Self-certification is the process by which an investor confirms their own accredited investor or qualified purchaser status through representations in the subscription agreement, without the fund independently verifying that status. The investor checks a box or signs a statement attesting that they meet the applicable standard.
Why It Matters
Self-certification is the default method for qualifying investors in Rule 506(b) offerings and for qualified purchaser determinations under Section 3(c)(7). It is simpler and less intrusive than independent verification. However, it is not sufficient for Rule 506(c) offerings, which require the issuer to take reasonable steps to verify accredited status independently.
Key Details
- Acceptable under Rule 506(b), where no independent verification of accredited investor status is required.
- Not acceptable under Rule 506(c), which requires the issuer to take reasonable steps to verify accredited status beyond self-certification.
- Typically accomplished through checkboxes and written representations in the subscription agreement or investor questionnaire.
- The issuer should not have actual knowledge that contradicts the investor's self-certification. If you know the representation is false, you cannot rely on it.
- Maintaining executed subscription documents serves as evidence of investor qualification in case of a future regulatory inquiry.
For more, see Investor Verification Requirements.
Capital Company manages subscription document collection and investor qualification tracking as part of fund administration.
This content is for informational purposes only and does not constitute legal, tax, or compliance advice. Consult qualified counsel for guidance specific to your situation.