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Employee Benefits Security Administration

EBSA Federal Register Notice

Grant of Individual Exemptions; Deutsche Bank AG (DB), Located in Germany, with Affiliates in New York, New York and Other Locations; and JPMorgan Chase Bank, Located in New York, New York; (collectively, with their Affiliates, the Applicants) [08/14/2003]

[PDF Version]

Volume 68, Number 157, Page 48637-48642


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DEPARTMENT OF LABOR

Employee Benefits Security Administration

[Prohibited Transaction Exemption 2003-24; Exemption Application No. D-
11004]

 
Grant of Individual Exemptions; Deutsche Bank AG (DB), Located in 
Germany, with Affiliates in New York, New York and Other Locations; and 
JPMorgan Chase Bank, Located in New York, New York; (collectively, with 
their Affiliates, the Applicants)

AGENCY: Employee Benefits Security Administrator, Labor.

ACTION: Grant of individual exemption.

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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 exemption and referred interested persons to the 
application for a complete statement of the facts and representations. 
The applicant 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.

Deutsche Bank AG (DB), Located in Germany, with Affiliates in New York, 
New York and Other Locations; and JPMorgan Chase Bank, Located in New 
York, New York; (collectively, with their Affiliates, the Applicants)

[Prohibited Transaction Exemption 2003-24; Exemption Application 
Nos. D-11004 and D-11106]

Exemption

    Under the authority of section 408(a) of the Employees Retirement 
Income Security Act of 1974 (the Act) and section 4975(c)(2) of the 
Internal Revenue Code of 1986 (the Code) and in accordance with the 
procedures set forth in 29 CFR part 2570, subpart B (55 FR 32,836, 
32,847, August 10, 1990), the Department amends the following 
individual prohibited transaction exemptions (PTEs) and authorization 
made pursuant to PTE 96-62 (61 FR 39988, July 31, 1996--referred to 
herein as ``EXPRO''): PTE 2000-25 (65 FR 35129, June 1, 2000), issued 
to Morgan Guaranty Trust Company of New York and J.P. Morgan Investment 
Management, Inc., and PTE 2000-27, issued to the Chase Manhattan Bank 
(65 FR 35129, June 1, 2000), and Final Authorization Number (FAN) 2001-
19E, issued to DB and its Affiliates (June 23, 2001).\1\ Such PTEs and 
EXPRO authorization are hereby replaced by the following exemption.
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    \1\ See also PTE 2000-26 (65 FR 35129, June 1, 2000), issued to 
Goldman, Sachs & Co., and its Affiliates; PTE 2000-28, (65 FR 35129, 
June 1, 2000), issued to Citigroup, Inc. and its Affiliates; PTE 
2000-29 (65 FR 35129, June 1, 2000), issued to Morgan Stanley Dean 
Witter & Co. and its Affiliates; FAN 2001-24E (October 6, 2001), 
issued to Barclays Global Investors N.A., Barclays Capital, Inc. and 
their Affiliates; and FAN 2002-09E (September 14, 2002), issued to 
The TCS Group, Inc., and its Affiliates. The Department will 
separately consider similar amendments to those exemptions and 
authorizations upon the receipt of applications or submissions 
relating thereto from such entities.
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Section I--Transactions
    The restrictions of section 406 of the Act and the sanctions 
resulting from the application of section 4975 of the Code, by reason 
of section 4975(c)(1) of the Code, shall not apply to the purchase of 
any securities by the Asset Manager (as defined in Section II(a)) on 
behalf of employee benefit plans (Client Plans), including Client Plans 
investing in a pooled fund (Pooled Fund), for which the Asset Manager 
acts as a fiduciary, from any person other than the Asset Manager or an 
affiliate thereof, during the existence of an underwriting or selling 
syndicate with respect to such securities, where the Affiliated Broker-
Dealer is a manager or member of such syndicate (an ``affiliated 
underwriter transaction'' (AUT)), and/or where an Affiliated Trustee 
serves as trustee of a trust that issued the securities (whether or not 
debt securities) or serves as indenture trustee of securities that are 
debt securities (an ``affiliated trustee transaction'' (ATT)), provided 
that the following conditions are satisfied:
    (a) The securities to be purchased are--
    (1) either:
    (i) Part of an issue registered under the Securities Act of 1933 
(the 1933 Act) (15 U.S.C. 77a et seq.) or, if exempt from such 
registration requirement, are (A) issued or guaranteed by the United 
States or by any person controlled or supervised by and acting as an 
instrumentality of the United States pursuant to authority granted by 
the Congress of the United States, (B) issued by a bank, (C) exempt 
from such registration requirement pursuant to a federal statute other 
than the 1933 Act, or (D) are the subject of a distribution and are of 
a class which is required to be registered under section 12 of the 
Securities Exchange Act of 1934 (the 1934 Act) (15 U.S.C. 781), and the 
issuer of which has been subject to the reporting requirements of 
section 13 of that Act (15 U.S.C. 78m) for a period of at least 90 days 
immediately preceding the sale of securities and has filed all reports 
required to be filed thereunder with the Securities and Exchange 
Commission (SEC) during the preceding 12 months; or
    (ii) part of an issue that is an ``Eligible Rule 144A Offering,'' 
as defined in SEC Rule 10f-3 (17 CFR 270.10f-3(a)(4)). Where the 
Eligible Rule 144A Offering is of equity securities, the offering 
syndicate shall obtain a legal opinion regarding the adequacy of the 
disclosure in the offering memorandum;
    (2) purchased prior to the end of the first day on which any sales 
are made, at a price that is not more than the price paid by each other 
purchaser of securities in that offering or in any concurrent offering 
of the securities, except that--
    (i) If such securities are offered for subscription upon exercise 
of rights, they may be purchased on or before the

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fourth day preceding the day on which the rights offering terminates; 
or
    (ii) if such securities are debt securities, they may be purchased 
at a price that is not more than the price paid by each other purchaser 
of securities in that offering or in any concurrent offering of the 
securities and may be purchased on a day subsequent to the end of the 
first day on which any sales are made, provided that the interest rates 
on comparable debt securities offered to the public subsequent to the 
first day and prior to the purchase are less than the interest rate of 
the debt securities being purchased; and
    (3) offered pursuant to an underwriting or selling agreement under 
which the members of the syndicate are committed to purchase all of the 
securities being offered, except if--
    (i) Such securities are purchased by others pursuant to a rights 
offering; or
    (ii) such securities are offered pursuant to an over-allotment 
option.
    (b) The issuer of such securities has been in continuous operation 
for not less than three years, including the operation of any 
predecessors, unless--
    (1) Such securities are non-convertible debt securities rated in 
one of the four highest rating categories by at least one nationally 
recognized statistical rating organization, i.e., Standard & Poor's 
Rating Services, Moody's Investors Service, Inc., Duff & Phelps Credit 
Rating Co., or Fitch IBCA, Inc., or their successors (collectively, the 
Rating Organizations); or
    (2) such securities are issued or fully guaranteed by a person 
described in paragraph (a)(1)(i)(A) of this exemption; or
    (3) Such securities are fully guaranteed by a person who has issued 
securities described in (a)(1)(i)(B), (C), or (D), and who has been in 
continuous operation for not less than three years, including the 
operation of any predecessors.
    (c) The amount of such securities to be purchased by the Asset 
Manager on behalf of a Client Plan does not exceed three percent of the 
total amount of the securities being offered. Notwithstanding the 
foregoing, the aggregate amount of any securities purchased with assets 
of all Client Plans (including Polled Funds) managed by the Asset 
Manager (or with respect to which the Asset Manager renders investment 
advice within the meaning of 29 CFR 2510.3-21(c)) does not exceed:
    (1) 10 percent of the total amount of any equity securities being 
offered;
    (2) 35 percent of the total amount of any debt securities being 
offered that are rated in one of the four highest rating categories by 
at least one of the Rating Organizations; or
    (3) 25 percent of the total amount of any debt securities being 
offered that are rated in the fifth or sixth highest rating categories 
by at least one of the Rating Organizations; and
    (4) if purchased in an Eligible Rule 144A Offering, the total 
amount of the securities being offered for purposes of determining the 
percentages for (1)-(3) above is the total of:
    (i) The principal amount of the offering of such class sold by 
underwriters or members of the selling syndicate to ``qualified 
institutional buyers'' (QIBs), as defined in SEC Rule 144A (17 CFR 
230.144A(a)(1)); plus
    (ii) the principal amount of the offering of such class in any 
concurrent public offering.
    (d) The consideration to be paid by the Client Plan in purchasing 
such securities does not exceed three percent of the fair market value 
of the total net assets of the Client Plan, as of the last day of the 
most recent fiscal quarter of the Client Plan prior to such 
transaction.
    (e) The transaction is not part of an agreement, arrangement, or 
understanding designed to benefit the Asset Manager or an affiliate.
    (f) If the transaction is an AUT, the Affiliated Broker-Dealer does 
not receive, either directly, indirectly, or through designation, any 
selling concession or other consideration that is based upon the amount 
of securities purchased by Client Plans pursuant to this exemption. In 
this regard, the Affiliated Broker-Dealer may not receive, either 
directly or indirectly, any compensation that is attributable to the 
fixed designations generated by purchases of securities by the Asset 
Manager on behalf of its client Plans.
    (g) If the transaction is an AUT,
    (1) the amount the Affiliated Broker-Dealer receives in management, 
underwriting or other compensation is not increased through an 
agreement, arrangement, or understanding for the purpose of 
compensating the Affiliated Broker-Dealer for foregoing any selling 
concessions for those securities sold pursuant to this exemption. 
Except as described above, nothing in this paragraph shall be construed 
as precluding the Affiliated Broker-Dealer from receiving management 
fees for serving as manager of the underwriting or selling syndicate, 
underwriting fees for assuming the responsibilities of an underwriter 
in the underwriting or selling syndicate, or other consideration that 
is not based upon the amount of securities purchased by the Asset 
Manager on behalf of Client Plans pursuant to this exemption; and
    (2) the Affiliated Broker-Dealer shall provide to the Asset Manager 
a written certification, signed by an officer of the Affiliated Broker-
Dealer, stating the amount that the Affiliated Broker-Dealer received 
in compensation during the past quarter, in connection with any 
offerings covered by this exemption, was not adjusted in a manner 
inconsistent with Section I, paragraphs (e), (f), or (g), of this 
exemption.
    (h) In the case of a single Client Plan, the covered transaction is 
performed under a written authorization executed in advance by an 
independent fiduciary (Independent Fiduciary) of the Client Plan. In 
the case of a single Client Plan on behalf of which an Independent 
Fiduciary executed a written authorization in respect of AUTs, as 
required under another prohibited transaction exemption covering the 
same Asset Manager, prior to publication of this exemption in the 
Federal Register, the written authorization requirement of this 
paragraph (h) shall be deemed satisfied with respect to ATTs and AUTs 
if the Asset Manager provides to the same Independent Fiduciary the 
materials described in paragraph (i) below, together with a termination 
form expressly providing an election for the Independent Fiduciary to 
terminate the authorization with respect to AUTs or ATTs, or both, and 
a statement to the effect that the Asset Manager proposes to engage in 
ATTs on a specified date (that shall be not less than 45 days after the 
notice is sent to the Independent Fiduciary) unless the Independent 
Fiduciary signs and returns the termination form to the Asset Manager 
prior to such date.
    (i) Prior to the execution of the written authorization described 
in paragraph (h) above, the following information and materials (which 
may be provided electronically) must be provided by the Asset Manager 
to the Independent Fiduciary of each single Client Plan:
    (1) A copy of the notice of proposed exemption and of the final 
exemption as published in the Federal Register; and
    (2) any other reasonably available information regarding the 
covered transactions that the Independent Fiduciary requests.
    (j) Subsequent to an Independent Fiduciary's initial authorization 
permitting the Asset Manager to engage in the covered transactions on 
behalf of a single Client Plan, the Asset Manager will continue to be 
subject to the requirement to provide any reasonably available 
information regarding the

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covered transactions that the Independent Fiduciary requests.
    (k) In the case of existing plan investors in a Pooled Fund, such 
Pooled Fund may not engage in any covered transactions pursuant to this 
exemption, unless the Asset Manager has provided the written 
information described below to the Independent Fiduciary of each plan 
participating in the Pooled Fund. The following information and 
materials (which may be provided electronically shall be provided not 
less than 45 days prior to the Asset Manager's engaging in the covered 
transactions on behalf of the Pooled Fund pursuant to the exemption:
    (1) A notice of the Pooled Fund's intent to purchase securities 
pursuant to this exemption and a copy of the notice of proposed 
exemption and of the final exemption as published in the Federal 
Register;
    (2) any other reasonably available information regarding the 
covered transactions that the Independent Fiduciary requests; and
    (3) a termination form expressly provided an election for the 
Independent Fiduciary to terminate the plan's investment in the Pooled 
Fund without penalty to the plan. Such form shall include instructions 
specifying how to use the form. Specifically, the instructions will 
explain that the plan has an opportunity to withdraw its assets from 
the Pooled Fund for a period at least 30 days after the plan's receipt 
of the initial notice described in subparagraph (1) above and that the 
failure of the Independent Fiduciary to return the termination form by 
the specified date shall be deemed to be an approval by the plan of its 
participation in covered transactions as a Pooled Fund investor. 
Further, the instructions will identify the Asset Manager and its 
Affiliated Broker-Dealer and/or Affiliated Trustee and state that this 
exemption may be unavailable unless the Independent Fiduciary is, in 
fact, independent of those persons. Such fiduciary must advise the 
Asset Manager, in writing, if it is not an ``independent Fiduciary,'' 
as that term is defined in Section II(g) of this exemption.
    For purposes of this paragraph, the requirement that the 
authorizing fiduciary be independent of the Asset Manager shall not 
apply in the case of an in-house plan sponsored by the Applicants or an 
affiliate thereof. However, in-house plans must notify the Asset 
Manager, as provided above.
    (1) In the case of a plan whose assets are proposed to be invested 
in a Pooled Fund subsequent to implementation of the procedures to 
engage in the covered transactions, the plan's investment in the Pooled 
Fund is subject to the prior written authorization of an Independent 
Fiduciary, following the receipt by the Independent Fiduciary of the 
materials described in subparagraphs (1) and (2) of paragraph (k). For 
purposes of this paragraph, the requirement that the authorizing 
fiduciary be independent of the Asset Manager shall not apply in the 
case of an in-house plan sponsored by the Applicants or an affiliate 
thereof.
    (m) Subsequent to an Independent Fiduciary's initial authorization 
of a plan's investment in a Pooled Fund that engages in the covered 
transactions, the Asset Manager will continue to be subject to the 
requirement to provide any reasonably available information regarding 
the covered transactions that the Independent Fiduciary requests.
    (n) At least once every three months, and not later than 45 days 
following the period to which such information relates, the Asset 
Manager shall:
    (1) Furnish the Independent Fiduciary of each single Client Plan, 
and of each plan investing in a Pooled Fund, with a report (which may 
be provided electronically) disclosing all securities purchased on 
behalf of that Client Plan or Pooled Fund pursuant to the exemption 
during the period to which such report relates, and the terms of the 
transactions, including:
    (i) The type of security (including the rating of any debt 
security);
    (ii) the price at which the securities were purchased;
    (iii) the first day on which any sale was made during this 
offering;
    (iv) the size of the issue;
    (v) the number of securities purchased by the Asset Manager for the 
specific Client Plan or Pooled Fund;
    (vi) the identity of the underwriter from whom the securities were 
purchased;
    (vii) in the case of an AUT, the spread on the underwriting;
    (viii) in the case of an ATT, the basis upon which the Affiliated 
Trustee is compensated;
    (ix) the price at which any such securities purchased during the 
period were sold; and
    (x) the market value at the end of such period of each security 
purchased during the period and not sold;
    (2) provide to the Independent Fiduciary in the quarterly report 
(i) in the case of AUTs, a representation that the Asset Manager has 
received a written certification signed by an officer of the Affiliated 
Broker-Dealer, as described in paragraph (g)(2), affirming that, as to 
each AUT covered by this exemption during the past quarter, the 
Affiliated Broker-Dealer acted in compliance with Section I, paragraphs 
(e), (f), and (g) of this exemption, and that copies of such 
certifications will be provided to the Independent Fiduciary upon 
request, and (ii) in the case of ATTs, a representation of the Asset 
Manager affirming that, as to each ATT, the transaction was not part of 
an agreement, arrangement or understanding designed to benefit the 
Affiliated Trustee;
    (3) disclose to the Independent Fiduciary that, upon request, any 
other reasonably available information regarding the covered 
transaction that the Independent Fiduciary requests will be provided, 
including, but not limited to:
    (i) The date on which the security were purchased on behalf of the 
plan;
    (ii) the percentage of the offering purchased on behalf of all 
Client Plans and Pooled Funds; and
    (iii) the identify of all members of the underwriting syndicate;
    (4) disclose to the Independent Fiduciary in the quarterly report, 
any instance during the past quarter where the Asset Manager was 
precluded for any period of time from selling a security purchased 
under this exemption in that quarter because of its status as an 
affiliate of the Affiliated Broker-Dealer or of an Affiliated Trustee 
and the reason for this restriction;
    (5) provide explicit notification, prominently displayed in each 
quarterly report, to the Independent Fiduciary of a single Client Plan, 
that the authorization to engage in the covered transaction may be 
terminated, without penalty, by the Independent Fiduciary on more than 
five days' notice by contacting an identified person; and
    (6) provide explicit notification, prominently displayed in each 
quarterly report, to the Independent Fiduciary of a Client Plan 
invested in a Pooled Fund, that the Independent Fiduciary may terminate 
investment in the Pooled Fund, without penalty, by contacting an 
identified person.
    (o) Each single Client Plan shall have total net assets with a 
value of at least $50 million. In addition, in the case of a 
transaction involving an Eligible Rule 144A Offering on behalf of a 
single Client Plan, each such Client Plan shall have at least $100 
million in securities, as determined pursuant to SEC Rule 144A (17 CFR 
230.144A).\2\ In the case of

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a Pooled Fund, the $50 million requirement will be met if 50 percent or 
more of the units of beneficial interest in such Pooled Fund as held by 
plans having total net assets with a value of at least $50 million, or 
if each such Client Plan in the Pooled Fund has total assets of at 
least $50 million. For purchases involving an Eligible Rule 144A 
Offering on behalf of a Pooled Fund, the $100 million requirement will 
be met if 50 percent or more of the units of beneficial interest in 
such Pooled Fund are held by plans having at least $100 million in 
assets, or if each such Client Plan in the Pooled fund has total assets 
of at least $100 million, and the Pooled Fund itself qualifies as a 
QIB, as determined pursuant to SEC Rule 144A (17 CFR 230.144A(a)(F)).
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    \2\ SEC Rule 10f-3(a)(4), 17 CFR 270.10f-3(a)(4), states that 
the term ``Eligible Rule 144A Offering'' means an offering of 
securities that meets the following conditions:
    (i) The securities are offered or sold in transactions exempt 
from registration under section 4(2) of the Securities Act of 1933 
[15 U.S.C. 77d(d)], rule 144A thereunder 230.144A of this chapter], 
or rules 501-508 thereunder [Sec. Sec.  230.501-230-508 of this 
chapter];
    (ii) The securities are sold to persons that the seller and any 
person acting on behalf of the seller reasonably believe to include 
qualified institutional buyers, as defined in Sec.  230.144A(a)(1) 
of this chapter; and
    (iii) The seller and any person acting on behalf of the seller 
reasonably believe that the securities are eligible for resale to 
other qualified institutional buyers pursuant to Sec.  230.144A of 
this chapter.
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    For purposes of the net assets tests described above, where a group 
of Client Plans is maintained by a single employer or controlled groups 
of employers, as defined in section 407(d)(7) of the Act, the $50 
million net asset requirement or the $100 million net asset requirement 
may be met by aggregating the assets of such Client Plans, if the 
assets are pooled for investment purposes in a single master trust.
    (p) The Asset Manager qualifies as a ``qualified professional asset 
manager'' (QPAM), as that term is defined under Part V(a) of Prohibited 
Transaction Exemption 84-14 (49 FR 9494, 9506, March 13, 1984) and, in 
addition, has, as of the last day of its most recent fiscal year, total 
client assets under its management and control in excess of $5 billion 
and shareholders' or partners' equity in excess of $1 million.
    (q) No more than 20 percent of the assets of a Pooled Fund, at the 
time of a covered transaction, are comprised of assets of employee 
benefit plans maintained by the Asset Manager, the Affiliated Broker-
Dealer, the Affiliated Trustee or an affiliate thereof for their own 
employees, for which the Asset Manager, the Affiliated Broker-Dealer, 
or an affiliate exercises investment discretion.
    (r) The Asset Manager, and the Affiliated Broker-Dealer, as 
applicable, 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 (s) of this 
exemption to determine whether the conditions of this exemption have 
been met, except that--
    (1) No party in interest with respect to a Client Plan, other than 
the Asset Manager and the Affiliated Broker-Dealer or Affiliated 
Trustee, as applicable, shall be subject to a civil penalty under 
section 502(i) of the Act or the taxes imposed by section 4975(a) and 
(b) of the Code, if such records are not maintained, or not available 
for examination, as required by paragraph (s); and
    (2) this record-keeping condition shall not be deemed to have been 
violated if, due to circumstances beyond the control of the Asset 
Manager or the Affiliated Broker-Dealer, or Affiliated Trustee, as 
applicable, such records are lost or destroyed prior to the end of the 
six-year period.
    (s) (1) Except as provided in subparagraph (2) of this paragraph 
(s) and notwithstanding any provisions of subsections (a)(2) and (b) of 
section 504 of the Act, the records referred to in paragraph (r) are 
unconditionally available at their customary location for examination 
during normal business hours by)--
    (1) Any duly authorized employee or representative of the 
Department, the Internal Revenue Service, or the SEC; or
    (ii) any fiduciary of a Client Plan, or any duly authorized 
employee or representative of such fiduciary; or
    (iii) any employer of participants and beneficiaries and any 
employee organizations whose members are covered by a Client Plan, or 
any authorized employee or representative of these entities; or
    (iv) any participant or beneficiary of a Client Plan, or duly 
authorized employee or representative of such participant or 
beneficiary;
    (2) none of the persons described in paragraphs (s)(1)(ii)-(iv) 
shall be authorized to examine trade secrets of the Asset Manager or 
the Affiliated Broker-Dealer or the Affiliated Trustee, or commercial 
or financial information which is privileged or confidential; and
    (3) should the Asset Manager or the Affiliated Broker-Dealer or the 
Affiliated Trustee refuse to disclose information on the basis that 
such information is exempt from disclosure pursuant to paragraph (s)(2) 
above, the Asset Manager 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.
    (t) An indenture trustee whose affiliate has, within the prior 12 
months, underwritten any securities for an obligor of the indenture 
securities will resign as indenture trustee if a default occurs upon 
the indenture securities.

Section II--Definitions

    (a) The term ``Asset Manager'' means any asset management affiliate 
of the Applicants (as ``affiliate'' is defined in paragraph (c)) that 
meets the requirements of this exemption.
    (b) The term ``Affiliated Broker-Dealer'' means any broker-dealer 
affiliate of the Applicants (as ``affiliate'' is defined in paragraph 
(c)) that meets the requirements of this exemption. Such Affiliated 
Broker-Dealer may participate in an underwriting or selling syndicate 
as a manager or member. The term ``manager'' means any member of an 
underwriting or selling syndicate who, either alone or together with 
other members of the syndicate, is authorized to act on behalf of the 
members of the syndicate in connection with the sale and distribution 
of the securities being offered, or who receives compensation from the 
members of the syndicate for its services as a manager of the 
syndicate.
    (c) The term ``affiliate'' of a person includes:
    (1) Any person directly or indirectly through one or more 
intermediaries, controlling, controlled by, or under common control 
with such person;
    (2) any officer, director, partner, employee, or relative (as 
defined in section 3(15) of the Act) of such person; and
    (3) any corporation or partnership of which such person is an 
officer, director, partner, or employee.
    (d) The term ``control'' means the power to exercise a controlling 
influence over the management or policies of a person other than an 
individual.
    (e) The term ``Client Plan'' means an employee benefit plan that is 
subject to the fiduciary responsibility provisions of the Act and whose 
assets under the management of the Asset Manager, including a plan 
investing in a Pooled Fund (as ``Pooled Fund'' is defined in paragraph 
(f) below).
    (f) The term ``Pooled Fund'' means a common or collective trust 
fund or pooled investment fund maintained by the Asset Manager.
    (g)(1) The term ``Independent Fiduciary'' means fiduciary of a 
Client Plan who is unrelated to, and independent of, the Asset Manager, 
the Affiliated Broker-Dealer and the Affiliated Trustee. For purposes 
of this exemption, a Client Plan fiduciary will

[[Page 48641]]

be deemed to be unrelated to, and independent of, the Asset Manager, 
the Affiliated Broker-Dealer and the Affiliated Trustee 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, is an officer, director, or 
highly compensated employee (within the meaning of section 
4975(e)(2)(H) of the Code) of the Asset Manager, the Affiliated Broker-
Dealer or the Affiliated Trustee and represents that such fiduciary 
shall advise the Asset Manager if those facts change.
    (2) Notwithstanding anything to the contrary in this Section II(g), 
a fiduciary is not independent if:
    (i) Such fiduciary directly or indirectly controls, is controlled 
by, or is under common control with the Asset Manager, the Affiliated 
Broker-Dealer or the Affiliated Trustee;
    (ii) such fiduciary directly or indirectly receives any 
compensation or other consideration from the Asset Manager, the 
Affiliated Broker-Dealer or the Affiliated Trustee 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 the Asset Manager, 
responsible for the transactions described in Section I, 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. However, if such 
individual is a director of the Client Plan sponsor or of the 
responsible fiduciary, and if he or she abstains from participation in 
(A) the choice of the Plan's investment manager/adviser and (B) the 
decision to authorize or terminate authorization for transactions 
described in Section I, then Section II(g)(2)(iii) shall not apply.
    (3) The term ``officer'' means a president, any vice president in 
charge of a principal business unit, division or function (such as 
sales, administration or finance), or any other officer who performs a 
policy-making function for the entity.
    (4) In the case of existing Client Plans in a Pooled Fund, at the 
time the Asset Manager provides such Client Plans with initial notice 
pursuant to this exemption, the Asset Manager will notify the 
fiduciaries of such Client Plans that they must advise the Asset 
Manager, in writing, if they are not independent, within the meaning of 
this Section II(g).
    (h) The term ``security'' shall have the same meaning as defined in 
section 2(36) of the Investment Company Act of 1940 (the 1940 Act), as 
amended (15 U.S.C. 80a-2(36) (1996)). For purposes of this exemption, 
mortgage-backed or other asset-baked securities rated by a Rating 
Organization will be treated as debt securities.
    (i) The term ``Eligible Rule 144A Offering'' shall have the same 
meaning as defined in SEC Rule 10f-3(a)(4) (17 CFR 270.10f-3(a)(4)) 
under the 1940 Act.
    (j) The term ``qualified institutional buyer'' or ``QIB'' shall 
have the same meaning as defined in SEC Rule 144A (17 CFR 
230.144A(a)(1)) under the 1933 Act.
    (k) The term ``Rating Organizations'' means Standard & Poor's 
Rating Services, Moody's Investors Service, Inc., Duff & Phelps Credit 
Rating Co., or Fitch IBCA, Inc., or their successors.
    (l) The term ``Affiliated Trustee'' means the Applicants and any 
bank or trust company affiliate of the Applicants (as ``affiliate'' is 
defined in paragraph (c)(1)) that serves as trustee of a trust that 
issues securities which are asset-backed securities or as indenture 
trustee of securities which are either asset-backed securities or other 
debt securities that meet the requirements of this exemption. For 
purposes of this exemption, other than Section I (t), performing 
services as custodian, paying agent, registrar or in similar 
ministerial capacities is also considered serving as trustee or 
indenture trustee.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption, 
interested persons should refer to the notice of proposed exemption 
published on May 22, 2003 at 68 FR 28018.
    Written Comments: The only comments received by the Department with 
respect to the notice of proposed exemption (the Notice) were submitted 
by the Applicants.
    With respect to section I(h), JP Morgan Chase Bank commented that 
pursuant to the prior exemptions that are being amended herein (i.e., 
PTE 2000-25 and PTE 2000-27), it had previously solicited written 
authorization to engage in AUTs from many of its Client Plans. Because 
the transactions provided for in the Notice are substantially similar 
to those for which JP Morgan Chase Bank has already given notice and 
obtained written consent, because the seeking of written consent is 
costly and time-consuming, and because, in the Applicants' view, the 
fact that the trustee is affiliated with the Asset Manager (i.e., an 
ATT) is of far less consequence than where an Affiliate is a manager of 
the underwriting syndicate (i.e., an AUT), the Applicants have 
requested that where they already have the written consent of a Client 
Plan for AUTs, they need only provide written notice and a termination 
form, terminating authorization for the additional ATT relief. The 
Department has accepted this comment \3\ and has modified section I(h) 
of this exemption accordingly.
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    \3\ The Department encourages all appropriate Client Plan 
fiduciaries to review the disclosures required herein and take 
whatever actions are necessary to protect the interests of the 
Client Plan's participants and beneficiaries. In addition, the 
Department notes that Client Plan fiduciaries should assess, in a 
timely fashion, their ability to monitor and subject transactions 
and determine whether the conditions described herein are satisfied.
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    In addition, the Applicants requested a clarification with respect 
to section I(o) of the Notice. Section I(o) of the Notice requires, in 
pertinent part, that each single Client Plan shall have total net 
assets with a value of at least $50 million. In the case of a Pooled 
Fund, such $50 million requirement will be deemed met if 50 percent or 
more of the units of beneficial interest in such Pooled Fund are held 
by plans having total net assets with a value of at least $50 million. 
The Applicants commented that the ``$50/$100 million'' test of that 
section seems to contemplate ``Pooled Funds'' composed mostly or 
entirely of investments by plans. However, the Applicant state that 
this is not always the case with their Pooled Funds. The Applicants 
represent that they and many managers advise or manage commingled 
vehicles which have sufficient investments from plans (25% or more) for 
the vehicle to be a ``look-through vehicle'' under the Plan Asset 
Regulations,\4\ but also have more than 50% of their investments from 
non-plan investors. The Applicants note that it is possible to read the 
$50/$100 million test as causing the exemptions proposed in the Notice 
to be unavailable to a Pooled Fund where, for example, 49% of 
investments are from plans which are $50/$100 million in size, and 51% 
of investments are from non-plans which are $50/$100 million in size.
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    \4\ See the Department's regulation at 29 CFR part 2510.3-101, 
Definition of ``plan assets''--plan investments.
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    The Applicants request that the Department clarify that the 
exemptions, as amended herein, will apply to activity by Pooled Funds 
if each plan in the Pooled Fund meets the general requirement of $50/
$100 million, even if

[[Page 48642]]

the Pooled Fund itself technically cannot satisfy the requirement that 
at least 50% of the units of beneficial interest in the Pooled Fund be 
held by plans having total net assets with a value of at least $50 
million.
    The Department accepts this comment and has modified the language 
of section I(o) of the exemption to clarify that the requirements 
therein are satisfied if each plan in the Pooled Fund meets the general 
requirement of $50/$100 million, even though 50 percent or more of the 
units of beneficial interest in such Pooled Fund are not held by plans.
    Accordingly, in consideration of the entire record, including the 
comments submitted by the Applicants, the Department has determined to 
grant the exemption as proposed, with the modifications and 
clarifications described herein.

For Further Information Contact: Gary Lefkowitz of the Department, 
telephone (202 693-8546. (This is not a total-free number).

IBEW Local No. 1 Health and Welfare Fund (the Welfare Fund) and IBEW 
Local No. 1 Apprenticeship and Training Fund (the Training Fund; 
collectively, the Funds) Located in St. Louis, MO

[Prohibited Transaction Exemption 2003-25; Exemption Application 
Nos. L-11155 and L-11156, respectively]

Exemption

    The restrictions of section 406(a) of the Act shall not apply to 
the lease of certain classroom space and supplemental facilities (the 
Lease) by the Welfare Fund to the Training Fund.
    The exemption is subject to the following conditions:
    (1) The terms of the Lease are at least favorable to the Welfare 
Fund and the Training Fund as those obtainable in an arm's length 
transaction with an unrelated party.
    (2) Qualified, independent appraisers have determined the initial 
amount of the Lease payments.
    (3) A qualified, independent fiduciary, The Philip Company, has 
approved the Lease and has agreed to monitor the terms of the 
exemption, at all times, on behalf of the Welfare Fund.
    (4) The independent fiduciary agrees to take whatever actions are 
necessary and proper to enforce the Welfare Fund's rights under the 
Lease and to protect the participants and beneficiaries of the Welfare 
Fund.
    (5) The rental payments under the Lease are adjusted once every 
five years by the independent fiduciary to ensure that such Lease 
payments are not greater than or less than the fair market rental value 
of the leased space.
    (6) The fair market rental amount for the leased space, at no time, 
will exceed 25 percent of the assets of either Fund, including any 
improvements that are constructed thereon.
    (7) The independent fiduciary and the Board of Trustees of the 
Welfare Fund have determined that the Lease is an appropriate 
investment for the Welfare Fund and is in the best interest of the 
Welfare Fund's participants and beneficiaries.
    (8) The Board of Trustees of the Training Fund has determined that 
the Lease transaction is an appropriate investment for the Training 
Fund and is in the best interest of the Training Fund's participants 
and beneficiaries.
    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 May 22, 2003 at 68 FR 
28026.

For Further information Contact: Ms. Silvia M. Quezada of the 
Department, telephone (202) 693-8553. (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 11th day of August 2003.
Ivan Strasfeld,
Director of Exemption Determinations, Employee Benefits Security 
Administration, Department of Labor.
[FR Doc. 03-20765 Filed 8-13-03; 8:45 am]

BILLING CODE 4510-29-M