Verifying Investor Suitability

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According to Reg D rules, Issuers (companies raising capital) are responsible for verifying investor suitability. This process establishes whether an investor is qualified as an accredited investor, as described in Rule 501 of Reg D. We have used the following method for verifying accredited investors, since most of our staff started working with Reg D in 1998. It was modified in 2013 to include the new general solicitation rules, Rule 506(c).

To properly verify a potential investor, one needs to check the following criteria:

  • Income
  • Assets
  • Liabilities

* Regulation D provides a few different ways to verify whether someone is suitable. We typically include an item from each category above, just to be on the safe side. Each investor is vetted.

For Income: Any one of the following IRS forms for most recent 2 years.

  • Form 1040
  • Form 1065
  • W-2 Form
  • Form 1099
  • Schedule K-1
For Assets: Any one of the following:
  • Bank Statements
  • Brokerage Statements
  • Certificates of Deposit
  • Life Insurance Statements
  • Annuity Statements
  • Trust Statements
  • Tax Assessments
  • Certified Appraisal Reports
For Liabilities:
  • Copy of Consumer Credit Report
Alternative:
  • A letter from one of the following confirming they have taken reasonable steps, within the prior 3 months, to verify that the purchaser is accredited.
    • A registered broker-dealer
    • A registered investment advisor
    • A licensed attorney
    • A CPA
* We include an Investor Suitability Questionnaire in our PPM Template Packages.