Amends the Investment Advisers Act of 1940 to define "family office" (exempt from coverage by the Act) as a company (including any director, partner, trustee, or employee of such company, when acting in their respective capacities as such) that has no clients other than family clients and is owned, controlled, or operated primarily for the benefit of family clients and does not hold itself out to the public as an investment adviser.
[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2225 Introduced in House (IH)]
112th CONGRESS
1st Session
H. R. 2225
To amend the Investment Advisers Act of 1940 to add a definition of
family office.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
June 16, 2011
Mr. Hensarling (for himself, Mr. Bachus, Mrs. Maloney, Mr. Garrett, Mr.
Neugebauer, Mrs. Capito, and Mrs. Biggert) introduced the following
bill; which was referred to the Committee on Financial Services
_______________________________________________________________________
A BILL
To amend the Investment Advisers Act of 1940 to add a definition of
family office.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. FINDINGS.
The Congress finds the following:
(1) Family offices are not of national concern in that
their advice, counsel, publications, writings, analyses, and
reports are not furnished or distributed to clients on a retail
basis, but are instead furnished or distributed only to persons
who are members of a particular family.
(2) Family offices do not hold themselves out to the public
as investment advisers.
(3) Family offices do not engage in the business of
advising others, but instead provide a wide range of services
to members of the family they serve, only one of which involves
investment advice, for which they may receive compensation from
the members of the family.
(4) Since the Investment Advisers Act of 1940 was enacted,
the Securities and Exchange Commission has regularly issued
orders to individual family offices exempting them from all of
the provisions of the Investment Advisers Act of 1940.
(5) Section 409 of the Dodd-Frank Wall Street Reform and
Consumer Protection Act expressly exempts family offices from
all of the provisions of the Investment Advisers Act of 1940.
(6) It was the intent of Congress that section 409 of the
Dodd-Frank Wall Street Reform and Consumer Protection Act be
interpreted broadly to encompass all family offices as they are
currently organized and operated, as well as to encompass
changes in the organization and operation of family offices in
the future.
SEC. 2. FAMILY OFFICE DEFINITION.
Section 202(a) of the Investment Advisers Act of 1940 (15 U.S.C.
80b-2(a)) is amended--
(1) in paragraph (11)(G), in the matter added by section
409(a) of the Dodd-Frank Wall Street Reform and Consumer
Protection Act, by striking ``, as defined by rule, regulation,
or order of the Commission, in accordance with the purposes of
this title'';
(2) by redesignating the second paragraph (29), as added by
section 770 of the Dodd-Frank Wall Street Reform and Consumer
Protection Act, as paragraph (31); and
(3) by adding at the end the following new paragraph:
``(32) Family office.--
``(A) In general.--The term `family office' means a
company (including any director, partner, trustee, or
employee of such company, when acting in their
respective capacities as such) that--
``(i) has no clients other than family
clients;
``(ii) is--
``(I) owned, directly or
indirectly, by,
``(II) controlled, directly or
indirectly, by, or
``(III) operated primarily for the
benefit of,
family clients; and
``(iii) does not hold itself out to the
public as an investment adviser.
``(B) Grandfathering.--A person described under
section 409(b)(3) of the Dodd-Frank Wall Street Reform
and Consumer Protection Act, but who otherwise meets
the requirements under subparagraph (A), shall qualify
as a family office.
``(C) Definitions.--For purposes of this paragraph:
``(i) Control.--The term `control' means
the power to exercise a controlling influence
over the management or policies of a company,
unless such power is solely the result of being
an officer of such company.
``(ii) Family client.--The term `family
client' means:
``(I) Any family member.
``(II) Any key employee.
``(III) Any charitable foundation,
charitable organization, charitable
trust, or other non-profit organization
established or controlled, directly or
indirectly, by persons one or more of
whom is a family client.
``(IV) Any trust or estate funded
exclusively by one or more family
members or established primarily for
the benefit of one or more family
clients.
``(V) Any limited liability
company, partnership, corporation, or
other entity, if--
``(aa) such entity is
majority-owned or controlled,
directly or indirectly, by, or
operated primarily for the
benefit of, one or more family
clients;
``(bb) the family office is
giving investment advice to
such entity; and
``(cc) persons who are not
otherwise defined as a family
client do not own interests in
such entity.
``(VI) Any former family member.
``(VII) Any former key employee,
if, upon the termination of such
individual's employment by the family
office or family client, the former key
employee shall not receive investment
advice from the family office or the
family client (or invest additional
assets with a family office-advised
trust, charitable foundation, or
entity), other than with respect to
assets advised, directly or indirectly,
by the family office or family client
immediately prior to the termination of
such individual's employment, except
that a former key employee shall be
permitted to receive investment advice
from the family office with respect to
additional investments that the former
key employee was contractually
obligated to make, and that relate to a
family office advised investment
existing, in each case, prior to the
time the person became a former key
employee. For purposes of this
subclause, the term `family office'
shall include any entity described
under subclause (V).
``(iii) Family member.--
``(I) In general.--The term `family
member' means:
``(aa) Any natural person
whose economic activities
created or substantially
contributed to the family's
wealth, and such person's
spouse.
``(bb) The siblings,
parents, grandparents of a
person described in item (aa).
``(cc) The spouse of a
person described in item (bb).
``(dd) The siblings of a
person described in item (bb)
or (cc).
``(ee) The spouse of a
person described in item (dd).
``(ff) The lineal
descendant of a person
described in item (bb), (cc),
(dd), or (ee).
``(gg) The spouse of a
person described in item (ff).
``(II) Construction.--For purposes
of this clause--
``(aa) the term `lineal
descendant' includes natural
children, adopted children, and
stepchildren;
``(bb) the term `spouse'
includes spousal equivalents;
and
``(cc) the terms
`siblings', `parents', and
`grandparents' include step-
siblings, step-parents, and
step-grandparents,
respectively.
``(iv) Former family member.--The term
`former family member' means a spouse or a
descendant who was a family member but is no
longer a family member due to a divorce or
other similar event.
``(v) Key employee.--The term `key
employee' means any natural person (and such
person's spouse or lineal descendant) who is an
executive officer, director, trustee, general
partner, or person serving in a similar
capacity, of the family office or any employee
of the family office (other than an employee
performing solely clerical, secretarial, or
administrative functions) who, in connection
with his or her regular functions or duties,
participates in the investment activities of
the family office. For purposes of this
subclause, the term `family office' shall
include any entity described under clause
(ii)(V).
``(vi) Spousal equivalent.--The term
`spousal equivalent' means a cohabitant
occupying a relationship generally equivalent
to that of a spouse.
``(D) Involuntary events.--If--
``(i) a person that is not a family client
becomes a client of the family office as a
result of the death of a family member or key
employee or other involuntary transfer from a
family member or key employee, or
``(ii) a person ceases to be a family
client,
that person shall be deemed to be a family client until
the end of the 1-year period beginning on the date that
it is both legally and practically feasible for the
family office to transfer the affected assets to such
person, but in no event earlier than 1 year from the
date that it becomes legally feasible to transfer the
affected assets unless it becomes practically feasible
to affect such a transfer sooner.''.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Financial Services.
Referred to the Subcommittee on Capital Markets and Government Sponsored Enterprises.
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