Non-accredited investors:

Everyone else doesn’t meet those criteria.

California difference:

California does not change the accredited investor definition but enforces federal rules through state oversight, particularly in fraud prevention and disclosure.

Below is a clear, citation-supported explanation of how to verify accredited investor status in California, emphasizing its role in ensuring legal compliance and reducing risk for private lenders, syndicators, and issuers.

Interested parties should verify these material facts with their competent lawyers.

Good news: California does not have its own separate accredited‑investor verification process.

Instead, California requires issuers to comply with federal SEC verification rules and then with California’s additional state-level oversight (fraud prevention, disclosure, issuer obligations).

✅ How to Verify Accredited Investor Status in California

California follows the federal definition of accredited investor under Rule 501(a) and emphasizes the need for clear, documented proof.  This approach helps private lenders, syndicators, and issuers feel assured that verification is straightforward and reliable, reinforcing trust in compliance procedures.

Verification methods depend on whether you’re conducting a Rule 506(b) or Rule 506(c) offering—but California accepts both frameworks because they originate from federal Law.

Below is the exact, compliant process.

✔ 1.  Determine What Type of Offering You Are Using

Accredited‑investor verification requirements differ depending on the federal exemption used:

Rule 506(b)

• No advertising.
• Investors may self-certify as accredited.
• The issuer needs only a reasonable belief supported by available information.
  (Confirmed by SEC guidance describing “reasonable belief” standard under 506(b).)

Rule 506(c)

• Advertising allowed.
• Mandatory third-party or documented verification of accreditation.
• Self-certification alone is NOT enough.
  (SEC requires “reasonable steps to verify” under 506(c).)

California accepts both, because these are federal exemptions.

California guidance specifically confirms that asset statements can be used to verify accredited status.  Recognizing the importance of thorough documentation empowers private lenders, syndicators, and issuers to meet compliance standards with confidence.

California requires issuers to verify income, assets, or credentials using documentation consistent with federal guidance.  A California legal analysis confirms issuers must verify status “through income verification, asset statements, or third-party certifications.”

Below are the acceptable verification methods recognized federally (and therefore valid in California):

A. Income Verification Methods

To verify the income test ($200k / $300k joint):

✔ Review IRS forms for the last two years:

• W‑2
• 1099
• K‑1
• 1040 tax returns

✔ Obtain a written representation that the investor expects similar income this year.

(SEC rules explicitly allow financial documentation and income verification to satisfy accreditation.)

B. Net Worth Verification Methods

To verify the $1 million net‑worth test (excluding primary residence):

✔ Review:

• Bank statements
• Brokerage statements
• Certificates of deposit
• Appraisal reports for assets
• Credit reports for liabilities

✔ Obtain a written representation that all liabilities have been disclosed.

California guidance specifically confirms that asset statements can be used to verify accredited status. 

C. Professional License Verification (Series 7, 65, 82, etc.)

The SEC recognizes accredited status through professional certifications, such as:

• Series 7
• Series 65
• Series 82

These are federally recognized credentials.

Issuers in California may simply:

• Check FINRA’s public BrokerCheck database, or
• Obtain a copy of the license or FINRA registration.

California defers to the federal standard here as well.

D. Third‑Party Verification Letters

California accepts the same third-party letters that federal Law permits.

You may obtain a verification letter from:

• CPA
• Licensed attorney
• SEC‑ or state-registered investment adviser
• Registered broker-dealer

This method satisfies the “reasonable steps to verify” requirement under federal Rule 506(c) (and thus under California Law).

California practitioners also note that third-party certifications are routinely used for verifying accredited status.

E. Verification for Entities

Entities may qualify by:

• Showing financial statements demonstrating over $5 million in assets
• Showing all equity owners are accredited
• Providing formation documents and financial statements

The federal government and the state of California accept these criteria.

✔ 3.  California‑Specific Compliance Layer

California does not change how accreditation is verified, but it does emphasize:

A. Anti-fraud & disclosure requirements

California DFPI places a high priority on:

• Truthful disclosure
• Avoiding misleading statements
• Avoiding omission of material information

California commentary stresses these rules “especially concerning fraud prevention and disclosure.”

B. Issuer obligations

California requires issuers to maintain documentation demonstrating that accreditation was verified in accordance with federal expectations, as noncompliance may result in penalties.

C. State notice filings (Form D → notice to California DFPI)

If filing a federal Form D for a Reg D offering, California requires a state notice filing within 15 days of the first sale.

(This requirement is widely recognized by state regulators, though not included directly in our search results—so I am not citing it here.)

✔ 4.  Summary: How to Verify Accredited Investors in California

California = Federal verification rules + State compliance oversight

You may verify accredited status in California using any of the following federally accepted methods:

·       Income documentation (W‑2, 1099, tax returns)

·       Net worth documentation (bank/brokerage statements, credit report)

·       Professional license verification (Series 7, 65, 82)

·       Third-party verification letters (CPA, attorney, adviser, broker-dealer)

·       Entity qualification documents (financials showing $5M+ in assets)

California requires:

• Proper documentation
• Honest disclosures
• Compliance with anti-fraud standards
• Filing requirements for Reg D offerings

These oversights are emphasized in California legal guidance.

Below is a concise, practice-ready guide explaining how to verify accredited investor status for INDIVIDUALS vs. ENTITIES, supported by citations from authoritative federal and California-specific sources.

How to Verify Accredited Status: Individuals vs. Entities

The SEC provides the official categories for accredited investors in Rule 501(a) of Regulation D. California follows the same standards, and California commentary confirms verification is generally done through income verification, asset statements, or third-party certifications. 

Verification requirements depend on what type of investor you are dealing with:

✅ 1.  Verifying Individuals (Federal + California)

Federal rules list three main paths for individuals to qualify:
(1) Income, (2) Net worth, or (3) Professional credentials/sophistication.

California accepts these federal criteria.

A. Verify Income (Federal Standard, accepted in CA)

To meet the income test ($200k individual / $300k joint for 2 prior years):

You must review documentation such as:

• IRS W‑2 forms
• 1099 forms
• K‑1s
• Complete IRS Form 1040 tax returns
• Written investor confirmation that they expect to meet income levels this year.

California explicitly notes income verification as an accepted method.

B. Verify Net Worth

To meet the $1 million net‑worth test (excluding primary residence)

Review:

• Bank statements
• Brokerage statements
• Appraisal reports (if assets need valuation)
• Credit report to confirm liabilities

California guidance confirms asset statements and financial documentation are appropriate verification tools.

C. Verify Professional Certifications (Non-financial pathway)

Individuals also qualify if they hold specific SEC-recognized financial licenses, including:

• Series 7
• Series 65
• Series 82

The federal government recognizes these certifications as proof of financial sophistication.
California adopts this recognition.  [

Verification method:

• Check FINRA BrokerCheck, or
• Obtain a copy of the license.

D. Verify Special Federal Categories (Also valid in CA)

Federal rules also allow specific individuals to qualify because of their roles or experience:

• Directors, executive officers, or GPs of the issuer
• Knowledgeable employees of private funds (12+ months investment involvement) ]
• Family clients of qualifying family offices

Verification method:

• Corporate records, job descriptions, employment verification.
• Written confirmation from theFundd Manager (for knowledgeable employees).

🚨 Verification Method for Individuals Depends on Your Exemption:

• Rule 506(b): Self‑certification permitted; issuer must hold a “reasonable belief.”
• Rule 506(c): Mandatory verification of income, net worth, credentials, or third-party letters.

California requires compliance with the federal method being used and emphasizes proper documentation.

✅ 2.  Verifying Entity Investors (Federal + California)

Entities qualify under Rule 501(a) if they meet asset, ownership, or institutional criteria.
California follows the same rules.

A. Entities With More Than $5 Million in Assets

These entities qualify automatically:

• Corporations
• Partnerships
• LLCs
• 501(c)(3) nonprofits
• Trusts
• Family offices

They must demonstrate assets of over $5 million and not be formed solely to buy the securities.

How to Verify:

Review:

• Balance sheet / Financial statements
• Bank or brokerage statements
• CPA letter
• Trust documents or corporate records

B. Entity Where ALL Equity Owners Are Accredited

If every owner is individually accredited, the entity qualifies.

How to Verify:

• Obtain entity ownership records.
• Verify each owner individually using the individual methods above.
• Maintain documentation in the file.

C. Regulated Institutions Automatically Accredited

Entities that qualify automatically include:

• Banks
• Insurance companies
• Registered investment companies
• Registered investment advisers
• Broker-dealers
• Small Business Investment Companies (SBICs)
  (Each listed under Rule 501(a).)

How to Verify:

• Check public regulatory databases (FDIC, FINRA, SEC’s IAPD).
• Request proof of licensure.

D. Newer Categories (Expanded SEC definition)

Per SEC updates:

• LLCs with $5M+ in assets
• Rural Business Investment Companies
• Entities owning $5M+ in investments (not just assets)
• Family offices + clients with $5M AUM
• 
  How to Verify:

• Financial statements
• Operating agreements
• Custodial/brokerage statements
• AUM confirmation

🔍 Differences in Verification Between Individuals vs. Entities

🚨 California Oversight Layer (Very Important)

California does not impose new definitions, but emphasizes:

• Documentation of verification
• Adequate disclosures
• Avoiding misleading statements or omissions
• Issuer compliance with anti-fraud standards
  These California-specific emphases are confirmed in state legal commentary.

✅ Bottom Line 

Individuals → verify income, net worth, licenses, or professional role.

Entities → verify assets, ownership, or institutional registration.

And in California:

Follow federal rules, document your file, and avoid misleading investors.