Rule 506(c) is a Regulation D exemption that allows a fund to use general solicitation and advertising to raise capital, but requires every investor to be a verified accredited investor.
Why It Matters
Rule 506(c) was introduced by the JOBS Act in 2013 to allow funds to market their offerings publicly for the first time. This opens fundraising beyond your personal network, but it comes with a significant obligation: you must take reasonable steps to verify that every single investor is accredited. The verification burden is higher than under 506(b), where self-certification is sufficient.
Key Details
- General solicitation is permitted, including websites, social media, events, conferences, and cold outreach.
- All investors must be accredited. No non-accredited investors are allowed under any circumstances.
- The issuer must take "reasonable steps" to verify each investor's accredited status before accepting their investment.
- The SEC provides non-exclusive safe harbor verification methods, including reviewing tax returns, bank statements, or obtaining written confirmation from a broker-dealer, attorney, or CPA.
- The same Form D filing requirement applies as under Rule 506(b), due within 15 days of the first sale.
For more, see Rule 506(b) vs. Rule 506(c).
Capital Company handles accredited investor verification workflows and documentation as part of fund administration.
This content is for informational purposes only and does not constitute legal, tax, or compliance advice. Consult qualified counsel for guidance specific to your situation.