SEC Amends the “Qualified Client” Standard for Investment Adviser Performance-Based Compensation

K&L Gates LLP
Contact

I. Introduction

On February 15, 2012, the U.S. Securities and Exchange Commission (the “SEC”) issued a final rule release (the “Adopting Release”) amending Rule 205-3 (the “Rule”) of the U.S. Investment Advisers Act of 1940, as amended (the “Advisers Act”), pursuant to the requirements of Section 418 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). The Rule amendments will become effective on May 22, 2012 (the “Effective Date”)2 and will provide for the following new requirements:

- Codification of the increase in the dollar thresholds used to determine whether an investment advisory client is a “qualified client” implemented by an SEC order on July 12, 2011;

- A modified net worth test for “qualified clients,” including a provision that excludes the value of a person’s primary residence and certain debt secured by the residence from the calculation of net worth under the Rule;

- Revised transition provisions of the Rule to allow for the continuation of certain arrangements (including certain new investments under such arrangements) that were permissible at the time the adviser and client entered into the advisory agreement; and

- A requirement for the SEC to issue periodic orders to adjust the dollar thresholds used to determine the qualified client standard to account for inflation.

Please see full alert below for more information.

Please see full publication below for more information.

LOADING PDF: If there are any problems, click here to download the file.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© K&L Gates LLP | Attorney Advertising

Written by:

K&L Gates LLP
Contact
more
less

K&L Gates LLP on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide
- hide