More On Legal & Compliancefrom The Advisor's Professional Library
- Suitability and Fiduciary Duty Recommending suitable investments is more than just a regulatory obligation. Many investors bring cases claiming lack of suitability, so RIAs must continuously put the onus on clients to notify the advisor of changes in their financial situation.
- Preventing and Dealing with Client Complaints Although the SEC has not provided specific guidance on how client complaints should be handled, a firms policies and procedures should provide clear direction how to do so, as neglecting complaints can exacerbate a bad situation.
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.