Key Takeaways
- Private funds raising money under Rule 506(b) of Regulation D cannot use general solicitation, so managers generally market only to investors with whom they have a pre-existing relationship.
- Talking publicly about a current fundraise, or touting a prior fund's returns in the middle of a raise, can be treated as general solicitation and put the exemption at risk.
- Since 2013, Rule 506(c) has allowed funds to advertise publicly if every purchaser is a verified accredited investor, and SEC staff relief in 2025 made that verification easier for high-minimum investments.
Private equity and hedge fund managers raise enormous sums, yet the rules on how they may talk about a new fund are surprisingly strict. Can a manager give a television interview during a raise? Post fund details online? Announce a successful exit?
In this TalksOnLaw Brief, Jeffrey Tabak, a longtime private funds lawyer who helped found the private funds practice at Weil, Gotshal & Manges, explains the rules of the road for private fund marketing and the consequences when managers get them wrong.
Who You Can Solicit
Fund managers raise money through private placements, relying on the Regulation D safe harbor to avoid registering with the SEC. Mr. Tabak explains that this generally means selling to accredited investors: individuals with a net worth of at least $1 million, or income of $200,000 ($300,000 with a spouse) for two years with a reasonable expectation of the same in the current year, and entities with at least $5 million of net worth. Regulation D also permits sales to no more than 35 non-accredited investors, but he notes that most private equity and hedge funds have minimums so large that the option is rarely worthwhile.
How You Can Solicit
Just as important is the manner of solicitation. General solicitation and media advertising, he explains, are anathema to a private placement. Managers need a relationship of some kind with the investors they approach: no cold calls and no emails to people they do not know. Because anything posted online may reach anyone, the industry developed password-protected websites so that only current investors and qualified prospects can see information about a fund. His firm sends clients a memo of things not to do, starting with going on CNBC or in the newspaper to discuss a fundraise. Managers can still talk about their business in general, but not the raise. He adds that touting returns from a prior fund while raising the next one may be seen as priming the market. A manager with a history of press releases announcing portfolio company sales can continue that practice, but should not start it in the middle of a raise.
The Cost of a Misstep
The consequences, Mr. Tabak warns, can be severe. A manager who engages in general solicitation may face a cooling-off period of up to six months during which it must stop fundraising. After a fund closes, investors could have a rescission right to ask for their money back, and the manager could face disgorgement of its profits.
What to Know Now
The ban on general solicitation still governs traditional private placements under Rule 506(b), and the practical cautions Mr. Tabak describes remain standard advice for those offerings. Several developments add options. Rule 506(c), available since 2013, permits general solicitation if the issuer takes reasonable steps to verify that every purchaser is accredited; in March 2025, SEC staff indicated that high minimum investments, such as $200,000 for individuals, combined with written representations, can support that verification. The SEC's 2020 overhaul of the integration rules, now in Rule 152, replaced the older six-month framework with a general principle and a set of safe harbors, including one for offerings more than 30 days apart, which can shorten the pause a manager faces. The accredited investor definition was also expanded in 2020 to include certain licensed professionals, and in September 2026 the SEC requested comment on more credential-based pathways. Managers should confirm which exemption they are relying on before making any public statement about a fund.
