Overview of Rule 506(c) and 506(b) Offerings
What are the real differences between Rule 506(c) and 506(b) Offerings?
The chart below covers a few of the differences between 506(b) and 506(c) offerings. Please note that this is not legal advice. You should consult with your own attorney before conducting a 506(b) or 506(c) offering. Securities regulations (and interpretations regarding such regulations) are subject to change.
| 506(b) Offering | 506(c) Offering | |
|---|---|---|
| Communications with Investors | Companies may not advertise their security offering. Generally, companies may approach potential investors if there is a substantive, pre-existing relationship. | General advertising permitted. Companies may advertise via social media, email, or offline. No substantive, pre-existing relationship with potential investors required. |
| Eligible investors | Accredited investors and up to 35 non-accredited investors who meet sophistication requirements. | Only accredited investors. |
| Accreditation Process | Self-certification via a questionnaire is the general standard.
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Companies must take reasonable steps to verify accredited investor status. Self-certification via a questionnaire is not permissible. The SEC issued examples of reasonable steps for verification. |
| Offering size | No limit on offering size. | No limit on offering size. |
| Disclosure | Companies must decide on what information to provide to accredited investors, but that information must not violate antifraud prohibitions. If non-accredited investors are included, companies must provide those investors with disclosure documents that are generally the same as those used in registered offerings. If a company provides information to accredited investors, it must make that information available to non-accredited investors as well. Companies must be available to answer questions from potential investors. | Companies must decide on what information to provide to accredited investors, but that information must not violate antifraud prohibitions. Companies must be available to answer questions from potential investors. |
| Filing Requirements | Companies must file a Form D. | Companies must file a Form D. |
| Intermediaries | Not required. If used, the intermediary must be a registered broker-dealer or exempt from broker-dealer registration. | Not required. If used, the intermediary must be a registered broker-dealer or exempt from broker-dealer registration. |