Rule 502(b) Disclosure When a 506(b) Raise Includes Non-Accredited Investors

Rule 502(b) sets the information a sponsor must give to non-accredited investors in a Rule 506(b) offering. It is the reason a raise that includes non-accredited investors needs much more paperwork than a raise limited to accredited investors. The rule applies only in that case: it does not apply to accredited investors, and it does not apply to a Rule 504 offering.

When the rule applies

Rule 502(b) is a condition on the Rule 506(b) exemption, not a separate offering. If every purchaser is accredited, the disclosure package is not required by this rule, although you still need the anti-fraud discipline that applies to every offer. Once you sell to even one non-accredited investor under 506(b), the package must go to that investor a reasonable time before the sale.

Rule 506(c) is different. It allows only accredited investors, so there is no Rule 502(b) package in a 506(c) raise. Compare the two in 506(b) vs. 506(c).

What the disclosure package contains

The content depends on the issuer and the size of the offering.

• For a non-reporting issuer that could use Regulation A, the package follows Part II of Form 1-A, the Regulation A offering circular.
• If Regulation A is not available, the package follows Part I of the registration form the issuer would be entitled to use.
• Financial statements are required, and the number of years and whether they must be audited scale with the offering size. Read the rule for the threshold that applies to your raise.

The package has to cover what is material to understanding the issuer, its business and the securities. For a real estate syndication that usually means the property, the business plan, the sponsor's experience, the fee structure, the capital stack and the risks.

Written information given to accredited investors

If the sponsor gives accredited investors any material written information about the offering, such as a deck, a projection or a summary, the sponsor must give the non-accredited investors a brief written description of that material. The rule does not require giving them the same documents in every case, but the description must not leave out what is material.

Sponsors often miss this when a deck is shared in a webinar or a one-to-one call. Keep a list of every document given to any investor, and check the list before you open the raise to non-accredited investors.

Questions and verifying information

Before a non-accredited investor buys, the issuer must give that investor the opportunity to ask questions and receive answers. The investor must also be able to get additional information that the issuer has or can get without unreasonable effort, so that they can verify what the disclosure says.

Write down the questions you receive and your answers. That record helps show that the offer was complete.

Limits that apply alongside the rule

Rule 506(b) allows no more than 35 non-accredited purchasers in an offering. Each non-accredited purchaser must also have enough knowledge and experience in financial and business matters to evaluate the investment, either alone or with a purchaser representative. The sponsor has to form that view before the sale.

Read the current text of Rule 506(b) before you rely on these limits, since the counting rules and the sophistication standard are spelled out there.

What to ask your securities attorney

• Does my offering size set a disclosure package with audited financial statements, and for how many years?
• Which document is the disclosure package for this raise, and how do I keep it current?
• Which written materials have I given to any investor that I need to describe to non-accredited investors?
• How do I count non-accredited purchasers, and who checks sophistication for each one?

The answers depend on the offering, the issuer and your states, so this article is not a substitute for that review.

Sources

• 17 CFR 230.502, general conditions to be met, including Rule 502(b) (Cornell LII)
• 17 CFR 230.506, Rule 506 exemption (Cornell LII)
• SEC, private placements under Rule 506(b) (sec.gov)

This article is general information as of October 2026, not legal, tax or investment advice. Rule 502(b) and Rule 506(b) have specific thresholds and conditions, so confirm what your offering must include with a securities attorney. DoorRaise is not a law firm, broker-dealer, investment adviser or funding portal.