Accredited Investors, Qualified Clients, and Qualified Purchasers
Accredited Investor Representation
Flow’s Special Purpose Vehicles are designed for accredited investors. In order to be considered an accredited investor as an individual, the SEC requires you to have:
- Individual net worth (or joint net worth with your spouse), excluding your primary residence, greater than $1,000,000
or - Annual income greater than $200,000, or combined income with your spouse greater than $300,000, in each of the two most recent years, and a reasonable expectation of seeing at least the same level of income in the current year
Accreditation requirements are intended to ensure that investments involving higher amounts of capital or risk are accessible only to investors with a high level of financial sophistication. Other ways in which the investing entity can qualify as an accredited investor include if the investor is a trust, employee benefit plan, or corporation with assets over $5,000,000; if the investor is a registered broker and investment advisor; if the investor is a bank, insurance, or investment company; or if all equity owners of the investing entity are themselves accredited.
Qualified Client Representation
The Investor is a “ qualified client” (within the meaning of Rule 205-3 under the Advisers Act), if any of the following are true with respect to the Investor:
(a) The Investor is a natural person, trust or a company that has made a Capital Commitment of at least $1,100,000.
(b) The Investor is a natural person (together with assets held jointly with a spouse), trust or a company that has a net worth of more than $2,200,000.
(c) The Investor is a Qualified Purchaser (within the meaning of Section 2(a)(51) under the Companies Act) (see Exhibit C).
Notwithstanding the foregoing, if the Investor is a company that (i) would be an “ investment company” under the Companies Act but for the exception provided from that definition by section 3(c)(1) of the Companies Act, (ii) is an investment company registered under the Companies Act, or (iii) is a “business development company,” as defined in section 202(a)(22) of the Advisers Act (each, an “Excluded Company”), all of the Investor’s equity owners must be “qualified clients” (as described above) and if any of the Investor’s equity owners is an Excluded Company, such equity owners must also “qualified clients” (as described above) in order for the Investor to be deemed a “qualified client.”
Qualified Purchaser Representation
The Investor is a “ qualified purchaser” (within the meaning of Section 2(a)(51) under the Companies Act), if any of the following are true with respect to the Investor:
(a) The Investor is an individual (including any person who is acquiring the Interest with his or her spouse in a joint capacity, as community property or similar shared interest) who either individually or together with the Investor’s spouse, owns Investments that are Valued at not less than $5,000,000.
(b) The Investor is an entity that owns Investments that are Valued at not less than $5,000,000 and is owned directly or indirectly by two (2) or more natural persons related as siblings, spouses (including former spouses) or direct lineal descendants by birth or adoption, spouses of such persons, the estates of such persons, or foundations, charitable organizations or trusts established by or for the benefit of such persons.
(c) The Investor is a trust not covered by clause (b) above and not formed for the specific purpose of acquiring the Interest, as to which the trustee or other person authorized to make decisions with respect to the trust and each settlor or other person who has contributed assets to the trust is a person described in clause (a) or (b) above or clause (d) below.
(d) The Investor is an entity, acting for its own account or the accounts of others described in clause (a), (b) or (c) above, this clause (d) or clause (e) below, that in the aggregate owns and invests on a discretionary basis Investments that are Valued at not less than $25,000,000.
(e) The Investor is an entity, all of the outstanding securities of which are owned by persons or entities described in clause (a), (b), (c) or (d) above or this clause (e).
(f) The Investor is a “ qualified institutional buyer” as defined in paragraph (a) of Rule 144A under the Securities Act, acting for its own account, the account of another qualified institutional buyer, or the account of a qualified purchaser; provided that (i) a dealer described in paragraph (a)(1)(ii) of Rule 144A must own and invest on a discretionary basis at least $25,000,000 in securities of issuers that are not affiliated persons of the dealer and (ii) a plan referred to in paragraph (a)(1)(i)(D) or (a)(1)(i)(E) of Rule 144A, or a trust fund referred to in paragraph (a)(1)(i)(F) of Rule 144A that holds the assets of such a plan, will not be deemed to be acting for its own account if investment decisions with respect to the plan are made by the beneficiaries of the plan, except with respect to investment decisions made solely by the fiduciary, trustee or sponsor of such plan.
Qualified Purchaser Representation (Part II). If one of the representations set forth in clauses (b) through (f) in Part I above are true and the Investor would be treated as an “ investment company” under the Companies Act but for the fact that the Investor qualifies for one of the exemptions from the definition of “investment company” provided for in Sections 3(c)(1) or 3(c)(7) of the Companies Act, in order for the Investor to indicate that it is a “qualified purchaser” the Investor certifies that the Investor has read and understands the provisions of Section 2(a)(51)(C) of the Companies Act and Rule 2a51-2 promulgated under the Companies Act excerpted on Exhibit E hereto and can make one of the following representations:
(a) No consent of the Investor’s direct or indirect beneficial owners is required for the Investor’s treatment as a “ qualified purchaser” (within the meaning of Section 2(a)(51) under the Companies Act) with respect to the Fund.
(b) Both of the following are true (NOTE – this representation is only required if Investor was formed on or before April 30, 1996): (A) all of the beneficial owners of the Investor’s outstanding securities (other than short-term paper), determined in accordance with Section 3(c)(1)(A) of the Companies Act, that acquired such securities on or before April 30, 1996 have consented to the Investor’s treatment as a “qualified purchaser” under the Companies Act with respect to the Fund; and (B) each direct and indirect owner of Investor who: (i) acquired its interest in Investor on or before April 30, 1996; and (ii) would be an “investment company” under the Companies Act but for the exclusions from the definition of “investment company” provided for in Sections 3(c)(1) or 3(c)(7) of the Companies Act, has consented to treatment of the Investor has a “qualified purchaser" under the Companies Act with respect to the Fund.
(c) If one of the representations set forth in clauses (b) or (c) in Part I above are true, all of the trustees, directors or Managers of the Investor have consented to the Investor’s treatment as a “ qualified purchaser” (within the meaning of Section 2(a)(51) under the Companies Act) with respect to the Fund.
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