The Dodd-Frank Act and Europe

Many multi family offices in the UK are already subject to Financial Services Authority regulation and SEC requirements would not impose much more in the way of additional compliance requirements other than a possible inspection, says Stonehage Investment Partners’ Paul Hecker.

“As with the asset management industry, some family offices may choose to ringfence their US client business in a separate entity to avoid the whole of their business being subject to SEC regulation.”

Where family offices conduct regulated activities, there is no exemption – this activity will continue to be regulated, says Irwin Spilka, executive director and head of compliance and risk at Stonehage Group. “Some family offices who would fall within the supervision of the UK HM Revenues & Customs under the Money Laundering Regulations 2007 prefer FSA regulation if they can bring themselves within the FSA’s scope.”

At European Union level, Recital 5 of the Alternative Investment Fund Management Directive, which is due to be transposed into national law across the EU by 2013, excludes “investment undertakings such as family office vehicles, which invest the private wealth of investors without raising external capital.”

Managers who manage alternative investment funds with a cumulative value of assets under management of less than €100 million or manage only unleveraged funds with a five-year lock-in and cumulative assets under management of less than €500 million will be subject to a lighter regulatory regime of registration within the EU member state of their domicile. However, family office funds are not considered to be alternative investment funds under the terms of the directive.