What is a Qualified Client or a Qualified Purchaser?

Generally, every investor in a private fund will need to be an accredited investor. However, there are other tiers of investor designations that impact different exemptions outlined by the SEC. 

Therefore, while every investor who invests through the CrowdStreet Marketplace will need to qualify as an accredited investor, some deals might require other investor qualifications.

What is a Qualified Client?

The definition of “Qualified Client” is found in the Investment Advisers Act of 1940 (specifically 17 C.F.R. § 275.205-3). In order to be considered a qualified client, you must meet one of the following criteria:

  • You are an individual or company with $1 million in assets under management with the advisor immediately after entering into an investment advisory contract with the advisor;
  • You are an individual who has a net worth of more than $2.1 million, either by themselves or jointly with their spouse, immediately before entering into an advisory contract (excluding primary residence);
  • You meet the definition of a "qualified purchaser" (definition below);
  • You are an executive officer, director, trustee, general partner, or person serving in a similar capacity of the advisor; or
  • You are an employee of the advisor who participates in the investment activities of the advisor (or similar company), and have done so for at least 12 months.

What is a Qualified Purchaser?

The definition of “Qualified Purchaser” is found in the Investment Company Act of 1940 (specifically, 15 U.S.C. § 80a-2(a)(51)).  In order to be considered a qualified purchaser, you must meet one of the following criteria:

  • You are an individual who owns $5,000,000 or more in investments (as defined by the SEC) (excluding a primary residence or business property). Investments can include stocks, bonds, futures contracts, real estate, etc. 
  • You are a family-company that owns $5,000,000 or more in investments (as defined by the SEC) not formed for the specific purpose of acquiring the securities offered. 
  • You are an entity which is owned entirely by qualified purchasers.
  • You are a trust that (a) was not formed for specific purpose of acquiring the securities offered, and (b) as to which the trustee and each settlor who contributed assets to the trust is a qualified purchaser.
  • You are a person or a company, acting for your own account or on the account of other qualified purchasers, who in the aggregate owns and invests on a discretionary basis at least $25,000,000 in investments, not formed for the specific purpose of acquiring the securities offered. 
  • You are a qualified institutional buyer.