ACA Guidance on Accredited Investor Verification: What Membership in an Established Angel Group Says About the Purchaser

ACA today provided guidance on the significance of angel group membership in connection with new standards for accredited investor verification. Under Securities and Exchange Commission (SEC) Rule 506(c), which becomes effective September 23, 2013, startups and emerging companies that generally solicit for investors will have heightened duties to verify that all purchasers are accredited.*

Rule 506(c) represents a significant change in securities law, and uncertainty about the verification process is of concern to members of the Angel Capital Association and the active angel community at large. ACA has been vocal in our objections to the rule’s safe harbors that would require sharing wealth or income data, but it is important to recognize that they are not the full rule. The SEC provided a significant and flexible approach for complying with this rule using a principles-based methodology. ACA is providing its guidance on how membership in an Established Angel Group may meet the requirements for a startup that uses general solicitation to verify that all investors are accredited under the principles-based methodology specified in Rule 506(c).

As practical application of the principles-based method develops under ongoing use of Rule 506(c), ACA believes it is essential that accredited investors and early-stage companies seeking capital for growth can all act with confidence that these new and important rules will enhance the likelihood of success in this most important job-creating sector of the capital markets.”

ACA’s guidance on membership in an Established Angel Group as a material factor in taking reasonable steps to verify under Rule 506(c) can be found at

I want to particularly thank a hard-working team who developed this guidance following considerable study and conversation with experts and legal counsel.  These include Jean Peters (ACA Board and Golden Seeds member), who worked tirelessly, Mike Eckert (ACA Vice Chair and Public Policy Chair), David Verrill (ACA Chair), William Carleton (ACA policy advisory council and partner McNaul, Ebel, Nawrot & Helgen PLLC and Counselor @ Law), and Joseph Bartlett (ACA policy advisory council and special counsel, McCarter & English Attorneys at Law).