Hedge Fund Formation and Securities Law Specialists
Law Offices of Scott Goldring Associates

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Family Office

Family Office

High net worth families recognize the benefit of forming a family office. SGA understands the needs and goals of a Family Office and with our large network of industry contacts we can provide assistance with a comprehensive approach to creation, oversight, and wealth management and preservation.

We collaborate with other professional service providers to assist clients with a holistic set of services to meet the growing complexity of needs and opportunities facing the high net worth family. We can serve as outsourced General Counsel to handle a wide variety of projects as well as supervise the work of others.

We are always available to handle both large and small matters and will work with the family to set a flat fee for ongoing services. We can help clients to address concerns and interrelated financial, personal and public objectives. 

Family Office Regulations

 The Securities and Exchange Commission  adopted  Rule 202(a)(11)(G)-1 to define “family offices” that will be excluded from the definition of an investment adviser under the Investment Advisers Act of 1940 (“Advisers Act”) and accordingly will not be subject to regulation under the Advisers Act. An investment advisor that does not meet the new definition of family office and is of a size to require registration will be required to register with the SEC (before March 2012) unless the advisor has fewer than 15 clients and does not hold itself out to the public as an investment advisor (or advise an SEC-registered fund or business development company), in which case the adviser will not have been required to register with the SEC until March 30, 2012.

Family office exclusion

Under the Family Office Rule, a family office is a "company" (i.e., any kind of entity) that

(1) provides investment advice only to "family clients,"

(2) is wholly owned by family clients and controlled (directly or indirectly) exclusively by "family members" and/or "family entities" and

(3) does not hold itself out to the public as an investment adviser. 


Who is considered a family member?

All lineal descendants of a common ancestor (no more than 10 generations removed from the youngest generation), current or former spouses or spousal equivalents of those descendants. Spousal equivalents are same-sex domestic partners as well as opposite sex partners who have decided not to marry even though the relationship is equivalent to a married couples’. Adopted children and current and former stepchildren are also considered family members.  

A non-family client owning non-voting shares would cause the office to lose its qualification as a family office under the rule. The rule does not include in-laws.


Family Trusts and Estates

  • Rule 202(a)(11)(G)-1 treats as a family client certain family trusts established for

testamentary and charitable purposes.

a)      Irrevocable Trusts: The rule treats any irrevocable trust in which family clients are the only current beneficiaries as family client. The rule allows the family office to advise irrevocable trusts funded exclusively by one or more other family clients in which the only current beneficiaries are non-profit organizations, charitable foundations, charitable trusts or other charitable organizations.

  • In cases where family offices are currently advising non-profit organizations that have accepted funding from non-family clients. These offices have until December 31, 2013 to transition such arrangements in order to restructure in order to comply with this aspect of the exclusion.
  • Charitable and non-profit organizations are broadly understood as defined under trust and tax law.

b)      Revocable Trusts: A revocable trust of which one or more family clients are the sole grantors is also treated as a family client.

c)      Estates: The estate of a family member, former family member, key employee or former key employee is treated as a family client under the final rule.

Providing non-advisory services such as catering, tax, or accounting to non-family members do

not affect whether or not the office is a family office under the rule. However, offices should be careful to make sure that the services it provides do not make it subject to the Advisers Act.


Ownership and Control

As long as the entity is wholly owned by and for the sole benefit of family clients, however, as with family trusts and family charitable organizations, the entity having non-family client control does not change that family clients are the ultimate beneficiaries of the investment advice, and the requirement for control by family clients has been eliminated in the final rule.


Key Employees

            The  family office may provide investment advice to any person (including any key employee’s spouse or spousal equivalent who holds a joint, community property or other similar shared ownership interest with that key employee) who is

(i)                          an executive officer, director, trustee, general partner, or person serving in a similar capacity at the family office or its affiliated family office. An executive officer is defined as  or

(ii)                        any other employee of the family office or its affiliated family office (other than an employee performing solely clerical, secretarial, or administrative functions) who participates in the investment activities of the family office or affiliated family office, as part of their regular duties for at least twelve months.

By allowing investment participation by key employees of family offices (since their interests would be aligned) family members are enabled to attract highly skilled investment professionals who may not otherwise be attracted to work at a family office.


Holding out

            The rule prohibits a family office from holding itself out to the public as an investment advisor since it suggests that they are looking to enter into typical advisory relationships.




Multifamily Offices

            The exclusions do not extent to family offices serving multiple families. If two or more families staff their family offices with the same or substantially the same employees who provide investment advice, these would be managing a multifamily office, de facto. Such family offices would not be able to claim the exclusion.


Grandfathered Companies

            The Dodd-Frank Act required the SEC to include in the definition of "family office" offices that were not registered or required to be registered under the Advisers Act on January 1, 2010, and would not meet all of the Family Office Rule's generally applicable requirements only because those offices provide investment advice to certain persons. A grandfathered family office meeting this narrow exclusion is not required to register as an investment adviser but  is subject to the anti-fraud provisions of the Advisers Act.

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