What is Rule 506(b)?

Most private fund offerings rely on 506(b), and the fund files a Form D after the first sale. The exemption depends on a substantive pre-existing relationship with each investor, which placement agents often supply. Non-accredited participants trigger extra disclosure duties, so managers usually limit sales to accredited investors. Often confused with 506(c), which permits advertising but requires verifying accredited status.

Say a manager raises a fund under 506(b). It can approach investors it already has a relationship with, but it cannot advertise the fund to the public.

It is the traditional route for private fundraising, and its ban on advertising shapes how managers talk about funds.