The U.S. Securities and Exchange Commission (“SEC”) recently finalized revisions to Rule 205-3 under the Investment Advisers Act of 1940, raising the net worth requirements for individuals who are charged performance fees. The SEC increased the threshold requirements for “qualified clients” to account for inflation, as required by the Dodd-Frank Act and section 205(e) of the Advisers Act. The next adjustment for inflation is anticipated in 2026.
Category Archives: Performance Fee
The Texas Securities Commissioner recently entered into a consent order with an investment adviser representative (also referred to as an “IAR”) related to his performance fee arrangement and trading practices.
SEC Revises Performance Fee Rules
July 05, 2016
The U.S. Securities and Exchange Commission (“SEC”) recently finalized revisions to Rule 205-3 under the Investment Advisers Act of 1940, raising the net worth requirements for individuals who are charged performance fees. The SEC increased the threshold requirements for “qualified clients” to account for inflation, which the Dodd-Frank Act and section 205(e) of the Advisers Act require it to do every 5 years.
SEC Finalizes Performance Fee Rules
March 27, 2012
The U.S. Securities and Exchange Commission (“SEC”) recently finalized revisions to Rule 205-3 under the Investment Advisers Act of 1940, raising the net worth requirements for individuals who are charged performance fees. As we discussed earlier, the SEC increased the threshold requirements for “qualified clients” to account for inflation.
SEC’s New Performance Fee Rule Effective Sept. 19, 2011
September 18, 2011
As a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the U.S. Securities and Exchange Commission (“SEC”) recently amended Rule 205-3 of the Investment Advisers Act of 1940, which exempts a “qualified client” from the general prohibition against an investment advisor charging a fee based upon the share of capital gains or capital appreciation (also known as a “performance fee”).
SEC Issues Order Raising Thresholds for Investment Advisers to Charge Performance Fees
July 18, 2011
On July 12, 2011 the U.S. Securities and Exchange Commission (“SEC”) issued an order that effectively raises two of the thresholds that determine whether an investment adviser can charge a performance fee. Under section 205(a)(1) of the Investment Advisers Act of 1940 (“Investment Advisers Act”) investment advisers are generally prohibited “from entering into, extending, renewing, or performing any investment advisory contract that provides for compensation to the adviser based on a share of capital gains on, or capital appreciation of, the funds of a client (also known as “performance compensation” or “performance fees”).” Section 205(e) of the Investment Advisers Act authorizes the SEC to exempt any investment advisory contract from the performance fee prohibition if the contract is with a person the SEC determines does not need the protections of the prohibition.
The United States Securities and Exchange Commission (“SEC”) recently proposed a rule that would increase the dollar requirements that must be met before an investment adviser can charge performance based fees.
