This is part two of a three-part series that addresses the regulation of family offices under the Investment Advisers Act of 1940, as amended (the “Advisers Act”), by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), signed into law by President Obama on July 21, 2010. The Dodd-Frank Act provides that family offices are to be exempt from the definition of “investment adviser” in the Advisers Act, but left to the Securities and Exchange Commission (“SEC” or the “Commission”) the definitional details, requiring only that the SEC’s implementation of the new rule be consistent with its historic position as reflected in its exemptive orders. In proposing its definition of family office, the SEC focuses on single family offices which have assets in excess of $100 million. There are about 2,500 to 3,000 such family offices in the U.S. In the aggregate, these family offices manage more than $1.2 trillion in assets. Part one of this series presented the current SEC position as reflected by the exemptive orders. See “Developments in Family Office Regulation: Part One
,” Hedge Fund Law Report, Vol. 3, No. 38 (Oct. 1, 2010). In this part two, Michael G. Tannenbaum and Christina Zervoudakis, Founding Partner and Associate, respectively, at Tannenbaum Helpern Syracuse & Hirschtritt LLP, discuss the proposed rules recently issued by the SEC. Unless extended by the SEC, the comment period with regard to the proposals ends on November 18, 2010. There will undoubtedly be comments for the SEC to consider and perhaps adopt. The authors expect that part three of this series will deal with the state of affairs as made final after the comment period ends and the SEC issues its final rules.