Can an issuer raise unlimited capital from accredited investors without registering under Rule 506 of Regulation D?
Rule 506 of Regulation D is a safe harbor under Securities Act Section 4(a)(2) that allows an issuer to sell an unlimited dollar amount of securities, with no limit on the number of accredited investors.
The answer
The safe harbor
17 CFR 230.506 provides that offers and sales of securities by an issuer satisfying its conditions are deemed transactions not involving any public offering within the meaning of Securities Act Section 4(a)(2). There is no ceiling on the aggregate offering price and no limit on the number of accredited investors who may purchase.
Purchaser limits
Under Rule 506(b), the issuer may sell to up to 35 non-accredited purchasers, each of whom must meet a sophistication requirement, while Rule 506(c) permits general solicitation if all purchasers are accredited and the issuer takes reasonable steps to verify accredited status.
The judged input
What the AI drafted
Submitted to the judgeThis is an excerpt from a draft legal opinion on resale — the kind of work product a lawyer generates with a legal-AI drafting tool, then has to stand behind. Kingsfield does not write it; it rules on the citations the model put in it. This draft cites two authorities; one of them is wrong.
The judge ruled on every citation as the draft used it — it accepted 17 CFR 230.506 and rejected 17 CFR 230.501. Here is why.
The verdict
How Kingsfield ruled
Ruled 2026-06-23Each citation in the draft above was submitted to the Kingsfield judge and ruled against the primary-law corpus — Accept, Reject, or Inconclusive, per citation. These are live verdicts, not editorial. Each card shows the claim the draft made and the verbatim authority the verdict was rendered against.
The draft claimed: Offers and sales of securities by an issuer satisfying the conditions of Rule 506 are deemed to be transactions not involving any public offering within the meaning of Section 4(a)(2) of the Securities Act, with no limit on the aggregate offering price or on the number of accredited investors.
“Exemption. Offers and sales of securities by an issuer that satisfy the conditions in paragraph (b) or (c) of this section shall be deemed to be transactions not involving any public offering within the meaning of section 4(a)(2) of the Act.”
Cite found; proposition supported by the cited text.
The draft claimed: Rule 501 is the Regulation D provision that operates as the safe-harbor exemption deeming an issuer's offering a non-public transaction exempt from registration under Section 4(a)(2).
Cite found, but the cited text does not support the claim. 17 CFR 230.501 supplies the definitions used in Regulation D, including the definition of accredited investor; the operative safe-harbor exemption deeming the offering a non-public transaction under Section 4(a)(2) is Rule 506 at 17 CFR 230.506. Regenerate with the correct authority.
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Connect the Judge See the architectureThis page is legal information, not legal advice, and does not create an attorney-client relationship. The draft shown is an illustration of a typical AI answer; verdicts reflect the cited authority in the Kingsfield corpus as of the ruling date shown above.