SEC Eases Accredited Investor Verification for Rule 506(c) Offerings
The Securities and Exchange Commission has taken a step to simplify the process of raising capital by easing how issuers can verify accredited investors under Regulation D, Rule 506(c). The change, announced on March 12, 2025 through a no action letter, clarifies that issuers may now rely on high minimum investment thresholds combined with written representations from investors to satisfy verification requirements.
Rule 506(c), created under the 2012 JOBS Act, allows companies to advertise and solicit broadly when selling securities, provided all buyers are accredited investors and the issuer takes reasonable steps to verify that status. The new guidance offers issuers an alternative to invasive financial documentation. For natural persons, a minimum investment of $200,000 along with a written statement confirming accredited investor status and affirming that the investment is not financed by a third party is sufficient. For legal entities, the threshold is set at $1 million with similar written representations required. Issuers must also confirm they have no actual knowledge contradicting the investor’s claim or suggesting the investment is financed externally.
The SEC’s move is expected to reduce the compliance burden on issuers and make Rule 506(c) offerings more attractive. By allowing reliance on substantial investment amounts and attestations, regulators hope to expand the use of general solicitation and ultimately increase the flow of capital into private markets.
Industry observers see this as a meaningful shift. Kevin S. Kim, a securities attorney, called the guidance a major step in streamlining the verification process, easing compliance obligations, and helping issuers, particularly those relying on online fundraising platforms, raise money more efficiently.
The updated approach marks a pivotal change in how accredited investor verification will be handled and is likely to reshape private capital formation by lowering barriers for issuers while maintaining safeguards meant to protect investors.
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