The SEC just raised the bar for “qualified client” status
On April 28, 2026, the SEC issued a final order adjusting the dollar thresholds under Rule 205-3 of the Investment Advisers Act, effective June 29, 2026. The assets-under-management threshold rises from $1.1 million to $1.4 million, and the net worth threshold rises from $2.2 million to $2.7 million (excluding the value of a primary residence). These are the levels the SEC periodically updates for inflation, and they determine who an adviser can charge a performance fee to without running afoul of the Advisers Act's general prohibition on such fees. For funds that rely on the qualified client exemption, the practical effect is straightforward: anyone entering into a new advisory relationship, or subscribing to a Section 3(c)(1) fund, on or after June 29, 2026 will be measured against the higher thresholds. Existing clients and investors who met the prior thresholds are grandfathered and unaffected. If you're a high-net-worth individual or family office evaluating a new allocation, it's worth confirming which threshold applies to your subscription date. This s a general summary, not legal advice, so we'd encourage you to confirm specifics with your advisor or counsel.
The SEC just raised the bar for “qualified client” status
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