Qualified purchaser
A 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.
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Example
A 3(c)(7) fund can admit an unlimited number of investors but every one must be a qualified purchaser, so the subscription document includes a QP questionnaire and the fund keeps the answers on file.
Confused with
Accredited investor. A lower threshold ($1M net worth or $200,000 income) used by 3(c)(1) funds, which are limited to 100 investors.
Related terms
- KYC and AML KYC (know your customer) and AML (anti-money-laundering) are the checks a fund performs on each prospective limited partner before accepting their subscription: verifying identity and beneficial ownership, screening against sanctions and politically exposed person lists, and documenting the source of funds, with records kept for audit and regulatory review.
- Side letter A side letter is a bilateral agreement between a fund and a single limited partner that grants that LP terms beyond the limited partnership agreement, such as a management fee discount, most-favoured-nation rights, co-investment rights, excuse rights or additional reporting, and must be tracked and honoured in every subsequent calculation and notice.