SEC Raises ‘Qualified Client’ Net Worth and Assets Under Management Thresholds
Highlights
As of Aug. 16, 2021, the SEC has raised the “qualified client” net worth threshold, from $2.1 million to $2.2 million, and the assets under management threshold, from $1 million to $1.1 million
Clients that entered into advisory contracts in reliance on the lower thresholds prior to the effective date will be grandfathered in and still be deemed to meet the “qualified client” definition
Registered investment advisers that rely on Rule 205-3 of the Advisors Act to receive performance or incentive-based compensation from their clients should consider updating their offering and subscription documents to reflect these increases
The Securities and Exchange Commission (SEC) issued an order dated June 17, 2021 that will increase the “net worth” and “assets under management” thresholds for purposes of determining whether an investment advisory client meets the definition of a “qualified client” under Rule 205-3 of the Investment Advisers Act of 1940 (the Advisers Act). The increase of the thresholds will take effect as of Aug. 16, 2021 and was made pursuant to the five-year indexing adjustment required by Section 205(e) of the Advisers Act and Section 419 of the Dodd-Frank Act.
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