Under U.S. securities laws, the sale of securities, including fund interests, require either registration with the S.E.C. which is expensive and time consuming, or such sale must be exempt from registration under the rules. Regulation D is the primary regulation relied on by funds and companies to be exempt from registration. Rules 506(b) and 506(c) of Regulation D are the primary rules that funds raise capital with an exemption from registration. The distinction between the two rules is that under 506(c), the issuer is permitted to advertise the offering, also know as general solicitation, however the issuer must take reasonable steps to verify that the purchasers are "accredited investors" under the rules. It is common for issuers to hire a third party service provider to perform the verification. Under a 506(b) offering, each investor is permitted to self-certify they are an accredited investor.
