SEC Issues FAQ’s on Family Office Investment Adviser Exemption
The SEC staff has issued frequently asked questions on the SEC’s rule regarding exemption of family offices from registration under the Investment Adviser Act. The Dodd-Frank Act required the SEC to adopt this exemption.
Some highlights of the FAQs include:
- A board comprised of independent board members that are less than a majority does not preclude reliance on the family office exemption.
- A non-family client owning non-voting shares would cause the office to lose its qualification as a family office under the rule.
- The key employee definition does not include key employees of a family-owned operating company that is not a family office.
- In-laws do not qualify as family members when they are related through the spouse of the common ancestor or through spouses or spousal equivalents that are family members.
- The definition of family member does not include descendants of a stepchild whose parent later divorced the family member stepparent.
- Examples of spousal equivalents include same-sex domestic partners as well as opposite sex partners that have determined not to marry even though they live together in a relationship generally equivalent to married couples.
- Activities such as providing non-advisory services (such as catering, tax filing, accounting, housekeeping) to non-family members do not affect the determination of whether or not the family office may rely on the rule. However, advisory services cover a broad range of activities and a family office should consider carefully whether any of the services it provides to non-family members are advisory services that make it subject to the Advisers Act.
Check dodd-frank.com frequently for updates on the Dodd-Frank Act and other important securities law matters.
Contact Jill Radloff for more information.