Skip to page content
Employee Benefits Security Administration

EBSA Federal Register Notice

Proposed Exemptions and Application Numbers: D-11272, Wells Fargo & Company; D-11390, BSC Services Corp. 401(k) Profit Sharing Plan [07/02/2007]

[PDF Version]

Volume 72, Number 126, Page 36048-36061

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

DEPARTMENT OF LABOR

Employee Benefits Security Administration

 
Proposed Exemptions and Application Numbers: D-11272, Wells Fargo 
& Company; D-11390, BSC Services Corp. 401(k) Profit Sharing Plan (the 
Plan); and D-11402 & D-11403, Owens Corning Savings Plan and Owens 
Corning Savings and Security (Collectively the Plans)

AGENCY: Employee Benefits Security Administration, Labor.

ACTION: Notice of proposed exemptions.

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

SUMMARY: This document contains notices of pendency before the 
Department of Labor (the Department) of proposed exemptions from 
certain of the prohibited transaction restrictions of the Employee 
Retirement Income Security Act of 1974 (ERISA or the Act) and/or the 
Internal Revenue Code of 1986 (the Code).

Written Comments and Hearing Requests

    All interested persons are invited to submit written comments or 
requests for a hearing on the pending exemptions, unless otherwise 
stated in the Notice of Proposed Exemption, within 45 days from the 
date of publication of this Federal Register Notice. Comments and 
requests for a hearing should state: (1) The name, address, and 
telephone number of the person making the comment or request, and (2) 
the nature of the person's interest in the exemption and the manner in 
which the person would be adversely affected by the exemption. A 
request for a hearing must also state the issues to be addressed and 
include a general description of the evidence to be presented at the 
hearing.

ADDRESSES: All written comments and requests for a hearing (at least 
three copies) should be sent to the Employee Benefits Security 
Administration (EBSA), Office of Exemption Determinations, Room N-5700, 
U.S. Department of Labor, 200 Constitution Avenue, NW., Washington, DC 
20210. Attention: Application No.----, stated in each Notice of 
Proposed Exemption. Interested persons are also invited to submit 
comments and/or hearing requests to EBSA via e-mail or FAX. Any such 
comments or requests should be sent either by e-mail to: 
Amoffitt.betty@dol.gov, or by FAX to (202) 219-0204 by the end of the 

scheduled comment period. The applications for exemption and the 
comments received will be available for public inspection in the Public 
Documents Room of the Employee Benefits Security Administration, U.S. 
Department of Labor, Room N-1513, 200 Constitution Avenue, NW., 
Washington, DC 20210.

Notice to Interested Persons

    Notice of the proposed exemptions will be provided to all 
interested persons in the manner agreed upon by the applicant and the 
Department within 15 days of the date of publication in the Federal 
Register. Such notice shall include a copy of the notice of proposed 
exemption as published in the Federal Register and shall inform 
interested persons of their right to comment and to request a hearing 
(where appropriate).

SUPPLEMENTARY INFORMATION: The proposed exemptions were requested in 
applications filed pursuant to section 408(a) of the Act and/or section 
4975(c)(2) of the Code, and in accordance with procedures set forth in 
29 CFR Part 2570, Subpart B (55 FR 32836, 32847, August 10, 1990). 
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 requested to 
the Secretary of Labor. Therefore, these notices of proposed exemption 
are issued solely by the Department.
    The applications contain representations with regard to the 
proposed exemptions which are summarized below. Interested persons are 
referred to the applications on file with the Department for a complete 
statement of the facts and representations.

Wells Fargo & Company (WFC)

Located in San Francisco, California

[Application No. D-11272]

Proposed Exemption

    The Department of Labor (the Department) is considering granting an 
exemption under the authority of section 408(a) of the Employee 
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

[[Page 36049]]

2570, Subpart B (55 FR 32836, 32847, August 10, 1990).

Section I--Transactions

    If the proposed exemption is granted, 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)(A) through 
(F) of the Code, shall not apply to the purchase of certain securities 
(the Securities), as defined, below in Section III(h), by an asset 
management affiliate of WFC, as ``affiliate'' is defined, below, in 
Section III(c), from any person other than such asset management 
affiliate of WFC or any affiliate thereof, during the existence of an 
underwriting or selling syndicate with respect to such Securities, 
where a broker-dealer affiliated with WFC (the Affiliated Broker-
Dealer), as defined, below, in Section III(b), is a manager or member 
of such syndicate and the asset management affiliate of WFC purchases 
such Securities, as a fiduciary:
    (a) On behalf of an employee benefit plan or employee benefit plans 
(Client Plan(s)), as defined, below, in Section III(e); or
    (b) On behalf of Client Plans, and/or In-House Plans, as defined, 
below, in Section III(l), which are invested in a pooled fund or in 
pooled funds (Pooled Fund(s)), as defined, below, in Section III(f); 
provided that the conditions as set forth, below, in Section II, are 
satisfied (An affiliated underwriter transaction (AUT)).\1\
---------------------------------------------------------------------------

    \1\ For purposes of this proposed exemption an In-House Plan may 
engage in AUT's only through investment in a Pooled Fund.
---------------------------------------------------------------------------

Section II--Conditions

    The proposed exemption is conditioned upon adherence to the 
material facts and representations described herein and upon 
satisfaction of the following requirements:
    (a)(1) The Securities to be purchased are either--
    (i) Part of an issue registered under the Securities Act of 1933 
(the 1933 Act) (15 U.S.C. 77a et seq.). If the Securities to be 
purchased are part of an issue that is exempt from such registration 
requirement, such Securities:
    (A) Are 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) Are issued by a bank,
    (C) Are 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 are issued by an issuer 
that has been subject to the reporting requirements of section 13 of 
the 1934 Act (15 U.S.C. 78m) for a period of at least ninety (90) days 
immediately preceding the sale of such Securities and that has filed 
all reports required to be filed thereunder with the Securities and 
Exchange Commission (SEC) during the preceding twelve (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 of the Securities is of equity securities, the 
offering syndicate shall obtain a legal opinion regarding the adequacy 
of the disclosure in the offering memorandum;
    (2) The Securities to be purchased are purchased prior to the end 
of the first day on which any sales are made, pursuant to that 
offering, at a price that is not more than the price paid by each other 
purchaser of the 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 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 the 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, pursuant to that offering, 
provided that the interest rates, as of the date of such purchase, on 
comparable debt securities offered to the public subsequent to the end 
of the first day on which any sales are made and prior to the purchase 
date are less than the interest rate of the debt Securities being 
purchased; and
    (3) The Securities to be purchased are 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 the Securities to be purchased pursuant to this 
proposed exemption must have been in continuous operation for not less 
than three years, including the operation of any predecessors, unless 
the Securities to be purchased--
    (1) Are non-convertible debt securities rated in one of the four 
highest rating categories by Standard & Poor's Rating Services, Moody's 
Investors Service, Inc., FitchRatings, Inc., Dominion Bond Rating 
Service Limited, Dominion Bond Rating Service, Inc., or any successors 
thereto (collectively, the Rating Organizations); provided that none of 
the Rating Organizations rates such Securities in a category lower than 
the fourth highest rating category; or
    (2) Are debt securities issued or fully 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; or
    (3) Are debt securities which are fully guaranteed by a person (the 
Guarantor) that has been in continuous operation for not less than 
three years, including the operation of any predecessors, provided that 
such Guarantor has issued other securities registered under the 1933 
Act; or if such Guarantor has issued other securities which are exempt 
from such registration requirement, such Guarantor has been in 
continuous operation for not less than three years, including the 
operation of any predecessors, and such Guarantor:
    (a) Is a bank; or
    (b) Is an issuer of securities which are exempt from such 
registration requirement, pursuant to a Federal statute other than the 
1933 Act; or
    (c) Is an issuer of securities that 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 are issued by an issuer that has been subject to 
the reporting requirements of section 13 of the 1934 Act (15 U.S.C. 
78m) for a period of at least ninety (90) days immediately preceding 
the sale of such securities and that has filed all reports required to 
be filed thereunder with the Securities and Exchange Commission (SEC) 
during the preceding twelve (12) months.
    (c) The aggregate amount of Securities of an issue purchased, 
pursuant to this proposed exemption, by the asset management affiliate 
of WFC with: (i) the assets of all Client Plans; and (ii) the assets, 
calculated on a pro-rata basis, of all Client Plans and In-House Plans 
investing in Pooled Funds managed by the asset management affiliate of 
WFC; and (iii) the assets of plans to which the asset management 
affiliate of WFC renders investment advice within the meaning of 29 CFR 
2510.3-21(c) does not exceed:

[[Page 36050]]

    (1) 10 percent (10%) of the total amount of the Securities being 
offered in an issue, if such Securities are equity securities;
    (2) 35 percent (35%) of the total amount of the Securities being 
offered in an issue, if such Securities are debt securities rated in 
one of the four highest rating categories by at least one of the Rating 
Organizations; provided that none of the Rating Organizations rates 
such Securities in a category lower than the fourth highest rating 
category; or
    (3) 25 percent (25%) of the total amount of the Securities being 
offered in an issue, if such Securities are debt securities rated in 
the fifth or sixth highest rating categories by at least one of the 
Rating Organizations; provided that none of the Rating Organizations 
rates such Securities in a category lower than the sixth highest rating 
category; and
    (4) The assets of any single Client Plan (and the assets of any 
Client Plans and any In-House Plans investing in Pooled Funds) may not 
be used to purchase any Securities being offered, if such Securities 
are debt securities rated lower than the sixth highest rating category 
by any of the Rating Organizations;
    (5) Notwithstanding the percentage of Securities of an issue 
permitted to be acquired, as set forth in Section II(c)(1), (2), and 
(3), above, of this proposed exemption, the amount of Securities in any 
issue (whether equity or debt securities) purchased, pursuant to this 
proposed exemption, by the asset management affiliate of WFC on behalf 
of any single Client Plan, either individually or through investment, 
calculated on a pro-rata basis, in a Pooled Fund may not exceed three 
percent (3%) of the total amount of such Securities being offered in 
such issue, and;
    (6) If purchased in an Eligible Rule 144A Offering, the total 
amount of the Securities being offered for purposes of determining the 
percentages, described, above, in Section II(c)(1)-(3) and (5), is the 
total of:
    (i) The principal amount of the offering of such class of 
Securities 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 of 
Securities in any concurrent public offering.
    (d) The aggregate amount to be paid by any single Client Plan in 
purchasing any Securities which are the subject of this proposed 
exemption, including any amounts paid by any Client Plan or In-House 
Plan in purchasing such Securities through a Pooled Fund, calculated on 
a pro-rata basis, does not exceed three percent (3%) of the fair market 
value of the net assets of such Client Plan or In-House Plan, as of the 
last day of the most recent fiscal quarter of such Client Plan or In-
House Plan prior to such transaction.
    (e) The covered transactions are not part of an agreement, 
arrangement, or understanding designed to benefit the asset management 
affiliate of WFC or an affiliate.
    (f) The Affiliated Broker-Dealer does not receive, either directly, 
indirectly, or through designation, any selling concession, or other 
compensation or consideration that is based upon the amount of 
Securities purchased by any single Client Plan, or that is based on the 
amount of Securities purchased by Client Plans or In-House Plans 
through Pooled Funds, pursuant to this proposed exemption. In this 
regard, the Affiliated Broker-Dealer may not receive, either directly 
or indirectly, any compensation or consideration that is attributable 
to the fixed designations generated by purchases of the Securities by 
the asset management affiliate of WFC on behalf of any single Client 
Plan or any Client Plan or In-House Plan in Pooled Funds.
    (g)(1) The amount the Affiliated Broker-Dealer receives in 
management, underwriting, or other compensation or consideration 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 proposed 
exemption. Except as described above, nothing in this Section II(g)(1) 
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 
compensation or consideration that is not based upon the amount of 
Securities purchased by the asset management affiliate of WFC on behalf 
of any single Client Plan, or on behalf of any Client Plan or In-House 
Plan participating in Pooled Funds, pursuant to this proposed 
exemption; and
    (2) The Affiliated Broker-Dealer shall provide to the asset 
management affiliate of WFC a written certification, signed by an 
officer of the Affiliated Broker-Dealer, stating the amount that the 
Affiliated Broker-Dealer received in compensation or consideration 
during the past quarter, in connection with any offerings covered by 
this proposed exemption, was not adjusted in a manner inconsistent with 
Section II(e), (f), or (g) of this proposed exemption.
    (h) The covered transactions are performed under a written 
authorization executed in advance by an independent fiduciary of each 
single Client Plan (the Independent Fiduciary), as defined, below, in 
Section III(g).
    (i) Prior to the execution by an Independent Fiduciary of a single 
Client Plan of the written authorization described, above, in Section 
II(h), the following information and materials (which may be provided 
electronically) must be provided by the asset management affiliate of 
WFC to such Independent Fiduciary:
    (1) A copy of the Notice of Proposed Exemption (the Notice) and a 
copy of the final exemption as published in the Federal Register; and
    (2) Any other reasonably available information regarding the 
covered transactions that such Independent Fiduciary requests the asset 
management affiliate of WFC to provide.
    (j) Subsequent to the initial authorization by an Independent 
Fiduciary of a single Client Plan permitting the asset management 
affiliate of WFC to engage in the covered transactions on behalf of 
such single Client Plan, the asset management affiliate of WFC will 
continue to be subject to the requirement to provide within a 
reasonable period of time any reasonably available information 
regarding the covered transactions that the Independent Fiduciary 
requests the asset management affiliate of WFC to provide.
    (k)(1) In the case of an existing employee benefit plan investor 
(or existing In-House Plan investor, as the case may be) in a Pooled 
Fund, such Pooled Fund may not engage in any covered transactions 
pursuant to this proposed exemption, unless the asset management 
affiliate of WFC provides the written information, as described, below, 
and within the time period described, below, in this Section II(k)(2), 
to the Independent Fiduciary of each such plan participating in such 
Pooled Fund (and to the fiduciary of each such In-House Plan 
participating in such Pooled Fund).
    (2) The following information and materials (which may be provided 
electronically) shall be provided by the asset management affiliate of 
WFC not less than 45 days prior to such asset management affiliate of 
WFC engaging in the covered transactions on behalf of a Pooled Fund, 
pursuant to this proposed exemption:

[[Page 36051]]

    (i) A notice of the intent of such Pooled Fund to purchase 
Securities pursuant to this proposed exemption, a copy of this Notice, 
and a copy of the final exemption, as published in the Federal 
Register;
    (ii) Any other reasonably available information regarding the 
covered transactions that the Independent Fiduciary of a plan (or 
fiduciary of an In-House Plan) participating in a Pooled Fund requests 
the asset management affiliate of WFC to provide; and
    (iii) A termination form expressly providing an election for the 
Independent Fiduciary of a plan (or fiduciary of an In-House Plan) 
participating in a Pooled Fund to terminate such plan's (or In-House 
Plan's) investment in such Pooled Fund without penalty to such plan (or 
In-House Plan). Such form shall include instructions specifying how to 
use the form. Specifically, the instructions will explain that such 
plan (or such In-House Plan) has an opportunity to withdraw its assets 
from a Pooled Fund for a period of no more than 30 days after such 
plan's (or such In-House Plan's) receipt of the initial notice of 
intent, described, above, in Section II(k)(2)(i), and that the failure 
of the Independent Fiduciary of such plan (or fiduciary of such In-
House Plan) to return the termination form to the asset management 
affiliate of WFC in the case of a plan (or In-House Plan) participating 
in a Pooled Fund by the specified date shall be deemed to be an 
approval by such plan (or such In-House Plan) of its participation in 
the covered transactions as an investor in such Pooled Fund.
    Further, the instructions will identify WFC, the asset management 
affiliate of WFC, and the Affiliated Broker-Dealer and will provide the 
address of the asset management affiliate of WFC. The instructions will 
state that this proposed exemption may be unavailable, unless the 
fiduciary of each plan participating in the covered transactions as an 
investor in a Pooled Fund is, in fact, independent of WFC, the asset 
management affiliate of WFC, and the Affiliated Broker-Dealer. The 
instructions will also state that the fiduciary of each such plan must 
advise the asset management affiliate of WFC, in writing, if it is not 
an ``Independent Fiduciary,'' as that term is defined, below, in 
Section III(g).
    For purposes of this Section II(k), the requirement that the 
fiduciary responsible for the decision to authorize the transactions 
described, above, in Section I of this proposed exemption for each plan 
be independent of the asset management affiliate of WFC shall not apply 
in the case of an In-House Plan.
    (l)(1) In the case of each plan (and in the case of each In-House 
Plan) whose assets are proposed to be invested in a Pooled Fund after 
such Pooled Fund has satisfied the conditions set forth in this 
proposed exemption to engage in the covered transactions, the 
investment by such plan (or by such In-House Plan) in the Pooled Fund 
is subject to the prior written authorization of an Independent 
Fiduciary representing such plan (or the prior written authorization by 
the fiduciary of such In-House Plan, as the case may be), following the 
receipt by such Independent Fiduciary of such plan (or by the fiduciary 
of such In-House Plan, as the case may be) of the written information 
described, above, in Section II(k)(2)(i) and (ii).
    (2) For purposes of this Section II(l), the requirement that the 
fiduciary responsible for the decision to authorize the transactions 
described, above, in Section I of this proposed exemption for each plan 
proposing to invest in a Pooled Fund be independent of WFC and its 
affiliates shall not apply in the case of an In-House Plan.
    (m) Subsequent to the initial authorization by an Independent 
Fiduciary of a plan (or by a fiduciary of an In-House Plan) to invest 
in a Pooled Fund that engages in the covered transactions, the asset 
management affiliate of WFC will continue to be subject to the 
requirement to provide within a reasonable period of time any 
reasonably available information regarding the covered transactions 
that the Independent Fiduciary of such plan (or the fiduciary of such 
In-House Plan, as the case may be) requests the asset management 
affiliate of WFC to provide.
    (n) At least once every three months, and not later than 45 days 
following the period to which such information relates, the asset 
management affiliate of WFC shall furnish:
    (1) In the case of each single Client Plan that engages in the 
covered transactions, the information described, below, in this Section 
II(n)(3)-(7), to the Independent Fiduciary of each such single Client 
Plan.
    (2) In the case of each Pooled Fund in which a Client Plan (or in 
which an In-House Plan) invests, the information described, below, in 
this Section II(n)(3)-(6) and (8), to the Independent Fiduciary of each 
such Client Plan (and to the fiduciary of each such In-House Plan) 
invested in such Pooled Fund.
    (3) A quarterly report (the Quarterly Report) (which may be 
provided electronically) which discloses all the Securities purchased 
pursuant to this proposed exemption during the period to which such 
report relates on behalf of the Client Plan, In-House Plan, or Pooled 
Fund to which such report relates, and which discloses the terms of 
each of the transactions described in such report, including:
    (i) The type of Securities (including the rating of any Securities 
which are debt securities) involved in each transaction;
    (ii) The price at which the Securities were purchased in each 
transaction;
    (iii) The first day on which any sale was made during the offering 
of the Securities;
    (iv) The size of the issue of the Securities involved in each 
transaction;
    (v) The number of Securities purchased by the asset management 
affiliate of WFC for the Client Plan, In-House Plan, or Pooled Fund to 
which the transaction relates;
    (vi) The identity of the underwriter from whom the Securities were 
purchased for each transaction;
    (vii) The underwriting spread in each transaction (i.e., the 
difference, between the price at which the underwriter purchases the 
Securities from the issuer and the price at which the Securities are 
sold to the public);
    (viii) The price at which any of the Securities purchased during 
the period to which such report relates were sold; and
    (ix) The market value at the end of the period to which such report 
relates of the Securities purchased during such period and not sold;
    (4) The Quarterly Report contains:
    (i) a representation that the asset management affiliate of WFC has 
received a written certification signed by an officer of the Affiliated 
Broker-Dealer, as described, above, in Section II(g)(2), affirming 
that, as to each AUT covered by this proposed exemption during the past 
quarter, the Affiliated Broker-Dealer acted in compliance with Section 
II(e), (f), and (g) of this proposed exemption, and
    (ii) a representation that copies of such certifications will be 
provided upon request;
    (5) A disclosure in the Quarterly Report that states that any other 
reasonably available information regarding a covered transaction that 
an Independent Fiduciary (or fiduciary of an In-House Plan) requests 
will be provided, including, but not limited to:
    (i) The date on which the Securities were purchased on behalf of 
the Client Plan (or the In-House Plan) to which the disclosure relates 
(including Securities purchased by Pooled Funds in which such Client 
Plan (or such In-House Plan) invests;

[[Page 36052]]

    (ii) The percentage of the offering purchased on behalf of all 
Client Plans (and the pro-rata percentage purchased on behalf of Client 
Plans and In-House Plans investing in Pooled Funds); and
    (iii) The identity of all members of the underwriting syndicate;
    (6) The Quarterly Report discloses any instance during the past 
quarter where the asset management affiliate of WFC was precluded for 
any period of time from selling Securities purchased under this 
proposed exemption in that quarter because of its status as an 
affiliate of an Affiliated Broker-Dealer and the reason for this 
restriction;
    (7) Explicit notification, prominently displayed in each Quarterly 
Report sent to the Independent Fiduciary of each single Client Plan 
that engages in the covered transactions that the authorization to 
engage in such covered transactions may be terminated, without penalty 
to such single Client Plan, within five (5) days after the date that 
the Independent Fiduciary of such single Client Plan informs the person 
identified in such notification that the authorization to engage in the 
covered transactions is terminated; and
    (8) Explicit notification, prominently displayed in each Quarterly 
Report sent to the Independent Fiduciary of each Client Plan (and to 
the fiduciary of each In-House Plan) that engages in the covered 
transactions through a Pooled Fund that the investment in such Pooled 
Fund may be terminated, without penalty to such Client Plan (or such 
In-House Plan), within such time as may be necessary to effect the 
withdrawal in an orderly manner that is equitable to all withdrawing 
plans and to the non-withdrawing plans, after the date that that the 
Independent Fiduciary of such Client Plan (or the fiduciary of such In-
House Plan, as the case may be) informs the person identified in such 
notification that the investment in such Pooled Fund is terminated.
    (o) For purposes of engaging in covered transactions, each Client 
Plan (and each In-House Plan) shall have total net assets with a value 
of at least $50 million (the $50 Million Net Asset Requirement). For 
purposes of engaging in covered transactions involving an Eligible Rule 
144A Offering,\2\ each Client Plan (and each In-House Plan) shall have 
total net assets of at least $100 million in securities of issuers that 
are not affiliated with such Client Plan (or such In-House Plan, as the 
case may be) (the $100 Million Net Asset Requirement).
---------------------------------------------------------------------------

    \2\ SEC Rule 10f-3(a)(4), 17 C.F.R. Sec.  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 [Sec.  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.
---------------------------------------------------------------------------

    For purposes of a Pooled Fund engaging in covered transactions, 
each Client Plan (and each In-House Plan) in such Pooled Fund shall 
have total net assets with a value of at least $50 million. 
Notwithstanding the foregoing, if each such Client Plan (and each such 
In-House Plan) in such Pooled Fund does not have total net assets with 
a value of at least $50 million, the $50 Million Net Asset Requirement 
will be met, if 50 percent (50%) or more of the units of beneficial 
interest in such Pooled Fund are held by Client Plans (or by In-House 
Plans) each of which has total net assets with a value of at least $50 
million. For purposes of a Pooled Fund engaging in covered transactions 
involving an Eligible Rule 144A Offering, each Client Plan (and each 
In-House Plan) in such Pooled Fund shall have total net assets of at 
least $100 million in securities of issuers that are not affiliated 
with such Client Plan (or such In-House Plan, as the case may be). 
Notwithstanding the foregoing, if each such Client Plan (and each such 
In-House Plan) in such Pooled Fund does not have total net assets of at 
least $100 million in securities of issuers that are not affiliated 
with such Client Plan (or In-House Plan, as the case may be), the $100 
Million Net Asset Requirement will be met if 50 percent (50%) or more 
of the units of beneficial interest in such Pooled Fund are held by 
Client Plans (or by In-House Plans) each of which have total net assets 
of at least $100 million in securities of issuers that are not 
affiliated with such Client Plan (or such In-House Plan, as the case 
may be), and the Pooled Fund itself qualifies as a QIB, as determined 
pursuant to SEC Rule 144A (17 CFR 230.144A(a)(F)).
    For purposes of the net asset requirements described, above, in 
this Section II(o), where a group of Client Plans is maintained by a 
single employer or controlled group of employers, as defined in section 
407(d)(7) of the Act, the $50 Million Net Asset Requirement (or in the 
case of an Eligible Rule 144A Offering, the $100 Million Net Asset 
Requirement) may be met by aggregating the assets of such Client Plans, 
if the assets of such Client Plans are pooled for investment purposes 
in a single master trust.
    (p) The asset management affiliate of WFC qualifies as a 
``qualified professional asset manager'' (QPAM), as that term is 
defined under Part V(a) of PTE 84-14. Notwithstanding the fact that the 
asset management affiliate of WFC satisfies the requirements, as set 
forth in Part V(a) of PTE 84-14, such asset management affiliate of WFC 
must also have total client assets under its management and control in 
excess of $5 billion, as of the last day of its most recent fiscal year 
and shareholders' or partners' equity in excess of $1 million. 
Furthermore, the requirement that the asset management affiliate of WFC 
must have total client assets under its management and control in 
excess of $5 billion, as of the last day of its most recent fiscal year 
and shareholders' or partners' equity in excess of $1 million, as set 
forth in this Section II(p), applies whether such asset management 
affiliate of WFC, qualifies as a QPAM, pursuant to Part V(a)(1), 
(a)(2), (a)(3) or (a)(4) of PTE 84-14.
    (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 In-House 
Plans for which WFC, the asset management affiliate of WFC, the 
Affiliated Broker-Dealer, or an affiliate exercises investment 
discretion.
    (r) The asset management affiliate of WFC, and the Affiliated 
Broker-Dealer, as applicable, maintain, or cause to be maintained, for 
a period of six (6) years from the date of any covered transaction such 
records as are necessary to enable the persons, described, below, in 
Section II(s), to determine whether the conditions of this proposed 
exemption have been met, except that--
    (1) No party in interest with respect to a plan which engages in 
the covered transactions, other than WFC, the asset management 
affiliate of WFC, and the Affiliated Broker-Dealer, 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, below, by Section II(s); and
    (2) A prohibited transaction shall not be considered to have 
occurred solely because, due to circumstances beyond the control of the 
asset management affiliate of WFC, or the Affiliated Broker-Dealer, as 
applicable, such records are lost or destroyed prior to the end of the 
six-year period.
    (s)(1) Except as provided, below, in Section II(s)(2), and 
notwithstanding any provisions of subsections (a)(2) and

[[Page 36053]]

(b) of section 504 of the Act, the records referred to, above, in 
Section II(r) are unconditionally available at their customary location 
for examination during normal business hours by--
    (i) Any duly authorized employee or representative of the 
Department, the Internal Revenue Service, or the SEC; or
    (ii) Any fiduciary of any plan that engages in the covered 
transactions, or any duly authorized employee or representative of such 
fiduciary; or
    (iii) Any employer of participants and beneficiaries and any 
employee organization whose members are covered by a plan that engages 
in the covered transactions, or any authorized employee or 
representative of these entities; or
    (iv) Any participant or beneficiary of a plan that engages in the 
covered transactions, or duly authorized employee or representative of 
such participant or beneficiary;
    (2) None of the persons described, above, in Section II(s)(1)(ii)-
(iv) shall be authorized to examine trade secrets of the asset 
management affiliate of WFC, or the Affiliated Broker-Dealer, or 
commercial or financial information which is privileged or 
confidential; and
    (3) Should the asset management affiliate of WFC, or the Affiliated 
Broker-Dealer refuse to disclose information on the basis that such 
information is exempt from disclosure, pursuant to Section II(s)(2), 
above, the asset management affiliate of WFC shall, by the close of the 
thirtieth (30th) day following the request, provide a written notice 
advising that person of the reasons for the refusal and that the 
Department may request such information.

Section III--Definitions

    (a) The term, ``the Applicant,'' means WFC.
    (b) The term, ``Affiliated Broker-Dealer,'' means any broker-dealer 
affiliate, as ``affiliate'' is defined, below, in Section III(c), of 
the Applicant, as ``Applicant'' is defined, above, in Section III(a), 
that meets the requirements of this proposed 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, as defined, below, in Section III(h), 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(s),'' means an employee benefit plan(s) 
that is subject to the Act and/or the Code, and for which plan(s) an 
asset management affiliate of WFC exercises discretionary authority or 
discretionary control respecting management or disposition of some or 
all of the assets of such plan(s), but excludes In-House Plans, as 
defined, below, in Section III(l).
    (f) The term, ``Pooled Fund(s),'' means a common or collective 
trust fund(s) or a pooled investment fund(s):
    (1) In which employee benefit plan(s) subject to the Act and/or 
Code invest,
    (2) Which is maintained by an asset management affiliate of WFC, 
(as the term, ``affiliate'' is defined, above, in Section III(c)), and
    (3) For which such asset management affiliate of WFC exercises 
discretionary authority or discretionary control respecting the 
management or disposition of the assets of such fund(s).
    (g)(1) The term, ``Independent Fiduciary,'' means a fiduciary of a 
plan who is unrelated to, and independent of WFC, the asset management 
affiliate of WFC, and the Affiliated Broker-Dealer. For purposes of 
this proposed exemption, a fiduciary of a plan will be deemed to be 
unrelated to, and independent of WFC, the asset management affiliate of 
WFC, and the Affiliated Broker-Dealer, if such fiduciary represents 
that neither such fiduciary, nor any individual responsible for the 
decision to authorize or terminate authorization for the transactions 
described, above, in Section I of this proposed exemption, is an 
officer, director, or highly compensated employee (within the meaning 
of section 4975(e)(2)(H) of the Code) of WFC, the asset management 
affiliate of WFC, or the Affiliated Broker-Dealer, and represents that 
such fiduciary shall advise the asset management affiliate of WFC 
within a reasonable period of time after any change in such facts 
occur.
    (2) Notwithstanding anything to the contrary in this Section 
III(g), a fiduciary of a plan is not independent:
    (i) If such fiduciary directly or indirectly controls, is 
controlled by, or is under common control with WFC, the asset 
management affiliate of WFC, or the Affiliated Broker-Dealer;
    (ii) If such fiduciary directly or indirectly receives any 
compensation or other consideration from WFC, the asset management 
affiliate of WFC, or the Affiliated Broker-Dealer for his or her own 
personal account in connection with any transaction described in this 
proposed exemption;
    (iii) If any officer, director, or highly compensated employee 
(within the meaning of section 4975(e)(2)(H) of the Code) of the asset 
management affiliate of WFC responsible for the transactions described, 
above, in Section I of this proposed exemption, is an officer, 
director, or highly compensated employee (within the meaning of section 
4975(e)(2)(H) of the Code) of the sponsor of the plan or of the 
fiduciary responsible for the decision to authorize or terminate 
authorization for the transactions described, above, in Section I. 
However, if such individual is a director of the sponsor of the plan 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, above, in Section I, then Section 
III(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 WFC or any affiliate thereof.
    (h) The term, ``Securities,'' 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 proposed exemption, mortgage-backed or other asset-backed 
securities rated by one of the Rating Organizations, as defined, below, 
in Section III(k), 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 the term, 
``QIB,'' shall have the same meaning as defined in SEC

[[Page 36054]]

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., FitchRatings, Inc., 
Dominion Bond Rating Service Limited, and Dominion Bond Rating Service, 
Inc., or any successors thereto.
    (l) The term, ``In-House Plan(s),'' means an employee benefit 
plan(s) that is subject to the Act and/or the Code, and that is 
sponsored by the Applicant, as defined, above, in Section III(a) for 
its own employees.

Summary of Facts and Representations

The Applicant

    1. WFC (i.e., the Applicant) is a diversified financial services 
company organized under the laws of Delaware and registered as a bank 
holding company and financial holding company under the Bank Holding 
Company Act of 1956. The Applicant engages in banking and a variety of 
related financial services businesses. Retail, commercial and corporate 
banking services are provided through banking stores in a number of 
states. Other financial services are provided by subsidiaries engaged 
in various businesses, such as wholesale banking, mortgage banking, 
consumer finance, equipment leasing, agricultural finance, commercial 
finance, securities brokerage and investment banking, insurance agency 
services, computer and data processing services, trust services, 
mortgage-backed securities servicing and venture capital investment. 
Subsidiaries of the Applicant manage institutional portfolios for 
mutual funds, corporations, pension plans, endowments, foundations, 
health care organizations, public agencies, sovereign organizations, 
insurance companies and Taft-Hartley plans. These affiliates act as 
fiduciaries to employee benefit plans, providing trustee, 
recordkeeping, consulting and investment management services. The 
Applicant and its affiliates' activities are subject to oversight and 
regulation by the Securities and Exchange Commission (the SEC), the 
Federal Reserve Board and the Office of the Comptroller of the 
Currency.

Requested Exemption

    2. The Applicant requests a prohibited transaction exemption that 
would permit the purchase of certain securities by an asset management 
affiliate of WFC (the Asset Manager), acting on behalf of Client Plans 
subject to the Act or Code, and acting on behalf of Client Plans and 
In-House Plans which are invested in certain Pooled Funds for which an 
Asset Manager acts as a fiduciary, from any person other than such 
Asset Manager or any affiliate thereof, during the existence of an 
underwriting or selling syndicate with respect to such Securities, 
where an Affiliated Broker-Dealer is a manager or member of such 
syndicate. Further, the Affiliated Broker-Dealer will receive no 
selling concessions in connection with the Securities sold to such 
plans.
    3. The Applicant represents that if the Affiliated Broker-Dealer is 
a member of an underwriting or selling syndicate, the Asset Manager may 
purchase underwritten securities for Client Plans in accordance with 
Part III of Prohibited Transaction Exemption (PTE) 75-1, (40 FR 50845, 
October 31, 1975). Part III provides limited relief from the Act's 
prohibited transaction provisions for plan fiduciaries that purchase 
securities from an underwriting or selling syndicate of which the 
fiduciary or an affiliate is a member. However, such relief is not 
available if the Affiliated Broker-Dealer manages the underwriting or 
selling syndicate.
    4. In addition, regardless of whether a fiduciary or its affiliate 
is a manager or merely a member of an underwriting or selling 
syndicate, PTE 75-1 does not provide relief for the purchase of 
unregistered securities. This includes securities purchased by an 
underwriter for resale to a ``qualified institutional buyer'' (QIB) 
pursuant to the SEC's Rule 144A under the Securities Act of 1933 (the 
1933 Act). Rule 144A is commonly utilized in connection with sales of 
securities issued by foreign corporations to U.S. investors that are 
QIBs. Notwithstanding the unregistered nature of such shares, it is 
represented that syndicates selling securities under Rule 144A (Rule 
144A Securities) are the functional equivalent of those selling 
registered securities.
    5. The Applicant represents that the Affiliated Broker-Dealer 
regularly serves as manager of underwriting or selling syndicates for 
registered securities, and as a manager or a member of underwriting or 
selling syndicates for Rule 144A Securities. Accordingly, the Asset 
Manager is currently unable to purchase on behalf of the Client Plans 
Rule 144A Securities sold in such offerings, resulting in such Client 
Plans being unable to participate in significant investment 
opportunities. In addition, since 1975, there has been a significant 
amount of consolidation in the financial services industry in the 
United States. As a result, there are more situations in which a plan 
fiduciary may be affiliated with the manager of an underwriting 
syndicate. Further, many plans have expanded investment portfolios in 
recent years to include securities issued by foreign corporations. As a 
result, the exemption provided in PTE 75-1, Part III, is often 
unavailable for purchase of domestic and foreign securities that may 
otherwise constitute appropriate plan investments.

Client Plan Investments in Offered Securities

    6. The Applicant represents that the Asset Manager makes its 
investment decisions on behalf of, or renders investment advice to, 
Client Plans pursuant to the governing document of the particular 
Client Plan or Pooled Fund and the investment guidelines and objectives 
set forth in the management or advisory agreement. Because the Client 
Plans are covered by Title I of the Act, such investment decisions are 
subject to the fiduciary responsibility provisions of the Act.
    7. The Applicant states, therefore, that the decision to invest in 
a particular offering is made on the basis of price, value and a Client 
Plan's investment criteria, not on whether the securities are currently 
being sold through an underwriting or selling syndicate. The Applicant 
further states that, because the Asset Manager's compensation for its 
services is generally based upon assets under management, the Asset 
Manager has little incentive to purchase securities in an offering in 
which the Affiliated Broker Dealer is an underwriter unless such a 
purchase is in the interests of Client Plans. If the assets under 
management do not perform well, the Asset Manager will receive less 
compensation and could lose clients, costs which far outweigh any gains 
from the purchase of underwritten securities.\3\
---------------------------------------------------------------------------

    \1\ In fact, under the terms of the proposed exemption set forth 
herein, the Affiliated Broker-Dealer may receive no compensation or 
other consideration, direct or indirect, in connection with any 
transaction that would be permitted under the proposed exemption.
---------------------------------------------------------------------------

    8. The Applicant states that the Asset Manager generally purchases 
securities in large blocks because the same investments will be made 
across several accounts. If there is a new offering of an equity or 
fixed income security that the Asset Manager wishes to purchase, it may 
be able to purchase the security through the offering syndicate at a 
lower price than it would pay in the open market, without transaction 
costs and with reduced market impact if it is buying a relatively large 
quantity. This is because a large purchase in the open market can cause 
an increase in the market price and, consequently, in the

[[Page 36055]]

cost of the securities. Purchasing from an offering syndicate can thus 
reduce the costs to the Client Plans.
    9. However, absent an exemption, if the Affiliated Broker-Dealer is 
a manager of a syndicate that is underwriting a securities offering, 
the Asset Manager will be foreclosed from purchasing any securities on 
behalf of its Client Plans from that underwriting syndicate. This will 
force the Asset Manager to purchase the same securities in the 
secondary market. In such a circumstance, the Client Plans may incur 
greater costs both because the market price is often higher than the 
offering price, and because of transaction and market impact costs. In 
turn, this will cause the Asset Manager to forego other investment 
opportunities because the purchase price of the underwritten security 
in the secondary market exceeds the price that the Asset Manager would 
have paid to the selling syndicate.

Underwriting of Securities Offerings

    10. The Applicant represents that the Affiliated Broker-Dealer 
currently manages and participates in firm commitment underwriting 
syndicates for registered offerings of both equity and debt securities. 
While equity and debt underwritings may operate differently with regard 
to the actual sales process, the basic structures are the same. In a 
firm commitment underwriting, the underwriting syndicate acquires the 
securities from the issuer and then sells the securities to investors.
    11. The Applicant represents that while, as a legal matter, a 
selling syndicate assumes the risk that the underwritten securities 
might not be fully sold, as a practical matter, this risk is reduced, 
in marketed deals, through ``building a book'' (i.e., taking 
indications of interest from potential purchasers) prior to pricing the 
securities. Accordingly, there is no incentive for the underwriters to 
use their discretionary accounts (or the discretionary accounts of 
their affiliates) to buy up the securities as a way to avoid 
underwriting liabilities.
    12. Each selling syndicate has a lead manager, who is the principal 
contact between the syndicate and the issuer and who is responsible for 
organizing and coordinating the syndicate. The syndicate may also have 
co-managers, who generally assist the lead manager in working with the 
issuer to prepare the registration statement to be filed with the SEC 
and in distributing the underwritten securities. While equity 
syndicates typically include additional members that are not managers, 
more recently, membership in many debt syndicates has been limited to 
lead and co-managers.
    13. If more than one underwriter is involved in a selling 
syndicate, the lead manager, who has been selected by the issuer of the 
underwritten securities, contacts other underwriters, and the 
underwriters enter into an ``Agreement Among Underwriters.'' Most lead 
managers have a standing form of agreement. This document is then 
supplemented for the particular deal by sending an ``invitation telex'' 
or ``terms telex'' that sets forth particular terms to the other 
underwriters.
    14. The arrangement between the syndicate and the issuer of the 
underwritten securities is embodied in an underwriting agreement, which 
is signed on behalf of the underwriters by one or more of the managers. 
In a firm commitment underwriting, the underwriting agreement provides, 
subject to certain closing conditions, that the underwriters are 
obligated to purchase the underwritten securities from the issuer in 
accordance with their respective commitments. This obligation is met by 
using the proceeds received from the buyers of the securities in the 
offering, although there is a risk that the underwriters will have to 
pay for a portion of the securities in the event that not all of the 
securities are sold.
    15. The Applicant represents that, generally, the risk that the 
securities will not be sold is small because the underwriting agreement 
is not executed until after the underwriters have obtained sufficient 
indications of interest to purchase the securities from a sufficient 
number of investors to assure that all the securities being offered 
will be acquired by investors. Once the underwriting agreement is 
executed, the underwriters immediately begin contacting the investors 
to confirm the sales, first orally and then by written confirmation, 
and sales are finalized within hours and sometimes minutes. In 
registered transactions, the underwriters are particularly anxious to 
complete the sales as soon as possible because until they ``break 
syndicate,'' they cannot enter the market. In many cases, the 
underwriters will act as market-makers for the security. A market-maker 
holds itself out as willing to buy or sell the security for its own 
account on a regular basis.
    16. The Applicant represents that the process of ``building a 
book'' or soliciting indications of interest occurs as follows: In a 
registered equity offering, after a registration statement is filed 
with the SEC and, while it is under review by the SEC staff, 
representatives of the issuer of the securities and the selling 
syndicate managers conduct meetings with potential investors, who learn 
about the company and the underwritten securities. Potential investors 
also receive a preliminary prospectus. The underwriters cannot make any 
firm sales until the registration statement is declared effective by 
the SEC. Prior to the effective date, while the investors cannot become 
legally obligated to make a purchase, they indicate whether they have 
an interest in buying, and the managers compile a ``book'' of investors 
who are willing to ``circle'' a particular portion of the issue. These 
indications of interest are sometimes referred to as a ``soft circle'' 
because investors cannot be legally bound to buy the securities until 
the registration statement is effective. However, the Applicant 
represents that investors generally follow through on their indications 
of interest, and would be expected to do so, barring any sudden adverse 
developments (in which case it is likely that the offering would be 
withdrawn or the price range modified and the process restarted), 
because, if the investors that gave an indication of interest do not 
follow through, the underwriters may be reluctant to include them in 
future offerings.
    17. Assuming that the marketing efforts have produced sufficient 
indications of interest, the Applicant represents that the issuer of 
the securities and the selling syndicate managers together will set the 
price of the securities and ask the SEC to declare the registration 
effective. After the registration statement becomes effective and the 
underwriting agreement is executed, the underwriters contact those 
investors that have indicated an interest in purchasing securities in 
the offering to execute the sales. The Applicant represents that 
offerings are often oversubscribed, and many have an over-allotment 
option that the underwriters can exercise to acquire additional shares 
from the issuer. Where an offering is oversubscribed, the underwriters 
decide how to allocate the securities among the potential purchasers. 
However, pursuant to the National Association of Securities Dealers 
Rule 2790, new issue securities (as defined under such rule) may not be 
sold directly to: officers, directors, general partners or associated 
persons of any broker-dealer (other than limited business broker-
dealers); any person who has the authority to buy or sell securities 
for: a bank, saving and loan institution, insurance and investment 
companies, investment advisors and collective investment

[[Page 36056]]

accounts; and certain of the family members of such persons 
(collectively, ``restricted persons''). Restricted persons may still 
participate, to a limited extent, in allocations of ``new issues'' 
through pooled investment vehicles in which they invest and may receive 
directly new issue allocations in certain other limited circumstances.
    18. The Applicant represents that debt offerings may be 
``negotiated'' offerings, ``competitive bid'' offerings, or ``bought 
deals.'' ``Negotiated'' offerings, which often involve non-investment 
grade securities, are conducted in the same manner as an equity 
offering with regard to when the underwriting agreement is executed and 
how the securities are offered. ``Competitive bid'' offerings, in which 
the issuer determines the price for the securities through competitive 
bidding rather than negotiating the price with the underwriting 
syndicate, are performed under ``shelf'' registration statements 
pursuant to the SEC's Rule 415 under the 1933 Act (17 CFR 230.415).\4\
---------------------------------------------------------------------------

    \4\ Rule 415 permits an issuer to sell debt as well as equity 
securities under an effective registration statement previously 
filed with the SEC by filing a post-effective amendment or 
supplemental prospectus.
---------------------------------------------------------------------------

    19. In a competitive bid offering, prospective lead underwriters 
will bid against one another to purchase debt securities, based upon 
their determinations of the degree of investor interest in the 
securities. Depending on the level of investor interest and the size of 
the offering, a bidding lead underwriter may bring in co-managers to 
assist in the sales process. Most of the securities are frequently sold 
within hours, or sometimes even less than an hour, after the securities 
are made available for purchase.
    20. Because of market forces and the requirements of Rule 415, the 
competitive bid process is generally available only to issuers of 
investment-grade securities who have been subject to the reporting 
requirements of the 1934 Act for at least one (1) year.
    21. Occasionally, in highly-rated debt issues, underwriters ``buy'' 
the entire deal off of a ``shelf registration'' before obtaining 
indications of interest. These ``bought'' deals involve issuers whose 
securities enjoy a deep and liquid secondary market, such that an 
underwriter has confidence without pre-marketing that it can identify 
purchasers for the bonds.

Structure of Diversified Financial Services Firms

    22. The Applicant represents that there are internal policies in 
place that restrict contact and the flow of information between 
investment management personnel and non-investment management personnel 
in the same or affiliated financial service firms. These policies are 
designed to protect against ``insider trading,'' i.e., trading on 
information not available to the general public that may affect the 
market price of the securities. Diversified financial services firms 
must be concerned about insider trading problems because one part of 
the firm--e.g., the mergers and acquisitions group--could come into 
possession of non-public information regarding an upcoming transaction 
involving a particular issuer, while another part of the firm--e.g., 
the investment management group--could be trading in the securities of 
that issuer for its clients.
    23. The Applicant represents that the business separation policies 
and procedures of WFC and its affiliates are also structured to 
restrict the flow of any information to or from the Asset Manager that 
could limit its flexibility in managing client assets, and of 
information obtained or developed by the Asset Manager that could be 
used by other parts of the organization, to the detriment of the Asset 
Manager's clients.
    24. The Applicant represents that major clients of the Affiliated 
Broker-Dealer include investment management firms that are competitors 
of the Asset Manager. Similarly, the Asset Manager deals on a regular 
basis with broker-dealers that compete with the Affiliated Broker-
Dealer. If special consideration were shown to an affiliate, such 
conduct would likely have an adverse effect on the relationships of the 
Affiliated Broker-Dealer and of the Asset Manager with firms that 
compete with such affiliate. Therefore, a goal of the Applicant's 
business separation policy is to avoid any possible perception of 
improper flows of information between the Affiliated Broker-Dealer and 
the Asset Manager, in order to prevent any adverse impact on client and 
business relationships.

Underwriting Compensation

    25. The Applicant represents that the underwriters are compensated 
through the ``spread,'' or difference, between the price at which the 
underwriters purchase the securities from the issuer and the price at 
which the securities are sold to the public. The spread is divided into 
three components.
    26. The first component includes the management fee, which 
generally represents an agreed upon percentage of the overall spread 
and is allocated among the lead manager and co-managers. Where there is 
more than one managing underwriter, the way the management fee will be 
allocated among the managers is generally agreed upon between the 
managers and the issuer prior to soliciting indications of interest. 
Thus, the allocation of the management fee is not reflective of the 
amount of securities that a particular manager sells in an offering.
    27. The second component is the underwriting fee, which represents 
compensation to the underwriters (including the non-managers, if any) 
for the risks they assume in connection with the offering and for the 
use of their capital. This component of the spread is also used to 
cover the expenses of the underwriting that are not otherwise 
reimbursed by the issuer of the securities.
    28. The first and second components of the ``spread'' are received 
without regard to how the underwritten securities are allocated for 
sales purposes or to whom the securities are sold. The third component 
of the spread is the selling concession, which generally constitutes 60 
percent or more of the spread. The selling concession compensates the 
underwriters for their actual selling efforts. The allocation of 
selling concessions among the underwriters generally follows the 
allocation of the securities for sales purposes. However, a buyer of 
the underwritten securities may designate other broker-dealers (who may 
be other underwriters, as well as broker-dealers outside the syndicate) 
to receive the selling concessions arising from the securities they 
purchase.
    29. Securities are allocated for sales purposes into two 
categories. The first and larger category is the ``institutional pot,'' 
which is the pot of securities from which sales are made to 
institutional investors. Selling concessions for securities sold from 
the institutional pot are generally designated by the purchaser to go 
to particular underwriters or other broker-dealers. If securities are 
sold from the institutional pot, the selling syndicate managers 
sometimes receive a portion of the selling concessions, referred to as 
a ``fixed designation,'' \5\ attributable to securities sold in this 
category, without regard to who sold the securities or to whom they 
were sold. For securities covered by this proposed exemption, however, 
the Affiliated Broker-Dealer may not receive, either directly or 
indirectly, any compensation or consideration that is attributable to 
the fixed designation generated by

[[Page 36057]]

purchases of securities by the Asset Manager on behalf of its Client 
Plans.
---------------------------------------------------------------------------

    \5\ A fixed designation is sometimes referred to as an ``auto 
pot split.''
---------------------------------------------------------------------------

    30. The second category of allocated securities is ``retail,'' 
which are the securities retained by the underwriters for sale to their 
retail customers. The underwriters receive the selling concessions from 
their respective retail retention allocations. Securities may be 
shifted between the two categories based upon whether either category 
is oversold or undersold during the course of the offering.
    31. The Applicant asserts that the Affiliated Broker-Dealer's 
inability to receive any selling concessions, or any compensation 
attributable to the fixed designations generated by purchases of 
securities by the Asset Manager's Client Plans, removes the primary 
economic incentive for the Asset Manager to make purchases that are not 
in the interests of its Client Plans from offerings for which the 
Affiliated Broker-Dealer is an underwriter. The reason is that the 
Affiliated Broker-Dealer will not receive any additional fees as a 
result of such purchases by the Asset Manager.

Rule 144A Securities

    32. The Applicant represents that a number of the offerings of Rule 
144A Securities in which the Affiliated Broker-Dealer participates 
represent good investment opportunities for the Asset Manager's Client 
Plans. Particularly with respect to foreign securities, a Rule 144A 
offering may provide the least expensive and most accessible means for 
obtaining these securities. However, PTE 75-1, Part III, does not cover 
Rule 144A Securities. Therefore, absent an exemption, the Asset Manager 
is foreclosed from purchasing such securities for its Client Plans in 
offerings in which the Affiliated Broker-Dealer participates.
    33. The Applicant states that Rule 144A acts as a ``safe harbor'' 
exemption from the registration provisions of the 1933 Act for sales of 
certain types of securities to QIBs. QIBs include several types of 
institutional entities, such as employee benefit plans and commingled 
trust funds holding assets of such plans, which own and invest on a 
discretionary basis at least $100 million in securities of unaffiliated 
issuers.
    34. Any securities may be sold pursuant to Rule 144A except for 
those of the same class or similar to a class that is publicly traded 
in the United States, or certain types of investment company 
securities. This limitation is designed to prevent side-by-side public 
and private markets developing for the same class of securities as is 
the reason that Rule 144A transactions are generally limited to debt 
securities.
    35. Buyers of Rule 144A Securities must be able to obtain, upon 
request, basic information concerning the business of the issuer and 
the issuer's financial statements, much of the same information as 
would be furnished if the offering were registered. This condition does 
not apply, however, to an issuer filing reports with the SEC under the 
1934 Act, for which reports are publicly available. The condition also 
does not apply to a ``foreign private issuer'' for whom reports are 
furnished to the SEC under Rule 12g3-2(b) of the 1934 Act (17 CFR 
240.12g3-2(b)), or to issuers who are foreign governments or political 
subdivisions thereof and are eligible to use Schedule B under the 1933 
Act (which describes the information and documents required to be 
contained in a registration statement filed by such issuers).
    36. Sales under Rule 144A, like sales in a registered offering, 
remain subject to the protections of the anti-fraud rules of federal 
and state securities laws. These rules include Section 10(b) of the 
1934 Act and Rule 10b-5 thereunder (17 CFR 240.10b-5) and Section 17(a) 
of the 1933 Act (15 U.S.C. 77a). Through these and other provisions, 
the SEC may use its full range of enforcement powers to exercise its 
regulatory authority over the market for Rule 144A Securities, in the 
event that it detects improper practices.
    37. The Applicant represents that this potential liability for 
fraud provides a considerable incentive to the issuer of the securities 
and the members of the selling syndicate to insure that the information 
contained in a Rule 144A offering memorandum is complete and accurate 
in all material respects. Among other things, the lead manager 
typically obtains an opinion from a law firm, commonly referred to as a 
``10b-5'' opinion, stating that the law firm has no reason to believe 
that the offering memorandum contains any untrue statement of material 
fact or omits to state a material fact necessary in order to make sure 
the statements made, in light of the circumstances under which they 
were made, are not misleading.
    38. The Applicant represents that Rule 144A offerings generally are 
structured in the same manner as underwritten registered offerings. The 
major difference is that a Rule 144A offering uses an offering 
memorandum rather than a prospectus that is filed with the SEC. The 
marketing process is the same in most respects, except that the selling 
efforts are limited to contacting QIBs and there are no general 
solicitations for buyers (e.g., no general advertising). In addition, 
the Affiliated Broker-Dealer's role in these offerings is typically 
that of a lead or co-manager. Generally, there are no non-manager 
members in a Rule 144A selling syndicate. However, the Applicant 
requests that the proposed exemption extend to authorization for 
situations where the Affiliated Broker-Dealer acts only as a syndicate 
member, not as a manager.

Summary

    39. In summary, the Applicant represents that the proposed 
transactions will satisfy the statutory criteria for an exemption set 
forth in section 408(a) of the Act because:
    (a) The Client Plans will gain access to desirable investment 
opportunities;
    (b) In each offering, the Asset Manager will purchase the 
securities for its Client Plans from an underwriter or broker-dealer 
other than the Affiliated Broker-Dealer;
    (c) Conditions similar to those of PTE 75-1, Part III, will 
restrict the types of securities that may be purchased, the types of 
underwriting or selling syndicates and issuers involved, and the price 
and timing of the purchases;
    (d) The amount of securities that the Asset Manager may purchase on 
behalf of Client Plans will be subject to percentage limitations;
    (e) The Affiliated Broker-Dealer will not be permitted to receive, 
either directly, indirectly or through designation, any selling 
concessions with respect to the securities sold to the Asset Manager 
for the account of a Client Plan;
    (f) Prior to any purchase of securities, the Asset Manager will 
make the required disclosures to an Independent Fiduciary of each 
Client Plan and obtain written authorization to engage in the covered 
transactions;
    (g) The Asset Manager will provide regular reporting to an 
Independent Fiduciary of each Client Plan with respect to all 
securities purchased pursuant to the exemption, if granted;
    (h) Each Client Plan will be subject to net asset requirements, 
with certain exceptions for Pooled Funds; and
    (i) the Asset Manager must have total assets under management in 
excess of $5 billion and shareholders' or partners' equity in excess of 
$1 million, in addition to qualifying as a QPAM, pursuant to Part V(a) 
of PTE 84-14.
    Notice to Intersted Persons: The Applicant represents that because 
those potentially interested Plans proposing to engage in the covered 
transactions cannot all be identified, the only practical means of 
notifying Independent Plan Fiduciaries or Plan Participants of such 
affected Plans is by publication of the proposed exemption in the 
Federal Register. Therefore, any

[[Page 36058]]

comments from interested persons must be received by the Department no 
later than 30 days from the publication of this notice of proposed 
exemption in the Federal Register.

FOR FURTHER INFORMATION CONTACT: Mr. Gary H. Lefkowitz of the 
Department, telephone (202) 693-8546. (This is not a toll-free number.)

Owens Corning Savings Plan and Owens Corning Savings and Security Plan 
(collectively, the Plans)

Located in Toledo, Ohio

[Exemption Application Numbers D-11402 and D-11403, respectively]

Proposed Exemption

    The Department is considering granting an exemption under the 
authority of section 408(a) of the Act and section 4975(c)(2) of the 
Code and in accordance with the procedures set forth in 29 CFR Part 
2570 Subpart B (55 FR 32836, 32847, August 10, 1990). If the exemption 
is granted, the restrictions of sections 406(a), 406(b)(1), 406(b)(2), 
and 407(a) of the Act and the sanctions resulting from the application 
of section 4975 of the Code, by reason of section 4975(c)(1)(A) through 
(E) of the Code, shall not apply, effective October 31, 2006, to: (1) 
The acquisition by the Plans of certain warrants (the Warrants) issued 
by Owens Corning (the Applicant), a party in interest with respect to 
the Plans, where such Warrants have been issued in exchange for the 
common stock (the Old Common Stock) of the Applicant incident to a 
bankruptcy reorganization; (2) The holding of the Warrants by each of 
the Plans pending the exercise or other disposition of said Warrants; 
and (3) The exercise of the Warrants by participants in the Plans to 
permit acquisition of shares of the Applicant's new common stock (the 
New Common Stock), provided that the following conditions were 
satisfied:
    (a) The Plans had no ability to affect the provisions of the Sixth 
Amended Joint Plan of Reorganization for Owens Corning and Its 
Affiliated Debtors and Debtors-in-Possession (the Reorganization Plan) 
approved by the United States Bankruptcy Court for the District of 
Delaware (the Bankruptcy Court) on September 26, 2006 pursuant to 
Chapter 11 of Title 11 of the United States Code (the Bankruptcy Code);
    (b) The acquisition and holding of the Warrants by the Plans 
occurred in connection with the Reorganization Plan, in which all 
holders of the Applicant's stock of the same class have been and will 
be treated similarly;
    (c) The Warrants were acquired automatically and without any action 
on the part of the Plans;
    (d) The Plans did not pay any fees or commissions in connection 
with the acquisition or holding of the Warrants;
    (e) The Plans will not pay any fees or commissions in connection 
with the exercise of the Warrants; and
    (f) All decisions regarding the exercise or other disposition of 
the Warrants have been and will be made by the individual participants 
of the Plans in whose accounts the Warrants were allocated, in 
accordance with the respective provisions of the Plans pertaining to 
the individually-directed investment of such accounts.

Summary of Facts and Representations

    1. The Applicant, a leading manufacturer of building materials 
systems and composite solutions, is a Delaware corporation with 
business headquarters in Toledo, Ohio. The Applicant sponsors the 
Plans, each of which is a defined contribution plan established and 
maintained pursuant to the requirements of section 401(a) of the Code. 
In addition, each of the Plans provides for participant-directed 
individual accounts in accordance with the provisions of section 404(c) 
of the Act and the corresponding regulations located at 29 CFR 
2550.404c-1. The Owens Corning Savings and Security Plan held 
$158,009,167.04 in assets as of September 27, 2006, and included 3,160 
participants as of October 19, 2006. The Owens Corning Savings Plan 
held $452,290,359.36 in assets as of September 27, 2006, and included 
1,130 participants as of October 19, 2006.
    2. On October 5, 2000, the Applicant (including seventeen of its 
United States subsidiaries) filed voluntary petitions for relief under 
Chapter 11 of the Bankruptcy Code. The Applicant filed for relief under 
Chapter 11 to address the substantial and growing demands on the 
Applicant's cash flow resulting from asbestos-related litigation. On 
September 26, 2006, the Bankruptcy Court approved a Reorganization Plan 
for the Company. Holders of the Old Common Stock (including the Plans) 
were permitted to vote on the Reorganization Plan, and individual 
participants in the Plans were similarly allowed to direct the voting 
of the Old Common Stock allocated to their accounts. The Reorganization 
Plan became effective on October 31, 2006, at which time the Old Common 
Stock was delisted from the New York Stock Exchange and all outstanding 
shares of the Old Common Stock were cancelled. On October 31, 2006, the 
Applicant issued the Warrants to stockholders (including the Plans) in 
full satisfaction of the Old Common Stock interests previously held by 
the stockholders. The Applicant represents that the Warrants do not 
constitute qualifying employer securities as defined in section 
407(d)(5) of the Act. Each Warrant permits the holder to purchase a 
share of the New Common Stock issued by the Applicant at the price of 
$45.25 per share (the Strike Price). The Applicant represents that 
Warrants which are not exercised by their respective holders shall 
expire seven (7) years after their date of issuance.
    3. The Applicant represents that, prior to September 29, 2000, 
participants in each of the Plans could elect to have all or a portion 
of their accounts invested in the Owens Corning Stock Fund (the Stock 
Fund), which consisted primarily of Old Common Stock. Matching 
contributions by the Applicant under each of the Plans that were made 
before September 29, 2000 were invested in the Stock Fund; in addition, 
50 percent of the Applicant's profit-sharing contributions to the Plans 
made prior to that date were invested in the Stock Fund. The Stock Fund 
was closed to new investments as of September 29, 2000; after that 
date, participants in the Plans were no longer permitted to invest new 
contributions or to transfer their existing Plan balances into the 
Stock Fund.\6\ However, participants in each of the Plans retained the 
right to transfer all or a portion of the amounts they had invested in 
the Stock Fund to any other investment fund available under the 
respective Plans. This transfer right ceased to apply as of October 31, 
2006, when shares of the Old Common Stock were extinguished.
---------------------------------------------------------------------------

    \6\ The Department expresses no opinion herein as to whether, on 
or before September 29, 2000, the fiduciaries of the Plans were in 
compliance with the general fiduciary responsibility provisions of 
Part 4 of Title I of the Act in connection with monitoring the 
investment options available to participants in the Plans, including 
the option to invest participant contributions in the Stock Fund.
---------------------------------------------------------------------------

    4. The Applicant represents that the Warrants are, by their terms, 
transferable. A market for the Warrants currently exists; the Applicant 
represents that, as of February 27, 2007, each participant in the Plans 
have been able to direct (and some have directed) the trustee of their 
respective Plans to sell the Warrants allocated to their accounts 
through the Plans' broker, Fidelity Brokerage Services LLC (Fidelity). 
Fidelity is not affiliated with the Applicant. Current trading of the 
Warrants occurs on the Over-the-Counter (OTC) market, and bid and ask 
prices for the Warrants on the OTC market are listed on a centralized,

[[Page 36059]]

electronic quotation service known as the Pink Sheets.\7\ As of May 4, 
2007, the Warrants were selling on the OTC market at $5.10-$5.15.\8\ 
The Applicant represents that commissions and Securities and Exchange 
Commission (SEC) fees associated with the sale of the Warrants have 
been and will be paid by participants; the commissions are paid to 
Fidelity for execution of the trades. The Applicant further represents 
that the commission rate charged by Fidelity for real time trades of 
such securities is generally 2.9 cents per unit. In addition, as 
required by law, Fidelity has deducted the so-called ``SEC Fee'', 
currently in the amount of 0.00153%, from the cash proceeds of all the 
executed trades and submitted it to the SEC.
---------------------------------------------------------------------------

    \7\ The symbol for the Warrants, known as the Class A12-A in the 
Reorganization Plan, is OCWAZ.
    \8\ Based on the Applicant's representations, to the extent the 
Warrants are publicly traded on a national exchange to unrelated 
third parties, no exemptive relief is being provided by the 
Department.
---------------------------------------------------------------------------

    5. If the Department approves this exemption application, the 
Applicant represents that participants currently holding the Warrants 
will be permitted to exercise them to purchase shares of the New Common 
Stock, but not if the current market price of the New Common Stock 
remains below the Strike Price.\9\ If a participant in one of the Plans 
determines to exercise the Warrants allocated to his or her account, 
funds will be transferred from the participant's other investment 
options under the Plan to purchase the New Common Stock.\10\ At this 
particular time, the Applicant represents that there is no option that 
would permit a participant to invest in the New Common Stock.
---------------------------------------------------------------------------

    \9\ The New Common Stock currently trades on the New York Stock 
Exchange under the symbol OC. As of the close of trading on May 10, 
2007, the share price of the New Common Stock stood at $31.69.
    \10\ The Applicant acknowledges that the appropriate fiduciaries 
of the Plans shall be responsible for monitoring the investment 
options available to participants in the Plans, and taking such 
action as they deem appropriate under the circumstances. For 
example, such action may include preventing participants from 
exercising the Warrants if the current market price for the New 
Common Stock is below the Strike Price, or causing the Plans to sell 
the Warrants in the event that it becomes clear that they would 
otherwise expire unexercised by participants.
---------------------------------------------------------------------------

    6. In summary, the Applicant represents that the proposed 
transaction meets the statutory criteria of section 408(a) of the Act 
because: (a) The Plans had no ability to affect the provisions of the 
Reorganization Plan approved by the Bankruptcy Court on September 26, 
2006 pursuant to Chapter 11 of the Bankruptcy Code; (b) the acquisition 
and holding of the Warrants by the Plans occurred in connection with 
the Reorganization Plan, in which all holders of the Applicant's stock 
of the same class have been and will be treated similarly; (c) the 
Warrants were acquired automatically and without any action on the part 
of the Plans; (d) the Plans did not pay any fees or commissions in 
connection with the acquisition or holding of the Warrants; (e) the 
Plans will not pay any fees or commissions in connection with the 
exercise of the Warrants; and (f) all decisions regarding the exercise 
or other disposition of the Warrants have been and will be made by the 
individual participants of the Plans in whose accounts the Warrants 
were allocated, in accordance with the respective provisions of the 
Plans pertaining to the individually-directed investment of such 
accounts.
    Notice to Interested Persons: Notice of the proposed exemption 
shall be given to all interested persons in the manner agreed upon by 
the Applicant and the Department within 15 days of the date of 
publication in the Federal Register. Comments and requests for a 
hearing are due forty-five (45) days after publication of the notice in 
the Federal Register.

FOR FURTHER INFORMATION CONTACT: Mr. Mark Judge of the Department, 
telephone (202) 693-8339. (This is not a toll-free number).

BSC Services Corp. 401(k) Profit Sharing Plan (the Plan)

Located in Philadelphia, PA

[Application No. D-11390]

Proposed Exemption

    The Department is considering granting an exemption under the 
authority of section 408(a) of the Act and section 4975(c)(2) of the 
Code and in accordance with the procedures set forth in 29 CFR Part 
2570, Subpart B (55 FR 32836, 32847, August 10, 1990).\11\
---------------------------------------------------------------------------

    \11\ For purposes of this proposed exemption, references to 
provisions of Title I of the Act, unless otherwise specified, refer 
also to the corresponding provisions of the Code.
---------------------------------------------------------------------------

Section I. Covered Transactions

    If the exemption is granted, the restrictions of sections 406(a), 
406(b)(1) and (b)(2), and 407(a) of the Act and the sanctions resulting 
from the application of section 4975 of the Code, by reason of section 
4975(c)(1)(A) through (E) of the Code, shall not apply, effective April 
27, 2006, to (1) The acquisition by the Plan of certain stock rights 
(the Rights) pursuant to a stock rights offering (the Offering) from 
First Bank of Delaware (the Bank), a party in interest and the parent 
company of BSC Services Corp. (BSC or the Applicant), which is the Plan 
sponsor as well as a party in interest with respect to the Plan; (2) 
the holding of the Rights by the Plan during the subscription period of 
the Offering; and (3) the disposition or exercise of the Rights by the 
Plan.

Section II. Conditions

    This proposed exemption is conditioned upon adherence to the 
material facts and representations described herein and upon 
satisfaction of the following conditions:
    (a) The Rights were acquired by the Plan pursuant to Plan 
provisions for the individually-directed investment of participant 
accounts.
    (b) The Plan's receipt of the Rights occurred in connection with 
the Rights Offering made available to all shareholders of the Bank's 
common stock (the Bank Stock).
    (c) All decisions regarding the holding and disposition of the 
Rights by the Plan were made in accordance with Plan provisions for the 
individually-directed investment of participant accounts by the 
individual participants whose accounts in the Plan received Rights in 
the Offering, and if no instructions were received, the Rights expired.
    (d) The Plan's acquisition of the Rights resulted from an 
independent act of the Bank as a corporate entity, and all holders of 
the Rights, including the Plan, were treated in the same manner with 
respect to the acquisition, holding and disposition of such Rights.
    (e) The Plan received the same proportionate number of the Rights 
as other owners of Bank Stock.

Effective Date: If granted, this proposed exemption will be effective 
as of April 27, 2006.

Summary of Facts and Representations

    1. The Bank, which is located at 1000 Rocky Run Parkway, 
Wilmington, Delaware, is a full-service, State-chartered commercial 
bank that offers a variety of credit and depository banking services. 
The Bank's commercial loan services are primarily offered to 
individuals and business in the Delaware area. The Bank also makes 
short-term consumer loans through third-party servicers in various 
states and via the Internet, and it offers tax refund anticipation 
loans in numerous states. Moreover, the Bank offers credit and debit 
cards to customers nationally. The majority of loan balances from these 
national products are sold on a non-recourse basis.
    The Bank's deposits are insured by the Federal Deposit Insurance 
Corporation (the FDIC). As a state

[[Page 36060]]

chartered bank which is not a member of the Federal Reserve System, the 
Bank is subject to examination and comprehensive regulation by the 
Delaware State Banking Commissioner as well as by the FDIC.
    As of December 31, 2006, the Bank had total assets of $123,913,000, 
total stockholders' equity of approximately $25,853,000, total deposits 
of approximately $92,636,000 and net loans receivable of approximately 
$67,697,000. The Bank's net income for the year ended December 31, 2005 
was $3,434,000. The Bank Stock is listed for quotation on the OTC 
Bulletin Board under the symbol FBOD (OBB). It is represented that the 
Bank Stock is both an ``employer security'' \12\ and a ``qualifying 
employer security.'' \13\
---------------------------------------------------------------------------

    \12\ Under section 407(d)(1) of the Act, the term ``employer 
security'' means a security issued by an employer of employees 
covered by a plan, or by an affiliate of such employer.
    \13\ Under section 407(d)(5) of the Act, the term ``qualifying 
employer security'' means an employer security which is stock, a 
marketable obligation, or an interest in a publicly traded 
partnership.
---------------------------------------------------------------------------

    The Bank was spun off as an independent company from Republic First 
Bancorp., Inc. (RFB) through a distribution of the Bank's common stock 
on January 31, 2005. Prior to the spin-off, the Bank was a subsidiary 
of RFB, which was then a two-bank holding company. RFB's other 
subsidiary was, and still is, Republic First Bank (the PA Bank), a 
Pennsylvania chartered bank.
    2. The Applicant is a wholly owned subsidiary of the Bank. The 
Applicant is the employer of employees who work for the Bank. The 
Applicant provides operations, accounting, compliance and human 
resource staffing to the Bank and the PA Bank at 1608 Walnut Street, 
Philadelphia, Pennsylvania.
    3. FBD Capital Markets Group, Inc. (FBD Capital) is also a wholly 
owned subsidiary of the Bank. FBD Capital was recently formed to offer 
short-term, high-yield mezzanine financing primarily in Delaware. FBD 
Capital operates out of the same facility as the Applicant.
    4. The Plan, which was formerly known as the ``Republic First Bank 
401(k) Profit Sharing Plan,'' was established on September 1, 1991 by 
RFB. The Plan is a defined contribution plan that previously covered 
full-time employees of the Bank and the PA Bank. Effective January 1, 
2005, the Applicant became the new Plan sponsor as part of an 
anticipated spin-off of the Bank, which occurred on February 1, 2005. 
The Plan was also adopted by the Applicant, the Bank, the PA Bank and 
RFB. As of May 23, 2007, the Plan had 229 participants and total assets 
of approximately $8.1 million.
    In addition, the Plan is a participant-directed individual account 
plan intended to satisfy the requirements of section 404(c) of the Act. 
The Plan offers participants 67 funds and a personal brokerage account 
(the Personal Brokerage Account) in which participants can invest all 
or a portion of their account balances in Bank Stock. As of April 27, 
2006, the Plan was the record holder of 58,161 shares of Bank Stock 
valued at $154,127 (or $2.65 per share) on such date, which were 
allocated to the Personal Brokerage Accounts of all of the Plan 
participants. At that time, the Bank Stock accounted for approximately 
3.3 percent of the $4.6 million in total Plan assets and it represented 
approximately 0.007 percent of the 7,943,720 shares of total 
outstanding Bank Stock.
    5. The Plan's trustees (the Trustees) are Harry Madonna, Chairman 
of the Board for the Bank, and Paul Frenkiel, Chief Financial Officer 
of the Bank. The Trustees also are members of the Plan Administrative 
Committee, which is the fiduciary responsible for Plan matters.
    Further, the custodian (the Custodian) of the Plan is John Hancock 
Life Insurance Company, which is part of Manulife Financial. The 
Custodian is located at 200 Bloor Street, East Toronto, Ontario, 
Canada. The Custodian holds legal title to the Plan's assets and it 
executes investment directions in accordance with participants' written 
or electronic instructions. In offering a Personal Brokerage Account to 
each Plan participant, the Custodian partners with TRUSOURCE Trust 
Outsourcing Partners (Trusource) of Costa Mesa, California. TruSource 
administers each Personal Brokerage Account and partners with 
AmeriTrade, the designated broker (the Broker) for such accounts.
    6. In an Offering Circular dated May 1, 2006 (the Offering 
Circular), the Bank announced a special Rights Offering. The Rights 
Offering would be an independent act of the Bank as a corporate entity 
under which all shareholders of Bank Stock, including the Plan, were to 
be treated in a like manner. The Rights Offering would allow the Bank 
to raise equity capital for the operation of FBD Capital. The Rights 
Offering would also afford its existing shareholders a preferential 
opportunity to subscribe for up to 3.4 million in new shares of Bank 
Stock and to maintain their proportionate ownership interests.
    7. Holders of record of Bank Stock at 5 p.m. Eastern Daylight 
Saving Time on April 27, 2006 (the Record Date) each were entitled to 
receive a number of Rights determined by dividing (a) the number of 
shares of the Bank Stock owned by the shareholder by (b) 2.33639, 
except that, if the number so calculated included a fraction, the 
number of Rights the shareholder would receive was rounded down to the 
nearest whole number. Each Right consisted of a ``Basic Subscription 
Right'' and an ``Over-Subscription Right.'' The Basic Subscription 
Right entitled the holder to purchase one share of Bank Stock at a 
purchase price of $2.25 per share, which was determined by the Bank's 
Board of Directors. If the shareholder exercised all of his or her 
Basic Subscription Rights, the shareholder was entitled to exercise 
his/her Over-Subscription Right to purchase, for $2.25 per share, one 
additional share of Bank Stock for every share of Bank Stock to which 
the shareholder had subscribed. The Rights were not transferable.\14\
---------------------------------------------------------------------------

    \14\ Among other things, a fiduciary of a plan is prohibited 
from allowing the plan to acquire any employer security which is not 
a ``qualifying employer security.'' Although the Rights constituted 
an ``employer security'' under section 407(d)(1) of the Act, 
inasmuch as they were issued by the Applicant, which is an employer 
of employees covered under the Plan, they did not represent a 
``qualifying employer security'' under section 407(d)(5) of the Act. 
This is because the Rights were not stock, a marketable obligation 
or an interest in a publicly-traded partnership. Therefore, the 
Applicant has requested a retroactive administrative exemption from 
the Department with respect to the acquisition of the Rights by the 
Plan and the subsequent holding and exercise of the Rights by the 
Plan participants. If granted, the exemption would be effective as 
of April 27, 2006, the Record Date.
---------------------------------------------------------------------------

    8. On May 8, 2006, all Plan participants (there were 210 at that 
time) were mailed: (a) A copy of the Offering Circular for the Bank; 
and (b) a letter from the Broker describing the procedures for 
participant directions with respect to the Rights Offering. 
Participants were required to call the toll-free number listed in the 
letter to direct the Broker either to exercise the Rights allocable to 
their Personal Brokerage Accounts or to opt out of the Rights Offering.
    9. Plan participants were required to contact the Broker prior to 5 
p.m. on June 19, 2006 (the Expiration Time). The Broker was responsible 
for exercising the Rights at the direction of each participant. In 
order for a participant's Rights to be exercised, RFB, the Subscription 
Agent, had to receive an election form from the Broker, together with 
payment for the shares which were to be purchased by the Expiration 
Time. Rights not exercised prior to the Expiration Time

[[Page 36061]]

would, by their terms, terminate and have no value.
    10. Thus, the Plan acquired the Rights pursuant to the Plan 
provisions for the individually-directed investment of participants' 
accounts. All decisions regarding the holding and disposition of the 
Rights by the Plan were made in accordance with these Plan provisions. 
The Plan participants were issued, and the Broker received from the 
Plan participants, a total of 24,893 Rights, of which 8,822 were 
exercised. This represented approximately 0.3 percent of the 3.4 
million Rights that were issued and exercised for $2.25 per share. As 
noted above, those Rights not exercised expired. Of the total Rights 
issued and exercised, 2,347,272 Shares represented Basic Subscription 
Rights and 1,052,728 Shares were attributed to Over-Subscription 
Rights. The Rights were not listed for trading on any stock exchange or 
on the OTC Bulletin Board. The total number of shares of Bank Stock 
outstanding at the Expiration Time, as adjusted to give effect to the 
shares issued pursuant to the Rights Offering, was 11,343,720 shares.
    The Bank compensated the Subscription Agent for fees generated in 
connection with the Rights Offering. Thus, no fees paid to the 
Subscription Agent were attributable to Plan assets. Although all 
shareholders of record were responsible for paying any other fees 
associated with the exercise of the Rights, the Subscription Agent 
waived all such fees.
    11. For each Plan participant who directed the Broker to exercise 
Rights attributable to his or her Personal Brokerage Account, the funds 
which were needed to pay the $2.25 per share exercise price were 
obtained by either selling specific investments at the participant's 
direction or by using cash equivalents in such participant's account, 
again at the participant's direction. Moreover, a participant who, 
under the terms of the Plan, was eligible to elect to receive a taxable 
distribution from his or her Plan account, was permitted, under the 
terms of the Offering Circular, to direct the Broker to cause such 
participant to be substituted for the record holder of the Bank Stock 
held in the Plan and to exercise the Rights attributable to the Bank 
Stock the participant beneficially owned. This was only permissible to 
the extent the terms of the Plan permitted a distribution to a 
participant and would be treated as a taxable distribution of a portion 
of the participant's Plan account.
    12. In summary, the Applicant represents that the transactions 
satisfied the statutory criteria for an exemption under section 408(a) 
of the Act because:
    (a) The Rights were acquired by the Plan pursuant to Plan 
provisions for the individually-directed investment of participant 
accounts.
    (b) The Plan's receipt of the Rights occurred in connection with 
the Rights Offering that was made available to all shareholders of Bank 
Stock.
    (c) All decisions regarding the holding and disposition of the 
Rights by the Plan were made in accordance with Plan provisions for the 
individually-directed investment of participant accounts by the 
individual participants whose accounts in the Plan received Rights in 
the Offering, and if no instructions were received, the Rights expired.
    (d) The Plan's acquisition of the Rights resulted from an 
independent act of the Bank as a corporate entity, and all holders of 
the Rights, including the Plan, were treated in the same manner with 
respect to the acquisition, holding and disposition of such Rights.
    (e) The Plan received the same proportionate number of the Rights 
as other owners of Bank Stock.
    Notice to Interested Persons: Notice of proposed exemption will be 
provided to all interested persons by first class mail within 30 days 
of publication of the notice of pendency in the Federal Register. Such 
notice shall include a copy of the notice of pendency of the exemption 
as published in the Federal Register and a supplemental statement, as 
required pursuant to 29 CFR 2570.43(b)(2), which will inform interested 
persons of their right to comment on the proposed exemption. Comments 
are due within 60 days of the date of publication of the proposed 
exemption in the Federal Register.

FOR FURTHER INFORMATION CONTACT: Ms. Anna M. Vaughan of the Department, 
telephone number (202) 693-8565. (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 of the Act and/or the Code, 
including any prohibited transaction 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) Before an exemption may be granted under section 408(a) of the 
Act and/or section 4975(c)(2) of the Code, the Department must find 
that the exemption is administratively feasible, in the interests of 
the plan and of its participants and beneficiaries, and protective of 
the rights of participants and beneficiaries of the plan;
    (3) The proposed exemptions, if granted, will be supplemental to, 
and not in derogation of, any other provisions of the Act and/or the 
Code, including statutory or administrative exemptions and transitional 
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
    (4) The proposed exemptions, if granted, will be subject to the 
express condition that the material facts and representations contained 
in each application are true and complete, and that each application 
accurately describes all material terms of the transaction which is the 
subject of the exemption.

    Signed at Washington, DC, this 26th day of June, 2007.
Ivan Strasfeld,
Director of Exemption Determinations, Employee Benefits Security 
Administration, U.S. Department of Labor.
[FR Doc. E7-12672 Filed 6-29-07; 8:45 am]

BILLING CODE 4510-29-P