Recognized as one of the premier practices in the industry, the Investment Funds Group leverages its extensive market knowledge and deep, long-term relationships to help sophisticated clients reach their most important investment goals. We have been at the forefront of some of the industry’s most creative and innovative investment product developments, helping clients set market trends instead of reacting to them.
SEC to Adjust for Inflation “Qualified Client” Tests; Issues Proposed Related Rule Amendments
May 12, 2011
On May 10, 2011, the SEC issued a notice of its plan to raise certain dollar thresholds that would need to be met before SEC-registered investment advisers can charge performance based fees to "qualified clients." Specifically, the SEC intends to issue an order to revise the assets under management and net worth tests of Rule 205-3 under the Advisers Act to $1 million and $2 million, respectively, to account for the effects of inflation. The SEC is also proposing related amendments to Rule 205-3 that would: (a) provide the method for calculating future inflation adjustments of the dollar amount tests; (b) exclude the value of a person's primary residence from the determination of whether a person meets the net worth standard; and (c) modify the transition provisions of the rule to take into account performance fee arrangements that were permissible at the time the adviser and client entered into their advisory contract.