Accredited investor verification under Rule 506(c), after the SEC's March 2025 guidance

What the rule requires

Rule 506(c) permits general solicitation on two conditions: every purchaser is an accredited investor, and the issuer takes reasonable steps to verify that they are. The SEC deliberately did not define reasonable steps as a checklist. The adopting release describes a principles-based inquiry that turns on three things — the nature of the purchaser and the category of accredited investor they claim, the amount and type of information the issuer already has about them, and the nature and terms of the offering, such as how investors were solicited and the minimum investment required. The more an issuer already knows, and the higher the minimum, the less additional verification is reasonable to require.

What the SEC has said is not sufficient on its own is the customary 506(b) approach: a subscription questionnaire in which the investor represents that they are accredited, with nothing behind it.

The four safe-harbor methods

Rule 506(c)(2)(ii) lists four methods that are deemed to satisfy the requirement for natural persons. They are non-exclusive — an issuer may use other reasonable methods — but they are the ones counsel reaches for first.

The March 2025 no-action letter

On March 12, 2025, the SEC's Division of Corporation Finance responded to a request from Latham & Watkins LLP with a no-action letter that has changed how many sponsors approach verification. The staff agreed that an issuer could reasonably conclude it had taken reasonable steps to verify where three conditions were met together:

1. A minimum investment of at least $200,000 for a natural person, or at least $1,000,000 for an entity (with related rules for entities whose status depends on their owners).
2. Written representations from the purchaser that they are an accredited investor, and 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 indicating that the purchaser is not accredited or that the investment is financed by a third party.

The letter is staff guidance about one set of facts, not a rule change, and it is expressly limited to the representations described. For sponsors whose minimums already sit at or above those thresholds it can remove the document-collection step entirely; for sponsors with a $25,000 or $50,000 minimum it changes nothing. Whether to rely on it, and how to word the representations, is counsel's call.

Third-party verification services

Several specialist services verify investors on the issuer's behalf, typically by collecting the documents described in the income and net-worth safe harbors and issuing a letter under the third-party confirmation method, signed by an attorney or CPA. Investor portals and fund-administration platforms often integrate one. The practical advantages are that the investor's tax returns and account statements never sit in the sponsor's own files, the letter is dated and standardised, and the three-month clock is tracked by someone whose job it is.

The practical cost is friction at the subscription stage — an investor asked for two years of tax returns by a sponsor they met three weeks ago sometimes stops there. Sponsors manage that with the sequence: verification is raised after the investor has decided, explained as a requirement of the exemption rather than of the sponsor, and handled by a named service with a short form.

Where verification sits in the investor-acquisition process

Verification is a subscription-stage event, and it belongs to the issuer. It is not something the ad asks about, not something the landing page assesses, and not something the person who calls the lead back should ever raise. Three reasons:

• It is the issuer's obligation under the rule, judged on the issuer's knowledge and the issuer's process. Delegating the judgement to a marketing vendor muddles who took the reasonable steps.
• It is the wrong moment. An investor who has read one landing page has not decided anything. Asking about their net worth before they have heard the sponsor's case costs the meeting.
• It keeps the vendor out of broker territory. A vendor that assesses investor suitability, discusses the offering and is paid by results looks like an unregistered broker. A vendor that handles logistics on a flat fee and never touches status does not.

That is why Ascent's setters are scripted to logistics only, why the CRM Ascent operates for a sponsor has no field for accredited status, and why the terms on which Ascent is not a broker say that verification stays with the issuer, permanently.

Verification happens when an investor decides to invest — by the issuer, under counsel's process — never on the ad and never on the first call.

A verification checklist for a 506(c) sponsor

• Counsel has chosen the method — safe harbor, third-party service, minimum-investment reliance under the 2025 letter, or a combination — and documented why it is reasonable for this offering.
• The subscription documents carry the written representations counsel specified.
• The three-month window on statements and third-party letters is tracked.
• Every purchaser, including friends, family and repeat investors, goes through the process.
• The record of steps taken for each purchaser is kept with the offering file.
• Nobody upstream of subscription — ads, landing pages, nurture, setters — asks about, assesses or verifies status.