On October 12, 2010, the Securities and Exchange Commission (the “SEC”) proposed a new rule relating to the exclusion of a “family office” from the requirements imposed under the Investment Advisers Act of 1940 (the “Advisers Act”). Traditionally, these family offices have been exempted from the registration requirements set forth under the Advisers Act provided they had fewer than 15 clients. However, in an effort to regulate hedge funds and other private fund advisers, the Dodd-Frank Wall Street Reform and Consumer Protection Act eliminated this blanket exemption based on a limited number of clients and, in its place, instructed the SEC to promulgate a new definition of family office for exemption purposes under the Advisers Act.

The proposed rule generally defines a family office as any firm that (i) provides investment advice only to family members, as defined by such rule; (ii) is wholly owned and controlled by family members; and (iii) does not hold itself out to the public as an investment adviser.