SEC Staff Issues Guidance on Accredited Investor Verification

The staff of the SEC Division of Corporation Finance confirmed that an issuer could use a minimum investment amount as a determinative factor in verifying accredited investor status.

In its interpretive guidance, the staff confirmed that an issuer conducting an offering under Securities Act Rule 506(c) ("Conditions to be met in offerings not subject to limitation on manner of offering") will be deemed to have taken reasonable steps to verify a purchaser's accredited investor status if the issuer requires purchasers to commit to a sufficient minimum investment amount, subject to certain other conditions.

Under the rule, an issuer may satisfy its verification obligations by:

• requiring a minimum investment amount of at least $200,000 for a natural person and $1,000,000 for a legal entity.
• obtaining written representations from a purchaser that it qualifies as an accredited investor and that the minimum investment amount is not financed by a third party for the specific purpose of making the investment.
• confirming the absence of actual knowledge indicating that a purchaser is not accredited or that the investment amount has been improperly financed.