Verifying Accredited Investor Status is a practical compliance step for many private offerings—particularly when an issuer must demonstrate it took “reasonable steps” to verify eligibility (as is typical in generally solicited offerings). A clear, repeatable verification process reduces execution risk, shortens onboarding timelines, and creates an audit-ready record if questions arise later from regulators, auditors, investors, or counterparties.
Below are three commonly used, straightforward pathways—each with distinct advantages depending on investor type, sensitivity to document sharing, and speed requirements.
1) Income verification
Best for: Individuals with stable, documentable income and a preference for a relatively simple test.
What it involves: Reviewing objective documentation that supports the income threshold over the relevant period. Commonly collected items may include:
- Tax forms (often the most direct support), and/or
- W-2s, 1099s, or other evidence of earnings, plus
- A written representation that the investor reasonably expects to meet the income threshold in the current year.
Practical tips for issuers:
- Use a checklist that specifies acceptable documents and time periods.
- Confirm the name matches subscription records and resolve discrepancies early.
- Minimize data exposure by permitting redaction of non-essential fields (where consistent with your policy and defensible documentation needs).
2) Net worth validation
Best for: Individuals whose wealth is primarily asset-based rather than income-based, or whose income is irregular.
What it involves: Establishing that assets exceed liabilities by the applicable margin. This typically requires documentation supporting both sides of the balance sheet, such as:
- Bank and brokerage statements for liquid assets,
- Appraisals or ownership documentation for certain non-liquid assets (when relevant),
- A credit report or similar liability overview to substantiate debts.
Practical tips for issuers: - Define “current” documents (for example, within a set number of days) and apply the rule consistently.
- Treat real estate and private holdings carefully; valuation support should be reasonable and well-documented.
- Maintain a clear file memo showing how you formed the conclusion, not just what you collected.
3) Third-party certification
Best for: Investors who prefer not to share detailed financial documents with the issuer, and issuers seeking a streamlined workflow.
What it involves: Obtaining written confirmation from a qualified third party who has taken reasonable steps to verify and can attest to the investor’s eligibility. This approach can be efficient, but it still requires the issuer to:
- Confirm the certification is complete, properly dated, and appropriately scoped, and
- Retain it in the investor’s file as part of the compliance record.
How a verification service can expedite the process
A neutral, third-party verification provider can reduce friction by standardizing document collection, applying consistent review criteria, and returning a clear verification outcome with supporting records. For issuers, this often translates into faster closings, fewer back-and-forth requests, better privacy controls, and more defensible documentation—especially when scaling to many investors or managing varied investor profiles.
Regardless of method, the goal is the same: a consistent, well-documented basis for accepting an investor and demonstrating a good-faith process for Accredited Investor Status verification.
