VC & PE Glossary
What Is 506(c)?
Definition
Rule 506(c) is a U.S. private offering exemption that allows general solicitation and advertising, but every purchaser must be verified as an accredited investor.
Useful for: GPs, Investors
Rule 506(c) lets issuers publicly advertise private securities offerings, provided they verify that all investors are accredited—not just take their word for it.
How it works
A GP launches a fund website, posts on LinkedIn, or speaks at a public webinar inviting investment. That is general solicitation, which 506(b) forbids but 506(c) permits. Before accepting capital, the issuer must verify accreditation through methods the SEC considers reasonable: reviewing tax returns, CPA letters, brokerage statements, or using a verification service.
There is no cap on the number of accredited investors or raise size under 506(c), same as 506(b). Form D still gets filed. Many AngelList-style vehicles and emerging-manager newsletters rely on this path because distribution is part of the strategy.
Why it matters
- GPs: 506(c) unlocks marketing for first-time fund managers without a Rolodex of pension funds. Documentation and verification workflows become part of ops from day one.
- Investors: You will share financial proof or use a verifier. That friction protects both sides if the SEC asks questions later.
- Founders: Less common at company level, but some later-stage rounds use 506(c) when strategic outreach is broad.
Common mistake
Running a public "invest in our fund" campaign while only collecting checkbox self-certification. That fails 506(c)'s verification standard and can force rescission offers or regulatory scrutiny.
Related ideas
Compare with 506(b), accredited investor tests, Form D, and syndicate platform compliance.
Editorial note: AI tools assisted with research, structure, or drafting. Venture Capital Tracker retains human editorial responsibility for factual accuracy, relevance, and source quality before publication.