E-Mail Greystone Advisers, Inc. 13333 Blanco Road, Suite 314 San Antonio, Texas 78216-7756 telephone: (210) 493-3971 fax: (210) 493-6290 February 10, 1997 Mr. Jonathan G. Katz, Secretary U.S. Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Re: "Rules Implementing Amendments to the Investment Advisers Act of 1940," Release No. IA-1601 (File No. S7-31-96) Dear Mr. Katz: We respectfully submit this letter in response to Investment Advisers Act Release No. 1601 (December 20, 1996) (the "Proposing Release"), in which the U.S. Securities and Exchange Commission (the "Commission") requested comment on proposed new rules and rule amendments (the "Proposed Rules") under the Investment Advisers Act of 1940, as amended (the "Advisers Act"). The Proposed Rules are intended to implement certain provisions of the Investment Advisers Supervision Coordination Act (the "Coordination Act"), which was enacted as Title III of the National Securities Markets Improvement Act of 1996, Pub. L. No. 104-290, 110 Stat. 3416 (1996), and signed into law on October 11, 1996. The particular provisions of the Coordination Act implemented by the Proposed Rules reallocate regulatory responsibilities for investment advisers between the Commission and the states. The Proposed Rules would establish the process by which certain investment advisers would withdraw from Commission registration, exempt certain investment advisers from the prohibition against Commission registration, and define certain terms in the Coordination Act. The Commission also proposed rules and rule amendments to clarify provisions of the Coordination Act and assist investment advisers in ascertaining their regulatory status. Greystone Advisers, Inc., a Delaware corporation organized in 1996 ("Greystone"), is registered with the Commission pursuant to Section 203(c)(2)(A) of the Advisers Act as an investment adviser (File No. 801- 52832). Greystone's principal activity is providing investment advice to Plymouth Commercial Mortgage Fund, a Delaware business trust ("Plymouth"), which has elected to be regulated as a business development company (File No. 814-129) pursuant to Section 54(a) of the Investment Company Act of 1940, as amended (the "1940 Act"). Including Plymouth's portfolio, Greystone currently has assets under management of substantially less than $25 million. Although Greystone has had fewer than 15 clients during the course of the preceding 12 months and does not hold itself out generally to the public as an investment adviser, it is registered under the Advisers Act because the exclusion from the registration requirement set forth in Section 203(b)(3) of the Advisers Act is expressly not available to "[a]ny investment adviser who . . . acts as an investment adviser to any investment company registered under Title I of this Act, or a company which has elected to be a business development company pursuant to Section 54 of Title I of this Act and has not withdrawn its election." Greystone requests that the Proposed Rules, including proposed Form ADV-T, be clarified to indicate that an investment adviser to a business development company ("BDC"), like an investment adviser to a registered investment company which is expressly addressed in Section 203A(a)(1)(B) of the Advisers Act, would not be subject to having its Commission registration canceled if it fails to withdraw its registration through Form ADV-T or otherwise. We believe that there is no basis in law or the policy of investor protection on which to distinguish BDC advisers from registered investment company advisers for purposes of Section 203A of the Advisers Act, and the legislative history provides no clear evidence of a contrary view on the part of Congress or the Commission. In view of the foregoing, Greystone requests that the Commission modify the Proposed Rules to permit advisers to BDCs to be treated in pari passu with advisers to registered investment companies for purposes of maintaining their registration with the Commission, consistent with its authority to do so set forth in Section 203A(c) of the Advisers Act. The burden imposed on Greystone and other BDC advisers with assets under management of less than $25 million to undertake a state-by-state analysis of the need for state investment adviser registration and to become subject thereto, absent such modification would, given the extent of existing Commission regulation of BDCs, provide no corresponding benefit. * * * We appreciate the opportunity to comment on the timely issues raised in the Proposing Release. If you have any questions concerning the issues or ideas addressed in this letter, please feel free to contact the undersigned. Respectfully submitted, John C. Mosher Vice President and Chief Financial Officer