Angel Investors Network
    Glossary

    Regulation D Rule 506(c)

    Regulation D Rule 506(c) is an SEC exemption allowing companies to raise unlimited capital from accredited investors through general solicitation and advertising. This rule enables startups and growth companies to conduct public marketing campaigns while maintaining exemption from full SEC registration requirements.

    Regulation D Rule 506(c) Overview

    Regulation D Rule 506(c) is a Securities and Exchange Commission exemption that permits companies to offer and sell securities to accredited investors without registering the offering. Unlike other Regulation D exemptions, Rule 506(c) uniquely allows companies to engage in general solicitation and advertising to promote their securities offerings.

    Why This Matters for Angel Investors

    This rule significantly impacts angel investors and investment networks by creating a more accessible pathway for discovering investment opportunities. Angel investors can now discover deals through public marketing channels rather than relying solely on private networks. Companies can reach a broader audience of qualified investors, expanding the pool of potential funding sources.

    The rule requires companies to take reasonable steps to verify that all purchasers are accredited investors. This verification protects both the company and investors by ensuring compliance with SEC requirements.

    Key Requirements

    • All investors must be accredited (typically $200,000+ annual income or $1 million+ net worth)
    • Companies must verify investor accreditation status
    • No investment limits apply to accredited investors
    • General solicitation and advertising are permitted
    • Offerings remain non-registered securities

    Practical Example

    A technology startup can post information about its funding round on its website, LinkedIn, and other public channels under Rule 506(c). When interested accredited investors respond, the company verifies their accreditation status before proceeding with the investment.

    Understanding Rule 506(c) requires familiarity with related concepts. Regulation D provides the broader framework for private offerings. Accredited investors are the primary eligible purchasers. Rule 506(b) is an alternative exemption with stricter advertising limitations. General solicitation refers to public marketing of securities offerings.