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Secretary of Labor Thomas E. Perez
Grant of Individual Exemptions; Chase Manhattan Bank [Notices] [11/22/1996]

EBSA (Formerly PWBA) Federal Register Notice

Grant of Individual Exemptions; Chase Manhattan Bank [11/22/1996]

[PDF Version]

Volume 61, Number 227, Page 59465-59468

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DEPARTMENT OF LABOR
Pension and Welfare Benefits Administration
[Prohibited Transaction Exemption 96-85; Exemption Application No. D-
10200, et al.]

 
Grant of Individual Exemptions; Chase Manhattan Bank

AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Grant of individual exemptions.

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SUMMARY: This document contains exemptions issued by the Department of

[[Page 59466]]

Labor (the Department) from certain of the prohibited transaction 
restrictions of the Employee Retirement Income Security Act of 1974 
(the Act) and/or the Internal Revenue Code of 1986 (the Code).
    Notices were published in the Federal Register of the pendency 
before the Department of proposals to grant such exemptions. The 
notices set forth a summary of facts and representations contained in 
each application for exemption and referred interested persons to the 
respective applications for a complete statement of the facts and 
representations. The applications have been available for public 
inspection at the Department in Washington, D.C. The notices also 
invited interested persons to submit comments on the requested 
exemptions to the Department. In addition the notices stated that any 
interested person might submit a written request that a public hearing 
be held (where appropriate). The applicants have represented that they 
have complied with the requirements of the notification to interested 
persons. No public comments and no requests for a hearing, unless 
otherwise stated, were received by the Department.
    The notices of proposed exemption were issued and the exemptions 
are being granted solely by the Department because, effective December 
31, 1978, section 102 of Reorganization Plan No. 4 of 1978 (43 FR 
47713, October 17, 1978) transferred the authority of the Secretary of 
the Treasury to issue exemptions of the type proposed to the Secretary 
of Labor.

Statutory Findings

    In accordance with section 408(a) of the Act and/or section 
4975(c)(2) of the Code and the procedures set forth in 29 CFR Part 
2570, Subpart B (55 FR 32836, 32847, August 10, 1990) and based upon 
the entire record, the Department makes the following findings:
    (a) The exemptions are administratively feasible;
    (b) They are in the interests of the plans and their participants 
and beneficiaries; and
    (c) They are protective of the rights of the participants and 
beneficiaries of the plans.

The Chase Manhattan Bank Located in New York, New York; Exemption 
[Prohibited Transaction Exemption 96-85; Exemption Application No. 
D-10200]

Section I--Transactions

    The restrictions of sections 406(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 (D) of the Code, shall not apply to 
the following transactions, provided that the conditions set forth in 
Section II below are met:
    (a) Any acquisition or sale of ``emerging market'' securities (the 
Securities), and any repurchase agreement involving such Securities, 
which occurs between The Chase Manhattan Bank (Chase) or its Affiliates 
and the IBM Retirement Plan (the IBM Plan), to which Chase or an 
Affiliate is a party in interest under the Act at the time of the 
transaction; and
    (b) Certain repurchase agreements involving the Securities which 
occurred between the IBM Plan and Chemical Bank (Chemical) that were 
outstanding as of March 31, 1996, the date of the merger between the 
holding companies of Chemical and Chase. (The merger of the two banks 
themselves (the Merger) occurred later on July 14, 1996, and all 
references herein to Chase which refer to the time period after July 
14, 1996 shall include Chemical.)

Section II--Conditions

    (a) The assets of the IBM Plan involved in the transactions 
described in Section I(a) and I(b) above are managed by WP Emerging 
Markets Asset Management, L.P. (WP), as the independent, qualified 
fiduciary for the IMB Plan;
    (b) WP, as the IBM Plan's independent fiduciary and investment 
manager for the assets invested in the Securities, negotiates the terms 
of such transactions on behalf of the IBM Plan and makes the decision 
to have the IBM Plan enter into any such transactions with Chase;
    (c) WP, as the IBM Plan's independent fiduciary and investment 
manager for the assets invested in the Securities, monitors the 
investments made by the IBM Plan in such Securities and takes whatever 
actions are necessary to protect the interests of the IBM Plan;
    (d) Neither Chase nor an Affiliate has discretionary authority or 
control with respect to the investment of the IBM Plan's assets 
involved in the transactions or renders investment advice (within the 
meaning of 29 CFR 2510.3-21(c)) with respect to those assets;
    (e) In any transaction where the IBM Plan acquires a Security from 
Chase, the IBM Plan pays a price which is no greater than the fair 
market value of such Security, as determined by WP in accordance with 
either WP's internal valuation process or independent third party 
sources (such as independent broker-dealers and market-makers dealing 
in such Securities);
    (f) In any transaction where the IBM Plan sells a Security to 
Chase, the IBM Plan receives a price which is no less than the fair 
market value of such Security, as determined by WP in accordance with 
either WP's internal valuation process or independent third party 
sources (such as independent broker-dealers and market-makers dealing 
in such Securities);
    (g) The repurchase agreements between the IBM Plan and Chase are 
entered into pursuant to a written agreement between the parties which 
describes all of the material terms and conditions for such 
transactions, including the rights and obligations of each party, and 
is consistent with the specific guidelines established by the IBM 
Plan's named fiduciary for transactions involving the Securities;
    (h) All repurchase agreements between the IBM Plan and Chase, and 
those between the IBM Plan and Chemical which were in place as of March 
31, 1996, have terms and conditions which are set least as favorable to 
the IBM Plan as terms and conditions which would exist in a similar 
transaction with an unrelated party;
    (j) All other terms of each transaction described above in Section 
I(a) are not less favorable to the IBM Plan than the terms available in 
an arm's-length transaction between unrelated parties;
    (j) WP does not engage in, or commit to sell, any uncovered put or 
call options (including, but not exclusive to, ``straddles'' and 
``strangles'') in transactions with Chase on behalf of the IBM Plan;
    (k) Any transactions involving the use of leverage by WP, on behalf 
of the IBM Plan, do not exceed the specific guidelines established by 
the IBM Plan's named fiduciary under its investment management 
agreement with WP;
    (l) No brokerage commission, sales commission, or similar 
compensation, other than the particular dealer mark-up for the 
Security, is paid to Chase by the IBM Plan with regard to such 
transactions; and
    (m) The amount of the IBM Plan's assets involved in the 
transactions described in Section I(a) and I(b) represents no more than 
two (2) percent of the total assets of the IBM Plan.

Section III--Definitions

    (a) The term ``Chase'' refers to The Chase Manhattan Bank and its 
Affiliates, as defined below, including, as of July 14, 1996, Chemical 
Bank, pursuant to the Merger described in Section I(b) above which 
occurred on such date.

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    (b) The term ``Chemical'' refers to Chemical Bank, as it existed 
prior to the Merger on July 14, 1996.
    (c) The term ``Affiliate'' refers to affiliates of Chase, including 
entities controlling, controlled by, or under common control with Chase 
as well as successors to such entities.
    (d) The term ``control'' for purposes of the above definition of 
``Affiliate'' means the power to exercise a controlling influence over 
the management or policies of an entity.
    (e) The term ``emerging market'' or ``emerging markets'' refers to 
capital markets in developing or less developed countries that are, 
with the exception of Mexico, not member countries of the Organization 
for Economic Cooperation and Development.
    (f) The term ``Security'' refers to certain ``emerging market'' 
securities and instruments issued in, or on behalf of, an ``emerging 
market'' (including both corporate and sovereign issuers of debt 
securities as well as corporate issuers of equity securities). For 
purposes of the proposed exemption, such ``Securities'' would include 
publicly traded or privately placed debt, equity, or convertible 
securities, certain put and call options (as described herein), 
collateralized bonds, Brady Bonds and Eurobonds.
    (g) The term ``IBM Plan'' refers to the IBM Retirement Plan, a 
defined benefit pension plan covering employees of the International 
Business Machines Corporation and its affiliates (IBM), which is an 
employee benefit plan covered by the Act.
    (h) The term ``WP'' refers to WP Emerging Markets Asset Management, 
L.P. and its affiliates, including the Emerging Capital Markets 
Division of Wasserstein Perella Securities, Inc.

EFFECTIVE DATE: The exemption is effective as of September 6, 1996 for 
all transactions described in Section I(a), and as of March 31, 1996, 
for the transactions described in Section I(b).
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption, refer to 
the notice of proposed exemption published on September 6, 1996 at 61 
FR 47195.

 Written Comments

    The Department received two written comments with respect to the 
notice of proposed exemption.
    The first written comment was submitted by the Applicant, who 
wished to clarify the details of its merger with Chemical and the 
precise names of the banks involved. On March 31, 1996, a merger of the 
holding companies of the two banks occurred; the merger of the banks 
themselves occurred on July 14, 1996. Specifically, on March 31, 1996, 
the Chase Manhattan Corporation was merged with and into Chemical 
Banking Corporation, which entity simultaneously changed its name to 
The Chase Manhattan Corporation. On July 14, 1996, the Chase Manhattan 
Bank (National Association) was merged with and into Chemical Bank, 
which entity simultaneously changed its name to The Chase Manhattan 
Bank. Accordingly, the words ``National Association'' are no longer 
part of the Applicant's name. The Applicant also notes that the 
Chemical Bank to which the notice of proposed exemption referred did 
not include ``National Association'' as part of its name. The 
Department has modified the language in this exemption to reflect the 
Applicant's corrections to the record.
    The second written comment was submitted by WP and also concerns a 
clarification to the notice of proposed exemption. First, WP notes that 
its precise name is WP Emerging Markets Asset Management, L.P. 
Secondly, WP notes, in Paragraph 5 of the Summary of Facts and 
Representations (the Summary), that the second full sentence on page 
47198 should be revised to read, ``WP states that WPS's Emerging 
Capital Markets Division [not its equities division], has been a 
manager on [eliminate ``significant''] syndicate transactions involving 
emerging market securities.'' Thirdly, WP notes, in paragraph 10 of the 
Summary, the final subparagraph therein on page 47199, which discusses 
WP's customary approach to REPO financing and negotiation, that a REPO 
is collateralized by a specific asset and the REPO does not provide the 
counterparty with a lien on the IBM Trust's general assets. 
Accordingly, the sentence beginning, ``Because the credit-standing of 
the IBM Trust is excellent * * *,'' should be eliminated, as well as 
the phrase ``of similar credit standing'' in the following sentence. 
Finally, WP notes, in Paragraph 16 of the Summary, that the 
parenthetical at the beginning of page 47202 should be revised to begin 
``currently, 150 percent * * *,'' to reflect the fact that the 
Guidelines for the IBM Plan are subject to modification by IBM.*

    * As previously noted in Footnote 9, on page 47200 of the notice 
of propose exemption, the Department expresses no opinion as to 
whether WP's use of leverage would violate any of the provisions of 
Part 4 of Title I in the Act. The Department notes that WP is 
required, under section 404(a) of the Act, to make investment 
decisions on behalf of the IBM Plan prudently and solely in the 
interests of the participants and beneficiaries of such Plan.
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FOR FURTHER INFORMATION CONTACT: Ms. Karin Weng of the Department, 
telephone (202) 219-8881. (This is not a toll-free number.)

Acme 401(k) Retirement Savings Plan (the Plan) Located in 
Scottsdale, Arizona; Exemption

[Prohibited Transaction Exemption 96-86; Exemption Application No. D-
10270]

    The restrictions of sections 406(a), 406(b)(1) and (b)(2) 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 to the cash sale (the Sale) by the Plan of a 2.86 
[percent interest (the Interest) in the Arizona Equities V Real Estate 
Investment Trust to RSC Holdings, Inc., the sponsor of the Plan and a 
party in interest with respect to the Plan; provided that the following 
conditions are satisfied:
    (1) The sale is a one-time transaction for cash;
    (2) The Plan does not incur any expenses in connection with the 
Sale; and
    (3) The Plan receives as consideration from the sale the greater 
of: (a) the fair market value of the Interest as determined by a 
qualified independent appraiser at the time of the Sale; or (b) the 
Plan's total investment in the Interest in the amount of $50,572.
    For a more complete statement of the facts and representations 
supporting this exemption, refer to the notice of proposed exemption 
published on September 6, 1996 at 61 FR 47204.

FOR FURTHER INFORMATION CONTACT: Ms. Marianne H. Cole or Mr. Ronald 
Willett of the Department, telephone (202) 219-8881. (This is not a 
toll-free number.)

General Information

    The attention of interested persons is directed to the following:
    (1) The fact that a transaction is the subject of an exemption 
under section 408(a) of the Act and/or section 4975(c)(2) of the Code 
does not relieve a fiduciary or other party in interest or disqualified 
person from certain other provisions to which the exemptions 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