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SEC Changes Performance Fee Thresholds

The SEC recently adopted rules that impose new restrictions on who can be charged performance-based fees.  Registered investment advisers may only charge performance fees to "qualified clients" that meet required net worth or assets under management thresholds.  The new rule increases these thresholds, as mandated by Dodd-Frank, and excludes the value of the client's primary residence from the net worth calculation.  Clients must now have at least a $2 million net worth (previously, $1.5 million) or $1 million of assets under management (previously, $750,000).  In addition, net worth now excludes the value of the primary residence and any debt secured by the residence.  The increased thresholds conform to amounts set by an SEC order in July 2011.

Additional details can be found in a recently released DrinkerBiddle Investment Management Alert available here.

 

 
 
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