The SEC provides notice of amended “Qualified Client” criteria


On May 10, 2021 the SEC provided notice that it intends to increase the dollar amount of the assets-under-management test from $1 million to $1.1 million, and the net worth test from $2.1 million to $2.2 million, for purposes of the definition of “qualified client” in Advisers Act Rule 205-3. The new dollar amounts take into account the effects of inflation since the last time the thresholds were increased.  

Pursuant to section 418 of the Dodd-Frank Act and rule 205-3(e), the SEC must provide notice that the SEC intends to issue an order making the required inflation adjustment to the assets-under-management test and the net worth test in the definition of “qualified client” in rule 205-3. Rule 205-3(e) requires that SEC adjust the dollar amount thresholds of the rule by order on or about May 1, 2016 and every five years thereafter. 

While largely immaterial, the amendment may require you to update certain investment management agreements, offering documents and/or subscription documents. 

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