SEC Raises Qualified Client Net Worth Threshold To $2.1M

On June 14, the Securities and Exchange Commission ("SEC") issued an order increasing the net worth threshold for qualified clients from $2 million to $2.1 million. The SEC published notice of the proposed increase on May 18. Investment advisers, including private fund sponsors that charge their private fund investors an incentive fee or allocation, should make appropriate revisions to their advisory agreements and fund documentation in order to reflect the updated qualification criteria. The new standard is not retroactive, meaning any contracts entered into before it becomes effective would not be subject to the higher net worth threshold, but closings or transfers after the August 15, 2016, effective date must comply with the higher standard.