SEC Rule 506(c), in plain English.
Rule 506(c) is the SEC exemption that lets issuers publicly advertise a private offering — as long as every investor is verified as accredited. That verification is what kills deals: most issuers spend five to seven days and $75+ per investor chasing documents. This guide explains the rule, who qualifies, what counts as “reasonable steps,” and why speed is the entire game.
Public advertising in exchange for verification.
Before 2013, raising private capital meant working a personal network behind closed doors. Rule 506(c) changed that: issuers can now advertise on social media, present at demo days, and email cold prospects. The trade-off — every dollar must come from a verified accredited investor, and the burden of verification falls on the issuer.
What you can do
- Advertise on social media and websites
- Present at conferences and demo days
- Email prospects you've never met
- Raise unlimited capital
What you must do
- Verify every investor's accredited status
- Keep detailed verification records
- Take 'reasonable steps' beyond self-certification
- File Form D within 15 days of first sale
Four paths to accredited status.
An investor qualifies under any one of these — they don't need to stack up. Wealth, income, professional license, or entity assets.
Net worth
$1M+ excluding primary residence
Individual or joint, calculated within the last 90 days.
Income
$200K individual / $300K joint
Each of the last two years, with the same expected this year.
Professional license
Series 7, 65, or 82
Active and in good standing. No wealth requirement.
Entities
$5M+ in assets
Family offices, RIAs, qualifying trusts, and certain funds.
The SEC widened the definition.
Licensed professionals
Series 7, 65, and 82 holders qualify regardless of wealth.
Family offices
$5M+ AUM with sophisticated client base.
Investment advisers
Both SEC and state-registered advisers count.
“Reasonable steps” sounds simple. It isn't.
The SEC doesn't prescribe one method. It gives safe harbors and expects you to judge what's reasonable given the investor. Most issuers default to the slowest possible interpretation — and lose investors waiting on paperwork.
The traditional process
- 5–7 daysAverage verification turnaround
- $55–125Per verification (third-party)
- 20+ hoursPer week chasing paperwork
- 73%Investor drop-off during the wait
With IncrediVer
- ~2 minutesAverage verification turnaround
- $10Per verification (pay as you go)
- 0 hoursAI handles document review
- <10%Drop-off — investors stay engaged
Four documented paths that count as “reasonable.”
The SEC has explicitly identified these methods as satisfying the verification requirement. Pick one, document the work, keep the records.
Required documents
- W-2s
- 1099s
- K-1s
- Federal tax returns
Timeline: Last two years, plus a written expectation for the current year.
Momentum is currency in private markets.
An investor's commitment decays. The longer verification takes, the lower the close rate. Industry data on commit-to-close intervals:
Hour 1
Peak interest
The investor is excited and ready to commit.
Day 3
Cooling off
Other deals appear. Doubt creeps in.
Day 7+
Gone
They've moved on. The deal is over.
What's actually at risk.
Skipping verification isn't a paperwork error. It vaporizes your exemption, opens you to rescission, and creates personal liability for officers and directors.
Regulatory consequences
- Loss of exemption — the entire offering becomes non-compliant.
- SEC enforcement — fines, penalties, and public action.
- Rescission rights — investors can demand their money back.
Business impact
- Reputation damage — future raises get harder.
- Legal costs — defense work easily exceeds $500K.
- Personal liability — officers and directors can be named.
Quick answers.
Rule 506(c) is a Regulation D exemption that lets issuers publicly advertise a private securities offering, provided every investor is verified as accredited and the issuer takes reasonable steps to confirm that status.
Related reading: Compliance Command Center for the full 506(c) checklist, ROI Calculator to model your savings, or pricing if you're ready to compare plans.
Compliance, without the bottleneck.
Two minutes per investor. $10 per verification. The audit trail your attorney expects.
This guide is for educational purposes and is not legal advice. Consult qualified securities counsel for your specific offering. Based on SEC regulations effective December 8, 2020.