Rule 506(b)

Example

A manager raises a $40M fund from 28 LPs met through prior deals and introductions. Each LP ticks the accredited investor box in the questionnaire; no verification letter is needed. The GP declines a podcast invitation to talk about the raise and keeps the fund off the firm website. First close of $15M lands on 2 March; Form D is filed on 13 March, inside the 15-day window, with the 506(b) box checked. A second close adds $25M from the same kind of relationships and does not restart the Form D clock.

Confused with

Rule 506(c). The alternative that permits advertising at the cost of verifying every investor. An offering that began under 506(b) can move to 506(c); it cannot move back, because solicitation cannot be undone.

Section 4(a)(2). The statutory private offering exemption that Rule 506 is a safe harbour for. A fund that fails 506(b) may still argue 4(a)(2), but without the certainty or the pre-emption of state registration.

In practice

What breaks a 506(b) offering is a public statement, not paperwork: a conference panel that mentions the raise, a press interview, a LinkedIn post from an LP. The test is whether the fund had a pre-existing substantive relationship with each person it solicited. The 35 non-accredited slots are rarely used because they trigger disclosure obligations close to those of a registered offering.