Rule 506(c): advertising a raise to accredited investors only

Rule 506(c) lets a company advertise a private placement to anyone, on any channel, as long as every person who actually invests is an accredited investor and the company takes reasonable steps to verify that they are. There is no cap on the amount raised and no limit on how much each investor puts in. The price of the public advertising is verification, and verification is a step inside the funnel that most retail campaigns never had to build.

It is one of the two main paths under Regulation D. This post covers what the rule permits, what verification looks like now, the filings that come with it, and how a 506(c) campaign differs from a Reg CF or Reg A+ campaign.

This is general information, not legal advice. Your securities counsel decides which exemption you use and approves the materials.

What does Rule 506(c) allow?

The short version is general solicitation. Under the older 506(b) path, a company may not advertise the offering publicly. It raises from people it already has a relationship with, and it may include up to thirty five non-accredited investors who are sophisticated, with heavier disclosure duties if it does. Under 506(c), the company may run ads, post on social media, publish a landing page, send press, and speak at public events about the offering.

In exchange, three conditions apply.

1. Every purchaser must be accredited. No exceptions for friends, family, or employees who are not.
2. The company must take reasonable steps to verify accredited status. A checkbox where the investor says "I am accredited" is not enough by itself.
3. The rest of Rule 506 still applies. That includes the bad actor rules and the restrictions on resale.

There is no dollar cap and no per-investor limit. The securities are restricted, which means investors generally cannot resell them freely for a holding period. liquidity-secondary-trading covers what that means for investors.

What counts as reasonable steps to verify?

The rule is principles based. The company weighs the facts: what kind of investor it is, how much information it has about them, how they were found, and the terms of the offering. A person found through a broad social ad warrants more than a longtime institutional relationship.

The rule also lists non-exclusive methods the SEC treats as sufficient for natural persons:

• Income. Reviewing tax filings, such as W-2s or returns, for the two most recent years, plus a written statement that the person expects to reach the required level this year.
• Net worth. Reviewing statements of assets from the prior three months, such as bank or brokerage statements, along with a credit report for liabilities, and a written statement that all liabilities have been disclosed.
• A third-party letter. Written confirmation from a registered broker-dealer, an SEC-registered investment adviser, a licensed attorney, or a CPA that they have taken reasonable steps to verify the person's status within the prior three months.

Many issuers use a verification service that collects documents or arranges the letter. That moves the work out of the company's inbox, but it is still a step the investor has to complete.

The minimum investment approach

In March 2025, the SEC's Division of Corporation Finance published a no-action letter and updated interpretations about high minimum investment amounts. In summary, the staff said an issuer can generally treat a high minimum as part of reasonable verification. The figures in that guidance were at least two hundred thousand dollars for a natural person and at least one million dollars for an entity. The conditions included a written representation from the investor that they are accredited and that the minimum is not financed by a third party for the purpose of meeting it, and the issuer having no actual knowledge to the contrary.

That guidance can remove most of the document friction for large checks. It does nothing for smaller ones, and its conditions are specific. Whether and how to rely on it is a decision for securities counsel, made before the funnel is designed, not afterward.

What filings come with a 506(c) offering?

Form D, within fifteen days. The company files a notice on EDGAR within fifteen calendar days after the first sale. A first sale is the date the first investor is irrevocably contractually committed, not the date money arrives. The form asks which Rule 506 path the company is using. Amendments follow for some changes and annually while the offering continues.

State notice filings. Securities sold under Rule 506 are covered securities, so states cannot require registration or merit review. States can still require a notice filing and a fee, usually tied to where the investors live. blue-sky-laws has the background. Counsel or a filing service usually tracks these by investor state.

Bad actor disqualification. Rule 506(d) disqualifies an offering if the company or certain covered people, such as directors, executive officers, large shareholders, and paid solicitors, have specified past securities violations or sanctions. Counsel runs this check with questionnaires before the offering begins. Paid promoters count, which matters to marketing.

How the campaign differs from Reg CF and Reg A+

A 506(c) campaign looks like a Reg CF or Reg A+ campaign from the outside. It is a different business underneath.

The audience is narrower and worth more. Accredited investors are a minority of any audience. The ad budget buys fewer qualified people, and each one is worth far more. Cost per lead looks worse. Cost per dollar raised is what matters. cost-per-investor still applies, read in dollars, not heads.

Targeting cannot do the qualifying. No ad audience can confirm that a person is accredited, and the rule puts the duty to verify on the company, not the platform. The qualifying happens on the page and in the funnel, not in the ad set. advertising-rules-by-exemption covers how each exemption changes the ads.

The funnel ends in a conversation, not a checkout. A Reg CF raise runs through a funding portal and a self-serve checkout. A 506(c) raise usually ends with a call, a data room, subscription documents, and verification. Someone has to own that pipeline and answer fast. crm-and-email-for-a-raise covers the tooling.

Verification is a measured step. Track how many people start verification, how many finish, and how long it takes. A drop at this step looks like weak demand when it is really friction.

The claims rules are the same. General solicitation does not loosen the anti-fraud rules. Every statement in an ad must be accurate and consistent with the offering documents, and projections and performance claims need counsel's review. offering-page-content covers what belongs on the page.

When should a 506(c) run alongside Reg A+?

Often. A public Reg A+ campaign already reaches accredited investors whose check is much larger than a retail checkout invites. A concurrent 506(c) gives them a route, and because both are advertised, the public campaign does not have to hide it. The case for doing it, and the integration question counsel must answer first, is in reg-a-plus-and-reg-d-at-once. The securities-offering-exemptions-compared article lays the exemptions side by side.

506(c) alone fits a company whose realistic investors are accredited, which raises more than Reg CF allows, and which does not want the review time or ongoing reporting of Reg A+. It does not fit a company whose story depends on customers becoming owners. Most customers are not accredited, and they cannot invest.

What it means for the campaign

• Decide 506(b) or 506(c) before any ad runs. Advertising first can take 506(b) off the table.
• Design verification into the funnel. Choose the method with counsel, then build it as a step with its own page and metrics.
• Staff the conversation. Every lead is a large potential check. Slow follow-up costs more here than anywhere.
• Measure in dollars. Lead volume will look small. That is expected.
• Calendar the Form D. Fifteen days from the first sale goes quickly.

This is general information, not legal advice. Which exemption your company may use, and how to verify investors, are questions for your own securities counsel.

FAQ

Can you advertise a Rule 506(c) offering on social media?

Yes. Rule 506(c) permits general solicitation, including social media and paid ads, provided every purchaser is accredited and the company takes reasonable steps to verify it. The anti-fraud rules still apply to everything the ads say.

Is a self-certification checkbox enough to verify an accredited investor?

Not by itself. The company must take reasonable steps, such as reviewing tax or asset documents or getting a letter from a broker-dealer, registered investment adviser, attorney, or CPA. SEC staff guidance from March 2025 also describes when a high minimum investment, with written representations, can support verification.

When is Form D due for a 506(c) offering?

Within fifteen calendar days after the first sale, filed on EDGAR. Most states also require a notice filing and fee.

Is there a limit on how much a company can raise under 506(c)?

No. Rule 506 has no offering cap and no per-investor limit. Every purchaser must be accredited.

What is the difference between 506(b) and 506(c)?

506(b) prohibits general solicitation and permits up to thirty five sophisticated non-accredited investors. 506(c) permits general solicitation and requires that every purchaser is accredited and verified.