Regulation D is the SEC rule set that allows companies and sponsors to raise capital through private securities offerings without registering them with the SEC, and Rules 506(b) and 506(c) are the two most common exemptions used by real estate syndicators. Under 506(b), a sponsor can raise capital from an unlimited number of accredited investors plus a limited number of sophisticated non-accredited investors, but cannot publicly advertise the offering and must rely on pre-existing relationships with participants.
Rule 506(c) permits general solicitation and public marketing of an offering, which is why some sponsors can advertise deals openly online, but it comes with a tradeoff: every investor must be verified as accredited through documentation such as tax returns, bank statements, or a letter from a licensed professional, rather than simply self-certifying. Both exemptions allow issuers to raise unlimited amounts of capital, and the choice between them shapes how a sponsor markets a deal and what documentation investors should expect to provide before committing capital.
Further reading: Understanding 1031 Exchanges: A Guide for Accredited Real Estate Investors
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