For sales of securities to accredited investors that are exempt from the requirement of registration with the Securities and Exchange Commission (SEC), the accredited status of the investors must be determined and verified. For many exemptions, an investor can “self certify” its status as an accredited investor by completing an accredited investor questionnaire. The questionnaire, typically provided by the issuer, allows the investor to identify the manner and basis of its accredited status and requires the investor to represent that the information provided is accurate. Investors typically sign the questionnaire in connection with the closing of the issuance, although some investors may be asked to sign in connection with reviewing an offering. For other exempted offerings, including those that involve a general solicitation (for example, a public offering ofsecurities via mailing or the internet), the issuer of the securities must take reasonable steps to ensure that the purchasers of the securities are in fact accredited investors. In these cases, self certification via an accredited investor questionnaire is insufficient. The issuer instead must independently verify the accredited investor’s status by reviewing tax returns and other financial information of the investor. In some cases, a third party verification service will review the confidential financial information of the investor and provide a verification report to the issuer. Regardless of whether an accredited investor self certifies its status or the issuer verifies the investor’s status independently, the issuer must reasonably believe that the investor is accredited in order for the registration exemption to apply.
