SEC Raises Qualified Client Thresholds: What Advisers Need To Do Before June 29

The Securities and Exchange Commission (SEC) has raised the dollar thresholds for “qualified client” status under Rule 205-3 of the Investment Advisers Act of 1940 (Advisers Act).¹ The increases, which will take effect on June 29, are the SEC’s required five-year inflation adjustments and will require private fund advisers and other SEC-registered investment advisers to review and, where applicable, update their fund offering documents, investment management agreements, and related compliance and disclosure materials before the effective date.

What Changed

Two new thresholds apply, effective June 29:

1. Assets under management test: $1.4 million managed by the adviser at the time the advisory contract becomes effective, up from $1.1 million.