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Secretary of Labor Thomas E. Perez
Grant of Individual Exemptions; UNUM Life Insurance Company of America [Notices] [10/29/1997]

EBSA (Formerly PWBA) Federal Register Notice

Grant of Individual Exemptions; UNUM Life Insurance Company of America [10/29/1997]

[PDF Version]

Volume 62, Number 209, Page 56201-56206

[DOCID:fr29oc97-101]


[[Page 56201]]

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DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration
[Prohibited Transaction Exemption 97-56; Exemption Application No. D-
10437, et al.]

 
Grant of Individual Exemptions; UNUM Life Insurance Company of 
America

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 
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.

UNUM Life Insurance Company of America (UNUM), Located in Portland, 
Maine

[Prohibited Transaction Exemption 97-56; Exemption Application No. D-
10437]

Exemption

Section I--Exemption for Certain Transactions Involving the Management 
of Investments Shared by Two or More Accounts Maintained by UNUM
    The restrictions of certain sections of the Act and the sanctions 
resulting from the application of certain parts of section 4975 of the 
Code shall not apply to the following transactions if the conditions 
set forth in Section IV are met:
    (a) Transfers Between Accounts
    (1) The restrictions of section 406(b)(2) of the Act shall not 
apply to the sale or transfer of an interest in a shared investment 
(including a shared joint venture interest) between two or more 
Accounts (except the General Account), provided that each ERISA-Covered 
Account pays no more, or receives no less, than fair market value for 
its interest in a shared investment.
    (2) The restrictions of sections 406(a), 406(b)(1) and 406(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 sale or transfer of an interest in a shared 
investment (including a shared joint venture interest) between ERISA-
Covered Accounts and the General Account, provided that such transfer 
is made pursuant to stalemate procedures, described in the notice of 
proposed exemption, adopted by the independent fiduciary for the ERISA-
Covered Account, and provided further that the ERISA-Covered Account 
pays no more or receives no less than fair market value for its 
interest in a shared investment.
    (b) Joint Sales of Property--The restrictions of sections 406(a), 
406(b)(1) and 406(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 sale to a 
third party of the entire interest in a shared investment (including a 
shared joint venture interest) by two or more Accounts, provided that 
each ERISA-Covered Account receives no less than fair market value for 
its interest in the shared investment.
    (c) Additional Capital Contributions--The restrictions of sections 
406(a), 406(b)(1) and 406(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 either to the 
making of a pro rata equity capital contribution by one or more of the 
Accounts to a shared investment; or to the making of a Disproportionate 
[as defined in Section V(e)] equity capital contribution by one or more 
of such Accounts which results in an adjustment in the equity ownership 
interests of the Accounts in the shared investment on the basis of the 
fair market value of such interests subsequent to such contribution, 
provided that each ERISA-Covered Account is given an opportunity to 
make a pro rata contribution.
    (d) Lending of Funds--The restrictions of sections 406(a), 
406(b)(1) and 406(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 lending of 
funds from the General Account to an ERISA-Covered Account to enable 
the ERISA-Covered Account to make an additional pro rata contribution, 
provided that such loan--
    (A) Is unsecured and non-recourse with respect to participating 
plans,
    (B) Bears interest at a rate not to exceed the prevailing rate on 
90-day Treasury Bills,
    (C) Is not callable at any time by the General Account, and
    (D) Is prepayable at any time without penalty.
Section II--Exemption for Certain Transactions Involving the Management 
of Joint Venture Interests Shared by Two or More Accounts Maintained by 
UNUM
    The restrictions of certain sections of the Act and the sanctions 
resulting from the application of certain parts of section 4975 of the 
Code shall not apply to the following transactions resulting from the 
sharing of an investment in a real estate joint venture between two or 
more Accounts, if the conditions set forth in Section IV are met:
    (a) Additional Capital Contributions--(1) The restrictions of 
sections 406(a), 406(b)(1) and 406(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 
making of additional pro rata equity capital contributions by one or

[[Page 56202]]

more Accounts participating in the joint venture.
    (2) The restrictions of sections 406(a), 406(b)(1) and 406(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 lending of funds from the General Account 
to an ERISA-Covered Account to enable the ERISA-Covered Account to make 
an additional pro rata capital contribution, provided that such loan--
    (A) Is unsecured and non-recourse with respect to the participating 
plans,
    (B) Bears interest at a rate not to exceed the prevailing rate on 
90-day Treasury Bills,
    (C) Is not callable at any time by the General Account, and
    (D) Is prepayable at any time without penalty.
    (3) The restrictions of sections 406(a), 406(b)(1) and 406(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 making of Disproportionate [as defined in 
section V(e)] additional equity capital contributions (or the failure 
to make such additional contributions) in the joint venture by one or 
more Accounts which result in an adjustment in the equity ownership 
interests of the Accounts in the joint venture on the basis of the fair 
market value of such joint venture interests subsequent to such 
contributions, provided that each ERISA-Covered Account is given an 
opportunity to provide its proportionate share of the additional equity 
capital contributions; and
    (4) In the event a co-venturer fails to provide all or any part of 
its pro rata share of an additional equity capital contribution, the 
restrictions of sections 406(a), 406(b)(1) and 406(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 making of Disproportionate additional equity capital 
contributions to the joint venture by the General Account and an ERISA-
Covered Account up to the amount of such contribution not provided by 
the co-venturer which result in an adjustment in the equity ownership 
interests of the Accounts in the joint venture on the basis provided in 
the joint venture agreement, provided that such ERISA-Covered Account 
is given an opportunity to participate in all additional equity capital 
contributions on a proportionate basis.
    (b) Third Party Purchase Offers--(1) In the case of an offer by a 
third party to purchase any property owned by the joint venture, the 
restrictions of sections 406(a), 406(b)(1) and 406(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 acquisition by the Accounts, including one or more 
ERISA-Covered Account[s], on either a proportionate or Disproportionate 
basis of a co-venturer's interest in the joint venture in connection 
with a decision on behalf of such Accounts to reject such purchase 
offer, provided that each ERISA-Covered Account is first given an 
opportunity to participate in the acquisition on a proportionate basis; 
and
    (2) The restrictions of section 406(b)(2) of the Act shall not 
apply to any acceptance by UNUM on behalf of two or more Accounts, 
including one or more ERISA-Covered Account[s], of an offer by a third 
party to purchase a property owned by the joint venture even though the 
independent fiduciary for one (but not all) of such ERISA-Covered 
Account[s] has not approved the acceptance of the offer, provided that 
such declining ERISA-Covered Account[s] are first afforded the 
opportunity to buy out both the co-venturer and ``selling'' Account's 
interests in the joint venture.
    (c) Rights of First Refusal--(1) In the case of the right to 
exercise a right of first refusal described in a joint venture 
agreement to purchase a co-venturer's interest in the joint venture at 
the price offered for such interest by a third party, the restrictions 
of sections 406(a), 406(b)(1) and 406(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 acquisition by such Accounts, including one or more ERISA-
Covered Account[s], on either a proportionate or Disproportionate basis 
of a co-venturer's interest in the joint venture in connection with the 
exercise of such a right of first refusal, provided that each ERISA-
Covered Account is first given an opportunity to participate on a 
proportionate basis; and
    (2) The restrictions of section 406(b)(2) of the Act shall not 
apply to any decision by UNUM on behalf of the Accounts not to exercise 
such a right of first refusal even though the independent fiduciary for 
one (but not all) of such ERISA-Covered Accounts has approved the 
exercise of the right of first refusal, provided that none of the 
ERISA-Covered Accounts that approved the exercise of the right of first 
refusal decides to buy-out the co-venturer on its own.
    (d) Buy-Sell Options--(1) In the case of the exercise of a buy-sell 
option set forth in the joint venture agreement, the restrictions of 
sections 406(a), 406(b)(1) and 406(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 
acquisition by one or more of the Accounts on either a proportionate or 
Disproportionate basis of a co-venturer's interest in the joint venture 
in connection with the exercise of such a buy-sell option, provided 
that each ERISA-Covered Account is first given the opportunity to 
participate on a proportionate basis; and
    (2) The restrictions of section 406(b)(2) of the Act shall not 
apply to any decision by UNUM on behalf of two or more Accounts, 
including one or more ERISA-Covered Account[s], to sell the interest of 
such Accounts in the joint venture to a co-venturer even though the 
independent fiduciary for one (but not all) of such ERISA-Covered 
Account[s] has not approved such sale, provided that such disapproving 
ERISA-Covered Account is first afforded the opportunity to purchase the 
entire interest of the co-venturer.
Section III--Exemption for Transactions Involving a Joint Venture or 
Persons Related to a Joint Venture
    The restrictions of section 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, if the 
conditions in Section IV are met, to any additional equity capital 
contributions to a joint venture by an ERISA-Covered Account that is 
participating in an interest in the joint venture, where the joint 
venture is a party in interest solely by reason of the ownership on 
behalf of the General Account of a 50 percent or more interest in such 
joint venture.
Section IV--General Conditions
    (a) Each contractholder or prospective contractholder in an ERISA-
Covered Account which shares or proposes to share real estate 
investments is provided with a written description of potential 
conflicts of interest that may result from the sharing, a copy of the 
notice of pendency, and a copy of this exemption.
    (b) An independent fiduciary must be appointed on behalf of each 
ERISA-Covered Account participating in the sharing of investments. The 
independent fiduciary shall be either

[[Page 56203]]

    (1) A business organization which has at least five years of 
experience with respect to commercial real estate investments, or
    (2) A committee composed of three to five individuals who each have 
at least five years of experience with respect to commercial real 
estate investments.
    (c) The independent fiduciary or independent fiduciary committee 
member shall not be or consist of UNUM or any of its affiliates.
    (d) No organization or individual may serve as an independent 
fiduciary for an ERISA-Covered Account for any fiscal year if the gross 
income (other than fixed, non-discretionary retirement income) received 
by such organization or individual (or any partnership or corporation 
of which such organization or individual is an officer, director, or 
ten percent or more partner or shareholder) from UNUM, its affiliates 
and the ERISA-Covered Accounts for that fiscal year exceeds five 
percent of its or his or her annual gross income from all sources for 
the prior fiscal year. If such organization or individual had no income 
for the prior fiscal year, the five percent limitation shall be applied 
with reference to the fiscal year in which such organization or 
individual serves as an independent fiduciary.
    The income limitation will include income for services rendered to 
the Accounts as independent fiduciary under any prohibited transaction 
exemption(s) granted by the Department.
    In addition, no organization or individual who is an independent 
fiduciary, and no partnership or corporation of which such organization 
or individual is an officer, director or ten percent or more partner or 
shareholder, may acquire any property from, sell any property to, or 
borrow any funds from, UNUM, its affiliates, or any Account maintained 
by UNUM or its affiliates, during the period that such organization or 
individual serves as an independent fiduciary and continuing for a 
period of six months after such organization or individual ceases to be 
an independent fiduciary, or negotiate any such transaction during the 
period that such organization or individual serves as independent 
fiduciary.
    (e) The independent fiduciary will approve the initial allocation 
of a shared investment to an ERISA-Covered Account. In addition, the 
independent fiduciary acting on behalf of an ERISA-Covered Account 
shall have the responsibility and authority to approve or reject 
recommendations made by UNUM or its affiliates for each of the 
transactions in this exemption. In the case of a possible transfer or 
exchange of any interest in a shared investment between the General 
Account and an ERISA-Covered Account, the independent fiduciary shall 
also have full authority to negotiate the terms of the transfer. UNUM 
shall involve the independent fiduciary in the consideration of 
contemplated transactions prior to the making of any decisions, and 
shall provide the independent fiduciary with whatever information may 
be necessary in making its determinations.
    In addition, the independent fiduciary shall review on an as-needed 
basis, but not less than twice annually, the shared real estate 
investments in the ERISA-Covered Account to determine whether the 
shared real estate investments are held in the best interest of the 
ERISA-Covered Account.
    (f) UNUM maintains for a period of six years from the date of the 
transaction the records necessary to enable the persons described in 
paragraph (g) of this Section to determine whether the conditions of 
this exemption have been met, except that a prohibited transaction will 
not be considered to have occurred if, due to circumstances beyond the 
control of UNUM or its affiliates, the records are lost or destroyed 
prior to the end of the six-year period.
    (g)(1) Except as provided in paragraph (2) of this subsection (g) 
and notwithstanding any provisions of subsection (a)(2) and (b) of 
section 504 of the Act, the records referred to in subsection (f) of 
this Section are unconditionally available at their customary location 
for examination during normal business hours by--
    (A) Any duly authorized employee or representative of the 
Department or the Internal Revenue Service,
    (B) Any fiduciary of a plan participating in an ERISA-Covered 
Account who has authority to acquire or dispose of the interests of the 
plan, or any duly authorized employee or representative of such 
fiduciary,
    (C) Any contributing employer to any plan participating in an 
ERISA-Covered Account or any duly authorized employee or representative 
of such employer, and
    (D) Any participant or beneficiary of any plan participating in an 
ERISA-Covered Account, or any duly authorized employee or 
representative of such participant or beneficiary.
    (2) None of the persons described in subparagraphs (B) through (D) 
of this subsection (g) shall be authorized to examine trade secrets of 
UNUM, any of its affiliates, or commercial or financial information 
which is privileged or confidential.
Section V--Definitions
    For the purposes of this exemption:
    (a) An ``affiliate'' of UNUM includes--
    (1) Any person directly or indirectly through one or more 
intermediaries, controlling, controlled by, or under common control 
with UNUM,
    (2) Any officer, director or employee of UNUM or person described 
in section V(a)(1), and
    (3) Any partnership in which UNUM is a partner.
    (b) An ``Account'' means the General Account (including the general 
accounts of UNUM affiliates), any separate account of UNUM or its 
affiliate, or any investment advisory account, trust, limited 
partnership or other investment account or fund managed by UNUM.
    (c) The ``General Account'' means the general asset account of UNUM 
and any of its affiliates which are insurance companies licensed to do 
business in at least one State as defined in section 3(10) of the Act.
    (d) An ``ERISA-Covered Account'' means any Account (other than the 
General Account) which consists solely of the UNUM Plan or other plans 
maintained by UNUM or its affiliates.
    (e) ``Disproportionate'' means not in proportion to an Account's 
existing equity ownership interest in an investment, joint venture or 
joint venture interest.
    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 August 1, 1997 at 62 FR 
41441.

FOR FURTHER INFORMATION CONTACT: Gary H. Lefkowitz of the Department, 
telephone (202) 219-8881. (This is not a toll-free number.)

NatWest Securities Corporation, NatWest Securities Limited, Located in 
New York, New York

[Prohibited Transaction Exemption 97-57; Exemption Application Nos. D-
10464, D-10465]

Exemption

Section I--Transactions
    A. Effective May 22, 1997, the restrictions of section 406(a)(1) 
(A) through (D) of the Employee Retirement Income Security Act of 1974 
(the Act) and the taxes imposed by section 4975 (a) and (b) of the 
Internal Revenue Code of 1986 (the Code), by reason of section 4975 
(c)(1) (A) through (D) of the Code, shall not apply to any purchase or 
sale of a security between an employee benefit plan and a broker-dealer 
affiliated with NatWest Securities Corporation and subject to British 
law

[[Page 56204]]

(NatWest/UK Affiliate), if the following conditions, and the conditions 
of Section II, are satisfied:
    (1) The NatWest/UK Affiliate customarily purchases and sells 
securities for its own account in the ordinary course of its business 
as a broker-dealer.
    (2) Such transaction is on terms at least as favorable to the plan 
as those which the plan could obtain in an arm's length transaction 
with an unrelated party.
    (3) Neither the NatWest/UK Affiliate nor an affiliate thereof has 
discretionary authority or control with respect to the investment of 
the plan assets involved in the transaction, or renders investment 
advice (within the meaning of 29 CFR 2510.3-21(c)) with respect to 
those assets, and the NatWest/UK Affiliate is a party in interest or 
disqualified person with respect to the plan assets involved in the 
transaction solely by reason of section 3(14)(B) of the Act or section 
4975(e)(2)(B) of the Code, or by reason of a relationship to a person 
described in such sections. For purposes of this paragraph, the 
NatWest/UK Affiliate shall not be deemed to be a fiduciary with respect 
to a plan solely by reason of providing securities custodial services 
for a plan.
    B. Effective May 22, 1997, the restrictions of section 406(a)(1) 
(A) through (D) of the Act and the taxes imposed by section 4975 (a) 
and (b) of the Code, by reason of section 4975(c)(1) (A) through (D) of 
the Code, shall not apply to the lending of securities that are assets 
of an employee benefit plan to an NatWest/UK Affiliate if the following 
conditions, and the conditions of Section II, are satisfied:
    (1) Neither the NatWest/UK Affiliate (the Borrower) nor an 
affiliate of the Borrower has discretionary authority or control with 
respect to the investment of the plan assets involved in the 
transaction, or renders investment advice (within the meaning of 29 CFR 
2510.3-21(c)) with respect to those assets;
    (2) The plan receives from the Borrower, either by physical 
delivery or by book entry in a securities depository located in the 
United States, by the close of business on the day on which the 
securities lent are delivered to the Borrower, collateral consisting of 
U.S. currency, securities issued or guaranteed by the United States 
Government or its agencies or instrumentalities, or irrevocable United 
States bank letters of credit issued by a person other than the 
Borrower or an affiliate thereof, or any combination thereof, having, 
as of the close of business on the preceding business day, a market 
value (or, in the case of letters of credit, a stated amount) equal to 
not less than 100 percent of the then market value of the securities 
lent. The collateral referred to in this Section I(B)(2) must be held 
in the United States;
    (3) Prior to the making of any such loan, the Borrower shall have 
furnished the following items to the fiduciary for the plan who is 
making decisions on behalf of the plan with respect to the lending of 
securities (the Lending Fiduciary): (1) the most recent available 
audited statement of the Borrower's financial condition, (2) the most 
recent available unaudited statement of the Borrower's financial 
condition (if more recent than such audited stated), and (3) a 
representation that, at the time the loan is negotiated, there has been 
no material adverse change in the Borrower's financial condition since 
the date of the most recent financial statement furnished to the plan 
that has not been disclosed to the Lending Fiduciary. Such 
representation may be made by the Borrower's agreement that each such 
loan shall constitute a representation by the Borrower that there has 
been no such material adverse change;
    (4) The loan is made pursuant to a written loan agreement, the 
terms of which are at least as favorable to the plan as those which the 
plan could obtain in an arm's-length transaction with an unrelated 
party. Such agreement may be in the form of a master agreement covering 
a series of securities-lending transactions;
    (5) The plan (1) receives a reasonable fee that is related to the 
value of the borrowed securities and the duration of the loan, or (2) 
has the opportunity to derive compensation through the investment of 
cash collateral. Where the plan has that opportunity, the plan may pay 
a loan rebate or similar fee to the Borrower, if such fee is not 
greater than the plan would pay an unrelated party in an arm's-length 
transaction;
    (6) The plan receives the equivalent of all distributions made to 
holders of the borrowed securities during the term of the loan, 
including, but not limited to, cash dividends, interest payments, 
shares of stock as a result of stock splits and rights to purchase 
additional securities;
    (7) If the market value of the collateral on the close of trading 
on a business day is less than 100 percent of the market value of the 
borrowed securities at the close of trading on that day, the Borrower 
shall deliver, by the close of business on the following business day, 
an additional amount of collateral (as described in paragraph (2)) the 
market value of which, together with the market value of all previously 
delivered collateral, equals at least 100 percent of the market value 
of all the borrowed securities as of such preceding day. 
Notwithstanding the foregoing, part of the collateral may be returned 
to the Borrower if the market value of the collateral exceeds 100 
percent of the market value of the borrowed securities, as long as the 
market value of the remaining collateral equals at least 100 percent of 
the market value of the borrowed securities;
    (8) The loan may be terminated by the plan at any time, whereupon 
the Borrower shall deliver certificates for securities identical to the 
borrowed securities (or the equivalent thereof in the event of 
reorganization, recapitalization or merger of the issuer of the 
borrowed securities) to the plan within (1) the customary delivery 
period for such securities, (2) three business days, or (3) the time 
negotiated for such delivery by the plan and the Borrower, whichever is 
lesser; and
    (9) In the event the loan is terminated and the Borrower fails to 
return the borrowed securities or the equivalent thereof within the 
time described in paragraph (8) above, then (i) the plan may, under the 
terms of the loan agreement, purchase securities identical to the 
borrowed securities (or their equivalent as described above) and may 
apply the collateral to the payment of the purchase price, any other 
obligations of the Borrower under the agreement, and any expenses 
associated with the sale and/or purchase, and (ii) the Borrower is 
obligated, under the terms of the loan agreement, to pay, and does pay 
to the plan, the amount of any remaining obligations and expenses not 
covered by the collateral plus interest at a reasonable rate. 
Notwithstanding the foregoing, the Borrower may, in the event the 
Borrower fails to return borrowed securities as described above, 
replace non-cash collateral with an amount of cash not less than the 
then current market value of the collateral, provided such replacement 
is approved by the Lending Fiduciary.
    (10) If the Borrower fails to comply with any condition of this 
exemption, in the course of engaging in a securities-lending 
transactions, the plan fiduciary who caused the plan to engage in such 
transaction shall not be deemed to have caused the plan to engage in a 
transaction prohibited by section 406(a)(1) (A) through (D) of the Act 
solely by reason of the Borrower's failure to comply with the 
conditions of the exemption.
    C. Effective May 22, 1997, the restrictions of sections 406(a)(1) 
(A)

[[Page 56205]]

through (D) and 406(b)(2) of the Act and the taxes imposed by section 
4975 (a) and (b) of the Code shall not apply to any extension of credit 
to an employee benefit plan by an NatWest/UK Affiliate to permit the 
settlement of securities transactions or in connection with the writing 
of options contracts provided that the following conditions are met:
    (a) The NatWest/UK Affiliate is not a fiduciary with respect to any 
assets of such plan, unless no interest or other consideration is 
received by such fiduciary or any affiliate thereof in connection with 
such extension of credit; and
    (b) Such extension of credit would be lawful under the Securities 
Exchange Act of 1934 and any rules or regulations thereunder if such 
act, rules or regulations were applicable.
Section II--General Conditions
    A. The NatWest/UK Affiliate is registered as a broker-dealer with 
the Securities and Futures Authority of the United Kingdom (the 
S.F.A.);
    B. The NatWest/UK Affiliate is in compliance with all requirements 
of Rule 15a-6 (17 CFR 240.15a-6) under the Securities and Exchange Act 
of 1934, which provides for foreign broker-dealers a limited exemption 
from U.S. registration requirements;
    C. Prior to the transaction, the NatWest/UK Affiliate enters into a 
written agreement with the plan in which the NatWest/UK Affiliate 
consents to the jurisdiction of the courts of the United States with 
respect to the transactions covered by this exemption;
    D. (1) The NatWest/UK Affiliate maintains or causes to be 
maintained within the United States for a period of six years from the 
date of such transaction such records as are necessary to enable the 
persons described in this section to determine whether the conditions 
of this exemption have been met; except that a party in interest with 
respect to an employee benefit plan, other than the NatWest/UK 
Affiliate, shall not be subject to a civil penalty under section 502(i) 
of the Act or the taxes imposed by section 4975 (a) or (b) of the Code, 
if such records are not maintained, or are not available for 
examination as required by this section, and a prohibited transaction 
will not be deemed to have occurred if, due to circumstances beyond the 
control of the NatWest/UK Affiliate, such records are lost or destroyed 
prior to the end of such six year period;
    (2) The records referred to in subsection (1) above are 
unconditionally available for examination during normal business hours 
by duly authorized employees of (a) the Department of Labor, (b) the 
Internal Revenue Service, (c) plan participants and beneficiaries, (d) 
any employer of plan participants and beneficiaries, and (e) any 
employee organization any of whose members are covered by such plan; 
except that none of the persons described in (c) through (e) of this 
subsection shall be authorized to examine trade secrets of NatWest 
Securities Corporation or the NatWest/UK Affiliate or any commercial or 
financial information which is privileged or confidential.
 Section III--Definitions
    ``Affiliate'' of a person shall include: (i) Any person directly or 
indirectly, through one or more intermediaries, controlling, controlled 
by, or under common control with such other person; (ii) any officer, 
director, or partner, employee or relative (as defined in section 3(15) 
of the Act) of such other person; and (iii) any corporation or 
partnership of which such other person is an officer, director or 
partner. For purposes of this definition, the term ``control'' means 
the power to exercise a controlling influence over the management or 
policies of a person other than an individual.
    ``Security'' shall include equities, fixed income securities, 
options on equity and on fixed income securities, government 
obligations, and any other instrument that constitutes a security under 
U.S. securities laws. The term ``security'' does not include swap 
agreements or other notional principal contracts.

EFFECTIVE DATE: This exemption is effective as of May 22, 1997.
    For a more complete statement of the summary of facts and 
representations supporting the Department's decision to grant this 
exemption refer to the Notice of Proposed Exemption published on 
September 5, 1997 at 62 FR 47060.

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

Carl M. Callaway Individual Retirement Account (IRA), Located in 
Huntington, West Virginia; [Prohibited Transaction Exemption No. 97-58; 
Application No. D-10469]

Exemption

    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 transaction involving a sale or exchange of certain 
securities (the Sale) by the IRA to Carl M. Callaway and his wife, 
Marianna F. Callaway, both disqualified persons with respect to the 
IRA; provided the following conditions are satisfied: (a) the sale or 
exchange is a one-time transaction constituting an exchange of 
securities approximately equal in value and any difference in value 
occurring is immediately eradicated with cash payments by either the 
Callaways or the IRA, in order to equalize the value of the exchanged 
assets, (b) the IRA incurs no commissions or other expenses in 
connection with the transaction, (c) the transaction involves only 
securities that have a fair market value on the date of the exchange 
which is objectively determinable through independently and regularly 
published market prices and quotations, and (d) the IRA tenders as 
consideration stock valued at an amount equal to the reported closing 
price of the stock on the date of the Sale and the IRA receives U. S. 
Treasury notes valued at the reported closing bid on the date of the 
Sale, plus the accrued interest the notes earned to the date of the 
Sale.
    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 5, 1997 at 62 
FR 47604.

FOR FURTHER INFORMATION CONTACT: Mr. C. E. Beaver 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 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) These exemptions are supplemental to and not in derogation of, 
any other provisions of the Act and/or the Code, including statutory or 
administrative exemptions and transactional rules. Furthermore, the 
fact that a transaction is subject to an

[[Page 56206]]

administrative or statutory exemption is not dispositive of whether the 
transaction is in fact a prohibited transaction; and
    (3) The availability of these exemptions is subject to the express 
condition that the material facts and representations contained in each 
application accurately describes all material terms of the transaction 
which is the subject of the exemption.

    Signed at Washington, D.C., this 23rd day of October, 1997.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits 
Administration, U.S. Department of Labor.
[FR Doc. 97-28593 Filed 10-28-97; 8:45 am]
BILLING CODE 4510-29-P