Investor accreditation requirements and process
The following article will help you manage investor accreditations when onboarding investors.
506c funds - require 3rd party accreditation letters for each investor when they join the fund.
506b funds - allows self accreditation by the investor when they join the fund. 506b funds can have a maximum of 35 non-accredited investors in the fund.
Key SEC accreditation rules
- 3rd party accreditation letters are only valid for 90 days from date of issuance.
- 3rd party letters must be from an attorney, CPA, registered investment advisor or 3rd party accreditation service.
- For a given offering (such as a private fund), the sponsor of the offering can use the letter for a period of one year without requesting a new letter. After one year, the sponsor must verify in writing that the investor continues to meet the accreditation requirements.
- After 5 years, the sponsor must get another 3rd party verification letter before taking additional capital from the investor.
When onboarding an investor, it is important to ensure that the letter than they have uploaded is a valid accreditation letter. Below are a few tips.
- Check letter to ensure that the letter has not expired. If there is no expiration date, then the expiration date is 90 days after the issuance of the letter.
- Investors cannot self-verify for a 506c fund.
- In the Avestor platform, you should place the accreditation letter date and the expiration date. The expiration date should be 1 year after the issuance date to ensure that you follow up with the investor at 1 year.
- In the Avestor platform, you should mark that the investor is accredited.
Rules for 506b funds are different than 506c funds. You are permitted to have up to 35 non-accredited investors in the fund. Accredited investors can self-verify their status.
Below are a few tips.
- Check the investors signed subscription document to see if they properly filled out their accreditation status. If an investor has not filled it out, you will need to request them to fill out a separate self-verification letter otherwise they will be marked as a non-accredited investor.
- If a separate self-verification letter is used, ensure either the investor or you have uploaded the letter into Avestor's portal as part of registration.
- In the Avestor platform, you should mark that whether the investor is accredited or non-accredited. Avestor will track how many non-accredited investors you have in your fund.
Note: Avestor is not providing the information as legal guidance. Please contact your securities attorney for official legal and regulatory guidance.