boltKey takeaways
- Nearly all U.S. private funds sell interests under Rule 506 of Regulation D, which has no dollar cap and preempts state registration, leaving only state notice filings.
- Rule 506(b) bars general solicitation but allows up to 35 non-accredited sophisticated purchasers; Rule 506(c) permits general solicitation if every purchaser is accredited and the issuer takes reasonable steps to verify it.
- A March 2025 SEC staff letter lets 506(c) issuers rely on high minimum investments ($200,000 for individuals, $1 million for entities) plus written representations as a reasonable verification step.
- Form D is due within 15 calendar days after the first sale, and the fund, its GP, the adviser and other covered persons must be screened for bad actor disqualification.
- As of late 2026, the SEC is seeking comment on adding new professional credentials as routes to accredited investor status; the core income and net worth tests are unchanged.
Regulation D is a set of SEC rules that let companies and funds sell securities without registering the offering under the Securities Act of 1933, provided they meet conditions on who can buy, how the offering is marketed and what is filed. Private funds almost always rely on Rule 506, either 506(b), which prohibits general solicitation, or 506(c), which allows it if every investor is verified as accredited. The core of Regulation D has been stable for years, but the SEC has adjusted how investors can qualify and how issuers can verify them, including steps taken in 2025 and 2026.
Why private funds need Regulation D#
Every offer and sale of a security must be registered under section 5 of the Securities Act unless an exemption applies. Interests in a limited partnership or LLC fund are securities. Section 4(a)(2) exempts transactions "not involving any public offering," but its boundaries are set by case law and can be uncertain. Regulation D provides a safe harbor: follow the rules and the offering is treated as exempt.
There is a second reason funds care. The Investment Company Act exclusions in sections 3(c)(1) and 3(c)(7) both require that the fund not make a public offering of its securities. A properly conducted Regulation D offering keeps the fund within those exclusions. The JOBS Act of 2012 confirmed that offerings under Rule 506(c) are not treated as public offerings for this purpose, even though they allow general solicitation.
The three exemptions compared#
Regulation D contains Rules 500 to 508. The operative exemptions are Rule 504 and the two branches of Rule 506.
| Rule 504 | Rule 506(b) | Rule 506(c) | |
|---|---|---|---|
| Offering size limit | $10 million in any 12 months | None | None |
| General solicitation | Permitted only in limited circumstances tied to state registration or state exemptions | Not permitted | Permitted |
| Purchasers | Any | Unlimited accredited investors plus up to 35 non-accredited purchasers, who must be sophisticated (alone or with a representative) | Accredited investors only |
| Verification | Not required | Reasonable belief in accredited status | Reasonable steps to verify accredited status |
| Disclosure | Antifraud only at the federal level | Specified information must go to any non-accredited purchasers | Antifraud only |
| State law | Not preempted; state registration or exemption needed | Preempted; state notice filings | Preempted; state notice filings |
| Available to investment funds | No (investment companies are excluded) | Yes | Yes |
Rule 505, a former mid-size exemption, was repealed in 2016. In practice private funds use Rule 506, because Rule 504 has a size cap, is unavailable to investment companies and does not preempt state securities registration.
506(b): the traditional private placement#
Most funds have historically used 506(b). The fund may not use general solicitation or advertising, which in practice means offering only to people with whom the manager or its placement agent has a pre-existing, substantive relationship. Investors self-certify accredited status in the subscription agreement, and the fund must reasonably believe the certifications. Funds rarely accept non-accredited investors, because doing so triggers detailed disclosure obligations, including financial statement information, that most funds would rather not provide.
506(c): marketing in public#
Rule 506(c), effective in September 2013, lets a fund advertise, speak publicly about a fundraise and accept inbound investors it has no prior relationship with. The trade-off is that every purchaser must be accredited and the fund must take reasonable steps to verify that status. The rule lists non-exclusive methods, including reviewing tax forms for the two most recent years for income-based status, reviewing bank, brokerage and credit reports dated within the prior three months for net worth, or obtaining written confirmation from a registered broker-dealer, SEC-registered adviser, licensed attorney or CPA.
In March 2025, SEC staff issued a no-action letter addressing a simpler approach. Staff indicated that an issuer could reasonably conclude it has taken reasonable verification steps when it requires a minimum investment of at least $200,000 for natural persons or $1 million for entities, obtains written representations that the investor is accredited and that the minimum is not financed by a third party for the purpose of making the investment, and has no actual knowledge to the contrary. This is staff guidance rather than a Commission rule, but it has made 506(c) more practical for funds with high minimum commitments.
The conditions that apply to every Rule 506 offering#
Accredited investor definition#
Rule 501(a) defines accredited investors. For individuals, the main tests are net worth over $1 million excluding the primary residence, income over $200,000 (or $300,000 with a spouse or spousal equivalent) in each of the last two years with the same expected this year, holders of Series 7, 65 or 82 licenses in good standing, and knowledgeable employees of the private fund. Most entities qualify with over $5 million in assets, and entities owned entirely by accredited investors qualify. Our accredited investor guide covers each category.
Bad actor disqualification#
Rule 506(d) makes the exemption unavailable if the issuer or certain "covered persons" have specified disqualifying events, such as certain securities-related criminal convictions, court injunctions, regulatory orders or SEC disciplinary orders. For a fund, covered persons include the fund, its general partner or managing member, directors and executive officers of the GP, the investment manager and its relevant officers, beneficial owners of 20% or more of the fund's voting equity, promoters, and compensated placement agents and their relevant personnel. Funds typically collect bad actor questionnaires at launch and refresh them before each closing.
Integration#
Two offerings that should be treated as one cannot be split to fit different exemptions. Rule 152, adopted in 2020, gives a general integration framework and safe harbors, including one for offerings more than 30 calendar days apart. Funds that run a 506(b) raise and later move to 506(c) for the same fund should plan the transition with counsel.
Resale restrictions#
Securities sold under Rule 506 are restricted securities. Fund documents typically go further, requiring GP consent for any transfer.
Form D and state filings#
Form D is a short notice filed electronically on EDGAR. The key timing rules are:
- Initial filing: within 15 calendar days after the first sale, which is the date the first investor is irrevocably contractually committed. If the deadline falls on a weekend or holiday, it moves to the next business day.
- Annual amendment: on or before the anniversary of the most recent filing, while the offering continues.
- Amendments for changes: to correct material mistakes or reflect certain changes, such as an offering size increase of more than 10%.
States cannot require registration of Rule 506 offerings but generally require a notice filing, a copy of Form D and a fee, usually within 15 days after the first sale in that state. Most use the NASAA Electronic Filing Depository.
A worked timeline#
Assume a fund signs its first subscription agreement and the GP accepts it on March 3. Form D is due by March 18. That investor lives in another state, so that state's notice filing is generally due on a similar timeline, as are notices in each other state where investors sign. If the fund closing period runs past the following March, an annual Form D amendment is due before the anniversary of the last filing. Calendar each state separately; the first sale in a new state starts that state's clock.
Changes through late 2026#
Regulation D has been amended several times since 2013:
- 2013: Rule 506(c) and the bad actor rule were adopted.
- 2016: Rule 504's limit rose and Rule 505 was repealed.
- 2020: The accredited investor definition gained professional certifications (Series 7, 65 and 82), knowledgeable employees, spousal equivalents and new entity categories. Separately, the SEC adopted the Rule 152 integration framework, raised Rule 504 to $10 million and aligned 506(b) disclosure to non-accredited purchasers with Regulation A.
- 2025: The staff no-action letter on 506(c) verification through minimum investment amounts.
- 2026: On September 30, 2026, the SEC published five notices asking for comment on designating additional credentials as qualifying individuals for accredited investor status: a FINRA-developed accredited investor exam, a U.S. CPA license, the CFA charter, the CFP certification, and the Series 79 and Series 86/87 licenses. The notices were published in the Federal Register on October 5, 2026, with comments due December 4, 2026.
As of late 2026, none of these new designations has been made, and the income and net worth tests are unchanged.
How Privatis helps#
Privatis supports the operational side of a Regulation D raise. KYC/AML onboarding captures investor eligibility alongside risk scoring, completed subscription documents and verification evidence are stored in the LP portal's data room, and the compliance filings calendar tracks Form D, annual amendments and state notice deadlines. An audit trail records who reviewed each investor and when, which helps evidence reasonable belief or reasonable steps if an examiner asks. The PPM and other offering documents can be shared with prospects through the same portal.
Regulation D has detailed conditions and state filings vary, so confirm your offering approach with counsel.