The SEC has previously adopted a rule to define “family offices” that are excluded from the Investment Advisers Act of 1940. “Family offices” are entities established by wealthy families to manage their wealth and provide other services to family members, such as tax and estate planning services. Historically, family offices have not been required to register with the SEC under the Advisers Act because of an exemption provided to investment advisers with fewer than 15 clients. However, the Dodd-Frank Act eliminated that exemption but directed the SEC to adopt a rule exempting family offices.
The SEC has granted two exceptions with similar circumstances to strict adherence to the family office rules:
- Gruss & Co: Inc: Here the family office provides services to two sisters of a spouse of a lineal descendant of Joseph S. Gruss and each sister’s respective spouse and children. The family office represented that each of the additional family clients has important familial ties to and is an integral part of the Gruss family. The family office maintained that including the additional family clients in the “family” simply recognizes and memorializes the familial ties and intra-familial relationships that already exist, and have existed for at least 14 years while the assets of the additional family clients were managed by the Gruss family. See the notice here and the order here.
- Duncan Family Office: Here the family office provides services to the mother of a spouse of a lineal descendant of Dan L. Duncan, as well as certain related foundations. Similar representations were made about long-standing family ties. See the notice here and the order here.