Trust But Verify (With A Minimum Investment Amount)

By: Pablo Man and Ruth Delaney

On 12 March 2025, the SEC staff issued a no-action letter for offerings under Rule 506(c) of Regulation D. In the letter, the Staff concurs that an issuer will have taken “reasonable steps to verify” a purchaser’s accredited investor status in an offering conducted under Rule 506(c) if the issuer requires purchasers to agree to certain minimum investment amounts, subject to a few additional conditions:

• The minimum investment amount would be accompanied by written representations from the purchaser as to:
  • Their accreditation (under Rule 501(a)(5) or (a)(6) if they are a natural person, or under Rule 501(a)(3), (7), (8), (9) or (12) if they are a legal entity); and
  • The fact that the purchaser’s minimum investment amount (and, for purchasers that are legal entities accredited solely from the accredited investor status of all of their equity owners, the minimum investment amount of each of the purchaser’s equity owners) is not financed in whole or in part by any third party for the specific purpose of making the particular investment in the issuer.
• The issuer would have no actual knowledge of any facts that indicate that:
  • Any purchaser is not an accredited investor; or
  • The minimum investment amount of any purchaser (and, for purchasers that are legal entities accredited solely from the accredited investor status of all of their equity owners, the minimum investment amount of any such equity owner) is financed in whole or in part by any third-party for the specific purpose of making the particular investment in the issuer.
• The incoming letter to the Staff includes a condition that requires a minimum investment amount of at least US$200,000 for natural persons and at least US$1,000,000 for legal entities.