Borrowing Against Wealth: SBLOCs, Pledged Founder Stock and Art Loans in Family Offices

The Liquidity Paradox at the Top of the Wealth Curve

Many of the wealthiest families hold much of their net worth in assets they would rather not sell: a founder's stake in the company that made the fortune, a portfolio of private-equity and venture fund interests, a collection of post-war paintings, an aircraft, a yacht. Selling any of them can trigger a capital-gains bill, give up control, signal something to the market, or break up a collection that took decades to build. Yet they still need cash for taxes, new ventures, real estate, philanthropy, capital calls and day-to-day spending.

Borrowing fills that gap. A securities-based line of credit (SBLOC) at a private bank, a term loan secured by a block of founder stock, a loan against a painting, a mortgage on a jet or a yacht, a net-asset-value facility against a fund portfolio: each one turns an asset into cash without a sale. For a family office, the practical questions are against what, from whom, on what terms, and what happens when the collateral falls in value.

This analysis covers the mechanics, the federal rules on credit secured by stock, the disclosure regime that puts insider pledges into proxy statements, documented cases where pledged founder shares were sold under pressure, and the "buy, borrow, die" tax logic. The focus is on what lenders, advisers and issuers each watch for.

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Part I: The Toolkit, and Why Families Borrow Instead of Selling

The basic trade-off

Asset-backed borrowing swaps one risk for another. The borrower keeps the asset, its upside and its unrealized gain, and takes on interest cost and collateral risk: if the asset falls in value, the lender can demand more collateral or repayment, or sell the asset itself, at its discretion rather than the family's. How that plays out depends on three features of the collateral:

• Price transparency. Listed securities are marked to market continuously. Art, aircraft and fund interests are valued by appraisal, at intervals.
• Liquidity. A diversified portfolio of large-cap stocks can be sold in hours. A 5% block of one company, a Basquiat or a mid-size jet cannot.
• Enforceability. A lender controlling a brokerage account can sell without going to court; one secured by a painting in a private home, or by an LP interest that needs the general partner's consent to transfer, cannot.

Collateral types at a glance

Regulatory caps such as Regulation U's 50% apply only to particular kinds of credit (see Part II). Where no figure appears, no published, verifiable convention exists; lenders set terms deal by deal.

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Part II: The Rulebook for Borrowing Against Stock

Regulation U: "purpose credit" and the 50% ceiling

The Federal Reserve's Regulation U (12 CFR Part 221) governs credit from banks and other non-broker lenders that is secured by "margin stock." Margin stock includes, among other things, any equity security registered or with unlisted trading privileges on a national securities exchange, and most registered investment company shares.

The central concept is purpose credit: "any credit for the purpose, whether immediate, incidental, or ultimate, of buying or carrying margin stock." If a lender extends purpose credit secured directly or indirectly by margin stock, the loan cannot exceed the stock's maximum loan value, which Section 221.7 sets at 50% of current market value.

Two practical mechanics follow:

• Purpose statements. A bank extending credit secured by margin stock in an amount exceeding $100,000 must have the customer sign Form FR U-1, a purpose statement. Nonbank lenders use Form FR G-3, with no dollar threshold.
• "Indirectly secured." Regulation U looks through structure. A loan can be "indirectly secured" by margin stock if the borrower's ability to sell or pledge the stock is restricted while the credit is outstanding, subject to exceptions, including where margin stock is no more than 25% of the assets covered by the arrangement or where the lender in good faith has not relied on the stock as collateral.

The flip side matters as much as the rule: the 50% maximum loan value applies to purpose credit. Credit that is not for buying or carrying margin stock is outside that cap, which is why non-purpose lines secured by securities can carry higher advance rates, while the lender sets its own limits.

Regulation T and FINRA Rule 4210: the broker-dealer side

Credit extended by broker-dealers falls under Regulation T (12 CFR Part 220). Its supplement sets the required initial margin for a margin equity security at 50% of current market value. After the purchase, FINRA Rule 4210 requires maintenance margin for long positions of 25% of current market value of margin securities, and firms can and do set higher "house" requirements.

The margin disclosure statement required by FINRA Rule 2264 is blunt: the firm "can sell your securities or other assets without contacting you," the customer cannot choose which securities are sold, the firm can raise house requirements at any time without advance written notice, and the customer is "not entitled to an extension of time on a margin call."

SBLOCs: non-purpose by design

The securities-based line of credit sits between those two regimes. It is typically a revolving line from a bank, secured by a pledged brokerage account. FINRA's investor guidance makes the defining restriction explicit: "SBLOCs are non-purpose loans, which means you can't use the proceeds to purchase or trade securities." According to FINRA, a typical SBLOC lets the client borrow 50% to 95% of the value of the assets in the account, depending on what those assets are. The line usually requires monthly, interest-only payments, and the loan stays outstanding until repaid.

FINRA also lists the risks lenders and advisers have to explain. If the pledged securities fall in value, the client may receive a maintenance call to post more collateral or repay within a set period, "typically two or three days," and FINRA warns that the lender can sell securities in the account "without giving you any notice." Pledged assets are also harder to move: as FINRA puts it, "It's not as easy to move your assets to a new firm if they're pledged as collateral," and the line will likely need to be repaid first.

What advisers watch for. Whether drawn proceeds are being routed into securities, which the product does not permit, and whether the collateral overlaps with what the money funds: a line secured by a portfolio heavy in one sector, drawn to fund a business in that sector, concentrates risk.

Rule 144: why founder stock is harder collateral

For a director, officer or controlling shareholder (an "affiliate" of the issuer), pledged shares come with an extra constraint. SEC Rule 144 limits how much an affiliate can sell in any three-month period to the greatest of 1% of the shares outstanding or the average weekly reported trading volume over the four preceding calendar weeks (for exchange-listed stock).

The rule addresses pledges directly. Securities bona fide pledged by an affiliate are treated as acquired by the pledgee when the pledgor acquired them, unless the pledge was without recourse, in which case the pledgee's holding period starts at the time of the pledge. And under Rule 144(e)(3)(ii), sales for the account of a pledgee in the six months after a default (one year for non-reporting issuers) are aggregated with the pledgor's own sales for volume purposes. A lender foreclosing on a large affiliate block therefore cannot assume it can sell the whole position quickly.

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Part III: The Margin-Call Spiral

How a pledge turns into a forced sale

The mechanics are the same whether the collateral is a margin account or a bank SBLOC:

1. The trigger. Collateral value falls until the loan-to-value ratio breaches the maintenance level.
2. The call. The lender demands more collateral or a partial repayment, usually within days.
3. The scramble. If the family's other assets are illiquid or already pledged, its options narrow.
4. The sale. If the call is not met, the lender sells collateral, choosing what and when.
5. The feedback loop. For a concentrated position, the lender's selling can push the price down further and trigger calls on other loans secured by the same stock.

The fifth step separates a founder pledge from an ordinary margin account: borrower, lender and issuer are all exposed to the same price.

Illustrative example (hypothetical)

A hypothetical, anonymous illustration of the mechanics, not a description of any real family or office.

A family office arranges a non-purpose term loan from a private bank, secured by part of its founder's block of listed stock, to fund a real estate project. The company then misses guidance and the stock falls sharply in two sessions, breaching the loan's maintenance level. The office's other assets are locked-up fund interests and the project itself, and the founder is inside the company's quarterly blackout window, so selling shares to pay down the loan may conflict with the insider trading policy. If the bank sells instead, those sales become public and can feed the decline. Every link in that chain (loan size against trading volume, the liquidity of other assets, blackout interaction, board oversight of the pledge) could have been tested in advance.

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Part IV: What Issuers Must Disclose and What Proxy Advisers Look For

Item 403(b) of Regulation S-K

Insider pledges stopped being a private matter in 2006. In its executive compensation and related-person disclosure release (Release No. 33-8732A), the SEC amended its beneficial ownership disclosure requirements "to require disclosure of shares pledged by named executive officers, directors and director nominees."

The resulting text of Item 403(b) requires the registrant, in the management ownership table, to "indicate, by footnote or otherwise, the amount of shares that are pledged as security." In a staff interpretation dated March 13, 2007, the SEC's Division of Corporation Finance said this requirement also applies to a negative pledge, a covenant in which the borrower promises the lender not to transfer or encumber the shares, "because shares subject to a 'negative pledge' may be subject to material risk or contingencies that do not apply to other shares beneficially owned by these persons."

Item 403(c) separately requires disclosure of known arrangements, "including any pledge by any person of securities of the registrant," that may later result in a change in control, and Item 407(i) requires companies to describe their policies on employee, officer and director hedging, or to say they have none.

Enforcement: the Icahn Enterprises case

The SEC has enforced the pledge footnote. On August 19, 2024, it announced settled charges against Carl Icahn and Icahn Enterprises L.P. (IEP). According to the SEC, from at least December 31, 2018, Icahn had pledged approximately 51% to 82% of IEP's outstanding securities, at any given time, as collateral for personal margin loans. IEP did not disclose the pledges until February 25, 2022, and the SEC found that IEP's Forms 10-K for at least fiscal years 2018 through 2020 omitted disclosure required by Item 403(b). The SEC's order against IEP also records that IEP represented that it and its outside advisors were aware of the pledges. Separately, the SEC found that Icahn failed to file required Schedule 13D amendments describing his margin loan agreements, which dated back to at least 2005, and attaching the related guaranty agreements. Both settled the administrative proceedings without admitting or denying the SEC's findings: IEP agreed to cease and desist and to pay a $1.5 million civil penalty, and Icahn agreed to cease and desist and to pay a $500,000 civil penalty. As Osman Nawaz, chief of the SEC Enforcement Division's Complex Financial Instruments Unit, put it: "The federal securities laws imposed independent disclosure obligations on both Icahn and IEP."

Proxy advisers: ISS's "problematic pledging" policy

ISS has treated significant pledging as a board-accountability issue since its 2013 policy cycle. Its current U.S. benchmark guidelines (effective for meetings on or after February 1, 2026) say ISS will vote against the members of the committee that oversees pledging risk, or the full board, "where a significant level of pledged company stock by executives or directors raises concerns." The factors it considers are:

• whether there is an anti-pledging policy, disclosed in the proxy statement, that prohibits future pledging;
• the magnitude of aggregate pledged shares relative to total shares outstanding, market value and trading volume;
• disclosure of progress, or lack of it, in reducing pledged shares over time;
• disclosure that shares counted toward stock ownership and holding requirements do not include pledged stock; and
• any other relevant factors.

The trading-volume factor measures what a lender worries about too: how long it would take to sell the pledged block.

Two issuer models, read from the filings

Oracle. Oracle's pledging policy bars directors, executive officers and their immediate families from holding Oracle securities in margin accounts and from pledging Oracle securities, with two exceptions, one of which allows Larry Ellison to continue pledging Oracle shares to secure debt, though not in a margin account. The 2026 proxy statement (filed September 25, 2026) reports that, as of September 21, 2026, Ellison had pledged 413 million shares as collateral for certain personal indebtedness, up from 346,000,000 shares reported as of September 19, 2025 in the prior year's proxy. The Governance Committee reviews the arrangements quarterly. The proxy states that the pledged shares secure personal term loans used only to fund outside personal business ventures, that none are pledged for margin accounts or used to hedge, and that the board believes Ellison can repay without resorting to the pledged shares.

Tesla. Tesla's 2025 proxy statement describes a policy that caps the loan amount, not the number of shares pledged. Directors and executive officers may pledge stock, provided the maximum aggregate loan or investment amount collateralized by it does not exceed, for the CEO, the lesser of $3.5 billion or 25% of the value of the pledged stock, and for other directors and officers 15%. The proxy states the policy's aim directly: "In order to mitigate the risk of forced sales of pledged shares, the Board has a policy that limits pledging of Tesla stock by our directors and executive officers." Tesla's annual reports have for years included a risk factor on forced sales of shares pledged by Elon Musk to secure personal loans.

Oracle permits a large pledge and surrounds it with board monitoring and disclosed comfort factors; Tesla writes a loan-to-value ceiling into the policy itself, an approach its proxy ties explicitly to reducing forced-sale risk.

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Part V: When Pledged Founder Shares Were Sold

The cases below use only facts from company filings or major news coverage. They are not a judgment on any individual; they show how the mechanics in Part III have played out.

Chesapeake Energy, October 2008

On October 10, 2008, Chesapeake Energy announced that CEO Aubrey McClendon had "involuntarily sold substantially all of his shares of Chesapeake common stock over the past three days in order to meet margin loan calls." McClendon attributed the sales to "the extraordinary circumstances" of the financial crisis, adding that "In no way do these sales reflect my view of the company's financial position." A Schedule 13D amendment reported that 4,645,206 shares were sold in the open market on October 8, 2008 as a result of margin loan calls, and that the reporting persons ceased to own more than 5% of the company's common stock that day.

What it shows: a CEO with a margin-financed position in his own company, a sharp fall in the stock during the 2008 crisis, and lenders selling over a few days.

Green Mountain Coffee Roasters, May 2012

In May 2012, Green Mountain Coffee Roasters founder Robert Stiller and lead director William Davis gave up their board leadership positions (chairman and lead director) and their committee roles after margin-call sales of their shares. As reported by Reuters (via NBC News), Stiller's account sold 5 million shares on May 7 and Davis's account sold a total of 548,000 shares on May 4 and May 7 to meet margin calls. The company said the sales took place at a time when trading by insiders was prohibited by company policy. Both men remained directors, without leadership or committee roles and, until further notice, without director fees, and the board required them to settle all outstanding margin loans by the end of 2012.

What it shows: the collision between margin calls and insider trading windows. A lender's forced sale does not wait for an open window, so a pledge that looks well collateralized can still turn into a governance event.

Luckin Coffee, April 2020

On April 2, 2020, Luckin Coffee disclosed that a special committee of its board had brought to the board's attention information indicating that its then-chief operating officer and employees reporting to him had fabricated transactions beginning in the second quarter of 2019; the company said its estimate of roughly RMB 2.2 billion in fabricated 2019 sales had not been independently verified. Days later, on April 6, Goldman Sachs, acting for a syndicate of lenders, said that Haode Investment Inc., an entity described as controlled by the family of chairman Charles Zhengyao Lu, had defaulted on a $518 million margin loan facility and that the lenders had begun enforcing against the pledged shares. According to that statement, as reported by The Motley Fool and TechNode, some of the pledged shares came from a trust controlled by the family of the company's CEO, Jenny Zhiya Qian.

What it shows: pledged founder stock as a channel of contagion. A disclosure of suspected fabricated sales hit the share price, which hit the collateral, which put a large block of stock in the hands of creditors seeking to sell.

A financing that was restructured: Twitter, 2022

Not every pledge story ends in a forced sale. In April 2022, Elon Musk's Schedule 13D amendments on Twitter disclosed a commitment from Morgan Stanley Senior Funding and other institutions to provide $12.5 billion in margin loans to help fund the acquisition. According to a later amendment, on May 4, 2022 Musk let part of the margin loan commitment expire, reducing it to $6.25 billion and adding equity, and on May 24, 2022 he let the rest expire, terminating the margin loan commitment letter and replacing it with additional equity financing.

What it shows: a pledge-backed financing disclosed in real time through Schedule 13D amendments, then replaced with equity before the acquisition closed.

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Part VI: Specialty Collateral Beyond Stock

Art-secured lending

Art lending is the specialty-collateral market with the most published data. The Deloitte Private and ArtTactic Art & Finance Report 2025 projects that the market for art- and collectibles-secured loans will reach $33.9 billion to $40 billion by the end of 2025, and estimates $42 billion to $50.1 billion by 2027. The report says the U.S. is the clear market leader, with Europe and the UK seen as the next growth areas. In its 2025 survey, 60% of family offices reported offering art-backed loan services (down from 67% in 2023), and among those offering art financing, 67% said art was used as collateral mainly to fund other business ventures, up from 36% in 2023.

Mechanics. Sotheby's Financial Services, in a March 2025 article, says lenders can secure loans by filing a UCC-1 financing statement, that collateral can be held at the borrower's residence, principal place of business or an approved storage facility, and that it updates valuations and makes site visits annually "to confirm collateral location and condition." On leverage it says: "Most lenders are comfortable offering a loan-to-value ratio up to 50%." It also contrasts specialty lenders, which look for "a collateral base with works of art that have liquid markets with broad interest and appeal," with banks, which lean more on the borrower's cash flow and financial covenants.

What lenders watch: title and provenance (lenders typically ask for bills of sale and run lien searches), an appraisal of fair market value, all-risk insurance for at least the full appraised value with proceeds directed to the lender, authenticity, condition, the work's location and how easily it could be repossessed across borders, and how deep the auction market is for that artist. What advisers watch: a UCC-1 filing is a public record that lists the debtor's name, which Day Pitney notes some families address by transferring title to a generically named LLC (the lender will still require a personal guarantee); art valuations can move in large steps between appraisals; and a loan against a collection intended for a museum gift or estate plan has to fit those plans.

Aircraft and yachts

Aircraft and yacht lenders rely on public registries to record their interest.

• Aircraft. Federal law (49 U.S.C. 44107) directs the FAA to keep a system for recording conveyances and security interests in civil aircraft. For international transactions, the Cape Town Treaty created an International Registry for interests in certain aircraft and engines; an FAA final rule published in January 2005 made the FAA Aircraft Registry the U.S. authorizing entry point to that registry.
• Yachts. A preferred mortgage under 46 U.S.C. 31322 is a mortgage on the whole of a documented vessel (or one with a pending documentation application), filed in substantial compliance with Section 31321.

For both, lenders watch registration, maintenance records, insurance, where the asset is based and the depth of the resale market; advisers watch the owning entity, charter or management arrangements, and operating costs on top of debt service.

Private-fund interests and NAV facilities

For family offices with large private-markets portfolios, fund interests are a growing source of collateral, in two distinct forms.

Borrowing against LP interests held by the family. Limited partnership agreements commonly prohibit an LP from pledging its interest without the general partner's consent. Dechert's fund-finance overview quotes typical LPA language: "A Limited Partner may not sell, assign, pledge or otherwise transfer in any manner whatsoever" its interest without GP consent, and describes workarounds: obtaining consent fund by fund, which "may be prohibitive" when there are many underlying funds, or placing the interests in an SPV whose equity can be pledged, which generally depends on the LPA allowing transfers to affiliates. Lenders also look at unfunded commitments, because the borrower still owes capital calls on the pledged funds.

Fund-level NAV facilities. The family is often on the other side of NAV lending: as an LP in funds whose GPs borrow against the fund's portfolio. As Morgan Lewis summarizes it, these loans "are backed by the underlying portfolio investments of a fund." On July 25, 2024, the Institutional Limited Partners Association (ILPA) published guidance on NAV-based facilities for private equity. It recommends LPAC consent where the LPA does not expressly allow such a facility and, even where it does, before facility proceeds are used to fund distributions, plus disclosure of rationale, size, structure, key terms and conflicts. Industry summaries of the guidance, including AIMA's, cite a Fund Finance Association estimate that the NAV market, then around $100 billion, could reach $600 billion by 2030.

What a family office watches as an LP: whether a distribution was funded by portfolio exits or by a NAV loan, how leverage at fund level adds to any leverage the family carries on its own interests, and whether the LPA gives the GP clear authority.

GP-stake and management-company financing

Families that own stakes in asset managers, or are principals of one, meet a related market: lending against management-company economics. Torys LLP notes that "Specialized lenders offer loans secured by future management fees or carried interest streams," often used to fund large GP commitments, and that some sponsors instead fund those commitments with proceeds from minority stake sales. It adds a caution that matters to LPs: "Structures that obscure economic alignment, such as back-levered, guaranteed loans, can raise red flags in due diligence." Torys also notes that LPs increasingly scrutinize how GP commitments are financed.

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Part VII: "Buy, Borrow, Die" at a General Level

The tax logic rests on a few Internal Revenue Code provisions, described here in general terms only; it is not tax advice.

Borrowing is not a sale. Loan proceeds are not income and do not realize the gain in the collateral. A family that borrows against appreciated stock keeps the deferred gain deferred.

Interest deductibility is limited. For individuals, Section 163(h) disallows deductions for personal interest. Investment interest is deductible only up to net investment income under Section 163(d)(1), with disallowed amounts carried forward to the next year under Section 163(d)(2). How loan proceeds are used therefore matters for after-tax cost.

Basis steps up at death. Under Section 1014(a)(1), the basis of property acquired from a decedent is generally its fair market value at the date of death. Unrealized appreciation held until death can therefore escape income tax in the hands of heirs, who can sell the asset and repay the debt with little or no gain. Section 1014(c) excludes items of income in respect of a decedent, which are governed by Section 691. Estate tax is a separate question and is not removed by the step-up.

Put together, the sequence of holding appreciated assets, borrowing against them for liquidity and passing them on at death has become known as "buy, borrow, die." It is a political issue as well as a planning one. On November 9, 2023, the Senate Finance Committee held a hearing titled "Examining How the Tax Code Affects High-Income Individuals and Tax Planning Strategies," at which then-Chairman Ron Wyden focused on the strategy. Proposals to change that treatment have been put forward in Congress, such as Senator Wyden's Billionaires Income Tax Act (S. 3367), introduced on November 30, 2023 and reintroduced in September 2025; neither version had been enacted as of this writing.

What advisers watch: the strategy only works if the family can carry the debt through drawdowns without forced sales, which brings back every risk in Parts II through V.

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The Intelligence Implication: What Lenders, Advisers and Issuers Watch

Asset-backed borrowing leaves traces across proxy footnotes, Schedule 13D amendments, Form 144 notices, UCC filings, aircraft and vessel registries and fund disclosures to LPs. None shows a full balance sheet; together they show a great deal.

For teams that cover family offices, pledge disclosures are a window on liquidity needs: a growing pledge footnote can signal a founder funding outside ventures through borrowing; Oracle's proxy, for example, states that the loans secured by Ellison's pledged shares are used only to fund outside personal business ventures. Combined with an office's structure, private-fund holdings and people, which our family office directory tracks, these public signals help explain how a family funds its activities. Our data methodology explains how we source and refresh filings-based data, and the RIA directory covers the advisers who often sit between these families and their lenders.

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Key sources

• Federal Reserve Regulation U (12 CFR 221.2, 221.3, 221.7) and Regulation T (12 CFR 220.12)
• FINRA Rules 4210 and 2264; FINRA, "Securities-Backed Lines of Credit Explained"
• SEC Rule 144 (17 CFR 230.144); Regulation S-K Items 403 and 407(i)
• SEC Release No. 33-8732A (2006); SEC Item 403 staff interpretations (March 13, 2007)
• SEC Press Release 2024-99, Carl C. Icahn and Icahn Enterprises L.P. (2024)
• ISS United States Proxy Voting Guidelines, Benchmark Policy (effective February 1, 2026)
• Oracle DEF 14A proxy statements (2025, 2026); Tesla DEF 14A (2025) and Forms 10-K
• Chesapeake Energy Form 8-K and McClendon Schedule 13D/A (October 2008)
• Reuters via NBC News, Green Mountain Coffee Roasters (May 2012)
• Luckin Coffee announcement of April 2, 2020 (as reported by CNBC and others); Goldman Sachs statement for the lender syndicate (April 6, 2020), as reported by The Motley Fool and TechNode
• Elon Musk, Schedule 13D/A amendments on Twitter, Inc. (April and May 2022)
• Deloitte Private and ArtTactic, Art & Finance Report 2025
• Sotheby's, "In Conversation: Unlocking Liquidity From Art and Collectibles" (2025); Day Pitney, "From Collection to Collateral" (2026)
• 49 U.S.C. 44107; 46 U.S.C. 31322; FAA Cape Town Treaty final rule, Federal Register (January 3, 2005)
• ILPA NAV-based facilities guidance (2024), with Morgan Lewis and AIMA summaries (2024)
• Dechert LLP, "The ABCs of Fund Finance" (2017); Torys LLP on GP commitment financing (2025)
• 26 U.S.C. 163 and 1014; Senate Finance Committee hearing of November 9, 2023; Senate Finance Committee release on S. 3367 (November 30, 2023)

Wealthmetrica provides intelligence on investment advisers, family offices and the people who run them. This analysis draws on public regulatory filings, statutes and published research; it is not legal, tax, or investment advice.