A qualified purchaser is an individual or entity that meets elevated investment thresholds under the Investment Company Act, qualifying them to invest in 3(c)(7) funds with no investor count limit.
Why It Matters
Funds that rely on Section 3(c)(7) can accept an unlimited number of investors, but every one of them must be a qualified purchaser. This higher bar reflects the assumption that investors with significant portfolios have the sophistication to evaluate private fund risks on their own. Getting the classification wrong can jeopardize the fund's exemption from Investment Company Act registration.
Key Details
- Individual threshold: $5,000,000 or more in investments.
- Family company threshold: $5,000,000 or more in investments.
- Trust threshold: $5,000,000 or more in investments, provided the trust was not formed for the purpose of investing in the fund.
- Entity investing for its own account or for other qualified purchasers: $25,000,000 or more in investments.
- "Investments" is a narrower measure than "net worth." It excludes your primary residence, personal property, and other non-investment assets.
For more, see Accredited Investor vs. Qualified Purchaser vs. Qualified Client.
Capital Company handles investor classification and qualification 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.