How a capital raise runs, from first conversation to investor relations
November 1, 2026
EducationGuideNovember 1, 2026
Private placements under Regulation D
Most private funds and companies raising equity in the United States do so under Rule 506 of Regulation D.
Guide
What you need to know
Rule 506 has two versions
506(b) and 506(c) differ mainly in how an offering may be marketed and in who may invest. A raise made this way is commonly called a private placement.
There is no limit on the amount
Under both versions there is no limit on the amount that can be raised. Investors receive restricted securities, which cannot be freely resold.
Form D is due within 15 days
The issuer must file a notice on Form D with the SEC within 15 days after the first sale of securities in the offering.
Limit on the amount raised under either rule
None
Non-accredited investors at most in any 90-day period under 506(b)
35
Days after the first sale to file Form D
15
What do the two rules have in common?
Any offer or sale of securities in the United States must either be registered with the Securities and Exchange Commission or qualify for an exemption. For private funds and companies raising equity, the exemption most often used is Rule 506 of Regulation D.
01
No limit on the amount
Under both versions of Rule 506, there is no limit on the amount that can be raised.
02
Restricted securities
Investors receive restricted securities, which cannot be freely resold.
03
Bad actor disqualification
An issuer cannot rely on the rule where certain people connected with the offering have specified disqualifying events in their history.
04
One filing, no state registration
A Form D within 15 days of the first sale. States cannot require registration, though they can require a notice filing and a fee.
How do 506(b) and 506(c) differ?
They differ mainly in how an offering may be marketed and in who may invest.
Rule506(b)506(c)
MarketingNo general solicitation or advertising. The issuer offers to investors it already has a relationship with, or reaches through a relationship.General solicitation permitted. The issuer may solicit and advertise the offering broadly.
Who may investAn unlimited number of accredited investors, and no more than 35 non-accredited investors in any 90-day period, each with the knowledge and experience to evaluate the investment.Every purchaser must be an accredited investor.
What the issuer must doGive any non-accredited investor disclosure documents broadly similar to those used in registered offerings. Many managers limit 506(b) offerings to accredited investors only.Take reasonable steps to verify that each purchaser is accredited.
Who counts as an accredited investor?
For natural persons, the SEC's definition turns on net assets or income. Holders in good standing of the Series 7, Series 65 or Series 82 licences qualify, as do knowledgeable employees of a private fund when investing in that fund. On September 30, 2026, the SEC proposed, among other things, allowing individuals to qualify through credentials such as the CPA, CFA or CFP designations. These are proposals and not final rules.
Net assets, excluding the primary residence
$1 million
Income individually, or $300,000 with a spouse or partner, in each of the prior two years
$200,000
Investments owned, for entities
$5 million
How did verification under 506(c) change?
Verification was for some years the main reason issuers avoided 506(c). In March 2025 the SEC's Division of Corporation Finance agreed, in a response to Latham & Watkins, that a high minimum investment amount, together with written representations from the investor, can be reasonable steps to verify accredited status. The letter has no legal force as a rule, and its conclusions rest on the facts presented.
Minimum investment for natural persons, as described in commentary on the letter
$200,000
Minimum for certain entities
$1 million
What does a Form D record?
A Form D is a notice of an exempt offering, filed online through EDGAR, where it becomes public. The SEC charges no fee for it.
01
The issuer
And the people related to it.
02
The exemption relied on
506(b) or 506(c).
03
The amount sought
The total the issuer intends to raise.
04
The amount sold to date
As at the filing. Our guide Reading a Form D covers what the form shows and where its figures fall short.
Which rule suits which raise?
The choice between the two rules is a choice about how the raise will be run. It is best made before the first conversation with an investor.
The decision affects how the fund is marketed and how investors are onboarded, and it should be made with counsel at the start of the raise.
506(b)
A manager whose investors come mainly from existing relationships, and who wants the option of admitting a small number of sophisticated non-accredited investors, has historically used 506(b).
506(c)
A manager who wants to speak about the fund publicly, and whose investors can meet the verification requirement, may find 506(c) a better fit, particularly since the 2025 staff letter.
Notes and sources
- [1] US Securities and Exchange Commission, "Private placements - Rule 506(b)"
- [2] US Securities and Exchange Commission, "General solicitation - Rule 506(c)"
- [3] US Securities and Exchange Commission, "Accredited investors"
- [4] US Securities and Exchange Commission, "Filing a Form D notice"
- [5] US Securities and Exchange Commission, Division of Corporation Finance, response to Latham & Watkins LLP regarding Rule 506(c), March 12, 2025
- [6] Proskauer, "SEC Eases Verification Burdens in Rule 506(c) Offerings" (minimum investment amounts)
- [7] US Securities and Exchange Commission, Press Release 2026-96, "SEC Proposes Amendments to Expand Responsible Retailization of Private Markets", September 30, 2026
For information only. This guide describes general practice, which varies between managers and allocators. It is not an offer or solicitation to buy or sell any security, and it is not investment, legal or tax advice.
