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FINRA Allows More Family Offices to Participate in IPO Allocations

FINRA has broadened the definition of “family investment vehicle” so that more family offices can receive IPO allocations.  The amended definition now cross-references the family office definition from the Advisers Act to include all lineal descendants and their spouses as well as family clients including family trusts.  The changes to Rule 5130 (IPOs) and 5130 (new issue allocations) also address foreign investment companies, retirement plans, SPACs, and charitable organizations.

This change fixes an anomaly where family offices were treated differently for different regulatory purposes.  For broker-dealer compli-pros at firms that deal in IPOs and new issues, it may be worth taking a refresher on the arcane rules. 

Family Office Seeks Exemption to Avoid RIA Registration

A single family office is seeking an exemption from investment adviser registration even though it may manage a pooled investment vehicle with more than 100 holders.  The family office wants to open a pooled vehicle to more than 100 family members to avoid family conflict, but such a vehicle would be deemed a “client” under the Advisers Act, thereby requiring the family office to register.  The family office argues against registration because of pre-Dodd-Frank precedent and the policy rationale underlying the registration requirements.

OUR TAKE: The publication of the application generally precedes approval unless somebody objects.  This application is good news for family offices who often must artificially contort their structures to avoid registration.   It is also good news that the SEC will accept no-action and exemptive precedents that pre-date Dodd-Frank.