Family Offices May Have More Time: Compliance with Dodd-Frank Act Adviser Registration Delayed

April 18, 2011

Many family offices have been asking when, how, and if they need to register as an investment adviser under the Investment Advisers Act of 1940 (Act). Those family offices may now have additional time to finalize efforts to comply with the “family office” exemption. The deadline for compliance with the adviser regulations under the new Dodd-Frank Act will likely be delayed until the first quarter of 2012, according to the SEC.

Dodd-Frank requires that the SEC complete rulemaking concerning these provisions by July 21, 2011. In a letter posted on the SEC website, Robert E. Plaze, associate director of the SEC’s Division of Investment Management, says that he anticipates the SEC will complete its rulemaking on time but will consider additional time for compliance.

Family Offices: Registration Requirements and Exemptions

The Dodd-Frank Act makes a number of changes to the regulation of investment advisers by the SEC. Until the passage of the Dodd-Frank Act, many family offices relied on the exemption from registration requirements for advisers with fewer than 15 clients who do not hold themselves out to the public as being investment advisers (Private Adviser Exemption). The Dodd-Frank Act eliminates the Private Adviser Exemption effective July 21, 2011, and replaces it with several new exemptions.

Among the new exemptions is one tailored for family offices, which specifically exempts family offices from registration and regulation under the Act. For more on the proposed rules and definition of “family office” and related materials, click here.

The SEC has received comments but has not yet issued final rules. In the letter from the SEC, Plaze states that the SEC anticipates completing the final rules by July 21, 2011, as required by the Dodd-Frank Act, but will consider extending the compliance date for these new rules until the first quarter of 2012.

Extension of Compliance Dates

Plaze’s letter is not an SEC action. However, based on the letter, it is very likely that the deadline for compliance will be delayed until next year.

McGuireWoods can help clients think through these questions in advance of the final rule making. When the “family office” definition – and exemption – have been finalized, we can assist a family office in positioning for regulation and registration within the time for compliance allowed by the SEC.

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