Form D Rule 506(b) vs 506(c): What the Checkbox Tells You About How a Startup Raised Its Round

Form D Item 6 asks a company which federal exemption it is claiming, and two of the boxes are Rule 506(b) and Rule 506(c). Under SEC guidance, Rule 506(b) bars general solicitation, while Rule 506(c) permits it if every purchaser is accredited and the issuer takes reasonable steps to verify that. In 2025, SEC statistics show 30,315 offerings claimed 506(b) and 3,989 claimed 506(c).

The box is a useful first clue about how a round was run. It is not proof. This post explains what each box means, what Form D does and does not tell you, and where the signal is weak. It is a news explainer, not legal advice.

What is the difference between Rule 506(b) and Rule 506(c)?

Rule 506(b) is the quiet route: no advertising, with room for a limited number of non-accredited buyers. Rule 506(c) is the public route: advertising is allowed, but every buyer must be accredited and verified.

Sources for the table: the SEC pages on Rule 506(b) and Rule 506(c), and the text of 17 CFR 230.506. The SEC says states still have authority to require notice filings and collect fees under both rules.

If a 506(b) company does sell to non-accredited buyers, the SEC says it must give them disclosure documents that generally contain the same type of information as a Regulation A offering. It must also give them specified financial statement information and be available to answer their questions.

Where is the 506(b) or 506(c) checkbox on Form D?

It is in Item 6, "Federal Exemptions and Exclusions Claimed (Select all that apply)." The Form D list includes separate boxes for Rule 506(b) and Rule 506(c), alongside Rule 504 and Investment Company Act Section 3(c).

A second field matters just as much. Item 14 asks whether securities have been or may be sold to people who are not accredited investors, and how many such investors have already put money in. It also asks for the total number of investors who have invested. Because a 506(c) offering requires all purchasers to be accredited, a filing that ticks 506(c) and also reports non-accredited investors would be worth a closer look.

Timing is set out in the SEC's Form D FAQ. A company must file within 15 calendar days after the first sale. The date of first sale is when the first investor is irrevocably contractually committed to invest. All Form D filings are publicly available through the SEC's filing search. For a walkthrough of reading one before a press release appears, see our Form D explainer.

What counts as general solicitation?

The SEC's small entity compliance guide says general solicitation includes ads in newspapers and magazines, public websites, and communications broadcast on television and radio. It also covers seminars where attendees were invited by general solicitation or general advertising.

The guide adds that using an unrestricted, publicly available website constitutes general solicitation. It also says the solicitation must be an "offer" of securities, but that solicitations which condition the market for an offering may be considered offers. Where that line falls for a specific company announcement is a legal question for counsel, not something the checkbox answers.

The JOBS Act rules that created 506(c) took effect on September 23, 2013. The SEC says Rule 506(b) remained unchanged and stays available to issuers that do not use general solicitation or do not want to limit sales to accredited investors.

How does a 506(c) issuer verify accredited investors?

The rule requires "reasonable steps," judged case by case. The SEC guide lists three factors: the type of purchaser, the information the issuer already has, and the nature of the offering, including how the purchaser was solicited and the minimum investment.

The rule also gives non-exclusive methods that count as reasonable steps for individuals (17 CFR 230.506(c)(2)(ii)):

• Income: review IRS forms reporting income for the two most recent years, such as a Form W-2, 1099, Schedule K-1 or 1040, and get a written representation about the current year.
• Net worth: review bank, brokerage or similar statements dated within the prior three months, plus a consumer report, and get a written representation that all liabilities were disclosed.
• Third-party confirmation: a written confirmation, within the prior three months, from a registered broker-dealer, an SEC-registered investment adviser, a licensed attorney or a certified public accountant.
• Repeat investors: a written representation from a person the issuer previously verified, which satisfies the obligation for five years from the earlier verification.

The accredited threshold for a person is net worth over $1 million excluding a primary residence, or income over $200,000 individually or $300,000 with a spouse or partner in each of the prior two years (SEC page, last reviewed 24 April 2026).

A March 2025 SEC staff no-action letter added a lighter path. Ropes & Gray and Kirkland & Ellis describe it this way: an issuer may rely on minimum investments of at least $200,000 for natural persons and $1 million for legal entities, with written representations that the purchaser is accredited and that the minimum is not financed by a third party. Morgan Lewis called it the first no-action letter on Rule 506(c) since the rule was adopted.

Which exemption do most startups and funds use?

Rule 506(b) is used far more often. SEC statistics (page as of 15 October 2026) show the split below. The figures cover all Regulation D issuers, funds included.

By simple arithmetic on those SEC figures, Rule 506(c) accounted for about 11.6% of 506(b) plus 506(c) offerings in 2025 (3,989 of 34,304) and about 6.0% of the dollars ($142.6 billion of $2,391.0 billion). Those percentages are calculated here, not published by the SEC.

For startups specifically, the evidence is thinner. According to a paper posted on SEC.gov, the 506(c) share among Regulation D companies matched to VC-backed startups on Pitchbook is about 6%. For venture capital funds over 2014-2023, the same paper reports 7,440 filings under 506(b) and 685 under 506(c), an 8.4% share by count. This is a single source, so treat it as indicative.

What can you infer from the 506(b) or 506(c) box, and what can't you?

You can read the box as the company's stated legal route. A 506(b) box says the issuer is claiming it did not use general solicitation. A 506(c) box says the issuer is claiming it was entitled to advertise, that every buyer was accredited, and that it verified them.

Here is a practical reading order for a Form D on a startup round:

1. Check Item 6 for 506(b) or 506(c).
2. Check Item 14 for any non-accredited investors and the total investor count.
3. Compare the filing date with the first-sale date and the 15-day deadline.
4. Compare the offering amount and amount sold with any press release. Our guide to round size versus cumulative funding covers that gap.
5. Note whether the company publicly promoted the raise, and keep that separate from the legal claim.

The box cannot tell you the valuation, the lead investor, or whether a given social post counted as an offer. It also does not say how the issuer verified investors, if it chose 506(c).

What's still unclear?

The checkbox is self-reported. The SEC's own statistics are based on information issuers self-report in Form D filings. The SEC also notes that filing a Form D is not a condition to claiming a Regulation D exemption, and that some issuers may not file, so the data could understate the true number of offerings.

Why a company picked one box is not on the form. Form D has no field explaining the choice. A 506(c) filer may have advertised, or may have chosen the box for other reasons. The filing does not say.

Aggregate statistics blur startups and funds. In 2025 the SEC counted 17,593 fund-issuer offerings and 16,960 non-fund offerings among Regulation D offerings. The 506(b) and 506(c) totals therefore mix pooled investment vehicles with operating companies.

The no-action letter's scope is described differently. Kirkland frames the guidance around private fund issuers. Ropes & Gray and Morgan Lewis describe it as available to issuers more broadly. How far it extends to a startup raising a priced round is not stated in the law firm summaries.

Weakest point of the "tell": a 506(b) box is the more common default, so on its own it says little. The informative cases are the less common ones: a 506(c) box, or any non-accredited investors in Item 14.