Compliance and filings

3(c)(7) fund

Also called Section 3(c)(7) exemption, QP fund.

Definition

A 3(c)(7) fund is a private fund excluded from the Investment Company Act under Section 3(c)(7) because every owner of its securities is a qualified purchaser, generally an individual or family company with at least $5 million in investments or a person investing at least $25 million on a discretionary basis, and it makes no public offering. It has no statutory limit on the number of investors.

Updated October 9, 2026Checked against our editorial standards

Example

A $400M buyout fund closes with 140 LPs: 115 institutions and 25 individuals. 3(c)(1) is unavailable because 140 is over the 100 cap, so the fund relies on 3(c)(7). Every LP completes a qualified purchaser questionnaire. A pension fund with $2B in investments qualifies. An individual with $7M in investments qualifies. A family investment company with $3M of investments does not, unless each of its owners is a qualified purchaser in their own right. That family vehicle is turned away, or restructured, before the close.

Confused with

3(c)(1) fund. Limited to 100 beneficial owners (250 for a small qualifying venture fund) but open to accredited investors who are not qualified purchasers. Most first venture funds are 3(c)(1).

Accredited investor. The Regulation D test for the offering. Being accredited is necessary for the Rule 506 offering but not sufficient for a 3(c)(7) fund, which needs the higher Investment Company Act status as well.

In practice

The no-cap rule is not unlimited in effect: a separate Exchange Act test on holders of record applies once a fund grows past a certain size, and LPAs restrict transfers to keep the fund under it. Larger buyout, growth and credit funds are nearly always 3(c)(7). The operational cost is a longer questionnaire and a GP that must refuse smaller individual cheques, which is one reason feeder funds exist.

Sources

Investment Company Act section 3 (Cornell LII)www.law.cornell.edu/uscode/text/15/80a-3
Investment Company Act section 2 definitions (Cornell LII)www.law.cornell.edu/uscode/text/15/80a-2

Related terms

3(c)(1) fundA 3(c)(1) fund is a private fund excluded from the definition of investment company under Section 3(c)(1) of the Investment Company Act because its securities are beneficially owned by no more than 100 persons, or 250 for a qualifying venture capital fund with no more than $12 million in aggregate capital contributions and uncalled commitments, and it does not make a public offering.
Qualified purchaserA qualified purchaser is an investor who meets the Investment Company Act threshold, generally an individual or family company with at least $5 million in investments or an entity with at least $25 million, which a fund relying on the Section 3(c)(7) exemption must verify for every limited partner.
Accredited investorAn accredited investor is a person who meets the Regulation D test in Rule 501(a): for an individual, net worth over $1 million excluding the primary residence, income over $200,000 ($300,000 jointly) in each of the last two years, or a Series 7, 65 or 82 licence; for an entity, assets over $5 million or all equity owners accredited.
Beneficial ownerA beneficial owner is the natural person who ultimately owns or controls an interest in a fund, directly or through one or more entities.