Sep/30/2019

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

Trust our over twenty-five years’ experience in creating innovative fund solutions for our clients. Contact the hedge fund formation experts at Wabash Advisors to begin the process of starting your hedge fund today. Our knowledgeable and skilled professionals are happy to answer all of your questions. Call (213) 262-9112 for your free consultation or contact us here.

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