Federal Register / Vol. 74, No. 219 / Monday, November 16, 2009 / Notices 58987 

—Minimize the burden of the collection 

of information on those who are to 

respond, including through the use of 

appropriate automated, electronic, 

mechanical, or other technological 

collection techniques or other forms 

of information technology, e.g., 

permitting electronic submission of 

responses. 

Overview of This Information 

Collection 

(1) Type of Information Collection: 

Extension of a currently approved 

collection. 

(2) Title of the Form/Collection: 

Transactions Among Licensee/ 

Permittees and Transactions Among 

Licensees and Holders of User Permits. 

(3) Agency form number, if any, and 

the applicable component of the 

Department of Justice sponsoring the 

collection: Form Number: None. Bureau 

of Alcohol, Tobacco, Firearms and 

Explosives. 

(4) Affected public who will be asked 

or required to respond, as well as a brief 

abstract: Primary: Business or other forprofit. Other: None. Abstract: The Safe 

Explosives Act requires that an 

explosives distributor must verify the 

identity of the purchaser; an explosives 

purchaser must provide a copy of the 

license/permit to the distributor prior to 

the purchase of explosive materials; 

possessors of explosive materials must 

provide a list of explosive storage 

locations; purchasers of explosive 

materials must provide a list of 

representatives authorized to purchase 

on behalf of the distributor; and an 

explosive purchaser must provide a 

statement of intended use of the 

explosives. 

(5) An estimate of the total number of 

respondents and the amount of time 

estimated for an average respondent to 

respond: There will be an estimated 

50,000 respondents, who will take 30 

minutes to comply with the required 

information. 

(6) An estimate of the total burden (in 

hours) associated with the collection: 

There are an estimated 25,000 total 

burden hours associated with this 

collection. 

If additional information is required 

contact: Lynn Bryant, Department 

Clearance Officer, United States 

Department of Justice, Policy and 

Planning Staff, Justice Management 

Division, Suite 1600, Patrick Henry 

Building, 601 D Street, NW., 

Washington, DC 20530. 

Dated: November 9, 2009. 

Lynn Bryant, 

Department Clearance Officer, PRA, United 

States Department of Justice. 

[FR Doc. E9–27380 Filed 11–13–09; 8:45 am] 

BILLING CODE 4410–FY–P 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

Application Nos. and Proposed 

Exemptions; D–11491, JPMorgan 

Chase Bank, N.A. (JPMCB or the 

Applicant); D–11492, Ivy Asset 

Management Corporation; and D– 

11571, The Bank of New York (BNY 

Mellon or the Applicant), et al. 

AGENCY: Employee Benefits Security 

Administration, Labor. 

ACTION: Notice of proposed exemptions. 

SUMMARY: This document contains 

notices of pendency before the 

Department of Labor (the Department) of 

proposed exemptions from certain of the 

prohibited transaction restrictions of the 

Employee Retirement Income Security 

Act of 1974 (ERISA or the Act) and/or 

the Internal Revenue Code of 1986 (the 

Code). 

Written Comments and Hearing 

Requests 

All interested persons are invited to 

submit written comments or requests for 

a hearing on the pending exemptions, 

unless otherwise stated in the Notice of 

Proposed Exemption, within 45 days 

from the date of 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 request, and (2) the nature 

of the person’s interest in the exemption 

and the manner in which the person 

would be adversely affected by the 

exemption. A request for a hearing must 

also state the issues to be addressed and 

include a general description of the 

evidence to be presented at the hearing. 

ADDRESSES: All written comments and 

requests for a hearing (at least three 

copies) should be sent to the Employee 

Benefits Security Administration 

(EBSA), Office of Exemption 

Determinations, Room N–5700, U.S. 

Department of Labor, 200 Constitution 

Avenue, NW., Washington, DC 20210. 

Attention: Application No. ll, stated 

in each Notice of Proposed Exemption. 

Interested persons are also invited to 

submit comments and/or hearing 

requests to EBSA via e-mail or FAX. 

Any such comments or requests should 

be sent either by e-mail to: 

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

(202) 219–0204 by the end of the 

scheduled comment period. The 

applications for exemption and the 

comments received will be available for 

public 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. 

Notice to Interested Persons 

Notice of the proposed exemptions 

will be provided to all interested 

persons in the manner agreed upon by 

the applicant and the Department 

within 15 days of the date of publication 

in the Federal Register. Such notice 

shall include a copy of the notice of 

proposed exemption as published in the 

Federal Register and shall inform 

interested persons of their right to 

comment and to request a hearing 

(where appropriate). 

SUPPLEMENTARY INFORMATION: The 

proposed exemptions were requested in 

applications filed pursuant to section 

408(a) of the Act and/or section 

4975(c)(2) of the Code, and in 

accordance with procedures set forth in 

29 CFR part 2570, subpart B (55 FR 

32836, 32847, August 10, 1990). 

Effective December 31, 1978, section 

102 of Reorganization Plan No. 4 of 

1978, 5 U.S.C. App. 1 (1996), transferred 

the authority of the Secretary of the 

Treasury to issue exemptions of the type 

requested to the Secretary of Labor. 

Therefore, these notices of proposed 

exemption are issued solely by the 

Department. 

The applications contain 

representations with regard to the 

proposed exemptions which are 

summarized below. Interested persons 

are referred to the applications on file 

with the Department for a complete 

statement of the facts and 

representations. 

JPMorgan Chase Bank, N.A. (JPMCB or the 

Applicant), Located in New York, New 

York 

[Application No. D–11491] 

Proposed Exemption 

The Department is considering 

granting an exemption under the 

authority of section 408(a) of the Act 

and section 4975(c)(2) of the Code and 

in accordance with the procedures set 

forth in 29 CFR part 2570, Subpart B (55 

FR 32836, 32847, August 10, 1990). 

Section I—Transactions 

If the exemption is granted, the 

restrictions of sections 406(a), 406(b)(1) 

and (b)(2) of the Act, and the sanctions 

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58988 Federal Register / Vol. 74, No. 219 / Monday, November 16, 2009 / Notices 

resulting from the application of section 

4975 of the Code, by reason of section 

4975(c)(1)(A) through (E) of the Code 

shall not apply, effective July 1, 2004, to 

the continued and future provision by 

JPMCB or by its current or future 

affiliates of letters of credit to guarantee 

the commercial lease obligations of 

unrelated third-party tenants in 

connection with commercial properties 

owned by a Fund (as defined below in 

Section III) or commercial properties for 

which a Fund has a security interest, 

where JPMCB is the manager and trustee 

(Trustee) of such Funds that hold the 

assets of certain employee benefit plans 

(the Plans), provided that the conditions 

set forth below in Section II are 

satisfied. 

Section II—Conditions 

A. With respect to existing or future 

letters of credit, each of the Funds is 

represented by an independent 

fiduciary to perform the following 

functions: 

(1) Monitor monthly reports of rental 

payments of tenants utilizing such 

letters of credit issued by JPMCB, or any 

current or future affiliate of JPMCB, to 

guarantee their lease payments; 

(2) Confirm whether an event has 

occurred that calls for a letter of credit 

to be drawn upon; and 

(3) Represent each of the Funds and 

the Plans as an independent fiduciary in 

any circumstances with respect to a 

letter of credit which would present a 

conflict of interest for the Trustee or 

otherwise violate section 406(b), 

including but not limited to: the need to 

enforce a remedy against JPMCB or a 

current or future affiliate with respect to 

its obligations under a letter of credit. 

B. With respect to future letters of 

credit issued by JPMCB, or any current 

or future affiliate of JPMCB, the 

following additional conditions are met: 

(1) JPMCB, or any current or future 

affiliate of JPMCB, as the issuer of a 

letter of credit, has at least an ‘‘A’’ credit 

rating by at least one nationally 

recognized statistical rating service at 

the time of the issuance of the letter of 

credit; 

(2) The letter of credit has objective 

market drawing conditions and states 

precisely the documents against which 

payment is to be made; 

(3) JPMCB and its affiliates do not 

‘‘steer’’ the Funds’ tenants to JPMCB or 

its affiliates in order to obtain a letter of 

credit; 

(4) Letters of credit are issued only to 

third-party tenants which are unrelated 

to JPMCB; and 

(5) The terms of any future letters of 

credit are not more favorable to the 

tenants than the terms generally 

available in transactions with other 

similarly situated unrelated third-party 

commercial clients of JPMCB or of its 

current or future affiliates. 

C. JPMCB or its affiliates maintain, or 

cause to be maintained, for a period of 

six (6) years from the date of any 

transactions involving letters of credit 

described in Section I above such 

records as are necessary to enable the 

persons, described below in Section 

II(D), to determine whether the 

conditions of this exemption have been 

met, except that— 

(1) No party in interest with respect 

to a Plan whose assets are involved in 

letter of credit transactions described in 

Section I above, other than JPMCB or its 

affiliates, shall be subject to a civil 

penalty under section 502(i) of the Act 

or the taxes imposed by section 4975(a) 

and (b) of the Code, if such records are 

not maintained, or not available for 

examination, as required below by 

Section II(D); and 

(2) A separate prohibited transaction 

shall not be considered to have occurred 

if, due to circumstances beyond the 

control of JPMCB or its affiliates, such 

records are lost or destroyed prior to the 

end of the six-year period. 

D. (1) Except as provided below in 

Section II(D)(2), and notwithstanding 

any provisions of subsections (a)(2) and 

(b) of section 504 of the Act, the records 

referred to above in Section II(C) 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, the Securities 

and Exchange Commission (SEC), and 

any U.S. banking regulatory agency; 

(ii) Any fiduciary of any Plan whose 

assets are involved in the letter of credit 

transactions described in Section I 

above, or any duly authorized employee 

or representative of such fiduciary; or 

(iii) Any employer of participants and 

beneficiaries and any employee 

organization whose members are 

covered by a Plan whose assets are 

involved in the letter of credit 

transactions described in Section I 

above, or any authorized employee or 

representative of these entities; or 

(iv) Any participant or beneficiary of 

a Plan whose assets are involved in the 

letter of credit transactions described in 

Section I above, or duly authorized 

employee or representative of such 

participant or beneficiary; 

(2) None of the persons described 

above in Section II(D)(1)(ii)–(iv) shall be 

authorized to examine trade secrets of 

JPMCB or its affiliates, or commercial or 

financial information which is 

privileged or confidential; and 

(3) Should JPMCB or its affiliates 

refuse to disclose information on the 

basis that such information is exempt 

from disclosure, pursuant to Section 

II(D)(2) above, JPMCB or its affiliates 

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. 

Section III—Definitions 

A. The term ‘‘independent fiduciary’’ 

means Fiduciary Counselors Inc. 

(Fiduciary Counselors) or any successor 

Independent Fiduciary, provided that 

Fiduciary Counselors or its successor is: 

(1) Independent of, and unrelated to, 

JPMCB and its affiliates, and (2) 

appointed to act on behalf of each Fund 

for the purposes described in Section 

II.A and II.B above. For purposes of this 

proposed exemption, a fiduciary will 

not be deemed to be independent of, 

and unrelated to, JPMCB if: (i) Such 

fiduciary directly or indirectly, controls, 

is controlled by, or is under common 

control with JPMCB; (ii) such fiduciary 

directly or indirectly receives any 

compensation or other consideration in 

connection with any transaction 

described in this proposed exemption, 

except that it may receive compensation 

for acting as an independent fiduciary 

from JPMCB in connection with the 

transactions described herein, if the 

amount or payment of such 

compensation is not contingent upon, or 

in any way affected by such fiduciary’s 

decision; and (iii) more than 5 percent 

of such fiduciary’s annual gross revenue 

in its prior tax year will be paid by 

JPMCB and its affiliates in the 

fiduciary’s current tax year with respect 

to any particular 12-month tax period. 

B. The term ‘‘affiliate’’ 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, or partner, employee, or 

relative (as defined in section 3(15) of 

the Act) of such person; and (3) any 

corporation or partnership of which 

such person is an officer, director, or 

partner or employee. For purposes of 

this definition, the term ‘‘control’’ 

means the power to exercise a 

controlling influence over the 

management or policies of a person 

other than an individual. 

C. The term ‘‘Fund’’ or ‘‘Funds’’ 

means ‘‘collective investment funds,’’ of 

JPMCB and its current or future 

affiliates, within the meaning of 

Prohibited Transaction Class Exemption 

91–38 (PTE 91–38) and ‘‘investment 

funds,’’ of JCMCB and its current or 

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Federal Register / Vol. 74, No. 219 / Monday, November 16, 2009 / Notices 58989 

future affiliates, within the meaning of 

Prohibited Transaction Class Exemption 

(PTE 84–14) and encompasses the 

following Funds: (i) the Commingled 

Pension Trust Fund/Strategic Property 

Fund of JPMorgan Chase Bank, N.A. (the 

Strategic Property Fund); (ii) the 

Commingled Pension Trust Fund/ 

Special Situation Property Fund of 

JPMorgan Chase Bank, N.A. (the Special 

Situation Property Fund); and (iii) the 

Commingled Pension Trust Fund/ 

Mortgage Private Placement Fund of 

JPMorgan Chase Bank, N.A. (the 

Mortgage Fund). 

Effective Date: The exemption is 

effective as of July 1, 2004. 

Summary of Facts and Representations 

Background 

1. JPMorgan Chase & Co. (JPMCC), the 

parent company of JPMorgan Chase 

Bank, N.A. (JPMCB), is headquartered in 

New York. JPMCC had assets of 

approximately $2.2 trillion as of January 

15, 2009. JPMCC has operations in more 

than 50 countries, and is a leader in 

investment banking, financial services 

for consumers and businesses, financial 

transaction processing, asset and wealth 

management, and private equity. 

On January 14, 2004, JPMCC and 

Bank One Corporation (Bank One), 

headquartered in Chicago, Illinois, 

announced that they had agreed to 

merge in a strategic business 

combination that established the second 

largest banking franchise in the United 

States, based on core deposits. 

Completion of the merger (the Bank One 

Merger) occurred on July 1, 2004, and 

the merged company is still known as 

JPMorgan Chase & Co. (i.e., JPMCC). The 

Bank One Merger created an enterprise 

with a combined market capitalization 

of approximately $130 billion. The 

common stock of JPMCC trades on the 

New York Stock Exchange under the 

trading symbol ‘‘JPM.’’ 

Following the Bank One Merger, 

JPMCC announced the merger of its 

three lead banks, JPMorgan Chase Bank, 

N.A., Bank One, N.A. (Chicago Illinois), 

and Bank One, N.A. (Columbus Ohio), 

effective as of November 13, 2004. 

Immediately prior to such merger, 

JPMorgan Chase Bank converted its 

charter to a national bank. The name of 

the surviving entity in the bank merger 

is JPMorgan Chase Bank, N.A. 

(hereinafter referred to as JPMCB or the 

Applicant). 

JPMCB is internally organized for 

management reporting purposes into six 

major business groups: (i) Asset & 

Wealth Management; (ii) Card Services; 

(iii) Commercial Banking; (iv) 

Investment Banking; (v) Retail Financial 

Services; and (vi) Treasury & Securities 

Services. According to the Applicant, 

only the first business group, Asset & 

Wealth Management, is relevant to this 

exemption request. 

2. The Applicant represents that 

JPMCB serves as trustee of various 

funds, which are ‘‘collective investment 

funds’’ within the meaning of PTE 91– 

38, and ‘‘investment funds’’ within the 

meaning of PTE 84–14 (collectively the 

Funds). According to the Applicant, 

JPMCB, which meets (as did its 

predecessor, Morgan Guaranty Trust 

Company) the definition of a qualified 

professional asset manager (QPAM) 

within the meaning of PTE 84–14 and 

which is a bank maintaining a bank 

collective investment fund within the 

meaning of PTE 91–38, has ordinarily 

relied upon these class exemptions to 

conduct the activities of various Funds 

including the Strategic Property Fund, 

the Special Situation Property Fund, 

and the Mortgage Fund. 

3. As of December 31, 2008, the 

Strategic Property Fund had net assets 

of approximately $13.7 billion, which 

were invested in 152 developed real 

estate properties, primarily office 

buildings, industrial parks, residential 

properties, retail properties, and hotels. 

As of December 31, 2008, the Special 

Situation Property Fund had net assets 

of approximately $2.5 billion, which 

were invested in real estate properties, 

primarily office buildings, industrial 

parks, residential properties, and retail 

properties. As of December 31, 2008, the 

Mortgage Fund had net assets of 

approximately $5.4 billion, which were 

invested primarily in whole loans 

collateralized by commercial, 

residential and cooperative properties, 

GNMA Project Loans, and residential 

mortgage-backed securities. 

As of December 31, 2008, there were 

approximately 290 employee benefit 

plans participating in the Strategic 

Property Fund, 125 employee benefit 

plans participating in the Special 

Situation Property Fund, and 355 

employee benefit plans participating in 

the Mortgage Fund. Collectively, these 

participating plans were comprised of 

both employee benefit plans subject to 

Title I of the Act (hereinafter the Plans), 

as well as employee benefit plans not 

subject to the Act, such as governmentsponsored plans within the meaning of 

section 3(32) of the Act. 

4. The Department previously 

provided individual exemptive relief in 

PTE 2003–10 (68 FR 28031, May 22, 

2003) with respect to prohibited 

transactions involving certain leases and 

letters of credit that arose from the 

December 31, 2000 merger of J.P. 

Morgan & Company, Inc. and the Chase 

Manhattan Corporation (the Chase 

Merger), which adversely affected 

JPMCB’s ability to rely on the 

administrative relief provided under 

PTE 84–14 and PTE 91–38. Specifically, 

entities that may have been parties in 

interest with respect to certain Plans 

whose assets were invested in the 

Strategic Property Fund and that were 

involved in certain leases and letters of 

credit transactions became affiliates of 

JPMCB. In accordance with the 

requirements of PTE 2003–10, JPMCB 

retained an independent fiduciary to act 

on behalf of the Strategic Property Fund 

and the participating employee benefit 

plans with respect to the oversight, 

negotiation, and approval of certain 

leases and letters of credit described in 

PTE 2003–10. 

5. The Applicant represents that, just 

as the Chase Merger affected JPMCB’s 

ability to rely on PTE 84–14 and PTE 

91–38, the Bank One Merger also may 

adversely affect JPMCB’s ability to rely 

on those class exemptions with respect 

to substantially similar transactions 

involving letters of credit. Specifically, 

entities that may be parties in interest 

with respect to the Plans and involved 

in the subject letters of credit (as 

described below) became affiliates of 

JPMCB as a result of the Bank One 

Merger. Consequently, one of the 

conditions of each class exemption, that 

the party in interest involved in a 

transaction may not be related to the 

QPAM of the investment fund (in the 

case of PTE 84–14) or to the trustee of 

the bank collective investment fund (in 

the case of PTE 91–38), is no longer 

satisfied (except to the extent that the 

grandfather provisions of Part V(i) of 

PTE 84–14 and Section IV(h) of PTE 91– 

38, respectively, of the exemptions are 

otherwise applicable). In addition, the 

Applicant also states that there may be 

issues that will arise under sections 

406(b)(1) and 406(b)(2) of the Act if it 

needs to enforce a remedy on behalf of 

the Funds against itself or its affiliate 

regarding the Applicant’s obligations 

under the Bank One letters of Credit. 

Accordingly, the Applicant seeks 

exemptive relief with respect to certain 

prohibited transactions involving Bank 

One-issued letters of credit that arose 

from the Bank One Merger. 

The Bank One Letters of Credit 

6. The Applicant represents that a 

series of letters of credit were issued by 

Bank One, prior to the Bank One 

Merger, to guarantee payment 

obligations of unrelated third-party 

tenants to pay rent for space leased in 

properties owned by the Funds. The 

tenants were not affiliates of JPMCB or 

Bank One prior to the Bank One Merger 

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58990 Federal Register / Vol. 74, No. 219 / Monday, November 16, 2009 / Notices 

1As a result of the Bank One Merger, JPMCB (the 

Applicant) will technically also be the issuer of the 

Bank One letters of credit. 

and are not now affiliates of JPMCB. 

However, once a Bank One letter of 

credit is drawn upon by a lessor 

subsequent to the merger, the affiliation 

or identity between the Applicant and a 

JPMCB affiliate issuing the letter of 

credit would give rise to a prohibited 

transaction.1

The Applicant represents that a letter 

of credit is an instrument issued by a 

bank or other lending institution, whose 

function is similar to that of a guaranty 

and is used in commercial leasing 

transactions as a substitute for a security 

deposit. The Applicant further 

represents that the lending institution, 

upon issuing a letter of credit, promises 

that if actions of the tenant trigger 

certain default events set forth in the 

lease, such as bankruptcy of the tenant, 

it will make such lease payments 

directly to the applicable Fund up to the 

face amount of the letter of credit. The 

beneficiary of the letter of credit, one of 

the Funds, is issued a redeemable 

instrument that it may take directly to 

the issuing lending institution and 

demand payment merely by stating that 

payment is due pursuant to the terms of 

the lease. The bank that issued the letter 

of credit is obligated to pay without 

further inquiry and without any 

requirement on the banks part to verify 

the accuracy of the information 

provided. In general, the bank cannot be 

sued by the tenant for having paid 

under the letter of credit, absent fraud 

on its part. The Applicant represents 

that the Fund is not required to have 

any further involvement with the tenant 

in order to receive payment under the 

letter of credit from the bank that issued 

the letter of credit. The Bank One letters 

of credit automatically renew annually 

until their final stated expiration date, 

and are either cash collateralized by the 

tenants or, in the case of particularly 

creditworthy tenants, the tenants enter 

into a reimbursement agreement with 

the bank. The Applicant represents that 

the existing Bank One letters of credit 

are cash collateralized. The Applicant 

further represents that the terms of the 

Bank One letters of credit are governed 

by the 1993 Uniform Customs and 

Practice for Documentary Credits and 

contain standard provisions widely 

accepted in the banking industry 

promulgated by the International 

Chamber of Commerce Commission on 

Banking Technique and Practice, which 

most banking institutions incorporate by 

reference in their letters of credit. 

According to the Applicant, the 

previously referred to standard 

industry-wide provisions and terms 

provide certainty in execution, 

interpretation, and remedies with 

respect to the letters of credit. 

The applicant also represents that it is 

difficult for the tenants to obtain a letter 

of credit if they do not otherwise have 

a business banking relationship with a 

particular bank. Therefore, if JPMCB or 

its affiliate is the tenant’s commercial 

bank, then the Applicant, according to 

its own representations, may be that 

tenant’s only source to obtain a letter of 

credit. In addition, given the increasing 

number of bank mergers, there are fewer 

banks available from which to purchase 

a letter of credit. Accordingly, in the 

absence of an individual exemption, the 

Applicant represents that the 

disqualification of JPMCB or its 

affiliates from the available pool of 

letters of credit providers would be 

highly disadvantageous to the Funds 

and the Plans. 

7. The chart below shows the 

outstanding letters of credit that had 

been issued by various Bank One 

entities at the time of the Bank One 

Merger: 

Fund interest Property name Bank One entity name 

Original letter 

of credit 

amount 

Strategic Property Fund 

(33.3%).

Century Plaza Towers ............ Bank One ................................................................................. $98,952 

Special Situation Property 

Fund (50%).

IDI—Valwood West D (IPF 2, 

LP)—IPA—DUPLIUM.

Bank One, N.A. 1717 Main Street, 11th Floor, Dallas, TX 

75201 (1–888–525–9395).

375,000 

Special Situation Property 

Fund (50%).

IDI—Corporate Crossing V 

(IPF 1, LP)—IPA— 

Fairington Transportation, 

Inc.

Bank One, N.A. Global Trade Services, One Bank One 

Plaza, Mail Code IL1–0236 Chicago, IL 60670–0236 (312– 

954–1969) (f/k/a—American National Bank).

500,000 

Strategic Property Fund 

(100%).

Woodfield Corporate Center ... American National Bank .......................................................... 89,000 

Future Letters of Credit 

8. The future letters of credit for 

which the applicant has requested 

exemptive relief include: (i) Any letters 

of credit issued by JPMCB or its 

affiliates on or after the effective date of 

the Bank One Merger with respect to 

third-party tenants unrelated to the 

Applicant in Fund-owned properties or 

in properties with respect to which a 

Fund has a security interest; and (ii) 

Any letters of credit issued by an entity 

that is not an affiliate of JPMCB at the 

time the letter of credit is issued but that 

later becomes an affiliate of JPMCB 

pursuant to a future merger, with 

respect to third-party tenants in Fundowned properties or in properties with 

respect to which a Fund has a security 

interest. The Applicant represents that 

the terms of any future letter of credit 

will not be more favorable to tenants 

than the terms generally available in 

similar transactions with other similarly 

situated unrelated third-party 

commercial clients of JPMCB or its 

affiliates. The Applicant further 

represents that an independent 

fiduciary will review and approve the 

extension of Bank One letters of credit 

as well as any other letters of credit that 

are issued by the Applicant or an 

affiliate (or an entity that later becomes 

an affiliate) to a third party tenant of a 

property held by a Fund or in which a 

Fund has a security interest. 

The Independent Fiduciary 

9. JPMCB has retained Fiduciary 

Counselors Inc. (Fiduciary Counselors) 

of Washington, DC as an independent 

fiduciary to determine on behalf of all 

of the Funds and Plans, among other 

things, whether it is appropriate to draw 

on any currently outstanding Bank One 

letters of credit or on any future letters 

of credit previously described herein. 

Fiduciary Counselors also will monitor 

monthly reports of rental payments by 

tenants so that it can confirm whether 

such letters of credit should be called. 

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Federal Register / Vol. 74, No. 219 / Monday, November 16, 2009 / Notices 58991 

2The Applicant represents that the Original Lease 

was modified on February 22, 2000, prior to the 

Bank One Merger, to increase the amount of space 

occupied by Bank One Arizona, N.A. in the 

Vodaphone Plaza office building to 3,811 square 

feet. The lease was amended on May 5, 2005 (i.e., 

the date upon which the negotiations were 

finalized). 

3The Department has expressed the view that the 

relief from the restrictions of section 406(a) of the 

Act that is provided under Part I of PTE 84–14 

would be generally available for a continuing 

transaction (e.g., a loan or lease), provided that all 

the conditions of the exemption are satisfied on the 

date on which the transaction is entered into, 

notwithstanding the subsequent failure to satisfy 

one or more of the conditions of the class 

exemption (such as the requirement of Part I of PTE 

84–14 that the subject transaction not occur with a 

party ‘‘related to’’ the QPAM). See Preamble to 

Proposed Amendment to PTE 84–14, 68 FR 52423 

(September 3, 2003). 

4The Department expresses no opinion herein as 

to whether the 2005 renewal of the Vodafone Plaza 

lease by the Fund may have violated any of the 

provisions of Part 4 of Title I of the Act. 

In addition, Fiduciary Counselors will 

act in place of JPMCB in any situation 

where the Funds’ rights need to be 

asserted against JPMCB as the issuer of 

the existing Bank One letters of credit or 

against JPMCB or its affiliates with 

respect to any future letters of credit. 

The Applicant represents that 

Fiduciary Counselors is a registered 

investment adviser registered under the 

Investment Advisers Act of 1940, and 

acts primarily as an independent 

fiduciary for large pension plans. Since 

its formation in 1999, Fiduciary 

Counselors has acted as independent 

fiduciary in transactions involving plan 

assets totaling more than $4 billion. The 

Applicant also represents that Fiduciary 

Counselors has been involved in a 

variety of transactions requiring an 

independent fiduciary, such as certain 

prohibited transaction exemptions 

granted by the Department, conversion 

of common and collective mutual funds, 

mergers of mutual funds, and ESOP 

transactions. Fiduciary Counselors has 

acknowledged its duties, 

responsibilities and obligations as a 

fiduciary under ERISA to act for the 

exclusive benefit of the Funds and the 

Funds’ participating plans. 

Ms. Nell Hennessy is the president of 

Fiduciary Counselors, and will lead the 

project on behalf of the firm with 

respect to the transactions for which 

exemptive relief from the Department is 

sought. The Applicant represents that 

neither Fiduciary Counselors nor its 

affiliates are ‘‘affiliates’’ of either JPMCB 

or its affiliates or any of the Plans’ 

sponsors within the meaning of 29 CFR 

2570.31(a). The Applicant further 

represents that no more than five (5) 

percent of Fiduciary Counselors’ annual 

gross revenue in its prior tax year will 

be paid by JPMCB and its affiliates in 

the fiduciary’s current tax year. The 

Applicant represents that, in the event 

that Fiduciary Counselors terminates its 

services as the Independent Fiduciary 

for purposes of overseeing transactions 

involving the Bank One letters of credit 

and/or future letters of credit, JPMCB 

will notify the Department of such 

termination. In this connection, the 

Applicant represents that any successor 

Independent Fiduciary shall be 

independent of JPMCB and its affiliates, 

shall possess fiduciary experience 

comparable to that of Fiduciary 

Counselors, and shall assume all of the 

fiduciary responsibilities described 

above with respect to the oversight of 

current and future letters of credit 

described herein. 

10. The Applicant represents that the 

proposed exemption would be 

administratively feasible because the 

Bank One and JPMCB letters of credit 

are, or would be, almost completely selfexecuting because there is essentially no 

discretion on the part of the issuing 

bank with respect to the letters of credit, 

and any conflict of interest situations 

would be handled by an independent 

fiduciary. The Applicant also represents 

that the continuance and/or future 

availability of the Bank One or JPMCB 

letters of credit would be in the interest 

of the Funds, the Plans, and their 

beneficiaries because the availability of 

these letters of credit mitigates the risk 

of loss of payment to the Funds if the 

applicable tenants default on their rent. 

The Applicant further represents that 

the Bank One and JPMCB letters of 

credit are and would be protective of the 

rights of the Funds’ Plan participants 

and beneficiaries because they allow the 

Funds to recover some or all of lost 

rental income despite a default by the 

tenant, and because they incorporate 

standard industry-wide terms that 

provide certainty in execution, 

interpretation, and remedies. 

Existing Commercial Leases and the 

Bank One Merger 

11. Although the Applicant withdrew 

its request for individual exemptive 

relief with respect to two Bank One 

leases involving the Strategic Property 

Fund that were in effect as of the date 

of the Bank One Merger, the Applicant 

has made the following representations 

regarding such leases and their 

renewals. The Applicant represents that, 

prior to the Bank One Merger, Bank One 

Arizona, N.A., an affiliate of Bank One, 

leased commercial office space in 

Vodaphone Plaza, a Class A office 

building in Walnut Creek, California, a 

property wholly owned by the Strategic 

Property Fund. The Vodafone Plaza 

property represented approximately 

0.39% of the net asset value of the 

Strategic Property Fund. Bank One 

Arizona, N.A. occupied 3,811 square 

feet, or 1.9%, of the property under a 

lease (the Original Lease) that originally 

commenced on May 9, 1997 and that 

expired, by its terms, on May 8, 2005.2

The Applicant represents that the 

original terms of the 1997 Bank One 

lease executed between Bank One, as 

tenant, and the Strategic Property Fund, 

as landlord, was negotiated and entered 

into between the parties when they were 

unrelated and when JPMCB was acting 

on behalf of the Funds as a fiduciary. 

The Applicant represents that JPMCB 

met the definition of a QPAM at the 

time that the Original Lease was entered 

into between the Strategic Property 

Fund and Bank One Arizona, N.A. The 

Applicant further represents that, 

because the Original Lease that was 

executed in 1997 continued to be in 

effect at the time of the 2004 Bank One 

Merger, the Vodaphone Plaza lease 

transaction met the requirements of Part 

I (the General Exemption) of PTE 84–14 

between July 1, 2004 and the expiration 

of the Original Lease.3

12. The Applicant also represents that 

Fiduciary Counselors Inc., acting as an 

independent fiduciary, negotiated a 

renewal of the lease of the Vodaphone 

Plaza property on behalf of the Strategic 

Property Fund in March of 2005, and 

the lease renewal became effective in 

May of 2005.4 On September 12, 2007, 

the Vodafone Plaza property was sold 

by the Strategic Property Fund to an 

unrelated third party, SVF Oak Road 

Walnut Creek Corporation (SVC), a 

subsidiary of a fund managed by 

American Realty Advisors. 

The Applicant further represents that, 

between the lease renewal and 

September 12, 2007, the Vodaphone 

Plaza lease met the conditions of Part III 

(the Specific Lease Exemption) of PTE 

84–14 for the leasing of office or 

commercial space by an investment 

fund managed by a QPAM or its affiliate 

to the QPAM, and therefore an 

individual exemption is not necessary 

to cover the lease renewal. Specifically, 

the Applicant represents that the 

requirements of Part III of PTE 84–14 

were satisfied during the renewal period 

because: (1) The Vodaphone Plaza lease 

was for office space; (2) JPMCB is both 

a QPAM with respect to the Strategic 

Property Fund (which wholly owned 

the property that was the subject of the 

Vodaphone Plaza lease), and is also an 

affiliate of Bank One Arizona, N.A., the 

lessee; (3) The unit of space subject to 

the lease was suitable for use by 

different tenants; (4) At the time the 

transaction was entered into (and at the 

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58992 Federal Register / Vol. 74, No. 219 / Monday, November 16, 2009 / Notices 

5This ‘‘arm’s length’’ determination was 

addressed by Fiduciary Counselors in its report 

dated April 13, 2009, based upon material compiled 

by CB Richard Ellis on January 21, 2005. 

6The Department is not providing any views in 

this proposed exemption as to whether the 

conditions of PTE 84–14 were met in connection 

with the Vodaphone Plaza lease transactions. 

7The Applicant represents that the Texas Plaza I 

lease executed between Banc One Trust Company, 

as tenant, and the Strategic Property Fund, as 

landlord, was originally negotiated and entered into 

between the contracting parties when they were 

completely unrelated and when JPMCB was acting 

on behalf of the Strategic Property Fund as an 

independent ERISA fiduciary. 

8The Department is not providing any opinion in 

this proposed exemption as to whether Dugan 

Texas LLC, which manages the Texas Plaza I lease, 

qualifies as a REOC, within the meaning of 29 CFR 

2510.3–101(e), and therefore is not expressing any 

opinion as to whether the Texas Plaza I lease 

arrangement constitutes a prohibited transaction 

pursuant to section 406 of the Act or section 4975 

of the Code. In this connection, the Department has 

noted in 29 CFR 2509.75–2(c) (Interpretive Bulletin 

75–2, or IB 75–2) and subsequent opinions 

interpreting IB 75–2 that, although a transaction 

between a party in interest and a corporate entity 

in which the assets of a plan are invested does not 

generally give rise to a prohibited transaction, a 

violation of section 406 of the Act or section 4975 

of the Code may occur in instances where a plan 

invests in a corporation as part of an arrangement 

or understanding under which it is expected that 

the corporation will engage in a transaction with a 

party in interest. See Advisory Opinion 2006–01A 

(January 6, 2006). 

time of any subsequent renewal or 

modification that required the consent 

of the Trustee as QPAM), the terms of 

the transaction were not more favorable 

to the lessee, Bank One Arizona, N.A., 

than the terms generally available in an 

arm’s length transaction between 

unrelated parties; 5 (5) No commission 

or other fee was paid by the Strategic 

Property Fund in connection with the 

Vodaphone Plaza lease to the QPAM, 

nor was any commission or fee paid to 

any person or entity (or any affiliate) 

who made the decision to have, or had 

the direct authority to direct, any Plan 

to invest in the Strategic Property Fund; 

and (6) The amount of space covered by 

the lease (i.e., 3,811 square feet, or 1.9% 

of the rentable area of the Vodaphone 

Plaza property) did not exceed the 

greater of 7,500 square feet or one 

percent (1%) of the available space of 

the Vodaphone Plaza property.6

13. The Applicant also represents 

that, prior to the Bank One Merger, the 

Banc One Trust Company, an affiliate of 

Bank One, leased commercial office 

space in the Dugan Texas—Texas Plaza 

I, an industrial building located in 

Irving, Texas. The Strategic Property 

Fund has a 50% ownership interest in 

this property. Banc One Trust Company 

occupies 54,146 square feet, or 46.7% of 

the net rentable area, of the Texas Plaza 

I property under a lease which 

commenced on July 15, 1999 and which 

was renewed upon its expiration on 

August 14, 2006. Prior to the renewal of 

the lease, Banc One Trust Company 

paid rent in the amount of $10.25 per 

square foot per year for the Texas Plaza 

I property.7 The Applicant represents 

that JPMCB, in its capacity as trustee of 

the Strategic Property Fund, was not 

involved in the lease renewal decisionmaking process; rather, the other 50% 

owner of the Texas Plaza I property (i.e., 

Duke-Weeks Realty Limited Partnership, 

now doing business as Duke Realty 

Limited Partnership and hereinafter 

referred to as ‘‘Duke Weeks’’) made the 

lease renewal decision without 

consulting the Strategic Property Fund 

in any manner. 

The Applicant further represents that, 

on December 28, 2000, pursuant to a 50/ 

50 joint venture by Dugan Texas 

Acquisition LLC (of which the Strategic 

Property Fund is the sole member) and 

Duke Weeks, a real estate operating 

company known as Dugan Texas LLC 

was formed. The Applicant represents 

that Dugan Texas LLC was established 

to operate and manage thirteen 

commercial real estate properties 

(including the Texas Plaza I property) 

that were initially contributed to it by 

Duke Weeks on December 28, 2000. The 

Applicant represents that, since its 

establishment on December 28, 2000, 

Dugan Texas LLC has operated so as to 

qualify as a real estate operating 

company (REOC), within the meaning of 

the Department’s ‘‘plan asset 

regulation’’ at 29 CFR 2510.3–101.8

14. In summary, the transactions for 

which exemptive relief is sought meet 

the statutory criteria of section 408(a) of 

the Act because: (A) With respect to 

existing or future letters of credit 

described herein, each of the Funds is 

represented by an independent 

fiduciary to perform the following 

functions: (1) Monitor monthly reports 

of rental payments of tenants utilizing 

such letters of credit issued by JPMCB, 

or any current or future affiliate of 

JPMCB, to guarantee their lease 

payments; (2) Confirm whether an event 

has occurred that calls for a letter of 

credit to be drawn upon; and (3) 

Represent each of the Funds and the 

Plans as an independent fiduciary in 

any circumstances with respect to a 

letter of credit which would present a 

conflict of interest for the Trustee or 

otherwise violate section 406(b), 

including but not limited to: The need 

to enforce a remedy against itself or a 

current or future affiliate with respect to 

its obligations under a letter of credit; 

(B) The issuance of future letters of 

credit by JPMCB, or any current or 

future affiliate of JPMCB, are subject to 

the following additional conditions: (1) 

JPMCB, or any current or future affiliate 

of JPMCB, as the issuer of a letter of 

credit, has at least an ‘‘A’’ credit rating 

by at least one nationally recognized 

statistical rating service at the time of 

the issuance of the letter of credit; (2) 

The letter of credit has objective market 

drawing conditions and states precisely 

the documents against which payment 

is to be made; (3) JPMCB and its 

affiliates do not ‘‘steer’’ the Funds’ 

tenants to JPMCB or its affiliates in 

order to obtain a letter of credit; (4) 

Letters of credit are issued only to thirdparty tenants which are unrelated to 

JPMCB; and (5) The terms of any future 

letters of credit are not more favorable 

to the tenants than the terms generally 

available in transactions with other 

similarly situated unrelated third-party 

commercial clients of JPMCB or of its 

current or future affiliates; and (C) 

JPMCB or its affiliates will maintain 

records that are sufficient for regulatory 

authorities and independent third 

parties to determine whether the 

conditions of this proposed exemption 

have been met. 

Notice to Interested Persons: Notice of 

the proposed exemption shall be given 

to all interested persons in the manner 

agreed upon by the Applicant and the 

Department within 15 days of the date 

of publication in the Federal Register. 

Comments and requests for a hearing are 

due forty-five (45) days after publication 

of the notice in the Federal Register. 

For Further Information Contact: Mr. 

Mark Judge of the Department at (202) 

693–8550. (This is not a toll-free 

number). 

The Bank of New York Mellon (BNY Mellon 

or the Applicant) Located in New York, 

NY 

[Application No. D–11571] 

Proposed Exemption 

The Department is considering 

granting an exemption under the 

authority of section 408(a) of the Act 

and section 4975(c)(2) of the Code and 

in accordance with the procedures set 

forth in 29 CFR part 2570, subpart B (55 

FR 32836, 32847, August 10, 1990). If 

granted, the restrictions of sections 

406(a) and 406(b)(1) and 406(b)(2) of the 

Act (or ERISA) and the sanctions 

resulting from the application of section 

4975 of the Code, by reason of section 

4975(c)(1)(A) through (E) of the Code, 

shall not apply as of February 20, 2009, 

to the cash sale of certain floating rate 

securities (the Securities) issued by 

Lehman Brothers Holdings, Inc. or its 

affiliates (together, Lehman) for an 

aggregate purchase price of 

$235,737,419.05 by the EB Temporary 

Investment Fund—Lehman (Liquidating 

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9According to the Applicant, the in-house Plans’ 

investments in the Collective Funds range from 0% 

for the DF Temporary Investment Fund to less than 

4% of the EB Temporary Investment Fund. 

Fund), the EB SMAM Short Term 

Investment Fund—Lehman (Liquidating 

Fund), the DF Temporary Investment 

Fund—Lehman (Liquidating Fund) and 

the Pooled Employee Daily Liquidity 

Fund—Lehman (Liquidating Fund) 

(collectively, the ‘‘Liquidating Funds’’) 

to the Bank of New York Mellon 

Corporation (BNYMC), a party in 

interest with respect to employee 

benefit plans (the Plans) invested, 

directly or indirectly, in the Liquidating 

Funds, provided that the following 

conditions are met: 

(a) The sale was a one-time 

transaction for cash; 

(b) The Liquidating Funds received an 

amount for the sale of the Securities, 

which was equal to the sum of (1) the 

par value of the Securities plus (2) 

accrued but unpaid interest through 

September 12, 2008, determined at the 

contract rate, plus (3) accrued and 

unpaid interest from September 15, 

2008 through the earlier of (i) the date 

of sale or (ii) the maturity date of the 

Securities, determined at the investment 

earnings rate of the collective fund (the 

Collective Fund) from which the 

Securities were transferred to the 

Liquidating Fund for the period from 

September 15, 2008 to the earlier of the 

maturity date of the Security or 

February 20, 2009; 

(c) The Liquidating Funds did not 

bear any commissions, fees, transaction 

costs or other expenses in connection 

with the sale of the Securities; 

(d) BNY Mellon, as trustee of the 

Liquidating Funds, determined that the 

sale of the Securities was appropriate 

for and in the best interests of the 

Liquidating Funds, and the Plans 

invested, directly or indirectly, in the 

Liquidating Funds, at the time of the 

transaction; 

(e) BNY Mellon took all appropriate 

actions necessary to safeguard the 

interests of the Liquidating Funds, and 

the Plans invested, directly or 

indirectly, in the Liquidating Funds, in 

connection with the transaction; 

(f) If the exercise of any of BNYMC’s 

rights, claims or causes of action in 

connection with its ownership of the 

Securities results in BNYMC recovering 

from Lehman, the issuer of the 

Securities, or from any third party, an 

aggregate amount that is more than the 

sum of: 

(1) The purchase price paid for the 

Securities by BNYMC; and 

(2) interest on the par value of the 

Securities from and after the date 

BNYMC purchased the Securities from 

the Liquidating Funds, determined at 

the last-published interest rate on the 

Securities preceding the Lehman’s 

bankruptcy filing, BNYMC refunds such 

excess amount promptly to the 

Liquidating Funds (after deducting all 

reasonable expenses incurred in 

connection with the recovery); 

(g) BNY Mellon and its affiliates, as 

applicable, maintain, or cause 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 person described below in 

paragraph (h)(1), to determine whether 

the conditions of this exemption have 

been met, except that— 

(1) No party in interest with respect 

to a Plan which engages in the covered 

transaction, other than BNY Mellon and 

its affiliates, as applicable, shall be 

subject to a civil penalty under section 

502(i) of the Act or the taxes imposed 

by section 4975(a) and (b) of the Code, 

if such records are not maintained, or 

not available for examination, as 

required, below, by paragraph (h)(1); 

(2) A separate prohibited transaction 

shall not be considered to have occurred 

solely because due to circumstances 

beyond the control of BNY Mellon or its 

affiliates, as applicable, such records are 

lost or destroyed prior to the end of the 

six-year period. 

(h)(1) Except as provided, below, in 

paragraph (h)(2), and notwithstanding 

any provisions of subsections (a)(2) and 

(b) of section 504 of the Act, the records 

referred to, above, in paragraph (g) are 

unconditionally available at their 

customary location for examination 

during normal business hours by— 

(A) Any duly authorized employee or 

representative of the Department, the 

Internal Revenue Service, or the 

Securities and Exchange Commission; 

or 

(B) Any fiduciary of any Plan that 

engages in the covered transaction, or 

any duly authorized employee or 

representative of such fiduciary; or 

(C) Any employer of participants and 

beneficiaries and any employee 

organization whose members are 

covered by a Plan that engages in the 

covered transaction, or any authorized 

employee or representative of these 

entities; or 

(D) Any participant or beneficiary of 

a Plan that engages in the covered 

transaction, or duly authorized 

employee or representative of such 

participant or beneficiary; 

(2) None of the persons described, 

above, in paragraph (h)(1)(B)–(D) shall 

be authorized to examine trade secrets 

of BNY Mellon or its affiliates, or 

commercial or financial information 

which is privileged or confidential; and 

(3) Should BNY Mellon refuse to 

disclose information on the basis that 

such information is exempt from 

disclosure, BNY Mellon 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. 

Effective Date: If granted, this 

proposed exemption will be effective as 

of February 20, 2009. 

Summary of Facts and Representations 

1. BNY Mellon is a state bank subject 

to regulation by the State of New York. 

As of December 31, 2008, BNY Mellon 

managed assets in excess of $210 

billion, a substantial part of which 

consisted of Plans subject to the Act. 

BNY Mellon is a subsidiary of BNYMC. 

2. BNYMC is the parent of BNY 

Mellon by reason of its 100% ownership 

of BNY Mellon. BNYMC has a number 

of subsidiaries and affiliates. It is a 

Delaware financial services company 

that provides a wide range of banking 

and fiduciary services to a broad array 

of clients, including employee benefit 

plans subject to the Act and section 

4975 of the Code. As of December 31, 

2008, BNYMC had total assets of $237.5 

billion. 

3. The EB Temporary Investment 

Fund, the EB SMAM Short Term 

Investment Fund, the DF Temporary 

Investment Fund and the Pooled 

Employee Daily Liquidity Fund are 

either collective investment funds or 

common trust funds trusteed and 

managed by BNY Mellon. BNY Mellon 

serves as a discretionary trustee for each 

of the Collective Funds. Three of the 

Collective Funds are group trusts that 

are exempt from federal income tax 

pursuant to Rev. Rul. 81–100. 

Accordingly, all of the investors in these 

Collective Funds, including three BNY 

Mellon/BNYMC in-house Plans,9 are 

either qualified plans or eligible 

government plans. There are no 

individual retirement accounts in any of 

these Collective Funds. 

The DF Temporary Investment Fund 

is a common trust fund that is exempt 

from federal income tax pursuant to 

section 584 of the Code. The investors 

in this Collective Fund as to which BNY 

Mellon or one of its affiliates is the 

trustee include trusts for individuals, 

nuclear decommissioning trusts, trusts 

for endowments, private foundations 

and other tax exempt institutional 

investors, and certain employee benefit 

trusts subject to the Act (e.g., VEBA 

trusts). 

Each of the Collective Funds is a 

short-term investment fund that values 

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10 It is represented that section 408(b)(8) of the 

Act would apply to the investment by the ERISAcovered plans in the Collective Funds. Section 

408(b)(8) of the Act provides a statutory exemption 

for any transactions between a plan and a common 

or collective trust fund maintained by a party in 

interest which is a bank or trust company 

supervised by a State or Federal agency if certain 

requirements are met. 

11The Department is expressing no opinion in 

this proposed exemption on whether the 

acquisition and holding of the Securities by the 

Collective Funds violated any of the fiduciary 

responsibility provisions of Part 4 of Title I of the 

Act. In this regard, the Department notes that 

section 404(a) of the Act requires, among other 

things, that a fiduciary of a plan act prudently, 

solely in the interest of the plan’s participants and 

beneficiaries, and for the exclusive purpose of 

providing benefits to participants and beneficiaries 

when making investment decisions on behalf of a 

plan. Section 404(a) of the Act also states that a plan 

fiduciary should diversify the investments of a plan 

so as to minimize the risk of large losses, unless 

under the circumstances it is clearly prudent not to 

do so. 

12Because September 12 fell on a Friday, the 

accrued interest on such date included the interest 

for September 13 and September 14. 

13The Applicant represents that the guarantees 

are extensions of credit eligible for exemption 

under Prohibited Transaction Exemption (PTE) 80– 

26, 66 FR 54541 (Oct. 29, 2001). PTE 80–26, a class 

exemption, permits parties in interest to employee 

benefit plans to make certain interest free loans to 

such plans provided certain conditions are met. The 

its assets based on their amortized cost 

and seeks to maintain a constant unit 

value equal to $1.00. The Collective 

Funds invest in a variety of fixed 

income instruments. As of September 

15, 2008, the value of the Collective 

Funds’ aggregate portfolios was 

$19,961,181,990.59.10 As of September 

15, 2008 there were in excess of 700 

investors in the Collective Funds, a 

substantial number of which were Plans 

subject to the Act. The other investors 

included government plans. 

4. The Collective Funds purchased 

the Securities, which were floating rate 

securities issued by Lehman, an 

unrelated party, between 2005 and 2007 

for acquisition prices ranging from 

$7,250,000 to $102,000,000, and for a 

total investment of $233,250,000. The 

acquisition prices represented the 

amortized cost of the Securities. The 

Securities paid interest on a quarterly 

basis, with the result that each 

Collective Fund collected interest from 

the purchase date through either June 

23, 2008 or July 22, 2008. The interest 

payments ranged from $759,804.42 to 

$6,860,087.55 for a total payment of 

$15,459,605.43. No interest was paid 

subsequent to September 15, 2008. 

As of September 15, 2008, the 

approximate net asset value of each 

Collective Fund was as follows: 

The EB Temporary Investment Fund 

($4,527,000); the EB SMAM Short Term 

Investment Fund ($2,070,000); the 

Pooled Employee Daily Liquidity Fund 

($12,423,000,000); and the DF 

Temporary Investment Fund 

($706,000,000). 

Set forth below is a table showing 

each Collective Fund’s investment in 

the Securities prior to Lehman’s 

bankruptcy: 

Fund name Security name, CUSIP and 

maturity date 

Acquisition 

and par price Purchase date 

Last published 

interest rate 

(percent) 

Total interest 

received prior 

to 9/15/08 

EB Temp. Inv. Fund ...................... Lehman Fltr. 52517PW31; 3/23/ 

09.

$50,000,000 3/22/07 7 .413 $3,362,788.21 

EB SMAM Short Term Inv. Fund .. Lehman Fltr. 52517PW31; 3/23/ 

09.

74,000,000 3/22/07 7 .413 4,976,925.25 

Pooled Employee Daily Liquid 

Fund.

Lehman Fltr. 52517PW31; 3/23/ 

09.

102,000,000 3/22/07 7 .413 6,860,087.55 

DF Temp. Inv. Fund ...................... Lehman Fltr. 52517PC58; 10/22/ 

08.

7,250,000 10/24/05 8 .00175 759,804.42 

Totals: .................................... ....................................................... 233,250,000 ........................ .......................... $15,959,605.43 

5. The decision to invest in the 

Securities was made by BNY Mellon. 

Prior to the investment, BNY Mellon 

conducted an investigation of the 

potential investment by examining and 

considering the economic and other 

terms of the Securities. BNY Mellon 

represents that the investment in the 

Securities was consistent with the 

applicable investment policies and 

objectives of the respective Collective 

Fund. At the time the Securities were 

acquired, they were rated ‘‘A1’’ by 

Moody’s and ‘‘A+’’ by S&P rating 

agencies. Based on its consideration of 

the relevant facts and circumstances, 

BNY Mellon states that it was prudent 

and appropriate to acquire the 

Securities on behalf of the Collective 

Funds.11

6. As stated above, on September 15, 

2008, Lehman filed for Chapter 11 

bankruptcy protection. BNY Mellon 

represents that following the Issuers’ 

bankruptcy, BNY Mellon determined 

that it would be in the best interest of 

the Collective Funds to segregate the 

Securities from the other assets of the 

Collective Funds. Therefore, BNY 

Mellon established the Liquidating 

Funds to hold the Securities as of such 

date in the following Liquidating Funds: 

The EB Temporary Investment Fund— 

Lehman (Liquidating Fund), the EB 

SMAM Short Term Investment Fund— 

Lehman (Liquidating Fund), the DF 

Temporary Investment Fund—Lehman 

(Liquidating Fund) and the Pooled 

Employee Daily Liquidity Fund— 

Lehman (Liquidating Fund). BNY 

Mellon also served as the trustee and 

the manager of each Liquidating Fund. 

The Applicant represents that BNY 

Mellon intended to hold the Securities 

in the Liquidating Funds pending the 

disposition of the Securities on the 

market. BNY Mellon further represents 

that each Collective Fund held 100 

percent of the interests of its 

corresponding Liquidating Fund, and, 

in turn, the account of each direct 

investor in such Collective Fund as of 

September 15, 2008, was credited with 

units of the applicable Liquidating Fund 

in lieu of its interests in the Securities. 

7. The Applicant represents that on 

September 30, 2008, the Liquidating 

Funds entered into guarantees with 

BNY Mellon pursuant to which BNY 

Mellon agreed to provide financial 

support to the Liquidating Funds for an 

amount up to the par value of the 

Securities and the accrued and unpaid 

interest on the Securities through 

September 12, 2008.12 The purpose of 

these guarantees was to enable BNY 

Mellon and the Collective Funds’ 

investors to value the units of the 

Liquidating Funds at one dollar per 

unit.13

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Federal Register / Vol. 74, No. 219 / Monday, November 16, 2009 / Notices 58995 

Department expresses no opinion herein on 

whether the guarantees satisfy the requirements of 

PTE 80–26. 

14The last published interest rate for each of the 

Securities at the contract rate in effect immediately 

preceding Lehman’s bankruptcy is set forth herein 

in the table. The investment earnings rate for each 

Collective Fund for the relevant period on and after 

September 15, 2008 is as follows: the EB Temporary 

Investment Fund (1.28707%), the EB SMAM Short 

Term Investment Fund (0.68443%), the Pooled 

Employee Daily Liquidating Fund (0.96503%), and 

the DF Temporary Investment Fund (2.383131%). 

8. BNY Mellon represents that 

following the date of the Lehman’s 

bankruptcy filing, the market value of 

the Securities decreased substantially. 

BNY Mellon further states that on 

February 20, 2009, it obtained pricing 

information from two independent 

broker-dealers, Barclays and Morgan 

Stanley, who confirmed in e-mail 

messages that the market for the 

Securities was in extreme distress and 

that prices for actual trades were 

substantially lower than the sum of the 

par value for the Securities plus accrued 

and unpaid interest thereon. The brokerdealers did not provide written analyses 

of their findings. 

9. In view of the foregoing, BNY 

Mellon determined that it would be 

appropriate and in the best interest of 

the Liquidating Funds if the Securities 

were sold by the Liquidating Funds to 

BNYMC at a price equal to the sum of 

(x) their par value and (y) any accrued 

but unpaid interest, as doing so would 

protect the Funds and the investors 

having an interest in the Liquidating 

Funds from potential investment losses 

with respect to the Securities. BNY 

Mellon also determined that the 

purchase of the Securities by BNYMC 

would be permissible under applicable 

banking law. 

10. Shortly before the consummation 

of the transaction on February 19, 2009, 

BNY Mellon sent written notice to the 

designated representative of each of the 

investors having a direct interest in the 

Liquidating Funds of BNY Mellon’s 

intent to cause the Liquidating Funds to 

sell the Securities to BNYMC on 

February 20, 2009. For purposes of the 

transaction, the notice stated that the 

purchase price would be distributed to 

the unit holders. Such amount would 

also include an interest component 

based on the period after September 12, 

2008. As a result, the notice further 

explained that the investor’s account 

would no longer hold units in a 

Liquidating Fund. While the notice did 

not require any response, the Applicant 

represents that it did not receive any 

negative reaction from any of the 

recipients thereof. 

11. On February 20, 2009, BNYMC 

purchased the Securities from the 

Liquidating Funds for an aggregate lump 

sum payment of $235,737,419.05. This 

amount represented the sum of the par 

value of the Securities ($233,250,000) 

plus the accrued but unpaid interest on 

the Securities (x) through September 12, 

2008 ($1,546,011.97) at the contract rate 

(which also included accrued interest 

for September 13th and 14th), and (y) 

interest from September 15, 2008 

through the earlier of February 20, 2009 

or the maturity date of the applicable 

Security at the investment earning rate 

achieved by the corresponding 

Collective Fund during such period 

($941,407.08).14 BNY Mellon notes that, 

in determining the amount of accrued 

interest subsequent to the date of 

Lehman’s bankruptcy filing, BNY 

Mellon utilized the investment earnings 

interest rate earned by the 

corresponding Collective Fund during 

such period. On April 21, 2009, the 

Liquidating Funds were formally 

terminated. 

12. BNY Mellon, as trustee of the 

Liquidating Funds, believed that the 

sale of the Securities to BNYMC was in 

the best interests of the Liquidating 

Funds, and the Plans invested, directly 

or indirectly, in the Liquidating Funds, 

at the time of the transaction. BNY 

Mellon states that any sale of the 

Securities on the open market would 

have produced significant losses for the 

Liquidating Funds and for the 

participating investors in the Funds. 

13. BNY Mellon represents that the 

sale of the Securities by the Liquidating 

Funds to BNYMC benefited the 

investors in the Liquidating Funds 

because the purchase price paid by 

BNYMC for the Securities substantially 

exceeded the aggregate fair market value 

of the Securities. In addition, BNY 

Mellon states that the transaction was a 

one-time sale for cash in connection 

with which the Liquidating Funds did 

not bear any brokerage commissions, 

fees, or other expenses. BNY Mellon 

represents that it took all appropriate 

actions necessary to safeguard the 

interests of the Liquidating Funds and 

their participating investors in 

connection with the sale of the 

Securities. 

Accordingly, BNY Mellon has 

requested an administrative exemption 

from the Department with respect to the 

sale of the Securities by the Liquidating 

Funds to BNYMC. If granted, the 

exemption would be effective as of 

February 20, 2009. 

14. BNY Mellon states that the sale of 

the Securities by the Liquidating Funds 

to BNYMC resulted in an assignment of 

all of the Liquidating Funds’ rights, 

claims, and causes of action against 

Lehman or any third party arising in 

connection with or out of the issuance 

of the Securities or the acquisition of the 

Securities by the Funds. BNY Mellon 

states further that if the exercise of any 

of the foregoing rights, claims or causes 

of action results in BNYMC recovering 

from Lehman or any third party an 

aggregate amount that is more than the 

sum of (a) the purchase price paid for 

the Securities by BNYMC; and (b) 

interest on the par value of the 

Securities from and after the date 

BNYMC purchased the Securities from 

the Liquidating Funds, determined at 

the last-published rate on the Securities 

preceding Lehman’s bankruptcy filing, 

BNYMC will refund such excess amount 

promptly to the Funds (after deducting 

all reasonable expenses incurred in 

connection with the recovery). 

15. In summary, the Applicant 

represents that the transaction satisfied 

or will satisfy the statutory criteria for 

an exemption under section 408(a) of 

the Act because: 

(a) The sale was a one-time 

transaction for cash; 

(b) The Liquidating Funds received an 

amount for the sale of the Securities, 

which was equal to the sum of (1) the 

par value of the Securities plus (2) 

accrued but unpaid interest through 

September 12, 2008, determined at the 

contract rate, plus (3) accrued and 

unpaid interest from September 15, 

2008 through the earlier of (i) the date 

of sale or (ii) the maturity date of the 

Securities, determined at the investment 

earnings rate of the Collective Fund 

from which the Securities were 

transferred to the Liquidating Fund for 

the period from September 15, 2008 to 

the earlier of the maturity date of the 

Security or February 20, 2009; 

(c) The Liquidating Funds did not 

bear any commissions, fees, transaction 

costs or other expenses in connection 

with the sale; 

(d) BNY Mellon, as trustee of the 

Liquidating Funds, determined that the 

sale of the Securities was appropriate 

for and in the best interests of the 

Liquidating Funds, and the Plans 

invested, directly or indirectly, in the 

Liquidating Funds, at the time of the 

transaction; 

(e) BNY Mellon took all appropriate 

actions necessary to safeguard the 

interests of the Liquidating Funds, and 

the employee benefit plans invested, 

directly or indirectly, in the Liquidating 

Funds, in connection with the 

transaction; 

(f) If the exercise of any of BNYMC’s 

rights, claims or causes of action in 

connection with its ownership of the 

Securities results in BNYMC recovering 

from Lehman, or any third party, an 

mstockstill on DSKH9S0YB1PROD with NOTICES

58996 Federal Register / Vol. 74, No. 219 / Monday, November 16, 2009 / Notices 

15For purposes of this proposed exemption, 

references to specific provisions of Title I of the 

Act, unless otherwise specified, refer also to the 

corresponding provisions of the Code. 

16 It is represented that to the extent that, prior 

to the effective date of the final exemption, the 

Fund had received distributions from the hedge 

funds in connection with interests in such hedge 

funds held by the Fund, those proceeds would have 

been distributed by the Fund to each holder of units 

in the Fund in proportion to each such holder’s 

interest in the Fund; and accordingly, would not 

have been purchased by Ivy or by any affiliate of 

Ivy, pursuant to this proposed exemption. 

17The Bank of New York Mellon Corporation is 

hereinafter referred to as BNYMC. 

aggregate amount that is more than the 

sum of: 

(1) The purchase price paid for the 

Securities by BNYMC; and 

(2) interest on the par value of the 

Securities from and after the date 

BNYMC purchased the Securities from 

the Liquidating Funds, determined at 

the last-published interest rate on the 

Securities preceding Lehman’s 

bankruptcy filing, BNYMC will refund 

such excess amount promptly to the 

Liquidating Funds (after deducting all 

reasonable expenses incurred in 

connection with the recovery); 

(g) BNY Mellon and its affiliates, as 

applicable, have maintained, or will 

cause to be maintained, for a period of 

six (6) years from the date of any 

covered transaction such records as are 

necessary to enable persons such as, 

employers or representatives of the 

Department, plan fiduciaries or plan 

participants, to determine whether the 

conditions of this exemption have been 

met. 

For Further Information Contact: 

Anh-Viet Ly of the Department, 

telephone (202) 693–8648. (This is not 

a toll-free number). 

Ivy Asset Management Corporation 

Located in Jericho, NY 

[Application No. D–11492] 

Proposed Exemption 

The Department is considering 

granting an exemption under the 

authority of section 408(a) of the Act 

and section 4975(c)(2) of the Code and 

in accordance with the procedures set 

forth in 29 CFR part 2570, subpart B (55 

FR 32836, 32847, August 10, 1990). 

Section I: Transactions 

If the proposed exemption is granted, 

the restrictions of sections 406(a)(1)(A) 

through (D), 406(b)(1) and 406(b)(2) of 

the Act and the sanctions resulting from 

the application of section 4975 of the 

Code, by reason of section 4975(c)(1)(A) 

through (E) of the Code,15 shall not 

apply, effective December 31, 2008, to: 

(a) The sale for cash of certain equity 

interests (the Shares) in hedge funds 

organized outside the United States,16

which Shares are held in the Ivy 

Enhanced Income Fund (the Fund), a 

sub-fund established under the 

Alternative Investment-Master Group 

Trust (the Group Trust), to Ivy Asset 

Management Corporation (Ivy), a party 

in interest with respect to certain 

employee benefit plans, including a 

defined benefit plan (the Retirement 

Plan) sponsored by Ivy’s parent 

corporation, The Bank of New York 

Mellon Corporation,17 (collectively, the 

Plan(s)), and certain individual 

retirement accounts (the IRA(s)), where 

such Plans and IRAs have interests in 

the Fund; provided that at the time the 

Shares were sold, the conditions set 

forth, below, in section I(b)(1)–(6) of this 

proposed exemption, and the general 

conditions, set forth, below, in section 

II, of this proposed exemption, were 

satisfied; and 

(b) The sale for cash of certain 

restricted shares (the Restricted Shares) 

of the D. E. Shaw Composite 

International Fund, Ltd. (the DE Shaw 

Fund), a hedge fund organized outside 

the United States, to Ivy Holding 

Cayman, LTS, an affiliate of Ivy (the 

Affiliate) which is also organized 

outside of the United States, and which 

is a party in interest with respect to the 

Plans and the IRAs, where such Plans 

and IRAs have interests in the Fund; 

provided that at the time the Restricted 

Shares were sold to the Affiliate, the 

conditions set forth, below, in section 

I(b)(1)–(6) of this proposed exemption, 

and the general conditions, set forth, 

below, in section II of this proposed 

exemption, were satisfied: 

(1) The sale of the Shares to Ivy and 

the sale of the Restricted Shares to the 

Affiliate were each one-time 

transactions for cash; 

(2) The purchase price paid by Ivy for 

the Shares and the purchase price paid 

by the Affiliate for the Restricted Shares 

was equal to the value of such shares, 

as reported to the Fund by investment 

managers of the hedge funds (the 

Manager(s)), who are independent of 

and unrelated to Ivy and any of its 

affiliates, as set forth on the most recent 

statement issued to the Fund 

immediately prior to the effective date 

of this proposed exemption; 

(3) The Fund did not incur any 

commissions or transaction costs with 

respect to the sale of the Shares to Ivy 

and with respect to the sale of the 

Restricted Shares to the Affiliate; 

(4) On January 29, 2008, Ivy solicited 

and received from each of the Plans and 

IRAs which have an interest in the Fund 

(the Unit Holder(s)) an affirmative 

consent to the sale by the Fund of the 

Shares and of the Restricted Shares; 

(5) On January 29, 2008, Ivy solicited 

and received from each Unit Holder in 

the Fund an affirmative consent to the 

entry into a promissory note (the 

Promissory Note(s)), and as of the 

effective date of this proposed 

exemption Ivy entered into such 

Promissory Notes; and 

(6) Pursuant to the terms of each of 

the Promissory Notes entered into 

between Ivy and each Unit Holder, in 

the event that Ivy receives redemption 

proceeds in excess of the purchase price 

paid by Ivy to the Fund for the Shares, 

and/or in the event the Affiliate receives 

redemption proceeds in excess of the 

purchase price paid by the Affiliate to 

the Fund for the Restricted Shares, Ivy 

will pay, as soon as practicable after 

receipt of such amounts by Ivy and/or 

by the Affiliate, the entirety of such 

excess in cash to each Unit Holder in 

proportion to each such Unit Holder’s 

investment in the Fund; and Ivy will 

absorb the loss, if the aggregate 

redemption proceeds are less than the 

aggregate purchase price from the sale of 

the Shares and the sale of the Restricted 

Shares. 

Section II: General Conditions 

(a) Ivy, as investment manager of the 

Fund, represents that the subject 

transactions are appropriate for and in 

the interest of the Fund, and each of the 

Unit Holders which have an interest in 

the Fund. 

(b) Ivy takes all appropriate actions 

necessary to safeguard the interests of 

the Fund, and the interests of the Unit 

Holders in the Fund, in connection with 

the subject transactions; 

(c) The decision by a Unit Holder as 

to whether to engage in the subject 

transactions was made, in the case of a 

Plan by the trustee of each such Plan, in 

the case of an IRA, by the IRA holder, 

and in the case of the Retirement Plan 

by the Benefits Investment Committee 

(the Committee), which serves as the 

named fiduciary of the Retirement Plan. 

(d) Notwithstanding affirmative 

consent given by each of the Unit 

Holders to the sale by the Fund of the 

Shares and of the Restricted Shares, and 

notwithstanding the entry into the 

Promissory Notes between Ivy and each 

Unit Holder: 

(i) The Plans and IRAs have not 

waived or released and do not waive or 

release any claims, demands, and/or 

causes of action which such Plans and 

IRAs may have against BNYMC and/or 

Ivy in connection with the acquisition 

and retention of the Shares and the 

acquisition and retention of the 

Restricted Shares; and 

mstockstill on DSKH9S0YB1PROD with NOTICES

Federal Register / Vol. 74, No. 219 / Monday, November 16, 2009 / Notices 58997 

18The Department is expressing no opinion in 

this proposed exemption regarding whether the 

acquisition and holding of interests by the Plans 

and IRAs in the Group Trust and in the Fund 

violated any of the fiduciary responsibility 

provisions of Part 4 of Title I of the Act. 

(ii) The Plans and IRAs have not 

waived or released and do not waive or 

release any claims, demands, and/or 

causes of action which such Plans and 

IRAs may have against BNYMC and/or 

Ivy in connection with the sale of the 

Shares to Ivy and the sale of the 

Restricted Shares to the Affiliate; 

(e) Ivy will maintain, or cause to be 

maintained, for a period of six (6) years 

from the date of any of the subject 

transactions such records as are 

necessary to enable the persons 

described, below, in section II(f)(1) of 

this proposed exemption, to determine 

whether the conditions of this proposed 

exemption have been met, except that— 

(1) No party in interest with respect 

to a Plan or to an IRA which engaged 

in the subject transactions, other than 

Ivy and the Affiliate, shall be subject to 

a civil penalty under section 502(i) of 

the Act or the taxes imposed by section 

4975(a) and (b) of the Code, if such 

records are not maintained, or not 

available for examination, as required, 

below, by section II(f)(1) of this 

proposed exemption; and 

(2) A separate prohibited transaction 

shall not be considered to have occurred 

solely because, due to circumstances 

beyond the control of Ivy, such records 

are lost or destroyed prior to the end of 

the six-year period. 

(f)(1) Except as provided, below, in 

section II(f)(2) of this proposed 

exemption, and notwithstanding any 

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

of section 504 of the Act, the records 

referred to, above, in section II(e) of this 

proposed exemption, are 

unconditionally available at their 

customary location for examination 

during normal business hours by— 

(A) Any duly authorized employee or 

representative of the Department, the 

Internal Revenue Service, or the 

Securities and Exchange Commission; 

or 

(B) Any fiduciary of any Plan or any 

IRA that engaged in the subject 

transactions, or any duly authorized 

employee or representative of such 

fiduciary; or 

(C) Any employer of participants and 

beneficiaries and any employee 

organization whose members are 

covered by a Plan or an IRA that 

engaged in the subject transactions, or 

any authorized employee or 

representative of these entities; or 

(D) Any participant or beneficiary of 

a Plan or an IRA that engaged in the 

subject transactions, or duly authorized 

employee or representative of such 

participant or beneficiary; 

(2) None of the persons described, 

above, in section II(f)(1)(B)–(D) of this 

proposed exemption, shall be 

authorized to examine trade secrets of 

Ivy, or commercial or financial 

information which is privileged or 

confidential; and 

(3) Should Ivy refuse to disclose 

information on the basis that such 

information is exempt from disclosure, 

Ivy 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. 

Effective Date: This proposed 

exemption, if granted, will be effective, 

December 31, 2008. 

Summary of Facts and Representations 

1. The applicant for this proposed 

exemption is Ivy, a Delaware 

corporation. On January 1, 2009, Ivy 

converted to a Delaware limited liability 

corporation and changed its name to Ivy 

Asset Management LLC. Ivy is a 

registered investment adviser under the 

laws of Delaware, having its principal 

place of business in Garden City, New 

York. 

2. The Group Trust qualifies as a 

group trust, pursuant to Revenue Ruling 

81–100. The Group Trust is exempt 

from taxation under section 501(a) of 

the Code. Ivy is the investment manager 

of the Group Trust. Custodial Trust 

Company, a wholly-owned subsidiary of 

Bear Stearns Companies, Inc., was the 

trustee of the Group Trust until July 31, 

2007. Wells Fargo and Company, a 

diversified financial services company, 

became the trustee of the Group Trust 

on August 1, 2007. 

3. The Fund is an Investment Fund 

established under the Group Trust, as 

set forth in Section 4.01 of the Group 

Trust Agreement. As required under 

Revenue Ruling 81–100, participation in 

the Fund is limited to certain investors 

which are themselves exempt from 

Federal income taxes. In this regard, 

each of the Unit Holders in the Fund is 

either a Plan or an IRA. As of August 6, 

2008, there were eight (8) Plans and four 

(4) IRAs each of which had an interest 

in the Fund. The Fund does not put a 

limit on the number of units that may 

be issued to the Unit Holders.18

The Fund has issued three (3) classes 

of units, Class C units, Class D units, 

and Class E units. The holders of Class 

C units paid a management fee of 1.5% 

and paid no performance fees. The 

minimum investment for the holders of 

Class C units was $1 million. The Class 

D units had a tiered management fee 

and paid a performance fee. The 

minimum investment for the holders of 

Class D units was $500,000. In all other 

material respects the Class C units and 

the Class D units were the same. 

The Retirement Fund is the only 

holder of Class E units. The Retirement 

Fund invested $25 million in Class E 

units in the Fund in 1996 and over time 

has received in excess of $33,503,000 in 

distributions. Ivy does not receive any 

fees with respect to the Class E units. 

The net asset value (NAV) of the Fund 

is determined at the end of each 

calendar quarter and at such other times 

as determined by the investment 

manager. The NAV is equal to the total 

value of the Fund’s assets minus the 

total value of its liabilities. The value of 

each unit equals the capital attributable 

to each unit class of the Fund divided 

by the outstanding units for each unit 

class on such valuation date. All 

outstanding Class C units, Class D units, 

and Class E units were redeemed. 

The Fund is a Section 3(c)(1) fund, as 

defined in the Investment Company Act 

of 1940. The Fund is not a registered 

open-ended investment company. 

Rather, it is a privately offered fund of 

funds that invests in private investment 

vehicles commonly referred to as hedge 

funds. The Fund is a fund of hedge 

funds. All of the holdings in the Fund 

are equity interests in hedge funds 

which are sponsored by investment 

Managers unrelated to Ivy and to any of 

its affiliates. 

The Fund is operated pursuant to 

Commodity Futures Trading 

Commission (CFTC) exemption 

Regulation 4.13(a)(4). As such, the 

investment manager of the Fund is not 

required to register with the CFTC as a 

commodity pool operator. In this regard, 

the investment manager is not required 

to deliver a CFTC disclosure document 

and a certified annual report to 

participants in the pool. 

The Fund is subject to tax on the 

unrelated business taxable income 

which is generated from income from 

debt financed investments. It is 

represented that such tax is paid by the 

Group Trust, not directly by the 

participants in the Fund. 

As Ivy, the investment manager of the 

Fund, is a subsidiary of BNYMC, a 

United States bank holding company, 

the Fund is subject to the Bank Holding 

Company Act (the BHCA). Due to 

BNYMC’s regulatory elections, the Fund 

is subject to the provisions of the BHCA 

governing merchant banking activities 

and to the provisions of the Federal 

Reserve Board’s Merchant Banking 

Regulations. Under such regulations, the 

mstockstill on DSKH9S0YB1PROD with NOTICES

58998 Federal Register / Vol. 74, No. 219 / Monday, November 16, 2009 / Notices 

19 64 FR 4131, January 27, 1999. 

20The Department, herein, is providing no relief 

from the prohibitions, as set forth in section 406 of 

the Act, for the receipt of fees by Ivy from the Fund, 

nor is the Department offering a view, as to whether 

the provision of services rendered by Ivy to the 

Fund is covered by the statutory exemption 

provided in section 408(b)(2) of the Act and the 

Department’s regulations, thereunder, pursuant to 

29 CFR 2550.408b–2. 

Further, the Department does not concur with 

Ivy’s conclusion that this particular fee arrangement 

was specifically approved by the Department in 

footnote 11 of the proposed exemption later 

finalized as PTE 99–13. Footnote 11 was limited to 

the need for additional disclosure where the initial 

disclosure noted that the fees were capped at a 

maximum number of basis points, but that such fees 

had initially been set at a lower amount, subject to 

later increase. 

duration of an investment may be 

limited to 10 years. 

Ivy, as the investment manager of the 

Fund, makes all investment decisions 

for the Fund. As of June 30, 2008, the 

approximate fair market value of the 

Fund’s portfolio was $2,425,200. 

4. As investment manager for the 

Fund, Ivy has received a quarterly 

management fee from the Fund. Ivy 

maintains in accordance with the 

provisions of section 408(b)(2) of the 

Act, it is entitled to payment of its fees 

from the holders of Class C and Class D 

units (which are fully disclosed in the 

Offering Memorandum and 

accompanying Adoption Agreement 

through which the investors purchased 

units of the Fund). Further, Ivy 

maintains that the payment of these 

fully disclosed fees is not subject to 

section 406(b) of the Act, because Ivy 

did not exercise any of the power that 

makes it a fiduciary to cause the Fund 

to pay it additional fees other than the 

fully disclosed fees which were 

approved by each investor at the time 

such investor made its investment in the 

Fund. It is represented that the holder 

of the Class E units, the Retirement 

Plan, paid no fees. 

In addition, Ivy under certain 

circumstances has received performance 

fees from the Fund. Only holders of 

Class D units paid performance fees. Ivy 

maintains that the payment of 

performance fees to Ivy in connection 

with the Class D units is entirely 

consistent with the Department’s 

advisory opinions with respect to the 

payment of incentive compensation. In 

this regard, Ivy represents that its 

performance fee was based on the 

amount by which the annualized return 

of the Class D units exceeded the 

average six (6) month U.S. Treasury rate. 

The annualized return of the Class D 

units is determined based on net asset 

value of each of the underlying hedge 

funds, as determined by the managers of 

those funds, each of whom was 

unrelated to Ivy and its affiliates. It is 

represented that Ivy took no part in the 

determination of the net asset values by 

the managers of the underlying hedge 

funds, and thus, Ivy did not determine 

the amount of its own compensation, 

which was set by external sources. It is 

further represented that Ivy, as part of 

its continuing duty as a fiduciary under 

the Act, routinely reviewed the 

valuation practices of those managers. 

Ivy also has received reimbursement 

for research, accounting, and operating 

services provided to the Fund. It is 

represented that the fact that Ivy 

charged and received research, 

accounting, and operating services fees, 

along with all of its other fees, were 

fully disclosed in the Offering 

Memorandum for the class of units 

purchased by the investors and were 

approved by the fiduciaries of the plans 

and IRA holders as part of the 

investment process. The fee is variable 

although it is capped at 60 basis points. 

It is Ivy’s view that this particular 

arrangement has been specifically 

approved by the Department in footnote 

11 in the Notice of Proposed Exemption 

which ultimately became Prohibited 

Transaction Exemption 99–13.19 Ivy 

maintains that the footnote, sets forth 

the Department’s position that there is 

no prohibited transaction where a plan 

fiduciary charges less than or waives a 

particular fee that has been disclosed in 

writing to an independent plan 

fiduciary and approved by such 

fiduciary, and then later charges the full 

fee. As a holder of Class E units, the 

Retirement Plan does not pay any 

research, accounting, and operating 

services fees to Ivy. 

It is represented that the Fund is no 

longer paying any fees to Ivy, because, 

as discussed more fully below, the Fund 

has been terminated.20

5. As an investment manager with 

discretion over the assets of the Plans 

and the assets of the IRAs that have 

interests in the Fund, Ivy is a fiduciary, 

pursuant to section 3(14)(A) of the Act. 

Ivy is also a party in interest and service 

provider, pursuant to section 3(14)(B) of 

the Act. 

The Affiliate, as a wholly-owned 

subsidiary of Ivy, is a party in interest 

with respect to the Plans and the IRAs 

that have interests in the Fund, 

pursuant to section 3(14)(G) of the Act. 

6. In view of the small size of the 

Fund, Ivy determined that it was in the 

best interest of the Unit Holders to 

terminate the Fund. In connection with 

the decision to terminate the Fund, the 

Fund sent a notice to each Unit Holder 

on October 2, 2007, informing all such 

Unit Holders of the termination of the 

Fund and of the mandatory redemption 

date, December 31, 2007. On December 

31, 2007, the Fund was terminated. 

On January 29, 2008, the Fund sent 

another notice to Unit Holders 

reiterating that Ivy had terminated the 

Fund, effective as of December 31, 2007, 

and stating that the Fund was in 

liquidation and that all Unit Holders 

were to be partially redeemed. In this 

regard, all Unit Holders were informed 

that the Fund was unable to distribute 

the full value of each Unit Holder’s 

interest in the Fund, because of 

undistributed amounts, as described 

below in paragraphs 9 and 10, which are 

retained by the six (6) hedge funds (the 

Underlying Funds) in which the Fund 

had an interest. 

The January 2008 notice further 

informed the Unit Holders of the 

intention of the Fund to sell its interest 

in the Shares and the Restricted Shares, 

provided the Department were to grant 

a final exemption to permit such 

transactions. As of the same date, the 

Unit Holders were also informed of Ivy’s 

intention to enter into the Promissory 

Notes with each of the Unit Holders. 

In addition, in the January 2008 

notice, Ivy solicited and received from 

each Unit Holder an affirmative consent 

to the proposed sale of the Shares and 

the sale of the Restricted Shares by the 

Fund and to the proposed entry into the 

Promissory Notes between Ivy and each 

Unit Holder. 

7. On August 6, 2008, Ivy submitted 

to the Department an application for an 

individual exemption. In this regard, Ivy 

has requested relief from the provisions 

of section 406(a)(1)(A) through (D), 

406(b)(1), and 406(b)(2) of the Act: (i) 

For the cash sale of the Shares by the 

Fund to Ivy, and (ii) for the cash sale of 

the Restricted Shares by the Fund to the 

Affiliate. 

The sale of Shares by the Fund to Ivy 

and the sale of the Restricted Shares by 

the Fund to the Affiliate constitute 

violations of section 406(a)(1)(A). The 

subject transactions also constitute a 

transfer to, or use by or for the benefit 

of a party in interest of any assets of a 

plan, in violation of section 406(a)(1)(D) 

of the Act. The subject transactions also 

raise issues under the self-dealing and 

conflicts of interest provisions of section 

406(b)(1) and 406(b)(2) of the Act, by 

Ivy, as a fiduciary of the assets of the 

Plans and the assets of the IRAs 

invested in the Fund. 

8. Ivy has requested that the 

exemption be made retroactive to 

December 31, 2008. It is represented 

that on December 31, 2008, Ivy did, in 

fact, purchase the Shares. However, on 

December 31, 2008, Ivy was informed by 

the DE Shaw Fund that, because the DE 

Shaw Fund is an offshore fund, such 

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Federal Register / Vol. 74, No. 219 / Monday, November 16, 2009 / Notices 58999 

21 It is represented that particular investments 

made by a hedge fund which the manager of such 

hedge fund has determined are either difficult to 

value on an on-going basis or should be held until 

the resolution of a special event or circumstance are 

commonly referred to as in a ‘‘side pocket.’’ 

fund would not consent to the sale of 

the Restricted Shares to Ivy, as Ivy is a 

Delaware entity. Instead, effective 

January 1, 2009, the Affiliate purchased 

from the Fund the Restricted Shares of 

the DE Shaw Fund. Ivy engaged in the 

subject transactions prior to obtaining 

an exemption, because it believes that in 

view of the current economic 

conditions, it was in the best interest of 

the Unit Holders in the Fund that such 

Unit Holders received the cash proceeds 

from the sale of the Shares and the sale 

of the Restricted Shares, as soon as 

possible. 

9. In connection with the decision to 

terminate the Fund, Ivy submitted 

redemption requests to each of the 

hedge funds in which the Fund was 

invested. As a result, the Fund began 

receiving redemption payments from 

such hedge funds in accordance with 

the private placement memorandum 

and other governing documents of such 

hedge funds. In this regard, it is 

represented that typically hedge funds 

pay redemption proceeds to a 

redeeming investor depending on the 

type of investments held by such hedge 

funds and the terms of the governing 

documents of such hedge funds. It is 

represented that the pace at which 

hedge funds pay redemption proceeds 

to a redeeming investor depends, for 

example, on whether the assets of such 

hedge funds are illiquid or held in a 

side pocket.21 Further, during the period 

when the assets of such hedge funds are 

illiquid or held in a side pocket, such 

hedge funds still owe redemption 

proceeds to a redeeming investor. The 

amount due to a redeeming investor will 

fluctuate as a result of any market gains 

and losses on the assets of such hedge 

funds. 

10. It is represented that for a variety 

of reasons the Underlying Funds in 

which the Fund, as of December 31, 

2008, had an interest have not fully paid 

out redemption proceeds. In this regard, 

one of the Underlying Funds is 

undergoing liquidation, and another is 

subject to an extended redemption 

payment schedule. Two of the 

Underlying Funds have established a 

litigation or regulatory reserve, and 

another has suspended redemptions 

with the intention of making periodic 

cash distributions to investors on a pro 

rata basis, subject to anticipated 

reserves. The Fund’s interests in these 

Underlying Funds constitute the Shares 

and the Restricted Shares which are the 

subject of this proposed exemption. 

11. Accordingly, effective December 

31, 2008, Ivy purchased the Shares from 

the Fund for cash, and the Affiliate 

purchased the Restricted Shares from 

the Fund for cash, so that the Fund 

could fully pay out its Unit Holders 

without requiring such Unit Holders to 

wait for each of the Underlying Funds 

to pay to the Fund the full redemption 

proceeds. The purchase price paid to 

the Fund by Ivy for the Shares equaled 

the value of such Shares, and the 

purchase price paid to the Fund by the 

Affiliate for the Restricted Shares 

equaled the value of such Restricted 

Shares, as reported to Fund by the 

Managers of the Underlying Funds, who 

are independent of and unrelated to Ivy 

and its affiliates, and as set forth on the 

most recent statement issued to the 

Fund immediately prior to the effective 

date of this proposed exemption. The 

proposed sale by the Fund of the Shares 

to Ivy and the proposed sale by the 

Fund of the Restricted Shares to the 

Affiliate are evidenced by purchase 

agreements. 

12. As a result of the sale by the Fund 

of the Shares to Ivy and as a result of 

the sale by the Fund of the Restricted 

Shares to the Affiliate, Ivy and the 

Affiliate became shareholders in or 

creditors of the respective Underlying 

Funds and will receive the redemption 

proceeds from such Underlying Funds 

at such time as the redemption proceeds 

are paid out by such Underlying Funds. 

With regard to the payment of 

redemption proceeds by the Underlying 

Funds to Ivy and to the Affiliate, it is 

represented that Ivy entered into a 

Promissory Note with each of the Unit 

Holders of the Fund. Under the terms of 

each of the Promissory Notes, in the 

event Ivy receives with respect to the 

Shares, or the Affiliate receives with 

respect to the Restricted Shares 

redemption proceeds from the 

Underlying Funds in excess of the 

purchase price paid to the Fund by Ivy 

for the Shares and the purchase price 

paid by the Affiliate for the Restricted 

Shares, Ivy will pay, as soon as 

practicable after the receipt of such 

amounts by Ivy and the Affiliate, 

respectively, the entirety of such excess 

in cash to each Unit Holder in 

proportion to each such Unit Holder’s 

investment in the Fund. It is 

represented that if Ivy or if the Affiliate 

receives redemption proceeds that are 

less than the purchase price paid by Ivy 

or by the Affiliate to the Fund, Ivy will 

absorb the loss. 

13. It is represented that the sales 

transactions were in the interest of the 

Fund, and the Plans and IRAs which 

had interests in the Fund. In this regard, 

the Unit Holders received from the 

Fund a purchase price, which equaled 

the aggregate value of the Shares and the 

Restricted Shares, respectively, as 

reported to the Fund by the Managers of 

the Underlying Funds who were 

independent of and unrelated to Ivy and 

its affiliates. Further, the Unit Holders 

did not have to wait for the Underlying 

Funds to fully pay out redemption 

proceeds to the Fund. In this regard, the 

sale of the Shares to Ivy and the sale of 

the Restricted Shares to the Affiliate 

converted a potential stream of 

payments from the Fund to the Unit 

Holders into one-time payments in cash. 

In addition, if the Unit Holders had 

had to wait until the Underlying Funds 

fully paid out, the redemption proceeds 

received by the Fund would have been 

subject to various administrative 

expenses (such as audit fees and trustee 

fees) applicable to any on-going pooled 

investment fund. Further, Unit Holders 

would have had to bear the market risk 

that the value of the assets held in the 

Underlying Fund, some of which are 

illiquid or held in a side pocket of the 

Underlying Funds, may have declined 

in value during 2009 and thereafter. 

It is represented further that the entry 

into the Promissory Notes is in the 

interest of Unit Holders, because, such 

Promissory Notes provide that if Ivy or 

the Affiliate receives redemption 

proceeds in excess of the purchase price 

paid, respectively, by such parties for 

the Shares and the Restricted Shares, 

the Unit holders will receive a 

proportionate share of such excess. On 

the other hand, it is represented that if 

Ivy or the Affiliate receives redemption 

proceeds that are less than the purchase 

price paid, respectively, by such parties 

for the Shares and the Restricted Shares, 

Ivy will absorb the loss. 

14. It is represented that the proposed 

sale transactions are feasible in that 

each such sale was a one-time 

transaction for cash. Further, in 

connection with the sale of the Shares 

to Ivy and the sale the Restricted Shares 

to the Affiliate, the Fund did not bear 

any commissions or transaction costs. In 

addition, Ivy is responsible for the costs 

of the exemption application and the 

cost of notifying interested persons. 

15. It is represented that the proposed 

transactions are protective of the Unit 

Holders, because the purchase price 

paid by Ivy and by the Affiliate, 

respectively, for the Shares and the 

Restricted Shares, equaled the value of 

such Shares and Restricted Shares, as 

reported to the Fund by the Managers of 

each of the Underlying Funds, each of 

whom is independent of and unrelated 

to Ivy and its affiliates. Further, it is 

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59000 Federal Register / Vol. 74, No. 219 / Monday, November 16, 2009 / Notices 

represented that the decision by a Unit 

Holder as to whether to engage in the 

proposed transactions was made: (a) In 

the case of a Plan, by the trustee of each 

such Plan; (b) in the case of an IRA, by 

the IRA holder, and (c) in the case of the 

Retirement Plan, by the Committee 

which serves as the named fiduciary on 

behalf of the Retirement Plan for 

investment matters. It is represented 

that although, a majority of the members 

of the Committee are officers of 

BNYMC, none of the members of the 

Committee are employed by Ivy. 

16. In summary, the applicant 

represents that the proposed 

transactions satisfy the statutory criteria 

of section 408(a) of the Act and section 

4975 of the Code because: 

(a) The sale of the Shares to Ivy and 

the sale of the Restricted Shares to the 

Affiliate were one-time transactions for 

cash; 

(b) The purchase price paid by Ivy for 

the Shares, and the purchase price paid 

by the Affiliate for the Restricted Shares 

was equal to the value of such Shares 

and Restricted Shares, as reported to the 

Fund by the Managers of each of the 

Underlying Funds, who are 

independent of and unrelated to Ivy and 

its affiliates, and as set forth on the most 

recent statement issued to the Fund 

immediately prior to the effective date 

of this proposed exemption; 

(c) The Fund did not incur any 

commissions or transaction costs with 

respect to the sale of the Shares to Ivy 

or the sale of the Restricted Shares to 

the Affiliate; 

(d) The decision by a Unit Holder as 

to whether to engage in the subject 

transactions was made, in the case of a 

Plan by the trustee of each such Plan, in 

the case of an IRA, by the IRA holder, 

and in the case of the Retirement Plan 

by the Committee which serves as the 

named fiduciary on behalf of the 

Retirement Plan; 

(e) Ivy solicited and received from 

each Unit Holder an affirmative consent 

to the sale of the Shares and the 

Restricted Shares by the Fund and to the 

entry into the Promissory Notes; 

(f) Pursuant to the terms of the 

Promissory Notes, in the event that Ivy 

or the Affiliate receives redemption 

proceeds with respect to the Shares and 

the Restricted Shares in excess of the 

purchase price paid to the Fund by Ivy 

for such Shares or the purchase price 

paid by the Affiliate for such Restricted 

Shares, Ivy will pay, as soon as 

practicable after receipt of such 

amounts, the entirety of such excess in 

cash to each Unit Holder in proportion 

to each such Unit Holder’s investment 

in the Fund, and Ivy will absorb the 

loss, if the aggregate redemption 

proceeds are less than the purchase 

price paid for the Shares and the 

Restricted Shares; 

(g) Ivy, as the investment manager of 

the Fund, represents that the subject 

transactions are appropriate for and in 

the interest of the Fund, and the Unit 

Holders which have interests in the 

Fund; 

(h) Ivy took all appropriate actions 

necessary to safeguard the interests of 

the Fund, and the Unit Holders in the 

Fund, in connection with the subject 

transactions; 

(i) Ivy will maintain, or cause to be 

maintained, for a period of six (6) years 

from the date of any of the subject 

transactions such records as are 

necessary to determine whether the 

conditions of this exemption have been 

met. 

Notice to Interested Persons 

The persons who may be interested in 

the publication in the Federal Register 

of the Notice of Proposed Exemption 

(the Notice) include the trustees of each 

of the Unit Holders that is a Plan, the 

custodian of each IRA, and each of the 

IRA holders, and the Committee which 

serves as the named fiduciary for the 

Retirement Plan. The Applicant has not 

proposed providing notice to each of the 

participants in the Plans, because each 

Unit Holder has already consented to 

the sale to Ivy, and these are the same 

persons who made the decision to 

invest in the first place. 

It is represented that each of these 

classes of interested persons will be 

notified of the publication of the Notice 

by mail, within fifteen (15) calendar 

days of publication of the Notice in the 

Federal Register. Such mailing will 

contain a copy of the Notice, as it 

appears in the Federal Register on the 

date of publication, plus a copy of the 

Supplemental Statement, as required, 

pursuant to 29 CFR 2570.43(b)(2), which 

will advise all interested persons of 

their right to comment and to request a 

hearing. 

A11 written comments and/or 

requests for a hearing must be received 

by the Department from interested 

persons within 45 days of the 

publication of this proposed exemption 

in the Federal Register. 

For Further Information Contact: Ms. 

Angelena C. Le Blanc of the Department, 

telephone (202) 693–8540. (This is not 

a toll-free number.) 

General Information 

The attention of interested persons is 

directed to the following: 

(1) The fact that a transaction is the 

subject of an exemption under section 

408(a) of the Act and/or section 

4975(c)(2) of the Code does not relieve 

a fiduciary or other party in interest or 

disqualified person from certain other 

provisions of the Act and/or the Code, 

including any prohibited transaction 

provisions to which the exemption does 

not apply and the general fiduciary 

responsibility provisions of section 404 

of the Act, which, among other things, 

require a fiduciary to discharge his 

duties respecting the plan solely in the 

interest of the participants and 

beneficiaries of the plan and in a 

prudent fashion in accordance with 

section 404(a)(1)(b) of the Act; nor does 

it affect the requirement of section 

401(a) of the Code that the plan must 

operate for the exclusive benefit of the 

employees of the employer maintaining 

the plan and their beneficiaries; 

(2) Before an exemption may be 

granted under section 408(a) of the Act 

and/or section 4975(c)(2) of the Code, 

the Department must find that the 

exemption is administratively feasible, 

in the interests of the plan and of its 

participants and beneficiaries, and 

protective of the rights of participants 

and beneficiaries of the plan; 

(3) The proposed exemptions, if 

granted, will be supplemental to, and 

not in derogation of, any other 

provisions of the Act and/or the Code, 

including statutory or administrative 

exemptions and transitional rules. 

Furthermore, the fact that a transaction 

is subject to an administrative or 

statutory exemption is not dispositive of 

whether the transaction is in fact a 

prohibited transaction; and 

(4) The proposed exemptions, if 

granted, will be subject to the express 

condition that the material facts and 

representations contained in each 

application are true and complete, and 

that each application accurately 

describes all material terms of the 

transaction which is the subject of the 

exemption. 

Signed at Washington, DC, this 10th day of 

November 2009. 

Ivan Strasfeld, 

Director of Exemption Determinations, 

Employee Benefits Security Administration, 

U.S. Department of Labor. 

[FR Doc. E9–27404 Filed 11–13–09; 8:45 am] 

BILLING CODE 4510–29–P 

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