The sponsor generally sells private securities to passive investors (the limited partners) under SEC Rule 506(b) or 506(c). The first main distinction between the two is that 506(c) permits the sponsor to actively advertise the deal to the public while this is forbidden for the 506(b) offerings. The second distinction is what kind of investor may participate in either offering. For the 506(b), only up to 35 unaccredited investors (these must be sophisticated investors) may participate. The 506(c) offering is open exclusively to accredited investors. Those investors participating in a 506(c) must verify their financials with a 3rd party – this involves reviewing tax returns, bank statements, etc with a broker, attorney, or certified accountant. Accredited investors must have a net worth exceeding $1M (excluding primary residence), or an individual annual income exceeding $200,000 in the last two years or a joint income with an income exceeding $300,000. For investors participating in a 506(b), financial verifications are not required. As well, to prove that the sponsor did not actively solicit the offering to unaccredited investors, they must demonstrate that they had a relationship with the passive investor prior to the deal.