Legislation written by Rep. Alexandria Ocasio-Cortez was sent to the House floor with democratic backing to increase regulation of advisory firms. The bill was approved on Thursday evening by the Democratic majority on the House Financial Services Committee on a party-line vote.
Family offices are currently exempt from SEC registration, but with the new bill, family offices with more than $750 million in assets under management would have to register with the Security and Exchange Commission. It would also require those family offices with less than $750 million to register with SEC, especially if they engage in ‘high-risk activities.’
According to a summary of the bill, it would require investors who are non-family members to register with the SEC, especially since they are currently exempt. It would also ban people in the finance industry from family offices who are targets of SEC orders involving deceit and fraud.
The bill is the first legislative response to the collapse of Archegos Capital Management, which cost around $10 million in losses to significant investment banks. The measure was specifically designed to provide the SEC with more information on the family office’s portfolios, sizes, and leverage to allow the agency to tailor its reporting requirements.
Ocasio-Cortez and other democrats cited statistics that showed that family offices are larger than venture capital funds and private equity combined since they manage $6 trillion in assets. The bill was created to stop family offices from working in the dark and possibly threatening the stability of the financial market.
“This is a rather common sense provision,” Ocasio-Cortez said during committee debate. “If we want to prevent systemic risk, I believe it is imminently reasonable that a family office that holds almost a billion dollars in assets simply register with the SEC. And if you have less than $750 million in assets but you are extremely highly leveraged or engaged in very high-risk activities, I think the bare minimum is to require registration with the SEC.”
She also expressed worry that wealthy individuals often used family offices to avoid taxation and protect their wealth. According to Rep R. Wagner, the bill opens the door for the government to keep a watch over family offices finances.
‘House committee approves bill to increase family office oversight’, Mark Schoeff Jr., Investment News
