1.The Congress finds the following:
(1)Family offices are
not of national concern in that their advice, counsel, publications, writings,
analyses, and reports are not furnished or distributed to clients on a retail
basis, but are instead furnished or distributed only to persons who are members
of a particular family.
(2)Family offices do
not hold themselves out to the public as investment advisers.
(3)Family offices do
not engage in the business of advising others, but instead provide a wide range
of services to members of the family they serve, only one of which involves
investment advice, for which they may receive compensation from the members of
the family.
(4)Since the Investment Advisers Act of 1940
was enacted, the Securities and Exchange Commission has regularly issued orders
to individual family offices exempting them from all of the provisions of the
Investment Advisers Act of 1940.
(5)Section 409 of the Dodd-Frank Wall Street
Reform and Consumer Protection Act expressly exempts family offices from all of
the provisions of the Investment Advisers Act of 1940.
(6)It was the intent of Congress that section
409 of the Dodd-Frank Wall Street Reform and Consumer Protection Act be
interpreted broadly to encompass all family offices as they are currently
organized and operated, as well as to encompass changes in the organization and
operation of family offices in the future.
2.Section 202(a) of
the Investment Advisers Act of 1940 (15 U.S.C. 80b–2(a)) is amended—
(1)in paragraph (11)(G), in the matter added
by section 409(a) of the Dodd-Frank Wall Street Reform and Consumer Protection
Act, by striking , as defined by rule, regulation, or order of the
Commission, in accordance with the purposes of this title
;
(2)by redesignating
the second paragraph (29), as added by section 770 of the Dodd-Frank Wall
Street Reform and Consumer Protection Act, as paragraph (31); and
(3)by adding at the
end the following new paragraph:
(32)
(A)The term family
office means a company (including any director, partner, trustee, or
employee of such company, when acting in their respective capacities as such)
that—
(i)has no clients
other than family clients;
(ii)is—
(I)owned, directly or indirectly, by,
(II)controlled, directly or indirectly, by,
or
(III)operated
primarily for the benefit of,
family
clients; and(iii)does not hold
itself out to the public as an investment adviser.
(B)A person described under section 409(b)(3)
of the Dodd-Frank Wall Street Reform and Consumer Protection Act, but who
otherwise meets the requirements under subparagraph (A), shall qualify as a
family office.
(C)For
purposes of this paragraph:
(i)The
term control means the power to exercise a controlling influence
over the management or policies of a company, unless such power is solely the
result of being an officer of such company.
(ii)The term family client means:
(I)Any family
member.
(II)Any key
employee.
(III)Any charitable
foundation, charitable organization, charitable trust, or other non-profit
organization established or controlled, directly or indirectly, by persons one
or more of whom is a family client.
(IV)Any trust or estate funded exclusively by
one or more family members or established primarily for the benefit of one or
more family clients.
(V)Any limited
liability company, partnership, corporation, or other entity, if—
- (aa)such entity is
majority-owned or controlled, directly or indirectly, by, or operated primarily
for the benefit of, one or more family clients;
- (bb)the family office is giving investment
advice to such entity; and
- (cc)persons who are
not otherwise defined as a family client do not own interests in such
entity.
(VI)Any former family
member.
(VII)Any former key
employee, if, upon the termination of such individual’s employment by the
family office or family client, the former key employee shall not receive
investment advice from the family office or the family client (or invest
additional assets with a family office-advised trust, charitable foundation, or
entity), other than with respect to assets advised, directly or indirectly, by
the family office or family client immediately prior to the termination of such
individual’s employment, except that a former key employee shall be permitted
to receive investment advice from the family office with respect to additional
investments that the former key employee was contractually obligated to make,
and that relate to a family office advised investment existing, in each case,
prior to the time the person became a former key employee. For purposes of this
subclause, the term family office shall include any entity
described under subclause (V).
(iii)
(I)The term family
member means:
- (aa)Any natural person whose economic
activities created or substantially contributed to the family's wealth, and
such person’s spouse.
- (bb)The
siblings, parents, grandparents of a person described in item (aa).
- (cc)The
spouse of a person described in item (bb).
- (dd)The
siblings of a person described in item (bb) or (cc).
- (ee)The
spouse of a person described in item (dd).
- (ff)The
lineal descendant of a person described in item (bb), (cc), (dd), or
(ee).
- (gg)The
spouse of a person described in item (ff).
(II)For
purposes of this clause—
- (aa)the
term lineal descendant includes natural children, adopted
children, and stepchildren;
- (bb)the
term spouse includes spousal equivalents; and
- (cc)the
terms siblings, parents, and
grandparents include step-siblings, step-parents, and
step-grandparents, respectively.
(iv)The term former
family member means a spouse or a descendant who was a family member but
is no longer a family member due to a divorce or other similar event.
(v)The term key
employee means any natural person (and such person’s spouse or lineal
descendant) who is an executive officer, director, trustee, general partner, or
person serving in a similar capacity, of the family office or any employee of
the family office (other than an employee performing solely clerical,
secretarial, or administrative functions) who, in connection with his or her
regular functions or duties, participates in the investment activities of the
family office. For purposes of this subclause, the term family
office shall include any entity described under clause (ii)(V).
(vi)The term spousal equivalent means a
cohabitant occupying a relationship generally equivalent to that of a
spouse.
(D)If—
(i)a
person that is not a family client becomes a client of the family office as a
result of the death of a family member or key employee or other involuntary
transfer from a family member or key employee, or
(ii)a
person ceases to be a family client,
that
person shall be deemed to be a family client until the end of the 1-year period
beginning on the date that it is both legally and practically feasible for the
family office to transfer the affected assets to such person, but in no event
earlier than 1 year from the date that it becomes legally feasible to transfer
the affected assets unless it becomes practically feasible to affect such a
transfer
sooner..