Qualified Purchaser

Legally, a Qualified Purchaser is an individual or a family-owned business that satisfy one or more of the criteria below: 

  1. They have $5 million or more in investments that excludes primary residence property used for business purposes. To qualify as a qualified purchaser, a family-owned business must not solely be formed for the purpose of investing in a given fund.
  2. The purchaser is an investment trust sponsored and managed by qualified purchasers and that is not formed for the sole purpose of investing in a fund.
  3. The purchaser is an individual or other entity that invests at least $25 million either from their own accounts or on the behalf of others. However, such an entity was not to have been formed for the sole purpose of investing in a certain fund.
  4. The individual owners of an entity must separately on their own meet the criteria for Qualified Purchaser.

The Investment Company Act of 1940 specified that a private fund having more than 100 investors must register as an investment company unless the fund is not making a public offering or the company’s outstanding securities are owned solely by qualified purchasers.

Private funds, Hedge Funds, or Venture Capital funds, that exclusively accept qualified purchasers as investors exempt themselves from registering with the Securities and Exchange Commission (SEC) which is an expensive and time-consuming process that most funds want to avoid. 

Therefore by qualifying for the SEC exemption, such funds gain access to an infinite number of investors while maintaining maximum flexibility regarding its corporate structure and investment strategies.

This help page and the information contained herein is provided for informational and discussion purposes only and is not intended to be a recommendation for any investment or other advice of any kind, and shall not constitute or imply any offer to purchase, sell or hold any security or to enter into or engage in any type of transaction.

Investing in venture capital funds is inherently risky and illiquid. It involves a high degree of risk and is suitable only for sophisticated and qualified investors.