Rule 506(b) bars general solicitation but allows up to 35 non-accredited purchasers; Rule 506(c) permits public marketing but every purchaser must be accredited and verified. Since March 2025, SEC staff have accepted that a high minimum investment, combined with written representations, can be a reasonable verification step under 506(c). Both require a Form D within 15 days of the first sale.
Key takeaways
- 506(b): no general solicitation; unlimited accredited investors plus up to 35 non-accredited, who must receive specified disclosure.
- 506(c): general solicitation allowed; all purchasers accredited, with reasonable steps to verify.
- SEC staff (March 12, 2025) accepted high minimum investment amounts plus written representations as a reasonable verification approach in the facts presented.
- Either way: file Form D within 15 days of the first sale, and watch bad-actor disqualification.
Two exemptions, one trade-off
Rule 506 of Regulation D is the workhorse exemption for private capital. Under Rule 506(b), an issuer may raise an unlimited amount from accredited investors and up to 35 non-accredited investors in any 90-day period, but may not use general solicitation, and non-accredited investors must receive disclosure documents and specified financial information [1]. Under Rule 506(c), the issuer may broadly solicit and advertise the offering, provided every purchaser is an accredited investor and the issuer takes reasonable steps to verify that status [2].
The choice is therefore between reach and flexibility: 506(c) lets you market publicly — at conferences, online, through media — while 506(b) relies on investors with whom the issuer or its intermediaries have a pre-existing, substantive relationship [5].
How verification works under 506(c)
The SEC describes 506(c) verification as principles-based: what counts as reasonable depends on the nature of the purchaser, the information the issuer has about them, and the terms of the offering [2]. The rule lists non-exclusive methods, including reviewing IRS forms for income, reviewing recent bank or brokerage statements and a credit report for net worth, or obtaining written confirmation from a registered broker-dealer, SEC-registered investment adviser, licensed attorney, or CPA [2].
In a no-action letter dated March 12, 2025, SEC staff agreed that an issuer could reasonably conclude it had taken reasonable steps to verify accredited status based on high minimum investment amounts together with purchasers' written representations and related conditions described in the request — including that the minimum is not financed by a third party for that investment [3]. Issuers relying on that approach should match the facts of the letter closely.
Filing and disqualification
Both exemptions require a Form D notice filed with the SEC within 15 days after the first sale of securities [4], and both are unavailable if the issuer or certain covered persons are subject to bad-actor disqualification [1]. Securities sold under either rule are restricted securities [1].
Choosing between them
506(c) suits issuers with a broad pool of potential accredited investors and the operational capacity to verify each one — and, after the 2025 staff letter, raises with high minimums. 506(b) suits raises built on existing relationships, or where a small number of sophisticated non-accredited investors, such as employees, need to participate. Switching mid-raise has integration consequences, so decide before marketing begins. Note also that the SEC is currently considering new credential-based pathways to accredited status, which could widen the 506(c) pool if adopted.
Frequently asked questions
- Can I advertise a Rule 506(b) offering?
- No. Rule 506(b) prohibits general solicitation. Issuers generally rely on investors with whom they, or their broker-dealer or adviser, have a pre-existing, substantive relationship.
- Is a self-certification questionnaire enough under Rule 506(c)?
- Generally not by itself. Rule 506(c) requires reasonable steps to verify accredited status. SEC staff accepted written representations combined with high minimum investment amounts and other conditions in a March 2025 no-action letter.
- When is Form D due?
- Within 15 days after the first sale of securities in the offering.
Sources
- [1]U.S. Securities and Exchange Commission, “Private Placements — Rule 506(b),” Accessed November 2026.
- [2]U.S. Securities and Exchange Commission, “General Solicitation — Rule 506(c),” Accessed November 2026.
- [3]U.S. Securities and Exchange Commission, Division of Corporation Finance, “Latham & Watkins LLP — Rule 506(c) No-Action Letter,” March 12, 2025.
- [4]U.S. Securities and Exchange Commission, “Filing a Form D Notice,” Accessed November 2026.
- [5]U.S. Securities and Exchange Commission, “SmallBiz Essentials: What Pathways Are Available to Raise Capital From Investors?,” Accessed November 2026.
How Baird Augustine helps
This article is for informational purposes only and is not legal, tax, or investment advice, or an offer to sell or a solicitation of an offer to buy any security. Regulatory proposals described here may change before adoption. Securities offered through Umergence LLC, Member FINRA/SIPC.
