The Dodd-Frank Act’s Impact on California’s Restrictions on Investment Adviser Performance Compensation

Allen Matkins
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Prior to the enactment of the Dodd-Frank Act, Section 205 of the Investment Advisers Act of 1940 prohibited the receipt of performance compensation by an investment adviser unless the adviser was exempt from registration under Section 203(b) of the Advisers Act. Performance compensation is compensation based on the capital gains or capital appreciation in a client’s account. Performance compensation has been a common component of hedge fund manager compensation.

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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.

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