The U.S. Securities and Exchange Commission (SEC) has issued new guidance in the form of a No-Action Letter that simplifies how issuers can verify accredited investor status under Rule 506(c) of Regulation D.
Under Rule 506(c), issuers can broadly solicit investors, but must take “reasonable steps” to verify that all purchasers are accredited investors. The SEC staff agreed in the March 12, 2025 No-Action Letter that issuers can satisfy their “reasonable steps to verify” obligation under Rule 506(c) by requiring high minimum investment amounts coupled with investor self-certifications.
Based on the guidance and industry interpretation, the recommended minimum investment amounts are:
- At least $200,000 for natural persons
- At least $1 million for legal entities
These thresholds reflect the principle that investors capable of making such substantial investments are more likely to meet accredited investor qualifications.
Under the new guidance, purchasers must provide written representations affirming: (1) accredited investor status under the applicable Rule 501(a) categories, and (2) that the investment funds are not borrowed or financed by a third party specifically for making the investment.
The SEC has updated its Compliance and Disclosure Interpretations (CD&Is 256.35 and 256.36) to note the interpretation in the No Action Letter. For more details, read the official SEC No-Action Letter to Latham & Watkins dated March 12, 2025.
