While advisors are not expected to master securities law, understanding how private offerings are structured, who may invest, and how eligibility is determined provides important context when evaluating opportunities.
A. Regulation D Overview
Most private market funds raise capital under Regulation D, a Securities Act exemption that allows companies to raise capital through private offerings without completing a full SEC registration.
Regulation D exemptions compared
| Exemption | What it permits |
|---|
| Rule 506(b) | Raise capital from up to 35 non-accredited investors who meet certain sophistication standards, plus an unlimited number of accredited investors. Does not allow general solicitation or advertising. |
| Rule 506(c) | Allows general solicitation and advertising but requires that all investors be accredited. Self-attestation alone is generally insufficient. Verification often involves third-party review of income documentation, net-worth confirmation, or CPA or attorney letters. |
B. Accredited Investor Rules
Accredited investor standards were designed to identify individuals presumed capable of evaluating and bearing the risks associated with private offerings that are not subject to the same registration and disclosure requirements as public securities.
Accredited investor qualification thresholds
| Qualification type | Threshold |
|---|
| Income (individual) | $200,000+ in each of the last two years, with reasonable expectation of the same in the current year |
| Income (joint with spouse) | $300,000+ jointly in each of the last two years |
| Net worth | $1 million+ (excluding primary residence), individually or jointly with spouse |
| Professional credential | Series 7, Series 65, or Series 82 license holders qualify regardless of income or net worth |
| Knowledgeable employee | Employees of the fund manager with access to fund information and investment decisions |
Thresholds shown reflect current SEC accredited investor standards as of 2026 and are subject to future regulatory change.
Evergreen Structures, BDCs and Interval Funds
Many modern advisor-oriented private market vehicles, including BDCs, interval funds, and other evergreen structures, operate under regulatory frameworks that differ from traditional drawdown funds, most notably the Investment Company Act of 1940. These structures often provide lower investment minimums, ongoing subscription availability, periodic liquidity programs, and enhanced reporting requirements, making private markets more accessible to individual investors.
C. Advisor Regulatory Considerations Checklist
1. Evaluate the manager
- Track record
- Team stability
- Investment process
- Portfolio construction
- Risk controls
2. Evaluate the structure
- Liquidity terms
- Capital calls
- Fund life
- Fees
- Valuation methodology
3. Evaluate client fit
- Liquidity needs
- Time horizon
- Risk tolerance
- Existing portfolio exposures
4. Set expectations early
- Illiquidity
- Reporting cadence
- Valuation methodology
- Distribution timing
ADVISOR TAKEAWAY · REGULATION
Accreditation determines eligibility. Suitability determines appropriateness.
Meeting accredited investor standards does not automatically make an investment suitable. Advisors should evaluate the manager, structure, liquidity profile, fees, and portfolio fit while ensuring clients understand how the investment works and what risks they are accepting.
