what is a qualified eligible participant qep 
a qualified eligible participant qep is an individual who meets the requirements to trade in sophisticated investment funds such as futures and hedge funds these requirements are defined by rule 4 7 of the commodity exchange act cea understanding qualified eligible participants qeps qualified eligible participants qeps must meet a set of conditions described by the commodity exchange act qeps are considered to be more knowledgeable than the typical investor regarding sophisticated investments hedge funds for example are understood to be riskier than mutual funds pension funds and other investment vehicles they are liable to see significant losses but produce higher than average long term returns when successful hedge fund managers go long on assets they predict will do well in the future while shorting assets they anticipate will fall in price by law a plurality of hedge fund participants must be qeps 2 hedge funds that limit their investors only to qeps may obtain an exemption from several securities and exchange commission sec regulations this exemption allows hedge fund managers more considerable latitude in their investment decisions which opens the door for both more significant risks and rewards than other types of investments hedge funds are blamed by many for contributing to the 2007 2008 financial crisis by adding risky leverage based derivatives to the banking system these investments created high returns when the market was good but amplified the impact of the market s decline qeps vs accredited investors and cposqualified eligible participants are similar to accredited investors in that they both must meet specific income and net worth requirements the difference is that qeps are assumed to have a sophisticated understanding of the complexities of trading risky assets such as futures and hedge funds 3individuals who receive funds to use in a commodity pool such as a hedge fund are required to register as commodity pool operators cpo cpos must comply with the disclosure requirements of both the commodity exchange act and the commodity futures trading commission 34 while investors in hedge funds must be qeps hedge fund managers must be both qeps and cpos 