[Federal Register Volume 59, Number 158 (Wednesday, August 17, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-20009]
[[Page Unknown]]
[Federal Register: August 17, 1994]
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DEPARTMENT OF LABOR
[Prohibited Transaction Exemption 94-61; Exemption Application No. D-
9230, et al.]
Grant of Individual Exemptions; Batterymarch Financial
Management, et al.
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.
Batterymarch Financial Management (BFM) Located in Boston,
Massachusetts; Exemption
[Prohibited Transaction Exemption 94-61; Application No. D-9230]
The restrictions of section 406(b)(2) of the Act shall not apply to
the proposed cross-trading of equity securities between various
accounts managed by BFM (the Accounts) where at least one Account
involved in any cross-trade is an employee benefit plan account (Plan
Account) for which BFM acts as a fiduciary.
Conditions and Definitions
This exemption is subject to the following conditions:
1. (a) Each Plan Account's participation in the cross-trade program
is subject to BFM's receipt of a written authorization executed in
advance by a qualified Plan fiduciary, which is independent of BFM and
its Affiliates (the Independent Fiduciary).
(b) The authorization referred to in paragraph (a) is terminable at
will, without penalty to the Plan Account, upon receipt by BFM of
written notice of termination.
(c) Before an authorization is made for any Account, an independent
account representative, which must be an Independent Fiduciary in the
case of a Plan Account (collectively, an Independent Account
Representative) must be furnished with any reasonable available
information necessary for the Independent Account Representative to
determine whether the authorization should be made, including (but not
limited to) a copy of the proposed and final exemption issued by the
Department, an explanation of how the authorization may be terminated,
a description of BFM's cross-trade practices, and any other information
requested by the Independent Account Representative.
2. Each cross-trade transaction must satisfy the following:
(a) The cross-trade opportunity must be triggered as a result of an
Account participating in the program experiencing a need to sell equity
securities arising from one of the following three circumstances:
(i) the Independent Account Representative specifically directs
that all of the assets in the Account be liquidated;
(ii) the Independent Account Representative specifically directs
that a portion of the Account be liquidated and the selection of the
particular equity securities to be sold is made either by the
Independent Account Representative or by an optimization program used
by BFM (the Optimization Program) which operates, pursuant to certain
prescribed objective criteria, to automatically generate an optimal
portfolio for such Accounts; or
(iii) the application of the Optimization Program to the specific
investment objectives and restrictions established by the Independent
Account Representative requires the sale of a security which is
otherwise ranked by BFM as a buy or a hold for all relevant Accounts
under the Stock Evaluation Process.
(b) With respect to each cross-trade opportunity triggered under
paragraph 2(a), the Optimization Program used by BFM must determine, in
the ordinary course of its considering all available equity securities
in the applicable universe, that another Account or Accounts
participating in the program should purchase some or all of the
available equity securities.
(c) The cross-trade transaction must take place within three
business days of the ``triggering event'' giving rise to the cross-
trade opportunity described in paragraph 2(a) above.
(d) The cross-trade transaction must be effected through a broker
which is unaffiliated with BFM and its Affiliates.
(e) The Independent Account Representative of each Account engaging
in a cross-trade transaction must be provided with a written
confirmation of the cross-trade transaction within 10 days after the
completion of the transaction. The confirmation must set forth:
(i) the particular equity securities involved;
(ii) the number of shares involved;
(iii) the price at which the transaction was executed; and
(iv) the specific triggering event, identified above in paragraph
2(a), which caused the cross-trade transaction to occur.
3. (a) Each cross-trade must be effected at the closing price for
the equity securities involved on the date of the transaction, as
quoted by the exchange on which such securities are principally traded
or by the NASDAQ National Market System (NASDAQ). In the case of
domestic equity securities traded over-the-counter, other than those
traded on NASDAQ, the price must be the mean between the closing daily
``bid'' and ``asked'' prices on the date of the transactions, obtained
from recognized independent sources, unless such securities have
actually traded within 24 hours of the cross-trade transaction in which
case the price must be the last sale price for the securities. If more
than one source is used by BFM to price a particular domestic equity
security traded over-the-counter, then the price must be equal to the
average of the highest current independent bid and lowest current
independent offer obtained from such sources. No foreign equity
securities, other than those traded on a recognized foreign securities
exchange for which market quotations are readily available, shall be
cross-traded by the Accounts.
(b) The equity securities involved in the cross-trade are those for
which there is a generally recognized market with adequate pricing
information to enable BFM to use the Optimization Program for the
Accounts in the transaction.
(c) The cross-trade must involve less than 5 percent of the
aggregate average daily trading volume of the equity securities which
are the subject of the transaction for the week immediately preceding
the completion of the transaction.
4. For any cross-trade opportunity where equity securities
available for sale from a Selling Account may be sold to more than one
Buying Account, each cross-trade opportunity shall be allocated first
to the Buying Account which is ranked by the Optimization Program as
being furthest from optimality, measured on a numerical basis at the
time of the transaction, until such Account is brought up to par with
the Account which is next furthest from optimality. Such Accounts shall
then be allocated cross-trade opportunities on a pro rata basis until
the Accounts are brought up to the level of the next Account which is
furthest from optimality. This allocation process shall continue until
all cross-trade opportunities involving the equity securities in
question are exhausted.
5. (a) BFM furnishes the Independent Fiduciary for each Plan
Account participating in the cross-trade program at least once every
three months, and not later than 45 days following the period to which
it related, a report disclosing:
(i) a list of all cross-trade transactions engaged in on behalf of
the Plan Account during the period; and
(ii) with respect to each cross-trade transaction, the actual price
used to effect the transaction and the identity of the pricing source,
as well as the highest and lowest reported prices at which the equity
securities involved in the transaction were traded on the date of such
transaction.
(b) The authorizing Independent Fiduciary for each Plan Account
participating in the program is furnished with a summary report 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 the Plan Account's assets,
by type of equity security, involved in cross-trade transactions during
the period;
(ii) a description of BFM's cross-trade practices, if such
practices have changed materially during the period covered by the
summary;
(iii) a statement that the Independent Fiduciary's authorization of
cross-trade transactions may be terminated upon receipt by BFM of the
Independent Fiduciary's written notice to that effect; and
(iv) a statement that the Independent Fiduciary's authorization of
the Plan Account's participation in the cross-trade program will
continue in effect unless it is terminated.
6. The cross-trade transaction does not involve assets of any
employee benefit plan established or maintained by BFM or any of its
Affiliates (Batterymarch Plan).
7. Each employee benefit plan comprising a Plan Account that
participates in the cross-trading program must have total assets equal
to at least $25 million. In the case of multiple employee benefit plans
maintained by a single employer or controlled group of employers, the
$25 million requirement may be met by aggregating the assets of such
plans if the assets are commingled for investment purposes in a single
master trust.
8. BFM receives no fee or other compensation (other than its agreed
investment management fee) with respect to any cross-trade transaction.
9. BFM is a discretionary investment manager with respect to Plan
Accounts participating in the cross-trade program and does not cause
any Plan Account to purchase or sell equity securities with another
Account in order to merely track or replicate the portfolio of an
independently maintained third party index.
10. For purposes of this exemption:
(a) ``Account'' means a Plan Account or a Non-Plan Account;
(b) ``Affiliate'' means any person directly or indirectly through
one or more intermediaries, controlling, controlled by, or under common
control with Batterymarch;
(c) ``Buying Account'' means the Account which seeks to purchase
equity securities in a cross-trade transaction;
(d) ``Cross-trade transaction'' means a purchase and sale of equity
securities between Accounts for which BFM or an Affiliate is acting as
a trustee or investment manager;
(e) ``Plan Account'' means an Account managed by BFM consisting of
assets of one or more employee benefit plans which are subject to the
Act;
(f) ``Independent Account Representative'' means the authorized
representative of the Account. In the case of a Plan Account, the
Independent Account Representative must be an Independent Fiduciary
authorized to act for the Plan Account;
(g) ``Non-Plan Account'' means an Account managed by BFM consisting
of assets of clients which are not employee benefit plans subject to
the Act;
(h) ``Selling Account'' means the Account which seeks to sell its
equity securities in a cross-trade transaction; and
(i) The ``Optimization Program'' means a computer program developed
by a third party, independent of BFM and its Affiliates, which BFM uses
pursuant to a license agreement and which utilizes objective
mathematical formulas to construct ``optimal'' portfolios for each
Account.
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 25, 1994 at 59 FR
27042.
For Further Information Contact: Mr. E.F. Williams of the
Department, telephone (202) 219-8194. (This is not a toll-free number.)
[Prohibited Transaction Exemption 94-62; Exemption Application No. D-
9613] Abbott Pension Plan (the Plan) Located in Lynn, MA; 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 proposed transfer by the Plan, of certain
limited partnership interests (the Interests) to Abbott House Nursing
Home, Inc. (Abbott); Winthrop Nursing Home, Inc. (which does business
as the Bay View Nursing Home and is referred to herein as Winthrop/Bay
View); Devereux House Nursing Home, Inc. (Devereux); and the Greenview
House Nursing Home, Inc. (Greenview), in satisfaction of certain cash
advances made to the Plan by these entities. (Abbott, Winthrop/Bay
View, Devereux and Greenview, which are parties in interest with
respect to the Plan, are collectively referred to herein as the Nursing
Facilities.)
This exemption is conditioned upon the following requirements: (1)
the transfer represents a one-time transaction and satisfies certain
cash advances made by the Nursing Facilities to the Plan; (2) the
Interests are transferred for the greater of their historical cost to
the Plan, their fair market value or the total amount of cash advanced
to the Plan; (3) for purposes of the transfer, the fair market value
the Interests has been established by a qualified, independent
appraiser; and (4) the Plan does not pay any fees or commissions in
connection with the transfer.
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 21, 1994 at 59 FR
32017.
For Further Information Contact: Ms. Jan D. Broady of the
Department, telephone (202) 219-8881. (This is not a toll-free number.)
AT&T Management Pension Plan and AT&T Pension Plan (the AT&T Plans),
and BellSouth Management Pension Plan and BellSouth Pension Plan (the
BellSouth Plans; Collectively, the Plans) Located in Morristown, New
Jersey; Exemption
[Prohibited Transaction Exemption 94-63; Exemption Application Nos.
D-9607, D-9608, D-9609, D-9610]
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, effective June 3, 1993, to the past and proposed lease
(the Lease) by the Plans, through the Telephone Real Estate Equity
Trust (TREET), of office space in Southpark C, a commercial office
building in Austin, Texas, to American Telephone and Telegraph Co.
(AT&T), one of the sponsors of the Plans; provided that the following
conditions are satisfied:
(A) The interests of TREET for all purposes under the Lease are
represented by Hill Partners, which is independent of and unrelated to
AT&T, serving as a fiduciary under the Act;
(B) At all times under the Lease, AT&T pays TREET rent of no less
than the fair market rental value of the Property; and
(C) All terms and conditions of the Lease are at least as favorable
to TREET as those which TREET could obtain in arm's-length transactions
with unrelated parties.
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 21, 1994 at 59 FR
32018.
Effective Date: This exemption is effective as of June 3, 1993.
Written Comments: The Department received one written comment and
no requests for a hearing. The comment was submitted on behalf of AT&T
(the Applicant) in supplementation of the Summary of Facts and
Representations (the Summary) in the notice of proposed exemption. The
points addressed by the Applicant in the comment are summarized as
follows:
(A) Paragraph (1) of the Summary indicates that the BellSouth
Master Trust hold assets of the BellSouth Plans, which are sponsored by
BellSouth. The Applicant states that it has become aware that one
additional plan participates in the BellSouth Master Trust: the
Retirement Plan of Stevens Graphics, Inc., sponsored by Stevens
Graphics, Inc., an affiliate of BellSouth Corporation.
(B) In paragraph (6) of the Summary, it is stated that with the
addition of the Southpark assets, Karsten commenced to hold under
management over 20 percent of the assets of TREET. The Applicant
represents that this statement does not accurately describe Karsten's
position with respect to management of TREET assets. The Applicant
represents that with the addition of the Southpark assets, the TREET
assets under management by Karsten constituted over twenty percent of
all assets managed by Karsten on behalf of all its clients.
After consideration of the entire record, including the comment,
the Department has determined to grant the exemption.
For Further Information Contact: Ronald Willett of the Department,
telephone (202) 219-8881. (This is not a toll-free number.)
NatWest Securities Corporation, Inc. (NatWest) Located in New York, New
York; Exemption
[Prohibited Transaction Exemption 94-64; Exemption Application No. D-
9681]
I. Transactions
A. Effective December 22, 1993, the restrictions of sections 406(a)
and 407(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 to the following transactions involving trusts and
certificates evidencing interests therein:
(1) The direct or indirect sale, exchange or transfer of
certificates in the initial issuance of certificates between the
sponsor or underwriter and an employee benefit plan when the sponsor,
servicer, trustee or insurer of a trust, the underwriter of the
certificates representing an interest in the trust, or an obligor is a
party in interest with respect to such plan;
(2) The direct or indirect acquisition or disposition of
certificates by a plan in the secondary market for such certificates;
and
(3) The continued holding of certificates acquired by a plan
pursuant to subsection I.A. (1) or (2).
Notwithstanding the foregoing, section I.A. does not provide an
exemption from the restrictions of sections 406(a)(1)(E), 406(a)(2) and
407 for the acquisition or holding of a certificate on behalf of an
Excluded Plan by any person who has discretionary authority or renders
investment advice with respect to the assets of that Excluded
Plan.1
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\1\Section I.A. provides no relief from sections 406(a)(1)(E),
406(a)(2) and 407 for any person rendering investment advice to an
Excluded Plan within the meaning of section 3(21)(A)(ii) and
regulation 29 CFR 2510.3-21(c).
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B. Effective December 22, 1993, the restrictions of sections
406(b)(1) and 406(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)(E) of the
Code shall not apply to:
(1) The direct or indirect sale, exchange or transfer of
certificates in the initial issuance of certificates between the
sponsor or underwriter and a plan when the person who has discretionary
authority or renders investment advice with respect to the investment
of plan assets in the certificates is (a) an obligor with respect to 5
percent or less of the fair market value of obligations or receivables
contained in the trust, or (b) an affiliate of a person described in
(a); if:
(i) The plan is not an Excluded Plan;
(ii) solely in the case of an acquisition of certificates in
connection with the initial issuance of the certificates, at least 50
percent of each class of certificates in which plans have invested is
acquired by persons independent of the members of the Restricted Group
and at least 50 percent of the aggregate interest in the trust is
acquired by persons independent of the Restricted Group;
(iii) a plan's investment in each class of certificates does not
exceed 25 percent of all of the certificates of that class outstanding
at the time of the acquisition; and
(iv) immediately after the acquisition of the certificates, no more
than 25 percent of the assets of a plan with respect to which the
person has discretionary authority or renders investment advice are
invested in certificates representing an interest in a trust containing
assets sold or serviced by the same entity.2 For purposes of this
paragraph B.(1)(iv) only, an entity will not be considered to service
assets contained in a trust if it is merely a subservicer of that
trust;
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\2\For purposes of this exemption, each plan participating in a
commingled fund (such as a bank collective trust fund or insurance
company pooled separate account) shall be considered to own the same
proportionate undivided interest in each asset of the commingled
fund as its proportionate interest in the total assets of the
commingled fund as calculated on the most recent preceding valuation
date of the fund.
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(2) The direct or indirect acquisition or disposition of
certificates by a plan in the secondary market for such certificates,
provided that the conditions set forth in paragraphs B.(1) (i), (iii),
and (iv) are met; and
(3) The continued holding of certificates acquired by a plan
pursuant to subsection I.B. (1) or (2).
C. Effective December 22, 1993, the restrictions of sections
406(a), 406(b) and 407(a) of the Act, and the taxes imposed by section
4975 (a) and (b) of the Code by reason of section 4975(c) of the Code,
shall not apply to transactions in connection with the servicing,
management and operation of a trust; provided:
(1) such transactions are carried out in accordance with the terms
of a binding pooling and servicing arrangement; and
(2) the pooling and servicing agreement is provided to, or
described in all material respects in the prospectus or private
placement memorandum provided to, investing plans before they purchase
certificates issued by the trust.3
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\3\In the case of a private placement memorandum, such
memorandum must contain substantially the same information that
would be disclosed in a prospectus if the offering of the
certificates were made in a registered public offering under the
Securities Act of 1933. In the Department's view, the private
placement memorandum must contain sufficient information to permit
plan fiduciaries to make informed investment decisions.
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Notwithstanding the foregoing, section I.C. does not provide an
exemption from the restrictions of section 406(b) of the Act or from
the taxes imposed by reason of section 4975(c) of the Code for the
receipt of a fee by a servicer of the trust from a person other than
the trustee or sponsor, unless such fee constitutes a ``qualified
administrative fee'' as defined in section III.S.
D. Effective December 22, 1993, the restrictions of sections 406(a)
and 407(a) of the Act, and the taxes imposed by sections 4975 (a) and
(b) of the Code by reason of sections 4975(c)(1) (A) through (D) of the
Code, shall not apply to any transactions to which those restrictions
or taxes would otherwise apply merely because a person is deemed to be
a party in interest or disqualified person (including a fiduciary) with
respect to a plan by virtue of providing services to the plan (or by
virtue of having a relationship to such service provider described in
section 3(14) (F), (G), (H), or (I) of the Act or section 4975(e)(2)
(F), (G), (H), or (I) of the Code), solely because of the plan's
ownership of certificates.
II. General Conditions
A. The relief provided under Part I is available only if the
following conditions are met:
(1) The acquisition of certificates by a plan is on terms
(including the certificate price) that are at least as favorable to the
plan as they would be in an arm's length transaction with an unrelated
party;
(2) The rights and interests evidenced by the certificates are not
subordinated to the rights and interests evidenced by other
certificates of the same trust;
(3) The certificates acquired by the plan have received a rating at
the time of such acquisition that is in one of the three highest
generic rating categories from either Standard & Poor's Corporation
(S&P's), Moody's Investors Service, Inc. (Moody's), Duff & Phelps Inc.
(D&P) or Fitch Investors Service, Inc. (Fitch);
(4) The trustee is not an affiliate of any member of the Restricted
Group. However, the trustee shall not be considered to be an affiliate
of a servicer solely because the trustee has succeeded to the rights
and responsibilities of the servicer pursuant to the terms of a pooling
and servicing agreement providing for such succession upon the
occurrence of one or more events of default by the servicer;
(5) The sum of all payments made to and retained by the
underwriters in connection with the distribution or placement of
certificates represents not more than reasonable compensation for
underwriting or placing the certificates; the sum of all payments made
to and retained by the sponsor pursuant to the assignment of
obligations (or interests therein) to the trust represents not more
than the fair market value of such obligations (or interests); and the
sum of all payments made to and retained by the servicer represents not
more than reasonable compensation for the servicer's services under the
pooling and servicing agreement and reimbursement of the servicer's
reasonable expenses in connection therewith; and
(6) The plan investing in such certificates is an ``accredited
investor'' as defined in Rule 501(a)(1) of Regulation D of the
Securities and Exchange Commission under the Securities Act of 1933.
B. Neither any underwriter, placement agent, sponsor, trustee,
servicer, insurer, or any obligor, unless it or any of its affiliates
has discretionary authority or renders investment advice with respect
to the plan assets used by a plan to acquire certificates, shall be
denied the relief provided under Part I, if the provision of subsection
II.A.(6) above is not satisfied with respect to acquisition or holding
by a plan of such certificates, provided that (1) such condition is
disclosed in the prospectus or private placement memorandum; and (2) in
the case of a private placement of certificates, the trustee obtains a
representation from each initial purchaser which is a plan that it is
in compliance with such condition, and obtains a covenant from each
initial purchaser to the effect that, so long as such initial purchaser
(or any transferee of such initial purchaser's certificates) is
required to obtain from its transferee a representation regarding
compliance with the Securities Act of 1933, any such transferees will
be required to make a written representation regarding compliance with
the condition set forth in subsection II.A.(6) above.
III. Definitions
For purposes of this exemption:
A. ``Certificate'' means:
(1) a certificate
(a) that represents a beneficial ownership interest in the assets
of a trust; and
(b) that entitles the holder to pass-through payments of principal,
interest, and/or other payments made with respect to the assets of such
trust; or
(2) a certificate denominated as a debt instrument--
(a) that represents an interest in a Real Estate Mortgage
Investment Conduit (REMIC) within the meaning of section 860D(a) of the
Internal Revenue Code of 1986; and
(b) that is issued by and is an obligation of a trust; with respect
to certificates defined in (1) and (2) for which NatWest or any of its
affiliates which is subject to the jurisdiction of the United States
courts is either (i) the sole underwriter or the manager or co-manager
of the underwriting syndicate, or (ii) a selling or placement agent.
For purposes of this exemption, references to ``certificates
representing an interest in a trust'' include certificates denominated
as debt which are issued by a trust.
B. ``Trust'' means an investment pool, the corpus of which is held
in trust in the United States and consists solely of:
(1) either
(a) secured consumer receivables that bear interest or are
purchased at a discount (including, but not limited to, home equity
loans and obligations secured by shares issued by a cooperative housing
association);
(b) secured credit instruments that bear interest or are purchased
at a discount in transactions by or between business entities
(including, but not limited to, qualified equipment notes secured by
leases, as defined in section III.T);
(c) obligations that bear interest or are purchased at a discount
and which are secured by single-family residential, multi-family
residential and commercial real property, (including obligations
secured by leasehold interests on commercial real property);
(d) obligations that bear interest or are purchased at a discount
and which are secured by motor vehicles or equipment, or qualified
motor vehicle leases (as defined in section III.U);
(e) ``guaranteed governmental mortgage pool certificates,'' as
defined in 29 CFR section 2510.3-101(i)(2);
(f) fractional undivided interests in any of the obligations
described in clauses (a)-(e) of this section B.(1);
(2) property which had secured any of the obligations described in
subsection B.(1);
(3) undistributed cash or temporary investments made therewith
maturing no later than the next date on which distributions are to be
made to certificateholders; and
(4) rights of the trustee under the pooling and servicing
agreement, and rights under any insurance policies, third-party
guarantees, contracts of suretyship and other credit support
arrangements with respect to any obligations described in subsection
B.(1).
Notwithstanding the foregoing, the term ``trust'' does not include
any investment pool unless: (i) the investment pool consists only of
assets of the type which have been included in other investment pools,
(ii) certificates evidencing interests in such other investment pools
have been rated in one of the three highest generic rating categories
by S&P's, Moody's, D&P, or Fitch for at least one year prior to the
plan's acquisition of certificates pursuant to this exemption, and
(iii) certificates evidencing interests in such other investment pools
have been purchased by investors other than plans for at least one year
prior to the plan's acquisition of certificates pursuant to this
exemption.
C. ``Underwriter'' means:
(1) NatWest;
(2) any person directly or indirectly, through one or more
intermediaries, controlling, controlled by or under common control with
NatWest; or
(3) any member of an underwriting syndicate or selling group of
which NatWest or a person described in (2) is a manager or co-manager
with respect to the certificates.
D. ``Sponsor'' means the entity that organizes a trust by
depositing obligations therein in exchange for certificates.
E. ``Master Servicer'' means the entity that is a party to the
pooling and servicing agreement relating to trust assets and is fully
responsible for servicing, directly or through subservicers, the assets
of the trust.
F. ``Subservicer'' means an entity which, under the supervision of
and on behalf of the master servicer, services receivables contained in
the trust, but is not a party to the pooling and servicing agreement.
G. ``Servicer'' means any entity which services receivables
contained in the trust, including the master servicer and any
subservicer.
H. ``Trustee'' means the trustee of the trust, and in the case of
certificates which are denominated as debt instruments, also means the
trustee of the indenture trust.
I. ``Insurer'' means the insurer or guarantor of, or provider of
other credit support for, a trust.
Notwithstanding the foregoing, a person is not an insurer solely
because it holds securities representing an interest in a trust which
are of a class subordinated to certificates representing an interest in
the same trust.
J. ``Obligor'' means any person, other than the insurer, that is
obligated to make payments with respect to any obligation or receivable
included in the trust. Where a trust contains qualified motor vehicle
leases or qualified equipment notes secured by leases, ``obligor''
shall also include any owner of property subject to any lease included
in the trust, or subject to any lease securing an obligation included
in the trust.
K. ``Excluded Plan'' means any plan with respect to which any
member of the Restricted Group is a ``plan sponsor'' within the meaning
of section 3(16)(B) of the Act.
L. ``Restricted Group'' with respect to a class of certificates
means:
(1) each underwriter;
(2) each insurer;
(3) the sponsor;
(4) the trustee;
(5) each servicer;
(6) any obligor with respect to obligations or receivables included
in the trust constituting more than 5 percent of the aggregate
unamortized principal balance of the assets in the trust, determined on
the date of the initial issuance of certificates by the trust; or
(7) any affiliate of a person described in (1)-(6) above.
M. ``Affiliate'' of another person includes:
(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, partner, employee, relative (as defined
in section 3(15) of the Act), a brother, a sister, or a spouse of a
brother or sister of such other person; and
(3) Any corporation or partnership of which such other person is an
officer, director or partner.
N. ``Control'' means the power to exercise a controlling influence
over the management or policies of a person other than an individual.
O. A person will be ``independent'' of another person only if:
(1) such person is not an affiliate of that other person; and
(2) the other person, or an affiliate thereof, is not a fiduciary
who has investment management authority or renders investment advice
with respect to any assets of such person.
P. ``Sale'' includes the entrance into a forward delivery
commitment (as defined in section Q below), provided:
(1) The terms of the forward delivery commitment (including any fee
paid to the investing plan) are no less favorable to the plan than they
would be in an arm's length transaction with an unrelated party;
(2) The prospectus or private placement memorandum is provided to
an investing plan prior to the time the plan enters into the forward
delivery commitment; and
(3) At the time of the delivery, all conditions of this exemption
applicable to sales are met.
Q. ``Forward delivery commitment'' means a contract for the
purchase or sale of one or more certificates to be delivered at an
agreed future settlement date. The term includes both mandatory
contracts (which contemplate obligatory delivery and acceptance of the
certificates) and optional contracts (which give one party the right
but not the obligation to deliver certificates to, or demand delivery
of certificates from, the other party).
R. ``Reasonable compensation'' has the same meaning as that term is
defined in 29 CFR section 2550.408c-2.
S. ``Qualified Administrative Fee'' means a fee which meets the
following criteria:
(1) the fee is triggered by an act or failure to act by the obligor
other than the normal timely payment of amounts owing in respect of the
obligations;
(2) the servicer may not charge the fee absent the act or failure
to act referred to in (1);
(3) the ability to charge the fee, the circumstances in which the
fee may be charged, and an explanation of how the fee is calculated are
set forth in the pooling and servicing agreement; and
(4) the amount paid to investors in the trust will not be reduced
by the amount of any such fee waived by the servicer.
T. ``Qualified Equipment Note Secured By A Lease'' means an
equipment note:
(a) which is secured by equipment which is leased;
(b) which is secured by the obligation of the lessee to pay rent
under the equipment lease; and
(c) with respect to which the trust's security interest in the
equipment is at least as protective of the rights of the trust as the
trust would have if the equipment note were secured only by the
equipment and not the lease.
U. ``Qualified Motor Vehicle Lease'' means a lease of a motor
vehicle where:
(a) the trust holds a security interest in the lease;
(b) the trust holds a security interest in the leased motor
vehicle; and
(c) the trust's security interest in the leased motor vehicle is at
least as protective of the trust's rights as the trust would receive
under a motor vehicle installment loan contract.
V. ``Pooling and Servicing Agreement'' means the agreement or
agreements among a sponsor, a servicer and the trustee establishing a
trust. In the case of certificates which are denominated as debt
instruments, ``Pooling and Servicing Agreement'' also includes the
indenture entered into by the trustee of the trust issuing such
certificates and the indenture trustee.
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 10, 1994, at 59 FR
30049.
Effective Date: This exemption is effective for transactions
occurring on or after December 22, 1993.
For Further Information Contact: Gary H. Lefkowitz 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 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 11th day of August 1994.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits
Administration, U.S. Department of Labor.
[FR Doc. 94-20009 Filed 8-16-94; 8:45 am]
BILLING CODE 4510-29-P
