Accreditation verification
Accreditation verification is the reasonable-steps process an issuer must complete under Reg D Rule 506(c) to confirm each investor is accredited, using income or net-worth evidence or a letter from a qualified third party.
Accreditation verification is the process of confirming that an investor really is an accredited investor, as opposed to simply taking their word for it. It is the specific obligation that distinguishes Rule 506(c) from other private offerings.
Under 506(c) - the exemption that allows general solicitation - the issuer must take "reasonable steps to verify" each investor's accredited status. The SEC's rule includes a non-exclusive list of methods that are deemed reasonable:
- Income test: reviewing IRS forms (such as W-2s or tax returns) showing income over $200,000 individually (or $300,000 jointly) for the last two years.
- Net-worth test: reviewing recent bank, brokerage, or similar statements of assets plus a credit report for liabilities, to confirm net worth over $1 million excluding the primary residence.
- Third-party letter: written confirmation from a CPA, attorney, registered broker-dealer, or SEC-registered investment adviser that they have verified the investor's status.
In practice most issuers outsource this to a verification service that collects the documents and issues the letter, keeping the sensitive financials off the issuer's own books.
Verification is distinct from KYC: KYC confirms who someone is for anti-money-laundering purposes, while accreditation verification confirms they are financially eligible to invest. A 506(c) token onboarding flow usually runs both. What counts as "reasonable" depends on the facts of each investor.
Source: U.S. SEC (sec.gov), as of 2026.
Mentioned in
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- Running KYC/AML for Your Offering
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Educational content, not financial or legal advice.