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Grant of Individual Exemptions; The Northern Trust Company and Affiliates [02/06/2003]
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Volume 68, Number 25, Page 6194-6196
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DEPARTMENT OF LABOR
Employee Benefits Security Administration
[Prohibited Transaction Exemption 2003-01; Exemption Application No. D-
10995 et al.,]
Grant of Individual Exemptions; The Northern Trust Company and
Affiliates
AGENCY: Employee Benefits Security 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).
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 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.
The Northern Trust Company and Affiliates Located in Chicago, Illinois
[Prohibited Transaction Exemption 2003-01; Application No. D-10995]
Exemption
Section I--Exemption for In-Kind Redemption of Assets
The restrictions of section 406(a) and 406(b) of ERISA 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
\1\ to the in-kind redemption (the Redemption) by the Northern Trust
Company Thrift-Incentive Plan (the Plan) (the Applicant) of shares (the
Shares) of proprietary mutual funds currently offered by, or offered in
the future by, investment companies for which the Northern Trust
Company (Northern) or an affiliate thereof provides investment advisory
and other services (the Mutual Funds), provided that the following
conditions are satisfied:
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\1\ Section 102 of Reorganization Plan No. 4 of 1978, 5 U.S.C.
App. 1 (1996) generally transferred the authority of the Secretary
of the Treasury to issue exemptions under section 4975(c)(2) of the
Code to the Secretary of Labor. For purposes of this exemption,
references to specific provisions of Title I of the Act, unless
otherwise specified, refer also to the corresponding provisions of
the Code.
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(A) The Plan pays no sales commissions, redemption fees, or other
similar fees in connection with the Redemption (other than customary
transfer charges paid to parties other than Northern and any affiliates
of Northern (Northern Affiliates);
(B) The assets transferred to the Plan pursuant to the Redemptions
consist entirely of cash and Transferable Securities. Notwithstanding
the foregoing, Transferable Securities which are odd lot securities,
fractional shares and accruals on such securities may be distributed in
cash;
(C) With certain exceptions defined below, the Plan receives a pro
rata portion of the securities of the Mutual Fund upon a Redemption
that is equal in value to the number of Shares redeemed for such
securities, as determined in a single valuation performed in the same
manner and as of 3 p.m. Chicago time (local time for the closing of the
exchanges) on the same day in accordance with Rule 2a-4 under the
Investment Company Act of 1940, as amended (the 1940 Act), and the
then-
[[Page 6195]]
existing procedures established by the Board of Trustees of the Mutual
Fund (using sources independent of Northern and Northern Affiliates);
(D) Northern, or any affiliate thereof, does not receive any fees,
including any fees payable pursuant to Rule 12b-1 under the 1940 Act in
connection with any redemption of the Shares;
(E) Prior to a Redemption, Northern provides in writing to an
independent fiduciary, as such term is defined in Section II (an
Independent Fiduciary), a full and detailed written disclosure of
information regarding the Redemption;
(F) Prior to a Redemption, the Independent Fiduciary provides
written authorization for such Redemption to Northern, such
authorization being terminable at any time prior to the date of
Redemption without penalty to the Plan, and such termination being
effectuated by 3 p.m. Chicago time following the date of receipt by
Northern of written or electronic notice regarding such termination
(unless circumstances beyond the control of Northern delay termination
for no more than one additional business day);
(G) Before authorizing a Redemption, based on the disclosures
provided by the Mutual Fund to the Independent Fiduciary, the
Independent Fiduciary determines that the terms of the Redemption are
fair to the participants of the Plan, and comparable to and no less
favorable than terms obtainable at arms-length between unaffiliated
parties, and that the Redemption is in the best interest of the Plan
and its participants and beneficiaries;
(H) Not later than thirty (30) business days after the completion
of a Redemption, the relevant Fund will provide to the Independent
Fiduciary a written confirmation regarding such Redemption containing:
(i) The number of Shares held by the Plan immediately before the
Redemption (and the related per Share net asset value and the total
dollar value of the Shares held);
(ii) the identity (and related aggregate dollar value) of each
security provided to the Plan pursuant to the Redemption, including
each security valued in accordance with Rule 2a-4 under the 1940 Act
and the then-existing procedures established by the Board of Trustees
of the Mutual Fund (using sources independent of Northern and Northern
Affiliates);
(iii) The current market price of each security received by the
Plan pursuant to the Redemption; and
(iv) The identity of each pricing service or market-maker consulted
in determining the value of such securities;
(I) The value of the securities received by the Plan for each
redeemed Share equals the net asset value of such Share at the time of
the transaction, and such value equals the value that would have been
received by any other investor for shares of the same class of the
Mutual Fund at that time;
(J) Subsequent to a Redemption, the Independent Fiduciary performs
a post-transaction review which will include, among other things,
testing a sampling of material aspects of the Redemption deemed in its
judgment to be representative, including pricing;
(K) Each of the Plan's dealings with: the Mutual Funds, the
investment advisors to the Mutual Funds (the Investment Advisers), the
principal underwriter for the Mutual Funds, or any affiliated person
thereof, are on a basis no less favorable to the Plan than dealings
between the Mutual Funds and other shareholders holding shares of the
same class as the Shares;
(L) Northern will maintain, or cause to be maintained, for a period
of six years from the date of any covered transaction such records as
are necessary to enable the persons described in paragraph (M) below to
determine whether the conditions of this exemption have been met,
except that (i) this record-keeping condition shall not be violated if,
due to circumstances beyond the control of Northern, the records are
lost or destroyed prior to the end of the six year period, (ii) no
party in interest with respect to the Plan other than Northern 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 such records are not maintained or are not available for
examination as required by paragraph (M) below;
(M)(1) Except as provided in subparagraph (2) of this paragraph
(M), and notwithstanding any provisions of section 504(a)(2) and (b) of
the Act, the records referred to in paragraph (L) above are
unconditionally available at their customary locations for examination
during normal business hours by (i) any duly authorized employee or
representative of the Department of Labor, the Internal Revenue
Service, or the Securities and Exchange Commission, (ii) any fiduciary
of the Plan or any duly authorized representative of such fiduciary,
(iii) any participant, beneficiary, or union employee covered by the
Plan or duly authorized representative of such participant,
beneficiary, or union employee, (iv) any employer whose employees are
covered by Plan and any employee organization whose members are covered
by such Plan.
(2) None of the persons described in paragraphs (M)(1)(ii), (iii)
and (iv) shall be authorized to examine trade secrets of Northern or
the Mutual Funds, or commercial or financial information which is
privileged or confidential; and
(3) Should Northern or the Mutual Funds refuse to disclose
information on the basis that such information is exempt from
disclosure pursuant to paragraph (2) above, Northern shall, by the
close of the thirtieth (30th) day following the request, provide a
written notice advising that person of the reasons for the refusal and
that the Department may request such information.
Section II--Definitions
For purposes of this exemption--
(A) The term ``affiliate'' means:
(1) Any person (including corporation or partnership) 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.
(B) The term ``control'' means the power to exercise a controlling
influence over the management or policies of a person other than an
individual.
(C) 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 Mutual Fund's
prospectus and statement of additional information, and other assets
belonging to the Mutual Fund, less the liabilities charged to each such
Mutual Fund, by the number of outstanding shares.
(D) The term ``Independent Fiduciary'' means a fiduciary who is:
(i) independent of and unrelated to Northern and its affiliates, and
(ii) appointed to act on behalf of the Plan with respect to the in-kind
transfer of assets from one or more Mutual Funds to or for the benefit
of the Plan. For purposes of this exemption, a fiduciary will not be
deemed to be independent of and unrelated to Northern if: (i) Such
fiduciary directly or indirectly controls, is controlled by or is under
common control with Northern, (ii) such fiduciary directly or
indirectly receives any compensation or other consideration in
connection with any transaction described in this exemption; except
that an independent fiduciary
[[Page 6196]]
may receive compensation from Northern in connection with the
transactions contemplated herein if the amount or payment of such
compensation is not contingent upon or in any way affected by the
independent fiduciary's ultimate decision, and (iii) more than 2
percent (2%) of such fiduciary's gross income, for federal income tax
purposes, in its prior tax year, will be paid by Northern and its
affiliates in the fiduciary's current tax year.
(E) The term ``Transferable Securities'' shall mean securities (1)
for which market quotations are readily available (as determined under
Rule 2a-4 of the 1940 Act) and (2) which are not: (i) Securities which,
if distributed, would require registration under the 1933 Act; (ii)
securities issued by entities in countries which (a) restrict or
prohibit the holding of securities by non-nationals other than through
qualified investment vehicles, such as the Mutual Funds, or (b) permit
transfers of ownership of securities to be effected only by
transactions conducted on a local stock exchange; (iii) certain
portfolio positions (such as forward foreign currency contracts,
futures and options contracts, swap transactions, certificates of
deposit and repurchase agreements) that, although they may be liquid
and marketable, involve the assumption of contractual obligations,
require special trading facilities or can only be traded with the
counter-party to the transaction to effect a change in beneficial
ownership; (iv) cash equivalents (such as certificates of deposit,
commercial paper and repurchase agreements) which are not readily
distributable; (v) other assets which are not readily distributable
(including receivables and prepaid expenses), net of all liabilities
(including accounts payable); and (vi) securities subject to ``stop
transfer'' instructions or similar contractual restrictions on
transfer.
(F) The term ``relative'' means a ``relative'' as that term is
defined in section 3(15) of ERISA (or a ``member of the family'' as
that term is defined in section 4975(e)(6) of the Code), or a brother,
sister, or a spouse of a brother or a sister.
Effective Date: The exemption is effective as of the date this
notice of final exemption is published in the Federal Register.
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 November 18, 2002, at 67
FR 69560.
For Further Information Contact: Ms. Andrea W. Selvaggio of the
Department, telephone (202) 694-8540. (This is not a toll-free number).
Brightpoint, Inc. (Brightpoint) Located in Indianapolis, Indiana
[Prohibited Transaction Exemption 2003-02; Exemption Application No. D-
10999]
Exemption
The restrictions of sections 406(a) and 406(b)(1) and (b)(2) 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) through (E) of
the Code shall not apply, effective June 5, 2001, to: (1) The payment
(the Payment) by Brightpoint of $108,738.85 (the Assessment Amount) to
the Millennium Trust Company LLC (Millennium) on behalf of the
Brightpoint, Inc. 401(k) Plan (the Plan) for the purpose of satisfying
a court-ordered assessment against the assets of the Plan (the
Assessment) that arose in connection with the $68,100,000.00 deficiency
(the Deficiency) incurred by the Independent Trust Corporation
(Intrust); and (2) the transfer by the Plan to Brightpoint (the
Repayment) of certain assets recovered by PricewaterhouseCoopers LLP
(the Receiver) in connection with the Deficiency, if the following
conditions are met:
(A) In the event the Plan receives an amount of assets from the
Receiver (a Recovery Amount) that is greater than the Assessment
Amount, the Plan will not be required to pay Brightpoint that portion
of the Recovery Amount that is in excess of the Assessment Amount;
(B) In the event the Plan receives a Recovery Amount that is less
than the Assessment Amount, the Plan will not be required to pay
Brightpoint the difference between the Assessment Amount and the
Recovery Amount;
(C) The Plan will not pay any of the costs and/or fees associated
with the Payment and the Repayment;
(D) The Deficiency did not arise in connection with any improper
act undertaken by a Plan fiduciary (other than Intrust or its
principals); and
(E) Upon notification of the Intrust losses, the Brightpoint Plan
fiduciaries undertook, and will continue to undertake, any actions
necessary to ensure that the assets of the Plan were, and are,
adequately protected.
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 in the Federal Register on
October 8, 2002 (67 FR 62822).
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 in Washington, DC this 3rd day of February, 2003.
Ivan Strasfeld,
Director of Exemption Determination, Employee Benefits Security
Administration, Department of Labor.
[FR Doc. 03-2963 Filed 2-5-03; 8:45 am]
BILLING CODE 4510-29-P
