Question: What are the rules for short-term investments in funds not related to the NCE or JCE?
Question Detail: If a project has received the full amount of investor funds, but has not yet put those monies into the EB-5 project, is it allowable to put the investor money into a short-term (e.g. 18 or 24 month) investment vehicle so that the regional center can earn some operational cash while waiting for project approvals? How much leeway does the regional center have to try and create a return on investor cash while waiting for governmental or project approvals? If none, isn't that tantamount to a loss (due to inflation)? But if it's unrestricted, doesn't this allow a regional center to essentially gamble with investor money on something that has nothing to do with the agreed-upon project?
Answer: Your question concerns rules on use of qualified investments in a regional center. I am assuming that, in asking about rules, you are asking if there is a law or regulation that restricts how a regional center uses the foreign national’s investment.; Laws created by the U.S. Congress and regulations created by the delegated Agency (Department of Homeland Security) control the eligibility of a foreign national to obtain U.S. lawful permanent residency through an EB5 investment. The law regarding regional centers is a subdivision of the law generally applicable to EB5 investments. The law requires that the qualified immigrant enters the U.S. with a purpose of engaging in a new commercial enterprise in which such alien has invested the requisite amount. Two elements are present. The investment must be in the new enterprise and that enterprise must be the one in which the immigrant will actively participate. Further, that same enterprise must benefit the U.S. economy and create the requisite 10 full-time jobs. Regulations implementing the law distinguish a qualifying investment from prospective investment arrangements entailing no present commitment.Without the present commitment, a prospective arrangement for investing in the new enterprise apparently is not a qualified EB5 investment.
Your question referred to the “project” of a regional center, impliedly a separate enterprise from the regional center.; Presumably, the documentation, accompanying the investment held in escrow for the “project”, committed the money to the new enterprise in which the investor would participate and which would generate the requisite jobs.If the regional center does not invest the funds in that specific new enterprise, there would be a breach of the commitment and, without the commitment, the money fails to satisfy the purpose and requirements that qualify the foreign national to U.S. permanent residency. However, if the regional center were, itself, the new enterprise, the answer to your question might be different. A regional center, itself the new enterprise, might invest and if there were a loss, so be it because the investment qualified when made and was at risk.However, if the regional center, which is not the new enterprise, makes an investment incurring a loss so that the requisite dollar value was lacking, there would no longer be a qualified EB5 investment. Enforcement or suits would likely follow.
I hope the above is of help to you.