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Regulation D, Rule 506(c) ​

Rule 506(c) is an exemption under Regulation D that allows issuers to publicly advertise and generally solicit an offering. This ability to advertise is granted in exchange for a higher standard of verification, as all investors in the offering must be verified as accredited.

Fundraising Limits ​

There is no limit on the amount of capital an issuer can raise in a Rule 506(c) offering.

Solicitation Rules ​

Issuers are permitted to engage in general solicitation and general advertising to market an offering. This allows for the use of public websites, social media, email marketing, and other public channels to attract potential investors. This permission is strictly conditioned on the requirement that all purchasers of the securities are verified accredited investors.

Investor Qualifications ​

The qualifications for investors in a Rule 506(c) offering are stringent and absolute.

  • All purchasers must be accredited investors. There is no allowance for non-accredited investors, regardless of their sophistication.
  • The issuer must take "reasonable steps to verify" that all purchasers are accredited. This is a higher, principles-based standard than the "reasonable belief" standard in Rule 506(b). Self-certification by the investor is insufficient. Acceptable verification methods include reviewing financial documents (e.g., tax returns, bank statements) or obtaining written confirmation from a qualified third party, such as a CPA, attorney, or registered investment adviser.

Disclosure Requirements ​

As all purchasers in a Rule 506(c) offering must be accredited investors, the rule does not mandate any specific disclosure documents. Nevertheless, the offering remains subject to federal anti-fraud provisions. The issuer is responsible for providing all material information required for an investor to make an informed decision and for ensuring that no information provided is false or misleading.

Reporting Requirements ​

The SEC Notice Filing (Form D) is the one and only required filing with the SEC for a Reg D offering.

  • What it is: A Form D is a brief notice that a company has sold securities without registration. It is not a disclosure document and does not contain detailed financial information. It simply alerts the SEC and the public that a private placement has occurred.
  • When it's filed: It must be filed with the SEC within 15 days of the first sale of securities in the offering.
  • Frequency: This is a one-time filing for the offering, not a recurring or ongoing report.

Reporting to Investors ​

While the SEC doesn't require ongoing public reports, issuers still have an obligation to keep their investors informed. This obligation is not defined by Regulation D itself, but rather by the legal agreements signed during the investment.

  • What it is: The Subscription Agreement, LLC Operating Agreement, or Shareholders' Agreement will typically outline the issuer's commitment to provide investors with updates.
  • What it includes: This can range from a simple quarterly email update to providing annual financial statements. For investments in LLCs or partnerships, it also includes providing necessary tax documents, like a Schedule K-1.
  • Why it's done: This is a matter of good governance and maintaining strong investor relations. It is a private, contractual obligation to the people who invested, not a public filing for the whole world to see.

Ongoing Updates & Communication ​

There are no SEC-mandated ongoing reports. All communication is either voluntary (a best practice for good investor relations) or a contractual obligation as defined in the Shareholders' or Operating Agreement.