On June 17, 2021, the Commission ordered that Rule 205-3 under the Investment Advisers Act of 1940 be amended so that the term “qualified client” means (i) natural person who, or a company that, immediately after entering into the contract has at least $1,100,000 under the management of the investment adviser; and (ii) a natural person who, or a company that, the investment adviser entering into the contract (and any person acting on his behalf) reasonably believes, immediately prior to entering into the contract, has a net worth (together, in the case of a natural person, with assets held jointly with a spouse) of more than $2,200,000. Both prongs have increased by $100,000 to keep pace with inflation.
The amendments become effective August 16, 2021.
While the amendments do not have any retroactive effect, investment advisers should review their policies and procedures, offering documents, and client agreements to make sure that these amendments are reflected in all performance-based compensation arrangements by August 16, 2021.