Regulatory Exemptions



Single Family Office Exemption

On June 22, 2011 the Commission adopted rule 202(a)(11)(G)-1 that defines "family offices" to be excluded from regulation under the Investment Advisers Act of 1940. “Family offices” are entities established by wealthy families to manage their wealth and provide other services to family members, such as tax and estate planning services. Historically, most family offices have not been registered as investment advisers under the Advisers Act because of the “private adviser exemption” provided under the Advisers Act to firms that advise less than fifteen clients and meet certain other conditions.

The Dodd-Frank Wall Street Reform and Consumer Protection Act repealed the private adviser exemption so hedge fund and other private fund advisers must register with the Commission. However, Dodd-Frank Act also included a new provision requiring the Commission to define family offices in order to exempt them from regulation under the Advisers Act. The new rule adopted by the Commission enables those managing their own family’s financial portfolios with family offices to determine whether their “family offices” can continue to be excluded from regulation under the Advisers Act. Family offices that are excluded from Advisers Act regulation under the rule Any company that: Provides investment advice about securities only to “family clients,” as defined by the rule; Is wholly owned by “family clients” and is exclusively controlled by “family members” and/or “family entities,” as defined by the rule; and Does not hold itself out to the public as an investment adviser. Permissible family clients Family members. Family members include all lineal descendants (including by adoption, stepchildren, foster children, and, in some cases, by legal guardianship) of a common ancestor (who is no more than 10 generations removed from the youngest generation of family members), and such lineal descendants’ spouses or spousal equivalents. Key employees. Key employees include: Executive officers, directors, trustees, general partners, or persons serving in a similar capacity for the family office or its affiliated family office; and Any other employee of the family office or its affiliated family office (other than a clerical, secretarial or administrative employee) who, in connection with his or her regular duties, participates in the investment activities of the family office or affiliated family office, and has been performing such duties for the family office or affiliated family office, or substantially similar functions or duties for another company, for at least twelve months. Other family clients.

 

Other family clients generally include: Any non-profit or charitable organization funded exclusively by family clients; Any estate of a family member, former family member, key employee, or subject to certain conditions, a former key employee; Certain family client trusts; and Any company wholly-owned by, and operated for the sole benefit of, family clients. (Read the entire order of exemptions at the SEC: https://www.sec.gov/rules/final/2011/ia-3220-secg.htm)

Mergers and Acquisitions Dealer Exemption

Broker Dealers and their Agents in Texas have exemptions - https://www.ssb.texas.gov/faqs-dealers-and-their-agents#2

M&A Brokers / SEC No-Action Letter: On January 31, 2014, the SEC’s Division of Trading and Markets issued a significant no-action letter permitting the involvement of “M&A Brokers” in business acquisition transactions involving privately-held companies. The no-action letter means that the SEC Staff will not seek enforcement action against the type of “broker” activity described in the letter. By adhering to the conditions specified in the no-action letter, an M&A Broker may advertise a privately-held company of any size for sale, with information such as the description of the business, its general location, and a price range, without fear of violating federal laws that require broker-dealer registration. State laws will still apply.
SEC "No-Action" Letter M&A Brokers

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