Private family trust companies aren’t required to register with the SEC.

A regulated private family trust company, called a “Chartered Family Trust Company” in Wyoming, can be useful for extraordinarily wealthy families who seek the flexibility of PFTCs and their regulation by the Wyoming Division of Banking.

On July 1, 2015, Wyoming enacted the Chartered Family Trust Company statute. If chartered by the Wyoming Banking Board, a PFTC isn’t required to register with the U.S. Securities and Exchange Commission. To fall within the current exception from registration with the SEC, a family office must provide securities advice only to members of a single family, be managed and controlled by the requisite family members and entities and not hold itself out to the public as an investment advisor. Wyoming-regulated PFTCs are required to maintain a minimum capital of $500,000, have a physical office in Wyoming and be examined by the Wyoming Division of Banking at least once every three years, among other requirements.

The CFTC statute attracts wealthy families to Wyoming, where they can enjoy the following benefits:

A regulated private family trust company, called a “Chartered Family Trust Company” in Wyoming, can be useful for extraordinarily wealthy families who seek the flexibility of PFTCs and their regulation by the Wyoming Division of Banking.

On July 1, 2015, Wyoming enacted the Chartered Family Trust Company statute. If chartered by the Wyoming Banking Board, a PFTC isn’t required to register with the U.S. Securities and Exchange Commission. To fall within the current exception from registration with the SEC, a family office must provide securities advice only to members of a single family, be managed and controlled by the requisite family members and entities and not hold itself out to the public as an investment advisor. Wyoming-regulated PFTCs are required to maintain a minimum capital of $500,000, have a physical office in Wyoming and be examined by the Wyoming Division of Banking at least once every three years, among other requirements.

The CFTC statute attracts wealthy families to Wyoming, where they can enjoy the following benefits:

Exemption from Investment Advisors Act of 1940 After Dodd-Frank

After enactment of the Dodd-Frank Act, an affluent family can continue to qualify for the SEC’s family office exemption and isn’t required to register as an investment advisor if it organized under Wyoming’s CFTC statute.

The Investment Advisors Act of 1940, or the Advisors Act, identifies who must register as an investment advisor. Prior to the Dodd-Frank Act, the Advisors Act had an exemption from registration for “private advisors.” Family offices and PFTCs serving only one family used this exemption to avoid the requirement to register as an investment advisor.

The Dodd-Frank Act eliminated the private advisor exemption, but created a new exemption for family offices and delegated the definition of a family office to the SEC. In Rule 202(a)(11)(G)-1 under the Advisors Act, the SEC defines a “family office” as serving only one family and being wholly owned by that one family. It also defines a “family member” as all lineal descendants of a common ancestor, as well as current and former spouses, provided that the common ancestor is no more than 10 generations removed from the youngest generation of family members. Key employees—not just any employees—may also be served.

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Published by WealthManagement.com | Melvin A. Warshaw | Nov 10, 2017

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