Doug Cornelius on compliance for private equity real estate
The U.S. Securities and Exchange Commission proposed to increase the net worth threshold for “Qualified Clients” from $2 million to $2.1 million. Rule 205-3 currently requires “qualified clients” to have at least $1 million of assets under management with the adviser or a net worth of at least $2 million. Under the Investment Advisers Act, an … Read more »
Under the Investment Advisers Act, an adviser can only charge a performance fee if the client was a “qualified client”. The SEC equates net worth with sophistication, so a “qualified client” had to have a level assets to prove their financial sophistication. Those levels are now officially increased. The original standard was that the client … Read more »
As a general rule, investment adviser cannot charge performance fees. Section 205(a)(1) of the Investment Advisers Act of 1940 generally prohibits an investment adviser from entering into, extending, renewing, or performing any investment advisory contract that provides for compensation to the adviser based on a share of capital gains on, or capital appreciation of, the … Read more »
The Securities and Exchange Commission is proposing to raise the dollar thresholds for someone to be considered a “qualified client.” The definition of a qualified client is set out in Rule 205-3. This is an exemption to the Section 205(a)(1) general prohibition on performance fees. Section 205(e) grants the SEC the power to create an … Read more »
In addition to the changing standard for an accredited investor, the standard for a “qualified client” under the Investment Advisers Act is also changing. Section 418 of the Dodd-Frank Wall Street Reform and Consumer Protection Act requires the SEC to increase the standard. SEC. 418. QUALIFIED CLIENT STANDARD. Section 205(e) of the Investment Advisers Act … Read more »
As more private investment funds will be pulled under the regulatory umbrella of the Investment Advisers Act,they will need to focus on the limitation on performance fees. Section 205(a)(1) of the Advisers Act generally prohibits any investment adviser, unless exempt from registration pursuant to Section 203(b) of the Advisers Act, from entering into, extending, renewing, … Read more »