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SEC Issues Order Adjusting for Inflation “Qualified Client” Tests
July 14, 2011
On July 12, 2011, the SEC issued an order that adjusts for inflation two dollar amount tests in Rule 205-3 under the Investment Advisers Act of 1940, as amended. Rule 205-3, as amended, exempts a registered investment adviser from the prohibition against charging a client performance fees if the client is a "qualified client" which includes, among other things, a client with at least $1 million under management with the investment adviser immediately after entering into the advisory contact, or a client that the investment adviser reasonably believes to have a net worth of more than $2 million at the time the contract is entered into.