Proposed Order Regarding the SEC’s Performance Fee Rule: Inflation Adjustments to Qualified Client Thresholds

3 June 2016
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Key takeaways

  • The SEC has proposed an order making inflation-related adjustments to the dollar amount thresholds in Rule 205-3 under the Investment Advisers Act of 1940, the rule that permits registered investment advisers to charge performance-based fees to “qualified clients.”
  • The final order, when effective, would maintain the dollar amount of the assets-under-management test at $1,000,000 and would increase the dollar amount of the alternative net worth test from $2,000,000 to $2,100,000.
  • We will provide an update when the SEC publishes its final order. Private equity fund sponsors should begin to plan to revise their subscription documents to reflect the revised financial criteria.