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Legacy Matters

July 29, 2021

New Bill Proposes To Have Family Offices Register With the SEC and Begin SEC Reporting

Last week the United States House of Representatives Committee on Financial Services gave support to a bill introduced recently by Rep. Alexandria Ocasio-Cortez. The bill will now be considered by the full House of Representatives. The purpose of the bill, H.R. 4620, is to amend the Investment Advisers Act of 1940 to impose regulatory oversight of family offices.
 
​Currently, family offices are typically exempted from the requirement to register with the SEC as investment advisers. If the bill is enacted in its current form, it would limit that exemption from registration to “covered” family offices, which would be those with less than $750,000,000 in assets under management. Any family office with more than $750,000,000 in assets under management would be required to register with the SEC as an investment adviser and follow investment adviser regulations and reporting rules.
 
The bill also provides that offices with less than $750,000,000 in assets could still be required to register with the SEC if the commission “determines the family office is highly leveraged or engaged in high risk activities that the Commission determines warrants inclusion, as appropriate to protect investors.”  
 
In addition, the bill would require all family offices to report to the SEC and provide “such annual or other reports as the Commission determines necessary or appropriate in the public interest or for the protection of investors.”
 
The bill is likely a response to the collapse of the highly leveraged Archegos Capital Management firm in late March, which cost banks billions of dollars in loan losses. Although Archegos was not a family office, the media has portrayed it as a family office, and as a result, its collapse has focused attention on family offices.
 
If it passes the House, it will still face opposition in the Senate, so enactment in its current form is not certain. Even if the bill does not pass, it may be a harbinger of efforts to impose additional oversight of family offices in the future.
 
If you have questions about this bill or other recently proposed legislation affecting family offices, please reach out to your Warner attorney or contact Mark Harder, Chair of the Private Client and Family Office Practice Group, at mharder@wnj.com or at 616-396-3225.

This blog post was also published online at Wealth Management here.
 

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