8128 Federal Register / Vol. 75, No. 35 / Tuesday, February 23, 2010 / Notices 

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. 

For a more complete statement of the 

facts and representations supporting the 

Department’s decision to grant this 

exemption, refer to the notice of 

proposed exemption published on 

November 16, 2009 at 74 FR 58992. 

For Further Information Contact: Mr. 

Anh-Viet Ly of the Department at (202) 

693–8648. (This is not a toll-free 

number.) 

General Information 

The attention of interested persons is 

directed to the following: 

(1) The fact that a transaction is the 

subject of an exemption under section 

408(a) of the Act and/or section 

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

a fiduciary or other party in interest or 

disqualified person from certain other 

provisions to which the 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) This exemption is supplemental to 

and not in derogation of, any other 

provisions of the Act and/or the Code, 

including statutory or administrative 

exemptions and transactional rules. 

Furthermore, the fact that a transaction 

is subject to an administrative or 

statutory exemption is not dispositive of 

whether the transaction is in fact a 

prohibited transaction; and 

(3) The availability of this exemption 

is subject to the express condition that 

the material facts and representations 

contained in the application accurately 

describes all material terms of the 

transaction which is the subject of the 

exemption. 

Signed at Washington, DC, this 16th day of 

February, 2010. 

Ivan Strasfeld, 

Director of Exemption Determinations, 

Employee Benefits Security Administration, 

U.S. Department of Labor. 

[FR Doc. 2010–3445 Filed 2–22–10; 8:45 am] 

BILLING CODE 4510–29–P 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

[Application Nos. and Proposed 

Exemptions; D–11514] 

Citigroup Inc. and Its Affiliates 

(Citigroup or the Applicant); Subaru of 

America, Inc. (Subaru); and The Bank 

of New York Mellon (BNY Mellon); et 

al.; Proposed Exemptions 

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., lll, 

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. 

Warning: If you submit written 

comments or hearing requests, do not 

include any personally-identifiable or 

confidential business information that 

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

requests are posted on the Internet 

exactly as they are received, and they 

can be retrieved by most Internet search 

engines. The Department will make no 

deletions, modifications or redactions to 

the comments or hearing requests 

received, as they are public records. 

Notice to Interested Persons 

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. 

Citigroup Inc. and Its Affiliates 

(Citigroup or the Applicant), Located in 

New York, New York 

[Application No. D–11514.] 

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 

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Federal Register / Vol. 75, No. 35 / Tuesday, February 23, 2010 / Notices 8129 

1For purposes of this proposed exemption, 

references to section 406 of the Act should be read 

to refer as well to the corresponding provisions of 

section 4975 of the Code. 

2The Department notes that the Act’s general 

standards of fiduciary conduct also would apply to 

the transactions described herein. In this regard, 

section 404 of the Act requires, among other things, 

that a fiduciary discharge his duties respecting a 

plan solely in the interest of the plan’s participants 

and beneficiaries and in a prudent manner. 

Accordingly, a plan fiduciary must act prudently 

with respect to, among other things, the decision to 

sell the Auction Rate Security to Citigroup for the 

par value of the Auction Rate Security, plus unpaid 

interest and dividends. The Department further 

emphasizes that it expects plan fiduciaries, prior to 

entering into any of the proposed transactions, to 

fully understand the risks associated with this type 

of transaction following disclosure by Citigroup of 

all relevant information. 

in accordance with the procedures set 

forth in 29 CFR part 2570, subpart B (55 

FR 32836, 32847, August 10, 1990).1

Section I. Sales of Auction Rate 

Securities From Plans to Citigroup: 

Unrelated to a Settlement Agreement 

If the proposed exemption is granted, 

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

and (D) and section 406(b)(1) and (2) of 

the Act and the sanctions resulting from 

the application of section 4975 of the 

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

(D), and (E) of the Code, shall not apply, 

effective February 1, 2008, to the sale by 

a Plan (as defined in Section V(e)) of an 

Auction Rate Security (as defined in 

Section V(c)) to Citigroup, where such 

sale (an Unrelated Sale) is unrelated to, 

and not made in connection with, a 

Settlement Agreement (as defined in 

Section V(f)), provided that the 

conditions set forth in Section II have 

been met. 

Section II. Conditions Applicable to 

Transactions Described in Section I 

(a) The Plan acquired the Auction 

Rate Security in connection with 

brokerage or advisory services provided 

by Citigroup to the Plan; 

(b) The last auction for the Auction 

Rate Security was unsuccessful; 

(c) Except in the case of a Plan 

sponsored by Citigroup for its own 

employees (a Citigroup Plan), the 

Unrelated Sale is made pursuant to a 

written offer by Citigroup (the Offer) 

containing all of the material terms of 

the Unrelated Sale. Either the Offer or 

other materials available to the Plan 

provide: (1) The identity and par value 

of the Auction Rate Security; (2) the 

interest or dividend amounts that are 

due and unpaid with respect to the 

Auction Rate Security; and (3) the most 

recent rate information for the Auction 

Rate Security (if reliable information is 

available). Notwithstanding the 

foregoing, in the case of a pooled fund 

maintained or advised by Citigroup, this 

condition shall be deemed met to the 

extent each Plan invested in the pooled 

fund (other than a Citigroup Plan) 

receives advance written notice 

regarding the Unrelated Sale, where 

such notice contains all of the material 

terms of the Unrelated Sale; 

(d) The Unrelated Sale is for no 

consideration other than cash payment 

against prompt delivery of the Auction 

Rate Security; 

(e) The sales price for the Auction 

Rate Security is equal to the par value 

of the Auction Rate Security, plus any 

accrued but unpaid interest or 

dividends; 

(f) The Plan does not waive any rights 

or claims in connection with the 

Unrelated Sale; 

(g) The decision to accept the Offer or 

retain the Auction Rate Security is made 

by a Plan fiduciary or Plan participant 

or IRA owner who is independent (as 

defined in Section V(d)) of Citigroup. 

Notwithstanding the foregoing: (1) in 

the case of an IRA (as defined in Section 

V(e)) which is beneficially owned by an 

employee, officer, director or partner of 

Citigroup, the decision to accept the 

Offer or retain the Auction Rate Security 

may be made by such employee, officer, 

director or partner; or (2) in the case of 

a Citigroup Plan or a pooled fund 

maintained or advised by Citigroup, the 

decision to accept the Offer may be 

made by Citigroup after Citigroup has 

determined that such purchase is in the 

best interest of the Citigroup Plan or 

pooled fund; 2

(h) Except in the case of a Citigroup 

Plan or a pooled fund maintained or 

advised by Citigroup, neither Citigroup 

nor any affiliate exercises investment 

discretion or renders investment advice 

within the meaning of 29 CFR 2510.3– 

21(c) with respect to the decision to 

accept the Offer or retain the Auction 

Rate Security; 

(i) The Plan does not pay any 

commissions or transaction costs with 

respect to the Unrelated Sale; 

(j) The Unrelated Sale is not part of an 

arrangement, agreement or 

understanding designed to benefit a 

party in interest to the Plan; 

(k) Citigroup and its affiliates, as 

applicable, maintain, or cause to be 

maintained, for a period of six (6) years 

from the date of the Unrelated Sale, 

such records as are necessary to enable 

the persons described below in 

paragraph (l)(1), to determine whether 

the conditions of this exemption, if 

granted, have been met, except that: 

(1) No party in interest with respect 

to a Plan which engages in an Unrelated 

Sale, other than Citigroup 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 (l)(1); and 

(2) A separate prohibited transaction 

shall not be considered to have occurred 

solely because, due to circumstances 

beyond the control of Citigroup or its 

affiliates, as applicable, such records are 

lost or destroyed prior to the end of the 

six-year period; 

(l)(1) Except as provided below in 

paragraph (l)(2), and notwithstanding 

any provisions of subsections (a)(2) and 

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

referred to above in paragraph (k) 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 U.S. 

Securities and Exchange Commission; 

or 

(B) Any fiduciary of any Plan, 

including any IRA owner, that engages 

in an Unrelated Sale, or any duly 

authorized employee or representative 

of such fiduciary; and 

(C) Any employer of participants and 

beneficiaries and any employee 

organization whose members are 

covered by a Plan that engages in the 

Unrelated Sale, or any authorized 

employee or representative of these 

entities; 

(2) None of the persons described 

above in paragraphs (l)(1)(B)–(C) shall 

be authorized to examine trade secrets 

of Citigroup, or commercial or financial 

information which is privileged or 

confidential; and 

(3) Should Citigroup refuse to disclose 

information on the basis that such 

information is exempt from disclosure, 

Citigroup 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. Sales of Auction Rate 

Securities From Plans to Citigroup: 

Related to a Settlement Agreement 

If the proposed exemption is granted, 

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

and (D) and section 406(b)(1) and (2) of 

the Act and the sanctions resulting from 

the application of section 4975 of the 

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

(D), and (E) of the Code, shall not apply, 

effective February 1, 2008, to the sale by 

a Plan of an Auction Rate Security to 

Citigroup, where such sale (a Settlement 

Sale) is related to, and made in 

connection with, a Settlement 

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8130 Federal Register / Vol. 75, No. 35 / Tuesday, February 23, 2010 / Notices 

3 In May 2009, Morgan Stanley Smith Barney was 

formed as a joint venture (JV). Under the JV 

agreement, each of Citigroup and Morgan Stanley 

Inc. (Morgan Stanley) (including their respective 

subsidiaries) contributed specified businesses into 

the JV, together with all contracts, employees, 

property licenses and other assets (as well as 

liabilities) used primarily in the contributed 

businesses. Generally, in the case of Citigroup, the 

contributed businesses included Citigroup’s retail 

brokerage and futures business operated under the 

name ‘‘Smith Barney’’ in the United States and 

Australia and operated under the name ‘‘Quilter’’ in 

the United Kingdom, Ireland and Channel Islands. 

Certain investment advisory and other businesses of 

Citigroup also were included. In the case of Morgan 

Stanley, the contributed businesses consisted 

generally of Morgan Stanley’s global wealth 

management (retail brokerage) and private wealth 

management businesses. This exemption 

application covers transactions between Citigroup 

and Plan clients as of the period prior to the 

formation of the JV. 

Agreement, provided that the conditions 

set forth in Section IV have been met. 

Section IV. Conditions Applicable to 

Transactions Described in Section III 

(a) The terms and delivery of the Offer 

are consistent with the requirements set 

forth in the Settlement Agreement and 

acceptance of the Offer does constitute 

a waiver of any claim of the tendering 

Plan; 

(b) The Offer or other documents 

available to the Plan specifically 

describe, among other things: 

(1) How a Plan may determine: the 

Auction Rate Securities held by the Plan 

with Citigroup; the number of shares or 

par value of the Auction Rate Securities; 

the interest or dividend amounts that 

are due and unpaid with respect to the 

Auction Rate Securities; and (if reliable 

information is available) the most recent 

rate information for the Auction Rate 

Securities; 

(2) The background of the Offer; 

(3) That neither the tender of Auction 

Rate Securities nor the purchase of any 

Auction Rate Securities pursuant to the 

Offer will constitute a waiver of any 

claim of the tendering Plan; 

(4) The methods and timing by which 

Plans may accept the Offer; 

(5) The purchase dates, or the manner 

of determining the purchase dates, for 

Auction Rate Securities tendered 

pursuant to the Offer; 

(6) The timing for acceptance by 

Citigroup of tendered Auction Rate 

Securities; 

(7) The timing of payment for Auction 

Rate Securities accepted by Citigroup 

for payment; 

(8) The methods and timing by which 

a Plan may elect to withdraw tendered 

Auction Rate Securities from the Offer; 

(9) The expiration date of the Offer; 

(10) The fact that Citigroup may make 

purchases of Auction Rate Securities 

outside of the Offer and may otherwise 

buy, sell, hold or seek to restructure, 

redeem or otherwise dispose of the 

Auction Rate Securities; 

(11) A description of the risk factors 

relating to the Offer as Citigroup deems 

appropriate; 

(12) How to obtain additional 

information concerning the Offer; and 

(13) The manner in which 

information concerning material 

amendments or changes to the Offer will 

be communicated to the Plan; 

(c) The terms of the Settlement Sale 

are consistent with the requirements set 

forth in the Settlement Agreement; and 

(d) All of the conditions in Section II 

have been met. 

Section V. Definitions 

For purposes of this proposed 

exemption: 

(a) The term ‘‘affiliate’’ means any 

person directly or indirectly, through 

one or more intermediaries, controlling, 

controlled by, or under common control 

with such other person; 

(b) 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 ‘‘Auction Rate Security’’ 

or ‘‘ARS’’ means a security: (1) that is 

either a debt instrument (generally with 

a long-term nominal maturity) or 

preferred stock; and (2) with an interest 

rate or dividend that is reset at specific 

intervals through a Dutch auction 

process; 

(d) A person is ‘‘independent’’ of 

Citigroup if the person is: (1) not 

Citigroup or an affiliate; and (2) not a 

relative (as defined in section 3(15) of 

the Act) of the party engaging in the 

transaction; 

(e) The term ‘‘Plan’’ means an 

individual retirement account or similar 

account described in section 

4975(e)(1)(B) through (F) of the Code (an 

IRA); an employee benefit plan as 

defined in section 3(3) of the Act; or an 

entity holding plan assets within the 

meaning of 29 CFR 2510.3–101, as 

modified by section 3(42) of the Act; 

and 

(f) The term ‘‘Settlement Agreement’’ 

means a legal settlement involving 

Citigroup and a U.S. state or federal 

authority that provides for the purchase 

of an ARS by Citigroup from a Plan. 

Effective Date: If granted, this 

proposed exemption will be effective as 

of February 1, 2008. 

Summary of Facts and Representations 

1. Citigroup Inc. is a holding company 

whose businesses provide a broad range 

of financial services to consumer and 

corporate customers around the world. 

As of June 30, 2008, Citigroup and its 

subsidiaries had total consolidated 

assets of approximately $2.1 trillion. 

Citigroup’s consumer and corporate 

banking business is a global franchise 

encompassing, among other things, 

branch and electronic banking, 

consumer lending services, investment 

services, and credit and debit card 

services. Citigroup also provides 

securities trading, research, and 

brokerage services to consumer and 

corporate customers, primarily through 

its registered broker-dealer, Citigroup 

Global Markets Inc. Formerly, ‘‘Smith 

Barney’’ was the brand name used by 

Citigroup for its retail brokerage 

business, and Smith Barney had more 

than 15,000 financial advisors, located 

in approximately 800 offices across the 

United States, who served 

approximately 9.2 million domestic 

client accounts, representing 

approximately $1.5 trillion in assets.3 In 

the ordinary course of its business, 

Citigroup provides a range of financial 

services to IRAs and pension, profit 

sharing and 401(k) plans qualified 

under section 401(a) of the Code under 

which some or all of the participants are 

employees described in section 401(c) of 

the Code. In this last regard, Citigroup 

acts as a broker and a dealer with 

respect to the purchase and sale of 

securities, including Auction Rate 

Securities. 

2. The Applicant describes Auction 

Rate Securities and the arrangement by 

which ARS are bought and sold as 

follows. Auction Rate Securities are 

securities (issued as debt or preferred 

stock) with an interest rate or dividend 

that is reset at periodic intervals 

pursuant to a process called a Dutch 

Auction. Investors submit orders to buy, 

hold, or sell a specific ARS to a brokerdealer selected by the entity that issued 

the ARS. The broker-dealers, in turn, 

submit all of these orders to an auction 

agent. The auction agent’s functions 

include collecting orders from all 

participating broker-dealers by the 

auction deadline, determining the 

amount of securities available for sale, 

and organizing the bids to determine the 

winning bid. If there are any buy orders 

placed into the auction at a specific rate, 

the auction agent accepts bids with the 

lowest rate above any applicable 

minimum rate and then successively 

higher rates up to the maximum 

applicable rate, until all sell orders and 

orders that are treated as sell orders are 

filled. Bids below any applicable 

minimum rate or above the applicable 

maximum rate are rejected. After 

determining the clearing rate for all of 

the securities at auction, the auction 

agent allocates the ARS available for 

sale to the participating broker-dealers 

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Federal Register / Vol. 75, No. 35 / Tuesday, February 23, 2010 / Notices 8131 

4The Department notes that Prohibited 

Transaction Exemption 80–26 (45 FR 28545 (April 

29, 1980), as amended at 71 FR 17917 (April 7, 

2006)) permits interest-free loans or other 

extensions of credit from a party in interest to a 

plan if, among other things, the proceeds of the loan 

or extension of credit are used only: (1) for the 

payment of ordinary operating expenses of the plan, 

including the payment of benefits in accordance 

with the terms of the plan and periodic premiums 

under an insurance or annuity contract, or (2) for 

a purpose incidental to the ordinary operation of 

the plan. 

5The relief contained in this proposed exemption 

does not extend to the fiduciary provisions of 

section 404 of the Act. 

based on the orders they submitted. If 

there are multiple bids at the clearing 

rate, the auction agent will allocate 

securities among the bidders at such 

rate on a pro-rata basis. 

3. The Applicant states that, under a 

typical Dutch Auction process, 

Citigroup is permitted, but not 

obligated, to submit orders in auctions 

for its own account either as a bidder or 

a seller and routinely does so in the 

auction rate securities market in its sole 

discretion. Citigroup may place one or 

more bids in an auction for its own 

account to acquire ARS for its 

inventory, to prevent: (a) a failed 

auction (i.e., an event where there are 

insufficient clearing bids which would 

result in the auction rate being set at a 

specified rate, resulting in no ARS being 

sold through the auction process); or (b) 

an auction from clearing at a rate that 

Citigroup believes does not reflect the 

market for the particular ARS being 

auctioned. 

4. The Applicant states that for many 

ARS, Citigroup has been appointed by 

the issuer of the securities to serve as a 

dealer in the auction and is paid by the 

issuer for its services. Citigroup is 

typically appointed to serve as a dealer 

in the auctions pursuant to an 

agreement between the issuer and 

Citigroup. That agreement provides that 

Citigroup will receive from the issuer 

auction dealer fees based on the 

principal amount of the securities 

placed through Citigroup. 

5. The Applicant states further that 

Citigroup may share a portion of the 

auction rate dealer fees it receives from 

the issuer with other broker-dealers that 

submit orders through Citigroup, for 

those orders that Citigroup successfully 

places in the auctions. Similarly, with 

respect to ARS for which broker-dealers 

other than Citigroup act as dealer, such 

other broker-dealers may share auction 

dealer fees with Citigroup for orders 

submitted by Citigroup. 

6. According to the Applicant, since 

February 2008, only a minority of 

auctions have cleared, particularly 

involving municipalities. As a result, 

Plans holding ARS may not have 

sufficient liquidity to make benefit 

payments, mandatory payments and 

withdrawals and expense payments 

when due.4

7. The Applicant represents that, in 

certain instances, Citigroup may have 

previously advised or otherwise caused 

a Plan to acquire and hold an Auction 

Rate Security.5 In connection with 

Citigroup’s role in the acquisition and 

holding of ARS by various Citigroup 

clients, including the Plans, Citigroup 

entered into Settlement Agreements 

with certain U.S. states and federal 

authorities. Pursuant to these Settlement 

Agreements, among other things, 

Citigroup was required to send a written 

offer to certain Plans that held ARS in 

connection with the advice and/or 

brokerage services provided by 

Citigroup. As described in further detail 

below, eligible Plans that accepted the 

Offer were permitted to sell the ARS to 

Citigroup for cash equal to the par value 

of such securities, plus any accrued 

interest and/or dividends. Specifically, 

pursuant to the relevant settlement, 

Applicant made an offer (the First Offer 

or an Offer) by letter dated October 3, 

2008, to eligible customers who then 

maintained an account with Applicant 

to purchase all non-auctioning auction 

rate securities purchased by such 

eligible customers from Applicant on or 

before February 11, 2008 (Subject 

Securities). Eligible customers who 

wanted Applicant to purchase some or 

all of their auction rate securities by 

November 5, 2008 were required to 

notify Applicant of their desire to do so 

by October 21, 2008. Eligible customers 

that wanted Applicant to purchase some 

or all of their auction rate securities at 

any scheduled auction date between 

November 5, 2008 and June 12, 2009 

were required to notify Applicant of 

their desire to do so at least three 

business days before the auction date. 

Also pursuant to the relevant 

settlement, by letter dated October 20, 

2008, Applicant made an Offer (the 

Second Offer, and together with the 

First Offer, the Offers) to eligible 

customers who had transferred their 

account from Applicant to another 

securities firm or bank to purchase all 

Subject Securities purchased by such 

eligible customers. Eligible customers 

who wanted Applicant to purchase 

some or all of their auction rate 

securities by December 23, 2008 were 

required to notify Applicant of their 

desire to do so by December 5, 2008. 

Eligible customers who wanted 

Applicant to purchase some or all of 

their auction rate securities at any 

scheduled auction date between 

December 23, 2008 and June 12, 2009 

were required to notify Applicant of 

their desire to do so at least three 

business days before the auction date. 

To take advantage of the Second Offer, 

eligible customers were also required to 

arrange for the transfer of the Subject 

Securities to Applicant through FINRA’s 

Automated Customer Account Transfer 

Service. No additional custody charges 

were imposed in connection with 

transferred securities. 

The Applicant is requesting 

retroactive and prospective relief for the 

Settlement Sales. With respect to 

Unrelated Sales, the Applicant states 

that to the best of its knowledge, no 

Unrelated Sale has occurred. However, 

the Applicant is requesting retroactive 

relief (and prospective relief) for 

Unrelated Sales in the event that a sale 

of Auction Rate Securities by a Plan to 

Citigroup has occurred outside the 

Settlement process. If granted, the 

proposed exemption will be effective 

February 1, 2008. 

8. The Applicant is requesting relief 

for the sale of Auction Rate Securities 

under two different circumstances: (a) 

Where Citigroup initiates the sale by 

sending to a Plan a written Offer to 

acquire the ARS (i.e., an Unrelated 

Sale), notwithstanding that such Offer is 

not required under a Settlement 

Agreement; and (b) where Citigroup is 

required under a Settlement Agreement 

to send to Plans a written Offer to 

acquire the ARS (i.e., a Settlement Sale). 

The Applicant states that the Unrelated 

Sales and Settlement Sales (hereinafter, 

either, a Covered Sale) are in the 

interests of Plans. In this regard, the 

Applicant states that the Covered Sales 

would permit Plans to normalize Plan 

investments. The Applicant represents 

that each Covered Sale will be for no 

consideration other than cash payment 

against prompt delivery of the ARS, and 

such cash will equal the par value of the 

ARS, plus any accrued but unpaid 

interest or dividends. The Applicant 

represents further that Plans will not 

pay any commissions or transaction 

costs with respect to any Covered Sale. 

9. The Applicant represents that the 

proposed exemption is protective of the 

Plans. The Applicant states that: Each 

Covered Sale will be made pursuant to 

a written Offer; and the decision to 

accept the Offer or retain the ARS will 

be made by a Plan fiduciary or Plan 

participant or IRA owner who is 

independent of Citigroup. Additionally, 

each Offer will be delivered in a manner 

designed to alert a Plan fiduciary that 

Citigroup intends to purchase ARS from 

the Plan. Offers made in connection 

with an Unrelated Sale will include the 

material terms of the Unrelated Sale, 

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8132 Federal Register / Vol. 75, No. 35 / Tuesday, February 23, 2010 / Notices 

6The Applicant states that while there may be 

communication between a Plan and Citigroup 

subsequent to an Offer, such communication will 

not involve advice regarding whether the Plan 

should accept the Offer. 

including: The identity and par value of 

the Auction Rate Security; the interest 

or dividend amounts that are due with 

respect to the Auction Rate Security; 

and the most recent rate information for 

the Auction Rate Security (if reliable 

information is available). Offers made in 

connection with a Settlement 

Agreement will specifically include, 

among other things: the background of 

the Offer; the method and timing by 

which a Plan may accept the Offer; the 

expiration date of the Offer; a 

description of certain risk factors 

relating to the Offer; how to obtain 

additional information concerning the 

Offer; and the manner in which 

information concerning material 

amendments or changes to the Offer will 

be communicated. The Applicant states 

that, with very narrowly tailored 

exceptions, neither Citigroup nor any 

affiliate will exercise investment 

discretion or render investment advice 

with respect to a Plan’s decision to 

accept the Offer or retain the ARS.6 In 

the case of a Citigroup Plan or a pooled 

fund maintained or advised by 

Citigroup, the decision to engage in a 

Covered Sale may be made by Citigroup 

after Citigroup has determined that such 

purchase is in the best interest of the 

Citigroup Plan or pooled fund. The 

Applicant represents further that Plans 

will not waive any rights or claims in 

connection with any Covered Sale. 

10. The Applicant represents that the 

proposed exemption, if granted, would 

be administratively feasible. In this 

regard, the Applicant notes that each 

Covered Sale will occur at the par value 

of the affected ARS (plus accrued but 

unpaid interest and dividends, to the 

extent applicable), and such value is 

readily ascertainable. The Applicant 

represents further that Citigroup will 

maintain the records necessary to enable 

the Department and Plan fiduciaries, 

among others, to determine whether the 

conditions of this exemption, if granted, 

have been met. 

11. In summary, the Applicant 

represents that the transactions 

described herein satisfy the statutory 

criteria of section 408(a) of the Act 

because, among other things: 

(a) Each Covered Sale shall be made 

pursuant to a written Offer; 

(b) Each Covered Sale shall be for no 

consideration other than cash payment 

against prompt delivery of the ARS; 

(c) The amount of each Covered Sale 

shall equal the par value of the ARS, 

plus any accrued but unpaid interest or 

dividends; 

(d) Plans will not waive any rights or 

claims in connection with any Covered 

Sale; 

(e)(1) the decision to accept an Offer 

or retain the ARS shall be made by a 

Plan fiduciary or Plan participant or IRA 

owner who is independent of Citigroup; 

and (2) neither Citigroup nor any 

affiliate shall exercise investment 

discretion or render investment advice 

within the meaning of 29 CFR 2510.3– 

21(c) with respect to the decision to 

accept the Offer or retain the ARS; 

(f) Plans shall not pay any 

commissions or transaction costs with 

respect to any Covered Sale; 

(g) A Covered Sale shall not be part 

of an arrangement, agreement or 

understanding designed to benefit a 

party in interest to the affected Plan; 

(h) With respect to any Settlement 

Sale, the terms and delivery of the Offer, 

and the terms of Settlement Sale, shall 

be consistent with the requirements set 

forth in the Settlement Agreement; 

(i) Citigroup shall make available in 

connection with an Unrelated Sale the 

material terms of the Unrelated Sale, 

including: (1) The identity and par 

value of the Auction Rate Security; (2) 

the interest or dividend amounts that 

are due but unpaid with respect to the 

Auction Rate Security; and (3) the most 

recent rate information for the Auction 

Rate Security (if reliable information is 

available); 

(j) Each Offer made in connection 

with a Settlement Agreement shall 

describe the material terms of the 

Settlement Sale, including the following 

(and shall not constitute a waiver of any 

claim of the tendering Plan): (1) The 

background of the Offer; (2) that neither 

the tender of ARS nor the purchase of 

ARS pursuant to the Offer will 

constitute a waiver of any claim of the 

tendering Plan; (3) the methods and 

timing by which the Plan may accept 

the Offer; and (4) the purchase dates, or 

the manner of determining the purchase 

dates, for ARS pursuant to the Offer and 

the timing for acceptance by Citigroup 

of tendered ARS for payment; and 

(k) Citigroup shall make available to 

the Plan information regarding how the 

Plan can determine: The ARS held by 

the Plan with Citigroup; the number of 

shares and par value of the ARS; interest 

or dividend amounts; purchase dates for 

the ARS; and (if reliable information is 

available) the most recent rate 

information for the ARS. 

Notice to Interested Persons 

The Applicant represents that the 

potentially interested participants and 

beneficiaries cannot all be identified, 

and, therefore, the only practical means 

of notifying such participants and 

beneficiaries of this proposed 

exemption is by the publication of this 

notice in the Federal Register. 

Comments and requests for a hearing 

must be received by the Department not 

later than 30 days from the date of 

publication of this notice of proposed 

exemption in the Federal Register. 

FOR FURTHER INFORMATION CONTACT: 

Brian Shiker of the Department, 

telephone (202) 693–8552. (This is not 

a toll-free number.) 

Subaru of America, Inc. (Subaru), 

Located in Cherry Hill, New Jersey 

[Application No. D–11531.] 

Proposed Exemption 

The Department is considering 

granting an exemption under the 

authority of section 408(a) of the Act 

and in accordance with the procedures 

set forth in 29 CFR part 2570, Subpart 

B (55 FR 32836, 32847, August 10, 

1990). If the exemption is granted, the 

restrictions of sections 406(a) and (b) of 

the Act shall not apply to the 

reinsurance of risks and the receipt of 

premiums therefrom by Pleiades 

Insurance Company, Ltd. (PIC) in 

connection with an insurance contract 

sold by Minnesota Life Insurance 

Company (MN Life) or any successor 

insurance company to MN Life which is 

unrelated to Subaru, to provide groupterm life insurance to employees of 

Subaru under the Subaru of America, 

Inc. Welfare Benefit Plan (the Plan), 

provided the following conditions are 

met: 

(a) PIC— 

(1) Is a party in interest with respect 

to the Plan by reason of a stock or 

partnership affiliation with Subaru that 

is described in section 3(14)(E) or (G) of 

the Act, 

(2) Is licensed to sell insurance or 

conduct reinsurance operations in at 

least one State as defined in section 

3(10) of the Act, (3) Has a U.S. branch, 

the Pleiades Insurance Company Ltd. 

(US Branch), which has obtained a 

Certificate of Authority from the 

Insurance Commissioner of its 

domiciliary State which has neither 

been revoked nor suspended, 

(4)(A) Has undergone and shall 

continue to undergo an examination by 

an independent certified public 

accountant for its last completed taxable 

year immediately prior to the taxable 

year of the reinsurance transaction; or 

(B) Has undergone a financial 

examination (within the meaning of the 

law of its domiciliary State, the District 

of Columbia) by the Insurance 

Commissioner of the District of 

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Columbia within 5 years prior to the 

end of the year preceding the year in 

which the reinsurance transaction 

occurred, and 

(5) Is licensed to conduct reinsurance 

transactions by a State whose law 

requires that an actuarial review of 

reserves be conducted annually by an 

independent firm of actuaries and 

reported to the appropriate regulatory 

authority; 

(b) The Plan pays no more than 

adequate consideration for the 

insurance contracts; 

(c) In subsequent years, the formula 

used to calculate premiums by MN Life 

or any successor insurer will be similar 

to formulae used by other insurers 

providing comparable coverage under 

similar programs. Furthermore, the 

premium charge calculated in 

accordance with the formula will be 

reasonable and will be comparable to 

the premium charged by the insurer and 

its competitors with the same or a better 

rating providing the same coverage 

under comparable programs; 

(d) The Plan only contracts with 

insurers with a rating of A or better from 

A.M. Best Company. The reinsurance 

arrangement between the insurer and 

PIC will be indemnity insurance only, 

i.e., the insurer will not be relieved of 

liability to the Plan should PIC be 

unable or unwilling to cover any 

liability arising from the reinsurance 

arrangement; 

(e) No commissions are paid with 

respect to the reinsurance of such 

contracts; and 

(f) For each taxable year of PIC, the 

gross premiums and annuity 

considerations received in that taxable 

year by PIC for life and health insurance 

or annuity contracts for all employee 

benefit plans (and their employers) with 

respect to which PIC is a party in 

interest by reason of a relationship to 

such employer described in section 

3(14)(E) or (G) of the Act does not 

exceed 50% of the gross premiums and 

annuity considerations received for all 

lines of insurance (whether direct 

insurance or reinsurance) in that taxable 

year by PIC. For purposes of this 

condition (f): 

(1) the term ‘‘gross premiums and 

annuity considerations received’’ means 

as to the numerator the total of 

premiums and annuity considerations 

received, both for the subject 

reinsurance transactions as well as for 

any direct sale or other reinsurance of 

life insurance, health insurance or 

annuity contracts to such plans (and 

their employers) by PIC. This total is to 

be reduced (in both the numerator and 

the denominator of the fraction) by 

experience refunds paid or credited in 

that taxable year by PIC. 

(2) all premium and annuity 

considerations written by PIC for plans 

which it alone maintains are to be 

excluded from both the numerator and 

the denominator of the fraction. 

Summary of Facts and Representations 

1. Subaru of America, Inc. (Subaru), a 

wholly owned subsidiary of Fuji Heavy 

Industries, Ltd. of Japan (Fuji), is a 

marketer of Subaru products 

manufactured by Fuji. The Plan is a 

fully insured welfare plan within the 

meaning of section 3(1) of the Act. The 

Plan includes group-term life insurance 

(including basic, supplemental and 

dependent coverage). 

2. PIC is a 100% owned subsidiary of 

Subaru. PIC’s U.S. branch, the Pleiades 

Insurance Company, Ltd. (US Branch) 

(hereafter, ‘‘Branch’’), is domiciled in the 

District of Columbia. As of March 31, 

2009, PIC reported approximately $39 

million in gross annual premiums and 

$214 million in total assets. The 

applicant represents that for each 

taxable year of PIC, the total amount of 

premiums, both for the subject 

reinsurance transactions as well as for 

any direct sale or other reinsurance of 

life insurance for all employee benefit 

plans for which PIC is a party in interest 

by reason of a relationship to the 

sponsoring employer described in 

section 3(14)(E) or (G) of the Act have 

not exceeded and will not exceed 50% 

of the gross premiums received by PIC 

from all lines of insurance in that 

taxable year. 

3. Subaru provides to its employees 

certain welfare benefits through the 

Plan. The group-term life insurance 

component of the Plan currently has 

approximately 929 participants and 

beneficiaries. 

4. The life insurance is currently 

underwritten by Minnesota Life 

Insurance Company (MN Life), an 

unaffiliated insurance carrier. Subaru 

has entered into a policy with MN Life 

for 100% of this coverage. Subaru 

proposes to use its subsidiary, PIC 

(through Branch), to reinsure 100% of 

the risk through a reinsurance contract 

between PIC and MN Life in which MN 

Life would pay 100% of the premiums 

to PIC. The premium paid to MN Life 

by Subaru includes fees for 

administrative costs, so there is no 

additional cost to the Plan as a result of 

the reinsurance arrangement. From the 

participants’ perspective, the 

participants have a binding contract 

with MN Life, which is legally 

responsible for the group-term life 

insurance risk associated under the 

Plan. MN Life is liable to provide the 

promised coverage regardless of the 

proposed reinsurance arrangement. 

5. The applicant represents that the 

proposed transaction will not in any 

way affect the cost to the insureds of the 

group-term life insurance contracts, and 

the Plan will pay no more than adequate 

consideration for the insurance. Neither 

Subaru nor PIC will profit from the 

reinsurance arrangement at the expense 

of the Plan or its participants. Also, Plan 

participants are afforded insurance 

protection from MN Life at competitive 

rates arrived at through arm’s-length 

negotiations. MN Life is rated ‘‘A+’’ by 

the A. M. Best Company, whose 

insurance ratings are widely used in 

financial and regulatory circles. MN Life 

has assets in excess of $26 billion. MN 

Life will continue to have the ultimate 

responsibility in the event of loss to pay 

insurance benefits to the employee’s 

beneficiary. The applicant represents 

that PIC is a sound, viable company 

which is dependent upon insurance 

customers that are unrelated to itself 

and its affiliates for premium revenue. 

6. The applicant represents that the 

proposed reinsurance transaction will 

meet all of the conditions of PTE 79–41 

covering direct insurance transactions: 

(a) PIC is a party in interest with 

respect to the Plan (within the meaning 

of section 3(14)(G) of the Act) by reason 

of stock affiliation with Subaru, which 

maintains the Plan. 

(b) Branch is licensed to do business 

in the District of Columbia. 

(c) PIC has undergone an examination 

by an independent certified public 

accountant for its fiscal year ending 

March 31, 2009. 

(d) PIC has received a Certificate of 

Authority from its domiciliary State (as 

defined in Act section 3(10)), the 

District of Columbia, which has neither 

been revoked nor suspended. 

(e) The Plan will pay no more than 

adequate consideration for the 

insurance. The proposed transaction 

will not in any way affect the cost to the 

insureds of the group-term life 

insurance transaction. 

(f) No commissions will be paid with 

respect to the acquisition of insurance 

by Subaru from MN Life or the 

acquisition of reinsurance by MN Life 

from PIC. 

(g) For each taxable year of PIC, the 

‘‘gross premiums and annuity 

considerations received’’ in that taxable 

year for group life and health insurance 

(both direct insurance and reinsurance) 

for all employee benefit plans (and their 

employers) with respect to which PIC is 

a party in interest by reason of a 

relationship to such employer described 

in section 3(14)(E) or (G) of the Act will 

not exceed 50% of the ‘‘gross premiums 

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8134 Federal Register / Vol. 75, No. 35 / Tuesday, February 23, 2010 / Notices 

7For purposes of this proposed exemption, 

references to section 406 of the Act should be read 

to refer as well to the corresponding provisions of 

section 4975 of the Code. 

and annuity considerations received’’ by 

PIC from all lines of insurance in that 

taxable year. All of the premium income 

of PIC comes from reinsurance. PIC has 

received no premiums for the groupterm life insurance in the past. 

7. In summary, the applicant 

represents that the proposed transaction 

will meet the criteria of section 408(a) 

of the Act because: (a) Plan participants 

and beneficiaries are afforded insurance 

protection by MN Life, an ‘‘A+’’ rated 

group insurer, at competitive market 

rates arrived at through arm’s-length 

negotiations; (b) PIC is a sound, viable 

insurance company which does a 

substantial amount of public business 

outside its affiliated group of 

companies; and (c) each of the 

protections provided to the Plan and its 

participants and beneficiaries by PTE 

79–41 will be met under the proposed 

reinsurance transaction. 

FOR FURTHER INFORMATION CONTACT: Gary 

H. Lefkowitz of the Department, 

telephone (202) 693–8546. (This is not 

a toll-free number.) 

The Bank of New York Mellon (BNY 

Mellon), Located in Pittsburgh, PA 

[Application No. D–11584.] 

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, in 

accordance with the procedures set 

forth in 29 CFR part 2570, subpart B (55 

FR 32836, 32847, August 10, 1990).7

If the proposed exemption is granted, 

the restrictions of sections 406(a), 

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 sections 4975(c)(1)(A) 

through (E) of the Code, shall not apply 

as of July 10, 2009, to the cash sale of 

certain medium term notes (the Notes) 

issued by Stanfield Victoria Finance 

Ltd. (Victoria Finance or the Issuer) for 

an aggregate purchase price of 

$26,997,049.52 by the BNY Mellon’s 

Short Term Investment Fund (the Fund) 

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 Fund, 

provided that the following conditions 

are met: 

(a) The sale was a one-time 

transaction for cash; 

(b) The Fund received an amount 

which was equal to the sum of (1) the 

total current amortized cost of the Notes 

as of the date of the sale plus (2) interest 

for the period beginning on January 1, 

2008 to July 12, 2009, calculated at a 

rate equal to the earnings rate of the 

Fund during such period; 

(c) The Fund did not bear any 

commissions, fees, transaction costs, or 

other expenses in connection with the 

sale; 

(d) BNY Mellon, as trustee of the 

Fund, determined that the sale of the 

Notes was appropriate for and in the 

best interests of the Fund, and the Plans 

invested, directly or indirectly, in the 

Fund, at the time of the transaction; 

(e) BNY Mellon took all appropriate 

actions necessary to safeguard the 

interests of the Fund, and the Plans 

invested, directly or indirectly, in the 

Fund, 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 

Notes results in BNYMC recovering 

from Victoria Finance, the Issuer of the 

Notes, or from any third party, an 

aggregate amount that is more than the 

sum of: (1) the purchase price paid for 

the Notes by BNYMC and (2) interest on 

the purchase price paid for the Notes at 

the interest rate specified in the Notes, 

then BNYMC will refund such excess 

amount promptly to the Fund (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 sections 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); 

and 

(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 in paragraph 

(h)(2), and notwithstanding any 

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

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; 

(B) Any fiduciary of any Plan that 

engages in the covered transaction, or 

any duly authorized employee or 

representative of such fiduciary; 

(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 in 

paragraphs (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 July 10, 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 plans 

subject to Section 4975 of the Code. As 

of December 31, 2008, BNYMC had total 

assets of $237.5 billion. 

3. The Fund is a group trust that is 

exempt from federal income tax 

pursuant to Rev. Rul. 81–100. BNY 

Mellon serves as a discretionary trustee 

for the Fund. The Fund is a short-term 

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Federal Register / Vol. 75, No. 35 / Tuesday, February 23, 2010 / Notices 8135 

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

would apply to the investment by the ERISAcovered Plans in the Fund. 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. 

9The Department is expressing no opinion in this 

proposed exemption regarding whether the 

acquisition and holding of the Notes by the Fund 

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. 

Moreover, the Department is not providing any 

opinion as to whether a particular category of 

investments or investment strategy would be 

considered prudent or in the best interests of a plan 

as required by section 404 of the Act. The 

determination of the prudence of a particular 

investment or investment course of action must be 

made by a plan fiduciary after appropriate 

consideration of those facts and circumstances that, 

given the scope of such fiduciary’s investment 

duties, the fiduciary knows or should know are 

relevant to the particular investment or investment 

course of action involved, including a plan’s 

potential exposure to losses and the role the 

investment or investment course of action plays in 

that portion of the plan’s portfolio with respect to 

which the fiduciary has investment duties (see 29 

CFR 2550.404a–1). The Department also notes that 

in order to act prudently in making investment 

decisions, a plan fiduciary must consider, among 

other factors, the availability, risks and potential 

return of alternative investments for the plan. Thus, 

a particular investment by a plan, which is selected 

in preference to other alternative investments, 

would generally not be prudent if such investment 

involves a greater risk to the security of a plan’s 

assets than other comparable investments offering 

a similar return or result. 

investment fund that values its assets 

based on their amortized cost and seeks 

to maintain a constant unit value equal 

to $1.00. The Fund invests primarily in 

commercial paper, including repurchase 

agreements, agency discount notes, 

corporate notes, medium term notes, 

floating rate notes, Treasuries, agency 

securities, time deposits, asset backed 

securities, and mortgage backed 

securities. 

4. On July 10, 2009, the value of the 

Fund’s portfolio was approximately $4.9 

billion. Also on July 10, 2009, there 

were in excess of 300 direct investors in 

the Fund, a substantial number of which 

were government-sponsored employee 

benefit plans, individual retirement 

accounts subject to section 408 of the 

Code, and employee benefit plans 

covered under section 401 of the Code.8

No in-house Plan of BNY Mellon 

invested in the Fund. However, the 

BNYMC Pension Plan did invest in the 

Fund, and it had a 0.05% indirect 

interest in the Fund. 

5. On May 16, 2007, the Fund 

purchased, with settlement on May 18, 

2007, the Notes, having an aggregate par 

value of $81,000,000, for $81,000,000. 

Victoria Finance, an unrelated party to 

BNY Mellon, issued these notes on May 

18, 2007. The Notes had a maturity date 

of February 8, 2009. On November 30, 

2007, BNY Mellon sold back to the 

Issuer $47,033,000 of the Notes 

pursuant to a tender offer by the Issuer. 

Although BNY Mellon had tendered all 

the Notes owned by the Fund, only a 

partial tender was accepted, leaving the 

Fund with a balance of $33,967,000 in 

the Notes. 

6. The Issuer is a structured 

investment vehicle (SIV) that raised 

capital primarily by issuing various 

types and classes of commercial paper, 

including the Notes. The assets acquired 

by the Issuer, which consisted of 

corporate and asset backed securities, 

were then pledged to secure the Notes 

pursuant to a security agreement with 

an independent bank serving as 

collateral agent. The security agreement 

provided that, as a general rule, upon 

the occurrence of an ‘‘Enforcement 

Event’’ (as defined in the security 

agreement), the collateral agent was 

required to sell all of the Issuer’s assets 

and distribute the proceeds thereof. 

Interest on the Notes was taxable and 

payable monthly at a variable rate that 

was reset on the 15th day of each month 

based upon the one-month London 

Interbank Offered Rate (LIBOR), minus 

four basis points. All interest accrued 

through December 31, 2007 was paid in 

full and on a timely basis. 

7. The decision to invest in the Notes 

was made by BNY Mellon. Prior to the 

investment, BNY Mellon conducted an 

investigation of the potential 

investment, examining and considering 

the economic and other terms of the 

Notes. BNY Mellon represents that the 

investment in the Notes was consistent 

with the applicable investment policies 

and objectives of the Fund. At the time 

the Fund acquired the Notes, they were 

rated ‘‘A–1+’’ by Standard & Poor’s 

Corporation (S&P) and ‘‘P–1’’ by 

Moody’s Investor Services, Inc. 

(Moody’s). Based on its consideration of 

the relevant facts and circumstances, 

BNY Mellon states that it was prudent 

and appropriate for the Fund to acquire 

the Notes.9

8. On November 7, 2007, S&P placed 

a ‘‘negative watch’’ on the Notes. On 

December 21, 2007, Moody’s 

downgraded the rating of the Notes to 

‘‘Baa3.’’ On January 7, 2008, S&P 

downgraded the rating of the Notes to 

‘‘B¥.’’ Responding to these events, BNY 

Mellon, on behalf of the Fund, executed 

an amendment to the security agreement 

governing the Notes pursuant to which, 

by providing notice (Election Notice) on 

or before January 17, 2008, BNY Mellon 

could elect to have the pro-rata share of 

the collateral assets allocable to the 

Notes held by the Fund excluded from 

any asset sale by the collateral agent that 

would otherwise occur immediately 

upon the occurrence of an Enforcement 

Event. On January 8, 2008, as a result of 

the foregoing ratings down-grades, an 

Enforcement Event occurred. On 

January 15, 2008, Moody’s further 

downgraded its rating of the Notes to 

‘‘B2.’’ On January 16, 2008, BNY Mellon 

submitted an Election Notice to the 

collateral agent instructing the collateral 

agent to exclude the Fund’s pro rata 

share of the Issuer’s assets from the asset 

sale triggered by the occurrence of the 

Enforcement Event on January 8, 2008. 

On January 17, 2008, S&P further 

downgraded its rating of the Notes to 

‘‘D.’’ 

9. BNY Mellon’s election was based 

on BNY Mellon’s determination that the 

market for the collateral assets securing 

the Notes was severely distressed and 

that the inherent value of such assets 

was substantially greater than the price 

that could have been obtained if such 

assets were sold currently by the 

collateral agent. Accordingly, BNY 

Mellon determined that it was in the 

best interests of the Fund to exclude 

such assets from a current sale. Had 

BNY Mellon not executed this 

amendment and submitted the Election 

Notice, the assets of the Issuer 

underlying the Notes likely would have 

been sold at a substantial discount, 

resulting in large losses for the Fund’s 

investors. 

10. The Applicant represents that 

since the time of the Enforcement Event, 

a collateral agent and an enforcement 

manager have controlled the Issuer and, 

under the terms of the applicable 

security agreement, stopped paying 

interest or principal on the Notes. 

However, pro rata periodic distributions 

to holders of the Notes and other senior 

creditors of the Issuer have been made 

based on the cash flow received by the 

Issuer with respect to underlying assets. 

The Applicant represents that as of July 

12, 2009, the Fund had received 

distributions from the collateral agent 

sufficient to pay down the unpaid 

interest accrued through January 15, 

2008, plus approximately 23 percent of 

the amortized cost of the Notes (from 

$33,967,000 to $26,090,137.06). 

11. BNY Mellon represents that 

following the date of the Enforcement 

Event, the market value of the Notes 

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8136 Federal Register / Vol. 75, No. 35 / Tuesday, February 23, 2010 / Notices 

decreased substantially. BNY Mellon 

further represents that on or about July 

10, 2009, it obtained information from 

two independent broker-dealers 

(Deutsche Bank and Credit Suisse) that 

the market for the Notes was in extreme 

distress, with prices for actual trades 

being substantially lower than their par 

value or amortized cost. In this regard, 

Deutsche Bank provided an execution 

price of $29.50 and Credit Suisse 

provided a bid indication price of 

$25.00. 

12. In view of the foregoing, BNY 

Mellon and the BNY Mellon fiduciary 

committee with responsibility for 

overseeing the Fund ultimately 

determined that it would be appropriate 

and in the best interests of the Fund to 

sell the Notes to BNYMC at a price 

equal to the sum of (a) the total current 

amortized cost of the Notes, plus (b) 

interest for the period from January 1, 

2008 to July 12, 2009, calculated at a 

rate equal to the earnings rate of the 

Fund during such period. Such a sale 

would protect the Fund from any 

investment loss with respect to the 

Notes. BNY Mellon also determined that 

the purchase of the Notes by BNYMC 

would be permissible under applicable 

banking law. 

13. Shortly before the consummation 

of the transaction on July 10, 2009, BNY 

Mellon sent written notice to the 

designated representative of each of the 

investors having a direct interest in the 

Fund of BNY Mellon’s intent to cause 

the Fund to sell the Notes to BNYMC. 

While such notice did not contemplate 

or require any response, it should be 

noted that this notice did not generate 

any negative reaction from any of the 

recipients thereof. 

14. The Applicant represents that on 

July 10, 2009, BNYMC purchased the 

Notes from the Fund for an aggregate 

lump sum payment of $26,997,049.52, 

which amount represented the sum of 

(a) the total current amortized cost of 

the Notes ($26,090,137.06), plus (b) 

interest for the period from January 1, 

2008 to July 12, 2009, calculated at a 

rate equal to the earnings rate of the 

Fund during such period ($906,912.46). 

15. BNY Mellon, as trustee of the 

Fund, believed that the sale of the Notes 

to BNYMC was in the best interests of 

the Fund, and the Plans invested, 

directly or indirectly, in the Fund, at the 

time of the transaction. BNY Mellon 

states that any sale of the Notes on the 

open market would have produced 

significant losses for the Fund and for 

the participating investors in the Fund. 

16. BNY Mellon represents that the 

sale of the Notes by the Fund to BNYMC 

benefited the investors in the Fund 

because the purchase price paid by 

BNYMC for the Notes substantially 

exceeded the aggregate fair market value 

of the Notes. In addition, BNY Mellon 

states that the transaction was a onetime sale for cash in connection with 

which the Fund 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 Fund and 

its participating investors in connection 

with the sale of the Notes. 

17. BNY Mellon states that the sale of 

the Notes by the Fund to BNYMC 

resulted in an assignment of all of the 

Fund’s rights, claims, and causes of 

action against the Issuer or any third 

party arising in connection with or out 

of the issuance of the Notes or the 

acquisition of the Notes by the Fund. 

BNY Mellon states further that if the 

exercise of any of the foregoing rights, 

claims or causes of action results in 

BNYMC recovering from the Issuer or 

any third party an aggregate amount that 

is more than the sum of (a) the purchase 

price paid for the Notes by BNYMC, and 

(b) interest on the purchase price paid 

for the Notes at the interest rate 

specified in the Notes, then BNYMC 

will refund such excess amount 

promptly to the Fund (after deducting 

all reasonable expenses incurred in 

connection with the recovery). 

18. In summary, the Applicant 

represents that the transactions satisfied 

the statutory criteria for an exemption 

under section 408(a) of the Act because: 

(a) the sale of the Notes by the Fund to 

BNYMC was a one-time transaction for 

cash; (b) the Fund received an amount 

equal to the sum of (i) the total current 

amortized cost of the Notes, plus (ii) 

interest for the period beginning on 

January 1, 2008 to July 12, 2009, 

calculated at a rate equal to the earnings 

rate of the Fund during such period, 

which amount was substantially greater 

than the aggregate market value of the 

Notes at the time of sale, as determined 

based on information regarding the then 

prevailing trading prices for the Notes 

obtained from two independent brokerdealers; (c) the Fund did not pay any 

commissions or other expenses with 

respect to the sale; (d) BNY Mellon, as 

trustee of the Fund, and the BNY 

Mellon fiduciary committee with 

responsibility for overseeing the Fund 

determined that the sale of the Notes to 

BNYMC was in the best interests of the 

Fund, and the Plans invested, directly 

or indirectly, in the Fund, at the time of 

the transaction; (e) BNY Mellon took all 

appropriate actions necessary to 

safeguard the interests of the Fund in 

connection with the transactions; and (f) 

BNYMC will promptly refund to the 

Fund any amount recovered from the 

Issuers or any third party in connection 

with its exercise of any rights, claims or 

causes of action as a result of its 

ownership of the Notes, if such amounts 

are in excess of the sum of (i) the 

purchase price paid for the Notes by 

BNYMC, and (ii) interest on the 

purchase price paid for the Notes at the 

interest rate specified in the Notes (after 

deducting all reasonable expenses 

incurred in connection with the 

recovery). 

FOR FURTHER INFORMATION CONTACT: Mr. 

Brian Shiker of the Department, 

telephone (202) 693–8552. (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 

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Federal Register / Vol. 75, No. 35 / Tuesday, February 23, 2010 / Notices 8137 

that each application accurately 

describes all material terms of the 

transaction which is the subject of the 

exemption. 

Signed at Washington, DC, this 17th day of 

February, 2009. 

Ivan Strasfeld, 

Director of Exemption Determinations, 

Employee Benefits Security Administration, 

U.S. Department of Labor. 

[FR Doc. 2010–3444 Filed 2–22–10; 8:45 am] 

BILLING CODE 4510–29–P 

OFFICE OF MANAGEMENT AND 

BUDGET 

Coordination and Strategic Planning of 

the Federal Effort Against Intellectual 

Property Infringement: Request of the 

Intellectual Property Enforcement 

Coordinator for Public Comments 

Regarding the Joint Strategic Plan 

AGENCY: Office of Management and 

Budget, Executive Office of the 

President. 

ACTION: Request for written submissions 

from the public. 

SUMMARY: The Federal Government is 

currently undertaking a landmark effort 

to develop an intellectual property 

enforcement strategy building on the 

immense knowledge and expertise of 

the agencies charged with enforcing 

intellectual property rights. By 

committing to common goals, the 

Government will more effectively and 

efficiently combat intellectual property 

infringement. In this request for 

comments, the Government, through the 

office of the Intellectual Property 

Enforcement Coordinator (‘‘IPEC’’), 

invites public input and participation in 

shaping an effective intellectual 

property enforcement strategy. 

This new effort is mandated by the 

Prioritizing Resources and Organization 

for Intellectual Property Act of 2008, 

Public Law 110–403 (Oct. 13, 2008) 

(‘‘the PRO IP Act’’ or ‘‘the Act’’) which 

created, within the Executive Office of 

the President, the position of the IPEC. 

The Act requires the IPEC to chair an 

interagency intellectual property 

enforcement advisory committee in 

order to develop an Administration 

strategy for enforcement against 

intellectual property infringement: The 

Joint Strategic Plan. The IPEC is 

currently working with the interagency 

advisory committee to develop this 

intellectual property enforcement 

strategy. 

This request for comments and for 

recommendations for an improved 

enforcement strategy is divided into two 

parts. In the first, the IPEC seeks written 

submissions from the public regarding 

the costs to the U.S. economy resulting 

from intellectual property violations, 

and the threats to public health and 

safety created by infringement. In the 

second part, the IPEC requests detailed 

recommendations from the public 

regarding the objectives and content of 

the Joint Strategic Plan and other 

specific recommendations for improving 

the Government’s intellectual property 

enforcement efforts. Responses to this 

request for comments may be directed to 

either of these two parts, or both, and 

may include a response to one or more 

requests for information found in either 

part. 

DATES: Submissions must be received on 

or before Wednesday, March 24, 2010, 

at 5 p.m. 

ADDRESSES: All submissions should be 

sent electronically via 

intellectualproperty@omb.eop.gov. 

Publication and Confidential 

Information 

Submissions filed in response to this 

request will be made available to the 

public by posting them on the Internet. 

For this reason, please do not include in 

your comments information of a 

confidential nature, such as sensitive 

personal information or proprietary 

information. If you have confidential 

business information that would 

support your recommendation or that 

you believe would help the Government 

formulate an effective enforcement 

strategy, please let us know, and we 

may request that additional information. 

FOR FURTHER INFORMATION CONTACT: 

Thomas L. Stoll, Office of the 

Intellectual Property Enforcement 

Coordinator, at (202) 395–1808. 

SUPPLEMENTARY INFORMATION: Through 

the PRO IP Act, Congress created the 

IPEC, to serve within the Executive 

Office of the President, and an 

interagency advisory committee 

specifically tasked with formulating and 

implementing a Joint Strategic Plan to 

improve the effectiveness of the U.S. 

Government’s efforts to protect the 

rights of intellectual property owners 

and to reduce the costs of and threats 

posed by intellectual property 

infringement, in the U.S. and in other 

countries. The IPEC seeks public input, 

in the form of written comments, on the 

formulation of a Joint Strategic Plan and 

on the U.S. Government’s intellectual 

property enforcement efforts. 

Part I 

The Joint Strategic Plan must contain 

an analysis of the threat posed by 

violations of intellectual property rights, 

including the costs to the U.S. economy 

resulting from such violations, and the 

threats to public health and safety 

created by infringement. Thus, the IPEC 

seeks written submissions from the 

public identifying the costs to the U.S. 

economy resulting from infringement of 

intellectual property rights, both direct 

and indirect, including any impact on 

the creation or maintenance of jobs. 

In addition, the IPEC seeks written 

submissions identifying threats to 

public health and safety posed by 

intellectual property infringement, in 

the U.S. and in other countries. 

Submissions directed to the economic 

costs of violations of intellectual 

property rights must clearly identify the 

methodology used in calculating the 

estimated costs and any critical 

assumptions relied upon, identify the 

source of the data on which the cost 

estimates are based, and provide a copy 

of or a citation to each such source. 

Submissions directed to threats to 

public health or safety must include a 

detailed description of the threat, 

identify the source of the information 

substantiating the existence of that 

threat and provide a copy of or a 

citation to each such source. 

The issues and challenges that pertain 

to adequate and appropriate 

enforcement of intellectual property are 

changing rapidly. Therefore, if desired, 

submissions may also identify and 

discuss emerging or future threats to the 

U.S. economy or to health and safety 

over the next five to ten years. 

Part II 

The IPEC requests written 

submissions from the public that 

provide specific recommendations for 

accomplishing one or more of the 

objectives of the Joint Strategic Plan, or 

other specific recommendations for 

significantly improving the U.S. 

Government’s enforcement efforts. 

Recommendations may include, but 

need not be limited to: Proposed 

legislative changes, regulations, 

executive orders, other executive action, 

guidelines, or changes in policies, 

practices or methods. 

Recommendations should include a 

detailed description of a preferred 

method for accomplishing the 

recommendation. If a submission 

includes multiple recommendations, the 

IPEC requests that the submission rank 

the recommendations in order of 

priority, where possible. 

The objectives of the Joint Strategic 

Plan include: 

• Reducing the supply of infringing 

goods, domestically and internationally; 

• Identifying weaknesses, duplication 

of efforts, waste, and other unjustified 

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