SECTION 1. FINDINGS.

    The Congress finds the following:
            (1) Family offices are not of national concern in that 
        their advice, counsel, publications, writings, analyses, and 
        reports are not furnished or distributed to clients on a retail 
        basis, but are instead furnished or distributed only to persons 
        who are members of a particular family.
            (2) Family offices do not hold themselves out to the public 
        as investment advisers.
            (3) Family offices do not engage in the business of 
        advising others, but instead provide a wide range of services 
        to members of the family they serve, only one of which involves 
        investment advice, for which they may receive compensation from 
        the members of the family.
            (4) Since the Investment Advisers Act of 1940 was enacted, 
        the Securities and Exchange Commission has regularly issued 
        orders to individual family offices exempting them from all of 
        the provisions of the Investment Advisers Act of 1940.
            (5) Section 409 of the Dodd-Frank Wall Street Reform and 
        Consumer Protection Act expressly exempts family offices from 
        all of the provisions of the Investment Advisers Act of 1940.
            (6) It was the intent of Congress that section 409 of the 
        Dodd-Frank Wall Street Reform and Consumer Protection Act be 
        interpreted broadly to encompass all family offices as they are 
        currently organized and operated, as well as to encompass 
        changes in the organization and operation of family offices in 
        the future.

SEC. 2. FAMILY OFFICE DEFINITION.

    Section 202(a) of the Investment Advisers Act of 1940 (15 U.S.C. 
80b-2(a)) is amended--
            (1) in paragraph (11)(G), in the matter added by section 
        409(a) of the Dodd-Frank Wall Street Reform and Consumer 
        Protection Act, by striking ``, as defined by rule, regulation, 
        or order of the Commission, in accordance with the purposes of 
        this title'';
            (2) by redesignating the second paragraph (29), as added by 
        section 770 of the Dodd-Frank Wall Street Reform and Consumer 
        Protection Act, as paragraph (31); and
            (3) by adding at the end the following new paragraph:
            ``(32) Family office.--
                    ``(A) In general.--The term `family office' means a 
                company (including any director, partner, trustee, or 
                employee of such company, when acting in their 
                respective capacities as such) that--
                            ``(i) has no clients other than family 
                        clients;
                            ``(ii) is--
                                    ``(I) owned, directly or 
                                indirectly, by,
                                    ``(II) controlled, directly or 
                                indirectly, by, or
                                    ``(III) operated primarily for the 
                                benefit of,
                        family clients; and
                            ``(iii) does not hold itself out to the 
                        public as an investment adviser.
                    ``(B) Grandfathering.--A person described under 
                section 409(b)(3) of the Dodd-Frank Wall Street Reform 
                and Consumer Protection Act, but who otherwise meets 
                the requirements under subparagraph (A), shall qualify 
                as a family office.
                    ``(C) Definitions.--For purposes of this paragraph:
                            ``(i) Control.--The term `control' means 
                        the power to exercise a controlling influence 
                        over the management or policies of a company, 
                        unless such power is solely the result of being 
                        an officer of such company.
                            ``(ii) Family client.--The term `family 
                        client' means:
                                    ``(I) Any family member.
                                    ``(II) Any key employee.
                                    ``(III) Any charitable foundation, 
                                charitable organization, charitable 
                                trust, or other non-profit organization 
                                established or controlled, directly or 
                                indirectly, by persons one or more of 
                                whom is a family client.
                                    ``(IV) Any trust or estate funded 
                                exclusively by one or more family 
                                members or established primarily for 
                                the benefit of one or more family 
                                clients.
                                    ``(V) Any limited liability 
                                company, partnership, corporation, or 
                                other entity, if--
                                            ``(aa) such entity is 
                                        majority-owned or controlled, 
                                        directly or indirectly, by, or 
                                        operated primarily for the 
                                        benefit of, one or more family 
                                        clients;
                                            ``(bb) the family office is 
                                        giving investment advice to 
                                        such entity; and
                                            ``(cc) persons who are not 
                                        otherwise defined as a family 
                                        client do not own interests in 
                                        such entity.
                                    ``(VI) Any former family member.
                                    ``(VII) Any former key employee, 
                                if, upon the termination of such 
                                individual's employment by the family 
                                office or family client, the former key 
                                employee shall not receive investment 
                                advice from the family office or the 
                                family client (or invest additional 
                                assets with a family office-advised 
                                trust, charitable foundation, or 
                                entity), other than with respect to 
                                assets advised, directly or indirectly, 
                                by the family office or family client 
                                immediately prior to the termination of 
                                such individual's employment, except 
                                that a former key employee shall be 
                                permitted to receive investment advice 
                                from the family office with respect to 
                                additional investments that the former 
                                key employee was contractually 
                                obligated to make, and that relate to a 
                                family office advised investment 
                                existing, in each case, prior to the 
                                time the person became a former key 
                                employee. For purposes of this 
                                subclause, the term `family office' 
                                shall include any entity described 
                                under subclause (V).
                            ``(iii) Family member.--
                                    ``(I) In general.--The term `family 
                                member' means:
                                            ``(aa) Any natural person 
                                        whose economic activities 
                                        created or substantially 
                                        contributed to the family's 
                                        wealth, and such person's 
                                        spouse.
                                            ``(bb) The siblings, 
                                        parents, grandparents of a 
                                        person described in item (aa).
                                            ``(cc) The spouse of a 
                                        person described in item (bb).
                                            ``(dd) The siblings of a 
                                        person described in item (bb) 
                                        or (cc).
                                            ``(ee) The spouse of a 
                                        person described in item (dd).
                                            ``(ff) The lineal 
                                        descendant of a person 
                                        described in item (bb), (cc), 
                                        (dd), or (ee).
                                            ``(gg) The spouse of a 
                                        person described in item (ff).
                                    ``(II) Construction.--For purposes 
                                of this clause--
                                            ``(aa) the term `lineal 
                                        descendant' includes natural 
                                        children, adopted children, and 
                                        stepchildren;
                                            ``(bb) the term `spouse' 
                                        includes spousal equivalents; 
                                        and
                                            ``(cc) the terms 
                                        `siblings', `parents', and 
                                        `grandparents' include step-
                                        siblings, step-parents, and 
                                        step-grandparents, 
                                        respectively.
                            ``(iv) Former family member.--The term 
                        `former family member' means a spouse or a 
                        descendant who was a family member but is no 
                        longer a family member due to a divorce or 
                        other similar event.
                            ``(v) Key employee.--The term `key 
                        employee' means any natural person (and such 
                        person's spouse or lineal descendant) who is an 
                        executive officer, director, trustee, general 
                        partner, or person serving in a similar 
                        capacity, of the family office or any employee 
                        of the family office (other than an employee 
                        performing solely clerical, secretarial, or 
                        administrative functions) who, in connection 
                        with his or her regular functions or duties, 
                        participates in the investment activities of 
                        the family office. For purposes of this 
                        subclause, the term `family office' shall 
                        include any entity described under clause 
                        (ii)(V).
                            ``(vi) Spousal equivalent.--The term 
                        `spousal equivalent' means a cohabitant 
                        occupying a relationship generally equivalent 
                        to that of a spouse.
                    ``(D) Involuntary events.--If--
                            ``(i) a person that is not a family client 
                        becomes a client of the family office as a 
                        result of the death of a family member or key 
                        employee or other involuntary transfer from a 
                        family member or key employee, or
                            ``(ii) a person ceases to be a family 
                        client,
                that person shall be deemed to be a family client until 
                the end of the 1-year period beginning on the date that 
                it is both legally and practically feasible for the 
                family office to transfer the affected assets to such 
                person, but in no event earlier than 1 year from the 
                date that it becomes legally feasible to transfer the 
                affected assets unless it becomes practically feasible 
                to affect such a transfer sooner.''.
Amends the Investment Advisers Act of 1940 to define "family office" (exempt from coverage by the Act) as a company (including any director, partner, trustee, or employee of such company, when acting in their respective capacities as such) that has no clients other than family clients and is owned, controlled, or operated primarily for the benefit of family clients and does not hold itself out to the public as an investment adviser.
{"src": "billsum_test", "title": "To amend the Investment Advisers Act of 1940 to add a definition of family office."}