79–006 

115TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 1st Session 115–362 

FAMILY OFFICE TECHNICAL CORRECTION ACT OF 2017 

OCTOBER 23, 2017.—Committed to the Committee of the Whole House on the State 

of the Union and ordered to be printed 

Mr. HENSARLING, from the Committee on Financial Services, 

submitted the following 

R E P O R T 

[To accompany H.R. 3972] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Financial Services, to whom was referred the 

bill (H.R. 3972) to clarify that family offices and family clients are 

accredited investors, and for other purposes, having considered the 

same, report favorably thereon with amendments and recommend 

that the bill as amended do pass. 

The amendments (stated in terms of the page and line numbers 

of the introduced bill) are as follows: 

Page 1, line 7, strike ‘‘Any person who is a’’ and insert ‘‘(a) IN

GENERAL.—Subject to subsection (b), any’’. 

Page 1, line 7, strike ‘‘client,’’ and insert ‘‘client of a family office,’’. 

Page 2, after line 2, insert the following: 

‘‘(b) LIMITATION.—Subsection (a) only applies to a family 

office with assets under management in excess of 

$5,000,000, and a family office or a family client not 

formed for the specific purpose of acquiring the securities 

offered, and whose purchase is directed by a person who 

has such knowledge and experience in financial and business matters that such person is capable of evaluating the 

merits and risks of the prospective investment.’’. 

PURPOSE AND SUMMARY

Introduced by Representative Carolyn Maloney on October 5, 

2017, H.R. 3972, the Family Office Technical Correction Act of 

2017, clarifies that family offices and family clients, as defined in 

section 275.202(a)(11)(G)–1 of title 17, Code of Federal Regulations, 

generally are accredited investors under Regulation D. 

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BACKGROUND AND NEED FOR LEGISLATION

The goal of H.R. 3972 is to provide a technical clarification to ensure that the federal securities laws consider family offices to be 

accredited investors under Regulation D, as promulgated by the Securities and Exchange Commission (SEC) pursuant to the Securities Act of 1933 (Securities Act). 

A family office is a private entity formed and controlled by the 

family it serves to manage its personal and financial needs. Section 

409 of the Dodd-Frank Wall Street Reform and Consumer Protection Act empowered the SEC to adopt Rule 202(a)(11)(G)–1, the 

Family Office Rule, under the Investment Advisers Act of 1940 

(Advisers Act). The Family Office Rule allows a family office to give 

investment advice to a ‘‘family client’’ without registering under the 

Advisers Act. The public policy to support this exclusion is based 

on the notion that members of a family will protect each other and 

that the investor protections of the Advisers Act do not need to 

apply in this unique situation. This policy rationale also should extend to treat family offices as accredited investors under Regulation D. Providing this clarity is important because family offices 

frequently seek to acquire interests in private equity funds and 

hedge funds as part of the family office asset allocation process. As 

amended, H.R. 3972 satisfies this need so long as the family office 

has more than $5,000,000 in assets under management and has 

not been formed for the specific purpose of acquiring the securities 

offered. 

HEARINGS

The Committee on Financial Services Subcommittee on Capital 

Markets, Securities, and Investment held hearings examining matters relating to H.R. 3972 on April 19, 2017 and July 18, 2017. 

COMMITTEE CONSIDERATION

The Committee on Financial Services met in open session on October 11, 2017, and October 12, 2017, and ordered H.R. 3972 to be 

reported favorably to the House, as amended, by a recorded vote 

of 60 yeas to 0 nays (Recorded vote no. FC–87), a quorum being 

present. Before the motion to report was offered, the Committee 

adopted an amendment offered by Mrs. Maloney by voice vote. 

COMMITTEE VOTES

Clause 3(b) of rule XIII of the Rules of the House of Representatives requires the Committee to list the record votes on the motion 

to report legislation and amendments thereto. The sole recorded 

vote was on a motion by Chairman Hensarling to report the bill favorably to the House, as amended. The motion was agreed to by 

a recorded vote of 60 yeas to 0 nays (Recorded vote no. FC–87), a 

quorum being present. 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Hensarling ...................... X ........... ............. Ms. Maxine Waters (CA) ...... X ........... .............

Mr. McHenry .......................... X ........... ............. Mrs. Carolyn B. Maloney 

(NY).

X ........... .............

Mr. King ................................ X ........... ............. Ms. Vela ́zquez ...................... X ........... .............

Mr. Royce (CA) ...................... X ........... ............. Mr. Sherman ........................ X ........... .............

Mr. Lucas .............................. X ........... ............. Mr. Meeks ............................. X ........... .............

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Representative Yea Nay Present Representative Yea Nay Present 

Mr. Pearce ............................. X ........... ............. Mr. Capuano ........................ X ........... .............

Mr. Posey .............................. X ........... ............. Mr. Clay ................................ X ........... .............

Mr. Luetkemeyer .................... X ........... ............. Mr. Lynch ............................. X ........... .............

Mr. Huizenga ......................... X ........... ............. Mr. David Scott (GA) ............ X ........... .............

Mr. Duffy ............................... X ........... ............. Mr. Al Green (TX) ................. X ........... .............

Mr. Stivers ............................ X ........... ............. Mr. Cleaver ........................... X ........... .............

Mr. Hultgren .......................... X ........... ............. Ms. Moore ............................. X ........... .............

Mr. Ross ................................ X ........... ............. Mr. Ellison ............................ X ........... .............

Mr. Pittenger ......................... X ........... ............. Mr. Perlmutter ...................... X ........... .............

Mrs. Wagner .......................... X ........... ............. Mr. Himes ............................. X ........... .............

Mr. Barr ................................ X ........... ............. Mr. Foster ............................. X ........... .............

Mr. Rothfus ........................... X ........... ............. Mr. Kildee ............................. X ........... .............

Mr. Messer ............................ X ........... ............. Mr. Delaney .......................... X ........... .............

Mr. Tipton ............................. X ........... ............. Ms. Sinema .......................... X ........... .............

Mr. Williams .......................... X ........... ............. Mrs. Beatty ........................... X ........... .............

Mr. Poliquin .......................... X ........... ............. Mr. Heck ............................... X ........... .............

Mrs. Love .............................. X ........... ............. Mr. Vargas ........................... X ........... .............

Mr. Hill .................................. X ........... ............. Mr. Gottheimer ..................... X ........... .............

Mr. Emmer ............................ X ........... ............. Mr. Gonzalez (TX) ................. X ........... .............

Mr. Zeldin ............................. X ........... ............. Mr. Crist ............................... X ........... .............

Mr. Trott ................................ X ........... ............. Mr. Kihuen ............................ X ........... .............

Mr. Loudermilk ...................... X ........... .............

Mr. Mooney (WV) ................... X ........... .............

Mr. MacArthur ....................... X ........... .............

Mr. Davidson ......................... X ........... .............

Mr. Budd ............................... X ........... .............

Mr. Kustoff (TN) .................... X ........... .............

Ms. Tenney ............................ X ........... .............

Mr. Hollingsworth .................. X ........... .............

COMMITTEE OVERSIGHT FINDINGS

Pursuant to clause 3(c)(1) of rule XIII of the Rules of the House 

of Representatives, the findings and recommendations of the Committee based on oversight activities under clause 2(b)(1) of rule X 

of the Rules of the House of Representatives, are incorporated in 

the descriptive portions of this report. 

PERFORMANCE GOALS AND OBJECTIVES

Pursuant to clause 3(c)(4) of rule XIII of the Rules of the House 

of Representatives, the Committee states that H.R. 3972 will provide regulatory parity for family offices by clarifying the definition 

of accredited investor, under Regulation D of the Securities Act of 

1933, includes family offices. 

NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX

EXPENDITURES

In compliance with clause 3(c)(2) of rule XIII of the Rules of the 

House of Representatives, the Committee adopts as its own the estimate of new budget authority, entitlement authority, or tax expenditures or revenues contained in the cost estimate prepared by 

the Director of the Congressional Budget Office pursuant to section 

402 of the Congressional Budget Act of 1974. 

CONGRESSIONAL BUDGET OFFICE ESTIMATES

Pursuant to clause 3(c)(3) of rule XIII of the Rules of the House 

of Representatives, the following is the cost estimate provided by 

the Congressional Budget Office pursuant to section 402 of the 

Congressional Budget Act of 1974: 

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U.S. CONGRESS, CONGRESSIONAL BUDGET OFFICE, Washington, DC, October 20, 2017. 

Hon. JEB HENSARLING, 

Chairman, Committee on Financial Services, 

House of Representatives, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 3972, the Family Office 

Technical Correction Act of 2017. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Stephen Rabent. 

Sincerely, 

KEITH HALL, 

Director. 

Enclosure. 

H.R. 3972—Family Office Technical Correction Act of 2017 

Current law provides a number of exemptions from the requirement that securities be registered with the Securities and Exchange Commission (SEC) prior to their sale. Central to those exemptions is the accredited investor, a person with sufficient financial sophistication and ability to sustain the risk of loss so that the 

protections from the registration process are unnecessary. Accredited investors may participate in investment opportunities not 

available to non-accredited investors, such as purchasing securities 

that are exempt from registration. 

H.R. 3972 would broaden the definition of an accredited investor 

to include a family office or a client of a family office that meets 

certain criteria. (A family office is a company that only has family 

clients, is owned and controlled by family members or family entities, and does not hold itself out to the public as an investment adviser.) 

Based on an analysis of information from the SEC, CBO estimates that implementing H.R. 3972 would cost less than $500,000 

for the agency to conduct a rulemaking to change the definition of 

an accredited investor. Moreover, the SEC is authorized to collect 

fees sufficient to offset its annual appropriation; therefore, CBO estimates that the net effect on discretionary spending would be negligible, assuming appropriation actions consistent with that authority. 

Enacting H.R. 3972 would not affect direct spending or revenues; 

therefore, pay-as-you-go procedures do not apply. 

CBO estimates that enacting H.R. 3972 would not increase net 

direct spending or on-budget deficits in any of the four consecutive 

10-year periods beginning in 2028. 

H.R. 3972 contains no intergovernmental mandates as defined in 

the Unfunded Mandates Reform Act (UMRA). 

If the SEC increases fees to offset the costs associated with implementing the bill, H.R. 3972 would increase the cost of an existing mandate on private entities required to pay those assessments. 

CBO estimates that the incremental cost of the mandate would be 

small and would fall well below the annual threshold for privatesector mandates established in UMRA ($156 million in 2017, adjusted annually for inflation). 

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The CBO staff contacts for this estimate are Stephen Rabent (for 

federal costs) and Logan Smith (for private-sector mandate). The 

estimate was approved by H. Samuel Papenfuss, Deputy Assistant 

Director for Budget Analysis. 

FEDERAL MANDATES STATEMENT

This information is provided in accordance with section 423 of 

the Unfunded Mandates Reform Act of 1995. 

The Committee has determined that the bill does not contain 

Federal mandates on the private sector. The Committee has determined that the bill does not impose a Federal intergovernmental 

mandate on State, local, or tribal governments. 

ADVISORY COMMITTEE STATEMENT

No advisory committees within the meaning of section 5(b) of the 

Federal Advisory Committee Act were created by this legislation. 

APPLICABILITY TO LEGISLATIVE BRANCH

The Committee finds that the legislation does not relate to the 

terms and conditions of employment or access to public services or 

accommodations within the meaning of the section 102(b)(3) of the 

Congressional Accountability Act. 

EARMARK IDENTIFICATION

With respect to clause 9 of rule XXI of the Rules of the House 

of Representatives, the Committee has carefully reviewed the provisions of the bill and states that the provisions of the bill do not 

contain any congressional earmarks, limited tax benefits, or limited 

tariff benefits within the meaning of the rule. 

DUPLICATION OF FEDERAL PROGRAMS

In compliance with clause 3(c)(5) of rule XIII of the Rules of the 

House of Representatives, the Committee states that no provision 

of the bill establishes or reauthorizes: (1) a program of the Federal 

Government known to be duplicative of another Federal program; 

(2) a program included in any report from the Government Accountability Office to Congress pursuant to section 21 of Public 

Law 111–139; or (3) a program related to a program identified in 

the most recent Catalog of Federal Domestic Assistance, published 

pursuant to the Federal Program Information Act (Pub. L. No. 95– 

220, as amended by Pub. L. No. 98–169). 

DISCLOSURE OF DIRECTED RULEMAKING

Pursuant to section 3(i) of H. Res. 5, (115th Congress), the following statement is made concerning directed rulemakings: The 

Committee estimates that the bill requires no directed rulemakings 

within the meaning of such section. 

SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1. Short title 

This section cites H.R. 3972 as the ‘‘Family Office Technical Correction Act of 2017.’’ 

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Section 2. Accredited investors clarification 

Any person who is a family office or a family client, as defined 

in section 275.202(a)(11)(G)–1 of title 17, Code of Federal Regulations, shall be deemed to be an accredited investor, as defined in 

Regulation D of the SEC (or any successor thereto) under the Securities Act, so long as the family office has more than $5,000,000 in 

assets under management and has not been formed for the specific 

purpose of acquiring the securities offered. 

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

H.R. 3972 does not repeal or amend any section of a statute. 

Therefore, the Office of Legislative Counsel did not prepare the report contemplated by Clause 3(e)(1)(B) of rule XIII of the House of 

Representatives. 

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