Most SPVs raise money under Rule 506 of Regulation D, and one of the first decisions a deal lead makes is which part of that rule to use. Rule 506(b) lets you raise from people you already know without reviewing their financial documents, but you cannot advertise the deal. Rule 506(c) lets you market the deal to anyone, but every investor must be accredited and you must take reasonable steps to verify that status.
The short answer: use 506(b) when your investors come from an existing network and you want the lightest onboarding. Use 506(c) when you plan to talk about the deal publicly, or when every investor commits $200,000 or more ($1,000,000 for entities), because a 2025 SEC staff letter lets a high minimum investment carry most of the verification work.
This guide covers how each exemption works for an SPV, how verification works today, how many investors an SPV can have, and the mistakes that most often put an exemption at risk.
On this page
506(b) vs. 506(c) at a glance
| Rule 506(b) | Rule 506(c) | |
|---|---|---|
| Public marketing (general solicitation) | Not allowed | Allowed |
| Who can invest | Unlimited accredited investors, plus up to 35 non-accredited investors who are financially sophisticated | Accredited investors only |
| Checking accredited status | Reasonable belief, usually from an investor questionnaire | Reasonable steps to verify |
| Disclosure package for non-accredited investors | Required, including financial statement information | Not applicable |
| Form D | Due within 15 days after the first sale | Due within 15 days after the first sale |
| State notice filings and fees | May apply in each investor’s state | May apply in each investor’s state |
| Bad actor disqualification | Applies | Applies |
How Rule 506(b) works for an SPV
Rule 506(b) is the traditional private placement. There is no cap on how much the SPV can raise and no cap on the number of accredited investors under Regulation D itself. The tradeoff is the ban on general solicitation.
What counts as general solicitation
General solicitation means offering the deal to people you do not already have a relationship with. Posting deal terms on a website anyone can open, sharing the raise on social media, pitching it at an open event, or emailing a purchased list all count. The SEC staff has said directly that using an unrestricted, publicly available website to offer securities is a general solicitation.
Under Rule 152, a 506(b) issuer needs a reasonable belief that each investor either was not reached through general solicitation or had a substantive relationship with the issuer, or with someone acting for it, before the offering began. In practice, that means SPV sponsors keep records of how they know each investor.
Non-accredited investors in a 506(b) SPV
Rule 506(b) allows up to 35 non-accredited purchasers in any 90-day period. Each one must have enough knowledge and experience in financial and business matters to evaluate the investment, alone or with a purchaser representative. They must also receive a disclosure package before they invest, including financial statement information, which is similar to what a registered offering provides.
That package takes time and money to prepare, so many sponsors keep their 506(b) SPVs open to accredited investors only. If you do plan to admit a non-accredited investor, involve securities counsel before you send documents.
For more on how 506(b) raises are structured, see Mastering SPVs for 506(b) Funds.
How Rule 506(c) works for an SPV
Rule 506(c) came out of the JOBS Act and took effect in 2013. It lets an issuer advertise the offering openly: post the deal on a public page, talk about it on a podcast, or promote it to a newsletter audience. In exchange, two conditions apply to every investor:
- Every purchaser must be an accredited investor.
- The issuer must take reasonable steps to verify that each purchaser is accredited.
Once a sponsor has used general solicitation, there is no easy fallback. The SEC staff has said that if the conditions of Rule 506(c) are not met after general solicitation, the Section 4(a)(2) private offering exemption is not available either. That makes verification the part of a 506(c) raise to plan most carefully.
How to verify accredited investors under Rule 506(c)
An accredited investor, for an individual, generally means income above $200,000 ($300,000 with a spouse or spousal equivalent) in each of the last two years with the same expected this year, or a net worth above $1 million not counting a primary residence. Holders of certain professional licenses, such as the Series 7, 65, and 82, also qualify. Entities qualify through several paths, including $5 million in assets or investments, or when all of their equity owners are accredited.
The 2013 adopting release made one point clear: having an investor check a box or sign a form stating that they are accredited, with nothing more, is not reasonable steps to verify.
The methods listed in the rule
Rule 506(c) lists methods that are deemed to satisfy the verification requirement. They are not mandatory, and an issuer can apply the reasonable steps standard directly to its own facts.
- Income: review IRS forms that report income, such as Form W-2, Form 1099, Schedule K-1, or a filed Form 1040, for the two most recent years, plus a written representation that the investor expects to reach the required income this year.
- Net worth: review bank, brokerage, or other asset statements dated within the prior three months, plus a credit report for liabilities, and a written representation that all liabilities have been disclosed.
- Third-party confirmation: a written confirmation, dated within the prior three months, from a registered broker-dealer, an SEC-registered investment adviser, a licensed attorney, or a certified public accountant who has taken reasonable steps to verify the investor’s status.
Many investors do not want to share tax returns with a deal sponsor, which is why third-party verification letters are common in 506(c) SPVs.
The 2025 minimum investment path
On March 12, 2025, the SEC’s Division of Corporation Finance issued a no-action letter to Latham & Watkins that gives 506(c) issuers a simpler route. The staff agreed that an issuer can reasonably conclude it has taken reasonable steps to verify accredited status when these conditions are met:
- The offering requires a minimum investment of at least $200,000 for natural persons and at least $1,000,000 for legal entities. A binding commitment paid in installments as capital is called counts toward the minimum.
- For an entity that is accredited only because all of its equity owners are accredited, the minimum is $1,000,000, or $200,000 for each equity owner when the entity is owned by fewer than five natural persons.
- Each purchaser gives a written representation that it is accredited and that its minimum investment is not financed, in whole or in part, by a third party for the specific purpose of making the investment.
- The issuer has no actual knowledge of facts that point the other way.
The same day, the staff updated its Regulation D interpretations to say that a high minimum investment can reduce, and in some cases replace, the other verification steps. In July 2026 the staff added that, in a tokenized 506(c) offering, these representations can be given through a digital attestation, as long as the issuer keeps adequate records of the process.
Two cautions apply. Staff letters are not rules and depend on the facts described, so counsel should confirm the approach fits your deal. And many SPV checks are smaller than $200,000, so this path suits larger tickets and entity investors more than a syndicate of smaller angel checks.
How many investors can an SPV have?
Regulation D is only half of the analysis. An SPV that holds securities can also be an investment company, and most SPVs stay outside the Investment Company Act of 1940 through one of the exclusions below. These limits apply whether the raise uses 506(b) or 506(c).
- Section 3(c)(1): no more than 100 beneficial owners. Knowledgeable employees of the fund are not counted.
- Qualifying venture capital fund: up to 250 beneficial owners, if the vehicle meets the SEC’s definition of a venture capital fund and has no more than $12,000,000 in aggregate capital contributions and uncalled committed capital. The SEC raised this threshold from $10,000,000 in a rule effective September 30, 2024, and can adjust it for inflation every five years.
- Section 3(c)(7): no fixed cap on owners, but every investor must be a qualified purchaser, which for an individual generally means at least $5 million in investments.
Counting owners is not always one person per signature. Under Section 3(c)(1), if a company owns 10% or more of the SPV’s voting securities and is itself an investment company, or would be one except for Section 3(c)(1) or 3(c)(7), you count that company’s own investors instead of counting it as one owner. An SPV that takes a large check from another fund can reach its limit sooner than the cap table suggests.
For a broader look at eligibility, see Who Can Invest Into SPVs?
Which exemption fits your SPV?
Rule 506(b) usually fits when:
- Your investors are people you already know, such as prior co-investors, LPs, or a private network.
- You want onboarding based on questionnaires rather than document review or third-party letters.
- You may admit a sophisticated non-accredited investor and are prepared for the disclosure work.
Rule 506(c) usually fits when:
- You plan to discuss the deal in public, such as on a website, on social media, at an open event, or in a newsletter.
- You are building a syndicate from an audience rather than an existing network.
- Your investors can meet the $200,000 and $1,000,000 minimums, or are comfortable providing verification letters.
If you are still deciding between a single-deal vehicle and a pooled fund, read Fund vs SPV: The Strategic Choice first.
Mistakes that put an SPV’s exemption at risk
Talking about a 506(b) deal in public
A post with deal terms, a public landing page, or a mention on a podcast during a 506(b) raise can count as general solicitation. Keep deal materials behind a login or in direct conversations with people you already know.
Changing exemptions at the wrong time
The SEC staff has said an issuer that started a 506(b) offering can switch to 506(c) before any sales, as long as every sale meets the 506(c) conditions and the Form D is amended to show the change. Going the other direction is harder. Under Rule 152, offerings more than 30 calendar days apart are generally treated as separate, but a later 506(b) offering still cannot take investors who came from the earlier general solicitation unless the issuer had a substantive relationship with them before that offering began.
Missing Form D and state notices
Form D is due within 15 calendar days after the first sale, and the SEC treats the first sale as the date the first investor is irrevocably committed to invest. States can also require notice filings and fees where investors live. See A Guide to Form D Filings and Blue Sky Filings for SPVs for the details.
Miscounting beneficial owners
The 100 and 250 owner limits apply at the SPV level, and the 10% look-through rule can turn one fund investor into dozens of counted owners. Check the count before accepting a large check from another vehicle.
Skipping bad actor checks
Rule 506(d) disqualifies an offering from both 506(b) and 506(c) if the issuer or certain covered persons, such as general partners or managing members, investment managers, promoters, or paid solicitors, have specified disqualifying events. Run the check before the raise opens.
Frequently asked questions
Can an SPV use Rule 506(c)?
Yes. An SPV can rely on Rule 506(c) if every investor is accredited and the sponsor takes reasonable steps to verify each one. The SPV still needs its own Investment Company Act exclusion, such as Section 3(c)(1).
How many non-accredited investors can a 506(b) SPV have?
Up to 35 in any 90-day period. Each must be financially sophisticated, alone or with a purchaser representative, and must receive the required disclosure before investing.
Is a self-certification enough for a 506(c) SPV?
Not by itself. A checkbox or signed statement alone does not meet the verification requirement. Paired with the minimum investment amounts and written representations described in the SEC’s March 2025 letter, investor representations can support a reasonable steps conclusion.
Do 506(b) and 506(c) SPVs both file Form D?
Yes. Both file Form D within 15 days after the first sale, and the form indicates which exemption the offering relies on.
Does a 506(c) SPV need a verification letter for every investor?
No. Letters from an attorney, CPA, registered broker-dealer, or SEC-registered investment adviser are one method. Document review and the minimum investment path are others.
Running your SPV on Syndicately
Syndicately forms and administers SPVs from start to finish: entity setup, investor onboarding with KYC/AML checks, subscription documents and e-signature, Form D and blue sky notice filings, taxes, and K-1s. Your securities counsel decides which exemption fits the deal, and the platform keeps the investor records, documents, and filings for the vehicle in one place. Book a demo to see how a raise runs on the platform.
This article is general information, not legal, tax, or investment advice. Securities rules turn on the facts of each offering, so speak with securities counsel before launching a raise. Sources: 17 CFR 230.506, 17 CFR 230.501, 17 CFR 230.152, 15 U.S.C. 80a-3, the SEC staff letter to Latham & Watkins (March 12, 2025), the SEC Securities Act Rules interpretations, and the qualifying venture capital fund inflation adjustment.
