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Mr. Jonathan G. Katz Securities and Exchange Commission March 12,2004

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access persons subjectto a showing that they, in fact do not have access to the type of information that Rule 17j-1 and the Proposed Rule seek to protect. In any case, NSCP believes that it is imperative that the same approach be used under both rules to avoid conflicting obligations. 6. Reporting of Investment CompanyShares

The Commission has asked for comment on whether personal transactionsin shares of unaffiliated investment companies should be exempt from the requirements of the Proposed Rule. NSCP sharesthe Commission's view that transactions in such securitiesdo not generally pose the types of risks associated with transactions in shares of affiliated investment companies. Accordingly, NSCP does not believe that transactions in shares of unaffiliated investment companies should be subject to the Proposed Rule. However, NSCP does believe that the business models of certain types of investment advisers may create a risk of conflict with respect to transactions in shares of unaffiliatedinvestment companies.16As a result, NSCP believes that firms should consider whether their business models involve a potential conflict of interest with respect to unaffiliated investment companies and adopt controls appropriate to any such risks.

NSCP also agrees that certain types of investment companies, such as money market funds, funds whose holdingstrack well-established market indicest7and exchange traded funds pose little risk of abuse. Accordingly, NSCP supports the exemption of such funds from the reporting requirements of the Proposed Rule.

NSCP also believes that a risk of misusing information exists whenever a supervised person has accessto transactional or holdings information concerning a portfolio. Accordingly, NSCP also supportsthe Proposed Rule's inclusion of individuals who obtain information about existing securitiesholdings in the definitionof Access Person and supports the amendment of Rule 17j-1to include such individuals.18 7. Initial Public Offeringsand Limited Offerings

NSCP agrees that, in some circumstances, investment in an IPO or limited offering may involve a conflict of interest between an adviser (including its employees) and its clients. Thus, clients have a legitimate interest in restricting the investment activities of advisers and their employees. NSCP also recognizes that IPOs and limited offeringsare legitimate investment opportunities for advisers and their employees. NSCP believes that where a conflict exists between the legitimateinterests of an adviser and its clients, the interests of the client are

16 For example, NSCP understands that some advisers recommend investmentby their clients in shares of investment companiesmanaged by other, unaffiliated, advisers. In the process of conductingresearch and developingrecommendationswith respect to such investments, such advisers may receive access to material nonpublic information about an investment company. In some circumstances, such adviser's recommendationsmay r e s u l t i n t r a n s a c t i o n s o f a m a g n i t u d e s u f f i c i e n t t o a f f e c t t h e p e r f o r m a n c e o f a s u b j e c t i n v e s t m e n t c o m p a n y . "

Such investmentcompanies are generally referred to as "index funds." Index h d s pose little risk of abuse because their holdings are known or readily available to the public, and because pricing and valuation information is standardized. However, index funds may also include funds that (i) track small, or "constructed," indices; and (ii) track the performance of an index, but not its holdings. NSCP does not believe that such investment companies p r o v i d e s u f f i c i e n t s t r u c t u r a l p r o t e c t i o n f r o m a b u s e t o w a r r a n t a n e x c e p t i o n f i o m t h e P r o p o s e d R u l e . 1 8 NSCP recognizes that such a requirement will result in the vast majority of most advisers' employeesbeing deemed to be access persons.

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