Overview
- The SEC, which issued its final order on April 28, 2026, set new tests of $1.4 million in assets with the adviser or $2.7 million in net worth starting June 29, 2026.
- Rule 205-3 defines who can lawfully pay performance-based fees to investment advisers, covering SEC-registered firms and some advisers that rely on state exemptions.
- Existing advisory contracts and fund investors keep their status, but any new agreements, subscriptions, admissions, or transfers on or after June 29 must meet the higher thresholds.
- Advisers are being urged to update subscription forms, managed-account agreements, compliance procedures, and marketing materials to avoid last-minute issues at closings near the effective date.
- Investors in Section 3(c)(1) private funds are checked one by one for qualified-client status, while qualified purchasers in 3(c)(7) funds and certain knowledgeable employees are already treated as qualified.