The Securities and Exchange Commission (the “SEC”) recently adopted a final rule (the “Rule”) defining “family offices” that are to be excluded from the definition of an investment adviser and corresponding registration requirements under the Investment Advisers Act of 1940 (the “Advisers Act”). The SEC adopted the Rule pursuant to Section 403 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”).

“Family offices” are entities established by families to manage their wealth and provide other services to family members, such as tax and estate planning. Although family offices have historically been subject to Advisers Act regulation, most have taken advantage of an exemption for firms that advise fewer than fifteen clients (the “Private Adviser Exemption”) or have obtained exemptive orders from the SEC. The Dodd-Frank Act repeals the Private Adviser Exemption to enable SEC regulation of hedge fund and other private fund advisers. The Dodd-Frank Act, however, also includes a provision requiring the SEC to define the term “family office” so as to exempt them from Advisers Act regulation.

Under the Rule, a family office will be excluded from Advisers Act regulation if it meets the following three conditions...