The SEC has approved rules that clarify family office exemptions to the Investment Advisers Act of 1940.
Under the rules approved by the SEC yesterday, family offices will be exempt if they advise only family clients and are controlled exclusively by family members, and do not present themselves publicly as investment advisors.
The rulemaking stems from the Dodd-Frank Wall Street Reform and Consumer Protection Act.
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.
The Dodd-Frank Act removed that exemption so the SEC can regulate hedge fund and other private fund advisers. However, Dodd-Frank also included a new provision requiring the SEC to define family offices in order to exempt them from regulation under the Advisers Act, according to the SEC.
The rule includes grandfathering provisions for family offices that were granted exemptions before the Dodd-Frank Act.