Accredited Investor, Qualified Client, Qualified Purchaser: Which Investor Test Applies to Your Offering
VerifyInvestor.com
Most people raising private capital treat "accredited investor" as the only eligibility question that matters. For a straightforward equity round sold under Regulation D, that is often true. For a fund with a carried interest, or a fund that wants to avoid the 100-holder limit, it is not. Those offerings sit on top of two additional tests that come from different statutes, use different dollar figures, and are proved with different evidence.
That has been easy to blur because the three tests have always run on separate tracks. On September 30, 2026, the SEC issued a package of proposals and notices that would widen the accredited investor definition and, for the first time, define one of the other tests by reference to it.
Three Tests, Three Statutes, Three Different Questions
Accredited investor: Regulation D
The accredited investor definition lives in Rule 501(a) under the Securities Act. It answers a single question: may this person buy into an exempt offering at all?
For natural persons the familiar paths are net worth and income. Rule 501(a)(5) covers individual or joint net worth exceeding $1,000,000, and the rule is explicit that "the person's primary residence shall not be included as an asset." Mortgage debt secured by that residence is also excluded as a liability, up to the residence's estimated fair market value, with any excess counted against the investor. Rule 501(a)(6) covers individual income above $200,000 in each of the two most recent years, or joint income above $300,000 with a spouse or spousal equivalent, plus a reasonable expectation of the same level in the current year.
Two points about these figures matter. They are written into the rule text and are not adjusted for inflation on any schedule. And they are not the only route: Rule 501(a)(10) lets a natural person qualify by "holding in good standing one or more professional certifications or designations or credentials" that the SEC has designated for that purpose, and Rule 501(a)(11) recognizes knowledgeable employees as defined in Rule 3c-5(a)(4).
Qualified client: Advisers Act Rule 205-3
Qualified client status has nothing to do with whether an investor may participate. It answers a narrower question: may the adviser charge this client performance-based compensation, such as carried interest or an incentive allocation?
Rule 205-3 under the Investment Advisers Act sets dollar-based tests that, unlike the accredited investor thresholds, are adjusted for inflation roughly every five years by SEC order using the PCE Chain-Type Price Index. The most recent adjustment took effect on June 29, 2026, raising the assets-under-management test from $1,100,000 to $1,400,000 and the net worth test from $2,200,000 to $2,700,000. Contracts entered into earlier generally remain subject to the prior figures, but a new party joining on or after June 29 is measured against the new ones.
Rule 205-3 also requires a look-through for funds relying on Section 3(c)(1) of the Investment Company Act: each equity owner must itself be a qualified client. A fund cannot satisfy the test on its own balance sheet.
Qualified purchaser: Investment Company Act Section 2(a)(51)
Qualified purchaser status answers a third question: can this fund rely on Section 3(c)(7), which has no cap on the number of beneficial owners, rather than Section 3(c)(1), which is limited to 100?
Section 2(a)(51)(A) of the Investment Company Act sets the highest bar of the three. A natural person generally qualifies by owning not less than $5,000,000 in investments, with certain family companies qualifying on a comparable investments test. A person acting for its own account or the accounts of other qualified purchasers qualifies by owning and investing on a discretionary basis not less than $25,000,000 in investments.
Note the measurement. Accredited investor status turns on net worth or income. Qualified purchaser status turns on investments, a narrower category that excludes much of what counts toward net worth. An investor can clear the accredited investor bar comfortably and still fall short, which is why fund managers who assume the tests scale together are surprised at closing.
What the September 30, 2026 Proposals Would Change
Two developments from that date matter for anyone maintaining investor eligibility files.
Five notices on credential-based eligibility
The SEC published five notices requesting comment on whether to designate additional credentials under the Rule 501(a)(10) credential prong. The candidates are a U.S. CPA license in good standing, a CFA charter in good standing, a U.S. CFP certification in good standing, the FINRA Series 79 license, the Series 86 and 87 licenses held together, and passage of a new accredited investor exam to be developed by FINRA.
The proposed exam, described in Release No. 33-11445, would be modeled on the Securities Industry Essentials exam, open to anyone 18 or older with no firm affiliation required, and valid for ten years. FINRA has indicated it would build a process allowing issuers to verify holder status independently, including the passage date and the end of the validity period.
These are notices requesting comment, not adopted rules. Each designation would take effect only if the Commission later issues an order, the same mechanism it used in 2020 to designate the Series 7, 65, and 82 licenses. Comments on the notices published in the Federal Register on October 5, 2026 are due December 4, 2026.
A proposal to define qualified client by reference to accredited investor status
Separately, Release No. 33-11443 proposes amendments to Rule 205-3 that would replace the qualified client net worth and assets-under-management tests with an accredited investor test. An adviser could charge performance-based compensation to any natural person or company, other than a private investment company, that the adviser reasonably believes is an accredited investor under Regulation D when the advisory contract is entered into. The five-year inflation adjustment would be eliminated as unnecessary. The qualified purchaser and knowledgeable employee prongs of the current rule would be retained.
If both sets of changes were adopted, a newly designated credential would widen not only the pool of people who can invest in a Rule 506(c) offering, but also the pool who can be charged carried interest. The two tests would move in step.
The proposal is not uniformly expansive, and the SEC has asked for comment on that point. Some entity investors relying on the $2.7 million or $1.4 million figures today would instead face the $5 million tests in the accredited investor definition, and some individuals who qualify now through the assets-under-management test, but whose liabilities put net worth below $1,000,000, would fall outside the new standard.
Rule 501(a) Says Who Qualifies. Rule 506(c) Says How You Prove It.
Eligibility and proof are separate obligations, and widening the first does not relax the second. Rule 506(c) permits general solicitation and general advertising, but conditions the exemption on two things: every purchaser must be an accredited investor, and the issuer must "take reasonable steps to verify" that status. A self-certified questionnaire, which is standard practice under Rule 506(b), does not satisfy Rule 506(c) on its own.
The non-exclusive methods
Rule 506(c)(2)(ii) lists verification methods an issuer may use for natural persons. They are non-exclusive and non-mandatory, and each applies only where the issuer has no knowledge that the person is not accredited:
Income. Review IRS forms reporting income for the two most recent years, such as W-2s, 1099s, Schedule K-1s, or Form 1040, plus a written representation of a reasonable expectation of reaching the required level in the current year.
Net worth. Review asset documentation and a consumer report from at least one nationwide consumer reporting agency, each dated within the prior three months, plus a written representation that all liabilities necessary to the determination have been disclosed.
Third-party confirmation. Obtain written confirmation, dated within the prior three months, from a registered broker-dealer, an SEC-registered investment adviser, a licensed attorney in good standing, or a registered certified public accountant in good standing, stating that it took reasonable steps to verify and determined the purchaser is accredited.
Prior verifications. Where the issuer previously verified a person under these methods and knows nothing to the contrary, a written representation at the time of sale satisfies the obligation for five years from the original verification date.
The safe harbors assume documents. None contemplates a credential, which is why the credential prong raises a question the notices leave open: what does a reasonable verification file look like when eligibility rests on a registry entry rather than a tax form?
What the March 2025 staff guidance did and did not change
On March 12, 2025, the SEC's Division of Corporation Finance issued a no-action letter addressing high minimum investment amounts. The staff agreed it would not object where an issuer treats a sufficiently high minimum investment as a reasonable step to verify accredited investor status, discussing $200,000 for natural persons and $1,000,000 for legal entities, provided the purchaser gives written representations that it is accredited and that the investment was not financed by a third party, and the issuer has no actual knowledge of facts indicating otherwise.
This is staff no-action guidance, not an amendment to Rule 506(c). The rule text did not change. The staff's position is a view on enforcement, it depends on the letter's conditions being met, and it does not displace the issuer's obligation to document a reasonable basis for its conclusion.
Mapping the Tests to the Deal
A short sequence resolves most of the confusion:
Every Rule 506(c) private placement. Each purchaser, individual or entity, must be an accredited investor, and the issuer must take and document reasonable steps to verify.
Any fund charging performance-based compensation. Each investor charged the fee must also be a qualified client, with the 3(c)(1) look-through in mind. Watch Release No. 33-11443, which would tie this test to accredited investor status.
Any fund relying on Section 3(c)(7). Each beneficial owner must be a qualified purchaser, measured in investments rather than net worth.
Every offering, independently. AML/KYC screening is a separate obligation driven by the offering's structure, the parties involved, and applicable sanctions requirements. It is not satisfied by accreditation work, and accreditation work is not satisfied by it.
A single investor in a 3(c)(7) fund with a carried interest therefore sits inside three tests at once, with different evidence behind each one.
Building Files That Hold Up
Verification is judged after the fact, usually by counsel in diligence, a buyer in a later round, or a regulator reviewing an offering. What survives that review is a dated file showing what was examined, who examined it, and what conclusion was reached.
That is where third-party verification earns its place. Rule 506(c)(2)(ii)(C) expressly contemplates written confirmation from a licensed attorney in good standing, which is the model VerifyInvestor.com is built around: attorney-reviewed accredited investor verification producing a dated accredited investor certificate the issuer keeps in the deal file, with turnaround typically one to two business days. The same platform handles qualified purchaser and qualified client verification, the part most issuers discover late, and AML/KYC screening alongside it, so the three tests and the screening obligation are not spread across four vendors and four formats. For tokenized offerings, On-ChainPass extends the same verification into a tokenized investor credential, so verified status travels with the wallet rather than being re-established at each raise. VerifyInvestor.com is majority-owned by tZERO Group.
It also removes a conflict that is easy to overlook. The party with the strongest commercial interest in closing a subscription is not the party best placed to document why the investor qualified.
What to Do Before December 4, 2026
The comment deadline on the credential notices is a useful forcing date, whether or not you plan to comment.
Confirm which of the three tests your offering actually triggers. If you charge a performance fee or rely on 3(c)(7), you have more than an accredited investor question.
Review your subscription documents for the credential prong. Documents that collect only income and net worth data cannot capture a credential-based claim. They need to record the registry checked, the credential held, and the date good standing was confirmed.
Check your records against the five-year rule. Investors verified in 2021 under Rule 506(c)(2)(ii)(E) are rolling out of that window now.
Ask your verification provider whether it can assess credential claims and qualified purchaser status, not just income and net worth.
Eligibility is getting broader. The proof obligation is not. The issuers who come through the next two years cleanly will be the ones whose files show their reasoning, investor by investor, on the date the decision was made.
If you are preparing a Rule 506(c) raise, or revisiting files from an earlier one, VerifyInvestor.com can tell you which tests your structure triggers and what evidence each one needs.