Fund Managers with a Clearer Path to General Solicitation Under Rule 506(c)
On March 12, 2025, the SEC's Division of Corporation Finance responded to a March 6, 2025 request from Latham & Watkins LLP and agreed that an issuer can satisfy Rule 506(c)'s "reasonable steps" requirement to verify accredited investor status simply by requiring a high minimum investment — at least $200,000 for individuals or $1,000,000 for entities — combined with a written representation that the purchaser is accredited and isn't using third-party financing to fund the minimum, provided the issuer has no actual knowledge to the contrary. For fund managers, this removes one of the biggest practical barriers to using Rule 506(c): the burden and cost of independently verifying every investor's accredited status through tax returns, brokerage statements, or third-party verification services. With a straightforward, staff-sanctioned checklist now available, general solicitation and broader marketing of private offerings becomes meaningfully more accessible — a real opening for managers who want to advertise a raise rather than rely solely on pre-existing relationships under Rule 506(b). That said, the guidance comes with real limits worth weighing before changing your offering approach. It's a no-action letter, not a rule change — it reflects the current staff's interpretive position and could be narrowed, withdrawn, or superseded in the future, and it doesn't bind a court or a future SEC. It also only helps issuers who can realistically set minimums at these thresholds; smaller-check vehicles, feeder funds serving less-wealthy accredited investors, or funds targeting emerging or first-time managers' networks may not benefit directly. And the "no actual knowledge to the contrary" condition still requires real diligence — if red flags suggest a purchaser doesn't meet the minimum in good faith or is using undisclosed financing, relying on the representation alone won't protect you. Managers considering a 506(c) offering under this framework should still document their verification process carefully and confirm all other Regulation D conditions are met.
Fund Managers with a Clearer Path to General Solicitation Under Rule 506(c)
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