Skip to page content
Secretary of Labor Thomas E. Perez
Grant of Individual Exemptions; VECO Corporation (VECO), et al. [Notices] [05/27/1999]

EBSA (Formerly PWBA) Federal Register Notice

Grant of Individual Exemptions; VECO Corporation (VECO), et al. [05/27/1999]

[PDF Version]

Volume 64, Number 102, Page 28838-28843

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

DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

[Prohibited Transaction Exemption 99-20; Exemption Application No. D-
10622, et al.]

 
Grant of Individual Exemptions; VECO Corporation (VECO), et al.

AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Grant of Individual Exemptions.

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

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.

VECO Corporation (VECO)

Located in Anchorage, Alaska
[Prohibited Transaction Exemption 99-20
Exemption Application Number D-10622]

Exemption

    The restrictions of sections 406(a), 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 to the proposed sale (the Sale) of a certain parcel of 
unimproved real property (the Property) from the VECO Corporation 
Profit Sharing Plan and Trust (the Plan) to Norcon, Inc. (Norcon), a 
party in interest with respect to the Plan, provided that the following 
conditions are met:
    (a) The terms and conditions of the Sale will be at least as 
favorable to the Plan as those obtainable in an arm's length 
transaction with an unrelated party;
    (b) Norcon will pay the greater of $2,940,000 or the fair market 
value of the Property on the date of the Sale as established by a 
qualified, independent appraiser;
    (c) The Sale will be a one-time transaction for cash;
    (d) The Plan will pay no fees or commissions with respect to the 
Sale; and
    (e) An independent fiduciary acting on behalf of the Plan has 
reviewed the terms of the Sale and has represented that the transaction 
is in the best interest of the Plan and protective of the Plan's 
participants and beneficiaries.
    For a more complete statement of the facts and representations 
supporting this exemption, refer to the notice of proposed exemption 
published on March 8, 1999 at 64 FR 11052.
    Written Comments: The Department received three letters signed by 
49 current or former participants in the Plan endorsing the transaction 
as proposed in the Notice.


[[Page 28839]]


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

Citibank, N.A. (Citibank) and Salomon Smith Barney Inc. (SSB)

Located in New York, NY
[Prohibited Transaction Exemption 99-21;
Exemption Application No. D-10674]

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 October 8, 1998, to (1) the 
past and continued lending of securities to SSB and affiliated U.S. 
registered broker-dealers of SSB or Citibank (together, SSB/U.S.) and 
certain foreign affiliates (the Foreign Affiliates) of SSB and Citibank 
which are broker-dealers or banks based in the United Kingdom (SB/
U.K.), Japan (SSB/Asia), Germany (SSB/Germany), Canada (SSB/Canada) and 
Australia (SSB/Australia), including their affiliates or 
successors,<SUP>1</SUP> by employee benefit plans (the Client Plans) or 
commingled investment funds holding Client Plan assets, for which 
Citibank or any U.S. affiliate of Citibank, acts as securities lending 
agent (or sub-agent), including those Client Plans for which Citibank 
also acts as directed trustee or custodian of the securities being 
lent; and (2) to the receipt of compensation by Citibank or any U.S. 
affiliate of Citibank in connection with these transactions, provided 
that the following conditions are met:
---------------------------------------------------------------------------

    \1\ Unless otherwise noted, SSB/U.S. and the Foreign Affiliates 
are collectively referred to as SSB.
---------------------------------------------------------------------------

    (a) For each Client Plan, neither Citibank, SSB nor any of their 
affiliates either has or exercises discretionary authority or control 
with respect to the investment of the Client 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 Citibank to lend Client Plan securities to 
SSB in either an agency or sub-agency capacity is approved in advance 
by a Client Plan fiduciary who is independent of SSB and 
Citibank.<SUP>2</SUP> In this regard, the independent Client Plan 
fiduciary also approves the general terms of the securities loan 
agreement (the Loan Agreement) between the Client Plan and SSB, 
although the specific terms of the Loan Agreement are negotiated and 
entered into by Citibank and Citibank acts as a liaison between the 
lender and the borrower to facilitate the lending transaction.
---------------------------------------------------------------------------

    \2\ The Department, herein, is not providing exemptive relief 
for securities lending transactions engaged in by primary lending 
agents, other than Citibank and its affiliates, 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).
---------------------------------------------------------------------------

    (c) The terms of each loan of securities by a Client Plan to SSB is 
at least as favorable to such Client 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 Client Plan on five 
business days notice.
    (e) The Client Plan receives from SSB (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 SSB, 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 
Citibank, SSB 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, SSB delivers 
additional collateral on the following day such that the market value 
of the collateral again equals at least 102 percent.
    (g) Prior to entering into the Loan Agreement, SSB furnishes 
Citibank its most recently available audited and unaudited financial 
statements, which are, in turn, provided to a Client Plan, as well as a 
representation by SSB, 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, Citibank does not make any further 
loans to SSB 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 circumstances, the Client 
Plan may pay a loan rebate or similar fee to SSB, 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 such class exemptions may be 
amended or superseded as well as to applicable securities laws of the 
United States, the United Kingdom, Japan, Germany, Canada or Australia.
    (j) Each SSB borrower 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 use of 
securities of such Client Plan by such SSB borrower or the failure of 
such borrower to return such securities to the Client Plan. In the 
event that the Foreign Affiliate defaults on a loan, Citibank, as agent 
for the lending Client Plan, will liquidate the loan collateral to 
purchase identical securities for the Client Plan. With respect to a 
default by a Foreign Affiliate, if the collateral is insufficient to 
accomplish such purchase, Citibank will indemnify the Client Plan for 
any shortfall in the collateral plus interest on such amount and any 
transaction costs incurred. Alternatively, with respect to a default by 
the Foreign Affiliate, if such identical securities are not available 
on the market, Citibank 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. (The amounts paid shall include the cash collateral or 
other collateral that is liquidated and held by Citibank on behalf of 
the Client Plan.)
    (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) Prior to the approval of the lending of its securities to SSB 
by a new Client

[[Page 28840]]

Plan, copies of the notice of proposed exemption (the Notice) and, once 
published in the Federal Register, the final exemption, are provided to 
such Client Plan.
    (m) Each Client Plan receives monthly reports with respect to its 
securities lending transactions, including, but not limited to the 
information described in Representation 28 of the Notice so that an 
independent fiduciary of the Client Plan may monitor such transactions 
with SSB.
    (n) Only Client Plans with total assets having an aggregate market 
value of at least $50 million are permitted to lend securities to SSB; 
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 SSB, 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 SSB, 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 Client 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 Client Plan or an employee organization whose members 
are covered by such Client 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 each successive two-week period, on average, 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 the Foreign 
Affiliates have the following supplemental requirements:
    (1) Such Foreign Affiliate is registered as a broker-dealer or bank 
with--
    (i) The Securities and Futures Authority of the United Kingdom in 
the case of SB/U.K.;
    (ii) The Ministry of Finance and the Tokyo Stock Exchange in the 
case of SSB/Asia;
    (iii) The Deutsche Bundesbank and the Federal Banking Supervisory 
Authority in the case of SSB/Germany;
    (iv) The Ontario Securities Commission and the Investment Dealers 
Association in the case of SSB/Canada; and
    (v) The Australian Securities & Investments Commission and the 
Australian Stock Exchange Limited in the case of SSB/Australia.
    (2) Such broker-dealer or bank is in compliance with all applicable 
rules and regulations thereof as well as with all requirements of Rule 
15a-6 (Rule 15a-6) (17 CFR 240.15a-6) under the Securities Exchange Act 
of 1934 (the 1934 Act) which provides foreign broker-dealers and banks 
a limited exemption from United States registration requirements and 
interpretations and amendments thereof to Rule 15a-6 by the Securities 
and Exchange Commission (the SEC), to the extent applicable;
    (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 Citibank 
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) The Foreign Affiliate provides SSB (i.e., Salomon Smith Barney 
Inc.) 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 SSB (i.e., Salomon Smith Barney Inc.).
    (q) Citibank and its affiliates maintain, or cause to be maintained 
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 to circumstances beyond the control of Citibank 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 Citibank 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 for examination by:
    (i) Any duly authorized employee or representative of the 
Department, the Internal Revenue Service or 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 SSB or commercial or financial information 
which is privileged or confidential.

EFFECTIVE DATE: This exemption is effective as of October 8, 1998.

[[Page 28841]]

    For a more complete statement of the facts and representations 
supporting Department's decision to grant this exemption, refer to the 
notice of proposed exemption (the Notice) published on March 4, 1999 at 
64 FR 10493.

Written Comments

    The Department received one written comment with respect to the 
Notice. The comment was submitted by Citibank and SSB (hereinafter, the 
Applicants) and it requests modifications to the conditional language 
and the Summary of Facts and Representations (the Summary) of the 
Notice for purposes of clarification or to revise several typographical 
errors. Following is a discussion of the Applicants' comments, the 
Department's responses to these comments and a comment made by the 
Department on its own initiative.
    1. Paragraph (g) of the Notice. On page 10494 of the Notice, 
paragraph (g) provides, in part, that prior to entering the Loan 
Agreement, SSB will furnish Citibank its most recently available 
``audited and unaudited statements'' which will be provided to the 
Client Plan. To clarify that the statements will be of a financial 
nature, the Applicants suggest that the word ``financial'' be inserted 
in the condition after the phrase ``audited and unaudited.'' The 
Applicants also suggest that the verb ``is'', which follows the word 
``which'' be replaced with the verb ``are.''
    In response to this comment, the Department has revised the 
beginning of paragraph (g) to read as follows:

    (g) Prior to entering into the Loan Agreement, SSB furnishes 
Citibank its most recently available audited and unaudited financial 
statements, which are in turn, * * *

    2. Paragraph (l) of the Notice. On page 10494 of the Notice, 
paragraph (l) states that prior to the approval of the lending of its 
securities to SSB by a new Client Plan, copies of the proposed 
exemption and the final exemption will be provided to such Client Plan. 
The Applicants recommend that the Department revise this condition to 
clarify that copies of the final exemption will be made available to 
Client Plans once they are published in the Federal Register.
    In response to this comment, the Department has revised paragraph 
(l) of the Notice to read as follows:

    (l) Prior to the approval of the lending of its securities to 
SSB by a new Client Plan, copies of the notice of proposed exemption 
(the Notice) and, once published in the Federal Register, the final 
exemption, are provided to such Client Plan.

    3. Paragraph (r)(1) of the Notice. On page 10495 of the Notice, 
paragraph (r)(1) provides that the records Citibank is required to 
maintain for purposes of the requested exemption are to be made 
available at their customary location during normal business hours for 
certain designated persons (i.e., the Service, the Department, a Client 
Plan fiduciary, etc.) and their authorized representatives. For 
purposes of clarification, the Applicants suggest that the phrase ``for 
examination'' be inserted in the condition immediately following the 
phrase ``normal business hours.''
    The Department concurs with this clarification and has modified 
paragraph (r)(1) of the Notice, accordingly.
    4. Preamble and General Summary Changes. On page 10495 of the 
Notice, the Preamble describes the 1998 merger (the Merger) between 
Citicorp Inc. (Citicorp) and a subsidiary of the Travelers Group 
(Travelers), the restructuring of Travelers as a bank holding company 
and its redesignation as ``Citigroup, Inc.'' (Citigroup). The Preamble 
also discusses the Applicants' request that the exemption apply 
retroactively to pre-existing securities lending arrangements between 
Citibank and broker-dealers associated with Citigroup which became 
affiliated with Citibank following the Merger.
    To clarify more accurately the status of Citibank with respect to 
securities lending arrangements before the Merger, the Applicants have 
requested that the Department modify the third sentence of the second 
paragraph of the Preamble to read as follows:

    Although prior to the Merger Citibank did not lend Client Plan 
securities to any of its then-current affiliates, upon consummation 
of the Merger, loans to SSB entity borrowers * * *

    In addition, the Applicants request that the Department change 
references to the word ``Travelers'' appearing in the Preamble and 
elsewhere in the Summary to ``Citigroup'' to reflect the new name for 
the entity.
    The Department concurs with the requested changes and has modified 
the Preamble and made corresponding changes to Representation 1(a), (b) 
and (d) of the Summary.
    5. Representation 1 of the Summary. On page 10495 of the Notice, 
Representation 1 of the Summary provides descriptions of the Applicants 
and their Foreign Affiliates. To clarify that SSB is a New York 
corporation and not a Delaware corporation, the Applicants request that 
the Department modify the first sentence of the first paragraph of 
Representation 1(a), accordingly.
    In addition, the Applicants wish to revise the sixth sentence of 
the first paragraph of Representation 1(a) as follows to reflect the 
updated financial information obtained for Citicorp:

    * * * As of December 31, 1998, Citigroup had approximately $668 
billion in assets and approximately $42.7 billion in shareholders' 
equity.

    In response to these comments, the Department has made the changes 
suggested by the Applicants.
    6. Representation 2 of the Summary. On page 10496 of the Notice, 
Representation 2 of the Summary describes the governmental entities 
regulating the Foreign Affiliates. The Applicants, however, wish to 
point out that due to a typographical error, the verb ``is'' was 
omitted from the third sentence of the first paragraph of 
Representation 2 following the reference to ``SSB/Asia.''
    In response to this comment, the Department has revised 
Representation 2 by inserting the missing word.
    7. Representations 4 and 5 and Footnote 8 of the Summary. On page 
10497 of the Notice, Representations 4 and 5 and Footnote 8 of the 
Summary describe Rule 15a-6 of the 1934 Act and its applicability to 
and compliance by the Foreign Affiliates. In order to be consistent 
with the requirements of Rule 15a-6, the Department has, on its own 
initiative, revised references to the terms ``U.S. major institutional 
investor'' and ``major institutional investor,'' which appear in 
Representations 4 and 5 and in Footnote 8 of the Summary, to the term 
``major U.S. institutional investor.'' Moreover, for purposes of 
clarification, the Department has inserted the following language at 
the beginning of Footnote 8:

    Note that the categories of entities that qualify as ``major 
U.S. institutional investors'' has been expanded by a SEC No-Action 
letter.

    The Applicants have concurred with the foregoing changes made by 
the Department.
    8. Representation 12 of the Summary. On pages 10498 and 10499 of 
the Notice, Representation 12 of the Summary describes the various 
forms of securities lending agreements that may be entered into by 
Client Plans with Citibank and the relevant terms of such agreements. 
However, to correct a typographical error, the Applicants suggest that 
the Department change the reference to ``Representation 10,'' in the 
second sentence of the third paragraph of Representation 12, to 
``Representation 11.''

[[Page 28842]]

    In response to this comment, the Department has made the requested 
modification.
    9. Footnote 17 of the Summary. On page 10499 of the Summary, 
Footnote 17 discusses the capital adequacy requirements for the 
Applicants' U.S.-domiciled and Foreign Affiliates. To correct a 
typographical error appearing in the footnote, the Applicants request 
that the Department change the reference to ``SSB,'' appearing in the 
first sentence of Footnote 17, to ``SSB/U.S.'' In addition, the 
Applicants request that the Department delete one of the duplicate 
references to SSB/Canada, appearing in the first sentence of the second 
paragraph of the footnote, and substitute the Foreign Affiliate, ``SSB/
Australia,'' in its stead.
    In response to these comments, the Department has made the 
suggested changes.
    10. Representation 16 of the Summary. On page 10499 of the Notice, 
Representation 16 of the Summary provides further details regarding the 
terms of the Agency Agreement and the Primary Lending Agreement, 
including the compensation paid to Citibank for its services as lending 
agent, custodian and manager of the cash collateral received. To 
emphasize that Citibank may also serve as a ``directed trustee'' to a 
Client Plan, the Applicants recommend that the term ``directed 
trustee'' be inserted immediately preceding the word ``custodian'' in 
the second sentence of the first paragraph of Representation 16.
    In response, the Department has made the suggested change.
    11. Representations 29 and 30 of the Summary. On page 10501 of the 
Notice, Representation 29 of the Summary describes the functions of the 
monthly report that will be provided to each Client Plan participating 
in the Applicants' securities lending program. The Applicants, however, 
request that the second sentence of Representation 29 be modified by 
inserting the phrase ``upon the request of the Client Plan'' 
immediately following the phrase ``In addition'' in order to be 
consistent with previously-agreed to language.
    In addition, on page 10502 of the Notice, Representation 30 of the 
Summary discusses the requirements for securities lending by two or 
more Unrelated Client Plans whose assets are commingled in a group 
trust or a ``plan assets'' investment entity and describes an ``outside 
business test'' that will be imposed on the fiduciary exercising 
investment discretion over the commingled entity.
    To correct a typographical error appearing in the Notice, the 
Applicants request that the Department insert the phrase ``member of 
the controlled group of corporations'' immediately following the phrase 
``or other entity or any'' in the second paragraph of Representation 
30.
    In response to the comments discussed above, the Department has 
made the requested changes.
    For further information regarding the Applicants' comment letter or 
other matters discussed herein, interested persons are encouraged to 
obtain copies of the exemption application file (Exemption Application 
No. D-10674) 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, N.W., 
Washington, D.C. 20210.
    Accordingly, after giving full consideration to the entire record, 
including the written comment provided by the Applicants, the 
Department has made the aforementioned changes to the Notice and has 
decided to grant the exemption subject to the modifications described 
above.

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

Operating Engineers Local 324 Journeyman and Apprentice Training 
Fund (the Plan)

Located in Howell, Michigan
(Prohibited Transaction Exemption 99-22
Exemption Application No. L-10645)

Exemption

    The restrictions of sections 406(a), 406(b)(1) and (2) of the Act 
shall not apply to: (1) the proposed loan of $1,500,000 (the Loan) to 
the Plan by the International Union of Operating Engineers Local 324, 
AFL-CIO (the Union), a party in interest with respect to the Plan, for 
the repayment of certain outstanding loans (the Original Loans) made to 
the Plan by the Michigan National Bank (the Bank), an unrelated party; 
and (2) as of March 12, 1998, the pledging of certificates of deposit 
by the Union as security for the Original Loans; provided that the 
following conditions are met:
    (a) The terms and conditions of the Loan are at least as favorable 
to the Plan as those which the Plan could have obtained in an arm's-
length transaction with an unrelated party;
    (b) The Plan's trustees determine that the Loan is appropriate for 
the Plan and in the best interests of the Plan's participants and 
beneficiaries;
    (c) An independent fiduciary acting on behalf of the Plan (the 
Independent Fiduciary) reviews the terms of the Loan and determines 
that the Loan is protective of and in the best interests of the Plan;
    (d) The Independent Fiduciary monitors the Loan, as well as the 
conditions of this exemption, and takes whatever actions are necessary 
to safeguard the interests of the Plan under the Loan;
    (e) The Loan is repaid by the Plan solely with funds the Plan 
retains after paying all of its operational expenses; and
    (f) The terms and conditions relating to the pledging of the 
certificates of deposit by the Union as security for the Original Loans 
were in the best interest of the Plan and its participants and 
beneficiaries.

EFFECTIVE DATE: This exemption is effective as of March 12, 1998.
    For a more complete statement of the facts and representations 
supporting this exemption, refer to the notice of proposed exemption 
published on January 21, 1999 at 64 FR 3356.

FOR FURTHER INFORMATION CONTACT: Christopher J. Motta of the 
Department, telephone (202) 219-8883 (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

[[Page 28843]]

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 are true and complete and accurately describe all material 
terms of the transaction which is the subject of the exemption. In the 
case of continuing exemption transactions, if any of the material facts 
or representations described in the application change after the 
exemption is granted, the exemption will cease to apply as of the date 
of such change. In the event of any such change, application for a new 
exemption may be made to the Department.

    Signed at Washington, D.C., this 24th day of May, 1999.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits 
Administration, U.S. Department of Labor.
[FR Doc. 99-13496 Filed 5-26-99; 8:45 am]
BILLING CODE 4510-29-P