Family offices with $750 million or less in assets under management would lose exemption status from registration as investment advisors with the SEC under a bill by proposed Rep. Alexandria Ocasio-Cortez that won approval from the U.S. House Committee on Financial Services last week.

The Family Office Regulation Act of 2021 (H.R. 4620), which aims to amend the Investment Advisers Act of 1940, would require family offices with more than $750 million in AUM to register with the SEC as “exempt reporting advisors.” These advisors would be required to file limited sections of Form ADV with the SEC. It would further prevent “persons who are barred or subject to final orders for conduct constituting fraud, manipulation or deceit from being associated with a family office.”

The bill would further repeal a grandfather clause in Section 409 of the Dodd-Frank Wall Street Reform and Consumer Protection Act that allowed family offices with clients who are not members of the family from registering as advisors. And it also would seek authorization for the SEC to require registration of family offices that are below the $750 million threshold “but are highly leveraged or engage in high-risk activities.”

Rep. Ocasio-Cortez, a Democrat from New York, noted that family offices are private firms that provide investment advice only to “family clients,” and are exempt from SEC registration.

“Through a loophole in current law, all investment funds organized and registered as ‘family offices’ are exempt from registration with the SEC and have no requirement whatsoever to disclose their size, portfolio or leverage,” Ocasio-Cortez said in introducing her legislation. She went on to explain that partly because of legislative and regulatory exemptions, “this loophole has created a massive rush of funneled cash into these entities deemed as family offices.”

Ocasio-Cortez cited a recent report by Ernst & Young, which, she said, estimated that money held by private family capital outstrips all private equity and venture capital combined with at least 10,000 single family offices in the world.

The committee’s memo made mention of the recent collapse of Bill Hwang’s Archegos Capital Management family office, and posited that it is an example of how “family offices can be deeply interconnected with the rest of the financial markets and their activities could affect the stability of financial markets.”

The bill, which was approved by a vote of 27-22 by the House Democratic majority, now heads to the Senate for approval.