There’s no strict legal definition of a family office in Canada. No doubt some firms are happy with the status quo, but others think we could do better in serving the industry and its families.
In the United States, for instance, the Securities and Exchange Commission (SEC) has defined American family offices as “entities established by wealthy families to manage their wealth and provide other services to family members, such as tax and estate planning services.”
This matters because U.S. legislation exempts certain “private advisers,” including family offices, from regulation under the Investment Advisers Act of 1940. Canada regulates numerous technical specialties—law, investment and accounting, for instance—that are often offered by family offices, but we don’t yet have legislation that specifically defines the family advisors themselves.
At the risk of opening a giant can of worms, we at Canadian Family Offices thought we would ask: Has the time come to consider this kind of regulation north of the border?
First, the backstory of the U.S. rules.
In the wake of the 2008 financial crisis, the U.S. restructured its rules governing financial industries. Existing legislation covering private advisors was modified under the Dodd-Frank Wall Street Reform and Consumer Protection Act such that family offices offering investment advice would be excluded, provided that they were wholly owned by “family clients” and exclusively controlled by “family members” and/or “family entities.”
I think most true family-office advisors would be supportive of additional clarity for the family office as the field grows in Canada.
Brad Jesson, Northwood Family Office
The definition of “family members” is fairly broad and includes adopted children, stepchildren and foster children and their spouses. The Act also defines key employees and “family clients” such as charitable organizations, estates, trusts and operating companies.
Following the multibillion-dollar collapse of the family office Archegos Capital Management in 2021, Congress proposed new legislation for family offices with $750 million in assets under management (AUM) “to register with the SEC and file annual reports disclosing investment strategies, risk management and counterparty exposures,” says Matt Knight, executive director of the Alberta Business Family Institute in Edmonton and a lecturer in entrepreneurship and family enterprise at the Alberta School of Business at the University of Alberta. The legislation, called the Family Office Regulation Act of 2021, ultimately did not pass.
Furthermore, says Knight, “new anti-money-laundering rules will subject SEC-registered advisors to Bank Secrecy Act obligations starting in 2026, including suspicious-activity reporting that would extend to newly registered family offices.”
Canada has no parallel to Dodd-Frank.
“In Canada, family offices are regulated provincially on the investment side,” says Brad Jesson, vice-president of Family Office Advisory for Northwood Family Office in Toronto.
Areas of potential conflicts of interest, such as selling insurance or private placement of capital, are handled differently by the two countries, Jesson says.
“The U.S. SEC actually audits that. There’s a lot more rigour. In Canada, they have to disclose it, but there’s less oversight. There’s no active auditing in Canada. I personally would predict that there’s going to be more regulation.”
In Canada, “there is no firm consensus on what a family office is, and so that’s an industry issue or challenge,” says Victoria Paris, general counsel for the Portfolio Management Association of Canada (PMAC), based in Toronto.
PMAC members, who typically advise high-net-worth individuals and families on asset management, must be registered with their provincial securities regulator. Those who offer other services, such as tax planning or legal advice, are covered under other laws and regulations. These may be specific to their technical specialty, or they may be subject to more generic rules such as privacy legislation or the French-language laws in Quebec.
“For people who fall under the securities regulatory framework, like asset managers, I wouldn’t see a need for a further regulation of the designation or title, unless there was evidence that someone was using a title that was misleading or misrepresenting themselves and that was causing confusion in the industry,” Paris says.
National harmonization is needed in Canada as a first step toward regulating the sector, Knight says.
“We need a standard definition of ‘family office’ that isn’t based on provincial advisor registration tests,” he says.
“Current oversight is fragmented, with 13 securities acts plus FINTRAC [the Financial Transactions and Reports Analysis Centre of Canada, the national money-laundering watchdog] and OSFI [the Office of the Superintendent of Financial Institutions] creating complications and unnecessary friction for interprovincial business families,” he adds.
Knight says he believes that targeted registration thresholds would be useful to implement oversight and registration rules that would apply to larger, more complex family offices, such as those with more than $500 million in AUM, while protecting smaller family operations from unnecessary regulatory burden.
He also favours further governance and professional standards, including “requirements for written investment policies, conflict management frameworks and minimum competency standards for CIOs [chief investment officers] and senior personnel managing family wealth.”
We need a standard definition of ‘family office’ that isn’t based on provincial advisor registration tests.
Matt Knight, Alberta Business Family Institute, University of Alberta
More reporting and compliance rules, he added, would “require confidential annual filings on AUM, leverage and governance structures to help regulators identify systemic risks before they materialize and protect our strong international banking reputation, while aligning beneficial ownership disclosure with international standards.”
Brad Jesson of Northwood Family Office says that, while numerous professional designations are already common in the family-office industry in Canada—including Chartered Financial Analyst (CFA®), Chartered Investment Manager (CIM®), Chartered Professional Accountant (CPA) and Certified Financial Planner (CFP®)—“we do believe that holding yourself out as a family-office advisor is different. We think that it would be good ultimately for families and the consumer if there were some kind of designation and regulation of the family office.”
Canada could usefully create a definition of the family office similar to what is used in the U.S., implemented through the appropriate provincial bodies, Jesson added, “especially as the term has exploded in the last five to 10 years. You now have a lot of groups calling themselves family offices.”
Knight predicts that some extra degree of legal oversight in Canada would meet with general approval from families.
“Our research with business families shows increasing recognition that robust governance frameworks and professional management standards serve long-term family interests beyond regulatory compliance requirements,” he says.
The emerging consensus is in favour of “professional standards for family-office personnel, proportionate oversight based on asset size and complexity, and harmonized national standards to address interprovincial regulatory fragmentation,” Knight adds.
The “primary friction points,” however, that would hinder such moves include “compliance costs for smaller operations, privacy considerations for ultra-high-net-worth families and definitional boundaries between single-family offices, multi-family offices and traditional asset managers.”
He would favour an education-first approach that nurtures good family governance and a homegrown Canadian framework more sophisticated than the current U.S. model, “focusing on asset size, leverage utilization and market impact rather than the family-office designation itself.”
It should begin, he says, with harmonization across provinces, followed by voluntary pilot programs for reporting frameworks and co-ordination with federal authorities to create regulatory clarity.
“I think most true family-office advisors would be supportive of additional clarity for the family office as the field grows in Canada,” says Jesson.
“Nobody likes additional complexity, paperwork and requirements, but if you’re just giving the definition of a family office, anyone acting in good faith would be supportive.”
Sarah B. Hood is a Toronto-based writer and book author. She has served as editor of three national magazines and written weekly columns for the National Post. She also serves on the editorial board of Spacing magazine. She writes frequently on business, urban affairs and culture. As a food writer, her work has been translated into Japanese and Arabic. She has taught writing at George Brown College for more than 20 years.
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