For years, many real estate sponsors kept their deals quiet on purpose. Advertising a private offering meant using Rule 506(c), and Rule 506(c) meant proving each investor's wealth with tax returns, bank statements or letters from lawyers and accountants. Plenty of sponsors decided the paperwork outweighed the reach and stuck with word of mouth.
That trade-off shifted in March 2025, when SEC staff issued guidance that lets sponsors rely on a high minimum investment as part of verification. Verification is now a design choice, and sponsors who design it well can market their deals openly while keeping investors moving.
506(b) vs 506(c): Which Rule Fits Your Raise
Both rules sit inside Regulation D, the set of SEC exemptions most private real estate deals use. Rule 506(b) is the quiet option. It allows up to 35 non-accredited investors who are financially sophisticated, and it prohibits general solicitation, meaning public advertising. Sponsors using 506(b) raise from people they already know.
Rule 506(c) is the public option. It allows advertising on websites, on social media and at events. In return, every investor must be accredited, and the sponsor must take reasonable steps to confirm it rather than relying on the investor's word. Sponsors who want to reach new investors choose 506(c).
| Feature | Rule 506(b) | Rule 506(c) |
|---|---|---|
| Advertising | Prohibited | Allowed |
| Investors | Accredited, plus up to 35 sophisticated non-accredited | Accredited only |
| Verification | Reasonable belief, often a questionnaire | Reasonable steps to verify every purchaser |
Who Counts as an Accredited Investor
The SEC's test is mostly financial. An individual qualifies with income above $200,000 in each of the past two years, or $300,000 together with a spouse, and a reasonable expectation of the same this year. A net worth above $1 million, not counting the home they live in, also qualifies. Since 2020, people who hold certain securities licenses, the Series 7, 65 and 82, qualify as well.
The Traditional Ways to Verify an Investor
The SEC lists several methods that satisfy its "reasonable steps" standard for individuals. The first looks at income. The sponsor reviews IRS forms for the past two years, such as a W-2, 1099, Schedule K-1 or Form 1040, and collects the investor's written statement that they expect similar income this year.
The second looks at net worth. The sponsor reviews bank or brokerage statements dated within the past three months, pulls a credit report to see the investor's debts and collects a written statement that all debts are disclosed.
The third, and often the most practical, is a letter. A registered broker-dealer, SEC-registered investment adviser, licensed attorney or CPA confirms in writing that they verified the investor within the past three months. Returning investors have a shortcut too: a sponsor can rely on a verification done within the past five years if the investor certifies that nothing material has changed.
The March 2025 SEC Guidance on Minimum Investments
On March 12, 2025, SEC staff issued a no-action letter that gave sponsors a simpler route. Under it, a sponsor can treat verification as complete when three conditions are met. The investment meets a minimum of at least $200,000 for individuals or $1 million for entities, with binding capital commitments counting toward that amount. Each investor confirms in writing that they are accredited and that no third party is lending them the minimum for this purpose. And the sponsor has no actual knowledge of facts suggesting otherwise.
The letter is staff guidance rather than a change to the rule itself. Sponsors who use it keep the same careful records they would keep for any other method.
Choosing the Right Verification Path for Each Investor
Most sponsors now offer two paths. Investors at or above the minimum sign the written statements, which go into their subscription file. Investors below the minimum use a traditional method, most often a letter from their CPA or a verification service.
Setting the minimum is a business decision as much as a compliance one. A $200,000 minimum makes verification fast, and it may also narrow the pool of investors who can join. Offering both paths gives every accredited investor a way into the deal.
A 506(c) Verification Workflow That Keeps Investors Moving
- Route investors at signup. A few qualifying questions send each investor down the right path.
- Collect evidence inside the subscription flow. Investors provide statements or documents in the same place they sign.
- Record every step. The method, date and evidence for each investor sit in one audit trail.
- Confirm verification before accepting funds. Each investor's check is complete before their wire arrives.
- Track renewal dates. Returning investors are re-verified on schedule.
What General Solicitation Allows Under 506(c)
General solicitation means offering a deal to people the sponsor has no prior relationship with, through a website, social media, email campaigns, events or paid ads. Rule 506(c) permits all of these. The SEC's anti-fraud rules still apply to every word a sponsor publishes, so each claim about the property, the team or the plan needs to be accurate and supported by the offering documents. Sponsors who run their marketing past securities counsel before it goes live can advertise with confidence.
Filing Form D for a 506(c) Offering
Every Regulation D offering, including one under 506(c), is reported to the SEC on Form D. The filing is generally due within 15 days after the first sale, and it tells the SEC which exemption the sponsor is relying on. Many states also ask for a short notice filing. Securities counsel usually handles both, and a sponsor who adds the deadline to the raise calendar at launch keeps the offering on track.
Verification for Investors Outside the United States
Sponsors raising capital globally run two kinds of checks. U.S. investors prove accredited status under Rule 506(c). International investors in a Regulation S offering confirm that they are not U.S. persons, and their eligibility follows the rules of their home country. Keeping the two onboarding paths separate, on one platform, lets a sponsor advertise the U.S. raise openly while the international raise runs through offshore channels. Our Regulation S guide explains the international track in full.
How Raveum Handles Investor Verification
Raveum builds identity and eligibility checks into investor onboarding, before any investor enters the investment process. U.S. investors follow the Rule 506(c) path and international investors follow the Regulation S path, on the same sponsor platform. Every step is recorded in an audit log that can be exported for counsel or auditors. See how the Raveum Sponsor Program works.
Frequently Asked Questions
Verification means taking reasonable steps to confirm that each purchaser is an accredited investor, rather than relying on a checkbox. Sponsors can review tax forms for income, review bank or brokerage statements and a credit report for net worth, obtain a written confirmation from a registered broker-dealer, SEC-registered investment adviser, licensed attorney or CPA, or rely on a high minimum investment with written statements under the March 2025 SEC staff guidance. The right method depends on the investor and the deal, and every step should be recorded in the investor's file.
The no-action letter points to minimums of at least $200,000 for individual investors and at least $1 million for entities, with different treatment for entities that are accredited only because their owners are accredited. Binding capital commitments can count toward the minimum. The sponsor also needs a written statement from each investor that they are accredited and that no third party financed the minimum investment amount, and must have no actual knowledge of facts that contradict those statements. Counsel should review how this applies to any specific investor.
No. The rule itself stayed the same. On March 12, 2025, SEC staff issued a no-action letter that explains one more way to meet the existing reasonable steps standard for verification. Because it is staff guidance, it can be revisited, and it applies only when its conditions are met. Sponsors who use it keep careful records, and sponsors who prefer the traditional methods can continue to use them.
For income, sponsors can review IRS forms from the past two years, such as a W-2, 1099, Schedule K-1 or Form 1040, plus the investor's written statement that they expect similar income this year. For net worth, sponsors can review bank or brokerage statements dated within the past three months and a credit report, plus a written statement that all debts are disclosed. These methods give sponsors documentary evidence. Investors who prefer not to share financial records can often use a professional letter instead.
The letter should confirm that a registered broker-dealer, SEC-registered investment adviser, licensed attorney or CPA verified the investor's accredited status within the prior three months, and the sponsor keeps it in the subscription file. For returning investors, a sponsor may be able to rely on a verification done within the past five years if the investor certifies that nothing material has changed. Counsel should confirm the exact conditions before a sponsor relies on that shortcut.
Both rules are part of Regulation D. Rule 506(b) prohibits general solicitation, allows up to 35 sophisticated non-accredited investors and lets the sponsor rely on a reasonable belief that investors are accredited. Rule 506(c) allows general solicitation, limits the raise to accredited investors and requires the sponsor to take reasonable steps to verify each one. Sponsors who raise from existing relationships often choose 506(b), and sponsors who want to advertise a deal choose 506(c).
Form D is generally due within 15 days after the first sale of securities in the offering. It tells the SEC which exemption the sponsor is relying on, and many states also require a short notice filing. Securities counsel usually handles both filings, and sponsors who add these deadlines to the raise calendar at launch avoid last-minute surprises.
Investors in a Regulation S offering confirm that they are not U.S. persons, and their eligibility follows the rules of their home country rather than the 506(c) accredited investor test. International investors who instead join a 506(c) offering are verified the same way as any other 506(c) investor. Many sponsors run both tracks on one platform, keeping onboarding, records and marketing for each track separate.
Verification Is Now a Design Choice
Verification once kept many sponsors in the quiet world of 506(b). In 2026, better tools and clearer SEC guidance make open marketing practical. A sponsor who sets a minimum that fits their investors, offers a second path for smaller checks and records every step turns verification into a short part of onboarding. With the U.S. raise running smoothly, that sponsor has room to build the next track, with investors from around the world.
About the author: Miya Israni is Chief Marketing Officer at Raveum, where she leads marketing for the company's sponsor, partner and investor programs.
This guide is for general education and is not legal or investment advice. Securities rules depend on your facts, and SEC staff guidance can change. Work with qualified securities counsel before launching an offering. All investing involves risk, including the potential loss of principal.