Many rich people establish “family offices” to provide investment advisory services to family members. Section 409 of the Dodd-Frank Act excludes “family offices” from the definition of ”investment adviser” under the Investment Advisers Act of 1940. Congress left it up to the Securities and Exchange Commission to define who is and isn’t family for purposes of the family office exclusion.
SEC Defines “Family Members”
Under the SEC’s new rule, a “family member” includes all lineal descendants of a common ancestor (who may be living or deceased) as well as current and former spouses or spousal equivalents of those descendants, provided that the common ancestor is no more than 10 generations removed from the youngest generation of family members. Rule 202(a)(11)(G)-1(b)(1). All children by adoption and current and former stepchildren also are considered family members.
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