[Federal Register Volume 62, Number 172 (Friday, September 5, 1997)]
[Notices]
[Pages 47050-47056]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-23641]
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DEPARTMENT OF LABOR
Pension and Welfare Benefits Administration
[Prohibited Transaction Exemption 97-44; Exemption Application No. D-
10346, et al.]
Grant of Individual Exemptions; 1st Source Bank, 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, DC. The notices also
invited interested persons to submit comments on the requested
exemptions to the Department. In addition the notices stated that any
interested person might submit a written request that a public hearing
be held (where appropriate). The applicants have represented that they
have complied with the requirements of the notification to interested
persons. No public comments and no requests for a hearing, unless
otherwise stated, were received by the Department.
The notices of proposed exemption were issued and the exemptions
are being granted solely by the Department because, effective December
31, 1978, section 102 of Reorganization Plan No.
[[Page 47051]]
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.
1st Source Bank, Located in South Bend, Indiana
[Prohibited Transaction Exemption 97-44; Exemption Application No. D-
10346]
Exemption
Section I--Exemption for In-Kind Transfer of Assets
The restrictions of section 406(a) and section 406(b) 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 (F) of the Code,
shall not apply, effective September 19, 1996, to the in-kind transfer
to separate series of an open-end investment company registered under
the Investment Company Act of 1940 (the Funds) to which 1st Source Bank
or any of its affiliates (collectively, the Bank) serves as investment
advisor, and may provide other services, of the assets of various
employee benefit plans (the Plans) that are held in certain collective
investment funds (the CIFs) maintained by the Bank or otherwise held by
the Bank as trustee, investment manager, or in any other capacity as
fiduciary on behalf of the Plans, in exchange for shares of such Funds;
provided that the following conditions are met:
(A) A fiduciary (the Second Fiduciary) who is acting on behalf of
each affected Plan and who is independent of and unrelated to the Bank,
as defined in paragraph (G) of Section III below, receives in advance
of the investment by the Plan in any of the Funds a full and detailed
written disclosure of information concerning such Fund, including, but
not limited to:
(1) A current prospectus for each portfolio of each of the Funds in
which such Plan is considering investing,
(2) A statement describing the fees for investment management,
investment advisory, or other similar services, any fees for secondary
services (Secondary Services), as defined in paragraph (H) of section
III below, and all other fees to be charged to or paid by the Plan and
by such Funds to the Bank, including the nature and extent of any
differential between the rates of such fees,
(3) The reasons why the Bank may consider such investment in the
Funds to be appropriate for the Plan,
(4) A statement describing whether there are any limitations
applicable to the Bank with respect to which assets of a Plan may be
invested in the Funds, and, if so, the nature of such limitations, and
(5) Upon request of the Second Fiduciary, a copy of this proposed
exemption and/or a copy of the final exemption;
(B)(1) With respect to each of the Funds in which a Plan invests,
the Bank will provide the Second Fiduciary of such Plan:
(a) At least annually with a copy of an updated prospectus of such
Fund,
(b) Upon the request of such Second Fiduciary, with a report or
statement (which may take the form of the most recent financial report,
the current statement of additional information or some other written
statement) which contains a description of all fees paid by the Fund to
the Bank;
(2) On the basis of the information described above in paragraph
(A) of this section I, the Second Fiduciary authorizes in writing the
in-kind transfer of assets of the Plans in exchange for shares of the
Funds, the investment of such assets in corresponding portfolios of the
Funds, and the fees received by the Bank in connection with its
services to the Funds, such authorization by the Second Fiduciary to be
consistent with the responsibilities, obligations, and duties imposed
on fiduciaries by Part 4 of Title I of the Act;
(C) No sales commissions or other fees are paid by the Plans in
connection with the purchase of Fund shares through the in-kind
transfer of Plan assets in the CIFs, and no redemption fees are paid in
connection with the sale of such shares by the Plans to the Fund;
(D) All or a pro rata portion of the assets of the Plans held in
the CIFs or all or a pro rata portion of the assets of the Plans held
by the Bank in any capacities as fiduciary on behalf of such Plans are
transferred in-kind to the Funds in exchange for shares of such Funds;
(E) The Plans receive shares of the Funds that have a total net
asset value that is equal to the value of the assets of the Plans or
the CIFs exchanged for such shares on the date of transfer, based on
the current market value of the assets of the Plans or the CIFs
(F) The current market value of the assets of the Plans or the CIFs
to be transferred in-kind in exchange for shares is determined in a
single valuation performed in the same manner and at the close of
business on the same day, using independent sources in accordance with
the procedures set forth in Rule 17a-7(b) (Rule 17a-7), issued by the
Securities and Exchange Commission under the Investment Company Act of
1940, and the procedures established by the Funds pursuant to Rule 17a-
7 for the valuation of such assets. Such procedures must require that
all securities for which a current market price cannot be obtained by
reference to the last sale price for transactions reported on a
recognized securities exchange or NASDAQ be valued based on an average
of the highest current independent bid and lowest current independent
offer, as of the close of business on the day preceding the CIF or Plan
transfers determined on the basis of reasonable inquiry from at least
three sources that are broker-dealers or pricing services independent
of the Bank;
(G) For all conversion transactions that occur after the date of
publication in the Federal Register of a notice proposing this
exemption: Not later than thirty (30) days after completion of each in-
kind transfer of assets of the Plans or the CIFs in exchange for shares
of the Funds, the Bank sends by regular mail to the Second Fiduciary,
as defined in paragraph (G) of Section III below, a written
confirmation which contains the following information:
(1) The identity of each of the assets that was valued for purposes
of the transaction in accordance with Rule 17a-7(b)(4) under the
Investment Company Act of 1940;
(2) The price of such asset involved in the transaction; and
(3) The identity of each pricing service or market maker consulted
in determining the value of such assets
(H) No later than ninety (90) days after completion of each in-kind
transfer of assets of the Plans or the CIFs in exchange for shares of
the Funds, the Bank sends by regular mail to the Second Fiduciary, who
is acting on behalf of each affected Plan and who is independent of and
unrelated to the Bank, as defined in paragraph (G) of section III
below, a written confirmation that contains the following information:
(1) The number of CIF units held by each affected Plan immediately
before
[[Page 47052]]
the transfer, the related per unit value, and the aggregate dollar
value of the units transferred; and
(2) The number of shares in the Funds that are held by each
affected Plan following the transfer, the related per share net asset
value, and the aggregate dollar value of the shares received;
(I) The combined total of all fees received by the Bank for the
provision of services to the Plans, and in connection with the
provision of services to any of the Funds in which the Plans may
invest, are not in excess of ``reasonable compensation'' within the
meaning of section 408(b)(2) of the Act;
(J) The Bank does not receive any fees payable pursuant to Rule
12b-1 under the Investment Company Act of 1940 in connection with the
transactions described herein;
(K) The Plans are not sponsored by the Bank;
(L) All dealings between the Plans and any of the Funds are on a
basis no less favorable to the Plans than dealings between the Funds
and other shareholders holding the same class of shares as the Plans;
and
(M) The requirements of Prohibited Transaction Class Exemption 77-4
(42 FR 18732, April 8, 1977) are met with respect to all arrangements
under which investment advisory fees are paid to the Bank directly or
indirectly by Plans with assets invested in the Funds.
Section II--General Conditions
(A) The Bank maintains for a period of six years the records
necessary to enable the persons, as described in paragraph (B) of this
section II, to determine whether the conditions of this exemption have
been met, except that:
(1) A prohibited transaction will not be considered to have
occurred if, due to circumstances beyond the control of the Bank, the
records are lost or destroyed prior to the end of the six (6) year
period, and
(2) No party in interest, other than the Bank, shall be subject to
the civil penalty that may be assessed under section 503(i) of the Act,
or to the taxes imposed by section 4975(a) and (b) of the Code, if the
records are not maintained, or are not available for examination as
required by paragraph (B) of this section;
(B)(1) Except as provided in paragraph (B)(2) of this section II
and notwithstanding any provisions of subsection (a)(2) and (b) of
section 504 of the Act, the records referred to in paragraph (A) of
section II above are unconditionally available at their customary
location for examination during normal business hours by--
(a) Any duly authorized employee or representative of the
Department or the Internal Revenue Service,
(b) Any fiduciary of each of the Plans who has authority to acquire
or dispose of shares of any of the Funds owned by such a Plan, or any
duly authorized employee or representative of such fiduciary, and
(c) Any participant or beneficiary of the Plans or duly authorized
employee or representative of such participant or beneficiary;
(2) None of the persons described in paragraphs (B)(1)(b) and
(B)(1)(c) of this section II shall be authorized to examine trade
secrets of the Bank or commercial or financial information which is
privileged or confidential.
Section III--Definitions
For purposes of this exemption:
(A) The term Bank means 1st Source Bank and any affiliate of the
Bank, as defined in paragraph (B) of this section III.
(B) An affiliate of a person includes:
(1) Any person directly or indirectly through one or more
intermediaries, controlling, controlled by, or under common control
with the person,
(2) Any officer, director, employee, relative, or partner in any
such person, and
(3) Any corporation or partnership of which such person is an
officer, director, partner or employee.
(C) The term control means the power to exercise a controlling
influence over the management or policies of a person other than an
individual.
(D) The term Fund or Funds means any diversified open-end
investment company or companies registered under the Investment Company
Act of 1940 for which the Bank serves as investment adviser, and may
also provide custodial or other services as approved by such Funds.
(E) The term net asset value means the amount for purposes of
pricing all purchases and sales calculated by dividing the value of all
securities, determined by a method as set forth in a Fund's prospectus
and statement of additional information, and other assets belonging to
each of the portfolios in such Fund, less the liabilities charged to
each portfolio, by the number of outstanding shares.
(F) The term relative means a relative as that term is defined in
section 3(15) of the Act (or a ``member of the family'' as that term is
defined in section 4975(e)(6) of the Code), or a brother, a sister, or
a spouse of a brother or sister.
(G) The term Second Fiduciary means a fiduciary of a plan who is
independent of and unrelated to the Bank. For purposes of this
exemption, the Second Fiduciary will not be deemed to be independent of
and unrelated to the Bank if:
(1) Such Second Fiduciary directly or indirectly controls, is
controlled by, or is under common control with the Bank,
(2) Such Second Fiduciary, or any officer, director, partner,
employee, or relative of such Second Fiduciary is an officer, director,
partner, or employee of the Bank (or is a relative of such person), or
(3) Such Second Fiduciary directly or indirectly receives any
compensation or other consideration for his or her own personal account
in connection with any transaction described in this exemption.
If an officer, director, partner, or employee of the Bank (or a
relative of such persons) is a director of such Second Fiduciary, and
if he or she abstains from participation in (i) the choice of the
Plan's investment manager/advisor, (ii) the approval of any purchase or
sale by the Plan of shares of the Funds, and (iii) the approval of any
change of fees charged to or paid by the Plan, in connection with any
of the transactions described in section I above, then paragraph (G)(2)
of section III above shall not apply.
(H) The term, Secondary Service means a service, other than an
investment management, investment advisory, or similar service, which
is provided by the Bank to the Funds, including but not limited to
custodial, accounting, brokerage, administrative or any other service.
EFFECTIVE DATE: This exemption is effective as of September 19, 1996.
For a more complete statement of the facts and representations
supporting this exemption, refer to the notice of proposed exemption
published on June 23, 1997 at 62 FR 33911.
FOR FURTHER INFORMATION CONTACT: Mr. Ronald Willett of the Department,
telephone (202) 219-8881. (This is not a toll-free number.)
Ronald L. Chez (Mr. Chez) IRA and Lawrence G. Kuntz (Mr. Kuntz) IRA
(Collectively; the IRAs) Located in Chicago, Illinois and Wilmington,
Delaware, Respectively
[Prohibited Transaction Exemption 97-45; Exemption Application Nos. D-
10359 and D-10360]
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: (a) The sale by the IRAs of certain
[[Page 47053]]
closely held stock (the Stock) to Happy Valley Corporation (the
Corporation), the issuer of the Stock and an unrelated third party with
respect to the IRAs; and (b) the subsequent repurchase of the Stock
from the Corporation by Mr. Chez and Mr. Kuntz, fiduciaries and
disqualified persons with respect to the IRAs; provided that the
following conditions are met:
1. The sale and the repurchase of the Stock will be one-time
transactions for cash;
2. The transactions described in (1) above will take place on the
same business day;
3. Mr. Chez and Mr. Kuntz, in their individual capacity, will
purchase the same shares of the Stock, as those that were sold to the
Corporation by the IRAs. The stock transfer records of the Corporation
will evidence that this is the case; and
4. The amount paid to the IRAs for the Stock will be the fair
market value of the Stock determined at the time of the sale by a
qualified independent appraiser. Mr. Chez and Mr. Kuntz will purchase
the Stock from the Corporation for the same consideration as was
received by the IRAs for the sale of the Stock.
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 11, 1997 at 62 FR
37309.
Written Comments
The Department received one written comment on the proposed
exemption and no requests for a hearing. The attorney for the applicant
submitted the written comment as follows:
1. Paragraph 1 at the top of the of the third column on page 37309
and section 7 of the Summary of Facts and Representations on page 37310
state that ``the sale and repurchase of the Stock will be one-time
transactions for cash.'' The applicant requests that the phrase ``check
or bank transfer'' be added at the end of that sentence to permit
payment by check or bank transfer.
The Department notes that the term cash includes payment by ``check
or bank transfer.'' In this regard, the Department wishes to assure
that, as a result of the transactions, the IRAs receive payment by
cash, as distinguished from an in-kind transfer of assets other than
cash, and there will be no extension of credit associated with the
transactions.
2. The second paragraph of section 3 of the Summary of Facts and
Representations states that ``On August 1, 1995, Mr. Kuntz subscribed
for Stock shares in his own name. On December 20, 1995, at the request
of Mr. Kuntz, the Corporation issued a replacement Stock certificate to
Mr. Kuntz's IRA.''
The applicant clarified that although the Stock was originally
issued by the Corporation to Mr. Kuntz, the intent of Mr. Kuntz was
always to make his investment in the Corporation through his IRA.
3. Section 5 of the Summary of the Facts and Representations states
that ``By letter dated May 22, 1997, the attorneys for the Corporation
represent that the transaction must be structured through the
Corporation'' (emphasis added).
In this regard, the applicant clarified that it believed that the
taint of having a non-permitted shareholder of the Corporation was most
completely removed where the parties were put back in the position they
would have been in had the stock been issued to the individuals
concerned and not to the IRAs.
After giving full consideration to the record and the comment
submitted to the Department, the Department has determined to grant the
exemption.
FOR FURTHER INFORMATION CONTACT: Ekaterina A. Uzlyan of the Department
at (202) 219-8883. (This is not a toll-free number.)
John Hancock Mutual Life Insurance Company (JH), Located in Boston,
Massachusetts,
[Prohibited Transaction Exemption 97-46; Exemption Application Nos. D-
10416-10420]
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 acquisition by a separate account
maintained by JH (the FPGT Account) from Willamette Industries, Inc. of
certain oil and gas rights (the Deer Creek Oil and Gas Rights), subject
to existing leases (the Leases) of such rights to Enerfin Resources
Northwest Limited Partnership (Enerfin), a party in interest with
respect to the plans invested in the FPGT Account; and (2) the
continuation of the Leases following the acquisition by the FPGT
Account, provided the following conditions are satisfied: (a) As part
of its decision to enter into the separate account contract
establishing the FPGT Account, an independent fiduciary determines that
the acquisition of the Deer Creek Oil and Gas Rights is in the interest
of the participants of the plans investing in the FPGT Account and that
the price paid for the rights is no more than the fair market value of
such rights; (b) an independent fiduciary determines that the
continuation of the Leases is in the best interests of the FPGT
Account; and (c) an independent fiduciary will monitor the performance
of Enerfin under the Leases, as well as any proposed modifications or
renewals of the Leases, and will take such steps as are necessary to
protect the interests of the FPGT Account with respect to the Leases.
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 23, 1997 at 62 FR
33915.
FOR FURTHER INFORMATION CONTACT: Gary H. Lefkowitz of the Department,
telephone (202) 219-8881. (This is not a toll-free number.)
AmSouth Bank of Alabama (AmSouth), Located in Birmingham, Alabama
[Prohibited Transaction Exemption 97-47; Application No. D-10422]
Exemption
Section I--Transactions
The restrictions of section 406(a) and 406(b) 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 (F) of the Code, shall not
apply to the receipt of fees by AmSouth from the AmSouth Mutual Funds,
or any other diversified open-end investment companies registered under
the Investment Company Act of 1940 (the Funds), for acting as an
investment adviser for the Funds as well as for providing other
services to the Funds which are ``Secondary Services'' as defined in
Section III(h), in connection with the investment by the Client Plans
in shares of the Funds, provided that the conditions set forth in
Section II below are met.
Section II--Conditions
(a) Each Client Plan satisfies either (but not both) of the
following:
(1) The Client Plan receives a cash credit of such Plan's
proportionate share of all fees charged to the Funds by AmSouth for
investment advisory services, including any investment advisory fees
paid by AmSouth to third party sub-advisers, no later than one business
day after the receipt of such fees by AmSouth. The crediting of all
such fees to the Client Plans by AmSouth is audited by an independent
accounting firm on at least an annual basis to verify the proper
crediting of the fees to each Plan; or
[[Page 47054]]
(2) The Client Plan does not pay any Plan-level investment
management fees, investment advisory fees, or similar fees to AmSouth
with respect to any of the assets of such Plan which are invested in
shares of any of the Funds. This condition does not preclude the
payment of investment advisory or similar fees by the Funds to AmSouth
under the terms of an investment management agreement adopted in
accordance with section 15 of the Investment Company Act of 1940 (the
1940 Act), nor does it preclude the payment of fees for Secondary
Services to AmSouth pursuant to a duly adopted agreement between
AmSouth and the Funds.
(b) The price paid or received by a Client Plan for shares in a
Fund is the net asset value per share at the time of the transaction,
as defined in Section III(e), and is the same price which would have
been paid or received for the shares by any other investor at that
time.
(c) AmSouth, including any officer or director of AmSouth, does not
purchase or sell shares of the Funds from or to any Client Plan.
(d) No sales commissions are paid by the Client Plans in connection
with the purchase or sale of shares of the Funds and no redemption fees
are paid in connection with the sale of shares by the Client Plans to
the Funds.
(e) For each Client Plan, the combined total of all fees received
by AmSouth for the provision of services to a Client Plan, and in
connection with the provision of services to the Funds in which the
Client Plan may invest, are not in excess of ``reasonable
compensation'' within the meaning of section 408(b)(2) of the Act.
(f) AmSouth does not receive any fees payable pursuant to Rule 12b-
1 under the 1940 Act in connection with the transactions.
(g) The Client Plans are not employee benefit plans sponsored or
maintained by AmSouth.
(h) The Second Fiduciary receives, in advance of any initial
investment by the Client Plan in a Fund, full and detailed written
disclosure of information concerning the Funds, including but not
limited to:
(1) A current prospectus for each Fund in which a Client Plan is
considering investing;
(2) A statement describing the fees for investment advisory or
similar services, any secondary services as defined in Section III(h),
and all other fees to be charged to or paid by the Client Plan and by
the Funds, including the nature and extent of any differential between
the rates of such fees;
(3) The reasons why AmSouth may consider such investment to be
appropriate for the Client Plan
(4) A statement describing whether there are any limitations
applicable to AmSouth with respect to which assets of a Client Plan may
be invested in the Funds, and if so, the nature of such limitations;
and
(5) Upon request of the Second Fiduciary, a copy of the proposed
exemption and/or a copy of the final exemption as published in the
Federal Register.
(i) After consideration of the information described above in
paragraph (h), the Second Fiduciary authorizes in writing the
investment of assets of the Client Plan in each particular Fund and the
fees to be paid by such Funds to AmSouth.
(j) All authorizations made by a Second Fiduciary regarding
investments in a Fund and the fees paid to AmSouth are subject to an
annual reauthorization wherein any such prior authorization referred to
in paragraph (i) shall be terminable at will by the Client Plan,
without penalty to the Client Plan, upon receipt by AmSouth of written
notice of termination. A form expressly providing an election to
terminate the authorization described in paragraph (i) above (the
Termination Form) with instructions on the use of the form must be
supplied to the Second Fiduciary no less than annually; provided that
the Termination Form need not be supplied to the Second Fiduciary
pursuant to this paragraph sooner than six months after such
Termination Form is supplied pursuant to paragraph (l) below, except to
the extent required by such paragraph in order to disclose an
additional service or fee increase. The instructions for the
Termination Form must include the following information:
(1) The authorization is terminable at will by the Client Plan,
without penalty to the Client Plan, upon receipt by AmSouth of written
notice from the Second Fiduciary; and
(2) Failure to return the Termination Form will result in continued
authorization of AmSouth to engage in the transactions described in
paragraph (i) on behalf of the Client Plan.
(k) For each Client Plan using the fee structure described in
paragraph (a)(1) above with respect to investments in a particular
Fund, the Second Fiduciary of the Client Plan receives full written
disclosure in a Fund prospectus or otherwise of any increases in the
rates of fees charged by AmSouth to the Funds for investment advisory
services, prior to the effective date of such increase.
(l)(1) For each Client Plan using the fee structure described in
paragraph (a)(2) above with respect to investments in a particular
Fund, an increase in the rate of fees paid by the Fund to AmSouth
regarding any investment management services, investment advisory
services, or similar services that AmSouth provides to the Fund over an
existing rate for such services that had been authorized by a Second
Fiduciary in accordance with paragraph (i) above; or
(2) For any Client Plan under this exemption, an addition of a
Secondary Service (as defined in Section III(h) below) provided by
AmSouth to the Fund for which a fee is charged, or an increase in the
rate of any fee paid by the Funds to AmSouth for any Secondary Service
that results either from an increase in the rate of such fee or from
the decrease in the number of kind of services performed by AmSouth for
such fee over an existing rate for such Secondary Service which had
been authorized by the Second Fiduciary of a Client Plan in accordance
with paragraph (i) above.
AmSouth will, at least 30 days in advance of the implementation of
such additional service for which a fee is charged or fee increase,
provide a written notice (which may take the form of a proxy statement,
letter, or similar communication that is separate from the prospectus
of the Fund and which explains the nature and amount of the additional
service for which a fee is charged or of the increase in fees) to the
Second Fiduciary of the Client Plan. Such notice shall be accompanied
by a Termination Form with instructions as described in paragraph (j)
above.
(m) On an annual basis, AmSouth provides the Second Fiduciary of a
Client Plan investing in the Funds with:
(1) A copy of the current prospectus for the Funds in which the
Client Plan invests and, upon such fiduciary's request, a copy of the
Statement of Additional Information for such Funds which contains a
description of all fees paid by the Funds to AmSouth;
(2) A copy of the annual financial disclosure report prepared by
AmSouth which includes information about the Fund portfolios as well as
audit findings of an independent auditor within 60 days of the
preparation of the report; and
(3) Oral or written responses to inquiries of the Second Fiduciary
as they arise.
(n) With respect to each of the Funds in which a Client Plan
invests, in the event such Fund places brokerage transactions with
AmSouth, AmSouth will provide the Second Fiduciary of
[[Page 47055]]
such Plan at least annually with a statement specifying:
(1) The total, expressed in dollars, of brokerage commissions of
each Fund that are paid to AmSouth by such Fund;
(2) The total, expressed in dollars, of brokerage commissions of
each Fund that are paid by such Fund to brokerage firms unrelated to
AmSouth;
(3) The average brokerage commissions per share, expressed as cents
per share, paid to AmSouth by each Fund; and
(4) The average brokerage commissions per share, expressed as cents
per share, paid by each Fund to brokerage firms unrelated to AmSouth.
(o) All dealings between the Client Plans and the Funds are on a
basis no less favorable to the Plans than dealings with other
shareholders of the Funds.
(p) AmSouth maintains for a period of six years the records
necessary to enable the persons described below in paragraph (q) to
determine whether the conditions of this exemption have been met,
except that (1) a prohibited transaction will not be considered to have
occurred if, due to circumstances beyond the control of AmSouth, the
records are lost or destroyed prior to the end of the six-year period,
and (2) no party in interest other than AmSouth or an affiliate shall
be subject to the civil penalty that may be assessed under section
502(i) of the Act or to the taxes imposed by section 4975 (a) and (b)
of the Code if the records are not maintained or are not available for
examination as required by paragraph (q) below.
(q)(1) Except as provided below in paragraph (q)(2) and
notwithstanding any provisions of section 504(a)(2) of the Act, the
records referred to in paragraph (p) are unconditionally available at
their customary location for examination during normal business hours
by--
(i) Any duly authorized employee or representative of the
Department or the Internal Revenue Service,
(ii) Any fiduciary of the Client Plans who has authority to acquire
or dispose of shares of the Funds owned by the Client Plans, or any
duly authorized employee or representative of such fiduciary, and
(iii) Any participant or beneficiary of the Client Plans or duly
authorized employee or representative of such participant or
beneficiary;
(2) None of the persons described in paragraph (q)(1) (ii) and
(iii) shall be authorized to examine trade secrets of AmSouth, or
commercial or financial information which is privileged or
confidential.
Section III--Definitions
For purposes of this exemption:
(a) The term AmSouth means AmSouth Bank of Alabama and any
affiliate thereof as defined below in paragraph (b) of this section.
(b) An affiliate of a person includes:
(1) Any person directly or indirectly through one or more
intermediaries, controlling, controlled by, or under common control
with the person;
(2) Any officer, director, employee, relative, or partner in any
such person; and
(3) Any corporation or partnership of which such person is an
officer, director, partner, or employee.
(c) The term control means the power to exercise a controlling
influence over the management or policies of a person other than an
individual.
(d) The term Fund or Funds shall include the AmSouth Mutual Funds
or any other diversified open-end investment company or companies
registered under the 1940 Act for which AmSouth serves as an investment
adviser and may also serve as a custodian, dividend disbursing agent,
shareholder servicing agent, transfer agent, Fund accountant, or
provide some other ``Secondary Service'' (as defined below in paragraph
(h) of this Section) which has been approved by such Funds.
(e) The term net asset value means the amount for purposes of
pricing all purchases and sales calculated by dividing the value of all
securities, determined by a method as set forth in the Fund's
prospectus and statement of additional information, and other assets
belonging to the Fund or portfolio of the Fund, less the liabilities
charged to each such portfolio or Fund, by the number of outstanding
shares.
(f) The term relative means a relative as that term is defined in
section 3(15) of the Act (or a ``member of the family'' as that term is
defined in section 4975(e)(6) of the Code), or a brother, a sister, or
a spouse of a brother or a sister.
(g) The term Second Fiduciary means a fiduciary of a Client Plan
who is independent of and unrelated to AmSouth. For purposes of this
exemption, the Second Fiduciary will not be deemed to be independent of
and unrelated to AmSouth if:
(1) Such fiduciary directly or indirectly controls, is controlled
by, or is under common control with AmSouth;
(2) Such fiduciary, or any officer, director, partner, employee, or
relative of the fiduciary is an officer, director, partner or employee
of AmSouth (or is a relative of such persons); or
(3) Such fiduciary directly or indirectly receives any compensation
or other consideration for his or her own personal account in
connection with any transaction described in this exemption.
If an officer, director, partner or employee of AmSouth (or
relative of such persons), is a director of such Second Fiduciary, and
if he or she abstains from participation in (i) the choice of the
Client Plan's investment adviser, (ii) the approval of any such
purchase or sale between the Client Plan and the Funds, and (iii) the
approval of any change in fees charged to or paid by the Client Plan in
connection with any of the transactions described in Sections I and II
above, then paragraph (g)(2) of this section shall not apply.
(h) The term Secondary Service means a service other than an
investment management, investment advisory, or similar service, which
is provided by AmSouth to the Funds, including (but not limited to)
custodian services, transfer and dividend disbursing agent services,
administrator or sub-administrator services, accounting services,
shareholder servicing agent services and brokerage services.
(i) The term Termination Form means the form supplied to the Second
Fiduciary which expressly provides an election to the Second Fiduciary
to terminate on behalf of a Client Plan the authorization described in
paragraph (i) of Section II. Such Termination Form may be used at will
by the Second Fiduciary to terminate an authorization without penalty
to the Client Plan and to notify AmSouth in writing to effect a
termination by selling the shares of the Funds held by the Client Plan
requesting such termination within one business day following receipt
by AmSouth of the form; provided that if, due to circumstances beyond
the control of AmSouth, the sale cannot be executed within one business
day, AmSouth shall have one additional business day to complete such
sale.
EFFECTIVE DATE: This exemption is effective as of April 16, 1997.
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 23, 1997, at 62 FR
33917.
WRITTEN COMMENTS: The Department received one written comment from an
officer of a Client Plan sponsor, which supported the granting of an
exemption for the subject transactions. No other written comments, and
no requests for a hearing, were received by the Department.
Accordingly, the
[[Page 47056]]
Department has determined to grant the requested exemption as proposed.
FOR FURTHER INFORMATION CONTACT: Mr. E.F. Williams of the Department,
telephone (202) 219-8194. (This is not a toll-free number.)
Martin D. Ross Individual Retirement Account (the IRA) Located in Boca
Raton, Florida
[Prohibited Transaction Exemption 97-48; Exemption Application No. D-
10451]
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 March 4, 1996 sale by the IRA of certain
debentures (the Debentures) to Mr. Martin D. Ross (Mr. Ross), a
disqualified person with respect to the IRA, provided the following
conditions were satisfied: (1) The sale of the Debentures by the IRA
was a one-time transaction for cash; (2) the IRA received no less than
the fair market value of the Debentures as of the time of the sale; and
(3) as soon as Mr. Ross became aware that the transaction was
prohibited, he reversed the transaction.1
---------------------------------------------------------------------------
\1\ Pursuant to 29 CFR 2510.3-2(d), the IRA is not within the
jurisdiction of Title I of the Act. However, there is jurisdiction
under Title II of the Act pursuant to section 4975 of the Code.
---------------------------------------------------------------------------
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, 1997 at 62 FR
39030.
EFFECTIVE DATE: This exemption is effective March 4, 1996.
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 exemption 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, DC, this 2nd day of September, 1997.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits
Administration, Department of Labor.
[FR Doc. 97-23641 Filed 9-4-97; 8:45 am]
BILLING CODE 4510-29-P
