# Form ADV — Family Office Exclusion

**Conclusion:** Not required. Palace Fund LLC is excluded from the definition of "investment adviser" under the Investment Advisers Act of 1940. No SEC or state registration. No filing obligation.

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## What Is Form ADV

Form ADV is the SEC registration form for investment advisers. It has two parts:

- **Part 1A** — Core firm information: AUM, structure, business practices, disciplinary history
- **Part 2A** — Client-facing brochure: services, fees, conflicts of interest

Full Registered Investment Advisers (RIAs) file both parts. Exempt Reporting Advisers (ERAs) file a truncated Part 1A only. **Family offices file nothing.**

## Why Palace Fund Is Excluded

The Investment Advisers Act of 1940 applies only to entities that fall within the definition of "investment adviser" in § 202(a)(11). The Act provides a complete exclusion — not merely an exemption — for qualifying family offices.

### Applicable Law

**Investment Advisers Act of 1940 (15 U.S.C. § 80b-1 et seq.)**

- **§ 202(a)(11)** defines "investment adviser" as any person who, for compensation, engages in the business of advising others as to the value of securities or as to the advisability of investing in, purchasing, or selling securities. Certain categories are excluded from this definition.
- **§ 202(a)(11)(G)** excludes "such family offices as the Commission may, by rule, define." The SEC exercised this authority by promulgating Rule 202(a)(11)(G)-1.
- **SEC Rule 202(a)(11)(G)-1** (17 C.F.R. § 275.202(a)(11)(G)-1) establishes the definition of "family office" and the conditions for exclusion.

### Three Conditions for Exclusion

All three must be met. Palace Fund meets all three.

| Condition | Requirement | Palace Fund |
|-----------|-------------|-------------|
| 1. Advises only family clients | "Family clients" per Rule 202(a)(11)(G)-1(d)(4): current and former family members, including lineal descendants and their spouses | Junwon Park (son) + Sungho Park (father) — both qualify ✓ |
| 2. Wholly owned and controlled by family | 100% ownership and control by family members | 100% family ownership; Junwon as sole Managing Member with 100% control ✓ |
| 3. Does not hold itself out as an investment adviser | No public advertising, solicitation, or representation as an adviser to the general public | No public solicitation, no advertising, private family arrangement ✓ |

AUM size and number of members are **irrelevant** to the exclusion analysis. A 2-person fund qualifies as cleanly as a 200-person family office.

### Effect of Exclusion

An excluded entity is not an "investment adviser" under the Act at all. This means:

- No SEC registration (no Form ADV filing)
- No state-level investment adviser registration required where federal exclusion applies
- No ongoing reporting obligations under the Advisers Act
- No compliance program requirements under the Advisers Act

This is more favorable than an exemption. An exemption acknowledges coverage but waives certain requirements. An exclusion means the law simply does not apply.

## Fallback: Private Fund Adviser Exemption (ERA Path)

If Palace Fund ever loses eligibility for the family office exclusion (e.g., outside investors are admitted, public solicitation begins), the following fallback applies:

**§ 203(m) of the Investment Advisers Act** — The Private Fund Adviser Exemption exempts advisers whose sole clients are "qualifying private funds" and whose AUM is under $150M from full registration. Such advisers must instead file as Exempt Reporting Advisers (ERAs).

For Palace Fund to qualify as a private fund:
- **Investment Company Act of 1940, § 3(c)(1)** — A fund with 100 or fewer beneficial owners that does not make a public offering is excluded from the Investment Company Act and qualifies as a private fund. Palace Fund: 2 beneficial owners, no public offering. ✓
- **Rule 204-4** (17 C.F.R. § 275.204-4) — Governs ERA filing requirements. ERAs file a truncated Form ADV Part 1A (Items 1, 2, 3, 6, 7, 10, 11, and related DRP sections). No Part 2A required.

**This path is not needed under current facts.** It is documented here for reference if circumstances change.

## Summary Table

| Filing | Required? | Legal Basis |
|--------|-----------|-------------|
| Form ADV (federal, SEC) | No | Advisers Act § 202(a)(11)(G); Rule 202(a)(11)(G)-1 |
| Form ADV (state, California) | No | Federal exclusion preempts state requirement |
| ERA truncated Form ADV | No (fallback only) | § 203(m); Rule 204-4 — not triggered |