On March 27, 2026, the Securities and Exchange Commission (“SEC”) announced its intention to adjust the dollar thresholds used under the Investment Advisers Act of 1940 in determining when a registered investment adviser may charge performance‑based fees. These fees, which tie adviser compensation to investment gains, are generally prohibited except in respect of “qualified clients” who meet certain net worth or assets‑under-management criteria. The inflation-linked adjustment is intended to keep the thresholds meaningful in today’s markets.
For investment advisers, the change could alter which clients qualify for performance‑based arrangements, potentially prompting a review of existing contracts and client onboarding processes. Private funds and other pooled investment vehicles may particularly feel the impact of the change because performance fees often form a significant portion of adviser compensation. Advisers should begin assessing how these updated thresholds might affect client eligibility, contract terms and disclosure obligations. Even modest increases could shift who qualifies for performance fees, making early planning and proactive compliance measures essential before the formal order is issued. Read the SEC’s notice.