Rule 506(b) vs 506(c): Which Needs Investor Verification?

The core trade-off

Rule 506 of Regulation D is the workhorse private-placement exemption — the vast majority of private capital raised in the U.S. relies on it. It comes in two flavors, and choosing between them is really a single decision: do you need to advertise the offering to people you do not already know?

Rule 506(b) — no general solicitation or advertising. You raise from investors with whom you (or your broker) have a pre-existing, substantive relationship. You may include up to 35 non-accredited but financially sophisticated investors. Because you are not advertising, the SEC lets you rely on each investor's written representation of accredited status, provided you have no reason to believe it is false.
Rule 506(c) — general solicitation and advertising are permitted. You can post the raise on a website, email a broad list, run a webinar, or speak about it publicly. In exchange, every purchaser must be an accredited investor, and you must take reasonable steps to verify it — you cannot simply take their word for it.

Side by side

	Rule 506(b)	Rule 506(c)
Advertising / general solicitation	Not allowed	Allowed
Who can invest	Accredited + up to 35 sophisticated non-accredited	Accredited investors only
Proof of accredited status	Investor self-certification (issuer reasonable belief)	Issuer must take reasonable steps to verify
Third-party verification	Not required	Effectively required for each investor
Typical use	Raising from an existing network, quietly	Publicly marketed raises, broad outreach

What "reasonable steps to verify" means under 506(c)

The SEC gives a non-exclusive list of ways to satisfy the 506(c) verification standard. In practice, issuers use one of these:

Income method — review the investor's IRS forms (tax returns, W-2s, 1099s) for the two most recent years, plus a written expectation of the current year.
Net-worth method — review assets and liabilities (bank, brokerage, and other statements, plus a recent credit report) to confirm net worth over $1 million excluding the primary residence.
Third-party confirmation — obtain a written confirmation from a licensed CPA, attorney, registered broker-dealer, or registered investment adviser who has verified the investor within the prior three months.

The third-party route is popular for a reason: it means the sponsor never has to collect or store an investor's tax returns and bank statements. The investor's documents go to the professional, and the sponsor receives only a letter confirming accredited status. That is exactly what AccreditedNow provides — a CPA-signed verification letter each investor can hand to the sponsor.

Estimate your 506(c) verification cost

506(c) is the version that lets you advertise — but every investor has to be verified. Sponsors often assume that's a big line item. Plug in your raise to see what it actually comes to. Everything below runs in your browser; nothing is sent anywhere.

Target raise$ Average investment per investor$

Estimate only, at AccreditedNow's investor-verification seat pricing (volume rates from $99 down to $59/investor). 506(b) needs no third-party verification, but prohibits advertising. Educational, not legal advice.

Running a 506(c) raise?

Give your investors a simple way to get verified — a CPA-signed letter, or prepaid seat packs so they verify at no cost to them, tracked in your sponsor dashboard.

See sponsor plans

Common questions

Does Rule 506(b) require accredited investor verification?

No. Under Rule 506(b), an issuer may rely on the investor's own representations of accredited status, as long as the issuer does not have reason to believe they are false and did not use general solicitation. Third-party verification is not required. It is 506(c) — the version that permits public advertising — that requires the issuer to take reasonable steps to verify each investor is accredited.

Can I advertise a Rule 506(b) offering?

No. Rule 506(b) prohibits general solicitation and general advertising. You can raise from people with whom you have a pre-existing, substantive relationship, and you may include up to 35 non-accredited (but sophisticated) investors. If you want to advertise the raise publicly, you must use Rule 506(c), which permits general solicitation but requires verification of every investor.

What counts as reasonable steps to verify under 506(c)?

The SEC lists non-exclusive methods, including reviewing income documents (tax returns or W-2s), reviewing assets and liabilities (bank, brokerage, and credit-report documents), or obtaining a written confirmation from a licensed CPA, attorney, registered broker-dealer, or registered investment adviser who has verified the investor. A CPA or attorney letter is a common way to satisfy the standard without the issuer handling the investor's financial documents directly.

Which is better for a syndication, 506(b) or 506(c)?

It depends on how you raise. If your investors come from your existing network and you are not advertising, 506(b) is simpler and does not require third-party verification. If you want to market the offering publicly — a website, social media, email to a broad list, a webinar — you need 506(c), and every investor must be verified as accredited. Many sponsors choose 506(c) specifically so they can advertise, and use CPA-signed letters to handle verification.

This page is general information about Regulation D, not legal advice. Rule 506(b) and 506(c) have additional conditions (Form D filing, bad-actor disqualification, information delivery to non-accredited investors under 506(b), and more). Confirm how they apply to your offering with your securities counsel. AccreditedNow is not a law firm.