Date: January 13th, 2012

The Investment Advisers Act of 1940 (the “Advisers Act”) generally requires “investment advisers” to register with the Securities and Exchange Commission (the “SEC”) and comply with a variety of ongoing disclosure and other regulatory requirements. An “investment adviser,” as broadly defined under the Advisers Act, is any person or firm that:

(1) for compensation;

(2) is engaged in the business of;

(3) providing advice, making recommendations, issuing reports, or furnishing analyses on securities, either directly or through publications.

The Advisers Act goes on to provide a number of exclusions from this broad definition, as well as exemptions from registration for some investment advisers that fall within the definition.

As part of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act” or “Dodd-Frank”), Congress eliminated a much-relied-on exemption from registration under the Advisers Act, the so-called “private adviser exemption” that had broadly relieved individuals and firms providing investment advisory services to fewer than 15 clients from a requirement to register under the Advisers Act. As a result, many private fund managers, including hedge fund managers, that formerly relied on the private adviser exemption will be required to register under the Advisers Act.

The policy thrust of the Dodd-Frank Act’s elimination of the private adviser exemption was to subject large private hedge funds to greater federal regulatory scrutiny; however, many private financial advisers to wealthy families and their associated companies, trusts and other entities also historically relied on the exemption. Recognizing that more intensive regulation of this sector is not part its reform agenda, the Dodd-Frank Act provides these advisers with continuing relief from registration and other requirements of the Advisers Act if they meet the requirements of a new “family office” exclusion from the definition of “investment adviser.” This new exclusion became effective August 29, 2011.

New section 202(a)(11)(G) of the Advisers Act excludes from the definition of “investment adviser” a “family office,” generally defined as a company (including its directors, partners, members, managers, trustees, and employees acting within the scope of their position or employment):

• that has no clients other than family clients;

• is wholly owned by family clients and is exclusively controlled by one or more family members and/or family clients; and

• does not hold itself out to the public as an investment adviser

The definition of “family clients” is somewhat involved, but essentially means family members, former family members and key employees (as well as former key employees to the extent of their investments and related investment obligations existing prior to departure), as well as non-profit organizations, charitable foundations and trusts, estates, trusts and companies that are funded, formed and/or owned by, or for the benefit of, only family clients.

“Family members” are all lineal descendents of a common ancestor (living or dead) and their spouses or spousal equivalents, provided that the common ancestor is no more than 10 generations removed from the youngest generation of family members.

The Dodd-Frank Act provides grandfathering and transition provisions to help ensure that advisers to families that were exempt under the former private adviser exemption can fit into the “family office” definition even if certain of their former activities would otherwise have disqualified them. Dodd-Frank also provides for the possibility that persons who are not family clients could become clients of a family office involuntarily, for example as a result of a family client’s death. Any such persons will be deemed to be family clients for one year after they receive title to the relevant assets resulting from the involuntary event. The family office may therefore advise them during this period without losing its status as an exempt family office.