The Securities Act of 1933 requires any issuer wanting to sell securities to 1) be registered with the United States Securities and Exchange Commission (SEC) or 2) meet certain qualifications to exempt them from such registration.

Regulation D (or Reg D) is one exemption issuers can use. This exemption is broken down into Rule 506(b) and Rule 506(c), either of which allows companies to raise an unlimited amount of funds. While 506 (b) has been the standard for some time, Rule 506(c) was adopted in 2012, as part of the Jumpstart Our Business Startups Act, or JOBS Act to allow for general solicitation.

So what exactly is the difference between Rule 506(b) and Rule 506(c)? Here is where the differences come into play:

Rule 506(b)

  • Allows companies to sell unlimited securities to accredited investors, and up to 35 other (by implication, unaccredited) investors, without having to register the securities with the SEC.
  • While registration is not required, the investor relationships need to be established, and the investors must be experienced and knowledgeable in the field.
  • No advertising or general solicitation of any kind is permitted.
  • Issuers may rely on self-certification by investors as verification of accreditation.

Rule 506(c)

  • · Allows general solicitation and public advertising to raise funds and attract investors to their private offering.
  • · Investors must all be accredited.
  • · Issuers must obtain proper documentation from investors in order to prove that they are accredited to participate in the offering.

506(c) levels the playing field for small businesses, as companies can reach out to anyone about investing and do not have to rely on whether they have previously established relationships. In addition, companies are able to connect with potential investors through targeted soliciting and advertising campaigns.

Always check with your state securities regulator before moving forward with any offerings. For more information, visit

Want to learn more about 506(b) and 506(c)? Click here to read our in-depth take on the subject, or check out this helpful write-up from Verify Investor.