The Securities and Exchange Commission has proposed changing which clients an investment adviser may charge a performance fee. The proposal published October 6 would replace two dollar-based paths in its qualified-client rule with a path based on accredited-investor status.
A performance fee ties compensation to investment results. This is a proposed change to eligibility, not an instruction to accept such a fee or a finding that it would benefit a particular client.
The proposed change
The document identifies the current dollar tests, effective June 29, 2026, as $2.7 million in net worth or $1.4 million managed by the adviser. It proposes removing those tests and adding clients who meet the accredited-investor definition in Regulation D.
Removing the dollar tests would also remove the associated inflation-adjustment mechanism. The proposal separately addresses performance fees paid by registered funds and business development companies and related disclosure forms.
A different eligibility boundary
Accredited-investor status has several paths. The proposal discusses financial tests and professional credentials, and acknowledges that substituting a different definition can expand access for some clients while excluding some entities that qualify under the current dollar tests.
It is therefore too broad to say every existing qualified client would automatically qualify under the replacement. The relevant definitions and transition provisions matter.
Existing contracts generally retain the eligibility rules that applied when entered into, according to the proposal's transition discussion. Adding a new party can require a fresh eligibility assessment.
The deadline is now printed
The published DATES paragraph says comments must arrive on or before December 7, 2026, under File Number S7-2026-28. This supersedes December 5, which was an arithmetic estimate from the earlier inspection copy's 60-day placeholder.
The release sets out the SEC's electronic, email and paper submission routes and asks whether the accredited-investor approach is appropriate. The Commission has not adopted the proposal. Publication starts a comment process; it does not change the present fee rules.