Accredited investors are people or entities that have the ability to purchase securities that are not registered with the Securities and Exchange Commission. They typically qualify by meeting specific requirements and/or criteria with respect to net worth, income, professional experience, governance status, or asset size. With that in mind, let’s take a look below at SEC accredited investor verification and the acceleration of initial coin offerings (ICOs).
Accredited Investor Verification
An issuer is obligated to confirm that investors have gone through an accredited investor verification process. Generally speaking, this process is straightforward to follow, however, it may require a number of forms to be completed and reviewed by the issuer. If the issuer does not have a process in-house that matches the regulatory guidelines, the issuer may engage a third-party SEC accredited investor verification service to conduct ICO investor verification. The third party can conduct an analysis of information that’s been gathered to make a verification decision. Alternatively, they may ask to see evidence letter attesting as to the investor’s accredited investor status provided by one of the following licensed professionals:
- Licensed attorney
- Registered broker-dealer
- Registered investment adviser
- Certified public accountant
ICO – Initial Coin Offering
ICO is a term that was developed to refer to the various offerings of cryptocurrencies (similar to Bitcoin, but for investment or other purposes), that have come on the scene in recent years. As a distributed ledger that functions best as digital money, Bitcoin is not a type of currency that has many non-monetary uses at the moment. On the other hand Ethereum is able to do the same thing Bitcoin does; however it is a highly programmable form of currency. Ethereum and other similar digital currencies produce tokens (sometimes these tokens are coins) which can be sold to investors to raise capital. So with an ICO you can either have a bitcoin/altcoin offering or a token launch.
SEC Accredited Investor Verification Still Required
In late 2017, the SEC along with other securities regulators in non-US jurisdictions, addressed the issue of the many distributed ledger-based capital and or crypto currency raises. The SEC advised issuers with a bitcoin cryptocurrency, or distributed ledger business model seeking to avoid standard private placement processes that those insurers may be required to conform with established accredited investor verification processes if they want to conduct an ICO legally.
Even though some entrepreneurs who have created virtual currencies claim that these currencies are not securities, the SEC and security regulators do seem to be signaling that many ICOs or similar offerings may be regulated under the securities laws, and as a result, some of them may need to go through the accredited investor verification process for compliance purposes.
