No Action Letter: Latham & Watkins

Response of the Office of Small Business Policy
Division of Corporation Finance (the “Division”)

March 12, 2025

Via Email

Michele M. Anderson, Alexander F. Cohen,
Paul M. Dudek, and Joel H. Trotter
Latham & Watkins LLP
Joel.Trotter@lw.com

Re: Request for Rule 506(c) Interpretative Guidance (Incoming letter dated March 6, 2025)

Based on the facts presented, the Division's views are as follows.

You have requested the staff concur in your conclusion that an issuer will have taken reasonable steps to verify a purchaser’s accredited investor status in an offering conducted under Rule 506(c) of Regulation D if the issuer requires purchasers to agree to certain minimum investment amounts, when coupled with the purchaser’s written representations and the related conditions described in your letter.

We agree that a high minimum investment amount is a relevant factor in verifying accredited investor status. As you note, the Commission stated that “if the terms of the offering require a high minimum investment amount and a purchaser is able to meet those terms, then the likelihood of that purchaser satisfying the definition of accredited investor may be sufficiently high such that, absent any facts that indicate that the purchaser is not an accredited investor, it may be reasonable for the issuer to take fewer steps to verify or, in certain cases, no additional steps to verify accredited investor status other than to confirm that the purchaser’s cash investment is not being financed by a third party.” Securities Act Release No. 9415 (July 10, 2013). We also note your representation that the minimum investment amount would be accompanied by written representations, from the purchaser, as to: (1) their accreditation (under Rule 501(a)(5) or (a)(6) if they are a natural person, or under Rule 501(a)(3), (7), (8), (9) or (12) if they are a legal entity), and (2) the fact that the purchaser's minimum investment amount (and, for purchasers that are legal entities accredited solely from the accredited investor status of all of their equity owners, the minimum investment amount of each of the purchaser’s equity owners) is not financed in whole or in part by any third party for the specific purpose of making the particular investment in the issuer. In addition, we note your representation that the issuer would have no actual knowledge of any facts that indicate: that any purchaser is not an accredited investor; or that the minimum investment amount of any purchaser (and, for purchasers that are legal entities accredited solely from the accredited investor status of all of their equity owners, the minimum investment amount of any such equity owner) is financed in whole or in part by any third-party for the specific purpose of making the particular investment in the issuer.

Whether an issuer has taken reasonable steps to verify that a purchaser is an accredited investor is an objective determination by the issuer (or those acting on its behalf), in the context of the particular facts and circumstances of each purchaser and transaction. Based on the representations in your letter, we agree the issuer could reasonably conclude that it has taken reasonable steps to verify that purchasers of securities sold in an offering under Rule 506(c) of Regulation D are accredited investors.

This letter reflects the views of the staff of the Division of Corporation Finance. It is not a rule, regulation, or statement of the Commission, and the Commission has neither approved nor disapproved its content. This letter, like all staff statements, has no legal force or effect: it does not alter or amend applicable law, and it creates no new or additional obligations for any person. Because the Division’s views are based on the representations in your letter, any different facts or conditions might require the Division to reach a different conclusion.