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Final Rule: Investment Adviser Performance Compensation

Final Rule: Investment Adviser Performance Compensation

RIN: 3235-AK71

Agency/Agencies: SEC

Federal Register Publication Date: 02/22/2012

Summary:  The Securities and Exchange Commission (“SEC”) adopted amendments to the rule under the Investment Advisers Act of 1940 that permits investment advisers to charge performance based compensation to “qualified clients.” The amendments revised the dollar amount thresholds of the rule’s tests that are used to determine whether an individual or company is a qualified client. These rule amendments codified revisions that the SEC previously issued by order that adjust the dollar amount thresholds to account for the effects of inflation. In addition, the rule amendments: provided that the SEC will issue an order every five years in the future adjusting the dollar amount thresholds for inflation; excluded the value of a person’s primary residence and certain associated debt from the test of whether a person has sufficient net worth to be considered a qualified client; and added certain transition provisions to the rule.

Ianthe Zabel
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