On July 12, 2011, the SEC issued an order adjusting for inflation the dollar amount tests for determining if a person is a “qualified client” for purposes of Rule 205-3 under the Advisers Act, which permits investment advisers to charge a performance fee to “qualified clients.” On September 19, 2011, the effective date of the order, a person will be considered a “qualified client” for purposes of Rule 205-3 if the person has at least $1 million under the management of the adviser immediately after entering into the advisory contract or the adviser reasonably believes that the person has a net worth of more than $2 million at the time the advisory contract is entered into.  

On May 10, 2011, the SEC also proposed amendments to Rule 205-3 to: (1) provide that the SEC will adjust the dollar amount thresholds for inflation approximately every five years; (2) exclude the value of a person‟s primary residence for purposes of determining a person‟s net worth under the Rule; and (3) clarify that the amended Rule requirements would apply to new contractual arrangements and not to existing contractual arrangements, except that new parties to existing contracts would be subject to the amended Rule requirements.