An accredited investor and a qualified purchaser are both income and asset tests used to decide who can invest in a private deal, but they come from different laws and set very different bars. Accredited investor status, defined under Regulation D, generally requires income above $200,000 a year, or $300,000 with a spouse, or net worth above $1 million excluding a primary residence. Qualified purchaser status, defined under the Investment Company Act, generally requires at least $5 million in investments for an individual, a far higher bar that exists for a different reason: it controls how many investors a fund can have, not whether the offering itself is exempt from registration.
Fund managers run into both tests because they answer two separate questions. The accredited investor standard decides who can buy into a private offering under Regulation D. The qualified purchaser standard decides which Investment Company Act exclusion a fund or SPV can rely on to avoid being regulated as a mutual fund, and how many investors it can have.
This guide compares the two tests directly, explains why a fund needs both, and works through how they interact for a single SPV.
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Accredited investor vs. qualified purchaser at a glance
| Accredited investor | Qualified purchaser | |
|---|---|---|
| Governing law | Securities Act, Regulation D | Investment Company Act of 1940 |
| Individual threshold | $200,000 income ($300,000 with spouse) or $1 million net worth excluding primary residence | At least $5,000,000 in investments |
| What it controls | Who can buy in a Regulation D private offering | Whether a fund can use the Section 3(c)(7) exclusion, and its investor cap |
| Entity threshold | Varies by entity type, generally $5 million in assets or all owners accredited | At least $5,000,000 in investments for family companies, or $25,000,000 managed on a discretionary basis |
| Verification | Reasonable belief (506(b)) or reasonable steps to verify (506(c)) | Fund manager’s own diligence at subscription |
What makes someone an accredited investor
Under Rule 501 of Regulation D, an individual is accredited if their income exceeded $200,000 in each of the last two years, or $300,000 jointly with a spouse, with a reasonable expectation of reaching the same level this year. An individual also qualifies with a net worth above $1 million, excluding the value of a primary residence. Entities qualify through several paths, including holding at least $5 million in investments or being owned entirely by accredited investors. This is the test that governs private placements under Rule 506(b) and 506(c) of Regulation D.
What makes someone a qualified purchaser
The qualified purchaser definition sits in the Investment Company Act rather than the securities registration rules. An individual qualifies by owning at least $5,000,000 in investments, and family companies owned by related individuals qualify at the same $5,000,000 threshold. A person or entity investing on a discretionary basis for itself or other qualified purchasers needs at least $25,000,000 in investments under its management. This standard exists to decide which funds can rely on the Section 3(c)(7) exclusion from being regulated as an investment company, rather than to decide who can buy a security in the first place.
Why a fund or SPV needs to think about both
Every SPV that pools investor money into securities is potentially an investment company under the Investment Company Act unless it fits an exclusion. Most SPVs rely on Section 3(c)(1), which caps the vehicle at 100 beneficial owners and only requires those owners to meet the accredited investor standard, not the higher qualified purchaser bar. A fund that instead relies on Section 3(c)(7) has no fixed cap on the number of owners, but every single investor must be a qualified purchaser, a much smaller pool of people and entities than accredited investors. See who can invest into SPVs for the broader eligibility picture, and Fund vs SPV: The Strategic Choice if you are still deciding on the vehicle itself.
Can an accredited investor also be a qualified purchaser
Yes, and in practice most qualified purchasers are also accredited investors, since the qualified purchaser thresholds are well above the accredited investor thresholds. The reverse is not true: plenty of accredited investors, particularly those who qualify on income rather than a large investment portfolio, do not hold the $5 million in investments needed to be a qualified purchaser.
A worked example of how the two tests interact
For example, suppose a fund manager is forming an SPV to hold $8 million from 40 investors. If every investor meets the accredited investor standard, the SPV can rely on Section 3(c)(1), as long as it stays under the 100 beneficial owner cap. If the manager instead wants to accept more than 100 investors, or expects a large institutional allocator later, the SPV would need to rely on Section 3(c)(7) instead, which means screening every investor for the $5,000,000 qualified purchaser threshold rather than the lower accredited investor bar, likely shrinking the pool of eligible investors substantially.
Both tests also matter when an SPV is admitting an institutional investor rather than an individual, since limited partners in private equity can be entities that qualify under either test through a different path than a natural person would.
What documentation each test typically requires
Accredited investor status under Rule 506(b) can usually be confirmed with an investor questionnaire and a reasonable belief standard. Under 506(c), the sponsor must take reasonable steps to verify the status, often through tax documents, an asset statement, or a letter from a CPA, attorney, or registered broker dealer. Qualified purchaser status is typically confirmed through a subscription document representation backed by an account statement, since there is no equivalent third party verification requirement written into the rule itself.
The paperwork burden also differs in a practical way that catches new fund managers off guard. An accredited investor under 506(b) can often complete onboarding with a single signed questionnaire, while a 506(c) raise or a qualified purchaser representation both tend to require a follow up document, whether that is a verification letter, a brokerage statement, or a schedule of the investor’s own holdings. Building that extra step into the onboarding timeline, rather than treating it as an afterthought once documents are already out, keeps a closing date from slipping because one investor’s file is incomplete.
Frequently asked questions
What is the difference between an accredited investor and a qualified purchaser?
An accredited investor meets an income or net worth test under Regulation D that governs who can invest in a private placement. A qualified purchaser meets a much higher investment portfolio test under the Investment Company Act that governs which exclusion a fund can rely on and how many investors it can have.
Can an accredited investor be a qualified purchaser?
Yes. The two tests are not mutually exclusive, and most people who meet the $5 million qualified purchaser threshold also meet the lower accredited investor thresholds. Meeting one does not automatically mean meeting the other.
What are the requirements for a qualified purchaser?
An individual generally needs at least $5,000,000 in investments. Family companies owned by related individuals need the same $5,000,000 threshold, and a person or entity investing on a discretionary basis for other qualified purchasers needs at least $25,000,000 under management.
How Syndicately fits
Syndicately’s investor onboarding runs KYC and AML checks and helps confirm accredited status through documents, a CPA letter, or a FINRA license number, whichever fits your SPV’s exemption and Investment Company Act exclusion. Book a demo to see how onboarding adapts to a 3(c)(1) or 3(c)(7) structure.
This article is general information, not legal, tax, or investment advice. Which test applies, and which exclusion your vehicle should rely on, depends on your specific structure, so confirm both with securities counsel.
