Sep 1, 2011 12:00 PM

Another unnecessary necessity

By Miles C. Padgett

Family offices must now square the corners of their ownership and investment process with a new regulation. The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) fundamentally changes the rules for family offices that provide investment advice. Prior to the passage of that law, many family offices considered themselves exempt from registration under the Investment Advisers Act of 1940 (Advisers Act) due to the exemption for advisers with fewer than 15 clients. In enacting Dodd-Frank, however, Congress revoked that exemption effective July 2011, but created a new exemption for family offices — the single family office exclusion — and directed the Securities and Exchange Commission to establish its scope. The SEC began that process on Oct. 12, 2010, with its release of Proposed Rule 202(a)(11)(G)-1 (proposed rule), and after considering comments from dozens of organizations, issued its final rule on June 22, 2011 (final rule).¹ Family offices must now address whether they qualify for the new exemption; if a family office doesn't qualify, it must decide promptly how to restructure and then execute that restructuring without delay.

Whether a family office constitutes an “investment adviser” under the Advisers Act has now become an important threshold determination. Unfortunately, there's precious little authoritative guidance that translates directly to the family office context because, in the past, most offices were exempt from registration under the prior 14-client exemption. In any event, under the key language of the Advisers Act, an “investment adviser” is a person who provides to others advice or analyses concerning securities as part of a business of providing such services, and does so for compensation.²

Topics of Interest

Estate Tax	Donor Advised Funds
GSTs	Family Offices
Private Foundations	Life Insurance
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Topics of Interest

Estate Tax	Donor Advised Funds
GSTs	Family Offices
Private Foundations	Life Insurance
2010 Tax Act News	Industry Trends Surveys

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2011 Trust Glossary

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50 Years Ago This Month

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50 years ago, in May 1962, we featured articles such as: "Future of Canadian Trusteeship" by Arthur H. Mingay", "Training Trust Employees" by Ian M. Marr, "What is a Trust Officer?" by Eric J. Brown, and "Selling Services" by Donald I. Webb.

Conrad Teitell's Guide to Tax Benefits For Charitable Gifts

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