grandfather clause

grandfather clause   n.   A provision in a statute that exempts those already involved in a regulated activity or business from the new regulations established by the statute. A clause in the constitutions of several southern states before the year 1915, intended to disfranchise African Americans by exempting from stringent voting requirements all lineal descendants of persons who were registered voters before 1867.

Grandfather Clause

An exemption that allows persons or entities to continue with an activity they were engaging in before it became illegal through a change in regulation.

Investopedia Commentary

For example, imagine there's a passing of a new law that states restaurants can serve only food with less than ten grams of fat per serving. If accompanied by a grandfather clause, the law would affect only new restaurants. All restaurants that began operating prior to the law would therefore be allowed to continue selling their products, regardless of whether their fat content exceeds the ten-gram limit. Because of the change in regulation, however, new restaurants must abide by the new law. Grandfathering is a debatable practice that often hinders some and benefits others.

See also: SEC

Main Entry: grandfather clause
Function: noun
: a clause creating an exemption (as from a law or regulation) based on circumstances previously existing; specifically : a provision inserted in the constitutions of some southern states after the Civil War requiring high standards of literacy and substantial property qualifications of voters except for descendants of men voting before 1867