An accredited investor, a qualified client, and a qualified purchaser are all terms used in the context of securities regulation in the United States. These classifications govern which investors can access certain investment opportunities.
INVESTOR CLASSIFICATIONS • INVESTMENTS • 3(C)1 & 3(C)7 FUNDS
Why do investor classifications matter?
Individuals who meet the requirements of these classifications can participate in offerings that aren’t registered with the SEC. The reason for this is that the SEC believes the risks of these opportunities may be greater than what is allowed in public markets which are regulated by the SEC. Participation in these opportunities can provide significant diversification to investor portfolios as well as enhanced returns.
Accredited investors have access to 3(c)1 funds while qualified clients and qualified purchasers can typically invest in both 3(c)1 and 3(c)7 funds.
An accredited investor is a person or entity that meets certain financial criteria that allows them to participate in certain types of private securities offerings. Specifically, an accredited investor is someone who:
If an investor wants to invest through a trust, the trust must meet all of the following requirements.
A qualified client is a type of investor that meets certain financial criteria, which allows them to invest in certain private funds that have the ability to charge a performance fee. To be considered a qualified client you must meet one of the following criteria:
A qualified purchaser is a type of investor that meets certain financial criteria, which allows them to invest in certain types of investment funds that are exempt from registration under the Investment Company Act of 1940. Specifically, a qualified purchaser is someone who:
In summary, while there are some similarities between the terms “accredited investor,” “qualified client,” and “qualified purchaser,” each term has a specific meaning and is used in a different regulatory context. An accredited investor is able to participate in certain private securities offerings, while a qualified client is eligible to receive certain types of investment advice as well as participate in investments that charge a performance fee, and a qualified purchaser is able to invest in certain types of investment funds that are exempt from registration under the Investment Company Act of 1940.
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