[Federal Register Volume 79, Number 129 (Monday, July 7, 2014)]
[Notices]
[Pages 38339-38341]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-15796]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. IA-3867/803-00212]
Duncan Family Office; Notice of Application
July 1, 2014.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of application for an exemptive order under section
202(a)(11)(H) of the Investment Advisers Act of 1940 (``Advisers
Act'').
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Applicant: Duncan Family Office (``Applicant'').
Relevant Advisers Act Sections: Exemption requested under section
202(a)(11)(H) of the Advisers Act from section 202(a)(11) of the
Advisers Act.
Summary of Application: Applicant requests that the Commission
issue an order declaring it to be a person not within the intent of
section 202(a)(11) of the Advisers Act, which defines the term
``investment adviser.''
DATES: Filing Dates: The application was filed on March 27, 2012, and
amended on March 4, 2014, and April 22, 2014.
Hearing or Notification of Hearing: An order granting the
application will be issued unless the Commission orders a hearing.
Interested persons may request a hearing by writing to the Commission's
Secretary and serving Applicant with a copy of the request, personally
or by mail. Hearing requests should be received by the Commission by
5:30 p.m. on July 28, 2014 and should be accompanied by proof of
service on Applicant, in the form of an affidavit or, for lawyers, a
certificate of service. Hearing requests should state the nature of the
writer's interest, the reason for the request, and the issues
contested. Persons may request notification of a hearing by writing to
the Commission's Secretary.
ADDRESSES: Secretary, Securities and Exchange Commission, 100 F Street
NE., Washington, DC 20549. Applicant, Duncan Family Office, c/o Martin
E. Lybecker, Perkins Coie LLP, Suite 600, 700 Thirteenth Street NW.,
Washington, DC 20005.
FOR FURTHER INFORMATION CONTACT: Vanessa M. Meeks, Senior Counsel, at
(202) 551-6806 or Melissa R. Harke, Branch Chief, at (202) 551-6722
(Division of Investment Management, Chief Counsel's Office).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained for a fee at the
SEC's Public Reference Branch, 100 F Street NE., Washington, DC 20549-
0102 (telephone (202) 551-5850).
Applicant's Representations
1. Applicant is a multi-generational single-family office that
provides services to the family and descendants of Dan L. Duncan.
Applicant is a division of Enterprise Products Company, an energy
company located in Houston, Texas (``Company''), and the Company is
wholly-owned by Family Clients and is exclusively controlled (directly
or indirectly) by one or more Family Members and/or Family Entities in
compliance with rule 202(a)(11)(G)-1 (``Family Office Rule''). For
purposes of the application, the term ``Duncan Family'' means the
lineal
[[Page 38340]]
descendants of Dan L. Duncan, their spouses, and all of the persons and
entities that qualify as Family Clients as defined in paragraph (d)(4)
of the Family Office Rule. Capitalized terms have the same meaning as
defined in the Family Office Rule.
2. Applicant provides both advisory and non-advisory services
(collectively, the ``Services''). Any Service provided by the Applicant
that relates to investment advice about securities or may otherwise be
construed as advisory in nature is considered an ``Advisory Service.''
3. Applicant represents that: (i) Other than the exception
discussed in representation 4 below, each of the persons served by the
Applicant is a Family Client, i.e., Applicant has no clients other than
Family Clients as required by paragraph (b)(1) of the Family Office
Rule, (ii) Applicant is a division of the Company, which is owned and
controlled in a manner that complies in all respects with paragraph
(b)(2) of the Family Office Rule, and (iii) Applicant does not hold
itself out to the public as an investment adviser as required by
paragraph (b)(3) of the Family Office Rule. At the time of the
application, Applicant represents that Family Members account for
approximately 75 percent of the natural persons to whom the Applicant
provides Advisory Services.
4. Applicant provides Services to the mother of a spouse of a
lineal descendant of Dan L. Duncan (``Mother-in-Law''), as well as
certain related foundations (collectively, the ``Additional Family
Client''). Applicant represents that if the Mother-in-Law were a Family
Client, the related foundations would meet the requirements of
(d)(4)(v) of the Family Office Rule.
5. The Additional Family Client does not have an ownership interest
in the Company. Applicant represents that the assets beneficially owned
by Family Members and/or Family Entities (excluding the Additional
Family Client's Family Entities) make up at least 75 percent of the
total assets for which the Applicant provides Advisory Services.
6. Applicant represents that the Additional Family Client has
important familial ties to and is an integral part of the Duncan
Family. Applicant maintains that including the Additional Family Client
in the ``family'' simply recognizes and memorializes the familial ties
and intra-familial relationships that already exist, and have existed
for at least 16 years while the assets of the Additional Family Client
were managed by the Duncan Family.
Applicant's Legal Analysis
1. Section 202(a)(11) of the Advisers Act defines the term
``investment adviser'' to mean ``any person who, for compensation,
engages in the business of advising others, either directly or through
publications or writings, as to the value of securities or as to the
advisability of investing in, purchasing, or selling securities, or
who, for compensation and as a part of a regular business, issues or
promulgates analyses or reports concerning securities . . . . ''
2. Applicant falls within the definition of an investment adviser
under section 202(a)(11). The Family Office Rule provides an exclusion
from the definition of investment adviser for which the Applicant would
be eligible but for the provision of Services to the Additional Family
Client. Section 203(a) of the Advisers Act requires investment advisers
to register with the Commission. Because the Applicant has regulatory
assets under management of more than $100 million, it is not prohibited
from registering with the Commission under section 203A(a) of the
Advisers Act. Therefore, absent relief, Applicant would be required to
register under section 203(a) of the Advisers Act.
3. Applicant submits that its relationship with the Additional
Family Client does not change the nature of the office into that of a
commercial advisory firm. In support of this argument, Applicant notes
that if the Mother-in-Law were the mother of a lineal descendent of Dan
L. Duncan, rather than the mother of a spouse of a lineal descendent,
there would be no question that each of the persons presently being
served by the office would be a Family Member, and that the related
foundations would meet the requirements of paragraph (d)(4)(v) of the
Family Office Rule pertaining to charitable foundations. Applicant
states that in requesting the order, the office is not attempting to
expand its operations or engage in any level of commercial activity to
which the Advisers Act is designed to apply. Indeed, although the
Mother-in-Law does not fall within the definition of Family Member, she
is considered to be, and is treated as, a member of the Duncan Family,
and the number of natural persons who are not Family Members as a
percentage of the total natural persons to whom the office would
provide Advisory Services if relief were granted would be only
approximately 25 percent. Applicant maintains that, from the
perspective of the Duncan Family, Applicant seeks to continue providing
Advisory Services exclusively to members of a single family.
4. Applicant also submits that there is no public interest in
requiring the Applicant to be registered under the Advisers Act.
Applicant states that the office is a private organization that was
formed to be the ``family office'' for the Duncan Family, and that the
office does not have any public clients. Applicant maintains that the
office's Advisory Services are tailored exclusively to the needs of the
Duncan Family and the Additional Family Client. Applicant argues that
the presence of the Additional Family Client, who has been receiving
Advisory Services from the office for 16 years, does not create any
public interest that would require the office to be registered under
the Advisers Act that is different in any manner than the
considerations that apply to a ``family office'' that complies in all
respects with the Family Office Rule.
5. Applicant argues that, although the Family Office Rule largely
codified the exemptive orders that the Commission had previously issued
before the enactment of the Dodd-Frank Wall Street Reform and Consumer
Protection Act, the Commission recognized in proposing the rule that
the exact representations, conditions, or terms contained in every
exemptive order could not be captured in a rule of general
applicability. The Commission noted that family offices would remain
free to seek a Commission exemptive order to advise an individual or
entity that did not meet the proposed family client definition, and
that certain situations may raise unique conflicts and issues that are
more appropriately addressed through an exemptive order process where
the Commission can consider the specific facts and circumstances, than
through a rule of general applicability. Applicant maintains that its
unusual circumstances--providing Services to Family Clients and to an
Additional Family Client for the past 16 years--have not changed the
nature of the office's operations into that of a commercial advisory
business, and that an exemptive order is appropriate based on the
Applicant's specific facts and circumstances.
6. For the foregoing reasons, Applicant requests an order declaring
it to be a person not within the intent of section 202(a)(11) of the
Advisers Act. Applicant submits that the order is necessary and
appropriate, in the public interest, consistent with the protection of
investors, and consistent with the
[[Page 38341]]
purposes fairly intended by the policy and provisions of the Advisers
Act.
Applicant's Conditions
1. The Applicant will offer and provide Advisory Services only to
Family Clients and to the Additional Family Client, who will generally
be deemed to be, and treated as if she and certain related foundations
were, a Family Client; provided, however, that the Additional Family
Client will be deemed to be, and treated as if she were, a Family
Member for purposes of paragraph (b)(1) and for purposes of paragraph
(d)(4)(vi) of the Family Office Rule.
2. The Company will at all times be wholly-owned by Family Clients
and exclusively controlled (directly or indirectly) by one or more
Family Members and/or Family Entities (excluding the Additional Family
Client's Family Entities) as defined in paragraph (d)(5) of the Family
Office Rule.
3. At all times the assets beneficially owned by Family Members
and/or Family Entities (excluding the Additional Family Client's Family
Entities) will account for at least 75 percent of the assets for which
Applicant provides Advisory Services.
4. Applicant will comply with all the terms for exclusion from the
definition of investment adviser under the Advisers Act set forth in
the Family Office Rule except for the limited exception requested by
this application.
For the Commission, by the Division of Investment Management,
under delegated authority.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2014-15796 Filed 7-3-14; 8:45 am]
BILLING CODE 8011-01-P