Definition
A Qualified Purchaser is an investor meeting the heightened wealth threshold established in Section 2(a)(51) of the Investment Company Act of 1940, which enables a fund investing in securities to rely on the Section 3(c)(7) exemption from registration as an investment company if all of its investors are Qualified Purchasers. While the accredited investor standard under the Securities Act of 1933 focuses on income ($200K/year) and net worth ($1M+ excluding primary residence), the Qualified Purchaser standard is based exclusively on “investments” — the value of financial assets the investor owns and invests for their own account, explicitly excluding real estate, physical assets, and the investor’s primary residence. This pure financial wealth test sets the Qualified Purchaser bar substantially higher than the accredited investor standard, making Qualified Purchaser status the mark of the most financially sophisticated and wealthy individual investors and institutions.
An individual (or family company, as defined in the Act) qualifies as a Qualified Purchaser if they own not less than $5 million in “investments” — defined to include securities, real estate held for investment purposes (not personal use), commodity interests, financial contracts, and in certain cases interests in investment funds. A trust qualifies as a Qualified Purchaser if it is sponsored and managed exclusively by Qualified Purchasers. A company or other entity (other than a trust or family company) qualifies if it owns and invests, on a discretionary basis, not less than $25 million in investments. Notably, the Qualified Purchaser definition focuses on what the investor owns ($5M+ in investable assets), not on their income level — meaning a retired investor with substantial savings but low current income may be a Qualified Purchaser even without meeting any income threshold.
Key Facts
- BlackRock’s BUIDL (BlackRock USD Institutional Digital Liquidity Fund) is structured as a Section 3(c)(7) fund, meaning all investors must be Qualified Purchasers — the minimum investment is $5 million, aligned with the individual QP threshold.
- The Section 3(c)(7) exemption has no cap on the number of investors (unlike Section 3(c)(1), which is limited to 100 beneficial owners), enabling unlimited investor participation in tokenized 3(c)(7) funds once the qualified purchaser criterion is met.
- The $5 million investments threshold for individual Qualified Purchaser status applies to “investments” owned for the investor’s own account, which specifically excludes: the investor’s primary residence, consumer durables, and property held for personal use.
- Every Qualified Purchaser is automatically an accredited investor (because $5M+ in investments implies net worth well above $1M), but the converse is not true: an investor with a $1.2M net worth (mostly in home equity) may be accredited but not a Qualified Purchaser.
- The SEC historically required that funds relying on 3(c)(7) sell their securities through broker-dealers or other appropriate means; for tokenized 3(c)(7) funds, the use of a digital transfer agent (Securitize) with appropriate broker-dealer registration satisfies this requirement.
- Hamilton Lane’s tokenized SCOPE Plus fund (distributed via Securitize) has a $10,000 minimum investment but still requires Qualified Purchaser status — demonstrating that tokenization can lower the ticket size while maintaining the investor eligibility standard.
- Venture capital funds typically rely on either 3(c)(1) (fewer than 100 investors) or 3(c)(7) (unlimited qualified purchasers); growth equity and buyout funds primarily use 3(c)(7), making QP status the threshold for institutional private equity access.
Relevance to Tokenization
The Qualified Purchaser standard defines the investor universe for the institutional tokenized fund market — the segment of tokenization that has seen the most significant growth and institutional adoption in 2023-2026. BlackRock BUIDL, Hamilton Lane Scope, KKR’s healthcare fund tokenization, and similar products are all 3(c)(7) structures because they invest in securities (US Treasuries, private equity interests) and must either register as investment companies or qualify for an exemption. The 3(c)(7) exemption, requiring all investors to be Qualified Purchasers, provides the most flexible and scalable structure: no registration burden, no investor count limit, and the ability to raise unlimited capital from the most sophisticated institutional investors.
The commercial significance of the Qualified Purchaser standard for tokenization lies in the demographic of eligible investors. Approximately 3-4 million US households own $5M+ in investable financial assets — a much smaller group than the 13-16 million accredited investors, but a group that collectively controls a disproportionate share of total investable assets. Family offices, endowments, pension funds, insurance companies, sovereign wealth funds, and ultra-high-net-worth individuals — the primary participants in the private equity, hedge fund, and private credit markets — are predominantly Qualified Purchasers. These investors are also the most sophisticated evaluators of novel investment structures, the most likely to understand and accept blockchain-based asset representation, and the most likely to have the operational infrastructure to manage digital asset positions.
The longer-term question for tokenization advocates is whether the Qualified Purchaser standard, designed for the analog private fund market of the 1940s, is appropriate for blockchain-native investment products that could theoretically operate at any investment minimum. The $5 million threshold excludes the mass affluent market — the 60-70 million American households with $250,000-$5 million in investable assets — from 3(c)(7) tokenized fund products. For the democratization of private markets to extend beyond the top 1% to the top 5% of the wealth distribution, either the Qualified Purchaser standard must be modernized or alternative regulatory structures (Reg A+ registered fund, registered closed-end fund) must be used for the broader investor population.
Related entries: Accredited Investor, Investment Company Act of 1940, Qualified Custodian