As we discussed in our recent Client Alert, on April 28, 2026, the Securities and Exchange Commission (“SEC”) issued a final order adjusting for inflation the thresholds required to qualify as a "qualified client" under Rule 205-3 of the Investment Advisers Act of 1940 (“Advisers Act”). The new thresholds take effect on June 29, 2026, and will require updates to subscription documents for certain private funds. https://www.sadis.com/insights/sec-final-order-increasing-qualified-client-thresholds-under-rule-205-3-of-the-investment-advisers-act
Exempt Reporting Advisers (“ERAs”). Although Rule 205-3 applies only to SEC-registered investment advisers, many ERAs rely on state private fund adviser exemptions that reference the federal “qualified client” standard. Where a state incorporates Rule 205-3 of the Advisers Act, the June 29, 2026 increases may also be applicable for fund subscriptions advised by ERAs.
Application. The increased qualified client thresholds will apply only to new investors and new investments made by existing investors in private funds managed by SEC-registered investment advisers or ERAs in states where the “qualified client” standard is required by state laws for the exemption.
Update Subscription Documents. As a result of the new standard, advisers to private funds should amend the form subscription documents being used for 3(c)(1) funds if the adviser is registered with the SEC or is an ERA in a state which requires a “qualified client” standard.
To assist you in facilitating investments by new or existing investors, we have attached a template Subscription Agreement Supplement for Qualified Clients. If applicable, you can reach out to your administrator to assist you in coordinating this process with your investors. https://issuu.com/sadisgoldberg/docs/subscription_agreement_supplement_for_qualified_cl?fr=sZWZmNTkwNzYzNzY
If you have any questions, please feel free to contact David Fitzgerald at dfitzgerald@sadis.com, Mark Strefling at mstrefling@sadis.com or Erika Winkler at ewinkler@sadis.com.