The SEC approved a new rule on Wednesday defining what kind of firm can call itself a "family office" and thereby be excluded from the Investment Advisers Act of 1940.
The rulemaking stems from the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Historically, family offices have not been required to register with the SEC under the Advisers Act because of an exemption provided to investment advisers with fewer than 15 clients.
The Dodd-Frank Act removed that exemption so the SEC can regulate hedge fund and other private fund advisers. At the same time, the legislation included a new provision requiring the SEC to define family offices in order to exempt them from regulation under the Advisers Act.
In a statement, the SEC said the new rule enables those managing their own family's financial portfolios to determine whether their "family offices" can continue to be excluded from the Investment Advisers Act.
