A CLOSER LOOK AT THE LAW "As unregistered offerings, EB-5 offerings are not subject to the heightened disclosure requirements of registered offerings. " an investment contract. The test requires an investment of money in a common enterprise with an expectation of profits produced by the efforts of others. The test is an objective inquiry into the nature of the investment based on what investors were led to expect. In Feng, the defendants focused their arguments on the third prong of the test, arguing that the EB-5 investors had no expectation of profits. Specifically, they argued that the EB-5 investors were motivated by the prospect of securing permanent resident status in the United States under the EB-5 program and not making profits. They argued that no profit motive existed since the administrative fee each EB-5 investor paid to invest was higher than the actual return on the investment. In rejecting these arguments, the Feng court focused on the rationale behind the EB-5 program, rather than the 105 EB5 INVESTORS M AGAZINE economic reality of the transactions at issue. The court cited EB-5 program regulations that allude to a profit motive and state that an investor must place “the required amount of capital at risk for the purpose of generating a return on the capital placed at risk.” The court found it significant that the regional centers’ offerings were intended to meet the requirements of the EB-5 program, including the “at risk” component. The court also noted that the offering materials mentioned the potential for profit and identified the investments as “securities.” Importantly, the Feng court drew a stark distinction between the administrative fees and the potential return on the investment contracts. The court essentially viewed the expectation of a return on investment in isolation, and refused to reduce the return by the amount of the administrative fees.