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Secretary of Labor Thomas E. Perez
Grant of Individual Exemptions; Pacific Life Corporation (Pacific Life), et al. [Notices] [11/09/1999]

Grant of Individual Exemptions; Pacific Life Corporation (Pacific Life), et al. [11/09/1999]

[PDF Version]

Volume 64, Number 216, Page 61136-61141

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DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration
[Prohibited Transaction Exemption 99-44; Exemption Application No. D-
10257, et al.]

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

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.

Pacific Life Corporation (Pacific Life) Located in Newport Beach, 
California; Exemption

[Prohibited Transaction Exemption 99-44; Exemption Application No. D-
10257]

Section I--Transactions

    (a) The restrictions of sections 406(a), 406(b)(1) and (b)(2) of 
the Act and the taxes imposed by section 4975(a) and (b) of the Code, 
by reason of section 4975(c)(1)(A) through (E) of the Code, shall not 
apply:
    (1) For the period from January 22, 1993 until October 31, 1998, to 
the sale by Pacific Life of an ``actively-managed synthetic'' 
guaranteed investment contract (Actively-Managed Synthetic GIC) to an 
employee benefit plan for which Pacific Life was a party in interest 
with respect to such plan (Plan) in instances where Pacific Life or an 
Affiliate manages the Plan's assets relating to the Synthetic GIC (an 
Affiliated-Manager GIC); and
    (2) As of January 22, 1993, to the purchase or retention of the 
Affiliated-Manager GICs, described in section (a)(1) above, by the 
Plans and the payments made by Pacific Life to the Plans pursuant to 
the terms and conditions of the Affiliated-Manager GICs, provided that 
the general conditions set forth in section II, the specific conditions 
set forth in section III, the retroactive conditions set forth in 
section IV, and the record-keeping requirements set forth in section V 
below are met.
    (b) The restrictions of sections 406(a) of the Act and the taxes 
imposed by section 4975(a) and (b) of the Code, by reason of section 
4975(c)(1)(A) through (D) of the Code, shall not apply:
    (1) As of January 22, 1993, to the sale by Pacific Life of an 
Actively-Managed Synthetic GIC to a Plan in instances where the Plan's 
assets relating to the Actively-Managed Synthetic GIC are managed by an 
investment manager who is unaffiliated with Pacific Life and

[[Page 61137]]

its Affiliates (an Unaffiliated-Manager GIC); and
    (2) As of January 22, 1993, to the purchase or retention of the 
Unaffiliated-Manager GICs, described in section (b)(1) above, by the 
Plans and the payments made by Pacific Life to the Plans pursuant to 
the terms and conditions of the Unaffiliated-Manager GICs, provided 
that the general conditions set forth in section II and the record-
keeping requirements set forth in section V below are met.

Section II--General Conditions

    (a) Prior to the sale of an Actively-Managed Synthetic GIC, an 
independent fiduciary of each Plan receives a full and detailed written 
disclosure of all material features of the Actively-Managed Synthetic 
GIC, including all applicable fees and charges;
    (b) Following receipt of such disclosure, the Plan's independent 
fiduciary approves in writing the purchase of the Actively-Managed 
Synthetic GIC on behalf of the Plan;
    (c) All fees and charges imposed under any such Actively-Managed 
Synthetic GIC are not in excess of reasonable compensation within the 
meaning of section 408(b)(2) of the Act;
    (d) Each Actively-Managed Synthetic GIC will specifically provide 
an objective means of determining the fair market value of the 
securities owned by the Plan pursuant to the Actively-Managed Synthetic 
GIC;
    (e) Each Actively-Managed Synthetic GIC will specifically provide 
an objective formula for determining the interest rates to be credited 
periodically under the Actively-Managed Synthetic GIC;
    (f) Pacific Life does not maintain custody of the assets which are 
the subject of the Actively-Managed Synthetic GIC or commingle those 
assets with any other funds under its management;
    (g) The assets subject to the Actively-Managed Synthetic GIC are 
invested in high quality fixed income investments specified in the 
investment guidelines agreed to, or provided by, the independent 
fiduciary;
    (h) The Plan may, at any time, terminate the Actively-Managed 
Synthetic GIC;
    (i) The fee charged under the arrangement is negotiated between 
Pacific Life and a Plan fiduciary independent of Pacific Life;
    (j) At all times during the term of each Actively-Managed Synthetic 
GIC, a Plan may elect to receive such lump sum amount equal to the 
Contract Value Record and shall be entitled to receive a lump sum 
payment no more than 3 (three) years after making an election which 
will establish a maturity date;
    (k) The Plan may establish a maturity date by notifying Pacific 
Life in writing of an intent to establish a maturity date. Each 
Actively-Managed Synthetic GIC will mature within three (3) years after 
the Plan notifies Pacific Life of its intent to establish a maturity 
date; and
    (l) Actively-Managed Synthetic GICs are sold only to Plans which 
have at least $25 million in assets.

Section III--Specific Conditions

    (a) With respect to any Affiliated-Manager GIC described in section 
I(a), Pacific Life will notify a Plan's independent fiduciary, in 
writing no later than 30 days prior to the date on which the Credited 
Rate is to be reset, advising such fiduciary that the Plan may replace 
Pacific Life or its affiliate as investment manager, <SUP>1</SUP> at no 
expense to the Plan, when the Credited Rate with respect to any 
Affiliated-Manager GIC described in section I(a) is expected to be less 
than three (3) percent at the next reset of the Credited Rate.
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    \1\ Although Pacific Life must approve the new investment 
manager selected by the Plan, Pacific Life represents that it will 
not unreasonably withhold such approval.
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Section IV--Retroactive Conditions

    (a) At no time between January 22, 1993 and October 31, 1998, was 
the Credited Rate with respect to any Affiliated-Manager GIC described 
in section I(a) less than 3% (three percent) per annum; and
    (b) At no time between January 22, 1993 and October 31, 1998, did a 
Plan elect to receive an amount equal to the Contract Value Record 
pursuant to an Affiliated-Manager GIC described in section I(a).

Section V--Recordkeeping

    (a) The Applicant maintains or causes to be maintained for a period 
of six years from the date of the transaction such records as are 
necessary to enable the persons described in paragraph (b) of this 
section V of this exemption, to determine whether the conditions of 
this exemption have been met, except that: (1) a prohibited transaction 
will not be deemed to have occurred if, due to circumstances beyond the 
control of the Applicant or its affiliates, such records are lost or 
destroyed prior to the end of such six year period; and (2) no party in 
interest, other than the Applicant or an affiliate, shall be subject to 
the civil penalty that may be accessed 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 by paragraph (b) below.
    (b)(1) Notwithstanding anything to the contrary in subsections 
(a)(2) and (b) of section 504 of the Act, the records referred to in 
paragraph (a) of this section V are unconditionally available at their 
customary location for examination during normal business hours by: (i) 
any duly authorized employee or representative of the Department of 
Labor or the Internal Revenue Service; (ii) any fiduciary of the plan 
or any duly authorized employee or representative of such fiduciary; 
(iii) any participant or beneficiary of the plan or duly authorized 
representative of such participant or beneficiary; (iv) any employer of 
plan participants and beneficiaries; and (v) any employee organization 
any of whose members are covered by such plan; and
    (2) None of the persons described in paragraph (b)(1)(ii) through 
(v) shall be authorized to examine trade secrets of the applicant, or 
commercial or financial information which is privileged or 
confidential.

Section VI--Definitions

    For purposes of this exemption:
    (A) ``Actively-Managed Synthetic GIC'' means: a synthetic 
guaranteed investment contact, which under certain circumstances 
provides a guarantee that a pool of underlying plan assets which may be 
managed by Pacific Life, an affiliate of Pacific Life, or an unrelated 
investment manager, will perform at a specified rate of return.
    (B) ``Affiliated-Manager GIC'' means: an Actively-Managed Synthetic 
GIC under which Pacific Life guarantees the performance of an related 
investment manager.
    (C) ``Unaffiliated-Manager GIC'' means: an Actively-Managed 
Synthetic GIC under which Pacific Life guarantees the performance of an 
unrelated investment manager.
    (D) ``Contract Value Record'' means: a bookkeeping account 
maintained by Pacific Life, pursuant to each Actively-Managed Synthetic 
GIC. Initially, the Contract Value Record will be credited with the 
value of the Investment Assets (defined in (F) below), and subsequently 
with a credited rate of interest (Credited Rate, defined in (E) below), 
which shall be reset periodically as agreed to at the inception of the 
Actively-Managed Synthetic GIC.
    (E) ``Credited Rate'' means: the interest rate credited to the 
Contract Value Record. The Credited Rate is reset periodically, in 
accordance with an objective formula established under the

[[Page 61138]]

terms of the Actively-Managed Synthetic GIC.
    (F) ``Investment Assets'' means: the underlying portfolio of 
investment assets, title to which remains with the Plan.
    (G) ``Managed Portfolio'' means: the total of all Investment Assets 
which comprise the portfolio which is managed by either an Affiliated-
Manager or an Unaffiliated-Manager.
    (H) ``Withdrawals'' means: a participant initiated payment or 
transfer to other investment options available under the Plan.

EFFECTIVE DATE: This exemption is effective for the period from January 
22, 1993, until October 31, 1998, for the transactions described in 
section I(a)(1). Section I(a)(2) of the exemption will be effective for 
the retention by the Plan of the Affiliated-Manager GICs until the 
maturity date of such GICs. Lastly, the exemption is effective as of 
January 22, 1993, for the transactions described in section I(b) 
(including the continuing retention of any Unaffiliated-Manager GICs).
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption, refer to 
the notice of proposed exemption published on July 22, 1999, at 64 FR 
39533.
    Written Comments: One written comment, addressing two issues, was 
received from the applicant, Pacific Life, regarding the notice of 
proposed exemption (the Notice).
    With respect to the first issue, the applicant states that the 
relief provided for in the operative language of the Notice regarding 
``synthetic'' guaranteed investment contracts that are actively-managed 
by Pacific Life or an Affiliate (i.e., Affiliated-Manager GICs) is 
effective only for contracts sold on or before August 12, 1998. The 
applicant represents that this date was established based on the belief 
that no existing Affiliated-Manager GICs had been entered into after 
that date. After the Notice was published in the Federal Register on 
July 22, 1998, the applicant discovered that one Plan client, which had 
previously held a traditional GIC issued by Pacific Life, requested 
conversion of that GIC contract to an Affiliated-Manager GIC prior to 
August 12, 1998, but the parties did not actually execute this 
Affiliated-Manager GIC until October 1998. Therefore, Pacific Life 
requests that references in the Notice to August 12, 1998 be changed to 
October 31, 1998 in order to accommodate the execution of this 
Affiliated-Manager GIC.
    In response to the applicant's comment, the Department has modified 
Section I(a)(1) and Section IV(a) and (b) of the exemption, as well as 
the effective date paragraph at the end of the operative language of 
the exemption, by substituting October 31, 1998 for August 12, 1998.
    With respect to the second issue, Section II(g) of the Notice 
requires that the assets subject to the Actively-Managed Synthetic GIC 
(i.e., Investment Assets) must be invested only in high quality fixed 
income investments specified in the investment guidelines agreed to, or 
provided by, the independent fiduciary. The summary of facts and 
representations (the Summary) contained in the Notice also states that 
the Investment Assets will be invested in securities issued or 
guaranteed by the Federal government, or an instrumentality thereof, or 
other investment grade debt securities whose value is readily 
determinable and which can thus be objectively valued (e.g., see 
Paragraph 8 of the Summary, 64 FR at 39535).
    The applicant's comments state that certain Plans have requested 
that a portion of the Investment Assets be allocated to non-investment 
grade securities in order to enhance the rate of return to such Plans, 
pursuant to certain investment guidelines established by independent 
Plan fiduciaries. However, the applicant represents that at least 90% 
of the Investment Assets will be allocated to investment grade 
securities at all times. Thus, for purposes of this exemption, Pacific 
Life wishes to clarify that while the Investment Assets will be 
primarily allocated to investment grade securities, a small percentage 
of such Assets may be non-investment grade securities.
    The Department acknowledges the applicant's clarification to the 
information and representations contained in the Summary regarding 
investment grade securities. In this regard, the Department notes that 
the requirements of Section II(g) of the exemption, relating to the 
need for ``* * * high quality fixed income investments,'' will be 
deemed to be met if at least 90% of the Investment Assets are allocated 
at all times to investment grade securities. Further, in response to 
the applicant's comment, the Department has modified the language of 
Section II(g) of the exemption by deleting the word ``only'' from the 
phrase referring to high quality fixed income investments.
    Accordingly, the Department has determined to grant the exemption 
as modified herein.

FOR FURTHER INFORMATION CONTACT: Janet Schmidt of the Department, 
telephone (202) 219-8883. (This is not a toll-free number.)

Donaldson, Lufkin & Jenrette Securities Corporation (DLJ) Located 
in New York, NY; Exemption

[Prohibited Transaction Exemption (PTE) 99-45; Application No. D-10772]

Section I. Covered Transactions

    A. The restrictions of section 406(a)(1))(A) through (D) of the Act 
and the sanctions resulting from the application of section 4975 of the 
Code, by reason of section 4975(c)(1)(A) through (D) of the Code, shall 
not apply, effective September 24, 1999, to any purchase or sale of a 
security between certain affiliates of DLJ which are foreign broker-
dealers (the Foreign Affiliates, as defined below) and employee benefit 
plans (the Plans) with respect to which the Foreign Affiliates are 
parties in interest, including options written by a Plan, DLJ or a 
Foreign Affiliate provided that the following conditions and the 
General Conditions of Section II, are satisfied:
    (1) The Foreign Affiliate customarily purchases and sells 
securities for its own account in the ordinary course of its business 
as a broker-dealer;
    (2) The terms of any transaction are at least as favorable to the 
Plan as those which the Plan could obtain in a comparable arm's length 
transaction with an unrelated party; and
    (3) Neither the Foreign Affiliate nor an affiliate thereof has 
discretionary authority or control with respect to the investment of 
the Plan assets involved in the transaction, or renders investment 
advice (within the meaning of 29 CFR 2510.3-21(c)) with respect to 
those assets, and the Foreign Affiliate is a party in interest or 
disqualified person with respect to the Plan assets involved in the 
transaction solely by reason of section 3(14)(B) of the Act or section 
4975(e)(2)(B) of the Code, or by reason of a relationship to a person 
described in such sections. For purposes of this paragraph, the Foreign 
Affiliate shall not be deemed to be a fiduciary with respect to Plan 
assets solely by reason of providing securities custodial services for 
a Plan.
    B. The restrictions of sections 406(a)(1)(A) through (D) and 
406(b)(2) of the Act and the sanctions resulting from the application 
of section 4975 of the Code, by reason of section 4975(c)(1)(A) through 
(D) of the Code, shall not apply, effective September 24, 1999, to any 
extension of credit to the Plans by the Foreign Affiliates to permit 
the settlement of securities transactions, regardless of whether they 
are effected on an agency or a principal basis, or in

[[Page 61139]]

connection with the writing of options contracts, provided that the 
following conditions and the General Conditions of Section II are 
satisfied:
    (1) The Foreign Affiliate is not a fiduciary with respect to any 
Plan assets involved in the transaction, unless no interest or other 
consideration is received by the Foreign Affiliate or an affiliate 
thereof, in connection with such extension of credit; and
    (2) Any extension of credit would be lawful under the Securities 
Exchange Act of 1934 (the 1934 Act) and any rules or regulations 
thereunder if such Act, rules or regulations were applicable.
    C. The restrictions of section 406(a)(1)(A) through (D) of the Act 
and the sanctions resulting from the application of section 4975 of the 
Code, by reason of section 4975(c)(1)(A) through (D) of the Code, shall 
not apply, effective September 24, 1999, to the lending of securities 
to the Foreign Affiliates by the Plans, provided that the following 
conditions and the General Conditions of Section II are satisfied:
    (1) Neither the Foreign Affiliate nor an affiliate thereof has 
discretionary authority or control with respect to the investment of 
Plan assets involved in the transaction, or renders investment advice 
(within the meaning of 29 CFR 2510.3-21(c)) with respect to those 
assets;
    (2) The Plan receives from the Foreign Affiliate (by physical 
delivery or by book entry in a securities depository, wire transfer, or 
similar means) by the close of business on the day on which the loaned 
securities are delivered to the Foreign Affiliate, collateral 
consisting of cash, securities issued or guaranteed by the U.S. 
Government or its agencies or instrumentalities, or irrevocable U.S. 
bank letters of credit issued by persons other than the Foreign 
Affiliate or an affiliate of the Foreign Affiliate, or any combination 
thereof. All collateral shall be in U.S. dollars, or dollar-denominated 
securities or bank letters of credit, and shall be held in the United 
States;
    (3) The collateral has, as of the close of business on the 
preceding business day, a market value equal to at least 100 percent of 
the then market value of the loaned securities (or, in the case of 
letters of credit, a stated amount equal to same);
    (4) The loan is made pursuant to a written loan agreement (the Loan 
Agreement), which may be in the form of a master agreement covering a 
series of securities lending transactions, and which contains terms at 
least as favorable to the Plan as those the Plan could obtain in an 
arm's length transaction with an unrelated party;
    (5) In return for lending securities, the Plan either (a) receives 
a reasonable fee, which 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 
latter case, the Plan may pay a loan rebate or similar fee to the 
Foreign Affiliate, if such fee is not greater than the Plan would pay 
an unrelated party in a comparable arm's length transaction with an 
unrelated party;
    (6) The Plan receives at least the equivalent of all distributions 
on the borrowed securities made 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 that the Plan would have received (net of tax withholdings) 
<SUP>2</SUP> had it remained the record owner of such securities.
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    \2\ The Department notes the applicant's representation that 
dividends and other distributions on foreign securities payable to a 
lending Plan may be subject to foreign tax withholdings and that the 
Foreign Affiliate will always put the Plan back in at least as good 
a position as it would have been in had it not lent the securities.
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    (7) If the market value of the collateral as of the close of 
trading on a business day falls below 100 percent of the market value 
of the borrowed securities as of the close of trading on that day, the 
Foreign Affiliate delivers additional collateral, by the close of the 
Plan's business on the following business day, to bring the level of 
the collateral back to at least 100 percent. However, if the market 
value of the collateral exceeds 100 percent of the market value of the 
borrowed securities, the Foreign Affiliate may require the Plan to 
return part of the collateral to reduce the level of the collateral to 
100 percent;
    (8) Before entering into a Loan Agreement, the Foreign Affiliate 
furnishes to the independent Plan fiduciary (a) the most recent 
available audited statement of the Foreign Affiliate's financial 
condition, (b) the most recent available unaudited statement of its 
financial condition (if more recent than the audited statement), and 
(c) a representation that, at the time the loan is negotiated, there 
has been no material adverse change in its financial condition that has 
not been disclosed since the date of the most recent financial 
statement furnished to the independent Plan fiduciary. Such 
representation may be made by the Foreign Affiliate's agreeing that 
each loan of securities shall constitute a representation that there 
has been no such material adverse change;
    (9) The Loan Agreement and/or any securities loan outstanding may 
be terminated by the Plan at any time, whereupon the Foreign Affiliate 
shall deliver certificates for securities identical to the borrowed 
securities (or the equivalent thereof in the event of reorganization, 
recapitalization or merger of the issuer of the borrowed securities) to 
the Plan within (a) the customary delivery period for such securities, 
(b) five business days, or (c) the time negotiated for such delivery by 
the Plan and the Foreign Affiliate, whichever is least, or, 
alternatively such period as permitted by Prohibited Transaction Class 
Exemption (PTCE) 81-6 (46 FR 7527, January 23, 1981, as amended at 52 
FR 18754, May 19, 1987), as it may be amended or superseded.\3\
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    \3\ PTCE 81-6 provides an exemption under certain conditions 
from section 406(a)(1)(A) through (D) of the Act and the 
corresponding provisions of section 4975(c) of the Code for the 
lending of securities that are assets of an employee benefit plan to 
a U.S. broker-dealer registered under the 1934 Act (or exempted from 
registration under the 1934 Act as a dealer in exempt Government 
securities, as defined therein).
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    (10) In the event that the loan is terminated and the Foreign 
Affiliate fails to return the borrowed securities or the equivalent 
thereof within the time described in paragraph (9), the Plan may 
purchase securities identical to the borrowed securities (or their 
equivalent as described above) and may apply the collateral to the 
payment of the purchase price, any other obligations of the Foreign 
Affiliate under the Loan Agreement, and any expenses associated with 
the sale and/or purchase. The Foreign Affiliate is obligated to pay, 
under the terms of the Loan Agreement, and does pay, to the Plan, the 
amount of any remaining obligations and expenses not covered by the 
collateral, plus interest at a reasonable rate. Notwithstanding the 
foregoing, the Foreign Affiliate may, in the event it fails to return 
borrowed securities as described above, replace non-cash collateral 
with an amount of cash not less than the then current market value of 
the collateral, provided that such replacement is approved by the 
independent Plan fiduciary; and
    (11) The independent Plan fiduciary maintains the situs of the Loan 
Agreement in accordance with the indicia of ownership requirements 
under section 404(b) of the Act and the regulations promulgated under 
29 CFR 2550.404b-1. However, in the event that the independent Plan 
fiduciary does not maintain the situs of the Loan Agreement in 
accordance with the indicia of ownership requirements of section 404(b) 
of the Act, the Foreign

[[Page 61140]]

Affiliate shall not be subject to the civil penalty which may be 
assessed under section 502(i) of the Act, or the taxes imposed by 
section 4975(a) and (b) of the Code.
    If the Foreign Affiliate fails to comply with any condition of this 
exemption in the course of engaging in a securities lending 
transaction, the Plan fiduciary which caused the Plan to engage in such 
transaction shall not be deemed to have caused the Plan to engage in a 
transaction prohibited by section 406(a)(1)(A) through (D) of the Act 
solely by reason of the Foreign Affiliate's failure to comply with the 
conditions of the exemption.

Section II. General Conditions

    A. The Foreign Affiliate is a registered broker-dealer subject to 
regulation by a governmental agency, as described in Section III. B., 
and is in compliance with all applicable rules and regulations thereof 
in connection with any transactions covered by this exemption;
    B. The Foreign Affiliate, in connection with any transactions 
covered by this exemption, is in compliance with the requirements of 
Rule 15a-6 (17 CFR 240.15a-6) of the 1934 Act, and Securities and 
Exchange Commission interpretations thereof, providing for foreign 
affiliates a limited exemption from U.S. broker-dealer registration 
requirements.
    C. Prior to the transaction, the Foreign Affiliate enters into a 
written agreement with the Plan in which the Foreign Affiliate consents 
to the jurisdiction of the courts of the United States for any civil 
action or proceeding brought in respect of the subject transactions.
    D. The Foreign Affiliate maintains, or causes to be maintained, 
within the United States for a period of six years from the date of any 
transaction such records as are necessary to enable the persons 
described in paragraph E. to determine whether the conditions of this 
exemption have been met except that--
    (1) A party in interest with respect to a Plan, other than the 
Foreign Affiliate, shall not be subject to a civil penalty under 
section 502(i) of the Act or the taxes imposed by section 4975(a) or 
(b) of the Code, if such records are not maintained, or are not 
available for examination, as required by paragraph E.; and
    (2) A prohibited transaction shall not be deemed to have occurred 
if, due to circumstances beyond the control of the Foreign Affiliate, 
such records are lost or destroyed prior to the end of such six year 
period;
    E. Notwithstanding the provisions of subsections (a)(2) and (b) of 
section 504 of the Act, the Foreign Affiliate makes the records 
referred to above in paragraph D., unconditionally available for 
examination during normal business hours at their customary location to 
the following persons or an authorized representative thereof:
    (1) The Department, the Internal Revenue Service or the SEC;
    (2) Any fiduciary of a Plan;
    (3) Any contributing employer to a Plan;
    (4) Any employee organization any of whose members are covered by a 
Plan; and
    (5) Any participant or beneficiary of a Plan.
    However, none of the persons described above in paragraphs (2)-(5) 
of this paragraph E. shall be authorized to examine trade secrets of 
the Foreign Affiliate, or any commercial or financial information which 
is privileged or confidential.
    F. Prior to any Plan's approval of any transaction with a Foreign 
Affiliate, the Plan is provided copies of the proposed and final 
exemption with respect to the exemptive relief granted herein.

Section III. Definitions

    For purposes of this exemption,
    A. The term ``DLJ'' as referred to in Parts A., B., and C. of 
Section I., means Donaldson, Lufkin & Jenrette Securities Corporation.
    B. The term ``affiliate'' of another person shall include:
    (1) Any person directly or indirectly, through one or more 
intermediaries, controlling, controlled by, or under common control 
with such other person;
    (2) Any officer, director, or partner, employee or relative (as 
defined in section 3(15) of the Act) of such other person; and
    (3) Any corporation or partnership of which such other person is an 
officer, director or partner. (For purposes of this definition, the 
term ``control'' means the power to exercise a controlling influence 
over the management or policies of a person other than an individual.)
    C. The term ``Foreign Affiliate,'' shall mean a current or future 
affiliate of DLJ that is subject to regulation as a broker-dealer by--
    (1) The Securities and Futures Authority, in the United Kingdom; or
    (2) The Australian Securities & Investments Commission in 
Australia.
    C. The term ``security'' shall include equities, fixed income 
securities, options on equity and on fixed income securities, 
government obligations, and any other instrument that constitutes a 
security under U.S. securities laws. The term ``security'' does not 
include swap agreements or other notional principal contracts.

EFFECTIVE DATE: This exemption is effective as of September 24, 1999.
    For a more complete statement of the facts and representations 
supporting this exemption, refer to notice of proposed exemption (the 
Notice) published on September 24, 1999 at 64 FR 51797.

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 DLJ, requested that the exemption be made retroactive to 
September 24, 1999, the date the Notice was published in the Federal 
Register, to ensure that any transactions entered into on or after the 
publication date of the Notice by Plans and the Foreign Affiliates 
would be covered by the requested exemption. In response to this 
comment, the Department has made the exemption effective as of 
September 24, 1999.
    For further information regarding DLJ's comment or other matters 
discussed herein, interested persons are encouraged to obtain copies of 
the exemption application file (Exemption Application No. D-10772) 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 DLJ, the Department has 
made the aforementioned change to the Notice and has decided to grant 
the exemption subject to the modification 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

[[Page 61141]]

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 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 4th day of November, 1999.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits 
Administration, U.S. Department of Labor.
[FR Doc. 99-29266 Filed 11-8-99; 8:45 am]
BILLING CODE 4510-29-P