On April 28, 2026, the U.S. Securities and Exchange Commission (“SEC”) issued an Order increasing the thresholds for a client or private fund investor to be deemed a “qualified client” under Rule 205-3 under the Advisers Act.

Threshold Changes in the SEC’s Order

• From $1.1 million to $1.4 million in assets under management with the adviser immediately after entering into the advisory arrangement (an investment in a private fund, for example); or
   
• From $2.2 million to $2.7 million in net worth (together with assets held jointly with a spouse, but excluding the value of the person’s primary residence and related debt) at the time of entering into the advisory arrangement (an investment in a private fund, for example)

The change becomes effective on June 29, 2026. Qualified Purchasers will continue to be deemed “qualified clients” after the rule’s effective date, with no change to the manner in which they currently qualify.
 
Practical Takeaways

Registered investment advisers that charge performance-based fees, including advisers sponsoring or otherwise affiliated with private fund offerings that anticipate holding one or more closings on or after June 29, 2026, should consider working with counsel to update the necessary documentation and compliance procedures, including but not limited to, subscription documents, private placement memorandums, transfer agreements, supplemental investor questionnaires and private placement guidelines.