On March 12, 2025, the Securities and Exchange Commission (SEC) issued new guidance in response to a request for an interpretation regarding accredited investor verification in private offerings under Rule 506(c) of Regulation D under the Securities Act of 1933, as amended.
Rule 506(c) permits an issuer to use general solicitation in private offerings, provided that the issuer takes reasonable steps to verify the accredited investor status of each purchaser in the offering. While the SEC noted in the Rule 506(c) adopting release that a purchaser’s ability to satisfy a minimum investment amount that is sufficiently high such that only accredited investors could reasonably be expected to meet it could be taken into account when verifying accredited investor status, the SEC did not provide specific guidance regarding how high a minimum investment amount would need to be, nor what other, if any, further steps would be necessary to reasonably verify accredited investor status. In the March 2025 interpretive letter, the SEC agreed that an issuer will have taken reasonable steps to verify a purchaser’s accredited investor status in a Rule 506(c) offering if the issuer requires a minimum investment amount of at least $200,000 for natural persons and $1,000,000 for legal entities, and obtains from the purchaser written representations that (1) he, she or it is an accredited investor under the applicable category of Rule 501(a) of Regulation D and (2) the minimum investment amount is not financed in whole or in part by any third party for the specific purpose of making the particular investment in the issuer. The issuer must also have no knowledge of any facts that indicate that the purchaser is not an accredited investor or that the purchaser’s minimum investment is financed in whole or in part by any third party for the specific purpose of making the particular investment in the issuer. Although the March 2025 interpretive letter is not an official statement of the SEC and is intended to relate only to the facts set forth in the request for interpretation, it provides useful guidance to issuers that are required to take reasonable steps to verify the accredited investor status of purchasers of their securities pursuant to Rule 506(c) private offerings.
