The SEC’s definition of a qualified purchaser is based on the value of an individual or entity’s investments. To be considered a qualified purchaser, at least one of the following criteria must be met:
- The purchaser is an individual or family-owned business that owns $5 million or more in investments. If the purchaser is a family owned business, it cannot be formed solely for the purpose of investing in the fund.
- The purchaser is a trust sponsored and managed by qualified purchasers, which was not formed for the sole purpose of investing in the fund.
- The purchaser is an individual or entity that invests at least $25 million, either for their own accounts or on behalf of others. Entities cannot have been formed for the specific purpose of investing in the fund.
- Any entity, if all owners are qualified purchasers.
Qualified purchasers differ from accredited investors in that the financial thresholds for accredited investors are lower than those of qualified purchasers. Accredited investors are required to have a net worth, excluding their primary residence, of more than $1 million, or must have earned an income of over $200,000 ($300,000 combined with a spouse) annually for at least three years.