How Qualified Client Rule Changes Affect Fund Managers

Law360, New York (April 5, 2012, 1:03 PM EDT) -- Registered investment advisers generally can charge "performance fees" only to qualified clients. If there is a performance fee, such as the typical carried interest, then investors in a fund managed by a registered adviser need to be qualified clients.

This issue is not a problem in C7 (qualified purchaser) funds, because qualified purchasers are qualified clients. However, a C1 (not more than 100 holders) fund may have investors that are not qualified clients.

Many fund managers have registered as investment advisers, or are in the process...
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