# Hedge Fund Subscription Agreement Reviewer Checklist[^about] A section-by-section reviewer checklist for a hedge fund subscription agreement, a hedge fund here meaning an open-end private investment fund organized as a Delaware limited partnership and relying on Section 3(c)(1): the subscription and admission mechanics, the investor's eligibility representations, the compliance information the fund collects, the limits on what the investor gives up, and the changes needed when the investment manager is organized outside the United States. This checklist is written first for the manager of an emerging or small hedge fund who is preparing the subscription agreement, and second for a smaller investor reading it without counsel of their own. A manager uses the items to keep the agreement consistent with the fund's limited partnership agreement and private placement memorandum and to collect what the fund needs to admit an investor. An investor uses the same items to see what it is representing, what it is agreeing to, and what it is not being asked to give up. Every item reads a subscription agreement for a fully funded, open-end U.S. private investment fund, testing its content and its consistency with the fund's other documents. The investor questionnaire has its own [reviewer checklist](/checklists/fund-formation/hedge-fund-investor-questionnaire). The [hedge fund formation practice guide](/practice-guides/fund-formation/us/hedge-funds) explains the Securities Act, Investment Company Act, and Investment Advisers Act rules behind the items. Completing it does not establish an exemption from registration or compliance with any law, which remain judgments for counsel. ## Subscription and admission {#subscription-and-admission} - [ ] **Shared deal terms taken from the partnership agreement, not restated** (Recommended) — Confirm that the fund name, general partner, manager, minimum investment, and subscription date in the agreement are the same values the limited partnership agreement and memorandum use, and that the agreement refers to the partnership agreement for everything it does not need to repeat, such as withdrawal rights, fees, transfers, and dispute resolution. A subscription agreement that restates a partnership-agreement term in its own words creates a second version of the term that can drift when the partnership agreement is amended. [#use-the-partnership-agreement-terms] - [ ] **Document and funding deadlines stated, with funds from the investor's own account** (Recommended) — Confirm the agreement says when completed documents and cleared funds must arrive before a subscription date, how funds are sent, and that they come from an account in the investor's own name. Confirm it says what happens to funds received before the subscription date. An open-end fund admits investors on recurring dates, so a deadline that is missing or inconsistent with the memorandum leaves the administrator to decide which date an investor's money is invested on. [#state-the-subscription-deadlines-and-funding] - [ ] **General partner may accept or reject in whole or part; rejected funds returned** (Recommended) — Confirm the general partner may accept or reject a subscription in whole or in part, including when the investor does not supply identity or eligibility information, and that rejected funds are returned promptly. Confirm the agreement binds the fund only on acceptance, and that the subscription is irrevocable by the investor once delivered, so the fund can rely on it while it completes its checks. [#reserve-acceptance-and-rejection] - [ ] **Admission and joinder to the partnership agreement, which governs conflicts** (Recommended) — Confirm the agreement states when the investor is admitted, in terms that match the partnership agreement's admission clause, that the investor then becomes bound by the partnership agreement, and that the partnership agreement governs if the two conflict. Delaware law lets a person be admitted as a limited partner as the partnership agreement provides, so the subscription agreement should point to that clause rather than create a different admission test. [^delaware-admission-of-limited-partners] [#join-the-partnership-agreement-on-admission] ## Eligibility representations {#eligibility-representations} - [ ] **Every admission condition in the partnership agreement has a matching representation** (Recommended) — Read the investor-eligibility clause of the limited partnership agreement and confirm that the subscription agreement and questionnaire ask for the facts behind every condition it imposes, and no stricter one: accredited-investor status, or the alternative eligibility route under the exemption the offering relies on where the partnership agreement allows one; qualified-client status where the partnership agreement requires it, including for equity owners that Rule 205-3 treats as clients; and qualified-purchaser status if the fund relies on Section 3(c)(7). Confirm the subscription agreement offers no waiver of a screen that the partnership agreement makes non-waivable. [#match-the-partnership-agreement-eligibility-screens] - [ ] **Rule 506(c) offering: reasonable steps to verify accredited status** (Required) — If the fund offers its interests under Rule 506(c), every purchaser must be an accredited investor and the fund must take reasonable steps to verify that status. Confirm the subscription process includes a verification step beyond the investor's own questionnaire answers, and that the agreement's no-general-solicitation representation is not used in a Rule 506(c) offering, where general solicitation is permitted. [^rule-506c-all-accredited] [^rule-506c-verification] [#verify-accredited-status-in-a-rule-506c-offering] - [ ] **Registered adviser charging a performance allocation: qualified-client representation** (Required) — If the manager is registered or required to be registered with the Commission and the fund charges a performance allocation, an investor in a Section 3(c)(1) fund who bears that allocation must be a qualified client, and, for an investor that is itself a private investment company, registered investment company, or business development company, each equity owner that bears the allocation is treated as the client. Confirm the agreement obtains that representation and the questionnaire collects the facts behind it. A side-letter waiver of the fund's contractual screen cannot relax this legal requirement. [^advisers-act-205-a-1] [^qualified-client-exemption] [^qualified-client-look-through] [#limit-performance-compensation-to-qualified-clients] - [ ] **Facts needed to count beneficial owners under Section 3(c)(1)** (Recommended) — A Section 3(c)(1) fund must stay at or below one hundred beneficial owners, and an investing company that holds 10% or more of the fund's voting securities and is itself an investment company, or would be but for Section 3(c)(1) or 3(c)(7), is counted by looking through to its own holders. Confirm the agreement requires the investor to answer the questionnaire's ownership questions and to report changes, so the general partner can keep the count. [^section-3c1-limit] [^section-3c1-look-through] [#collect-beneficial-owner-count-information] - [ ] **Representations about facts the investor knows, not legal conclusions** (Recommended) — Check that each representation asks the investor to confirm facts it knows or can determine, such as its net worth, its owners, the form it filed, or an event in its history, and that the general partner applies the legal definitions to those facts. A bare representation that the investor is not a restricted person, or not a benefit plan investor, with no underlying facts, asks for a legal conclusion the investor may not be able to reach and gives the fund little to rely on when the answer is wrong. [#ask-for-facts-not-legal-conclusions] ## Compliance information {#compliance-information} - [ ] **Rule 506(d): factual inquiry of any investor that will hold 20% or more** (Required) — Rule 506 is unavailable if a covered person, which includes a beneficial owner of 20% or more of the issuer's outstanding voting equity securities calculated on the basis of voting power, has a disqualifying event. The reasonable-care exception requires factual inquiry. If an investor, or a person owning through it, could reach that threshold, confirm the subscription documents identify each such person and ask the disqualification questions of each, and require updates. [^rule-506d-covered-persons] [^rule-506d-factual-inquiry] [#make-factual-inquiry-for-rule-506d] - [ ] **Benefit plan status collected to monitor the 25% test** (Recommended) — Where the fund relies on keeping benefit-plan-investor participation below 25% of each class, as the family memorandum states, confirm the agreement and questionnaire collect each investor's benefit plan status and, for an investing entity, the share of its equity held by benefit plan investors. Confirm a plan investor represents that an independent fiduciary made the decision to invest. [^plan-asset-25-percent-test] [#collect-benefit-plan-status] - [ ] **Form W-9 or W-8 and FATCA and CRS self-certification required and kept current** (Recommended) — Confirm the agreement requires a Form W-9 from a United States person or the applicable Form W-8 from anyone else, any Foreign Account Tax Compliance Act and Common Reporting Standard self-certification the fund needs, and prompt updates when information changes. Confirm withholding and the charging of taxes to an investor follow the partnership agreement rather than a separate rule in the subscription agreement. [#collect-tax-forms] - [ ] **Identity, beneficial ownership, sanctions, and source-of-funds information** (Recommended) — Confirm the agreement obtains the investor's representations on the lawful source of its funds and sanctions status, requires the identity and beneficial-ownership information the fund's procedures call for, and lets the general partner reject, block, or compel withdrawal of an investment when the law requires it. FinCEN has postponed its anti-money-laundering program rule for registered and exempt reporting investment advisers to January 1, 2028, so the agreement should describe the fund's actual onboarding practice rather than an obligation that is not yet in force. [^fincen-adviser-aml-postponement] [#collect-anti-money-laundering-information] - [ ] **FINRA Rule 5130 and 5131 status collected before the fund buys new issues** (Recommended) — If the fund may buy initial public offerings, the selling broker-dealer must obtain a representation about the accounts it sells to, so the fund needs each investor's status under FINRA Rule 5130 and Rule 5131. Confirm the agreement relies on the questionnaire answers, requires updates, and lets the general partner treat an investor as ineligible until it answers, consistent with the partnership agreement's new-issue allocation clause. [^finra-5130-restriction] [^finra-5131-spinning] [#collect-new-issue-status] - [ ] **Public-records status disclosed and handled** (Recommended) — Confirm the agreement asks whether the investor is subject to the Freedom of Information Act or a state public-records law, requires notice of any request for fund information, and allows the general partner to limit the confidential information it gives that investor. Public pension plans and university endowments are the usual cases. [#address-public-records-laws] ## What the investor gives up {#what-the-investor-gives-up} - [ ] **Power of attorney limited to signing the partnership agreement** (Recommended) — Check the scope of any power of attorney in the subscription agreement. A grant limited to executing a counterpart signature page to the partnership agreement does what the subscription needs; a grant that also reaches recording instruments, amendments, litigation, and any filing the general partner considers advisable duplicates, and can widen, the power of attorney in the partnership agreement itself. Confirm the subscription agreement neither expands nor narrows the partnership agreement's own power of attorney. [#limit-the-power-of-attorney] - [ ] **Investor indemnity limited to untrue representations and capped** (Recommended) — Check what the investor indemnifies and up to what amount. An indemnity limited to losses from representations that were untrue when made, and capped at the amount subscribed, gives the fund recourse for the harm a false eligibility answer causes without exposing the investor to open-ended liability for the fund's own compliance. An uncapped indemnity for any breach of any covenant is the term an investor's counsel is most likely to push back on. [#cap-the-investor-indemnity] - [ ] **Fund-side representations and investor concessions left to negotiation** (Optional) — A manager-side form may omit representations by the fund or general partner to the investor, most-favored-nation rights, and other investor concessions, leaving an investor to ask for them in a side letter. Some filed forms include fund-side representations about formation, authority, and compliance of the offering. If the form omits them, the memorandum and partnership agreement are the investor's only statements from the fund, so check that they say what the investor needs to rely on. [#leave-investor-concessions-to-side-letters] ## Investment manager outside the United States {#investment-manager-outside-the-united-states} - [ ] **Drafting note: a manager organized and regulated outside the United States** (Recommended) — Where a Delaware fund's investment manager is organized and regulated outside the United States, for example a European manager, first confirm where its principal office and place of business is, since the non-U.S. private fund adviser exemption turns on that rather than on where the manager is organized, and then establish its status under the Investment Advisers Act. It may be registered with the Commission; an exempt reporting adviser under the non-U.S. private fund adviser exemption, which requires that it have no U.S.-person client other than qualifying private funds and less than $150 million in private fund assets managed from a U.S. place of business; or a foreign private adviser, which has no U.S. place of business, fewer than 15 U.S. clients and investors in its private funds, and less than $25 million attributable to them. Then check these points in the subscription documents: 1. Section 205(a)(1) reaches only an adviser registered or required to be registered with the Commission, so for a manager that is neither, the qualified-client representation screens a contractual admission condition, not a legal one. Keep it if the partnership agreement requires it. 2. Identify the investment manager correctly in the Rule 506(d) covered-person inquiry, which reaches the investment manager of a pooled investment fund wherever it is organized. 3. Replace references to a U.S. adviser's regulatory documents, such as delivery of Form ADV Part 2, with whatever the manager's home regulator requires, and describe the manager's actual status in the memorandum. 4. Add the notices the manager's home law requires when it processes investor data, such as a privacy notice, and confirm the anti-money-laundering representations match both the fund's U.S. procedures and the manager's home-country obligations. [^foreign-private-adviser-exemption] [^foreign-private-adviser-definition] [^non-us-private-fund-adviser-exemption] [^advisers-act-205-a-1-scope] [#adjust-for-a-non-us-investment-manager] [^about]: By Steven Obiajulu, J.D. Published by [openagreements.org](https://openagreements.org). Last reviewed 2026-09-30. License: CC BY 4.0. Steven Obiajulu, J.D. edits this reviewer checklist for U.S. hedge fund subscription agreement for a fully funded, open-end fund, read with its limited partnership agreement and private placement memorandum. Not a closed-end drawdown fund such as a private equity fund coverage. It synthesizes legal sources and is not legal advice. This article is for informational purposes only and does not create an attorney-client relationship. Source excerpts and linked materials belong to their owners. CC BY 4.0. Cite as Steven Obiajulu, *Hedge Fund Subscription Agreement Reviewer Checklist*, OpenAgreements (last updated September 30, 2026), https://openagreements.org/checklists/fund-formation/hedge-fund-subscription-agreement. [^delaware-admission-of-limited-partners]: **Delaware Revised Uniform Limited Partnership Act § 17-301(b), 6 Del. C. § 17-301(b)** — "After the formation of a limited partnership, a person is admitted as a limited partner of the limited partnership: (1) In the case of a person who is not an assignee of a partnership interest, including a person acquiring a partnership interest directly from the limited partnership and a person to be admitted as a limited partner of the limited partnership without acquiring a partnership interest in the limited partnership, at the time provided in and upon compliance with the partnership agreement or, if the partnership agreement does not so provide, upon the consent of all partners or as otherwise provided in the partnership agreement;" *6 Del. C. § 17-301(b)(1).* [^rule-506c-all-accredited]: **17 CFR 230.506(c)(2)(i): Purchasers in a Rule 506(c) offering** — "All purchasers of securities sold in any offering under paragraph (c) of this section are accredited investors." *17 C.F.R. § 230.506(c)(2)(i).* [^rule-506c-verification]: **17 CFR 230.506(c)(2)(ii): Verification of accredited-investor status** — "The issuer shall take reasonable steps to verify that purchasers of securities sold in any offering under paragraph (c) of this section are accredited investors." *17 C.F.R. § 230.506(c)(2)(ii).* [^advisers-act-205-a-1]: **Investment Advisers Act of 1940 § 205(a)(1), 15 U.S.C. § 80b-5(a)(1)** — "No investment adviser registered or required to be registered with the Commission shall enter into, extend, or renew any investment advisory contract, or in any way perform any investment advisory contract entered into, extended, or renewed on or after November 1, 1940, if such contract- (1) provides for compensation to the investment adviser on the basis of a share of capital gains upon or capital appreciation of the funds or any portion of the funds of the client;" *15 U.S.C. § 80b-5(a)(1).* [^qualified-client-exemption]: **17 CFR 275.205-3(a): Qualified-client exemption** — "The provisions of section 205(a)(1) of the Act (15 U.S.C. 80b-5(a)(1)) will not be deemed to prohibit an investment adviser from entering into, performing, renewing or extending an investment advisory contract that provides for compensation to the investment adviser on the basis of a share of the capital gains upon, or the capital appreciation of, the funds, or any portion of the funds, of a client, Provided, That the client entering into the contract subject to this section is a qualified client, as defined in paragraph (d)(1) of this section." *17 C.F.R. § 275.205-3(a).* [^qualified-client-look-through]: **17 CFR 275.205-3(b): Identification of the client** — "In the case of a private investment company, as defined in paragraph (d)(3) of this section, an investment company registered under the Investment Company Act of 1940, or a business development company, as defined in section 202(a)(22) of the Act (15 U.S.C. 80b-2(a)(22)), each equity owner of any such company (except for the investment adviser entering into the contract and any other equity owners not charged a fee on the basis of a share of capital gains or capital appreciation) will be considered a client for purposes of paragraph (a) of this section." *17 C.F.R. § 275.205-3(b).* [^section-3c1-limit]: **15 U.S.C. § 80a-3(c)(1): Private-fund exclusion** — "Notwithstanding subsection (a), none of the following persons is an investment company within the meaning of this subchapter: (1) Any issuer whose outstanding securities (other than short-term paper) are beneficially owned by not more than one hundred persons (or, in the case of a qualifying venture capital fund, 250 persons) and which is not making and does not presently propose to make a public offering of its securities." *15 U.S.C. § 80a-3(c)(1).* [^section-3c1-look-through]: **15 U.S.C. § 80a-3(c)(1)(A): Company-investor look-through** — "Beneficial ownership by a company shall be deemed to be beneficial ownership by one person, except that, if the company owns 10 per centum or more of the outstanding voting securities of the issuer, and is or, but for the exception provided for in this paragraph or paragraph (7), would be an investment company, the beneficial ownership shall be deemed to be that of the holders of such company's outstanding securities (other than short-term paper)." *15 U.S.C. § 80a-3(c)(1)(A).* [^rule-506d-covered-persons]: **17 CFR 230.506(d)(1): Bad-actor disqualification** — "No exemption under this section shall be available for a sale of securities if the issuer; any predecessor of the issuer; any affiliated issuer; any director, executive officer, other officer participating in the offering, general partner or managing member of the issuer; any beneficial owner of 20% or more of the issuer's outstanding voting equity securities, calculated on the basis of voting power; any promoter connected with the issuer in any capacity at the time of such sale; any investment manager of an issuer that is a pooled investment fund; any person that has been or will be paid (directly or indirectly) remuneration for solicitation of purchasers in connection with such sale of securities; any general partner or managing member of any such investment manager or solicitor; or any director, executive officer or other officer participating in the offering of any such investment manager or solicitor or general partner or managing member of such investment manager or solicitor:" *17 C.F.R. § 230.506(d)(1).* [^rule-506d-factual-inquiry]: **17 CFR 230.506(d)(2)(iv) and instruction: Reasonable care** — "An issuer will not be able to establish that it has exercised reasonable care unless it has made, in light of the circumstances, factual inquiry into whether any disqualifications exist." *17 C.F.R. § 230.506(d)(2)(iv), instruction.* [^plan-asset-25-percent-test]: **29 CFR 2510.3-101(f)(1): Significant participation by benefit plan investors** — "Equity participation in an entity by benefit plan investors is ‘significant’ on any date if, immediately after the most recent acquisition of any equity interest in the entity, 25 percent or more of the value of any class of equity interests in the entity is held by benefit plan investors (as defined in paragraph (f)(2))." *29 C.F.R. § 2510.3-101(f)(1).* [^fincen-adviser-aml-postponement]: **FinCEN Issues Final Rule to Postpone Effective Date of Investment Adviser Rule to 2028** — "Today, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued a final rule to extend the effective date of the rule establishing Anti-Money Laundering/Countering the Financing of Terrorism Program and Suspicious Activity Report Filing Requirements for Registered Investment Advisers and Exempt Reporting Advisers (IA AML Rule) from January 1, 2026, until January 1, 2028." *FinCEN, Final Rule Postponement Notice (Dec. 31, 2025).* [^finra-5130-restriction]: **FINRA Rule 5130(a)(1): Restrictions on the purchase and sale of initial equity public offerings** — "A member or a person associated with a member may not sell, or cause to be sold, a new issue to any account in which a restricted person has a beneficial interest, except as otherwise permitted herein." *FINRA Rule 5130(a)(1).* [^finra-5131-spinning]: **FINRA Rule 5131(b)(1): Spinning** — "No member or person associated with a member may allocate shares of a new issue to any account in which an executive officer or director of a public company or a covered non-public company, or a person materially supported by such executive officer or director, has a beneficial interest: (A) if the company is currently an investment banking services client of the member or the member has received compensation from the company for investment banking services in the past 12 months;" *FINRA Rule 5131(b)(1)(A).* [^foreign-private-adviser-exemption]: **Investment Advisers Act of 1940 § 203(b)(3), 15 U.S.C. § 80b-3(b)(3)** — "The provisions of subsection (a) shall not apply to- (1) any investment adviser, other than an investment adviser who acts as an investment adviser to any private fund, all of whose clients are residents of the State within which such investment adviser maintains his or its principal office and place of business, and who does not furnish advice or issue analyses or reports with respect to securities listed or admitted to unlisted trading privileges on any national securities exchange; (2) any investment adviser whose only clients are insurance companies; (3) any investment adviser that is a foreign private adviser;" *15 U.S.C. § 80b-3(b)(1)-(3).* [^foreign-private-adviser-definition]: **Investment Advisers Act of 1940 § 202(a)(30), 15 U.S.C. § 80b-2(a)(30)** — "The term ‘foreign private adviser’ means any investment adviser who- (A) has no place of business in the United States; (B) has, in total, fewer than 15 clients and investors in the United States in private funds advised by the investment adviser; (C) has aggregate assets under management attributable to clients in the United States and investors in the United States in private funds advised by the investment adviser of less than $25,000,000, or such higher amount as the Commission may, by rule, deem appropriate in accordance with the purposes of this subchapter; and" *15 U.S.C. § 80b-2(a)(30)(A)-(C).* [^non-us-private-fund-adviser-exemption]: **17 CFR 275.203(m)-1(b): Non-United States private fund advisers** — "(b) Non-United States investment advisers. For purposes of section 203(m) of the Act (15 U.S.C. 80b-3(m)), an investment adviser with its principal office and place of business outside of the United States is exempt from the requirement to register under section 203 of the Act if: (1) The investment adviser has no client that is a United States person except for one or more qualifying private funds; and (2) All assets managed by the investment adviser at a place of business in the United States are solely attributable to private fund assets, the total value of which is less than $150 million." *17 C.F.R. § 275.203(m)-1(b).* [^advisers-act-205-a-1-scope]: **Investment Advisers Act of 1940 § 205(a)(1), 15 U.S.C. § 80b-5(a)(1)** — "No investment adviser registered or required to be registered with the Commission shall enter into, extend, or renew any investment advisory contract, or in any way perform any investment advisory contract entered into, extended, or renewed on or after November 1, 1940, if such contract- (1) provides for compensation to the investment adviser on the basis of a share of capital gains upon or capital appreciation of the funds or any portion of the funds of the client;" *15 U.S.C. § 80b-5(a)(1).*