On September 30, 2026, the SEC voted to propose a package of amendments aimed at expanding retail investor access to private-market strategies. Two parts of the package matter most to advisers: a change to the performance-fee rule, Rule 205-3 (Release No. 33-11443), and a modernization of interval funds under Rule 23c-3 (Release No. 33-11444). Comments on each are due 60 days after publication in the Federal Register. These are proposals, so nothing here is in effect yet.
Performance fees from registered funds
Today, performance-based compensation, meaning fees calculated on capital gains or appreciation, is largely a private-fund feature. The proposal would amend Rule 205-3 under the Advisers Act so that advisers could charge performance fees to registered investment companies and business development companies if conditions are met. As proposed, those conditions include:
- a fee that does not exceed 20% of the fund's net gains over a specified period;
- compliance with board governance standards, with the fund's independent directors determining that the arrangement serves shareholders' interests; and
- separate disclosure to shareholders of all performance-based compensation.
A wider “qualified client” definition
The proposal would also expand who can be charged a performance fee. Under the proposal, the “qualified client” test would be replaced by the Regulation D accredited-investor standard, which generally reaches individuals with $1 million or more in net worth (excluding the primary residence) or meeting the income test. Conforming changes would be made to related adviser rules that refer to the qualified-client definition. For advisers who currently use the existing thresholds to decide who can be offered performance-fee arrangements, this would meaningfully enlarge the eligible pool.
Interval funds and share classes
The companion proposal on interval funds (Rule 23c-3) would, among other changes, allow monthly repurchase intervals, extend the permitted initial repurchase deferral, and replace prescriptive liquidity requirements with a principles-based standard. The package would also replace the exemptive-order process for multiple share classes in regulated closed-end funds with a rules-based framework. These changes are mainly relevant to fund sponsors, but they matter to advisers who recommend or distribute these products.
A question to watch: who counts as accredited
The SEC also asked for comment on additional ways to qualify as an accredited investor, including passing a FINRA-developed exam, holding professional credentials such as CPA, CFA, or CFP, or holding a FINRA license such as the Series 79, 86, or 87. This is a request for comment, not a proposed rule, but it signals where the agency may be heading.
Why compliance teams should care now
More retail access to private-market-style products and performance fees raises the stakes on three things examiners already look at closely: conflicts of interest created by performance-based compensation, suitability and best-interest analysis for retail clients, and valuation and liquidity disclosure. If your firm advises registered funds, sells interval funds, or relies on the qualified-client definition, add this proposal to your regulatory-change log and decide whether you will comment.
How Compliers Can Help
We translate proposed rules into the policy, fee-disclosure, and Form ADV changes they would require. See our Consulting & Staffing page for how we support firms through regulatory change.