On March 12, 2025, the SEC issued a no-action letter to Latham & Watkins LLP, offering an alternative path for issuers to verify accredited investor status in private placements conducted under Rule 506(c) of Regulation D[1]. This letter establishes that, for offerings with high minimum investment thresholds, issuers may satisfy the “reasonable steps to verify” requirement by:
- Setting a minimum investment of at least $200,000 for natural persons or $1,000,000 for entities;
- Obtaining written representations from each investor confirming both their accredited status and that their investment is not financed by a third party for the specific purpose of making the investment; and
- Ensuring the issuer has no actual knowledge that would call into question the investor’s accredited status or the source of funds.
This provides an alternative to the more intrusive income or net worth verification process required under 506(c) (such as reviewing tax returns or bank statements), provided the above conditions are met and there is no contrary information. A copy of the no-action letter may be found here: SEC No-Action Letter issued to Latham & Watkins on March 12, 2025.
Should you have any questions about this new rule, or any other exemption rules, please feel free to reach out to one of our attorneys.