Reg D 506(b) vs 506(c): What Fund Managers Can and Cannot Do in Marketing

By Christoph Olivier, Founder, CO Consulting

Last reviewed: July 2026

The exemption you pick decides your entire marketing playbook. Under Rule 506(b) you cannot advertise the raise at all. Under Rule 506(c) you can market publicly, but every investor’s accredited status must be verified. Most compliance fights I see with fund managers trace back to a marketing team acting like 506(c) is live when the offering documents say 506(b). This guide draws the line clearly. It is educational, not legal advice, and nothing here guarantees a compliant raise. Confirm the specifics with your securities counsel.

The short answer

Both are exemptions under Regulation D that let a private fund raise capital without registering the securities with the SEC. Rule 506(b) prohibits general solicitation and lets you accept up to 35 non-accredited but sophisticated investors alongside accredited ones. Rule 506(c) permits general solicitation, meaning public marketing, but restricts the raise to accredited investors whose status you verify with reasonable steps. In plain terms: 506(b) is quiet and relationship-driven, 506(c) is public and verification-heavy.

Where these rules came from: the JOBS Act

The split exists because of the JOBS Act, signed April 5, 2012. For roughly 80 years, private placements carried a blanket ban on general solicitation. Congress directed the SEC to lift that ban where every purchaser is accredited and the issuer takes reasonable steps to verify it. The SEC adopted the rule on July 10, 2013, and it took effect September 23, 2013, as new paragraph (c) of Rule 506. Rule 506(b), the old private-and-quiet path, stayed exactly as it was. So 506(c) is not a replacement for 506(b). It is a second lane with a public-marketing upside and a verification cost attached.

Adoption tells the story. In 2024, issuers raised roughly $1.7 trillion under 506(b) versus about $125 billion under 506(c). The verification burden kept most managers quiet. The 2025 change below is why that ratio is starting to move.

Rule 506(b): no general solicitation, relationships first

Under 506(b) you cannot advertise the offering. No open social posts inviting investment, no press campaign about the fund, no paid ads, no public webinar pitching the raise, no “we are raising” on your website. You can only approach investors with whom you have a substantive, pre-existing relationship, meaning you knew enough about their financial situation and sophistication before you presented the deal.

That word “pre-existing” is where teams get sloppy. Adding someone to a list on Monday and pitching them the fund on Tuesday is not a pre-existing relationship. The relationship has to predate the specific offering, and it has to be substantive. This is why 506(b) fundraising leans on warm introductions, referral partners, and long-nurtured investor lists rather than campaigns. Accredited investors self-certify through a subscription questionnaire, and you may accept up to 35 non-accredited but sophisticated investors, though those trigger heavier disclosure obligations that most managers avoid.

If you are running a 506(b) raise, your marketing is not idle. It is brand and relationship building that stays clear of the specific offering, the kind of long-game presence covered in our guide to content marketing for capital raisers and fund managers. You build the audience and the trust now, so investors are qualified relationships before any deal is on the table.

Rule 506(c): public marketing allowed, verification required

Under 506(c), general solicitation is on the table. Webpages, podcasts, conference talks, PR, LinkedIn, email, even paid ads can promote the offering. This is the exemption that lets a fund manager build a genuine public presence around a live raise. The trade is strict: every purchaser must be an accredited investor, and you, the issuer, must take reasonable steps to verify it. Self-certification is not enough.

Reasonable steps historically meant collecting real evidence: W-2s and 1040s for the income test, brokerage and liability statements for the net-worth test, or a written confirmation from a licensed CPA, attorney, registered investment adviser, or broker-dealer. That documentation friction is exactly why so many managers stayed on 506(b) despite the marketing upside. If you plan to market publicly, treat channel choice as a compliance decision too. LinkedIn marketing for capital raisers and fund managers is the workhorse channel here, because the audience is professional, the targeting is precise, and the content sits inside a documented verification funnel.

One direction-of-travel rule matters: you can convert a 506(b) raise to 506(c) if you decide to start advertising, but once you have publicly solicited you generally cannot go back to 506(b). Solicitation is a one-way door.

What marketing is actually permitted under each

Here is the practical channel-by-channel view. The dividing question is always the same: does this communication generally solicit investment in the specific offering?

Notice the bottom rows. Educational content that does not mention or offer the specific securities is available to both. That is the safe zone for a 506(b) manager who still wants a public voice. You can publish, speak, and build an audience all day, as long as you are not soliciting investment in the live deal.

The March 2025 SEC change that made 506(c) easier

On March 12, 2025, the SEC’s Division of Corporation Finance issued a no-action letter that gave 506(c) a cleaner, faster verification path. Instead of collecting income and net-worth documentation from every investor, an issuer can now treat a high minimum investment plus written representations as a reasonable step to verify accredited status.

The framework has clear pieces. Set a minimum investment of at least $200,000 for a natural person, or at least $1,000,000 for an entity relying on the $5 million assets test. Collect written representations from the purchaser confirming (1) they are accredited, (2) which specific category of the Rule 501(a) definition they rely on, and (3) that the investment is not financed, in whole or part, by a third party for the purpose of qualifying. And the sponsor must have no actual knowledge of facts indicating the investor is not accredited or that third-party financing was used to hit the minimum.

Meet all of that and you have taken reasonable steps without chasing tax returns. This is the guidance that makes a public 506(c) raise practical for more managers, provided your ticket sizes clear the thresholds. A no-action letter is staff guidance, not a rule change, so document your reliance and keep counsel in the loop.

How the choice actually gets made: your offering documents

The exemption is not a marketing preference you flip on later. It is baked into your offering. Your private placement memorandum, subscription agreement, and the Form D you file with the SEC all name the exemption you are relying on. Form D is filed within 15 days of the first sale, and it is a notice filing, not SEC review or approval of the deal.

The order of operations matters. Counsel and the offering documents decide 506(b) or 506(c) first. Then marketing operates inside that decision. When a fundraising team and a marketing team run on different assumptions, that is how a quiet 506(b) raise accidentally gets solicited and blows its own exemption. Keeping strategy, compliance, and campaign execution in one accountable seat is the core argument for marketing for capital raisers and fund managers being run as one integrated function rather than scattered vendors who never read the PPM.

Two compliance traps beyond the exemption

The 506(b)/506(c) line is not the only rule in play. Two others catch fund managers constantly.

The finder / broker-dealer rule. Paying someone transaction-based compensation, a cut of capital raised, to introduce or solicit investors can require that person to be a registered broker-dealer under Section 15(a) of the Exchange Act. Unregistered finders paid on success are a well-worn enforcement target, and the exposure can flow back to the issuer. Before you set up any referral or capital-introduction arrangement with variable pay tied to dollars raised, get it reviewed.

The SEC Marketing Rule. If your firm is an SEC-registered investment adviser, Rule 206(4)-1 governs your advertising, and since November 2022 it explicitly covers private fund marketing materials. It permits testimonials and endorsements, but only with required disclosures, and it sets strict conditions on presenting performance and track records. Every pitch deck, one-pager, and investor letter sits under it. Layer that on top of Reg D, not instead of it. Broker-dealers, separately, answer to FINRA Rule 2210.

None of this replaces advice from your securities counsel and compliance team. It is the map, not the territory.

Want your raise marketed inside the lines? If you want a marketing engine built around the exemption you are actually using, book a consultation and we will pressure-test your funnel against your offering documents before a dollar of ad spend goes out.

Frequently asked questions

Can I advertise a 506(b) fund at all?
Not the specific offering. Under 506(b) general solicitation is prohibited, so no public ads, press, or open posts inviting investment in the raise. You can still publish educational content and build your brand, as long as it does not offer or promote the live securities. Investor outreach must go to substantive, pre-existing relationships.

What counts as a reasonable step to verify accredited status under 506(c)?
Historically, reviewing income documents like 1040s, net-worth evidence, or a written confirmation from a CPA, attorney, RIA, or broker-dealer. Since the March 12, 2025 no-action letter, a high minimum investment ($200,000 for individuals, $1,000,000 for entities) plus written representations can also qualify, absent actual knowledge to the contrary.

Can I switch from 506(b) to 506(c) mid-raise?
Yes, you can convert a 506(b) offering to 506(c) if you decide to start marketing publicly, subject to conditions your counsel should confirm. But it is a one-way door. Once you have generally solicited, you generally cannot revert to 506(b) for that offering. Plan the direction before you advertise.

Do I file anything with the SEC for a Reg D raise?
Yes. You file Form D within 15 days after the first sale of securities. It is a short notice filing, not a registration, and submitting it does not mean the SEC reviewed or approved your offering. State blue-sky notice filings may also apply. Your exemption choice is named in the filing and your offering documents.

Does the SEC Marketing Rule apply to my fund’s materials?
If your firm is an SEC-registered investment adviser, yes. Rule 206(4)-1 has covered private fund marketing materials since November 2022. It permits testimonials and endorsements with required disclosures and governs how you present performance. It layers on top of Regulation D and the anti-fraud rules, so both regimes apply at once.

Is 506(c) always the better choice because I can market?
No. Public marketing is only an advantage if your raise suits verified, accredited-only capital and your ticket sizes support the verification approach. Many managers with strong warm networks still prefer 506(b) for the flexibility to accept a limited number of non-accredited relationships and the lighter verification. The right answer depends on your investor base and deal.