Key takeaways 

• The SEC has proposed an order adjusting for inflation the standards for the qualification of advisory clients and investors as "qualified clients" under Rule 205-3 of the Investment Advisers Act of 1940, the rule that permits a registered investment adviser to charge performance fees to "qualified clients." 
• The SEC has also proposed amendments to Rule 205-3 that will permit adjustments for inflation in the future and to adjust the definition of "qualified client" to exclude the value of the primary residence from the net worth test. 
• The SEC has proposed a transition rule that will permit existing performance fee arrangements to remain in effect even after an unregistered investment adviser has registered or the standards are adjusted for inflation in the future.