Toning Down The Anxiety Over Accredited-Investor Verification

William Carleton, Contributing Editor, VC Experts

There are times to turn up the heat, and then there are times to cool things down.

I happen to be in the camp of those who found nothing wrong with Richard Sherman's in-the-moment taunting of Michael Crabtree. Stoke it up!

But there's too much anxiety over the aspect of new Rule 506(c) which requires issuers to take "reasonable steps" to verify the accredited status of their purchasers.

That anxiety caused the startup community to complain about the first iteration of 506(c) proposed by the SEC, which contained no safe harbors but just a flexible standard that would have been shaped over time by industry practice. That gift horse was looked in the mouth, and the SEC issued final rules that gave folks the safe harbors they asked for.

Result: more anxiety! People now worry about being straight-jacketed into the safe harbors!

So I'm glad leaders in the angel community are working to suck the anxiety out of the accreditation process, from the ACA's guidance last fall, to the new service from AngelList recently announced.

There are third-party services, too, handling accredited investor verification. But angel groups should be shaping industry practice, and it's good that they are stepping up to do so.

William Carleton

Bill is a member of McNaul Ebel Nawrot & Helgren PLLC, a Seattle law firm. He blogs every day at