Business-Minded Legal Solutions

General solicitation under Rule 506(c): Part 1

Entrepreneurs and business owners typically have one thought at the back of their mind to help grow their operations: raising capital. One increasingly popular way to attain investment is via a private offering under Reg. D Rule 506(c) because it allows general solicitation.

General solicitation: What is it?

Rule 506(c) allows an exemption from registration requirements for a business to “broadly solicit and widely advertise an offering.” The goal of this advertising and solicitation is to raise capital for the enterprise.

What are the Essential Requirements of Rule 506(c)?

According to the SEC, general solicitation under Rule 506(c) is only allowed under certain conditions, including:

  • Accreditation: Each purchaser in the offering must be accredited. Often, an accredited purchaser in a generally solicited offering under Rule 506(c) is an individual investor or an entity owned by one or more individual accredited investors.
  • Verification: The business that is raising funds must take reasonable steps to ensure that the purchasers are accredited.
  • Limits on resale: There are restrictions on the ability of purchasers to resell the security without registration.
  • Integration: The business must keep in mind the possibility that the Rule 506(c) offering could be integrated with other offers or sales of its securities under 230.152. Integration can make Rule 506(c) unavailable if the other sales do not comply.

Allowing for the above restrictions, among others, the issuer may freely advertise the security.

Are there limits on advertising?

According to, there are no limits to the advertising tactics one may use. Social media, print, email, word-of-mouth, and many more options are available. Depending on the offering, you may find one method for advertising works better than others.

What investments does a 506(c) general solicitation work best with?

Some sources indicate that real estate investors tend to take advantage of Rule 506(6) more frequently than other enterprises. That tendency does not imply general suitability, however.

Next week, we will continue with this topic and explore the concept of “accredited investors” more fully.