--- title: "Qualified Purchaser (QP) | Altss Glossary" description: "A qualified purchaser (QP) is an investor meeting a test in Investment Company Act section 2(a)(51), chiefly owning at least $5 million (individuals,…" canonical: "https://altss.com/glossary/qualified-purchaser" --- Glossary · Legal, regulatory & tax # Qualified Purchaser (QP) A qualified purchaser (QP) is an investor meeting a test in Investment Company Act section 2(a)(51), chiefly owning at least $5 million (individuals, family companies) or $25 million (most others) in investments; 3(c)(7) funds are limited to QPs. Publisher: Altss LLCPublished 2026-01-01Content modified 2026-10-02 ALTSS-REG-002 Some private funds avoid registering as investment companies by admitting only very large investors. The law measures size by investments owned, not by net worth or income. A home, a personal art collection or a stake in one's own operating business usually does not count, so a wealthy individual can be an accredited investor without being a qualified purchaser. ### Formal definition Under section 2(a)(51)(A) of the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(51)(A)), a qualified purchaser is (i) a natural person who owns not less than $5,000,000 in investments; (ii) a family company owning not less than $5,000,000 in investments; (iii) certain trusts whose trustee and every settlor or contributor is a qualified purchaser; or (iv) any person, acting for its own account or for other qualified purchasers, who in the aggregate owns and invests on a discretionary basis not less than $25,000,000 in investments. ## Jurisdiction and status Qualified purchaser is a US federal term in the Investment Company Act of 1940, section 2(a)(51). Securities and Exchange Commission (SEC) Rule 2a51-1 (17 CFR 270.2a51-1) defines which assets count as "investments" and how to value them; Rule 3c-5 deals with knowledgeable employees. The $5 million and $25 million amounts are statutory and are not indexed for inflation; they were checked against current text on 2 October 2026 and are unchanged. The status matters mainly for section 3(c)(7), under which an issuer is not an investment company if its securities are owned exclusively by persons who were qualified purchasers when they acquired them and it is not making a public offering. ## The statutory categories | Category | Test | Provision | | --- | --- | --- | | Natural person | Owns not less than $5 million in investments (investments held jointly with a spouse may be counted under Rule 2a51-1(g)(2)) | 2(a)(51)(A)(i) | | Family company | Owns not less than $5 million in investments and is owned by or for two or more related natural persons (siblings, spouses including former spouses, lineal descendants), their estates, or foundations, charities or trusts established for them | 2(a)(51)(A)(ii) | | Trust | Not formed to acquire the securities offered; the trustee or decision-maker and each settlor or contributor is a qualified purchaser under (i), (ii) or (iv) | 2(a)(51)(A)(iii) | | Any other person | Acting for its own account or for other qualified purchasers, owns and invests on a discretionary basis not less than $25 million in investments | 2(a)(51)(A)(iv) | ## What counts as investments Rule 2a51-1(b) counts: securities (excluding securities of an issuer that controls, is controlled by or is under common control with the prospective qualified purchaser, subject to exceptions such as investment vehicles and public companies); real estate held for investment; commodity interests; physical commodities and financial contracts held for investment; and cash and cash equivalents held for investment. Real estate used for personal purposes, such as a primary residence, is not held for investment. Investments may be valued at market value or at cost, and debt incurred to acquire the investments is deducted. For entities, the $25 million test looks at investments the entity owns and invests on a discretionary basis, including on behalf of other qualified purchasers; it is not a net-asset or balance-sheet test. ## Knowledgeable employees and look-through entities Under Rule 3c-5, securities owned by knowledgeable employees of the fund or its manager (executive officers, directors, general partners, advisory board members and certain investment staff) are disregarded when deciding whether a 3(c)(7) fund is owned exclusively by qualified purchasers. They can invest without meeting the dollar tests and are also accredited investors under Rule 501(a)(11). SEC rules also treat an entity owned entirely by qualified purchasers as a qualified purchaser, and deny the status to an entity formed for the specific purpose of investing in the fund unless each of its owners qualifies. Qualified institutional buyers (QIBs) under Rule 144A are generally deemed qualified purchasers when acting for their own account or for other QIBs or qualified purchasers. ## How the test is used Fund managers use the test in three places. First, a [3(c)(7) fund](https://altss.com/glossary/3-c-7-fund) admits only qualified purchasers (plus knowledgeable employees), so its subscription documents ask investors to identify the category they rely on. Second, because qualified purchasers are [qualified clients](https://altss.com/glossary/qualified-client), a 3(c)(7) fund can pay a performance fee or carried interest without a separate investor-level qualified client test. Third, structured credit deals sold under Rule 144A commonly restrict buyers to QIBs that are also qualified purchasers so the issuing vehicle can rely on 3(c)(7). In market usage "QP" is shorthand for an investor or a fund ("QP fund"). Legally, the status belongs to the investor and is tested at the time each security is acquired. ## Worked example ### Illustrative investments count An individual holds a $3.2m brokerage portfolio, a $1.0m interest in a private equity fund, $0.6m of cash held for investment, and a $2.5m primary residence. The portfolio was partly bought with a $0.8m margin loan. Investments: $3.2m + $1.0m + $0.6m = $4.8m. The residence is personal-use real estate and is excluded. Debt incurred to acquire investments is deducted: $4.8m − $0.8m = **$4.0m**, below the $5m test, although the individual's net worth is far above the $1m accredited-investor threshold. The example shows the arithmetic only; it is not a determination of any investor's status. Examples are illustrative; figures are not market data. ## Not the same as - [Accredited Investor](https://altss.com/glossary/accredited-investor): Accredited investor tests net worth or income ($1 million / $200,000) for Regulation D sales; qualified purchaser counts investments owned ($5 million / $25 million) for 3(c)(7) funds. - [Qualified Client](https://altss.com/glossary/qualified-client): Qualified client is the lower Advisers Act test for paying performance fees; every qualified purchaser is a qualified client, but not the reverse. - Qualified Institutional Buyer: A QIB generally owns and invests $100 million in securities for Rule 144A resales; most QIBs are deemed qualified purchasers, but the tests are separate. ## Common mistakes - Measuring net worth instead of investments. Debt-free wealth in a home or an operating business can leave a very rich person below the $5 million investments test. - Describing qualified-purchaser status as merely "common" for 3(c)(7) funds. It is a statutory condition of the exclusion. - Assuming the thresholds are inflation-indexed. They are fixed in the statute. - Treating the $25 million entity test as a test of total assets or net assets rather than investments owned and invested on a discretionary basis. ## Edge cases - Status is tested when the security is acquired. An investor whose investments later fall below $5 million keeps its existing interest, but a new acquisition, including a purchase by a new holder, is tested again. Securities received from a qualified purchaser as a gift or bequest, or through legal separation, divorce, death or another involuntary event, are deemed owned by a qualified purchaser (section 3(c)(7)(A)). - A family company relying on 2(a)(51)(A)(ii) must be owned by related persons; a company owned by unrelated individuals needs the $25 million test or must be owned entirely by qualified purchasers. - A trust qualifies through its trustee and contributors, not through the size of the trust alone. ## Questions ### Does a primary residence count toward qualified purchaser status? No. Only investments count, and real estate used for personal purposes is not held for investment. ### Is a qualified purchaser automatically an accredited investor? Not by definition; the tests are separate and serve different rules. Most qualified purchasers also meet an accredited-investor test, but each status must be established for the rule that requires it. ## Sources - [15 U.S.C. 80a-2 - Definitions (Investment Company Act sec. 2, incl. 2(a)(48) BDC and 2(a)(51) qualified purchaser)](https://www.law.cornell.edu/uscode/text/15/80a-2). U.S. Congress (United States Code; LII mirror), Current US Code text as published by LII (accessed 2026-10-01). Status: in force (checked 2026-10-01). 15 U.S.C. 80a-2(a)(51)(A)(i)–(iv) — supports: Statutory categories and $5,000,000 / $25,000,000 thresholds; not inflation-indexed - [17 CFR 270.2a51-1 - Definition of investments for purposes of section 2(a)(51) (qualified purchaser); certain calculations](https://www.law.cornell.edu/cfr/text/17/270.2a51-1). U.S. Securities and Exchange Commission (CFR text via eCFR; LII mirror), eCFR current as of 2026-09-29; no substantive amendment since eCFR baseline (2016-12-31). Status: in force (checked 2026-10-01). 17 CFR 270.2a51-1(b)–(e), (g)(1)–(2) — supports: Definition of investments; valuation; deduction of acquisition debt; qualified institutional buyers deemed qualified purchasers; joint investments of spouses - [17 CFR 270.3c-5 - Beneficial ownership by knowledgeable employees and certain other persons](https://www.law.cornell.edu/cfr/text/17/270.3c-5). U.S. Securities and Exchange Commission (CFR text via eCFR; LII mirror), eCFR current as of 2026-09-29; unchanged since 1997 adoption (62 FR 17529). Status: in force (checked 2026-10-01). 17 CFR 270.3c-5(a)(4), (b) — supports: Knowledgeable employees and their exclusion from the 3(c)(7) ownership test - [15 U.S.C. 80a-3 - Definition of investment company (Investment Company Act sec. 3, incl. 3(c)(1) and 3(c)(7))](https://www.law.cornell.edu/uscode/text/15/80a-3). U.S. Congress (United States Code; LII mirror), Current US Code text as published by LII (accessed 2026-10-01). Status: in force (checked 2026-10-01). 15 U.S.C. 80a-3(c)(7)(A) — supports: 3(c)(7) requires ownership exclusively by qualified purchasers at acquisition and no public offering; gifts, bequests and involuntary transfers from a qualified purchaser are deemed owned by a qualified purchaser - [17 CFR 275.205-3 - Exemption from the compensation prohibition of section 205(a)(1) for investment advisers (qualified client)](https://www.law.cornell.edu/cfr/text/17/275.205-3). U.S. Securities and Exchange Commission (CFR text via eCFR; LII mirror), eCFR current as of 2026-09-29; last amended 86 FR 62475 (2021-11-10). Status: in force (checked 2026-10-01). 17 CFR 275.205-3(d)(1)(ii)(B) — supports: Qualified purchasers are qualified clients - [17 CFR 230.501 - Definitions and terms used in Regulation D (accredited investor)](https://www.law.cornell.edu/cfr/text/17/230.501). U.S. Securities and Exchange Commission (CFR text via eCFR; LII mirror), eCFR current as of 2026-09-29; last amended 2025-02-18 (technical, 90 FR 9684); last substantive amendment effective 2020-12-08 (85 FR 64234). Status: in force (checked 2026-10-01). 17 CFR 230.501(a)(11) — supports: Knowledgeable employees are accredited investors - [17 CFR 270.2a51-3 - Certain companies as qualified purchasers](https://www.law.cornell.edu/cfr/text/17/270.2a51-3). U.S. Securities and Exchange Commission (CFR text via LII), Current CFR text as published by LII (accessed 2026-10-01); source line 62 FR 17528, Apr. 9, 1997. Status: in force (checked 2026-10-01). 17 CFR 270.2a51-3(a)–(b) — supports: A company formed to invest in a 3(c)(7) fund is a qualified purchaser only if each beneficial owner is one; a company whose beneficial owners are all qualified purchasers may be deemed one - [15 U.S.C. 80b-5 - Investment advisory contracts (Advisers Act s.205)](https://www.law.cornell.edu/uscode/text/15/80b-5). U.S. Congress (US Code via LII), Current US Code text as published by LII (accessed 2026-10-01). Status: in force (checked 2026-10-01). Sec. 205(b)(4) — supports: Section 205(a)(1) does not apply to advisory contracts with 3(c)(7) funds - [17 CFR 230.144A - Private resales of securities to institutions (Rule 144A; qualified institutional buyer)](https://www.law.cornell.edu/cfr/text/17/230.144A). U.S. Securities and Exchange Commission (CFR text via eCFR; LII mirror), eCFR current as of 2026-09-29; last amended 2020-12-08. Status: in force (checked 2026-10-01). 17 CFR 230.144A(a)(1)(i) — supports: QIB $100 million owns-and-invests test ## Related terms 5 terms - [3(c)(7) Fund](https://altss.com/glossary/3-c-7-fund) - [Accredited Investor](https://altss.com/glossary/accredited-investor) - [Qualified Client](https://altss.com/glossary/qualified-client) - [Subscription Agreement (Subscription Documents)](https://altss.com/glossary/subscription-agreement) - [Family Office](https://altss.com/glossary/family-office) ## Referenced by 8 terms - [3(c)(1) Fund](https://altss.com/glossary/3-c-1-fund) - [Capital Commitment](https://altss.com/glossary/capital-commitment) - [SEC Family Office Rule (Rule 202(a)(11)(G)-1)](https://altss.com/glossary/family-office-rule) - [Hedge Fund](https://altss.com/glossary/hedge-fund) - [Institutional Investor](https://altss.com/glossary/institutional-investors) - [Limited Partner (LP)](https://altss.com/glossary/limited-partner) - [LP-Led Secondary](https://altss.com/glossary/lp-led-secondary) - [Single-Family Office (SFO)](https://altss.com/glossary/single-family-office) ## Concept record Concept ID ALTSS-REG-002 Classification Legal, regulatory & tax Topics Legal, regulatory & tax Jurisdiction US Version 2.0.0 Last reviewed 2026-10-02 Structured data [JSON](https://altss.com/reference/concepts/qualified-purchaser.json) Source check Legal and regulatory statements checked against the cited primary sources on 2026-10-02 ([how](https://altss.com/methodology)). General information, not advice. ## Canonical URL https://altss.com/glossary/qualified-purchaser