What Is Rule 506(c)? Definition, How It Works and Examples

Before 2013, every Rule 506 offering was barred from general solicitation, meaning advertising, public websites or cold outreach. The JOBS Act of 2012 told the SEC to lift that ban for offerings sold only to accredited investors. The SEC did so in a release of July 10, 2013, adding paragraph (c) to Rule 506. The older route, now called 506(b), stayed as it was.

The trade-off 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. In return, it gives up the right to sell to anyone who is not accredited. Its “reasonable belief” about a buyer is also no longer enough. It must have taken reasonable steps to check.

What Does Not Change

The rest of Regulation D applies as before. Buyers receive restricted securities, which cannot be resold without registration or another exemption. Federal law overrides state registration, but states may still require notice filings and fees. The bad actor rule in Rule 506(d) can disqualify an offering. That happens if the issuer or certain people connected to it have relevant convictions, injunctions or regulatory orders within set look-back periods. Those people include directors, officers, large owners, promoters and paid solicitors. And the anti-fraud rules apply to every word of the marketing.

1. 1.0
   MarketingThe issuer may describe the offering in public: a website, an email list, a webinar or social media. The issuer can be a company, a fund or a single-deal vehicle.
2. 2.0
   SubscriptionEach buyer signs the subscription documents, which include statements about accredited status.
3. 3.0
   VerificationBefore accepting the money, the issuer takes reasonable steps to confirm each buyer is accredited. It uses one of the methods described below or its own documented judgment.
4. 4.0
   ClosingSecurities go only to buyers who passed. A buyer who could not be verified is refused. A promise to prove it later is not enough.
5. 5.0
   Form DWithin 15 days of the first sale, the issuer files a notice on Form D with the SEC. It then makes any state notice filings.

In the pre-IPO market, the issuer is often an SPV, a special purpose vehicle that buys the company’s shares and sells interests in itself. The vehicle relies on the exemption, so the vehicle is the one that verifies you. Axevil runs one dedicated Delaware SPV per deal, managed by Axevil Capital, LLC. How the check works in the app is set out in accredited investor verification.

The standard rests on principles. The issuer weighs what kind of buyer it is dealing with, what it knows about them, and how the offering was marketed and sized. For certainty, Rule 506(c)(2)(ii) lists methods that count as meeting the standard. The list is not exhaustive. An issuer may use another method if it can show the steps were reasonable.

The March 2025 Minimum-Investment Letter

On March 12, 2025, SEC staff agreed that an issuer could reasonably treat buyers as verified if three things hold. The offering requires a high minimum investment. Each buyer confirms in writing that they are accredited and that no third party financed the minimum, in whole or in part, for this specific investment. And the issuer knows nothing that contradicts either statement. The request letter set the minimums: $200,000 for individuals (natural persons) and $1,000,000 for legal entities. For an entity accredited because all its owners are, the minimum is $1,000,000, or $200,000 per owner if it has fewer than five owners who are natural persons. A commitment paid in installments as called counts toward the minimum.

The example below runs four buyers through one illustrative SPV offering. It has a $50,000 standard minimum and an optional larger ticket.

For a buyer, the difference is practical. 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, an experienced buyer who is not accredited, has a route into 506(b) and none into 506(c).

• Self-certification aloneA tick box saying “I am accredited” is not a reasonable step under 506(c). The exception is a recognized route such as the high-minimum letter with both written statements.
• Borrowed minimumsMoney lent by a third party specifically to fund the investment breaks the minimum-investment route, even if the amount clears $200,000.
• Stale documentsNet-worth statements and third-party letters older than three months fall outside the listed methods.
• Switching to 506(b) after advertisingOnce an offering has been advertised, it cannot simply be relabeled 506(b) to admit a buyer who is not accredited.
• Ignoring bad actorsA disqualifying event involving a covered person removes the exemption for everyone, however well buyers were verified.
• Assuming advertising means liquidityA publicly marketed offering still produces restricted securities. You can read about it in public. You cannot sell it in public.

Regulation D

SEC rules for selling securities without registration. Rule 501 defines terms, Rule 502 sets conditions, and Rule 506 is the exemption most private rounds use.

Issuer

The company, fund or vehicle selling the securities and relying on the exemption.

General solicitation

Offering securities to the public at large through advertising, open websites, broadcasts or 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.

Reasonable steps to verify

The 506(c) duty to check a buyer’s status with evidence, using a listed method or a documented judgment of the issuer’s own.

No-action letter

A letter in which SEC staff give their view on a described situation. The Commission itself has not adopted that view, and the staff can withdraw it.

Form D

The short notice an issuer files with the SEC within 15 days of the first sale. Filing it does not mean the SEC approved anything.

Bad actor rule

Rule 506(d): an offering loses the exemption if the issuer or a covered person has a disqualifying conviction, order or injunction within the look-back period.

Restricted securities

Securities bought in a private offering that cannot be resold publicly without registration or a further exemption.

Every rule and figure was checked against the primary source on October 1, 2026. Staff no-action letters state the views of SEC staff. The Commission has not adopted them, and they can be withdrawn.