Subject: File No. DF - Other Initiatives
From: Edward Resnick, Jr.
Affiliation: Nautic Partners, LLC

August 30, 2010

Nautic Partners appreciates the opportunity to comment on certain provisions of the Dodd-Frank Act. Nautic Partners is a Providence, RI based private equity firm that focuses on middle market private equity investments. Our firm has made over 100 private equity investments since its founding in 1986.

Nautic Partners supports the intent of the Dodd-Frank Act to increase the ability of regulators to monitor risks to our financial system. However, we are concerned that some aspects of the Act may result in increased costs to advisors to private funds without any beneficial impact resulting for regulators or investors. One such area of concern is the current application of the custody rule under the Investor Advisors Act of 1940. The current rule would require private advisors to hire a qualified custodian to maintain certificated shares in privately held companies. While an exception to the custody rule does currently exist for non-certificated securities provided an annual audit is completed and distributed to investors, this rule does not extend to certificated shares. We contend that certificated shares of privately held companies do not contain any additional inherent risk of unauthorized transferability than non-certificated securities. These share units, while papered, are typically non transferable and non redeemable. The stock registers are also typically maintained by attorneys representing the privately held company or officers of the company. Requiring advisors to private funds to custody privately offered certificated shares would result in increased costs, which would be passed along to investors and would thus result in lower returns without any corresponding benefit to investors or regulators. We respectfully ask that the Commission extend the current exemption provided to non-certificated privately offered securities to include certificated privately offered securities.