Accredited investors and Rule 506(c): who can invest in a private fund
Private funds like Levment can only accept accredited investors. Here is who qualifies, how a fund verifies it and what the SEC is considering changing.
In short
Individuals are generally accredited if they earned more than $200,000 ($300,000 with a spouse or spousal equivalent) in each of the last two years, have a net worth over $1 million excluding their home, or hold a Series 7, 65 or 82 license. Under Rule 506(c), a fund may advertise publicly but must take reasonable steps to verify every investor’s status. Since March 2025, SEC staff have accepted high minimum investments plus written representations as one way to do that. Proposals published in fall 2026 would add new pathways, but none are final.
Who is an accredited investor
The definition is in Rule 501(a) of Regulation D under the Securities Act of 1933. An individual generally qualifies through one of these tests.
- Income. Income above $200,000 in each of the two most recent years, or joint income with a spouse or spousal equivalent above $300,000, with a reasonable expectation of the same this year.
- Net worth. Net worth above $1 million, alone or with a spouse or spousal equivalent, not counting the value of your primary residence.
- Professional licenses. Holding a FINRA Series 7, Series 65 or Series 82 license in good standing.
- Insiders. Directors, executive officers and general partners of the issuer, and “knowledgeable employees” of a private fund for investments in that fund.
Entities can also qualify, including trusts and companies with more than $5 million in assets that were not formed to make the specific investment, entities owning more than $5 million in investments, qualifying family offices and their family clients, and entities whose equity owners are all accredited investors.
The dollar thresholds for individuals are not indexed to inflation. They have stayed the same for decades, apart from the 2011 change that excluded the primary residence from net worth.
Rule 506(b) and Rule 506(c)
Most private funds raise money under one of two exemptions in Rule 506.
| Rule 506(b) | Rule 506(c) | |
|---|---|---|
| Public advertising | Not allowed | Allowed |
| Who can invest | Accredited investors, plus up to 35 sophisticated non-accredited investors | Accredited investors only |
| Verification | Investor can self-certify | Issuer must take reasonable steps to verify |
Levment uses Rule 506(c). That is why this website can describe the fund publicly, and why every investor must be verified before investing.
How verification works
Rule 506(c) lists several methods that count as reasonable steps, and issuers can use other reasonable methods as well. Common approaches include:
- Reviewing IRS forms such as W-2s, 1099s or tax returns for the two most recent years, for the income test.
- Reviewing recent bank, brokerage and similar statements together with a credit report, for the net worth test.
- Obtaining a written confirmation from a registered broker-dealer, an SEC-registered investment adviser, a licensed attorney or a certified public accountant.
The March 2025 minimum-investment guidance
On March 12, 2025, the SEC’s Division of Corporation Finance issued a no-action letter that simplified verification for offerings with high minimums. The staff agreed that an issuer may treat a minimum investment of at least $200,000 for an individual, or $1 million for an entity, as a reasonable verification step, as long as the investor makes written representations that they are accredited and that the minimum investment is not financed by a third party for that purpose, and the issuer has no actual knowledge to the contrary.
Which method applies to a particular fund depends on its minimum investment and its subscription documents.
Qualified clients and performance fees
A separate standard can apply to funds that charge a performance fee. Under Rule 205-3 of the Investment Advisers Act, a registered investment adviser may generally charge performance-based fees only to “qualified clients.” An SEC order effective June 29, 2026 raised those thresholds to $1.4 million in assets under management with the adviser or $2.7 million in net worth.
On September 30, 2026, the SEC proposed amending the definition so that accredited investors would count as qualified clients. That proposal is not final.
What may change
Alongside that proposal, the SEC published notices on September 30, 2026 asking for comment on new ways for individuals to qualify as accredited investors, including passing an accredited investor exam developed by FINRA, holding a U.S. CPA license, a CFA charter or a CFP certification, or holding a FINRA Series 79 license or Series 86 and 87 licenses. Comments are due in early December 2026. Until the SEC acts, none of these pathways is available.
How to invest in Levment
If you believe you qualify, request access. We will send the private placement memorandum and explain the verification method that applies. The fund terms page summarizes fees and the investment process.
Sources
- 17 CFR 230.501(a), definition of accredited investor, and 17 CFR 230.506(c), Regulation D.
- SEC Division of Corporation Finance, no-action letter to Latham & Watkins LLP, March 12, 2025. Summaries: Gibson Dunn and Morgan Lewis.
- SEC final order adjusting qualified client thresholds under Advisers Act Rule 205-3, April 28, 2026, effective June 29, 2026.
- SEC proposals and Rule 501(a)(10) notices of September 30, 2026. Summary: Greenberg Traurig.
This article is educational and is not investment, tax or legal advice. Examples are illustrative and are not Levment results.