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Pillsbury submits second comment letter to the NASAA on behalf of the Private Investment Fund Industry regarding Proposed Custody Rule

Written by Jay Gould and Michael Wu

On March 2, 2011, Pillsbury’s Investment Fund and Investment Management group (“Pillsbury IFIM Group”) submitted a comment letter to the North American Securities Administrator’s Association (the “NASAA”) on behalf of the California Hedge Fund Association and the Florida Alternative Investment Association.  The letter to the NASAA was intended to provide comments regarding the proposed model custody rule of the NASAA that was released on February 17, 2011.  A copy of the March 2, 2011 comment letter was posted here on March 8, 2011.

On May 23, 2011, Pillsbury IFIM Group submitted a second comment letter on behalf of the California and Florida fund groups to the NASAA commenting on the re-proposal of the model custody rule on April 18, 2011 (the “Re-Proposed Rule”).  The Re-Proposed Rule reflected certain suggestions made in the first letter to the NASAA, but would require that all portfolio positions be provided to all fund investors at the end of each quarter.  The letter requested that the NASAA limit quarter end disclosure to positions that comprise 5% or more of a fund’s portfolio and exclude all disclosure with respect to short positions.  Pillsbury believes that it is critical for fund managers and hedge fund industry groups to comment on the NASAA rule proposals, as it is likely that many states will simply adopt the NASAA rules without providing a robust public comment process as a result of the many new registrants for which the states will be responsible when the investment adviser registration provisions of Dodd Frank Act are fully implemented.

A full text of the second letter can be found here.