Federal Register / Vol. 75, No. 200 / Monday, October 18, 2010 / Proposed Rules 63753 

1 15 U.S.C. 80b. Unless otherwise noted, when we 

refer to the Advisers Act, or any paragraph of the 

Advisers Act, we are referring to 15 U.S.C. 80b of 

the United States Code, at which the Advisers Act 

is codified. 

I strongly encourage the public to closely 

analyze the language of each proposed rule 

and to provide the Commission with 

constructive and detailed comments on each 

of them. In particular, I am interested to 

know (i) what effect the Commission’s 

proposed rules on voting and ownership 

limitations will have on competition, raising 

capital, and managing risk, and (ii) whether 

or not the open access and eligibility 

provisions in Sections 2(h)(1)(B) and 

5b(c)(2)(c) of the Act would be a more 

effective method for the Commission to 

expand access to clearing, rather than placing 

limits on the voting and ownership of DCOs. 

Proposed Requirements for Derivatives 

Clearing Organizations, Designated Contract 

Markets, and Swap Execution Facilities 

Regarding the Mitigation of Conflicts of 

Interest 

Commissioner Jill E. Sommers, Dissenting 

The Commission is voting today on a 

proposal to implement two sections of the 

Dodd-Frank Act regarding the governance of 

CFTC regulated trading venues and 

clearinghouses that trade or clear swaps and 

how to mitigate conflicts of interest that may 

arise in connection with ownership interests 

that certain entities may have in these 

registrants. Specifically, Section 725(d) of the 

Act directs the Commission to: 

Adopt rules mitigating conflicts of interest 

in connection with the conduct of business 

by a swap dealer or a major swap participant 

with at [DCO], [DCM], or a [SEF] that clears 

or trades swaps in which the swap dealer or 

major swap participant has a material debt or 

material equity investment. 

Section 726 of the Act provides that the 

Commission shall adopt rules which ‘‘may’’ 

include numerical limits on the degree of 

control or voting rights that certain 

enumerated entities may possess with respect 

to DCOs, DCMs and SEFs if the Commission 

determines, after a review: 

That such rules are necessary or 

appropriate to improve the governance of, or 

to mitigate systemic risk, promote 

competition, or mitigate conflicts of interest 

in connection with a swap dealer or major 

swap participant’s conduct of business with, 

a [DCO], [DCM], or [SEF] that clears or posts 

swaps or makes swaps available for trading 

and in which such swap dealer or major 

swap participant has a material debt or 

equity investment. 

I recognize that these provisions direct the 

Commission to adopt strong governance rules 

to mitigate conflicts of interest in connection 

with the interaction between swap dealers 

and major swap participants and DCOs, 

DCMs and SEFs in which they have a 

material debt or equity investment. In my 

opinion, however, the voting equity 

restrictions being proposed are not necessary 

or appropriate to mitigate the perceived 

conflicts and in fact, may do more harm than 

good to the emerging marketplace for trading 

and clearing swaps. 

In 2009, after more than two years of study, 

the Commission finalized acceptable 

practices to provide a safe harbor for 

complying with Core Principle 15 for DCMs 

dealing with conflicts of interest. I support 

making those acceptable practices mandatory 

for DCMs, DCOs and SEFs, as augmented by 

some of the additional provisions being 

proposed today, such as the Risk 

Management Committee for DCOs. I believe 

that strong governance rules, coupled with 

the Commission’s ultimate authority to 

determine which swaps must be cleared, 

under Section 723 of Dodd-Frank, is 

sufficient to ensure that swaps that should be 

listed for trading and cleared will be listed 

for trading and cleared. 

I have grave concerns that the proposed 

limitations on voting equity, especially those 

proposed for enumerated entities in the 

aggregate with respect to DCOs, may stifle 

competition by preventing new DCMs, DCOs 

and SEFs that trade or clear swaps from being 

formed. The Commission recognizes in the 

preamble to the proposal that the enumerated 

entities will be the most likely source of 

funding for new DCMs and SEFs and thus 

chose not to propose the aggregate limits for 

trading venues. I believe the same logic 

applies with even greater force for DCOs. I 

am equally concerned that a number of 

recent entrants into the swaps trading and 

clearing space will potentially be required to 

disband their operations if they are unable to 

attract the required amount of non-voting 

equity within the two-year/two board 

election cycles proposed. I also note that the 

European Commission explicitly rejected 

ownership limitations in its proposal for 

regulating OTC derivatives announced 

September 15th because such limitations 

may have negative consequences for market 

structures. I agree. And I hope that we will 

be mindful of global consistency as we move 

forward. The marketplace for trading and 

clearing swaps is in its infancy. I strongly 

believe that the limitations the Commission 

is proposing will have the effect of inhibiting 

emerging competition rather than promoting 

it. I therefore cannot support today’s 

proposal. 

[FR Doc. 2010–26220 Filed 10–15–10; 8:45 am] 

BILLING CODE P 

SECURITIES AND EXCHANGE 

COMMISSION 

17 CFR Part 275 

[Release No. IA–3098; File No. S7–25–10] 

RIN 3235–AK66 

Family Offices 

AGENCY: Securities and Exchange 

Commission. 

ACTION: Proposed rule. 

SUMMARY: The Securities and Exchange 

Commission (the ‘‘Commission’’) is 

proposing a rule to define ‘‘family 

offices’’ that would be excluded from the 

definition of an investment adviser 

under the Investment Advisers Act of 

1940 (‘‘Advisers Act’’) and thus would 

not be subject to regulation under the 

Advisers Act. 

DATES: Comments must be received on 

or before November 18, 2010. 

ADDRESSES: Comments may be 

submitted by any of the following 

methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form, http://www.sec.gov/ 

rules/proposed.shtml; or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number S7–25–10 on the subject line; 

or 

• Use the Federal eRulemaking 

Portal, http://www.regulations.gov. 

Follow the instructions for submitting 

comments. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number S7–25–10. This file number 

should be included on the subject line 

if e-mail is used. To help us process and 

review your comments more efficiently, 

please use only one method. The 

Commission will post all comments on 

the Commission’s Web site, http:// 

www.sec.gov/rules/proposed.shtml. 

Comments are also available for Web 

site viewing and printing in the 

Commission’s Public Reference Room, 

100 F Street, NE., Washington, DC 

20549 on official business days between 

the hours of 10 a.m. and 3 p.m. All 

comments received will be posted 

without change; we do not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. 

FOR FURTHER INFORMATION CONTACT: 

Sarah ten Siethoff, Senior Special 

Counsel, or Vivien Liu, Senior Counsel, 

at (202) 551–6787 or IArules@sec.gov, 

Office of Investment Adviser 

Regulation, Division of Investment 

Management, U.S. Securities and 

Exchange Commission, 100 F Street, 

NE., Washington, DC 20549–8549. 

SUPPLEMENTARY INFORMATION: The 

Securities and Exchange Commission is 

requesting public comment on proposed 

rule 202(a)(11)(G)–1 [17 CFR 

275.202(a)(11)(G)–1] under the 

Investment Advisers Act of 1940 [15 

U.S.C. 80b] (the ‘‘Advisers Act’’ or 

‘‘Act’’).1

Table of Contents 

I. Background 


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2See John J. Bowen, Jr., In the Family Way, 

Financial Planning (Aug. 1, 2004); Robert Frank, 

Minding the Money—‘Family Office’ Chiefs Get 

Plied with Perks; Club Membership, Jets, The Wall 

Street Journal (Sept. 7, 2007), at W2. A recent study 

found the average net worth of a single family office 

was $517 million. See Russ Alan Prince et al., The 

Family Office: Advising the Financial Elite (2010) 

(‘‘The Family Office’’). 

3See Pamela J. Black, The Rise of the MultiFamily Office, Financial Planning (Apr. 27, 2010). 

A single family office generally provides services 

only to members of a single family. 

4See Raphael Amit, et al., Single Family Offices: 

Private Wealth Management in the Family Context, 

Wharton Global Family Alliance (Apr. 1, 2008), 

available at http://knowledge.wharton.upenn.edu/ 

papers/1354.pdf (‘‘Wharton Study’’); The Family 

Office, supra note 2; Angelo J. Robles, Creating a 

Single Family Office for Wealth Creation and 

Family Legacy Sustainability, Family Office 

Association, available at http:// 

familyofficeassociation.org/dwnld/ 

FOA_White_Paper.pdf. 

5 15 U.S.C. 80b–2(a)(11). See Applicability of the 

Investment Advisers Act to Financial Planners, 

Pension Consultants, and Other Persons Who 

Provide Investment Advisory Services as a 

Component of Other Financial Services, Investment 

Advisers Act Release No. 1092 (Oct. 8, 1987) [52 FR 

38400 (Oct. 16, 1987)]. There are certain exceptions 

to this definition, but the typical single family office 

does not meet any of these exceptions. 

6 15 U.S.C. 80b–2(b)(3). 

7See, e.g., In the Matter of Donner Estates, Inc., 

Investment Advisers Act Release No. 21 (Nov. 3, 

1941); In the Matter of the Pitcairn Company, 

Investment Advisers Act Release No. 52 (Mar. 2, 

1949) (‘‘Pitcairn’’); In the Matter of Roosevelt & Son, 

Investment Advisers Act Release No. 54 (Aug. 31, 

1949); Bear Creek Inc., Investment Advisers Act 

Release Nos. 1931 (Mar. 9, 2001) (notice) [66 FR 

15150 (Mar. 15, 2001)] and 1935 (Apr. 4, 2001) 

(order); Riverton Management, Inc., Investment 

Advisers Act Release Nos. 2459 (Dec. 9, 2005) [70 

FR 74381 (Dec. 15, 2005)] and 2471 (Jan. 6, 2006) 

(order). 

8 15 U.S.C. 80b–2(a)(11)(G), which will be redesignated as 15 U.S.C. 80b–2(a)(11)(H) on July 21, 

2010. If a person is excluded from the definition of 

an investment adviser, no state can require that 

person to register as an investment adviser. See 15 

U.S.C. 80b–3A(b)(1). 

9There also are commercial family offices, which 

are for-profit organizations that serve a much larger 

number of families and typically are registered as 

an investment adviser with the Commission or one 

or more states. See The Family Office, supra note 

2. For example, GenSpring Family Offices, LLC 

reports on Part 1 of its Form ADV that it provides 

investment advisory services to 5000 clients. 

10Pub. L. 111–203, 124 Stat. 1376 (2010). 

11See section 403 of the Dodd-Frank Act. 

12See S. Conf. Rep. No. 111–176, at 38–39 (2010) 

(‘‘Senate Committee Report’’). 

13The Senate Report states that ‘‘family offices are 

not investment advisers intended to be subject to 

registration under the Advisers Act’’ and that ‘‘the 

Advisers Act is not designed to regulate the 

interactions of family members, and registration 

would unnecessarily intrude on the privacy of the 

family involved.’’ Senate Committee Report, supra 

note 12, at 75. 

14Section 409(b) of the Dodd-Frank Act. Section 

409 also includes a ‘‘grandfathering clause’’ that 

precludes us from excluding certain family offices 

from the definition solely because they provide 

investment advice to certain clients and had 

provided investment advice to those clients before 

January 1, 2010. See section 409(b)(3) of the DoddFrank Act. 

II. Discussion 

III. General Request for Comment 

IV. Paperwork Reduction Act 

V. Cost-Benefit Analysis 

VI. Initial Regulatory Flexibility Analysis 

VII. Statutory Authority 

Text of Proposed Rule 

I. Background 

‘‘Family offices’’ are entities 

established by wealthy families to 

manage their wealth, plan for their 

families’ financial future, and provide 

other services to family members. Single 

family offices generally serve families 

with at least $100 million or more of 

investable assets.2 Industry observers 

have estimated that there are 2,500 to 

3,000 single family offices managing 

more than $1.2 trillion in assets.3

Family office services typically 

include managing securities portfolios, 

providing personalized financial, tax, 

and estate planning advice, providing 

accounting services, and directing 

charitable giving, in each case to 

members of a family. Some family 

offices even provide services such as 

travel planning or managing a family’s 

art collection or household staff.4

Family offices generally meet the 

definition of ‘‘investment adviser’’ under 

the Advisers Act, as we and our staff 

have interpreted the term, because, 

among the variety of services provided, 

family offices are in the business of 

providing advice about securities for 

compensation.5

We understand that many family 

offices have been structured to take 

advantage of the exemption from 

registration under section 203(b)(3) of 

the Advisers Act for any adviser that 

during the course of the preceding 12 

months had fewer than 15 clients and 

neither held itself out to the public as 

an investment adviser nor advised any 

registered investment company or 

business development company.6 Other 

family offices have sought and obtained 

from us orders under the Advisers Act 

declaring those offices not to be 

investment advisers within the intent of 

section 202(a)(11) of the Advisers Act.7

We have issued more than a dozen of 

these orders since the 1940s. 

The Commission issued those 

exemptive orders pursuant to a 

provision of the Advisers Act that 

authorizes us to exclude any person that 

falls within the Advisers Act’s 

definition of investment adviser, but 

that we conclude is ‘‘not within the 

intent’’ of that definition.8 We viewed 

the typical single family office as not the 

sort of arrangement that Congress 

designed the Advisers Act to regulate. 

We also were concerned that 

application of the Advisers Act would 

intrude on the privacy of family 

members. Thus, each of our orders 

exempted the particular family office 

from all of the provisions of the 

Advisers Act (and not merely the 

registration provisions). As a 

consequence, disputes among family 

members concerning the operation of 

the family office could be resolved 

within the family unit or, if necessary, 

through state courts under laws 

specifically designed to govern family 

disputes, but without the involvement 

of the Commission. 

Our exemptive orders have included 

conditions designed to distinguish 

between a ‘‘family office,’’ as described 

above, and a ‘‘family-run office’’ that, 

although owned and controlled by a 

single family, provides advice to a 

broader group of clients and much more 

resembles the business model common 

among many smaller investment adviser 

firms that are registered with the 

Commission or state regulatory 

authorities.9 Accordingly, and as 

described in more detail below, our 

exemptive orders have limited relief to 

those family offices that provide 

advisory services only to members of a 

single family and their lineal 

descendants, with very limited 

exceptions. 

On July 21, 2010, President Obama 

signed into law the Dodd-Frank Wall 

Street Reform and Consumer Protection 

Act (the ‘‘Dodd-Frank Act’’).10 The 

Dodd-Frank Act, among other matters, 

will repeal the 15-client exemption 

contained in section 203(b)(3) of the 

Advisers Act, effective July 21, 2011.11

The primary purpose of repealing this 

exemption was to require advisers to 

private funds, such as hedge funds, to 

register under the Advisers Act.12 But 

another potential consequence, which 

Congress recognized, was that many 

family offices that have relied on that 

exemption would be required to register 

under the Advisers Act or seek an 

exemptive order before that section of 

the Dodd-Frank Act becomes effective. 

To prevent that consequence, section 

409 of the Dodd-Frank Act creates a new 

exclusion from the Advisers Act in 

section 202(a)(11)(G), under which 

family offices, as defined by the 

Commission, are not investment 

advisers subject to the Advisers Act.13

Section 409 instructs that any definition 

the Commission adopts should be 

‘‘consistent with the previous exemptive 

policy’’ of the Commission and 

recognize ‘‘the range of organizational, 

management, and employment 

structures and arrangements employed 

by family offices.’’ 14 We have taken this 

legislative instruction into account in 


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15See, e.g., Adler Management, L.L.C., Investment 

Advisers Act Release Nos. 2500 (Mar. 21, 2006) [71 

FR 15498 (Mar. 28, 2006)] (notice) and 2508 (Apr. 

14, 2006) (order) (‘‘Adler’’) (permitting one 

particular ‘‘long-standing loyal family employee’’ to 

hold a beneficial interest in a family entity advised 

by the family office). 

16We note that the proposed rule would exclude 

directors, partners, trustees, and employees of 

family offices from regulation under the Advisers 

Act only when they are acting within the scope of 

their position or employment. 

17See supra note 14 and section II.A.4 of this 

release. 

18Proposed rule 202(a)(11)(G)–1(b)(1). 

19Proposed rule 202(a)(11)(G)–1(d)(3). 

20See, e.g., WLD Enterprises, Inc., Investment 

Advisers Act Release Nos. 2804 (Oct. 17, 2008) [73 

FR 63218 (Oct. 23, 2008)] (notice) and 2807 (Nov. 

14, 2008) (order) (‘‘WLD’’); Woodcock Financial 

Management Company, LLC, Investment Advisers 

Act Release Nos. 2772 (Aug. 26, 2008) [73 FR 51322 

(Sept. 2, 2008)] (notice) and 2787 (Sept. 24, 2008) 

(order); Adler, supra note 15. For an example of the 

legal treatment of adopted children, see, e.g., 

National Conference of Commissioner on Uniform 

State Laws, Uniform Adoption Act, (1994), at § 1– 

104 (each adoptive parent and the adoptee have the 

legal relationship of parent and child and have all 

the rights and duties of that relationship). This 

treatment is also reflected in Federal laws. For 

example, section 2(a)(51)(ii) of the Investment 

Company Act of 1940 recognizes adopted children 

as ‘‘lineal descendants’’ for purposes of determining 

whether a person is a ‘‘qualified purchaser.’’ 

21Our exemptive orders issued to family offices 

in two instances have included family offices 

advising stepchildren. See WLD, supra note 20 

(included two stepchildren of the patriarch’s son 

and their spouses and children, but required that 

those individuals be provided with written 

disclosure describing the material terms and effects 

of the exemptive order and that the office obtain 

written consent from these individuals); Woodcock 

Financial Management Company, LLC, Investment 

Advisers Act Release Nos. 2772 (Aug. 26, 2008) [73 

FR 51322 (Sept. 2, 2008)] (notice) and 2787 (Sept. 

24, 2008) (order) (‘‘Woodcock’’) (including 

matriarch’s children from a former marriage and 

their lineal descendants, and the spouses of such 

children and descendents). 

formulating our proposed rule, as 

further detailed below. 

II. Discussion 

We propose to adopt new rule 

202(a)(11)(G)–1 under the Advisers Act 

to define family offices that would be 

excluded from the definition of 

‘‘investment adviser’’ under the Advisers 

Act. As a consequence, these family 

offices would not be subject to any of 

the provisions of the Advisers Act. 

Proposed rule 202(a)(11)(G)–1 largely 

would codify the exemptive orders that 

we have issued to family offices. Each 

of these exemptive orders reflected the 

specific factual situation presented by 

the family office applicant. Drafting a 

rule defining family offices, however, 

requires us to turn these fact-specific 

exemptive orders into a rule of general 

applicability. Thus, the proposed rule 

would not (and could not) match the 

exact representations, conditions or 

terms contained in every exemptive 

order as they varied to accommodate the 

particular circumstances of each family 

office. For example, some of these 

orders have permitted specific 

individuals to be treated as a member of 

a family for purposes of the 

exemption.15 Moreover, the 

Commission’s views have changed over 

time as we have gained experience with 

family offices, and as we have been 

presented with new issues. Finally, 

some questions raised by this 

rulemaking have never been presented 

to us in the context of an exemptive 

request, but seem appropriate to address 

in a rule of general applicability. 

The proposal, which we discuss in 

more detail below, reflects the 

Commission’s current exemptive policy 

regarding family offices, and thus the 

policy judgments that we have made in 

granting the more recent orders, which 

Congress understood. Where terms and 

conditions in exemptive applications 

have varied over the years, we have 

sought to distill the policy rationale for 

the term or condition, and designed our 

proposed rule to align with the general 

policy. 

The core policy judgment that formed 

the basis of our exemptive orders (and 

which prompted Congressional action) 

is the lack of need for application of the 

Advisers Act to the typical single family 

office.16 The Act was not designed to 

regulate the interactions of family 

members in the management of their 

own wealth. Accordingly, most of the 

conditions of the proposed rule (like our 

exemptive orders) operate to restrict the 

structure and operation of a family 

office relying on the rule to activities 

unlikely to involve commercial advisory 

activities, while permitting traditional 

family office activities involving 

charities, tax planning, and pooled 

investing. 

Finally, we note that the failure of a 

family office to be able to meet the 

conditions of this rule would not 

preclude the office from providing 

advisory services to family members 

either collectively or individually. In 

such a situation, a family office could 

seek an exemptive order from the 

Commission or, in the absence of such 

an order, the family office would be 

subject to the Advisers Act and would 

have to register unless another 

exemption is available. A number of 

family offices currently are registered 

under the Advisers Act. 

We request comment generally on our 

approach to the proposed rule and its 

implementation of section 409 of the 

Dodd-Frank Act. Are other approaches 

available that we should consider? 

A. Family Office Structure and Scope of 

Activities 

As discussed below, the proposed 

rule contains three general conditions. 

First, it would limit the availability of 

the rule to family offices that provide 

advice about securities only to certain 

family members and key employees. 

Second, it would require that family 

members wholly own and control the 

family office. Third, it would preclude 

a family office from holding itself out to 

the public as an investment adviser. In 

addition to these conditions, we have 

incorporated into the rule the 

‘‘grandfathering’’ provision required by 

section 409 of the Dodd-Frank Act.17

1. Family Clients 

We propose that excluded family 

offices not be permitted to have any 

investment advisory clients other than 

‘‘family clients.’’18 As discussed in more 

detail below, family clients would 

include family members, certain 

employees of the family office, charities 

established and funded exclusively by 

family members or former family 

members, trusts or estates existing for 

the sole benefit of family clients, and 

entities wholly owned and controlled 

exclusively by, and operated for the sole 

benefit of, family clients (with certain 

exceptions), and, under certain 

circumstances, former family members 

and former employees. 

a. Family Member 

We propose to define the term ‘‘family 

member’’ to include the individual and 

his or her spouse or spousal equivalent 

for whose benefit the family office was 

established and any of their subsequent 

spouses or spousal equivalents, their 

parents, their lineal descendants 

(including by adoption and 

stepchildren), and such lineal 

descendants’ spouses or spousal 

equivalents.19 Except as discussed 

below, this definition generally 

corresponds to the types of clients that 

family offices have advised under our 

exemptive orders. 

Our exemptive orders issued to family 

offices typically have included adopted 

children as family members because 

adopted children generally are not 

treated differently as a legal matter than 

children by birth.20 However, our 

exemptive orders have not always 

included stepchildren as ‘‘family 

members.’’ 21 Proposed rule 

202(a)(11)(G)–1 would include 

stepchildren as family members. We 

recognize that stepchildren are not 

treated as consistently as adopted 

children under relevant tax, family, and 


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22For example, under state inheritance law, 

stepchildren typically are not granted the 

inheritance rights of genetic children unless they 

are adopted. See, e.g., Mass. Gen. Laws Ann. Ch. 

190B, § 1–201(5) (West 2010); Alaska Stat. 

§ 13.06.050(5) (2010); Fla. Stat. Ann. § 731.201(3) 

(West 2010); Haw. Rev. Stat. § 560:1–201(5) (2009), 

(32). See also Susan N. Gary, We Are Family: The 

Definition of Parent and Child for Succession 

Purposes, 34 ACTEC J. 171, 172 (Winter 2008). 

Other states provide limited inheritance rights to 

stepchildren. See, e.g., Cal. Prob. Code § 6454 (West 

2010) (stating that a stepchild may inherit through 

intestate succession if (1) the relationship began 

during the child’s minority and continued 

throughout the joint lifetimes of the child and the 

child’s stepparent and (2) it is established by clear 

and convincing evidence that the stepparent would 

have adopted the stepchild but for a legal barrier); 

Conn. Gen. Stat. Ann. § 45a–439(a)(1) (West 2010) 

(stating that if a person dies intestate without any 

surviving children, spouse, parents, siblings, or 

other next of kin, then the estate is distributed to 

stepchildren rather than escheat to the state); Md. 

Code Ann., Est. & Trusts § 3–104(e) (2010) (same). 

Other legal contexts have been more generous in 

ascribing legal rights to stepchildren. For example, 

some states have inheritance tax statutes that treat 

stepchildren the same as natural or adopted 

children. See Wendy C. Gerzog, Families for Tax 

Purposes: What About the Steps?, 42 U. Mich. J.L. 

Reform 805, at n.37 and accompanying text 

(Summer 2009). The laws of inheritance are 

beginning to ascribe more rights to stepchildren. In 

2008, the Uniform Probate Code was amended to 

recognize as a ‘‘child’’ for purposes of intestate 

succession any child for whom a parent-child 

relationship exists, regardless of whether the child’s 

genetic parents are married and regardless of 

whether the child is a genetic child of each parent. 

See Uniform Probate Code §§ 2–115 to 2–122. Some 

states have begun to amend their intestacy laws to 

reflect these amendments. See, e.g., H.B. 09–1287, 

67th Gen. Assem., 1st Reg. Sess. (Colo. 2009); H.B. 

1072, 61st Leg. Assem., Reg. Sess. (N.D. 2009). 

23Thus, for example, this context differs from the 

intestacy context where family is often defined 

narrowly because the decedent is not alive to state 

whether or not he or she wishes his or her 

stepchildren to inherit his or her estate. 

24See 17 CFR 210.2–01(f)(9) and (13); Revision of 

the Commission’s Auditor Independence 

Requirements, Securities Act Release No. 7919 

(Nov. 21, 2000) [65 FR 76008 (Dec. 5, 2000)], at 

section IV.H.8. Spousal equivalent is defined as a 

cohabitant occupying a relationship generally 

equivalent to that of a spouse. See proposed rule 

202(a)(11)(G)–1(d)(7). 

25Proposed rule 202(a)(11)(G)–1(d)(3). 

26See, e.g., Google Executives Eye Family Office, 

Private Asset Management (Dec. 5, 2005), at 1; Jim 

Grote, Old Money vs. New Money, Financial 

Advisor Magazine (May 2003). 

27Proposed rule 202(a)(11)(G)–1(d)(3). 

28The order was to a family office that advised 

siblings of one of the founders, those siblings’ 

spouses, their children and their spouses, and their 

grandchildren and spouses (the applicant was 

required to give these individuals a disclosure 

statement describing the material legal effects 

associated with a Commission order exempting the 

family office from regulation under the Advisers 

Act). See WLD, supra note 20. 

29See Hannah Shaw Grove & Russ Alan Prince, 

E Pluribus Unum, Registered Rep (May 1, 2004). 

These multi-family offices generally serve families 

with a lesser average net worth. See The Family 

Office, supra note 2 (finding that the average net 

worth for a multi-family office client to be $116 

million). 

estate law.22 However, we are proposing 

including stepchildren in our definition 

of a family client based on our 

understanding of their close ties to the 

family members who would be included 

in the definition, and on the fact that 

permitting stepchildren to be included 

as clients of the family office leaves to 

the family members whether they wish 

to include stepchildren as part of the 

family office clientele. Indeed, nothing 

in our proposed rule would mandate 

that the family office provide advice to 

any particular family member; it simply 

permits such advice.23 We request 

comment on our proposed inclusion of 

stepchildren within the meaning of the 

term ‘‘family members’’ for purposes of 

the ‘‘family office’’ definition. Should we 

include stepchildren? Are there any 

additional conditions that we should 

impose if stepchildren are included? 

We also propose including ‘‘spousal 

equivalents,’’ using the definition of that 

term currently used under our auditor 

independence rules.24 We are not aware 

of any applicant that requested that 

spousal equivalents be included as a 

permitted client of any family office 

covered by our exemptive orders, and 

thus have never provided such relief. 

However, we believe that permitting 

spousal equivalents to be a family office 

client seems appropriate in a rule of 

general applicability. We request 

comment on our proposed definition of 

spousal equivalent. 

The proposed rule also would permit 

a family office relying on the exclusion 

to provide investment advice to parents 

of the family office’s founders.25 While 

the family offices that have obtained an 

exemptive order from the Commission 

typically were managing wealth built by 

an older generation—and thus the 

‘‘parents’’ are typically the ‘‘founders,’’ 

we understand that this may not always 

be the case. For example, some 

entrepreneurs (such as in the technology 

and private fund management sectors) 

have built sizeable fortunes at an early 

age and may form a family office.26

These younger founders may wish to 

include one or more of their parents as 

a client of the family office. We request 

comment on including parents of the 

founders as a ‘‘family member’’ under 

the proposed rule. 

Our proposed definition of ‘‘family 

member’’ also would include siblings of 

the founders of the family office, their 

spouses or spousal equivalents, their 

lineal descendants (including by 

adoption and stepchildren), and such 

lineal descendants’ spouses or spousal 

equivalents.27 We have issued an 

exemptive order to a family office that 

advised siblings of one of the founders 

and certain of those siblings’ 

descendants.28 These individuals have 

close family ties to the founders and 

allowing family members to choose to 

include these individuals as family 

office clients does not appear to us to 

expand the family office’s clientele to 

such an extent that it starts to resemble 

a typical commercial investment 

adviser. We request comment on 

including siblings and their spouses and 

descendants in the definition of family 

client. 

More generally, we request comment 

on our definition of family member. Are 

we drawing the line too broadly or too 

narrowly regarding when the clientele 

of a family office starts to resemble that 

of a typical commercial investment 

adviser and not a single family? For 

example, certain legally created 

relationships such as certain types of 

guardianships may resemble the type of 

relationship that is included in the 

definition of family member depending 

on the facts and circumstances. Are 

there other types of family members that 

should be included? Why or why not? 

We note that family offices would still 

be able to seek a Commission exemptive 

order if they wanted to continue to 

advise family that did not meet our 

proposed definition of family member. 

We are aware that some families have 

added other families to their family 

office’s clientele to achieve economies 

of scale and thus save on costs.29 The 

rule would not extend to family offices 

serving multiple families. We have 

never granted an exemptive order to a 

multifamily office declaring them not to 

be an investment adviser and thus 

including them would seem to be 

inconsistent with our prior exemptive 

policy. Many multifamily offices more 

resemble a typical commercial 

investment adviser appropriately 

subject to the Advisers Act. Should we 

permit multifamily offices to operate 

under this exclusion from the Advisers 

Act? If so, how would we distinguish 

between a multi-family commercial 

office and an office more closely 

resembling those operating under our 

exemptive orders (except providing 

advice to multiple families)? 

b. Involuntary Transfers 

We recognize that family offices may 

encounter situations in which assets 

under management are transferred 

involuntarily. We note that one 

implication of the proposed rule would 

be that a family office could continue to 

provide advice without becoming an 

investment adviser under the Advisers 

Act to a person that receives assets in an 

involuntary transfer only if the 

involuntary transaction is to a person 

that is a family client. For example, if 


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30Proposed rule 202(a)(11)(G)–1(b)(1). 

31For example, under our rules addressing the 

exclusion of private funds from the definition of an 

investment company, the Commission has treated 

an involuntary transfer of securities as if the 

transfer had not occurred, consistent with the 

direction from Congress in the Investment Company 

Act. See 15 U.S.C. 80a–3(c)(1)(B) 15 U.S.C. 80a– 

3(c)(7)(A); 17 CFR 270.3c–6. However, under our 

rules relating to the registration of securities 

pursuant to certain compensatory benefit plans, we 

have only permitted involuntary transfers to family 

members without jeopardizing the ability of the 

person to continue to rely on the exemptive 

provision. See 17 CFR 230.701 (exempting offers 

and sales of securities under a written 

compensatory benefit plan or written compensation 

contract for the participation of employees, 

directors, general partners, trustees, officers, or 

consultants and advisors, and their family members 

who acquire such securities from such persons 

through gifts or domestic relations orders). See also 

General Instruction A.1(a)(5) to Form S–8 (The form 

also is available for the exercise of employee benefit 

plan options and the subsequent resale of the 

underlying securities by an employee’s family 

member who has acquired the options from the 

employee through a gift or a domestic relations 

order.); Registration of Securities on Form S–8, 

Securities Act Release No. 7646 (Feb. 26, 1999) [64 

FR 11103 (Mar. 8, 1999)], at section III.A.2 

(explicitly rejecting expanding the availability of 

the abbreviated disclosure in Form S–8 for the 

exercise of employee benefit plan options 

transferred by gift to charities or to other ‘‘unrelated 

persons who are the object of the employee’s 

generosity’’ and stating that ‘‘[w]hile we seek to 

facilitate employees’ estate planning through the 

amendments we adopt today, we must keep in 

mind that investor protection is our primary 

objective’’ and to ‘‘permit entities that are not 

controlled by, or for the primary benefit of, an 

employee’s family members to exercise options on 

Form S–8 would suggest that the abbreviated Form 

S–8 disclosure is adequate for the offer and sale of 

securities to non-employees generally. As discussed 

above, we remain firmly persuaded of the contrary 

view.’’). 

32By including in the definition of ‘‘founders’’ any 

subsequent spouse of a founder, our proposed rule 

would address the situation in which the founders 

divorce and one or both of the founders 

subsequently remarries. See proposed rule 

202(a)(11)(G)–1(d)(5). Again, we are not aware of 

any applicant for an exemptive order having 

requested that the order cover this situation, but in 

formulating a rule of general applicability, we 

thought it important to address the impact of this 

situation on the family office’s exclusion under the 

Advisers Act. 

33Proposed rule 202(a)(11)(G)–1(d)(2)(vi), and 

(d)(4). 

34The proposed rule would permit the family 

office to provide investment advice with respect to 

additional investments that the former spouse or 

spousal equivalent was contractually obligated to 

make, and that relate to a family-office advised 

investment existing, prior to the time the person 

became a former spouse or spousal equivalent (e.g., 

if the individual has a previously existing capital 

commitment to a private fund advised by the family 

office). See proposed rule 202(a)(11)(G)–1(d)(2)(vi). 

35Proposed rule 202(a)(11)(G)–1(d)(2)(iii). 

36Proposed rule 202(a)(11)(G)–1(d)(2)(iv). 

37 ‘‘Company’’ is defined in section 202(a)(5) of 

the Advisers Act to mean ‘‘a corporation, a 

partnership, an association, a joint-stock company, 

a trust, or any organized group of persons, whether 

incorporated or not; or any receiver, trustee in a 

case under title 11, or similar official, or any 

liquidating agent for any of the foregoing, in his 

capacity as such.’’ 

38Proposed rule 202(a)(11)(G)–1(d)(2)(v). Under 

proposed rule 202(a)(11)(G)–1(d)(1), control would 

be defined as the power to exercise a controlling 

influence over the management or policies of an 

entity, unless such power is solely the result of 

being an officer of such entity. If any of these 

companies are pooled investment vehicles, they 

must be exempt from registration as an investment 

company under the Investment Company Act of 

1940 because the Advisers Act requires that an 

adviser to a registered investment company must 

register. See 15 U.S.C. 80b–3a(a)(1)(B). 

39See, e.g., Woodcock, supra note 21; Kamilche 

Company, Investment Advisers Act Release Nos. 

1958 (Jul. 31, 2001) [66 FR 41063 (Aug. 6, 2001)] 

(notice) and 1970 (Aug. 27, 2001) (order). 

a family member in his will left assets 

in a family office-advised private fund 

to a charity that did not qualify as a 

family client, generally after that family 

member died the family office could not 

continue to provide investment advice 

with respect to those assets and still rely 

on rule 202(a)(11)(G)–1 to be excluded 

from the definition of an investment 

adviser. The proposed rule would 

permit the family office to continue to 

advise such a client without violating 

the terms of the exclusion for four 

months following the transfer of assets 

resulting from the involuntary event, 

which should allow that family office to 

orderly transition that client’s assets to 

another investment adviser, seek 

exemptive relief, or otherwise 

restructure its activities to comply with 

the Advisers Act.30

We believe that this treatment of 

involuntary transfers is appropriate 

because after such a bequest, the office 

would no longer be providing advice 

solely to members of a single family, 

and after several such bequests the 

office would cease to operate as a family 

office. Indeed, we have never issued an 

exemptive order to a family office 

permitting involuntary transfers to nonfamily members. However, we recognize 

that the Commission in some contexts 

has treated involuntary transfers in this 

manner and in other contexts permitted 

involuntary transfers outside the 

family.31 We request comment on our 

proposed approach regarding 

involuntary transfers. Should we permit 

family clients to transfer assets advised 

by the family office to non-family 

clients if there is a death or other 

involuntary event without jeopardizing 

the ability of the family office to rely on 

the exclusion under proposed rule 

202(a)(11)(G)–1? If so, under what 

conditions and to what types of 

transferees? How would we distinguish 

between a typical commercial adviser 

serving both related and unrelated 

clients from a family office resembling 

those operating under our prior 

exemptive orders? Should we allow a 

different period of time or transition 

mechanism to transfer assets that a nonfamily client receives in an involuntary 

transfer to another investment adviser? 

c. Former Family Members 

None of our exemptive orders have 

permitted former family members to 

receive investment advice from an 

exempt family office.32 However, we 

recognize that divorces and other events 

may occur in some families covered by 

the rule and that addressing in our 

proposed rule the effect of these 

circumstances on the family office 

would provide clarity to family offices 

affected by such a legal separation from 

the family. 

We propose permitting former family 

members, i.e., former spouses, spousal 

equivalents and stepchildren, to retain 

any investments held through the family 

office at the time they became a former 

family member.33 However, we propose 

to limit former family members from 

making any new investments through 

the family office.34 Our approach is 

designed to prevent such a separation 

from resulting in harmful investment or 

tax consequences, while also 

recognizing that such persons are no 

longer members of the family 

controlling the office, and thus would 

not be subject to the protections we 

assume accompany membership in a 

family. We request comment on this 

approach. Should we exclude former 

family members? Are there other 

approaches to treating such persons that 

we should consider? 

d. Family Trusts, Charitable 

Organizations, and Other Family 

Entities 

We also propose to treat as a ‘‘family 

client’’ any charitable foundation, 

charitable organization, or charitable 

trust established and funded exclusively 

by one or more family members 35 and 

any trust or estate existing for the sole 

benefit of one or more family clients.36

Similarly, we would also treat as a 

family client any company,37 including 

a pooled investment vehicle, that is 

wholly owned and controlled, directly 

or indirectly, by one or more family 

clients and operated for the sole benefit 

of family clients.38 We generally have 

included these types of companies and 

organizations when owned and 

controlled by family members to be 

treated as permitted clients of the family 

office under our exemptive orders.39

Including them should allow the family 

office to structure its activities through 

typical investment structures. We 

request comment on this aspect of our 

proposal. 


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40See, e.g., WLD, supra note 20 (family office 

provided investment advice to several executives of 

the family business and their trusts); Gates Capital 

Partners, LLC/Bear Creek, Inc., Investment Advisers 

Act Release Nos. 2590 (Feb. 16, 2007) [72 FR 8405 

(Feb. 26, 2007)] (notice) and 2599 (Mar. 20, 2007) 

(order) (two pooled investment vehicles advised by 

the family office had non-voting interests owned by 

certain senior employees of the family office); 

Adler, supra note 15 (one long-standing employee 

held interest in one family office advised entity). 

These key employees typically either had their 

investments frozen or were permitted to continue 

their side-by-side investments through the family 

office but upon termination of employment were 

limited to investments at the time of termination 

along with reinvestment of accretions or 

distributions on the investment. 

41See e.g., Robert Frank, Minding the Money— 

‘Family Office’ Chiefs Get Plied with Perks; Club 

Membership, Jets. The Wall Street Journal, at W2 

(Sept. 7, 2007) (‘‘a growing number of wealthy 

families are dangling the biggest perk of all: 

allowing their family office manager to become a 

‘‘participant,’’ investing his or her own funds along 

with the family money in big deals’’). But see 

Thomas Coyle, Family Offices Mostly unscathed by 

Overhaul, Dow Jones News Service (Jul. 16, 2010) 

(‘‘family office recruiters don’t think co-investment 

plays a big role in attracting family office 

managers’’). 

42Section 409(b)(2) of the Dodd-Frank Act. 

43Senate Committee Report, supra note 12, at 76. 

44 Id. 

45Proposed rule 202(a)(11)(G)–1(d)(6). The 

proposed rule also would permit the family office 

to provide investment advice to trusts created for 

the sole benefit of family clients (which could 

include these key employees), and to other entities 

wholly owned and controlled by and operated for 

the sole benefit of family clients. Proposed rule 

202(a)(11)(G)–1(d)(2)(iv)–(v). 

46The knowledgeable employee standard in 

Advisers Act rule 205–3 was itself based on the 

similar standard under the Investment Company 

Act of 1940 for knowledgeable employees of private 

funds that are exempt from registration under the 

Investment Company Act through section 3(c)(1) or 

3(c)(7) of the Investment Company Act. See rule 3c– 

5 under the Investment Company Act [17 CFR 

270.3c–5]; Exemption To Allow Investment 

Advisers To Charge Fees Based upon a Share of 

Capital Gains upon or Capital Appreciation of a 

Client’s Account, Investment Advisers Act Release 

No. IA–1731 (Jul. 15, 1998) [63 FR 39022 (Jul. 21, 

1998)], at nn.24–28 and accompanying text. 

47See Exemption To Allow Investment Advisers 

To Charge Fees Based upon a Share of Capital 

Gains upon or Capital Appreciation of a Client’s 

Account, Investment Advisers Act Release No. IA– 

1731 (Jul. 15, 1998) [63 FR 39022 (Jul. 21, 1998)], 

at nn.24–28 and accompanying text. 

48See section II.A.1.d of this Release. See also 

WLD, supra note 20 (permitting the family office to 

advise key employee trusts). 

49Proposed rule 202(a)(11)(G)–1(d)(2)(vii). 

e. Key Employees 

We also are proposing to treat as 

family members certain key employees 

of the family office so that they may 

receive investment advice from and 

participate in investment opportunities 

provided by the family office. Such 

persons have been treated like family 

members in some of our exemptive 

orders.40 Permitting participation by key 

employees allows such family offices to 

incentivize key employees to take a job 

with the family office and to create 

positive investment results at the family 

office under terms that could be 

available to them as employees of other 

types of money management firms. It is 

our understanding that in some cases 

family offices may need to provide such 

incentives to attract highly skilled 

investment professionals who may not 

otherwise be attracted to work at a 

family office.41

The Dodd-Frank Act acknowledges 

the Commission’s exemptive policy in 

this area by requiring that in defining a 

‘‘family office’’ we ‘‘recognize the range 

of organizational, management, and 

employment structures and 

arrangements employed by family 

offices’’ in defining excluded family 

offices.42 The Senate committee report 

explained that some family offices have 

non-family member directors, officers, 

and employees that may co-invest with 

family members, enabling them to share 

in the profits of investments that they 

oversee and better aligning the interests 

of such persons with those of the family 

members served by the family office.43

The report states that it expected that 

‘‘such arrangements would not 

automatically exclude a family office 

from the definition.’’ 44

The proposed rule would permit the 

family office to provide investment 

advice to any natural person (including 

persons who hold joint and community 

property with their spouse) who is (i) an 

executive officer, director, trustee, 

general partner, or person serving a 

similar capacity of the family office, or 

(ii) any other employee of the family 

office (other than an employee 

performing solely clerical, secretarial, or 

administrative functions) who, in 

connection with his or her regular 

duties, has participated in the 

investment activities of the family 

office, or similar functions or duties for 

or on behalf of another company, for at 

least twelve months.45

We believe that this standard would 

limit employees who participate 

without the protections of the Advisers 

Act (or family membership) to those 

employees that are likely to be in a 

position or have a level of knowledge 

and experience in financial matters 

sufficient to be able to evaluate the risks 

and take steps to protect themselves. 

This definition of key employee is based 

on the ‘‘knowledgeable employee 

standard’’ currently contained in 

Advisers Act rule 205–3(d)(iii), which 

specifies the types of clients to whom 

the adviser may charge performance 

fees.46 We adopted the knowledgeable 

employee exception in the performance 

fee rule based on a similar policy 

conclusion that these types of 

employees are likely to be sophisticated 

financially and not need the protections 

of the Advisers Act’s restrictions on 

performance fees.47

Similar to our treatment of family 

members under the proposed rule, key 

employees would be able to structure 

their investments through trusts and 

other entities, subject to the conditions 

relating to control and ownership 

described earlier in this Release.48 Upon 

the end of key employees’ employment 

by the family office, key employees 

(including their trusts and controlled 

entities) would not be permitted to 

make additional investments through 

the family office.49 Similar to our 

treatment of former spouses, spousal 

equivalents, and stepchildren, our 

proposed rule would not require former 

key employees to liquidate or transfer 

investments held through the family 

office at the time of the end of their 

employment, however, to avoid 

imposing possible adverse tax or 

investment consequences that might 

otherwise result. 

We request comment on our proposed 

treatment of investments by employees 

of the family office. Should we permit 

key employees to receive investment 

advice through the family office? Do 

family offices rely on allowing coinvestment to attract talented 

investment professionals to work at the 

family office? Should the definition of 

key employee be based on the 

knowledgeable employee standard in 

rule 205–3 under the Advisers Act? Are 

there restrictions that we should 

consider imposing as a condition to 

such investment to help protect nonfamily members investing through the 

family office? Should we allow former 

key employees to retain their 

investments through the family office at 

the time of termination? Are any of our 

conditions too restrictive? For example, 

should we modify or eliminate the 12- 

month experience requirement for key 

employees? If so, how and why? Are 

there other types of individuals or 

entities that should be permitted to 

invest through the family office without 

jeopardizing that family office’s 

exclusion under the Advisers Act? 

More broadly, we request comment on 

our definition of who is considered a 

‘‘family client.’’ We have not included 

every type of individual or entity that 

has been included in a prior exemptive 

order based on specific facts and 

circumstances. We do not believe we 

could have taken such an approach in 

a rule of general applicability and we 

note that family offices would remain 

free to seek a Commission exemptive 

order to advise an individual or entity 


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50Proposed rule 202(a)(11)(G)–1(b)(2). 

51See, e.g., WLD, supra note 20 (requiring that a 

majority of the board of directors of the family 

office be comprised of family members and that the 

family office be wholly owned by family members); 

Slick Enterprises, Inc., Investment Advisers Act 

Release Nos. 2736 (May 22, 2008) [73 FR 30984 

(May 29, 2008)] (notice) and 2745 (June 20, 2008) 

(order) (same) (‘‘Slick’’). 

52See, e.g., WLD, supra note 20; Adler, supra 

note 15; Parkland Management Company, L.L.C., 

Investment Advisers Act Release Nos. 2362 (Feb. 

24, 2005) [70 FR 10155 (Mar. 2, 2005)] (notice) and 

2369 (Mar. 22, 2005) (order); Longview Management 

Group LLC, Investment Advisers Act Release Nos. 

2008 (Jan. 3, 2002) [67 FR 1251 (Jan. 9, 2002)] 

(notice) and 2013 (Feb. 7, 2002) (order). 

53 In one case we granted an exemptive order to 

a family office in which four churches owned a 

small interest in the family office. See Pitcairn, 

supra note 7. In one other case we granted an 

exemptive order to a family office owned by a trust 

in which half of the trustees were independent and 

half of the trustees were family members. See 

Moreland Management Company, Investment 

Advisers Act Release Nos. 1700 (Feb. 12, 1998) [63 

FR 8710 (Feb. 20, 1998)] (notice) and 1706 (Mar. 10, 

1998) (order). 

54See, e.g., WLD, supra note 20; Woodcock, supra 

note 21; Slick, supra note 51. 

55Proposed rule 202(a)(11)(G)–1(b)(3). 

56We note that the exemption from registration 

under section 202(b)(3) of the Advisers Act is not 

available to a person that holds himself out as an 

investment adviser. In addition, our staff has stated 

that a person that holds himself out as an 

investment adviser or as one who provides 

investment advice satisfies the ‘‘in the business’’ 

element of being an investment adviser under the 

Advisers Act. See Applicability of the Investment 

Advisers Act to Financial Planners, Pension 

Consultants, and Other Persons Who Provide 

Investment Advisory Services as a Component of 

Other Financial Services, Investment Advisers Act 

Release No. 1092 (Oct. 8, 1987) [52 FR 38400 (Oct. 

16, 1987)]. 

57See section 409(b)(3) and (c) of the Dodd-Frank 

Act. The family office must have been providing 

investment advice to such clients before January 1, 

2010. The grandfathered clients are natural persons 

who, at the time of their investment, are officers, 

directors, or employees of the family office, and had 

invested with the family office before January 1, 

2010. These clients must be accredited investors 

under Regulation D of the Securities Act of 1933. 

The other grandfathered clients are investment 

advisers registered under the Advisers Act that in 

turn provide investment advice and identify 

investment opportunities to the family office and 

invest in such transactions on substantially the 

same terms as the family office invests, but does not 

invest in other funds advised by the family office 

and whose assets as to which the family office 

directly or indirectly provides investment advice 

represent, in the aggregate, not more than 5% of the 

value of the total assets as to which the family office 

provides investment advice. See proposed rule 

202(a)(11)(G)–1(c). 

58A family office that will only qualify for the 

exclusion under section 202(a)(11)(G) of the 

Advisers Act, as amended by the Dodd-Frank Act, 

because of section 409(b)(3) of the Dodd-Frank Act 

will still be subject to paragraphs (1), (2) and (4) of 

section 206 of the Advisers Act. See section 409(c) 

of the Dodd-Frank Act. 

that does not meet our proposed family 

client definition. However, we request 

comment on our approach. Are there 

other individuals or entities that should 

be included? Under our proposed rule, 

the family office could not provide 

investment advice to a person that may 

have a long employment relationship 

with the family but does not qualify as 

a ‘‘key employee.’’ Are there other types 

of individuals that commonly have 

close ties to a family that should be 

included as a family client? We note 

that as a family office extends its 

provision of investment advice beyond 

family members, it increasingly 

resembles a more typical commercial 

investment advisory business, and not a 

family managing its own wealth. 

2. Ownership and Control 

We propose that to operate under the 

proposed exclusion from the Advisers 

Act the family office be wholly owned 

and controlled, either directly or 

indirectly, by family members.50 This 

condition generally is consistent with 

our exemptive orders 51 and assures that 

the family is in a position to protect its 

own interests and thus is less likely to 

need the protection of the Federal 

securities laws. 

This condition also helps distinguish 

family offices from family-run offices 

that may provide advice to other people, 

as well as other families, and operates 

as a more typical commercial 

investment adviser. Most family offices 

that have obtained an exemptive order 

from the Commission under the 

Advisers Act have represented that they 

did not operate for the purpose of 

generating a profit and charged fees 

designed to just cover their costs.52 This 

feature helped distinguish these family 

offices from the family-run investment 

advisory businesses that the Advisers 

Act appropriately regulates. Requiring 

that the family office be wholly owned 

by family members alleviates any 

concern that we may otherwise have 

about the profit structure of the family 

office, because any profits generated by 

the family office from managing family 

clients’ assets only accrue to family 

members. Accordingly, we are not 

proposing a specific condition regarding 

whether the family office generates a 

profit. 

We request comment on the condition 

that the family office be wholly owned 

and controlled by family members. Are 

there reasons that we should not require 

that the family office be wholly owned 

and controlled by family members? 

Should some minor ownership stake of 

non-family members be permitted? 53 If 

we permitted non-family members to 

own a minor ownership stake in the 

family office, what other protections 

should we impose to ensure that the 

family office did not operate as a more 

typical commercial investment adviser? 

Are there other restrictions on 

ownership and control of the family 

office that we should impose consistent 

with our policy goals? Should we also 

require that the family office be 

operated without the intent of 

generating a profit or only charge fees 

designed to cover its costs and the 

compensation of its employees? 

3. Holding Out 

Consistent with our exemptive 

orders,54 we propose to prohibit a 

family office relying on the rule from 

holding itself out to the public as an 

investment adviser.55 Holding itself out 

to the public as an investment adviser 

suggests that the family office is seeking 

to enter into typical advisory 

relationships with non-family clients, 

and thus is inconsistent with the basis 

on which we have provided exemptive 

orders and this proposed rule.56 We 

request comment on this proposed 

condition. Are there circumstances 

where a family office holding itself out 

to the general public as an investment 

adviser should nevertheless be excluded 

from the protections afforded to the 

investing public under the Advisers 

Act? 

4. Grandfathering Provisions 

The Dodd-Frank Act prohibits us from 

excluding from our definition of family 

office persons not registered or required 

to be registered on January 1, 2010 that 

would meet all of the required 

conditions under rule 202(a)(11)(G)–1 

but for their provision of investment 

advice to certain clients specified in 

section 409(b)(3) of the Dodd-Frank 

Act.57 We have incorporated this 

required grandfathering into paragraph 

(c) of our proposed rule.58

B. Effect of Rule on Previously Issued 

Exemptive Orders 

As discussed above, the Commission 

has issued orders under section 

202(a)(11)(G) of the Advisers Act to 

certain family offices declaring them 

and their employees acting within the 

scope of their employment to not be 

investment advisers within the intent of 

the Act. In some areas these exemptive 

orders may be slightly broader than the 

rule we are proposing today, and in 

other areas they may be narrower. 

We are not proposing to rescind the 

orders we have issued to family offices 

because we do not believe that the 

policy behind the previously issued 

orders differs substantially from that of 

our proposal. Further, single family 

offices do not compete with one another 

and thus there is no need to rescind 

exemptive orders to create a ‘‘level 

playing field.’’ Family offices currently 


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59 44 U.S.C. 3501 et seq. 

60See section 409 of the Dodd-Frank Act. 

61See supra note 3 and accompanying text for 

industry estimates of the number of single family 

offices. 

62This estimate is based on our understanding of 

typical outside legal fees for past applications. 

63We expect that a family office would need no 

more than 10 hours of consulting or legal advice to 

learn the differences between its order and the rule. 

We estimate that this advice would cost the family 

office $500 per hour based on our understanding of 

the rates typically charged by outside consulting or 

law firms. 

operating under these orders could 

continue to rely on those orders or, if 

they meet the conditions of proposed 

rule 202(a)(11)(G)–1, they could rely on 

the rule. We request comment on 

whether we should rescind previous 

orders granted to family offices under 

section 202(a)(11)(G) of the Advisers 

Act. Should we rescind the very early 

orders that did not impose all of the 

same conditions as more recent orders? 

III. General Request for Comment 

The Commission requests comment 

on the rule proposed in this Release, 

suggestions for additional changes to the 

existing rules and comment on other 

matters that might have an effect on the 

proposals contained in this Release. 

Commenters should provide empirical 

data to support their views. 

IV. Paperwork Reduction Act 

Proposed rule 202(a)(11)(G)–1 does 

not contain a ‘‘collection of information’’ 

requirement within the meaning of the 

Paperwork Reduction Act of 1995.59

Accordingly, the Paperwork Reduction 

Act is not applicable. 

V. Cost-Benefit Analysis 

We have identified certain costs and 

benefits of the proposed new rule, and 

we request comment on all aspects of 

this cost benefit analysis, including 

identification and assessment of any 

costs and benefits not discussed in this 

analysis. We seek comment and data on 

the value of the benefits identified. We 

also welcome comments on the 

accuracy of the cost estimates in this 

analysis, and request that commenters 

provide data that may be relevant to 

these cost estimates. In addition, we 

seek estimates and views regarding 

these costs and benefits for particular 

family offices as well as any other costs 

or benefits that may result from the 

adoption of the proposed new rule. 

In proposing this rule, we are 

responding to the Dodd-Frank Act’s 

repeal of section 203(b)(3) of the 

Advisers Act and proposing a new 

exclusion for a ‘‘family office,’’ which 

Congress anticipated we would 

define.60 Proposed rule 202(a)(11)(G)–1 

would exclude from regulation under 

the Advisers Act family offices that 

meet the qualifications and conditions 

contained in the proposed rule. Among 

other matters, to qualify as an excluded 

family office, the family office generally 

must have no non-family clients, must 

be wholly owned and controlled by 

family members, and must not hold 

itself out to the public as an investment 

adviser. 

A. Benefits 

As discussed earlier in this Release, 

we expect that proposed rule 

202(a)(11)(G)–1 would yield several 

important benefits. First, the proposed 

rule would result in several benefits for 

excluded family offices that do not 

already have an exemptive order. They 

would not be subject to the costs of 

registering with the Commission as an 

investment adviser and its associated 

compliance costs (or if they were 

previously registered, they would 

benefit from the reduced regulatory 

costs after de-registering in reliance on 

the exclusion). These reduced 

regulatory costs should result in direct 

cost savings to these family offices, and 

thus to their family clients. Excluded 

family offices would be able to maintain 

greater privacy because they would not 

have to make the public filings with the 

Commission that they would otherwise 

have to make as a registered investment 

adviser. 

The proposed rule also would benefit 

the Commission and family offices that 

meet the conditions of the proposed rule 

and their clients by eliminating the 

costs and inefficiencies of seeking (and 

considering) individual exemptive 

orders. As discussed above, family 

offices that did not qualify for the 

exemption from registration contained 

in section 203(b)(3) of the Advisers Act 

often applied to the Commission for 

exemptive relief from the Advisers Act. 

Following the repeal of the exemption 

contained in section 203(b)(3), we 

would expect a much greater number of 

family offices to otherwise apply for 

exemptive relief absent our rule 

proposal.61 We estimate that a typical 

family office (and thus indirectly their 

family clients) would incur legal fees of 

$200,000 on average to engage in the 

exemptive order application process, 

including preparation and revision of an 

application and consultations with 

Commission staff.62 The proposed rule 

would benefit qualifying family offices 

and their family clients by eliminating 

the costs of applying to the Commission 

for an exemptive order to avoid 

registration and the associated 

compliance burdens. It also would 

benefit excluded family offices and their 

family clients by eliminating the 

uncertainty that they might not obtain 

such an order. 

The proposed rule also would benefit 

the Commission by freeing staff 

resources from reviewing and 

processing family office exemptive 

applications that would result from the 

repeal of section 203(b)(3) of the 

Advisers Act in many cases where the 

staff would likely recommend to the 

Commission that exclusion from 

regulation under the Advisers Act was 

appropriate and in the public interest, 

allowing the staff to target its work more 

efficiently, and thus would indirectly 

benefit investors. 

We seek comment on whether the 

elimination of these costs would result 

in additional benefits to family offices 

or their clients. 

B. Costs 

We recognize that there are costs that 

could result if we adopted our proposed 

rule. We do not expect that the 

proposed rule would impose any 

significant costs on family offices 

currently operating under a Commission 

exemptive order. We are permitting 

these family offices to continue to rely 

on their exemptive orders and thus 

would expect them to do so if the costs 

to do so were lower than complying 

with the proposed rule. We expect that 

most of these family offices could satisfy 

all the conditions of the rule without 

changing their structure or operations. 

However, these family offices may incur 

one-time ‘‘learning costs’’ in determining 

the differences between their orders and 

the rule. We expect that such costs 

would be no more than $5,000 on 

average for a family office if it hires an 

external consulting firm or law firm to 

assist in determining the differences.63

There are 13 family offices that have 

obtained exemptive orders. 

Accordingly, we estimate that these 

family offices collectively would incur 

outside consulting or legal expenses of 

$65,000 to discern the differences 

between their orders and the rule. 

As discussed above, there are a 

number of family offices that currently 

are not registered as an investment 

adviser in reliance on the exemption 

from registration in section 203(b)(3) of 

the Advisers Act. The proposed rule 

would not impose any costs on those 

advisers because they currently are 

exempt from registration and thus 

would have no reason to consider 

whether they would rather rely on the 

proposed rule to relieve them of the 


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Federal Register / Vol. 75, No. 200 / Monday, October 18, 2010 / Proposed Rules 63761 

64Pub. L. 104–121, Title II, 110 Stat. 857 (1996) 

(codified in various sections of 5 U.S.C., 15 U.S.C. 

and as a note to 5 U.S.C. 601). 

65 5 U.S.C. 603(a). 

66 17 CFR 275.0–7(a). 

67See supra note 2 and accompanying text. See 

also The Family Office, supra note 2 (finding 

investable assets of single family offices surveyed 

ranged from $197 million to $843 million); Family 

Wealth Alliance, Single-Family Office Study 

Executive Summary, available at http:// 

www.fwalliance.com/store/ 

2ndannualsinglefamilystudy.html (finding assets 

under management of surveyed single family offices 

ranged from $51 million to $2.1 billion); Wharton 

Study, supra note 4, at 4 (stating that surveyed 

single family offices had at least $100 million in 

investable assets). 

burdens associated with being a 

registered investment adviser. After July 

21, 2010, section 203(b)(3) of the 

Advisers Act will be repealed and as a 

result, some of these family offices 

would be subject to the costs and 

burdens of registration under the 

Advisers Act. However, these costs are 

a consequence of section 403 of the 

Dodd-Frank Act repealing the section 

203(b)(3) exemption, and not this 

rulemaking. Accordingly, we do not 

attribute these costs to this rulemaking 

and thus are not considering them. 

We recognize that some family offices 

may decide to restructure their business 

to meet the conditions imposed by 

proposed rule 202(a)(11)(G)–1 so that 

they would avoid the costs and burdens 

of registration in reliance on our 

proposed rule. Some family offices may 

need to reorganize the ownership or 

control structure of the family office in 

order to meet the family office 

definition under the proposed rule. We 

estimate that this type of reorganization 

could be accomplished without 

significant costs being imposed on the 

family office because we estimate that 

most family offices are wholly owned 

and those that are not only have a small 

number of non-family members with 

ownership interests. Other family 

offices may have to terminate providing 

investment advice to certain persons 

because they would not meet the 

definition of a ‘‘family client,’’ which 

may require these individuals to divest 

interests in pooled investment vehicles 

and other entities advised by the family 

office. The costs of any such 

restructuring would be highly 

dependent on the nature and extent of 

investment of these non-qualifying 

clients through the family office, which 

we understand may vary significantly 

from family office to family office. 

Finally, if there were any family 

offices that previously registered with 

the Commission, but now may deregister in reliance on the new family 

office exclusion in the Advisers Act, the 

proposed rule may have competitive 

effects on investment advisers that may 

compete with the family office for the 

provision of investment management 

services to family clients since these 

third party investment advisers would 

bear the regulatory costs associated with 

compliance with the Advisers Act or 

state investment adviser regulatory 

requirements. We do not expect that the 

proposed rule would impact capital 

formation. 

We request comment on this analysis. 

Would family offices that currently rely 

on an order bear lower costs if they rely 

on the proposed rule? What amount and 

types of costs will these family offices 

bear as a result of the proposed rule? 

How many family offices are likely to 

restructure and in what ways? At what 

cost? What competitive impacts may 

result if registered family offices deregister if the proposed rule is adopted? 

C. Request for Comment 

The Commission requests comments 

on all aspects of the cost-benefit 

analysis, including the accuracy of the 

potential costs and benefits identified 

and assessed in this Release, as well as 

any other costs or benefits that may 

result from the proposals. We encourage 

commenters to identify, discuss, 

analyze, and supply relevant data 

regarding these or additional costs and 

benefits. For purposes of the Small 

Business Regulatory Enforcement 

Fairness Act of 1996,64 the Commission 

also requests information regarding the 

potential annual effect of the proposals 

on the U.S. economy. Commenters are 

requested to provide empirical data to 

support their views. 

VI. Initial Regulatory Flexibility 

Analysis 

The Commission has prepared the 

following Initial Regulatory Flexibility 

Analysis (‘‘IRFA’’) regarding proposed 

rule 202(a)(11)(G)–1 in accordance with 

section 3(a) of the Regulatory Flexibility 

Act.65

A. Reasons for Proposed Action 

We are proposing rule 202(a)(11)(G)– 

1 defining family offices excluded from 

regulation under the Advisers Act 

because we are required to do so under 

Section 409 of the Dodd-Frank Act. 

B. Objectives and Legal Basis 

As described more fully in Sections I 

and II of this Release, the general 

objective of proposed rule 

202(a)(11)(G)–1 is to define a family 

office consistent with prior Commission 

exemptive policy consistent with the 

Dodd-Frank Act. The Commission is 

proposing rule 202(a)(11)(G)–1 pursuant 

to our authority set forth in section 

202(a)(11)(G) of the Advisers Act [15 

U.S.C. 80b–2(a)(11)(G)]. 

C. Small Entities Subject to the Rule 

Under Commission rules, for the 

purposes of the Advisers Act and the 

Regulatory Flexibility Act, an 

investment adviser generally is a small 

entity if it: (i) Has assets under 

management having a total value of less 

than $25 million; (ii) did not have total 

assets of $5 million or more on the last 

day of its most recent fiscal year; and 

(iii) does not control, is not controlled 

by, and is not under common control 

with another investment adviser that 

has assets under management of $25 

million or more, or any person (other 

than a natural person) that had $5 

million or more on the last day of its 

most recent fiscal year.66

We do not have data and are not 

aware of any databases that compile 

information regarding how many family 

offices would be a small entity under 

this definition, but since family offices 

only are established for the very wealthy 

and given the statistics noted earlier 

showing that they generally serve 

families with at least $100 million or 

more of investable assets and have an 

average net worth of $517 million, we 

believe it is unlikely that any family 

offices would be small entities.67

D. Reporting, Recordkeeping, and Other 

Compliance Requirements 

Proposed rule 202(a)(11)(G)–1 would 

impose no reporting, recordkeeping or 

other compliance requirements. 

E. Duplicative, Overlapping, or 

Conflicting Federal Rules 

The Commission has not identified 

any Federal rules that duplicate, 

overlap, or conflict with the proposed 

rule. 

F. Significant Alternatives 

The Regulatory Flexibility Act directs 

the Commission to consider significant 

alternatives that would accomplish the 

stated objective, while minimizing any 

significant impact on small entities. In 

connection with the proposed rules and 

amendments, the Commission 

considered the following alternatives: 

(i) The establishment of differing 

compliance or reporting requirements or 

timetables that take into account the 

resources available to small entities; 

(ii) the clarification, consolidation, or 

simplification of compliance and 

reporting requirements under the rule 

for small entities; (iii) the use of 

performance rather than design 

standards; and (iv) an exemption from 

coverage of the rule, or any part thereof, 

for small entities. 


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63762 Federal Register / Vol. 75, No. 200 / Monday, October 18, 2010 / Proposed Rules 

Proposed rule 202(a)(11)(G)–1 is 

exemptive and compliance with the rule 

would be voluntary. We therefore do not 

believe that different or simplified 

compliance, timetable, or reporting 

requirements, or an exemption from 

coverage of the proposed rule for small 

entities would be appropriate. The 

conditions in the proposed rule are 

designed to ensure that family offices 

operating under the rule would only 

impact the family itself and not the 

general public and, accordingly, the 

protections of the Advisers Act are not 

warranted. Reducing these conditions 

for smaller family offices would be 

inconsistent with the policy underlying 

the exclusion and would harm investor 

protection. 

Our prior exemptive orders have not 

made any differentiation based on the 

size of the family office. In addition, as 

discussed above, we expect that very 

few, if any, family offices are small 

entities. The Commission also believes 

that proposed rule 202(a)(11)(G)–1 

would decrease burdens on small 

entities by making it unnecessary for 

them to seek an exemptive order from 

the Commission to operate without 

registration under the Advisers Act. As 

a result, we do not anticipate that the 

potential impact of the proposed rule on 

small entities would be significant. 

The proposed rule specifies broad 

conditions with which a family office 

must comply to rely on the exclusion; 

the proposed rule leaves to each family 

office how to structure its specific 

operations to meet these conditions. The 

proposed rule thus already incorporates 

performance rather than design 

standards. For these reasons, 

alternatives to the proposed rule appear 

unnecessary and in any event are 

unlikely to minimize any impact that 

the proposed rule might have on small 

entities. 

G. Solicitation of Comments 

We encourage written comments on 

matters discussed in this IRFA. In 

particular, the Commission seeks 

comment on: 

• The number of small entities that 

would be affected by the proposed rule; 

and 

• Whether the effect of the proposed 

rule on small entities would be 

economically significant. 

Commenters are asked to describe the 

nature of any effect and provide 

empirical data supporting the extent of 

the effect. 

VII. Statutory Authority 

We are proposing rule 202(a)(11)(G)– 

1 [17 CFR 275.202(a)(11)(G)–1] pursuant 

to our authority set forth in section 

202(a)(11)(G) of the Advisers Act [15 

U.S.C. 80b–2(a)(11)(G)]. 

List of Subjects in 17 CFR Part 275 

Reporting and recordkeeping 

requirements, Securities. 

Text of Proposed Rule 

For the reasons set out in the 

preamble, Title 17, Chapter II of the 

Code of Federal Regulations is proposed 

to be amended as follows. 

PART 275—RULES AND 

REGULATIONS, INVESTMENT 

ADVISERS ACT OF 1940 

1. The authority citation for Part 275 

continues to read in part as follows: 

Authority: 15 U.S.C. 80b–2(a)(11)(G), 80b– 

2(a)(17), 80b–3, 80b–4, 80b–4a, 80b–6(4), 

80b–6a, and 80b–11, unless otherwise noted. 

* * * * * 

2. Section 275.202(a)(11)(G)–1 is 

added to read as follows: 

§ 275.202(a)(11)(G)–1 Family offices. 

(a) Exclusion. A family office, as 

defined in this section, shall not be 

considered to be an investment adviser 

for purpose of the Act. 

(b) Family office. A family office is a 

company (including its directors, 

partners, trustees, and employees acting 

within the scope of their position or 

employment) that: 

(1) Has no clients other than family 

clients; provided that if 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, that person 

shall be deemed to be a family client for 

purposes of this § 275.202(a)(11)(G)–1 

for four months following the transfer of 

assets resulting from the involuntary 

event; 

(2) Is wholly owned and controlled 

(directly or indirectly) by family 

members; and 

(3) Does not hold itself out to the 

public as an investment adviser. 

(c) Grandfathering. A family office as 

defined in paragraph (a) of this section 

shall not exclude any person, who was 

not registered or required to be 

registered under the Act on January 1, 

2010, solely because such person 

provides investment advice to, and was 

engaged before January 1, 2010 in 

providing investment advice to: 

(1) Natural persons who, at the time 

of their applicable investment, are 

officers, directors, or employees of the 

family office who have invested with 

the family office before January 1, 2010 

and are accredited investors, as defined 

in Regulation D under the Securities Act 

of 1933; 

(2) Any company owned exclusively 

and controlled by one or more family 

members; or 

(3) Any investment adviser registered 

under the Act that provides investment 

advice to the family office and who 

identifies investment opportunities to 

the family office, and invests in such 

transactions on substantially the same 

terms as the family office invests, but 

does not invest in other funds advised 

by the family office, and whose assets as 

to which the family office directly or 

indirectly provides investment advice 

represents, in the aggregate, not more 

than 5 percent of the value of the total 

assets as to which the family office 

provides investment advice; provided 

that a family office that would not be a 

family office but for this paragraph (c) 

shall be deemed to be an investment 

adviser for purposes of paragraphs (1), 

(2) and (4) of section 206 of the Act. 

(d) Definitions. For purposes of this 

section: 

(1) 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. 

(2) Family client means: 

(i) Any family member; 

(ii) Any key employee; 

(iii) Any charitable foundation, 

charitable organization, or charitable 

trust, in each case established and 

funded exclusively by one or more 

family members or former family 

members; 

(iv) Any trust or estate existing for the 

sole benefit of one or more family 

clients; 

(v) Any limited liability company, 

partnership, corporation, or other entity 

wholly owned and controlled (directly 

or indirectly) exclusively by, and 

operated for the sole benefit of, one or 

more family clients; provided that if any 

such entity is a pooled investment 

vehicle, it is excepted from the 

definition of ‘‘investment company’’ 

under the Investment Company Act of 

1940; 

(vi) Any former family member, 

provided that from and after becoming 

a former family member the individual 

shall not receive investment advice from 

the family office (or invest additional 

assets with a family office-advised trust, 

foundation or entity) other than with 

respect to assets advised (directly or 

indirectly) by the family office 

immediately prior to the time that the 

individual became a former family 

member, except that a former family 

member shall be permitted to receive 

investment advice from the family office 

with respect to additional investments 

that the former family member was 


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Federal Register / Vol. 75, No. 200 / Monday, October 18, 2010 / Proposed Rules 63763 

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 

family member; or 

(vii) Any former key employee, 

provided that upon the end of such 

individual’s employment by the family 

office, the former key employee shall 

not receive investment advice from the 

family office (or invest additional assets 

with a family office-advised trust, 

foundation or entity) other than with 

respect to assets advised (directly or 

indirectly) by the family office 

immediately prior to the end 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. 

(3) Family member means: 

(i) The founders, their lineal 

descendants (including by adoption and 

stepchildren), and such lineal 

descendants’ spouses or spousal 

equivalents; 

(ii) The parents of the founders; and 

(iii) The siblings of the founders and 

such siblings’ spouses or spousal 

equivalents and their lineal descendants 

(including by adoption and 

stepchildren) and such lineal 

descendants’ spouses or spousal 

equivalents. 

(4) Former family member means a 

spouse, spousal equivalent, or stepchild 

that was a family member but is no 

longer a family member due to a divorce 

or other similar event. 

(5) Founders means the natural 

person and his or her spouse or spousal 

equivalent for whose benefit the family 

office was established and any 

subsequent spouse of such individuals. 

(6) Key employee means any natural 

person (including any person who holds 

a joint, community property, or other 

similar shared ownership interest with 

that person’s spouse or spousal 

equivalent) 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 with regard to 

the family office) who, in connection 

with his or her regular functions or 

duties, participates in the investment 

activities of the family office, provided 

that such employee has been performing 

such functions and duties for or on 

behalf of the family office, or 

substantially similar functions or duties 

for or on behalf of another company, for 

at least 12 months. 

(7) Spousal equivalent means a 

cohabitant occupying a relationship 

generally equivalent to that of a spouse. 

Dated: October 12, 2010. 

By the Commission. 

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2010–26086 Filed 10–15–10; 8:45 am] 

BILLING CODE 8011–01–P 

DEPARTMENT OF EDUCATION 

34 CFR Part 668 

RIN 1840–AD04 

[Docket ID ED–2010–OPE–0012] 

Program Integrity: Gainful Employment 

AGENCY: Office of Postsecondary 

Education, Department of Education. 

ACTION: Notice of public meeting 

sessions. 

SUMMARY: The Secretary of Education 

(Secretary) announces public meeting 

sessions to receive oral presentations 

and to interact with commenters 

regarding comments that were 

submitted to the Department of 

Education in response to its Notice of 

Proposed Rulemaking on Program 

Integrity: Gainful Employment, 

published in the Federal Register on 

July 26, 2010 (75 FR 43616). 

DATES: The public meeting sessions will 

be held on the dates and at the locations 

specified later in this document. 

FOR FURTHER INFORMATION CONTACT: 

Leigh Arsenault, U.S. Department of 

Education, 400 Maryland Avenue, SW., 

Room 7E304, Washington, DC 20202. 

Telephone: 202–453–7127 or by e-mail: 

Leigh.Arsenault@ed.gov. 

If you use a telecommunications 

device for the deaf (TDD), call the 

Federal Relay Service (FRS), toll free, at 

1–800–877–8339. 

SUPPLEMENTARY INFORMATION: On July 

26, 2010, the Department published a 

notice of proposed rulemaking (NPRM) 

in the Federal Register proposing 

regulations for determining whether a 

postsecondary educational program 

provides training that leads to gainful 

employment in a recognized occupation 

and the conditions under which such a 

program would remain eligible for the 

student financial assistance programs 

authorized under title IV of the Higher 

Education Act of 1965, as amended 

(HEA). Comments on the Department’s 

proposed regulations were due on 

September 9, 2010. The Department 

received over 90,000 comments from a 

wide range of stakeholders, including 

for-profit universities and colleges, 

community colleges, students, higher 

education associations, members of 

Congress, financial analysts, 

economists, and college and university 

faculty. 

The Department appreciates the 

tremendous feedback, both positive and 

negative, that it received on the 

proposed regulations. The response 

from so many individuals and entities 

demonstrates how important the issues 

relating to gainful employment and this 

rulemaking are. To better understand 

parties’ comments and have an 

opportunity to interact with 

commenters, the Department will hold 

four public meeting sessions over the 

course of two days. During this time, 

commenters who have timely submitted 

comments on the NPRM may orally 

present their comments to a panel of 

Department representatives. 

Commenters also may have an 

opportunity to respond to questions 

from the Department about their 

comments. 

Public Meeting Dates, Times, Locations, 

and Registration Information 

The four public meeting sessions will 

be held on the following dates and times 

at the U.S. Department of Education, 

Barnard Auditorium, 400 Maryland 

Avenue, SW., Washington, DC 20202. 

Session 1: November 4, 2010, from 9 

a.m. to 12 p.m. 

Session 2: November 4, 2010, from 1 

p.m. to 4:30 p.m. 

Session 3: November 5, 2010, from 9 

a.m. to 12 p.m. 

Session 4: November 5, 2010, from 1 

p.m. to 4:30 p.m. 

Oral Presentations From Commenters 

Oral presentations at the public 

meeting sessions will be limited only to 

individuals or entities that timely 

submitted comments on the NPRM and 

only to the comments the commenter 

submitted. No new topics or concerns 

may be introduced. Each commenter 

who is interested in making an oral 

presentation of comments on the NPRM 

will be allowed a total of five minutes. 

The Department will not accept any 

written materials from any presenter or 

other individual or entity attending the 

public meeting sessions. 

If you are interested in making an oral 

presentation of your comments at one of 

the public meeting sessions, you must 

register at http:// 

usdoedregistration.ed.gov/profile/web/ 

index.cfm?PKwebID=0x3626e49. We 

will accept registrations at this Web site, 

beginning at 12 noon, Washington, DC 


jlentini on DSKJ8SOYB1PROD with PROPOSALS