The recent requirement mandating hedge fund managers to register funds with the Securities & Exchange Commission could get murky for some family offices, which would have to count each family member as a client and decide whether a manager or fund markets to the public.

The new law, put into place Feb. 1, has a three-prong private advisor exemption, which waives the registration requirement if, among other factors, there are fewer than 15 clients, investors cannot redeem interests within two-years and the fund does not hold itself out to the public as providing investment advice--all of which are not as cut and dry in the family office space, executives said. "If Uncle Bob offers no investment advice and the family trusts him because he has integrity, that's not considered running a private fund," said Nir Yarden, a hedge fund attorney with Greenberg Traurig. "But family offices have to really understand this relationship, and you can't close your eyes to it."

While most family offices are fully aware of the new law and SEC ramifications of skipping registration, many covet their privacy and may count a family fund as one client, said a family office head. Managers may also oversee several funds and may occasionally reach outside of the family to bring in new investors, which would qualify as marketing for funds with $25 million or more. Still, executives said registration is not as invasive as transparency, which could cause more flack in the space. "You may have some that will say 'the hell with it. I didn't do this to be regulated'," said a family office head.