15058 Federal Register / Vol. 76, No. 53 / Friday, March 18, 2011 / Notices 

1Capitalized terms used but not defined in the 

Summary of Facts and Representations have the 

meaning set forth in Section VI of the proposed 

exemption. 

2For purposes of this application, references to 

the ‘‘Applicants’’ include each of the banks, 

investment advisors and investment managers 

directly or indirectly, through one or more 

intermediaries, under the control of BlackRock, and 

any other bank, investment advisor or investment 

manager which subsequently becomes directly or 

indirectly, through one or more intermediaries, 

under the control of BlackRock, and successors of 

the foregoing. As of the date hereof, banks, 

investment advisors and investment managers 

under the control of BlackRock include, but are not 

limited to, BlackRock Advisors, LLC, BlackRock 

Financial Management, Inc., BlackRock Capital 

Management, Inc., BlackRock Institutional 

Management Corporation, BlackRock International, 

Ltd., State Street Research and Management 

Company, BlackRock Realty Advisors, Inc., 

BlackRock Investment Management, LLC, 

BlackRock Fund Advisors, and BTC (collectively, 

the BlackRock Managers). ‘‘Applicants’’ also 

includes broker-dealers presently or subsequently 

under the direct or indirect control, through one or 

more intermediaries, of BlackRock. 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

[Application No. D–11588] 

Notice of Proposed Exemption; 

BlackRock, Inc. and Its Investment 

Advisory, Investment Management and 

Broker-Dealer Affiliates and Their 

Successors (Applicants) Located in 

New York, NY 

AGENCY: Employee Benefits Security 

Administration, U.S. Department of 

Labor. 

ACTION: Notice of proposed exemption. 

SUMMARY: This document contains a 

notice of pendency before the 

Department of Labor (the Department) of 

a proposed individual exemption from 

certain prohibited transaction 

restrictions of the Employee Retirement 

Income Security Act of 1974, as 

amended (ERISA), the Federal 

Employees’ Retirement System Act of 

1986, as amended (FERSA), and the 

Internal Revenue Code of 1986, as 

amended (the Code). The proposed 

transactions involve BlackRock, Inc. and 

its investment advisory, investment 

management and broker-dealer affiliates 

and their successors. The proposed 

exemption, if granted, would affect 

plans for which BlackRock, Inc. and its 

investment advisory, investment 

management and broker-dealer affiliates 

and their successors serve as fiduciaries, 

and the participants and beneficiaries of 

such plans. 

DATES: Effective Date: If granted, this 

proposed exemption will be effective as 

of December 1, 2009. 

Written Comments and Hearing 

Requests: All interested persons are 

invited to submit written comments 

and/or requests for a hearing on the 

proposed exemption within forty-five 

(45) days from the date of the 

publication of this Federal Register 

Notice. Comments and requests for a 

hearing should state: (1) The name, 

address and telephone number of the 

person making the comment or the 

request for a hearing and (2) the nature 

of the person’s interest in the proposed 

exemption and the manner in which the 

person would be adversely affected by 

the proposed exemption. A request for 

a hearing must also state the issues to 

be addressed at the requested hearing 

and include a general description of the 

evidence to be presented at the 

requested hearing. 

ADDRESSES: All written comments and 

requests for a public hearing concerning 

the proposed exemption should be sent 

to the Office of Exemption 

Determinations, Employee Benefits 

Security Administration, Room N–5700, 

U.S. Department of Labor, 200 

Constitution Avenue, NW., Washington, 

DC 202010, Attention: Application No. 

D–11588. Interested persons are also 

invited to submit comments and/or 

hearing requests to the Employee 

Benefits Security Administration by email or FAX. Any such comments or 

requests should be sent either to: 

moffitt.betty@dol.gov, or by FAX to 

(202) 219–0204 by the end of the 

scheduled comment period. The 

application for exemption and the 

comments received will be available for 

inspection in the Public Documents 

Room of the Employee Benefits Security 

Administration, U.S. Department of 

Labor, Room N–1513, 200 Constitution 

Avenue, NW., Washington, DC 20210. 

Warning: If you submit written 

comments or hearing requests, do not 

include any personally-identifiable or 

confidential business information that 

you do not want to be publiclydisclosed. All comments and hearing 

requests are posted on the Internet 

exactly as they are received, and they 

can be retrieved by most Internet search 

engines. The Department will make no 

deletions, modifications or redactions to 

the comments or hearing requests 

received, as they are public records. 

FOR FURTHER INFORMATION CONTACT: 

Brian L. Shiker, Office of Exemption 

Determinations, Employee Benefits 

Security Administration, U.S. 

Department of Labor, telephone (202) 

693–8552. (This is not a toll-free 

number.) 

SUPPLEMENTARY INFORMATION: This 

document contains a notice of proposed 

individual exemption from the 

restrictions of ERISA sections 406(a)(1) 

and 406(b), FERSA sections 8477(c)(1) 

and (c)(2) and the sanctions resulting 

from the application of Code section 

4975, by reason of Code section 

4975(c)(1). The proposed exemption has 

been requested by BlackRock, Inc. and 

its investment advisory, investment 

management and broker-dealer affiliates 

and their successors pursuant to ERISA 

section 408(a), Code section 4975(c)(2) 

and FERSA section 8477(c)(3), and in 

accordance with the procedures set 

forth in 29 CFR Part 2570, Subpart B (55 

FR 32836, 32847, August 10, 1990). 

Effective December 31, 1978, section 

102 of the 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 requested to the Secretary of 

Labor. Accordingly, this proposed 

exemption is being issued solely by the 

Department. 

Summary of Facts and 

Representations 1

1. BlackRock, Inc. (BlackRock), based 

in New York, NY, is the largest publiclytraded investment management firm in 

the United States. BlackRock, through 

its investment advisory and investment 

management subsidiaries, currently 

manages assets for institutional and 

individual investors worldwide through 

a variety of equity, fixed income, cash 

management and alternative investment 

products. As of September 30, 2010, 

BlackRock, through its advisor 

subsidiaries, had approximately $3.446 

trillion in assets under management, 

including assets managed by BlackRock 

Institutional Trust Company, N.A. (BTC) 

(formerly known as Barclays Global 

Investors, N.A. (BGI)) and its affiliates. 

The Applicants 2 together with any 

other entity presently or subsequently 

under the direct or indirect control, 

through one or more intermediaries, of 

BlackRock and successors of any of the 

foregoing are referred to herein as the 

‘‘BlackRock Entities.’’ 

2. BTC is a national banking 

association headquartered in San 

Francisco, California. Prior to its 

acquisition by BlackRock on December 

1, 2009 (the Acquisition), BTC (then 

BGI) was the largest asset manager in 

the U.S. A significant amount of BTC’s 

assets under management in the U.S. 

consist of assets of employee benefit 

plans subject to ERISA, FERSA and/or 

the Code. BTC is a market leader in 

index and model-driven investment 

products. Until its sale to BlackRock, 

BGI was an indirect subsidiary of 

Barclays PLC, a public limited company 


Emcdonald on DSK2BSOYB1PROD with NOTICES2
Federal Register / Vol. 76, No. 53 / Friday, March 18, 2011 / Notices 15059 

3Each of Barclays, BOA and PNC is a ‘‘Minority 

Passive Shareholder’’ or ‘‘MPS,’’ but, for avoidance 

of doubt, an MPS does not include any BlackRock 

Entity. 4See applications associated with PTE 2009–25, 

74 FR 45300 (September 1, 2009) (Barclays); PTE 

2009–22, 74 FR 45284 (September 1, 2009) (PNC); 

and proposed exemption for application D–11576, 

75 FR 61932 (October 6, 2010) (Bank of America/ 

Merrill Lynch). 

5Series B Non-Voting Preferred Stock provides 

for the same economic rights as BlackRock common 

stock, but it is non-voting. The Series B Non-Voting 

Preferred Stock is automatically converted to 

common stock when transferred to a third party. 

6Series C Non-Voting Preferred Stock provides 

for the same terms as Series B Non-Voting Preferred 

Stock, except that it (a) has a liquidation preference 

of $40 per share as opposed to $.01 for Series B 

Non-Voting Preferred Stock, (b) is only convertible 

to common stock upon the termination of a Share 

Surrender Agreement between BlackRock, and (c) 

can only be transferred to BlackRock pursuant to 

such Share Surrender Agreement. Series D NonVoting Preferred Stock provides for the same terms 

as Series B Non-Voting Preferred Stock and was 

automatically converted to Series B Non-Voting 

Preferred Stock on January 31, 2010. 

7On November 17, 2010, Barclays Luxembourg 

transferred approximately ninety nine percent 

(99%) of its BlackRock voting common stock and 

approximately ninety nine (99%) of its Series B 

Non-Voting Preferred Stock to Lapis (Gers 

Investments) LP, a newly-formed Delaware limited 

partnership and an indirect subsidiary of Barclays 

Bank PLC. 

organized under the laws of England 

and Wales. BTC, as of the date of the 

Acquisition, is now a wholly-owned 

subsidiary of BlackRock. 

3. The Applicants represent that they 

are regulated by various federal 

government agencies such as the SEC 

and the Office of the Comptroller of the 

Currency, as well as state government 

agencies and industry self-regulatory 

organizations (e.g., the Financial 

Industry Regulatory Authority or, in the 

case of some broker-dealers and banks, 

corresponding foreign regulatory 

authorities). As with the Applicants, 

each of (a) Barclays PLC (Barclays), (b) 

Bank of America Corporation (BOA), (c) 

The PNC Financial Services Group, Inc. 

(PNC), and (d) each entity directly or 

indirectly, through one or more 

intermediaries, controlling, controlled 

by or under common control with one 

or more of Barclays, BOA or PNC3 has 

previously made representations to the 

Department regarding the significant 

extent to which they are regulated.4

The Acquisition 

4. There have recently occurred 

extraordinary circumstances in both the 

U.S. financial services industry and the 

global financial services industry. Many 

entities in the financial services 

industry have faced severe economic 

hardship. During this period of 

upheaval, the recent trend of industry 

consolidation amongst significant 

banks, broker-dealers and other 

providers of financial services has 

accelerated. For example, BOA became 

the parent company of the Merrill 

Lynch Group, Inc. (the Merrill Group) as 

of January 1, 2009; in September 2008, 

Barclays Bank PLC (Barclays Bank), a 

subsidiary of Barclays PLC, acquired 

most of the U.S. broker-dealer business 

of Lehman Brothers Holdings Inc.; and, 

in May 2008, Bear Stearns Companies 

Inc. was acquired by JPMorgan Chase & 

Co. 

5. In this context, BlackRock, in June 

2009, made a binding offer to Barclays 

pursuant to an Amended and Restated 

Stock Purchase Agreement by and 

among BlackRock, Barclays Bank and 

(for limited purposes) Barclays, which 

ultimately resulted in the Acquisition. 

BlackRock completed the Acquisition 

on December 1, 2009, in exchange for an 

aggregate of 37,566,771 shares of 

BlackRock common stock and 

participating preferred stock (which 

ownership is discussed in more detail 

below) and approximately $6.6 billion 

in cash. Barclays’ decision to enter into 

the Acquisition was based upon a 

variety of factors that Barclays stated 

would be beneficial to its shareholders, 

including the creation of material 

economic exposure to a highly 

competitive global asset manager. 

6. Prior to the Acquisition, PNC, 

indirectly through its subsidiary PNC 

Bancorp, Inc. (PNC Bancorp), held an 

approximately 31.9% economic interest 

and an approximately 43.2% voting 

interest in BlackRock. BOA, through its 

(indirect) wholly-owned subsidiary the 

Merrill Group, held an approximately 

48.3% economic interest and 

approximately 4.6% voting interest in 

BlackRock. Immediately following the 

Acquisition, the MPS ownership was as 

follows: 

(a) Bank of America/Merrill Group. 

The Merrill Group owned 

approximately 3.7% of BlackRock 

voting common stock and 

approximately 34.2% of BlackRock 

equity by value, consisting of Series B 

Non-Voting Preferred Stock 5 in addition 

to the voting common stock held. The 

Merrill Group also owned (and owns) 

the equity of the Merrill brokerage firms 

(including Merrill Lynch, Pierce, Fenner 

& Smith Incorporated) and other 

financial service providers, which firms 

are owned down different chains of 

ownership from the Merrill Group’s 

stake in BlackRock. The Merrill Group 

is 100% owned by Merrill Lynch & Co. 

Inc. (the former publicly traded holding 

company), which in turn is 100% 

owned by BOA, the publicly traded 

overall Bank of America holding 

company. BOA owns Bank of America, 

N.A. down a different ownership chain 

from the Merrill Group-BlackRock 

ownership chain. 

(b) PNC Ownership Interest. PNC 

Bancorp owned approximately 35.2% of 

BlackRock voting common stock and 

approximately 24.5% of BlackRock 

equity by value, consisting of Series B, 

C and D 6 Non-Voting Preferred Stock. 

PNC Bancorp owned (and owns) PNC 

Bank, N.A. down a different chain of 

ownership. PNC Bancorp is whollyowned by PNC, the publicly traded 

overall PNC holding company. 

(c) Barclays Ownership Interest. 

Barclays BlackRock Holdings, S.a.r.l. 

(Barclays Luxembourg), a wholly-owned 

Luxembourg subsidiary of Barclays 

Bank, owned approximately 4.8% of 

BlackRock voting common stock and 

approximately 19.8% of BlackRock 

equity by value, consisting of Series B 

Non-Voting Preferred Stock and Series 

D Non-Voting Preferred Stock in 

addition to the voting common stock. 

Barclays Bank is a 100% owned 

subsidiary of Barclays PLC, the publicly 

traded Barclays holding company.7

7. Post-Acquisition, a secondary 

offering of BlackRock common stock 

was completed on November 15, 2010, 

by the Merrill Group and PNC Bancorp 

(the Secondary Offering). BlackRock’s 

ownership structure following the 

Secondary Offering was as follows: (a) 

The Merrill Group owned 0% of 

BlackRock’s voting common stock and 

approximately 7.1% of BlackRock’s 

equity by value, consisting of Series B 

Non-Voting Preferred Stock; (b) PNC 

Bancorp owned approximately 25.3% of 

BlackRock’s voting common stock and 

approximately 20.3% of BlackRock’s 

equity by value, consisting of Series B 

and C Non-Voting Preferred Stock in 

addition to the voting common stock 

held; and (c) Barclays Bank owned 

approximately 2.3% of BlackRock’s 

voting common stock and 

approximately 19.7% of BlackRock’s 

equity by value, consisting of Series B 

Non-Voting Preferred Stock in addition 

to the voting common stock held. 

8. Immediately following the 

Acquisition, the approximately 56.3% 

of BlackRock’s voting common stock not 

owned by the MPSs (representing an 

approximately 21.5% economic interest 

in BlackRock) was beneficially owned 

by the employees of BlackRock and 

retail and institutional investors 

unrelated to BlackRock or an MPS. 

Immediately following the Secondary 

Offering, the approximately 72.4% of 

BlackRock’s voting common stock not 

owned by the MPSs (representing an 

approximately 52.9% economic interest 

in BlackRock) was beneficially owned 


Emcdonald on DSK2BSOYB1PROD with NOTICES2
15060 Federal Register / Vol. 76, No. 53 / Friday, March 18, 2011 / Notices 

8Section 303A.01 of the NYSE Listed Company 

Manual requires listed companies to have a 

majority of independent directors. Although an 

exception is made for companies controlled by a 

group of shareholders, the Stockholders Agreements 

among BlackRock and the MPSs preclude the MPSs 

from becoming part of any such group. BlackRock 

represents that the Board must include a minimum 

of fourteen (14) directors total, which minimum 

would be applicable only if one or more of the 

MPSs has its equity stake drop to the point where 

it loses the ability to identify representative 

BlackRock directors, due to the interplay of the 

Shareholders Agreements and NYSE rules. 

9While the Executive Committee may exercise 

the powers of the Board during intervals between 

Board meetings or at times when the Board is 

unable to convene, the Executive Committee has 

not met for over five (5) years. 

10Pursuant to the BOA Stockholder Agreement, 

the following significant actions would require 

BOA’s consent: (a) Certain amendments to the 

certificate of incorporation or bylaws; (b) entering 

into certain regulatory settlements with specified 

adverse consequences to BOA; (c) amending or 

modifying the PNC Stockholder Agreement in a 

manner that would be viewed as materially adverse 

to BOA or materially more advantageous to PNC, 

and (d) any voluntary bankruptcy filing by 

BlackRock. Pursuant to the PNC Stockholder 

Agreement, the following significant actions would 

require approval by two-thirds of all directors or all 

of the independent directors: (a) Appointment of a 

new Chief Executive Officer; (b) certain major 

acquisitions, divestures or share issuances; (c) 

amendments to the certificate of incorporation or 

bylaws applicable to BlackRock; and (d) any 

amendment, modification or waiver of any 

obligation of another significant stockholder 

pursuant to a stockholder agreement with such 

significant stockholder. Further, the PNC 

Stockholder Agreement provides that the following 

actions would require the consent of PNC: (a) 

Certain major acquisition or divestitures; and (b) the 

same matters for which BOA has a consent right as 

described previously. Pursuant to the Barclays 

Stockholder Agreement, the following significant 

actions would require the consent of Barclays: (a) 

Amending the certificate of incorporation or bylaws 

in a manner that would in any material respect 

adversely change the powers or preferences of any 

capital stock; (b) entering into certain regulatory 

settlements with specified adverse consequences to 

Barclays and (c) any voluntary bankruptcy of 

BlackRock. 

11The following are the caps on voting interests: 

BOA = 4.9%; PNC = 49.9%; and Barclays = 4.9%. 

The following are the caps on economic interest: 

BOA = 9.9%; PNC = 38%; and Barclays = 19.9%. 

by the employees of BlackRock and 

retail and institutional investors 

unrelated to BlackRock or an MPS. 

All BlackRock stock beneficially 

owned by each MPS (other than stock 

held in certain fiduciary capacities and 

customer or market making accounts) is 

subject to a stockholders agreement 

entered into by and between that MPS 

and BlackRock (collectively, the 

Stockholders Agreements). Pursuant to 

each Stockholders Agreement, each 

MPS has or had the right to identify to 

BlackRock two (2) prospective directors, 

and, if such nominees are reasonably 

acceptable to the BlackRock Board of 

Directors (the Board), BlackRock and 

each respective MPS agrees to use best 

efforts to cause the election of such 

nominees to the Board. The Stockholder 

Agreements also contemplate a 

reduction in the number of Board seats 

which an MPS is entitled to designate 

to one upon the MPS’ interest falling 

below a ten percent (10%) equity 

interest for ninety (90) consecutive days, 

and to zero upon the MPS’ interest 

falling below a five percent (5%) equity 

interest for ninety (90) consecutive days. 

The Board may waive this provision. As 

a result of the Secondary Offering, the 

Merrill Group fell below a ten percent 

(10%) equity interest, and, assuming 

that it remains below this level, the 

Merrill Group lost the right to identify 

to BlackRock one representative director 

on or about February 13, 2011 (the 

Merrill Director Reduction). It is 

anticipated that the Board will not 

waive the Merrill Director Reduction. 

At least 10 of the current 19 directors 

must be ‘‘independent’’ (within the 

meaning of New York Stock Exchange 

(NYSE) rules 8) of the MPSs and 

BlackRock management and each MPS 

must vote its BlackRock voting common 

stock in accordance with the 

recommendations of the Board. In 

addition, the Audit Committee, the 

Management Development and 

Compensation Committee, and the 

Nominating and Governance Committee 

of the Board consist entirely of 

independent directors, and a majority of 

each other Board committee (if any), 

with the exception of the Executive 

Committee,9 must consist of 

independent directors. With limited 

exceptions, all decisions of any 

committee of the Board require the 

presence of a majority of the directors at 

a meeting at which a quorum is present. 

As of the date hereof, none of the 

directors representing an MPS serve on 

any Board committee, except that one 

director representing PNC serves on the 

Executive Committee. Further, no MPS 

representative directors sit on any of the 

Board of Directors of BlackRock 

Managers. While each MPS monitors its 

investment in BlackRock through its 

Board representatives and each MPS has 

certain limited governance rights,10 no 

MPS has or will have any involvement 

in the day-to-day management of 

BlackRock, any BlackRock Manager or 

any other BlackRock Entity. 

In addition, the respective 

Stockholder Agreements provide for the 

following additional restrictions on the 

ability of an MPS to control BlackRock 

or any BlackRock Manager: 

(a) Standstill Agreements. The 

Stockholder Agreements cap the MPSs’ 

ownership interest in BlackRock’s 

capital stock at certain prescribed levels 

of voting power on an issued and 

outstanding basis, and economic 

interest on a fully diluted basis, and 

they generally restrict each MPS from 

purchasing additional stock if doing so 

would cause its respective interests in 

BlackRock to exceed the applicable 

ownership cap.11

(b) Transfer Restrictions. The 

Stockholder Agreements include 

limitations on the transfer of an MPS’ 

BlackRock capital stock, and provide for 

a right of first refusal in BlackRock’s 

favor should the MPS desire to sell its 

BlackRock capital stock privately. 

(c) Arm’s Length Business 

Relationships. The MPSs and BlackRock 

conduct business on a competitive 

basis, including executions and other 

services for the clients of each. Under 

the Stockholder Agreements, any new 

material transaction between BlackRock 

or its affiliates and an MPS or its 

affiliates not in the ordinary course of 

business on behalf of clients or not 

pursuant to a policy, transaction or 

agreement (or form of agreement) 

previously approved must generally be 

approved by a majority of the BlackRock 

directors (other than the directors 

designated by the applicable MPS). 

Requested Relief 

9. Given the unique nature of the 

BlackRock ownership structure 

following the Acquisition, the 

Applicants believe that no MPS should 

be regarded for ERISA purposes as an 

‘‘affiliate’’ of BlackRock or any 

BlackRock Manager because the 

Applicants believe that no MPS, alone 

or with another MPS, will be in a 

position to ‘‘control’’ BlackRock. In 

addition to the BlackRock ownership 

structure itself preventing MPS control 

of BlackRock, the Stockholder 

Agreements provide several important 

safeguards to mitigate the possibility of 

an MPS exerting any form of control 

that might otherwise raise concerns 

under ERISA. In particular, the 

standstill agreements, transfer 

restrictions and arm’s length business 

relationship provisions are designed to 

ensure that BlackRock maintains its 

independence. Even if the MPSs wished 

to act together to control BlackRock, 

BlackRock believes that the MPSs 

would not be able control BlackRock 

because the Stockholder Agreements 

mandate that each MPS vote its 

BlackRock shares in accordance with 

the recommendations of the Board, 

which is dominated by persons other 

than MPS nominees. Lastly, the MPSs 

are competitors in the financial services 

industry, and as such, concerted action 

among the MPSs is extremely unlikely. 

10. Nevertheless, the Applicants 

represent that when a BlackRock 


Emcdonald on DSK2BSOYB1PROD with NOTICES2
Federal Register / Vol. 76, No. 53 / Friday, March 18, 2011 / Notices 15061 

12 ‘‘Client Plan’’ means any plan subject to ERISA 

section 406, Code section 4975 or FERSA section 

8477(c) for which a BlackRock Manager is a 

fiduciary as described in ERISA section 3(21), 

including, but not limited to, any Pooled Fund, 

MPS Plan, Index Account or Fund, Model-Driven 

Account or Fund, Other Account or Fund, or InHouse Plan, as defined in Section VI of the 

proposed exemption, except where specified to the 

contrary. 

13 ‘‘Covered Transaction’’ means each transaction 

set forth in Section III of the proposed exemption 

by a BlackRock Manager for a Client Plan with or 

involving, directly or indirectly, an MPS and/or a 

BlackRock Entity. 

14 49 FR 9494 (Mar. 13, 1984), as amended, 70 FR 

49305 (Aug. 23, 2005), and as amended, 75 FR 

38837 (July 6, 2010). 

15The QPAM Exemption may not be relied upon 

for securities lending. See Section I(b)(1) of the 

QPAM Exemption. However, for purposes of this 

proposed exemption, securities lending constituting 

Covered Transactions involving an MPS must 

comply with the QPAM Exemption conditions set 

forth in Section II.A. of the proposed exemption as 

well as the specific conditions (modeled on PTE 

2006–16, 71 FR 63786 (October 31, 2006)) set forth 

in Section III.M. of the proposed exemption. 

Manager is a fiduciary with investment 

discretion with respect to a Client 

Plan,12 and the BlackRock Manager is 

deciding whether to enter into a 

Covered Transaction 13 with or 

involving an MPS, the ownership 

interest of the MPS in BlackRock could 

affect the BlackRock Manager’s best 

judgment as a fiduciary, raising issues 

under ERISA section 406(b). The 

Applicants note that the Department’s 

regulation at 29 CFR 2550.408b–2(e)(1) 

provides that ‘‘[a] person in which a 

fiduciary has an interest which may 

affect the exercise of such fiduciary’s 

best judgment as a fiduciary includes, 

for example, a person who is a party in 

interest by reason of a relationship to 

such fiduciary described in section 

3(14)(E), (F), (G), (H), or (I)’’ of ERISA. 

ERISA section 3(14)(H) provides that a 

10% or more shareholder of a service 

provider (which may include a plan 

fiduciary) is a party in interest to the 

plan in question by reason of that 

relationship to the service provider. 

Accordingly, the Applicants seek relief 

from the prohibitions of ERISA section 

406(b) to cover the Covered 

Transactions described hereinafter. 

Further, if BlackRock Entities and one 

or more MPS are deemed affiliates, and 

because each MPS and its affiliates are 

very likely parties in interest within the 

meaning of ERISA section 3(14) with 

respect to many Client Plans, the 

Applicants also seek relief from the 

prohibitions of ERISA section 406(a) 

with respect to such Covered 

Transactions. Specifically, many 

prohibited transaction class exemptions 

from ERISA section 406(a) require as a 

condition for relief that the plan 

fiduciary and the party in interest not be 

‘‘affiliates.’’ Although the Applicants 

believe that no MPS should be regarded 

for ERISA purposes as an ‘‘affiliate’’ of 

BlackRock, the Applicants desire the 

certainty of relief which the proposed 

exemption would provide if Covered 

Transactions are entered into in 

conformance therewith. The Applicants, 

however, are seeking relief with respect 

to BOA only until the day after the 

effective date of the Merrill Director 

Reduction. 

11. As discussed above, there have 

recently occurred extraordinary 

circumstances in both the U.S. and the 

global financial services industry. Many 

entities in the financial services 

industry have faced severe economic 

hardship. During this period of 

upheaval, the trend of industry 

consolidation amongst significant 

banks, broker-dealers and other 

providers of financial services has 

accelerated. Thus, it is the Applicants’ 

belief that each MPS’ involvement in 

financial services has expanded at the 

same time as the number of participants 

in the capital markets has declined. As 

a result, the Applicants believe that the 

failure to obtain exemptive relief 

proposed herein would deny Client 

Plans access to a significant portion of 

the financial markets and that such 

denial would unduly harm Client Plans 

and their participants and beneficiaries. 

12. The Applicants request that the 

proposed exemption provide relief for 

certain enumerated types of Covered 

Transactions entered into after the 

Acquisition and, in certain cases, before 

the Acquisition and that have continued 

after the Acquisition. 

Structure of Relief 

13. The structure of the Applicants’ 

requested relief is founded upon 

compliance with five sets of general 

conditions. The five sets of general 

conditions are: (a) Modified conditions 

derived from PTE 84–14, as amended 

(sometimes referred to as the QPAM 

Exemption);14 (b) restrictions on the 

compensation of BlackRock Managers 

and their employees; (c) the 

establishment and implementation of 

certain policies and procedures (the 

Exemption Polices and Procedures or 

EPPs); (d) the appointment by 

BlackRock of an Exemption Compliance 

Officer (ECO); and (5) the retention by 

BlackRock of an Independent Monitor 

(IM). The purpose of these general 

conditions is, when coupled with the 

restrictions of the Stockholders 

Agreements and the BlackRock 

ownership structure, to foster 

independence of action by the 

BlackRock Managers notwithstanding 

the equity interests in BlackRock held 

by the MPSs. This unique overarching 

structure includes a comprehensive 

compliance function and an 

independent monitor, each of which 

work together for the benefit of Client 

Plans and their participants and 

beneficiaries by allowing Covered 

Transactions with or involving an MPS 

only if the Covered Transaction is, as 

best as can be determined, as favorable 

to the Client Plans as arm’s length 

transactions with third parties. 

14. In addition to the general 

conditions, each Covered Transaction 

has its own set of additional conditions 

deemed suitable for it in light of the 

nature of the transaction. Many of the 

conditions for individual Covered 

Transactions are derived from statutory 

exemptions, administrative class 

exemptions or administrative individual 

exemptions frequently relied upon by 

fiduciaries and parties in interest 

(sometimes affiliated and sometimes 

not) to exempt similar transactions. The 

general and transaction-specific 

conditions for relief attempt to strike a 

balance that takes into account both the 

MPSs’ unique equity interests in 

BlackRock and the ability of BlackRock 

Managers acting on behalf of Client 

Plans to engage in arm’s length Covered 

Transactions with or involving 

institutions as significant in their 

markets as are the MPSs. 

15. With respect to the relief for all 

Covered Transactions described herein, 

Section II of the proposed exemption 

provides that the following general 

safeguards must be met: 

Section II.A—Compliance with the 

QPAM Exemption. With certain 

exceptions, the conditions for relief 

under Part I of PTE 84–14 must be 

satisfied with respect to each Covered 

Transaction.15 Compliance with the 

QPAM Exemption conditions, as 

modified, is intended to assure that 

BlackRock Managers will be 

independent of the MPSs with which 

they enter into transactions. These 

conditions impose, among other 

requirements, the requirement that there 

be no agreement, arrangement or 

understanding designed to benefit an 

MPS, and the requirement that the terms 

of the Covered Transaction be at least as 

favorable to the Client Plans as the 

terms generally available in arm’s length 

transactions between unrelated parties. 

Each BlackRock Manager utilizing the 

requested relief must meet the 

definition of a ‘‘qualified professional 

asset manager’’ as described in Section 

VI(a) of the QPAM Exemption, and each 

Covered Transaction must satisfy the 


Emcdonald on DSK2BSOYB1PROD with NOTICES2
15062 Federal Register / Vol. 76, No. 53 / Friday, March 18, 2011 / Notices 

16For the avoidance of doubt, no BlackRock 

Entity will be regarded as an affiliate of an MPS for 

these purposes. 

17For purposes of Section I.A.3.(b) of the 

proposed exemption and for the 10% Rule set forth 

in Sections III.I., III.L., III.M. and III.U. of the 

proposed exemption, the MPS Plans of each of the 

MPS Groups (the PNC MPSs, the BOA MPSs, and 

the Barclays MPSs) are separately aggregated (e.g., 

all MPS Plans of BOA MPSs are aggregated together 

but are not aggregated with MPS Plans of Barclays 

MPSs or PNC MPSs). 

18For the avoidance of doubt, MPSs are excluded 

from the terms ‘‘affiliate’’ and ‘‘owner’’ for purposes 

of Section II.A. of the proposed exemption. 

conditions described in the following 

paragraphs. 

With certain exceptions discussed in 

the descriptions of the Covered 

Transactions, Section II.A.2. of the 

proposed exemption provides that, at 

the time of a Covered Transaction with 

or involving an MPS, the MPS, or its 

affiliate (within the meaning of section 

VI(c) of the QPAM Exemption),16 must 

not have the authority to appoint or 

terminate the BlackRock Manager as a 

manager of the Client Plan assets 

involved in the Covered Transaction, or 

negotiate on behalf of the Client Plan 

the terms of the management agreement 

with the BlackRock Manager (including 

renewals or modifications thereof) with 

respect to the Client Plan assets 

involved in the Covered Transaction. 

Under Section II.A.3(a), 

notwithstanding the foregoing, in the 

case of an investment fund in which 

two or more unrelated Client Plans have 

an interest, a Covered Transaction with 

an MPS will be deemed to satisfy the 

requirements of the foregoing condition 

if the assets of a Client Plan on behalf 

of which the MPS or its affiliate 

possesses the authority described above 

and which is managed by the BlackRock 

Manager in the investment fund, when 

combined with the assets of other Client 

Plans established or maintained by the 

same employer (or an affiliate thereof) 

or by the same employee organization, 

on behalf of which the same MPS 

possesses such authority and which are 

managed in the same investment fund, 

represent less than ten percent (10%) of 

the assets of the investment fund (this 

rule is referred to herein as the 10% 

Rule). 

In this regard, the Applicants 

represent that, in certain cases, as of the 

date of the Acquisition, assets of MPS 

Plans, whether or not combined with 

the assets of other plans of the same 

employer, represented ten percent 

(10%) or more of a BTC bank collective 

trust fund. These investments in the 

BTC bank collective trust fund, at the 

time they were made or authorized, 

were selected by fiduciaries of MPS 

Plans (or participants therein) as being 

in the interests of the MPS Plans and 

their participants and beneficiaries 

when no relationship existed between 

BlackRock and the MPSs in question 

that might be viewed as affecting the 

best judgment of the fiduciaries of the 

MPS Plans. While the appropriate 

fiduciary of these Client Plans, rather 

than the MPS itself, appointed the 

BlackRock Manager by investing or 

permitting investment in the bank 

collective trust fund, the Applicants 

nevertheless desire certainty that 

Section II.A.2. of this proposed 

exemption will be deemed to be met 

during the an unwind period that shall 

last until July 1, 2010 (the Unwind 

Period). There were practical obstacles 

to otherwise achieving compliance with 

the ten percent (10%) limitation in a 

shorter time frame, such as the need of 

the MPS Plans for sufficient time to 

adequately explore replacement 

investment managers. During the 

Unwind Period, such MPS Plans would 

be deemed for purposes of the proposed 

exemption to satisfy the 10% Rule if 

certain conditions are met; such 

conditions focus on fees paid by MPS 

Plans to BlackRock Managers during the 

Unwind Period, the termination 

provisions of the MPS Plans’ 

investments in the Pooled Fund, and the 

IM’s oversight of the terms of the 

investments in the Pooled Fund.17

The remaining conditions of Section 

II.A. of the proposed exemption 

generally track conditions set forth in 

Sections I(c)–I(g) of the QPAM 

Exemption, with an exception for the 

condition set forth in Section I(d) of the 

QPAM Exemption because MPSs are 

deemed not ‘‘related to’’ BlackRock for 

purposes of the proposed exemption.18

Section II.B.—Compensation 

Restrictions. The Applicants recognize 

that an unrestricted ability for 

employees of BlackRock to receive 

compensation in connection with the 

Covered Transactions could give rise to 

potential ERISA conflicts. In order to 

address this potential for conflicts, the 

Applicants will agree that no employees 

of a BlackRock Manager can receive any 

compensation that is based on any 

Covered Transaction having taken place 

between Client Plans and any of the 

MPSs (as opposed to with another 

institution that is not an MPS). The fact 

that a specific Covered Transaction 

occurred with an MPS as opposed to a 

non-MPS counterparty must be ignored 

by BlackRock and BlackRock Managers 

for compensation purposes. None of the 

employees of BlackRock or a BlackRock 

Manager can receive any compensation 

from BlackRock or a BlackRock Manager 

which consists of equity Securities 

issued by an MPS, which fluctuates in 

value based on changes in the value of 

equity Securities issued by an MPS, or 

which is otherwise based on the 

financial performance of an MPS 

independent of BlackRock’s 

performance, provided that this 

condition shall not fail to be met 

because of the compensation of an 

employee of a BlackRock Manager 

fluctuates with the value of a broadlybased index which includes equity 

Securities issued by an MPS. 

Section II.C.—Exemption Policies and 

Procedures. The Applicants recognize 

that in order for BlackRock to 

successfully manage and monitor 

Covered Transactions, the establishment 

of systematic policies and procedures is 

essential. The proposed exemption 

requires that BlackRock adopt and 

implement Exemption Policies and 

Procedures (EPPs), as defined in the 

proposed exemption, that address each 

of the Covered Transactions and that are 

reasonably designed to achieve the goals 

of: (a) Compliance with the terms of the 

exemption, (b) ensuring BlackRock’s 

decisionmaking with respect to the 

Covered Transactions on behalf of 

Client Plans is done in the interests of 

the Client Plans and their participants 

and beneficiaries and, (c) to the extent 

possible, verifying that the terms of such 

Covered Transactions are at least as 

favorable to Client Plans as the terms 

generally available in arm’s length 

transactions with unrelated parties. The 

EPPs are to be developed with the 

cooperation of both the ECO and the IM, 

and such EPPs are subject to the 

approval of the IM. The EPPs need not 

address transactions which are not 

within the definition of the term 

Covered Transactions. 

Transgressions of the EPPs fall into 

three categories: (a) transgressions that 

constitute prohibited transactions under 

ERISA sections 406, Code section 4975, 

or FERSA section 8477(c) and which are 

not exempt by reason of a failure to 

comply with the proposed exemption or 

another administrative or statutory 

exemption (referred to herein as 

Violations), (b) transgressions that 

involve material amounts or material 

deviations from the EPPs, taking into 

account the amount of Client Plan assets 

affected by such transgressions (EPP 

Corrections), but that do not constitute 

Violations, and (c) transgressions that 

involve immaterial amounts and 

deviations from the EPPs and do not 

constitute Violations. The ECO will 

make a written determination as to 

whether such transgressions constitute 

Violations and require corrective action 

pursuant to Section V of the proposed 

exemption, require EPP Correction, or 


Emcdonald on DSK2BSOYB1PROD with NOTICES2
Federal Register / Vol. 76, No. 53 / Friday, March 18, 2011 / Notices 15063 

19 ‘‘ECO Function’’ means the ECO and such other 

BlackRock Entity employees in legal and 

compliance roles working under the supervision of 

the ECO in connection with the Covered 

Transactions. The list of BlackRock Entity 

employees shall be shared with the IM from time 

to time, not less than quarterly, and such employees 

will be made available to discuss the relevant 

Covered Transactions with the IM to the extent the 

IM or the ECO deem it reasonably prudent. 

require no action. If the ECO determines 

a Violation has occurred, the provisions 

of Section V of the proposed exemption 

are applicable. If the ECO determines an 

EPP Correction is required, the ECO will 

provide written notice to the IM of the 

EPP Correction and the IM would have 

the authority to mandate further 

corrective action. The ECO will provide 

summaries for the IM of any such EPP 

Corrections as part of the required 

quarterly report. 

To illustrate the implementation of 

the rules with respect to the three 

categories outlined above, the 

Applicants have provided the following 

hypothetical examples. 

(a) Hypothetical Example One: A 

portfolio manager (PM) at a BlackRock 

Manager purchases Barclays common 

stock on the secondary market on behalf 

of several Client Plan portfolios, which 

if such purchases were below fifteen 

percent (15%) of the aggregate average 

daily trading volume (ADTV) for the 

previous ten trading days or below 

fifteen percent (15%) of the trading 

volume on the day of the purchase 

would otherwise appear to satisfy the 

criteria for relief under Section III.S. of 

the proposed exemption. The PM fails 

to aggregate the purchases of all of the 

accounts, and it purchases 15.2% of the 

ten trading day ADTV (which is also 

higher than the day in question’s 

volume), thereby exceeding fifteen 

percent (15%) of both the ten day ADTV 

and the trading volume on the day of 

the transactions. As a result, they are no 

longer eligible for purchase under 

Section III.S. of the proposed 

exemption. Unless timely corrected 

under Section V of the proposed 

exemption, the purchase would 

constitute a Violation. 

(b) Hypothetical Example Two: A PM 

at a BlackRock Manager purchases 

Barclays common stock on the 

secondary market on behalf of several 

Client Plan portfolios. The PM 

purchases an amount of Barclay stock 

equal to thirteen percent (13%) of the 

ten trading day ADTV. In order to 

simplify a compliance monitoring 

process that oversees three separate 

trading desks, the EPPs provide that 

purchases with respect to certain groups 

of portfolios be limited to purchases of 

MPS stock that equal no more than five 

percent (5%) of the ten day ADTV, 

unless approved in advance by the ECO. 

The purchases are made and no 

Violation has occurred because 

BlackRock is well below fifteen percent 

(15%) of the ten trading day ADTV, but 

there has been a serious transgression of 

the EPPs in that the PM failed to adhere 

to the carefully designed EPPs. 

Assuming for these purposes no 

mitigating further circumstances, the 

ECO Function would make a 

determination of an appropriate EPP 

Correction, including whether the 

implicated Client Plans would be better 

served by keeping or selling the 

securities acquired. The ECO would 

provide written notice to the IM of the 

EPP Correction. The IM would have the 

authority to mandate further corrective 

action. 

(c) Hypothetical Example Three: The 

circumstances of the Barclays stock 

purchase are essentially the same as 

those in Hypothetical Example Two, 

except the PM at the BlackRock 

Manager in question, when he checks 

his trade list and aggregates the total 

percentage of Barclays stock to be 

purchased, issues instructions to cancel 

enough of the proposed purchase to 

bring it below five percent (5%). 

However, through inadvertence of the 

broker, the cancellation is not 

implemented and the full thirteen 

percent (13%) purchase is made of 

Barclays stock. There is no Violation, 

the original purchase order was a 

transgression of the EPPs, and 

correction may or may not be necessary 

depending on the circumstances, 

including why it was that the original 

purchase order was given and why it 

was the cancellation was not effected. 

Section II.D.—Exemption Compliance 

Officer. In order to comply with the 

proposed exemption, the Applicants 

represent that it is essential to appoint 

an ECO and an ECO Function.19 The 

ECO and the ECO Function will be 

developed and maintained by 

BlackRock to monitor compliance with 

the Code, ERISA, FERSA and the 

proposed exemption. The use of a 

dedicated ECO is more advantageous 

than simple reliance upon the 

Applicants’ existing compliance 

department because the ECO will have 

a single focus on ERISA compliance as 

well as the expertise to ensure such 

compliance. In addition, the ECO and 

the ECO Function provide a centralized 

resource that is well suited to providing 

and receiving information to and from 

the IM (as discussed below). 

The proposed exemption requires that 

BlackRock appoint an ECO. If the ECO 

resigns or is removed, BlackRock shall 

appoint a successor ECO within a 

reasonable period of time, not to exceed 

thirty (30) days, which successor shall 

be subject to the affirmative written 

approval of the IM. The ECO is a 

professional with at least ten years of 

experience and extensive knowledge of 

the regulation of financial services and 

products, including such regulation 

under ERISA and FERSA. 

The conditions of Section II.D. of the 

proposed exemption govern the ECO’s 

employment with BlackRock, including 

compensation, termination, treatment 

and responsibilities. The 

responsibilities set forth in Section II.D. 

of the proposed exemption generally 

include, but are not limited to: 

Monitoring Covered Transactions 

(including transactions and situations 

resulting from transactions with MPSs), 

monitoring compliance with the EPPs, 

determining whether corrective action, 

if any, is necessary with respect to 

Violations and EPP Corrections, 

determining whether revisions are 

necessary to the EPPs, the supervision 

of the ECO Function, the provision of a 

quarterly report to the IM, and the 

provision of certain certifications to the 

IM. 

Section II.E.—Independent Monitor. 

The applicant represents that the ECO 

and the ECO Function alone may not be 

sufficient to completely avoid potential 

conflicts of interests. Conversely, the 

Applicants also believe that a wholly 

independent third party alone would 

not be able to efficiently or effectively 

monitor and oversee all of the relevant 

BlackRock activities. Therefore, 

BlackRock will appoint an IM that will 

provide an independent perspective, be 

capable of making independent 

decisions when necessary, and, to the 

extent any Violations occur or 

corrections are necessary, pass upon the 

same without any risk of self-interested 

motives that could be perceived if the 

ECO alone were to be responsible for 

making such decisions. The IM serves 

some of the same functions that a 

Qualified Professional Asset Manager 

might under similar circumstances but, 

as discussed above, due to the unique 

nature and complexities of the 

requirements contained in the proposed 

exemption, reliance upon the IM alone, 

without the support of the ECO and the 

ECO Function (and the EPPs) would be 

inadequate. The Applicants believe that 

the ECO, the ECO Function and the IM 

together will complement each other in 

serving their respective roles and 

combine, through frequent 

communication and coordination, to 

provide the necessary compliance 

regime. 

The proposed exemption, therefore, 

requires that BlackRock retain an IM. If 

the IM resigns or is removed, BlackRock 


Emcdonald on DSK2BSOYB1PROD with NOTICES2
15064 Federal Register / Vol. 76, No. 53 / Friday, March 18, 2011 / Notices 

20 56 FR 31966 (July 12, 1991), as corrected at 56 

FR 59299 (Nov. 25, 1991). 21 73 FR 63200, 63204 (Oct. 23, 2008). 

shall appoint a successor IM within a 

reasonable period of time, not to exceed 

thirty (30) days. The IM agrees in 

writing to serve as IM, and he or she is 

independent within the meaning of the 

proposed exemption. 

The conditions of Section II.E. of the 

proposed exemption set forth the IM’s 

responsibilities. The IM’s 

responsibilities generally include, but 

are not limited to, the following: 

approval of the ECO and his or her 

compensation, assistance in the 

development, alteration and monitoring 

of the EPPs, consulting with the ECO 

regarding EPP Corrections and 

Violations (including modifications 

regarding such), exercising discretion 

for Client Plans when BlackRock 

Managers may have conflicts, reviewing 

the ECO’s quarterly reports and 

certifications, determining whether a 

pattern or practice of BlackRock noncompliance exists, and the completion 

of an annual report. 

Section II.F.—Special Notice 

Provisions. As an added safeguard to 

affected Client Plans, the proposed 

exemption requires specific disclosure 

to a plan fiduciary independent of 

BlackRock with respect to certain 

Covered Transactions. Such additional 

disclosure makes the provision of 

exemptive relief for certain Covered 

Transactions consistent with existing 

exemptive relief regimes. In that vein, a 

Special Notice containing (a) a notice of 

all of the conditions for relief under 

Sections III.C., E., F., G., Q., R., S. and 

V. of the proposed exemption and (b) a 

copy of the Notice to Interested Persons, 

must be provided to affected Client 

Plans in writing (which may be 

provided by U.S. mail or electronically, 

including by e-mail or use of a 

centralized electronic mailbox, so long 

as such electronic communication is 

reasonably calculated to result in the 

applicable Client Plan’s receipt) as soon 

as practical, but no later than fifteen (15) 

days, following the date that the Notice 

to Interested Persons is provided to 

Client Plans generally, through 

publication in the Federal Register. As 

soon as practical following the Special 

Notice, a Client Plan fiduciary 

independent of any BlackRock Entity 

must be provided any additional 

material information regarding Covered 

Transactions described in Sections 

III.C., E., F., G., Q., R., S. and V. of the 

proposed exemption by the applicable 

BlackRock Manager on reasonable 

request; provided, that, solely for 

purposes of this provision, the fiduciary 

of an In-House Plan is not required to 

be independent of any BlackRock 

Entity. 

Covered Transactions 

16. As discussed above, the structure 

of the requested relief is founded upon 

compliance with five sets of general 

conditions. These five sets of general 

conditions are then modified by 

additional conditions deemed suitable 

for each Covered Transaction. Many of 

the conditions for individual Covered 

Transactions are derived from statutory 

exemptions, administrative class 

exemptions or administrative individual 

exemptions frequently relied upon by 

fiduciaries and parties in interest 

(sometimes affiliated and sometimes 

not) to exempt similar transactions. 

Section III of the proposed exemption 

sets forth the Covered Transactions for 

which the Applicants are seeking 

exemptive relief and the conditions 

which must be satisfied in respect of 

such Covered Transactions in order to 

be accorded such relief. Each Covered 

Transaction is set forth below, 

corresponding to the subsections of 

Section III of the proposed exemption. 

A. Continuing Covered Transactions 

17. The Applicants represent that as 

of the closing date of the Acquisition, 

there were three types of continuing 

Covered Transactions still in place 

which were previously entered into 

between BlackRock Managers and one 

or more of the MPSs in reliance on PTE 

84–14 (the QPAM Exemption) and/or 

PTE 91–38 20 (a class exemption for 

transactions entered into on behalf of 

bank collective trust funds), with such 

transactions relying upon the 

continuing transaction provisions 

therein (i.e., Section VI(i) of the QPAM 

Exemption and Section IV(h) of PTE 91– 

38). The three types of continuing 

transactions (Continuing Covered 

Transactions) are defined in the 

proposed exemption as Type A, Type B 

and Type C. 

18. The three types of Continuing 

Covered transactions can be described 

as follows: 

(a) Type A: Continuing Covered 

transactions where there is no discretion 

on the part of either party, other than 

the ability of the BlackRock Manager to 

sell or otherwise transfer the Client 

Plan’s position to a third party, the 

ability of the MPS to sell or otherwise 

transfer its position to a third party, or 

the ability of an MPS to otherwise 

terminate the transaction on previously 

specified terms. This could include, for 

example, the holding by a Client Plan of 

a corporate debt instrument issued by 

an MPS, which the BlackRock Manager 

may sell on behalf of a Client Plan or 

which the MPS may redeem. Another 

example is a commercial mortgage loan 

made to a Client Plan by an MPS that 

does not include a prepayment 

provision, which loan the MPS might 

sell to a third party. 

(b) Type B: Continuing Covered 

Transactions such as those described as 

Type A, with the additional feature that 

the BlackRock Manager, on behalf of a 

Client Plan, has the option to terminate 

the Transaction with the MPS on 

previously specified terms. This could 

include a note issued by an MPS which 

the BlackRock Manager, on behalf of a 

Client Plan, has the ability to sell to a 

third party, or could choose to ‘‘put’’ 

back to the MPS on previously specified 

terms. 

(c) Type C: Continuing Covered 

Transactions similar to Type B where 

the BlackRock Manager may terminate 

or modify the Transaction on behalf of 

a Client Plan under certain 

circumstances, but only with 

negotiation and/or payment of 

consideration to the MPS or to the 

Client Plan which was not 

predetermined. An example of such a 

Transaction could include a swap 

between a Client Plan and an MPS with 

a fixed term, under which the 

BlackRock Manager can seek novation 

to a third party if the MPS consents 

(perhaps for a price, for example, to 

reflect any credit differences between 

the selling Client Plan and the buyer), 

or which the BlackRock manager can 

terminate at any time if there is 

agreement on the termination payments. 

The Applicants represent that each 

continuing Covered Transaction was 

believed to be in the interests of Client 

Plans and their participants and 

beneficiaries as of the date entered into. 

19. With respect to Type A Covered 

Transactions in reliance on PTE 84–14 

or PTE 91–38, the Applicants’ position 

is that relief for any prohibited 

transaction that might arise under 

ERISA section 406(a) should continue to 

be available, if such relief applied preAcquisition, whether or not needed, 

pursuant to Section VI(i) of PTE 84–14 

and Section IV(h) of PTE 91–38, the 

‘‘continuing transactions’’ provisions of 

the exemptions, until or unless a 

modification, renewal or other 

discretionary action becomes necessary. 

The Department has previously 

concurred with a similar analysis of the 

‘‘continuing transaction’’ provisions of 

PTE 84–14 and 91–38 in the Notice of 

Proposed Exemption with respect to 

PTE 2009–11.21 However, the 

Department additionally noted that no 

relief is provided from ERISA section 


Emcdonald on DSK2BSOYB1PROD with NOTICES2
Federal Register / Vol. 76, No. 53 / Friday, March 18, 2011 / Notices 15065 

22For purposes of the proposed exemption, Fixed 

Income Obligations is a defined term generally 

meaning fixed income obligations characterized as 

debt pursuant to 29 CFR 2510.3–101 (other than 

loans with respect to which an MPS is the entity 

which acts as lead lender and other than AssetBacked Securities). 

23The Applicants’ representations in this regard 

are equally applicable to other Covered 

Transactions. 

406(b) for an act of self-dealing that 

arises if circumstances change during 

the course of the continuing transaction. 

20. With respect to Type B and Type 

C Continuing Covered Transactions, and 

the unwind, settlement or other 

termination thereof, ERISA section 

406(a) and 406(b) relief is afforded 

under the proposed exemption, subject 

to the conditions outlined below. In 

conjunction therewith, the Applicants’ 

position is that the provision of the 

exemptive relief from ERISA sections 

406(a) and (b) for Type B and Type C 

continuing Covered Transactions does 

not necessarily mean that ERISA section 

406(a) relief was not available for at 

least some of these Continuing Covered 

Transactions under PTE 84–14 or PTE 

91–38. The Applicants acknowledge, 

however, that the Department is 

expressing no view as to whether such 

relief was otherwise available. 

21. A list of all Type B Covered 

Transactions and all Type C Covered 

Transactions (B and C List) as of the 

Acquisition must be prepared and 

provided to the ECO and the IM. Any 

discretionary act by a BlackRock 

Managers with respect to a transaction 

on the B and C List must be approved 

in writing in advance by the ECO. Such 

approval is required for, but not limited 

to, sales and other transfers to a third 

party, redemptions, the exercise of 

options and the declaration of default or 

other credit impairment driven 

decisions. The ECO must determine that 

the terms of the action are in the 

interests of the affected Client Plans. 

The ECO Function periodically 

monitors outstanding transactions on 

the B and C List to inquire if an 

affirmative discretionary act, such as a 

credit driven action would be 

appropriate. If the ECO makes such a 

determination, the ECO must direct the 

action be taken and must approve the 

terms thereof as being in the interests of 

the affected Client Plans. The ECO 

Function must send to the IM an 

updated copy of the B and C List as of 

the end of each fiscal quarter 

summarizing the Type B Covered 

Transactions and the Type C Covered 

Transactions remaining at the end of the 

quarter and any discretionary actions 

taken during the quarter by BlackRock 

Managers with respect to such 

transactions. Upon the determination by 

the IM that an action taken with respect 

to a Type B Covered Transaction or a 

Type C Covered Transaction was 

inappropriate or that the compensation 

the Client Plans received was 

inadequate, or that an action should 

have been taken but was not, the Client 

Plans will be made whole by BlackRock. 

B. Purchases and Holdings by 

BlackRock Managers of Fixed Income 

Obligations Issued by an MPS in an 

Underwriting on Behalf of Client Plans 

Invested in an Index Account or Fund, 

or in a Model-Driven Account or Fund 

22. The MPSs are significant issuers 

of Fixed Income Obligations 22 both in 

the United States and in the United 

Kingdom. The Applicants represent that 

BlackRock Managers in their normal 

course may determine that an 

investment for Client Plans in Fixed 

Income Obligations newly issued by an 

MPS will be a beneficial investment for 

Client Plans. In the case of Index Funds 

or Model-Driven Funds, BlackRock 

Managers will need to make purchases 

of MPS Fixed Income Obligations for 

Index Funds for purposes of tracking the 

relevant Index, and for Model-Driven 

Funds for purposes of tracking the 

relevant Model. The Applicants 

represent that the purchase of such MPS 

Fixed Income Obligations for Index 

Funds or Model-Driven Funds in the 

primary market may be the best way to 

acquire such Fixed Income Obligations. 

The purchase of such Fixed Income 

Obligations, however, may convey an 

economic benefit on the issuing MPS, 

and establishes a debtor-creditor 

relationship. In addition, if an MPS is a 

member or manager of the selling 

syndicate, the purchase might convey 

an economic benefit on such MPS. 

23. The Applicants represent that: (a) 

Each BlackRock Manager makes 

investment decisions on behalf of, or 

renders investment advice to, its Client 

Plans in accordance with the governing 

document of the particular Client Plan 

and the guidelines and objectives 

established in the relevant trust 

agreement or investment management or 

advisory agreement; (b) a decision to 

invest in a particular offering of Fixed 

Income Obligations is made on the basis 

of price, value, and a Client Plan’s 

investment criteria; (c) a BlackRock 

Manager has little incentive to make 

purchases from offerings in which an 

MPS is an issuer that are not in the 

interests of a Client Plan because the 

BlackRock Manager’s compensation for 

its services is generally based upon 

assets under management; and (d) if the 

assets under its management do not 

perform well, the BlackRock Manager 

will over time receive less 

compensation and could lose clients.23

24. In order for relief under the 

proposed exemption to be available for 

this transaction, such purchase and 

holding must be for the sole purpose of 

maintaining quantitative conformity 

with the weight of such Securities 

prescribed by the relevant Index, for 

Index Accounts or Funds, or the weight 

of such Securities prescribed by the 

relevant Model, for Model-Driven 

Accounts or Funds, and such purchase 

may not exceed the purchase amount 

necessary for such Model or quantitative 

conformity. In addition, such purchase 

shall not be made from any MPS and no 

BlackRock Entity shall be in the selling 

syndicate. Furthermore, the responsible 

BlackRock Manager must notify the ECO 

if circumstances arise in which an 

action or inaction on the part of the 

BlackRock Manager regarding an MPS 

Fixed Income Obligation so acquired 

might be thought to be motivated by an 

interest which may affect the exercise of 

such BlackRock Manager’s best 

judgment as a fiduciary (e.g., 

participation in a creditor’s committee, 

exercise of a put, waiver of covenants or 

other substantially similar actions), and 

the BlackRock Manager must comply 

with decisions of the ECO regarding the 

taking, or the refraining from taking, of 

actions in such circumstances. After the 

purchase, any decision regarding the 

conversion of an MPS Fixed Income 

Obligation into equity in the MPS must 

be made by the IM. 

C. Purchase and Holding by BlackRock 

Managers of Fixed Income Obligations 

Issued by an MPS in an Underwriting on 

Behalf of Client Plans Invested in an 

Other Account or Fund 

25. Because the MPSs are significant 

issuers of Fixed Income Obligations in 

the United States and the United 

Kingdom, the Applicants represent that 

BlackRock Managers in their normal 

course may determine that an 

investment in a new offering of Fixed 

Income Obligations issued by an MPS 

will be a beneficial investment for 

Client Plans in an account or a pooled 

fund which is not an Index Fund or 

Model-Driven Fund (an Other Account 

or Fund). As stated above, the purchase 

of such Fixed Income Obligations, 

however, may convey an economic 

benefit on the issuing MPS, and 

establishes a debtor-creditor 

relationship. In addition, if an MPS is a 

member or manager of the selling 


Emcdonald on DSK2BSOYB1PROD with NOTICES2
15066 Federal Register / Vol. 76, No. 53 / Friday, March 18, 2011 / Notices 

24 Greenwich Associates, Leading Dealers (2008). 

25As defined in the proposed exemption, ‘‘Three 

Quote Process’’ means three bids or offers (either of 

which being sometimes referred to as quotes) are 

received by a trader for a BlackRock Manager each 

of which such quotes such trader reasonably 

believes is an indication that the dealer presenting 

the bid or offer is willing to transact the trade at 

the stipulated volume under discussion, and all 

material terms (including volume) under discussion 

are materially similar with respect to each other 

such quote. In selecting the best of three such 

quotes, a BlackRock Manager may maintain books 

and records for the three firm bids/offers in a 

convention that it reasonably believes is customary 

for the specific asset class (such as ‘‘price’’ quotes, 

‘‘yield’’ quotes or ‘‘spread’’ quotes). For example, 

corporate bonds are often quoted on a spread basis 

and dealers customarily quote the spread above a 

certain benchmark bond’s yield (e.g., for a given 

size and direction a BlackRock trader may ask for 

quotes to sell $1 million of a particular bond, dealer 

1 may quote 50 bps above the yield of the ten (10) 

year treasury bond, dealer 2 might quote 52 bps 

above the yield of the ten (10) year treasury bond 

and dealer 3 might quote 53 bps above the yield of 

the ten (10) year treasury bond). If only two firm 

bids/offers can be obtained, the trade requires prior 

approval by the ECO and the ECO must inquire as 

to why three firm bids/offers could not be obtained. 

If in the case of a sale or purchase a trader for a 

BlackRock Manager reasonably believes it would be 

injurious to the Client Plan to specify the size of 

the intended trade to certain bidders, a bid on a 

portion of the intended trade may be treated as a 

firm bid if the trader documents (a) why the bid 

price is a realistic indication of the economic terms 

for the actual amount being traded despite the 

difference in the size of the actual trade and (b) why 

it would be harmful to the Client Plan to solicit 

multiple bids on the actual amount of the trade. If 

a trader for a BlackRock Manager solicits bids from 

three or more dealers on a sale or purchase of a 

certain volume of Securities, and receives back 

three or more bids, but at least one bid is not for 

the full amount of the intended sale, if the price 

offered by the partial bidder(s) is less than the price 

offered by the full bidder(s), the trader may assume 

a full bid by the partial bidder(s) would not be the 

best bid, and the trader can consummate the trade, 

in the case of at least two full bids, with the dealer 

making the better of the full bids, or in the case of 

only one full bid, with the dealer making that full 

bid. 

syndicate, the purchase might convey 

an economic benefit on such MPS. 

26. In order for relief under the 

proposed exemption to be available for 

this transaction, such purchase and 

holding must satisfy the conditions of 

Section IV.A. (Affiliated Underwritings) 

of the proposed exemption, except that 

for purposes of the ratings requirement 

described therein, the MPS-issued Fixed 

Income Obligations at the time of 

purchase must be rated in one of the 

three highest rating categories by a 

Rating Organization and none of the 

Rating Organizations may rate the Fixed 

Income Obligations lower than in the 

third highest rating category. In 

addition, such purchase must not be 

made from an MPS and no BlackRock 

Entity can be in the selling syndicate. 

27. After purchase, the responsible 

BlackRock Manager must notify the ECO 

if circumstances arise in which an 

action or inaction on the part of the 

BlackRock Manager regarding an MPS 

Fixed Income Obligation so acquired 

might be thought to be motivated by an 

interest which may affect the exercise of 

such BlackRock Manager’s best 

judgment as a fiduciary, and the 

BlackRock Manager must comply with 

decisions of the ECO regarding the 

taking, or the refraining from taking, of 

actions in such circumstances. After 

purchase, any decision regarding 

conversion of an MPS Fixed Income 

Obligation into equity in the MPS must 

be made by the IM. 

D. Certain Transactions in the 

Secondary Market by BlackRock 

Managers of Fixed Income Obligations 

Including Fixed Income Obligations 

Issued by or Traded With an MPS 

28. Because the MPSs and their 

affiliates are significant issuers of Fixed 

Income Obligations in the United States 

and the United Kingdom, the 

Applicants represent that BlackRock 

Managers in their normal course may 

determine that a secondary market 

investment for Client Plans in Fixed 

Income Obligations issued by an MPS 

will be a beneficial investment for 

Client Plans. The Applicants further 

represent that BlackRock Managers in 

the normal course may determine that 

the purchase from or sale to an MPS in 

the secondary market of third party 

Fixed Income Obligations will be 

beneficial investments for Client Plans. 

The MPSs are significant participants in 

the fixed income markets as brokerdealers and offer significant sources of 

trading liquidity to investment 

managers. Furthermore, multiple MPSs 

are often ranked in the top five 

counterparties in the debt markets in the 

aggregate as well as many asset classes 

and geographies. A leading 2008 survey 

(completed before Barclays/Lehman and 

BOA/Merrill Group acquisitions) of 

investment managers ranking the 

quality of fixed income broker-dealers 

ranked Bank of America, Barclays, 

Lehman Brothers, and Merrill Lynch in 

the top 10 broker-dealers.24

29. While purchases of Fixed Income 

Obligations in the secondary market 

convey no economic benefit on the 

issuing MPS, a debtor-creditor 

relationship is still established thereby. 

Also, such a purchase from an MPS may 

be a prohibited transaction in and of 

itself, requiring exemptive relief. 

30. The Applicants state that 

obtaining the best available purchase or 

sales price for a particular trade presents 

special challenges in the fixed income 

markets, which trade a very large array 

of different Fixed Income Obligations 

with specific features, including some 

Fixed Income Obligations issued in 

relatively small numbers and/or in 

which markets are made by only a small 

number of dealers. The diminution in 

the number of market makers due to the 

recent exit of several major participants 

from the financial services industry 

through bankruptcies or acquisitions 

has heightened these challenges. 

Accordingly, the Applicants represent 

that purchases and sales to or from an 

MPS will be done in compliance with 

the Three Quote Process,25 which will 

demonstrate that the MPS provides the 

best available purchase or sale price for 

the Fixed Income Obligation being 

traded. 

31. In order for relief under the 

proposed exemption to be available for 

this transaction, the following 

additional conditions are applicable 

solely to the extent that the Fixed 

Income Obligations are issued by an 

MPS and are purchased and held by a 

BlackRock Manager for a Client Plan: (a) 

The purchase of the Fixed Income 

Obligation issued by an MPS is not 

made from the issuing MPS; (b) after 

purchase, the responsible BlackRock 

Manager must notify the ECO if 

circumstances arise in which an action 

or inaction on the part of the BlackRock 

Manager regarding an MPS Fixed 

Income Obligation so acquired might be 

thought to be motivated by an interest 

which may affect the exercise of such 

BlackRock Manager’s best judgment as a 

fiduciary, and must comply with the 

decisions of the ECO regarding the 

taking, or the refraining from taking, of 

actions in such circumstances; (c) after 

purchase, any decision regarding 

conversion of an MPS Fixed Income 

Obligation into equity in the MPS must 

be made by the IM; and (d) if purchased 

for an Index Account or Fund, or a 

Model-Driven Account or Fund, such 

purchase must be for the sole purpose 

of maintaining quantitative conformity 

with the weight of such Securities 

prescribed by the relevant Index, for 

Index Accounts or Funds, or the weight 

of such Securities prescribed by the 

relevant Model, for Model-Driven 

Accounts or Funds, and such purchase 

may not exceed the purchase amount 

necessary for such Model or quantitative 

conformity. 

32. With respect to Fixed Income 

Obligations, whether or not issued by an 

MPS, held by a BlackRock Manager for 

a Client Plan under which an MPS has 

an ongoing function, such as servicing 

of collateral for asset-backed debt, or the 

potential for liability, such as under 

representations or warranties made by 

an MPS with respect to collateral for 

such asset-backed debt which the MPS 

originated, the taking of or refraining 


Emcdonald on DSK2BSOYB1PROD with NOTICES2
Federal Register / Vol. 76, No. 53 / Friday, March 18, 2011 / Notices 15067 

26As defined in the proposed exemption, AssetBacked Securities means Securities which are passthrough certificates or trust certificates 

characterized as equity pursuant to 29 CFR 2510.3– 

101 that represent a beneficial ownership interest 

in the assets of an issuer which is a trust, with any 

such trust limited to (a) a single or multi-family 

residential or commercial mortgage investment 

trust, (b) a motor vehicle receivable investment 

trust, or (c) a guaranteed governmental mortgage 

pool certificate investment trust, and which entitles 

the holder to payments of principal, interest and/ 

or other payments made with respect to the assets 

of the trust, the corpus or assets of which consist 

solely or primarily of secured obligations that bear 

interest or are purchased at a discount. For 

purposes of Section IV.A. of the proposed 

exemption, Asset-Backed Securities are treated as 

debt Securities. 

27The Department has issued individual 

exemptions for situations where an asset manager 

purchases securities in an underwriting and an 

affiliate is trustee of the issuer. See, e.g., PTE 2003– 

24, granted to Deutsche Bank AG and JPMorgan 

Chase Bank, 68 FR 48637 (August 14, 2003). 

28Applicants note that the Department concluded 

under similar circumstances that relief is not 

necessary for the purchase of investment grade 

CMBS Securities on behalf of employee benefit 

plans during an underwriting syndicate, where the 

investment manager is related to an originator of 

one or more of the loans in the CMBS pool, once 

the loan originator has transferred the loans to the 

pool because the loan originator has no other 

responsibilities to the pool other than a limited 

repurchase obligation. See Notice of Proposed 

Exemption with respect to PTE 2008–16, 73 FR 

60325, 60328 (Oct. 10, 2008). 

29Relief is not provided in the proposed 

exemption for purchases of Asset-Backed Securities 

in the primary market if an MPS is a sponsor, swap 

counterparty, servicer (except in the case of CMBS), 

originator (except in the case of CMBS), liquidity 

provider, or insurer with respect to the AssetBacked Securities. With respect to originators and 

CMBS, see footnote 28. 

30As defined in the proposed exemption, 

‘‘Underwriter Exemption(s)’’ means a group of 

individual exemptions granted by the Department 

to provide relief for the origination and operation 

Continued 

from taking of any action (e.g., 

instituting legal action for breach of 

representation) by the responsible 

BlackRock Manager which could have a 

material positive or negative effect upon 

the MPS must be decided upon by the 

ECO. For purposes of this Covered 

Transaction, Asset-Backed Securities,26

as defined in the proposed exemption, 

are not Fixed Income Obligations. 

E. Purchase in an Underwriting and 

Holding by BlackRock Managers of 

Fixed Income Obligations Issued by a 

Third Party When an MPS is 

Underwriter, Manager or Member of the 

Selling Syndicate, or a Debt Trustee 

33. The Applicants represent that 

BlackRock Managers in their normal 

course may determine that an 

investment in a new offering of thirdparty Fixed Income Obligations where 

an MPS is an underwriter, manager or 

member of the selling syndicate and/or 

where an MPS is the debt trustee will 

be a beneficial investment for Client 

Plans. As discussed above, the purchase 

of Securities in an offering when an 

MPS is a member or manager of the 

syndicate might convey an economic 

benefit on such MPS. In addition, if an 

MPS is a debt trustee of such Securities, 

the purchase might enable such MPS to 

earn a fee, or earn a larger fee.27

34. The Applicants estimate that the 

majority of the syndicated offerings that 

they review as potentially attractive 

investments for Client Plans include one 

or more MPS as an underwriter. 

Additionally, multiple MPS are often 

ranked in the top five underwriters for 

total debt issued in the Americas and 

globally. Thus, the failure to obtain 

relief for primary market offerings due 

to an MPS acting as an underwriter, 

whether as a manager or member, would 

deny Client Plans access to a majority of 

primary market offerings for Fixed 

Income Obligations. 

35. In order for relief under the 

proposed exemption to be available for 

this transaction, the following 

conditions apply: (a) The conditions of 

Section IV.A. (Affiliated Underwritings) 

of the proposed exemption must be 

satisfied; (b) such purchase must not be 

made from an MPS; (c) no BlackRock 

Entity may be in the selling syndicate; 

and (d) with respect to Fixed Income 

Obligations under which an MPS has 

either an ongoing function, such as debt 

trustee, servicer of collateral for asset– 

backed debt, or the potential for 

liability, such as under representations 

or warranties made by an MPS with 

respect to collateral for such assetbacked debt which the MPS originated, 

the taking of or refraining from taking 

any action by the responsible BlackRock 

Manager which could have a material 

positive or negative effect upon the MPS 

must be decided upon by the ECO. For 

purposes of this Covered Transaction, 

Asset-Backed Securities are not Fixed 

Income Obligations. 

F. Purchase in an Underwriting and 

Holding by BlackRock Managers of 

Asset-Backed Securities, When an MPS 

is Underwriter, in the Capacity as Either 

a Manager or a Member of the Selling 

Syndicate, Trustee, or, in the Case of 

Asset-Backed Securities Which Are 

CMBS, Servicer 28

36. The Applicants represent that 

BlackRock Managers in their normal 

course may determine that an 

investment in a new offering of AssetBacked Securities treated as equity for 

ERISA purposes where an MPS is an 

underwriter, in the capacity as either a 

manager or a member of the selling 

syndicate, or trustee (or, in the case of 

CMBS, servicer, when the MPS serves 

solely as servicer and not as underwriter 

or trustee while being such servicer) 

will be a beneficial investment for 

Client Plans. The Applicants also 

represent that multiple MPSs are often 

ranked in the top ten underwriters for 

Asset-Backed Securities. Thus, the 

failure to obtain relief for primary 

market offerings due to an MPS acting 

as an underwriter or CMBS Servicer 

would have a significant impact on 

Client Plans. A failure to obtain relief 

would prevent Client Plans from 

investing in a large part of the AssetBacked Securities market, resulting in 

tracking error for Index or Model Driven 

Funds and greatly reducing 

opportunities for Other Funds or 

Accounts. 

37. In order for relief under the 

proposed exemption to be available for 

this transaction, the following 

conditions apply: (a) The conditions of 

Section IV.A. (Affiliated Underwritings) 

of the proposed exemption must be 

satisfied, except that (i) for purposes of 

the ratings requirement therein, the 

Asset-Backed Securities at the time of 

purchase must be rated in one of the 

three highest rating categories by a 

Rating Organization and none of the 

Rating Organizations may rate the AssetBacked Securities lower than the third 

highest rating category; and (ii) in the 

case of Asset-Backed Securities which 

are CMBS and for which the MPS is 

servicer, the conditions of Section IV.B. 

(Affiliated Servicing) of the proposed 

exemption must be satisfied instead of 

the conditions of Section IV.A. 

(Affiliated Underwritings) of the 

proposed exemption (if an MPS serves 

in both an Affiliated Underwriting 

capacity and an Affiliated Servicing 

capacity, both Section IV.A. and Section 

IV.B. of the proposed exemption must 

be satisfied, with respect to the 

applicable capacity); (b) such purchase 

must not be made from an MPS; (c) no 

BlackRock Entity may be in the selling 

syndicate; (d) in the case of AssetBacked Securities with respect to which 

either (i) an MPS has an ongoing 

function (such as trustee, or servicer of 

collateral for CMBS) or (ii) the potential 

for liability exists (such as under 

representations or warranties made by 

an MPS with respect to collateral for 

CMBS which collateral the MPS 

originated), the taking of or refraining 

from taking of any action by a 

responsible BlackRock Manager which 

could have a material positive or 

negative effect upon the MPS must be 

decided upon by the ECO; 29 and (e) the 

purchase must meet the conditions of an 

applicable ‘‘Underwriter Exemption.’’ 30


Emcdonald on DSK2BSOYB1PROD with NOTICES2
15068 Federal Register / Vol. 76, No. 53 / Friday, March 18, 2011 / Notices 

of certain asset pool investment trusts and the 

acquisition, holding and disposition by plans of 

Asset-Backed Securities representing undivided 

interests in those trusts. Such group of individual 

exemptions was collectively amended by PTE 

2009–31, 74 FR 59001 (Nov. 16, 2009). 

31 In Advisory Opinion 99–03A (January 25, 

1999) (sometimes called the ‘‘Lawson Letter’’), the 

Department provided that an affiliate of an ERISA 

fiduciary could provide sub-servicer services to a 

trust invested in mortgage loans without violating 

ERISA section 406(b) if the ERISA fiduciary could 

not use any of its authority or control to change or 

influence, in any way, compensation paid to the 

sub-servicer affiliate. The Applicants represent that 

unless and until a decision must be made which 

could materially affect an MPS performing one or 

more roles with respect to Asset-Backed Securities 

the reasoning articulated in the Lawson Letter 

should apply to such MPS roles. 

32 46 FR 7511 (January 23, 1981); as amended, 50 

FR 14043 (April 9, 1985). 

G. Purchase and Holding by BlackRock 

Managers of Equity Securities Issued by 

an Entity Which Is Not an MPS and Is 

Not a BlackRock Entity, in an 

Underwriting When an MPS is an 

Underwriter, in Either a Manager or 

Member Capacity, of the Selling 

Syndicate 

38. The Applicants represent that 

BlackRock Managers in their normal 

course may determine that equity 

Securities issued by an independent 

third party where an MPS is an 

underwriter, in either a manager or a 

member capacity, of the selling 

syndicate will be a beneficial 

investment for Client Plans. 

39. The Applicants estimate that the 

majority of the syndicated offerings that 

they review as potentially attractive 

investments for Client Plans include one 

or more MPS as an underwriter. 

Additionally, multiple MPS are often 

ranked in the top ten underwriters for 

equity securities issued in the Americas 

and globally. Thus, a failure to obtain 

relief for primary market offerings due 

to an MPS acting as an underwriter 

would deny Client Plans access to a 

majority of primary markets offerings for 

equity securities. 

40. In order for relief under the 

proposed exemption to be available for 

this transaction, such purchase and 

holding must meet the following 

conditions: (a) The conditions of 

Section IV.A. (Affiliated Underwritings) 

of the proposed exemption must be 

satisfied; (b) such purchase must not be 

made from an MPS; (c) no BlackRock 

Entity may be in the selling syndicate; 

and (d) the Securities must not be AssetBacked Securities. 

H. Purchase and Sale by BlackRock 

Managers of Asset-Backed Securities in 

the Secondary Market, From or to an 

MPS, and/or When an MPS is Sponsor, 

Servicer, Originator, Swap 

Counterparty, Liquidity Provider, 

Trustee or Insurer, and the Holding 

Thereof 

41. The Applicants represent that 

BlackRock Managers in their normal 

course may determine that the purchase 

in the secondary market of Asset-Backed 

Securities treated as equity for ERISA 

purposes where an MPS fills one of the 

captioned roles will be a beneficial 

investment decision for Client Plans. 

There may also be situations where the 

purchase or sale of such instruments to 

or from an MPS is in the interests of 

Client Plans. 

42. The Applicants represent that 

multiple MPSs are significant 

counterparties for Asset-Backed 

Securities in the Secondary Market and 

have large businesses as sponsor, 

servicer, originator, swap counterparty, 

liquidity provider, trustee or insurer 

thereof. Thus, the failure to obtain relief 

for secondary market purchases and 

sales with an MPS or where an MPS is 

a CMBS servicer or fills one of the 

captioned roles would have a significant 

impact on Client Plans. The failure to 

obtain relief would prevent Client Plans 

from investing in a large part of the 

Asset-Backed Securities market, 

resulting in tracking error for Index or 

Model-Driven Funds and greatly 

reducing opportunities for Other Funds 

or Accounts. 

43. In order for relief under the 

proposed exemption to be available for 

this transaction, the following 

conditions apply: (a) The Asset-Backed 

Securities are purchased from or sold to 

an MPS as a result of the Three Quote 

Process as defined in the proposed 

exemption; (b) regardless of from whom 

the BlackRock Manager purchases the 

Asset-Backed Securities, the purchase 

and holding of the Asset-Backed 

Security otherwise must meet the 

conditions of an applicable Underwriter 

Exemption;31 and (c) regardless of from 

whom the BlackRock Manager 

purchased the Asset-Backed Securities, 

if an MPS is, with respect to such AssetBacked Securities, a sponsor, servicer, 

originator, swap counterparty, liquidity 

provider, insurer or trustee, as those 

terms are utilized or defined in the 

Underwriter Exemption, and 

circumstances arise in which the taking 

of or refraining from taking of any action 

(e.g., instituting legal action for breach 

of representation, a decision with 

respect to dismissing or retaining a 

special servicer, etc.) by the responsible 

BlackRock Manager could have a 

material positive or negative effect upon 

the MPS, the taking of or refraining from 

taking of any such action must be 

decided upon by the ECO. 

I. Repurchase Agreements When MPS Is 

the Seller 

44. The Applicants represent that a 

BlackRock Manager may transfer cash of 

a Client Plan to an MPS in exchange for 

Securities (e.g., Treasuries, corporate 

debt, etc.). The MPS will agree to buy 

back the same Securities from the Client 

Plan at a fixed price or fixed spread at 

an agreed upon later date. The 

Securities transferred serve as collateral 

in the case of a default by the MPS. 

Applicants believe that the value to 

plans of engaging in repurchase 

transactions was tacitly recognized by 

the Department by including such 

transactions in PTE 81–8, the prohibited 

transaction class exemption covering 

certain short-term investments.32

45. The Applicants represent that 

historically a BTC cash management 

program has held a significant amount 

of Client Plan assets invested in 

repurchase agreements with a 

counterparty who is now an MPS 

(constituting roughly 25% of BTC’s 

repurchase positions). Generally, these 

Covered Transactions are ‘‘on open,’’ 

which means that they roll over 

automatically but are subject to 

termination by either party every 

business day. In practice, the ‘‘on open’’ 

repurchase transactions may continue 

indefinitely with rates changing daily to 

reflect market conditions as continually 

mutually agreed upon by the parties. 

46. The Applicants further represent 

that there are an extremely limited 

number of counterparties available for 

these large ‘‘on open’’ repurchase 

Covered Transactions. On any given 

day, it is very likely that a single MPS 

will be the only counterparty for these 

overnight ‘‘on open’’ repurchase 

transactions. While BlackRock Managers 

may be able to find another 

counterparty to bid on a repurchase 

transaction, with like collateral and like 

terms, for a part of the overall amount, 

it is likely that only one MPS would be 

available as a counterparty for the full 

balance. 

47. The Applicants represent further 

that on a daily basis, when such 

Covered Transactions roll over, another 

counterparty may offer a better rate than 

the one MPS, on that day for a partial 

size of the repurchase balance. Despite 

this rate differential, for overnight 

repurchase, on each business day, 

BlackRock Managers still need to 

consider whether continuing the 

repurchase with the MPS for some or all 

of the full repurchase balance is in the 

interests of the Client Plans. If 

BlackRock Managers pull part of the 


Emcdonald on DSK2BSOYB1PROD with NOTICES2
Federal Register / Vol. 76, No. 53 / Friday, March 18, 2011 / Notices 15069 

trades to place with another 

counterparty offering a better rate on a 

particular day, such action can 

jeopardize the ability to re-place that 

amount with the MPS, and to continue 

to place large amounts with the MPS, 

since the MPS seeks consistent ongoing 

funding. Thus, over time, BlackRock 

Managers may continue to roll over 

large repurchase transactions with the 

MPS even though another counterparty 

may have offered somewhat better terms 

for a fraction of the repurchase amount. 

48. In order for relief under the 

proposed exemption to be available for 

this transaction, the conditions of PTE 

81–8 applicable to repurchase 

agreements, with some revisions and 

additional conditions, generally apply. 

Such revisions and additional 

conditions include, but are not limited 

to: (a) The written agreement that is 

referenced in Section III.A. of PTE 81– 

8 is required to be a standardized 

industry form, with the exception of 

certain written agreements entered into 

prior to the Acquisition and disclosed to 

the ECO; and (b) the limitation on 

‘‘restricted securities’’ that is referenced 

in Section III.G. of PTE 81–8 is modified 

to permit Client Plans to receive 

Securities that are ‘‘restricted securities’’ 

within the meaning of Rule 144 under 

the 1933 Act, until July 31, 2010. 

Additionally, while this proposed 

exemption, consistent with PTE 81–8, 

provides that neither the MPS seller nor 

any MPS which is a member of the same 

MPS Group may have discretionary 

authority or control with respect to the 

investment of the Client Plan assets 

involved in the transaction or render 

investment advice (within the meaning 

of 29 CFR 2510.3–21(c)) with respect to 

such assets, it also provides an 

exception to such condition in the form 

of the 10% Rule. 

49. In addition to the conditions of 

PTE 81–8, in order for relief under the 

proposed exemption to be available for 

this transaction, two additional 

conditions must be met: 

(a) In the event of any dispute 

between a BlackRock Manager and an 

MPS seller involving a Covered 

Transaction under Section I of the 

proposed exemption, the IM must have 

the responsibility to decide whether, 

and if so how, BlackRock is to pursue 

relief on behalf of the Client Plan(s) 

against the MPS Seller; and 

(b) At time of entry into or renewal of 

each Covered Transaction under this 

Section III.I., including both term 

repurchase transactions and daily 

renewals for ‘‘open’’ or ‘‘overnight’’ 

transactions, either (i) each Covered 

Transaction under Section III.I. of the 

proposed exemption, must be as a result 

of the Three Quote Process, or, (ii) the 

BlackRock Manager must determine that 

the yield on the proposed transaction, or 

the renewal thereof, is at least as 

favorable to the Client Plans as the yield 

of the Client Plan on two (2) other 

available transactions which are 

comparable in terms of size, collateral 

type, credit quality of the counterparty, 

term and rate. The methodology 

employed for purposes of the 

comparison in (ii) above must (iii) be 

approved in advance by the ECO 

Function and (iv), to the extent possible, 

refer to objective external data points, 

such as the Eurodollar overnight time 

deposit bid rate, the rate for repurchase 

agreements with U.S. government 

Securities, or rates for commercial paper 

issuances or agency discount note 

issuances sourced from Bloomberg, or 

another third party pricing service or 

market data provider (which providers 

may use different terminology to refer to 

these same external data points). The 

applicable BlackRock Manager must 

record a description of the comparable 

transactions, if reliance is placed upon 

same, and such data must be 

periodically reviewed by the ECO 

Function. The procedures described in 

this paragraph 49(b) must be designed to 

ensure that BlackRock Managers 

determine to only enter into Covered 

Transactions with MPS sellers which 

are in the interests of Plan Clients, and 

such procedures must be reviewed and 

may be commented on by the IM. 

J. Responding to Tender Offers and 

Exchange Offers Solicited by an MPS 

50. One or more of the MPS are 

commonly hired by issuers of securities 

to solicit holders of Securities regarding 

tender offers, exchange offers and 

similar transactions. In such capacity, 

the MPS acts as agent for its client. As 

the holder of trillions of dollars in 

Securities, the Applicants commonly 

receive solicitations from such agents in 

situations where BlackRock Managers 

are responsible for exercising discretion 

on behalf of Client Plans to respond to 

such solicitations. The compensation of 

the MPS for such services will be paid 

by its client, may or may not vary with 

the relative success of the offer, and the 

BlackRock Managers might or might not 

know how the MPS is compensated. 

Client Plans would suffer harm if the 

BlackRock Managers were unable to 

respond to such tender offers and 

exchanges. 

51. In order for relief under the 

proposed exemption to be available for 

this transaction, the following 

conditions must be met: (a) The Client 

Plan pays no fees to the MPS in 

connection with this Covered 

Transaction; (b) the BlackRock Manager 

must submit to the ECO in advance of 

participation a written explanation of 

the reasons for such participation; and 

(c) the ECO Function must determine 

that the reasons for participation by the 

BlackRock Manager in the Covered 

Transaction are appropriate from the 

vantage point of the Client Plans. 

Effective October 1, 2010, the ECO 

Function must affirmatively make this 

determination in writing prior to the 

BlackRock Manager participating in the 

Covered Transactions under Section 

III.J. of the proposed exemption. 

K. Purchase in Underwritings of 

Securities Issued by an Entity Which Is 

Not an MPS When the Proceeds Are 

Used To Repay a Debt to an MPS 

52. The Applicants represent that the 

MPSs are very significant lenders to 

domestic and foreign corporate and 

other third party borrowers. Such third 

party borrowers may issue debt or 

equity Securities in primary market 

offerings. BlackRock Managers might 

decide that the purchase of such 

Securities would be in the interest of 

Client Plans. The proceeds of such 

offerings might be used by the third 

party issuers to repay debt owed to an 

MPS. BlackRock Managers purchasing 

such Securities in a primary market 

offering might or might not know 

whether the proceeds of the offering 

would be used to repay debt to an MPS. 

The BlackRock Managers represent that 

Client Plans would be harmed if they 

were unable to participate in primary 

market offerings based on the possibility 

that some of the proceeds may be used 

to repay a pre-existing debt to an MPS. 

53. Relief under the proposed 

exemption is available for this 

transaction if the BlackRock Manager 

does not know (within the meaning of 

the proposed exemption) that the 

proceeds will be applied to the 

repayment of debt owed to an MPS. If 

the BlackRock Manager does know that 

proceeds of the offering will be applied 

to the repayment of debt owed to an 

MPS, the purchase of the Securities and 

the payment of the proceeds to the MPS 

qualify for relief under the proposed 

exemption provided that no more than 

twenty percent (20%) of the offering is 

purchased by BlackRock Managers for 

Client Plans, and no more than fifty 

percent (50%) of the offering in the 

aggregate is purchased by BlackRock, 

BlackRock Managers and other 

BlackRock Entities for Client Plans, 

other clients of BlackRock Managers, or 

as proprietary investments. 


Emcdonald on DSK2BSOYB1PROD with NOTICES2
15070 Federal Register / Vol. 76, No. 53 / Friday, March 18, 2011 / Notices 

33 Granted to Barclays Global Investors, N.A., 67 

FR 59569 (September 23, 2002). 

L. Bank Deposits and Commercial Paper 

54. The Applicants represent that 

BlackRock Managers might decide that 

it would be in the interest of Client 

Plans to invest in certificates of deposit, 

time deposits or other bank deposits at 

an MPS, or in commercial paper issued 

by an MPS. The applicants believe that 

the potential merit of such investments 

was recognized by Congress in enacting 

the statutory prohibited transaction 

exemption set forth in ERISA section 

408(b)(4) and by the Department in 

promulgating PTE 81–8. 

55. The Applicants represent that the 

MPSs are significant issuers of high 

quality bank debt including certificates 

of deposit, time deposits, other bank 

deposits and commercial paper, and 

they are able to take large deposits on 

short notice. The universe of large 

domestic issuers of such instruments is 

contracting as a result of the 

consolidation outlined above. Thus, 

BlackRock believes having MPSs 

available to provide such instruments 

provides necessary liquidity and 

portfolio diversification to Client Plans. 

The MPS are recognizable, household 

names that Client Plans are familiar 

with and with which Client Plans are 

comfortable with BlackRock holding on 

behalf of Client Plans. 

56. In order for relief under the 

proposed exemption to be available for 

this transaction, the following 

conditions must be met: 

(a) With respect to Covered 

Transaction involving bank deposits, 

either (i)(A) the bank must be 

supervised by the United States or a 

State, and at the outset of the Covered 

Transaction or renewal thereof of, such 

bank must have a credit rating in one of 

the top two (2) categories by at least one 

of the Rating Organizations; (B) neither 

the bank nor an affiliate of the bank may 

have discretionary authority or control 

with respect to the investment of Client 

Plan assets involved in the Covered 

Transaction or render investment advice 

(within the meaning of 29 CFR 2510.3– 

21(c)) with respect to those assets; and 

(C) such deposit must bear a reasonable 

interest rate, or (ii) the BlackRock 

Manager and the MPS must comply 

with ERISA section 408(b)(4); 

(b) With respect to Covered 

Transactions involving investments in 

commercial paper, the conditions of 

PTE 81–8 applicable to commercial 

paper generally apply, except that the 

commercial paper is required to be 

ranked in one of the two highest rating 

categories of one of the Rating 

Organizations instead of one of the three 

highest rating categories of one of the 

Rating Organizations, as permitted 

under PTE 81–8; and 

(c) For purposes of the Covered 

Transactions set forth in this Section 

III.L. of the proposed exemptions, (i) no 

BlackRock Entity shall be regarded as an 

affiliate of an MPS bank at which a 

deposit is made of Client Plan assets, 

nor of an MPS issuer of commercial 

paper in which a BlackRock Manager 

invests Client Plan assets, and (ii) the 

10% Rule shall apply. 

M. Securities Lending to an MPS 

57. The Applicants represent that 

Securities loans, for this purpose, 

consist of different types of loans, 

‘‘General Collateral Open Loans,’’ 

‘‘Special Open Loans,’’ ‘‘Term Loans,’’ 

and ‘‘Exclusive Loans.’’ In the past, BGI 

adopted a process to ensure, in 

accordance with PTE 2002–46,33 that 

the terms of every loan made to an 

affiliate of BGI (such as Barclays Capital 

Inc. (BCI)) were at least as favorable to 

the Client Plan as those of comparable 

arm’s length transactions between 

unrelated parties. With effect from the 

date of the Acquisition, BTC has 

adopted the same process for loans to an 

MPS as previously employed with 

respect to loans to BCI. 

58. General Collateral (GC) Open 

Loans: The Applicants represent that 

without regard to the identity of any 

given approved borrower, the large 

majority of Securities loans are made 

using an ‘‘auto borrow’’ functionality by 

which the borrower can borrow ‘‘general 

collateral,’’ or very liquid Securities, in 

a non-negotiated manner, at a flat rate 

that applies to all borrowers. 

Accordingly, all loans of GC collateral 

are re-rated based on prevailing rates for 

the relevant Securities. An MPS may be 

an approved borrower. 

59. Special Open Loans: The 

Applicants represent that for those loans 

not made using auto borrow, which 

involve more illiquid and thus more 

desirable or ‘‘special’’ Securities, 

BlackRock Managers negotiate the 

rebate rate individually with each 

borrower. The BlackRock Managers rely 

upon technology built into BlackRock’s 

trading systems which shows them the 

rates for all other loans of the same 

Security to other borrowers, as well as 

the general market rates for that Security 

from third party data suppliers. 

60. Term Loans: The Applicants 

represent that BTC may agree to lend a 

specific Security, Securities (a basket), 

or fixed notional value of non-specific 

Securities at a negotiated price for an 

agreed upon duration longer than 

overnight. Such term loans can be GC or 

Special. Term agreements with MPS 

borrowers must be executed at the best 

pricing available at the time of 

negotiation. Since such agreements 

include pricing terms for a specified 

period of time, they are not subject to 

re-pricing or comparison to other loans 

through the agreed upon term. 

61. Exclusive Loans: The Applicants 

represent that BTC may agree to provide 

a single borrower with exclusive 

borrowing access to a fund for a fixed 

duration. Exclusive access is awarded to 

the qualified borrower with the highest 

bid. Income is accrued daily by charging 

a fee on the notional value of the fund 

and not related to the Securities actually 

borrowed, if any. Exclusive loan 

agreements with MPS borrowers must 

be executed at the best pricing available 

at the time of negotiation. Since such 

agreements include pricing terms for a 

specified period of time, they are not 

subject to re-pricing or comparison to 

other loans through the agreed upon 

duration of the agreement. 

62. The Applicants represent that 

Open Loans, both GC and Special, to an 

MPS must be subject to competitive 

pricing comparisons on the day of 

execution and each day that the loans 

remain outstanding. All Special Open 

Loans are re-priced on a periodic basis 

as market conditions and supply/ 

demand change. More specifically, BTC 

runs a daily pricing comparison report 

that compares all Open Loans to all 

borrowers, including an MPS, from its 

proprietary system, known as Global 

Loan Manager. The report highlights 

loans that are no longer priced in 

accordance with the arm’s length 

transaction requirements of PTE 2002– 

46, i.e., where market conditions such 

as supply and demand have changed. If 

a loan to an MPS is not currently priced 

at least equal to or better than the least 

favorable pricing to a non-MPS, such 

loan is re-priced to the market pricing 

for such Security on the same day. If the 

MPS does not accept the re-price, the 

loan is recalled. 

63. The Applicants represent that if 

the price of a loan is identified as not 

meeting the criteria described above but 

BlackRock traders determine that the 

loan is not comparable to outstanding 

loans with comparable non-MPS 

borrowers and therefore should not be 

re-priced, the BlackRock trader must 

insert comments into Global Loan 

Manager with a relevant explanation. 

This may be due to the size or other 

characteristics of the various trades 

being compared. The Global Loan 

Manager rate comparison report, 

including any such comments, will then 

be re-generated and stored 


Emcdonald on DSK2BSOYB1PROD with NOTICES2
Federal Register / Vol. 76, No. 53 / Friday, March 18, 2011 / Notices 15071 

34 71 FR 63786 (Oct. 31, 2006). 

electronically. The regenerated report is 

reviewed on a regular basis (usually 

weekly) by the trading desk manager 

and signed off on by such trading desk 

manager; hard copies of the report are 

saved. The ECO performs a periodic 

review of this process. 

64. The Applicants represent that it is 

generally more beneficial to have a 

Security on loan than not, and it may 

not be possible to relend the same 

Security to another borrower. In 

repricing a loan, the loan will only be 

re-priced to a rate that is within the 

range of other loans of that Security to 

non-MPS borrowers, and the loan will 

only be re-priced to a rate at which, in 

the BlackRock Manager’s judgment, it 

would be more favorable to the lending 

Client Plan to re-price the loan at that 

rate than to terminate the loan. 

65. The Applicants represent that 

based on the foregoing, ongoing loans 

will meet an arm’s length standard but 

may not always remain at the absolute 

‘‘best’’ rate in the market during the 

entire time the loan is outstanding. 

Borrowers are not fungible (e.g., they 

don’t have infinite demand for a given 

Security, and the willingness to pay 

varies by broker). Thus, rates will vary 

across borrowers over time, and the only 

way to ensure all loans to MPSs are 

always at the absolute best rate paid by 

all other borrowers would be to simply 

lend less to the MPS. Unfortunately, 

however, lending less would reduce 

client revenue and consequently is not 

in the Client Plans’ interests. 

66. The proposed exemption will only 

apply (a) to the lending of Securities by 

a BlackRock Manager that are assets of 

a Client Plan to an MPS which is a ‘‘U.S. 

Broker-Dealer’’ (as defined in the 

proposed exemption) or a ‘‘U.S. Bank’’ 

(as defined in the proposed exemption), 

provided that the conditions set forth in 

Section III.M.2. of the proposed 

exemption are met; (b) to the lending of 

Securities by a BlackRock Manager that 

are assets of a Client Plan to an MPS 

which is a ‘‘Foreign Broker-Dealer’’ (as 

defined in the proposed exemption) or 

‘‘Foreign Bank’’ (as defined in the 

proposed exemption), provided that the 

conditions set forth in Sections III.M.2 

and III.M.3. of the proposed exemption 

are met; and (c) to the payment to a 

BlackRock Manager of compensation for 

services rendered in connection with 

loans of Client Plan assets that are 

Securities to an MPS, provided that the 

conditions set forth in Section III.M.4. of 

the proposed exemption are met. 

67. In order for relief under the 

proposed exemption to be available for 

Covered Transactions described in 

paragraphs 66(a) and (b), the conditions 

of Section II of PTE 2006–16 34 shall 

generally apply, with some revisions 

and additional conditions. For example, 

in addition to the conditions of Section 

II of PTE 2006–16, the proposed 

exemption requires that the length of a 

securities loan to an MPS must not 

exceed a one-year term. Additionally, 

although the proposed exemption, 

consistent with PTE 2006–16, provides 

that neither the MPS borrower nor any 

MPS affiliate which is a member of the 

same MPS Group as the MPS borrower 

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, it also provides an 

exception to such condition in the form 

of the 10% Rule. 

68. In addition to the general 

conditions of PTE 2006–16, in order for 

relief under the proposed exemption to 

be available for this transaction, 

additional conditions must be met: 

(a) The written loan agreement must 

be a standardized industry form; 

provided, that, with the approval of the 

ECO on or about the date of the 

Acquisition, written loan agreements 

with an MPS borrower that were in 

effect as of the date of the Acquisition 

may continue to be used until there is 

a material modification of the same, at 

which time standardized industry forms 

must be adopted (Section III.M.2.(h)); 

(b) all fees and other consideration 

received by the Client Plan in 

connection with the loan of Securities 

must be reasonable. The identity of the 

currency in which the payment of fees 

and rebates will be made must be set 

forth either in the written loan 

agreement or the loan confirmation as 

agreed to by the MPS borrower and the 

BlackRock Manager prior to the making 

of the loan; 

(i) Pricing of a loan to an MPS 

borrower must be based on rates for 

comparable loans of the same Security 

to non-MPS borrowers and third-party 

market data: 

(A) For loans of liquid Securities 

(sometimes referred to as general 

collateral loans) an automatic system 

may be used to price loans so long as 

the resulting rate the Client Plan 

receives from the MPS borrower is at 

least as favorable to the Client Plan as 

the rate the BlackRock Managers are 

receiving for Client Plans or other 

clients from non-MPS borrowers of the 

same Security; and 

(B) For purposes of pricing loans of 

less liquid Securities (sometimes 

referred to as special loans), and for 

purposes of determining whether to 

terminate or continue a loan which does 

not have a set term, pricing may also be 

based on a BlackRock trader 

determination that continuing the loan 

is in the interest of the Client Plan based 

on all relevant factors, including price 

(provided that price is within the range 

of prices of other loans of the same 

Security to comparable non-MPS 

borrowers by BlackRock Managers for 

Client Plans or other clients) and 

potential adverse consequences to the 

Client Plan of terminating the loan, 

provided that the pricing data used in 

making these decisions must be retained 

and made available for possible review 

by the ECO; and 

(ii) Automatic pricing mechanisms 

and pricing decisions by traders must be 

subject to ongoing periodic review by 

the ECO Function, and the results of 

such review must be included in reports 

by the ECO to the IM. Specifically, the 

quarterly reports by the ECO to the IM 

must address the lending patterns of (I) 

illiquid Securities to the MPS borrowers 

from all Client Plans, including the 

percentage that loans of such Securities 

to the MPSs represent of all loans of 

such Securities from all Client Plans; 

and (II) illiquid Securities to the MPS 

borrowers from all Other Accounts or 

Funds, including the percentage that 

loans of such Securities to the MPSs 

represent of all loans of such Securities 

from all Other Accounts or Funds 

(Section III.M.2.(j)); 

(c) If the Securities being loaned to an 

MPS borrower are managed in an Index 

Account or Fund, or a Model-Driven 

Account or Fund where the Index or the 

Model are created or maintained by the 

MPS borrower, the ECO Function 

periodically must perform a review, no 

less than quarterly, of the use of such 

MPS-sponsored Index or Model, and the 

Securities loaned from such an account 

or fund to the MPS, which review is 

designed to enable a reasonable 

judgment as to whether the use of such 

Index or Model, or any changes thereto, 

were for the purpose of benefitting 

BlackRock or the MPS through the 

Securities lending activity described in 

this Section III.M. of the proposed 

exemption. If the ECO forms a 

reasonable judgment that the use of 

such Index or Model, or any changes 

thereto were for the purpose of 

benefitting BlackRock or the MPS, the 

ECO must promptly inform the IM 

(Section III.M.2.(p)); 

(d) In the event of any dispute 

between the BlackRock Manager on 

behalf of a Client Plan and an MPS 

borrower involving a Covered 

Transaction under Section III.M. of the 


Emcdonald on DSK2BSOYB1PROD with NOTICES2
15072 Federal Register / Vol. 76, No. 53 / Friday, March 18, 2011 / Notices 

35The Department has previously adopted a 

similar concept for ‘‘replacement’’ mortgage-backed 

Securities in the context of lending such Securities 

in PTE 94–88, 60 FR 483 (January 4, 1995). 36 59 FR 8022 (Feb. 17, 1994). 

proposed exemption, the IM shall 

decide whether, and if so, how the 

BlackRock Manager is to pursue relief 

on behalf of the Client Plan(s) against 

the MPS borrower (Section III.M.2.(q)); 

and 

(e) If the Securities being loaned to an 

MPS borrower are managed in an Other 

Account or Fund, the employees of the 

BlackRock Manager who exercise 

discretionary authority or control over 

the Other Account or Fund shall not 

have access to the information regarding 

whether the particular Securities are on 

loan to an MPS, with such access 

limitations imposed on or about 

September 30, 2010 and implemented 

through the EPPs on or about September 

30, 2010 (Section III.M.2.(q)). 

69. In order for relief under the 

proposed exemption to be available for 

Covered Transactions described in 

paragraph 66(b), BlackRock must 

comply with the conditions of Section 

III of PTE 2006–16. 

70. In order for relief under the 

proposed exemption to be available for 

Covered Transactions described in 

paragraph 67(c), the conditions of 

Section IV of PTE 2006–16 generally 

apply, with one revision. The proposed 

exemption provides that the 

compensation received by the 

BlackRock Managers must be paid 

under terms at least as favorable to the 

Client Plan as an arm’s length 

transaction with an unrelated party. 

N. To-Be-Announced Trades (TBAs) of 

GNMA, FHLMC or FNMA MortgageBacked Securities With an MPS 

Counterparty 

71. The Applicants represent that 

BlackRock Managers might decide it 

would be advantageous to trade GNMA 

(as defined in the proposed exemption), 

FHLMC (as defined in the proposed 

exemption) or FNMA (as defined in the 

proposed exemption) mortgage-backed 

Securities with an MPS counterparty on 

a ‘‘to-be-announced’’ basis. A ‘‘TBA’’ is a 

contract for the purchase or sale of such 

agency mortgage-backed Securities to be 

delivered at a future agreed-upon date. 

The actual pool identities or the number 

of pools that will be delivered to fulfill 

the trade obligation or terms of the 

contract are unknown at the time of the 

trade but must meet the ‘‘Guidelines of 

Good Delivery’’ established by the 

Depository Trust & Clearing 

Corporation. TBA trading is based on 

the assumption that the specific 

mortgage pools which will be delivered 

are fungible, and thus do not need to be 

explicitly known at the time a trade is 

initiated. The TBA market for agency 

mortgage-backed Securities has been 

referred to as the most liquid, and 

consequently most important, secondary 

market for mortgage loans in the world. 

Given that TBAs allow institutional 

accounts to buy and sell mortgage 

exposure in a large and liquid manner, 

TBAs are a useful tool in furthering the 

investment objectives of such clients. 

Certain of the MPSs maintain deep 

franchises in the agency mortgagebacked Securities trading market. As 

TBAs are one of the largest and most 

active parts of the mortgage-backed 

Securities market, having the ability to 

trade agency mortgage-backed Securities 

with an MPS counterparty on a TBA 

basis in the ordinary course of business 

could significantly assist BlackRock 

Managers in providing high quality and 

competitive service to Client Plans 

managed by BlackRock. BlackRock 

Client Plans could be disadvantaged if 

BlackRock Managers are unable to 

access the platforms of the MPSs in 

agency mortgage-backed Securities 

trading. 

72. The Applicants represent that 

while there has been concern recently 

with respect to public debt issued by 

FHLMC and FNMA and specifically 

whether such debt would be backed by 

the federal government, there has been 

little concern regarding default risk with 

respect to the FHLMC or FNMA 

mortgage-backed Securities. Such 

mortgage-backed Securities currently 

trade with virtually no difference on 

return from GNMA mortgage-backed 

Securities based on any perceived 

difference in credit quality due to the 

implicit guarantee of FHLMC and 

FNMA mortgage-backed Securities (in 

contrast to the explicit government 

guarantee of GNMA mortgage-backed 

Securities), as a result of recent actions 

by the US government. Even before 

those actions, any difference in return 

based on a perception of credit 

differences was minimal, in the order of 

two to five basis points. Furthermore, 

other factors, such as depth of liquidity 

(for example, FHLMC Securities 

typically have deeper liquidity than 

FNMA or GNMA Securities) have as 

great an effect, if not a greater effect, on 

returns as perceived credit differences. 

73. In order for relief under the 

proposed exemption to be available for 

these transactions: (a) The Covered 

Transactions must be a result of the 

Three Quote Process; provided, that, 

solely for purposes of these transactions, 

firm quotes under the Three Quote 

Process may also include firm quotes 

obtained on comparable Securities, as 

described below, when firm quotes with 

respect to the applicable TBA 

transactions are not reasonably 

attainable; (b) with regard to purchases 

of FHLMC and FNMA mortgage-backed 

Securities on a TBA basis (i) the 

BlackRock Manager must make a 

determination that such Securities are of 

substantially similar credit quality as 

GNMA guaranteed governmental 

mortgage pool certificates; (ii) the ECO 

(in regular consultation with and under 

the supervision of the IM) must monitor 

the credit spread between GNMA and 

FHLMC/FNMA mortgage-backed 

Securities; and (iii) each of the ECO and 

the IM (independently) must have the 

authority and responsibility to 

determine whether purchases of FHLMC 

and/or FNMA mortgage-backed 

Securities on a TBA basis should not be 

permitted due to such credit spread, and 

such authority and responsibility must 

be reflected in the EPPs; and (c) with 

regard to possible delivery of underlying 

Securities to Client Plans, as opposed to 

cash settlement, the ECO Function must 

approve any such delivery in advance. 

74. For purposes of these transactions, 

‘‘comparable Securities’’ described in 

clause (a) of paragraph 73 are Securities 

that: (a) Are issued and/or guaranteed 

by the same agency, (b) have the same 

coupon, (c) have a principal amount at 

least equal to but no more than two 

percent (2%) greater than the Security 

purchased or sold, (d) are of the same 

program or class, and (e) either (i) have 

an aggregate weighted average monthly 

maturity within a 12-month variance of 

the Security purchased or sold, but in 

no case can the variance be more than 

ten percent (10%) of such aggregate 

weighted average maturity of the 

Securities purchased or sold, or (ii) meet 

some other comparable objective 

standard containing a range of variance 

that is no greater than that described in 

(i) above and that assures that the aging 

of the Securities is properly taken into 

account.35

O. Foreign Exchange Transactions With 

an MPS Counterparty 

75. The BlackRock Managers 

represent that they frequently engage in 

foreign exchange transactions on behalf 

of Client Plans. For example, foreign 

exchange transactions are typically 

necessary to facilitate the settlement of 

the purchase or sale of a non-US 

security. The Applicants represent that 

the types of foreign currency Covered 

Transactions at issue are those 

described in PTE 94–20,36 the 

prohibited transaction class exemption 

relating to certain employee benefit plan 

foreign exchange transactions, i.e., 

options, spot trades, forwards and splits. 


Emcdonald on DSK2BSOYB1PROD with NOTICES2
Federal Register / Vol. 76, No. 53 / Friday, March 18, 2011 / Notices 15073 

37FX Poll: Euromoney’s Annual FX Market 

Ranking, http://www.Euromoney.com, http://www.

euromoney.com/poll/3301/PollsAndAwards/ (last 

visited Jan. 31, 2011). 

38Top Ten Liquidity Providers—December 2010, 

http://www.NASDAQOMXtrader.com, http://www.

nasdaqtrader.com/trader.aspx?ID=topliquidity (last 

visited Jan. 28, 2011). 

39 51 FR 41686 (November 18, 1986), as amended, 

67 FR 64137 (October 17, 2002). 

The Applicants represent that the 

primary market makers in foreign 

exchange are the largest banks in the 

world, and external surveys consistently 

rank multiple MPSs as major 

counterparties in this market.37 Client 

Plans would be harmed if they were 

forced to exclude such MPS 

counterparties from the limited number 

of large banks that make markets in 

foreign exchange. These banks deal with 

each other constantly, either on behalf 

of themselves or their customers. The 

market on which these banks conduct 

foreign exchange transactions is called 

the ‘‘interbank market.’’ 

Parties transacting other than in the 

interbank market transact by referencing 

the interbank rate, which is the rate 

representative of the rate at which 

dealers in currencies (i.e., banks) are 

willing to transact with one another. 

Transacting in the actual foreign 

exchange interbank market is limited to 

dealers only, and does not include buy 

side firms such as investment managers. 

Accordingly, full transparency in terms 

of quotes (bids and offers) is limited to 

the dealers only. 

76. In order for relief under the 

proposed exemption to be available for 

this transaction, the following 

conditions must be met: (a)(i) The 

Foreign Exchange Transaction must be 

as a result of the Three Quote Process; 

or (ii) the total net amount of the 

Foreign Exchange Transaction on behalf 

of Client Plans by BlackRock Managers 

must be greater than $1 million and the 

exchange rate must be within 0.5% 

above or below the Interbank Rate (as 

defined in the proposed exemption) as 

represented to the BlackRock Managers 

by the MPS; (b) the Foreign Exchange 

Transactions with an MPS counterparty 

will only involve currencies of countries 

that are classified as ‘‘developed’’ or 

‘‘emerging’’ markets by a third party 

Index provider that divides national 

economies into ‘‘developed,’’ ‘‘emerging’’ 

and ‘‘frontier’’ markets. The Index 

provider shall be selected by BlackRock, 

provided, however, the IM shall have 

the right to reject the Index provider in 

its sole discretion at any time; and (c) 

each Foreign Exchange Transaction 

complying with paragraph 76(a)(ii) must 

be set forth in the applicable quarterly 

reports of the ECO to the IM. 

P. Agency Execution of Equity and 

Fixed Income Securities Trades and 

Related Clearing as Described in PTE 

86–128, Including Agency Cross Trades, 

When the Broker Is an MPS 

77. MPS broker-dealers are key 

brokers in both the equity and fixed 

income markets. For example, the 

NASDAQ Stock Market ranked two MPS 

brokers as top ten liquidity providers for 

September 2010.38 The Applicants 

represent that: BlackRock Managers 

need the ability to utilize the brokerage 

services offered by the MPSs, especially 

in light of the consolidation of the 

financial services sector; BlackRock 

Managers have a long history of using 

MPS brokers to affect Securities trades, 

and to continue normal trading 

practices with these brokers will benefit 

Client Plans; and, Client Plans would be 

harmed if they were unable to access the 

liquidity provided by such MPS brokers. 

The proposed exemption would include 

the relief available under Section II of 

PTE 86–128,39 the prohibited 

transaction class exemption for 

securities transactions involving 

employee benefit plans and brokerdealers, as if BlackRock Managers and 

MPS broker-dealers were ‘‘affiliates’’ as 

defined in Section I(b) of PTE 86–128; 

however, certain conditions would be 

modified, as described herein. 

78. The conditions applicable to this 

transaction are: 

(a) The MPS must be selected to 

perform Securities brokerage services 

for Client Plans pursuant to the normal 

brokerage placement practices, policies 

and procedures of the BlackRock 

Manager designed to ensure best 

execution; 

(b) The conditions of PTE 86–128 set 

forth in the following sections of that 

exemption must be complied with: 

Section III(e); Section III(f); Section 

III(g)(2); and Section III(h); provided, 

however, that the first sentence of 

section III(h) of PTE 86–128 is amended 

for purposes of this paragraph to 

provide as follows: ‘‘A trustee [other 

than a nondiscretionary trustee] may 

only engage in a covered transaction 

with a plan that has total net assets with 

a value of at least $50 million and in the 

case of a pooled fund, the $50 million 

requirement will be met if fifty percent 

(50%) or more of the units of beneficial 

interest in such pooled fund are held by 

investors having total net assets with a 

value of at least $50 million.’’ The 

conditions of Section III of PTE 86–128 

that are not included as conditions 

herein are generally the conditions that 

would relate to actions required of, or 

information to be provided to, a Client 

Plan’s independent fiduciary, and the 

revision to the first sentence of Section 

III(h) of PTE 86–128 changes the $50 

million calculation to include all 

investors, instead of limiting such 

calculation to only employee benefits 

plans; 

(c) The ECO Function must receive 

the information required to be provided 

to the ‘‘authorizing fiduciary’’ under 

Section III(e), Section III(f) and Section 

III(g)(2) of PTE 86–128, and the ECO 

must have the authority to terminate the 

use of the MPS as broker-dealer without 

penalty to Client Plans at any time; 

(d) With respect to agency cross 

transactions described in Section III(g) 

of PTE 86–128 that are being effected or 

executed by an MPS broker, (i) neither 

the MPS broker effecting or executing 

the agency cross transaction nor any 

member of the same MPS Group as the 

MPS broker effecting or executing the 

agency cross transaction may have 

discretionary authority to act on behalf 

of, and/or provide investment advice to 

another party to the agency cross 

transaction which is a seller when the 

Client Plan is a buyer, or which is a 

buyer, when the Client Plan is a seller 

(Another Party), and (ii), the BlackRock 

Manager instituting the transaction for 

the Client Plan must not have 

knowledge that a BlackRock Entity has 

discretionary authority and/or provides 

investment advice to Another Party to 

the agency cross transaction; 

(e) The exceptions in Sections IV(a), 

(b) and (c) of PTE 86–128 are applicable 

to the proposed exemption; and 

(f) Notwithstanding the other 

conditions of Section III.P. of the 

proposed exemption, with respect to 

Client Plans which as of the date of the 

Acquisition had in place with 

BlackRock Managers either directed 

brokerage and/or wrap fee arrangements 

which required the BlackRock Managers 

to use an MPS as a Securities broker, 

BlackRock Managers may continue to 

use that MPS as the Securities broker for 

such Client Plans under the brokerage 

procedures in place as of the date of the 

Acquisition; provided that a list of all 

such arrangement has been provided to 

the ECO and no material changes are 

made to arrangements. This last 

condition is referred to herein as the 

‘‘Existing Directed Brokerage and/or 

Wrap Fee Arrangement Exception.’’ 


Emcdonald on DSK2BSOYB1PROD with NOTICES2
15074 Federal Register / Vol. 76, No. 53 / Friday, March 18, 2011 / Notices 

40 67 FR 39069 (June 6, 2002). 

Q. Use by BlackRock Managers of 

Exchanges and Automated Trading 

Systems on Behalf of Client Plans 

79. As outlined above, BlackRock is 

the largest publicly-traded U.S. 

investment management firm. Funds 

and Accounts buy, sell, or otherwise 

transact in securities, futures contracts, 

and foreign exchange to the extent 

contemplated by Fund or Account 

investment guidelines. A number of 

Index and Model-Driven Funds attempt 

to either track or outperform the index 

for a specific non-U.S. country or 

geographic region (such as Emerging 

Markets, World ex U.S., Asia Pacific, 

etc.). To do so, such Index and ModelDriven Funds must be able to buy and 

sell securities that are listed on the 

relevant non-U.S. exchanges. 

Additionally, a number of Index and 

Model-Driven Funds hold long 

positions in stock or bond index futures 

contracts to ‘‘equitize’’ or ‘‘bondize’’ 

dividends or other cash to be received 

by the Index and Model-Driven Fund 

(including for liquidity purposes). 

Foreign currency trading is a necessary 

adjunct to such trading. As of November 

30, 2010, BlackRock managed, in the 

aggregate, more than $100 billion in 

assets for more than 100 Index and 

Model Driven Funds or Accounts with 

non-U.S. geographic benchmarks that 

include more than 50 countries. 

The evolution of electronic trading 

over the last few decades has led to 

improvements in the trading processes 

within established exchanges. For 

example, computerized trading systems 

have largely replaced trading pits 

utilizing paper tickets as the primary 

execution method within numerous 

established exchanges. Additionally, 

over the last few decades a number of 

established Automated Trading Systems 

have gained widespread market 

acceptance for transacting in equities, 

fixed income obligations and foreign 

currency which permits BlackRock 

Managers to reduce the transaction costs 

for Client Plans. 

The establishment of electronic 

trading over the last few decades has led 

to increased operational efficiencies, 

improved price discovery, and higher 

overall liquidity for plans and other 

investors. As financial markets have 

embraced electronic markets and 

decimal pricing, spreads have been 

reduced significantly. The advent of 

multiple execution venues for Securities 

and other assets encourages competition 

amongst market participants, driving 

transaction costs lower for plans and 

other investors. 

80. The Applicants represent that one 

or more of the MPSs have ownership 

interests in one or more U.S. or non-U.S. 

exchanges and Automated Trading 

Systems. The use of such exchanges and 

Automated Trading Systems by 

BlackRock Managers increases 

operational efficiencies, minimizes 

transaction costs and improves 

liquidity, all of which are inherently 

beneficial to Client Plans. The 

Applicants represent that Client Plans 

would be harmed if they were unable to 

access such trading venues. 

81. In order for relief under the 

proposed exemption to be available for 

this transaction, the following 

conditions must be met: 

(a) Prior to January 1, 2011: 

(i) No single MPS (together with other 

members of the same MPS Group) may 

have a greater than twenty percent 

(20%) ownership interest in the 

exchange or the ATS; and 

(ii) The ECO does not make a 

determination, summarized in the ECO 

quarterly report, that a BlackRock 

Manager or all BlackRock Managers 

must discontinue such direct or indirect 

use of or the directing of trades to any 

such exchange or ATS on the basis that 

either the amount of use or the volume 

of trades is unwarranted or not in the 

interests of the Client Plans and their 

participants and beneficiaries; and 

(b) From and after January 1, 2011, 

either: 

(i) No one MPS (together with other 

members of the same MPS Group) may 

have (A) a greater than ten percent 

(10%) ownership interest in the 

exchange or ATS or (B) the BlackRock 

Managers do not know the level of such 

ownership interest; or 

(ii) A BlackRock Manager knows that 

an MPS (together with other members of 

the same MPS Group) has a greater than 

ten percent (10%) ownership interest 

but no greater than twenty percent 

(20%) ownership interest in the 

exchange or ATS, 

(A) The ECO makes a determination, 

summarized in the ECO quarterly 

report, that there is no reason for a 

BlackRock Manager or all BlackRock 

Managers to discontinue such direct or 

indirect use of or the directing of trades 

to any such exchange or ATS on the 

basis that the amount of use or the 

volume of trades is unwarranted or not 

in the interests of the Client Plans and 

their participants and beneficiaries, and 

does not make a determination that a 

BlackRock Manager or all BlackRock 

Managers must discontinue such direct 

or indirect use of or the directing of 

trades to any such exchange or ATS on 

the basis that the amount of use or the 

volume of trades is unwarranted or not 

in the interests of the Client Plans and 

their participants and beneficiaries. The 

IM may request any additional 

information relating to any such 

determination summarized in the ECO 

quarterly report and may, after 

consultation with the ECO, make a 

determination that a BlackRock Manager 

or all BlackRock Managers must 

discontinue such direct or indirect use 

of or the directing of trades to any such 

exchange or ATS on the basis that the 

amount of use or the volume of trades 

is unwarranted or not in the interests of 

the Client Plans and their participants 

and beneficiaries; 

(B) The price and compensation 

associated with any purchases or sales 

utilizing such exchange or ATS must 

not be greater than the price and 

compensation associated with an arm’s 

length transaction with an unrelated 

party; and 

(C) All such exchanges and ATSs 

must be situated within the jurisdiction 

of the U.S. District Courts and regulated 

by a U.S. federal regulatory body or a 

U.S. federally approved self-regulatory 

body provided that this condition shall 

not apply to the direct or indirect use of 

or the directing of trades to an exchange 

in a country other than the United 

States which is regulated by a 

government regulator or a government 

approved self-regulatory body in such 

country and which involve trading in 

Securities (including the lending of 

Securities) or futures contracts. 

The Applicants further request that 

the Department confirm that for 

purposes of PTE 2002–30 40 BlackRock 

Entities and MPSs are not regarded as 

‘‘affiliates.’’ The Department concurs. 

R. Purchases in the Secondary Market of 

Common and Preferred Stock Issued by 

an MPS by BlackRock Managers for 

Client Plans Invested in an Index 

Account or Fund, or a Model-Driven 

Account or Fund 

82. The MPS include several issuers 

of publicly traded equity securities with 

combined market capitalizations, as of 

November 11, 2010, of nearly $200 

billion. As a result, the Applicants 

represent that common or preferred 

stock issued by an MPS may be 

included as an important constituent in 

an Index used by an Index Fund or a 

Model used by Model-Driven Fund 

managed by a BlackRock Manager. 

Thus, although the purchase of 

Securities issued by MPSs may convey 

an economic benefit on the MPS, the 

purchase may be necessary for a 

portfolio to track the underlying 

benchmark. If Client Plans were unable 

to invest in such Securities, it could 

result in tracking error for applicable 


Emcdonald on DSK2BSOYB1PROD with NOTICES2
Federal Register / Vol. 76, No. 53 / Friday, March 18, 2011 / Notices 15075 

41BlackRock Managers may rely on other 

exemptive relief, whether statutory, class or 

individual, when acquiring stock of an MPS for 

Client Plans under either Section III.R. or Section 

III.S. of the proposed exemption through an MPS 

broker, including the issuing MPS. 

42For example, if two portfolio managers send 

their purchase orders to the same trading desk and 

the traders on that trading desk coordinate the 

purchases of the same MPS equity Securities, the 

limitations apply to the trading desk. 

43The Applicants did not request relief, and the 

Department agrees that such a request would be 

unnecessary, in situations where such services are 

performed for Client Plans at the direction of a 

Client Plan fiduciary independent of a BlackRock 

Entity (or an MPS) if neither BlackRock (nor an 

MPS) renders ‘‘investment advice’’ in connection 

with such determination. 

funds and accounts. The Applicants 

believe there is a sound basis for 

concluding that an exemption is not 

necessary to acquire and hold MPS 

stock under such circumstances, but, 

given the breadth of the exemption, the 

Applicants believe that requesting the 

certitude of exemptive relief on this 

point is appropriate. 

83. In order for relief under the 

proposed exemption to be available for 

this transaction, the following 

conditions must be satisfied: (a) Such 

purchase is for the sole purpose of 

maintaining quantitative conformity 

with the weight of such Securities 

prescribed by the relevant Index, for 

Index Accounts or Funds, or the weight 

of such Securities prescribed by the 

relevant Model, for Model-Driven 

Accounts or Funds, and such purchase 

may not exceed the purchase amount 

necessary for such Model or quantitative 

conformity; and (b) the purchases must 

not be made from the issuing MPS. The 

Existing Directed Brokerage and/or 

Wrap Fee Arrangement Exception 

applies.41

S. Purchase in the Secondary Market of 

Common and Preferred Stock Issued by 

an MPS by BlackRock Managers for 

Client Plans Invested in an Other 

Account or Fund 

84. As stated above, the MPSs include 

several issuers of publicly traded equity 

securities with combined market 

capitalizations, as of November 11, 

2010, of nearly $200 billion. As a result, 

such securities may comprise an 

important portion of an Other Account 

or Fund’s investment universe. The 

Applicants represent that BlackRock 

Managers might decide that common or 

preferred stock of an MPS is an 

appropriate investment for a Client Plan 

account or a pooled fund that is not an 

Index Fund or a Model-Driven Fund. If 

Client Plans were unable to invest in 

such Securities, it could adversely result 

in the loss of investment opportunity for 

such funds and accounts. 

85. In order for relief under the 

proposed exemption to be available for 

this transaction, the following 

conditions must be satisfied: 

(a) Such purchase must not be made 

from the issuing MPS; 

(b) The Existing Directed Brokerage 

and/or Wrap Fee Arrangement 

Exception applies with respect to this 

transaction as well; and 

(c) With respect to such Client Plans 

with existing directed brokerage and/or 

wrap fee arrangements, the ECO 

Function periodically must monitor 

purchases of MPS stock for such Client 

Plans to ensure that the amount of stock 

of an MPS purchased for such Client 

Plans is not disproportionate to the 

amount of such stock of the same MPS 

purchased for Client Plans invested in 

Other Accounts or Funds not subject to 

directed brokerage and/or wrap fee 

arrangements; 

(d) As a consequence of a purchase of 

MPS stock, the class of stock purchased 

must not constitute more than five 

percent (5%) of the Other Account or 

Fund. In the case of a Pooled Fund, the 

class of stock purchased and attributed 

to each Client Plan must not exceed five 

percent (5%) of such Client Plan’s 

proportionate interest in the Pooled 

Fund. 

(e) Aggregate daily purchases of a 

class of MPS stock for Client Plans must 

not exceed the greater of (i) fifteen 

percent (15%) of the aggregate average 

daily trading volume (ADTV) for the 

previous ten (10) trading days, or (ii) 

fifteen percent (15%) of trading volume 

on the date of the purchase. These 

volume limitations must be met on a 

portfolio manager by portfolio manager 

basis unless purchases are coordinated 

among portfolio managers, in which 

case the limitations are applied to the 

coordinated purchase.42 Any 

coordinated purchases of the same class 

of MPS stock in the secondary market 

for Index Accounts or Funds or for 

Model-Driven Accounts or Funds must 

be taken into account when applying 

these ADTV limitations on purchases 

for an Other Account or Fund; provided, 

however, if coordinated purchases for 

Index Accounts or Funds, or for ModelDriven Accounts or Funds, would cause 

the fifteen percent (15%) limitation to 

be exceeded, BlackRock Managers can 

nonetheless acquire for Other Accounts 

or Funds up to the greater of five 

percent (5%) of ADTV for the previous 

ten (10) trading days or five percent 

(5%) of trading volume on the day of the 

Covered Transaction. For purposes of 

this paragraph 85(e), cross trades of 

MPS equity Securities which comply 

with an applicable statutory or 

administrative prohibited transaction 

exemption are not taken into account; 

and 

(f) The ECO Function must monitor 

the volume limits on purchases of MPS 

stock described in paragraph 85(e) and 

must provide a monthly report to the IM 

with respect to such purchases and 

limits. The IM shall impose lower 

volume limitations and take other 

appropriate action with respect to such 

purchases if the IM determines on the 

basis of these reports by the ECO and 

publicly available information 

materially related to the trading of the 

Securities of an MPS on its primary 

listing exchange (or market) that the 

purchases described have a material 

positive impact on the market price for 

such Securities. 

T. The Provision of Custodial, 

Administrative and Similar Ministerial 

Services by an MPS for a Client Plan as 

a Consequence of a BlackRock Manager 

Exercising Investment Discretion on 

Behalf of the Client Plan or Rendering 

Investment Advice to the Client Plan 

86. The Applicants represent that 

MPSs commonly provide custodial, 

administrative and similar ministerial 

services (e.g., collective fund custodial 

services, recordkeeping, etc.) to 

numerous entities, including plans and 

ERISA look-through entities, and 

BlackRock Managers may decide that 

retaining an MPS to provide custodial or 

administrative services is in the 

interests of Client Plans. 

87. In order for relief under the 

proposed exemption to be available for 

this transaction, the proposed 

exemption provides that (a) the terms of 

such service are comparable to those a 

Client Plan would receive in an arm’s 

length transaction with an unrelated 

party and (b) the ECO approves in 

advance and in writing (which may 

include electronic communication if 

retrievable by the ECO) the choice or 

recommendation of the MPS by the 

BlackRock Manager and the terms of the 

services, including but not limited to, 

the associated fees.43

U. Purchases, Sales and Holdings by 

BlackRock Managers for Client Plans of 

Commercial Paper Issued by ABCP 

Conduits, When an MPS Has One or 

More Roles 

88. The Applicants represent that in 

the past, the BGI cash management 

program purchased and sold, and at 

present and in the future BTC and other 

BlackRock Managers may purchase and 

sell, significant amounts of commercial 

paper for Client Plans through 


Emcdonald on DSK2BSOYB1PROD with NOTICES2
15076 Federal Register / Vol. 76, No. 53 / Friday, March 18, 2011 / Notices 

44 42 FR 18732 (April 8, 1977). 

45See Proposed Exemption, Application No. D– 

11318, 72 FR 51668 (September 10, 2007). 

46The grant of the exemptive relief provided in 

Section III.V. of the proposed exemption does not 

preclude compliance with and use of PTE 77–4 or 

PTE 2008–1 granted to Barclays Global Investors, 

N.A. 

commercial paper conduits, with 

respect to some of which an MPS, such 

as BOA, acts as the program 

administrator, placement agent, 

liquidity provider and/or credit support 

provider. 

89. The Applicants represent that an 

ABCP Conduit is a special purpose 

vehicle that acquires assets from one or 

more originators and issues commercial 

paper to provide funding to the 

originator(s). Conduits are typically 

administered by a bank which provides 

liquidity support (standing ready to 

purchase the conduit’s commercial 

paper if it cannot be rolled over) and/ 

or credit support (committing to cover 

losses in the event of default). The 

program administrator also typically 

acts as placement agent for the 

commercial paper, sometimes together 

with one or more other placement 

agents. 

90. The Applicants represent that 

commercial paper issued by a conduit 

may be purchased directly from the 

program administrator or other 

placement agent, or traded on the 

secondary market with another brokerdealer making a market in the 

Securities. 

91. If an MPS acts as program 

administrator and placement agent in a 

conduit, the MPS is compensated as 

follows: (a) In the case of asset-backed 

commercial paper purchased directly 

from the MPS in its capacity as 

placement agent, the MPS receives a fee, 

typically five basis points; and (b) in the 

case of asset-backed commercial paper 

purchased from another broker-dealer, 

the MPS receives a fee (the amount of 

which is not made public) in connection 

with its services as program 

administrator, or as a provider of credit 

and/or liquidity support. 

92. A BlackRock Manager might 

determine it is in the interest of Client 

Plans to purchase commercial paper in 

a primary offering directly from the 

placement agent(s) or trade in the 

secondary market with the placement 

agent(s) or another broker-dealer that 

makes a market in the Securities. In 

ABCP Conduits where an MPS is a 

program administrator, or is providing 

liquidity and/or credit support, the 

role(s) of the MPS might give rise to 

prohibited transactions on the part of 

BlackRock Managers, whether the 

BlackRock Manager purchases directly 

from the MPS or from another brokerdealer. In many cases there will not be 

three counterparties with which the 

BlackRock Manager can trade such 

Securities. In particular, in the case of 

purchases in the primary offering, the 

Securities frequently can only be 

purchased from the administrator (e.g., 

an MPS), acting as the placement agent. 

There may be only one placement agent 

(e.g., an MPS). If there is more than one 

placement agent, they will all offer the 

Securities in the primary offering at the 

same price. As a practical matter, there 

are many circumstances where there 

will not be competing prices for these 

Securities even in the secondary market. 

As in the case of repurchase agreements, 

a BlackRock Manager is able to 

determine the competitiveness of 

pricing of the ABCP Conduit 

commercial paper by reference to 

prevailing rates above Treasuries for 

comparable short-term money market 

instruments rated in the same category. 

93. In order for relief under the 

proposed exemption to be available for 

this transaction, the following 

conditions are applicable: 

(a)(i) The Client Plan must not be an 

MPS Plan of the MPS with whom the 

purchase or sale takes place, or an MPS 

Plan of another member of the same 

MPS Group as such MPS; and (ii) the 

Client Plan must not be an MPS Plan of 

an MPS which is acting in a continuing 

capacity, or an MPS Plan of another 

member of the same MPS Group as such 

MPS; and (iii) no MPS described in 

paragraphs 93(a)(i) or (ii), or another 

member of the same MPS Group as such 

MPS, has discretionary authority or 

control with respect to the Client Plan 

assets involved in the Covered 

Transaction or renders investment 

advice (within the meaning of 29 CFR 

2510.3–21(c)) with respect to such 

assets; however, the 10% Rule applies; 

(b) The commercial paper must have 

a stated maturity date of nine months or 

less from the date of issue, exclusive of 

days of grace, or must be a renewal of 

an issue of commercial paper the 

maturity of which is likewise limited; 

(c) At the time it is acquired, the 

commercial paper must be ranked in the 

highest rating category by at least one of 

the Rating Organizations; 

(d) If the seller or purchaser of the 

ABCP Conduit commercial paper is an 

MPS and/or an MPS performs a 

continuing role with respect to the 

Securities, secondary market purchases 

and sales must be pursuant to the Three 

Quote Process, provided that, for 

purposes of this transaction, firm quotes 

on comparable short-term money market 

instruments rated in the same category 

may be used as quotes for purposes of 

the Three Quote Process; and 

(e) If an MPS performs a continuing 

role and there is a default, the taking of 

or refraining from taking of any action 

by the responsible BlackRock Manager 

which could have a material positive or 

negative effect upon the MPS must be 

decided upon by the IM. 

94. The Applicants further request 

that the Department confirm that, for 

purposes of Section III.U. of the 

proposed exemption, no BlackRock 

Entity is to be regarded as an affiliate of 

any MPS. The Department concurs. 

V. Purchase, Holding and Disposition by 

BlackRock Managers for Client Plans of 

Shares of Exchange-Traded Open-End 

Investment Companies Registered 

Under the 1940 Act (ETF) Managed by 

BlackRock Managers 

95. The BlackRock Managers may 

serve as investment advisers to ETFs. 

For example, the BlackRock Managers 

serve as the investment adviser to the 

iShares® family of ETFs, one of the 

nation’s largest ETF families. The 

Applicants represent that investment in 

ETFs is becoming increasingly more 

popular. If Client Plans were unable to 

invest in such ETFs, they would be 

unable to take advantage of both a 

beneficial investment opportunity and 

an important tool with which to manage 

liquidity. 

96. The Applicants observe that BGI 

applied for and was granted an 

individual prohibited transaction 

exemption, PTE 2008–1, 73 FR 3274 

(January 17, 2008), which, among other 

relief, permits BGI (now, BTC) and its 

investment advisory affiliates to acquire 

for ERISA and FERSA clients, shares of 

ETFs managed by BTC or an affiliate of 

BTC. PTE 2008–1 was patterned on PTE 

77–4,44 the prohibited transaction class 

exemption for certain transactions 

between investment companies and 

employee benefit plans. The Summary 

of Facts and Representations in the 

related proposal of PTE 2008–12 45

describes in detail how trading in ETFs 

takes place, including the process by 

which Creation Shares are acquired. 

97. The Applicants represent that 

should BlackRock Managers acquire or 

sell for Client Plans shares of ETFs 

managed by BTC or another BlackRock 

Manager, no material benefit accrues to 

the BlackRock Manager managing the 

ETF in question, as its assets under 

management are not thereby increased, 

with the possible exception of when the 

purchase of the ETF shares constitutes 

or results in new Creation Shares. 

98. In order for relief under the 

proposed exemption to be available for 

this transaction,46 the following 

conditions apply: 


Emcdonald on DSK2BSOYB1PROD with NOTICES2
Federal Register / Vol. 76, No. 53 / Friday, March 18, 2011 / Notices 15077 

47 ‘‘Buy-Up’’ means an initial acquisition of 

Securities issued by BlackRock by a BlackRock 

Manager, if such acquisition exceeds one percent 

(1%) of the aggregate daily trading volume for such 

Security, for an Index Account or Fund, or a ModelDriven Account or Fund which is necessary to bring 

the fund’s or account’s holdings of such Securities 

either to its capitalization-weighted or other 

specified composition in the relevant Index, as 

determined by the organization maintaining such 

Index, or to its correct weighting as determined by 

the Model. In non-Buy-up situations, the 

Applicants believe that a BlackRock Manager 

should be able to purchase, hold and dispose of 

BlackRock Securities in an Index/Model-Driven 

Account or Fund for the purpose of maintaining the 

proper benchmark weight without the need for 

additional exemptive relief. BlackRock requests 

relief for non-Buy-Up situations subject only to 

Sections III.X.1. and 2. of the proposed exemption 

for the avoidance of any issues about the necessity 

for such relief in particular circumstances. The 

Department is not opining on the need for such 

relief herein. 

(a)(i) The BlackRock Manager must 

purchase such ETF shares from or 

through a person other than an MPS or 

a BlackRock Entity; and (ii) no purchase 

shall be exempt under the proposed 

exemption if the BlackRock Manager 

portfolio manager acting for the Client 

Plan knows (within the meaning of the 

proposed exemption) or should know 

that the shares to be acquired for Client 

Plans are Creation Shares, or that the 

purchase for Client Plans will result in 

new Creation Shares; and 

(b) Notwithstanding paragraph 

98(a)(i), the Existing Directed Brokerage 

and/or Wrap Fee Arrangement 

Exception applies. Additionally, the 

ECO Function periodically monitors 

purchases of Securities to ensure that 

the amount of BlackRock-managed ETF 

shares purchased for Client Plans under 

this paragraph 98(b) is not 

disproportionate to the amount of 

BlackRock-managed ETF shares 

purchased for Client Plans pursuant to 

paragraph 98(a) under the brokerage 

arrangement in place as of the date of 

the Acquisition. 

W. Investment of Assets of MPS Plans in 

a BlackRock Bank-Maintained Common 

or Collective Trust as of the Date of the 

Acquisition—Fees Paid Outside the 

Trust 

99. The Applicants represent that as 

of the Acquisition, one or more MPS 

Plans was invested in one or more BTC 

bank collective trust funds under an 

arrangement where the fees owed to 

BTC by these MPS Plans are paid 

directly to BTC by the MPS Plans, not 

out of the assets of the bank collective 

trust fund. These investments in the 

BTC funds, at the time they were made, 

were selected by fiduciaries of the MPS 

Plans as being in the interests of such 

Client Plans and their participants and 

beneficiaries when no relationship 

existed between BGI and the MPSs that 

might be viewed as affecting the best 

judgment of the fiduciaries of the MPS 

Plans. All such fees are paid at BTC’s 

standard rates, or at negotiated rates 

discounted from BTC’s standard rates. 

The proposed exemption would permit 

continuation of these investments, 

subject to certain conditions. 

100. With respect to MPS Plans 

invested in Pooled Funds as of the date 

of the Acquisition, which Pooled Funds 

are common or collective trusts 

maintained by BTC, and in connection 

with which investments such MPS 

Plans pay management fees directly to 

BlackRock Managers, relief under the 

proposed exemption will be available 

until the earliest of (a) termination of 

the investment in the Pooled Fund, (b) 

transition of the fee arrangement to one 

under which the BlackRock Manager’s 

fees are paid from assets of the Pooled 

Fund or by the MPS Plan sponsor, or (c) 

December 31, 2010 (Unwind Period 2) if 

the following conditions are met: 

(a) The fees paid by such MPS Plans 

to the BlackRock Managers during 

Unwind Period 2 are neither more than 

reasonable compensation nor 

significantly more than fees paid to the 

BlackRock Managers by other, 

comparable Client Plans invested in 

such Pooled Funds which are not MPS 

Plans; 

(b) The MPS Plans must not pay to 

BlackRock Managers during Unwind 

Period 2 any type of fee or other 

compensation that was not charged to or 

otherwise borne by MPS Client Plans 

investors in the Pooled Fund as of the 

date of the Acquisition; and 

(c) During Unwind Period 2 the IM 

must review the investment by the MPS 

Plans in the Pooled Fund; all fees paid 

by the affected MPS Plans to BlackRock 

Managers must be disclosed to the IM; 

the IM must review the offering 

documents for the Pooled Funds and 

any advisory or management agreements 

with BlackRock Managers; and any 

material change in the terms and 

conditions of the investment by the 

affected MPS Plans in the Pooled Fund, 

including but not limited to changes to 

fees paid to BlackRock Managers or the 

terms of the advisory or management 

agreements with BlackRock Managers, 

must be promptly disclosed to the IM 

and be subject to the IM’s written 

approval. Further, during Unwind 

Period 2, each such MPS Plan may 

terminate its investment in the Pooled 

Fund upon no more than thirty (30) 

days notice and without incurring a 

redemption fee paid to a BlackRock 

Manager. 

X. Purchase, Holding and Disposition of 

BlackRock Equity Securities in the 

Secondary Market by BlackRock 

Managers for an Index Account or Fund, 

or a Model-Driven Account or Fund, 

Including Buy-Ups 47

101. BlackRock is an issuer of equity 

Securities with a significant market 

capitalization. As a result, the 

Applicants represent that common or 

preferred Securities issued by 

BlackRock may be included as a 

component in an Index used by an 

Index Fund or a Model-Driven Fund 

managed by a BlackRock Manager. 

Thus, the purchase of Securities issued 

by BlackRock may be necessary for a 

portfolio to track the underlying 

benchmark. If Client Plans were unable 

to invest in such Securities, it could 

result in tracking error for applicable 

funds and accounts. It is not clear to the 

Applicants that an exemption is 

necessary to purchase or hold 

BlackRock Securities under such 

circumstances, but, given the breadth of 

the exemption, the Applicants believe 

requesting the certitude of exemptive 

relief on this point is appropriate. 

102. In order for relief under the 

proposed exemption to be available for 

this transaction, the following 

conditions apply: 

(a) The acquisition, holding and 

disposition of the BlackRock Securities 

must be for the sole purpose of 

maintaining quantitative conformity 

with the weight of such Securities 

prescribed by the relevant Index, for 

Index Accounts or Fund, or the weight 

of such Securities prescribed by the 

relevant Model, for Model-Driven 

Accounts or Funds, and such purchase 

may not exceed the purchase amount 

necessary for such Model or quantitative 

conformity; 

(b) Any acquisition of BlackRock 

Securities must not involve any 

agreement, arrangement or 

understanding regarding the design or 

operation of the account or fund 

acquiring the BlackRock Securities 

which is intended to benefit BlackRock 

or any party in which BlackRock may 

have an interest; and 

(c) With respect to an acquisition of 

BlackRock Securities by such an 

account or fund which constitutes a 

Buy-Up (see footnote 47): 

(i) The acquisition must be made on 

a single trading day from or through one 

broker-dealer, which broker-dealer is 

not an MPS or a BlackRock Entity; 

provided, however, that if the volume 

condition in paragraph 102(c)(iv) below 

cannot be satisfied in a single trading 

day, the acquisition must be completed 

in as few trading days as possible in 

compliance with such volume 


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48Such trades are priced by reference to market 

prices, and, thus, they generally do not affect 

market prices. 

limitation and such trades must be 

reviewed by the ECO and reported to 

the IM; 

(ii) Based upon the best available 

information, the acquisition must not be 

the opening transaction of a trading day 

and must not be made in the last half 

hour before the close of the trading day; 

(iii) The price paid by the BlackRock 

Manager must not be higher than the 

lowest current independent offer 

quotation, determined on the basis of 

reasonable inquiry from broker-dealers 

who are not MPSs or BlackRock 

Entities; 

(iv) Aggregate daily purchases must 

not exceed fifteen percent (15%) of 

aggregate average daily trading volume 

for the Security, as determined by the 

greater of (A) the trading volume for the 

Security occurring on the applicable 

Recognized Securities Exchange and/or 

Automated Trading System on the date 

of the transactions, or (B) the aggregate 

average daily trading volume for the 

Security occurring on the applicable 

Recognized Securities Exchange and/or 

Automated Trading System for the 

previous ten (10) trading days, both 

based on the best information 

reasonably available at the time of the 

transaction. These volume limitations 

must be applied on a portfolio manager 

by portfolio manager basis unless 

purchases of BlackRock Securities are 

coordinated by the portfolio managers 

or trading desks, in which case the 

limitations are aggregated for the 

coordinating portfolio managers or 

trading desks. Provided further, if 

BlackRock, without Client Plan 

direction or consent, initiates a new 

Index Account or Fund, or ModelDriven Account or Fund on its own 

accord, with BlackRock Securities 

included therein, the volume 

restrictions for such new account or 

fund must be determined by aggregating 

all portfolio managers purchasing for 

such new account or fund. Cross trades 

of BlackRock Securities which comply 

with an applicable statutory or 

administrative prohibited transaction 

exemption are not included in the 

amount of aggregate daily purchases to 

which the limitations of this paragraph 

apply; 48

(v) All purchases and sales of 

BlackRock Securities must occur either 

(A) on a Recognized Securities 

Exchange, (B) through an Automated 

Trading System operated by a brokerdealer that is not a BlackRock Entity and 

is either registered under the 1934 Act, 

and thereby subject to regulation by the 

Securities and Exchange Commission, 

or subject to regulation and supervision 

by the Securities and Futures Authority 

of the UK or another applicable 

regulatory authority, which provides a 

mechanism for customer orders to be 

matched on an anonymous basis 

without the participation of a brokerdealer, or (C) through an Automated 

Trading System that is operated by a 

Recognized Securities Exchange, 

pursuant to the applicable securities 

laws, and provides a mechanism for 

customer orders to be matched on an 

anonymous basis without the 

participation of a broker-dealer; and 

(vi) The ECO must design acquisition 

procedures for BlackRock Managers to 

follow in Buy-Ups, which the IM 

approves in advance of the 

commencement of any Buy-Up, and the 

ECO Function must monitor BlackRock 

Manager’s compliance with such 

procedures. 

Y. Acquisition by BlackRock Managers 

of Financial Guarantees, Indemnities 

and Similar Protections for Client Plans 

From MPSs 

103. The Applicants represent that 

BlackRock Managers in the past have 

provided and in some cases currently 

have in place for Client Plans financial 

guarantees, indemnification 

arrangements or similar instruments 

providing protection to the Client Plans 

against various possible losses or risks, 

such as an indemnification arrangement 

to protect against the consequences of a 

counterparty default. On occasion, these 

arrangements were and are provided to 

Client Plans by means of a contract or 

similar funding arrangement with a 

third party, and in some cases that third 

party can be an MPS. These guarantees, 

indemnification arrangements and 

similar instruments do not exist as a 

freestanding commitment constituting 

the sole relationship between BlackRock 

and the Client Plan; instead, they are 

features or additions to a more 

fundamental relationship, such as the 

retention of a BlackRock Manager as a 

discretionary asset manager, or in 

connection with a Client Plan 

investment in a commingled vehicle 

sponsored and/or managed by a 

BlackRock Manager. The terms of these 

arrangements benefit Client Plans, and 

independent Client Plan fiduciaries 

must agree to the terms of the 

arrangement, including, if provided 

through a third party, the identity of the 

third party. 

104. In order for relief under the 

proposed exemption to be available for 

this transaction, the following 

conditions apply: (a) The terms of the 

arrangement (including the identity of 

the provider) must be approved by a 

fiduciary of the Client Plan which is 

independent of the MPS providing such 

protection or an MPS which is a 

member of the same MPS Group as such 

MPS and of BlackRock; (b) the 

compensation owed the MPS under the 

arrangement must be paid by a 

BlackRock Entity and not paid out of the 

assets of the Client Plan; (c) in the event 

a Client Plan or the ECO concludes an 

event has occurred which should trigger 

the obligations of the MPS under the 

arrangement, and the MPS disagrees to 

any material extent, the IM must 

determine the steps the BlackRock 

Manager must take to protect the 

interests of the Client Plan; and (d) the 

MPS providing the arrangement must be 

capable of being sued in United States 

courts, has contractually agreed to be 

subject to litigation in the United States 

with respect to any matter relating to 

Section III.Y. of the proposed 

exemption, and must have sufficient 

assets in the United States to honor its 

commitments under the arrangement. 

Affiliated Underwritings and Affiliated 

Servicing 

105. Several of the Covered 

Transactions set forth above include in 

their conditions requirements regarding 

affiliated underwriting and affiliated 

servicing. Because the conditions 

associated therewith apply to multiple 

Covered Transactions, the specific 

conditions for Affiliated Underwritings 

and Affiliated Servicing are set forth in 

this paragraph 105. In order for relief 

under the proposed exemption to be 

available, the following conditions must 

be met for an Affiliated Underwriting: 

Affiliated Underwritings 

(a) The Securities to be purchased 

must be either— 

(i) Part of an issue registered under 

the 1933 Act. If the Securities to be 

purchased are part of an issue that is 

exempt from such registration 

requirement, such Securities must be: 

(A) Issued or guaranteed by the 

United States or by any person 

controlled or supervised by and acting 

as an instrumentality of the United 

States pursuant to authority granted by 

the Congress of the United States, 

(B) Issued by a bank, 

(C) Exempt from such registration 

requirement pursuant to a federal 

statute other than the 1933 Act, or 

(D) The subject of a distribution and 

are of a class which is required to be 

registered under section 12 of the 1934 

Act, and are issued by an issuer that has 

been subject to the reporting 

requirements of section 13 of the 1934 

Act for a period of at least ninety (90) 


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Federal Register / Vol. 76, No. 53 / Friday, March 18, 2011 / Notices 15079 

days immediately preceding the sale of 

such Securities and that has filed all 

reports required to be filed thereunder 

with the SEC during the preceding 

twelve (12) months; 

(ii) Part of an issue that is an Eligible 

Rule 144A Offering. Where the Eligible 

Rule 144A Offering of the Securities is 

of equity securities, the offering 

syndicate shall obtain a legal opinion 

regarding the adequacy of the disclosure 

in the offering memorandum; or 

(iii) Municipal bonds taxable by the 

United States, including Build America 

Bonds created under section 54AA of 

the Code or successor thereto, under 

which the United States pays a subsidy 

to the state or local government issuer, 

but not including Building America 

Bonds which provide a tax credit to 

investors. 

(b) The Securities to be purchased 

must be purchased prior to the end of 

the first day on which any sales are 

made, pursuant to that offering, at a 

price that is not more than the price 

paid by each other purchaser of the 

Securities in that offering or in any 

concurrent offering of the Securities, 

except that— 

(i) If such Securities are offered for 

subscription upon exercise of rights, 

they may be purchased on or before the 

fourth day preceding the day on which 

the rights offering terminates; or 

(ii) If such Securities are debt 

Securities, they may be purchased at a 

price that is not more than the price 

paid by each other purchaser of the 

Securities in that offering or in any 

concurrent offering of the Securities and 

may be purchased on a day subsequent 

to the end of the first day on which any 

sales are made, pursuant to that offering, 

provided that the interest rates, as of the 

date of such purchase, on comparable 

debt Securities offered to the public 

subsequent to the end of the first day on 

which any sales are made and prior to 

the purchase date are less than the 

interest rate of the debt Securities being 

purchased; 

(c) The Securities to be purchased 

must be offered pursuant to an 

underwriting or selling agreement under 

which the members of the syndicate are 

committed to purchase all of the 

Securities being offered, except if— 

(i) Such Securities are purchased by 

others pursuant to a rights offering; or 

(ii) Such Securities are offered 

pursuant to an over-allotment option; 

(d) The issuer of the Securities to be 

purchased pursuant to the proposed 

exemption must have been in 

continuous operation for not less than 

three (3) years, including the operation 

of any predecessors, unless the 

Securities to be purchased— 

(i) Are non-convertible debt Securities 

rated in one of the four highest rating 

categories by a Rating Organization; 

provided that none of the Rating 

Organizations rates such Securities in a 

category lower than the fourth highest 

rating category; or 

(ii)(A) Are debt Securities issued or 

fully guaranteed by the United States or 

by any person controlled or supervised 

by and acting as an instrumentality of 

the United States pursuant to authority 

granted by the Congress of the United 

States; or 

(B) Are municipal bonds taxable by 

the United States, including Build 

America Bonds created under section 

54AA of the Code or successor thereto, 

under which the United States pays a 

subsidy to the state or local government 

issuer, but not including Building 

America Bonds which provide a tax 

credit to investors; or 

(iii) Are debt Securities which are 

fully guaranteed by a guarantor that has 

been in continuous operation for not 

less than three (3) years, including the 

operation of any predecessors, provided 

that such guarantor has issued other 

Securities registered under the 1933 

Act; or if such guarantor has issued 

other Securities which are exempt from 

such registration requirement, such 

Guarantor has been in continuous 

operation for not less than three (3) 

years, including the operation of any 

predecessors, and such guarantor is: 

(A) A bank; 

(B) An issuer of Securities which are 

exempt from such registration 

requirement, pursuant to a Federal 

statute other than the 1933 Act; or 

(C) An issuer of Securities that are the 

subject of a distribution and are of a 

class which is required to be registered 

under section 12 of the 1934 Act, and 

are issued by an issuer that has been 

subject to the reporting requirements of 

section 13 of the 1934 Act for a period 

of at least ninety (90) days immediately 

preceding the sale of such Securities 

and that has filed all reports required to 

be filed hereunder with the SEC during 

the preceding twelve (12) months. 

(e) The aggregate amount of Securities 

of an issue purchased, pursuant to the 

proposed exemption, by the BlackRock 

Manager with: (i) the assets of all Client 

Plans; and (ii) the assets, calculated on 

a pro rata basis, of all Client Plans 

investing in Pooled Funds managed by 

the BlackRock Manager; and (iii) the 

assets of plans to which the BlackRock 

Asset Manager renders investment 

advice within the meaning of 29 CFR 

2510.3–21(c) must not exceed: 

(i) Ten percent (10%) of the total 

amount of the Securities being offered 

in an issue, if such Securities are equity 

securities; 

(ii) Thirty five percent (35%) of the 

total amount of the Securities being 

offered in an issue, if such Securities are 

Asset-Backed Securities rated in one of 

the three highest rating categories by at 

least one of the Rating Organizations; 

provided that none of the Rating 

Organizations rates such Securities in a 

category lower than the third highest 

rating category; 

(iii) Thirty five percent (35%) of the 

total amount of the Securities being 

offered in an issue, if such Securities are 

debt Securities rated in one of the four 

highest rating categories by at least one 

of the Rating Organizations; provided 

that none of the Rating Organizations 

rates such Securities in a category lower 

than the fourth highest rating category; 

or 

(iv) Twenty five percent (25%) of the 

total amount of the Securities being 

offered in an issue, if such Securities are 

debt Securities rated in the fifth or sixth 

highest rating categories by at least one 

of the Rating Organizations; provided 

that none of the Rating Organizations 

rates such Securities in a category lower 

than the sixth highest rating category; 

and 

(v) The assets of any single Client 

Plan (and the assets of any Client Plans 

and any In-House Plans investing in 

Pooled Funds) must not be used to 

purchase any Securities being offered, if 

such Securities are debt Securities rated 

lower than the sixth highest rating 

category by any of the Rating 

Organizations; 

(vi) Notwithstanding the percentage of 

Securities of an issue permitted to be 

acquired, as set forth in Sections 

IV.A.(5)(a)–(d) of the proposed 

exemption, the amount of Securities in 

any issue (whether equity or debt 

Securities or Asset-Backed Securities) 

purchased, pursuant to the proposed 

exemption, by the BlackRock Manager 

on behalf of any single Client Plan, 

either individually or through 

investment, calculated on a pro rata 

basis, in a Pooled Fund may not exceed 

three percent (3%) of the total amount 

of such Securities being offered in such 

issue, provided that a Sub-Advised 

Pooled Fund (as described in the 

proposed exemption) as a whole may 

purchase up to three percent (3%) of an 

issue; and 

(vii) If purchased in an Eligible Rule 

144A Offering, the total amount of the 

Securities being offered for purposes of 

determining the percentages, described 

in Sections IV.A.(5)(a)–(d) and (f) of the 

proposed exemption, is the total of: 

(A) The principal amount of the 

offering of such class of Securities sold 


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15080 Federal Register / Vol. 76, No. 53 / Friday, March 18, 2011 / Notices 

by underwriters or members of the 

selling syndicate to QIBs; plus 

(B) The principal amount of the 

offering of such class of Securities in 

any concurrent public offering. 

(f) The aggregate amount to be paid by 

any single Client Plan in purchasing any 

Securities which are the subject of the 

proposed exemption, including any 

amounts paid by any Client Plan in 

purchasing such Securities through a 

Pooled Fund, calculated on a pro rata 

basis, must not exceed three percent 

(3%) of the fair market value of the net 

assets of such Client Plan, as of the last 

day of the most recent fiscal quarter of 

such Client Plan prior to such 

transaction, provided that a SubAdvised Pooled Fund as a whole may 

pay up to one percent (1%) of fair 

market value of its net assets in 

purchasing such Securities. 

(g) The covered transactions must not 

be part of an agreement, arrangement, or 

understanding designed to benefit any 

BlackRock Entity or MPS. 

(h) Each Client Plan must have total 

net assets with a value of at least $50 

million (the $50 Million Net Asset 

Requirement). For purposes of engaging 

in covered transactions involving an 

Eligible Rule 144A Offering, each Client 

Plan must have total net assets of at 

least $100 million in Securities of 

issuers that are not affiliated with such 

Client Plan (the $100 Million Net Asset 

Requirement). 

For purposes of a Pooled Fund 

engaging in an Affiliated Underwriting, 

each Client Plan in such Pooled Fund 

other than a Sub-Advised Pooled Fund 

must have total net assets with a value 

of at least $50 million. Notwithstanding 

the foregoing, if each such Client Plan 

in a Pooled Fund other than a SubAdvised Pooled Fund does not have 

total net assets with a value of at least 

$50 million, the $50 Million Net Asset 

Requirement will be met if fifty percent 

(50%) or more of the units of beneficial 

interest in such Pooled Fund are held by 

investors, each of which has total net 

assets with a value of at least $50 

million. 

For purposes of a Pooled Fund 

engaging in an Affiliated Underwriting 

involving an Eligible Rule 144A 

Offering, each Client Plan in such 

Pooled Fund other than a Sub-Advised 

Pooled Fund must have total net assets 

of at least $100 million in Securities of 

issuers that are not affiliated with such 

Client Plan. Notwithstanding the 

foregoing, if each such Client Plan in 

such Pooled Fund other than a SubAdvised Pooled Fund does not have 

total net assets of at least $100 million 

in Securities of issuers that are not 

affiliated with such Client Plan, the 

$100 Million Net Asset Requirement 

will be met if fifty percent (50%) or 

more of the units of beneficial interest 

in such Pooled Fund are held by 

investors, each of which have total net 

assets of at least $100 million in 

Securities of issuers that are not 

affiliated with such investor, and the 

Pooled Fund itself qualifies as a QIB. 

For purposes of the net asset 

requirements described above, where a 

group of Client Plans is maintained by 

a single employer or controlled group of 

employers, as defined in ERISA section 

407(d)(7), the $50 Million Net Asset 

Requirement (or in the case of an 

Eligible Rule 144A Offering, the $100 

Million Net Asset Requirement) may be 

met by aggregating the assets of such 

Client Plans, if the assets of such Client 

Plans are pooled for investment 

purposes in a single master trust. 

(i) No more than twenty percent 

(20%) of the assets of a Pooled Fund, at 

the time of a covered transaction, may 

be comprised of assets of In-House Plans 

for which the BlackRock Manager, or a 

BlackRock Entity exercises investment 

discretion. 

(j) The BlackRock Manager must be a 

QPAM, and, in addition to satisfying the 

requirements for a QPAM under section 

VI(a) of PTE 84–14, the BlackRock 

Manager must also have total client 

assets under its management and 

control in excess of $5 billion, as of the 

last day of its most recent fiscal year and 

shareholders’ or partners’ equity in 

excess of $1 million. 

(k) The applicable recordkeeping 

requirements are set forth in Sections 

IV.A.11–12. of the proposed exemption. 

Further, in order for relief under the 

proposed exemption to be available, the 

following conditions must be met for an 

Affiliated Servicing: 

Affiliated Servicing 

(a) The Securities must be CMBS that 

are rated in one of the three highest 

rating categories by Rating 

Organizations; provided that none of the 

Rating Organizations rates such 

Securities in a category lower than the 

third highest rating category; 

(b) The purchase of the CMBS must 

meet the conditions of an applicable 

Underwriter Exemption; 

(c)(i) The aggregate amount of CMBS 

of an issue purchased, pursuant to the 

proposed exemption, by the BlackRock 

Manager with: 

(A) The assets of all Client Plans; 

(B) The assets, calculated on a pro rata 

basis, of all Client Plans and In-House 

Plans investing in Pooled Funds 

managed by the Asset Manager; and 

(C) The assets of plans to which the 

Asset Manager renders investment 

advice within the meaning of 29 CFR 

2510.3–21(c) must not exceed thirty five 

percent (35%) of the total amount of the 

CMBS being offered in an issue; 

(ii) Notwithstanding the percentage of 

CMBS of an issue permitted to be 

acquired, as set forth in Section 

IV.B.3.(a) of the proposed exemption, 

the amount of CMBS in any issue 

purchased, pursuant to the proposed 

exemption, by the Asset Manager on 

behalf of any single Client Plan, either 

individually or through investment, 

calculated on a pro rata basis, in a 

Pooled Fund must not exceed three 

percent (3%) of the total amount of such 

CMBS being offered in such issue; and 

(iii) If purchased in an Eligible Rule 

144A Offering, the total amount of the 

CMBS being offered for purposes of 

determining the percentages, described 

in Section IV.B.3(a) of the proposed 

exemption, is the total of: 

(A) The principal amount of the 

offering of such class of CMBS sold by 

underwriters or members of the selling 

syndicate to QIBs; plus 

(B) The principal amount of the 

offering of such class of CMBS in any 

concurrent public offering; 

(d) The aggregate amount to be paid 

by any single Client Plan in purchasing 

any CMBS which are the subject of the 

proposed exemption, including any 

amounts paid by any Client Plan in 

purchasing such CMBS through a 

Pooled Fund, calculated on a pro rata 

basis, must not exceed three percent 

(3%) of the fair market value of the net 

assets of such Client Plan, as of the last 

day of the most recent fiscal quarter of 

such Client Plan prior to such 

transaction; 

(e) The Covered Transactions under 

Section IV.B. (Affiliated Servicing) of 

the proposed exemption must not be 

part of an agreement, arrangement, or 

understanding designed to benefit any 

MPS; and 

(f) The requirements of Sections 

IV.A.8. through 12. of the proposed 

exemption must be met. 

Correction Procedures 

106. The Applicants requested that 

isolated violations of the EPPs, or 

isolated violations of the proposed 

exemption (the latter, Violations) should 

not cause the entire proposed 

exemption to be revoked (only a 

persistent pattern or practice of 

violations of the EPPs or of the 

conditions might cause the proposed 

exemption to be revoked). The 

Department concurs in this request. 

107. The Department’s concurrence is 

based in part on the unique nature of 

the proposed exemption. The BlackRock 

ownership structure outlined herein is 


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49 67 FR 15062 (March 28, 2002), as amended, 71 

FR 20262 (April 19, 2006). 

uniquely protective of BlackRock’s 

independence from the MPSs, and the 

structure of the proposed transaction is 

unique in its use of both an extensive 

internal compliance regime and an 

extensive external compliance regime. 

108. Further, the size and scale of the 

proposed exemption provides a unique 

ability to focus BlackRock on the 

financial implications of noncompliance 

with the proposed exemption. The 

proposed correction procedures give 

BlackRock only a single opportunity to 

report and correct failures, thus focusing 

BlackRock on identifying and correcting 

Violations within a specific window of 

opportunity and thereby increasing 

compliance. Due to the size and scale, 

if BlackRock does not identify 

Violations accurately, it risks the 

imposition of a significant excise tax. 

109. In such context, the Applicants 

and the Department concur that 

compliance with the proposed 

exemption requires that all Violations 

must still be completely corrected. No 

non-exempt prohibited transaction will 

be deemed to occur, however, if the 

Violation is completely corrected 

(within the meaning set out below) no 

later than fourteen (14) business days 

following the date on which the ECO 

submits the quarterly report to the IM 

for the quarter in which the Covered 

Transaction first became a non-exempt 

prohibited transaction. 

110. Under the proposed exemption, 

the following correction procedures 

would apply at all times that the 

exemption remains in effect: 

(a)(i) The ECO shall monitor Covered 

Transactions and shall determine 

whether a particular Covered 

Transaction constitutes a Violation. The 

ECO shall notify the IM within five (5) 

business days following the discovery of 

any Violation; 

(ii) The ECO shall make the initial 

determination in writing of how to 

correct a Violation, with such 

determination disclosed to the IM 

within five (5) business days of initial 

written determination. Following the 

initial written determination, the ECO 

must keep the IM apprised on a current 

basis of the process of correction and 

must consult with the IM regarding each 

Violation and the appropriate form of 

correction. The ECO shall report the 

correction of the Violation to the IM 

within five (5) business days following 

completion of the correction. For 

purposes of Section V.A.2. of the 

proposed exemption, ‘‘correction’’ must 

be consistent with ERISA section 502(i) 

and Code section 4975(f)(5); 

(iii) The IM shall determine in writing 

whether it agrees that the correction of 

a Violation by the ECO is adequate, and, 

if the IM does not agree with the 

adequacy of the correction, the IM shall 

have the authority to require additional 

corrective actions by BlackRock; and 

(iv) The summary of Violations and 

corrections of Violations will be in the 

IM’s annual compliance report as 

described in Section II.E.12 of the 

proposed exemption; and 

(b)(i) If a Covered Transaction which 

would otherwise constitute a Violation 

is corrected under the ‘‘Special 

Correction Procedure,’’ such Covered 

Transaction shall continue to be exempt 

under Section I of the proposed 

exemption; 

(ii)(A) The Special Correction 

Procedure mandates a complete 

correction of the Violation no later than 

fourteen (14) business days following 

the date on which the ECO submits the 

quarterly report to the IM for the quarter 

in which the Covered Transaction first 

would become a non-exempt prohibited 

transaction by reason of constituting a 

Violation if not for Section V.B. of the 

proposed exemption; 

(B) Solely for purposes of the Special 

Correction Procedure, ‘‘correction’’ of a 

Covered Transaction which would 

otherwise by a Violation means either: 

(a) Restoring the Client Plan to the 

position it would have been in had the 

conditions of the exemption been 

complied with; 

(b) Correction consistent with section 

ERISA section 502(i) and Code section 

4975(f)(5); or 

(c) Correction consistent with the 

Voluntary Fiduciary Correction 

Program; 49 and 

(C) Other than with respect to the 

definition of ‘‘correction,’’ specified 

above, when utilizing the Special 

Correction Procedure the ECO and the 

IM must comply with Section V.A. of 

the proposed exemption. 

111. In summary, the Applicants 

represent that the exemption proposed 

herein will satisfy the statutory criteria 

of ERISA section 408(a) and Code 

section 4975(c)(2) because: 

(a) Administratively feasible. The 

Applicants believe that the proposed 

exemption is administratively feasible. 

Most of the Covered Transactions are 

the subject of existing statutory and/or 

administrative exemptions. The 

conditions for relief for the Covered 

Transaction have been modified to 

reflect, on the one hand, the possible 

negative implication of the equity 

investments of the MPSs in BlackRock, 

and on the other hand, the 

circumscribed ability of the MPSs to 

exercise rights normally associated with 

such equity investments. In addition, 

EPPs will have been developed with the 

cooperation and approval of the IM; an 

ECO will be appointed to report on 

compliance with the terms of the 

proposed exemption and the EPPs; and 

the IM will review compliance reports, 

pass upon corrections of Violations, and 

if necessary, contact the Department. 

Granting the proposed exemption 

requires no additional monitoring by the 

Department. 

(b) In the interest of plans and 

participants and beneficiaries. The 

Applicants believe that the proposed 

exemption is in the interest of plans and 

participants and beneficiaries because 

the proposed exemption would allow 

BlackRock Managers to continue to 

engage in Covered Transactions with 

major participants in the financial 

markets which are necessary and 

beneficial to plans and their participants 

and beneficiaries. While many Covered 

Transactions (although perhaps not all) 

could be engaged in with parties other 

than an MPS, in numerous cases such 

transactions would be quantitatively or 

qualitatively inferior to the same 

transactions with an MPS. 

(c) Protective of the rights of 

participants and beneficiaries of such 

plans. Each of the Covered Transactions 

is protective of the rights of participants 

and beneficiaries because specific 

conditions have been tailored to their 

respective natures. More broadly, the 

rights of participants and beneficiaries 

are protected by the general conditions, 

modeled on the QPAM Exemption, that 

are applicable to all Covered 

Transaction. The general protective 

conditions include compensation 

restrictions, development of EPPs, and 

implementation of EPPs with the 

cooperation and approval of the IM. 

Further, the ECO will report on 

compliance with the proposed 

exemption and the EPPs, and the IM 

will review compliance reports, pass 

upon corrections of Violations, and if 

necessary, contact the Department. 

PROPOSED EXEMPTION 

Based on the facts and representations 

set forth in the application, the 

Department is considering granting the 

following exemption under the 

authority of ERISA section 408(a), Code 

section 4975(c)(2) and FERSA section 

8477(c)(3), and in accordance with the 

procedures set forth in 29 CFR Part 

2570, Subpart B (55 FR 32836, 32847, 

August 10, 1990), as follows: 

SECTION I: COVERED 

TRANSACTIONS GENERALLY 

If the proposed exemption is granted, 

for the period from December 1, 2009, 


Emcdonald on DSK2BSOYB1PROD with NOTICES2
15082 Federal Register / Vol. 76, No. 53 / Friday, March 18, 2011 / Notices 

50For purposes of this proposed exemption, 

references to ERISA section 406 should be read to 

refer as well to the corresponding provisions of 

Code section 4975 and FERSA section 8477(c). 

51 49 FR 9494 (Mar. 13, 1984), as amended, 70 FR 

49305 (Aug. 23, 2005), and as amended, 75 FR 

38837 (July 6, 2010). 

52Solely for purposes of this Section II.A.2., no 

BlackRock Entity will be deemed to be an affiliate 

of an MPS. The Department is not making herein 

a determination as to whether any BlackRock Entity 

is an affiliate of an MPS under ERISA. 

53For purposes of this Section II.A.3.(b), the MPS 

Plans of each of the MPS Groups (the PNC MPSs, 

the BOA MPSs, and the Barclays MPSs) are 

separately aggregated (e.g., all MPS Plans of BOA 

MPSs are aggregated together but are not aggregated 

with MPS Plans of Barclays MPSs or PNC MPSs). 

through the earlier of (i) the effective 

date of an individual exemption 

granting permanent relief for the 

following transactions, or (ii) May 31, 

2011, the restrictions of ERISA sections 

406(a)(1) and 406(b), FERSA sections 

8477(c)(1) and (2), and the sanctions 

resulting from the application of Code 

section 4975, by reason of Code section 

4975(c)(1),50 shall not apply to the 

Covered Transactions set forth in 

Section III and entered into on behalf of 

or with the assets of a Client Plan; 

provided, that (x) the generally 

applicable conditions of Section II of 

this exemption are satisfied, and, as 

applicable, the transaction-specific 

conditions set forth below in Sections III 

and IV of this exemption are satisfied, 

or (y) the Special Correction Procedure 

set forth in Section V of this exemption 

is satisfied. 

SECTION II: GENERALLY APPLICABLE 

CONDITIONS 

A. Compliance with the QPAM 

Exemption. The following conditions of 

Part I of Prohibited Transaction 

Exemption 84–14, as amended (PTE 84– 

14 or the QPAM Exemption),51 must be 

satisfied with respect to each Covered 

Transaction: 

1. The BlackRock Manager engaging 

in the Covered Transaction is a 

Qualified Professional Asset Manager; 

2. Except as set forth in Section III of 

this exemption, at the time of the 

Covered Transaction (as determined 

under Section VI(i) of the QPAM 

Exemption) with or involving an MPS, 

such MPS, or its affiliate (within the 

meaning of Section VI(c) of the QPAM 

Exemption),52 does not have the 

authority to: 

(a) Appoint or terminate the 

BlackRock Manager as a manager of the 

Client Plan assets involved in the 

Covered Transaction, or 

(b) Negotiate on behalf of the Client 

Plan the terms of the management 

agreement with the BlackRock Manager 

(including renewals or modifications 

thereof) with respect to the Client Plan 

assets involved in the Covered 

Transaction; 

3. (a) Notwithstanding the foregoing, 

in the case of an investment fund (as 

defined in Section VI(b) of the QPAM 

Exemption) in which two or more 

unrelated Client Plans have an interest, 

a Covered Transaction with an MPS will 

be deemed to satisfy the requirements of 

Section II.A.2. of this exemption if the 

assets of a Client Plan on behalf of 

which the MPS or its affiliate possesses 

the authority set forth in Subsections 

2(a) and/or (b) above, and which are 

managed by the BlackRock Manager in 

the investment fund, when combined 

with the assets of other Client Plans 

established or maintained by the same 

employer (or an affiliate thereof 

described in section VI(c)(1) of the 

QPAM Exemption) or by the same 

employee organization, on behalf of 

which the same MPS possesses such 

authority and which are managed in the 

same investment fund, represent less 

than ten percent (10%) of the assets of 

the investment fund; 

(b) For purposes of Section II.A.3.(a) 

of this exemption, and for purposes of 

Sections III.I.6, L.3(b), M.2.(b) and U.1. 

of this exemption, with respect to the 

assets of an MPS Plan invested in a 

Pooled Fund as of the date of the 

Acquisition, which Pooled Fund is a 

bank-maintained common or collective 

trust, such assets when aggregated with 

the assets of all other MPS Plans of the 

same MPS Group and invested in such 

Pooled Fund shall be deemed to 

constitute less than ten percent (10%) of 

the assets of such Pooled Fund from the 

date of the Acquisition through July 1, 

2010 (the Unwind Period); provided, 

that: 53

(i) The fees paid by such MPS Plans 

to BlackRock Managers during the 

Unwind Period are not more than 

reasonable compensation and are 

substantially the same as fees paid to 

the same BlackRock Managers by other, 

comparable Client Plans which are not 

MPS Plans, invested in such Pooled 

Fund as of the date of the Acquisition; 

(ii) Such MPS Plans do not pay to the 

same BlackRock Managers during the 

Unwind Period any type of fee or other 

compensation that was not charged to or 

otherwise borne by Client Plan 

investors, which are not MPS Plans, in 

the Pooled Fund as of the date of the 

Acquisition; 

(iii) During the Unwind Period, the 

IM reviews the investment by the MPS 

Plans in the Pooled Fund; all fees paid 

by the MPS Plans to BlackRock 

Managers are disclosed to the IM; the IM 

reviews the offering documents for the 

Pooled Funds and any advisory or 

management agreements with 

BlackRock Managers; and any material 

change in the terms and conditions of 

the investment by the MPS Plans in the 

Pooled Fund, including but not limited 

to fees paid to BlackRock Managers and 

the terms of the advisory or 

management agreements with 

BlackRock Managers, are promptly 

disclosed to the IM and are subject to 

the IM’s approval; and 

(iv) During the Unwind Period, each 

MPS Plan may terminate its investment 

in the Pooled Fund upon no more than 

thirty (30) days notice and without 

incurring a redemption fee paid to a 

BlackRock Manager; 

4. The terms of the Covered 

Transaction are negotiated on behalf of 

the investment fund by, or under the 

authority and general direction of, the 

BlackRock Manager and either the 

BlackRock Manager or (so long as the 

BlackRock Manager retains full 

fiduciary responsibility with respect to 

the Covered Transaction) a property 

manager acting in accordance with 

written guidelines established and 

administered by the BlackRock 

Manager, makes the decision on behalf 

of the investment fund to enter into the 

Covered Transaction, provided that the 

Covered Transaction is not part of an 

agreement, arrangement or 

understanding designed to benefit the 

MPS; 

5. The Covered Transaction is not 

entered into with an MPS which is a 

party in interest or disqualified person 

with respect to any Client Plan whose 

assets managed by the BlackRock 

Manager, when combined with the 

assets of other Client Plans established 

or maintained by the same employer (or 

affiliate thereof described in Section 

VI(c)(1) of the QPAM Exemption) or by 

the same employee organization, and 

managed by the BlackRock Manager, 

represent more than twenty percent 

(20%) of the total client assets managed 

by the BlackRock Manager at the time of 

the Covered Transaction; 

6. At the time the Covered 

Transaction is entered into, and at the 

time of any subsequent renewal or 

modification thereof that requires the 

consent of the BlackRock Manager, the 

terms of the Covered Transaction are at 

least as favorable to the investment fund 

as the terms generally available in arm’s 

length transactions between unrelated 

parties; and 

7. Neither the BlackRock Manager nor 

any affiliate thereof (as defined in 

Section VI(d) of the QPAM 


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54For the avoidance of doubt, all MPSs are 

excluded from the term ‘‘affiliate’’ for these 

purposes. 

55For the avoidance of doubt, all MPSs are 

excluded from the term ‘‘owner’’ for these purposes. 

Exemption),54 nor any owner, direct or 

indirect, of a five percent (5%) or more 

interest in the BlackRock Manager 55 is 

a person who within the ten years 

immediately preceding the Covered 

Transaction has been either convicted or 

released from imprisonment, whichever 

is later, as a result of: Any felony 

involving abuse or misuse of such 

person’s employee benefit plan position 

or employment, or position or 

employment with a labor organization; 

any felony arising out of the conduct of 

the business of a broker, dealer, 

investment adviser, bank, insurance 

company or fiduciary; income tax 

evasion; any felony involving the 

larceny, theft, robbery, extortion, 

forgery, counterfeiting, fraudulent 

concealment, embezzlement, fraudulent 

conversion, or misappropriation of 

funds or securities; conspiracy or 

attempt to commit any such crimes or 

a crime in which any of the foregoing 

crimes is an element; or any other crime 

described in ERISA section 411. For 

purposes of this section, a person shall 

be deemed to have been ‘‘convicted’’ 

from the date of the judgment of the trial 

court, regardless of whether that 

judgment remains under appeal. 

B. Compensation. None of the 

employees of a BlackRock Manager 

receive any compensation that is based 

on any Covered Transaction having 

taken place between Client Plans and 

any of the MPSs (as opposed to with 

another institution that is not an MPS). 

The fact that a specific Covered 

Transaction occurred with an MPS as 

opposed to a non-MPS counterparty is 

ignored by BlackRock and BlackRock 

Managers for compensation purposes. 

None of the employees of BlackRock or 

a BlackRock Manager receive any 

compensation from BlackRock or a 

BlackRock Manager which consists of 

equity Securities issued by an MPS, 

which fluctuates in value based on 

changes in the value of equity Securities 

issued by an MPS, or which is otherwise 

based on the financial performance of 

an MPS independent of BlackRock’s 

performance, provided that this 

condition shall not fail to be met 

because the compensation of an 

employee of a BlackRock Manager 

fluctuates with the value of a broadlybased index which includes equity 

Securities issued by an MPS. 

C. Exemption Policies and 

Procedures. BlackRock adopts and 

implements Exemption Policies and 

Procedures (EPPs) which address each 

of the types of Covered Transactions 

and which are designed to achieve the 

goals of: (1) Compliance with the terms 

of the exemption, (2) ensuring 

BlackRock’s decision-making with 

respect to the Covered Transactions on 

behalf of Client Plans with MPSs or 

BlackRock Entities is done in the 

interests of the Client Plans and their 

participants and beneficiaries, and (3) to 

the extent possible, verifying that the 

terms of such Covered Transactions are 

at least as favorable to the Client Plans 

as the terms generally available in arm’s 

length transactions with unrelated 

parties. The EPPs are developed with 

the cooperation of both the Exemption 

Compliance Officer (ECO) and the 

Independent Monitor (IM), and such 

EPPs are subject to the approval of the 

IM. The EPPs need not address 

transactions which are not within the 

definition of the term Covered 

Transactions. 

Transgressions of the EPPs which do 

not result in Violations require 

correction only if the amount involved 

in the transgression and the extent of 

deviation from the EPPs is material, 

taking into account the amount of Client 

Plan assets affected by such 

transgressions (EPP Corrections). The 

ECO will make a written determination 

as to whether such transgressions 

require EPP Correction, and, if the ECO 

determines an EPP Correction is 

required, the ECO will provide written 

notice to the IM of the EPP Correction. 

The ECO will provide summaries for the 

IM of any such EPP Corrections as part 

of the quarterly report referenced in 

Section II.D.11. 

D. Exemption Compliance Officer. 

BlackRock appoints an Exemption 

Compliance Officer (ECO) with respect 

to the Covered Transactions. If the ECO 

resigns or is removed, BlackRock shall 

appoint a successor ECO within a 

reasonable period of time, not to exceed 

thirty (30) days, which successor shall 

be subject to the affirmative written 

approval of the IM. With respect to the 

ECO, the following conditions shall be 

met: 

1. The ECO is a legal professional 

with at least ten years of experience and 

extensive knowledge of the regulation of 

financial services and products, 

including under ERISA and FERSA; 

2. A committee made up exclusively 

of members of the Board who are 

independent of BlackRock and the 

MPSs determines the ECO’s 

compensation package, with input from 

the general counsel of BlackRock; the 

ECO’s compensation is not set by 

BlackRock business unit heads, and 

there is no direct or indirect input 

regarding the identity or compensation 

of the ECO from any MPS; 

3. The ECO’s compensation is not 

based on performance of any BlackRock 

Entity or MPS, although a portion of the 

ECO’s compensation may be provided 

in the form of BlackRock stock or stock 

equivalents; 

4. The ECO can be terminated by 

BlackRock only with the approval of the 

IM; 

5. The EPPs prohibit any officer, 

director or employee of BlackRock or 

any MPS or any person acting under 

such person’s direction from directly or 

indirectly taking any action to coerce, 

manipulate, mislead, or fraudulently 

influence the ECO in the performance of 

his or her duties; 

6. The ECO is responsible for 

monitoring Covered Transactions and 

shall determine whether Violations have 

occurred, and the appropriate correction 

thereof, consistent with the 

requirements of Section V of this 

exemption; 

7. If the ECO determines a Violation 

has occurred, the ECO must determine 

why it occurred and what steps should 

be taken to avoid such a Violation in the 

future (e.g., additional training, 

additional procedures, additional 

monitoring, or additional and/or 

changed processes or systems); 

8. The ECO is responsible for 

monitoring and overseeing the 

implementation of the EPPs. The ECO 

may delegate such responsibilities to the 

ECO Function, but the ECO will remain 

responsible for monitoring and 

overseeing the ECO Function’s 

implementation of the EPPs. When 

appropriate, the ECO will recommend 

changes to the EPPs to BlackRock and 

the IM. The ECO will consult with the 

IM regarding the need for, timing, and 

form of EPP Corrections; 

9. The ECO carries out the 

responsibilities required of the ECO 

described in: (a) The definition of 

‘‘Index’’ in this exemption and (b) with 

respect to loans of Securities to an MPS 

in Section III.M. of this exemption, and 

carries out such other responsibilities 

stipulated or described in Section III of 

this exemption including supervision of 

the ECO Function; 

10. The ECO, with the assistance of 

the ECO Function, monitors Covered 

Transactions and situations resulting 

from Covered Transactions with or 

involving an MPS with respect to 

which, because of the investment of the 

MPS in BlackRock, an action or inaction 

on the part of a BlackRock Manager 

might be thought to be motivated by an 

interest which may affect the exercise of 

such BlackRock Manager’s best 

judgment as a fiduciary. If a situation is 


Emcdonald on DSK2BSOYB1PROD with NOTICES2
15084 Federal Register / Vol. 76, No. 53 / Friday, March 18, 2011 / Notices 

56The first quarterly report will cover a 4-month 

period ending March 31, 2010. 

57The first annual compliance report will cover 

the 13-month period ending December 31, 2010. 

identified by the ECO which poses the 

potential for a conflict, as specified in 

Section III, the ECO shall consult with 

the IM, or refer decision-making to the 

discretion of the IM; 

11. The ECO provides a quarterly 

report 56 to the IM summarizing the 

material activities of the ECO for the 

preceding quarter and setting forth any 

Violations discovered during the quarter 

and actions taken to correct such 

Violations. With respect to Violations, 

the ECO report details changes to 

process put in place to guard against a 

substantially similar Violation occurring 

again, and recommendations for 

additional training, additional 

procedures, additional monitoring, or 

additional and/or changed processes or 

systems or training changes and 

BlackRock management’s actions on 

such recommendations. In connection 

with providing the quarterly report for 

the second quarter and fourth quarter of 

each year, upon the request of the IM, 

the ECO and the IM shall meet in person 

to review the content of the report. 

Other members of the ECO Function 

may attend such meetings at the request 

of either the ECO or the IM; 

12. In each quarterly report, the ECO 

certifies in writing to his or her 

knowledge that (a) the quarterly report 

is accurate; (b) BlackRock’s compliance 

program is working in a manner which 

is reasonably designed to prevent 

Violations; (c) any Violations discovered 

during the quarter and the related 

corrections taken to date have been 

identified in the report; and (d) 

BlackRock has complied with the EPPs 

in all material respects; 

13. No less frequently than annually, 

the ECO certifies to the IM as to whether 

BlackRock has provided the ECO with 

adequate resources, including, but not 

limited to, adequate staffing of the ECO 

Function, and, in connection with the 

quarterly report for the fourth quarter of 

each year, the ECO shall identify to the 

IM those BlackRock Managers that 

relied upon this exemption during the 

prior year and those that he reasonably 

anticipates relying on this exemption 

during the current year; and 

14. The ECO provides any further 

information regarding Covered 

Transactions reasonably requested by 

the IM. 

E. Independent Monitor. BlackRock 

retains an Independent Monitor (IM) 

with respect to the Covered 

Transactions. If the IM resigns or is 

removed, BlackRock shall appoint a 

successor IM within a reasonable period 

of time, not to exceed thirty (30) days. 

The IM: 

1. Agrees in writing to serve as IM, 

and he or she is independent within 

meaning of Section VI (OO); 

2. Approves the ECO selected by 

BlackRock, and as part of the approval 

process and annually thereafter 

approves in general terms the 

reasonableness of the ECO’s 

compensation, taking into account such 

information as the IM may request of 

BlackRock and which BlackRock must 

supply, and approves any termination of 

the ECO by BlackRock; 

3. Assists in the development of, and 

the granting of written approval of, the 

EPPs and any material alterations of the 

EPPs by determining that they are 

reasonably designed to achieve the goals 

of (a) compliance with the terms of the 

exemption, (b) ensuring BlackRock’s 

decision-making with respect to 

Covered Transactions on behalf of 

Client Plans with MPSs or BlackRock 

Entities is done in the interests of the 

Client Plans and their respective 

participants and beneficiaries and, (c) 

requiring, to the extent possible, 

verification that the terms of such 

Covered Transactions are at least as 

favorable to the Client Plans as the 

terms generally available in comparable 

arm’s length transactions with unrelated 

parties; 

4. Consults with the ECO regarding 

the need for, timing and form of any 

EPP Corrections. The IM has the 

responsibilities with respect to 

corrections of Violations, as set forth in 

Section V of this Exemption. In 

response to EPP Corrections or 

Violations, the IM considers whether, 

and must have the authority, to require 

further sampling, testing or corrective 

action if necessary; 

5. Exercises discretion for Client Plans 

in situations specified in Section III of 

this exemption where BlackRock 

Managers may be thought to have 

conflicts; 

6. Performs certain monitoring 

functions described in Section III, and 

carries out the responsibilities required 

of the IM, as set forth in the definition 

of ‘‘Index’’ in this exemption, and with 

respect to loans of Securities to an MPS 

as set forth in Section III.M. of this 

exemption, and carries out such other 

responsibilities stipulated in Section III 

of this exemption; 

7. Reviews the quarterly reports of the 

ECO, obtains and reviews representative 

samples of the data underlying the 

quarterly reports of the ECO, and, if the 

IM deems it appropriate, obtains 

additional factual information on either 

an ad hoc basis or on a systematic basis; 

8. Reviews the certifications of the 

ECO as to whether (a) the quarterly 

report is accurate; (b) BlackRock’s 

compliance program is working in a 

manner which is reasonably designed to 

prevent Violations; (c) any Violations 

discovered during the quarter and the 

related corrections taken to date have 

been identified in the report; (d) 

BlackRock has complied with the EPPs 

in all material respects; and (e) 

BlackRock has provided the ECO with 

adequate resources, including, but not 

limited to, adequate staffing of the ECO 

Function; 

9. Determines, on the basis of the 

information supplied to the IM by 

BlackRock and the ECO, whether there 

has occurred a pattern or practice of 

insufficient diligence in adhering to the 

EPPs and/or the conditions of the 

exemption, and if such a determination 

is made, reports the same to the 

Department, and informs BlackRock and 

the ECO of any such report; 

10. Determines whether the purchases 

of equity Securities issued by an MPS 

on behalf of Client Plans that are Other 

Accounts or Funds by a BlackRock 

Manager has had a positive material 

impact on the market price for such 

Securities, notwithstanding any volume 

limitations imposed by Section III.S. of 

the exemption and/or imposed by the 

IM with respect to such equity 

Securities. The IM makes this 

determination based upon its review of 

the relevant monthly reports required by 

the exemption with respect to such 

Covered Transactions provided by the 

ECO and publicly available information 

materially related to the trading of the 

Securities of an MPS on its primary 

listing exchange (or market); 

11. Issues an annual compliance 

report,57 to be timely delivered to (i) the 

Chairman of the Board, (ii) the Chief 

Executive Officer of BlackRock and (iii) 

the General Counsel of BlackRock. The 

annual compliance report shall be based 

on a review of the EPPs, the quarterly 

reports provided by the ECO, any 

transactions reviewed by the IM as well 

as any additional information the IM 

requests from BlackRock, and certifying 

to each of the following (or describing 

any exceptions thereto) that: 

(a) The EPPs are reasonably designed 

to achieve the goals of (i) compliance 

with the terms of the exemption, (ii) 

ensuring BlackRock’s decision-making 

with respect to Covered Transactions on 

behalf of Client Plans with MPSs or 

BlackRock Entities is done in the 

interests of the Client Plans and the 

respective participants and 


Emcdonald on DSK2BSOYB1PROD with NOTICES2
Federal Register / Vol. 76, No. 53 / Friday, March 18, 2011 / Notices 15085 

beneficiaries, and (iii) requiring to the 

extent possible, verification that the 

terms of any Covered Transaction are at 

least as favorable to Client Plans as the 

terms generally available in comparable 

arm’s length transactions with unrelated 

parties; 

(b) The EPPs and the other terms of 

the exemption were complied with, 

with any material exceptions duly 

noted; 

(c) The IM has made the 

determination referred to in Section 

II.E.9. and the results of that 

determination; 

(d) BlackRock has provided the ECO 

with adequate resources, including but 

not limited to adequate staffing of the 

ECO Function; and 

(e) The compensation package for the 

ECO for the prior year is reasonable; 

12. The annual compliance report of 

the IM, as described in Section II.E.11., 

shall contain a summary of Violations, 

any corrections of Violations required 

by the IM and/or the ECO at any time 

during the prior year. In addition, the 

IM further certifies that BlackRock 

correctly implemented the prescribed 

corrections, based in part on 

certification from the ECO; and 

13. The annual compliance report of 

the IM shall also be timely delivered by 

the IM to the chief executive officer, the 

general counsel and the members of the 

boards of directors of each of the 

BlackRock Managers identified to the 

IM by the ECO as having relied upon 

this exemption during the prior year 

and those that the ECO reasonably 

anticipates will be relying on this 

exemption during the current year. The 

copies of the compliance report 

described in this Section II.E.13. shall 

be accompanied by a cover letter from 

the IM calling the attention of the 

recipients to any violations, material 

exceptions to compliance with the EPPs, 

or other shortfalls in compliance with 

the exemption to assist such officers and 

directors in carrying out their respective 

responsibilities. 

F. Special Notice Provisions. A 

Special Notice containing (i) a notice of 

all of the conditions for relief under 

Sections III.C., E., F., G., Q., R., S. and 

V. and (ii) a copy of the Notice to 

Interested Parties must be provided to 

affected Client Plans in writing (which 

may be provided by U.S. mail or 

electronically, including by e-mail or 

use of a centralized electronic mailbox, 

so long as such electronic 

communication is reasonably calculated 

to result in the applicable Client Plan’s 

receipt) as soon as practical, but no later 

than fifteen (15) days, following the date 

that the Notice to Interested Persons is 

provided to Client Plans generally, 

through publication in the Federal 

Register. As soon as practical following 

the Special Notice, a Client Plan 

fiduciary independent of any BlackRock 

Entity must be provided any additional 

material information regarding Covered 

Transactions described in Sections 

III.C., E., F., G., Q., R., S. and V. by the 

applicable BlackRock Manager on 

reasonable request; provided, that, 

solely for purposes of this subsection, 

the fiduciary of an In-House Plan is not 

required to be independent of any 

BlackRock Entity. 

SECTION III: COVERED 

TRANSACTIONS 

A. Continuing Transactions. Relief 

under Section I of this exemption is 

available for Type B Covered 

Transactions and Type C Covered 

Transactions and the unwind, 

settlement or other termination thereof 

provided that: 

1. A list of all Type B Covered 

Transactions and all Type C Covered 

Transactions (the B and C List) as of the 

date of the Acquisition is prepared by 

BlackRock and provided to the ECO. 

2. Any discretionary act by a 

BlackRock Manager with respect to a 

transaction on the B and C List is 

approved in advance in writing by the 

ECO. Such approval is required for, but 

not limited to, sales and other transfers 

to a third party, redemptions, the 

exercise of options, and the declaration 

of default or other credit impairmentdriven decisions. The ECO must 

determine that the terms of such 

discretionary act are in the interests of 

the affected Client Plans. 

3. The ECO Function periodically 

monitors outstanding transactions on 

the B and C List to inquire if an 

affirmative discretionary act, such as a 

credit driven action, would be 

appropriate. If the ECO makes such a 

determination, the ECO must direct the 

action be taken and must approve the 

terms thereof as being in the interests of 

the affected Client Plans. 

4. The ECO Function sends to the IM 

an updated copy of the B and C List as 

of the end of each fiscal quarter 

summarizing the Type B Covered 

Transactions and Type C Covered 

Transactions remaining at the end of the 

quarter and any discretionary actions 

taken during the quarter by BlackRock 

Managers with respect to such 

transactions. 

5. Upon the determination by the IM 

that an action taken with respect to a 

Type B Covered Transactions or Type C 

Covered Transaction was inappropriate 

or that the compensation the Client 

Plans received was inadequate, or that 

an action should have been taken but 

was not, the Client Plans are made 

whole by BlackRock. 

B. Purchases and Holdings by 

BlackRock Managers of Fixed Income 

Obligations Issued by an MPS in an 

Underwriting on Behalf of Client Plans 

Invested in an Index Account or Fund, 

or in a Model-Driven Account or Fund. 

Relief under Section I of this exemption 

is available for a purchase and holding 

by BlackRock Managers of Fixed Income 

Obligations issued by an MPS in an 

underwriting on behalf of Client Plans 

for an Index Account or Fund, or a 

Model-Driven Account or Fund, 

provided that: 

1. Such purchase is for the sole 

purpose of maintaining quantitative 

conformity with the weight of such 

Securities prescribed by the relevant 

Index, for Index Accounts or Funds, or 

the weight of such Securities prescribed 

by the relevant Model, for Model-Driven 

Accounts or Funds; and such purchase 

may not exceed the purchase amount 

necessary for such Model or quantitative 

conformity; 

2. Such purchase is not made from 

any MPS; 

3. No BlackRock Entity is in the 

selling syndicate; 

4. After purchase, the responsible 

BlackRock Manager notifies the ECO if 

circumstances arise in which an action 

or inaction on the part of the BlackRock 

Manager regarding an MPS Fixed 

Income Obligation so acquired might be 

thought to be motivated by an interest 

which may affect the exercise of such 

BlackRock Manager’s best judgment as a 

fiduciary, and complies with decisions 

of the ECO regarding the taking, or the 

refraining from taking, of actions in 

such circumstances; and 

5. After purchase, any decision 

regarding conversion of an MPS Fixed 

Income Obligation into equity in the 

MPS is made by the IM. 

C. Purchase and Holding by 

BlackRock Managers of Fixed Income 

Obligations Issued by an MPS in an 

Underwriting on Behalf of Client Plans 

Invested in an Other Account or Fund. 

Relief under Section I of this exemption 

is available for a purchase and holding 

by BlackRock Managers of Fixed Income 

Obligations issued by an MPS in an 

underwriting on behalf of Client Plans 

invested in an Other Account or Fund 

provided that: 

1. The conditions of Section IV.A. of 

this exemption are satisfied, except that 

for purposes of Section IV.A.4.(a) and 

Section IV.A.5.(c), the MPS-issued 

Fixed Income Obligations at the time of 

purchase must be rated in one of the 

three highest rating categories by a 

Rating Organization and none of the 

Rating Organizations may rate the Fixed 


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Income Obligations lower than in the 

third highest rating category; 

2. Such purchase is not made from an 

MPS; 

3. No BlackRock Entity is in the 

selling syndicate; 

4. After purchase, the responsible 

BlackRock Manager notifies the ECO if 

circumstances arise in which an action 

or inaction on the part of the BlackRock 

Manager regarding an MPS Fixed 

Income Obligation so acquired might be 

thought to be motivated by an interest 

which may affect the exercise of such 

BlackRock Manager’s best judgment as a 

fiduciary, and complies with decisions 

of the ECO regarding the taking, or the 

refraining from taking, of actions in 

such circumstances; 

5. After purchase, any decision 

regarding conversion of an MPS Fixed 

Income Obligation into equity in the 

MPS is made by the IM; and 

6. Special Notice of all of the 

foregoing conditions for relief under this 

Section III.C. must be provided in 

accordance with the terms of Section 

II.F. 

D. Certain Transactions in the 

Secondary Market by BlackRock 

Managers of Fixed Income Obligations 

Including Fixed Income Obligations 

Issued by or Traded With an MPS. Relief 

under Section I of this exemption is 

available for a purchase or sale in the 

secondary market or the holding by 

BlackRock Managers on behalf of Client 

Plans of (i) Fixed Income Obligations 

issued by an MPS or (ii) Fixed Income 

Obligations issued by a third party but 

purchased or sold to an MPS, provided 

that: 

1. The Fixed Income Obligations are 

purchased from or sold to an MPS as a 

result of the Three Quote Process. 

2. With respect to Fixed Income 

Obligations that are issued by an MPS 

and are purchased and held by a 

BlackRock Manager for a Client Plan— 

(a) The purchase of the Fixed Income 

Obligation issued by an MPS is not 

made from the issuing MPS; 

(b) After purchase, the responsible 

BlackRock Manager notifies the ECO if 

circumstances arise in which an action 

or inaction on the part of the BlackRock 

Manager regarding an MPS Fixed 

Income Obligation so acquired might be 

thought to be motivated by an interest 

which may affect the exercise of such 

BlackRock Manager’s best judgment as a 

fiduciary, and complies with the 

decisions of the ECO regarding the 

taking, or the refraining from taking, of 

actions in such circumstances; 

(c) After purchase, any decision 

regarding conversion of an MPS Fixed 

Income Obligation into equity in the 

MPS is made by the IM; and 

(d) If purchased for an Index Account 

or Fund, or a Model-Driven Account or 

Fund, such purchase is for the sole 

purpose of maintaining quantitative 

conformity with the weight of such 

Securities prescribed by the relevant 

Index, for Index Accounts or Funds, or 

the weight of such Securities prescribed 

by the relevant Model, for Model-Driven 

Accounts or Funds and such purchase 

may not exceed the purchase amount 

necessary for such Model or quantitative 

conformity. 

3. With respect to Fixed Income 

Obligations (whether or not issued by an 

MPS) held by a BlackRock Manager for 

a Client Plan under which an MPS has 

an ongoing function, such as servicing 

of collateral for asset-backed debt, or the 

potential for liability, such as under 

representations or warranties made by 

an MPS with respect to collateral for 

such asset-backed debt which the MPS 

originated, the taking of or refraining 

from taking any action by the 

responsible BlackRock Manager which 

could have a material positive or 

negative effect upon the MPS is decided 

upon by the ECO. 

4. For purposes of this Section III.D., 

Asset-Backed Securities are not Fixed 

Income Obligations. 

E. Purchase in an Underwriting and 

Holding by BlackRock Managers of 

Fixed Income Obligations Issued by a 

Third Party when an MPS is 

Underwriter, in Either a Manager or a 

Member Capacity, or Debt Trustee. 

Relief under Section I of this exemption 

is available for the purchase and 

holding by BlackRock Managers of 

Fixed Income Obligations issued by 

third parties in an underwriting when 

an MPS is an underwriter, in either a 

manager or a member capacity, or debt 

trustee under the Fixed Income 

Obligation, provided that: 

1. The conditions of Section IV.A. are 

satisfied; 

2. Such purchase is not made from an 

MPS; 

3. No BlackRock Entity is in the 

selling syndicate; and 

4. With respect to Fixed Income 

Obligations under which an MPS has 

either an ongoing function, such as debt 

trustee, servicer of collateral for asset– 

backed debt, or the potential for 

liability, such as under representations 

or warranties made by an MPS with 

respect to collateral for such assetbacked debt which the MPS originated, 

the taking of or refraining from taking 

any action by the responsible BlackRock 

Manager which could have a material 

positive or negative effect upon the MPS 

is decided upon by the ECO. 

5. For purposes of this Section III.E., 

Asset-Backed Securities are not Fixed 

Income Obligations. 

6. Special Notice of all of the 

foregoing conditions for relief under this 

Section III.E. must be provided in 

accordance with the terms of Section 

II.F. 

F. Purchase in an Underwriting and 

Holding by BlackRock Managers of 

Asset-Backed Securities, When an MPS 

is an Underwriter, in the Capacity as 

Either a Manager or a Member of the 

Selling Syndicate, Trustee, or, in the 

Case of Asset-Backed Securities Which 

Are CMBS, Servicer. Relief under 

Section I of this exemption is available 

for the purchase and holding by 

BlackRock Managers of Asset-Backed 

Securities issued in an underwriting 

where an MPS is (i) an underwriter, in 

the capacity as either a manager or a 

member of the selling syndicate, (ii) 

trustee, or (iii), solely in the case of 

Asset-Backed Securities which are 

CMBS, servicer, when the MPS serves 

solely as servicer and not as an 

underwriter or trustee while being such 

servicer, of securitized obligations, 

provided that: 

1. The conditions of Section IV.A. are 

satisfied, except that (a) for purposes of 

Section IV.A.4.(a), the Asset-Backed 

Securities at the time of purchase must 

be rated in one of the three highest 

rating categories by a Rating 

Organization and none of the Rating 

Organizations may rate the AssetBacked Securities lower than the third 

highest rating category and (b) in the 

case of Asset-Backed Securities which 

are CMBS and for which the MPS is 

servicer, the conditions of Section IV.B. 

are satisfied instead of the conditions of 

Section IV.A.; 

2. Such purchase is not made from an 

MPS; 

3. No BlackRock Entity is in the 

selling syndicate; 

4. In the case of Asset-Backed 

Securities with respect to which an MPS 

has either an ongoing function, such as 

trustee, servicer of collateral for CMBS, 

or the potential for liability, such as 

under representations or warranties 

made by an MPS with respect to 

collateral for CMBS which collateral the 

MPS originated, the taking of or 

refraining from taking of any action by 

a responsible BlackRock Manager which 

could have a material positive or 

negative effect upon the MPS is decided 

upon by the ECO; 

5. The purchase meets the conditions 

of an applicable Underwriter 

Exemption; and 

6. Special Notice of all of the 

foregoing conditions for relief under this 

Section III.F. must be provided in 


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accordance with the terms of Section 

II.F. 

G. Purchase and Holding by 

BlackRock Managers of Equity 

Securities Issued by an Entity Which is 

not an MPS and is Not a BlackRock 

Entity, in an Underwriting when an MPS 

is an Underwriter, in Either a Manager 

or a Member Capacity. Relief under 

Section I of this exemption is available 

for the purchase and holding by 

BlackRock Managers of Equity 

Securities issued by an entity which is 

not an MPS and which is not a 

BlackRock Entity in an underwriting 

when an MPS is an underwriter, in 

either a manager or a member capacity, 

provided that: 

1. The conditions of Section IV.A. are 

satisfied; 

2. Such purchase is not made from an 

MPS; 

3. No BlackRock Entity is in the 

selling syndicate; 

4. The Securities are not Asset-Backed 

Securities; and 

5. Special Notice of all of the 

foregoing conditions for relief under this 

Section III.G. must be provided in 

accordance with the terms of Section 

II.F. 

H. Purchase and Sale by BlackRock 

Managers of Asset-Backed Securities in 

the Secondary Market, from or to an 

MPS, and/or when an MPS is Sponsor, 

Servicer, Originator, Swap 

Counterparty, Liquidity Provider, 

Trustee or Insurer, and the Holding 

Thereof. Relief under Section I of this 

exemption is available for a sale of 

Asset-Backed Securities by a BlackRock 

Manager to an MPS, or the purchase of 

Asset-Backed Securities by BlackRock 

Managers from an MPS and the holding 

thereof, and/or any such purchase or 

sale in the secondary market or holding 

when an MPS is a sponsor, a servicer, 

an originator, a swap counterparty, a 

liquidity provider, a trustee or an 

insurer, provided that: 

1. If the Asset-Backed Securities are 

purchased from or sold to an MPS, the 

purchase or sale is as a result of the 

Three Quote Process. 

2. Regardless of from whom the 

BlackRock Manager purchases the 

Asset-Backed Securities, the purchase 

and holding of the Asset-Backed 

Security otherwise meets the conditions 

of an applicable Underwriter 

Exemption. 

3. Regardless of from whom the 

BlackRock Manager purchased the 

Asset-Backed Securities, if an MPS is, 

with respect to such Asset-Backed 

Securities, a sponsor, servicer, 

originator, swap counterparty, liquidity 

provider, insurer or trustee, as those 

terms are utilized or defined in the 

Underwriter Exemptions, and 

circumstances arise in which the taking 

of or refraining from taking of any action 

by the responsible BlackRock Manager 

could have a material positive or 

negative effect upon the MPS, the taking 

of or refraining from taking of any such 

action is decided upon by the ECO. 

I. Repurchase Agreements when MPS 

is the Seller. Section I of this exemption 

applies to an investment by a BlackRock 

Manager of Client Plan assets which 

involves the purchase or other 

acquisition, holding, sale, exchange or 

redemption by or on behalf of a Client 

Plan of a repurchase agreement (or 

Securities or other instruments under 

cover of a repurchase agreement) in 

which the seller of the underlying 

Securities or other instruments is an 

MPS which is a bank supervised by the 

United States or a State, a broker-dealer 

registered under the 1934 Act, or a 

dealer who makes primary markets in 

Securities of the United States 

government or any agency thereof, or in 

banker’s acceptances, and reports daily 

to the Federal Reserve Bank of New 

York its positions with respect to these 

obligations, provided that each of the 

following conditions are satisfied: 

1. The repurchase agreement is 

embodied in, or is entered into pursuant 

to a written agreement. Such written 

agreement must be a standardized 

industry form; provided, that with the 

approval of the ECO on or about the 

date of the Acquisition, written 

agreements with an MPS that were in 

effect as of the date of the Acquisition 

may continue to be used until there is 

a material modification of the same, at 

which time standardized industry forms 

must be adopted; 

2. The repurchase agreement has a 

term of one year or less; 

3. The Client Plan receives interest no 

less than that which it would receive in 

a comparable arm’s length transaction 

with an unrelated party; 

4. The Client Plan receives Securities, 

banker’s acceptances, commercial paper 

or certificates of deposit having a market 

value equal to not less than one 

hundred percent (100%) of the purchase 

price paid by the Client Plan; 

5. Upon expiration of the repurchase 

agreement and return of the Securities 

or other instruments to the seller, the 

seller transfers to the Client Plan an 

amount equal to the purchase price plus 

the appropriate interest; 

6. Neither the MPS seller nor any 

MPS which is a member of the same 

MPS Group has 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 

such assets. This Section III.I.6. shall be 

deemed satisfied notwithstanding the 

investment of assets of an MPS Plan of 

the MPS which is the seller under such 

repurchase agreement in a Pooled Fund 

as of the date of the Acquisition, which 

Pooled Fund is a bank-maintained 

common or collective trust, provided 

that such assets, when aggregated with 

the assets of all other MPS Plans of the 

same MPS Group as that of the MPS 

seller and invested in such Pooled 

Fund, at all times since the date of the 

Acquisition, constitute or are deemed 

pursuant to Section II.A.3.(b) to 

constitute less than ten percent (10%) of 

the assets of such Pooled Fund; 

7. The Securities, banker’s 

acceptances, commercial paper or 

certificates of deposit received by the 

Client Plan: 

(a) Could be acquired directly by the 

Client Plan in a transaction not covered 

by this Section III.I. without violating 

ERISA sections 406(a)(1)(E), 406(a)(2) or 

407(a); and 

(b) If the Securities are subject to the 

provisions of the 1933 Act, they are 

obligations that are not ‘‘restricted 

securities’’ within the meaning of Rule 

144 under the 1933 Act; provided, that, 

such restricted securities are permitted 

until July 31, 2010. 

8. If the market value of the 

underlying Securities or other 

instruments falls below the purchase 

price at any time during the term of the 

agreement, the Client Plan may, under 

the written agreement required by 

Section III.I.1., require the MPS seller to 

deliver, by the close of business on the 

following business day (as such term is 

defined for purposes of the relevant 

written agreement), additional 

Securities or other instruments the 

market value of which, together with the 

market value of Securities or other 

instruments previously delivered or 

sold to the Client Plan under the 

repurchase agreement, equals at least 

one hundred percent (100%) of the 

purchase price paid by the Client Plan. 

9. If the MPS seller does not deliver 

additional Securities or other 

instruments as required above, the 

Client Plan may terminate the 

agreement, and, if upon termination or 

expiration of the agreement, the amount 

owing is not paid to the Client Plan, the 

Client Plan may sell the Securities or 

other instruments and apply the 

proceeds against the obligations of the 

MPS seller under the agreement, and 

against any expenses associated with 

the sale. 

10. The MPS seller agrees to furnish 

the Client Plan with the most recent 

available audited statement of its 


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financial condition as well as its most 

recent available unaudited statement, 

agrees to furnish additional audited and 

unaudited statements of its financial 

condition as they are issued and either: 

(a) Agrees that each repurchase 

agreement transaction pursuant to the 

agreement shall constitute a 

representation by the MPS seller that 

there has been no material adverse 

change in its financial condition since 

the date of the last statement furnished 

that has not been disclosed to the Client 

Plan with whom such written agreement 

is made; or (b) prior to each repurchase 

agreement transaction, the MPS seller 

represents that, as of the time the 

transaction is negotiated, there has been 

no material adverse change in its 

financial condition since the date of the 

last statement furnished that has not 

been disclosed to the Client Plan with 

whom such written agreement is made. 

11. In the event of termination and 

sale as described in Section III.I.9., the 

MPS seller pays to the Client Plan the 

amount of any remaining obligations 

and expenses not covered by the sale of 

the Securities or other instruments, plus 

interest at a reasonable rate. 

12. If an MPS seller involved in a 

repurchase agreement covered by this 

exemption fails to comply with any 

condition of this exemption in the 

course of engaging in the repurchase 

agreement, the BlackRock Manager who 

caused the plan to engage in such 

repurchase agreement shall not be 

deemed to have caused the plan to 

engage in a transaction prohibited by 

ERISA sections 406(a)(1)(A) through (D) 

or ERISA section 406(b), Code section 

4975, or FERSA section 8477(c) solely 

by reason of the MPS seller’s failure to 

comply with the conditions of the 

exemption. 

13. In the event of any dispute 

between a BlackRock Manager and an 

MPS seller involving a Covered 

Transaction under this Section III.I., the 

IM has the responsibility to decide 

whether, and if so how, BlackRock is to 

pursue relief on behalf of the Client 

Plan(s) against the MPS Seller. 

14. At time of entry into or renewal 

of each Covered Transaction under this 

Section III.I., including both term 

repurchase transactions and daily 

renewals for ‘‘open’’ or ‘‘overnight’’ 

transactions, either (a) each Covered 

Transaction under this Section III.I., is 

as a result of the Three Quote Process, 

or, (b) the BlackRock Manager 

determines that the yield on the 

proposed transaction, or the renewal 

thereof, is at least as favorable to the 

Client Plans as the yield of the Client 

Plan on two (2) other available 

transactions which are comparable in 

terms of size, collateral type, credit 

quality of the counterparty, term and 

rate. The methodology employed for 

purposes of the comparison in (b) above 

must (c) be approved in advance by the 

ECO Function and (d), to the extent 

possible, refer to objective external data 

points, such as the Eurodollar overnight 

time deposit bid rate, the rate for 

repurchase agreements with U.S. 

government Securities, or rates for 

commercial paper issuances or agency 

discount note issuances sourced from 

Bloomberg, or another third party 

pricing service or market data provider 

(which providers may use different 

terminology to refer to these same 

external data points). The applicable 

BlackRock Manager must record a 

description of the comparable 

transactions, if reliance is placed upon 

same, and such data must be 

periodically reviewed by the ECO 

Function. The procedures described in 

this Section III.I.14. must be designed to 

ensure that BlackRock Managers 

determine to only enter into Covered 

Transactions with MPS sellers which 

are in the interests of Plan Clients, and 

such procedures must be reviewed and 

may be commented on by the IM. 

J. Responding to Tender Offers and 

Exchange Offers Solicited by an MPS. 

Relief under Section I of this exemption 

is available for participation by 

BlackRock Managers on behalf of Client 

Plans in tender offers or exchange offers 

or similar transactions where an MPS 

acts as agent for the entity (which entity 

may not be an MPS) making the offer, 

provided that: 

1. The Client Plan pays no fees to the 

MPS in connection with this Covered 

Transaction; 

2. The BlackRock Manager submits to 

the ECO in advance of participation a 

written explanation of the reasons for 

such participation; and 

3. The ECO Function determines that 

the reasons for participation by the 

BlackRock Manager in the Covered 

Transaction are appropriate from the 

vantage point of the Client Plans. 

Effective as of October 1, 2010, the ECO 

Function must affirmatively make this 

determination in writing prior to the 

BlackRock Manager participating in the 

Covered Transactions under this Section 

III.J. 

K. Purchase in Underwritings of 

Securities Issued by an Entity Which is 

not an MPS when the Proceeds are Used 

to Repay a Debt to an MPS. Relief under 

Section I of this exemption is available 

for the purchase by BlackRock Managers 

of Securities in underwritings issued by 

an entity which is not an MPS, but 

where the proceeds of the offering are 

used to repay a debt owed to an MPS, 

and the payment of such proceeds to the 

MPS, provided that the BlackRock 

Manager does not know that the 

proceeds will be applied to the 

repayment of debt owed to an MPS. If 

the BlackRock Manager does know that 

proceeds of the offering will be applied 

to the repayment of debt owed to an 

MPS, the purchase of the Securities and 

the payment of the proceeds to the MPS 

are exempt under Section I of this 

exemption provided that no more than 

twenty percent (20%) of the offering is 

purchased by BlackRock Managers for 

Client Plans, and no more than fifty 

percent (50%) of the offering in the 

aggregate is purchased by BlackRock, 

BlackRock Managers and other 

BlackRock Entities for Client Plans, 

other clients of BlackRock Managers, or 

as proprietary investments. 

L. Bank Deposits and Commercial 

Paper. Relief under Section I of this 

exemption is available for an investment 

by a BlackRock Manager of Client Plan 

assets which involves the purchase or 

other acquisition, holding, sale, 

exchange or redemption by or on behalf 

of a Client Plan of certificates of deposit, 

time deposits or other bank deposits at 

an MPS, or in commercial paper issued 

by an MPS, provided that: 

1. With respect to bank deposits, 

either: 

(a)(i) The bank is supervised by the 

United States or a State, and at the 

outset of the Covered Transaction or 

renewal thereof of, such bank has a 

credit rating in one of the top two (2) 

categories by at least one of the Rating 

Organizations; (ii) neither the bank nor 

an affiliate of the bank has discretionary 

authority or control with respect to the 

investment of Client Plan assets 

involved in the Covered Transaction or 

renders investment advice (within the 

meaning of 29 CFR § 2510.3–21(c)) with 

respect to those assets; and (iii) such 

deposit bears a reasonable interest rate, 

or— 

(b) The BlackRock Manager and the 

MPS comply with ERISA section 

408(b)(4). 

2. With respect to commercial paper: 

(a) The Client Plan is not an MPS Plan 

of the MPS issuing the commercial 

paper; 

(b) The commercial paper has a stated 

maturity date of nine (9) months or less 

from the date of issue, exclusive of days 

of grace, or is a renewal of an issue of 

commercial paper the maturity of which 

is likewise limited; 

(c) Neither the MPS issuer of the 

commercial paper, any MPS guarantor 

of the commercial paper, nor any 

member of the same MPS Group as such 

MPS issuer or guarantor has 

discretionary authority or control with 


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respect to the investment of the Client 

Plan assets involved in the Covered 

Transaction or renders investment 

advice (within the meaning of 29 CFR 

§ 2510.3–21(c)) with respect to those 

assets; and 

(d) At the time it is acquired, the 

commercial paper is ranked in one of 

the two (2) highest rating categories by 

at least one of the Rating Organizations. 

3. For purposes of the Covered 

Transactions set forth in this Section 

III.L.: 

(a) No BlackRock Entity shall be 

regarded as an affiliate of an MPS bank 

at which a deposit is made of Client 

Plan assets, nor of an MPS issuer of 

commercial paper in which a BlackRock 

Manager invests Client Plan assets, and 

(b) Section III.L.1.(a)(ii) and Sections 

III.L.2.(a) and (c) shall be deemed 

satisfied notwithstanding the 

investment of assets of an MPS Plan of 

the MPS which is the depository bank 

or issuer of commercial paper in a 

Pooled Fund as of the date of the 

Acquisition, which Pooled Fund is a 

bank-maintained common or collective 

trust, provided that such assets when 

aggregated with the assets of all other 

MPS Plans of the same MPS Group as 

the issuer of such asset and invested in 

such Pooled Fund, at all times since the 

date of the Acquisition, constitute or are 

deemed pursuant to Section II.A.3.(b) to 

constitute less than ten percent (10%) of 

such Pooled Fund. 

M. Securities Lending to an MPS. 

1. Relief under Section I of this 

exemption is available for: 

(a) The lending of Securities by a 

BlackRock Manager that are assets of a 

Client Plan to an MPS which is a U.S. 

Broker-Dealer or a U.S. Bank provided 

that the conditions set forth in Section 

III.M.2. are met; 

(b) The lending of Securities by a 

BlackRock Manager that are assets of a 

Client Plan to an MPS which is a 

Foreign Broker-Dealer or Foreign Bank; 

provided that, the conditions set forth in 

Section III.M.2. and Section III.M.3. 

below are met; and 

(c) The payment to a BlackRock 

Manager of compensation for services 

rendered in connection with loans of 

Client Plan assets that are Securities to 

an MPS; provided that, the conditions 

set forth in Section III.M.4. below are 

met. 

2. General Conditions for 

Transactions Described in Sections 

III.M.1.(a) and (b). 

(a) The length of a Securities loan to 

an MPS does not exceed one year in 

term. 

(b) Neither the MPS borrower nor any 

MPS which is a member of the same 

MPS Group as the MPS borrower 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. This Section III.M.2.(b) shall be 

deemed satisfied notwithstanding the 

investment of the assets of an MPS Plan 

of the MPS which is the borrower under 

such Securities lending transaction in a 

Pooled Fund as of the date of the 

Acquisition, which Pooled Fund is a 

bank-maintained common or collective 

trust, provided that such assets when 

aggregated with the assets of all other 

MPS Plans of the same MPS Group as 

that of the MPS borrower and invested 

in such Pooled Fund, at all times since 

the date of the Acquisition, constitute or 

are deemed pursuant to Section 

II.A.3.(b) to constitute less than ten 

percent (10%) of the assets of such 

Pooled Fund. 

(c) The Client Plan receives from the 

MPS borrower by the close of the 

BlackRock Manager’s business on the 

day in which the Securities lent are 

delivered to the MPS, 

(i) U.S. Collateral having, as of the 

close of business on the preceding 

business day, a market value, or, in the 

case of bank letters of credit, a stated 

amount, equal to not less than one 

hundred percent (100%) of the then 

market value of the Securities lent; or 

(ii) Foreign Collateral having as of the 

close of business on the preceding 

business day, a market value, or, in the 

case of bank letters of credit, a stated 

amount, equal to not less than: 

(x) One hundred two percent (102%) 

of the then market value of the 

Securities lent as valued on a 

Recognized Securities Exchange or an 

Automated Trading System on which 

the Securities are primarily traded if the 

collateral posted is denominated in the 

same currency as the Securities lent, or 

(y) One hundred five percent (105%) 

of the then market value of the 

Securities lent as valued on a 

Recognized Securities Exchange or an 

Automated Trading System on which 

the Securities are primarily traded if the 

collateral posted is denominated in a 

different currency than the Securities 

lent. 

(d) Notwithstanding the foregoing, if 

the BlackRock Manager is a U.S. Bank 

or U.S. Broker-Dealer, and such 

BlackRock Manager indemnifies the 

Client Plan with respect to the 

difference, if any, between the 

replacement cost of the borrowed 

Securities and the market value of the 

collateral on the date of a borrower 

default, the Client Plan receives from 

the MPS borrower by the close of the 

BlackRock Manager’s business on the 

day in which the Securities lent are 

delivered to the borrower, Foreign 

Collateral having as of the close of 

business on the preceding business day, 

a market value, or, in the case of bank 

letters of credit, a stated amount, equal 

to not less than: 

(i) One hundred percent (100%) of the 

then market value of the Securities lent 

as valued on a Recognized Securities 

Exchange or an Automated Trading 

System on which the Securities are 

primarily traded if the collateral posted 

is denominated in the same currency as 

the Securities lent; or 

(ii) One hundred one percent (101%) 

of the then market value of the 

Securities lent as valued on a 

Recognized Securities Exchange or an 

Automated Trading System on which 

the Securities are primarily traded if the 

collateral posted is denominated in a 

different currency than the Securities 

lent and such currency is denominated 

in Euros, British pounds, Japanese yen, 

Swiss francs or Canadian dollars; or 

(iii) One hundred five percent (105%) 

of the then market value of the 

Securities lent as valued on a 

Recognized Securities Exchange or an 

Automated Trading System if the 

collateral posted is denominated in a 

different currency than the Securities 

lent and such currency is other than 

those specified above. 

(e)(i) If the MPS borrower is a U.S. 

Bank or U.S. Broker-Dealer, the Client 

Plan receives such U.S. Collateral or 

Foreign Collateral from the MPS 

borrower by the close of the BlackRock 

Manager’s business on the day in which 

the Securities are delivered to the MPS 

borrower. Such collateral is received by 

the Client Plan either by physical 

delivery, wire transfer or by book entry 

in a Securities depository located in the 

United States, or, 

(ii) If the MPS borrower is a Foreign 

Bank or Foreign Broker-Dealer, the 

Client Plan receives U.S. Collateral or 

Foreign Collateral from the MPS 

borrower by the close of the BlackRock 

Manager’s business on the day in which 

the Securities are delivered to the 

borrower. Such collateral is received by 

the Client Plan either by physical 

delivery, wire transfer or by book entry 

in a Securities depository located in the 

United States or held on behalf of the 

Client Plan at an Eligible Securities 

Depository. The indicia of ownership of 

such collateral shall be maintained in 

accordance with section 404(b) of 

ERISA and 29 CFR 2550.404b–1. 

(f) Prior to making of any such loan, 

the MPS borrower shall have furnished 

the BlackRock Manager with: 


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(i) The most recent available audited 

statement of the MPS borrower’s 

financial condition, as audited by a 

United States certified public 

accounting firm or in the case of an MPS 

borrower that is a Foreign Broker-Dealer 

or Foreign Bank, a firm which is eligible 

or authorized to issue audited financial 

statements in conformity with 

accounting principles generally 

accepted in the primary jurisdiction that 

governs the borrowing MPS Foreign 

Broker-Dealer or Foreign Bank; 

(ii) The most recent available 

unaudited statement of its financial 

condition (if the unaudited statement is 

more recent than such audited financial 

statement); and 

(iii) A representation that, at the time 

the loan is negotiated, there has been no 

material adverse change in its financial 

condition since the date of the most 

recent financial statement furnished to 

the BlackRock Manager that has not 

been disclosed to the BlackRock 

Manager. Such representations may be 

made by the MPS borrower’s agreement 

that each loan shall constitute a 

representation by the MPS borrower that 

there has been no such material adverse 

change. 

(g) The loan is made pursuant to a 

written loan agreement, the terms of 

which are at least as favorable to the 

Client Plan as an arm’s-length 

transaction with an unrelated party 

would be. Such loan agreement states 

that the Client Plan has a continuing 

security interest in, title to, or the rights 

of secured creditor with respect to the 

collateral. Such agreement may be in the 

form of a master agreement covering a 

series of Securities lending transactions. 

(h) The written loan agreement must 

be a standardized industry form; 

provided, that, with the approval of the 

ECO on or about the date of the 

Acquisition, written loan agreements 

with an MPS borrower that were in 

effect as of the date of the Acquisition 

may continue to be used until there is 

a material modification of the same, at 

which time standardized industry forms 

must be adopted. 

(i) In return for lending Securities, the 

Client Plan: 

(i) Receives a reasonable fee (in 

connection with the Securities lending 

transaction), and/or 

(ii) Has the opportunity to derive 

compensation through the investment of 

the currency collateral. Where the Client 

Plan has that opportunity, the Client 

Plan may pay a loan rebate or similar fee 

to the MPS borrower, if such fee is not 

greater than the Client Plan would pay 

in a comparable transaction with an 

unrelated party. 

(j) All fees and other consideration 

received by the Client Plan in 

connection with the loan of Securities 

are reasonable. The identity of the 

currency in which the payment of fees 

and rebates will be made is set forth 

either in the written loan agreement or 

the loan confirmation as agreed to by 

the MPS borrower and the BlackRock 

Manager prior to the making of the loan. 

(i) Pricing of a loan to an MPS 

borrower is based on (i) rates for 

comparable loans of the same Security 

to non-MPS borrowers and (ii) thirdparty market data: 

(x) For loans of liquid Securities 

(sometimes referred to as general 

collateral loans), an automatic system 

may be used to price loans so long as 

the resulting rate the Client Plan 

receives from the MPS borrower is at 

least as favorable to the Client Plan as 

the rate the BlackRock Managers are 

receiving for Client Plans or other 

clients from non-MPS borrowers of the 

same Security; 

(y) For purposes of pricing loans of 

less liquid Securities (sometimes 

referred to as ‘‘special loans’’), and for 

purposes of determining whether to 

terminate or continue a loan which does 

not have a set term, pricing may also be 

based on a BlackRock trader 

determination that continuing the loan 

is in the interest of the Client Plan based 

on all relevant factors, including price 

(provided that price is within the range 

of prices of other loans of the same 

Security to comparable non-MPS 

borrowers by BlackRock Managers for 

Client Plans or other clients) and 

potential adverse consequences to the 

Client Plan of terminating the loan, 

provided that the pricing data used in 

making these decisions is retained and 

made available for possible review by 

the ECO. 

(ii) Automatic pricing mechanisms 

and pricing decisions by traders are 

subject to ongoing periodic review by 

the ECO Function, and the results of 

such review are included in reports by 

the ECO to the IM. Specifically, the 

quarterly reports by the ECO to the IM 

must address the lending patterns of: 

(x) Illiquid Securities to the MPS 

borrowers from all Client Plans, 

including the percentage that loans of 

such Securities to the MPSs represent of 

all loans of such Securities from all 

Client Plans; and 

(y) Illiquid Securities to the MPS 

borrowers from all Other Accounts or 

Funds, including the percentage that 

loans of such Securities to the MPSs 

represent of all loans of such Securities 

from all Other Accounts or Funds. 

(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, dividends, interest 

payments, shares of stock as a result of 

stock splits and rights to purchase 

additional Securities; 

(l) If the market value of the collateral 

at the close of trading on a business day 

is less than the applicable percentage of 

the market value of the borrowed 

Securities at the close of trading on that 

day (as described in this Section 

III.M.2.(c) of this exemption), then the 

MPS borrower shall deliver, by the close 

of business on the following business 

day, an additional amount of U.S. 

Collateral or Foreign Collateral the 

market value of which, together with the 

market value of all previously delivered 

collateral, equals at least the applicable 

percentage of the market value of all the 

borrowed Securities as of such 

preceding day. 

Notwithstanding the foregoing, part of 

the U.S. Collateral or Foreign Collateral 

may be returned to the MPS borrower if 

the market value of the collateral 

exceeds the applicable percentage 

(described in this Section III.M.2.(c) of 

this exemption) of the market value of 

the borrowed Securities, as long as the 

market value of the remaining U.S. 

Collateral or Foreign Collateral equals at 

least the applicable percentage of the 

market value of the borrowed Securities. 

(m) The loan may be terminated by 

the Client Plan at any time, whereupon 

the MPS borrower shall deliver 

certificates for Securities identical to the 

borrowed Securities (or the equivalent 

thereof in the event of reorganization, 

recapitalization or merger of the issuer 

of the borrowed Securities) to the Client 

Plan within the lesser of: 

(i) The customary delivery period for 

such Securities, 

(ii) Five business days, or 

(iii) The time negotiated for such 

delivery by the BlackRock Manager for 

the Client Plan, and the borrower. 

(n) In the event that the loan is 

terminated, and the MPS borrower fails 

to return the borrowed Securities or the 

equivalent thereof within the applicable 

time described in Section III.M.2(m), the 

BlackRock Manager for the Client Plan 

may, under the terms of the loan 

agreement: 

(i) Purchase Securities identical to the 

borrowed Securities (or their equivalent 

as described above) and may apply the 

collateral to the payment of the 

purchase price, any other obligations of 

the borrower under the agreement, and 

any expenses associated with the sale 

and/or purchase, and 

(ii) The MPS borrower is obligated, 

under the terms of the loan agreement, 

to pay, and does pay to the Client Plan 


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the amount of any remaining obligations 

and expenses not covered by the 

collateral, including reasonable 

attorney’s fees incurred by the Client 

Plan for legal action arising out of 

default on the loans, plus interest at a 

reasonable rate. 

Notwithstanding the foregoing, the 

MPS borrower may, in the event the 

MPS borrower fails to return borrowed 

Securities as described above, replace 

collateral, other than U.S. currency, 

with an amount of U.S. currency that is 

not less than the then current market 

value of the collateral, provided such 

replacement is approved by the 

BlackRock Manager. 

(o) If the MPS borrower fails to 

comply with any provision of a loan 

agreement which requires compliance 

with this exemption, the BlackRock 

Manager who caused the Client Plan to 

engage in such transaction shall not be 

deemed to have caused the Client Plan 

to engage in a transaction prohibited by 

ERISA sections 406(a)(1)(A) through (D) 

or ERISA section 406(b) or FERSA 

section 8477(c) solely by reason of the 

borrower’s failure to comply with the 

conditions of the exemption. 

(p) If the Securities being loaned to an 

MPS borrower are managed in an Index 

Account or Fund, or a Model-Driven 

Account or Fund where the Index or the 

Model are created or maintained by the 

MPS borrower, the ECO Function 

periodically performs a review, no less 

than quarterly, of the use of such MPSsponsored Index or Model, and the 

Securities loaned from such an account 

or fund to the MPS, which review is 

designed to enable a reasonable 

judgment as to whether the use of such 

Index or Model, or any changes thereto, 

were for the purpose of benefitting 

BlackRock or the MPS through the 

Securities lending activity described in 

this Section III.M. If the ECO forms a 

reasonable judgment that the use of 

such Index or Model, or any changes 

thereto, were for the purpose of 

benefitting BlackRock or the MPS, the 

ECO shall promptly inform the IM. 

(q) In the event of any dispute 

between the BlackRock Manager on 

behalf of a Client Plan and an MPS 

borrower involving a Covered 

Transaction under this Section III.M., 

the IM shall decide whether, and if so, 

how the BlackRock Manager is to 

pursue relief on behalf of the Client 

Plan(s) against the MPS borrower. 

(r) If the Securities being loaned to an 

MPS borrower are managed in an Other 

Account or Fund, the employees of the 

BlackRock Manager who exercise 

discretionary authority or control over 

the Other Account or Fund shall not 

have access to the information regarding 

whether the particular Securities are on 

loan to an MPS, with such access 

limitations imposed on or about 

September 30, 2010 and implemented 

through the EPPs on or about September 

30, 2010. 

3. Specific Conditions for 

Transactions Described in Section 

III.M.1.(b). 

(a) The BlackRock Manager maintains 

the written documentation for the loan 

agreement at a site within the 

jurisdiction of the courts of the United 

States. 

(b) Prior to entering into a transaction 

involving an MPS Foreign Broker-Dealer 

or an MPS Foreign Bank either: 

(i) The MPS Foreign Broker-Dealer or 

Foreign Bank agrees to submit to the 

jurisdiction of the United States; agrees 

to appoint an agent for service of 

process in the United States, which may 

be an affiliate; consents to service of 

process on such agent; and agrees that 

any enforcement by a Client Plan of its 

rights under the Securities lending 

agreement will, as the option of the 

Client Plan, occur exclusively in the 

United States courts; or 

(ii) The BlackRock Manager, if a U.S. 

Bank or U.S. Broker-Dealer, agrees to 

indemnify the Client Plan with respect 

to the difference, if any, between the 

replacement cost of the borrowed 

Securities and the market value of the 

collateral on the date of an MPS 

borrower default plus interest and any 

transaction costs incurred (including 

attorney’s fees of such Client Plan 

arising out of the default on the loans or 

the failure to indemnify properly under 

this provision) which the Client Plan 

may incur or suffer directly arising out 

of a borrower default by the MPS 

Foreign Broker-Dealer or Foreign Bank. 

(c) In the case of a Securities lending 

transaction involving an MPS Foreign 

Broker-Dealer or an MPS Foreign Bank, 

the BlackRock Manager must be a U.S. 

Bank or U.S. Broker-Dealer, and prior to 

entering into the loan transaction, such 

BlackRock Manager must agree to 

indemnity the Client Plan with respect 

to the difference, if any, between the 

replacement cost of the borrowed 

Securities and the market value of the 

collateral on the date of an MPS 

borrower default plus interest and any 

transaction costs incurred (including 

attorney’s fees of such plan arising out 

of the default on the loans or the failure 

to indemnify properly under this 

provision) which the Client Plan may 

incur or suffer directly arising out of a 

borrower default by the MPS Foreign 

Broker-Dealer or Foreign Bank. 

4. Specific Conditions for 

Transactions Described in Section 

III.M.1.(c): 

(a) The loan of Securities is not 

prohibited by section 406(a) of ERISA or 

otherwise satisfies the conditions of this 

exemption. 

(b) The BlackRock Manager is 

authorized to engage in Securities 

lending transactions on behalf of the 

Client Plan. 

(c) The compensation, the terms of 

which are at least as favorable to the 

Client Plan as an arm’s length 

transaction with an unrelated party, is 

reasonable and is paid in accordance 

with the terms of a written instrument, 

which may be in the form of a master 

agreement covering a series of Securities 

lending transactions. 

(d) Except as otherwise provided in 

Section III.M.4.(f), the arrangement 

under which the compensation is paid: 

(i) Is subject to the prior written 

authorization of a fiduciary of a Client 

Plan (the authorizing fiduciary), who is 

(other than in the case of an In-House 

Plan) independent of the BlackRock 

Manager, provided that for purposes of 

this Section III.M.4.(d) a fiduciary of an 

MPS Plan acting as the authorizing 

fiduciary shall be deemed independent 

of the BlackRock Manager so long as 

such fiduciary, as of the date of the 

authorization, is not a BlackRock Entity, 

and 

(ii) May be terminated by the 

authorizing fiduciary within: 

(x) The time negotiated for such 

notice of termination by the Client Plan 

and the BlackRock Manager, or 

(y) Five business days, whichever is 

less, in either case without penalty to 

the Client Plan. 

(e) No such authorization is made or 

renewed unless the BlackRock Manager 

shall have furnished the authorizing 

fiduciary with any reasonably available 

information which the BlackRock 

Manager reasonably believes to be 

necessary to determine whether such 

authorization should be made or 

renewed, and any other reasonably 

available information regarding the 

matter that the authorizing fiduciary 

may reasonably request. 

(f) Special Rule for Commingled 

Investment Funds. In the case of a 

pooled separate account maintained by 

an insurance company qualified to do 

business in a State or a common or 

collective trust fund maintained by a 

bank or trust company supervised by a 

State or Federal agency, the 

requirements of Section III.M.4.(d) of 

this exemption shall not apply, 

provided that: 

(i) The information described in 

Section III.M.4.(e) (including 

information with respect to any material 

change in the arrangement) shall be 

furnished by the BlackRock Manager to 


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58 51 FR 41686 (Nov. 18, 1986), as amended, 67 

FR 64137 (Oct. 17, 2002). 

the authorizing fiduciary described in 

Section III.M.4.(d) with respect to each 

Client Plan whose assets are invested in 

the account or fund, not less than 30 

days prior to implementation of the 

arrangement or material change thereto, 

and, where requested, upon the 

reasonable request of the authorizing 

fiduciary; 

(ii) In the event any such authorizing 

fiduciary submits a notice in writing to 

the BlackRock Manager objecting to the 

implementation of, material change in, 

or continuation of the arrangement, the 

Client Plan on whose behalf the 

objection was tendered is given the 

opportunity to terminate its investment 

in the account or fund, without penalty 

to the Client Plan, within such time as 

may be necessary to effect such 

withdrawal in an orderly manner that is 

equitable to all withdrawing plans and 

to the non-withdrawing plans. In the 

case of a Client Plan that elects to 

withdraw pursuant to the foregoing, 

such withdrawal shall be effected prior 

to the implementation of, or material 

change in, the arrangement; but an 

existing arrangement need not be 

discontinued by reason of a Client Plan 

electing to withdraw; and 

(iii) In the case of a Client Plan whose 

assets are proposed to be invested in the 

account or fund subsequent to the 

implementation of the compensation 

arrangement and which has not 

authorized the arrangement in the 

manner described in Sections 

III.M.4.(f)(i) and (ii), the Client Plan’s 

investment in the account or fund shall 

be authorized in the manner described 

in Section III.M.4.(d)(i). 

N. To-Be-Announced Trades (TBAs) 

of GNMA, FHLMC or FNMA MortgageBacked Securities with an MPS 

Counterparty. Relief under Section I of 

this exemption is available for trades 

(purchases and sales) on a principal 

basis of mortgage-backed Securities 

issued by FHLMC, FNMA or guaranteed 

by GNMA and meeting the definition of 

‘‘guaranteed governmental mortgage 

pool certificate’’ in 29 CFR 2510.3–101(i) 

with an MPS on a TBA basis, including, 

when applicable, delivery of the 

underlying Securities to a Client Plan, 

provided that: 

1. The Covered Transactions under 

this Section III.N. are a result of the 

Three Quote Process; provided that, 

solely for purposes of this Section 

III.N.1., firm quotes under the Three 

Quote Process may also include firm 

quotes obtained on comparable 

Securities, as described below, when 

firm quotes with respect to the 

applicable TBA transactions are not 

reasonably attainable. 

2. With regard to purchases of FHLMC 

and FNMA mortgage-backed Securities 

on a TBA basis, (i) the BlackRock 

Manager makes a determination that 

such Securities are of substantially 

similar credit quality as GNMA 

guaranteed governmental mortgage pool 

certificates, (ii) the ECO (in regular 

consultation with and under the 

supervision of the IM) monitors the 

credit spread between GNMA and 

FHLMC/FNMA mortgage-backed 

Securities, and (iii) each of the ECO and 

the IM (independently) has the 

authority and responsibility to 

determine whether purchases of FHLMC 

and/or FNMA mortgage-backed 

Securities on a TBA basis should not be 

permitted due to such credit spread, and 

such authority and responsibility is 

reflected in the EPPs. 

3. With regard to possible delivery of 

underlying Securities to Client Plans, as 

opposed to cash settlement, the ECO 

Function approves any such delivery in 

advance. 

For purposes of Section III.N.1., 

‘‘comparable Securities’’ are Securities 

that: (a) Are issued and/or guaranteed 

by the same agency, (b) have the same 

coupon, (c) have a principal amount at 

least equal to but no more than two 

percent (2%) greater than the Security 

purchased or sold, (d) are of the same 

program or class, and (e) either (i) have 

an aggregate weighted average monthly 

maturity within a 12-month variance of 

the Security purchased or sold, but in 

no case can the variance be more than 

ten percent (10%) of such aggregate 

weighted average maturity of the 

Securities purchased or sold, or (ii) meet 

some other comparable objective 

standard containing a range of variance 

that is no greater than that described in 

(i) above and that assures that the aging 

of the Securities is properly taken into 

account. 

O. Foreign Exchange Transactions 

With an MPS Counterparty. Relief under 

Section I of this exemption is available 

for a Foreign Exchange Transaction by 

a BlackRock Manager on behalf of Client 

Plans with an MPS as counterparty 

provided that: 

1. (a) The Foreign Exchange 

Transaction is as a result of the Three 

Quote Process; or (b) the total net 

amount of the Foreign Exchange 

Transaction on behalf of Client Plans by 

BlackRock Managers is greater than $1 

million and the exchange rate is within 

0.5% above or below the Interbank Rate 

as represented to the BlackRock 

Managers by the MPS; 

2. Foreign Exchange Transactions 

with an MPS counterparty only involve 

currencies of countries that are 

classified as ‘‘developed’’ or ‘‘emerging’’ 

markets by a third party Index provider 

that divides national economies into 

‘‘developed,’’ ‘‘emerging’’ and ‘‘frontier’’ 

markets. The Index provider shall be 

selected by BlackRock, provided, 

however, the IM shall have the right to 

reject the Index provider in its sole 

discretion at any time; and 

3. Each Foreign Exchange Transaction 

complying with Section III.O.1.(b) must 

be set forth in the applicable quarterly 

reports of the ECO to the IM. 

P. Agency Execution of Equity and 

Fixed Income Securities Trades and 

Related Clearing as Described in PTE 

86–128, Including Agency Cross Trades, 

When the Broker is an MPS. Relief 

under Section I of this exemption is 

available for transactions in Securities 

described in Section II of PTE 86–128, 

as from time to time amended,58 as if 

BlackRock Managers and MPS brokerdealers were ‘‘affiliates’’ as defined in 

Section I.(b) of PTE 86–128, provided 

the following conditions are satisfied: 

1. The MPS is selected to perform 

Securities brokerage services for Client 

Plans pursuant to the normal brokerage 

placement practices, policies and 

procedures of the BlackRock Manager 

designed to ensure best execution. 

2. The conditions of PTE 86–128 set 

forth in the following sections of that 

exemption must be complied with: 

Section III(e); Section III(f); Section 

III(g)(2); and Section III(h); provided, 

however, that the first sentence of 

section III(h) of PTE 86–128 is amended 

for purposes of this Section III.P.2. to 

provide as follows: ‘‘A trustee [other 

than a nondiscretionary trustee] may 

only engage in a covered transaction 

with a plan that has total net assets with 

a value of at least $50 million and in the 

case of a pooled fund, the $50 million 

requirement will be met if fifty percent 

(50%) or more of the units of beneficial 

interest in such pooled fund are held by 

investors having total net assets with a 

value of at least $50 million.’’ 

3. The ECO Function receives the 

information required to be provided to 

the ‘‘authorizing fiduciary’’ under 

Section III(e), Section III(f) and Section 

III(g)(2) of PTE 86–128, and the ECO has 

the authority to terminate the use of the 

MPS as broker-dealer without penalty to 

Client Plans at any time. 

4. With respect to agency cross 

transactions described in Section III(g) 

of PTE 86–128 that are being effected or 

executed by an MPS broker, (i) neither 

the MPS broker effecting or executing 

the agency cross transaction nor any 

member of the same MPS Group as the 

MPS broker effecting or executing the 


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agency cross transaction may have 

discretionary authority to act on behalf 

of, and/or provide investment advice to 

another party to the agency cross 

transaction which is a seller when the 

Client Plan is a buyer, or which is a 

buyer, when the Client Plan is a seller 

(Another Party), and (ii), the BlackRock 

Manager instituting the transaction for 

the Client Plan must not have 

knowledge that a BlackRock Entity has 

discretionary authority and/or provides 

investment advice to Another Party to 

the agency cross transaction. 

5. The exceptions in Sections IV(a), 

(b), and (c) of PTE 86–128 are applicable 

to this exemption. 

6. Notwithstanding the other 

conditions of this Section III.P., with 

respect to Client Plans which as of the 

date of the Acquisition had in place 

with BlackRock Managers either 

directed brokerage and/or wrap fee 

arrangements which required the 

BlackRock Managers to use an MPS as 

a Securities broker, BlackRock Managers 

may continue to use that MPS as the 

Securities broker for such Client Plans 

under the brokerage procedures in place 

as of the date of the Acquisition; 

provided that a list of all of such 

arrangements has been provided to the 

ECO and no material changes are made 

to such arrangements. 

Q. Use by BlackRock Managers of 

Exchanges and Automated Trading 

Systems on Behalf of Client Plans. Relief 

under Section I of this exemption is 

available for the direct or indirect use 

by, or directing of trades to, U.S. and 

non-U.S. exchanges or U.S. Automated 

Trading Systems (ATS) in which one or 

more MPSs have an ownership interest 

by BlackRock Managers for Client Plans, 

provided that: 

1. Prior to January 1, 2011, 

(a) No single MPS (together with other 

members of the same MPS Group) has 

a greater than twenty percent (20%) 

ownership interest in the exchange or 

the ATS; and 

(b) The ECO does not make a 

determination, summarized in the ECO 

quarterly report, that a BlackRock 

Manager or all BlackRock Managers 

must discontinue such direct or indirect 

use of or the directing of trades to any 

such exchange or ATS on the basis that 

either the amount of use or the volume 

of trades is unwarranted or not in the 

interests of the Client Plans and their 

participants and beneficiaries. 

2. Effective on and after January 1, 

2011, either 

(a) No one MPS (together with other 

members of the same MPS Group) has 

(i) a greater than ten percent (10%) 

ownership interest in the exchange or 

ATS or (ii) the BlackRock Managers do 

not know the level of such ownership 

interest; or 

(b) If a BlackRock Manager knows that 

an MPS (together with other members of 

the same MPS Group) has an ownership 

interest that is greater that ten percent 

(10%) but not greater than twenty 

percent (20%) in the exchange or ATS, 

(i) The ECO makes a determination, 

summarized in the ECO quarterly 

report, that there is no reason for a 

BlackRock Manager or all BlackRock 

Managers to discontinue such direct or 

indirect use of or the directing of trades 

to any such exchange or ATS on the 

basis that the amount of use or the 

volume of trades is unwarranted or not 

in the interests of the Client Plans and 

their participants and beneficiaries, and 

does not make a determination that a 

BlackRock Manager or all BlackRock 

Managers must discontinue such direct 

or indirect use of or the directing of 

trades to any such exchange or ATS on 

the basis that the amount of use or the 

volume of trades is unwarranted or not 

in the interests of the Client Plans and 

their participants and beneficiaries. The 

IM may request any additional 

information relating to any such 

determination summarized in the ECO 

quarterly report and may, after 

consultation with the ECO, make a 

determination that a BlackRock Manager 

or all BlackRock Managers must 

discontinue such direct or indirect use 

of or the directing of trades to any such 

exchange or ATS on the basis that the 

amount of use or the volume of trades 

is unwarranted or not in the interests of 

the Client Plans and their participants 

and beneficiaries; 

(ii) The price and compensation 

associated with any purchases or sales 

utilizing such exchange or ATS are not 

greater than the price and compensation 

associated with an arm’s length 

transaction with an unrelated party; 

(iii) All such exchanges and ATSs 

shall be situated within the jurisdiction 

of the U.S. District Courts and regulated 

by a U.S. federal regulatory body or a 

U.S. federally approved self-regulatory 

body, provided that this condition shall 

not apply to the direct or indirect use of 

or the directing of trades to an exchange 

in a country other than the United 

States which is regulated by a 

government regulator or a government 

approved self-regulatory body in such 

country and which involves trading in 

Securities (including the lending of 

Securities) or futures contracts; and 

(iv) Special Notice of all of the 

foregoing conditions for relief under this 

Section II.Q.2.(b) must be provided in 

accordance with the terms of Section 

II.F. 

R. Purchases in the Secondary Market 

of Common and Preferred Stock Issued 

by an MPS by BlackRock Managers for 

Client Plans Invested in an Index 

Account or Fund, or a Model-Driven 

Account or Fund. Relief under Section 

I of this exemption is available for the 

purchase in the secondary market of 

common or preferred stock issued by an 

MPS by BlackRock Managers for Client 

Plans invested in an Index Account or 

Fund, or a Model-Driven Account or 

Fund provided that: 

1. Such purchase is for the sole 

purpose of maintaining quantitative 

conformity with the weight of such 

Securities prescribed by the relevant 

Index, for Index Accounts or Funds, or 

the weight of such Securities prescribed 

by the relevant Model, for Model-Driven 

Accounts or Funds, and such purchase 

may not exceed the purchase amount 

necessary for such Model or quantitative 

conformity. 

2. Such purchase is not made from the 

issuing MPS. 

3. Notwithstanding Section III.R.2., 

(a) With respect to Client Plans which 

as of the date of the Acquisition had in 

place with a BlackRock Manager either 

a directed brokerage and/or wrap fee 

arrangement which required the 

BlackRock Manager to use a certain 

MPS as a Securities broker, the 

BlackRock Manager may purchase MPS 

common or preferred stock through 

such MPS, including, if applicable, the 

issuing MPS, acting as agent under the 

brokerage arrangement in place as of the 

date of the Acquisition; provided that, a 

list of all of such arrangements has been 

provided to the ECO and no material 

changes are made to such arrangements. 

Special Notice of all of the foregoing 

conditions for relief under this Section 

III.R. must be provided in accordance 

with the terms of Section II.F. 

(b) BlackRock Managers may rely on 

other exemptive relief when acquiring 

stock of an MPS for Client Plans through 

an MPS broker, including the issuing 

MPS. 

S. Purchase in the Secondary Market 

of Common and Preferred Stock Issued 

by an MPS by BlackRock Managers for 

Client Plans Invested in an Other 

Account or Fund. Relief under Section 

I of this exemption is available for the 

purchase in the secondary market of 

common or preferred stock issued by an 

MPS by BlackRock Managers for Client 

Plans invested in an Other Account or 

Fund provided that: 

1. Such purchase is not made from the 

issuing MPS. 

2. Notwithstanding Section III.S.1., 

(a) With respect to Client Plans which 

as of the date of the Acquisition had in 

place with a BlackRock Manager either 


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59For example, if two or more portfolio managers 

send their purchase orders to the same trading desk 

and the traders on that trading desk coordinate the 

purchases of the same MPS equity Securities, the 

limitations apply to the trading desk; if two or more 

portfolio managers or two or more trading desks are 

coordinating purchases of MPS equity Securities, 

the limitations are applied across the group of 

portfolio managers or traders who are coordinating 

the purchase orders. 

a directed brokerage and/or wrap fee 

arrangement which required the 

BlackRock Manager to use a certain 

MPS as a Securities broker, the 

BlackRock Manager may purchase MPS 

common or preferred stock through 

such MPS, including if applicable, the 

issuing MPS, acting as agent under the 

brokerage arrangements in place as of 

the date of the Acquisition; provided 

that, a list of all of such arrangements 

has been provided to the ECO and no 

material changes are made to such 

arrangements. Special Notice of all of 

the foregoing conditions for relief under 

this Section III.S. must be provided in 

accordance with the terms of Section 

II.F. 

(b) BlackRock Managers may rely on 

other exemptive relief when acquiring 

stock of an MPS for Client Plans under 

this Section III.S. through an MPS 

broker, including the issuing MPS. 

3. With respect to Client Plans 

described in Section III.S.2.(a), the ECO 

Function periodically monitors 

purchases of MPS stock for such Client 

Plans to ensure that the amount of stock 

of an MPS purchased for such Client 

Plans is not disproportionate to the 

amount of such stock of the same MPS 

purchased for Client Plans invested in 

Other Accounts or Funds not subject to 

directed brokerage and/or wrap fee 

arrangements and described in Section 

III.S.2.(a). 

4. As a consequence of a purchase of 

MPS stock, the class of stock purchased 

does not constitute more than five (5) 

percent of the Other Account or Fund. 

In the case of a Pooled Fund, the class 

of stock purchased and attributed to 

each Client Plan does not exceed five 

percent (5%) of such Client Plan’s 

proportionate interest in the Pooled 

Fund. 

5. Aggregate daily purchases of a class 

of MPS stock for Client Plans do not 

exceed the greater of (i) fifteen percent 

(15%) of the aggregate average daily 

trading volume (ADTV) for the previous 

ten (10) trading days, or (ii) fifteen 

percent (15%) of trading volume on the 

date of the purchase. These volume 

limitations must be met on a portfolio 

manager by portfolio manager basis 

unless purchases are coordinated among 

portfolio managers, in which case the 

limitations are applied to the 

coordinated purchase.59 Any 

coordinated purchases of the same class 

of MPS stock in the secondary market 

for Index Accounts or Funds or for 

Model-Driven Accounts or Funds must 

be taken into account when applying 

these ADTV limitations on purchases 

for an Other Account or Fund; provided, 

however, if coordinated purchases for 

Index Accounts or Funds, or for ModelDriven Accounts or Funds, would cause 

the fifteen percent (15%) limitation to 

be exceeded, BlackRock Managers can 

nonetheless acquire for Other Accounts 

or Funds up to the greater of five 

percent (5%) of ADTV for the previous 

ten (10) trading days or five percent 

(5%) of trading volume on the day of the 

Covered Transaction. For purposes of 

this Section III.S.5., cross trades of MPS 

equity Securities which comply with an 

applicable statutory or administrative 

prohibited transaction exemption are 

not taken into account. 

6. The ECO Function monitors the 

volume limits on purchases of MPS 

stock described in Section III.S.5. and 

provides a monthly report to the IM 

with respect to such purchases and 

limits. The IM shall impose lower 

volume limitations and take other 

appropriate action with respect to such 

purchases if the IM determines on the 

basis of these reports by the ECO and 

publicly available information 

materially related to the trading of the 

Securities of an MPS on its primary 

listing exchange (or market) that the 

purchases described have a material 

positive impact on the market price for 

such Securities. 

T. The Provision of Custodial, 

Administrative and Similar Ministerial 

Services by an MPS for a Client Plan as 

a Consequence of a BlackRock Manager 

Exercising Investment Discretion on 

Behalf of the Client Plan or Rendering 

Investment Advice to the Client Plan. 

Relief under Section I of this exemption 

is available for the provision of 

custodial, administrative and similar 

ministerial services by an MPS for a 

Client Plan as a consequence of a 

BlackRock Manager exercising 

investment discretion or rendering 

investment advice (in each case, within 

the meaning of ERISA section 3(21)(A)) 

for or to such Client Plan, provided that 

(1) the terms of such service are 

comparable to those a Client Plan would 

receive in an arm’s length transaction 

with an unrelated party and (2) the ECO 

approves in advance and in writing 

(which may include electronic 

communication if retrievable by the 

ECO) the choice or recommendation of 

the MPS by the BlackRock Manager and 

the terms of the services, including but 

not limited to, the associated fees. 

U. Purchases, Sales and Holdings by 

BlackRock Managers for Client Plans of 

Commercial Paper Issued by ABCP 

Conduits, When an MPS Has One or 

More Roles. Relief under Section I of 

this exemption is available for the 

purchase, holding and sale by 

BlackRock Managers acting on behalf of 

Client Plans of commercial paper issued 

by an ABCP Conduit with respect to 

which an MPS acts as placement agent, 

and/or in some continuing capacity 

such as program administrator, provider 

of liquidity, or provider of credit 

support, provided that: 

1. (a)(i) The Client Plan is not an MPS 

Plan of the MPS with whom the 

purchase or sale takes place, or an MPS 

Plan of another member of the same 

MPS Group as such MPS, and (ii) the 

Client Plan is not an MPS Plan of an 

MPS which is acting in a continuing 

capacity, or an MPS Plan of another 

member of the same MPS Group as such 

MPS, and (iii) no MPS described in 

Sections III.U.1.(a)(i) or (ii), or another 

member of the same MPS Group as such 

MPS, has discretionary authority or 

control with respect to the Client Plan 

assets involved in the Covered 

Transaction or renders investment 

advice (within the meaning of 29 CFR 

2510.3–21(c)) with respect to such 

assets; 

(b) This Section III.U.1 shall be 

deemed satisfied notwithstanding the 

investment of assets of an MPS Plan of 

the MPS, which is placement agent or 

otherwise is acting in a continuing 

capacity, in a Pooled Fund as of the date 

of the Acquisition, which Pooled Fund 

is a bank-maintained common or 

collective trust, provided that such 

assets when aggregated with the assets 

of all other MPS Plans of the same MPS 

Group as the MPS which is the 

placement agent or otherwise is acting 

in a continuing capacity and invested in 

such Pooled Fund, at all times since the 

date of the Acquisition, constitute or are 

deemed pursuant to Section II.A.3.(b) to 

constitute less than ten percent (10%) of 

such Pooled Fund. 

2. The commercial paper has a stated 

maturity date of nine months or less 

from the date of issue, exclusive of days 

of grace, or is a renewal of an issue of 

commercial paper the maturity of which 

is likewise limited; 

3. At the time it is acquired, the 

commercial paper is ranked in the 

highest rating category by at least one of 

the Rating Organizations; 

4. If the seller or purchaser of the 

ABCP Conduit commercial paper is an 

MPS and/or an MPS performs a 

continuing role with respect to the 

Securities, secondary market purchases 

and sales are pursuant to the Three 


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60BlackRock requested such relief for the 

avoidance of any issue about the necessity for such 

relief in particular circumstances; the Department is 

not opining on the need for such relief herein. 

Quote Process, provided that, for 

purposes of this Section III.U.4., firm 

quotes on comparable short-term money 

market instruments rated in the same 

category may be used as quotes for 

purposes of the Three Quote Process; 

5. If an MPS performs a continuing 

role and there is a default, the taking of 

or refraining from taking of any action 

by the responsible BlackRock Manager 

which could have a material positive or 

negative effect upon the MPS is decided 

upon by the IM; 

No BlackRock Entity is to be regarded 

as an affiliate of any MPS for purposes 

of the Covered Transactions set forth in 

this Section III.U. 

V. Purchase, Holding and Disposition 

by BlackRock Managers for Client Plans 

of Shares of Exchange-Traded OpenEnd Investment Companies Registered 

Under the 1940 Act (ETF) Managed by 

BlackRock Managers. Relief under 

Section I of this exemption is available 

for the purchase, holding and 

disposition by BlackRock Managers for 

Client Plans of shares of an ETF 

managed by a BlackRock Manager 

provided that: 

1. (a) The BlackRock Manager 

purchases such ETF shares from or 

through a person other than an MPS or 

a BlackRock Entity, and 

(b) No purchase is exempt under 

Section I of this exemption if the 

BlackRock Manager portfolio manager 

acting for the Client Plan knows or 

should know that the shares to be 

acquired for Client Plans are Creation 

Shares, or that the purchase for Client 

Plans will result in new Creation 

Shares. 

2. Notwithstanding Section III.V.1.(a), 

BlackRock Managers may purchase 

shares of ETFs managed by a BlackRock 

Manager through an MPS acting as agent 

for Client Plans which, as of the date of 

the Acquisition, had in place with a 

BlackRock Manager either a directed 

brokerage and/or wrap fee arrangement 

which required the BlackRock Manager 

to use such MPS as a Securities broker; 

provided that, (i) a list of all of such 

arrangements has been provided to the 

ECO and no material changes are made 

to such arrangements and (ii) the ECO 

Function periodically monitors 

purchases of Securities to ensure that 

the amount of BlackRock-managed ETF 

shares purchased for Client Plans under 

Section III.V.2. is not disproportionate 

to the amount of BlackRock-managed 

ETF shares purchased for Client Plans 

pursuant to Section III.V.1. Special 

Notice of all of the foregoing conditions 

for relief under this Section III.V.2. must 

be provided in accordance with the 

terms of Section II.F. 

W. Investment of Assets of MPS Plans 

in a BlackRock Bank-Maintained 

Common or Collective Trust as of the 

Date of the Acquisition—Fees Paid 

Outside the Trust. Relief under Section 

I of this exemption is available with 

respect to MPS Plans invested in Pooled 

Funds as of the date of the Acquisition, 

which Pooled Funds are common or 

collective trusts maintained by 

BlackRock Institutional Trust Company, 

N.A., and in connection with which 

investments such MPS Plans pay 

management fees directly to BlackRock 

Managers until the earliest of (i) 

termination of the investment in the 

Pooled Fund, (ii) transition of the fee 

arrangement to one under which the 

BlackRock Manager’s fees are paid from 

assets of the Pooled Fund or by the MPS 

Plan sponsor, or (iii) December 31, 2010 

(Unwind Period 2) provided that: 

1. The fees paid by such MPS Plans 

to the BlackRock Managers during 

Unwind Period 2 are neither more than 

reasonable compensation nor 

significantly more than fees paid to the 

BlackRock Managers by other, 

comparable Client Plans invested in 

such Pooled Funds which are not MPS 

Plans; and 

2. The MPS Plans do not pay to 

BlackRock Managers during Unwind 

Period 2 any type of fee or other 

compensation that was not charged to or 

otherwise borne by MPS Client Plan 

investors in the Pooled Fund as of the 

date of the Acquisition. 

During Unwind Period 2, the IM must 

review the investment by the MPS Plans 

in the Pooled Fund; all fees paid by the 

affected MPS Plans to BlackRock 

Managers must be disclosed to the IM; 

the IM must review the offering 

documents for the Pooled Funds and 

any advisory or management agreements 

with BlackRock Managers; and any 

material change in the terms and 

conditions of the investment by the 

affected MPS Plans in the Pooled Fund, 

including but not limited to changes to 

fees paid to BlackRock Managers or the 

terms of the advisory or management 

agreements with BlackRock Managers, 

must be promptly disclosed to the IM 

and be subject to the IM’s written 

approval. Further, during Unwind 

Period 2, each such MPS Plan may 

terminate its investment in the Pooled 

Fund upon no more than thirty (30) 

days notice and without incurring a 

redemption fee paid to a BlackRock 

Manager. 

X. Purchase, Holding and Disposition 

of BlackRock Equity Securities in the 

Secondary Market by BlackRock 

Managers for an Index Account or Fund, 

or a Model-Driven Account or Fund, 

Including Buy-Ups.60 Relief under 

Section I of this exemption is available 

for the purchase, holding and 

disposition of common or preferred 

stock issued by BlackRock in the 

secondary market by BlackRock 

Managers for Client Plans in an Index 

Account or Fund, or in a Model-Driven 

Account or Fund provided that: 

1. The acquisition, holding and 

disposition of the BlackRock Securities 

is for the sole purpose of maintaining 

quantitative conformity with the weight 

of such Securities prescribed by the 

relevant Index, for Index Accounts or 

Funds, or the weight of such Securities 

prescribed by the relevant Model, for 

Model-Driven Accounts or Funds, and 

such purchase may not exceed the 

purchase amount necessary for such 

Model or quantitative conformity. 

2. Any acquisition of BlackRock 

Securities does not involve any 

agreement, arrangement or 

understanding regarding the design or 

operation of the account or fund 

acquiring the BlackRock Securities 

which is intended to benefit BlackRock 

or any party in which BlackRock may 

have an interest. 

3. With respect to an acquisition of 

BlackRock Securities by such an 

account or fund which constitutes a 

Buy-Up, 

(a) The acquisition is made on a single 

trading day from or through one brokerdealer, which broker-dealer is not an 

MPS or a BlackRock Entity; provided, 

however, that if the volume limitation 

in Section III.X.3.(d) below cannot be 

satisfied in a single trading day, the 

acquisition will be completed in as few 

trading days as possible in compliance 

with such volume limitation and such 

trades will be reviewed by the ECO and 

reported to the IM; 

(b) Based upon the best available 

information, the acquisition is not the 

opening transaction of a trading day and 

is not made in the last half hour before 

the close of the trading day; 

(c) The price paid by the BlackRock 

Manager is not higher than the lowest 

current independent offer quotation, 

determined on the basis of reasonable 

inquiry from broker-dealers who are not 

MPSs or BlackRock Entities; 

(d) Aggregate daily purchases do not 

exceed fifteen percent (15%) of 

aggregate average daily trading volume 

for the Security, as determined by the 

greater of (i) the trading volume for the 

Security occurring on the applicable 

Recognized Securities Exchange and/or 


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Automated Trading System on the date 

of the transactions, or (ii) the aggregate 

average daily trading volume for the 

Security occurring on the applicable 

Recognized Securities Exchange and/or 

Automated Trading System for the 

previous ten (10) trading days, both 

based on the best information 

reasonably available at the time of the 

transaction. These volume limitations 

are applied on a portfolio manager by 

portfolio manager basis unless 

purchases of BlackRock Securities are 

coordinated by the portfolio managers 

or trading desks, in which case the 

limitations are aggregated for the 

coordinating portfolio managers or 

trading desks. Provided further, if 

BlackRock, without Client Plan 

direction or consent, initiates a new 

Index Account or Fund or Model-Driven 

Account or Fund on its own accord, 

with BlackRock Securities included 

therein, the volume restrictions for such 

new account or fund shall be 

determined by aggregating all portfolio 

managers purchasing for such new 

account of fund. Cross trades of 

BlackRock Securities which comply 

with an applicable statutory or 

administrative prohibited transaction 

exemption are not included in the 

amount of aggregate daily purchases to 

which the limitations of this Section 

III.X. apply; 

(e) All purchases and sales of 

BlackRock Securities occur either (i) on 

a Recognized Securities Exchange, (ii) 

through an Automated Trading System 

operated by a broker-dealer that is not 

a BlackRock Entity and is either 

registered under the 1934 Act, and 

thereby subject to regulation by the 

Securities and Exchange Commission, 

or subject to regulation and supervision 

by the Securities and Futures Authority 

of the UK or another applicable 

regulatory authority, which provides a 

mechanism for customer orders to be 

matched on an anonymous basis 

without the participation of a brokerdealer, or (iii) through an Automated 

Trading System that is operated by a 

Recognized Securities Exchange, 

pursuant to the applicable securities 

laws, and provides a mechanism for 

customer orders to be matched on an 

anonymous basis without the 

participation of a broker-dealer; and 

(f) The ECO designs acquisition 

procedures for BlackRock Managers to 

follow in Buy-Ups, which the IM 

approves in advance of the 

commencement of any Buy-Up, and the 

ECO Function monitors BlackRock 

Manager’s compliance with such 

procedures. 

Y. Acquisition by BlackRock 

Managers of Financial Guarantees, 

Indemnities and Similar Protections for 

Client Plans from MPSs. Relief under 

Section I of this exemption is available 

for the provision by an MPS of a 

financial guarantee, indemnification 

arrangement or similar instrument or 

arrangement providing protection to a 

Client Plan against possible losses or 

risks provided that: 

1. The terms of the arrangement 

(including the identity of the provider) 

are approved by a fiduciary of the Client 

Plan which is independent of the MPS 

providing such protection and of 

BlackRock; 

2. The compensation owed the MPS 

under the arrangement is paid by a 

BlackRock Entity and not paid out of the 

assets of the Client Plan; 

3. In the event a Client Plan or the 

ECO concludes an event has occurred 

which should trigger the obligations of 

the MPS under the arrangement, and the 

MPS disagrees to any material extent, 

the IM determines the steps the 

BlackRock Manager must take to protect 

the interests of the Client Plan; and 

4. The MPS providing the 

arrangement is capable of being sued in 

United States courts, has contractually 

agreed to be subject to litigation in the 

United States with respect to any matter 

relating to this Section III.Y., and has 

sufficient assets in the United States to 

honor its commitments under the 

arrangement. 

SECTION IV: AFFILIATED 

UNDERWRITINGS AND AFFILIATED 

SERVICING 

A. Affiliated Underwritings 

1. The Securities to be purchased are 

either: 

(a) Part of an issue registered under 

the 1933 Act, or, if Securities to be 

purchased are part of an issue that is 

exempt from such registration 

requirement, such Securities: 

(i) Are issued or guaranteed by the 

United States or by any person 

controlled or supervised by and acting 

as an instrumentality of the United 

States pursuant to authority granted by 

the Congress of the United States, 

(ii) Are issued by a bank, 

(iii) Are exempt from such registration 

requirement pursuant to a federal 

statute other than the 1933 Act, or 

(iv) Are the subject of a distribution 

and are of a class which is required to 

be registered under section 12 of the 

1934 Act, and are issued by an issuer 

that has been subject to the reporting 

requirements of section 13 of the 1934 

Act for a period of at least ninety (90) 

days immediately preceding the sale of 

such Securities and that has filed all 

reports required to be filed thereunder 

with the SEC during the preceding 

twelve (12) months; or 

(b) Part of an issue that is an Eligible 

Rule 144A Offering. Where the Eligible 

Rule 144A Offering of the Securities is 

of equity securities, the offering 

syndicate shall obtain a legal opinion 

regarding the adequacy of the disclosure 

in the offering memorandum; or 

(c) Municipal bonds taxable by the 

United States, including Build America 

Bonds created under section 54AA of 

the Code or successor thereto, under 

which the United States pays a subsidy 

to the state or local government issuer, 

but not including Building America 

Bonds which provide a tax credit to 

investors. 

2. The Securities to be purchased are 

purchased prior to the end of the first 

day on which any sales are made, 

pursuant to that offering, at a price that 

is not more than the price paid by each 

other purchaser of the Securities in that 

offering or in any concurrent offering of 

the Securities, except that: 

(a) If such Securities are offered for 

subscription upon exercise of rights, 

they may be purchased on or before the 

fourth day preceding the day on which 

the rights offering terminates; or 

(b) If such Securities are debt 

Securities, they may be purchased at a 

price that is not more than the price 

paid by each other purchaser of the 

Securities in that offering or in any 

concurrent offering of the Securities and 

may be purchased on a day subsequent 

to the end of the first day on which any 

sales are made, pursuant to that offering, 

provided that the interest rates, as of the 

date of such purchase, on comparable 

debt Securities offered to the public 

subsequent to the end of the first day on 

which any sales are made and prior to 

the purchase date are less than the 

interest rate of the debt Securities being 

purchased; and 

3. The Securities to be purchased are 

offered pursuant to an underwriting or 

selling agreement under which the 

members of the syndicate are committed 

to purchase all of the Securities being 

offered, except if: 

(a) Such Securities are purchased by 

others pursuant to a rights offering; or 

(b) Such Securities are offered 

pursuant to an over-allotment option. 

4. The issuer of the Securities to be 

purchased pursuant to this exemption 

must have been in continuous operation 

for not less than three (3) years, 

including the operation of any 

predecessors, unless the Securities to be 

purchased: 

(a) Are non-convertible debt 

Securities rated in one of the four 

highest rating categories by a Rating 

Organization; provided that none of the 


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Rating Organizations rates such 

Securities in a category lower than the 

fourth highest rating category; or 

(b)(i) are debt Securities issued or 

fully guaranteed by the United States or 

by any person controlled or supervised 

by and acting as an instrumentality of 

the United States pursuant to authority 

granted by the Congress of the United 

States; or 

(ii) Are municipal bonds taxable by 

the United States, including Build 

America Bonds created under section 

54AA of the Code or successor thereto, 

under which the United States pays a 

subsidy to the state or local government 

issuer, but not including Building 

America Bonds which provide a tax 

credit to investors; or 

(c) Are debt Securities which are fully 

guaranteed by a guarantor that has been 

in continuous operation for not less 

than three (3) years, including the 

operation of any predecessors, provided 

that such guarantor has issued other 

Securities registered under the 1933 

Act; or if such guarantor has issued 

other Securities which are exempt from 

such registration requirement, such 

guarantor has been in continuous 

operation for not less than three (3) 

years, including the operation of any 

predecessors, and such guarantor is: 

(i) A bank; 

(ii) An issuer of Securities which are 

exempt from such registration 

requirement, pursuant to a Federal 

statute other than the 1933 Act; or 

(iii) An issuer of Securities that are 

the subject of a distribution and are of 

a class which is required to be registered 

under section 12 of the 1934 Act, and 

are issued by an issuer that has been 

subject to the reporting requirements of 

section 13 of the 1934 Act for a period 

of at least ninety (90) days immediately 

preceding the sale of such Securities 

and that has filed all reports required to 

be filed hereunder with the SEC during 

the preceding twelve (12) months. 

5. The aggregate amount of Securities 

of an issue purchased, pursuant to this 

exemption, by the BlackRock Manager 

with: (i) The assets of all Client Plans; 

and (ii) the assets, calculated on a pro 

rata basis, of all Client Plans investing 

in Pooled Funds managed by the 

BlackRock Manager; and (iii) the assets 

of plans to which the BlackRock 

Manager renders investment advice 

within the meaning of 29 CFR 2510.3 

21(c) does not exceed: 

(a) Ten percent (10%) of the total 

amount of the Securities being offered 

in an issue, if such Securities are equity 

securities; 

(b) Thirty five percent (35%) of the 

total amount of the Securities being 

offered in an issue, if such Securities are 

Asset-Backed Securities rated in one of 

the three highest rating categories by at 

least one of the Rating Organizations; 

provided that none of the Rating 

Organizations rates such Securities in a 

category lower than the third highest 

rating category; 

(c) Thirty five percent (35%) of the 

total amount of the Securities being 

offered in an issue, if such Securities are 

debt Securities rated in one of the four 

highest rating categories by at least one 

of the Rating Organizations; provided 

that none of the Rating Organizations 

rates such Securities in a category lower 

than the fourth highest rating category; 

or 

(d) Twenty five percent (25%) of the 

total amount of the Securities being 

offered in an issue, if such Securities are 

debt Securities rated in the fifth or sixth 

highest rating categories by at least one 

of the Rating Organizations; provided 

that none of the Rating Organizations 

rates such Securities in a category lower 

than the sixth highest rating category; 

and 

(e) The assets of any single Client Plan 

(and the assets of any Client Plans and 

any In-House Plans investing in Pooled 

Funds) may not be used to purchase any 

Securities being offered, if such 

Securities are debt Securities rated 

lower than the sixth highest rating 

category by any of the Rating 

Organizations; 

(f) Notwithstanding the percentage of 

Securities of an issue permitted to be 

acquired, as set forth in Subsections 

A.(5)(a)–(d) of this Section IV., the 

amount of Securities in any issue 

(whether equity or debt Securities or 

Asset-Backed Securities) purchased, 

pursuant to this exemption, by the 

BlackRock Manager on behalf of any 

single Client Plan, either individually or 

through investment, calculated on a pro 

rata basis, in a Pooled Fund may not 

exceed three percent (3%) of the total 

amount of such Securities being offered 

in such issue, provided that a SubAdvised Pooled Fund described in 

Section VI.(AAA) as a whole may 

purchase up to three percent (3%) of an 

issue; and 

(g) If purchased in an Eligible Rule 

144A Offering, the total amount of the 

Securities being offered for purposes of 

determining the percentages, described, 

above, in Section IV.A.5.(a)–(d) and (f), 

is the total of: 

(i) The principal amount of the 

offering of such class of Securities sold 

by underwriters or members of the 

selling syndicate to QIBs; plus 

(ii) The principal amount of the 

offering of such class of Securities in 

any concurrent public offering. 

6. The aggregate amount to be paid by 

any single Client Plan in purchasing any 

Securities which are the subject of this 

exemption, including any amounts paid 

by any Client Plan in purchasing such 

Securities through a Pooled Fund, 

calculated on a pro rata basis, does not 

exceed three percent (3%) of the fair 

market value of the net assets of such 

Client Plan, as of the last day of the most 

recent fiscal quarter of such Client Plan 

prior to such transaction, provided that 

a Sub-Advised Pooled Fund as a whole 

may pay up to one percent (1%) of fair 

market value of its net assets in 

purchasing such Securities. 

7. The covered transactions are not 

part of an agreement, arrangement, or 

understanding designed to benefit any 

BlackRock Entity or MPS. 

8. Each Client Plan shall have total 

net assets with a value of at least $50 

million (the $50 Million Net Asset 

Requirement). For purposes of engaging 

in covered transactions involving an 

Eligible Rule 144A Offering, each Client 

Plan shall have total net assets of at least 

$100 million in Securities of issuers that 

are not affiliated with such Client Plan 

(the $100 Million Net Asset 

Requirement). 

For purposes of a Pooled Fund 

engaging in an Affiliated Underwriting, 

each Client Plan in such Pooled Fund 

other than a Sub-Advised Pooled Fund 

shall have total net assets with a value 

of at least $50 million. Notwithstanding 

the foregoing, if each such Client Plan 

in a Pooled Fund other than a SubAdvised Pooled Fund does not have 

total net assets with a value of at least 

$50 million, the $50 Million Net Asset 

Requirement will be met, if fifty percent 

(50%) or more of the units of beneficial 

interest in such Pooled Fund are held by 

investors, each of which has total net 

assets with a value of at least $50 

million. 

For purposes of a Pooled Fund 

engaging in an Affiliated Underwriting 

involving an Eligible Rule 144A 

Offering, each Client Plan in such 

Pooled Fund other than a Sub-Advised 

Pooled Fund shall have total net assets 

of at least $100 million in Securities of 

issuers that are not affiliated with such 

Client Plan. Notwithstanding the 

foregoing, if each such Client Plan in 

such Pooled Fund other than a SubAdvised Pooled Fund does not have 

total net assets of at least $100 million 

in Securities of issuers that are not 

affiliated with such Client Plan, the 

$100 Million Net Asset Requirement 

will be met if fifty percent (50%) or 

more of the units of beneficial interest 

in such Pooled Fund are held by 

investors, each of which have total net 

assets of at least $100 million in 


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Securities of issuers that are not 

affiliated with such investor, and the 

Pooled Fund itself qualifies as a QIB. 

For purposes of the net asset 

requirements described, above in 

Section IV.A.8., where a group of Client 

Plans is maintained by a single 

employer or controlled group of 

employers, as defined in ERISA section 

407(d)(7), the $50 Million Net Asset 

Requirement (or in the case of an 

Eligible Rule 144A Offering, the $100 

Million Net Asset Requirement) may be 

met by aggregating the assets of such 

Client Plans, if the assets of such Client 

Plans are pooled for investment 

purposes in a single master trust. 

9. No more than twenty percent (20%) 

of the assets of a Pooled Fund, at the 

time of a covered transaction, are 

comprised of assets of In-House Plans 

for which the BlackRock Manager, or a 

BlackRock Entity exercises investment 

discretion. 

10. The BlackRock Manager must be 

a QPAM, and, in addition to satisfying 

the requirements for a QPAM under 

section VI(a) of PTE 84–14, the 

BlackRock Manager must also have total 

client assets under its management and 

control in excess of $5 billion, as of the 

last day of its most recent fiscal year and 

shareholders’ or partners’ equity in 

excess of $1 million. 

11. The BlackRock Manager 

maintains, or causes to be maintained, 

for a period of six (6) years from the date 

of any covered transaction such records 

as are necessary to enable the persons 

described below in Section IV.A.12.(a) 

to determine whether the conditions of 

this exemption have been met, except 

that: 

(a) No party in interest with respect to 

a plan which engages in the covered 

transactions, other than the BlackRock 

Manager, shall be subject to a civil 

penalty under ERISA section 502(i) or 

the taxes imposed by Code sections 

4975(a) and (b), if such records are not 

maintained, or not available for 

examination as required below by 

Section IV.A.12.(a); and 

(b) A separate prohibited transaction 

shall not be considered to have occurred 

if, due to circumstances beyond the 

control of the BlackRock Manager, such 

records are lost or destroyed prior to the 

end of the six-year period. 

12. (a) Except as provided below, in 

Section IV.A.12.(b), and 

notwithstanding the provisions of 

subsections (a)(2) and (b) of ERISA 

section 504, the records referred to, 

above, in Section IV.A.11. are 

unconditionally available at their 

customary location for examination 

during normal business hours by: 

(i) Any duly authorized employee or 

representative of the Department, the 

Internal Revenue Service, or the SEC; 

(ii) Any fiduciary of any plan that 

engages in the covered transactions, or 

any duly authorized employee or 

representative of such fiduciary; 

(iii) Any employer of participants and 

beneficiaries and any employee 

organization whose members are 

covered by a plan that engages in the 

covered transactions, or any authorized 

employee or representative of these 

entities; or 

(iv) Any participant or beneficiary of 

a plan that engages in the covered 

transactions, or duly authorized 

employee or representative of such 

participant or beneficiary; 

(b) None of the persons described in 

Sections IV.A.12.(a)(ii) through (iv) shall 

be authorized to examine trade secrets 

of the BlackRock Manager, or 

commercial or financial information 

which is privileged or confidential; and 

(c) Should the BlackRock Manager 

refuse to disclose information on the 

basis that such information is exempt 

from disclosure, pursuant to Section 

IV.A.12.(b), the BlackRock Manager 

shall, by the close of the thirtieth (30th) 

day following the request, provide a 

written notice advising that person of 

the reasons for the refusal and that the 

Department may request such 

information. 

B. Affiliated Servicing 

1. The Securities are CMBS that are 

rated in one of the three highest rating 

categories by a Rating Organization; 

provided that none of the Rating 

Organizations rates such Securities in a 

category lower than the third highest 

rating category. 

2. The purchase of the CMBS meets 

the conditions of an applicable 

Underwriter Exemption. 

3. (a) The aggregate amount of CMBS 

of an issue purchased, pursuant to this 

exemption, by the BlackRock Manager 

with: 

(i) The assets of all Client Plans; and 

(ii) The assets, calculated on a pro rata 

basis, of all Client Plans and In-House 

Plans investing in Pooled Funds 

managed by the Asset Manager; and 

(iii) The assets of plans to which the 

Asset Manager renders investment 

advice, within the meaning of 29 CFR 

Sec. 2510.3–21(c), does not exceed 

thirty five percent (35%) of the total 

amount of the CMBS being offered in an 

issue. 

(b) Notwithstanding the percentage of 

CMBS of an issue permitted to be 

acquired, as set forth in Section 

IV.B.3.(a) of this exemption, the amount 

of CMBS in any issue purchased, 

pursuant to this exemption, by the Asset 

Manager on behalf of any single Client 

Plan, either individually or through 

investment, calculated on a pro rata 

basis, in a Pooled Fund may not exceed 

three percent (3%) of the total amount 

of such CMBS being offered in such 

issue, and; 

(c) If purchased in an Eligible Rule 

144A Offering, the total amount of the 

CMBS being offered for purposes of 

determining the percentages described 

in Section IV.B.3(a), is the total of: 

(i) The principal amount of the 

offering of such class of CMBS sold by 

underwriters or members of the selling 

syndicate to QIBs; plus 

(ii) The principal amount of the 

offering of such class of CMBS in any 

concurrent public offering. 

4. The aggregate amount to be paid by 

any single Client Plan in purchasing any 

CMBS which are the subject of this 

exemption, including any amounts paid 

by any Client Plan in purchasing such 

CMBS through a Pooled Fund, 

calculated on a pro rata basis, does not 

exceed three percent (3%) of the fair 

market value of the net assets of such 

Client Plan, as of the last day of the most 

recent fiscal quarter of such Client Plan 

prior to such transaction. 

5. The Covered Transactions under 

this Section IV.B. are not part of an 

agreement, arrangement, or 

understanding designed to benefit any 

MPS. 

6. The requirements of Sections 

IV.A.8. through 12. are met. 

SECTION V: CORRECTION 

PROCEDURES 

A. 1. The ECO shall monitor Covered 

Transactions and shall determine 

whether a particular Covered 

Transaction constitutes a Violation. The 

ECO shall notify the IM within five (5) 

business days following the discovery of 

any Violation. 

2. The ECO shall make an initial 

determination as to how to correct a 

Violation and place the conclusion of 

such determination in writing, with 

such conclusion disclosed to the IM 

within five (5) business days of the 

placing of the conclusion of such 

determination in writing. Following the 

initial determination, the ECO must 

keep the IM apprised on a current basis 

of the process of correction and must 

consult with the IM regarding each 

Violation and the appropriate form of 

correction. The ECO shall report the 

correction of the Violation to the IM 

within five (5) business days following 

completion of the correction. For 

purposes of this Section V.A.2., 

‘‘correction’’ must be consistent with 


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61PTE 2002–51, 67 FR 70623 (November 25, 

2002), as amended, 71 FR 20135 (April 19, 2006). 

62The definition of terms herein shall apply 

equally to the singular and plural forms of the terms 

defined. Section headings are for convenience only. 

ERISA section 502(i) and Code section 

4975(f)(5). 

3. The IM shall determinate whether 

it agrees that the correction of a 

Violation by the ECO is adequate and 

shall place the conclusion of such 

determination in writing, and, if the IM 

does not agree with the adequacy of the 

correction, the IM shall have the 

authority to require additional 

corrective actions by BlackRock. 

4. A summary of Violations and 

corrections of Violations will be in the 

IM’s annual compliance report as 

described in Section II.E.12. 

B. Special Correction Procedure 

1. If a Covered Transaction which 

would otherwise constitute a Violation 

is corrected under this ‘‘Special 

Correction Procedure,’’ such Covered 

Transaction shall continue to be exempt 

under Section I of this exemption. 

2. (a) The Special Correction 

Procedure is a complete correction of 

the Violation no later than fourteen (14) 

business days following the date on 

which the ECO submits the quarterly 

report to the IM for the quarter in which 

the Covered Transaction first would 

become a non-exempt prohibited 

transaction by reason of constituting a 

Violation if not for this Section V.B. 

(b) Solely for purposes of the Special 

Correction Procedure, ‘‘correction’’ of a 

Covered Transaction which would 

otherwise be a Violation means either: 

(i) Restoring the Client Plan to the 

position it would have been in had the 

conditions of the exemption been 

complied with; 

(ii) Correction consistent with ERISA 

section 502(i) and Code section 

4975(f)(5); or 

(iii) Correction consistent with the 

Voluntary Fiduciary Correction 

Program.61

(c) Other than with respect to the 

definition of ‘‘correction’’ specified 

above, when utilizing the Special 

Correction Procedure the ECO and the 

IM shall comply with Section V.A. 

SECTION VI: DEFINITIONS 62

A. ‘‘1933 Act’’ means the Securities 

Act of 1933, as amended. 

B. ‘‘1934 Act’’ or ‘‘Exchange Act’’ 

means the Securities Exchange Act of 

1934, as amended. 

C. ‘‘1940 Act’’ means the Investment 

Company Act of 1940, as amended. 

D. ‘‘$50 Million Net Asset 

Requirement’’ shall have the meaning 

set forth in Section IV.A.8. of this 

exemption. 

E. ‘‘$100 Million Net Asset 

Requirement’’ shall have the meaning 

set forth in Section IV.A.8. of this 

exemption. 

F. ‘‘ABCP Conduit’’ means a special 

purpose vehicle that acquires assets 

from one or more originators and issues 

commercial paper to provide funding to 

the originator(s). Such vehicles are 

typically administered by a bank, but is 

not required to be administered by a 

bank, which provides liquidity support 

(standing ready to purchase the 

conduit’s commercial paper if it cannot 

be rolled over) and/or credit support 

(committing to cover losses in the event 

of default). The program administrator 

also typically acts as placement agent 

for the commercial paper, sometimes 

together with one or more other 

placement agents. Commercial paper 

issued by such a conduit may be 

purchased directly from the program 

administrator or other placement agent, 

or traded on the secondary market with 

another broker-dealer making a market 

in the Securities. 

G. ‘‘Acquisition’’ means the 

acquisition by BlackRock of Barclays 

Global Investors UK Holdings, Ltd. and 

its subsidiaries on December 1, 2009. 

H. ‘‘Affiliate’’ of another person 

means: 

(1) Any person directly or indirectly, 

through one or more intermediaries, 

controlling, controlled by, or under 

common control with such person; 

(2) Any officer, director, partner, 

employee, or relative (as defined in 

section 3(15) of ERISA) of such other 

person; and 

(3) Any corporation or partnership of 

which such other person is an officer, 

director, partner or employee. 

I. ‘‘Asset-Backed Securities’’ means 

Securities which are pass-through 

certificates or trust certificates 

characterized as equity pursuant to 29 

CFR 2510.3–101 that represent a 

beneficial ownership interest in the 

assets of an issuer which is a trust, with 

any such trust limited to (1) a single or 

multi-family residential or commercial 

mortgage investment trust, (2) a motor 

vehicle receivable investment trust, or 

(3) a guaranteed governmental mortgage 

pool certificate investment trust, and 

which entitles the holder to payments of 

principal, interest and/or other 

payments made with respect to the 

assets of the trust, the corpus or assets 

of which consist solely or primarily of 

secured obligations that bear interest or 

are purchased at a discount. For 

purposes of Section IV.A. of this 

exemption, Asset-Backed Securities are 

treated as debt Securities. 

J. ‘‘Authorizing fiduciary’’ has the 

meaning set forth in Section 

III.M.4.(d)(i) of this exemption. 

K. ‘‘Automated Trading System’’ or 

‘‘ATS’’ means an electronic trading 

system, ECN or electronic clearing 

network or similar venue that functions 

in a manner intended to simulate a 

Securities exchange by electronically 

matching orders from multiple buyers 

and sellers, such as an ‘‘alternative 

trading system’’ within the meaning of 

the SEC’s Reg. ATS (17 CFR part 

242.300), as such definition may be 

amended from time to time, or an 

‘‘automated quotation system’’ as 

described in Section 3(a)(51)(A)(ii) of 

the 1934 Act. 

L. ‘‘B and C List’’ has the meaning set 

forth in Section III.A.1. of this 

exemption. 

M. ‘‘BlackRock’’ means BlackRock, 

Inc. and any successors thereof. 

N. ‘‘BlackRock Entity’’ means 

BlackRock and any entity directly or 

indirectly, through one or more 

intermediaries, under the control of 

BlackRock, and any other entity which 

subsequently becomes directly or 

indirectly, through one or more 

intermediaries, under the Control of 

BlackRock, and successors of the 

foregoing. 

O. ‘‘BlackRock Manager’’ means any 

bank, investment advisor, investment 

manager directly or indirectly, through 

one or more intermediaries, under the 

control of BlackRock, and any other 

bank, investment advisor, or investment 

manager which subsequently becomes 

directly or indirectly, through one or 

more intermediaries, under the control 

of BlackRock, and successors of the 

foregoing, including but not limited to 

BlackRock Advisors, LLC, BlackRock 

Financial Management, Inc., BlackRock 

Capital Management, Inc., BlackRock 

Institutional Management Corporation, 

BlackRock International, Ltd., State 

Street Research and Management 

Company, BlackRock Realty Advisors, 

Inc., BlackRock Investment 

Management, LLC, BlackRock Fund 

Advisors, and BlackRock Institutional 

Trust Company, N.A. and any of the 

investment advisors and investment 

manager it controls. 

P. ‘‘Buy-Up’’ means an initial 

acquisition of Securities issued by 

BlackRock by a BlackRock Manager, if 

such acquisition exceeds one percent 

(1%) of the aggregate daily trading 

volume for such Security, for an Index 

Account or Fund, or a Model-Driven 

Account or Fund which is necessary to 

bring the fund’s or account’s holdings of 

such Securities either to its 

capitalization-weighted or other 

specified composition in the relevant 


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Index, as determined by the 

organization maintaining such Index, or 

to its correct weighting as determined 

by the Model. 

Q. ‘‘Client Plan’’ means any plan 

subject to ERISA section 406, Code 

section 4975 or FERSA section 8477(c) 

for which a BlackRock Manager is a 

fiduciary as described in ERISA section 

3(21), including, but not limited to, any 

Pooled Fund, MPS Plan, Index Account 

or Fund, Model-Driven Account or 

Fund, Other Account or Fund, or InHouse Plan, except where specified to 

the contrary. 

R. ‘‘CMBS’’ means an Asset-Backed 

Security with respect to which the 

assets or corpus of the issuer consist 

solely or primarily of obligations 

secured by commercial real property 

(including obligations secured by 

leasehold interests on commercial real 

property). 

S. ‘‘Code’’ means the Internal Revenue 

Code of 1986, as amended. 

T. ‘‘Control’’ means the power to 

exercise a controlling influence over the 

management or policies of a person 

other than an individual. 

U. ‘‘Covered Transaction’’ means each 

transaction set forth in Section III by a 

BlackRock Manager for a Client Plan 

with, affecting or involving, directly or 

indirectly, an MPS and/or a BlackRock 

Entity. 

V. ‘‘Creation Shares’’ means new 

shares in an ETF created by an exchange 

of a specified basket of Securities and/ 

or cash to the ETF for such new shares 

of the ETF. 

W. ‘‘ECO Function’’ means the ECO 

and such other BlackRock Entity 

employees in legal and compliance roles 

working under the supervision of the 

ECO in connection with the Covered 

Transactions. The list of BlackRock 

Entity employees shall be shared with 

the IM from time to time, not less than 

quarterly, and such employees will be 

made available to discuss the relevant 

Covered Transactions with the IM to the 

extent the IM or the ECO deem it 

reasonably prudent. 

X. ‘‘Electronic Communications 

Network’’ or ‘‘ECN’’ means an electronic 

system described in Rule 600(b)(23) of 

Regulation NMS under the 1934 Act. 

Y. ‘‘Eligible Rule 144A Offering’’ shall 

have the same meaning as defined in 

SEC Rule 10f-3(a)(4) (17 CFR 270.10f3(a)(4)) under the 1940 Act. 

Z. ‘‘Eligible Securities Depository’’ 

means an eligible securities depository 

as that term is defined under Rule 17f7 of the 1940 Act, as such definition 

may be amended from time to time. 

AA. ‘‘EPP Correction’’ has the meaning 

set forth in Section II.C. of this 

exemption. 

BB. ‘‘ERISA’’ means the Employee 

Retirement Income Security Act of 1974, 

as amended. 

CC. ‘‘Exemption Compliance Officer’’ 

or ‘‘ECO’’ means an officer of BlackRock 

or of a BlackRock Entity appointed by 

BlackRock or such BlackRock Entity, 

subject to the approval of the IM, who 

is responsible for compliance with the 

exemption. The ECO, unless otherwise 

stated in this exemption, will be 

responsible for: Monitoring all Covered 

Transactions and reviewing compliance 

with all of the conditions of the 

exemption applicable thereto; approving 

certain Covered Transactions in advance 

as required by the terms of the 

exemption; reviewing reports of 

Covered Transactions and the results of 

sampling of Covered Transactions; and 

determining when Covered Transactions 

transgress the EPPs and/or constitute a 

Violation. 

DD. ‘‘ETF’’ means an exchange-traded 

open-end investment company 

registered under the 1940 Act. 

EE. ‘‘Exemption Policies and 

Procedures’’ or ‘‘EPPs’’ means the written 

policy adopted and implemented by 

BlackRock for BlackRock Entities that is 

reasonably designed to ensure 

compliance with the terms of the 

exemption. The EPPs must reflect the 

specific requirements of the exemption, 

but must also be designed to ensure that 

the decisions to enter into Covered 

Transactions on behalf of Client Plans 

with the MPSs is in the interests of 

Client Plans and their participants and 

beneficiaries, including by ensuring to 

the extent possible that the terms of 

each Covered Transaction are at least as 

favorable to the Client Plan as the terms 

generally available in comparable arm’s 

length transactions with unrelated 

parties. 

FF. ‘‘FERSA’’ means the Federal 

Employees’ Retirement System Act of 

1986, as amended. 

GG. ‘‘FHLMC’’ means the Federal 

Home Loan Mortgage Corporation. 

HH. ‘‘Fixed Income Obligations’’ 

means fixed income obligations 

including structured debt or other 

instruments characterized as debt 

pursuant to 29 CFR 2510.3–101, 

including, but not limited to, debt 

convertible into equity, certificates of 

deposit and loans (other than loans with 

respect to which an MPS is the entity 

which acts as lead lender). Asset-Backed 

Securities are not Fixed Income 

Obligations for purposes of this 

exemption. 

II. ‘‘FNMA’’ means the Federal 

National Mortgage Association. 

JJ. ‘‘Foreign Bank’’ means an 

institution that has substantially similar 

powers to a bank as defined in section 

202(a)(2) of the Investment Advisers 

Act, as amended, has as of the last day 

of its most recent fiscal year, equity 

capital which is the equivalent of no 

less than $200 million, and is subject to: 

(1)(a) Registered and regulated under 

the laws of the Financial Services 

Authority in the United Kingdom, or 

(b)(i) registered and regulated by a 

securities commission of a Province of 

Canada that is a member of the 

Canadian Securities Administration, 

and (ii) is subject to the oversight of a 

Canadian self-regulatory authority; or 

(2) Regulation by the relevant 

governmental banking agency(ies) of a 

country other than the United States 

and the regulation and oversight of 

these banking agencies were applicable 

to a bank that received: (i) An 

individual exemption, granted by the 

Department under section 408(a) of 

ERISA, involving the loan of securities 

by a plan to a bank or (ii) a final 

authorization by the Department to 

engage in an otherwise prohibited 

transaction pursuant to PTE 96–62, as 

amended, involving the loan of 

securities by a plan to a bank. On the 

date this exemption becomes effective, 

the following countries shall qualify for 

purposes of this clause (ii): United 

Kingdom, Canada, Germany, Japan, 

Australia, Switzerland, France, the 

Netherlands and Sweden. 

KK. ‘‘Foreign Broker-Dealer’’ means a 

broker-dealer that has, as of the last day 

of its most recent fiscal year, equity 

capital that is the equivalent of no less 

than $200 million and is: 

(1) Registered and regulated under the 

laws of the Financial Services Authority 

in the United Kingdom; 

(2) Registered and regulated by a 

securities commission of a Province of 

Canada that is a member of the 

Canadian Securities Administration, 

and is subject to the oversight of a 

Canadian self-regulatory authority; or 

(3) Registered and regulated under the 

relevant securities laws of a 

governmental entity of a country other 

than the United States and such 

securities laws and regulation were 

applicable to a broker-dealer that 

received: (a) An individual exemption, 

granted by the Department under 

section 408(a) of ERISA, involving the 

loan of securities by a plan to a brokerdealer or (b) a final authorization by the 

Department to engage in an otherwise 

prohibited transaction pursuant to PTE 

96–62, as amended, involving the loan 

of securities by a plan to a broker-dealer. 

On the date this exemption becomes 

effective, the following countries shall 

qualify for purposes of this clause (2): 

United Kingdom, Canada, Germany, 


Emcdonald on DSK2BSOYB1PROD with NOTICES2
Federal Register / Vol. 76, No. 53 / Friday, March 18, 2011 / Notices 15101 

Japan, Australia, Switzerland, France, 

the Netherlands and Sweden. 

LL. ‘‘Foreign Collateral’’ means: 

(1) Securities issued by or guaranteed 

as to principal and interest by the 

following Multilateral Development 

Banks, the obligations of which are 

backed by the participating countries, 

including the United States: The 

International Bank for Reconstruction 

and Development, the Inter-American 

Development Bank, the Asian 

Development Bank, the African 

Development Bank, the European Bank 

for Reconstruction and Development 

and the International Finance 

Corporation; 

(2) Foreign sovereign debt securities 

provided that at least one nationally 

recognized statistical rating organization 

has rated in one of its two highest 

categories either the issue, the issuer or 

guarantor; 

(3) The British pound, the Canadian 

dollar, the Swiss franc, the Japanese yen 

or the Euro; 

(4) Irrevocable letters of credit issued 

by a Foreign Bank, other than the 

borrower or an affiliate thereof, which 

has a counterparty rating of investment 

grade or better as determined by a 

nationally recognized statistical rating 

organization; or 

(5) Any type of collateral described in 

Rule 15c3–3 of the 1934 Act as amended 

from time to time provided that the 

lending fiduciary is a U.S. Bank or U.S. 

Broker-Dealer and such fiduciary 

indemnifies the plan with respect to the 

difference, if any, between the 

replacement cost of the borrowed 

Securities and the market value of the 

collateral on the date of a borrower 

default plus interest and any transaction 

costs which a plan may incur or suffer 

directly arising out of a borrower 

default. Notwithstanding the foregoing, 

collateral described in any of the 

categories enumerated in section V(e) of 

PTE 2006–16 will be considered U.S. 

Collateral for purposes of the 

exemption. 

MM. ‘‘Foreign Exchange Transaction’’ 

means the exchange of the currency of 

one nation for the currency of another 

nation, or a contract for such an 

exchange. The term Foreign Exchange 

Transaction includes option contracts 

on foreign exchange transactions. 

Foreign Exchange Transactions may be 

either ‘‘spot’’, ‘‘forward’’ or ‘‘split’’ 

depending on the settlement date of the 

transaction. 

NN. ‘‘GNMA’’ means the Government 

National Mortgage Association. 

OO. ‘‘Independent Monitor’’ or ‘‘IM’’ 

means an individual or entity appointed 

by BlackRock to carry out certain 

functions set forth in Sections II, III and 

V of the exemption and who (or which), 

given the number of types of Covered 

Transactions and the number of actual 

individual Covered Transactions 

potentially covered by the exemption, 

must be knowledgeable and experienced 

with respect to each Covered 

Transaction and able to demonstrate 

sophistication in relevant markets, 

instruments and trading techniques 

relative thereto, and, in addition, must 

understand and accept in writing its 

duties and responsibilities under ERISA 

and the exemption with respect to the 

Client Plans. The IM must be 

independent of and unrelated to 

BlackRock and any MPS. For purposes 

of this exemption, such individual or 

entity will not be deemed to be 

independent of and unrelated to 

BlackRock and the MPSs if: 

(1) Such individual or entity directly 

or indirectly controls, is controlled by, 

or is under common control with 

BlackRock or an MPS; 

(2) Such individual or entity, or any 

employee thereof performing services in 

connection with this exemption, or an 

officer, director, partner, or highly 

compensated employee (as defined in 

Code section 4975(e)(2)(H)) thereof, is 

an officer, director, partner or highly 

compensated employee (as defined in 

Code section 4975(e)(2)(H)) of 

BlackRock or an MPS; or any member of 

the business segment performing 

services in connection with this 

exemption is a relative of an officer, 

director, partner or highly compensated 

employee (as defined in Code section 

4975(e)(2)(H)) of BlackRock or an MPS. 

However, if an individual is a director 

of the IM and an officer, director, 

partner or highly compensated 

employee (as defined in Code section 

4975(e)(2)(H)) of BlackRock or an MPS, 

and if he or she abstains from 

participation in any of the services 

performed by the IM under this 

exemption, then this Section VI.OO.(2) 

shall not apply. 

For purposes of this Subsection, the 

term officer means a president, any 

senior vice president in charge of a 

principal business unit, division or 

function (such as sales, administration, 

or finance), or any other officer who 

performs a policy-making function for 

the IM, BlackRock, or an MPS. 

(3) The IM directly or indirectly 

receives any compensation or other 

consideration for the IM’s personal 

account in connection with any Covered 

Transaction, except that the IM may 

receive compensation from BlackRock 

for acting as IM as contemplated herein 

if the amount or payment of such 

compensation is reasonable and not 

contingent upon or in any way affected 

by any decision made by the IM while 

acting as IM; or 

(4) The annual gross revenue received 

by the IM, during any year of its 

engagement, from the MPSs and 

BlackRock Entities for all services 

exceeds the greater of (a) five percent 

(5%) of the IM’s annual gross revenue 

from all sources for its prior tax year, or, 

(b) one percent (1%) of the annual gross 

revenue of the IM and its majority 

shareholder from all sources for their 

prior tax year. 

PP. ‘‘Index’’ means an equity or debt 

Securities or commodities index that 

represents the investment performance 

of a specific segment of the market for 

equity or debt Securities or commodities 

in the United States and/or an 

individual foreign country or any 

collection of foreign countries, but only 

if— 

(1) The organization creating and 

maintaining the index is: 

(a) Engaged in the business of 

providing financial information, 

evaluation, advice or Securities 

brokerage services to institutional 

clients, 

(b) A publisher of financial news or 

information, or 

(c) A public Securities exchange or 

association of Securities dealers; and 

(2) The index is created and 

maintained by an organization 

independent of all BlackRock Entities. 

For purposes of this definition of 

‘‘Index,’’ every BlackRock Entity is 

deemed to be independent of every 

MPS. 

(3) The index is a generally accepted 

standardized index of Securities or 

commodities which is not specifically 

tailored for the use of a BlackRock 

Manager(s). 

(4) If the organization creating, 

providing or maintaining the Index is an 

MPS: 

(a) Such Index must be widely-used 

in the market by independent 

institutional investors other than 

pursuant to an investment management 

or advisory relationship with a 

BlackRock Manager, and must be 

prepared or applied by such MPS in the 

same manner as for customers other 

than a BlackRock Manager(s); 

(b) BlackRock must certify to the ECO 

whether, in its reasonable judgment, 

such Index is widely-used in the 

market. In making this determination, 

BlackRock shall take into consideration 

factors such as (i) publication of 

summary Index information by the MPS 

providing the Index, Bloomberg, 

Reuters, or a similar institution involved 

in the dissemination of financial 

information, and (ii) delivery of Index 

information including but not limited to 


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Index component information by such 

MPS to clients or other subscribers 

including by electronic means including 

via the internet; 

(c) BlackRock must notify the ECO if 

it becomes aware that: (i) Such Index is 

operated other than in accordance with 

objective rules, in the ordinary course of 

business, (ii) manipulation of any such 

Index has occurred for the purpose of 

benefiting BlackRock, or (iii) in the 

event that any rule change occurred in 

connection with the rules underlying 

such Index, such rule change was made 

by the MPS for the purpose of benefiting 

BlackRock; provided, however, this 

Subsection (c)(iii) expressly excludes 

instances where the rule changes were 

made in response to requests from 

clients/prospective clients of BlackRock 

even if BlackRock is ultimately hired to 

manage such a portfolio (e.g., if plan 

sponsor X requests a ‘‘Global ex-Sudan 

Fixed Income Index’’, an MPS decides to 

sponsor such index and plan sponsor X 

approaches BlackRock or otherwise 

issues a ‘‘Request for Proposal’’ for 

investment managers who could manage 

an index portfolio benchmarked to the 

Global ex-Sudan Fixed Income Index). 

(d) BlackRock must certify to the ECO 

annually that it is not aware of the 

occurrence of any of the events 

described in Section VI.PP.(4)(c), and if 

BlackRock cannot so certify, or if 

BlackRock provides the ECO with the 

notice described Section VI.PP.(4)(c), 

the ECO shall notify the IM, and the IM 

must take appropriate remedial action 

which may include, but need not be 

limited to, instructions for relevant 

BlackRock Managers to cease using such 

Index. 

QQ. ‘‘Index Account or Fund’’ means 

any investment fund, account or 

portfolio sponsored, maintained, 

trusteed, or managed by a BlackRock 

Manager or a BlackRock Entity, in 

which one or more Client Plans invest, 

and— 

(1) Which is designed to track the rate 

of return, risk profile and other 

characteristics of an Index by either (i) 

replicating the same combination of 

Securities or commodities which 

compose such Index or (ii) sampling the 

Securities or commodities which 

compose such Index based on objective 

criteria and data; 

(2) For which the BlackRock Manager 

does not use its discretion, or data 

within its control, to affect the identity 

or amount of Securities or commodities 

to be purchased or sold; 

(3) That contains ‘‘plan assets’’ subject 

to either ERISA section 406, Code 

section 4975 or FERSA section 8477(c); 

and, 

(4) That involves no agreement, 

arrangement, or understanding 

regarding the design or operation of the 

Index Account or Fund which is 

intended to benefit a BlackRock Entity 

or an MPS, or any party in which a 

BlackRock Entity or an MPS may have 

an interest. 

For purposes of this definition of 

‘‘Index Account or Fund’’, every 

BlackRock Entity is deemed to be 

independent of each MPS. 

RR. ‘‘In-House Plan’’ means an 

employee benefit plan that is subject to 

ERISA section 406 and/or Code section 

4975, and that is sponsored by a 

BlackRock Entity for its employees. 

SS. ‘‘Interbank Rate’’ means the 

interbank bid and asked rate for foreign 

exchange transactions of comparable 

size and maturity at the time of the 

transaction as quoted on a nationally 

recognized service for facilitating 

foreign currency trades between large 

commercial banks and Securities 

dealers. 

TT. ‘‘Know’’ means to have actual 

knowledge. BlackRock Managers will be 

deemed to have actual knowledge of 

information set forth in a written 

agreement or offering document as of 

the date the BlackRock Manager 

receives such agreement or document. 

UU. ‘‘Model’’ means a computer 

model that is based on prescribed 

objective criteria using independent 

data not within the control of a 

BlackRock Entity to transform an Index. 

VV. ‘‘Model-Driven Account or Fund’’ 

means any investment fund, account or 

portfolio sponsored, maintained, 

trusteed, or managed by a BlackRock 

Manager or a BlackRock Entity in which 

one or more Client Plans invest, and— 

(1) Which is composed of Securities 

or commodities the identity of which 

and the amount of which are selected by 

a Model; 

(2) That contains ‘‘plan assets’’ subject 

to either ERISA section 406, Code 

section 4975 or FERSA section 8477(c); 

and 

(3) That involves no agreement, 

arrangement, or understanding 

regarding the design or operation of the 

Model-Driven Account or Fund or the 

utilization of any specific objective 

criteria which is intended to benefit a 

BlackRock Entity or an MPS, or any 

party in which a BlackRock Entity or an 

MPS may have an interest. 

For purposes of this definition of 

‘‘Model-Driven Account or Fund,’’ every 

BlackRock Entity is deemed to be 

independent of each MPS. 

WW. ‘‘MPS’’ or ‘‘Minority Passive 

Shareholder’’ means (1) Barclays PLC, 

(2) Bank of America Corporation, (3) 

The PNC Financial Services Group, Inc., 

or (4) each entity directly or indirectly, 

through one or more intermediaries, 

controlling, controlled by or under 

common control with one or more of 

Barclays PLC (Barclays MPSs), Bank of 

America Corporation (BOA MPSs) or 

The PNC Financial Services Group, Inc., 

(PNC MPSs) (each of the PNC MPSs, 

Barclays MPSs, and the BOA MPSs, an 

MPS Group) but excluding any and all 

BlackRock Entities. Bank of America 

Corporation and any entity directly or 

indirectly, through one or more 

intermediaries, controlling, controlled 

by or under common control with Bank 

of America Corporation (collectively, 

the BOA Group) shall cease to be an 

MPS on the day after the number of 

representatives of the BOA Group on the 

BlackRock Board of Directors is reduced 

to one (1). 

XX. ‘‘MPS Group’’ shall have the 

meaning set forth in the definition of 

MPS. 

YY. ‘‘MPS Plans’’ means an employee 

benefit plan(s) that is subject to ERISA 

section 406 and/or Code section 4975, 

and that is sponsored by an MPS for its 

employees. 

ZZ. ‘‘Other Account or Fund’’ means 

any investment fund, account or 

portfolio sponsored, maintained, 

trusteed, or managed by a BlackRock 

Manager or a BlackRock Entity in which 

one or more Client Plans invest, and— 

(1) Which is not an Index Account or 

Fund or a Model-Driven Account or 

Fund; and 

(2) That contains ‘‘plan assets’’ subject 

to either ERISA section 406, Code 

section 4975 or FERSA section 8477(c). 

AAA. ‘‘Pooled Fund’’ means a 

common or collective trust fund or other 

pooled investment fund: 

(1) In which Client Plan(s) invest; 

(2) For which a BlackRock Manager 

exercises discretionary authority or 

discretionary control respecting the 

management or disposition of the assets 

of such fund(s); and 

(3) That contains ‘‘plan assets’’ subject 

to either ERISA section 406, Code 

section 4975 or FERSA section 8477(c). 

Solely for purposes of Section IV of 

this exemption, ‘‘Pooled Fund(s)’’ shall 

only include funds or trusts which 

otherwise meet this definition but 

which also are either (i) maintained by 

a BlackRock Entity or (ii) maintained by 

a person which is not a BlackRock 

Entity but is sub-advised by a BlackRock 

Manager, provided that with respect to 

a Pooled Fund described in (ii), (A) the 

fund or trust is either a bank-maintained 

common or collective trust fund or an 

insurance company pooled separate 

account that holds assets of at least $250 

million, (B) the bank or insurance 

company sponsoring the pooled fund 


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Federal Register / Vol. 76, No. 53 / Friday, March 18, 2011 / Notices 15103 

has total client assets under its 

management or control in excess of $5 

billion as of the last day of its most 

recent fiscal year, and shareholders’ or 

partners’ equity in excess of $1 million, 

and (C) the decision to invest the Client 

Plan into the bank-maintained common 

or collective trust or insurance company 

pooled separate account and to maintain 

such investment is made by a Client 

Plan fiduciary which is not a BlackRock 

Entity. Such sub-advised Pooled Funds 

are sometimes referred to herein as 

‘‘Sub-Advised Pooled Funds’’. 

BBB. ‘‘QPAM Exemption’’ or ‘‘PTE 84– 

14’’ means Prohibited Transaction 

Exemption 84–14, as amended. 

CCC. ‘‘Qualified Professional Asset 

Manager’’ or ‘‘QPAM’’ shall have the 

meaning set forth in Section VI(a) of the 

QPAM Exemption. 

DDD. ‘‘Qualified Institutional Buyer’’ 

or ‘‘QIB’’ shall have the same meaning as 

defined in SEC Rule 144A (17 CFR 

230.144A(a)(1)) under the 1933 Act. 

EEE. ‘‘Rating Organizations’’ means 

Standard & Poor’s Rating Services, 

Moody’s Investors Service, Inc., Fitch 

Ratings Inc., DBRS Limited, DBRS, Inc., 

or any successors thereto. 

FFF. ‘‘Recognized Securities 

Exchange’’ means a U.S. securities 

exchange that is registered as a ‘‘national 

securities exchange’’ under section 6 of 

the 1934 Act, or a designated offshore 

securities market, as defined in 

Regulation S of the SEC (17 CFR 

230.902(b)), as such definition may be 

amended from time to time, which 

performs with respect to Securities the 

functions commonly performed by a 

stock exchange within the meaning of 

definitions under the applicable 

Securities laws (e.g., 17 CFR 240.3b-16). 

GGG. ‘‘SEC’’ means the United States 

Securities and Exchange Commission. 

HHH. ‘‘Securities’’ shall have the same 

meaning as defined in section 2(36) of 

the 1940 Act. For purposes of Section IV 

of this exemption, except as where 

specifically identified, Asset-Backed 

Securities are treated as debt Securities. 

III. ‘‘Special Notice’’ shall have the 

meaning set forth in Section II.F. of this 

exemption. 

JJJ. ‘‘Three Quote Process’’ means three 

bids or offers (either of which being 

sometimes referred to as quotes) are 

received by a trader for a BlackRock 

Manager each of which such quotes 

such trader reasonably believes is an 

indication that the dealer presenting the 

bid or offer is willing to transact the 

trade at the stipulated volume under 

discussion, and all material terms 

(including volume) under discussion are 

materially similar with respect to each 

other such quote. In selecting the best of 

three such quotes, a BlackRock Manager 

shall maintain books and records for the 

three firm bids/offers in a convention 

that it reasonably believes is customary 

for the specific asset class (such as 

‘‘price’’ quotes, ‘‘yield’’ quotes or 

‘‘spread’’ quotes). For example, corporate 

bonds are often quoted on a spread basis 

and dealers customarily quote the 

spread above a certain benchmark 

bond’s yield (e.g., for a given size and 

direction such as a BlackRock trader 

may ask for quotes to sell $1 million of 

a particular bond, dealer 1 may quote 50 

bps above the yield of the 10 year 

treasury bond, dealer 2 might quote 52 

bps above the yield of the 10 year 

treasury bond and dealer 3 might quote 

53 bps above the yield of the 10 year 

treasury bond). If only two firm bids/ 

offers can be obtained, the trade requires 

prior approval by the ECO and the ECO 

must inquire as to why three firm bids/ 

offers could not be obtained. If in the 

case of a sale or purchase a trader for a 

BlackRock Manager reasonably believes 

it would be injurious to the Client Plan 

to specify the size of the intended trade 

to certain bidders, a bid on a portion of 

the intended trade may be treated as a 

firm bid if the trader documents (i) why 

the bid price is a realistic indication of 

the economic terms for the actual 

amount being traded despite the 

difference in the size of the actual trade 

and (ii) why it would be harmful to the 

Client Plan to solicit multiple bids on 

the actual amount of the trade. If a 

trader for a BlackRock Manager solicits 

bids from three or more dealers on a sale 

or purchase of a certain volume of 

Securities, and receives back three or 

more bids, but at least one bid is not for 

the full amount of the intended sale, if 

the price offered by the partial bidder(s) 

is less than the price offered by the full 

bidder(s), the trader may assume a full 

bid by the partial bidder(s) would not be 

the best bid, and the trader can 

consummate the trade, in the case of at 

least two full bids, with the dealer 

making the better of the full bids, or in 

the case of only one full bid, with the 

dealer making that full bid. 

KKK. ‘‘Type A Transactions’’ means 

transactions between BlackRock 

Managers on behalf of Client Plans with 

MPSs which (i) are or were continuing 

transactions within the meaning of 

section VI(i) of PTE 84–14 and/or 

section IV(h) of PTE 91–38 in existence 

on the date of the Acquisition, and (ii) 

pursuant to which there is no discretion 

on the part of either party, other than 

the ability of the BlackRock Manager to 

sell or otherwise transfer the Client 

Plan’s position to a third party, or the 

ability of the MPS to sell or otherwise 

transfer its position to a third party, or 

the ability of the MPS to otherwise 

terminate the transaction on previously 

specified terms. 

LLL. ‘‘Type B Covered Transactions’’ 

means transactions which meet the 

criteria to be Type A Transactions but 

which possess the additional feature 

that the BlackRock Manager, on behalf 

of a Client Plan, has the option to 

terminate the transaction with the MPS 

on previously specified terms. 

MMM. ‘‘Type C Covered 

Transactions’’ means transactions which 

meet the criteria to be Type B Covered 

Transactions but which possess the 

additional feature that the BlackRock 

Manager may terminate or modify the 

transaction on behalf of a Client Plan 

under certain circumstances, but only 

with negotiation and/or payment of 

consideration to the MPS or to the 

Client Plan which was not 

predetermined. 

NNN. ‘‘Underwriter Exemption(s)’’ 

means a group of individual exemptions 

granted by the Department to provide 

relief for the origination and operation 

of certain asset pool investment trusts 

and the acquisition, holding and 

disposition by plans of Asset-Backed 

Securities representing undivided 

interests in those trusts. Such group of 

individual exemptions was collectively 

amended by PTE 2009–31, 74 FR 59001 

(Nov. 16, 2009). 

OOO. ‘‘Unwind Period’’ shall have the 

meaning set forth in Section II.A.3.(b) of 

this exemption. 

PPP. ‘‘Unwind Period 2’’ shall have 

the meaning set forth in Section III.W. 

of this exemption. 

QQQ. ‘‘U.S. Bank’’ means a bank as 

defined in section 202(a)(2) of the 

Investment Advisers Act, as amended. 

RRR. ‘‘U.S. Broker-Dealer’’ means a 

broker-dealer registered under the 1934 

Act or exempted from registration under 

section 15(a)(1) of the 1934 Act as a 

dealer in exempted government 

Securities (as defined in section 3(a)(12) 

of the 1934 Act). 

SSS. ‘‘U.S. Collateral’’ means: 

(1) U.S. currency; 

(2) ‘‘Government securities’’ as defined 

in section 3(a)(42)(A) and (B) of the 

1934 Act; 

(3) ‘‘Government securities’’ as defined 

in section 3(a)(42)(C) of the 1934 Act 

issued or guaranteed as to principal or 

interest by the following corporations: 

The Federal Home Loan Mortgage 

Corporation, the Federal National 

Mortgage Association, the Student Loan 

Marketing Association and the 

Financing Corporation; 

(4) Mortgage-backed Securities 

meeting the definition of a ‘‘mortgage 

related security’’ set forth in section 

3(a)(41) of the 1934 Act; 


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15104 Federal Register / Vol. 76, No. 53 / Friday, March 18, 2011 / Notices 

(5) Negotiable certificates of deposit 

and bankers acceptances issued by a 

‘‘bank’’ as that term is defined in section 

3(a)(6) of the 1934 Act, and which are 

payable in the United States and 

deemed to have a ‘‘ready market’’ as that 

term is defined in 17 CFR 240.15c3–1; 

or 

(6) Irrevocable letters of credit issued 

by a U.S. Bank other than the borrower 

or an affiliate thereof, or any 

combination, thereof. 

TTT. ‘‘Violation’’ means a Covered 

Transaction which is a prohibited 

transaction under section 406 or 407 of 

ERISA, Code section 4975, or FERSA 

section 8477(c) and which is not exempt 

by reason of a failure to comply with 

this exemption or another 

administrative or statutory exemption. 

To the extent that the non-exempt 

prohibited transaction relates to an act 

or omission that is separate and distinct 

from a prior otherwise exempt 

transaction that may relate to the same 

asset (e.g., a conversion of a debt 

instrument into an equity instrument or 

a creditor’s committee for a debt 

instrument), the Violation occurs only at 

the current point in time and no 

Violation shall be deemed to occur for 

the earlier transaction relating to the 

same asset (e.g., the initial purchase of 

the asset) that was otherwise in 

compliance with ERISA, the Code or 

FERSA. 

Effective Date: This exemption is 

effective as of December 1, 2009; 

notwithstanding the foregoing, this 

exemption ceases to be available with 

respect to the BOA Group on the day 

after the number of representatives of 

the BOA Group on the BlackRock Board 

of Directors is reduced to one (1). 

Signed at Washington, DC, this 9th day of 

March____, 2011. 

Ivan L. Strasfeld, 

Director of Exemption Determinations, 

Employee Benefits Security Administration, 

U.S. Department of Labor. 

[FR Doc. 2011–6044 Filed 3–17–11; 8:45 am] 

BILLING CODE 4510–29–P 


Emcdonald on DSK2BSOYB1PROD with NOTICES2