Rule 506(c): How Issuers Can Advertise Private Offerings — and What the SEC Expects

For decades, the prohibition on general solicitation was one of the defining constraints of private securities offerings. Issuers raising capital under Regulation D were required to have a pre-existing, substantive relationship with each investor before the offering — no advertising, no public announcements, no social media posts about the deal. The JOBS Act of 2012 changed that, and Rule 506(c) of Regulation D now permits issuers to broadly solicit and advertise their offerings, provided they comply with specific conditions. Recent SEC guidance issued in 2025 has made that compliance meaningfully easier.

The Core Framework: What Rule 506(c) Permits

Under Rule 506(c), an issuer may engage in general solicitation — including advertising on social media, at public events, through email campaigns, and in press releases — in connection with an unregistered securities offering. The offering is exempt from SEC registration under Section 4(a)(2) of the Securities Act, meaning the issuer does not need to file a registration statement or produce a prospectus.

The trade-off is a stricter investor eligibility requirement. Unlike Rule 506(b), which permits up to 35 non-accredited but sophisticated investors, Rule 506(c) requires that every purchaser be an accredited investor. There is no exception. The issuer must also take reasonable steps to verify that each purchaser meets the accredited investor standard — a requirement that goes beyond merely asking investors to self-certify.

506(c) vs. 506(b): Choosing the Right Exemption

The choice between Rule 506(b) and Rule 506(c) is one of the first structural decisions an issuer must make. The two exemptions differ in three key respects.

First, general solicitation is permitted only under 506(c). If an issuer wants to publicly market the offering — through a website, LinkedIn post, or investor conference presentation — 506(c) is the required path. Under 506(b), any general solicitation taints the entire offering and can destroy the exemption.

Second, 506(b) permits up to 35 non-accredited but sophisticated investors; 506(c) does not. Issuers who want flexibility to include non-accredited investors in their cap table must use 506(b) and forgo general solicitation.

Third, the verification obligation differs. Under 506(b), issuers may rely on investor self-certification of accredited status. Under 506(c), the issuer must take affirmative, reasonable steps to verify — a higher standard that historically required reviewing tax returns, brokerage statements, or third-party verification letters.

The 2025 SEC Guidance: A Lighter Verification Burden

In March 2025, the SEC staff issued new no-action guidance that significantly eases the verification burden for 506(c) issuers. The guidance establishes two important safe harbors.

The first is a minimum investment safe harbor. If a natural person invests at least $200,000 (or an entity invests at least $1,000,000), and the investor represents in writing that the investment does not represent more than 50% of their net worth (or the entity’s assets), the issuer may treat that as reasonable verification of accredited investor status. Binding capital commitments count toward the threshold, not just funded amounts.

The second is a prior relationship safe harbor. If the issuer (or its placement agent) has a pre-existing, substantive relationship with the investor — meaning the issuer has sufficient information to evaluate the investor’s financial sophistication and status — that relationship may satisfy the verification requirement without additional documentation review.

These safe harbors do not eliminate the need for care. Issuers should document their verification process contemporaneously and maintain records demonstrating that the safe harbor conditions were met for each investor.

Form D Filing Requirements

Issuers conducting a 506(c) offering must file a Form D with the SEC within 15 days of the first sale of securities. The Form D is a notice filing — it does not constitute SEC approval of the offering — but failure to file can result in the loss of the exemption and potential enforcement action. The Form D must identify the issuer, the offering amount, the type of securities being sold, and the exemption being claimed.

Issuers should also be aware that many states have their own notice filing requirements for Regulation D offerings. Florida, for example, requires a notice filing with the Office of Financial Regulation for offerings sold to Florida residents.

Ongoing Compliance Obligations

Completing a 506(c) offering is not the end of the compliance obligation. Securities sold under Rule 506(c) are restricted securities — they cannot be freely resold without registration or another applicable exemption. Issuers must ensure that investors receive appropriate legends on their securities and understand the resale restrictions.

Issuers who raise capital from multiple investors also take on ongoing disclosure obligations to those investors, even in the absence of a formal reporting requirement. Maintaining clear, accurate records of the offering, investor communications, and use of proceeds is essential for any future financing round, audit, or regulatory inquiry.

Counsel for Issuers

The Law Office of Carl G. Hawkins, PLLC advises issuers on Regulation D offerings, including Rule 506(c) structuring, Form D filings, accredited investor verification procedures, and state notice filing compliance. If you are considering a private capital raise, contact the firm before going to market.