FAQs About Due Diligence

Do Most Investors Practice Due Diligence?

Well, unfortunately not. What you have is that 85 per cent or higher of the investors are from China. Most of those 85 per cent are getting referrals through agents, agents in China who are marketing specific projects.

The good agents do a due diligence because they feel their name is on the line. So, some of the agents do due diligence and the investors generally speaking take the word of the agent; they don’t do independent due diligence. It’s like a salesman is selling you something and you take their word for it.

As mentioned, some of the good ones do a very extensive due diligence, but some do not.

So, a vast majority of people do not do independent due diligence. Attorneys Mark Ivener’s experience is that investors who go through lawyers who don’t sell specific projects or don’t sell any project actually, in those types of cases, there is a highest chance that an investor will do a due diligence.

Based on his own personal experience, he would say a growing number of clients in the last 3 or 4 years have been doing due diligence by going through broker dealers who are independent, who do due diligence reports and give those to the perspective investor.

Why Can’t Someone Simply Trust The Agent On Their Own To Do The Due Diligence?

It is not that you in can’t trust the agent in all cases, because as mentioned, a number of them do complete a due diligence and they do it because their name is on it and they are in China and people know if there is a problem, they have somebody to come back to.

However, the reality is that this all takes a lot of time, so the people who are buying are going through seminars or in China in various cities where they’re being marketed to by various agents, these agents are primarily trying to sell even though people may have questions.

So, it’s important to do more than just trust the word of a salesperson. But generally, that doesn’t happen.

What Professional Consultations Should Someone Seek When They Are Doing Due Diligence?

According to Attorney Mark Ivener, a higher standard is that he gives clients a list of the following:

A list of 3 broker dealers, the licensed security representatives who are authorized to accept a finder’s fee from a regional center and they are obligated under their licensing to do a due diligence and write a report on anything that they are representing.

It may be that the broker dealer has checked out a dozen projects and feels that there are just a few that meet their criteria or whatever the number is, a small number, and do reports on those, so that’s something that the investor can read and go through.

They have a report from an independent broker dealer who says that this gives them an option of investments that meets their criteria for return of capital, which is one of the top criteria; approvability; the immigration consequences, and they write about the regional center areas that were mentioned at the beginning.

So these reports are anywhere from 15 to 25 pages, so they are quite complete.

Attorney Mark Ivener gives them the names of 3 broker dealers for them to choose themselves; he doesn’t ever recommend just one because whoever they go to, they should feel most comfortable with, and they could go to all of them if they wanted to.

Then, there are clients who like to do the research themselves to find what they think is a project that they like.

This second category are investors selected projects. Mark Ivener gives them names of people who prepare due diligence reports and also financial analysts who do financial reports on EB-5 projects. Again, he doesn’t recommend any one person; he gives them a choice and they choose whoever they want.

There’ve been some people who have said, “Well, look, I have an accounting background, I have a real estate background, I feel I can do my own due diligence”. If they do, it’s their money, they can do whatever they want, Ivener’s just gives them the options to make their own decision.

If you need answers to more questions regarding EB-5 Due Diligence, call the law office of Mark Ivener for a free initial consultation at (310) 477-3000 and get the information and legal answers you’re seeking.