Investment

The SEC’s “accredited investors” proposal for family offices will further fuel private market investing

Last month, the US Securities and Exchange Commission released proposals to amend its so-called “accredited investor” definition. The proposals apply to many investors wanting to access private capital and family offices are covered in detail. The good news for family offices is that if the proposals become law, they should have even more freedom to access private markets. 

The SEC proposals say its accredited investor definition should apply to single-family offices. Under the proposals, an accredited investor family office would be a family investment entity serving family clients, which has at least $5 million of assets under management. This is pretty much any single-family office in the US, given that most have at least $100 million of assets under management 

“Family clients”, according to the SEC, are: “family members, former family members, and certain key employees of the family office, as well as certain of their charitable organizations, trusts, and other types of entities.” In other words, single-family offices and family foundations, as defined by the Dodd-Frank Act of 2011.  

If the proposal is adopted, family offices, which pass the above criteria, will not need additional protections of regulation under the US Securities Act of 1933, the so-called Truth in Securities Act.

This will mean they will have less regulatory hurdles to buy private assets and should act as a further boon to the already thriving US private capital market. 

In response to the SEC’s efforts to obtain comments on the proposals, , the Cleveland, Ohio-based family office of the Horvitz family, welcomed the proposal for family offices. But he felt asset thresholds are problematic for individual family members. 

He said: “Some family members may be young and not have assets in their names. They may be contingent beneficiaries of trusts and may not be considered beneficial owners. Even in these cases, it’s likely those family members would enjoy protections provided by the umbrella family office structure.”

William Kambas, a partner in the US offices of law firm Withers, says: “The testing of accredited investor status is often done at multiple levels of the structure of a family enterprise. The family office is typically tasked with identifying the appropriate investing entity and how it meets regulatory status requirements.”

Apart from Hemmingsen’s comments, there have been no other responses from family office personnel to the SEC proposals. But those wanting to comment on the proposals can do so up until February 17th by emailing the SEC on: rule-comments@sec.gov 

Interestingly, there is the potential of the law of unintended consequences with the SEC accredited investor proposal. If it becomes law, family offices will need to register with the SEC to gain their accredited investor status. As such, the SEC will obtain more information about family offices, and effectively, the family office sector will come more under the sphere of the SEC. 

“The SEC will likely continue to examine the potential impact that SFOs have on capital markets and overtime attempt to bring some of the largest ones under more active oversight,” says Stephen Martiros, a US-based expert in family office strategies.

“In short, large pools of capital will likely attract more attention from the SEC regardless of their ownership structure.”  

Subscribe

You will need a Premium Plus Subscription to access this database.

Exclusive news, analysis and research on global family enterprise and private investment offices.

Access to the most comprehensive fully interactive database on global family offices, principal investment offices, and family enterprises.

Check Deal Data, Senior Staff, and New Analysis on more than 500 family/principal investment and holding groups

Already have an account? Login

Subscribe

You need at least a Premium Subscription to read this article.

The most comprehensive information service on the global family enterprise world, featuring exclusive news, analysis, research and data on global family enterprises, family offices, and private investment offices.

Premium

£ 299

Annually

  • Exclusive reports, analysis and commentary
  • Exclusive access to family/private investment office deal information
  • Exclusive interviews with principals and senior management of family/investment offices
Subscribe now

Premium Plus

£ 399

Annually

  • Access to All of Premium
  • Access to all of FamilyCapital Analytics, our interactive database with more than 500 detailed profiles of family investment groups

More Info

Subscribe Now

Already have an account? Login

Subscribe

Exclusive news, analysis and research on global family enterprise and private investment offices.

Membership

Free

  • Exclusive reports, analysis and commentary
Sign up

Premium

£ 299

Annually

  • Exclusive reports, analysis and commentary
  • Exclusive access to family/private investment office deal information
  • Exclusive interviews with principals and senior management of family/investment offices
Subscribe now

Premium Plus

£ 399

Annually

  • Access to All of Premium
  • Access to all of FamilyCapital Analytics, our interactive database with more than 500 detailed profiles of family investment groups

More Info

Subscribe Now

Already have an account? Login

Leave a Reply