Amendments to The Advisers Act Performance Fee Rule

27 February 2012
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Key takeaways:

  • The SEC adopted amendments that adjust for inflation the standards for the qualification of advisory clients and investors as "qualified clients" under Rule 205-3 of the Investment Advisers Act of 1940, the rule that permits a registered investment adviser to charge performance fees to "qualified clients." 
  • The SEC also adopted amendments to Rule 205-3 that permit adjustments for inflation in the future and adjust the definition of "qualified client" to exclude the value of the primary residence from the net worth test. 
  • The SEC has adopted a transition rule that allows an investment adviser and its clients to maintain existing performance fee arrangements that were permissible when the advisory contracts were entered into.