[Federal Register Volume 60, Number 183 (Thursday, September 21, 1995)]
[Notices]
[Pages 49009-49014]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-23463]
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DEPARTMENT OF LABOR
Pension and Welfare Benefits Administration
[Prohibited Transaction Exemption 95-85; Exemption Application No. D-
09882, et al.]
Grant of Individual Exemptions; Retirement Plan for Employees of
Automobile Club of New York, Inc.
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.
Retirement Plan for Employees of Automobile Club of New York, Inc. (the
Plan) Located in Garden City, New York
[Prohibited Transaction Exemption 95-85; Exemption Application No.
D-9882]
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: (1) The purchase (the Purchase) by the Plan of
a certain office building (the Building) from Automobile Club of New
York, Inc. (the Club), a sponsor of the Plan and a party in interest
with respect to the Plan; (2) a subsequent leaseback (the Lease) of the
Building by the Plan to the Club; and (3) the potential future exercise
of (a) a repurchase option (the Repurchase Option) between the Club and
the Plan; and (b) a make whole obligation (the Make Whole Obligation)
whereby the Club will pay the Plan the difference between the original
acquisition price paid by the Plan for the Building, and the price
received by the Plan upon the sale of a Building to a purchaser other
than the Club; provided that the following conditions are satisfied:
(1) All terms and conditions of the Purchase, the Lease, the
Repurchase Option, and the Make Whole Obligation are and will be at
least as favorable to the Plan as those the Plan could obtain in an
arm's-length transaction with an unrelated party;
(2) the Lease will have an initial term of fifteen years with three
five year renewal options, and will be a triple net lease under which
the Club as the tenant is obligated for all operating expenses,
including real estate taxes, insurance, repairs, maintenance,
electricity and other utilities;
(3) the fair market value of the Building has been determined by an
independent qualified appraiser, and will be updated as of the date of
purchase by the Plan;
(4) with respect to the Lease, the fair market rental amount has
been and will be determined by an independent qualified appraiser,
which amount will never be below the initial fair market annual rental
amount of $470,000;
(5) with respect to the Lease, appraisals of the Building will be
performed at three year intervals during the initial fifteen year term
of the Lease, and at five year intervals with respect to the three
renewal periods for purposes of updating the fair market rental amount
to be received by the Plan;
(6) the fair market value of the Building will not exceed 25% of
the Plan's total assets. Notwithstanding this condition, if the 25%
limitation is ever exceeded the Club will have 60 days to comply with
the 25% limit. In the event the 25% limit cannot be met within the 60
days, the Plan will undertake an orderly disposition of its interests
in the Building in such manner as to cure the violation within nine (9)
months of the date when the 25% limit was initially exceeded. If at any
time during the 9 month disposition period, the Building exceeds 30% of
the Plan's total assets, the exemption will no longer be available;
(7) an independent fiduciary will be appointed to review, approve
and monitor the transactions described herein, and the fees received by
the independent fiduciary for serving in such capacity, combined with
any other fees derived from the Club or related parties, will not
exceed 1% of its annual income for each fiscal year that it continues
to serve in the independent fiduciary capacity with respect to these
transactions;
(8) U.S. Trust, as the independent fiduciary, will evaluate the
transactions described herein and deemed them to be administratively
feasible, protective and in the interest of the Plan;
(9) U.S. Trust, as the independent fiduciary, will monitor the
terms and the conditions of the exemption and the Lease throughout its
initial term plus the three renewal periods, and will take whatever
action is necessary to protect the Plan's rights;
(10) U.S. Trust, as the independent fiduciary, will monitor the net
subleasing amount received by the Club during any annual period under
the Lease. If such subleasing amount results in a profit to the Club,
the Club will contribute this profit to the Plan; and
(11) the Plan will bear no costs or expenses with respect to the
transactions described herein.
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 31, 1995 at 60 FR
39016/39020.
Written Comments
The Department received two written comments on the proposed
exemption
[[Page 49010]]
and no requests for a hearing. The Automobile Club of New York, Inc.,
the applicant, suggested certain modifications to the language of the
proposed exemption as it appears in the Federal Register to clarify and
more accurately reflect the conditions and representations surrounding
the transactions. U.S. Trust, as the independent fiduciary with respect
to the transactions described herein, concurs with these suggested
modifications. Specifically, the applicant suggests that:
1. The words ``its interests in'' should be inserted in condition
6, line 9 of the proposed exemption as it appears in the Federal
Register, such that condition 6 should read, in relevant part, ``* *
*the Plan will undertake an orderly disposition of its interests in the
Building* * *''.
2. The words ``for no more than'' should have been inserted in the
Summary of Facts and Representations (the Summary), paragraph 2, line
4, such that it would have read, ``First, the Plan will purchase the
Building from the Club for no more than fair market value* * *'', and
the words `` for no less than'' should have been inserted in paragraph
2, line 11, such that it would have read, ``* * *the Club will lease
the Building from the Plan for no less than fair market rental* * *''.
3. The words ``the Plan'' should have been substituted for ``U.S.
Trust'' in the Summary, paragraph 6, line 14, such that it would have
read, ``* * *with three renewable options of five years each at the
discretion of the Plan.''
4. The words ``the Plan'' should have been substituted for ``U.S.
Trust as the independent fiduciary'' in the Summary, paragraph 9, line
8, such that it would have read, ``the Repurchase Option can be
exercised under certain circumstances under the discretion of the Plan*
* *''.
5. The words ``its interests in'' should have been inserted in the
Summary, paragraph 17, line 26, such that it would have read, ``* *
*the Plan will undertake an orderly disposition of its interests in the
Building* * *''. The Department concurs with these modifications.
One former employee of the applicant asserted in a comment that the
fair market value of the Building, and subsequent evaluations thereof,
should be determined by at least two qualified appraisers, not one as
currently proposed, to assure a fair and accurate finding. Also, the
commentor asserted that the appraisers should be certified as
completely independent of, and receiving no other business from, the
Automobile Club of New York, its Board of Directors, the Retirement
Committee, the American Automobile Association, as well as independent
of any of the individuals (and their relatives) associated with any of
the above bodies.
In response to this comment the applicant asserted that the
retention of a second appraiser is unnecessary. The appraiser(s) for
the initial and all subsequent appraisals of the Building is being
selected by U.S. Trust, as the independent fiduciary, not the
Automobile Club of New York, Inc. The integrity of the appraisal is
ensured through the use of an independent fiduciary to retain and
evaluate the appraiser. Also, the applicant asserted that this
requirement is substantially satisfied by the Certificate of Appraisal
contained in the limited scope appraisal dated January 10, 1995, which
was submitted to the Department by the applicant as part of the
exemption application.
After giving full consideration to the record, the comments
submitted to the Department, and the response of the applicant, the
Department has determined to grant the exemption, as described herein.
FOR FURTHER INFORMATION CONTACT: Ekaterina A. Uzlyan, U.S. Department
of Labor, telephone (202) 219-8883. (This is not a toll-free number).
Adel E. Zaki Money Purchase Pension Plan (the Plan) Located in Los
Angeles, California
[Prohibited Transaction Exemption 95-86; Exemption Application No.
D-9883]
Exemption
The restrictions of sections 406(a), 406(b)(1), 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 (E) of the
Code shall not apply to the cash sale of a parcel of improved real
property (the Property) by the Plan to Adel E. Zaki, M.D. (Dr. Zaki), a
party in interest with respect to the Plan; provided that (1) the sale
will be a one-time transaction for cash; (2) as a result of the sale,
the Plan receives in cash the greater of $710,000 or the fair market
value of the Property, as determined by an independent, qualified
appraiser, as of the date of the sale; (3) the Plan pays no
commissions, fees, or other expenses as a result of the transaction;
and (4) the terms of the sale are no less favorable to the Plan than
those it would have received in similar circumstances when negotiated
at arm's length with unrelated third 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 July 12, 1995 at 60 FR
35943.
FOR FURTHER INFORMATION CONTACT: Angelena C. Le Blanc of the
Department, telephone (202) 219-8883 (This is not a toll-free number.)
John L. Rust Co. Profit Sharing Plan (the Plan) Located in Albuquerque,
New Mexico
[Prohibited Transaction Exemption 95-87; Exemption Application No.
D-09943]
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 (1) the past and proposed purchases by the Plan of
certain leases of equipment (the Leases) from John L. Rust Co. (Rust),
the Plan sponsor and a party in interest with respect to the Plan, and
(2) the agreement by Rust to indemnify the Plan against any loss
relating to the Leases and also to repurchase any Leases that are in
default in accordance with paragraph (E) below, provided that the
following conditions are met:
A. Any sale of Leases to the Plan will be on terms at least as
favorable to the Plan as an arm's length transaction with an unrelated
third party would be.
B. Subsequent to the date of publication of the proposed exemption
(July 21, 1995), the acquisition of a Lease from Rust shall not cause
the Plan to hold immediately following the acquisition (i) more than
25% of the current value (as that term is defined in section 3(26) of
the Act) of Plan assets in customer notes and Leases sold by Rust or
(ii) more than 10% of Plan assets in the aggregate of Leases with and
customer notes of any one entity.
C. Prior to the purchase of each Lease, an independent, qualified
fiduciary must determine that the purchase is appropriate and suitable
for the Plan and that any Lease purchase is a fair market value
transaction.
D. The independent fiduciary, on behalf of the Plan, will monitor
the terms of the Leases and the exemption and take whatever action is
necessary to enforce the rights of the Plan.
E. Upon default by the lessee on any payment due under a Lease,
Rust has agreed to repurchase the Lease from the Plan at the payout
value as of the date of the default, without discount, and to indemnify
the Plan for any loss suffered. The occurrence of any of the following
events shall be considered events of default for purposes of this
section: The lessee's failure to pay any amounts due
[[Page 49011]]
hereunder within five days after receipt of written notice from the
Plan's independent fiduciary, or the lessee's failure to pay any
amounts due hereunder within 30 days after payment becomes past due, if
earlier; the lessee's failure to perform any other obligation under
this agreement within ten days of receipt of written notice from the
Plan's independent fiduciary; abandonment of the equipment by the
lessee; the lessee's cessation of business; the commencement of any
proceeding in bankruptcy, receivership or insolvency or assignment for
the benefit of creditors by the lessee; false representation by the
lessee as to its credit or financial standing; attachment or execution
levied on lessee's property; or use of the equipment by third parties
without lessor's prior written consent.
F. The Plan receives adequate security for the Lease. For purposes
of this exemption, the term adequate security means that the Lease is
secured by a perfected security interest in the leased property which
will name the Plan as the secured party.
G. Insurance against loss or damage to the leased property from
fire or other hazards will be procured and maintained by the lessee and
the proceeds from such insurance will be assigned to the Plan.
H. The Plan shall maintain for the duration of any Lease which is
sold to the Plan pursuant to this exemption, records necessary to
determine whether the conditions of this exemption have been met. The
Plan will continue to maintain the records for a period of six years
following the expiration of the Lease or the disposition by the Plan of
the Lease. The records referred to above must be unconditionally
available at their customary location for examination, for purposes
reasonably related to protecting rights under the Plan, during normal
business hours by the Internal Revenue Service, the Department of
Labor, Plan participants, any employee organization any of whose
members are covered by the Plan, or any duly authorized employee or
representative of the above described persons.
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 21, 1995 at 60 FR
37685.
Temporary Nature of Exemption
EFFECTIVE DATE: This exemption is effective December 30, 1985. However,
the exemption is temporary and will expire five years from the date the
exemption is granted with respect to the Plan's future purchases of
Leases. The Plan may hold the Leases pursuant to the terms of the
exemption subsequent to the end of the five year period.
FOR FURTHER INFORMATION CONTACT: Mr. Gary Lefkowitz of the Department,
telephone (202) 219-8881. (This is not a toll-free number.)
Donald D. Busker Individual Retirement Account (the IRA) Located in
Detroit Lakes, Minnesota
[Prohibited Transaction Exemption 95-88; Application No. D-10005]
Exemption
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 cash sale of two parcels of unimproved real
property (the Properties) by the IRA to Donald D. Busker, a
disqualified person with respect to the IRA,1 provided the
following conditions are met:
\1\ Pursuant to 29 CFR 2510.3-2(d), there is no jurisdiction
with respect to the IRA under Title I of the Act. However, there is
jurisdiction under Title II of the Act pursuant to section 4975 of
the Code.
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(a) The sale is a one-time transaction for cash;
(b) The terms and conditions of the sale are at least as favorable
to the IRA as those obtainable in an arm's-length transaction with an
unrelated party;
(c) The IRA receives the fair market value of the Properties as
established at the time of the sale by an independent qualified
appraiser; and
(d) The IRA is not required to pay any commissions, costs or other
expenses in connection with the sale.
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 Notice published on August 11, 1995,
60 FR 41125.
FOR FURTHER INFORMATION CONTACT: Mr. E.F. Williams of the Department,
telephone (202) 219-8194. (This is not a toll-free number.)
Banc One Capital Corporation (Banc One) Located in Columbus, OH
[Prohibited Transaction Exemption 95-89; Exemption Application No.
D-10046]
Exemption
Section I. Transactions
A. Effective June 2, 1995, 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.2
\2\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 June 2, 1995, 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
[[Page 49012]]
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.3 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;
\3\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 June 2, 1995, 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.4
\4\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 June 2, 1995, 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.
Section II. General Conditions
A. The relief provided under Section 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, 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 Section 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.
Section 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) above for which Banc One or any
of its affiliates is either (i) the sole underwriter or the manager or
co-
[[Page 49013]]
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 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 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 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) Banc One;
(2) Any person directly or indirectly, through one or more
intermediaries, controlling, controlled by or under common control with
Banc One; or
(3) Any member of an underwriting syndicate or selling group of
which Banc One 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 loans contained in the
trust, but is not a party to the pooling and servicing agreement.
G. Servicer means any entity which services loans 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
[[Page 49014]]
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 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:
(1) Which is secured by equipment which is leased;
(2) Which is secured by the obligation of the lessee to pay rent
under the equipment lease; and
(3) 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:
(1) The trust holds a security interest in the lease;
(2) The trust holds a security interest in the leased motor
vehicle; and
(3) 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.
W. Banc One means Banc One Capital Corporation, an Ohio
corporation, and its affiliates.
The Department notes that this exemption is included within the
meaning of the term ``Underwriter Exemption'' as it is defined in
Section V(h) of Prohibited Transaction Exemption (PTE) 95-60 (60 FR
35925, July 12, 1995), the Class Exemption for Certain Transactions
Involving Insurance Company General Accounts, at 35932.
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 August 11, 1995 at 60 FR
41127.
EFFECTIVE DATE: This exemption is effective for transactions occurring
on or after June 2, 1995.
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 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, DC, this 18th day of September, 1995.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits,
Administration, U.S. Department of Labor.
[FR Doc. 95-23463 Filed 9-20-95; 8:45 am]
BILLING CODE 4510-29-P
