This rule is part of Regulation D and permits private offerings to raise unlimited amounts from accredited investors without registering a public sale through the SEC. The rule is further split depending on the issuer’s use of general solicitation or advertising to market securities. If there is no general solicitation, then under Rule 506(b) the securities can be issued and sold to an unlimited number of accredited investors and up to 35 non-accredited investors. A company that satisfies the following criteria may qualify for an exemption under Rule 506:

  1. Can raise an unlimited amount of capital
  2. Seller must be available to answer questions raised by prospective investors
  3. Financial statement requirements as outlined in Rule 505
  4. Investors receive restricted securities that are not freely traded in the secondary market