US Securities and Exchange Commission amends dollar threshold tests under qualified client standard, requires exclusion of net equity in primary residence

Abstract

Purpose

The purpose of this paper is to explain the SEC's new dollar threshold tests under the qualified client standard.

Design/methodology/approach

The paper explains the amendments to the dollar thresholds, which provide for inflation adjustments to the assets under management and net worth tests every five years; the exclusion of net equity in the primary residence from the net worth calculation; and certain transitional provisions designed to allow investment advisers and their clients to maintain performance fee arrangements that existed when they entered into advisory contracts.

Findings

The paper finds that these increased dollar thresholds codify the increased thresholds that the Commission issued in its July 12, 2011 order as required by the Dodd‐Frank Act.

Originality/value

The paper provides practical guidance from an experienced financial services lawyer.

Citation

Cohen, R.M. (2012), "US Securities and Exchange Commission amends dollar threshold tests under qualified client standard, requires exclusion of net equity in primary residence", Journal of Investment Compliance, Vol. 13 No. 2, pp. 48-51. https://doi.org/10.1108/15285811211238156