506(c) offerings let sponsors publicly advertise private raises — but only to verified accredited investors. Here is what that means for your capital and your protections.
Most accredited investors encounter 506(c) on a term sheet or in an email subject line before they encounter it in a regulatory document. That gap matters. Understanding what a 506(c) offering actually is — and how it differs from the older 506(b) exemption — determines whether the deal you are reviewing was built for you, or built around you.
This post breaks down the mechanics, the investor protections, and the practical implications of 506(c) in plain language. No securities law degree required.
A 506(c) offering is a type of private securities exemption under Regulation D of the Securities Act of 1933 that allows a sponsor to publicly advertise a capital raise — but only to verified accredited investors. The SEC codified this exemption in 2013 as part of the JOBS Act implementation, lifting the longstanding prohibition on general solicitation for private placements that restrict participation to accredited investors.
Before 2013, sponsors raising private capital had to rely entirely on pre-existing relationships. A developer could not run an ad, post on LinkedIn, or send a cold email about an open fund. The 506(c) exemption changed that — with one critical condition: every investor who actually participates must be independently verified as accredited. Not self-certified. Verified.
The SEC outlines the general solicitation framework and what qualifies as a 506(c) compliant offering at SEC.gov.
The two exemptions are frequently confused. They are not interchangeable, and the difference affects how a sponsor can reach you and what they must do before you can invest.
506(b) is the older exemption. It prohibits general solicitation entirely. A sponsor operating under 506(b) cannot advertise the offering publicly. They can accept up to 35 non-accredited sophisticated investors alongside an unlimited number of accredited investors — but every investor must have a pre-existing, substantive relationship with the sponsor before the raise begins.
Under 506(b), accredited investors self-certify their status. The sponsor takes you at your word on a questionnaire. There is no independent verification requirement.
506(c) allows general solicitation. The sponsor can advertise on LinkedIn, run Meta ads, publish the raise on a platform like Selly's accredited investor matching service, or send outreach to a cold list — as long as all of that outreach goes only to accredited investors.
The trade-off: every investor who participates must be independently verified as accredited before committing capital. Self-certification is not sufficient.
| | 506(b) | 506(c) |
|---|---|---||
| General solicitation allowed | No | Yes |
| Non-accredited investors permitted | Up to 35 (sophisticated) | No |
| Accredited investor verification | Self-certification | Independent verification required |
| Advertising permitted | No | Yes (accredited-only channels) |
| Pre-existing relationship required | Yes | No |
General solicitation is any communication that reaches people with whom the sponsor does not have a pre-existing relationship. A post on LinkedIn announcing a new fund. A Meta ad targeting real estate investors in Houston. An email sent to a curated investor database. A webinar open to the public.
Under 506(c), all of this is permitted — as long as the actual investment is restricted to independently verified accredited investors.
This is why you encounter 506(c) deals in your inbox from sponsors you have never met. They are not violating securities law. They are operating under an exemption that was designed to improve capital access for qualified investors. Whether the deal itself is worth your attention is a separate question — and that is where the underwriting begins.
The SEC defines accredited investor status under Regulation D. The most commonly used qualifications for individuals are income-based or net worth-based, and verification goes beyond a checkbox.
For a 506(c) offering, the sponsor or a third-party verifier must confirm your status using one of the SEC-approved methods:
The full framework for verification under Regulation D is documented by the SEC at this resource on assessing accredited investors.
The verification requirement is not a formality. It is the mechanism that gives 506(c) its legitimacy — and it is the investor protection that keeps unqualified capital out of high-risk private placements.
Private placements are not registered securities. They do not go through SEC review before they reach you. That distinction carries real implications for how you protect yourself.
Sponsors operating under 506(c) must:
The sponsor is not required to have their PPM reviewed or approved by the SEC. There is no government sign-off on the quality of the deal, the reasonableness of the projections, or the credibility of the team. The burden of diligence sits with the investor.
This is the correct structure — accredited investor status exists precisely because qualified investors are presumed to have the financial sophistication and resources to conduct their own diligence. But it means the protections are procedural, not substantive. A compliant 506(c) offering can still be a bad deal.
Selly's syndication marketing practice is built around the 506(c) exemption. When a sponsor engages Selly to market a private capital raise, the process starts with the math: Selly performs its own 360-degree verification of the asset — financials, team track record, market viability — before any outreach begins.
Only deals that clear that internal standard get promoted to the investor network. That is not a marketing claim. It is an operational constraint. Selly's LP re-up rate of 94% is a consequence of that discipline.
For investors in the Selly network, that verification process functions as a secondary filter — not a substitute for your own diligence, but a meaningful signal that the deal reached your inbox for a reason.
For sponsors, Selly charges a flat fee for the marketing infrastructure — not a percentage of capital raised. Operators keep their equity and fee structure intact. The average capital raise launch time from engagement to live campaign is 14 days.
Learn more about how Selly structures compliant 506(c) syndication marketing campaigns for disciplined operators.
A 506(c) offering that is properly structured and compliantly marketed is not automatically a good investment. Regulatory compliance and deal quality are separate variables. What the 506(c) framework does is create the conditions for disciplined operators to reach verified accredited investors at scale — and for those investors to evaluate opportunities that were previously invisible to them.
If you are reviewing a private placement, understanding the exemption type is step one. Understanding the asset, the sponsor, and the structure is the rest of the work.
Selly's investor network is built on curation, not a firehose. If you are an accredited investor looking for deal flow that has already cleared a rigorous internal review, or a sponsor who needs 506(c) marketing infrastructure built and launched in 14 days, the conversation starts the same way it always does — with the math.
