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SEC Issues Family Office Rule

The U.S. Securities and Exchange Commission (SEC) adopted a new rule defining “family offices.” This rule was written in response to the Dodd-Frank Act and clarifies which offices are excluded from the definition of an investment adviser under the Investment Advisers Act of 1940.

The new rule excludes offices that provide securities advice only to family clients. These offices must be wholly owned and controlled by family members or family entities. Finally, the office cannot hold itself out to the public as an investment adviser.

Family members are defined as lineal descendents of a common ancestor, provided the ancestor is no more than 10 generations removed from the youngest generation of family members. Current and former spouses or spousal equivalents of those descendents are also included.

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