Regulation D Explained: Rules 504, 506(b), and 506(c)

What Is Regulation D?

Regulation D (often shortened to “Reg D”) is a set of rules adopted by the U.S. Securities and Exchange Commission (SEC) that provides exemptions from the registration requirements of the Securities Act of 1933. These exemptions allow companies, funds, and special purpose vehicles (SPVs) to raise capital through private offerings without going through the costly and time-consuming process of registering securities with the SEC.

Since its adoption in 1982, Regulation D has become the dominant pathway for private capital formation in the United States. In 2024 alone, issuers reported more than $2.7 trillion raised under Reg D exemptions—dwarfing the amount raised through public offerings. Whether you are a startup raising a seed round, a real estate fund syndicating a deal, or a venture fund deploying capital, chances are you will rely on a Reg D exemption to do so.

A Reg D offering is sometimes called a “private placement” because securities are placed directly with a select group of investors rather than offered to the general public on an exchange. The three primary rules within Regulation D that issuers use today are Rule 504, Rule 506(b), and Rule 506(c).

The Securities Act Framework

To understand Regulation D, it helps to understand the legal framework it sits within. The Securities Act of 1933 was enacted in the aftermath of the 1929 stock market crash. Its central mandate is straightforward: any offer or sale of securities must be registered with the SEC—unless an exemption applies.

Registration is an expensive, disclosure-heavy process designed to protect public investors. Companies that register securities must file detailed prospectuses, undergo SEC review, and comply with ongoing reporting requirements. For large public offerings, this level of scrutiny is appropriate. For smaller, private transactions among sophisticated parties, it can be prohibitively burdensome.

Why Exemptions Exist

Congress and the SEC recognized early on that not every securities transaction needs the same level of regulatory oversight. Transactions involving a limited number of investors, or investors who are financially sophisticated enough to evaluate risks on their own, present a different risk profile than broad public offerings. Exemptions like those in Regulation D exist to balance investor protection with capital formation efficiency.

Regulation D is not the only exemption framework—Regulation A and Regulation Crowdfunding (Reg CF) are alternatives—but Reg D remains the most heavily used because of its flexibility and the sheer volume of capital it can accommodate.

Rule 504: Small Offerings Up to $10 Million

Rule 504 of Regulation D provides an exemption for smaller offerings. It allows companies to raise up to $10 million in a 12-month period. Rule 504 is primarily used by early-stage companies and small businesses that need a lighter regulatory burden.

Rule 504 Requirements

• Maximum raise: $10 million in any 12-month period.
• Investor qualifications: Rule 504 does not impose specific requirements on who can invest. Both accredited and non-accredited investors may participate.
• General solicitation: Generally not permitted unless the offering is made exclusively in states that require registration and delivery of a disclosure document, or the offering is made solely to accredited investors under a state exemption.
• Disclosure requirements: No specific federal disclosure document is mandated, though state law may require one.
• Resale restrictions: Securities issued under Rule 504 are generally “restricted securities,” meaning purchasers cannot freely resell them. Exceptions apply when the offering is registered at the state level.
• Issuer restrictions: Rule 504 is not available to SEC-reporting companies, investment companies, or “blank check” companies (shell companies with no specific business plan).
• State preemption: Rule 504 does not preempt state securities laws. Issuers must comply with “blue sky” registration or exemption requirements in each state where they offer or sell securities.

The lack of state preemption is a significant practical limitation. For offerings in multiple states, the compliance burden under Rule 504 can be substantial, which is one reason many issuers prefer Rule 506.

Rule 506(b): Unlimited Raise, No General Solicitation

Rule 506(b) is the most widely used Regulation D exemption. It allows issuers to raise an unlimited amount of capital while including a limited number of non-accredited investors—making it highly versatile for fund managers, SPV sponsors, and startup founders.

The trade-off is that 506(b) offerings cannot involve general solicitation or advertising. You cannot post about the offering on social media, run advertisements, or pitch the deal at public events. Instead, the issuer must have a pre-existing, substantive relationship with each potential investor before discussing the offering.

Rule 506(b) Requirements

• Maximum raise: No limit.
• Accredited investors: Unlimited number of accredited investors may participate.
• Non-accredited investors: Up to 35 non-accredited investors may participate, but they must be “sophisticated”—meaning they have sufficient knowledge and experience in financial and business matters to evaluate the merits and risks of the investment.
• Disclosure to non-accredited investors: If any non-accredited investors participate, the issuer must provide disclosure documents comparable in substance to what would be required in a registered offering (financial statements, risk factors, use of proceeds, etc.).
• General solicitation: Strictly prohibited. The issuer must have a pre-existing relationship with every investor or prospective investor.
• Accredited investor verification: Self-certification (such as a questionnaire or checkbox) is sufficient. No independent verification is required.
• State preemption: Rule 506(b) offerings are “covered securities” under the National Securities Markets Improvement Act (NSMIA), which preempts state registration requirements. States may only require notice filings and collect fees.

The combination of unlimited raise size, the ability to include some non-accredited investors, and state preemption makes Rule 506(b) the go-to exemption for the majority of private placements. For a deeper dive into how 506(b) compares with 506(c), see our 506(b) vs 506(c) comparison.

Rule 506(c): Unlimited Raise, General Solicitation Allowed

Rule 506(c) was introduced by the JOBS Act of 2012 and became effective in September 2013. It opened a new avenue for issuers by allowing general solicitation and advertising—meaning issuers can publicly market their offerings through websites, social media, conferences, and other channels.

The trade-off for this marketing freedom is strict: every purchaser must be a verified accredited investor. Unlike 506(b), self-certification is not sufficient. Issuers must take “reasonable steps” to verify each investor’s accredited status.

Rule 506(c) Requirements

• Maximum raise: No limit.
• Investor qualifications: All purchasers must be accredited investors. No non-accredited investors are permitted.
• General solicitation: Permitted. Issuers may advertise the offering publicly.
• Accredited investor verification: The issuer must take “reasonable steps” to verify accredited status. The SEC has provided a non-exclusive list of acceptable methods:
  1. Reviewing tax returns, W-2s, or other IRS documents to verify income.
  2. Reviewing bank statements, brokerage statements, or third-party appraisals to verify net worth.
  3. Obtaining written confirmation from a registered broker-dealer, SEC-registered investment adviser, licensed CPA, or attorney.
  4. For investors who previously qualified, obtaining a certification that their status has not changed.
• State preemption: Like 506(b), Rule 506(c) offerings are covered securities and preempt state registration requirements.

Rule 506(c) is increasingly popular among fund managers, syndicators, and platforms that operate online and need to reach investors beyond their existing network. The ability to advertise a Reg D offering publicly is a powerful tool—but the verification burden adds operational complexity and cost.

Comparison: Rule 504 vs 506(b) vs 506(c)

The following table summarizes the key differences between the three primary Regulation D exemptions:

Feature	Rule 504	Rule 506(b)	Rule 506(c)
Maximum raise	$10 million (12 months)	Unlimited	Unlimited
Accredited investors	No specific requirement	Unlimited	All investors must be accredited
Non-accredited investors	Permitted	Up to 35 (must be sophisticated)	Not permitted
General solicitation	Limited (state-dependent)	Not permitted	Permitted
Accredited verification	Not required	Self-certification	Reasonable steps required
SEC disclosure	Not required (state may require)	Required if non-accredited investors participate	Not required (but recommended)
State preemption	No	Yes	Yes
Form D filing	Required	Required	Required
Resale restrictions	Generally restricted	Restricted	Restricted
Best suited for	Small businesses, early-stage	Funds, SPVs, startups with existing networks	Online platforms, public fundraising campaigns

If you are deciding between 506(b) and 506(c) specifically, our detailed comparison guide walks through the practical considerations in depth.

Form D Filing Requirements

All Regulation D offerings—whether under Rule 504, 506(b), or 506(c)—require the issuer to file a Form D with the SEC. Form D is a brief notice filing that includes basic information about the issuer, the offering, and the exemption being relied upon.

Key points about Form D:

• Timing: Form D must be filed electronically through the SEC’s EDGAR system no later than 15 calendar days after the first sale of securities in the offering.
• Amendments: Issuers should file an amendment to Form D annually if the offering is ongoing, and must file an amendment to report any material changes to the information previously filed.
• Content: Form D captures the issuer’s name and address, the names of executive officers and directors, the type of exemption claimed (504, 506(b), or 506(c)), the total offering amount, the amount sold, the number of investors, and the use of sales commissions or finders’ fees.
• Public record: Form D filings are publicly available on the SEC’s EDGAR database. Anyone can search for and view them.

While failure to file Form D does not automatically disqualify the exemption under Rule 506, it can result in SEC enforcement action and may disqualify the issuer from relying on Regulation D for future offerings. Many states also condition their notice filing exemptions on timely Form D submission. For a step-by-step walkthrough, see our guide on how to file Form D.

Tracking Form D filings across the market can provide valuable insights into fundraising trends, fund formation activity, and competitive intelligence. SPV Flow’s analytics dashboard aggregates and enriches Form D data to make this analysis fast and actionable.

State Blue Sky Considerations

Federal securities law is only half the picture. Every state has its own securities laws—commonly known as “blue sky” laws—that may impose additional requirements on private offerings.

The treatment varies significantly depending on which Regulation D rule you are using:

• Rule 506 offerings (both (b) and (c)): Because these are “covered securities” under federal law, states cannot require registration of the offering itself. However, states can require a notice filing (typically a copy of the Form D filing) and payment of a fee. The notice filing requirements and fees vary by state and must be tracked carefully.
• Rule 504 offerings: These are not covered securities. States can require full registration or qualification of Rule 504 offerings under their own laws. This means issuers relying on Rule 504 may need to find state-level exemptions in each state where they sell securities—a process that can be complex and costly for multi-state offerings.

Some states also have their own “bad actor” disqualification provisions, accredited investor definitions that differ slightly from the federal definition, or additional filing requirements beyond the federal Form D. Working with experienced securities counsel is essential to ensure compliance across all relevant jurisdictions.

Choosing the Right Exemption

Selecting the right Regulation D exemption depends on several practical factors:

• How much capital are you raising? If your offering is under $10 million and limited to a few states, Rule 504 may be viable. For larger raises—or if you want the simplicity of state preemption—Rule 506 is almost always the better choice.
• Do you need to include non-accredited investors? If so, Rule 506(b) allows up to 35 non-accredited investors (with additional disclosure requirements). Rule 506(c) requires all investors to be accredited.
• Do you need to advertise? If you want to publicly market your offering through online platforms, social media, or public events, Rule 506(c) is the only Reg D option that permits general solicitation.
• How well do you know your investors? If you have a strong existing network and pre-existing relationships with potential investors, 506(b)’s prohibition on general solicitation is less of a constraint. If you need to reach new investors, 506(c)’s advertising flexibility is valuable.
• How important is operational simplicity? The accredited investor verification requirements under 506(c) add operational overhead. 506(b)’s self-certification approach is lighter.

Many fund managers and SPV sponsors start with 506(b) because of its flexibility and lower verification burden, then move to 506(c) when they need broader distribution. For a broader view of how Reg D compares with other exemptions like Reg A and Reg CF, see our Reg D vs Reg A vs Reg CF comparison.

Ready to explore Reg D filing data and track offerings in real time? SPV Flow provides tools to search, analyze, and monitor Form D filings across the entire SEC EDGAR database.

Frequently Asked Questions