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Secretary of Labor Thomas E. Perez

EBSA Federal Register Notice

Grant of Individual Exemptions; The Northern Trust Company and Affiliates [02/06/2003]

[PDF Version]

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