Skip to page content
Employee Benefits Security Administration

EBSA Federal Register Notice

Prohibited Transaction Exemption 2003-15; [Exemption Application No. D-11111, 11112, and 11113] et al. Grant of Individual Exemptions; Dupont Capital Management Corporation, (DCMC) [06/24/2003]

[PDF Version]

Volume 68, Number 121, Page 37519-37525

=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF LABOR

Employee Benefits Security Administration

 
Prohibited Transaction Exemption 2003-15; [Exemption Application 
No. D-11111, 11112, and 11113] et al. Grant of Individual Exemptions; 
Dupont Capital Management Corporation, (DCMC)

AGENCY: Employee Benefits Security Administration, Labor.

ACTION: Grant of Individual Exemptions.

-----------------------------------------------------------------------

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.

DuPont Capital Management Corporation, (DCMC) Located in Wilmington, DE

[Prohibited Transaction Exemption 2003-15;
Exemption Application Nos. D-11111, 11112, and 11113]

Exemption

    The restrictions of section 406(a) 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 (D) of the Code, shall not 
apply to the past extension of credit from the DuPont Pension and

[[Page 37520]]

Retirement Plan, the Pioneer Hi-Bred International, Inc. Retirement 
Plan, and the Protein Technologies International Retirement Plan 
(collectively, the Plans) \1\ to the Dow Chemical Company (Dow), a 
party in interest with respect to the Plans, as a result of the holding 
by the Plans of certain corporate debt securities (the Bonds) issued by 
Dow, for the period from October 25, 2000 until July 10, 2001; provided 
the following conditions were satisfied:
---------------------------------------------------------------------------

    \1\ Because the Plans are funded through the same trust and each 
has an undivided interest in the assets of such trust, this 
exemption treats the purchase of the Bonds by the Plans as a single 
transaction and information concerning such purchase is referred to 
on an aggregate basis.
---------------------------------------------------------------------------

    (a) The purchase of the Bonds by the Plans was a one-time 
transaction for cash;
    (b) The Plans paid no more than the current fair market value for 
the Bonds at the time of the transaction, as determined by a reputable, 
independent, third party market source;
    (c) The Bonds were sold on July 10, 2001 for $2,101,900 at a profit 
of $126,580 for the Plans;
    (d) The purchase of the Bonds was not part of an agreement, 
arrangement or understanding designed to benefit Dow or any other party 
in interest with respect to the Plans; and
    (e) The transaction represented less than .02% of each Plan's total 
assets.
Effective Date of Exemption
    The exemption is effective for the period from October 25, 2000 
(the date of the acquisition of the Bonds by the Plans) until July 10, 
2001 (the date the Bonds were sold).
    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 January 22, 2003, at 68 
FR 3047.
    Written Comments: The applicant (i.e., DCMC) submitted a written 
comment with respect to the notice of proposed exemption (the 
Proposal). The comment is summarized below.
    The applicant noted that in the operative language section of the 
Proposal, paragraph (c), it was erroneously indicated that the Bonds 
were sold for $1,975,320 (rather than for $2,101,900, as correctly 
stated in Item 5 of the Summary of Facts and Representations in the 
Proposal). Therefore, the Department has modified the language in 
paragraph (c) of the exemption to state that the Bonds were sold for 
$2,101,900.
    The Department also received over one hundred telephone calls from 
interested persons concerning the Proposal. In addition, the Department 
received seven written inquiries from interested persons. All of the 
telephone calls and written inquiries requested additional information 
regarding the transactions and their possible affect on benefits 
payable to the appropriate Plan participants. The Department responded 
to each inquiry by telephone and attempted to address the concerns that 
were raised. None of the additional comments made to the Department 
offered any suggestions for changes to the Proposal.
    No other comments were received by the Department. Accordingly, the 
Department has determined to grant the exemption, as clarified above.

FOR FURTHER INFORMATION CONTACT: Brian Buyniski of the Department at 
(202) 693-8545. (This is not a toll-free number).

DuPont Capital Management Corporation, (DCMC) Located in Wilmington, DE

[Prohibited Transaction Exemption 2003-16;
Exemption Application Nos. D-11114, 11115, 11116, 11117, 11118]

Exemption

    The restrictions of section 406(a) 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 (D) of the Code, shall not 
apply to the past extension of credit from the DuPont Pension and 
Retirement Plan, the DuPont Dow Elastomers Pension and Retirement Plan, 
the Pioneer Hi-Bred International, Inc. Retirement Plan, the Protein 
Technologies International Retirement Plan, and the DuPont Savings and 
Investment Plan (collectively, the Plans) to ConAgra Foods, Inc. 
(ConAgra), a party in interest with respect to the Plans, as a result 
of the holding by the Plans of certain corporate debt securities (the 
Bonds) issued by ConAgra, for the period from September 5, 2001 until 
October 17, 2001; provided the following conditions were satisfied:
    (a) The purchase of the Bonds by the Plans was a one-time 
transaction for cash;
    (b) The Plans paid no more than the current fair market value for 
the Bonds at the time of the transaction, as determined by reputable, 
independent, third party market sources;
    (c) The Bonds were sold on October 17, 2001 for $4,234,531 at a 
profit of $185,638 for the Plans;
    (d) The purchase of the Bonds was not part of an agreement, 
arrangement or understanding designed to benefit ConAgra or any other 
party in interest with respect to the Plans; and
    (e) The transaction represented less than 1% of each Plan's total 
assets.
Effective Date of Exemption
    The exemption is effective for the period from September 5, 2001 
(the date of the acquisition of the Bonds by the Plans) until October 
17, 2001 (the date the Bonds were sold).
    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 January 22, 2003, at 68 
FR 3048.
    Written Comments: The applicant (i.e., DCMC) submitted written 
comments with respect to the notice of the proposed exemption (the 
Proposal). The comments are summarized below.
    The applicant states that the DuPont Dow Elastomers Pension and 
Retirement Plan was not included in the list of ``Plans'' in the 
Proposal.
    Based on this comment, the Department has revised the appropriate 
language in the Proposal to include the DuPont Dow Elastomers Pension 
and Retirement Plan.
    In addition, the applicant states that the information concerning 
the plan sponsor of, and number of participants covered under, the 
DuPont Dow Elastomers Pension and Retirement Plan was not included in 
Item 2 of the Summary of Facts and Representations contained in the 
Proposal (the Summary).
    The applicant also noted that footnote 12 in the Proposal indicates 
that ``the Plans are funded through the same trust'' and should have 
indicated that the Dupont Savings and Investment Plan is funded through 
a separate trust. The Department acknowledges the applicant's 
clarifications to the information contained in the Summary.
    The Department received seven written inquiries and over one 
hundred telephone calls concerning the Proposal from interested 
persons. All of the telephone calls and written inquiries requested 
additional information regarding the transactions and their possible 
affect on benefits payable to the appropriate Plan participants. The 
Department responded to each inquiry by telephone and attempted to 
address the concerns that were raised. None of the additional comments 
made to the Department offered specific suggestions for changes to the 
Proposal.
    No other comments were received by the Department. Accordingly, the 
Department has determined to grant the exemption, as modified herein.

FOR FURTHER INFORMATION CONTACT: Brian Buyniski of the Department at

[[Page 37521]]

(202) 693-8545. (This is not a toll-free number).

DuPont Capital Management Corporation, (DCMC) Located in Wilmington, DE

[Prohibited Transaction Exemption 2003-17;
Exemption Application Nos. D-11119 and 11120]

Exemption

    The restrictions of section 406(a) 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 (D) of the Code, shall not 
apply to the past extension of credit from the CONSOL Inc. Employee 
Retirement Plan and the CONSOL Inc. Investment Plan for Salaried Plans 
(collectively, the Plans)\2\ to Conoco Inc. (Conoco), a party in 
interest with respect to the Plans, as a result of the holding by the 
Plans of certain corporate debt securities (the Bonds) issued by 
Conoco, for the period from December 29, 1999 through August 16, 2001; 
provided the following conditions were satisfied:
---------------------------------------------------------------------------

    \2\ Because the Plans are funded through the same trust and each 
has an undivided interest in the assets of such trust, this 
exemption treats the purchase of the Bonds by the Plans as a single 
transaction and information concerning such purchase is referred to 
on an aggregate basis.
---------------------------------------------------------------------------

    (a) The purchase of the Bonds by the Plans was a one-time 
transaction for cash;
    (b) The Plans paid no more than the current fair market value for 
the Bonds at the time of the transaction, as determined by reputable, 
independent, third party market sources;
    (c) The Bonds were sold on August 16, 2001 for $816,641 at a profit 
of $61,858 for the Plans;
    (d) The purchase of the Bonds was not part of an agreement, 
arrangement or understanding designed to benefit Conoco or any other 
party in interest with respect to the Plans; and
    (e) The transaction represented less than 1% of each Plan's total 
assets.
Effective Date of Exemption
    The exemption is effective for the period from December 29, 1999 
(the date of the acquisition of the Bonds by the Plans) until August 
16, 2001 (the date the Bonds were sold).
    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 January 22, 2003, at 68 
FR 3050.
    Written Comments: The applicant (i.e., DCMC) submitted written 
comments with respect to the notice of the proposed exemption (the 
Proposal). The comments are summarized below.
    First, the applicant states that in Item 1 of the Summary of Facts 
and Representations (the Summary), a reference was made to the DuPont 
Pension Trust Fund (the DuPont Trust). In this regard, the applicant 
notes that CONSOL, Inc., (CONSOL) was a member of a controlled group of 
corporations that were subsidiaries of the E.I. duPont de Nemours and 
Company (the DuPont Group) prior to November 1998. However, after such 
date, CONSOL was no longer a member of the DuPont Group. Therefore, the 
applicant wishes to clarify that the assets of the Plans are no longer 
held in the DuPont Trust. In addition, the applicant notes that DCMC's 
investment management services to employee benefit plans that are 
sponsored by corporations that are part of the DuPont Group is not 
relevant to CONSOL and the subject transactions described in the 
proposal.
    Second, the applicant notes that footnote 14 in the Summary, 
reference is made to PTE 2001-05, 66 FR 7789 (January 25, 2001). The 
information therein states that PTE 2001-05 was not effective at the 
time of the subject transactions. The applicant represents that if PTE 
2001-05 had been in effect at the time of the subject transactions the 
exemption would not have provided relief. In this regard, the applicant 
notes that PTE 2001-05 only provides relief for prohibited transactions 
where the counterparty's party in interest status results solely from 
being a service provider to the Plan. In the present case, the 
counterparty's status as a party in interest results from an ownership 
affiliation with an employer whose employees are covered by the Plan.
    The Department acknowledges all of the applicant's comments and 
clarifications to the information contained in the Summary.
    Finally, the Department also received seven written inquiries and 
over one hundred telephone calls from interested persons concerning the 
Proposal. All of the telephone calls and written inquiries requested 
additional information regarding the transactions and their possible 
affect on benefits payable to the appropriate Plan participants. The 
Department responded to each inquiry by telephone and attempted to 
address the concerns that were raised. None of the additional comments 
made to the Department offered any specific suggestions for changes to 
the Proposal.
    No other comments were received by the Department. Accordingly, the 
Department has determined to grant the exemption, as clarified herein.

FOR FURTHER INFORMATION CONTACT: Brian Buyniski of the Department at 
(202) 693-8545. (This is not a toll-free number).

Skandinaviska Enskilda Banken AB (SEB) Located in Stockholm, Sweden

[Prohibited Transaction Exemption 2003-18; Exemption Application No. 
D-11133]

Exemption

Section I. Covered Transactions
    The restrictions of section 406(a)(1)(A) through (D) 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,\3\ 
shall not apply, effective October 23, 2002, to: (1) the lending of 
securities that are assets of a plan (the Plan) to SEB's head office in 
Stockholm (the Borrower or the Applicant) in accordance with the 
conditions set forth below(the foregoing being Part One of this 
exemption); and (2) the lending of securities, under certain exclusive 
borrowing arrangements, to the Borrower by Plans, including commingled 
investment funds holding assets of such Plans with respect to which SEB 
or any of its affiliates is a party in interest; and (3) the receipt of 
compensation by SEB or any of its affiliates in connection with these 
exclusive borrowing transactions (the foregoing being Part Two of this 
exemption).
---------------------------------------------------------------------------

    \3\ For the 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.
---------------------------------------------------------------------------

    This exemption is subject to the conditions contained below in 
Sections II, III, and IV.
Section II. Conditions Applicable to Part One of the Exemption--
Securities Lending Between Plans and the Borrower
    (a) Neither the Borrower nor any of its affiliates shall have 
discretionary authority or control with respect to the investment of 
Plan assets involved in the transaction, or renders investment advice 
(within the meaning of 29 CFR 2510.3-21(c)) with respect to such 
assets.
    (b) Each Plan receives from the Borrower, either by physical 
delivery or by book entry in a securities depository located in the 
United States, by the close of business on the day on which the 
securities lent are delivered to the Borrower, collateral consisting of 
U.S. currency, securities issued or guaranteed by the United States

[[Page 37522]]

Government or its agencies or instrumentalities, or irrevocable United 
States bank letters of credit issued by persons other than the Borrower 
(or any of its affiliates), or any combination thereof, having, as of 
the close of business on the preceding business day, a market value 
(or, in the case of letters of credit, a stated amount) equal to not 
less than 100 percent of the then market value of the securities lent. 
The collateral referred to in this exemption, shall in all cases, be in 
U.S. dollars or dollar-denominated securities or United States bank 
letters of credit and must be held in the United States.
    (c) Each loan is made pursuant to a written loan agreement (the 
Loan Agreement), which may be in the form of a master agreement 
covering a series of securities lending transactions, and which 
contains terms at least as favorable to the Plan as those the Plan 
could obtain in an arm's length transaction with an unrelated party.
    (d) In return for lending securities, each Plan either (1) receives 
a reasonable fee which is related to the value of the borrowed 
securities and the duration of the loan, or (2) has the opportunity to 
derive compensation through the investment of cash collateral. In the 
latter case, the Plan may pay a loan rebate or similar fee to the 
Borrower, if such fee is not greater than the Plan would pay an 
unrelated party in a comparable arm's length transaction with an 
unrelated party.
    (e) Each Plan receives at least the equivalent of all distributions 
made to holders of the borrowed securities during the term of the loan, 
including, but not limited to, cash dividends, interest payments, 
shares of stock as a result of stock splits and rights to purchase 
additional securities that the Plan would have received (net of tax 
withholdings)\4\ had it remained the record owner of such securities.
---------------------------------------------------------------------------

    \4\ The Department notes that the Applicants representation that 
dividends and other distributions on foreign securities payable to a 
lending Plan may be subject to foreign tax withholdings and that the 
Borrower will always put the Plan in at least as good a position as 
it would have been in had it not loaned the securities.
---------------------------------------------------------------------------

    (f) If the market value of the collateral on the close of trading 
on a business day falls below 100 percent of the market value of the 
borrowed securities at the close of trading on that day, the Borrower 
delivers additional collateral, by the close of business on the 
following business day to bring the level of the collateral back to at 
least 100 percent of the market value of all the borrowed securities as 
of such preceding day. Notwithstanding the foregoing, part of the 
collateral may be returned to the Borrower if the market value of the 
collateral exceeds 100 percent of the market value of the borrowed 
securities, as long as the market value of the remaining collateral 
equals at least 100 percent of the market value of the borrowed 
securities.
    (g) Prior to entering into a Loan Agreement, the Borrower furnishes 
to the independent fiduciary for the Plan who is making decisions on 
behalf of the Plan with respect to the lending of securities: (1) the 
most recently available audited and unaudited statements of its 
financial condition; (2) the most recent available unaudited statement 
of the Borrower's financial condition; and (3) a representation by the 
Borrower that, as of each time it borrows securities, there has been no 
material adverse change in its financial condition since the date of 
the most recently furnished financial statement that has not been 
disclosed to the Plan fiduciary.
    Such representation may be made by the Borrowers' agreeing that 
each loan shall constitute a representation by the Borrower that there 
has been no material adverse change in its financial condition since 
the date of the most recently furnished statements of financial 
condition.
    (h) Each Loan Agreement and any securities loan outstanding may be 
terminated by the applicable Plan at any time, whereupon the Borrower 
delivers securities identical to the borrowed securities (or the 
equivalent thereof in the event of reorganization, recapitalization, or 
merger of the issuer of the borrowed securities) to the Plan within (1) 
the customary delivery period for such securities; (2) five business 
days; or (3) the time negotiated for such delivery by the Plan and the 
Borrower, whichever is lesser, or, alternatively such period as 
permitted by Prohibited Transaction Class Exemption (PTE) 81-6 (43 FR 
7527, January 23, 1981), as it may be amended or superseded.\5\
---------------------------------------------------------------------------

    \5\ PTE 81-6, as amended at 52 FR 18754, May 19, 1987, provides 
an exemption under conditions from section 406(a)(1)(A), through (D) 
of the Act and the corresponding provisions of section 4975(c) of 
the Code for the lending of securities that are assets of an 
employee benefit plan to certain broker-dealers or banks which are 
parties in interest.
---------------------------------------------------------------------------

    (i) In the event that a loan is terminated and the Borrower fails 
to return the borrowed securities or the equivalent thereof within the 
time described in paragraph (h) above, then the Plan may purchase 
securities identical to the borrowed securities (or their equivalent as 
described above) and may apply the collateral to the payment of the 
purchase price, any other obligations of the Borrower under the Loan 
Agreement, and any expenses associated with any such sale and/or 
purchase. The Borrower indemnifies the Plan with respect to the 
difference, if any, between the replacement cost of the borrowed 
securities and the market value of the collateral on the date the loan 
is declared in default, together with expenses not covered by the 
collateral plus applicable interest at a reasonable rate. 
Notwithstanding the foregoing, the Borrower, may, in the event it fails 
to return borrowed securities ad described above, replace non-cash 
collateral with an amount of cash not less than the then-current market 
value of the collateral, provided that such replacement is approved by 
the independent plan fiduciary.
    (j) Each Plan maintains the situs of any Loan Agreement in 
accordance with the indicia of ownership requirements under section 
404(b) of the Act and the regulations promulgated under 29 CFR 
2550.404(b)-1. However, the Borrower shall not be subject to the civil 
penalty, which may be assessed pursuant to section 502(i) of the Act, 
or to the taxes imposed by section 4975(a) and (b) of the Code, if the 
Plan fails to comply with the requirements of 29 CFR 2550.404(b)-1.
    If the Borrower fails to comply with any condition of this 
exemption in the course of engaging in a securities lending 
transaction, the Plan fiduciary which caused the Plan to engage in such 
transaction shall not be deemed to have caused the Plan to engage in a 
transaction prohibited by section 406(a)(1)(A) through (D) of the Act 
solely by reason of the failure on the part of the Borrower to comply 
with the conditions of the exemption.
    (k) Prior to any Plan's approval of any transaction with the 
Borrower, the Plan is provided copies of the proposed and final 
exemptions covering the exemptive relief described herein.

SECTION III. Conditions Applicable to Part Two of the Exemption--
Exclusive Borrowing Arrangements Between Plans and the Borrower

    (a) For each Plan, neither the Borrower nor any affiliate has or 
exercises discretionary authority or control over the Plan's investment 
in the securities available for loan, nor do they render investment 
advice (within the meaning of 29 CFR 2510.3-21(c)) with respect to 
those assets.
    (b) The Borrower is a party in interest with respect to each Plan 
(including a fiduciary) solely by reason of providing services to the 
Plan, or solely by reason of a relationship to a service provider 
described in section 3(14)(F), (G), (H), or (I) of the Act.

[[Page 37523]]

    (c) The Borrower directly negotiates an exclusive borrowing 
agreement (the Borrowing Agreement) with a Plan fiduciary which is 
independent of the Borrower and its affiliates.
    (d) The terms of each loan of securities by a Plan to the Borrower 
are at least as favorable to such Plan as those of a comparable arm's 
length transaction between unrelated parties, taking into account the 
exclusive arrangement.
    (e) In exchange for granting the Borrower the exclusive right to 
borrow certain securities, each Plan will receive from the Borrower 
either (1) a flat fee (which may be equal to a percentage of the value 
of the total securities subject to the Borrowing Agreement from time to 
time); (2) a periodic payment that is equal to a percentage of the 
value of the total balance of outstanding borrowed securities; or (3) 
any combination of (1) and (2) (collectively, the Exclusive Fee). If 
the Borrower deposits cash collateral, all the earnings generated by 
such cash collateral shall be returned to the Borrower; provided that 
the Borrower may, but shall not be obligated to, agree with the 
independent fiduciary of the applicable Plan that a percentage of the 
earnings on the collateral may be retained by the Plan or the Plan may 
agree to pay the Borrower a rebate fee and retain the earnings on the 
collateral (the Shared Earnings Compensation). If the Borrower deposits 
non-cash collateral, all earnings on the non-cash collateral shall be 
returned to the Borrower; provided that the Borrower may, but shall not 
be obligated to, agree to pay the applicable Plan a lending fee (the 
Lending Fee, together with the Shared Earnings Compensation, the 
Transaction Lending Fee). The Transaction Lending Fee, if any, shall be 
either in addition to the Exclusive Fee or an offset against such 
Exclusive Fee. The Exclusive Fee and the Transaction Lending Fee may be 
determined in advance or pursuant to an objective formula, and may be 
different for different securities or different groups of securities 
subject to the Borrowing Agreement. Any change in the Exclusive Fee or 
the Transaction Lending Fee that the Borrower pays to the Plan with 
respect to any securities loan requires the prior written consent of 
the independent fiduciary of the Plan, except that consent is presumed 
where the Exclusive Fee or the Transaction Lending Fee changes pursuant 
to an objective formula. Where the Exclusive Fee or the Transaction 
Lending Fee changes pursuant to an objective formula, the independent 
fiduciary of the Plan must be notified at least 24 hours in advance of 
such change and such independent Plan fiduciary must not object in 
writing to such change, prior to the effective time of such change.
    (f) The Borrower may, but shall not be required to, agree to 
maintain a minimum balance of borrowed securities subject to each 
Borrowing Agreement. Such minimum balance may be a fixed U.S. dollar 
amount, a flat percentage or other percentage determined pursuant to an 
objective formula.
    (g) By the close of business on or before the day the loaned 
securities are delivered to the Borrower, each Plan shall receive from 
the Borrower (by physical delivery, book entry in a securities 
depository located in the United States, wire transfer, or similar 
means) collateral consisting of U.S. currency, securities issued or 
guaranteed by the U.S. Government or its agencies or instrumentalities, 
irrevocable bank letters of credit issued by a U.S. bank other than SEB 
or any affiliate thereof, or any combination thereof, or other 
collateral permitted under Prohibited Transaction Exemption 81-6, as 
amended or superseded. Such collateral will be deposited and maintained 
in an account which is separate from the Borrower's accounts and will 
be maintained with an institution other than the Borrower. For this 
purpose, the collateral may be held on behalf of a Plan by an affiliate 
of the Borrower that is the trustee or custodian of such Plan.
    (h) The market value (or in the case of a letter of credit, the 
stated amount) of the collateral initially equals at least 102 percent 
of the market value of the loaned securities on the close of business 
on the day preceding the day of the loan, and, if the market value of 
the collateral at any time falls below 100 percent (or such higher 
percentage as the Borrower and the independent fiduciary of a Plan may 
agree upon) of the market value of the loaned securities, the Borrower 
delivers additional collateral on the following day to bring the level 
of the collateral back to at least 102 percent. The level of the 
collateral is monitored daily by each Plan or its designee, which may 
be SEB or any of its affiliates which provides custodial or directed 
trustee services in respect of the securities covered by the applicable 
Borrowing Agreement. Such Borrowing Agreement shall give the applicable 
Plan title to the collateral until such collateral is redelivered to 
SEB pursuant to the terms of the Borrowing Agreement.
    (i) Before entering into any Borrowing Agreement, the Borrower 
furnishes to the applicable Plan the most recent publicly available 
audited and unaudited statements of its financial condition, as well as 
any publicly available information which it believes is necessary for 
the independent fiduciary to determine whether the Plan should enter 
into or renew the Borrowing Agreement.
    (j) Each Borrowing Agreement contains a representation by the 
Borrower that as of each time it borrows securities, there has been no 
material adverse change in its financial condition since the date of 
the most recently furnished statements of financial condition.
    (k) Each Plan receives at least the equivalent of all distributions 
made during the applicable loan period, including, but not limited to, 
cash dividends, interest payments, shares of stock as a result of stock 
splits, and rights to purchase additional securities, that the Plan 
would have received (net of tax withholdings)\6\ had it remained the 
record owner of the securities.
---------------------------------------------------------------------------

    \6\ See Footnote 4, infra.
---------------------------------------------------------------------------

    (l) Each Borrowing Agreement and any outstanding securities loans 
with respect thereto may be terminated by either party at any time 
without penalty (except for, if a Plan has terminated its Borrowing 
Agreement, the return to the Borrower of a pro rata portion of the 
Exclusive Fee paid by the Borrower to the Plan), whereupon the Borrower 
returns any borrowed securities (or the equivalent thereof in the event 
of reorganization, recapitalization, or merger of the issuer of the 
borrowed securities) to the applicable Plan within the lesser of five 
business days of written notice of termination or the customary 
settlement period for such securities.
    (m) In the event that the Borrower fails to return securities in 
accordance with a Borrowing Agreement, the applicable Plan will have 
the right under the Borrowing Agreement to purchase securities 
identical to the borrowed securities and apply the collateral to 
payment of the purchase price. If the collateral is insufficient to 
satisfy the Borrower's obligation to return the Plan's securities, the 
Borrower will indemnify the Plan in the U.S. with respect to the 
difference between the replacement cost of the securities and the 
market value of the collateral on the date the loan is declared in 
default, together with expenses incurred by the Plan plus applicable 
interest at a reasonable rate, including reasonable attorneys' fees 
incurred by the Plan for legal action arising out of default on the 
loans, or failure by the Borrower to properly

[[Page 37524]]

indemnify the Plan, except to the extent that such losses or damages 
are caused by the Plan's own negligence.
    (n) Except as otherwise provided herein, all procedures regarding 
the securities lending activities, at a minimum, conform to the 
applicable provisions of PTE 81-6 (as amended or superseded), as well 
as to applicable securities laws of the United States and Sweden, as 
appropriate.
    (o) Only Plans with total assets having an aggregate market value 
of at least $50 million are permitted to lend securities to the 
Borrower; provided, however, that--
    (1) In the case of two or more Plans which are maintained by the 
same employer, controlled group of corporations or employee 
organization, whose assets are commingled for investment purposes in a 
single master trust or any other entity the assets of which are ``plan 
assets'' under 29 CFR 2510.3-101 (the Plan Asset Regulation), which 
entity is engaged in securities lending arrangements with the Borrower, 
the foregoing $50 million requirement shall be deemed satisfied if such 
trust or other entity has aggregate assets which are in excess of $50 
million; provided that, if the fiduciary responsible for making the 
investment decision on behalf of such master trust or other entity is 
not the employer or an affiliate of the employer, such fiduciary has 
total assets under its management and control, exclusive of the $50 
million threshold amount attributable to plan investment in the 
commingled entity, which are in excess of $100 million.
    (2) In the case of two or more Plans which are not maintained by 
the same employer, controlled group of corporations or employee 
organization, whose assets are commingled for investment purposes in a 
group trust or any other form of entity the assets of which are ``plan 
assets'' under the Plan Asset Regulation, which entity is engaged in 
securities lending arrangements with the Borrower, the foregoing $50 
million requirement is satisfied if such trust or other entity has 
aggregate assets which are in excess of $50 million (excluding the 
assets of any Plan with respect to which the fiduciary responsible for 
making the investment decision on behalf of such group trust or other 
entity or any member of the controlled group of corporations including 
such fiduciary is the employer maintaining such Plan or an employee 
organization whose members are covered by such Plan). However, the 
fiduciary responsible for making the investment decision on behalf of 
such group trust or other entity--
    (i) Has full investment responsibility with respect to plan assets 
invested therein; and
    (ii) Has total assets under its management and control, exclusive 
of the $50 million threshold amount attributable to plan investment in 
the commingled entity, which are in excess of $100 million. (In 
addition, none of the entities described above are formed for the sole 
purpose of making loans of securities.)
    (p) Prior to any Plan's approval of the lending of its securities 
to the Borrower, a copy of this exemption and the notice of pendency is 
provided to the Plan, and the Borrower informs the independent 
fiduciary that the Borrower is not acting as a fiduciary of the Plan in 
connection with its borrowing securities from the Plan.\7\
---------------------------------------------------------------------------

    \7\ The Department notes SEB's representation that, under the 
exclusive borrowing arrangements, neither the Borrower nor any of 
its affiliates will perform the essential functions of a securities 
lending agent, i.e., SEB will not be the fiduciary who negotiates 
the terms of the Borrowing Agreement on behalf of the Plan, the 
fiduciary who identifies the appropriate borrowers of the securities 
or the fiduciary who decides to lend securities pursuant to either a 
general securities lending arrangement or an exclusive borrowing 
arrangement. However, SEB or its affiliates may monitor the level of 
collateral and the value of the loaned securities.
---------------------------------------------------------------------------

    (q) The independent fiduciary of each Plan shall receive monthly 
reports with respect to the securities lending transactions, including 
but not limited to the information set forth in the following sentence, 
so that an independent Plan fiduciary may monitor such transactions 
with the relevant Borrower. The monthly report will list for a 
specified period all outstanding or closed securities lending 
transactions. The report will identify for each open loan position, the 
securities involved, the value of the security for collateralization 
purposes, the current value of the collateral, the rebate or premium 
(if applicable) at which the security is loaned, and the number of days 
the security has been on loan. At the request of a Plan, such a report 
will be provided on a daily or weekly basis, rather than a monthly 
basis. Also, upon request of a Plan, the relevant Borrower will provide 
the Plan with daily confirmations of securities lending transactions. 
SECTION IV.

General Conditions

    (a) In addition to the above conditions, all loans involving the 
Borrower must satisfy the following supplemental requirements:
    (1) The Borrower is a bank which is subject to regulation by the 
Swedish Financial Supervisory Authority (Finansin-spektionen).
    (2) The Borrower is in compliance with all applicable provisions of 
Rule 15a-6 (17 CFR 240.15a-6) under the Securities Exchange Act of 
1934, as amended which provides foreign broker-dealers a limited 
exception from United States registration requirements.
    (3) All collateral is maintained in United States dollars or in 
U.S. dollar-denominated securities or letters of credit, or other 
collateral permitted under PTE 81-6 (as amended or superseded).
    (4) All collateral is held in the United States and the situs of 
the applicable Borrowing Agreement is maintained in the United States 
under an arrangement that complies with the indicia of ownership 
requirements under section 404(b) of the Act and the regulations 
promulgated under 29 CFR 2550.404(b)-1.
    (5) Prior to entering into a transaction involving the Borrower, 
the Borrower must:
    (i) Agree to submit to the jurisdiction of the United States;
    (ii) Agree to appoint an agent for service of process in the United 
States, which may be an affiliate (the Process Agent);
    (iii) Consent to the service of process on the Process Agent; and
    (iv) Agree that enforcement by a Plan of the indemnity provided by 
the Borrower will occur in the United States courts.
    (b) The Borrower maintains, or causes to be maintained, within the 
United States for a period of six years from the date of such 
transaction, in a manner that is convenient and accessible for audit 
and examination, such records are necessary to enable the persons 
described in paragraph (c)(1) to determine whether the conditions of 
the exemption have been met, except that--
    (1) A prohibited transaction will not be considered to have 
occurred if, due to circumstances beyond the control of SEB and/or its 
affiliates, the records are lost or destroyed prior to the end of the 
six year period; and
    (2) No party in interest other than the Borrower 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 below by paragraph (c)(1).
    (c)(1) Except as provided in subparagraph (c)(2) of this paragraph 
and not withstanding any provisions of subsections (a)(2) and (b) of 
section 504 of the Act, the records referred to in paragraph (b) are 
unconditionally available at their customary location or

[[Page 37525]]

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 a participating Plan or any duly authorized 
representative of such fiduciary;
    (iii) Any contributing employer to any participating Plan or any 
duly authorized employee representative of such employer; and
    (iv) Any participant or beneficiary of participating Plan, or any 
duly authorized representative of such participant or beneficiary.
    (2) None of the persons described above in paragraphs (c)(1)(ii)-
(t)(1)(iv) of this paragraph (c)(1) are authorized to examine the trade 
secrets of SEB or its affiliates or commercial or financial information 
which is privileged or confidential.
Section V. Definitions
    (a) An ``affiliate'' of a person means:
    (1) Any person directly or indirectly, through one or more 
intermediaries, controlling, controlled by, or under common control 
with the person. (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);
    (2) Any officer, director, employee or relative (as defined in 
section 3(15) of the Act) of any such other person or any partner in 
any such person; and
    (3) Any corporation or partnership of which such person is an 
officer, director or employee, or in which such person is a partner.
    (b) The term ``borrower'' includes SEB and any other affiliate of 
SEB that now or in the future, is a U.S. registered broker-dealer or a 
government securities broker or dealer or U.S. bank.
    Effective Date: This exemption is effective as of October 23, 2002.
    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 (the Notice) published on May 5, 2003 
at 68 FR 23768.

Written Comments

    The Department received one written comment with respect to the 
Notice. The comment letter, which was submitted on behalf of SEB by its 
outside legal counsel, is intended to modify the Summary of Facts and 
Representations (the Summary) of the Notice, as discussed below.
    1. Footnote 6. On page 23770 of the Notice, SEB states that 
Footnote 6 of the Summary contains a reference to a non-existent 
``Footnote 2.'' SEB explains that the correct reference should have 
been to another footnote, i.e., ``Footnote 4,'' which describes the tax 
implications of foreign securities lending on an investing Plan.
    2. Representation 18. On page 23374 of the Notice, the first 
sentence of Representation 18 of the Summary states, in part, that ``in 
the event a loan is terminated and the Borrower fails to return the 
borrowed securities, or the equivalent thereof, within the time 
described in Representation 18 above, the Plan may purchase securities 
identical to the borrowed securities * * *'' SEB notes that the 
reference should be to ``Representation 17'' rather than to 
``Representation 18.''
    3. Representation 32. On page 23777 of the Notice, in 
Representation 32 of the Summary, the last sentence of the fourth 
paragraph states, that ``the Applicant concludes that a Plan can bring 
an enforcement action, under an expedited procedure, on a foreign money 
judgment in New York to attach the assets of SEB's New York branch 
located in New York.'' For purposes of clarification, SEB suggests that 
the word ``often'' be inserted before the phrase ``under an expedited 
procedure.'' As a result, the sentence would now read as follows:

    * * * Thus, the Applicant concludes that the Plan can bring an 
enforcement action, often under an expedited procedure, on a foreign 
money judgment in New York to attach the assets of SEB's New York 
branch located in New York.

    The Department concurs with SEB's comments and suggested changes, 
and it takes note of the foregoing revisions to the Notice. In 
addition, the Department has revised Footnote 4 of the operative 
language to reflect the correct footnote reference.
    Accordingly, after giving full consideration to the entire record, 
including SEB's written comment, the Department has decided to grant 
the exemption, as modified herein.
    For further information regarding the comment and other matters 
discussed herein, interested persons are encouraged to obtain copies of 
the exemption application file (Exemption Application No. D-11133) 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 Documents Room of 
the Employee Benefits Security Administration, Room N-1513, U.S. 
Department of Labor, 200 Constitution Avenue, NW., Washington, DC 
20210.
    For Further Information Contact: Ms. Blessed Chuksorji of the 
Department, telephone (202) 693-8567. (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 19th day of June, 2003.
Ivan Strasfeld,
Director of Exemption Determinations, Employee Benefits Security 
Administration, Department of Labor.
[FR Doc. 03-15929 Filed 6-23-03; 8:45 am]

BILLING CODE 4510-29-P