Can My CPA Verify Accredited Investor Status for a Syndication?

Question

Before anything else, I'd ask whether the offering is being done under 506(b) or 506(c).

In a 506(c) offering, the issuer generally needs to take reasonable steps to verify that investors are accredited. One of the SEC's non-exclusive verification methods allows written confirmation from a CPA if the applicable requirements are met.

That said, I wouldn't assume every CPA letter will automatically be accepted. It seems like the best approach is to ask the sponsor what verification methods they accept and what they need the letter to include.

For those who've invested in 506(c) syndications, have sponsors generally accepted CPA letters, or did they require a different verification process?

Ashish Acharya · Answer

Narasimha, you're asking the right question because the answer is different under 506(b) versus 506(c).

For a 506(c) offering, a CPA can provide written confirmation as one of the SEC's non-exclusive verification methods, but the CPA isn't simply confirming that you "look" accredited. The CPA needs to take reasonable steps to verify the status and determine that you qualify.

I'd also confirm with the sponsor exactly what verification method they're accepting and what they want included in the CPA's letter. The fact that a CPA is willing to provide a letter doesn't automatically mean every sponsor will accept the same format.

If you're evaluating syndications regularly, I'd also make sure you're looking beyond the accredited-investor verification question and reviewing the tax side of the investment itself, especially projected K-1 income, depreciation, passive losses, and the possibility of phantom income.

Have you already identified a 506(c) offering you're considering, or are you trying to understand the process before investing?

Feel free to DM me. I'd be happy to share a few resources the might be helpful.

Can My CPA Verify Accredited Investor Status for a Syndication?

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