New SEC Guidance Could Make Fundraising Easier For Private Funds

On March 12, 2025, the staff of the Division of Corporation Finance of the U.S. Securities and Exchange Commission (the SEC) issued a no-action letter regarding Rule 506(c) under Regulation D, a safe harbor promulgated under the U.S. Securities Act of 1933, as amended, which will likely increase the number of private fund sponsors that publicly advertise their private funds (e.g., venture capital funds, private equity funds, etc.) to prospective investors.

Interests in private funds are typically offered to prospective investors under Rule 506(b) or Rule 506(c). Under Rule 506(b), interests in a private fund cannot be publicly advertised. Under Rule 506(c), interests in a private fund can be publicly advertised (including through social media, press releases, podcasts, etc.) as long as the private fund's sponsor takes reasonable steps to verify that all the investors in the private fund are "accredited investors," as defined in Rule 501(a) of Regulation D.