Here is how I think it works:
Due to characteristics of the offering, risk, disclosures, etc. SEC rules require the promoter to offer to accredited investors only. Accredited investors are, in theory, more sophisticated investors and better able to accept risk. The promoter features this requirment in the offering circular and anyone applying to buy part of the deal must fill out an accredited investor qualification form, which is also attached to the offering. The promoter basically takes the investor's word that he/she is qualified.
Down the road, if the SEC somehow finds out that the promoter is selling to investors who are not accredited, the promoter could be in hot water. I'm not sure how the SEC could discover this fact, though.
Down the road, if the investor is unhappy with the deal, I guess he could argue that he/she was not actually accredited and that he/she had lied to the promoter. It's hard for me to see how this kind of complaint could go very far.
As I said above, in doing maybe 5-10 deals I simply filled out the form asserting that I was accredited and never heard another thing. No one asked for any kind of proof. There is nothing preventing the promoter from asking for backup, I suppose, but he is in the business of attracting investors not repelling them. So it is not in his interest to be fussy about this.
A couple of things from my history, though: First, I only did small local deals where I had some personal confidence in the principals. I believe that any national deal that comes with salespeople, colored brochures, etc. to be prima facie stinky. No one would screw around selling nationally to retail investors if the deal was good enough that heavy hitters and institutional investors would buy it. Also, the paperwork for a national deal might be different; I wouldn't know because I have never had any interest in them.
The other thing from my history is that I never made a private investment that was more than a single-digit percentage of our net worth. If I went back and checked, probably none were over 5%. For us little guys I think the goal should be base hits, not home runs.
From the OP's question I am concerned first that his friend is considering putting a crazy percentage of his/her net worth into a very risky deal. Second, my guess is that this is a stinky national deal where some salesperson has convinced the friend that the deal is wonderful. Novice investors are particularly vulnerable to buying castles in the sky, something Ben Graham warned us about more than a half century ago.
