506b vs 506c: 30% of Real Estate Form Ds Now Choose 506(c)

What the two paragraphs of Rule 506 say

Both exemptions sit in one rule, 17 CFR 230.506, and both depend on the general terms of Regulation D. Paragraph (b) is headed “Conditions to be met in offerings subject to limitation on manner of offering” and paragraph (c) “Conditions to be met in offerings not subject to limitation on manner of offering” (17 CFR 230.506(b) and (c)). The operative words:

• 506(b), buyers. “There are no more than, or the issuer reasonably believes that there are no more than, 35 purchasers of securities from the issuer in offerings under this section in any 90-calendar-day period.” Each purchaser who is not accredited, alone or with a purchaser representative, must have “such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of the prospective investment” (17 CFR 230.506(b)(2)(i) and (ii)). Accredited investors are not counted toward the 35 (17 CFR 230.501(e)(1)(iv)).
• 506(b), disclosure. If the issuer sells to a non-accredited purchaser, “the issuer shall furnish the information specified in paragraph (b)(2) of this section to such purchaser a reasonable time prior to sale” (17 CFR 230.502(b)(1)). It is not required to furnish that information to accredited investors.
• 506(b), advertising. “Neither the issuer nor any person acting on its behalf shall offer or sell the securities by any form of general solicitation or general advertising” (17 CFR 230.502(c)); the exception is paragraph 506(c).
• 506(c), buyers. “All purchasers of securities sold in any offering under paragraph (c) of this section are accredited investors,” and “The issuer shall take reasonable steps to verify that purchasers of securities sold in any offering under paragraph (c) of this section are accredited investors” (17 CFR 230.506(c)(2)(i) and (ii)). There is no cap on the number of purchasers.

Source: 17 CFR 230.501, 230.502, 230.503 and 230.506 as published in the eCFR (version dated October 1, 2026). The row on information to buyers is our reading of 230.502(b)(1), which applies to sales under 230.506(b) to a non-accredited purchaser, and of 230.506(c)(1), which lists only 230.501 and 230.502(a) and (d) as general conditions.

The accredited-investor tests are in 17 CFR 230.501(a): for a natural person, individual or joint net worth that “exceeds $1,000,000” with the primary residence not counted as an asset (230.501(a)(5)), or individual income above $200,000 in each of the two most recent years, or joint income above $300,000 with a spouse or spousal equivalent (230.501(a)(6)). For how these compare with the qualified purchaser and qualified client tests, see our accredited versus qualified purchaser page.

How filers actually choose: the 506(c) share by year

The Form D carries the choice in Item 6. The SEC's data sets list it in a single field, FEDERALEXEMPTIONS_ITEMS_LIST, with codes such as 06b and 06c, and we counted original notices (amendments excluded) by filing year. “Real estate” here means the SEC's five real estate industry groups, with 3,754 REIT preferred placements set aside because they are almost all 506(b) and would hide the choice real sponsors make. Our PPM page counts all 2025 real estate notices, preferred placements included, and gets 27.6%; excluding them, as our partnership census does, gives 30.0% of all real estate notices and 30.2% of those that picked 506(b) or 506(c).

Source: SEC Form D data sets, 2019q1 to 2026q3; original notices only; shares are 506(c) as a percentage of notices claiming 506(b) or 506(c) (our arithmetic). Median offering from each offering's latest report, excluding “Indefinite” and amounts of $5 billion or more.

Three readings. First, 506(c) doubled in real estate in six years and did so by holding steady while 506(b) shrank: 633 notices in 2020 and 1,295 in 2025 (a factor of 2.05), against 506(b) falling from 4,482 in 2022 to 2,990 in 2025 (our arithmetic). Real estate leans to 506(c) about 2.3 times as much as the whole market: 23.4% over the full period against 10.3% (our arithmetic). Second, pooled investment funds and other industries sit close together, at 8.4% and 8.5% over the full period, so real estate is the outlier, probably because its deals are marketed to the public online (our reading). Third, the rule leaves no room for both on the form: no original notice, and no amendment, in the data ticks both 506(b) and 506(c). An offering is one or the other.

Source: SEC Form D data sets; our arithmetic.

The quarterly series answers one question. On March 12, 2025 the staff of the SEC's Division of Corporation Finance said an issuer could rely on high minimum investments as part of verifying accredited status (described below), which makes 506(c) cheaper to run. If that had moved sponsors, the 506(c) share should have stepped up. It did not: it was 28.7% in the fourth quarter of 2024 and 28.6% in the third quarter of 2026, and stayed between 28.4% and 31.2% from the first quarter of 2025 through the third quarter of 2026 (our arithmetic). The filings show which exemption sponsors claim, not how they verify.

What kind of offering picks 506(c)

By size. The larger the offering, the likelier it is to advertise.

By minimum investment. Offerings with no stated minimum are 8.6% 506(c); from $25,000 up the share sits between 27.5% and 32.5%.

Source: SEC Form D data sets, January 2019 to September 2026; offering amount from the latest report; minimum as first filed; our arithmetic.

The $200,000 line in the March 2025 staff letter sits inside the $100,000-to-under-$250,000 band, which has the highest 506(c) share, but the data show only the minimum, not whether a sponsor used it to verify (our reading).

By property type. The SEC's own industry groups differ:

Source: SEC Form D data sets; our arithmetic. Residential sponsors lean to 506(b) and most often report a non-accredited buyer.

By state. The state is the issuer's address on the form, not where the property is. Among states with 300 or more real estate notices, 506(c) shares range from 9.6% in Alabama (405 notices) to 64.3% in Arkansas (305) and 56.9% in Wyoming (341); the large states cluster between 21% and 26%: Texas 21.8% (5,625 notices), Florida 22.8% (2,395), New York 23.3% (2,313), California 25.5% (4,202). Small-state shares can be driven by a few sponsors that file many notices, so treat the extremes as places to look, not as a state effect (our reading). By entity type, limited liability companies are 23.7% 506(c) and limited partnerships 17.4%.

What the choice does to the deal

The comparison below uses each offering's latest Form D report, so it shows where things stood at the latest amendment, not at the first filing.

Source: SEC Form D data sets; shares and medians are our arithmetic; sums exclude individual amounts of $5 billion or more. All-industries sums include pooled investment funds, whose reported amounts sold are very large and not comparable with operating deals.

What stands out:

• 506(c) offerings are larger and slower to show sales. The median real estate 506(c) offering is 1.8 times the 506(b) one ($8.1 million against $4.5 million), but 40.0% show nothing sold on their latest report against 22.4%, and the gap holds for notices filed through 2024 (37.4% against 22.1%), so it is not only recent filings that have not had time to sell (our arithmetic). The filing does not say why.
• 506(c) carries 13.3% of the dollars reported sold across real estate 506(b) and 506(c) notices while being 23.4% of the notices (our arithmetic). A few very large offerings drive sums of this kind, so read it as a direction.
• The commission gap is small in real estate (14.4% of 506(c) notices report sales commissions against 11.1% of 506(b)), which suggests advertised deals are mostly marketed by the sponsors themselves rather than through paid broker-dealers (our reading). For the cost lines the form does show, see our syndication Form D page.

506(b) and the 35 non-accredited buyers, in practice

Rule 506(b) allows non-accredited buyers, and many real estate sponsors keep the door open: the Form D box for securities that “may be sold to” non-accredited investors is ticked on 22.6% of real estate 506(b) notices, against 5.4% across all industries. Ticking the box is not buying. Of the 26,789 real estate 506(b) notices, the latest report shows:

Source: SEC Form D data sets, field NUMBERNONACCREDITEDINVESTORS; our arithmetic.

In all, 3,204 real estate 506(b) notices (12.0%) report at least one non-accredited investor and 25,865 such investors in total, a median of 5 where reported. Residential offerings are the most open (21.1% of residential 506(b) notices). Across every industry only 10 506(b) notices report more than 35, one of them in real estate. The 35 limit is per “any 90-calendar-day period” (17 CFR 230.506(b)(2)(i)) and the form reports the total invested so far, so a figure above 35 is not by itself a breach (our reading). A non-accredited buyer also triggers the information package in 17 CFR 230.502(b), which is why a sponsor who wants them carries more paperwork.

On the 506(c) side the rule says “all purchasers.” Even so, 37 real estate 506(c) notices (134 across all industries) report at least one non-accredited investor, 385 in real estate in total, and 215 real estate 506(c) notices tick the non-accredited box. The form cannot say why; a data-entry slip, a box left from an earlier version or an offering that began under 506(b) are all possible (our reading). A reader who sees such a notice has a question for the sponsor, not a finding.

Verification under 506(c): the rule, and the staff letter of March 12, 2025

The rule gives a safe harbor for natural persons: an issuer “shall be deemed to take reasonable steps to verify” if it uses, at its option, one of the “non-exclusive and non-mandatory methods” in 17 CFR 230.506(c)(2)(ii) and does not have knowledge that the person is not accredited. The methods are, in summary:

Source: 17 CFR 230.506(c)(2)(ii)(A) to (E) as published in the eCFR (version dated October 1, 2026); the summary is ours.

The rule's own instruction adds: “The issuer is not required to use any of these methods in verifying the accredited investor status of natural persons who are purchasers.” The test is “reasonable steps,” and the methods are examples.

The March 12, 2025 letter is the staff's position on one other way to meet that test. In reply to a request dated March 6, 2025 from a law firm, the Division of Corporation Finance's Office of Small Business Policy wrote: “We agree that a high minimum investment amount is a relevant factor in verifying accredited investor status.” The incoming letter describes issuers that require minimum investments “of at least $200,000 for natural persons and at least $1,000,000 for legal entities,” together with the purchaser's written representations that it is accredited and that the minimum is not financed by a third party for the specific purpose of the investment, and no actual knowledge of contrary facts. The staff concluded that “Based on the representations in your letter, we agree the issuer could reasonably conclude that it has taken reasonable steps to verify” (the sentence goes on to name purchasers in a Rule 506(c) offering).

Four limits come from the letter itself. It “is not a rule, regulation, or statement of the Commission”. It says “any different facts or conditions might require the Division to reach a different conclusion.” It describes a way an issuer could satisfy the rule, not a new requirement. And the staff repeated that the question “is an objective determination by the issuer (or those acting on its behalf), in the context of the particular facts and circumstances of each purchaser and transaction.” The eCFR text of 506(c)(2)(ii) retrieved for this page still lists the same five methods (our reading); we did not search for later staff statements.

For an investor, the practical meaning (our reading) is that a 506(c) sponsor may ask for documents, a letter from a professional or, at a high enough minimum, a written representation. The Form D data have no field for the verification method, so the choice cannot be measured from the filings.

Bad actors and Form D: what applies to both

Neither paragraph helps an issuer with a disqualified participant: “No exemption under this section shall be available for a sale of securities if the issuer” or any of the listed covered persons has a disqualifying event (17 CFR 230.506(d)(1)). The covered persons include directors, executive officers, general partners or managing members, 20% beneficial owners, promoters and anyone paid for soliciting purchasers. The rule says the disqualification does not apply “If the issuer establishes that it did not know and, in the exercise of reasonable care, could not have known that a disqualification existed” (17 CFR 230.506(d)(2)(iv)). Anyone paid to solicit purchasers is a covered person, so a sponsor that advertises and pays others for leads has more people to check (our reading). The notice itself is due “no later than 15 calendar days after the first sale of securities in the offering” (17 CFR 230.503(a)(1)). Some issuers use other Regulation D exemptions: the data include 4,039 notices claiming Rule 504 and 2,072 claiming section 4(a)(5) across all industries (619 and 367 in real estate), which this page does not cover.

What a reader can do with this

• Read Item 6 of the offering's Form D. The code 06b or 06c tells you which rules the sponsor claims. Search the LLC's exact name in EDGAR company search. A public advertisement for a deal whose Form D says 506(b) is a question to put to the sponsor (17 CFR 230.502(c)).
• If it is 506(c), expect verification and ask what it is. Under 17 CFR 230.506(c)(2)(ii) the sponsor must take reasonable steps; a self-checked box alone is the point to raise. Ask whether it relies on documents, a letter from your adviser or a minimum.
• If it is 506(b), ask what the sponsor will do about non-accredited buyers. In real estate 12.0% of 506(b) notices report at least one; a non-accredited buyer may receive the 230.502(b) information package.
• Compare the offering with the medians above. The median real estate 506(c) raise is $8.1 million with a $50,000 minimum; 40.0% report nothing sold on the latest report. Neither tells you whether a deal is good. The Form D syndicator census shows how many sponsors come back.
• For a sponsor, the choice is a legal question for a securities attorney. The data show what peers claim: 23.4% 506(c) overall, 36.5% among raises of $25 million to under $100 million and 11.8% among raises under $1 million.

An adviser match does not fit this reader: whether an offering is 506(b) or 506(c), and whether its verification is adequate, are securities-law questions for a securities lawyer, and an investor's questions go to the sponsor. If you want to know when these numbers change, the alert below sends one email.

FAQ

Sources: U.S. SEC Form D data sets, quarterly files 2019q1 to 2026q3 (OFFERING, FORMDSUBMISSION and ISSUERS tables) from sec.gov/data-research/sec-markets-data/form-d-data-sets; 17 CFR 230.501, 230.502, 230.503 and 230.506 as published in the eCFR; SEC Division of Corporation Finance, Office of Small Business Policy, response letter of March 12, 2025 (Request for Rule 506(c) Interpretative Guidance, incoming letter dated March 6, 2025), sec.gov, all retrieved October 13, 2026. Counts, shares, medians, sums and changes are our arithmetic from the saved script and its output; the real estate group is the SEC's five real estate industry groups less 3,754 REIT preferred placements. Staff letters have no legal force. This is analysis of public documents, not investment, legal or tax advice.