The SEC has adopted a family office exclusion from the Investment Advisers Act, excluding single family offices from all Advisers Act regulation.  To qualify, the family office must only serve "family members," certain key employees of the family office itself, and certain charities funded solely by the family.  The SEC defines "family member" as any lineal descendant of a common ancestor (including spouses) up to 10 generations.  The family can choose and change the common ancestor but the 10-generation limit would continue to apply.  The family must own and control the family office.  Multi-family offices are excluded from the Rule.  The Rule allows a one-year transition period for involuntary transfers to non-family members and requires pooled investment vehicles to be owned and operated solely for the benefit of family clients.  Family offices that do not qualify for the exclusion must file an ADV by February 14, 2012 to ensure registration by March 30, 2012.

OUR TAKE: The SEC compromised with commenters by allowing the family to choose and change the common ancestor and going out as far as 10 generations.  If a family office does not qualify, the SEC may still grant exemptive relief.