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Federal Register / Vol. 86, No. 215 / Wednesday, November 10, 2021 / Rules and Regulations
amendments, to add a new paragraph e that states that the Commission will issue an order on or about May 1, 2016, and approximately every five years thereafter, adjusting for inflation the dollar amount thresholds of the assetsunder-management and net worth tests of the rule.10
Since then, the Commission has twice issued orders adjusting for the effects of inflation the dollar amount thresholds in accordance with rule 2053e. In 2016, the Commission issued an order increasing the dollar amount threshold of the net worth test to $2,100,000 and maintaining the dollar amount threshold of the assets-under management test at $1,000,000.11 On June 17, 2021, the Commission issued an order, effective as of August 16, 2021, increasing the dollar amount threshold of the assets-under-management test from $1,000,000 to $1,100,000 and the dollar amount threshold of the net worth test from $2,100,000 to $2,200,000.12
II. Discussion
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A. Amendments to Rule 2053
We are adopting amendments to rule 2053 to replace the specific dollar amount thresholds in the rules net worth and assets-under-management tests with references to the most recent order issued by the Commission containing the specific dollar amount thresholds adjusted for inflation. We define most recent order in the rule to mean the most recently issued Commission order in accordance with paragraph e of this section and as published in the Federal Register. 13
As discussed above, the Commission is required to issue an order every five 10 Rule 2053d and e. See Investment Adviser Performance Compensation, Investment Advisers Act Release No. 3372 Feb. 15, 2012 77 FR 10358
Feb. 22, 2012. Rule 2053e also specifies the methodology and price index on which inflation adjustments must be based.
11 Order Approving Adjustment for Inflation of the Dollar Amount Tests in Rule 2053 under the Investment Advisers Act of 1940, Investment Advisers Act Release No. 4421 June 14, 2016 81
FR 39985 June 20, 2016 2016 Order.
12 Order Approving Adjustment for Inflation of the Dollar Amount Tests in Rule 2053 under the Investment Advisers Act of 1940, Investment Advisers Act Release No. 5756 June 17, 2021 86
FR 32993 June 23, 2021 2021 Order. Both the 2016 Order and the 2021 Order stated that to the extent that contractual relationships were entered into prior to the orders effective date, the adjustments to the dollar amount thresholds would not generally apply retroactively to such contractual relationships, subject to the transition rules of rule 2053, which are described infra footnote 14.
13 Such orders are published in the Federal Register, but are also available on the SECs website at www.sec.gov/rules/other.shtml. See, e.g., 2021
Order, supra footnote 12. Publication of the orders on the website may precede publication in the Federal Register.

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years adjusting for inflation the dollar amount thresholds of the assets-undermanagement and net worth tests of the rule. By amending the rule to refer to the most recent order for the dollar amount thresholds in the rules qualified client tests, the rule will reference the most recently issued and published adjusted dollar amounts,14
and more directly tie the relevant amount to the mechanism by which it is established i.e., the order.
We are also adopting an amendment to rule 2053 to update from May 1, 2016 to May 1, 2026 the reference point of a specific date in paragraph e.
Paragraph e currently provides that the dollar amount thresholds of the assetsunder-management and net worth tests will be adjusted for inflation by Commission order issued on or about May 1, 2016 and approximately every five years thereafter. 15 By amending the rule to refer to a date in the future, the rule will establish clearly the next expected date for issuance of a Commission order, while retaining the five-year period between such orders that was established by the Commission in 2012. We believe that referring in the rule text to a specific date will be useful to market participants in determining approximately when the Commission will issue and the Federal Register will publish an order for purposes of the amended rules definition of most recent order.
B. Procedural and Other Matters Under the Administrative Procedure Act APA, notice of proposed rulemaking is not required: 1 For interpretive rules, general statements of policy, or rules of agency organization, procedure, or practice; or 2 when the agency for good cause finds and incorporates the finding and a brief statement of reasons therefor in the rules issued that notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest.16 Given that the amendments to 14 The
effective dates of the adjustments are specified in the most recent order and are subject to the transition provisions of the rule. See, e.g., 2021 Order, supra footnote 12. The transition provisions state, for example, that if a registered investment adviser entered into a contract and satisfied the conditions of rule 2053 that were in effect when the contract was entered into, the adviser will be considered to satisfy the conditions of the rule; if, however, a natural person or company that was not a party to the contract becomes a party, the conditions of the rule in effect at the time such natural person or company becomes a party will apply to that person or company. See rule 2053c1 through 3.
15 Rule 2053e.
16 5 U.S.C. 553b. The amendments to rule 205
3 do not require analysis under the Regulatory Flexibility Act RFA 5 U.S.C. 6012 for
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rule 2053 do not substantively change the methodology for calculating the dollar amount thresholds or the amount of those thresholds, and instead merely add a reference in the rule to the Commissions most recent order adjusting the dollar amount thresholds and update the reference point of a specific date in paragraph e, the Commission finds that good cause exists to dispense with public notice and comment pursuant to the notice and comment provisions of the APA. In accordance with the APA, the Commission also finds that there is good cause to establish an effective date less than 30 days after publication of rule 2053.17 The Commission finds there is good cause for the amendments to rule 2053 to take effect upon publication in the Federal Register because the current rules dollar thresholds do not conform to the dollar thresholds adopted pursuant to the most recent order. The Commission believes that establishing an effective date less than 30 days after publication of rule 2053 is necessary to remove the outdated dollar thresholds in the rule by making the text consistent with the thresholds adopted pursuant to the most recent order. Furthermore, the amendments to rule 2053 under the Advisers Act do not contain any collection of information requirements as defined by the Paperwork Reduction Act of 1995, as amended PRA.18 Accordingly, the PRA is not applicable.
III. Economic Analysis The Commission is sensitive to the economic effects that could result from the amendments to rule 2053.
Investment advisers who charge, or may charge, performance fees and clients who meet, or may meet, the definition of qualified client in the rule could be affected by the amendments. As of August 2021, of the approximately 14,543 investment advisers registered with the Commission, 5,251 36%
purposes of RFA analysis, the term rule generally means any rule for which the agency publishes a general notice of proposed rulemaking. In addition, pursuant to the Congressional Review Act, the Office of Information and Regulatory Affairs has designated the amendments to rule 2053 as not a major rule as defined by 5 U.S.C. 8042. See 5
U.S.C. 801 et seq.
17 5 U.S.C. 553d. This finding also satisfies the requirements of 5 U.S.C. 8082, allowing the amendment to rule 2053 to become effective notwithstanding the requirement of 5 U.S.C. 801 if a Federal agency finds that notice and public comment are impracticable, unnecessary or contrary to the public interest, a rule shall take effect at such time as the federal agency promulgating the rule determines. Therefore, the amendments to rule 2053 shall take effect on November 10, 2021.
18 44 U.S.C. 35013520.

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