In tribute to Family Day this month, we think it’s a good time to discuss family offices. A family office is a private wealth management advisory firm that typically offers a total, outsourced solution to managing the investment and other financial affairs of an affluent individual or family. Broadly speaking, there are two types of family offices: single family offices, which manage the wealth of (you guessed it) a single family, and multi-family offices, which manage the wealth of multiple families and possibly other clients.
A question that often arises is whether the family office and certain of its employees need to be registered with the Ontario Securities Commission. Generally, the Securities Act (Ontario) requires an individual or entity that engages in the business of “advising others” with respect to investing in, or buying or selling securities, to register as an adviser, unless a registration exemption is available.
Some family offices take the position that they do not have to register as an adviser because they are not advising “others”. Rather, they are advising and making investment decisions in respect of the family office’s own proprietary capital. Although this position may be tenable in some circumstances, we caution that any registration analysis is very fact-specific and must be assessed in light of the factors identified in Companion Policy to National Instrument 31-103 – Registration Requirements, Exemptions and Ongoing Registration Obligations. Moreover, Canadian securities regulators have provided limited guidance on the distinction between acting for one’s own account versus acting for another’s account in the context of a family office. For multi-family offices in particular, it may be quite challenging to persuade regulators that the office is not in the business of advising others.
Another thing to consider is that the registration analysis may need to be revisited as the family served by the family office evolves. For example, if the family grows in size and/or one or more members relocate to other jurisdictions, new regulatory considerations may arise.