On April 28, 2026, the SEC increased the financial thresholds for “qualified client” status under Rule 205-3 of the Advisers Act. The change, which takes effect June 29, 2026, reflects the SEC’s required five‑year inflation adjustment and directly impacts when advisers can charge performance‑based fees, including carried interest.
Pursuant to the updated rule, a client or private fund investor will qualify if they meet either of the following thresholds:
- $1.4 million in assets under management with the adviser (up from $1.1 million); or
- $2.7 million in net worth (up from $2.2 million), excluding the value of a primary residence (but including spousal assets).
The dollar amount test adjustments generally would not apply retroactively to subscriptions entered into prior to the effective date and qualified purchasers and certain knowledgeable employees will continue to be deemed qualified clients without regard to these dollar thresholds.
Next Steps
As a result of the increased thresholds, advisers should:
- amend subscription documents and other offering materials (in particular 3(c)(1) funds) to reference the increased threshold;
- amend any template client agreement (e.g., separately managed account agreements) that provides for performance fees to account for the increased threshold; and
- flag the increased threshold for investor relations/administration teams.
The order is available here. Should you have any questions, please contact Joseph M. Mannon at jmannon@vedder.com, Cody J. Vitello at cvitello@vedder.com, Jeff A. VonDruska at jvondruska@vedder.com, Adam S. Goldman at agoldman@vedder.com or the Vedder lawyer(s) with whom you normally work.
