Compliance and Best Practices in EB-5 – Part 2
In the world of EB-5 investing, good compliance is good business — and it begins with putting investors’ interests first.
Since the U.S. Securities and Exchange Commission (SEC) adopted Regulation Best Interest (Reg BI) in 2020, the standard for financial professionals — including those who market and sell EB-5 offerings — has shifted significantly. The rule raised the bar well beyond traditional “suitability,” creating a new expectation of transparency, diligence, and investor protection that now shapes every EB-5 investment relationship.
In Part 2 of CanAm’s Compliance and Best Practices in EB-5 series, we explore what Reg BI means for EB-5 investors and how CanAm Investor Services applies these principles to ensure every client relationship meets the highest standard of care.
From “Suitability” to “Best Interest”
Before Reg BI, broker-dealers were required to ensure that investments were “suitable” for each client — meaning generally consistent with the investor’s financial situation and objectives.
Reg BI goes further. It requires that any recommendation made by a broker-dealer must be in the investor’s best interest — not merely suitable — and that the firm cannot place its own financial interests ahead of the investor’s.
This shift formalized a higher fiduciary-like duty of care that aligns EB-5 distribution practices with mainstream U.S. securities standards.
As Pete Calabrese, CEO of CanAm Investor Services, explained:
“EB-5 investments are complex, long-term securities. Regulation Best Interest makes sure that when investors make these life-changing decisions, they’re doing so with full understanding, clear disclosure, and confidence that their interests come first.”
How Reg BI Applies to EB-5
Under Reg BI, broker-dealers participating in EB-5 offerings must meet four key obligations:
- Disclosure Obligation – Provide clear, written disclosure of material facts, including project risks, fees, and potential conflicts of interest.
- Care Obligation – Exercise diligence and skill when recommending an investment, ensuring it’s in the investor’s best interest based on their profile and goals.
- Conflict of Interest Obligation – Identify and manage any financial or structural conflicts that could compromise objectivity.
- Compliance Obligation – Maintain written policies and procedures reasonably designed to ensure adherence to all of the above.
In practice, this means every EB-5 broker-dealer must evaluate an investor’s full profile — including financial capacity, liquidity needs, risk tolerance, time horizon, and immigration objectives — before recommending a specific offering.
For investors, it’s a framework that transforms compliance from a behind-the-scenes requirement into a real-world protection.
The EB-5 Investor Profile
Every EB-5 investor is unique — but every investment decision should be grounded in the same fundamentals of responsible risk assessment.
A comprehensive investor profile typically includes:
- Financial suitability: Does the investor have sufficient liquidity and net worth to participate without undue hardship?
- Risk tolerance: Is the investor aware that EB-5 investments are illiquid, long-term, and subject to business and immigration risks?
- Immigration goals: How do the investor’s timing and family considerations align with visa category realities and sustainment periods?
Calabrese noted:
“Matching an investor to the right EB-5 offering isn’t just about funding a project. It’s about aligning the investment with their immigration timeline, personal goals, and financial comfort level.”
That balance — of opportunity and realism — is the hallmark of a responsible EB-5 advisor.
Transparency: The Cornerstone of Trust
Reg BI also reinforces the importance of balanced, factual communication. Marketing materials must present both benefits and risks clearly, ensuring investors receive a full picture of each project before investing.
For example, CanAm Investor Services provides standardized offering summaries and risk disclosures that detail:
- Job creation projections and economic methodologies
- Collateral structures and repayment assumptions
- Exit timelines and redeployment provisions
- Regulatory status of each offering (Form D, I-956F filings, etc.)
This structured transparency empowers investors to make informed, confident decisions — and ensures compliance with both FINRA and SEC expectations.
Why It Matters for Investors
In the EB-5 market, the presence of a broker-dealer adhering to Reg BI is more than a regulatory formality — it’s a safeguard against misinformation, incomplete disclosures, and misaligned incentives.
“Reg BI builds confidence,” Calabrese emphasized. “It’s how investors know their advisor is working in their best interest — not just selling them a visa, but helping them make a sound financial and immigration decision.”
For investors, it means knowing that every recommendation has been vetted not only for opportunity, but also for compliance, suitability, and ethics.
The Takeaway
Regulation Best Interest has reshaped the EB-5 landscape for the better. It ensures that investors receive objective advice, full transparency, and a fair assessment of both risk and reward — the foundation of any credible investment relationship.
At CanAm, that standard is part of our culture:
- Every investor conversation is documented.
- Every risk disclosure is reviewed and understood.
- Every recommendation is made with one goal — your best interest.
Coming Next in the Series
Part 3 – Reform and Integrity Act: Raising Standards in EB-5
We’ll examine how the Reform and Integrity Act of 2022 (RIA) strengthened due diligence, disclosure, and accountability — and why these guardrails continue to protect both investors and the industry as EB-5 evolves.
