If you run a fund, the vocabulary is GP and LP, not "sponsor" and "investor." The rule you are working under does not use either set of words — it says "issuer" and "purchaser" — but the mechanics are the same, and there are two or three places where the GP/LP structure changes how verification actually plays out. This is the fund version of the question: how does a general partner verify that its limited partners are accredited, and do it without turning the raise into a document-collection project.
One note before anything else. This is a description of how verification works in practice, not legal advice, and we are not a law firm. Every claim about the rule below is sourced to the CFR text or an SEC document, and the specifics of your fund belong with your securities counsel.
The fund is the issuer — so the obligation is yours
Under Regulation D Rule 506(c), an issuer that generally solicits has to take reasonable steps to verify that every purchaser is accredited. In a fund, the issuer is the fund entity, and the purchasers are your LPs. The GP manages the process, but the legal duty sits with the issuer — which means it is the fund's obligation, not the LP's. The rule text is short:
"The issuer shall take reasonable steps to verify that purchasers of securities sold in any offering under paragraph (c) of this section are accredited investors."
17 CFR 230.506(c)(2)(ii), quoted from the rule text.
That has one practical consequence GPs sometimes miss: you can decide who pays for verification, but you cannot hand the duty to the LP. If an LP cannot complete verification, that is your closing risk, not theirs. So the goal is not just to satisfy the rule — it is to satisfy it in a way that keeps LPs moving toward the wire instead of stalling in a compliance portal.
The route GPs actually use, and why
The rule lists specific verification methods, and it describes that list as non-exclusive — companies may use them but are not required to, and the underlying test is whether the steps are reasonable in the facts and circumstances of each investor and transaction. In practice GPs lean on the enumerated methods, because "greater certainty" is exactly what you want in a file counsel will review at closing. Three of them matter for a fund:
| Method | What it requires of the LP | What it means for the GP |
|---|---|---|
| (A) Income | IRS forms for the two most recent years, plus a written representation about the current year | You are now holding your LPs' tax returns |
| (B) Net worth | Assets and liabilities documented within the prior three months, plus a consumer report | More documents, plus a credit pull, in your custody |
| (C) Third-party letter | A written letter from a CPA, attorney, broker-dealer, or registered investment adviser confirming they verified the LP within the prior three months | You hold a one-page letter, not a filing cabinet of LP financials |
Most funds run on (C), and the reason is not that (A) and (B) are legally weaker — they are not. It is that the income and net-worth routes put the GP in possession of every LP's tax returns, brokerage statements, and credit report. That is a data-security posture most GPs have not built and do not want, and it is an awkward thing to ask a prospective LP to hand directly to the person raising the fund. Method (C) moves the document review to a licensed professional who carries the judgment and the liability, and gives the fund a clean letter for the file. The LP's financials never touch the GP's inbox.
Mechanically, this is a link. The GP sends each LP a single verification link, the LP uploads documents through a secure portal, a licensed CPA reviews them, and a signed Rule 506(c) letter comes back — typically within 24 hours of complete documents. The GP sees a dashboard of who is verified, who is pending, and who has not started, and files the letters. What the GP never sees is the underlying financial documents.
Two clocks: the 90-day letter and the five-year window
This is the part most worth reading twice, because two different time limits get collapsed into one and they are not the same thing.
The first clock is the letter's freshness: about 90 days. Method (C) requires the professional to have verified the LP within the prior three months, and method (B) puts the same three-month limit on the documents. So a verification is not a permanent status — it is a determination with a shelf life, measured against the sale. On a fund that holds a rolling first close and a final close months apart, an LP who verified early can age out of that window before their capital is actually called. Verification is best timed to the close, not to the soft commitment.
The second clock is the issuer's five-year re-reliance window, and it is a different mechanism entirely. Method (E), added in 2020, says this:
"In regard to any person that the issuer previously took reasonable steps to verify as an accredited investor in accordance with this paragraph (c)(2)(ii), so long as the issuer is not aware of information to the contrary, obtaining a written representation from such person at the time of sale that he or she qualifies as an accredited investor. A written representation under this method of verification will satisfy the issuer's obligation to verify the person's accredited investor status for a period of five years from the date the person was previously verified."
17 CFR 230.506(c)(2)(ii)(E). The bold is ours — it marks the word the rest of this turns on.
You will see this marketed as "verification is valid for five years." That is not what it says. What lasts five years is a particular issuer's ability to rely on a written representation from a person that issuer already verified — not the freshness of the letter, and not a credential the LP carries around. The word that governs it is issuer, and it appears twice in that one sentence.
Now apply it to fund structure. If you run Fund I and Fund II as separate legal entities — or you form a separate SPV per deal — then each entity is its own issuer. When Fund II sells interests to an LP you verified in Fund I, the question under (E) is whether Fund II previously verified that LP. It did not; it may not have existed yet. On the face of the rule, the five-year method does not automatically carry across separate fund entities, and the SEC has not said otherwise. Some counsel structure around it; some read the issuer question differently for a given structure. What no GP should do is assume that verifying an LP once means that LP never needs verifying again for the next fund.
Where the same issuer is involved — a continuation vehicle, a follow-on close in the same fund, an LP re-upping into the entity that verified them — the re-reliance window is real and useful: a returning LP can re-confirm in writing that they remain accredited, absent information to the contrary, instead of re-uploading documents. Whether to re-rely for a specific offering is the GP's decision with counsel, not a blanket five-year pass.
Take these three questions to your securities counsel
- In our structure, who is the issuer for Rule 506(c) purposes — the management entity, the fund, or the deal-level SPV?
- Given that answer, can we re-rely on a prior verification for repeat LPs across our funds, or does each fund entity need to verify independently?
- On a raise with a rolling close, at what point do we re-verify LPs who verified early, before their letters age out of the three-month window?
The LP types you will actually see
A fund's LP roster is heavier on entities than an individual-investor deal, and each structure is a slightly different verification question. The pattern to remember: the harder the balance sheet, the worse an automated instant-check performs, and the more a human reviewer earns their place.
Individual or married couple
The straightforward LP. Either the income route (two years of IRS forms plus a current-year representation) or the net-worth route (assets and liabilities within the prior three months, plus a consumer report). The delay is usually the LP locating documents, not the review.
Trust, family office, or holding LLC
Common at the larger end of an LP base. An entity with more than $5,000,000 in assets that was not formed to make this specific investment can qualify on that basis under Rule 501(a)(3); otherwise the route is that all of its equity owners are themselves accredited, which means the reviewer works through to the owners. A revocable living trust is usually one of the easier cases, provided the LP can find the trust document.
Self-directed IRA or solo 401(k)
The account is held at a custodian, but the qualifying facts sit with the individual behind it — which is exactly where an automated checker tends to fail quietly. Expect the custodian statement plus verification of the account holder, and plan for the custodian's own funding paperwork to add days on the capital-call side.
A fund-of-one or SPV pooling into your fund
Several LPs pool into a new vehicle to take one interest. Because that vehicle was formed for the specific purpose of acquiring the securities, the $5,000,000 asset test is off the table — so every equity owner has to qualify, which is several verifications, not one. GPs budgeting one verification per subscription line under-count here and find out late.
Because a licensed professional handles the review rather than a black-box checker, the same engagement can carry the other checks a GP often wants beside accreditation: an optional identity check the LP adds during upload, a screen against 1,300+ global sanctions and PEP lists, and, for entity LPs, business verification that confirms the entity in official registries and identifies its beneficial owners. That bundle supports your own LP due diligence rather than replacing it — the CPA-signed letter is still the document counsel reviews at closing.
Verifying LPs without slowing the close
The operational shape most GPs settle on is simple. Buy a pack of verification seats up front so LPs verify at no cost to them — removing the "who pays" friction from the LP's first interaction with the fund. Send one branded link with the subscription packet rather than in a follow-up email. Watch a dashboard that shows the letter date per LP, not just a checkmark, so the LPs who verified first do not quietly age out on a long raise. And treat entity LPs as multiple verifications from the start.
Seats do not have to be tied to a single fund, and pricing runs from the individual rate down at volume, so the per-LP cost on a larger raise is a rounding error against the capital involved. The point of paying for it as the GP is not the few dollars — it is that an LP who hits a paywall or a clunky form on their way into your fund is an LP who pauses, and a paused LP on a timed close is the expensive problem.
Verify your whole LP list from one branded link
Prepaid verification seats so your LPs verify free, a dashboard that shows letter dates, and CPA-signed 506(c) letters, typically within 24 hours of complete documents. Seats do not expire and are not tied to one fund.
See plans and pricing →Frequently Asked Questions
How do GPs verify that their LPs are accredited investors?
Under Rule 506(c) the fund is the issuer, and the issuer must take reasonable steps to verify that every LP is accredited. The route most GPs use is third-party confirmation: a licensed CPA (or attorney, broker-dealer, or registered investment adviser) reviews the LP's documents and issues a written letter, so the GP holds a one-page letter for the file instead of the LP's tax returns and brokerage statements. In practice a GP sends each LP a link, the LP uploads documents, and a signed letter comes back, typically within 24 hours of complete documents.
Does the GP or the LP have to pay for verification?
Either. The legal obligation to take reasonable steps is the issuer's — the fund's — not the LP's, but who pays the invoice is a business decision. Many GPs buy a pack of verification seats up front so their LPs verify at no cost to them, which removes a friction point during a raise; others let LPs pay individually. The obligation stays with the GP regardless of who pays.
If a GP verified an LP for a previous fund, is that LP still verified for the next one?
Not automatically. Rule 506(c)(2)(ii)(E) lets an issuer that previously verified a person rely on a written representation from that person for five years — but the reliance is tied to the specific issuer that did the original verification. If each fund or SPV is a separate legal entity, the new entity is a new issuer that has not itself verified the LP. Whether a GP can re-rely across entities is a question for securities counsel; a fresh verification, or a written re-confirmation where the same issuer is involved, is the safe default.
How long is an LP's accredited investor verification good for?
A CPA verification letter reflects a review as of its date and is treated as fresh for 90 days, because the third-party and net-worth methods require the verification (or the underlying documents) to be within the prior three months. Separately, the issuer's five-year re-reliance window under method (E) is a different clock — it governs how long that same issuer may rely on a written representation, not how long the letter itself is fresh.
Do GPs have to run identity or AML checks on their LPs?
Rule 506(c) requires reasonable-steps verification of accreditation; it does not by itself require identity or AML screening. But OFAC sanctions apply to every US person, and many fund administrators and banks expect an identity and sanctions check on LPs before onboarding. Because the accreditation review is handled by a licensed professional, a GP can bundle an optional identity check and a sanctions/PEP screen with the accreditation letter. This is general information, not legal advice — a GP's own counsel confirms what a given fund needs.