Grant of Individual Exemptions; Massachusetts Mutual Insurance
Company (MassMutual) [Notices] [06/06/2002]
Grant of Individual Exemptions; Massachusetts Mutual Insurance
Company (MassMutual) [06/06/2002]
Volume 67, Number 109, Page 39063-39072
-----------------------------------------------------------------------
DEPARTMENT OF LABOR
Pension and Welfare Benefits Administration
[Prohibited Transaction Exemption 2002-28; (Exemption Application No.
D-10869), et al.]
Grant of Individual Exemptions; Massachusetts Mutual Insurance
Company (MassMutual)
AGENCY: Pension and Welfare Benefits Administration, Labor.
ACTION: Grant of individual exemption.
-----------------------------------------------------------------------
SUMMARY: This document contains an exemption 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).
A notice was published in the Federal Register of the pendency
before the Department of a proposal to grant such exemption. The notice
set forth a summary of facts and representations contained in the
application for
[[Page 39064]]
exemption and referred interested persons to the application for a
complete statement of the facts and representations. The application
has been available for public inspection at the Department in
Washington, DC. The notice also invited interested persons to submit
comments on the requested exemption to the Department. In addition the
notice stated that any interested person might submit a written request
that a public hearing be held (where appropriate). The applicant has
represented that it has complied with the requirements of the
notification to interested persons. No requests for a hearing were
received by the Department. Public comments were received by the
Department as described in the granted exemption.
The notice of proposed exemption was issued and the exemption is
being granted solely by the Department because, effective December 31,
1978, section 102 of Reorganization Plan No. 4 of 1978, 5 U.S.C. App. 1
(1996), 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 exemption is administratively feasible;
(b) The exemption is in the interests of the plan and its
participants and beneficiaries; and
(c) The exemption is protective of the rights of the participants
and beneficiaries of the plan.
Massachusetts Mutual Insurance Company (MassMutual) Located in
Springfield, Massachusetts
[Prohibited Transaction Exemption 2002- ; Exemption Application No. D-
10869]
Exemption
Section I. Retroactive Exemption for the Purchase of Fund Shares
For the period from April 1, 1995 until June 6, 2002, the
restrictions of sections 406(a) and 406(b) of the Act and the taxes
imposed by section 4975 of the Code, by reason of section 4975(c)(1)(A)
through (F) of the Code, shall not apply to the purchase by an employee
benefit plan (the Client Plan) (directly or through a single customer
or pooled separate account or other pooled vehicle) of shares of one or
more diversified open-end management investment companies (Fund or
Funds) in exchange for Client Plan assets transferred in-kind to a Fund
from a single customer or pooled separate account or other pooled
vehicle holding plan assets maintained by MassMutual (a Separate
Account), where MassMutual or its affiliate is the Fund's investment
adviser and a Client Plan fiduciary.
The exemption is subject to the following conditions: \1\
---------------------------------------------------------------------------
\1\ The Department notes that the exemption does not provide
relief for any prohibited transactions that may arise in connection
with terminating a separate investment account, or permitting
certain plans to withdraw from a separate investment account that is
not terminating, or liquidating or transferring any plan assets held
by the separate investment account.
---------------------------------------------------------------------------
(a) No sales commissions, redemption fees, or other fees are paid
by the Client Plan in connection with the purchase of Fund shares by a
Client Plan.
(b) All transferred assets are either cash or securities for which
market quotations are readily available.
(c) The assets transferred in-kind to the Funds constitute the
Client Plan's pro rata portion of the assets held by the Separate
Account immediately prior to the transfer.
(d) The Client Plan receives Fund shares having a total net asset
value equal to the value of the assets transferred by the Client Plan
on the date of the transfer, as determined in a single valuation
performed in the same manner at the close of the same business day with
respect to all Client Plans participating in the transaction on such
date, in accordance with the procedures set forth in Rule 17a-7 of the
Investment Company Act of 1940 (the 1940 Act) (using sources
independent of MassMutual and the Fund) and the procedures established
by the Funds pursuant to Rule 17a-7 for the valuation of such assets.
(e) An Independent Fiduciary with respect to each Client Plan
receives advance written notice of an in-kind transfer and purchase of
assets and full written disclosure of information concerning the Funds,
including:
(1) A current prospectus for each Fund to which the Separate
Account's assets may be transferred, updated as necessary, deliverable:
(i) In hard copy format either automatically or upon timely
notification to the Independent Fiduciary that a hard copy format is
available upon request; or (ii) in electronic copy format upon timely
notification to the Independent Fiduciary that such electronic format
is available by accessing MassMutual's internet website.
(2) A statement describing the investment advisory and other fees
to be charged to, or paid by, a Client Plan and the Funds to the Fund
Adviser, including the nature and extent of any differential between
the rates of the fees paid by the Fund and the rates of the fees paid
by the Client Plan in connection with the Client Plan's investment in
the Separate Account;
(3) A statement of the reasons why MassMutual considers such
investment to be appropriate for the Client Plan; and
(4) A statement describing whether there are any limitations
applicable to MassMutual with respect to which Client Plan assets may
be invested in Fund shares, including the nature of the limitations.
(f) The Independent Fiduciary may: (1) Opt-out of the in-kind
transfer of the Client Plan's interest in the Separate Account for
shares of the Funds (including by selling its interest in a pooled
vehicle) without penalty; or (2) approve the in-kind transfer (on the
basis of the prospectus and disclosure referred to in paragraph (e) of
this Section) consistent with the responsibilities, obligations, and
duties imposed on fiduciaries by Part 4 of Title I of the Act. Approval
for the in-kind transfer of a Client Plan's interest in the Separate
Account in exchange for Fund shares may be presumed notwithstanding
that MassMutual does not receive any response from a Client Plan
pursuant to MassMutual's two written requests (one by certified mail)
for such approval, provided that the first such request occur at least
45 days before the in-kind transfer and the second written request
occur at least 30 days before the in-kind transfer.
(g) MassMutual sends a written confirmation by regular mail or
personal delivery to the Independent Fiduciary of each Client Plan
participating in the in-kind transfer, no later than 105 days after
completion of each purchase, containing:
(1) The number of Separate Account units held by the Client Plan
immediately before the transfer, and the related per unit value and the
total dollar amount of such units; and
(2) The number of Fund shares held by the separate account
immediately following the transfer, and the related per share net asset
value and the total dollar amount of such shares.
(h) All other dealings between the Client Plan and the Funds are on
a basis no less favorable to the Client Plan than dealings between the
Funds and other shareholders holding the same class of shares as the
Client Plans.
(i) Conditions (a) and (f) of Section III have been met.
[[Page 39065]]
Section II. Prospective Exemption for the Purchase of Fund Shares
Effective after [insert date of publication of this final exemption
in the Federal Register], the restrictions of sections 406(a) and
406(b) of the Act and the taxes imposed by section 4975 of the Code, by
reason of section 4975(c)(1)(A) through (F) of the Code, shall not
apply to the purchase by a Client Plan (directly or through a single
customer or pooled separate account or other pooled vehicle) of shares
of one or more Fund(s) in exchange for Client Plan assets transferred
in-kind to a Fund from a Separate Account, where MassMutual or its
affiliate is the Fund's investment adviser and a Client Plan fiduciary.
The exemption is subject to the following conditions:
(a) The assets transferred in-kind to the Funds constitute the
Client Plan's pro rata portion of the assets held by the Separate
Account immediately prior to the transfer. Notwithstanding the
foregoing, the allocation among Client Plans of fixed-income securities
held by a Separate Account on the basis of each Client Plan's pro rata
share of the aggregate value of such securities will not fail to meet
the requirements of this subsection if:
(1) The aggregate value of the fixed-income securities does not
exceed one percent of the total value of the assets held by the
Separate Account immediately prior to the transfer; and
(2) Such securities have the same coupon rate and maturity, and at
the time of the transfer, the same credit ratings from nationally
recognized statistical rating agencies.
(b) An Independent Fiduciary with respect to each Client Plan
receives advance written notice of the in-kind transfer and purchase
and full written disclosure of information concerning the Funds
including:
(1) The identity of the securities that will be valued in
accordance with Rule 17a-7(b)(4) under the 1940 Act;
(2) The identity of any fixed-income securities allocated on the
basis of each Client Plan's pro rata share of the aggregate value of
such securities pursuant to Section II (a);
(3) Upon request of the Independent Fiduciary, a copy of the
proposed exemption and/or a copy of the final exemption; and
(4) The date on which the in-kind purchase will take place.
(c) MassMutual sends by regular mail or personal delivery to the
Independent Fiduciary of each Client Plan that purchases Fund shares
pursuant to the in-kind transfer:
(1) Not later than 30 days after the completion of the purchase, a
written confirmation containing:
(A) The identity of each security valued in accordance with Rule
17a-7(b)(4) under the 1940 Act;
(B) The current market price, as of the date of the in-kind
transfer, of each such security involved in the purchase of Fund
shares; and
(C) The identity of each pricing service or market-maker consulted
in determining the current market price of such securities; and
(2) Not later than 90 days after each in-kind transfer, a written
confirmation which contains:
(A) The number of Separate Account units held by such affected
Client Plan immediately before the in-kind transfer (and the related
per unit value and the aggregate dollar value of the units
transferred); and
(B) The number of shares in the Funds that are held by such
affected Client Plan following the in-kind transfer (and the related
per share net asset value and the aggregate dollar value of the shares
received).
(d)(1) MassMutual provides the Independent Fiduciary of each Client
Plan holding shares of the Funds with--
(A) A copy of an updated prospectus, deliverable in the manner
specified in paragraph (e) of Section I, of such Fund, at least
annually; and
(B) Upon request of the Independent Fiduciary, 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) containing a description of all fees paid by the Fund to
MassMutual or its affiliates.
(2) With respect to each of the Funds in which a Client Plan
invests, in the event such Fund places brokerage transactions with an
affiliate of MassMutual, MassMutual will provide the Independent
Fiduciary of such Client Plan at least annually with a statement
specifying:
(A) The total, expressed in dollars, of brokerage commissions of
each Fund's investment portfolio that are paid to an affiliate of
MassMutual by such Fund;
(B) The total, expressed in dollars, of brokerage commissions of
each Fund's investment portfolio that are paid by such Fund to
brokerage firms unrelated to MassMutual;
(C) The average brokerage commissions per share, expressed as cents
per share, paid to an affiliate of MassMutual by each portfolio of a
Fund; and
(D) The average brokerage commissions per share, expressed as cents
per share, paid by each portfolio of a Fund to brokerage firms
unrelated to MassMutual.
(e) The Independent Fiduciary may: (1) Opt-out (including by
selling its interest in a pooled vehicle) of the in-kind exchange of
the Client Plan's interest in the Separate Account for shares of the
Funds without penalty; or (2) approve the in-kind transfer (on the
basis of the prospectus and disclosure referred to in paragraph (b) of
this Section and paragraph (e) of Section I) consistent with the
responsibilities, obligations, and duties imposed on fiduciaries by
Part 4 of Title I of the Act. Approval for the in-kind transfer of a
Client Plan's interest in the Separate Account in exchange for Fund
shares may be presumed notwithstanding that MassMutual does not receive
any response from a Client Plan pursuant to MassMutual's two written
requests (one by certified mail) for such approval, provided that the
first such request occurs at least 90 days before the in-kind transfer
and the second such request occurs within 45 days thereafter.
(f) All of a Client Plan's assets held in a Separate Account (other
than Fund shares already held in the Account) are transferred in-kind
to one or more of the Funds in exchange for Fund shares, except that
any Plan assets in the Separate Account which are not suitable for
acquisition by the Funds shall be liquidated as soon as reasonably
practicable, and the cash proceeds shall be invested directly in shares
of the Funds.
(g) The authorization described in paragraph (e) of this section is
terminable at will by the Independent Fiduciary of a Client Plan,
without penalty to such Client Plan. Such termination will be effected
by MassMutual redeeming the shares of the Fund(s) held by the affected
Client Plan or selling its interest in a Separate Account, in one
business day, provided that if, due to circumstances beyond the control
of MassMutual, the redemption cannot be executed within one business
day, MassMutual shall have one additional business day to complete such
redemption.
(h) Conditions (a), (b), (d), (e), and (h) of Section I, Conditions
(a) and (e) of Section III, and Conditions (a) and (b) of Section V
have been met.
Section III. Retroactive Exemption for the Receipt of Fees
For the period from April 1, 1995 until June 6, 2002, the
restrictions of sections 406(a) and 406(b) of the Act and the taxes
imposed by 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
[[Page 39066]]
MassMutual from the Funds for acting as an investment adviser for such
Funds, as well as for providing other services to the Funds which are
``Secondary Services'', as defined in Section VI(i), in connection with
the investment by the Client Plans for which MassMutual serves as a
fiduciary in shares of the Funds.
The exemption is subject to the following conditions:
(a) As to each Client Plan, the combined total of all fees received
by MassMutual for the provision of services to the Client Plan, and for
the provision of services to a Fund in which a Client Plan holds
shares, is not in excess of ``reasonable compensation'' within the
meaning of section 408(b)(2) of the Act.
(b) The price paid or received by a Client Plan for shares in a
Fund is the net asset value of such shares, as defined in Section
VI(g), at the time of the transaction and is the same price that would
have been paid or received for the shares by any other investor at that
time.
(c) Neither MassMutual, other than in its capacity as agent for the
Funds, nor any officer or director of MassMutual, purchases or sells
shares of the Funds from or to any Client Plan.
(d) The Independent Fiduciary approves the fees to be paid by the
Funds to MassMutual as such fees relate to:
(1) Fund shares purchased by a Client Plan for cash;
(2) Fund shares purchased by a Client Plan pursuant to an in-kind
transfer (upon the Independent Fiduciary's consideration of the
information described in paragraph (e) of Section I);
(3) the addition of a Secondary Service (as defined in Section V
(i)) provided by MassMutual to the Fund for which a fee is charged, or
an increase in the rate of any fee paid by the Funds to MassMutual for
any Secondary Service that results either from an increase in the rate
of such fee or from a decrease in the number or kind of services
performed by MassMutual for such fee over an existing rate for such
Secondary Service that had been authorized by the Independent Fiduciary
of a Client Plan. The approvals required in this paragraph may be
presumed notwithstanding that MassMutual does not receive any response
from a Client Plan to MassMutual's two written requests (one by
certified mail) for approval of a change in the rates of fees provided
that the first such request occurs at least 45 days before the in-kind
transfer and the second written request occur at least 30 days before
the in-kind transfer. Such approval may be limited solely to the
investment advisory and other fees paid by the mutual fund in relation
to the fees paid by a Client Plan and need not relate to any other
aspects of such investment.
(e) The Fund Adviser does not receive any fees payable pursuant to
Rule 12b-1 under the 1940 Act in connection with the acquisition of
Fund shares in exchange for Client Plan assets.
(f) The Plan does not pay any plan-level investment management,
investment advisory or similar fee with respect to the Client Plan
assets invested in such shares for the entire period of such
investment. This condition does not preclude the payment of investment
advisory fees by an investment company under the terms of its
investment advisory agreement adopted in accordance with section 15 of
the Investment Company Act of 1940.
(g) On an annual basis, MassMutual provides the Independent
Fiduciary of each Client Plan holding shares of the Funds with--
(1) A copy of an updated prospectus of such Fund, deliverable in
the manner specified in paragraph (e) of Section I of this exemption;
and
(2) Upon request of the Independent Fiduciary, 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) containing a description of all fees paid by the Fund to
MassMutual or its affiliates.
(3) Oral or written responses to inquiries of the Independent
Fiduciary as they arise.
(h) Conditions (a), (e), (h) and (i) of Section I, Condition (b) of
Section II, and Conditions (a) and (b) of Section V have been met.
Section IV. Prospective Exemption for the Receipt of Fees
Effective after June 6, 2002, the restrictions of sections 406(a)
and 406(b) of the Act and the taxes imposed by 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 MassMutual from the Funds for
acting as an investment adviser for such Funds, as well as for
providing other services to the Funds which are ``Secondary Services,''
as defined in Section VI(i), in connection with the investment by the
Client Plans for which MassMutual serves as a fiduciary in shares of
the Funds, provided that the following conditions are met:
(a) For each Client Plan using the fee structure described in
paragraph (d)(2) of this Section with respect to investments in a
particular Fund, the Independent 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 MassMutual to the Funds for
investment advisory services.
(b) All authorizations made by an Independent Fiduciary regarding
investments in a Fund and the fees paid to MassMutual are subject to an
annual reauthorization, wherein any such prior authorization referred
to in Section III(d) shall be terminable at will by the Client Plan,
without penalty to the Client Plan, upon receipt by MassMutual of
written notice of termination. The Independent Fiduciary must be
supplied with a Termination Form, at the times specified in paragraph
(c) of this Section, with instructions on the use of the form,
including the following information:
(1) The authorization is terminable at will by any of the Client
Plans, without penalty to such Client Plans, upon receipt by MassMutual
of written notice from the Independent Fiduciary; and
(2) Failure by the Independent Fiduciary to return the Termination
Form on behalf of a Client Plan will be deemed to be an approval of the
additional Secondary Service for which a fee is charged or increase in
the rate of any fees, if such Termination Form is supplied pursuant to
the requirements of this Section, and will result in the continuation
of the authorizations of MassMutual to engage in the transactions on
behalf of such Client Plan.
(c) The Independent Fiduciary is supplied with a Termination Form
no less than annually; provided that the Termination Form need not be
supplied to the Independent Fiduciary pursuant to this paragraph sooner
than six months after such Termination Form is supplied pursuant to
paragraph (e) below, except to the extent required to disclose an
additional service or an increase in fees.
(d) Each Client Plan satisfies either (but not both) of the
following:
(1) For a Client Plan for which MassMutual serves as a non-
discretionary trustee, the Plan does not pay any Plan-level investment
management fees, investment advisory fees, or similar fees to
MassMutual with respect to Client Plan assets invested in shares of the
Funds. This condition does not preclude the payment of investment
advisory fees, or similar fees, by a Fund to MassMutual under the terms
of its investment advisory agreement adopted in accordance with section
15 of the 1940 Act, nor does it preclude the payment of fees for
Secondary Services to MassMutual pursuant to a duly
[[Page 39067]]
adopted agreement between MassMutual and the Funds.
(2) For a Client Plan for which MassMutual serves as a
discretionary fiduciary (i.e., a trustee or investment manager), such
Client Plan pays MassMutual an investment advisory fee based on total
Client Plan assets from which a credit had been subtracted representing
such Client Plan's pro rata share of all investment advisory fees paid
by the Funds. This condition does not preclude the payment of fees for
Secondary Services to MassMutual pursuant to a duly adopted agreement
between MassMutual and the Funds.
(e)(1) For each Client Plan using the fee structure described in
paragraph (d)(1) of this Section with respect to investments in a
particular Fund, an increase in the rate of fees paid by the Fund to
MassMutual regarding any investment management services, investment
advisory services, or similar services that MassMutual provides to the
Fund over an existing rate for such services that had been authorized
by an Independent Fiduciary in accordance with paragraph (d) of Section
III; or
(2) For any Client Plan under this exemption, an addition of a
Secondary Service (as defined in Section V (i)) provided by MassMutual
to the Fund for which a fee is charged, or an increase in the rate of
any fee paid by the Funds to MassMutual for any Secondary Service that
results either from an increase in the rate of such fee or from a
decrease in the number or kind of services performed by MassMutual for
such fee over an existing rate for such Secondary Service that had been
authorized by the Independent Fiduciary of a Client Plan in accordance
with paragraph (d) of Section III--
MassMutual 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 increase in
fees) to the Independent Fiduciary of the Client Plan. Such notice
shall be accompanied by a Termination Form with instructions as
described above.
(f) Conditions (a), (e) and (h) of Section I, Conditions (b) and
(d) of Section II, Conditions (a), (b), (c), (d), (e), and (g) of
Section III, and Conditions (a) and (b) of Section V have been met.
Section V. General Conditions
(a) MassMutual maintains for a period of six years the records
necessary to enable the persons described in paragraph (b) of this
section to determine whether the conditions of this exemption, and the
proper crediting of fees described in paragraph (d)(2) of Section IV,
have been met, except that:
(1) A prohibited transaction will not be deemed to have occurred
if, due to circumstances beyond the control of MassMutual, the records
are lost or destroyed prior to the end of the six-year period; and
(2) No party in interest other than MassMutual 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 (b) below.
(b)(1) Except as provided in paragraph (b)(2) below and
notwithstanding any provisions of section 504(a)(2) of the Act, the
records referred to in paragraph (a) in this section are
unconditionally available at their customary location for examination
during normal business hours by--
(i) Any duly authorized employee or representative of the
Department, the Internal Revenue Service, or the Securities and
Exchange Commission,
(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 (b)(1)(ii) and (iii)
above shall be authorized to examine trade secrets of MassMutual, or
commercial or financial information that is privileged or confidential.
Section VI. Definitions
For purposes of this exemption:
(a) 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 or relative of such person, or
partner in any such person; and
(3) Any corporation or partnership of which such person is an
officer, director, partner or employee.
(b) The term ``Client Plan'' means a pension plan described in 29
CFR 2510.3-2, a welfare benefit plan described in 29 CFR 2510.3-1, and
a plan described in section 4975(e)(1) of the Code.
(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 ``fixed income security'' means any interest-bearing
or discounted government or corporate debt security with a face amount
of $1,000 or more that obligates the issuer to pay the holder a
specified sum of money, and to repay the principal amount of the loan
at maturity.
(e) The term ``Fund'' or ``Funds'' means any diversified open-end
management investment company or companies registered under the
Advisers Act for which MassMutual or its affiliates serves as an
investment adviser, and may also serve as a custodian, shareholder
servicing agent, transfer agent or provide some other secondary service
(as defined in paragraph (j) of this section).
(f)(1) The term ``Independent Fiduciary'' means a fiduciary of a
Client Plan who is unrelated to, and independent of, MassMutual. For
purposes of this exemption, a Client Plan fiduciary will be deemed to
be unrelated to, and independent of, MassMutual if such fiduciary
represents that neither such fiduciary, nor any individual responsible
for the decision to authorize or terminate authorization for
transactions described in Section I, II, III, or IV is an officer,
director, or highly compensated employee (within the meaning of section
4975(e)(2)(H) of the Code) of MassMutual and represents that such
fiduciary shall advise MassMutual if those facts change.
(2) Notwithstanding anything to the contrary in this Section VI(f),
a fiduciary is not independent if:
(i) such fiduciary directly or indirectly controls, is controlled
by, or is under common control with the Insurer;
(ii) such fiduciary directly or indirectly receives any
compensation or other consideration from MassMutual for his or her own
personal account in connection with any transaction described in this
exemption;
(iii) any officer, director, or highly compensated employee (within
the meaning of section 4975(e)(2)(H) of the Code) of MassMutual,
responsible for the transactions described in Section I, II, III or IV
is an officer, director, or highly compensated employee (within the
meaning of section 4975(e)(2)(H) of the Code) of the Client Plan
sponsor or of the fiduciary responsible for the decision to authorize
or terminate authorization for transactions described in Section I, II,
III or IV. However, if such individual is a director of
[[Page 39068]]
MassMutual or of the responsible fiduciary and if he or she abstains
from participation in the decision to authorize or terminate
authorization for transactions described in Section I, II, III or IV,
then Section VI(f)(2)(iii) shall not apply.
(g) The term ``Net Asset Value'' means the amount 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 chargeable to each portfolio, by the number of
outstanding shares.
(h) The term ``pooled separate account'' means a pooled investment
fund maintained by MassMutual or an affiliate for the collective
investment of assets attributable to two or more plans maintained by
unrelated employers.
(i) The term ``secondary service'' means a service provided by
MassMutual or an affiliate to a Fund other than investment management,
investment advisory or similar services.
(j) The term ``security'' shall be defined by section 2(36) of the
Advisers Act, as amended, 15 U.S.C. 80a-2(36) (1996).
(k) The term ``Fund Adviser'' means (i) any affiliate of MassMutual
which serves as an investment adviser to a Fund, and (ii) any affiliate
of an investment adviser identified in subsection (i).
(l) The term ``Termination Form'' means the form supplied to the
Independent Fiduciary, at the times specified above, which expressly
provides an election to the Independent Fiduciary to terminate on
behalf of the Client Plans the authorizations described in Paragraph
(b) of Section IV. Such Termination Form may be used at will by the
Independent Fiduciary to terminate such authorization without penalty
to the Client Plans and to notify MassMutual in writing to effect such
termination by redeeming the shares of the Fund held by the Client
Plans requesting termination by the close of the business day following
the date of receipt by MassMutual, whether by mail, hand delivery,
facsimile or other available means at the option of the Independent
Fiduciary, of written notice of such request for termination; provided
that if, due to circumstances beyond the control of MassMutual, the
redemption cannot be executed within one business day, MassMutual shall
have one additional business day to complete such redemption.
Written Comments
In response to the proposed exemption, the Department received one
comment letter submitted by MassMutual (hereinafter, the applicant). In
the letter, the applicant requested a change with respect to the
retroactive portions of the exemption (sections I and III) relating to
certain time-frames in which MassMutual is required to make the
requests to an Independent Fiduciary. Specifically, section I(f)
requires that MassMutual make certain requests to an Independent
Fiduciary for the advance approval of an in-kind transfer for
retroactive relief, and section III(d) requires that MassMutual make
certain requests to an such fiduciary for the advance approval of
certain fees and/or services provided by MassMutual. In this regard,
both sections provide that each such approval:
``may be presumed notwithstanding that MassMutual does not receive
any response from a Client Plan pursuant to MassMutual's two written
requests (one by certified mail) for such approval, provided that
the first such request occurs at least 90 days before the in-kind
transfer and the second such request occurs within 45 days
thereafter.'' (emphasis added)
The applicant requests that, with respect to the time-frame
described above, the first written request occur at least 45 days
before the in-kind transfer and the second written request occur at
least 30 days before the in-kind transfer. The applicant represents
that such time-frame has ensured that adequate and timely notice was
given to an Independent Fiduciary with respect to any in-kind transfer
and any change in fees/services described in the exemption. The
Department has determined that it is appropriate to modify paragraph
section I(f) and section III(d) as requested and has revised the
exemption accordingly.
Additionally, MassMutual requested a modification with respect to
the manner in which a prospectus for each Fund may be delivered. Such
modification affects section I(e), section II(d), section III(g), and
section IV(f) (which require, among other things, that condition (e) of
section I, condition (d) of section II, and condition (g) of section
III must be met) of the exemption. In this regard, the applicant
requests that the delivery of a prospectus pursuant to the affected
sections of the exemption may occur in one of two ways: (1) MassMutual
may automatically deliver a prospectus to an Independent Fiduciary in
hard copy format; or (2) MassMutual may notify an Independent Fiduciary
that a hard copy format of the prospectus is available upon request or
an electronic copy format of the prospectus is available by accessing
MassMutual's internet website. The applicant represents the
notification and delivery arrangements described above are sufficient
to ensure that an Independent Fiduciary is able to obtain a prospectus
in a timely manner. The Department has agreed to this request by the
applicant and, accordingly, has revised the exemption.
After giving full consideration to the entire record, including the
written comment noted above, the Department has decided to grant the
exemption.
For further information regarding the comments and other matters
discussed herein, interested persons are encouraged to obtain copies of
the exemption application file (Exemption Application No. D-11026) the
Department is maintaining in this case. The complete application file,
as well as all supplemental submissions received by the Department, are
made available for public inspection in the Public Disclosure Room of
the Pension and Welfare Benefits Administration, Room N-1513, U.S.
Department of Labor, 200 Constitution Avenue, NW., Washington, DC
20210.
For Further Information Contact: Christopher Motta of the
Department, telephone (202) 693-8544 (This is not a toll-free number).
Wyndham International, Inc., Employee Savings & Retirement Plan (the
Plan), Located in Dallas, Texas
[Prohibited Transaction Exemption 2002-29; Exemption Application No. D-
10912]
Exemption
The restrictions of sections 406(a), 406(b)(2), and 407(a) of the
Act and the sanctions resulting from the application of section 4975 of
the Code, by reason of section 4975(c)(1)(A) through (D) of the Code,
shall not apply to the past acquisition, holding, and exercise by the
Plan of certain stock purchase rights (the Rights),\2\ which were
issued by Wyndham International, Inc. (Wyndham) to all shareholders of
record, as of September 30, 1999, of certain Wyndham common stock (the
Common Stock) pursuant to a rights offering (the Rights Offering),
provided that the following conditions were satisfied:
---------------------------------------------------------------------------
\2\ The applicant states that the Rights do not constitute
``qualifying employer securities'' within the meaning of section
407(d)(5) of the Act.
---------------------------------------------------------------------------
(a) The Plan's acquisition and holding of the Rights in connection
with the Rights Offering occurred as a result of an independent act of
Wyndham as a corporate entity;
[[Page 39069]]
(b) All holders of the Common Stock, including the Plan, were
treated in a like manner with respect to all aspects of the Rights
Offering; and
(c) All decisions regarding the disposition or exercise of the
Rights were made by the individual Plan participants whose accounts in
the Plan received the Rights, in accordance with Plan provisions for
the individually directed investment of such accounts.
Effective Date: This exemption is effective for the period from
November 9, 1999 to December 8, 1999.
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 March 18, 2002 at 67 FR
12062.
For Further Information Contact: Ms. Karin Weng of the Department,
telephone (202) 693-8540. (This is not a toll-free number.)
EquiLend Holdings LLC (EquiLend), Located in New York, New York
[Prohibited Transaction Exemption 2002-30; Exemption Application No. D-
11026]
Exemption
Section I. Sale of EquiLend Products to Plans
The restrictions of section 406(a)(1)(A) and (D) of the Act and the
sanctions resulting from the application of section 4975(a) and (b) of
the Code, by reason of section 4975(c)(1)(A) and (D) of the Code, shall
not apply, effective March 29, 2002, to the sale or licensing of
certain data and/or analytical tools to an employee benefit plan by
EquiLend, a party in interest with respect to such plan.
This exemption is subject to the following conditions:
(a) The terms of any such sale or licensing are at least as
favorable to the plan as the terms generally available in an arm's-
length transaction involving an unrelated party;
(b) Any data sold/licensed to the plan will be limited to:
(1) Current and historical data related to transactions proposed or
occurring on EquiLend's electronic securities lending platform (the
Platform) or,
(2) Data derived from current and historical data using statistical
or computational techniques; and
(c) Each analytical tool sold/licensed to the plan will be an
objective statistical or computational tool designed to permit the
evaluation of securities lending activities.
Section II. Use of Platform by Owner Lending Agent/Sale of EquiLend
Products to Plans Represented by Owner Lending Agent
The restrictions of sections 406(a) and 406(b) of the Act, section
8477(c)(2) of FERSA, and the sanctions resulting from the application
of section 4975(a) and (b) of the Code, by reason of section
4975(c)(1)(A) through (F) of the Code, shall not apply, effective March
29, 2002, to: (1) The participation in the Platform by an equity owner
of EquiLend (an Equity Owner), in its capacity as a securities lending
agent for a plan (an Owner Lending Agent); and (2) the sale or
licensing of certain data and/or analytical tools by EquiLend to a plan
for which an Equity Owner acts as a securities lending agent.
This exemption is subject to the following conditions:
(a) In the case of participation in the Platform on behalf of a
plan, to the extent an applicable exemption is required, the securities
lending transactions conform to the provisions of Prohibited
Transaction Class Exemption (PTE) 81-6 (46 FR 7527 (Jan. 23, 1981)),
PTE 82-63 (46 FR 14804 (Apr. 6, 1982)), and/or any applicable
individual exemption;
(b) None of the fees imposed by EquiLend for securities lending
transactions conducted through the use of the Platform at the direction
of an Owner Lending Agent will be charged to a plan;
(c) Each securities lender and securities borrower participating in
a securities lending transaction through EquiLend will be notified by
EquiLend as to its responsibilities with respect to compliance, as
applicable, with the Act, the Code, and FERSA. This requirement may be
met by including such notification in the participation, subscription
or other user agreement required to be executed by each participant in
EquiLend;
(d) EquiLend will not act as a principal in any securities lending
transaction involving plan assets;
(e) Each Owner Lending Agent will provide prior written notice to
its plan clients of its intention to participate in EquiLend;
(f) (1) Except as otherwise provided in paragraph (i), the
arrangement pursuant to which the Owner Lending Agent utilizes the
services of EquiLend on behalf of a plan for securities lending:
(A) Is subject to the prior written authorization of an independent
fiduciary (an ``authorizing fiduciary'') as defined in paragraph (b) of
section III). For purposes of subparagraph (f)(1), the requirement that
the authorizing fiduciary be independent shall not apply in the case of
an Equity Owner Plan;
(B) May be terminated by the authorizing fiduciary, without penalty
to the plan, within the lesser of: (i) The time negotiated for such
notice of termination by the plan and the Owner Lending Agent, or (ii)
five business days. Notwithstanding the foregoing, the requirement for
prior written authorization will be deemed satisfied in the case of any
plan for which the authorizing fiduciary has previously provided
written authorization to the Owner Lending Agent pursuant to PTE 82-63,
unless such authorizing fiduciary objects to participation in the
Platform in writing to the Owner Lending Agent within 30 days following
disclosure of the information described in paragraphs (e) and (g) of
this section to such authorizing fiduciary; and
(2) Except as otherwise provided in paragraph (i), each purchase or
license of a securities lending-related product from EquiLend on behalf
of a plan by an Owner Lending Agent:
(A) Is subject to the prior written authorization of an authorizing
fiduciary. For purposes of subparagraph (f)(2), the requirement for
prior written authorization shall not apply to any purchase or
licensing of an EquiLend securities lending-related product by an
Equity Owner Plan if the fee or cost associated with such purchase or
licensing is not paid by the Equity Owner Plan; and
(B) May be terminated by the authorizing fiduciary within (i) the
time negotiated for such notice of termination by the plan and the
Owner Lending Agent or (ii) five business days, whichever is lesser, in
either case without penalty to the plan, provided that, such
authorizing fiduciary shall be deemed to have given the necessary
authorization in satisfaction of this paragraph (f)(2) with respect to
each specific product purchased or licensed pursuant thereto unless
such authorizing fiduciary objects to the Owner Lending Agent within 15
days after the delivery of information regarding such specific product
to the authorizing fiduciary in accordance with paragraph (g) of this
exemption;
(g) The authorization described in paragraph (f) of this section
shall not be deemed to have been made unless the Owner Lending Agent
has furnished the authorizing fiduciary with any reasonably available
information that the Owner Lending Agent reasonably believes to be
necessary for the authorizing fiduciary to determine whether such
authorization should be made, and any other reasonably
[[Page 39070]]
available information regarding the matter that the authorizing
fiduciary may reasonably request. This includes, but is not limited to:
(1) A statement that the Equity Owner, as securities lending agent, has
a financial interest in the successful operation of EquiLend, and (2) a
statement, provided on an annual basis, that the authorizing fiduciary
may terminate the arrangement(s) described in (f) above at any time;
(h) Any purchase or licensing of data and/or analytical tools with
respect to securities lending activities by a plan pursuant to this
section complies with the relevant conditions of section I and will be
authorized in advance by an authorizing fiduciary in accordance with
the applicable procedures of paragraphs (f), (g) and (i);
(i) (Special Rule for Commingled Investment Funds) In the case of a
pooled separate account maintained by an insurance company qualified to
do business in a state or a common or collective trust fund maintained
by a bank or trust company supervised by a state or federal agency
(Commingled Investment Fund), the requirements of paragraph (f) of this
section shall not apply, provided that--
(1) The information described in paragraph (g) (including
information with respect to any material change in the arrangement) of
this section and a description of the operation of the Platform
(including a description of the fee structure paid by securities
lenders and borrowers), shall be furnished by the Owner Lending Agent
to the authorizing fiduciary (described in paragraph (b) of section
III) with respect to each plan whose assets are invested in the account
or fund, not less than 30 days prior to implementation of any such
arrangement or material changes thereto, or, not less than 15 days
prior to the purchase or license of any specific securities lending-
related product, and, where requested, upon the reasonable request of
the authorizing fiduciary. For purposes of this subparagraph, the
requirement that the authorizing fiduciary be independent shall not
apply in the case of an Equity Owner Plan;
(2) In the event any such authorizing fiduciary notifies the Owner
Lending Agent that it objects to participation in the Platform, or to
the purchase or license of any EquiLend securities lending-related tool
or product, the plan on whose behalf the objection was tendered is
given the opportunity to terminate its investment in the account or
fund, without penalty to the plan, within such time as may be necessary
to effect the withdrawal in an orderly manner that is equitable to all
withdrawing plans and to the non-withdrawing plans. In the case of a
plan that elects to withdraw pursuant to the foregoing, such withdrawal
shall be effected prior to the implementation of, or material change
in, the arrangement or purchase or license, but any existing
arrangement need not be discontinued by reason of a plan electing to
withdraw; and
(3) In the case of a plan whose assets are proposed to be invested
in the pooled account or fund subsequent to the implementation of the
arrangements and which has not authorized the arrangements in the
manner described in paragraphs (i)(1) and (i)(2), the plan's investment
in the account or fund shall be authorized in the manner described in
paragraph (f)(1)(A) and (f)(2)(A);
(j) The Equity Owner, together with its affiliates (as defined in
paragraph (a) of section III), does not own at the time of the
execution of a securities lending transaction on behalf of a plan by
the Equity Owner (i.e., in its capacity as Owner Lending Agent) through
EquiLend or at the time of the purchase, or commencement of licensing,
of data and/or analytical tools by the plan, more than 20% of:
(1) If EquiLend is a corporation, including a limited liability
company taxable as a corporation, the combined voting power of all
classes of stock entitled to vote or the total value of shares of all
classes of stock of EquiLend, or
(2) If EquiLend is a partnership, including a limited liability
company taxable as a partnership, the capital interest or the profits
interest of EquiLend;
(k) Any information, authorization, or termination of authorization
may be provided by mail or electronically; and
(l) No Equity Owner Plan, as defined in section III(e) below, will
participate in the Platform, other than through a Commingled Investment
Fund in which the aggregate investment of all Equity Owner Plans at the
time of the transaction constitutes less than 20% of the total assets
of such fund. Notwithstanding the foregoing, this prohibition shall not
apply to the participation by an Equity Owner Plan as of the date that
the aggregate loan balance of all securities lending transactions
entered into through EquiLend by all participants outstanding on such
date (excluding transactions entered into on behalf of Equity Owner
Plans) is equal to or greater than $10 billion; provided that if such
aggregate loan balance is later determined to be less than $10 billion,
no additional participation by an Equity Owner Plan (other than through
a Commingled Investment Fund) shall occur until such time as the $10
billion threshold amount is again met.
Section III. Definitions
For purposes of this exemption:
(a) An ``affiliate'' of another person means:
(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) of such other person; and
(3) Any corporation or partnership of which such other person is an
officer, director or partner.
For purposes of this paragraph, the term ``control'' means the
power to exercise a controlling influence over the management or
policies of a person other than an individual.
(b) The term ``authorizing fiduciary'' means, with respect to an
Owner Lending Agent, a plan fiduciary who is independent of such Owner
Lending Agent. In this regard, an authorizing fiduciary will not be
considered independent of an Owner Lending Agent if:
(1) Such fiduciary directly or indirectly controls, is controlled
by, or is under common control with the Owner Lending Agent; or
(2) Such fiduciary directly or indirectly receives any compensation
or other consideration from the Owner Lending Agent or an affiliate for
his or her own personal account in connection with any securities
lending transaction described herein; provided that Commingled
Investment Funds and Equity Owner Plans maintained by such Owner
Lending Agent or an affiliate will not be deemed affiliates of such
Owner Lending Agent for purposes of this subparagraph (2).
For purposes of Section II, no Equity Owner or any affiliate may be
an authorizing fiduciary except in the case of an Equity Owner Plan.
Notwithstanding the foregoing, the requirements for consent by an
authorizing fiduciary with respect to participation in the Platform,
and the annual right of such fiduciary to terminate such participation,
shall be deemed met to the extent that the Owner Lending Agent's
proposed utilization of the services of EquiLend on behalf of a plan
for securities lending has been approved by an order of a United States
district court.
(c) The term ``Owner Lending Agent'' means an Equity Owner in its
capacity
[[Page 39071]]
as a fiduciary of a plan acting as securities lending agent in
connection with the loan of plan assets that are securities.
(d) The term ``Equity Owner'' means an entity that either directly
or through an affiliate owns an equity ownership interest in EquiLend.
(e) The term ``Equity Owner Plan'' means an employee benefit plan,
as defined under section 3(3) of the Act, which is established or
maintained by an Equity Owner of EquiLend, as defined in section III(d)
above, as an employer of employees covered by such plan, or by its
affiliate.
(f) The terms ``employee benefit plan'' and/or ``plan'' means:
(1) An ``employee benefit plan'' within the meaning of section 3(3)
of the Act subject to Part 4 of Subtitle B of Title I of the Act,
(2) A ``plan'' (within the meaning of section 4975(e)(1) of the
Code) subject to section 4975 of the Code, or
(3) The Federal Thrift Savings Fund.
Written Comments
The Department received one comment letter submitted by EquiLend
Holdings LLC (hereinafter, the applicant) with respect to the proposed
exemption. In the letter, the applicant requested that several
revisions be made to section II, section III, and the Summary of Facts
and Representations of the exemption, as proposed. In addition, the
applicant requested that the Department clarify whether a specific
transaction fell within the scope of the exemption.
1. Section II. With respect to this section of the proposed
exemption, EquiLend requested that:
A. The phrase ``to the extent applicable the procedures regarding
the securities lending activities'', as such phrase appears in section
II(a), be replaced with ``to the extent an applicable exemption is
required, the securities lending transactions'';
B. The phrase ``a plan of an Equity Owner (Equity Owner Plan)'', as
such phrase appears in section II(f)(1)(A), be replaced with ``Equity
Owner Plan''; and
C. The sentence ``This requirement may be met by including such
notification in the participation, subscription or other user agreement
required to be executed by each participant in EquiLend.'' be added at
the end of section II(c).
The applicant states that the proposed revisions described above
provide clarity and/or consistency to the exemption. The Department has
determined that it is appropriate to modify the proposed exemption in
the manner requested by the applicant and, accordingly, has revised
section II of the final exemption.
2. Section III. With respect to this section of the proposed
exemption, EquiLend requested that:
A. The definition of the term ``authorizing fiduciary'', as
contained in section III(b) of the proposed exemption, be modified by--
(i) Deleting the phrase ``unrelated to'' from the first sentence of
section III(b);
(ii) Adding the phrase ``provided that Commingled Investment Funds
and Equity Owner Plans maintained by such Owner Lending Agent or an
affiliate will not be deemed affiliates of such Owner Lending Agent for
purposes of this subparagraph (2)'' at the end of section III(b)(2);
and
(iii) Adding the phrase ``except in the case of an Equity Owner
Plan'' to the end of the second to the last sentence of section III(b).
B. The definition of the term ``Owner Lending Agent'', as contained
in section III(c) of the proposed exemption, be amended by adding the
following italicized language--
``The term Owner Lending Agent means an Equity Owner in its
capacity as a fiduciary of a plan acting as securities lending agent in
connection with loans of plan assets that are securities.''
The applicant states that the proposed revisions described above
brings clarity and consistency to the exemption. Specifically, the
applicant represents that the modification described in (i) of this
paragraph is being requested to ensure that the first sentence of
section III(b) is consistent with the rest of section III(b) as well as
with section II(f)(1)(A) of the exemption. In addition, the applicant
states that the modification described in (ii) of this paragraph is
being requested in order to clarify that certain transactions would not
inadvertently result in a plan fiduciary being unable to prospectively
authorize the use of EquiLend. As an example, the applicant states that
a bank borrowing securities (through EquiLend) from, and providing cash
collateral to, a collective trust fund managed by an Equity Owner would
customarily receive a rebate from the collective trust fund on earnings
generated by such collateral. According to the applicant, the rebate of
earnings on the collateral received by the bank may affect the ability
of the bank under the exemption to prospectively authorize the use of
EquiLend by an Equity Owner (as Owner Lending Agent) to lend securities
held by the bank's own plan since section III(b) of the proposed
exemption requires that a plan fiduciary be ``independent'' of the
Owner Lending Agent. Under that definition, a fiduciary is not
considered independent of an Owner Lending Agent if such fiduciary
receives any compensation from the Owner Lending Agent or an affiliate
for his or her own personal account in connection with any securities
lending transaction described in the exemption. The applicant states
that the proposed modification as it applies to Commingled Investment
Funds and Equity Owner Plans is consistent with the intent of the
exemption.
The Department has determined that it is appropriate to modify the
proposed exemption in the manner requested by the applicant and,
accordingly, has revised the final exemption.
3. Summary of Facts and Representations. With respect to this
section of the proposed exemption, the applicant stated that in October
2001, EquiLend LLC changed its name to EquiLend Holdings LLC and, in
November 2001, The Chase Manhattan Bank merged with Morgan Guaranty
Trust Company of New York with the resulting bank being named JP Morgan
Chase Bank. In addition, the applicant further requested that the
Department clarify that:
A. The term ``members'', as such term appears throughout the
Summary of Facts and Representations, refers to the entities that
participate in EquiLend and not merely to the entities that have an
ownership interest in EquiLend; and
B. The prohibition with respect to participation in EquiLend by an
Equity Owner Plan, as discussed in Paragraph 5(E) of the Summary, is
inapplicable to the extent that the aggregate loan balance of all
securities lending transactions entered into through EquiLend by all
participants (other than on behalf of the Equity Owner Plans) is equal
to or greater than $10 billion.
The applicant also sought the addition of the following as a
footnote at the end of Paragraph 7--
However, the applicant requests that such authorizing fiduciary
be deemed to have given the required authorization unless such
authorizing fiduciary objects in writing to the purchase or
licensing of a specific product to the Owner Lending Agent within 15
days after the disclosure of the information described above. In
addition, such requirement for prior written authorization shall not
apply to any such purchase or licensing by an Equity Owner Plan if
the fee or cost associated with such purchase or licensing is not
paid by the Equity Owner Plan.
The purpose of the proposed clarifications and addition described
above, the applicant states, is to update and provide consistency to
the
[[Page 39072]]
exemption. The Department has determined that it is appropriate to
clarify and modify the exemption in the manner requested by the
applicant and, accordingly, has revised the final exemption.
4. Scope of Exemption. The applicant states that it is possible
that a lending agent, upon its appointment by an Equity Owner, may seek
to use EquiLend on behalf of an Equity Owner Plan and/or a plan
unrelated to an Equity Owner. The applicant inquires whether, in this
situation, such arrangement falls within the scope of the exemption. If
not, the applicant inquires further whether the arrangement described
above constitutes a prohibited transaction for which additional
exemptive relief is necessary.
It is the view of the Department that the use of EquiLend by a
lending agent appointed by an Equity Owner is outside the scope of the
relief provided by this exemption. In this regard, the Department notes
that the exemption does not extend relief to the participation in
EquiLend's electronic platform by a lending agent appointed by an
Equity Owner. Rather, with respect to such participation, the exemption
provides relief solely to an Owner Lending Agent (see section II).
The Department notes that any determination as to whether the
arrangement described above constitutes a prohibited transaction is
inherently factual in nature. In this regard, the Department notes that
a violation of section 406 of ERISA would occur if the decision of a
lending agent appointed by an Equity Owner to use EquiLend on behalf of
a plan is part of an agreement, arrangement, or understanding in which
a fiduciary caused plan assets to be used in a manner designed to
benefit a party in interest or if the lending agent has an interest in
the transaction which affects his judgment as a fiduciary.
After giving full consideration to the entire record, including the
written comment submitted by the applicant, the Department has decided
to grant the exemption.
For further information regarding the comments and other matters
discussed herein, interested persons are encouraged to obtain copies of
the exemption application file (Exemption Application No. D-11026) the
Department is maintaining in this case. The complete application file,
as well as all supplemental submissions received by the Department, are
made available for public inspection in the Public Disclosure Room of
the Pension and Welfare Benefits Administration, Room N-1513, U.S.
Department of Labor, 200 Constitution Avenue, NW., Washington, DC
20210.
For Further Information Contact: Christopher Motta of the
Department, telephone (202)693-8544 (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) This exemption is 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 this exemption is subject to the express
condition that the material facts and representations contained in the
application accurately describes all material terms of the transaction
which is the subject of the exemption.
Signed at Washington, DC, this 3rd day of June, 2002.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits
Administration, Department of Labor.
[FR Doc. 02-14222 Filed 6-5-02; 8:45 am]
BILLING CODE 4510-29-P
|
