[Federal Register Volume 61, Number 227 (Friday, November 22, 1996)]
[Notices]
[Pages 59465-59468]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-29901]
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DEPARTMENT OF LABOR
Pension and Welfare Benefits Administration
[Prohibited Transaction Exemption 96-85; Exemption Application No. D-
10200, et al.]
Grant of Individual Exemptions; Chase Manhattan Bank
AGENCY: Pension and Welfare Benefits Administration, Labor.
ACTION: Grant of individual exemptions.
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SUMMARY: This document contains exemptions issued by the Department of
[[Page 59466]]
Labor (the Department) from certain of the prohibited transaction
restrictions of the Employee Retirement Income Security Act of 1974
(the Act) and/or the Internal Revenue Code of 1986 (the Code).
Notices were published in the Federal Register of the pendency
before the Department of proposals to grant such exemptions. The
notices set forth a summary of facts and representations contained in
each application for exemption and referred interested persons to the
respective applications for a complete statement of the facts and
representations. The applications have been available for public
inspection at the Department in Washington, D.C. The notices also
invited interested persons to submit comments on the requested
exemptions to the Department. In addition the notices stated that any
interested person might submit a written request that a public hearing
be held (where appropriate). The applicants have represented that they
have complied with the requirements of the notification to interested
persons. No public comments and no requests for a hearing, unless
otherwise stated, were received by the Department.
The notices of proposed exemption were issued and the exemptions
are being granted solely by the Department because, effective December
31, 1978, section 102 of Reorganization Plan No. 4 of 1978 (43 FR
47713, October 17, 1978) transferred the authority of the Secretary of
the Treasury to issue exemptions of the type proposed to the Secretary
of Labor.
Statutory Findings
In accordance with section 408(a) of the Act and/or section
4975(c)(2) of the Code and the procedures set forth in 29 CFR Part
2570, Subpart B (55 FR 32836, 32847, August 10, 1990) and based upon
the entire record, the Department makes the following findings:
(a) The exemptions are administratively feasible;
(b) They are in the interests of the plans and their participants
and beneficiaries; and
(c) They are protective of the rights of the participants and
beneficiaries of the plans.
The Chase Manhattan Bank Located in New York, New York; Exemption
[Prohibited Transaction Exemption 96-85; Exemption Application No.
D-10200]
Section I--Transactions
The restrictions of sections 406(a) of the Act and the sanctions
resulting from the application of section 4975 of the Code, by reason
of section 4975(c)(1) (A) through (D) of the Code, shall not apply to
the following transactions, provided that the conditions set forth in
Section II below are met:
(a) Any acquisition or sale of ``emerging market'' securities (the
Securities), and any repurchase agreement involving such Securities,
which occurs between The Chase Manhattan Bank (Chase) or its Affiliates
and the IBM Retirement Plan (the IBM Plan), to which Chase or an
Affiliate is a party in interest under the Act at the time of the
transaction; and
(b) Certain repurchase agreements involving the Securities which
occurred between the IBM Plan and Chemical Bank (Chemical) that were
outstanding as of March 31, 1996, the date of the merger between the
holding companies of Chemical and Chase. (The merger of the two banks
themselves (the Merger) occurred later on July 14, 1996, and all
references herein to Chase which refer to the time period after July
14, 1996 shall include Chemical.)
Section II--Conditions
(a) The assets of the IBM Plan involved in the transactions
described in Section I(a) and I(b) above are managed by WP Emerging
Markets Asset Management, L.P. (WP), as the independent, qualified
fiduciary for the IMB Plan;
(b) WP, as the IBM Plan's independent fiduciary and investment
manager for the assets invested in the Securities, negotiates the terms
of such transactions on behalf of the IBM Plan and makes the decision
to have the IBM Plan enter into any such transactions with Chase;
(c) WP, as the IBM Plan's independent fiduciary and investment
manager for the assets invested in the Securities, monitors the
investments made by the IBM Plan in such Securities and takes whatever
actions are necessary to protect the interests of the IBM Plan;
(d) Neither Chase nor an Affiliate has discretionary authority or
control with respect to the investment of the IBM Plan's assets
involved in the transactions or renders investment advice (within the
meaning of 29 CFR 2510.3-21(c)) with respect to those assets;
(e) In any transaction where the IBM Plan acquires a Security from
Chase, the IBM Plan pays a price which is no greater than the fair
market value of such Security, as determined by WP in accordance with
either WP's internal valuation process or independent third party
sources (such as independent broker-dealers and market-makers dealing
in such Securities);
(f) In any transaction where the IBM Plan sells a Security to
Chase, the IBM Plan receives a price which is no less than the fair
market value of such Security, as determined by WP in accordance with
either WP's internal valuation process or independent third party
sources (such as independent broker-dealers and market-makers dealing
in such Securities);
(g) The repurchase agreements between the IBM Plan and Chase are
entered into pursuant to a written agreement between the parties which
describes all of the material terms and conditions for such
transactions, including the rights and obligations of each party, and
is consistent with the specific guidelines established by the IBM
Plan's named fiduciary for transactions involving the Securities;
(h) All repurchase agreements between the IBM Plan and Chase, and
those between the IBM Plan and Chemical which were in place as of March
31, 1996, have terms and conditions which are set least as favorable to
the IBM Plan as terms and conditions which would exist in a similar
transaction with an unrelated party;
(j) All other terms of each transaction described above in Section
I(a) are not less favorable to the IBM Plan than the terms available in
an arm's-length transaction between unrelated parties;
(j) WP does not engage in, or commit to sell, any uncovered put or
call options (including, but not exclusive to, ``straddles'' and
``strangles'') in transactions with Chase on behalf of the IBM Plan;
(k) Any transactions involving the use of leverage by WP, on behalf
of the IBM Plan, do not exceed the specific guidelines established by
the IBM Plan's named fiduciary under its investment management
agreement with WP;
(l) No brokerage commission, sales commission, or similar
compensation, other than the particular dealer mark-up for the
Security, is paid to Chase by the IBM Plan with regard to such
transactions; and
(m) The amount of the IBM Plan's assets involved in the
transactions described in Section I(a) and I(b) represents no more than
two (2) percent of the total assets of the IBM Plan.
Section III--Definitions
(a) The term ``Chase'' refers to The Chase Manhattan Bank and its
Affiliates, as defined below, including, as of July 14, 1996, Chemical
Bank, pursuant to the Merger described in Section I(b) above which
occurred on such date.
[[Page 59467]]
(b) The term ``Chemical'' refers to Chemical Bank, as it existed
prior to the Merger on July 14, 1996.
(c) The term ``Affiliate'' refers to affiliates of Chase, including
entities controlling, controlled by, or under common control with Chase
as well as successors to such entities.
(d) The term ``control'' for purposes of the above definition of
``Affiliate'' means the power to exercise a controlling influence over
the management or policies of an entity.
(e) The term ``emerging market'' or ``emerging markets'' refers to
capital markets in developing or less developed countries that are,
with the exception of Mexico, not member countries of the Organization
for Economic Cooperation and Development.
(f) The term ``Security'' refers to certain ``emerging market''
securities and instruments issued in, or on behalf of, an ``emerging
market'' (including both corporate and sovereign issuers of debt
securities as well as corporate issuers of equity securities). For
purposes of the proposed exemption, such ``Securities'' would include
publicly traded or privately placed debt, equity, or convertible
securities, certain put and call options (as described herein),
collateralized bonds, Brady Bonds and Eurobonds.
(g) The term ``IBM Plan'' refers to the IBM Retirement Plan, a
defined benefit pension plan covering employees of the International
Business Machines Corporation and its affiliates (IBM), which is an
employee benefit plan covered by the Act.
(h) The term ``WP'' refers to WP Emerging Markets Asset Management,
L.P. and its affiliates, including the Emerging Capital Markets
Division of Wasserstein Perella Securities, Inc.
EFFECTIVE DATE: The exemption is effective as of September 6, 1996 for
all transactions described in Section I(a), and as of March 31, 1996,
for the transactions described in Section I(b).
For a more complete statement of the facts and representations
supporting the Department's decision to grant this exemption, refer to
the notice of proposed exemption published on September 6, 1996 at 61
FR 47195.
Written Comments
The Department received two written comments with respect to the
notice of proposed exemption.
The first written comment was submitted by the Applicant, who
wished to clarify the details of its merger with Chemical and the
precise names of the banks involved. On March 31, 1996, a merger of the
holding companies of the two banks occurred; the merger of the banks
themselves occurred on July 14, 1996. Specifically, on March 31, 1996,
the Chase Manhattan Corporation was merged with and into Chemical
Banking Corporation, which entity simultaneously changed its name to
The Chase Manhattan Corporation. On July 14, 1996, the Chase Manhattan
Bank (National Association) was merged with and into Chemical Bank,
which entity simultaneously changed its name to The Chase Manhattan
Bank. Accordingly, the words ``National Association'' are no longer
part of the Applicant's name. The Applicant also notes that the
Chemical Bank to which the notice of proposed exemption referred did
not include ``National Association'' as part of its name. The
Department has modified the language in this exemption to reflect the
Applicant's corrections to the record.
The second written comment was submitted by WP and also concerns a
clarification to the notice of proposed exemption. First, WP notes that
its precise name is WP Emerging Markets Asset Management, L.P.
Secondly, WP notes, in Paragraph 5 of the Summary of Facts and
Representations (the Summary), that the second full sentence on page
47198 should be revised to read, ``WP states that WPS's Emerging
Capital Markets Division [not its equities division], has been a
manager on [eliminate ``significant''] syndicate transactions involving
emerging market securities.'' Thirdly, WP notes, in paragraph 10 of the
Summary, the final subparagraph therein on page 47199, which discusses
WP's customary approach to REPO financing and negotiation, that a REPO
is collateralized by a specific asset and the REPO does not provide the
counterparty with a lien on the IBM Trust's general assets.
Accordingly, the sentence beginning, ``Because the credit-standing of
the IBM Trust is excellent * * *,'' should be eliminated, as well as
the phrase ``of similar credit standing'' in the following sentence.
Finally, WP notes, in Paragraph 16 of the Summary, that the
parenthetical at the beginning of page 47202 should be revised to begin
``currently, 150 percent * * *,'' to reflect the fact that the
Guidelines for the IBM Plan are subject to modification by IBM.*
* As previously noted in Footnote 9, on page 47200 of the notice
of propose exemption, the Department expresses no opinion as to
whether WP's use of leverage would violate any of the provisions of
Part 4 of Title I in the Act. The Department notes that WP is
required, under section 404(a) of the Act, to make investment
decisions on behalf of the IBM Plan prudently and solely in the
interests of the participants and beneficiaries of such Plan.
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FOR FURTHER INFORMATION CONTACT: Ms. Karin Weng of the Department,
telephone (202) 219-8881. (This is not a toll-free number.)
Acme 401(k) Retirement Savings Plan (the Plan) Located in
Scottsdale, Arizona; Exemption
[Prohibited Transaction Exemption 96-86; Exemption Application No. D-
10270]
The restrictions of sections 406(a), 406(b)(1) and (b)(2) of the
Act and the sanctions resulting from the application of section 4975 of
the Code, by reason of section 4975(c)(1) (A) through (E) of the Code,
shall not apply to the cash sale (the Sale) by the Plan of a 2.86
[percent interest (the Interest) in the Arizona Equities V Real Estate
Investment Trust to RSC Holdings, Inc., the sponsor of the Plan and a
party in interest with respect to the Plan; provided that the following
conditions are satisfied:
(1) The sale is a one-time transaction for cash;
(2) The Plan does not incur any expenses in connection with the
Sale; and
(3) The Plan receives as consideration from the sale the greater
of: (a) the fair market value of the Interest as determined by a
qualified independent appraiser at the time of the Sale; or (b) the
Plan's total investment in the Interest in the amount of $50,572.
For a more complete statement of the facts and representations
supporting this exemption, refer to the notice of proposed exemption
published on September 6, 1996 at 61 FR 47204.
FOR FURTHER INFORMATION CONTACT: Ms. Marianne H. Cole or Mr. Ronald
Willett of the Department, telephone (202) 219-8881. (This is not a
toll-free number.)
General Information
The attention of interested persons is directed to the following:
(1) The fact that a transaction is the subject of an exemption
under section 408(a) of the Act and/or section 4975(c)(2) of the Code
does not relieve a fiduciary or other party in interest or disqualified
person from certain other provisions to which the exemptions does not
apply and the general fiduciary responsibility provisions of section
404 of the Act, which among other things require a fiduciary to
discharge his duties respecting the plan solely in the interest of the
participants and beneficiaries of the plan and in a prudent fashion in
accordance with section 404(a)(1)(B) of the Act; nor does it affect the
requirement of section 401(a) of the Code that the plan must operate
for the exclusive benefit of the
[[Page 59468]]
employees of the employer maintaining the plan and their beneficiaries;
(2) These exemptions are supplemental to and not in derogation of,
nay other provisions of the Act and/or the Code, including statutory or
administrative exemptions and transactional rules. Furthermore, the
fact that a transaction is subject to an administrative or statutory
exemption is not dispositive of whether the transaction is in fact a
prohibited transaction; and
(3) The availability of these exemptions is subject to the express
condition that the material facts and representations contained in each
application accurately describes all material terms of the transaction
which is the subject of the exemption.
Signed at Washington, D.C., this 19th day of November, 1996.
Ivan Strasfeld,
Director or Exemption Determinations, Pension and Welfare Benefits
Administration, U.S. Department of Labor.
[FR Doc. 96-29901 Filed 11-21-96; 8:45 am]
BILLING CODE 4510-29-M
