More On Legal & Compliancefrom The Advisor's Professional Library
- Trading Practices and Errors When SEC-registered investment advisors conduct annual audits of firm policies and procedures, they should pay close attention to trading practices. Though usually not required to, state-registered advisors should look at their trading practices and revise policies that do not fully protect clients.
- Recent Changes in the Regulatory Landscape 2011 marked a major shift in the regulatory environment, as the SEC adopted rules for implementing the Dodd-Frank Act. Many changes to Investment Advisers Act were authorized by Title IV of the Dodd-Frank Act.
The SEC proposed a new rule on Tuesday that would define what kind of firm could call itself a “family office.” The agency was required to define the term under the Dodd-Frank Wall Street Reform and Consumer Protection Act, which became law on July 21.
The intent of the proposed rule, the SEC said in a statement, was to help those managing their own family's financial portfolios determine whether their "family offices" could continue to be excluded from the Investment Advisers Act of 1940.
It noted that family offices historically had not been required to register with the SEC under the Advisers Act because of an exemption provided to investment advisors with fewer than 15 clients. The Dodd-Frank Act removed that exemption to enable the SEC to regulate hedge fund and other private fund advisers, but included a new provision requiring the SEC to define family offices in order to exempt them from regulation under the Advisers Act.
The commission is proposing to define a family office as any firm that:
- Provides investment advice only to family members, as defined by the rule; certain key employees; charities and trusts established by family members; and entities wholly owned and controlled by family members.
- Is wholly owned and controlled by family members.
- Does not hold itself out to the public as an investment adviser.
The SEC said the public should send comments on the proposed rule to the commission by Nov. 18.