of this letter might be given to potential investors.
· An RC should not insist that its own immigration attorney be engaged by the clients. It is acceptable to identify that attorney and to include him or her on a list of recommended attorneys. The object of having an in house immigration attorney is to assure that the client receives the best possible legal advice.
It has been said that “communication is everything.” It is also true that the number one issue in nearly any corporate or commercial environment is lack of communication. The final best practice recommendations from the IIUSA relate to the subject of communication, including a recommendation to provide a written copy of the RC’s own written best practices. The other major factor is consistent, regular communication with investors. IIUSA further recommends that the Memorandum of Understanding between the RC and the developer include this as an obligation. In fact, they cite failure to disclose as a more serious matter than the failure of the project, at least in terms of an RC’s exposure to litigation. Although IIUSA recommends quarterly communication, RCs should consider time to be of the essence in any disclosures that may have a negative impact on the investment.
Best practices should not be limited to what has been reviewed here, or even to the entire listing by IIUSA. Creation and implementation of your own set of best practices indicates that you care at least as much about operating ethically and operating on behalf of the client, as you do about making money.
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