5-Year Accreditation Lookback Rules & continuous accreditation

[Olivier Nallet]

Hi everyone,

I have probably an out-of-the-ordinary question, and I would love some insight. I am not sure that's the correct forum.

We have an evergreen fund of funds, and we continuously invest in syndications, mostly 506(c), so it means that the fund must be accredited. All our investors are accredited, and we make sure that investors provide less than 90 days old accreditation letters.

When we invest in 506(c) syndications, we have to provide less than 90 days old accredited letter from the fund too. Because the fund is less than $5m, we are currently exclusively relying on the accreditation of our investors.

Our current process is to ask all the investors to refresh their accreditation letters every 90 days or so, so we can have an updated accreditation letter for the fund. Well, it's okay when you have a handful of investors, but when you start to get a few dozens, it does not scale anymore. Have to constantly check the investors' status and follow up with the stragglers.

Now, if I understand correctly the new 5-year accreditation lookback rule from the SEC, I can assume that the investors are still accredited for up to 5 years, at the condition that this is a single issuer (our fund) can use the "reasonable steps" verification for an investor (the original accreditation letter) and the investor provides the issuer with a written document that they still qualify as an accredited investor and the issuer (our fund) is not aware that the investor is not accredited anymore. Instead of renewing the accreditation every 90 days, we would just have to file a simple form and renew the accreditation every 5 years.

More details here: https://www.sec.gov/corpfin/fa...

under Rule 506(c) Reasonable Steps to Verify.

Do I understand this correctly?

Can I then ask the investors to sign this form every 90 days (a lower barrier to entry as they don't have to interact with a 3rd party, which can take several business days) and find a 3rd party to accredit our fund every 90 days with both the initial accreditation letters and the signed forms from each investor? Furthermore, reading the SEC page, it does not seem that we need to renew this form every 90 days. A regular update may be enough (once a year, with a notice that the investor should let the fund know if they are not accredited anymore)?

Any insight is much appreciated.

Thanks!