Family Offices: The Development of Family Office Structures in the UK, Singapore and Hong Kong

• The UK has historically been favoured as a jurisdiction for family offices due to its geographical location (with easy access to the US, Europe and the UAE), proliferation of highly experienced investment management, legal and finance professionals, and its highly regarded legal framework and regulatory infrastructure. That being said, family offices are seen as the least formally regulated area of wealth management in the UK. There are no specific regulations for family offices, and they are subject to regulations in the same way as other investment management businesses. 
• A family office will be regulated under the Financial Services and Markets Act 2000 (FSMA) and associated regulations if it carries on regulated activities by way of business in the UK.  In such circumstances, the family office will need to be authorised and supervised by the Financial Conduct Authority (FCA).  Examples of the regulated activities that family offices often carry on include:  managing investment assets belonging to another person where the management involves exercise of discretion, providing advice to investors on the merits of investment, arranging for investments to take place, and dealing as principal when carried out in relation to investments such as shares, bonds, units in funds and derivatives. 
• Whether the family office is in scope of the regulations is subject to how its operations are structured and work in practice.  A family office will not be in scope of FSMA if it is not considered to be carrying on such activities "by way of business in the UK".  Where the activities are carried on by way of business, there may also be exclusions available for certain activities, such as when the family office conducts activities on behalf of another entity within the same group.  A family office is therefore only likely to be caught if it is carrying on activities by way of business in the UK, and an exclusion is not available, e.g., managing assets which are not exclusively family assets, or assets being held by distinct legal entities etc. 
• Often exclusions are available to SFOs. In most cases, family offices are treated as lightly regulated private wealth-management companies and, whilst they are arguably the fastest-growing area of wealth management, they are also the least understood and least formally regulated in the UK. 

• Singapore's family office regime is well-known, attracting high-profile individuals like James Dyson and Sergey Brin. The city-state offers a favourable tax exemption regime and has specific legislation and regulatory requirements for family offices. 
• Similar to the UK, family offices may need regulation if they perform "Regulated Activities" such as fund management under the Securities and Futures Act (SFA). However, unlike the UK, a more stringent requirement has recently been introduced: a capital markets services licence from the Monetary Authority of Singapore (MAS) is also required unless an exemption applies. 
• SFOs are typically exempt from licensing under the SFA if: 

1. The assets are held in "related corporation(s)" fund vehicles; or 
2. A "case-by-case exemption" from MAS on the basis that the SFO is managing assets for one family and is wholly owned or controlled by family members. 

• The MAS proposes a new framework with a structure-agnostic class exemption for SFOs, exempting them from licensing if the family office is: 

1. Incorporated in Singapore; 
2. Wholly owned by family members; 
3. Managing funds for family and non-family key employees, with non-family AUM not exceeding 10%; and 
4. Maintaining an account with at least one MAS-regulated bank. 

• This framework provides an additional level of protection to the UK regime, by ensuring that any family office has to either (i) apply for a capital markets services licence or, (ii) if exempt, hold a bank account with at least one MAS-regulated bank. Both requirements mean that any family office is going to be subject to AML requirements either directly or through a regulated bank. 

While family offices have long existed in Hong Kong for large wealthy Chinese families based in the city, it was the introduction of a specific SFO tax concession in May 2023 that saw the proliferation of family office structures in Hong Kong in recent years. Given its geographical location, sophisticated capital market, and the unique one-country two-system constitutional principle, it remains a popular jurisdiction for setting up family offices, particularly for Chinese families across Asia.  

Similar to the UK, Hong Kong does not have a specific regulatory regime for family offices but operates an activity-based licensing system, where persons carrying out "Regulated Activities" are required to obtain a licence under the Securities and Futures Ordinance (Cap. 571).  

Multi-family offices typically would carry on a business comprising certain regulated activities such as dealing in securities and asset management, in which case a licence under Cap. 571 would normally be required.  

SFOs are generally not required to apply for a licence as they are established to serve the investment needs of members of a single family, rather than operating as a business. In any event, if a SFO is caught by the general licensing requirement, often it would fall within the group exemption where services are provided solely by one group company to another, i.e., by the family office to the family investment holding vehicle.