Qualified Clients vs. Qualified Purchasers vs. Accredited Investors: What’s the Difference?
Written for investors and issuers. Updated on June 29, 2026
Why These Terms Matter
When you raise money from private investors, you cannot sell to just anyone. The SEC has three categories based on different wealth thresholds:accredited investors, qualified clients and qualified purchasers. Knowing these categories helps issuers decide who can invest and under which conditions.
Accredited investors – The 506(c) Standard
Accredited investors are people or companies who meet basic income or net‑worth tests. They can invest in most private placements under Regulation D. The requirements are:
- Income: One person must earn at least $200 000 per year for the last two years. A married couple must earn $300 000 together.
- Net worth: A person or couple must have more than $1 million in net assets, not including their primary home.
- Licences and roles: People who hold certain financial licences (Series 7, Series 65 or Series 82) or who are directors, executive officers or general partners of the issuing company also qualify.
- Entities: A business can be accredited if it owns more than $5 million in assets or if all its owners meet the accredited criteria.
Accredited investors can buy into funds that are limited to 100 or 250 investors.
Qualified Clients – For Performance Fees
Qualified clients fall under the Investment Advisers Act. Advisers can charge performance fees only if their clients meet these higher thresholds. On June 29, 2026 the tests become stricter:
- Assets under management: $1.4 million managed by the adviser (up from $1.1 million).
- Net worth: $2.7 million in net assets, not counting the primary home (up from $2.2 million).
- These new levels apply to contracts or fund subscriptions made after June 29, 2026. Until then, the lower numbers still apply. Some investors, like qualified purchasers or knowledgeable employees, are automatically treated as qualified clients.
Qualified Purchasers – The Highest Bar
Qualified purchasers meet the strictest standards. This category, created by the Investment Company Act of 1940, allows investors into 3(c)(7) funds that can take up to 2 000 investors. The wealth levels are much higher:
- Individuals: Own at least $5 million in investments such as stocks, bonds, or investment real estate. Primary homes and business assets do not count.
- Entities: Own at least $25 million in investments and were not formed just for a single fund.
- Family offices and trusts: Own $5 million in investments and have related people as owners.
Because the minimum is so high, most qualified purchasers are already accredited investors and qualified clients.
Comparing the Categories
Here is a quick summary:
| Category | Main Purpose | Key Thresholds | Main Law |
|---|---|---|---|
| Accredited Investors | Can take part in most private offerings under Regulation D. | $200k income for individuals, $300k income for couples, or $1 million net worth excluding the primary home. | Securities Act of 1933 |
| Qualified Clients | Allow advisers to charge performance-based fees. | $1.4 million under management or $2.7 million net worth starting in mid-2026. | Investment Advisers Act of 1940 |
| Qualified Purchasers | Can enter certain private funds, including 3(c)(7) funds with larger investor pools. | $5 million in investments for individuals or $25 million in investments for entities. | Investment Company Act of 1940 |
What Issuers and Investors Should Do
- Check status carefully: Issuers must verify status before deciding which category each investor falls into. Asking for tax returns, bank statements or proof of licenses helps verify status.
- Update documents: The qualified client thresholds will change on June 29, 2026. Update subscription forms and contracts to reflect the new amounts.
- Choose the right investors: Accredited investors are enough for many private placements. To charge performance fees, make sure investors are qualified clients. For more exclusive funds, you need qualified purchasers.
- Record keeping: Keep clear records of how each investor was verified. This protects issuers in case of audits.
For most 506(c) offerings, accredited investor status is the key category issuers need to confirm before accepting capital. Using an accredited investor verification service can help sponsors manage this step more clearly, especially when investors have different income, net-worth or entity structures.
Conclusion
Accredited investors, qualified clients, and qualified purchasers are three separate groups, each with its own financial thresholds and legal standards. Accredited status is the primary standard most 506(c) issuers need to verify before accepting capital. Qualified clients need a higher net worth or assets under management and allow advisers to charge performance fees. Qualified purchasers have the highest thresholds. Understanding these categories helps issuers comply with SEC rules and choose the right investors.
Frequently Asked Questions:
An accredited investor meets income or $1M net worth thresholds and verification is required for Regulation D 506(c) offerings. A qualified client has $2.7M net worth or $1.4M with an adviser, allowing performance fees. A qualified purchaser has $5M in investments and is typically required for certain private funds.
Yes. Qualified purchaser is based on investments owned, while accredited investor is based on income or net worth. Many qualified purchasers are also accredited, but the definitions don’t perfectly overlap.
You typically need to be a qualified client if an adviser has a performance fee. If you’re not a qualified client, performance-based compensation is generally restricted.
For individuals, a qualified purchaser generally means $5M+ in investments (as defined under the Investment Company Act). Some entities and managers can qualify under different tests, so it’s not always just the $5M individual standard.
A 3(c)(1) fund is typically offered to accredited investors and is capped at 100 beneficial owners. A 3(c)(7) fund generally requires investors to be qualified purchasers, which is a higher standard and changes who you can admit.
