Monday, February 20, 2012

SEC Tightens Rules on Advisory Performance Fee Charges

The SEC is tightening its rule on investment advisory performance fees to raise the net worth requirement for investors who pay performance fees, by excluding the value of the investor’s home from the net worth calculation. As a result, registered investment advisers may charge clients performance fees if the client’s net worth or assets under management by the adviser meet certain dollar thresholds. Those who do are deemed to be “qualified clients,” able to bear the risks associated with performance fee arrangements. The revised rule will require “qualified clients” to have at least $1 million of assets under management with the adviser, up from $750,000, or a net worth of at least $2 million, up from $1.5 million. These rule changes conform the rule’s dollar thresholds to the levels set by a Commission order in July 2011.

SEC Tightens Rules on Advisory Performance Fee Charges
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