General Solicitation
Also known as General Advertising, Rule 506(c), Public Solicitation, 506c
General solicitation is the public advertising of a private securities offering, permitted under SEC Rule 506(c) of Regulation D. It allows companies to broadly market a fundraise, but every investor must be accredited and the issuer must take reasonable steps to verify accreditation.
In depth
For most of the 20th century, US private securities offerings could not be advertised. The prohibition on general solicitation defined the texture of Wall Street and Silicon Valley: deals moved through warm introductions, country-club networks, and pre-existing relationships, because anything broader was illegal. Title II of the JOBS Act, signed in 2012 and implemented by the SEC in 2013, rewrote this rule by creating Rule 506(c).
The mechanic is a tradeoff. Rule 506(b) keeps the old constraint (no advertising) but lets the issuer accept up to 35 non-accredited sophisticated investors and rely on their self-certification. Rule 506(c) flips both levers: advertise as widely as you want, but every investor must be accredited and the issuer must verify it, not just take the investor's word. Verification is the operational cost of going public with a fundraise.
Why it matters
Rule 506(c) changed how funds and startups fundraise publicly. Demo Days, AngelList syndicates, and Twitter-driven SAFE rounds all operate under 506(c). The cost is verification overhead. The benefit is reach: a founder can post the open round on LinkedIn and let a third-party service like VerifyInvestor.com or Parallel Markets handle the accreditation check on incoming interest.
The choice between 506(b) and 506(c) is strategic. A warm-intro round with a known investor list usually stays under 506(b) to avoid verification cost. A fundraise that needs broad reach or that touches a public Demo Day moves to 506(c) and accepts the verification burden as the price of advertising.
Worked example
A founder runs a $2M seed under Rule 506(c) and advertises through a podcast appearance and a Twitter thread:
| Step | Action | Notes |
|---|---|---|
| 1. File Form D | File with SEC within 15 days of first sale | Standard for any Reg D offering |
| 2. Public marketing | Podcast, Twitter, LinkedIn, demo day | Allowed only under 506(c), not 506(b) |
| 3. Verify accreditation | Investors upload tax returns or letters via third-party service | Required for every investor |
| 4. Close round | Sign SAFEs with verified investors only | Restricted securities under Rule 144 |
If the same founder had run the round under 506(b), the podcast appearance and public Twitter thread would have voided the exemption, exposing the company to SEC enforcement risk. The choice to use 506(c) was the choice to advertise.
Frequently asked
What is the difference between Rule 506(b) and Rule 506(c)?
Rule 506(b) prohibits general solicitation but allows up to 35 non-accredited sophisticated investors alongside unlimited accredited investors, with self-certification. Rule 506(c) permits public advertising but restricts the offering to accredited investors only, and requires the issuer to take reasonable steps to verify accreditation through documentation.
What counts as general solicitation?
Demo Day pitches to a public audience, social media posts about an open round, newspaper or podcast ads, and websites listing offering terms all qualify. The SEC interprets it broadly: any communication that publicizes the offering to the general public triggers Rule 506(c) treatment instead of 506(b).
How do I verify accredited investor status under 506(c)?
Acceptable methods include reviewing two years of tax returns, brokerage statements showing net assets, written confirmation from a registered broker-dealer, investment adviser, attorney, or CPA, and certifications from third-party verification services. Self-certification alone is not enough under 506(c), unlike 506(b).
When did general solicitation become legal?
The JOBS Act of 2012 directed the SEC to lift the ban, and the rule took effect on September 23, 2013. Before that, all Regulation D private offerings required a pre-existing substantive relationship between issuer and investor, which is why VC fundraising looked the way it did for decades.
Sources & further reading
- Investor.gov: Rule 506 of Regulation D (defines 506(b) and 506(c) including general solicitation)— U.S. Securities and Exchange Commission
- SEC Small Business: General solicitation — Rule 506(c) (verification methods, advertising rules)— U.S. Securities and Exchange Commission, Office of the Advocate for Small Business Capital Formation
- 17 CFR 230.506 — Exemptions for limited offers and sales without regard to dollar amount of offering (primary federal rule for 506(b) and 506(c))— U.S. Government, Electronic Code of Federal Regulations