Accredited Investor Verification for 506(c) Deals

In a Rule 506(c) offering, the sponsor must take reasonable steps to verify that every investor is accredited. The rule lists methods that count: two years of tax forms, asset documents plus a recent credit report, or a letter from a registered broker-dealer, SEC-registered adviser, attorney or CPA. If you are the sponsor, we built DoorRaise to run these checks on every investor.

This post covers how verification works. For who qualifies, see the accredited investor definition. For where it fits in the whole deal, see our guide to real estate syndication.

Who needs to verify accredited investors?

Only issuers using Rule 506(c), the exemption that allows public marketing. Under Rule 506(c), all purchasers must be accredited and the issuer must take reasonable steps to verify that status.

In a 506(b) offering you cannot advertise, and the rule does not prescribe verification steps. You still need a reasonable belief about each buyer. If you post about your deal publicly, such as on social media or an open website, assume you are in 506(c) territory. See 506(b) vs. 506(c) and what a 506(c) offering is.

How do you verify an accredited investor?

You choose from the rule's non-exclusive methods, or another approach that is reasonable on the facts. The rule is principles-based: what counts as reasonable depends on the investor and the deal. The listed methods give sponsors a clear path.

Method	What the investor provides	Best for
Income	IRS forms (W-2, 1099, Schedule K-1 or Form 1040) for the two most recent years, plus a written statement of a reasonable expectation to reach the level this year	Investors who qualify on income
Net worth	Asset documents such as bank or brokerage statements, plus a consumer report from a nationwide agency dated within the prior three months, plus a written statement that all liabilities are disclosed	Investors who qualify on net worth
Professional letter	Written confirmation, within the prior three months, from a registered broker-dealer, SEC-registered investment adviser, licensed attorney in good standing or CPA in good standing	Most investors; often the least friction
Previously verified	A written representation at the time of sale that they still qualify, for a person the same issuer verified under these methods before	Repeat investors, for a limited time
High minimum	A commitment of at least $200,000 (individual) or $1,000,000 (entity), plus written representations	Large checks only

For spouses who qualify jointly, the rule calls for documentation and representations from both. The text is in 17 CFR 230.506(c). The income and net worth tests themselves are covered in our post on the accredited investor definition.

How does the high-minimum method work?

The method comes from an SEC staff no-action letter dated March 12, 2025, responding to a request from Latham & Watkins. It says an issuer can reasonably conclude it took reasonable steps if three things are true. Read the SEC letter or Dechert's summary for the details.

The investor commits to invest at least $200,000 as a natural person or $1,000,000 as a legal entity.
The investor represents in writing that they are accredited and that the minimum is not financed, in whole or in part, by a third party for the purpose of making the investment.
The issuer has no actual knowledge of facts indicating those statements are false.

For an entity that is accredited only because all its equity owners are, each owner must have a minimum commitment of $200,000 (natural person) or $1,000,000 (legal entity), not third-party financed, and the entity itself must commit $1,000,000, or $200,000 per owner if it has fewer than five natural-person owners. The SEC letter states it reflects the views of the staff and is not a rule or Commission statement, and whether steps are reasonable is a facts-and-circumstances call. Ask your attorney before relying on it.

Who can write an accredited investor verification letter?

Under the rule, the confirmation can come from four types of professionals: a registered broker-dealer, an SEC-registered investment adviser, a licensed attorney in good standing, or a certified public accountant in good standing. The letter must say the professional took reasonable steps to verify the investor's status within the prior three months.

Many investors ask their own CPA or attorney. The professional decides what to review, and the sponsor decides whether the letter is enough. If a letter looks thin, or the facts do not add up, ask follow-up questions.

What does it look like in practice? A worked example (illustrative)

Take a sponsor raising $3,000,000 in a 506(c) offering. All numbers are illustrative.

Twenty-five investors commit. Five commit $200,000 each (5 x $200,000 = $1,000,000), and twenty commit $100,000 each (20 x $100,000 = $2,000,000). Total: $3,000,000.

The five large investors sign the high-minimum representations. The sponsor asks each for a written statement that the money is not borrowed for this investment and checks nothing in the file contradicts it. Of the twenty $100,000 investors, twelve provide CPA or attorney letters, five send two years of tax forms, and three send bank statements plus a credit report (12 + 5 + 3 = 20).

A date trap. One of the three net worth investors pulled a credit report on September 1, 2026, but the sponsor will accept the subscription on December 15, 2026. Three months before December 15 is September 15, so the report is stale. The investor needs a fresh one. Build in time for this, since the clock runs from the sale, not the date the investor started.

What mistakes do sponsors make with verification?

The biggest mistakes are timing and record keeping, not the method itself. Each of these can undermine an exemption.

Relying on a checkbox. For a new investor, self-certification alone does not meet 506(c), apart from the high-minimum route and repeat-investor representations.
Verifying after the money arrives. Verify before you accept the investment.
Using stale documents. Net worth documents and professional letters must be dated within the prior three months.
Ignoring red flags. If the investor's documents conflict with what they told you, the problem does not go away because a form is signed.
Careless storage. Tax returns and statements contain sensitive data and need secure handling and limited access.
Re-verifying from scratch every deal. Repeat investors get frustrated. A previously verified investor can give a written representation, but the rule limits that route to a period of five years, so confirm the details with counsel.

Our take

Our take: verification should be boring and early. The sponsors who get into trouble are usually the ones who treat it as a last-minute form to clear at closing. We think it belongs on day one of every investor conversation.

We also think the high-minimum option is useful but narrow. It helps with large checks. Many syndications accept smaller checks, so many investors will still need a letter or documents. And because it is staff guidance, a sponsor leaning on it should have counsel comfortable with it, in writing.

Trade-offs and who this is not for

Verification adds friction, and some investors will drop out rather than share documents. That is part of the price of public marketing.

Not for sponsors who want zero paperwork. If that is you, 506(b) with a warm list may fit better, though it limits marketing.
Not for investors who are uncomfortable sharing tax returns. A professional's letter keeps the raw documents with the professional.
Not a suitability check. Verification confirms status. It does not tell you whether the deal is right for the investor.
Third-party services vary. Fees, turnaround and data handling differ, so compare them.

How DoorRaise fits in

DoorRaise helps sponsors raise equity for apartment buildings with 5+ units from people who already trust them, under Rule 506(b) or 506(c). We are software, legal document preparation, escrow coordination and verification services. We are not a law firm, broker-dealer, investment adviser, funding portal, bank or escrow agent, and we do not hold investor money.

Accreditation checks on every investor are part of the $500 setup fee, which also covers forming the deal's LLC, investor documents from attorney-approved templates, an escrow account in the deal's name and the deal page. The $5,000 closing fee, paid from the funds raised and only if the deal closes, covers attorney review of the offering documents, sponsor and property checks, the Form D filing and electronic signing. The $3,500 yearly fee covers bookkeeping, the tax return and K-1s. There are no per-investor fees, and we take 0% of the raise or profits. State filing fees are included in the $5,000 closing fee. DoorRaise's own estimate for accreditation checks purchased separately on a raise of about 40 investors is $2,000 to $4,000. Compare on our pricing page.

Ready to raise? Create your free sponsor page or see pricing.

FAQ

How do you prove you're an accredited investor?

Usually with a letter from your CPA, attorney, SEC-registered investment adviser or registered broker-dealer. You can also share two years of tax forms, or recent asset statements plus a credit report. Which route fits depends on whether you qualify on income or net worth.

Can investors self-certify in a 506(c) offering?

Not on a checkbox alone for a new investor. A written statement counts toward reasonable steps in two cases: with a high minimum investment under the March 2025 SEC staff letter, or for a person the same issuer verified under the rule before.

How long does accredited investor verification last?

Net worth documents and professional letters must be dated within the prior three months of the sale. A previously verified investor can give a written representation at the time of a later sale for up to five years. A new issuer should plan on its own check.

Can my CPA write my accredited investor letter?

Yes. A CPA in good standing can give written confirmation that they took reasonable steps to verify your status within the prior three months.

Do I need to verify investors in a 506(b) deal?

The rule does not prescribe verification steps, but you need a reasonable belief that each investor is accredited, or sophisticated if not. You also cannot advertise. Ask your attorney what is reasonable for your deal.

Does the investor's spouse need to be verified too?

If a couple qualifies on joint income or joint net worth, the rule calls for documentation and representations from both spouses. Ask counsel how to handle it for your investors.

Sources

This article is general information as of October 2026, not legal, tax or investment advice. Talk to a securities attorney about your verification process. DoorRaise is not a law firm, broker-dealer, investment adviser or funding portal.