Qualified Purchaser

A Qualified Purchaser is an investor category under the Investment Company Act of 1940 with a higher threshold than the accredited investor standard. For individuals, qualification requires owning at least $5 million in investments (not including primary residence or business property). For family companies, the threshold is $5 million in investments owned by close family members. For trusts and institutions, the threshold is $25 million in investments. The qualified purchaser designation is important for venture funds because Section 3(c)(7) of the Investment Company Act exempts funds from registration as investment companies if all investors are qualified purchasers, with no limit on the number of investors. This contrasts with the more commonly used Section 3(c)(1) exemption, which limits funds to 100 investors regardless of qualification level. Larger funds that need more than 100 LPs typically use the 3(c)(7) exemption, requiring all investors to be qualified purchasers.