A knowledgeable employee is a person who participates in the investment activities of a private fund and is excluded from beneficial owner counts under Section 3(c)(1) and from qualified purchaser requirements under Section 3(c)(7).
Why It Matters
Fund managers and key employees often co-invest alongside their limited partners. Without the knowledgeable employee exclusion, these individuals would count toward the 100 beneficial owner limit in a 3(c)(1) fund or would need to meet the $5,000,000 investment threshold in a 3(c)(7) fund. The exclusion allows your team to invest in the fund they manage without consuming investor capacity or facing qualification barriers.
Key Details
- Includes executive officers, directors, trustees, general partners, and advisory board members of the fund or its management affiliate.
- Also includes employees who have participated in the investment activities of the fund, its adviser, or an affiliate for at least 12 months.
- Clerical and administrative staff do not qualify, even if they work at the management company.
- The person must actually participate in investment activities. Working at the firm in a non-investment role is not sufficient.
- Knowledgeable employees also qualify as accredited investors under Regulation D.
For more, see The 100 Investor Limit.
Capital Company handles knowledgeable employee classification and investor count tracking as part of fund administration.
This content is for informational purposes only and does not constitute legal, tax, or compliance advice. Consult qualified counsel for guidance specific to your situation.