If you have ever browsed a private market marketplace and been asked to complete accreditation verification before seeing deal details, that requirement flows from a single SEC rule: Regulation D Rule 506(c). Most pre-IPO secondary transactions, including all of the listings on our marketplace, are offered under this exemption. If you're still building foundational context on how pre-IPO investing and secondary offerings are structured, review the complete guide to pre-IPO investing before navigating 506(c) requirements. Understanding it takes less time than you might expect, and it will make every subsequent transaction easier to navigate.
Why private placements need an exemption at all
Securities sold to the public in the United States must be registered with the SEC — an expensive, slow, and disclosure-intensive process designed for companies selling to millions of ordinary investors. Private placements are transactions where a company or fund raises capital without that full registration process. They are permitted under Regulation D, a set of SEC rules that creates exemptions from the registration requirement in exchange for restrictions on who can invest and how the offering can be marketed.
There are two primary exemptions used in secondary markets. Rule 506(b) allows up to 35 non-accredited but sophisticated investors per offering, but prohibits any general solicitation or advertising — meaning the issuer cannot publicly market the deal. Rule 506(c), added in 2012 as part of the JOBS Act, lifted the advertising ban entirely. Issuers can now publicly market 506(c) offerings, including on websites and platforms, as long as every actual purchaser is a verified accredited investor.
What verification actually requires from you
This is the part that trips up first-time buyers. Under 506(c), the issuer — or the platform acting on its behalf — cannot simply ask you to check a box confirming you are accredited. The SEC requires reasonable steps to verify your status. In practice, this means providing documentation.
For the income method, you will typically upload two years of W-2s, 1040s, or equivalent tax documents, plus a signed representation that you expect to meet the same threshold in the current year. For the net worth method, you will provide recent bank statements, brokerage account statements, or a CPA or attorney letter confirming your net worth. Holders of qualifying FINRA licenses — Series 7, Series 65, or Series 82 — can verify by providing their license information, which the platform can check directly.
- Income verification: two years of tax returns or equivalent documentation plus a forward-looking representation.
- Net worth verification: financial account statements dated within the past 90 days, or a written confirmation from a licensed CPA, attorney, or registered broker-dealer.
- Professional license verification: FINRA license number for Series 7, 65, or 82 holders — the fastest path if applicable.
- Third-party letters: some platforms accept a letter from your attorney or accountant confirming accredited status, provided the professional has actual knowledge of your finances and the letter is dated within the past 90 days.
Verification is typically valid for 90 days. Some platforms re-verify annually. Once you have completed it once on a given platform, subsequent transactions do not require you to repeat the process until the verification window expires.
What happens after verification: the deal flow
Once verified, you gain access to live listings. In a secondary marketplace context, each listing represents a specific block of shares — or, more commonly, membership interests in an SPV that holds shares — at a posted price per share or implied valuation. The listing will include the issuer name, the structure (direct transfer, SPV, or forward contract), the minimum investment amount, the approximate settlement timeline, and the relevant offering documents.
You will be asked to sign a subscription agreement — the legal document by which you agree to purchase the offered interest on the stated terms. Read this document. It will specify the exact security being purchased, any right of first refusal (ROFR) provisions that could allow the issuer to block or redirect the transfer, the fee and carry structure if you are buying into an SPV, and any transfer restrictions that will apply to you as the new holder.
The ROFR step and why it creates timing uncertainty
Most private company shareholder agreements give the company — and sometimes existing shareholders — a right of first refusal on secondary transfers. This means that when a seller tries to transfer shares to you, the company can step in and buy those shares itself at the agreed price, effectively blocking your purchase. ROFR periods typically run 10 to 30 business days after the company receives formal notice of the proposed transfer.
ROFR is one of the primary reasons secondary transactions take longer to settle than public market trades. A well-run marketplace will notify the company of a proposed transfer as early in the process as possible and run ROFR clearance in parallel with document execution, rather than sequentially. Ask any platform you use to describe their ROFR process and timeline before you commit capital.
If the company exercises its ROFR, the transaction does not close. This is called a fall-through. Your subscription agreement should specify what happens to any funds already wired in a fall-through scenario — refund terms and timing vary by platform.
What you receive at closing
Settlement depends on the structure. In a direct transfer, you receive an updated position on the company's cap table — your name or entity name replaces the seller's. You may receive a stock certificate (increasingly rare) or, more commonly, an updated cap table entry confirmed through the company's equity management platform. In an SPV structure, you receive membership interest in the vehicle — your economic exposure to the underlying shares is real, but you are not a direct shareholder of the issuer. The SPV holds the shares; you hold the SPV.
In either case, you should receive a closing confirmation, your executed subscription agreement, and — if applicable — the SPV's operating agreement and any K-1 filing information for tax purposes. K-1s from SPVs are notoriously late, often arriving well after the April 15 tax deadline. If you invest in an SPV, plan to file for an extension on your personal return to avoid amending it.
One step to take before your first transaction
The single most useful thing a first-time private-market buyer can do is read the full offering documents — not just the one-page summary card — before signing anything. The subscription agreement and operating agreement contain the terms that govern your investment for years, potentially through an IPO, a secondary sale, or a company wind-down. They are not light reading, but the key sections (representations and warranties, transfer restrictions, ROFR provisions, fee and carry schedule, distribution waterfall) can be worked through in under an hour with a basic glossary.
When you are ready to explore specific listings, visit /marketplace to see current 506(c) offerings across our 28 issuers. Accreditation verification takes approximately 10 minutes to initiate, and most applicants complete it within one business day.