Russell D. Sacks, Shearman & Sterling LLP

January 15, 2004

Mr. Russell D. Sacks
Shearman & Sterling LLP
599 Lexington Avenue
New York, NY 10022-6069

Re: Request for Exemption from the Provisions of NASD Conduct Rule 2710

Dear Mr. Sacks

This letter responds to your August 12, 2003 letter in which you requested an exemption from the application of NASD Conduct Rule 2710 (“Corporate Financing Rule” or “Rule 2710”) on behalf of members that participate in offerings of units of Citigroup Alternative Investments Multi-Advisor Hedge Fund Portfolio LLC (the “Fund”). This letter also memorializes verbal advice given to you by the NASD Corporate Financing Department prior to the effectiveness of this offering and sets forth the basis for the limited exemptive relief from the compensation provisions of Rule 2710 granted in the no-objections letter issued by the Department on December 2, 2003.

Open-end investment management companies ("open-end funds") that continuously offer redeemable securities are exempt from filing with the NASD under Rule 2710 and their sales charges are regulated under NASD Conduct Rule 2830 (“Rule 2830”).¹ In contrast, closed-end investment management companies ("closed-end funds") are subject to the filing requirements, filing fees, and regulations of the Corporate Financing Rule.

The Corporate Financing Rule has an exemption for securities of “interval funds” which are closed-end investment companies that make periodic repurchase offers pursuant to Rule 23c-3(b) under the Investment Company Act of 1940 and offer their shares on a continuous basis pursuant to Rule 415(a)(1)(xi) under the Securities Act of 1933. Instead, Rule 2830 regulates the offering terms of interval funds, including their sales charges.

In comparison, the Fund is structured as a “tender offer fund” because it continuously offers shares pursuant to Rule 415 under the Securities Act of 1933 and uses periodic tender offers in compliance with Rule 13e-4 and Schedule TO under the Securities Exchange Act of 1934 ("1934 Act") to repurchase its securities. Tender offer funds are not required to establish as a fundamental policy that they will make periodic repurchases, as required by Rule 23c-3 under the 1940 Act for interval funds.

You state in your letter of August 12, 2003 that the Fund will make semi-annual repurchase offers, at net asset value, for securities of the Fund. The Fund will price its securities on a monthly basis, based on a monthly determination of net asset value. You further state that broker-dealers who sell or distribute the Fund generally will be entitled to receive a fee from each investor in the Fund whose securities the broker-dealer places. The size of the fees will vary, depending on the size of the investment, but will not exceed three percent of the subscription amount. The placement fee will be deducted from the subscription amount paid by prospective investors. Separately, the investment adviser to the Fund will regularly compensate the broker-dealers from its own assets, based on a percentage of the value of the securities sold by the broker-dealers that remain outstanding. As a condition to the limited exemption granted in the no-objections letter, the Fund has agreed to comply with the sales charge limitations in Rule 2830. Therefore, the total amount of the compensation paid to broker-dealers, including the ongoing payments by the investment adviser to the broker-dealers, will not exceed the sales charge limitations of Rule 2830. Finally, you state that securities of the Fund are not listed for trading on any market and do not trade in the secondary market.

The Corporate Financing Rule, and its predecessor rule, has long been applied to members’ sales of the securities of closed-end funds on the basis that closed-end fund offerings are structured and marketed in a manner that is more similar to and competitive with corporate securities offerings than to open-end funds. At the time the Rule was adopted, closed-end funds typically conducted offerings of a fixed number of common shares at specified times; limited sales compensation of broker/dealers to a discount from a fixed offering price; did not redeem their securities; and generally listed their securities on a securities market.

You state in your letter that the Fund should be exempt from the application of Rule 2710 because, in comparison to traditional closed-end funds, the Fund functions more like open-end funds and interval funds because the Fund: continuously offers securities under SEC Rule 415; prices its shares monthly; allows broker/dealers to receive initial and continuing compensation that meets the sales charge limitations of Rule 2830; redeems its securities through periodic repurchase offers; and does not list its securities on a securities market. We note, however, that unlike interval funds, the Fund is not required to establish as a fundamental policy that it will make periodic repurchases in compliance with the conditions of Rule 23c-3 under the 1940 Act. Instead, the Fund uses periodic tender offers to repurchase its securities under Rule 13e-4 and Schedule TO under the 1934 Act.

The Department agrees to grant a limited exemption pursuant to the Rule 9600 Series to the Fund and participating NASD members from compliance with the compensation provisions of Rule 2710 for sales of securities of the Fund, so long as the Fund makes continuous offerings of common shares under SEC Rule 415; prices its shares monthly; limits the total amount of compensation paid to broker/dealers to the amount permitted by the sales charge limitations of Rule 2830; makes at least two repurchase offers per calendar year for the fund’s securities under Rule 13e-4 and Schedule TO under the 1934 Act; and does not list its securities on any securities market. In addition, as a condition of the limited exemption, any member that participates in sales of securities of the Fund that relies on this exemption is required to comply with the sales charge limitations of Rule 2830. The Fund remains subject to all other provisions of Rule 2710, including the filing requirements.

I hope that this letter is responsive to your request. Please note that the opinions expressed herein are staff opinions only and have not been reviewed or endorsed by the Board of Governors of NASD. This letter responds only to the issues you have raised based on the facts as you have described them in your letter, and does not address any other rule or interpretation of NASD, or all the possible regulatory and legal issues involved.

NASD has its own Web site. When we believe that others may benefit from seeing particular exemption requests, we publish our decision (but not the request letter) in a section of our Web site designed for exemption requests. [Redacted]

Very truly yours,

Joseph E. Price, Vice President
Corporate Financing Department

¹ Section 5(a)(1) of the Investment Company Act of 1940 ("1940 Act") defines "open-end company" as "a management company which is offering for sale or has outstanding any redeemable security for which it is the issuer." Section 5(a)(2) of the 1940 Act defines "closed-end company" as "any management company other than an open-end company."