Today, the SEC released a proposed rule that would define “family offices” for purposes of a new exemption from the registration requirements of the Investment Advisers Act of 1940 (Advisers Act) created by the Dodd-Frank Act [http://www.alston.com/financialmarketscrisisblog/blog.aspx?entry=3813]. According to the SEC, “[f]amily offices are entities established by wealthy families to manage their money and provide tax and estate planning and similar services.” Prior to the enactment of the Dodd-Frank Act, most family offices relied on an exemption from the Advisers Act for investment advisers with fewer than 15 clients. Although the Dodd-Frank Act eliminates that exemption, it also “creates a new exclusion from the Advisers Act in section 202(a)(11)(G), under which family offices, as defined by the [SEC], are not investment advisers subject to the Advisers Act.”
Today’s proposed rule offers a definition of family offices for the purpose of such exclusion. According to the SEC, a family office would be defined as any firm that:
- “Provides investment advice only to family members, as defined by the rule; certain key employees; charities and trusts established by family members; and entities wholly owned and controlled by family members.
- Is wholly owned and controlled by family members.
- Does not hold itself out to the public as an investment adviser.”
Comments on the proposed rule should be submitted to the SEC by November 18, 2010.