Series 79 practice questionmediumRegulation D
Which of the following would constitute acceptable verification of accredited investor status under Rule 506(c)?
- AA simple checkbox on the subscription agreement where the investor self-certifies
- BChecking that the investor has a brokerage account
- CA verbal confirmation from the investor during a phone call
- DReviewing the investor's tax returns for the prior two years showing income exceeding $200,000 and obtaining a written representation of expected income in the current year✓ Correct answer
Explanation
Why D — Reviewing the investor's tax returns for the prior two years showing income exceeding $200,000 and obtaining a written representation of expected income in the current year
Rule 506(c) requires issuers to take 'reasonable steps' to verify accredited investor status. The SEC has provided non-exclusive examples of acceptable verification methods, including reviewing IRS forms (W-2, tax returns) for income-based qualification, obtaining written confirmation from a registered broker-dealer, investment adviser, or CPA, or reviewing bank and brokerage statements for the net worth test. Simple self-certification, which is sufficient under Rule 506(b), is not adequate for Rule 506(c) verification.
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