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Secretary of Labor Thomas E. Perez
Grant of Individual Exemptions; Bankers Trust Company [Notices] [05/29/1998]

EBSA (Formerly PWBA) Federal Register Notice

Grant of Individual Exemptions; Bankers Trust Company [05/29/1998]

[PDF Version]

Volume 63, Number 103, Page 29435-29442

[[Page 29435]]

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DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration
[Prohibited Transaction Exemption 98-23; Exemption Application No. D-
10213, et al.]

 
Grant of Individual Exemptions; Bankers Trust Company

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, DC. 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.

Bankers Trust Company (Bankers Trust) Located in New York, New York

[Prohibited Transaction Exemption 98-23; Exemption Application No. D-
10213]

Exemption

    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, effective February 16, 1996, to the: (1) lending of 
certain securities to BT Alex. Brown Incorporated, Bankers Trust 
International PLC, and Bankers Trust (Australia) Limited (and their 
corporate successors), which are affiliates of Bankers Trust, 
(collectively; the Affiliated Borrowers), by certain employee benefit 
plans (including commingled investment funds holding plan assets) (the 
Client Plans), for which Bankers Trust and certain other affiliates 
(the BT Group) act as the directed trustee or custodian or securities 
lending agent or sub-agent; <SUP>1</SUP> and (2) receipt of 
compensation by the BT Group in connection with these transactions; 
provided that the following conditions are satisfied:
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    \1\ The applicant represents that because Bankers Trust may add 
new affiliates, the entities comprising the BT Group may change. 
However, the Affiliated Borrowers will always be BT Alex. Brown 
Incorporated, Bankers Trust International PLC and Bankers Trust 
(Australia) Limited (and their corporate successors) for purposes of 
this exemption.
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    1. Neither the Affiliated Borrowers nor the BT Group has or 
exercises discretionary authority or control with respect to the 
investment of the assets of the Client Plans involved in the 
transaction (other than with respect to the investment of cash 
collateral after securities have been loaned and collateral received), 
or renders investment advice (within the meaning of 29 CFR 2510.3-
21(c)) with respect to those assets, including decisions concerning a 
Client Plan's acquisition and disposition of securities available for 
loan.
    2. Before a Client Plan participates in a securities lending 
program and before any loan of securities to the Affiliated Borrowers 
is affected, a Client Plan fiduciary who is independent of the BT Group 
and the Affiliated Borrowers must have:
    (a) Authorized and approved a securities lending authorization 
agreement with the BT Group, where the BT Group is acting as the 
securities lending agent;
    (b) Authorized and approved the primary securities lending 
authorization agreement with the primary lending agent, where BT Group 
is lending securities under a sub-agency arrangement with the primary 
lending agent; <SUP>2</SUP> and
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    \2\ When the BT Group acts as sub-agent, rather than the primary 
lending agent, the primary lending agent is receiving no section 
406(b) of the Act relief herein. In such situations, the primary 
lending agent may be provided relief by Prohibited Transaction Class 
Exemption (PTE) 81-6 and PTE 82-63. PTE 81-6 was published at 46 FR 
7527, January 23, 1981, as amended at 52 FR 18754, May 19, 1987, and 
PTE 82-63 was published at 47 FR 14804, April 6, 1982.
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    (c) Approved the general terms of the securities loan agreement 
(the Loan Agreement) between such Client Plan and the Affiliated 
Borrowers, the specific terms of which are negotiated and entered into 
by BT Group.
    3. The Client Plan may terminate the agency or sub-agency agreement 
at any time without penalty to such plan on five (5) business days 
notice, whereupon the Affiliated Borrowers shall deliver securities 
identical to the borrowed securities (or the equivalent in the event of 
reorganization, recapitalization or merger of the issuer of the 
borrowed securities) to the plan within (a) the customary delivery 
period for such securities, (b) five (5) business days, or (c) the time 
negotiated for such delivery by the Client Plan and the Affiliated 
Borrowers, whichever is less.
    4. The Client Plan will receive from the Affiliated Borrowers 
(either by physical delivery or by book entry in a securities 
depository located in the United States, wire transfer or similar 
means) by the close of business on or before the day on which the 
loaned securities are delivered to the Affiliated Borrowers, collateral 
consisting of U.S. currency, securities issued or guaranteed by the 
U.S. Government or its agencies or instrumentalities, or an irrevocable 
bank letter of credit issued by a U.S. bank, which is a person other 
than the Affiliated Borrowers or an affiliate thereof, or any 
combination thereof, or other collateral permitted under Prohibited 
Transaction Exemption (PTE) 81-6 (as amended from time to time or, 
alternatively, any additional or superceding class exemption that may 
be issued to cover securities lending by employee benefit plans), 
having, as of the close of business on the preceding business day, a 
market value (or, in the case of a letter of credit, a stated amount) 
initially equal to at least 102 percent of the market value of the 
loaned securities.

[[Page 29436]]

    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 business on that day, the 
Affiliated Borrowers will deliver additional collateral on the 
following day such that the market value of the collateral in the 
aggregate will again equal 102 percent. The Loan Agreement will give 
the Client Plan a continuing security interest in, title to, or the 
rights of a secured creditor with respect to the collateral and a lien 
on the collateral. The BT Group will monitor the level of the 
collateral daily.
    5. When the BT Group lends securities to the Affiliated Borrowers, 
the following conditions must be met: (a) the collateral will be 
maintained in U.S. dollars, U.S. dollar-denominated securities or 
letters of credit of U.S. Banks, or any combination thereof, or other 
collateral permitted under PTE 81-6 (as amended from time to time or, 
alternatively, any additional or superceding class exemption that may 
be issued to cover securities lending by employee benefit plans); 
<SUP>3</SUP> (b) all collateral will be held in the United States; (c) 
the situs of the loan agreement will be maintained in the United 
States; (d) the lending Client Plans will be indemnified by Bankers 
Trust in the United States for any transactions covered by this 
exemption with the foreign Affiliated Borrowers so that the Client 
Plans will not have to litigate in a foreign jurisdiction nor sue the 
foreign Affiliated Borrowers to realize on the indemnification; (e) 
prior to the transaction, the foreign Affiliated Borrowers will enter 
into a written agreement with the Client Plan whereby the Affiliated 
Borrowers consent to the service of process in the United States and to 
the jurisdiction of the courts of the United States with respect to the 
transactions described herein; and (f)(1) Bankers Trust International 
PLC is a deposit taking institution supervised by the Bank of England; 
and (2) Bankers Trust (Australia) Limited is a merchant bank which is 
under the jurisdiction of the Federal Reserve Bank of Australia.
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    \3\ See limitations discussed in Item I.5 of the Written 
Comments.
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    6. Before entering into the Loan Agreement and before a Client Plan 
lends any securities to the Affiliated Borrowers, the Affiliated 
Borrowers shall have furnished the following items to the Client Plan 
fiduciary: (a) the most recent available audited and unaudited 
statement of the Affiliated Borrowers' financial condition; (b) at the 
time of the loan, the Affiliated Borrowers must give prompt notice to 
the Client Plan fiduciary of any material adverse changes in the 
Affiliated Borrowers' financial condition since the date of the most 
recently financial statement furnished to the Client Plan; and (c) in 
the event of any such changes, the BT Group will request approval of 
the Client Plan to continue lending to the Affiliated Borrowers before 
making any such additional loans. No such new loans will be made until 
approval is received. Each loan shall constitute a representation by 
the Affiliated Borrower that there has been no such material adverse 
change.
    7. The Client Plan: (a) receives a reasonable fee that is related 
to the value of the borrowed securities and the duration of the loan, 
or (b) has the opportunity to derive compensation through the 
investment of cash collateral. In the case of cash collateral, the 
Client Plan may pay a loan rebate or similar fee to the Affiliated 
Borrower, if such fee is not greater than the fee Client Plan would pay 
an unrelated party in an arm's length transaction.
    8. All procedures regarding the securities lending activities will 
at a minimum conform to the applicable provisions of PTEs 81-6 and 82-
63 (as amended from time to time or, alternatively, any additional or 
superceding class exemption that may be issued to cover securities 
lending by employee benefit plans).
    9. In the event Bankers Trust International PLC and/or Bankers 
Trust (Australia) Limited default on a loan, Bankers Trust will 
liquidate the loan collateral to purchase identical securities for the 
Client Plan. If the collateral is insufficient to accomplish such 
purchase, Bankers Trust will indemnify the Client Plan for any 
shortfall in the collateral plus interest on such amount and any 
transaction costs incurred (including attorney's fees of the Client 
Plan for legal actions arising out of the default on the loans or 
failure to properly indemnify under this provision). Alternatively, if 
such identical securities are not available on the market, Bankers 
Trust will pay the Client Plan cash equal to the market value of the 
borrowed securities as of the date they should have been returned to 
the Client Plan plus all the accrued financial benefits derived from 
the beneficial ownership of such loaned securities. The lending Client 
Plans will be indemnified by Bankers Trust in the United States for any 
loans to the foreign Affiliated Borrowers.
    10. In the event BT Alex. Brown Incorporated, a U.S. registered 
broker-dealer, defaults on a loan, Bankers Trust will liquidate the 
loan collateral to purchase identical securities for the Client Plan. 
If the collateral is insufficient to accomplish such purchase, BT Alex. 
Brown Incorporated will indemnify the Client Plan for any shortfall in 
the collateral plus interest on such amount and any transaction costs 
incurred (including attorney's fees of the Client Plan for legal 
actions arising out of the default on the loans or failure to properly 
indemnify under this provision).
    11. If the Affiliated Borrowers' default on the securities loan or 
enter bankruptcy, the collateral will not be available to the 
Affiliated Borrowers or their creditors, but is used to make the Client 
Plan whole.
    12. The Client Plans will be entitled to the equivalent of all 
distributions made to holders of the borrowed securities, including all 
interest, dividends and distributions on the loaned securities during 
the loan period.
    13. Only Client Plans with total assets having an aggregate market 
value of at least $50 million are permitted to lend securities to the 
Affiliated Borrowers; provided however, that--
    (a) In the case of two or more Client Plans which are maintained by 
the same employer, controlled group of corporations or employee 
organization (the Related Client Plans), whose assets are commingled 
for investment purposes in a single master trust or any other entity 
the assets of which are ``plan assets'' under 29 CFR 2510.3-101 (the 
Plan Asset Regulation), which entity is engaged in securities lending 
arrangements with the Affiliated Borrowers, the foregoing $50 million 
requirement shall be deemed satisfied if such trust or other entity has 
aggregate assets which are in excess of $50 million; provided that if 
the fiduciary responsible for making the investment decision on behalf 
of such master trust or other entity is not the employer or an 
affiliate of the employer, such fiduciary has total assets under its 
management and control, exclusive of the $50 million threshold amount 
attributable to plan investment in the commingled entity, which are in 
excess of $100 million.
    (b) In the case of two or more Client Plans which are not 
maintained by the same employer, controlled group of corporations or 
employee organization (the Unrelated Client Plans), whose assets are 
commingled for investment purposes in a group trust or any other form 
of entity the assets of which are ``plan assets'' under the Plan Asset 
Regulation, which entity is engaged in securities lending arrangements 
with the Affiliated Borrowers, the foregoing $50 million requirement is 
satisfied if such trust or other entity has aggregate assets which are 
in excess of $50

[[Page 29437]]

million (excluding the assets of any Plan with respect to which the 
fiduciary responsible for making the investment decision on behalf of 
such group trust or other entity or any member of the controlled group 
of corporations including such fiduciary is the employer maintaining 
such Plan or an employee organization whose members are covered by such 
Plan). However, the fiduciary responsible for making the investment 
decision on behalf of such group trust or other entity--
    (i) Has full investment responsibility with respect to plan assets 
invested therein; and
    (ii) Has total assets under its management and control, exclusive 
of the $50 million threshold amount attributable to plan investment in 
the commingled entity, which are in excess of $100 million. (In 
addition, none of the entities described above are formed for the sole 
purpose of making loans of securities.)
    14. For purposes of this exemption, the Affiliated Borrowers will 
consist only of BT Alex. Brown Incorporated, Bankers Trust 
International PLC and Bankers Trust (Australia) Limited, and their 
corporate successors.
    15. In any calendar quarter, on average 50 percent or more of the 
outstanding dollar value of securities loans negotiated on behalf of 
the Client Plans by the BT Group in the aggregate will be to borrowers 
who are not affiliated with the BT Group.
    16. The terms of each loan of securities by the Client Plans to any 
of the Affiliated Borrowers will be at market rates and at terms as 
favorable to such plans as if made at the same time and under the same 
circumstances to an unaffiliated party.
    17. Each Client Plan will receive a monthly transaction report, 
including but not limited to the information described in paragraph 24 
of the notice of proposed exemption (the Notice), so that the 
independent fiduciary of such plan may monitor the securities lending 
transactions with the Affiliated Borrowers.
    18. During the notification of interested persons period, all 
Client Plans (that were Client Plans during this period) received a 
copy of the notice of pendency of the proposed exemption. In addition, 
current Client Plans will receive a copy of the final exemption and 
Bankers Trust will provide a copy of the final exemption to any new 
Client Plans.
    19. Bankers Trust or the Affiliated Borrowers maintain or cause 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 paragraph (20) below 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 Bankers 
Trust or the Affiliated Borrowers, 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 Bankers Trust or the Affiliated 
Borrowers, such records are lost or destroyed prior to the end of such 
six year period.
    (20)(i) Except as provided in subparagraph (ii) of this paragraph 
(20) and notwithstanding any provisions of subsections (a)(2) and (b) 
of section 504 of the Act, the records referred to in paragraph (19) 
are unconditionally available at their customary location for 
examination during normal business hours by--
    (a) Any duly authorized employee or representative of the 
Department, the Internal Revenue Service, or the Securities and 
Exchange Commission,
    (b) Any fiduciary of a Client Plan or any duly authorized 
representative of such fiduciary,
    (c) Any contributing employer to any Client Plan, or any duly 
authorized employee or representative of such employer, and
    (d) Any participant or beneficiary of any Client Plan, or any duly 
authorized representative of such participant or beneficiary.
    (ii) None of the persons described in subparagraphs (b)-(d) of this 
paragraph (20) shall be authorized to examine trade secrets of Bankers 
Trust or the Affiliated Borrowers, or commercial or financial 
information which is privileged or confidential.
    Effective Date: This exemption is effective as of February 16, 
1996.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption, refer to 
the Notice published on February 19, 1998 at 63 FR 8482.

Written Comments

    The Department received one written comment (the Comment) with 
respect to the Notice and no requests for a public hearing. The Comment 
was filed by Bankers Trust and generally requests clarifications and 
modifications to the Notice. Set forth below in section I is a 
discussion of those aspects of the Comment which relate to the language 
of the final exemption (the Exemption). In addition, section II below 
discusses the aspects of the Comment which relate to the Summary of 
Facts and Representations (the Summary) contained in the Notice.

I. Discussion of the Comment Regarding the Exemption

    1. The introductory paragraph of the Notice proposes to exempt, in 
relevant part, the lending of securities to certain affiliates of 
Bankers Trust. Bankers Trust states that BT Securities Corporation has 
merged with Alex. Brown and Sons, Incorporated. Accordingly, Bankers 
Trust requests that the term ``BT Alex. Brown Incorporated'' be 
substituted for ``BT Securities Corporation'' in the relevant sections 
of the Notice.
    The Department acknowledges the applicant's request and has 
modified the Exemption to reflect this substitution.
    2. Bankers Trust states that it would like to avoid the need to 
request a clarification of the Exemption from the Department in the 
future should another change occur in the names of the entities that 
comprise the BT Group. Thus, the applicant suggests that the term 
``Affiliated Borrowers'' be defined in the Exemption as BT Alex. Brown 
Incorporated, Bankers Trust International PLC, and Bankers Trust 
(Australia) Limited and their corporate successors [emphasis added]. 
Bankers Trust requests that this modification be made in the 
introductory paragraph of the operative language of the Exemption, in 
the last sentence of footnote 1, and elsewhere in the Exemption, as 
relevant.
    The Department concurs with the applicant's suggestion and has 
modified the Exemption accordingly. However, with respect to corporate 
successors, the Department notes that the Exemption would not be 
effective for any new entities created by the sale of the underlying 
assets of an Affiliated Borrower to an unrelated third party.
    3. Bankers Trust comments that the Affiliated Borrowers are 
sometimes only the securities lending agent and not the custodian or 
directed trustee of the Client Plan. Therefore, Bankers Trust requests 
that the word ``or'' should be substituted for the word ``and'' in the 
relevant places of the Exemption to clarify that an Affiliated Borrower 
may be only the securities agent for the Client Plan.
    The Department acknowledges the applicant's clarification and has 
modified the Exemption accordingly.
    4. Condition 3 of the Notice provides, among other things, that the 
Client Plan may terminate the agency or sub-agency

[[Page 29438]]

agreement on five (5) days notice whereupon the Affiliated Borrowers 
shall deliver certificates for securities identical to the borrowed 
securities to the Client Plan within a specified time period (as stated 
therein). Bankers Trust states that because the certificates of 
securities are not physically delivered to the Client Plan in every 
instance, the words ``* * * certificates for'' as used in this 
Condition should be deleted.
    The Department acknowledges the applicant's clarification and has 
modified Condition 3 of the Exemption accordingly.
    5. Condition 5(a) of the Notice requires that when the BT Group 
lends securities to the Affiliated Borrowers, the collateral will be 
maintained in U.S. dollars, U.S. dollar-denominated securities or 
letters of credit of U.S. Banks. The applicant states that when Bankers 
Trust lends securities to the Affiliated Borrowers under the Exemption, 
it should be able to use as collateral any property or other 
arrangement which may be permitted by the Department in a future class 
exemption for securities lending. Therefore, Bankers Trust suggests 
adding the following language as an insert at the end of the language 
contained in Condition 5(a):

    * * * or any combination thereof, or other collateral permitted 
under Prohibited Transaction Exemption (PTE) 81-6 (as amended from 
time to time or, alternatively, any additional or superceding class 
exemption that may be issued to cover securities lending by employee 
benefit plans).

    The Department concurs with the applicant's suggested modification 
and has added the above-referenced language to Condition 5(a) of the 
Exemption. However, the Department notes that the Exemption provides 
relief from the restrictions of section 406(a) as well as section 
406(b)(1) and (b)(2) of the Act, whereas PTE 81-6 provides relief only 
for securities lending transactions which would violate section 406(a) 
of the Act. Thus, any amendments that may be made by the Department to 
PTE 81-6 which would permit different types of assets to be used as 
collateral for a securities loan would not allow the use of such assets 
as collateral under this Exemption to the extent that the transactions 
covered by this Exemption would require relief from section 406(b) of 
the Act.
    6. Condition 8 of the Notice requires that all procedures regarding 
the securities lending activities will at a minimum conform to the 
applicable provisions of PTEs 81-6 and 82-63. Bankers Trust comments 
that the following language should be added at the end of Condition 8 
of the Notice.

    * * * (as amended from time to time or, alternatively, any 
additional or superceding class exemption that may be issued to 
cover securities lending by employee benefit plans).

    3The Department concurs with the applicant's suggested modification 
and has added the above-referenced language to Condition 8 of the 
Exemption.
    7. Condition 13 of the Notice requires that only Client Plans with 
total assets having an aggregate market value of at least $50 million 
will be permitted to lend securities to the Affiliated Borrowers. 
Bankers Trust requests that the Client Plans be permitted to aggregate 
their assets for purposes of meeting the minimum Plan size requirement 
for lending securities to the Affiliated Borrowers under the Exemption. 
Therefore, Bankers Trust recommends that the following language be 
substituted for Condition 13 of the Notice:

    ``Only Client Plans with total assets having an aggregate market 
value of at least $50 million are permitted to lend securities to 
the Affiliated Borrowers; provided however, that--
    (a) In the case of two or more Client Plans which are maintained 
by the same employer, controlled group of corporations or employee 
organization (the Related Client Plans), whose assets are commingled 
for investment purposes in a single master trust or any other entity 
the assets of which are ``plan assets'' under 29 CFR 2510.3-101 (the 
Plan Asset Regulation), which entity is engaged in securities 
lending arrangements with the Affiliated Borrowers, the foregoing 
$50 million requirement shall be deemed satisfied if such trust or 
other entity has aggregate assets which are in excess of $50 
million; provided that if the fiduciary responsible for making the 
investment decision on behalf of such master trust or other entity 
is not the employer or an affiliate of the employer, such fiduciary 
has total assets under its management and control, exclusive of the 
$50 million threshold amount attributable to plan investment in the 
commingled entity, which are in excess of $100 million.
    (b) In the case of two or more Client Plans which are not 
maintained by the same employer, controlled group of corporations or 
employee organization (the Unrelated Client Plans), whose assets are 
commingled for investment purposes in a group trust or any other 
form of entity the assets of which are ``plan assets'' under the 
Plan Asset Regulation, which entity is engaged in securities lending 
arrangements with the Affiliated Borrowers, the foregoing $50 
million requirement is satisfied if such trust or other entity has 
aggregate assets which are in excess of $50 million (excluding the 
assets of any Plan with respect to which the fiduciary responsible 
for making the investment decision on behalf of such group trust or 
other entity or any member of the controlled group of corporations 
including such fiduciary is the employer maintaining such Plan or an 
employee organization whose members are covered by such Plan). 
However, the fiduciary responsible for making the investment 
decision on behalf of such group trust or other entity--
    (i) Has full investment responsibility with respect to plan 
assets invested therein; and
    (ii) Has total assets under its management and control, 
exclusive of the $50 million threshold amount attributable to plan 
investment in the commingled entity, which are in excess of $100 
million.

(In addition, none of the entities described above are formed for 
the sole purpose of making loans of securities.)'' [emphasis added]

    The Department concurs with this change to the language of 
Condition 13 of the Notice and has modified the Exemption accordingly.

II. Discussion of the Comment Regarding the Summary

    1. Paragraph 4 of the Summary in the Notice contains a discussion 
regarding Federal Reserve Board's Regulation T. Bankers Trust comments 
that the Regulation T provision that limited the situations for which 
securities may be borrowed or lent (the ``purpose test'') has been 
amended to reflect recent legislation, and now may not apply to Bankers 
Trust securities lending activities in every instance. Thus, the 
representation previously made by Bankers Trust, as stated in the first 
sentence of Paragraph 4 of the Summary, should be modified to read as 
follows:

    BT Alex. Brown Incorporated, a U.S. registered broker-dealer, 
will comply with the Federal Reserve Board's Regulation T in its 
securities lending activities to the extent that Regulation T 
applies.

    The Department concurs with this modification.
    2. Paragraph 17 of the Summary discusses the written schedule of 
lending fees and rebate rates established by the BT Group. In this 
regard, in order to clarify how these rates may relate to the rates for 
a particular securities lending transaction with a Client Plan, Bankers 
Trust requests that the third sentence in Paragraph 17 of the Summary 
be changed as follows:

    In no case will loans be made to the Affiliated Borrowers at 
rates less favorable to the Client Plans than those on the schedule. 
[emphasis added]

    The Department concurs with this modification.
    3. Bankers Trust comments that the BT Group will provide notice of 
a change in the lending fee formula or

[[Page 29439]]

rebate rate formula, as discussed in paragraph 21 of the Summary. 
However, because the formula rates are designed to vary based on the 
operation of the formula, the BT Group will provide notice only of the 
formula change (unless such formula change would always be beneficial 
to the Client Plans), and not of a decrease or increase in the lending 
fee or rebate rate itself. Therefore, Bankers Trust states that its 
previous representations, which are contained in first and second 
sentences of Paragraph 21 of the Summary, should be clarified as 
follows:

    Should the BT Group recognize prior to the end of a business day 
that, with respect to new and/or existing loans, it must change the 
rebate rate formula or lending fee formula in the best interest of 
Client Plans, it may do so with respect to the Affiliated Borrowers.
    If the BT Group changes the lending fee formula or the rebate 
rate formula on any outstanding loan to the Affiliated Borrower 
(except for any change resulting from a change in the value of any 
third party independent index with respect to which the fee or 
rebate is calculated, or if the formula will always be beneficial to 
the Client Plan), the BT Group, by the close of business on the date 
of such adjustment, shall provide the independent fiduciary of the 
Client Plan with notice that it has changed such fee formula or 
rebate rate formula with respect to such Affiliated Borrower and 
that the Client Plan may terminate such loan at any time. [emphasis 
added]

    The Department acknowledges Bankers Trust's request for 
clarification to the representations contained in Paragraph 21 of the 
Summary as well as the other clarifications to the current record 
provided by the applicant.
    Therefore, after giving full consideration to the entire record, 
including the Comment, the Department has decided to grant the 
exemption, subject to the modifications and clarifications described 
above. The Comment has been included as part of the public record of 
the exemption application. The complete exemption file is available for 
public inspection in the Public Disclosure Room of the Pension and 
Benefits Administration, Room N-5638, U.S. Department of Labor, 200 
Constitution Avenue, NW., Washington, DC 20210.
    For Further Information Contact: Ekaterina A. Uzlyan, U.S. 
Department of Labor, telephone (202) 219-8883. (This is not a toll-free 
number.)

Goldman Sachs & Co. (Goldman Sachs) and The Goldman Sachs Trust Company 
(GSTC) Located in New York, NY

[Prohibited Transaction Exemption 98-24; Exemption Application No. D-
10306]

Exemption

    The restrictions of sections 406(a)(1)(A) through (D) and 406(b)(1) 
and (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, effective July 31, 1996, to the past 
and continued lending of securities to Goldman Sachs International or 
any other Goldman Sachs affiliate based in the United Kingdom 
(together, GSI), Goldman Sachs, affiliated U.S. registered broker-
dealers of Goldman Sachs, or Goldman Sachs (Japan), Ltd., including any 
of its affiliates (together, Goldman Sachs (Japan),<SUP>4</SUP> by 
employee benefit plans (the Client Plans), including commingled 
investment funds holding Plan assets, for which Goldman Sachs Trust 
Company (GSTC), an affiliate of Goldman Sachs, acts as securities 
lending agent (or sub-agent) and to the receipt of compensation by GSTC 
in connection with these transactions, provided that the following 
conditions are met:
---------------------------------------------------------------------------

    \4\ Unless otherwise noted, for purposes of this exemption, 
Goldman Sachs, the affiliated U.S. registered broker-dealers of 
Goldman Sachs, GSI and Goldman Sachs (Japan) are collectively 
referred to herein as Goldman Sachs.
---------------------------------------------------------------------------

    (a) For each Client Plan, neither GSTC, Goldman Sachs nor an 
affiliate of either has or exercises 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.
    (b) Any arrangement for GSTC to lend Plan securities to Goldman 
Sachs in either an agency or sub-agency capacity is approved in advance 
by a Plan fiduciary who is independent of Goldman Sachs and 
GSTC.<SUP>5</SUP> In this regard, the independent Plan fiduciary also 
approves the general terms of the securities loan agreement (the Loan 
Agreement) between the Client Plan and Goldman Sachs, although the 
specific terms of the Loan Agreement are negotiated and entered into by 
GSTC and GSTC acts as a liaison between the lender and the borrower to 
facilitate the lending transaction.
---------------------------------------------------------------------------

    \5\ The Department, herein, is not providing exemptive relief 
for securities lending transactions engaged in by primary lending 
agents, other than GSTC, beyond that provided pursuant to Prohibited 
Transaction Exemption (PTE) 81-6 (46 FR 7527, January 23, 1981, as 
amended at 52 FR 18754, May 19, 1987) and PTE 82-63 (47 FR 14804, 
April 6, 1982).
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    (c) The terms of each loan of securities by a Client Plan to 
Goldman Sachs is at least as favorable to such Plans as those of a 
comparable arm's length transaction between unrelated parties.
    (d) A Client Plan may terminate the agency or sub-agency 
arrangement at any time without penalty to such Plan on five business 
days notice.
    (e) The Client Plan receives from Goldman Sachs (either by physical 
delivery or by book entry in a securities depository located in the 
United States, wire transfer or similar means) by the close of business 
on or before the day the loaned securities are delivered to Goldman 
Sachs, collateral consisting of cash, 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 Goldman Sachs or an affiliate thereof, or any combination 
thereof, or other collateral permitted under PTE 81-6, as it may be 
amended or superseded.
    (f) As of the close of business on the preceding business day, the 
fair market value of the collateral initially equals at least 102 
percent of the market value of the loaned securities and, if the market 
value of the collateral falls below 100 percent, Goldman Sachs delivers 
additional collateral on the following day such that the market value 
of the collateral again equals 102 percent.
    (g) Prior to entering into the Loan Agreement, Goldman Sachs 
furnishes GSTC its most recently available audited and unaudited 
statements, which is, in turn, provided to a Client Plan, as well as a 
representation by Goldman Sachs, that as of each time it borrows 
securities, there has been no material adverse change in its financial 
condition since the date of the most recently-furnished statement that 
has not been disclosed to such Client Plan; provided, however, that in 
the event of a material adverse change, GSTC does not make any further 
loans to Goldman Sachs unless an independent fiduciary of the Client 
Plan is provided notice of any material adverse change and approves the 
loan in view of the changed financial condition.
    (h) In return for lending securities, the Client Plan either--
    (1) Receives a reasonable fee, which is related to the value of the 
borrowed securities and the duration of the loan; or
    (2) Has the opportunity to derive compensation through the 
investment of cash collateral. (Under such

[[Page 29440]]

circumstances, the Client Plan may pay a loan rebate or similar fee to 
Goldman Sachs, if such fee is not greater than the fee the Client Plan 
would pay in a comparable arm's length transaction with an unrelated 
party.)
    (i) All procedures regarding the securities lending activities 
conform to the applicable provisions of Prohibited Transaction 
Exemptions PTE 81-6 and PTE 82-63 as well as to applicable securities 
laws of the United States, the United Kingdom or Japan.
    (j) Each Goldman Sachs entity indemnifies and holds harmless each 
lending Client Plan in the United States against any and all losses, 
damages, liabilities, costs and expenses (including attorney's fees) 
which the Client Plan may incur or suffer directly arising out of the 
lending of securities of such Client Plan to such Goldman Sachs entity. 
In the event that GSI or Goldman Sachs (Japan) defaults on a loan, GSTC 
will liquidate the loan collateral to purchase identical securities for 
the Client Plan. If the collateral is insufficient to accomplish such 
purchase, GSTC will indemnify the Client Plan for any shortfall in the 
collateral plus interest on such amount and any transaction costs 
incurred (including attorney's fees of the Client Plan for legal 
actions arising out of the default on the loans or failure to properly 
indemnify under such provisions). Alternatively, if such identical 
securities are not available on the market, GSTC will pay the Client 
Plan cash equal to (1) the market value of the borrowed securities as 
of the date they should have been returned to the Client Plan, plus (2) 
all the accrued financial benefits derived from the beneficial 
ownership of such loaned securities as of such date, plus (3) interest 
from such date to the date of payment.
    (k) The Client 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, or other distributions.
    (l) Except for Client Plans which have or had outstanding 
securities loans to Goldman Sachs before February 19, 1998, Goldman 
Sachs provides, prior to any Client Plan's approval of the lending of 
its securities to Goldman Sachs, copies of the notice of proposed 
exemption (the Notice) and the final exemption. With respect to Client 
Plans which have or had outstanding securities loans to Goldman Sachs 
through GSTC prior to February 19, 1998, GSTC provides such Plans with 
copies of the Notice.
    (m) Each Client Plan receives monthly reports with respect to its 
securities lending transactions, including, but not limited to the 
information described in Representation 31 of the Notice, so that an 
independent fiduciary of the Client Plan may monitor such transactions 
with Goldman Sachs.
    (n) Only Client Plans with total assets having an aggregate market 
value of at least $50 million are permitted to lend securities to 
Goldman Sachs; provided, however, that--
    (1) In the case of two or more Client Plans which are maintained by 
the same employer, controlled group of corporations or employee 
organization (the Related Client Plans), whose assets are commingled 
for investment purposes in a single master trust or any other entity 
the assets of which are ``plan assets'' under 29 CFR 2510.3-101 (the 
Plan Asset Regulation), which entity is engaged in securities lending 
arrangements with Goldman Sachs, the foregoing $50 million requirement 
shall be deemed satisfied if such trust or other entity has aggregate 
assets which are in excess of $50 million; provided that if the 
fiduciary responsible for making the investment decision on behalf of 
such master trust or other entity is not the employer or an affiliate 
of the employer, such fiduciary has total assets under its management 
and control, exclusive of the $50 million threshold amount attributable 
to plan investment in the commingled entity, which are in excess of 
$100 million.
    (2) In the case of two or more Client Plans which are not 
maintained by the same employer, controlled group of corporations or 
employee organization (the Unrelated Client Plans), whose assets are 
commingled for investment purposes in a group trust or any other form 
of entity the assets of which are ``plan assets'' under the Plan Asset 
Regulation, which entity is engaged in securities lending arrangements 
with Goldman Sachs, the foregoing $50 million requirement is satisfied 
if such trust or other entity has aggregate assets which are in excess 
of $50 million (excluding the assets of any Plan with respect to which 
the fiduciary responsible for making the investment decision on behalf 
of such group trust or other entity or any member of the controlled 
group of corporations including such fiduciary is the employer 
maintaining such Plan or an employee organization whose members are 
covered by such Plan). However, the fiduciary responsible for making 
the investment decision on behalf of such group trust or other entity--
    (i) Has full investment responsibility with respect to plan assets 
invested therein; and
    (ii) Has total assets under its management and control, exclusive 
of the $50 million threshold amount attributable to plan investment in 
the commingled entity, which are in excess of $100 million.

(In addition, none of the entities described above are formed for the 
sole purpose of making loans of securities.)
    (o) With respect to any calendar quarter, at least 50 percent or 
more of the outstanding dollar value of securities loans negotiated on 
behalf of Client Plans will be to unrelated borrowers.
    (p) In addition to the above, all loans involving GSI and Goldman 
Sachs (Japan), have the following supplemental requirements:
    (1) Such broker-dealer is registered as a broker-dealer with the 
Securities and Futures Authority of the United Kingdom or with the 
Ministry of Finance and the Tokyo Stock Exchange;
    (2) Such broker-dealer is in compliance with all applicable 
provisions of Rule 15a-6 (17 CFR 240.15a-6) under the Securities 
Exchange Act of 1934 which provides for foreign broker-dealers a 
limited exemption from United States registration requirements;
    (3) All collateral is maintained in United States dollars or 
dollar-denominated securities or letters of credit;
    (4) All collateral is held in the United States and GSTC maintains 
the situs of the securities Loan Agreements in the United States under 
an arrangement that complies with the indicia of ownership requirements 
under section 404(b) of the Act and the regulations promulgated under 
29 CFR 2550.404(b)-1; and
    (5) GSI or Goldman Sachs (Japan) provides Goldman Sachs a written 
consent to service of process in the United States for any civil action 
or proceeding brought in respect of the securities lending transaction, 
which consent provides that process may be served on such borrower by 
service on Goldman Sachs.
    (q) Goldman Sachs and its affiliates maintain, or cause to maintain 
within the United States for a period of six years from the date of 
such transaction, in a manner that is convenient and accessible for 
audit and examination, such records as are necessary to enable the 
persons described in paragraph (r)(1) to determine whether the 
conditions of the exemption have been met, except that--
    (1) A prohibited transaction will not be considered to have 
occurred if, due

[[Page 29441]]

to circumstances beyond the control of Goldman Sachs and/or its 
affiliates, the records are lost or destroyed prior to the end of the 
six year period; and
    (2) No party in interest other than Goldman Sachs shall be subject 
to the civil penalty that may be assessed under section 502(i) of the 
Act, or to the taxes imposed by section 4975(a) and (b) of the Code, if 
the records are not maintained, or are not available for examination as 
required below by paragraph (r)(1).
    (r)(1) Except as provided in subparagraph (r)(2) of this paragraph 
and notwithstanding any provisions of subsections (a)(2) and (b) of 
section 504 of the Act, the records referred to in paragraph (q) are 
unconditionally available at their customary location during normal 
business hours by:
    (i) Any duly authorized employee or representative of the 
Department, the Internal Revenue Service or the Securities and Exchange 
Commission (the SEC);
    (ii) Any fiduciary of a participating Client Plan or any duly 
authorized representative of such fiduciary;
    (iii) Any contributing employer to any participating Client Plan or 
any duly authorized employee representative of such employer; and
    (iv) Any participant or beneficiary of any participating Client 
Plan, or any duly authorized representative of such participant or 
beneficiary.
    (r)(2) None of the persons described above in paragraphs 
(r)(1)(ii)-(r)(1)(iv) of this paragraph (r)(1) are authorized to 
examine the trade secrets of Goldman Sachs or commercial or financial 
information which is privileged or confidential.
    Effective date: This exemption is effective as of July 31, 1996.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption, refer to 
the Notice published on February 19, 1998 at 63 FR 8489.

Written Comments

    The Department received one written comment with respect to the 
Notice and no requests for a public hearing. The comment, which was 
submitted by Goldman Sachs, suggested modifications to the operative 
language of the Notice and recommended certain changes to the Summary 
of Facts and Representations (the Summary) of the Notice. Presented 
below are the modifications requested by Goldman Sachs and the 
Department's accompanying responses.
    1. Condition (l). Condition (l) of the Notice requires that GSTC 
provide a copy of the proposed and final exemption to Client Plans 
prior to such plans' approval of loans to Goldman Sachs. Given that the 
relief requested is retroactive, Goldman Sachs proposes to amend 
Condition (l) by inserting the following phrase at the beginning of 
this provision: ``Except for Client Plans which have or had outstanding 
securities loans to Goldman through GSTC prior to February 19, 1998.'' 
In addition, Goldman Sachs suggests adding the following sentence to 
the end of Condition (l): ``With respect to Client Plans which have or 
had outstanding securities loans to Goldman through GSTC prior to 
February 19, 1998, GSTC will provide such Plans with the notice of 
pendency as set forth in the Notice to Interested Persons section of 
the proposed exemption.'' In response, the Department has modified 
Condition (l) of the Notice to read as follows:

    (1) Except for Client Plans which have or had outstanding 
securities loans to Goldman Sachs before February 19, 1998, Goldman 
Sachs provides, prior to any Client Plan's approval of the lending 
of its securities to Goldman Sachs, copies of the notice of proposed 
exemption (the Notice) and the final exemption. With respect to 
Client Plans which have or had outstanding securities loans to 
Goldman Sachs through GSTC prior to February 19, 1998, GSTC provides 
such Plans with copies of the Notice.

    2. Representations 7 and 8. Representations 7 and 8 of the Summary 
discuss compliance provisions with Rule 15a-6 of the 1934 Act by 
Goldman Sachs, GSI and Goldman Sachs (Japan). As noted in the Summary, 
Rule 15a-6 provides foreign broker-dealers with a limited exemption 
from SEC registration requirements and offers additional protections. 
Goldman Sachs states that some of the provisions of Rule 15a-6 have 
been changed or modified as a result of an SEC No-Action Letter 
obtained by its counsel on behalf of it and a group of broker-dealers 
on April 9, 1997.\6\ Although Goldman Sachs represents that it intends 
to comply with any applicable provisions of Rule 15a-6 as it may change 
from time to time, for the sake of accuracy, it requests that 
Representations 7 and 8 be amended to reflect the rule and the no-
action relief. Accordingly, Goldman Sachs suggests the following 
changes which have been made by the Department:
---------------------------------------------------------------------------

    \6\ See SEC No-Action Letter dated April 9, 1997 to Giovanni P. 
Prezioso, Esq. of Cleary, Gottlieb, Steen & Hamilton regarding 
Securities Activities of U.S-Affiliated Foreign Dealers.
---------------------------------------------------------------------------

    a. Footnote 14. Footnote 14 of the Summary states that GSI and 
Goldman Sachs (Japan) may rely on a U.S. bank or trust company, 
including GSTC, instead of relying on a U.S. broker-dealer. Goldman 
Sachs requests that Footnote 14 of the Summary be moved to the end of 
the third sentence of Representation 7.
    b. Addition of Footnote to Representation 7. Goldman Sachs suggests 
that a new footnote be inserted at the end of Representation 7 which 
would read as follows:

    ``See also SEC No-Action Letter issued to Cleary, Gottlieb, 
Steen & Hamilton on April 9, 1997 (hereinafter, ``the April 9 No-
Action Letter''), expanding the definition of ``Major U.S. 
Institutional Investor.''

    c. Addition of Footnote to Representation 8(c)(5). Representation 
8(c)(5) of the Summary states that a foreign broker-dealer that induces 
or attempts to induce the purchase or sale of any security by a U.S. 
institutional or major institutional investor must ``receive, deliver 
and safeguard funds and securities in connection with transactions on 
behalf of the U.S. institutional investor or U.S. major institutional 
investor in compliance with Rule 15c3-3 of the 1934 Act (Customer 
Protection--Reserves and Custody of Securities).'' To update this 
provision, Goldman Sachs requests that the following footnote be placed 
at the end of paragraph (c)(5) of Representation 8:

    ``Under certain circumstances described in the April 9, 1997 No-
Action Letter (e.g., clearance and settlement transactions), there 
may be direct transfers of funds and securities between the Client 
Plan and GSI and Goldman Sachs (Japan). Goldman Sachs notes that in 
such situations, the U.S. registered broker-dealer will not be 
acting as a principal with respect to any duties it is required to 
undertake pursuant to Rule 15a-6.''

    d. Modification of Representation 8(c)(6). Representation 8(c)(6) 
of the Summary states that a foreign broker-dealer that induces or 
attempts to induce the purchase or sale of any security by a U.S. 
institutional or major institutional investor must ``participate in all 
oral communications (e.g., telephone calls) between the foreign 
associated person and the U.S. institutional investor (not the U.S. 
major institutional investor), and accompany the foreign associated 
person on all visits with both U.S. institutional and major 
institutional investors. By virtue of this participation, the U.S. 
registered broker-dealer would become responsible for the content of 
all these communications.''
    Given that the relief granted in the April 9, 1997 No-Action Letter 
significantly modified the ``chaperoning'' requirements of Rule 15a-6 
to provide, under certain

[[Page 29442]]

circumstances, direct communications and contact between the foreign 
broker-dealer and the U.S. Institutional Investor, Goldman Sachs 
requests that the reference to ``all communications'' and ``all 
visits'' be amended to read ``certain communications'' and ``certain 
visits.'' In addition, Goldman Sachs requests that the last sentence of 
Representation 8(c)(6) be deleted and the following footnote be added 
to the end of such section to read:

    ``Under certain circumstances, the foreign associated person may 
have direct communications and contact with the U.S. Institutional 
Investor. See April 9 SEC No-Action Letter.''

    3. Representation 12. The second sentence of Representation 12 
states that ``for each Plan, neither GSTC, Goldman Sachs nor any 
affiliate will have no discretionary authority or control or render 
investment advice over Client Plans' decisions concerning the 
acquisition or disposition of securities available for loan.'' Goldman 
Sachs requests that the word ``no,'' which precedes the word 
``discretionary'' be deleted from this sentence as it is in error. The 
Department concurs with this change and has made the required 
modification.
    4. Representation 15. The third paragraph of Representation 15 
states that the provisions of the Sub-Agency Agreement will be 
comparable to those of the Agency Agreement but it erroneously cross-
references the Agency Agreement to Representation 9. Goldman Sachs 
wishes to point out that the correct cross-reference should be to 
Representation 14 rather than Representation 9. The Department concurs 
with this change and has made the required modification.
    5. Representation 24. Goldman Sachs states that the fourth sentence 
of Representation 24 contains a typographical error in that the 
parenthetical should end after the phrase ``from such loan'' instead of 
at the end of the sentence. Therefore, the Department has revised this 
sentence to read as follows:

    With respect to any loan to Goldman Sachs, GSTC will never 
negotiate a rebate rate with respect to such loan which would be 
expected to produce a zero or negative return to the Client Plan 
(assuming no default on the investments related to the cash 
collateral from such loan) where GSTC has investment discretion over 
the cash collateral.

    6. Representation 33 and Condition (n). Representation 22 of the 
Summary and Condition (n) of the Notice exclude from the securities 
lending program commingled trust funds which contain plan assets of 
more than one employer if the fiduciary responsible for making the 
investment decision is one of the Client Plan's employers. Goldman 
Sachs does not believe this restriction is necessary because it would 
preclude the State Street Collective Trust Funds from using GSTC as a 
securities lending agent and lending to Goldman Sachs under the 
exemption if one of State Street's employee benefit plans were invested 
in the fund, even though the fund would otherwise comply with the $50 
million in assets requirement and State Street as a fiduciary to the 
fund would otherwise satisfy the $100 million under management 
requirement. Therefore, Goldman Sachs suggests that the Department 
revise paragraph (n)(2) of the Conditions and subclause (a) of the 
second paragraph of Representation 33 to read as follows:

    (2) In the case of two or more Client Plans which are not 
maintained by the same employer, controlled group of corporations or 
employee organization (the Unrelated Client Plans), whose assets are 
commingled for investment purposes in a group trust or any other 
form of entity the assets of which are ``plan assets'' under the 
Plan Asset Regulation, which entity is engaged in securities lending 
arrangements with Goldman Sachs, the foregoing $50 million 
requirement is satisfied if such trust or other entity has aggregate 
assets which are in excess of $50 million (excluding the assets of 
any Plan with respect to which the fiduciary responsible for making 
the investment decision on behalf of such group trust or other 
entity or any member of the controlled group of corporations 
including such fiduciary is the employer maintaining such Plan or an 
employee organization whose members are covered by such Plan). 
However, the fiduciary responsible for making the investment 
decision on behalf of such group trust or other entity--
    (i) Has full investment responsibility with respect to plan 
assets invested therein; and
    (ii) Has total assets under its management and control, 
exclusive of the $50 million threshold amount attributable to plan 
investment in the commingled entity, which are in excess of $100 
million.

    After considering this comment, the Department has made the changes 
suggested by Goldman Sachs.
    For further information regarding Goldman Sachs's comments or other 
matters discussed herein, interested persons are encouraged to obtain 
copies of the exemption application file (Exemption Application No. D-
10306) the Department is maintaining in this case. The complete 
application file, as well as all supplemental submissions received by 
the Department, are made available for public inspection in the Public 
Documents Room of the Pension and Welfare Benefits Administration, Room 
N-5638, U.S. Department of Labor, 200 Constitution Avenue, NW, 
Washington, DC 20210.
    Accordingly, after giving full consideration to the entire record, 
including the written comments provided by Goldman Sachs, the 
Department has made the aforementioned changes to the Notice. In 
addition, the Department has decided to grant the exemption subject to 
the modifications or clarifications described above.
    For Further Information Contact: Ms. Jan D. Broady 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 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 22nd day of May, 1998.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits 
Administration, U.S. Department of Labor.
[FR Doc. 98-14197 Filed 5-28-98; 8:45 am]
BILLING CODE 4510-29-P