Family Office Insights: "Fair Investment Practices by Investment Advisers" California's New Law Seeks to Increase Transparency of Private Fund Investments in California US

On October 8, 2023, California’s Governor, Gavin Newsom, signed the “Fair Investment Practices by Investment Advisers” law (SB54), that will require certain “venture capital companies” (broadly defined to include venture capital firms, private equity firms and family offices) with sufficient nexus to California to report demographic information to California’s Civil Rights Department (CRD), with respect to the founding members of their portfolio companies.

According to Governor Newsom, SB54’s purpose is to address the characteristically sparse and inequitable distribution of funding by venture capital firms to emerging companies that are owned, founded and/or operated by traditionally underrepresented groups, including women and minorities, and to consequently provide economic empowerment to such underrepresented groups.

Due to SB54’s broad characterization of “venture capital companies,” family offices should keep abreast of the latest developments with SB54 (regulatory, amendments, or legal challenges) as we come closer to SB54’s first compliance date of March 1, 2025.