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What is Rule 506?

filing form d

What is Rule 506 of Regulation D? It’s a rule that pertains to private capital raising and using an exemption from having to register an offering of securities, to private investors, with the SEC and state regulators. 506 has two parts that are frequently relied upon to use the exemption. The rules are 506(b) and 506(c).

Reg D Summary Chart
Reg D Summary Chart

506(b) Details

506(b) is the ‘old rule’ which is still used by most companies who are raising capital. It’s the most popular rule. It stipulates that sellers (issuers of stocks or units) cannot advertise or solicit their offering to ‘any’ investor(s). 506(b) allows sellers to raise any amount of capital, from $1 to billions of dollars. This rule also allows issuers to sell to 35 unaccredited investors who are at least sophisticated in their knowledge of investing and financial condition. Most sellers use this rule.

506(c) Details
506(c) has all the same stipulations as 506(b) above, however, this rule allows general advertising, provided the solicitations are targeted solely at accredited investors; moreover, if general advertising is used it disqualifies the seller from taking ‘any’ unaccredited investor capital.

Looking to see ‘all’ the companies who are using Regulation D to raise capital?
Here’s the Form D List, which is directly linked to the SEC’s EDGAR database. It shows an exhaustive list of literally all the Form D’s filed with the SEC.

PPM Docs Team

Our team blogs about certain topics that pertain to the PPM and Regulation D landscape. We gather information and post helpful data that assists business owners, attorneys and other professionals. Please let us know if there is anything specific you'd like us to blog about.

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