[Federal Register Volume 64, Number 216 (Tuesday, November 9, 1999)]
[Notices]
[Pages 61136-61141]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-29266]
-----------------------------------------------------------------------
DEPARTMENT OF LABOR
Pension and Welfare Benefits Administration
[Prohibited Transaction Exemption 99-44; Exemption Application No. D-
10257, et al.]
Grant of Individual Exemptions; Pacific Life Corporation (Pacific
Life), et al.
AGENCY: Pension and Welfare Benefits Administration, Labor.
ACTION: Grant of individual exemptions.
-----------------------------------------------------------------------
SUMMARY: This document contains exemptions issued by the Department of
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, DC. 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.
Pacific Life Corporation (Pacific Life) Located in Newport Beach,
California; Exemption
[Prohibited Transaction Exemption 99-44; Exemption Application No. D-
10257]
Section I--Transactions
(a) The restrictions of sections 406(a), 406(b)(1) and (b)(2) of
the Act and the taxes imposed by section 4975(a) and (b) of the Code,
by reason of section 4975(c)(1)(A) through (E) of the Code, shall not
apply:
(1) For the period from January 22, 1993 until October 31, 1998, to
the sale by Pacific Life of an ``actively-managed synthetic''
guaranteed investment contract (Actively-Managed Synthetic GIC) to an
employee benefit plan for which Pacific Life was a party in interest
with respect to such plan (Plan) in instances where Pacific Life or an
Affiliate manages the Plan's assets relating to the Synthetic GIC (an
Affiliated-Manager GIC); and
(2) As of January 22, 1993, to the purchase or retention of the
Affiliated-Manager GICs, described in section (a)(1) above, by the
Plans and the payments made by Pacific Life to the Plans pursuant to
the terms and conditions of the Affiliated-Manager GICs, provided that
the general conditions set forth in section II, the specific conditions
set forth in section III, the retroactive conditions set forth in
section IV, and the record-keeping requirements set forth in section V
below are met.
(b) The restrictions of sections 406(a) of the Act and the taxes
imposed by section 4975(a) and (b) of the Code, by reason of section
4975(c)(1)(A) through (D) of the Code, shall not apply:
(1) As of January 22, 1993, to the sale by Pacific Life of an
Actively-Managed Synthetic GIC to a Plan in instances where the Plan's
assets relating to the Actively-Managed Synthetic GIC are managed by an
investment manager who is unaffiliated with Pacific Life and
[[Page 61137]]
its Affiliates (an Unaffiliated-Manager GIC); and
(2) As of January 22, 1993, to the purchase or retention of the
Unaffiliated-Manager GICs, described in section (b)(1) above, by the
Plans and the payments made by Pacific Life to the Plans pursuant to
the terms and conditions of the Unaffiliated-Manager GICs, provided
that the general conditions set forth in section II and the record-
keeping requirements set forth in section V below are met.
Section II--General Conditions
(a) Prior to the sale of an Actively-Managed Synthetic GIC, an
independent fiduciary of each Plan receives a full and detailed written
disclosure of all material features of the Actively-Managed Synthetic
GIC, including all applicable fees and charges;
(b) Following receipt of such disclosure, the Plan's independent
fiduciary approves in writing the purchase of the Actively-Managed
Synthetic GIC on behalf of the Plan;
(c) All fees and charges imposed under any such Actively-Managed
Synthetic GIC are not in excess of reasonable compensation within the
meaning of section 408(b)(2) of the Act;
(d) Each Actively-Managed Synthetic GIC will specifically provide
an objective means of determining the fair market value of the
securities owned by the Plan pursuant to the Actively-Managed Synthetic
GIC;
(e) Each Actively-Managed Synthetic GIC will specifically provide
an objective formula for determining the interest rates to be credited
periodically under the Actively-Managed Synthetic GIC;
(f) Pacific Life does not maintain custody of the assets which are
the subject of the Actively-Managed Synthetic GIC or commingle those
assets with any other funds under its management;
(g) The assets subject to the Actively-Managed Synthetic GIC are
invested in high quality fixed income investments specified in the
investment guidelines agreed to, or provided by, the independent
fiduciary;
(h) The Plan may, at any time, terminate the Actively-Managed
Synthetic GIC;
(i) The fee charged under the arrangement is negotiated between
Pacific Life and a Plan fiduciary independent of Pacific Life;
(j) At all times during the term of each Actively-Managed Synthetic
GIC, a Plan may elect to receive such lump sum amount equal to the
Contract Value Record and shall be entitled to receive a lump sum
payment no more than 3 (three) years after making an election which
will establish a maturity date;
(k) The Plan may establish a maturity date by notifying Pacific
Life in writing of an intent to establish a maturity date. Each
Actively-Managed Synthetic GIC will mature within three (3) years after
the Plan notifies Pacific Life of its intent to establish a maturity
date; and
(l) Actively-Managed Synthetic GICs are sold only to Plans which
have at least $25 million in assets.
Section III--Specific Conditions
(a) With respect to any Affiliated-Manager GIC described in section
I(a), Pacific Life will notify a Plan's independent fiduciary, in
writing no later than 30 days prior to the date on which the Credited
Rate is to be reset, advising such fiduciary that the Plan may replace
Pacific Life or its affiliate as investment manager, 1 at no
expense to the Plan, when the Credited Rate with respect to any
Affiliated-Manager GIC described in section I(a) is expected to be less
than three (3) percent at the next reset of the Credited Rate.
---------------------------------------------------------------------------
\1\ Although Pacific Life must approve the new investment
manager selected by the Plan, Pacific Life represents that it will
not unreasonably withhold such approval.
---------------------------------------------------------------------------
Section IV--Retroactive Conditions
(a) At no time between January 22, 1993 and October 31, 1998, was
the Credited Rate with respect to any Affiliated-Manager GIC described
in section I(a) less than 3% (three percent) per annum; and
(b) At no time between January 22, 1993 and October 31, 1998, did a
Plan elect to receive an amount equal to the Contract Value Record
pursuant to an Affiliated-Manager GIC described in section I(a).
Section V--Recordkeeping
(a) The Applicant maintains or causes to be maintained for a period
of six years from the date of the transaction such records as are
necessary to enable the persons described in paragraph (b) of this
section V of this exemption, to determine whether the conditions of
this exemption have been met, except that: (1) a prohibited transaction
will not be deemed to have occurred if, due to circumstances beyond the
control of the Applicant or its affiliates, such records are lost or
destroyed prior to the end of such six year period; and (2) no party in
interest, other than the Applicant or an affiliate, shall be subject to
the civil penalty that may be accessed under section 502(i) of the Act,
or to the taxes imposed by section 4975(a) and (b) of the Code, if the
records are not maintained, or are not available for examination as
required by paragraph (b) below.
(b)(1) Notwithstanding anything to the contrary in subsections
(a)(2) and (b) of section 504 of the Act, the records referred to in
paragraph (a) of this section V are unconditionally available at their
customary location for examination during normal business hours by: (i)
any duly authorized employee or representative of the Department of
Labor or the Internal Revenue Service; (ii) any fiduciary of the plan
or any duly authorized employee or representative of such fiduciary;
(iii) any participant or beneficiary of the plan or duly authorized
representative of such participant or beneficiary; (iv) any employer of
plan participants and beneficiaries; and (v) any employee organization
any of whose members are covered by such plan; and
(2) None of the persons described in paragraph (b)(1)(ii) through
(v) shall be authorized to examine trade secrets of the applicant, or
commercial or financial information which is privileged or
confidential.
Section VI--Definitions
For purposes of this exemption:
(A) ``Actively-Managed Synthetic GIC'' means: a synthetic
guaranteed investment contact, which under certain circumstances
provides a guarantee that a pool of underlying plan assets which may be
managed by Pacific Life, an affiliate of Pacific Life, or an unrelated
investment manager, will perform at a specified rate of return.
(B) ``Affiliated-Manager GIC'' means: an Actively-Managed Synthetic
GIC under which Pacific Life guarantees the performance of an related
investment manager.
(C) ``Unaffiliated-Manager GIC'' means: an Actively-Managed
Synthetic GIC under which Pacific Life guarantees the performance of an
unrelated investment manager.
(D) ``Contract Value Record'' means: a bookkeeping account
maintained by Pacific Life, pursuant to each Actively-Managed Synthetic
GIC. Initially, the Contract Value Record will be credited with the
value of the Investment Assets (defined in (F) below), and subsequently
with a credited rate of interest (Credited Rate, defined in (E) below),
which shall be reset periodically as agreed to at the inception of the
Actively-Managed Synthetic GIC.
(E) ``Credited Rate'' means: the interest rate credited to the
Contract Value Record. The Credited Rate is reset periodically, in
accordance with an objective formula established under the
[[Page 61138]]
terms of the Actively-Managed Synthetic GIC.
(F) ``Investment Assets'' means: the underlying portfolio of
investment assets, title to which remains with the Plan.
(G) ``Managed Portfolio'' means: the total of all Investment Assets
which comprise the portfolio which is managed by either an Affiliated-
Manager or an Unaffiliated-Manager.
(H) ``Withdrawals'' means: a participant initiated payment or
transfer to other investment options available under the Plan.
EFFECTIVE DATE: This exemption is effective for the period from January
22, 1993, until October 31, 1998, for the transactions described in
section I(a)(1). Section I(a)(2) of the exemption will be effective for
the retention by the Plan of the Affiliated-Manager GICs until the
maturity date of such GICs. Lastly, the exemption is effective as of
January 22, 1993, for the transactions described in section I(b)
(including the continuing retention of any Unaffiliated-Manager GICs).
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 July 22, 1999, at 64 FR
39533.
Written Comments: One written comment, addressing two issues, was
received from the applicant, Pacific Life, regarding the notice of
proposed exemption (the Notice).
With respect to the first issue, the applicant states that the
relief provided for in the operative language of the Notice regarding
``synthetic'' guaranteed investment contracts that are actively-managed
by Pacific Life or an Affiliate (i.e., Affiliated-Manager GICs) is
effective only for contracts sold on or before August 12, 1998. The
applicant represents that this date was established based on the belief
that no existing Affiliated-Manager GICs had been entered into after
that date. After the Notice was published in the Federal Register on
July 22, 1998, the applicant discovered that one Plan client, which had
previously held a traditional GIC issued by Pacific Life, requested
conversion of that GIC contract to an Affiliated-Manager GIC prior to
August 12, 1998, but the parties did not actually execute this
Affiliated-Manager GIC until October 1998. Therefore, Pacific Life
requests that references in the Notice to August 12, 1998 be changed to
October 31, 1998 in order to accommodate the execution of this
Affiliated-Manager GIC.
In response to the applicant's comment, the Department has modified
Section I(a)(1) and Section IV(a) and (b) of the exemption, as well as
the effective date paragraph at the end of the operative language of
the exemption, by substituting October 31, 1998 for August 12, 1998.
With respect to the second issue, Section II(g) of the Notice
requires that the assets subject to the Actively-Managed Synthetic GIC
(i.e., Investment Assets) must be invested only in high quality fixed
income investments specified in the investment guidelines agreed to, or
provided by, the independent fiduciary. The summary of facts and
representations (the Summary) contained in the Notice also states that
the Investment Assets will be invested in securities issued or
guaranteed by the Federal government, or an instrumentality thereof, or
other investment grade debt securities whose value is readily
determinable and which can thus be objectively valued (e.g., see
Paragraph 8 of the Summary, 64 FR at 39535).
The applicant's comments state that certain Plans have requested
that a portion of the Investment Assets be allocated to non-investment
grade securities in order to enhance the rate of return to such Plans,
pursuant to certain investment guidelines established by independent
Plan fiduciaries. However, the applicant represents that at least 90%
of the Investment Assets will be allocated to investment grade
securities at all times. Thus, for purposes of this exemption, Pacific
Life wishes to clarify that while the Investment Assets will be
primarily allocated to investment grade securities, a small percentage
of such Assets may be non-investment grade securities.
The Department acknowledges the applicant's clarification to the
information and representations contained in the Summary regarding
investment grade securities. In this regard, the Department notes that
the requirements of Section II(g) of the exemption, relating to the
need for ``* * * high quality fixed income investments,'' will be
deemed to be met if at least 90% of the Investment Assets are allocated
at all times to investment grade securities. Further, in response to
the applicant's comment, the Department has modified the language of
Section II(g) of the exemption by deleting the word ``only'' from the
phrase referring to high quality fixed income investments.
Accordingly, the Department has determined to grant the exemption
as modified herein.
FOR FURTHER INFORMATION CONTACT: Janet Schmidt of the Department,
telephone (202) 219-8883. (This is not a toll-free number.)
Donaldson, Lufkin & Jenrette Securities Corporation (DLJ) Located
in New York, NY; Exemption
[Prohibited Transaction Exemption (PTE) 99-45; Application No. D-10772]
Section I. Covered Transactions
A. The restrictions of section 406(a)(1))(A) through (D) 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, effective September 24, 1999, to any purchase or sale of a
security between certain affiliates of DLJ which are foreign broker-
dealers (the Foreign Affiliates, as defined below) and employee benefit
plans (the Plans) with respect to which the Foreign Affiliates are
parties in interest, including options written by a Plan, DLJ or a
Foreign Affiliate provided that the following conditions and the
General Conditions of Section II, are satisfied:
(1) The Foreign Affiliate customarily purchases and sells
securities for its own account in the ordinary course of its business
as a broker-dealer;
(2) The terms of any transaction are at least as favorable to the
Plan as those which the Plan could obtain in a comparable arm's length
transaction with an unrelated party; and
(3) Neither the Foreign Affiliate nor an affiliate thereof has
discretionary authority or control with respect to the investment of
the Plan assets involved in the transaction, or renders investment
advice (within the meaning of 29 CFR 2510.3-21(c)) with respect to
those assets, and the Foreign Affiliate is a party in interest or
disqualified person with respect to the Plan assets involved in the
transaction solely by reason of section 3(14)(B) of the Act or section
4975(e)(2)(B) of the Code, or by reason of a relationship to a person
described in such sections. For purposes of this paragraph, the Foreign
Affiliate shall not be deemed to be a fiduciary with respect to Plan
assets solely by reason of providing securities custodial services for
a Plan.
B. The restrictions of sections 406(a)(1)(A) through (D) and
406(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
(D) of the Code, shall not apply, effective September 24, 1999, to any
extension of credit to the Plans by the Foreign Affiliates to permit
the settlement of securities transactions, regardless of whether they
are effected on an agency or a principal basis, or in
[[Page 61139]]
connection with the writing of options contracts, provided that the
following conditions and the General Conditions of Section II are
satisfied:
(1) The Foreign Affiliate is not a fiduciary with respect to any
Plan assets involved in the transaction, unless no interest or other
consideration is received by the Foreign Affiliate or an affiliate
thereof, in connection with such extension of credit; and
(2) Any extension of credit would be lawful under the Securities
Exchange Act of 1934 (the 1934 Act) and any rules or regulations
thereunder if such Act, rules or regulations were applicable.
C. The restrictions of section 406(a)(1)(A) through (D) 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, effective September 24, 1999, to the lending of securities
to the Foreign Affiliates by the Plans, provided that the following
conditions and the General Conditions of Section II are satisfied:
(1) Neither the Foreign Affiliate nor an affiliate thereof has
discretionary authority or control with respect to the investment of
Plan assets involved in the transaction, or renders investment advice
(within the meaning of 29 CFR 2510.3-21(c)) with respect to those
assets;
(2) The Plan receives from the Foreign Affiliate (by physical
delivery or by book entry in a securities depository, wire transfer, or
similar means) by the close of business on the day on which the loaned
securities are delivered to the Foreign Affiliate, collateral
consisting of cash, securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities, or irrevocable U.S.
bank letters of credit issued by persons other than the Foreign
Affiliate or an affiliate of the Foreign Affiliate, or any combination
thereof. All collateral shall be in U.S. dollars, or dollar-denominated
securities or bank letters of credit, and shall be held in the United
States;
(3) The collateral has, as of the close of business on the
preceding business day, a market value equal to at least 100 percent of
the then market value of the loaned securities (or, in the case of
letters of credit, a stated amount equal to same);
(4) The loan is made pursuant to a written loan agreement (the Loan
Agreement), which may be in the form of a master agreement covering a
series of securities lending transactions, and which contains terms at
least as favorable to the Plan as those the Plan could obtain in an
arm's length transaction with an unrelated party;
(5) In return for lending securities, the Plan either (a) receives
a reasonable fee, which is related to the value of the borrowed
securities and the duration of the loan, or (b) has the opportunity to
derive compensation through the investment of cash collateral. In the
latter case, the Plan may pay a loan rebate or similar fee to the
Foreign Affiliate, if such fee is not greater than the Plan would pay
an unrelated party in a comparable arm's length transaction with an
unrelated party;
(6) The Plan receives at least the equivalent of all distributions
on the borrowed securities made during the term of the loan, including,
but not limited to, cash dividends, interest payments, shares of stock
as a result of stock splits and rights to purchase additional
securities that the Plan would have received (net of tax withholdings)
2 had it remained the record owner of such securities.
---------------------------------------------------------------------------
\2\ The Department notes the applicant's representation that
dividends and other distributions on foreign securities payable to a
lending Plan may be subject to foreign tax withholdings and that the
Foreign Affiliate will always put the Plan back in at least as good
a position as it would have been in had it not lent the securities.
---------------------------------------------------------------------------
(7) If the market value of the collateral as of the close of
trading on a business day falls below 100 percent of the market value
of the borrowed securities as of the close of trading on that day, the
Foreign Affiliate delivers additional collateral, by the close of the
Plan's business on the following business day, to bring the level of
the collateral back to at least 100 percent. However, if the market
value of the collateral exceeds 100 percent of the market value of the
borrowed securities, the Foreign Affiliate may require the Plan to
return part of the collateral to reduce the level of the collateral to
100 percent;
(8) Before entering into a Loan Agreement, the Foreign Affiliate
furnishes to the independent Plan fiduciary (a) the most recent
available audited statement of the Foreign Affiliate's financial
condition, (b) the most recent available unaudited statement of its
financial condition (if more recent than the audited statement), and
(c) a representation that, at the time the loan is negotiated, there
has been no material adverse change in its financial condition that has
not been disclosed since the date of the most recent financial
statement furnished to the independent Plan fiduciary. Such
representation may be made by the Foreign Affiliate's agreeing that
each loan of securities shall constitute a representation that there
has been no such material adverse change;
(9) The Loan Agreement and/or any securities loan outstanding may
be terminated by the Plan at any time, whereupon the Foreign Affiliate
shall deliver certificates for securities identical to the borrowed
securities (or the equivalent thereof in the event of reorganization,
recapitalization or merger of the issuer of the borrowed securities) to
the Plan within (a) the customary delivery period for such securities,
(b) five business days, or (c) the time negotiated for such delivery by
the Plan and the Foreign Affiliate, whichever is least, or,
alternatively such period as permitted by Prohibited Transaction Class
Exemption (PTCE) 81-6 (46 FR 7527, January 23, 1981, as amended at 52
FR 18754, May 19, 1987), as it may be amended or superseded.\3\
---------------------------------------------------------------------------
\3\ PTCE 81-6 provides an exemption under certain conditions
from section 406(a)(1)(A) through (D) of the Act and the
corresponding provisions of section 4975(c) of the Code for the
lending of securities that are assets of an employee benefit plan to
a U.S. broker-dealer registered under the 1934 Act (or exempted from
registration under the 1934 Act as a dealer in exempt Government
securities, as defined therein).
---------------------------------------------------------------------------
(10) In the event that the loan is terminated and the Foreign
Affiliate fails to return the borrowed securities or the equivalent
thereof within the time described in paragraph (9), the Plan may
purchase securities identical to the borrowed securities (or their
equivalent as described above) and may apply the collateral to the
payment of the purchase price, any other obligations of the Foreign
Affiliate under the Loan Agreement, and any expenses associated with
the sale and/or purchase. The Foreign Affiliate is obligated to pay,
under the terms of the Loan Agreement, and does pay, to the Plan, the
amount of any remaining obligations and expenses not covered by the
collateral, plus interest at a reasonable rate. Notwithstanding the
foregoing, the Foreign Affiliate may, in the event it fails to return
borrowed securities as described above, replace non-cash collateral
with an amount of cash not less than the then current market value of
the collateral, provided that such replacement is approved by the
independent Plan fiduciary; and
(11) The independent Plan fiduciary maintains the situs of the Loan
Agreement in accordance with the indicia of ownership requirements
under section 404(b) of the Act and the regulations promulgated under
29 CFR 2550.404b-1. However, in the event that the independent Plan
fiduciary does not maintain the situs of the Loan Agreement in
accordance with the indicia of ownership requirements of section 404(b)
of the Act, the Foreign
[[Page 61140]]
Affiliate shall not be subject to the civil penalty which may be
assessed under section 502(i) of the Act, or the taxes imposed by
section 4975(a) and (b) of the Code.
If the Foreign Affiliate fails to comply with any condition of this
exemption in the course of engaging in a securities lending
transaction, the Plan fiduciary which caused the Plan to engage in such
transaction shall not be deemed to have caused the Plan to engage in a
transaction prohibited by section 406(a)(1)(A) through (D) of the Act
solely by reason of the Foreign Affiliate's failure to comply with the
conditions of the exemption.
Section II. General Conditions
A. The Foreign Affiliate is a registered broker-dealer subject to
regulation by a governmental agency, as described in Section III. B.,
and is in compliance with all applicable rules and regulations thereof
in connection with any transactions covered by this exemption;
B. The Foreign Affiliate, in connection with any transactions
covered by this exemption, is in compliance with the requirements of
Rule 15a-6 (17 CFR 240.15a-6) of the 1934 Act, and Securities and
Exchange Commission interpretations thereof, providing for foreign
affiliates a limited exemption from U.S. broker-dealer registration
requirements.
C. Prior to the transaction, the Foreign Affiliate enters into a
written agreement with the Plan in which the Foreign Affiliate consents
to the jurisdiction of the courts of the United States for any civil
action or proceeding brought in respect of the subject transactions.
D. The Foreign Affiliate maintains, or causes to be maintained,
within the United States for a period of six years from the date of any
transaction such records as are necessary to enable the persons
described in paragraph E. to determine whether the conditions of this
exemption have been met except that--
(1) A party in interest with respect to a Plan, other than the
Foreign Affiliate, shall not be subject to a civil penalty under
section 502(i) of the Act or the taxes imposed by section 4975(a) or
(b) of the Code, if such records are not maintained, or are not
available for examination, as required by paragraph E.; and
(2) A prohibited transaction shall not be deemed to have occurred
if, due to circumstances beyond the control of the Foreign Affiliate,
such records are lost or destroyed prior to the end of such six year
period;
E. Notwithstanding the provisions of subsections (a)(2) and (b) of
section 504 of the Act, the Foreign Affiliate makes the records
referred to above in paragraph D., unconditionally available for
examination during normal business hours at their customary location to
the following persons or an authorized representative thereof:
(1) The Department, the Internal Revenue Service or the SEC;
(2) Any fiduciary of a Plan;
(3) Any contributing employer to a Plan;
(4) Any employee organization any of whose members are covered by a
Plan; and
(5) Any participant or beneficiary of a Plan.
However, none of the persons described above in paragraphs (2)-(5)
of this paragraph E. shall be authorized to examine trade secrets of
the Foreign Affiliate, or any commercial or financial information which
is privileged or confidential.
F. Prior to any Plan's approval of any transaction with a Foreign
Affiliate, the Plan is provided copies of the proposed and final
exemption with respect to the exemptive relief granted herein.
Section III. Definitions
For purposes of this exemption,
A. The term ``DLJ'' as referred to in Parts A., B., and C. of
Section I., means Donaldson, Lufkin & Jenrette Securities Corporation.
B. The term ``affiliate'' of another person shall include:
(1) Any person directly or indirectly, through one or more
intermediaries, controlling, controlled by, or under common control
with such other person;
(2) Any officer, director, or partner, employee or relative (as
defined in section 3(15) of the Act) of such other person; and
(3) Any corporation or partnership of which such other person is an
officer, director or partner. (For purposes of this definition, the
term ``control'' means the power to exercise a controlling influence
over the management or policies of a person other than an individual.)
C. The term ``Foreign Affiliate,'' shall mean a current or future
affiliate of DLJ that is subject to regulation as a broker-dealer by--
(1) The Securities and Futures Authority, in the United Kingdom; or
(2) The Australian Securities & Investments Commission in
Australia.
C. The term ``security'' shall include equities, fixed income
securities, options on equity and on fixed income securities,
government obligations, and any other instrument that constitutes a
security under U.S. securities laws. The term ``security'' does not
include swap agreements or other notional principal contracts.
EFFECTIVE DATE: This exemption is effective as of September 24, 1999.
For a more complete statement of the facts and representations
supporting this exemption, refer to notice of proposed exemption (the
Notice) published on September 24, 1999 at 64 FR 51797.
Written Comments
The Department received one written comment with respect to the
Notice and no requests for a public hearing. The comment, which was
submitted by DLJ, requested that the exemption be made retroactive to
September 24, 1999, the date the Notice was published in the Federal
Register, to ensure that any transactions entered into on or after the
publication date of the Notice by Plans and the Foreign Affiliates
would be covered by the requested exemption. In response to this
comment, the Department has made the exemption effective as of
September 24, 1999.
For further information regarding DLJ's comment or other matters
discussed herein, interested persons are encouraged to obtain copies of
the exemption application file (Exemption Application No. D-10772) the
Department is maintaining in this case. The complete application file,
as well as all supplemental submissions received by the Department, are
made available for public inspection in the Public Documents Room of
the Pension and Welfare Benefits Administration, Room N-5638, U.S.
Department of Labor, 200 Constitution Avenue, N.W., Washington, D.C.
20210.
Accordingly, after giving full consideration to the entire record,
including the written comment provided by the DLJ, the Department has
made the aforementioned change to the Notice and has decided to grant
the exemption subject to the modification described above.
FOR FURTHER INFORMATION CONTACT: Ms. Jan D. Broady 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
[[Page 61141]]
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
employees of the employer maintaining the plan and their beneficiaries;
(2) These exemptions are supplemental to and not in derogation of,
any 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 are true and complete and accurately describe all material
terms of the transaction which is the subject of the exemption. In the
case of continuing exemption transactions, if any of the material facts
or representations described in the application change after the
exemption is granted, the exemption will cease to apply as of the date
of such change. In the event of any such change, application for a new
exemption may be made to the Department.
Signed at Washington, D.C., this 4th day of November, 1999.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits
Administration, U.S. Department of Labor.
[FR Doc. 99-29266 Filed 11-8-99; 8:45 am]
BILLING CODE 4510-29-P
