Question: Can an investor that invested with us before in a Rule 506 Offering complete a re-affirmation letter in lieu of getting re-verified as an accredited investor if they want to invest in our current Rule 506(c) Offering?
Answer: Investors can sign a re-affirmation letter verifying that they are still accredited for up to five years after they were originally verified and invested in a Rule 506(c) Offering that was offered by an entity owned or controlled by you or a member of your management team.
You can’t use a verification letter they generated for someone else’s offering, as their initial verification must be dated within 90 days of their first investment in your Rule 506(c) Offering as a verified accredited investor.
If they only invested in Rule 506(b) Offerings and weren’t previously verified, it’s harder for you to defend that you had a reasonable belief that they were accredited (which, per the SEC, requires third-party verification or examination of their financial statements). However, if they have invested with you in multiple prior Rule 506(b) Offerings as an accredited investor, it could be considered reasonable for you to have them re-affirm their accredited investor status for a new Rule 506(c) Offering in lieu of verification. But you would have to dig up records on when they first made the assertion they were accredited, and if it’s over five years old, you would probably have to re-verify them.
If they did invest in a Rule 506(c) Offering and were previously verified, you should keep track of when they were originally verified in your CRM so you can re-verify them in another five years. The safest position for you is to have all investors for your current Rule 506(c) Offerings verified every five years, and don’t rely on their previous self-certification from a Rule 506(b) Offering.
