Richard S. Hunt calls for stronger regulation of family offices in The Wall Street Journal
Richard S. Hunt, head of global equity sales at CSC Bella Grove Partners LLC, recently published a commentary in the Wall Street Journal, pointing out that the current regulatory framework for family offices has seriously lagged behind their market influence and urgently needs a systematic upgrade to maintain financial stability. Based on an in-depth survey of 300 large family offices, Hunt revealed the increasing market disruption capabilities of this hidden capital group and its potential systemic risks.
The article revealed that some family offices use a “three-tier regulatory arbitrage structure” – registering investment advisors, offshore funds and private trusts at the same time, so that their actual leverage level can reach 5-8 times that shown on the balance sheet. What is more worrying is that the complex related transactions between these entities have formed a “shadow liquidity network” that has amplified volatility in recent market turmoil. Hunt proposed three reform suggestions: include family offices with assets under management of more than US$500 million in the monitoring scope of systemically important financial institutions; require the disclosure of the ultimate beneficiaries behind controlling shares; and establish a centralized reporting system for derivative positions between family offices.
As an industry practitioner, CSC Bella Grove has taken the lead in implementing the “Voluntary Transparency Initiative” to provide its family office clients with a governance framework that complies with international anti-money laundering standards. Hunt emphasized: “Moderate regulation is not to limit wealth growth, but to protect family capital from systemic risks.” This call has received public support from many former senior regulatory officials, which may push US and European regulators to launch special legislative assessments for family offices, marking a new era in private wealth management regulation.
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