On March 12, 2025, the SEC’s Division of Corporation Finance (the “Division”) issued a No Action Letter regarding the verification of accredited investor status for potential investors in a Rule 506(c) offering under Regulation D which may streamline verification requirements in such offerings.
Rule 506(c) under Regulation D broadly permits issuers to solicit and generally advertise an offering, provided that (i) all purchasers in the offering are accredited investors, and (ii) the issuer takes reasonable steps to verify that investors in the offering are accredited investors. Rule 506(c)(2)(ii) provides a “non-exclusive and non-mandatory” list of acceptable verification procedures, which generally require obtaining documentation or information from third parties, including a review of W-2s or 1099s, tax returns, and bank or brokerage statements.
In the No Action Letter, the Division agreed that a high minimum investment amount in an offering is a relevant factor in verifying accredited investor status, and indicated that a minimum investment amount of $200,000 for investors who are natural persons, and $1,000,000 for investors that are entities, satisfies the verification requirement if:
- Such minimum amount is accompanied by written representations from investors that (i) the investor is an accredited investor under Rule 501(a), and (ii) the minimum investment amount is not financed in whole or in whole or in part by any third party for the specific purpose of making the particular investment in the issuer; and
- The issuer does not have actual knowledge of any facts that indicate that (i) any investor is not an accredited investor, or (ii) the minimum investment amount of any purchaser is financed in whole or in part by any third-party for the specific purpose of making the particular investment in the issuer.
Whether an issuer has taken reasonable steps to verify that an investor is an accredited investor is an objective determination by the issuer, in the context of the particular facts and circumstances of each investor and transaction. As the Division’s views are based on the representations set forth in the underlying request for interpretive guidance, any different facts or conditions for another issuer or offering may require the Division to reach a different conclusion. At Thompson Hine, we remain ready to assist in navigating these changes.