What is Rule 506(c)? Definition, how it works and examples
The Regulation D exemption that allows a private offering to be advertised — the price is that every buyer is accredited and verified. The rules and the verification methods.
The short answer
Reg D 506(c) — Rule 506(c) of Regulation D — is the SEC exemption that lets a company sell securities without registering them while advertising the offering openly, on one condition: every purchaser must be an accredited investor, and the issuer must take reasonable steps to verify that status. It has been available since 23 September 2013. It matters to a private-company investor because it is why you can see a private deal described on a website at all.
What is SEC Reg D Rule 506(c)?
Before 2013 every Rule 506 offering was barred from general solicitation — no advertising, no public website, no cold outreach. The JOBS Act of 2012 told the SEC to lift that ban for offerings sold only to accredited investors, and the SEC did so in a release of 10 July 2013, adding paragraph (c) to Rule 506. The older route, now called 506(b), was left as it was. The trade is simple. An issuer under 506(c) may market the offering by any means, raise an unlimited amount, and sell to as many buyers as it likes.
How does a Reg D 506(c) offering work?
Marketing The issuer — a company, a fund or a single-deal vehicle — may describe the offering publicly: a website, an email list, a webinar, social media. Subscription Each buyer signs the subscription documents, which include representations about accredited status. Verification Before accepting the money, the issuer takes reasonable steps to confirm each buyer is accredited — by one of the methods in section 4.0 or by its own documented judgement. Closing Securities are issued only to buyers who passed. A buyer who could not be verified is refused, not admitted on a promise.
Regulation D 506(c) for accredited investors only: what are “reasonable steps”?
The standard is principles-based. The issuer weighs the nature of the buyer, the information it has about them, and how the offering was marketed and sized. To give certainty, Rule 506(c)(2)(ii) lists methods that are deemed to satisfy it. They are non-exclusive: an issuer may use another method if it can show the steps were reasonable.
Reg D 506(c) offering vs Rule 506(b): which one is a deal using?
The verdict is about the buyer, not the deal. Under 506(b) you may be asked fewer questions, but you will only hear of the offering through someone who already knows you. Under 506(c) anyone can learn of the offering, and only a verified accredited investor can buy it. A sophisticated investor who is not accredited has a route into 506(b) and none into 506(c).
Common mistakes in a 506(c) offering
Self-certification alone A tick box saying “I am accredited” is not a reasonable step under 506(c), unless it sits inside a recognised route such as the high-minimum letter with both representations. Borrowed minimums Money lent by a third party specifically to fund the investment breaks the minimum-investment route, even if the amount clears $200,000. Stale documents Net-worth statements and third-party letters older than three months fall outside the listed methods.
The terms this page uses
Regulation D SEC rules for selling securities without registration. Rule 501 defines terms, Rule 502 sets conditions, Rule 506 is the exemption most private rounds use. General solicitation Offering securities to the public at large — advertising, open websites, broadcasts, seminars open to anyone. Barred under 506(b), allowed under 506(c). Accredited investor A person or entity meeting one of the Rule 501(a) tests. The only kind of buyer a 506(c) offering may accept.
Questions about Rule 506(c)
What does “reg d 506c” mean on a deal page? It tells you the offering relies on Rule 506(c) of Regulation D. The deal can be advertised, every buyer must be an accredited investor, and the issuer will verify that before accepting your money. Is a Regulation D Rule 506(c) offering approved by the SEC? No. It is exempt from registration, which means the SEC does not review or approve it. The issuer files a Form D notice within 15 days of the first sale, and the anti-fraud rules still apply. Do I have to send tax returns to invest in a 506(c) deal? Not necessarily.
What does “reg d 506c” mean on a deal page?
It tells you the offering relies on Rule 506(c) of Regulation D. The deal can be advertised, every buyer must be an accredited investor, and the issuer will verify that before accepting your money.
Is a Regulation D Rule 506(c) offering approved by the SEC?
No. It is exempt from registration, which means the SEC does not review or approve it. The issuer files a Form D notice within 15 days of the first sale, and the anti-fraud rules still apply.
Do I have to send tax returns to invest in a 506(c) deal?
Not necessarily. Tax forms are one listed method; recent account statements, a letter from your CPA, attorney or registered adviser, or — since the March 2025 staff letter — a high minimum investment with two written representations are others. The issuer chooses which it accepts.
Can a non-accredited investor ever buy into a 506(c) offering?
No. Every purchaser must be accredited. A non-accredited but sophisticated buyer can only be admitted to a 506(b) offering, which cannot be advertised.
Is the $200,000 minimum a rule?
It is the figure in the request SEC staff responded to on 12 March 2025, not a number in Rule 506(c) itself. An issuer that meets those conditions can reasonably treat buyers as verified; others still verify by the methods in the rule.
Where every rule on this page comes from
Every rule and figure was checked against the primary source on 1 October 2026. Staff no-action letters state the views of SEC staff, not of the Commission, and can be withdrawn.