Most 3(c)(1) private equity and hedge funds are impacted; exempt venture capital funds are not impacted.
Effective August 16, 2021, the dollar thresholds specified in the definition of “qualified client” under Rule 205-3 of the Investment Advisers Act of 1940, as amended (“Advisers Act”) will increase (i) from $2.1 million to $2.2 million (net worth test) and (ii) from $1 million to $1.1 million (assets under management (AUM) test). Clients that enter into investment advisory agreements (and existing fund investors that make additional fund investments) in reliance on the net worth test prior to the effective date will be “grandfathered” in under the prior net worth threshold. The increases are made pursuant to a five-year inflation adjustment required by section 205(e) of the Advisers Act (section 419 of the Dodd-Frank Act). (The most recent prior change was effective August 15, 2016.)