Beginning on June 29, 2026 (the “Effective Date”), SEC-registered investment advisers charging performance-based fees (e.g. carried interest or performance allocation) and in certain cases exempt reporting advisers[1] (collectively, “Advisers”) must ensure that clients or private fund investors (“Investors”) meet updated “qualified client” thresholds under Section 205-3 of the Investment Advisers Act of 1940 (the “Advisers Act”). In April 2026, the SEC issued a final order that adjusts these dollar thresholds to account for inflation, affecting fee arrangements for many investment advisory relationships. Section 205(a)(1) of the Advisers Act generally prohibits investment advisers from entering into advisory contracts that compensate Advisers with performance-based fees based on a share of capital gains unless their Investors qualify as a “qualified client” under the Advisers Act.