The SEC has issued an order adjusting for inflation the dollar amount thresholds for qualified client status under Rule 205-3 of the Investment Advisers Act of 1940 (Advisers Act), which takes effect on June 29, 2026.1 The Dodd-Frank Act requires the SEC to make this adjustment every five years, and the latest order reflects inflation from 2021 through the end of 2025.
Background
Section 205(a)(1) of the Advisers Act generally prohibits registered investment advisers (RIAs)2 from charging performance fees unless the client is a qualified client, as defined in Rule 205-3. A client qualifies through either having 1) at least a specified dollar amount of assets under management with the RIA immediately after entering the advisory contract3 or 2) a specified net worth test (including spousal assets, but excluding a primary residence and related indebtedness).4 Qualified purchasers and certain "knowledgeable employees" of an RIA are deemed qualified clients regardless of these dollar
