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Alexandria Ocasio-Cortez Anna Moneymaker/Getty Images News/Getty Images
U.S. Rep. Alexandria Ocasio-Cortez

Family Offices May Face New SEC Oversight

New federal bill recently introduced by U.S. Rep. Alexandria Ocasio-Cortez proposes to have family offices register with the regulator and begin reporting.

Last week, the U.S. House of Representatives Committee on Financial Services gave support to a bill introduced recently by U.S. Rep. Alexandria Ocasio-Cortez. The bill will now be considered by the full House of Representatives. The purpose of the bill, H.R. 4620, is to amend the Investment Advisers Act of 1940 to impose regulatory oversight of family offices.
​Currently, family offices are typically exempted from the requirement to register with the SEC as investment advisors. If the bill is enacted in its current form, it would limit that exemption from registration to “covered” family offices, which would be those with less than $750 million in assets under management (AUM). Any family office with more than $750 million in AUM would be required to register with the SEC as an investment advisor and follow investment advisor regulations and reporting rules.
The bill also provides that offices with less than $750 million in assets could still be required to register with the SEC if the commission “determines the family office is highly leveraged or engaged in high risk activities that the Commission determines warrants inclusion, as appropriate to protect investors.”  
In addition, the bill would require all family offices to report to the SEC and provide “such annual or other reports as the Commission determines necessary or appropriate in the public interest or for the protection of investors.”

Attention on Family Offices

The bill is likely a response to the collapse of the highly leveraged Archegos Capital Management firm in late March, which cost banks billions of dollars in loan losses. Although Archegos wasn’t a family office, the media has portrayed it as a family office, and, as a result, its collapse has focused attention on family offices.
If it passes the House, it will still face opposition in the Senate, so enactment in its current form isn’t certain. Even if the bill doesn’t pass, it may be a harbinger of efforts to impose additional oversight of family offices in the future.
Mark Harder is chair of the Private Client and Family Office Practice Group,
Warner Norcross + Judd LLP, in Holland, Mich., [email protected] 

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