How to Verify Accredited Investor Status: A Rule 506(c) Walkthrough

Why 506(c) requires verification — and 506(b) does not

Rule 506 is the workhorse exemption that nearly every private real estate syndication relies on to raise capital without registering the offering with the SEC. The rule has two subsections — 506(b) and 506(c) — and they look similar on the surface but diverge on one critical point: what the sponsor has to do to prove that every investor is actually accredited.

Under 506(b), a sponsor may rely on the investor's self-certification. You fill out a questionnaire, check a box, attest that you meet the standards, and — assuming no red flags — the sponsor accepts that attestation. The tradeoff is that 506(b) offerings cannot use general solicitation. No website pitch, no public advertisement, no LinkedIn post, no newsletter blast. The sponsor must have a pre-existing substantive relationship with every investor before raising a dollar.

Under 506(c), the sponsor may advertise the offering broadly — website, newsletter, social — but in exchange, the sponsor must take "reasonable steps to verify" that every investor is accredited. Self-certification alone is not enough. The sponsor has to independently confirm. That independent confirmation is what people mean when they say "506(c) verification."

Fremont Developers structures its offerings under 506(c). We describe the vehicles publicly on this site, which we could not do under 506(b). The price of that transparency is that every investor goes through a verification process before subscribing to any offering.

The three accreditation paths

The SEC recognizes three principal paths to accreditation for individual investors. Any one is sufficient. You do not need to qualify under all three.

1. Income. Annual income exceeding $200,000 individually, or $300,000 jointly with a spouse or spousal equivalent, in each of the two most recent years — with a reasonable expectation of reaching the same income level in the current year.
2. Net worth. Individual or joint net worth exceeding $1,000,000, excluding the value of a primary residence.
3. Professional license. Holding an active, in-good-standing license as a Series 7 registered representative, a Series 65 investment adviser representative, or a Series 82 private securities offerings representative.

Entity investors qualify under separate rules — typically through asset tests ($5 million in assets for trusts, or all equity owners being accredited) — which we cover in subscription documents rather than a blog post.

Path 1 — Income verification

The cleanest documentation is two years of IRS Form 1040s (pages 1 and 2 is usually enough; some verifiers request W-2 or 1099 attachments) plus a short representation from the investor stating a reasonable expectation of the same income level in the current year. For high-W-2 earners, pay stubs from the most recent payroll run can substitute in some structures.

The joint-filing variant is straightforward: if you are filing jointly with a spouse and the combined AGI exceeds $300,000 for each of the last two years, you qualify. One household member alone does not need to meet the $200,000 bar — the joint income is the governing number.

Common edge case: if you are relying on income that has only just crossed the threshold (for example, a new role with a higher base that moved you over $200,000 this year but not in the prior two), you do not yet qualify under the income path. The rule requires two completed years above the threshold. In that scenario, the net worth path is usually the alternative.

Path 2 — Net worth verification

This is the most common path for investors whose wealth sits in appreciated assets rather than high current income. Net worth is calculated as assets minus liabilities, excluding the equity value of the primary residence (and excluding any mortgage secured by that residence, up to the value of the residence).

Documentation is a balance-sheet exercise. The verifier needs to see:

• Brokerage statements (last three months), retirement account statements, bank account statements for any accounts counted toward the asset side
• For real estate other than the primary residence — current appraisals, tax assessments, or broker opinions of value; current mortgage statements for any liens
• For private company interests — recent capitalization table or valuation support
• For the liability side — a credit report (usually a tri-bureau pull) to confirm no undisclosed liabilities that would materially reduce net worth

The documentation must be current, typically dated within 90 days of the verification, which is why many investors find themselves updating statements partway through the process.

The 90-day window is the detail that trips up more investors than any other. Six-month-old statements do not work. The verifier needs documents that are, by SEC guidance, reasonably contemporaneous.

Path 3 — Professional license

A 2020 SEC amendment added the license path. If you hold an active Series 7, Series 65, or Series 82 license in good standing, you qualify on the strength of that license — no income or net worth documentation required. Verification is typically a look-up of your FINRA BrokerCheck or state-level adviser record.

The license path is used by a specific subset of investors — financial advisors, registered reps, institutional allocators who happen to hold the qualifying credential personally — and for that group, it is the fastest path in the rulebook. It is meaningful for EB-5 investors who are moving to the US and may not yet have two years of US income tax returns to support the income path; a qualifying license transferred in from abroad is outside scope, but a US-issued license qualifies.

Who can verify you

The SEC does not require the sponsor to perform the verification itself. Sponsors commonly rely on third-party verification letters from any of the following:

• A licensed CPA or tax professional who has reviewed the investor's documents and provides a letter attesting to accreditation
• A licensed attorney who has performed the same review
• A registered broker-dealer or investment adviser who has verified the investor in connection with an existing relationship
• A third-party verification service — the two most widely used in 2026 are VerifyInvestor and EarlyIQ, both of which run a structured document-upload workflow and issue a verification letter the sponsor can rely on

For most first-time 506(c) investors, the third-party service is the path of least friction. You upload documents, the service reviews, and the verification letter lands in the sponsor's inbox in one to three business days for a straightforward case. For more complex cases — private company interests, international assets, entities — a CPA or attorney letter is often faster than a third-party platform's review cycle.

The 90-day freshness window

Verification has a shelf life. SEC guidance treats a verification as "reasonably contemporaneous" for up to ninety days. Past that window, if you want to subscribe to a new offering, you re-verify. Re-verification is typically a quick update of statements rather than a full restart — third-party services and professional verifiers will extend an existing letter for modest incremental effort — but it is real work, and scheduling an offering with a stale verification letter is the single most common source of last-minute friction in a 506(c) subscription.

The practical implication: if you expect to be active across several syndications over a twelve-month period, it is worth thinking of verification as a quarterly cadence, not a one-time event.

What happens after verification

Once verification is complete, the verification letter sits in the sponsor's investor file. You proceed with the subscription agreement, the operating agreement acknowledgement, the wire instructions, the K-1 onboarding questionnaire, and the capital contribution. The total elapsed time from "I want to invest" to "my capital has been called and my subscription is accepted" is typically seven to fourteen business days for a new investor, depending on how quickly documentation arrives and how the sponsor's close schedule lines up with your subscription date.

One note on data handling: reputable sponsors and verification services treat accreditation documents as sensitive personal financial information. Ask how your documents are transmitted and stored. We transmit through encrypted channels, retain verification letters but not source documents longer than the regulatory minimum, and delete source files on a documented schedule. If a sponsor cannot tell you how they handle your tax return after it arrives, that is information about the sponsor.

A 506(c) sponsor has to take reasonable steps to verify. A 506(c) investor has to be comfortable with what "verification" means in practice. Both sides of that arrangement should be explicit before you upload a tax return.

If you'd like to understand how our subscription process works before you start gathering documents, a brief conversation is usually more useful than a long document list. The mechanics are covered in our investor overview, and for a first conversation, a direct message is the fastest route in.