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Reg D Options: 506c vs 506b, 3c1 vs 3c5

Here is an overview of the differences between Regulation D 506c and 506b funds:

Reg D 506b Reg D 506c
Dollar Limit: None None
Eligible Investors: Up to 35 non-accredited investors permitted; remaining must be accredited investors. Only verified accredited investors
Accredited Investor Check: Self-certify through an investor questionnaire. Fund manager must take reasonable steps to verify accredited status, usually through 3rd party.
Advertising: Marketing limited to investors with direct relationships. No general solicitation or advertising of any kind. No restrictions on advertising or general solicitation.
Financial Statements: Financial statements required if non-accredited investors: Audits may be required as size of fund grows. Not required.

For Reg D funds, there are 2 exemption options that we primarily support.

3c1 Exemption 3c5 Exemption
Number of investors: Limited to <100 investors for funds Limited to <250 investors for venture capital funds Less than 2000 total investors.
Asset Class Restrictions: No restrictions At least 55% of the fund portfolio must be allocated directly to real estate holdings that you control. 25% must be in real estate related interested. 20% can be any other assets.

So which way should you go?

​506b 506c
​3c1 - Fund can invest in any asset class - Limited to 99 investors - No plans to advertise the fund - Fund can invest in any asset class - Limited to 99 investors. - Engage in general solicitation and advertising
3c5 - Primarily a real estate fund - Control underlying assets for 80% of portfolio - No plans to advertise the fund - Primarily a real estate fund. - Control underlying assets for 80% of portfolio - Engage in general solicitation and advertising

MARKETING 506B FUNDS

WHAT IS A SUBSTANTIVE OR ESTABLISHED RELATIONSHIP WITH AN INVESTOR (506B FUNDS)?

DO I NEED AN ACCREDITATION LETTER?

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