Partners Jack O’Brien and Christine Ayako Schleppegrell were joined by Mike Abbriano from Apogee Compliance during one of our recent Family Office Fundamentals webinars to discuss the family office regulatory landscape.
Key takeaways from the webinar include the following:
- Understanding and Distinguishing Between Family Offices and Investment Advisers: If a family office provides advice on securities to another person for compensation, the organization must bear in mind the regulatory implications of being an investment adviser. To qualify for the family office exclusion, entities generally must only serve “family clients,” be wholly owned by them, and not hold themselves out as investment advisers. Misunderstanding this distinction can expose offices to unexpected compliance obligations.
- Family Offices Are Not Immune from Regulatory Oversight: Even if excluded from investment adviser registration, family offices remain subject to other federal securities laws (e.g., insider trading, beneficial ownership reporting). Regulatory exposure can exist without formal registration and may be heightened based on the size and activities of the family office.
- Building a Robust Compliance Framework Is Crucial: Implementing written compliance policies and procedures helps mitigate risks, including the risk that hired internal managers are not acting in the family office’s best interest. Best practices include appointing a compliance officer, using independent audits, and maintaining clear personal trading policies. Investment adviser compliance programs may offer a useful starting point, by analogy.
- Maintaining Clear Separation Between a Family Office and Spun-Off Advisory Firms: Internal teams will often want to spin out and form investment advisers to apply their strategies to a broader client audience (and grow their asset management business). In such cases, operational and legal separation is essential for preserving regulatory exclusions on the family office side. Factors such as having separate corporate existence, governance structures, staff, and IT systems all contribute to demonstrating independence between the family office and investment adviser—but there is no clear, guaranteed path to separation.
- Insider Trading Risks Are Elevated and Require Strong Controls: Due to the unique positioning of family offices—often involving executives or individuals with access to material nonpublic information—there is a heightened risk of personal trading activity being viewed suspiciously by regulators. Family offices should establish credible information barriers, provide regular training, and have escalation protocols for questionable information to avoid liability.