What is the difference between Rule 506(b) and Rule 506(c)?
Rule 506(b) bans public advertising but lets an issuer sell to up to 35 non-accredited investors; Rule 506(c) allows advertising, but every buyer must be a verified accredited investor. From July 2024 to June 2025, issuers reported about $378 billion raised under 506(b) and about $24 billion under 506(c) (SEC Small Business Advocate report, via TheCorporateCounsel.net).
What does Rule 506(b) allow?
Rule 506(b) is the quiet private placement. The issuer may raise an unlimited amount from accredited investors and sell to no more than 35 non-accredited investors, each of whom must have enough financial knowledge, alone or with a representative, to judge the risks (SEC, Rule 506(b)). If any non-accredited investor takes part, the issuer must give them disclosure documents similar to a Regulation A offering, according to the same SEC page. The issuer may not use general solicitation, so the raise moves through existing relationships.
What does Rule 506(c) allow?
Rule 506(c) lets the issuer advertise the offering in public, on its website, in the press or at events, as long as every buyer is accredited and the issuer has taken reasonable steps to verify it. Verification used to mean tax returns, bank statements or a letter from an accountant or lawyer.
On 12 March 2025, SEC staff issued a no-action letter that eases this: an issuer can treat a high minimum investment as part of verification, set at $200,000 for individuals and $1 million for entities, with a written statement from the buyer that the money is not financed by a third party for the deal (King & Spalding, March 2025). Below those minimums, the older verification methods still apply.
Which exemption do most companies choose?
Most money still goes through 506(b). In the SEC advocate's 2025 report, 506(c) raised about $24 billion against about $378 billion for 506(b), roughly 6% of the combined total (TheCorporateCounsel.net, January 2026). Earlier SEC economist studies found the same pattern: about 3% of reported Regulation D capital through 2016 went through 506(c) (Davis Polk summary).
| Rule 506(b) | Rule 506(c) | |
|---|---|---|
| Public advertising | Not allowed | Allowed |
| Non-accredited buyers | Up to 35, with a sophistication test | None |
| Investor verification | Buyer may self-certify | Issuer must take reasonable steps to verify |
| Offering size | Unlimited | Unlimited |
| Form D box in item 6 | Rule 506(b) | Rule 506(c) |
Step 1. Find the exemption in item 6 of the Form D
Open the company's Form D on SEC EDGAR and go to item 6, "Federal Exemptions and Exclusions Claimed" (SEC Form D). The issuer ticks one or more boxes, including Rule 504, Rule 506(b) and Rule 506(c). The filing is due within 15 days after the first sale (17 CFR 230.503), so it tells you an offering has started, not that it has closed. Our guide on how to read a Form D filing covers every other item.
Step 2. Read the investor count against the exemption
Go to item 14, which gives the number of investors and how many are not accredited. On a 506(c) filing the non-accredited count should be zero. On a 506(b) filing, a non-zero count means the issuer had to prepare fuller disclosure documents for those buyers, which tells you the raise included friends, family or employees.
Step 3. Ask what the choice says about the raise
A 506(c) box suggests the company planned to market the round widely: a crowdfunding portal, an online syndicate, a public pitch or a fund that advertises. It also tells you the issuer verified every buyer, so ask how. A 506(b) box is the default for venture rounds led by a known investor and says little on its own.
Check item 13 for the total offering amount and the amount sold. A 506(c) raise with a large target and a small amount sold after several amendments can mean the public campaign is struggling. Item 7 shows whether the filing is a new notice or an amendment.
Step 4. Check what the Form D leaves out
Neither exemption puts a valuation, a price per share or investor names on the Form D. Related persons in item 3 are the issuer's own officers, directors and promoters. If you are being offered a stake in a 506(c) round, the advertising itself is legal; what you need is the offering documents and your own diligence. Our private company due diligence checklist lists the next records to pull.
How does Tamarly Intelligence use Form D?
Tamarly Intelligence is Tamarly's research platform on companies, funds, countries and markets, built from official filings and open data. Its Venture workflow reads every new Form D from operating companies, leaves out funds and real estate, and opens on raises of $15 million or less, with first raises on file first. Each company has its Form D history rebuilt into rounds and its US patents. Tamarly does not show investor names on private rounds.
See every new Form D raise of $15 million or less, free for 7 days
Frequently asked questions
Can a company switch from 506(b) to 506(c) during a raise?
Issuers do move an offering from 506(b) to 506(c), usually by filing an amended Form D with the new box ticked. Any solicitation must come after the switch, and every later buyer must be verified as accredited. Ask counsel before relying on it, because earlier sales still have to meet 506(b).
Does 506(c) mean the company is riskier?
Not by itself. The box shows the company chose to advertise and to verify buyers. Most capital still goes through 506(b), about $378 billion against $24 billion for 506(c) from July 2024 to June 2025 (TheCorporateCounsel.net), so judge the company on its filings and terms.
How does an issuer verify accredited investors under 506(c)?
By reviewing documents such as tax returns or bank statements, by relying on a letter from a lawyer, accountant or broker, or, since a March 2025 SEC staff letter, by setting a minimum investment of $200,000 for individuals or $1 million for entities with written buyer statements (King & Spalding).
About the author. Melvine Manchau is the founder of Tamarly and author of the Tamarly Newsletter. He previously worked at PwC, Salesforce, BlackRock/eFront and Lazard.
About Tamarly Research. Tamarly Research is part of Tamarly Media, which holds no investment positions. Tamarly is a New York research house that studies how AI is changing regulated institutions.