{"id":922,"date":"2011-07-30T20:37:32","date_gmt":"2011-07-30T20:37:32","guid":{"rendered":"https:\/\/www.stockbrokerfraudblog.com\/2011\/07\/advisory_performance_fee_rule"},"modified":"2022-03-09T16:07:07","modified_gmt":"2022-03-09T22:07:07","slug":"advisory-performance-fee-rule","status":"publish","type":"post","link":"https:\/\/www.investorlawyers.com\/blog\/advisory-performance-fee-rule\/","title":{"rendered":"Advisory Performance Fee Rule Limit Adjusted by the SEC"},"content":{"rendered":"

\t\t\t\tThe Securities and Exchange Commission has issued an order raising the threshold for determining whether an investment adviser can charge performance fees to clients. The increase is because of inflation. It also executes a Dodd-Frank Wall Street Reform and Consumer Protection Act requirement.<\/p>\n

Under the Investment Adviser Act’s Rule 205-3, investment advisers are allowed to charge performance fees if the client meets certain criteria. Two tests with dollar amount threshold are among these requirements.<\/p>\n

Per the SEC order, an investment adviser can charge performance fees if it is managing at least $1 million for the client, or if the latter’s net worth is over $2 million. Either test has to have been satisfied at the time that the advisory contract is entered. Prior to this order, since 1998 the thresholds have been $750,000 and $1.5 million, respectively. <\/p>\n

Under the Dodd-Frank Act, the Commission was required to set forth an order to take into account inflation by July 21, 2011. The new order will go into effect on September 19, 2011
\nThe SEC has proposed amendments to Rule 205-3, including:<\/strong><\/em>
\n\u2022\tUsing the PCE Index as the inflation index to calculate the inflation adjustment rates to this rule, which would be updated every five years.<\/p>\n

\u2022\tExcluding the value of that person’s main residence and debt that the property securities when determining if someone is a “qualified client”.<\/p>\n

\u2022\tLetting an investment adviser and its clients keep existing performance fee arrangements that were set up when they entered into the advisory contract.<\/p>\n

Investment Adviser Fraud <\/strong>
\nUnfortunately, there are investors who end up losing money because of investment advisor fraud<\/a>. Our securities fraud lawyers <\/a>can help you determine whether you have a case. <\/p>\n

SEC Issues Order Raising Performance Fee Rule Dollar Limit to Adjust for Inflation<\/a>, SEC, July 12, 2011
\nRead the SEC Rule<\/a> (PDF)<\/p>\n


\nRead the SEC’s Final Rule on this Matter from 1998 <\/a><\/p>\n

Rules Under the Investment Advisers Act of 1940
\n<\/p>\n

More Blog Posts:<\/strong>
\nSEC to Up Dollar Thresholds for When an Investment Adviser Can Charge Investors Performance Fees<\/a>, Stockbroker Fraud Blog, May 24, 2011
\nInvestments Advisers Told to Look at Recent SEC Enforcement Actions When Preparing for Exams<\/a>, Stockbroker Fraud Blog, April 20, 2011
\nNo Need for New SRO Overseeing Investment Advisers, Says NASAA Official to Congress<\/a>, Stockbroker Fraud Blog, April 10, 2011 Continue Reading \u203a<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

The Securities and Exchange Commission has issued an order raising the threshold for determining whether an investment adviser can charge performance fees to clients. The increase is because of inflation. It also executes a Dodd-Frank Wall Street Reform and Consumer Protection Act requirement. 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