If you’re raising under the 506(b) exemption, you don’t have to verify an investor’s accreditation status. However, you should have a pre-existing relationship with them and make sure that they self-certify that they are accredited.
If you’re raising under a 506(c) exemption, the SEC requires you to take reasonable steps to verify that an investor is accredited. It doesn’t have to be that they actually are, in fact, accredited, but you must take reasonable steps to make sure that they are. If they falsify or doctor documents, that’s not really your fault, so long as you took reasonable steps.
Now, what are reasonable steps? You can either verify the accredited status of an investor yourself, or you can outsource it or contract it out to a company that does that. There are several companies out there that do it today. If you’re going to try and do it yourself, you need to make sure you keep that documentation on file.
The SEC says there are a number of ways to verify someone’s accredited status. They came up with three ways, though, that are more or less bulletproof (we call this a safe harbor). The first way is have an attorney, CPA, or broker dealer write you a letter to verify that you are accredited.
The second way requires that the investor give you documentation showing that they have an annual salary of over $200,000 per year for the past two calendar years if they filed singly, and over $300,000 if they filed their taxes jointly. This usually means that the investor is furnishing you with two years worth of W-2s or year-end paystubs. They also need to represent that they expect to keep on earning this level of annual income into the near future.
The third way to verify an accredited investor status is to look at their net worth, excluding their primary residence (or the house that they live in) and their liabilities (any debts they have).