Section 3(c)(7) Funds
Section 3(c)(7) of the Investment Company Act provides an exemption for private hedge funds from registration as an Investment Company. Like Section 3(c)(1) it is an important exemption that alleviates many of the reporting burdens that the Investment Company Act can place on asset managers.
To qualify for the 3(c)(7) exemption, a private hedge fund must show that: (a) the fund hasn’t any intention of making an initial public offering of its interests and (b) that every investor in the hedge fund are “qualified purchasers”. A “qualified purchaser” is a higher standard than the traditional “accredited investor” standard, requiring investors to have at least $5 million in liquid investments.
Moreover, while 3(c)(1) hedge funds are capped at 100 investors, a 3(c)(7) hedge fund can take up to 2,000 investors before registration under the Investment Company Act is required
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