General solicitation is a marketing rule, not a risk rating, and confusing the two costs investors real clarity when they compare DST offerings. Rule 506(c) of Regulation D decides whether a sponsor can advertise a DST offering to the public or has to stay inside an existing relationship — and that single distinction shapes 506(c) general solicitation and DST marketing long before you ever open a private placement memorandum. It governs where you encounter an offering, who put it in front of you, and how much paperwork you hand over before you can see full terms. It says nothing about the building, the rent roll, or the sponsor behind either one.
Why the exemption box matters
Every DST offering sold under a Regulation D exemption sits in one of two buckets, and the bucket determines whether you could have found it through a public ad, a webinar, or a cold email — or only through a registered representative who already knew you. Compare offerings across the Top1031 directory and you'll see both exemption types represented.
The rule itself isn't new. The SEC adopted Rule 506(c) under a mandate from the JOBS Act, and the amendments took effect September 23, 2013. More than a decade on, the choice between 506(b) and 506(c) still appears on every Form D a DST sponsor files.
The rule that decides how a DST offering can be marketed
Regulation D is the framework almost all DST offerings use. An offering under Rule 506(b) or 506(c) is exempt from registration with the SEC — not registered — and the two subsections draw a hard line around one activity: general solicitation, meaning any offer made through public advertising, mass media, seminars open to the public, or unsolicited outreach to people the sponsor has no prior relationship with.
Under Rule 506(b), general solicitation is prohibited. A sponsor can sell to an unlimited number of accredited investors, plus up to 35 non-accredited investors who are sophisticated — meaning they have sufficient knowledge and experience in financial and business matters to evaluate the investment — but only through existing relationships, typically a broker-dealer's client base or a registered investment adviser's book. No public ad, no open webinar, no cold traffic.
Under Rule 506(c), general solicitation is allowed. A sponsor can run paid ads, publish the offering publicly, host an open webinar, or email a list, provided every purchaser is an accredited investor and the issuer takes reasonable steps to verify that status. Verification is the price of the marketing freedom, and it's the part most first-time DST investors don't see coming.
506(b) vs 506(c): what changes and what doesn't
Rule 506(b) | Rule 506(c) | |
|---|---|---|
General solicitation | Prohibited | Permitted |
Investor pool | Accredited, plus up to 35 non-accredited sophisticated investors | Accredited only |
Investor status check | Typically self-certified | Issuer must take reasonable steps to verify |
Typical distribution | Existing broker-dealer or RIA relationship | Public marketing, direct-to-investor, or relationship-based |
PPM disclosure | Not changed by exemption choice | Not changed by exemption choice |
Sponsor track record disclosure | Not changed by exemption choice | Not changed by exemption choice |
The last two rows are the ones worth sitting with. Exemption type is a distribution decision the sponsor made, not a change to what the offering documents cover on fees, structure, or history. A 506(c) offering with aggressive public marketing and a 506(b) offering placed quietly through a broker-dealer network can carry identical disclosure obligations.
What general solicitation changes in practice
The practical effect shows up in how you first met the offering. Paid search ad, public list, unsolicited email, or a webinar you registered for online with no prior advisor relationship? That offering is almost certainly relying on 506(c). Brought to you by a registered representative or adviser you already work with, with no public ad anywhere? That's the signature of a 506(b) placement.
It also blurs the line between sponsor disclosure and sponsor promotion. General solicitation lets promotional content — polished sites, marketing decks, sponsor videos — reach you directly, without a registered rep filtering it first. That doesn't make the material more or less accurate. It means more of what you read arrived without an intermediary checking it against the filing, which raises the value of reading the filing yourself. The concepts behind that comparison are covered in Learn.
None of this changes minimum investment amounts, distribution structures, or leverage. A debt-free DST and a leveraged DST can each be marketed under either exemption. The exemption governs who can see the pitch and how, not what the pitch may contain.
The tradeoff sponsors accept under 506(c): verification, not self-certification
General solicitation isn't free for the issuer. A signed questionnaire alone doesn't satisfy 506(c). The SEC's non-exclusive verification methods for individuals include:
- Reviewing IRS forms reporting income for the two most recent years — W-2, 1099, Schedule K-1, Form 1040 — together with a written representation from the investor about the current year
- Reviewing bank, brokerage, or other asset statements dated within the prior three months, plus a consumer report and a written representation on liabilities, to establish net worth
- Obtaining written confirmation from a CPA, attorney, registered investment adviser, or registered broker-dealer that the person has verified accredited status within the prior three months
Under 506(b), a signed self-certification is typically sufficient, because the sponsor never publicly solicited the investor — the pre-existing relationship is treated as part of the safeguard. So if a 506(c) sponsor asks for tax documents or a CPA letter before you can proceed, that request is the exemption working as designed, not a quirk of one sponsor.
Where to check which exemption an offering uses
Every Regulation D offering files a Form D with the SEC through EDGAR. Item 6, "Federal Exemptions and Exclusions Claimed," carries separate check boxes for Rule 506(b) and Rule 506(c). That field is the direct way to confirm which rule governs a given DST's marketing, rather than inferring it from how the offering reached you.
It's one line in a much larger filing record — capital structure, leverage treatment, what the sponsor discloses about prior programs, and what the documents leave unanswered. In the Top1031 directory, leverage is tracked as a category (all-cash, leveraged, or zero-coupon) rather than a stated ratio, and a Sponsor Grade describes the sponsor firm, not any single offering and not anyone's suitability.
What the exemption can't tell you
Exemption type says nothing about a sponsor's history, the underlying asset, or how distributions behave. A publicly marketed 506(c) offering and a quietly placed 506(b) offering can come from sponsors at opposite ends of the grading range — or the same end — with no relationship to how either was marketed.
There's also a hard limit on what's publicly checkable. Form D confirms which exemption a sponsor claimed. It does not confirm that the sponsor complied with that exemption in practice, including whether its verification steps were adequate. That question sits with regulators and counsel, not the public filing record.
What the exemption choice does tell you, reliably, is how much of the offering's outreach came through public channels versus a private relationship, and how much documentation you'll be asked to produce. Useful context walking into a conversation with a sponsor — and no substitute for the underwriting work.
FAQ
Can a DST sponsor advertise publicly under 506(c)?
Yes. Public ads, open webinars, and unsolicited outreach are permitted, so long as every purchaser is an accredited investor whose status the issuer has taken reasonable steps to verify.
Do all DST sponsors use 506(c)?
No. Sponsors choose offering by offering, often depending on whether they intend to reach investors through public marketing or through existing broker-dealer and adviser relationships.
What is Form D?
It's the notice an issuer files with the SEC when relying on a Regulation D exemption. Its Item 6 field discloses which exemption — including 506(b) or 506(c) — the offering claims.
One last thing
Verification under 506(c) runs in one direction: it protects the exemption, not the reader's underwriting. A sponsor can complete every documented step correctly, confirm accreditation beyond question, and still be marketing a DST whose fundamentals deserve scrutiny. The paperwork establishes eligibility, not merit — and reading it as a quality signal confuses a marketing rule with an analysis.