Skip to main content

SEC Provides Further Clarity in Rule 506(c) Offerings

On March 12, 2025, the Securities and Exchange Commission (SEC) issued a No-Action Letter that provided guidance regarding the ways issuers can satisfy the accredited investor verification requirements of offerings made pursuant to Rule 506(c) under Regulation D. Specifically, the SEC confirmed that an issuer will satisfy the requirement that it take “reasonable steps” to verify the accredited investor status of an investor if the issuer requires purchasers to agree to certain minimum investment amounts, coupled with such investor’s self-certification of certain representations related to their investment.

Rule 506(c) provides a non-exhaustive list of steps which include collecting bank statements, verification letters, credit reports, or other sensitive documentation, which many issuers find too burdensome. The SEC’s clarification could make it easier for issuers relying on Rule 506(c) to make general solicitations to accredited investors.

Under the guidance provided by the No-Action Letter, an issuer can satisfy the verification requirement if: 

  1. The offering requires a minimum investment of at least $200,000 from natural persons or $1 million for legal entities (in either case, including binding commitments to invest at least the minimum amount in one or more installments when called by the issuer); and 
     
  2. The investor provides written representations that (a) the purchaser is an accredited investor; and (b) the purchaser’s minimum investment amount is not financed in whole or in part by any third party for the specific purpose of making the particular investment in the issuer. 
     

Should you have any questions, please contact a member of the Mintz team.

 

Subscribe To Viewpoints

Authors

Daniel I. DeWolf

Daniel I. DeWolf

Member / Chair, Technology Practice; Co-chair, Venture Capital & Emerging Companies Practice

Daniel I. DeWolf is an authority on growth companies and serves as Chair of Mintz's Technology Practice Group and Co-chair of the firm’s Venture Capital & Emerging Companies Practice. He has worked on pioneering online capital-raising methods. He also teaches venture capital law at NYU Law School.
Samuel Asher Effron

Samuel Asher Effron

Member / Co-chair, Venture Capital & Emerging Companies Practice

Samuel Asher Effron assists Mintz clients with venture capital and private equity transactions, helping start-ups with legal and business matters. He has clients in a variety of technology sectors, including video gaming, music, virtual and augmented reality, and consumer electronics.
Daniel A. Lerner is a Mintz attorney who focuses his practice on corporate and securities law. He works with public and private companies on a variety of corporate matters.