EB5 Investors Magazine Volume 5, Issue 2 - Page 107

A CLOSER LOOK AT THE LAW On this point, the court stated that the defendants had cited no authority to support the proposition that there can be no expectation of profits where investors pay fees in excess of their profits.Despite being rejected by the court, the defendants’ arguments in Feng have a certain appeal. After all, it seems pretty clear that EB-5 investors are motivated by permanent residency status rather than making a profit. However, the potential for a profit is likely enough to satisfy the Howey test and litigants will likely have an uphill battle convincing courts to rule against the SEC on this issue under similar facts and circumstances. That said, it is possible that a court may reach a different conclusion under the Howey test in a scenario where an investment cannot objectively return a profit, for example because the maximum theoretical return is less than the administrative fee. Of course, EB-5 investments also need to satisfy the EB-5 program’s requirement that investor funds be placed “at-risk” for the purpose of generating a return and an investment without an objective possibility of a return may not meet th H]\\]Z\[Y[ Xܙ[K\YۈX[\\[Y[[X][ۙ\œ[\[YH]PMH[\Y[[HX]Y\œX\]Y\XX]H[Y\[X\]Y\]˂SQTTQTQPST•HY\[X\]Y\]X]Y[ۙHX[˜\H\HYX[X\]Y\[X[ۜ[\Y\\Y H\HZ[HY\][ۂ\]Z\[Y[\XZH\H]X\]Y\\HBY[ۙHۛYXXHX]H[\Y[Z[œ[\܈\\ۜX[]Y\\[\ܜ˂HX\]Y\]Y[HH8'\'H\8'[H\ۂ[YY[H\[\وYX[[X[ۜ[PRSTԔːH L