Rule 506(b) vs. Rule 506(c): Solicitation, Verification and Filings

Rule 506(b) bans general solicitation but lets a company rely on a reasonable belief that investors are accredited and admit up to 35 non-accredited investors; Rule 506(c) allows public marketing but requires every purchaser to be accredited and the company to take reasonable steps to verify it. A March 12, 2025 SEC staff letter accepted high minimum investments ($200,000 for individuals, $1 million for entities) plus written representations as reasonable verification. Both rules require Form D within 15 days of the first sale, carry bad-actor disqualification and leave states able to require notice filings and fees.

Two versions of the same exemption

Rule 506(b) lets a company raise an unlimited amount from an unlimited number of accredited investors, but it bars general solicitation and limits non-accredited purchasers to 35 in any 90-calendar-day period ^[1]. If non-accredited investors participate, the company must give them disclosure generally similar to a Regulation A offering, plus specified financial statement information, and anything given to accredited investors must also be made available to them ^[1]. Rule 506(c) allows general solicitation and advertising, provided all purchasers are accredited and the issuer takes reasonable steps to verify their status ^[2].

What general solicitation means

General solicitation is not precisely defined, but it includes newspaper and magazine ads, unrestricted public websites, broadcasts and seminars ^[8]. Whether a communication is a general solicitation depends on the facts; the more people without financial experience or a prior relationship who are contacted through impersonal, non-selective communications, the more likely it is ^[8]. A company can avoid it by limiting the offering to investors with whom it, or its broker-dealer or investment adviser, has a pre-existing, substantive relationship, meaning one formed before the offering in which the offeror had enough information to evaluate, and did evaluate, the investor's accredited status ^[8]. Pitches at qualifying demo days sponsored by universities, governments, nonprofits, angel groups, incubators or accelerators are not treated as general solicitation if certain limits on the information shared are respected ^[8].

Reasonable belief vs. reasonable steps to verify

Under Rule 506(b), the company needs a reasonable belief that an investor is accredited, a facts-and-circumstances judgment based on its relationship with and information about the investor ^[3]. Under Rule 506(c), it must take reasonable steps to verify, an objective, principles-based judgment that considers the type of investor, the information available, how the investor was solicited and the offering's terms, such as a minimum investment ^[3]. Self-certification alone, such as checking a box, satisfies neither standard ^[3].

• Income: review IRS forms reporting income, such as W-2, 1099, Schedule K-1 or Form 1040 ^[3][7].
• Net worth: review documents dated within the prior three months, such as bank or brokerage statements and a credit report, plus a written representation ^[3][7].
• Third-party letter: written confirmation from a registered broker-dealer, SEC-registered investment adviser, licensed attorney or CPA that it verified the investor within the last three months ^[3][7].
• Prior verification: a new written representation from an investor the company verified before, valid for five years from the earlier verification ^[3].

The March 12, 2025 minimum-investment letter

On March 12, 2025, the SEC's Division of Corporation Finance responded to a Latham & Watkins request, agreeing that a high minimum investment amount is a relevant factor in verifying accredited status ^[4]. The request proposed minimums of at least $200,000 for natural persons and at least $1,000,000 for legal entities, including binding commitments paid in installments ^[5]. Under the staff's view, the minimum must be paired with written representations that the purchaser is accredited and that the minimum is not financed by a third party for the specific purpose of the investment, and the issuer must have no actual knowledge of contrary facts ^[4]. Given those representations, the staff agreed the issuer could reasonably conclude it had taken reasonable steps to verify ^[4]. The letter is staff guidance with no legal force; it is not a rule or a Commission statement ^[4].

Form D, bad actors and the states

Under both rules, the company must file a Form D notice within 15 days after the first sale, and the first sale is the date the first investor is irrevocably contractually committed to invest ^[1][2][6]. If the deadline falls on a weekend or holiday, it moves to the next business day, and the SEC charges no filing fee ^[6]. Both rules are subject to bad-actor disqualification ^[1][2]. Under Rule 506(d), covered persons include the issuer, its directors, executive officers and other officers in the offering, 20% voting-equity holders, promoters and paid solicitors, and disqualifying events include certain securities-related criminal convictions within ten years (five years for the issuer and its affiliates) ^[7]. Rule 506 offerings preempt state registration, but states can still require notice filings and collect fees ^[1][2].

Key terms

General solicitation

Offering securities through broad, impersonal communications such as public websites, ads or broadcasts.

Pre-existing substantive relationship

A relationship formed before the offering in which the company or its intermediary evaluated the investor's accredited status; it helps avoid general solicitation.

Reasonable belief

The Rule 506(b) standard for concluding that an investor is accredited, based on facts and circumstances.

Reasonable steps to verify

The Rule 506(c) duty to take objectively reasonable steps to confirm every purchaser is accredited.

Form D

The notice of a Regulation D offering filed on EDGAR within 15 days after the first sale; no SEC fee.

Bad-actor disqualification

Rule 506(d) provisions that bar reliance on Rule 506 when covered persons have certain disqualifying events.

No-action letter

A staff response stating its view on specific facts; it is not a rule and has no legal force.

State notice filing

A filing and fee states may require for Rule 506 offerings even though state registration is preempted.

Check your understanding

Sources

1. [1]U.S. Securities and Exchange Commission, “Private Placements - Rule 506(b),” Last reviewed September 21, 2026.
2. [2]U.S. Securities and Exchange Commission, “General solicitation — Rule 506(c),” June 21, 2024 (last reviewed March 17, 2026).
3. [3]U.S. Securities and Exchange Commission, Capital-Raising Building Blocks, “Assessing Accredited Investors under Regulation D,” March 21, 2025 (last reviewed April 24, 2026).
4. [4]U.S. Securities and Exchange Commission, Division of Corporation Finance, “No Action Letter: Latham & Watkins,” March 12, 2025.
5. [5]Latham & Watkins LLP (posted by the SEC), “Incoming Letter: Latham & Watkins LLP request regarding Rule 506(c),” March 6, 2025.
6. [6]U.S. Securities and Exchange Commission, “Filing a Form D Notice,” June 13, 2024 (last reviewed March 17, 2026).
7. [7]Electronic Code of Federal Regulations (eCFR), “17 CFR 230.506 -- Exemption for limited offers and sales without regard to dollar amount of offering.,” Accessed November 2026.
8. [8]U.S. Securities and Exchange Commission, Capital-Raising Building Blocks, “General Solicitation,” June 12, 2024 (last reviewed April 24, 2026).

Educational content only — not legal, tax, or investment advice, or an offer to sell or a solicitation of an offer to buy any security. Rules and data are described as of November 2026 and may change. Securities offered through Umergence LLC, Member FINRA/SIPC.