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Glossary

Rule 506(b)

What Rule 506(b) of Regulation D allows, its limits on non-accredited investors and general solicitation, and what it requires to be filed.

Rule 506(b) is the Regulation D exemption for private offerings without general solicitation. A company may raise an unlimited amount from accredited investors and up to 35 non-accredited purchasers in any 90-day period, if each non-accredited purchaser is financially sophisticated alone or with a purchaser representative (17 CFR 230.506(b)).

The conditions

  • No general solicitation (230.502(c)). Offers go to people with a pre-existing, substantive relationship with the company or its registered intermediary.
  • Non-accredited purchasers must receive specified disclosure, including financial statements, a reasonable time before the sale (230.502(b)).
  • The securities are restricted and cannot be freely resold.
  • A Form D is filed within 15 calendar days after the first sale, and most states require a notice filing and fee.
  • The bad actor rule applies.

Compare Rule 506(c), which allows general solicitation but only accredited, verified buyers.

Further reading

  • Rule 506(b): the private raise most companies already use
  • Choosing an exemption by how much you need to raise

This page is general information about securities rules, not legal advice.

Topics:glossaryregulationreg d

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