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506(b)
Existing relationships, no verification needed, up to 35 non-accredited investors. Self-certification is enough.
How Covercy handles thisStay compliant by default — not by chasing paperwork.
Self-attested and third-party accreditation, identity checks, and secure entity/tax collection run inside the raise, so every investor clears before they fund.
Self-Accreditation & NDA
Step 2 of 2 — Entity & accreditation
Individual
SSN
123-45-6789
Are you an accredited investor? *
Accreditation Type *
Net assets
$1M or more in net assets, not including primary residence
Income
$200k ($300k jointly with spouse) of annual income for the last 2 years
License
Series 7, 65, or 82 license holder (active and in good standing)
Other
Other SEC-recognized qualification method
Which raise are you running?
Pick the exemption that fits the go-to-market — the platform handles the rest.
506(c)
Public marketing, accredited investors only, verification required. Covercy supports verification automatically after the investor signs.
How Covercy handles thisThe four things that actually differ
506(b) vs 506(c) — what changes between exemptions, in plain English.
| 506(b) | 506(c) | |
|---|---|---|
How you reach investors | Pre-existing, substantive relationships only. No public marketing. The raise stays among LPs you already know. | Public marketing allowed. Open a public landing page, share the link, run paid campaigns, post on social. |
Who can invest | Accredited investors plus up to 35 non-accredited but sophisticated investors per offering. | Accredited investors only. Non-accredited investors are blocked at the configuration level. |
How you confirm they are accredited | Reasonable belief, typically via investor self-certification with appropriate questionnaires. | Reasonable steps to verify, typically via documentary review or a qualified third party. Covercy triggers verification automatically after the investor signs, before the commitment is approved. |
What you owe non-accredited investors | Specified disclosure obligations to non-accredited investors before the sale — financial statements and offering-document content prescribed by the rule. | Not applicable — non-accredited investors cannot participate. |
How you reach investors
- 506(b)
- Pre-existing, substantive relationships only. No public marketing. The raise stays among LPs you already know.
- 506(c)
- Public marketing allowed. Open a public landing page, share the link, run paid campaigns, post on social.
Who can invest
- 506(b)
- Accredited investors plus up to 35 non-accredited but sophisticated investors per offering.
- 506(c)
- Accredited investors only. Non-accredited investors are blocked at the configuration level.
How you confirm they are accredited
- 506(b)
- Reasonable belief, typically via investor self-certification with appropriate questionnaires.
- 506(c)
- Reasonable steps to verify, typically via documentary review or a qualified third party. Covercy triggers verification automatically after the investor signs, before the commitment is approved.
What you owe non-accredited investors
- 506(b)
- Specified disclosure obligations to non-accredited investors before the sale — financial statements and offering-document content prescribed by the rule.
- 506(c)
- Not applicable — non-accredited investors cannot participate.
Required either way — table stakes for any Reg D raise
Independent of which exemption you pick, every Reg D raise carries three baseline obligations.
File Form D with the SEC
Within 15 days of the first sale of securities in the offering.
Pass the "bad actor" test
No covered person — officers, directors, 20%+ owners, placement agents — can have a disqualifying event.
File state notice filings ("Blue Sky")
A Form D copy plus the state fee in every state where an investor resides. States retain notice-filing fee authority under NSMIA.
How Covercy handles 506(b)
SEC requirement → Covercy mechanism. Four mappings.
- No general solicitation
- Public audience mode is disabled when the raise is configured as 506(b). The deal page is only reachable by invited or pre-known LPs.
- 35 non-accredited investor cap, all of whom must be sophisticated
- A built-in non-accredited counter tracks the cap in real time. New non-accredited investors enter a GP approval queue so sophistication review is explicit, not retroactive.
- Reasonable belief of accredited status
- A guided self-certification wizard collects the investor’s basis (income, net worth, professional credential) and stores it in an auditable trail.
- Disclosure obligations to non-accredited investors
- Subscription and disclosure documents are hosted on the deal page and gated so non-accredited investors see prescribed documents before sale.
How Covercy handles 506(c)
SEC requirement → Covercy mechanism. Four mappings.
- General solicitation allowed
- "Anyone with a link" audience mode is unlocked. Embed the deal page on your site, run paid campaigns, share on social — all consistent with publicly solicited offerings.
- All investors must be accredited
- Non-accredited investors are blocked at the configuration level. The flow refuses to admit them on a 506(c) raise.
- Reasonable steps to verify accredited status
- Covercy supports post-sign third-party verification, triggered after the investor signs and before the commitment is approved — supporting the safe-harbor methods: income test, net-worth test, a written confirmation from a qualified professional, or prior-verification reliance within the 5-year window. A third-party identity check runs as part of the same verification step.
- Verification must be substantive — not a checkbox
- A qualified third party performs the verification in line with SEC verification requirements. The result lands in the investor record with the basis used and an audit trail of supporting evidence.
Secure entity and tax-identity collection
Collected inside the raise so every investor clears before they fund — not chased over email after the fact.
Full name and investing entity
Each investor provides their full name, investing-entity name, and entity type (individual, LLC, trust, and the like) in one guided form.
Tax information
Tax ID Type (SSN / TIN / EIN) and Tax ID Number are captured, formatted on entry, and validated by type.
Non-US investors
A non-US entity is conditionally asked for its passport country, so cross-border investors are collected correctly the first time.
A fundraise is either 506(b) or 506(c) — never both
You pick one exemption per fundraise. Running one 506(b) raise and one 506(c) raise in parallel on the same Covercy account is supported — each raise sets its own gate independently. What you cannot do is mix the two within a single fundraise.
What stays in your court
Matter-of-fact: the platform is honest about scope.
Form D filing
Covercy surfaces the data you need (first-sale date, exemption claimed, offering details). You or your counsel file with the SEC.
State Blue Sky notice filings
Per-state notice filings and fees in every state of investor residence. You or your counsel manage the matrix.
Bad-actor diligence on covered persons
Confirming officers, directors, 20%+ owners, and placement agents have no disqualifying events. You or your counsel run the diligence.
PPM drafting
Covercy stores and delivers the offering documents — your counsel drafts them.
Part of the Covercy One platform
Compliance connects to your deal page, agreements, and funding.
Distributions
Calculate, approve, and pay distributions to the cent, then reconcile automatically.
ExploreInvestor Portal
Give LPs a branded portal for positions, documents, reporting, and capital accounts.
ExploreNeo, your AI Co-GP
The AI layer that drafts investor updates, runs reports, and automates workflows across Covercy One.
ExploreFund Administration
Institutional-grade NAV, bookkeeping, tax, and K-1s, delivered inside the same platform.
ExploreCompliance questions
- Can a fundraise switch from 506(b) to 506(c) mid-flight?
- Mid-raise switches are not advisable as a normal practice — once non-accredited investors are admitted under 506(b) or once general solicitation has occurred, the exemption posture is set. If the strategy genuinely needs to change, that is a counsel conversation about restructuring rather than a configuration toggle. Most GPs run a new fundraise on the same account when their go-to-market changes.
- Who performs the 506(c) third-party verification, and how is its cost handled?
- A qualified third party performs the verification — typically a CPA, an attorney, a registered broker-dealer, or a registered investment advisor providing a written confirmation, or an integrated verification provider routed through documentary review. Cost handling is set per fundraise: the GP can cover it, the LP can cover it, or it can be offered as part of the deal.
- How long is a 506(c) verification good for under the 5-year reliance safe harbor?
- The SEC permits issuers to rely on a prior verification for up to five years, provided the investor reaffirms their accredited status at the time of the new investment. Covercy stores the verification on the investor record and prompts for reaffirmation on subsequent deals so the reliance period is used correctly.
- What investor data does Covercy collect, and how is it secured?
- Inside the raise, Covercy securely collects each investor’s full name, investing-entity name, entity type, and tax information (Tax ID Type — SSN, TIN, or EIN — and Tax ID Number), plus passport country for non-US entities. A third-party identity check runs as part of the 506(c) verification step. The data is collected once and reused on the investor’s next deal.
This page is informational and not legal advice. Securities laws are fact-specific and change over time; GPs should consult qualified securities counsel before relying on this material for any specific raise.