Securities rules for Opportunity Zone funds

Yes, generally. In July 2019, the staffs of the SEC and the North American Securities Administrators Association (NASAA) issued a joint staff statement indicating that interests in Qualified Opportunity Funds (QOFs) are likely to be securities for purposes of federal and state securities laws; the staff stressed that the analysis is fact-specific.^15,16 That means a fund must either register its offering with the SEC or fit an exemption, and the sponsor and anyone who sells the interests must follow the securities rules on disclosure, solicitation and anti-fraud.

The tax rules and securities rules are separate. A fund can be a perfectly qualified QOF for tax purposes and still violate securities law, or the reverse. In practice, most Opportunity Zone funds are private placements under Regulation D, and the SEC notes that most private placements rely on Rule 506.¹ For who can invest from a tax standpoint, see who can invest in an Opportunity Zone fund.

The difference is whether the fund may advertise. Under Rule 506(b), the issuer may not use general solicitation (public advertising, open websites, cold mass marketing) and may sell to unlimited accredited investors plus up to 35 non-accredited investors in any 90-calendar-day period, who must be financially sophisticated alone or with a purchaser representative and must receive disclosure comparable to a registered offering.^1,2 Under Rule 506(c), the issuer may solicit generally, but every purchaser must be an accredited investor and the issuer must take reasonable steps to verify that status.³

Sponsors that raise from an existing network often use 506(b); sponsors that market publicly use 506(c). Under either rule, a sponsor that has a substantive pre-existing relationship with an investor is in a stronger position to show it did not generally solicit. The SEC states that self-certification alone, such as checking a box, does not satisfy the 506(c) verification requirement; under 506(b), the issuer needs a reasonable belief that investors are accredited, usually supported by a questionnaire.^1,3

An accredited investor is a person or entity that meets one of the tests in Rule 501(a) of Regulation D. For individuals, the main tests are income above $200,000 in each of the two most recent years ($300,000 with a spouse or spousal equivalent) with a reasonable expectation of the same this year, or net worth above $1 million, alone or jointly, excluding the primary residence.^4,5 Holders in good standing of the Series 7, Series 65 or Series 82 licenses also qualify, under amendments the SEC adopted in 2020.^5,6

Entities can qualify too: for example, entities with more than $5 million of assets not formed to make the investment, entities owning more than $5 million of investments, family offices with at least $5 million under management, and entities owned entirely by accredited investors.^4,6 The definition can change. At a September 30, 2026 open meeting, the SEC considered notices on whether more certifications or credentials should qualify individuals under Rule 501(a)(10); check the SEC's current list before relying on a credential.¹⁴

In a 506(c) offering, the issuer must take reasonable steps to verify each purchaser, and the SEC lists non-exclusive methods: reviewing IRS forms showing income, reviewing recent bank, brokerage and credit statements for net worth, or obtaining a written confirmation from a registered broker-dealer, SEC-registered investment adviser, licensed attorney or certified public accountant.^3,13 Investors in a 506(c) Opportunity Zone fund should expect to provide documents or a letter from their CPA or attorney.

Form D is a short notice filed with the SEC on EDGAR, due 15 calendar days after the first sale, which is the date the first investor is irrevocably committed to invest.⁷ An amendment is required annually if the offering continues for more than 12 months, and when certain information changes. The SEC says filing is not a condition of the Rule 506 exemptions, but it expects a late filer to file as soon as practicable, and in December 2024 it charged two private companies and a registered investment adviser for failing to file Forms D on time.^8,9 Many states require their own notice filing and fee for Rule 506 offerings.⁷

It can, so most funds rely on an exclusion. A fund that invests in securities, such as membership interests in a Qualified Opportunity Zone Business (QOZB), could fall within the definition of an investment company and face registration. The two common private fund exclusions are section 3(c)(1), for funds with no more than 100 beneficial owners that do not make a public offering, and section 3(c)(7), for funds owned only by qualified purchasers (generally individuals with at least $5 million in investments, and certain larger entities).^10,11

Some real estate funds rely instead on section 3(c)(5)(C), which covers issuers primarily engaged in acquiring mortgages and other liens on and interests in real estate; SEC staff positions generally look for at least 55% of assets in qualifying real estate interests.¹⁷ A development fund holding equity in an operating business may not fit that exclusion, which is why many Opportunity Zone funds use 3(c)(1) or 3(c)(7). A 3(c)(1) fund's 100-owner cap can be tight for a broadly marketed data center fund with modest minimum investments, so check how the fund counts investors.

It depends on what the fund holds and how large the sponsor is. A sponsor that manages a fund investing in securities is generally an investment adviser. Rule 203(m)-1 exempts an adviser that advises solely private funds and has less than $150 million of assets under management in the United States; such an adviser is an exempt reporting adviser and must still file reports on Form ADV.¹² An adviser above the threshold, or with clients that are not private funds, generally must register. One commentator notes that an adviser solely to a fund relying on the real estate exclusion may not need the private fund exemption at all, because that fund is not a private fund under the Advisers Act definition; confirm with securities counsel.¹⁷

Anyone paid a commission or other transaction-based compensation for selling fund interests should generally be a registered broker-dealer. Investors can ask who is being paid to sell the offering and check registrations. The issuer must also confirm that no covered person is subject to a disqualifying event under the Rule 506(d) bad actor rules. Our guide to choosing a sponsor lists the regulatory checks to run.

Data center funds tend to be large raises with long timelines, which affects three choices. First, scale often pushes sponsors toward Rule 506(c) to reach a wider group of accredited investors, which brings verification work. Second, a large investor base can exceed the 3(c)(1) limit of 100 beneficial owners, so funds may need 3(c)(7) or a structure with several parallel funds. Third, the offering documents must disclose risks that are specific to the asset: power delivery, construction cost, tenant concentration and the pending bills that would exclude data centers from Opportunity Zone benefits.

The SEC's guidance to investors applies directly: securities bought under Rule 506 are restricted and cannot be freely resold, and an issuer that does not answer questions adequately is a warning sign.¹ Read this guide alongside the risks of Opportunity Zone investing, the due diligence checklist and how a data center Opportunity Zone fund works.