The American Institute of CPAs has submitted comments on the Securities and Exchange Commission’s proposed rules on “family offices,” and given the SEC its suggestions on how to define “family clients.”

“Family offices” are entities established by wealthy families to manage their wealth and plan for their families’ financial future. The SEC has proposed rules for defining “family offices” as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act for purposes of exemption under the Investment Advisers Act of 1940.

Section 409 of the Dodd-Frank Act excluded “family offices” from the definition of investment advisers, which means that “family offices” are not subject to registration under the Investment Advisers Act of 1940. Previously, many “family offices” relied on the “private adviser exemption” to the Advisers Act. The private adviser exemption was repealed by Section 403 of the Dodd-Frank Act. 

AICPA Tax Executive Committee chair Patricia A. Thompson and AICPA Personal Financial Planning Executive Committee chair Clark M. Blackman II said in a letter to the SEC that the institute generally supports the definitional approach of “family offices” in the SEC’s proposed rule, which, in general, provides that a “family office” is 1) a company that is wholly owned and controlled by family members, 2) has no clients other than family clients, and 3) does not hold itself out to the public as an investment adviser.

The AICPA, however, suggested that the SEC define the “family clients” of the “family offices” broadly enough so that all the clients and arrangements typically present in a single-family office are covered, including former family members, family trusts, charitable organizations, and key employees. The AICPA recommended grandparents of the founder and widows and widowers of family members be included, too.

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