[Federal Register Volume 60, Number 146 (Monday, July 31, 1995)]
[Notices]
[Pages 39011-39013]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-18718]
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DEPARTMENT OF LABOR
Pension and Welfare Benefits Administration
[Prohibited Transaction Exemption 95-64; Exemption Application No. D-
09878, et al.]
Grant of Individual Exemptions; Tenneco, Inc., Health Care Plan
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
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.
Tenneco, Inc. Health Care Plan (the Plan) Located in Houston, Texas
[Prohibited Transaction Exemption 95-64; Exemption Application No. D-
09878]
Exemption
The restrictions of sections 406(a), 406(b)(1) and (b)(2), and
407(a) of the Act shall not apply to the contribution to the Plan of
common stock (the Stock) of Tenneco, Inc. (Tenneco) by Tenneco or any
of its subsidiaries, provided the following conditions are satisfied:
(a) The Plan will dispose of the Stock received within 2 business days
of receipt, either by sale on the open market or by sale to Tenneco;
(b) any sale of the Stock from the Plan to Tenneco will comply with
conditions (1) and (2) of section 408(e) of the Act; and (c) Tenneco
will pay any and all transactional costs for any sales by the Plan on
the open market.
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 May 22, 1995 at 60 FR
27124.
Written Comments: The Department received nine written comments and
numerous telephone inquiries with respect to the proposed exemption in
which the writers and callers sought additional information concerning
the proposed exemption. The Department provided this information by
telephone. In addition, the Department received one written comment
requesting that the Department deny the exemption application. The
commentator complained about the increase in his required contribution
to the Plan, and also stated that he disagreed with the applicant's
representation that the market price of the Stock will not be diluted
by the infusion of shares in the market as a result of the subject
transaction.
The applicant responded to this comment by stating that the
required increases in participants' contributions to the Plan were made
for legitimate business reasons and were unrelated to the transaction
which is the subject of the exemption request. With regard to the
commentator's second point, the applicant responded that the sale of
the Stock by the Plan should not lead to a dilution of the price of the
Stock because the volume of Stock passing through the Plan will be
relatively small. It is intended that the Plan will receive a
contribution from Tenneco (and sell each share immediately thereafter)
of approximately 691,000 shares of the Stock over a six-month period.
In 1994, the average daily trading volume of Stock on the New York
Stock Exchange was approximately 540,000 shares per day. Because the
number of shares involved in the subject transaction is relatively
small compared to the general trading volume of the Stock, the
applicant anticipates that there will be no effect on the market price
of the Tenneco shares.
The Department has considered the entire record, including the
comments submitted and the applicant's responses thereto, and has
determined to grant the exemption as it was proposed.
For Further Information Contact: Gary H. Lefkowitz of the
Department, telephone (202) 219-8881. (This is not a toll-free number.)
[[Page 39012]]
The Brown Group, Inc. 401(k) Savings Plan (the Plan) Located in St.
Louis, Missouri
[Prohibited Transaction Exemption 95-65; Exemption Application No. D-
09951]
Exemption
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 guarantee (the Guarantee) by The Brown Group,
Inc. (the Employer), the sponsor of the Plan, of amounts due the Plan
with respect to a guaranteed investment contract issued by
Confederation Life (Confederation Life), including the Employer's
potential cash advances to the Plan (the Advances) pursuant to the
Guarantee and the potential repayment of the Advances (the Repayments);
provided that the following conditions are satisfied:
(A) No interest and/or expenses are paid by the Plan;
(B) The Advances are made in lieu of amounts due the Plan under the
terms of the GIC;
(C) The Repayments are restricted to cash proceeds actually
received by the Plan from Confederation Life or any other entity making
payment with respect to Confederation Life's obligations under the
terms of the GIC, or from the sale or transfer of the GIC to unrelated
third parties (the GIC Proceeds), and no other Plan assets are used to
make the Repayments; and
(D) The Repayments will be waived to the extent the Advances exceed
the GIC Proceeds.
For a more complete statement of the facts and representations
supporting this exemption, refer to the notice of proposed exemption
published on May 10, 1995 at 60 FR 24903.
For Further Information Contact: Ronald Willett of the Department,
telephone (202) 219-8881. (This is not a toll-free number.)
BlackRock Financial Management L.P. (BlackRock) Located in New York,
New York
[Prohibited Transaction Exemption 95-66; Application No. D-09963]
Exemption
The restrictions of sections 406(a)(1)(A) 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) of the Code, shall not apply
to the proposed cross-trading of equity or debt securities between
various accounts managed by BlackRock (the Accounts) where at least one
Account involved in any cross-trade is an employee benefit plan account
(Plan Account) for which BlackRock acts as a fiduciary.
Conditions and Definitions
This exemption is subject to the following conditions:
1. (a) A Plan's participation in the cross-trade program is subject
to a written authorization executed in advance by a fiduciary with
respect to each such Plan, the fiduciary of which is independent of
BlackRock;
(b) The authorization referred to in paragraph (a) is terminable at
will without penalty to such Plan, upon receipt by BlackRock of written
notice of termination; and
(c) Before an authorization is made, the authorizing Plan fiduciary
must be furnished with any reasonably available information necessary
for the authorizing fiduciary to determine whether the authorization
should be made, including (but not limited to) a copy of this
exemption, an explanation of how the authorization may be terminated, a
description of BlackRock's cross-trade practices, and any other
reasonably available information regarding the matter that the
authorizing fiduciary requests.
2. (a) No more than three (3) business days prior to the execution
of any cross-trade transaction, BlackRock must inform an independent
fiduciary of each Plan involved in the cross-trade transaction: (i)
that BlackRock proposes to buy or sell specified securities in a cross-
trade transaction if an appropriate opportunity is available; (ii) the
current trading price for such securities; and (iii) the total number
of shares to be acquired or sold by each such Plan;
(b) Prior to each cross-trade transaction, the transaction must be
authorized either orally or in writing by the independent fiduciary of
each Plan involved in the cross-trade transaction;
(c) If a cross-trade transaction is authorized orally by an
independent fiduciary, BlackRock will provide written confirmation of
such authorization in a manner reasonably calculated to be received by
such independent fiduciary within one (1) business day from the date of
such authorization;
(d) The authorization referred to in this paragraph (2) will be
effective for a period of three (3) business days; and
(e) No more than ten (10) days after the completion of a cross-
trade transaction, the independent fiduciary authorizing the cross-
trade transaction must be provided a written confirmation of the
transaction and the price at which the transaction was executed.
3. (a) Each cross-trade transaction is effected at the current
market value for the security on the date of the transaction, which
shall be, for equity securities, the closing price for the security on
the date of the transaction, and for debt securities, the fair market
value for the security as determined in accordance with paragraph (b)
of Rule 17a-7 issued by the Securities and Exchange Commission (SEC)
under the Investment Company Act of 1940 (the 1940 Act);
(b) The cross-trade transaction is effected at a price that: (1) in
the case of any equity security, is within 10 percent of the closing
price for the security on the day before the date on which BlackRock
receives authorization from the independent Plan fiduciary to engage in
the cross-trade transaction; and (2) in the case of any debt security,
is within 10 percent of the fair market value of the security on the
last valuation date preceding the date on which BlackRock receives
authorization by the independent Plan fiduciary to engage in the cross-
trade transaction as determined in accordance with SEC Rule 17a-7(b) of
the 1940 Act;
(c) The securities involved in the cross-trade transaction are
those for which there is a generally recognized market;
(d) The cross-trade transaction is effected only where the trade
involves less than five (5) percent of the aggregate average daily
trading volume of the securities which are the subject of the
transaction for the week immediately preceding the authorization of the
transaction. A cross-trade transaction may exceed this limit only by
express authorization of independent fiduciaries on behalf of Plans
affected by the transaction, prior to the execution of the cross-trade.
4. For all accounts participating in the cross-trading program, if
the number of units of a particular security which any accounts need to
sell on a given day is less than the number of units of such security
which any accounts need to buy, or vice versa, the direct cross-trade
opportunity must be allocated among the buying or selling accounts on a
pro rata basis.
5. (a) BlackRock furnishes the authorizing Plan fiduciary at least
once every three months, and not later than 45 days following the
period to which it relates, a report disclosing: (i) a list of all
cross-trade transactions engaged in on behalf of the Plan; and (ii)
with respect to each cross-trade transaction, the prices at which the
securities involved in the transaction were traded on the date of such
transaction; and
[[Page 39013]]
(b) The authorizing Plan fiduciary is furnished with a summary of
the information required under this paragraph 4(a) at least once per
year. The summary must be furnished within 45 days after the end of the
period to which it relates, and must contain the following: (i) a
description of the total amount of Plan assets involved in cross-trade
transactions during the period; (ii) a description of BlackRock's
cross-trade practices, if such practices have changed materially during
the period covered by the summary; (iii) a statement that the Plan
fiduciary's authorization of cross-trade transactions may be terminated
upon receipt by BlackRock of the fiduciary's written notice to that
effect; and (iv) a statement that the Plan fiduciary's authorization of
the cross-trade transactions will continue in effect unless it is
terminated.
6. The cross-trade transaction does not involve assets of any Plan
established or maintained by BlackRock or any of its affiliates.
7. All Plans that participate in the cross-trade program have total
assets of at least $25 million.
8. BlackRock receives no fee or other compensation (other than its
agreed upon investment management fee) with respect to any cross-trade
transaction.
9. BlackRock is a discretionary investment manager with respect to
Plans participating in the cross-trade program.
10. For purposes of this exemption:
(a) ``Cross-trade transaction'' means a purchase and sale of
securities between accounts for which BlackRock or an affiliate is
acting as an investment manager;
(b) ``Affiliate'' means any person directly or indirectly through
one or more intermediaries, controlling, controlled by, or under common
control with BlackRock;
(c) ``Plan Account'' means an account holding assets of one or more
employee benefit plans that are subject to the Act, for which BlackRock
acts as a fiduciary.
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 June 7, 1995, at 60 FR
30111.
For Further Information Contact: Mr. E.F. Williams of the
Department, telephone (202) 219-8194. (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 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 accurately describes all material terms of the transaction
which is the subject of the exemption.
Signed at Washington, D.C., this 26th day of July 1995.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits
Administration, U.S. Department of Labor.
[FR Doc. 95-18718 Filed 7-28-95; 8:45 am]
BILLING CODE 4510-29-P
