I 
112TH CONGRESS 
1ST SESSION H. R. 2225 
To amend the Investment Advisers Act of 1940 to add a definition of 
family office. 
IN THE HOUSE OF REPRESENTATIVES 
JUNE 16, 2011 
Mr. HENSARLING (for himself, Mr. BACHUS, Mrs. MALONEY, Mr. GARRETT, 
Mr. NEUGEBAUER, Mrs. CAPITO, and Mrs. BIGGERT) introduced the fol-
lowing bill; which was referred to the Committee on Financial Services 
A BILL 
To amend the Investment Advisers Act of 1940 to add a 
definition of family office. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. FINDINGS. 
The Congress finds the following: 
(1) Family offices are not of national concern 
in that their advice, counsel, publications, writings, 
analyses, and reports are not furnished or distrib-
uted to clients on a retail basis, but are instead fur-
nished or distributed only to persons who are mem-
bers of a particular family. 
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(2) Family offices do not hold themselves out to 
the public as investment advisers. 
(3) Family offices do not engage in the business 
of advising others, but instead provide a wide range 
of services to members of the family they serve, only 
one of which involves investment advice, for which 
they may receive compensation from the members of 
the family. 
(4) Since the Investment Advisers Act of 1940 
was enacted, the Securities and Exchange Commis-
sion has regularly issued orders to individual family 
offices exempting them from all of the provisions of 
the Investment Advisers Act of 1940. 
(5) Section 409 of the Dodd-Frank Wall Street 
Reform and Consumer Protection Act expressly ex-
empts family offices from all of the provisions of the 
Investment Advisers Act of 1940. 
(6) It was the intent of Congress that section 
409 of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act be interpreted broadly to 
encompass all family offices as they are currently or-
ganized and operated, as well as to encompass 
changes in the organization and operation of family 
offices in the future. 
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SEC. 2. FAMILY OFFICE DEFINITION. 
Section 202(a) of the Investment Advisers Act of 
1940 (15 U.S.C. 80b–2(a)) is amended— 
(1) in paragraph (11)(G), in the matter added 
by section 409(a) of the Dodd-Frank Wall Street 
Reform and Consumer Protection Act, by striking ‘‘, 
as defined by rule, regulation, or order of the Com-
mission, in accordance with the purposes of this 
title’’; 
(2) by redesignating the second paragraph (29), 
as added by section 770 of the Dodd-Frank Wall 
Street Reform and Consumer Protection Act, as 
paragraph (31); and 
(3) by adding at the end the following new 
paragraph: 
‘‘(32) FAMILY OFFICE.— 
‘‘(A) IN GENERAL.—The term ‘family of-
fice’ means a company (including any director, 
partner, trustee, or employee of such company, 
when acting in their respective capacities as 
such) that— 
‘‘(i) has no clients other than family 
clients; 
‘‘(ii) is— 
‘‘(I) owned, directly or indirectly, 
by, 
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‘‘(II) controlled, directly or indi-
rectly, by, or 
‘‘(III) operated primarily for the 
benefit of, 
family clients; and 
‘‘(iii) does not hold itself out to the 
public as an investment adviser. 
‘‘(B) GRANDFATHERING.—A person de-
scribed under section 409(b)(3) of the Dodd- 
Frank Wall Street Reform and Consumer Pro-
tection Act, but who otherwise meets the re-
quirements under subparagraph (A), shall qual-
ify as a family office. 
‘‘(C) DEFINITIONS.—For purposes of this 
paragraph: 
‘‘(i) CONTROL.—The term ‘control’ 
means the power to exercise a controlling 
influence over the management or policies 
of a company, unless such power is solely 
the result of being an officer of such com-
pany. 
‘‘(ii) 
FAMILY
CLIENT.—The 
term 
‘family client’ means: 
‘‘(I) Any family member. 
‘‘(II) Any key employee. 
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‘‘(III) Any charitable foundation, 
charitable 
organization, 
charitable 
trust, or other non-profit organization 
established or controlled, directly or 
indirectly, by persons one or more of 
whom is a family client. 
‘‘(IV) Any trust or estate funded 
exclusively by one or more family 
members or established primarily for 
the benefit of one or more family cli-
ents. 
‘‘(V) Any limited liability com-
pany, partnership, corporation, or 
other entity, if— 
‘‘(aa) such entity is major-
ity-owned or controlled, directly 
or indirectly, by, or operated pri-
marily for the benefit of, one or 
more family clients; 
‘‘(bb) the family office is 
giving investment advice to such 
entity; and 
‘‘(cc) persons who are not 
otherwise defined as a family cli-
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ent do not own interests in such 
entity. 
‘‘(VI) Any former family mem-
ber. 
‘‘(VII) Any former key employee, 
if, upon the termination of such indi-
vidual’s employment by the family of-
fice or family client, the former key 
employee shall not receive investment 
advice from the family office or the 
family client (or invest additional as-
sets with a family office-advised trust, 
charitable foundation, or entity), other 
than with respect to assets advised, 
directly or indirectly, by the family of-
fice or family client immediately prior 
to the termination of such individual’s 
employment, except that a former key 
employee shall be permitted to receive 
investment advice from the family of-
fice with respect to additional invest-
ments that the former key employee 
was contractually obligated to make, 
and that relate to a family office ad-
vised investment existing, in each 
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case, prior to the time the person be-
came a former key employee. For pur-
poses of this subclause, the term ‘fam-
ily office’ shall include any entity de-
scribed under subclause (V). 
‘‘(iii) FAMILY MEMBER.— 
‘‘(I) IN
GENERAL.—The term 
‘family member’ means: 
‘‘(aa) Any natural person 
whose economic activities created 
or substantially contributed to 
the family’s wealth, and such 
person’s spouse. 
‘‘(bb) The siblings, parents, 
grandparents of a person de-
scribed in item (aa). 
‘‘(cc) The spouse of a person 
described in item (bb). 
‘‘(dd) The siblings of a per-
son described in item (bb) or 
(cc). 
‘‘(ee) The spouse of a person 
described in item (dd). 
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‘‘(ff) The lineal descendant 
of a person described in item 
(bb), (cc), (dd), or (ee). 
‘‘(gg) The spouse of a per-
son described in item (ff). 
‘‘(II) CONSTRUCTION.—For pur-
poses of this clause— 
‘‘(aa) the term ‘lineal de-
scendant’ includes natural chil-
dren, adopted children, and step-
children; 
‘‘(bb) the term ‘spouse’ in-
cludes spousal equivalents; and 
‘‘(cc) the terms ‘siblings’, 
‘parents’, and ‘grandparents’ in-
clude step-siblings, step-parents, 
and step-grandparents, respec-
tively. 
‘‘(iv) FORMER FAMILY MEMBER.—The 
term ‘former family member’ means a 
spouse or a descendant who was a family 
member but is no longer a family member 
due to a divorce or other similar event. 
‘‘(v) KEY EMPLOYEE.—The term ‘key 
employee’ means any natural person (and 
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such person’s spouse or lineal descendant) 
who is an executive officer, director, trust-
ee, 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, sec-
retarial, or administrative functions) who, 
in connection with his or her regular func-
tions or duties, participates in the invest-
ment activities of the family office. For 
purposes of this subclause, the term ‘fam-
ily office’ shall include any entity described 
under clause (ii)(V). 
‘‘(vi) 
SPOUSAL
EQUIVALENT.—The 
term ‘spousal equivalent’ means a cohabi-
tant occupying a relationship generally 
equivalent to that of a spouse. 
‘‘(D) INVOLUNTARY EVENTS.—If— 
‘‘(i) a person that is not a family cli-
ent becomes a client of the family office as 
a result of the death of a family member 
or key employee or other involuntary trans-
fer from a family member or key employee, 
or 
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‘‘(ii) a person ceases to be a family 
client, 
that person shall be deemed to be a family cli-
ent until the end of the 1-year period beginning 
on the date that it is both legally and prac-
tically feasible for the family office to transfer 
the affected assets to such person, but in no 
event earlier than 1 year from the date that it 
becomes legally feasible to transfer the affected 
assets unless it becomes practically feasible to 
affect such a transfer sooner.’’. 
Æ 
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