What is Regulation D, Rule 506(c)
Introduced in 2013, Regulation D, Rule 506(c), revolutionized private capital raising by allowing public advertising of investment opportunities. Like Rule 506(b), this exemption permits companies to raise unlimited amounts of capital exclusively from accredited investors. However, it introduces a critical distinction: the requirement to verify investor accreditation.
Key features of Rule 506(c):
- Public Advertising (i.e. “General Solicitation”): Startups can publicly promote their offerings through online platforms, social media, or traditional media channels. This is
- Investor Verification: Unlike Reg D 506(b), where investors may self-certify their accreditation, Rule 506(c) mandates issuers to verify an investor’s status through documentation such as tax returns, bank statements, or third-party certification.
While the verification process imposes additional administrative burdens, the ability to advertise can significantly enhance a company’s ability to attract capital. This exemption is well-suited for startups leveraging online platforms to engage a broader audience of accredited investors.
It is similar to Regulation A and Regulation Crowdfunding in that it allows issuers (e.g. the companies raising capital) to publicly advertise their offerings, such as on social media or on Google.
