Accredited Investor: A Little Less Red Tape, A Lot More Capital: What the SEC Just Did for Reg D Rule 506(c)

The U.S. Securities and Exchange Commission (SEC) just made a game-changing move for capital raisers utilizing Rule 506(c) under Regulation D. On March 12, 2025; the SEC issued two new C&DIs as well as a pivotal no-action letter (the “Latham No-Action Letter”) which together significantly clarify and expand the permissible accredited investor verification methods under Rule 506(c) of Regulation D. This development holds particular importance for real estate syndications, online capital raising platforms, and other private issuers looking to streamline their verification processes and maximize the impact of general solicitation.

For years, one of the biggest pain points of Rule 506(c) has been the investor verification requirement. While the Rule allows issuers to publicly advertise their offerings, they must also take “reasonable steps” to ensure every investor is accredited. The burden of proof deterred many issuers, leading to underutilization of what should be a powerful fundraising tool.

Now, thanks to these new SEC interpretations, issuers have more flexibility, clearer standards, and reduced compliance friction. Here’s what’s new:

C&DI 256.35: A Broader, More Flexible Verification Approach

C&DI 256.35 confirms that the list of verification methods in Rule 506(c)(2)(ii) is “non-exclusive and non-mandatory.” This means that issuers are not required to rely on one or more of the safe harbor methods—such as reviewing tax returns, brokerage statements, or obtaining third-party attestations—but may instead assess whether an investor is accredited based on a broader facts-and-circumstances analysis.

The C&DI references past SEC guidance, including the 2013 Regulation D adopting release and the 2020 exempt offering simplification rules, to outline factors that issuers should consider when determining whether they have taken “reasonable steps” to verify accredited status, including:

1. The nature of the purchaser and the type of accredited investor the purchaser claims to be;
2. The amount and type of information the issuer has about the purchaser; and
3. The nature of the offering, such as how the purchaser was solicited and the terms of the offering, including a minimum investment requirement.

These factors should be evaluated collectively, meaning issuers with strong pre-existing knowledge of an investor’s financial standing may not need to collect as much additional documentation.

C&DI 256.36: The Power of High Minimum Investment Thresholds

C&DI 256.36 goes a step further by establishing a practical test for issuers who impose high minimum investment amounts in their offerings. It specifically addresses whether a high minimum investment amount is a relevant factor, or even perhaps the determining factor, in verifying accredited investor status.

This new C&DI is based on the Latham No-Action Letter, which recognized that in certain circumstances, issuers may reasonably conclude that a high minimum investment amount creates a strong likelihood that an investor qualifies as accredited. The SEC reaffirmed that an issuer may reasonably take fewer or no additional steps beyond verifying that the investor has met the investment requirement when an offering requires a high cash investment—such as $200,000 for individuals or $1 million for entities—and the issuer confirms that:

1. The investor is not financing the investment with funds from a third party, and
2. The issuer has no actual knowledge that contradicts the investor’s accredited status.

This is a huge win for issuers raising large sums, particularly in real estate syndications, tokenized real-world asset offerings, and other private placements, where high buy-ins are common.

Understanding the Latham No-Action Letter

The Latham No-Action Letter introduces a clear, bright-line standard for verification based on minimum investment thresholds. According to the SEC’s guidance, issuers can satisfy the verification requirement if the following conditions are met:

1. High Minimum Investment Amount: The investor makes a minimum investment of $200,000 for natural persons or $1,000,000 for legal entities.
2. Investor Representations: The investor provides written representations confirming their status as an accredited investor under the applicable definitions and attesting that the investment is not financed by any third party specifically for the purpose of making the investment.
3. Issuer’s Knowledge: The issuer has no actual knowledge or information that would contradict the investor’s representations as to their accredited status or financing source.

For issuer utilizing high investment minimums, this guidance simplifies the verification process by allowing issuers to rely on objective criteria—namely, the size of the investment—coupled with investor attestations, to meet their regulatory requirement. This approach aligns with the SEC’s recognition that a substantial investment amount can serve as a strong indicator of an investor’s accredited status, as articulated in previous releases.

Implications for Real Estate Syndications & Online Platforms

For real estate sponsors, the SEC’s updated guidance means that Rule 506(c) is now far more practical. Previously, many syndicators avoided general solicitation due to the hassle of investor verification. With the new framework, they now have a viable, objective alternative to traditional verification methods, allowing them to:

• Market their offerings more broadly.

• Reduce friction in investor onboarding.

• Expand access to high-net-worth investors who are wary of providing personal financial documents.

For crowdfunding platforms, broker-dealers, and Fintech issuers, this is also a major efficiency boost. Online platforms built around digital investment experiences can now refine their verification processes to be less invasive and more scalable, ultimately increasing participation and transaction volume.

A Glimpse Into the Future?

The SEC’s decision to introduce more flexible verification pathways could signal broader changes ahead. The accredited investor definition is a longstanding debate in securities regulation, and these updates suggest that regulators may be open to further refinements—perhaps even a push toward a more inclusive and innovation-friendly framework.

What’s Next for Internet-Based Capital Formation?

If you’re an issuer contemplating a 506(c) offering, now is the time to:

• Re-evaluate your investor verification process and determine whether you can reduce compliance burdens while maintaining regulatory confidence.

• Consider higher minimum investment thresholds as a built-in, SEC-approved verification tool.

• Leverage online marketing and general solicitation strategies with greater assurance that your investor verification process aligns with SEC guidance.

Conclusion: A New Era for Online Capital Raising Under Rule 506(c)

For years, the online capital raising community—including broker-dealers, technology platforms, marketers, issuers, and other professional service providers—has worked within the confines of Rule 506(c), navigating investor verification challenges while developing private market solutions to maintain compliance. The list of verification methods outlined in Rule 506(c)(2)(ii) has long served as a non-exclusive, non-mandatory framework, providing safe harbors that have been widely adopted by accredited investor verification services such as InvestReady.

However, one lingering issue has remained: the high-net-worth investor writing a check so large that they are obviously accredited—but with no clear safe harbor for issuers to rely upon. The result? A frustrating gap between regulatory intent and practical application, leaving issuers caught between compliance risk and common sense.

Now, with the new SEC C&DIs and the Latham No-Action Letter, that gap has finally been addressed. The SEC’s updated guidance signals a major shift in how accredited investor verification can be approached, broadening the acceptance of alternative verification methods beyond traditional financial document reviews. This shift could also be a precursor to changes in the accredited investor definition on the 2025 legislative horizon, further modernizing private market access.

For issuers already implementing high minimum investment thresholds—such as $200,000 for individuals and $1 million for entities—this is an inflection point. Rule 506(c) now offers a far more compelling value proposition, with its expansive marketing potential unlocked while the regulatory burden remains manageable. Of course, not all issuers are eligible to engage in public solicitation, and consultation with experienced securities counsel remains essential.

But for those positioned to take advantage of these changes, the message is clear: A little less red tape. A lot more capital.

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Robin Sosnow, Esq., J.D., M.B.A.  is the founder and Managing Attorney of Sosnow & Associates PLLC, where she provides strategic legal guidance to issuers, platforms, and broker-dealers navigating alternative financing strategies. She is also the CEO of Bootstrap Legal and serves on the Board of Directors of the Crowdfunding Professional Association (CfPA). Sosnow specializes in Regulation A, Regulation Crowdfunding, and Regulation D offerings, helping entrepreneurs and investors navigate compliance and capital formation. She is also a leading advocate for blockchain-based securities, advising on tokenized offerings, cap table management, and secondary market liquidity solutions. Robin is the founder of the CrowdCrypto Newsletter, covering market trends, regulatory updates, and fintech innovation.

Jason Siev, Esq., J.D. is a corporate and securities attorney focused on capital formation, private placements, and regulatory compliance for startups and emerging businesses. Before joining Sosnow & Associates, he gained experience at the Cardozo Tech Startup Clinic, a hospitality management startup, and the U.S. Air Force JAG Corps, where he worked across multiple legal disciplines. Siev’s multi-industry background enables him to craft business-focused legal solutions that align with the needs of startup founders, investors, and issuers. His passion for entrepreneurship and innovation drives his commitment to helping companies navigate complex securities laws and scale with confidence.