SEC Tightens Performance Fee Rule

Dechert LLP
Contact

The U.S. Securities and Exchange Commission on February 15, 2012 adopted amendments (the “Amendments”) to Rule 205-3 under the Investment Advisers Act of 1940 (“Advisers Act”), which tighten the net worth eligibility requirements for “qualified clients” who may pay performance fees to a registered investment adviser.

Rule 205-3 provides an exemption from the general prohibition on charging performance fees under Section 205(a)(1) of the Advisers Act. Under current Rule 205-3, a registered investment adviser is permitted to charge clients a performance fee if the client’s net worth or the assets managed for the client by the investment adviser meet certain thresholds. The current rule allows the payment of performance fees if the client has at least $750,000 of assets under management with the adviser prior to entering into the advisory contract, or if the adviser reasonably believes the client has a net worth exceeding $1.5 million at the start of the contractual relationship.

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.

© Dechert LLP | Attorney Advertising

Written by:

Dechert LLP
Contact
more
less

Dechert 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