Rule 506(b) vs 506(c): which Reg D exemption fits your raise?
Regulation D is the exemption most private offerings in the United States rely on to sell securities without registering them with the SEC. Rule 506 is its safe harbor, and it comes in two flavors. The practical difference is a trade: 506(c) lets you advertise the raise, but every investor must be verified as accredited. 506(b) keeps verification light, but you cannot solicit publicly.
Side by side
| Dimension | Rule 506(b) | Rule 506(c) |
|---|---|---|
| General solicitation & advertising | Not permitted. You may only offer to people with a pre-existing, substantive relationship. | Permitted. You can market the offering publicly - website, email, social, demo days, press. |
| Who can invest | Unlimited accredited investors plus up to 35 sophisticated non-accredited investors. | Accredited investors only. No non-accredited participants. |
| Accreditation standard | Reasonable belief - self-certification by the investor is generally accepted. | Issuer must take reasonable steps to verify: income, net worth, or a third-party letter. |
| Disclosure burden | Adding non-accredited investors triggers Rule 502(b) information delivery requirements. | No Rule 502(b) delivery requirement because all investors are accredited. |
| Federal filing | Form D with the SEC within 15 days of first sale. | Form D with the SEC within 15 days of first sale, with the 506(c) box checked. |
| State (Blue Sky) filings | Notice filings and fees in each state where an investor resides. | Notice filings and fees in each state where an investor resides. |
| Resale | Restricted securities. Rule 144 holding periods apply. | Restricted securities. Rule 144 holding periods apply. |
Which exemption to choose
Choose 506(b) when
- • Your raise comes from an existing network - prior LPs, angels, colleagues, friends of the GP.
- • You want the option to include a small number of sophisticated non-accredited investors.
- • You would rather avoid collecting tax returns, bank statements, or verification letters.
Choose 506(c) when
- • You intend to market publicly: a live deal page, a newsletter, a podcast, a demo day, LinkedIn.
- • Your investor list is mostly people you have not met, so a pre-existing relationship is hard to prove.
- • You are comfortable running (or outsourcing) documented accreditation verification on every investor.
What the filing sequence actually looks like
- 1Form the issuing entity and get the EIN - Form D requires both before you can file.
- 2Pick the exemption and lock the offering terms in the subscription documents and PPM.
- 3Onboard investors: KYC/AML, accreditation (self-certified for 506(b), verified for 506(c)), and e-signature.
- 4File Form D on EDGAR within 15 days of the first sale, then file amendments annually while the offering is open.
- 5File state Blue Sky notices and pay each state's fee where an investor resides.
- 6Keep the evidence: verification records, investor communications, and filing receipts, retained and auditable.
Rule 506 is codified at 17 CFR § 230.506. This page is general information, not legal advice - confirm the specifics of your offering with securities counsel.
Run the whole raise in one place
Harmonious offers EIN, Form D and Blue Sky filing services for clients. Our team coordinates the applicable submissions, tracks filing dates and receipts, and keeps the record alongside investor onboarding and signed subscriptions. Filing work is handled by the team, not submitted automatically by the platform.