How to verify accredited investors under Rule 506(c) after the SEC's March 2025 guidance

What the rule requires

Rule 506(c) lets you use general solicitation. That means you may market the deal to the public. But there are two rules. Each buyer must be an accredited investor. And the issuer must take reasonable steps to verify that they are. The SEC chose not to make this a checklist. The SEC paper that put the rule in place is called the adopting release. It sets a test based on principles. The test turns on three things. First is the kind of buyer, and the type of accredited investor they claim to be. Second is how much the issuer knows about them, and what kind of facts it has. Third is the kind of deal and its terms. That includes how the issuer found buyers. It also includes the minimum check size. The more the issuer knows, the less extra checking is reasonable to ask for. The same is true when the minimum is higher.

The SEC has said one thing is not enough on its own. That is the usual 506(b) way. Rule 506(b) is the private deal rule with no general solicitation. The investor fills out a form and says they are accredited. Nothing backs it up.

The four safe-harbor methods

Rule 506(c)(2)(ii) lists four methods. The rule says they meet the test for natural persons. Those are people, not entities. They are not the only ways. An issuer may use other reasonable methods. But these are the ones counsel tends to use first.

The March 2025 no-action letter

On March 12, 2025, the SEC's Division of Corporation Finance answered a request from Latham & Watkins LLP. Its answer was a no-action letter. SEC staff use these letters to say they would not recommend action. Each one covers a set of facts. This letter has changed how many sponsors handle verification. The staff agreed on one point. An issuer could reasonably conclude it had taken reasonable steps to verify. But three things had to be true at the same time:

1. A minimum investment of at least $200,000 for a natural person. Or at least $1,000,000 for an entity. Related rules apply to entities whose status depends on their owners.
2. Written representations from the buyer. These are signed statements of fact. The buyer states that they are an accredited investor. The buyer also states that the minimum investment is not being financed in whole or in part by a third party for the specific purpose of making the investment.
3. The issuer has no actual knowledge of facts that show the buyer is not accredited. It also has no actual knowledge of facts that show a third party is financing the investment.

The letter is staff guidance about one set of facts. It is not a rule change. The letter itself says it covers only the representations it describes. Some sponsors' minimums are already at or above those levels. For them, it can cut the step of collecting papers. For sponsors with a $25,000 or $50,000 minimum, it changes nothing. Should you rely on it? How should the statements be worded? Counsel makes that call.

Third-party verification services

Some firms focus on this: they verify investors for the issuer. Most often they collect the papers listed in the income and net worth safe harbors. Then they write a letter under the third-party method. An attorney or CPA signs it. Investor portals and fund admin tools often have one built in. This helps in real ways. The investor's tax returns and account statements never sit in the sponsor's own files. The letter is dated and in a standard form. And someone whose job it is tracks the three-month clock.

The real cost is friction when the investor signs up. Say you met an investor three weeks ago. Now you ask for two years of tax returns. Sometimes the investor stops right there. Sponsors handle this with the order of steps. They bring up verification after the investor has decided. They explain it as a rule of the exemption, not a demand from the sponsor. And a named service handles it with a short form.

Where verification fits in your raise

Verification happens at the subscription stage. It is the issuer's job. The ad does not ask about it. The landing page does not judge it. And the person who calls the lead back should never bring it up. There are three reasons:

• It is the issuer's duty under the rule. It is judged on what the issuer knows and the steps the issuer takes. Say a marketing vendor makes that call. Then who took the reasonable steps? It is no longer clear.
• It is the wrong time. A person who has read one landing page has not decided anything. Ask about their net worth before they hear the sponsor's case, and you lose the meeting.
• It keeps the vendor out of broker territory. Say a vendor judges whether investors are suitable, talks about the deal and gets paid by results. It looks like an unregistered broker. Now say a vendor handles logistics for a flat fee and never touches status. It does not.

This is why Ascent works the way it does. Ascent's setters are the people who call leads back. Their script covers logistics only. A CRM is a contact system. The CRM Ascent runs for a sponsor has no field for accredited status. And the terms on which Ascent is not a broker say verification stays with the issuer, for good.

Verification happens when an investor decides to invest. The issuer does it, under counsel's process. It never happens on the ad or on the first call.

A verification checklist for a 506(c) sponsor

• Counsel has picked the method. Counsel has also written down why it is reasonable for this deal. The method may be a safe harbor or a third-party service. It may be relying on the minimum under the 2025 letter. Or it may be a mix.
• The sign-up papers hold the written statements counsel asked for.
• Someone tracks the three-month window on statements and third-party letters.
• Each buyer goes through the process. That includes friends, family and repeat investors.
• The record of steps for each buyer is kept with the deal file.
• No one before sign-up asks about, judges or verifies status. That means ads, landing pages, nurture messages and setters.