For purposes of the Investment Company Act of 1940, as amended (ICA), an entity that falls within the meaning of Section 2(a)(51) of the ICA, which generally includes:
Any natural person (including any person who holds a joint, community property, or other similar shared ownership interest in an issuer that is excepted under Section 3(c)(7) of the ICA with that person's qualified purchaser spouse) who owns not less than $5 million in investments, as defined by ICA Rule 2a51-1 (17 C.F.R. § 270.2a51-1).
Any company that owns not less than $5 million in investments and that is owned directly or indirectly by or for two or more natural persons who are related as siblings, as a spouse (including former spouses), direct lineal descendants by birth or adoption, spouses of these persons, the estates of these persons, foundations, charitable organizations, or trusts established by or for the benefit of these persons.
Any trust that is not covered by the second bullet above and that was not formed for the specific purpose of acquiring the securities offered, in which the trustee or other person authorized to make decisions for the trust, and each settler or other person who has contributed assets to the trust, is a person described in the first, second, or fourth bullets.
Any person, acting for its own account or the accounts of other qualified purchasers, who in the aggregate owns and invests on a discretionary basis, not less than $25 million in investments.
(ICA Section 2(a)(51)(A) (15 U.S.C. § 80a-2(a)(51)(A)).)
Any qualified institutional buyer (QIB) as defined in Rule 144A under the Securities Act of 1933, as amended, acting for its own account, the account of another QIB, or the account of a qualified purchaser, provided that:
a dealer described in Rule 144A(a)(1)(ii) must own and invest on a discretionary basis at least $25 million in securities of issuers that are not affiliated persons of the dealer; and
a plan referred to in Rule 144A(a)(1)(D) or (E), or a trust fund referred to in Rule 144A(a)(1)(F) that holds the assets of that plan, will not be deemed to be acting for its own account if investment decisions concerning the plan are made by the beneficiaries of the plan, except for investment decisions made solely by the fiduciary, trustee, or sponsor of that plan.
(ICA Rule 2a51-1(g)(1) (17 C.F.R. § 270.2a51-1(g)(1)).)
Any company, if each beneficial owner of the company's securities is a qualified purchaser (ICA Rule 2a51-3(b) (17 C.F.R. § 270.2a51-3(b))).
Any natural person who is deemed to be a "knowledgeable employee" of a Section 3(c)(7) fund, as that term is defined in ICA Rule 3c-5(a)(4) (17 C.F.R. § 270.3c-5(a)(4)) and (ICA Rule 3c-5(b) (17 C.F.R. § 270.3c-5(b))).
Certain persons who receive securities in a Section 3(c)(7) fund from a qualified purchaser as a gift, bequest, or due to certain other involuntary events (ICA Section 3(c)(7)(A) (15 U.S.C. § 80a-3(c)(7)(A)) and (ICA Rule 3c-6) (17 C.F.R. § 270.3c-6)).
However, the term "qualified purchaser" does not include any company that, but for the exceptions provided for in Sections 3(c)(1) or 3(c)(7) of the ICA, would be an investment company (excepted investment company), unless all beneficial owners of its outstanding securities (other than short-term paper), determined in accordance with Section 3(c)(1)(A) of the ICA, that acquired these securities on or before April 30, 1996 (pre-amendment beneficial owners), and all pre-amendment beneficial owners of the outstanding securities (other than short-term paper) or any excepted investment company that, directly or indirectly, owns any outstanding securities of that excepted investment company, have consented to its treatment as a qualified purchaser. (ICA Section 2(a)(51)(C) (15 U.S.C. § 80a-2(a)(51)(C)).)
For more information, see Practice Note, Investment Company Act of 1940 Exceptions: Guide for Transactional Lawyers.
