The Staff of the SEC’s Division of Investment Management recently issued a no-action letter related to the family office exemption from registration under the Investment Advisers Act of 1940. Under the Advisers Act, family offices need not register so long as the family office (i) gives investment advice only to “family clients;” (ii) is wholly-owned by family clients and exclusively controlled by family members and/or family entities; and (iii) does not hold itself out to the public as an investment adviser.

In the no-action letter, Peter Adamson III proposed to provide investment advisory services as a key employee, director, partner, manager or trustee in up to ten family offices, each representing a separate and distinct family. Mr. Adamson’s no-action request stated that nothing in the rule exempting family offices suggests that an adviser in a family office must act exclusively for only one family office. Mr. Adamson requested confirmation that the Staff would not recommend any enforcement action against Mr. Adamson if he provided investment advisory services to family clients of multiple family offices.

The Staff denied Mr. Adamson’s request and explained that Mr. Adamson had failed to demonstrate or explain how the proposed arrangement does not create a multi-family office, which, according to the adopting release establishing the family office exemption, could not rely on the family office exemption. Specifically, the Staff cited footnote 114 of the adopting release which provided “if several unrelated families established separate family offices staffed with the same or substantially the same employees, such employees would be managing a de facto multifamily office, such that the family offices could not rely on the exclusion.”