45284 Federal Register / Vol. 74, No. 168 / Tuesday, September 1, 2009 / Notices 

1For purposes of this exemption references to 

specific provisions of Title I of the Act, unless 

otherwise specified, refer also to the corresponding 

provisions of the Code. 

2PNC Financial represents that it would be 

accurate to describe ‘‘the credit’’ as a ‘‘credited 

dollar amount’’ to cover situations in which the 

credited amount is used to acquire additional 

shares of a Fund, rather than being held by a Client 

Plan in the form of cash. It is represented that the 

standard practice is to reinvest the ‘‘credited dollar 

amount’’ in additional shares of the same Fund 

with respect to which the fees were credited. 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

Grant of Individual Exemptions and 

Prohibited Transaction Exemptions 

Involving: PNC Financial Services 

Group, Inc. (PNC Financial), PTE 2009– 

22; Verizon Investment Management 

Corporation, PTE 2009–23; United 

States Steel and Carnegie Pension 

Fund (the Applicant), PTE 2009–24; 

and Barclays Global Investors, N.A. 

and Its Affiliates and Successors (BGI) 

and Barclays Capital Inc. and Its 

Affiliates and Successors (BarCap) 

(Collectively the Applicants), PTE 

2009–25 

AGENCY: Employee Benefits Security 

Administration, Labor. 

ACTION: Grant of Individual Exemptions. 

SUMMARY: This document contains 

exemptions issued by the Department of 

Labor (the Department) from certain of 

the prohibited transaction restrictions of 

the Employee Retirement Income 

Security Act of 1974 (ERISA or the Act) 

and/or the Internal Revenue Code of 

1986 (the Code). 

A notice was published in the Federal 

Register of the pendency before the 

Department of a proposal to grant such 

exemption. The notice set forth a 

summary of facts and representations 

contained in the application for 

exemption and referred interested 

persons to the application for a 

complete statement of the facts and 

representations. The application has 

been available for public inspection at 

the Department in Washington, DC. The 

notice also invited interested persons to 

submit comments on the requested 

exemption to the Department. In 

addition the notice stated that any 

interested person might submit a 

written request that a public hearing be 

held (where appropriate). The applicant 

has represented that it has complied 

with the requirements of the notification 

to interested persons. No requests for a 

hearing were received by the 

Department. Public comments were 

received by the Department as described 

in the granted exemption. 

The notice of proposed exemption 

was issued and the exemption is being 

granted solely by the Department 

because, 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 proposed to the Secretary of 

Labor. 

Statutory Findings 

In accordance with section 408(a) of 

the Act and/or section 4975(c)(2) of the 

Code and the procedures set forth in 29 

CFR Part 2570, Subpart B (55 FR 32836, 

32847, August 10, 1990) and based upon 

the entire record, the Department makes 

the following findings: 

(a) The exemption is administratively 

feasible; 

(b) The exemption is in the interests 

of the plan and its participants and 

beneficiaries; and 

(c) The exemption is protective of the 

rights of the participants and 

beneficiaries of the plan. 

PNC Financial Services Group, Inc. 

(PNC Financial), Located in 

Pittsburgh, Pennsylvania. 

[Prohibited Transaction Exemption 

2009–22 Application No. D–11397.] 

Exemption 

Section I—Exemption for Receipt of 

Fees 

In connection with the investment in 

an open-end investment company (a 

Fund or Funds), as defined, below, in 

Section IV(e), by certain employee 

benefit plans (Client Plan or Client 

Plans) for which PNC, as defined, 

below, in Section IV(a), serves as a 

fiduciary and is a party in interest with 

respect to such Client Plan(s), the 

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

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 (F) 1 of the Code, 

shall not apply, effective September 29, 

2006, to: 

(a) The receipt of fees by PNC from a 

Fund where BlackRock, as defined, 

below, in Section IV(b), acts as the 

investment adviser for such Fund, and 

the receipt of fees by BlackRock for the 

provision of investment advisory 

services, or similar services, to such 

Fund; 

(b) The receipt of fees by PNC from a 

Fund for providing certain service(s) 

(Secondary Service(s)), as defined, 

below, in Section IV(i), to such Fund; 

and 

(c) The receipt of fees by PNC from 

BlackRock in connection with 

administrative service(s) (Mutual Fund 

Administration Service(s)), as defined, 

below, in Section IV(l), provided to a 

Fund in which a Client Plan invests; 

provided that the conditions, as set forth 

in Section II and Section III, below, 

were satisfied, as of the effective date of 

this exemption and thereafter. 

Section II—Specific Conditions 

(a) PNC, serving as a fiduciary for a 

Client Plan, satisfies any one (but not 

all) of the following: 

(1) A Client Plan invested in a Fund 

does not pay any plan-level investment 

management fee, investment advisory 

fee, or similar fee (Plan-Level Fee(s)) to 

PNC with respect to any of the assets of 

such Client Plan which are invested in 

shares of such Fund for the entire 

period of such investment (the Offset 

Fee Method). This condition does not 

preclude the payment of investment 

advisory fees or similar fees (Fund-Level 

Fee(s)) by a Fund to BlackRock under 

the terms of an investment advisory 

agreement adopted in accordance with 

section 15 of the Investment Company 

Act of 1940 (the Investment Company 

Act); 

(2) A Client Plan invested in a Fund 

pays an investment management fee or 

similar fee based on total assets of such 

Client Plan from which a credit has 

been subtracted representing such 

Client Plan’s pro rata share of 

investment advisory fees or similar fees 

paid by such Fund to BlackRock (the 

Subtraction Fee Method). If, during any 

fee period for which a Client Plan has 

prepaid its investment management or 

similar fee, such Client Plan purchases 

shares of such Fund, the requirement of 

this Section II(a)(2) shall be deemed met 

with respect to such prepaid fee if, by 

a method reasonably designed to 

accomplish the same, the amount of the 

prepaid fee that constitutes the fee with 

respect to the assets of such Client Plan 

invested in shares of such Fund: (i) Is 

anticipated and subtracted from the 

prepaid fee at the time of payment of 

such fee, (ii) is returned to such Client 

Plan no later than during the 

immediately following fee period, or 

(iii) is offset against the prepaid fee for 

the immediately following fee period or 

for the fee period immediately following 

thereafter. For purposes of this Section 

II(a)(2), a fee shall be deemed to be 

prepaid for any fee period, if the amount 

of such fee is calculated as of a date not 

later than the first day of such period; 

or 

(3) A Client Plan invested in a Fund 

receives a ‘‘a credit’’ 2 (the Credit Fee 

Method) of such Client Plan’s 

proportionate share of all fees charged 

to such Fund by BlackRock for 

mstockstill on DSKH9S0YB1PROD with NOTICES2

Federal Register / Vol. 74, No. 168 / Tuesday, September 1, 2009 / Notices 45285 

investment advisory services or similar 

services for a particular month: (1) 

Effective for the period, September 29, 

2006, through December 31, 2008, on 

the earlier of either: (a) The same day as 

PNC receives a fee from BlackRock for 

Mutual Fund Administration Services 

provided for that month to such Fund 

by PNC, or (b) the fifth business day 

before the end of the month following 

the month in which fees for investment 

advisory services, or similar services, 

accrued, or (2) effective for the period 

beginning, January 1, 2009, and 

continuing thereafter, on a date which is 

no later than one business day after 

BlackRock receives fees from the Fund 

for investment advisory services, or 

similar services, provided for that 

month to such Fund by BlackRock. The 

crediting of all such fees to such Client 

Plan by PNC is audited by an 

independent accounting firm (the 

Auditor) on at least an annual basis to 

verify the proper crediting of such fees 

to such Client Plan. 

(b) The price paid or received by a 

Client Plan for shares in a Fund is the 

net asset value per share, as defined, 

below, in Section IV(f), at the time of the 

transaction, and is the same price which 

would have been paid or received for 

such shares by any other investor in 

such Fund at that time; 

(c) PNC, including any officer or 

director of PNC, does not purchase 

shares of a Fund from any Client Plan 

or sell shares of a Fund to any Client 

Plan; 

(d) A Client Plan does not pay sales 

commissions in connection with any 

purchase or sale of shares of a Fund, 

and a Client Plan does not pay 

redemption fees in connection with any 

sale of shares to a Fund, unless 

(1) Such redemption fee is paid only 

to a Fund, and 

(2) The existence of such redemption 

fee is disclosed in the prospectus for 

such Fund in effect both at the time of 

any purchase of such shares and at the 

time of such sale; 

(e) The combined total of all fees 

received by PNC for services provided 

by PNC: 

(1) To Client Plans, and 

(2) To Funds in which Client Plans 

invest is not in excess of reasonable 

compensation within the meaning of 

section 408(b)(2) of the Act; 

(f) PNC does not receive any fees 

payable pursuant to Rule 12b–1 under 

the Investment Company Act in 

connection with the subject 

transactions; 

(g) A Client Plan is not an employee 

benefit plan sponsored or maintained by 

PNC; 

(h) A second fiduciary (Second 

Fiduciary), as defined, below, in Section 

IV(h), who is acting on behalf of a Client 

Plan receives, in advance of any initial 

investment by a Client Plan in a Fund, 

full and detailed written disclosure of 

information concerning such Fund, 

including but not limited to: 

(1) A current prospectus for each 

Fund in which such Client Plan is 

considering investing; 

(2) A statement describing the fees, 

including the nature and extent of any 

differential between the rates of such 

fees for: 

(i) Any investment advisory or similar 

services to be paid by such Fund to 

BlackRock, 

(ii) Any Secondary Services to be paid 

by such Fund to PNC, 

(iii) Any Mutual Fund Administration 

Services to be paid by BlackRock to 

PNC, and 

(iv) All other fees to be charged to or 

paid by a Client Plan and by such Fund; 

(3) The reasons why PNC, acting as 

fiduciary for such Client Plan, may 

consider investment in such Fund to be 

appropriate for such Client Plan; 

(4) A statement describing whether 

there are any limitations applicable to 

PNC with respect to which assets of a 

Client Plan that may be invested in such 

Fund, and if so, the nature of such 

limitations; and 

(5) Upon the request of the Second 

Fiduciary, acting on behalf of a Client 

Plan, a copy of the proposed exemption 

and a copy of the final exemption, once 

such documents are published in the 

Federal Register. 

(i) On the basis of the information 

described, above, in Section II(h), a 

Second Fiduciary, acting on behalf of a 

Client Plan, authorizes in writing: (1) 

The investment of the assets of such 

Client Plan in shares of each particular 

Fund; and (2) the fees received by PNC 

and by BlackRock in connection with 

services provided by PNC and by 

BlackRock to such Fund. Such 

authorization by a Second Fiduciary 

must be consistent with the 

responsibilities, obligations, and duties 

imposed on fiduciaries by Part 4 of Title 

I of the Act. 

(j)(1) All authorizations, described, 

above, in Section II(i), made by a 

Second Fiduciary, regarding: (i) 

Investments by a Client Plan in a Fund, 

(ii) fees paid for investment advisory 

services or similar services provided by 

BlackRock to such Fund, (iii) fees paid 

for Secondary Services provided by PNC 

to such Fund, and (iv) fees paid by 

BlackRock to PNC for Mutual Fund 

Administration Services provided by 

PNC to such Fund, shall be terminable 

at will by the Second Fiduciary, acting 

on behalf of such Client Plan, without 

penalty to such Client Plan, upon 

receipt by PNC of a written notice of 

termination. A form (the Termination 

Form), as defined, below, in Section 

IV(j), expressly providing an election to 

terminate the authorizations, described, 

above, in Section II(i), with instructions 

on the use of such Termination Form 

must be provided to such Second 

Fiduciary at least annually. However, if 

a Termination Form has been provided 

to such Second Fiduciary, pursuant to 

Section II(k) and (l), below, then a 

Termination Form need not be provided 

again, pursuant to this Section II(j), 

unless at least six (6) months but no 

more than twelve (12) months have 

elapsed, since a Termination Form was 

provided, pursuant to Section II(k) and 

(l), below. 

(2) The instructions for the 

Termination Form must include the 

following statements: 

(i) The authorization, described, 

above, in Section II(i), is terminable at 

will by the Second Fiduciary, acting on 

behalf of a Client Plan, without penalty 

to such Client Plan, upon receipt by 

PNC of written notice from such Second 

Fiduciary. 

(ii) Failure by such Second Fiduciary 

to return the Termination Form on 

behalf of such Client Plan will be 

deemed to be an approval by the Second 

Fiduciary and will result in the 

continuation of the authorization, as 

described, above, in Section II(i), of PNC 

to engage in the transactions which are 

the subject of this exemption. 

(k) For a Client Plan invested in a 

Fund which uses one of the fee methods 

described, above, in Section II(a)(1), 

(a)(2), or (a)(3), in the event of a 

proposed change from one of the fee 

methods to another or in the event of a 

proposed increase in the rate of any fee 

paid by a Fund to BlackRock for any 

investment advisory service, or similar 

service that BlackRock provides to such 

Fund over an existing rate for such 

services or method of determining the 

fee for such services, which had been 

authorized, in accordance with Section 

II(i), above, by the Second Fiduciary for 

such Client Plan, at least thirty (30) days 

in advance of the implementation of 

such change from one of the fee 

methods to another or such increase in 

a fee, PNC will provide a written notice 

(which may take the form of a proxy 

statement, letter, or similar 

communication that is separate from the 

prospectus of such Fund and which 

explains the nature and amount of such 

change from one of the fee methods to 

another or increase in fee) to the Second 

Fiduciary of each Client Plan affected by 

such change from one of the fee 

mstockstill on DSKH9S0YB1PROD with NOTICES2

45286 Federal Register / Vol. 74, No. 168 / Tuesday, September 1, 2009 / Notices 

3 It is represented that PNC furnished only 

disclosure, not advanced notice, of a mid-2007 

advisory fee change to the Second Fiduciaries of 

Client Plans invested in Funds using the Credit Fee 

Method. The change, which resulted in increased 

fees to BlackRock of 0.5 basis points, (which it is 

represented was credited back to the Client Plans) 

occurred effective June 1, 2007, with the disclosure 

being provided in October 2007, after the effective 

date of such change. As the Second Fiduciaries of 

the Client Plans did not receive notification of such 

increase at least thirty (30) days in advance of the 

implementation of such increase, the Department, 

herein, is not providing relief for the receipt of such 

fee increase by BlackRock. 

methods to another or increased fee. 

Such notice shall be accompanied by a 

Termination Form, with instructions on 

the use of such Termination Form, as 

described, above, in Section II(j).3

(l) In the event of: 

(i) A proposed addition of a 

Secondary Service for which an 

additional fee is charged; or 

(ii) A proposed addition of a Mutual 

Fund Administration Service provided 

by PNC to a Fund in which a Client Plan 

invests and for which an additional fee 

is charged; or 

(iii) A proposed increase in the rate of 

any fee paid by a Fund to PNC for any 

Secondary Service, or 

(iv) A proposed increase in the rate of 

any fee paid by BlackRock to PNC for 

Mutual Fund Administration Services 

provided to such Fund, or 

(v) A proposed increase in the rate of 

any fee paid for Secondary Services or 

for Mutual Fund Administration 

Services that results from the decrease 

in the number or kind of services 

performed by PNC for such fee over an 

existing rate for services which had 

been authorized, in accordance with 

Section II(i), by the Second Fiduciary 

for a Client Plan invested in such Fund, 

PNC, at least thirty (30) days in advance 

of the implementation of such fee 

increase or additional service for which 

an additional fee is charged, will 

provide a written notice (which may 

take the form of a proxy statement, 

letter, or similar communication that is 

separate from the prospectus of such 

Fund and which explains the nature 

and amount of the additional service for 

which an additional fee is charged or 

the nature and amount of the increase 

in fees) to the Second Fiduciary of each 

Client Plan invested in such Fund 

which is proposing to increase fees or 

add services for which an additional fee 

is charged. Such notice shall be 

accompanied by a Termination Form, 

with instructions on the use of such 

Termination Form, as described, above 

in Section II(j). 

(m) On an annual basis, PNC, serving 

as fiduciary to a Client Plan, provides 

the Second Fiduciary of such Client 

Plan invested in a Fund with: 

(1) A copy of the current prospectus 

for such Fund in which such Client Plan 

invests; 

(2) Upon the request of such Second 

Fiduciary, a copy of the Statement of 

Additional Information for such Fund 

which contains a description of all fees 

paid by such Fund to PNC and all fees 

paid by BlackRock to PNC for Mutual 

Fund Administration Services; 

(3) A copy of the annual financial 

disclosure report which includes 

information about Fund portfolios, 

within sixty (60) days of the preparation 

of such report; 

(4) Oral or written responses to 

inquiries of the Second Fiduciary of 

such Client Plan, as such inquiries arise; 

and 

(5) A copy of the audit findings 

prepared by the independent Auditor, 

as required by Section II(a)(3), is 

provided by PNC at least annually 

within sixty (60) days of the completion 

of the report of such audit findings, to 

the Second Fiduciary of those Client 

Plans using the Credit Fee Method, as 

described in Section II(a)(3). 

(n) All dealings between a Client Plan 

and a Fund are on a basis no less 

favorable to such Client Plan than 

dealings between such Fund and other 

shareholders invested in such Fund. 

Section III—General Conditions 

(a) PNC maintains for a period of six 

(6) years the records necessary to enable 

the persons described, below, in Section 

III(b) to determine whether the 

conditions of this exemption have been 

met, except that: 

(1) A prohibited transaction will not 

be considered to have occurred, if solely 

because of circumstances beyond the 

control of PNC, the records are lost or 

destroyed prior to the end of the sixyear period, and 

(2) No party in interest other than 

PNC shall be subject to the civil penalty 

that may be assessed under section 

502(i) of the Act or to the taxes imposed 

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

if the records are not maintained or are 

not available for examination as 

required by Section III(b), below. 

(b)(1) Except as provided in Section 

III(b)(2) and notwithstanding any 

provisions of section 504(a)(2) of the 

Act, the records referred to in Section 

III(a) are unconditionally available at 

their customary location for 

examination during normal business 

hours by— 

(i) Any duly authorized employee or 

representative of the Department of 

Labor (the Department) or the Internal 

Revenue Service, 

(ii) Any fiduciary of a Client Plan who 

has authority to acquire or dispose of 

shares of a Fund owned by such Client 

Plan, or any duly authorized employee 

or representative of such fiduciary, and 

(iii) Any participant or beneficiary of 

a Client Plan or duly authorized 

employee or representative of such 

participant or beneficiary. 

(2) None of the persons described in 

Section III(b)(1)(ii) and (iii) shall be 

authorized to examine trade secrets of 

PNC, or commercial or financial 

information which is privileged or 

confidential. 

Section IV—Definitions 

For purposes of this exemption: 

(a) The term, ‘‘PNC,’’ means PNC 

Financial, and any affiliate thereof, as 

defined, below in Section IV(c). 

(b) The term, ‘‘BlackRock,’’ means 

BlackRock, Inc., and any affiliate 

thereof, as defined, below in Section 

IV(c). 

(c) An ‘‘affiliate’’ of a person includes: 

(1) Any person directly or indirectly, 

through one or more intermediaries, 

controlling, controlled by, or under 

common control with the person; 

(2) Any officer, director, employee, 

relative, or partner in any such person; 

and 

(3) Any corporation or partnership of 

which such person is an officer, 

director, partner, or employee. 

(d) The term, ‘‘control,’’ means the 

power to exercise a controlling 

influence over the management or 

policies of a person other than an 

individual. 

(e) The term, ‘‘Fund(s),’’ shall mean 

any diversified open-end investment 

company or companies registered with 

the Securities and Exchange 

Commission under the Investment 

Company Act, as amended, for which 

BlackRock serves as an investment 

adviser (but not sub-adviser). 

(f) The term, ‘‘net asset value,’’ means 

the amount for purposes of pricing all 

purchases and sales of shares of a Fund 

calculated by dividing the value of all 

securities, determined by a method as 

set forth in the prospectus for such 

Fund and in the statement of additional 

information, and other assets belonging 

to the Fund or portfolio of the Fund, 

less the liabilities charged to each such 

portfolio or Fund, by the number of 

outstanding shares. 

(g) The term, ‘‘relative,’’ means a 

relative as that term is defined in 

section 3(15) of the Act (or a member of 

the family as that term is defined in 

section 4975(e)(6) of the Code), or a 

brother, a sister, or a spouse of a brother 

or a sister. 

(h) The term, ‘‘Second Fiduciary,’’ 

means a fiduciary of a Client Plan who 

is independent of and unrelated to PNC 

mstockstill on DSKH9S0YB1PROD with NOTICES2

Federal Register / Vol. 74, No. 168 / Tuesday, September 1, 2009 / Notices 45287 

and BlackRock. For purposes of this 

exemption, the Second Fiduciary will 

not be deemed to be independent of and 

unrelated to PNC and BlackRock if: 

(1) Such fiduciary, directly or 

indirectly controls, through one or more 

intermediaries, is controlled by, or is 

under common control with PNC or 

with BlackRock; 

(2) Such fiduciary, or any officer, 

director, partner, employee, or relative 

of the fiduciary, is an officer, director, 

partner, or employee of PNC or of 

BlackRock (or is a relative of such 

persons); or 

(3) Such fiduciary, directly or 

indirectly, receives any compensation or 

other consideration for his or her 

personal account in connection with 

any transaction described in this 

exemption. 

If an officer, director, partner, or 

employee of PNC or of BlackRock (or 

relative of such persons) is a director of 

such Second Fiduciary, and if he or she 

abstains from participation in: 

(i) The choice of such Client Plan’s 

investment adviser, 

(ii) The approval of any such 

purchase or sale between such Client 

Plan and a Fund, and 

(iii) The approval of any change in 

fees or fee method, as described, above, 

in Section II (k) or (l), charged to or paid 

by such Client Plan in connection with 

any of the transactions described in 

Section I above, then Section IV(h)(2), 

above, shall not apply. 

(i) The term, ‘‘Secondary Service(s),’’ 

means a service or services which is/are 

provided by PNC to a Fund, including 

but not limited to custodial, accounting, 

or administrative services. The fees for 

providing Secondary Services to a Fund 

are paid to PNC by such Fund. 

(j) The term, ‘‘Termination Form,’’ 

means the form supplied to a Second 

Fiduciary which expressly provides an 

election to such Second Fiduciary to 

terminate on behalf of a Client Plan the 

authorization described, above, in 

Section II(i). 

(k) The term, ‘‘business day,’’ means 

any day that 

(i) PNC Financial is open for 

conducting all or substantially all of its 

banking functions, and 

(ii) the New York Stock Exchange (or 

any successor exchange) is open for 

trading. 

(l) The term, ‘‘Mutual Fund 

Administration Services,’’ means a 

service or services which is/are 

provided by PNC to, or on behalf of, a 

Fund, including PNC’s maintaining 

records of investments by Client Plans 

in such Fund, processing Fund 

transactions for Client Plans, 

transmitting account statements and 

shareholder communications, 

responding to inquiries from Client 

Plans regarding account balances and 

dividends, and providing information to 

such Fund on sales and assisting in 

monitoring possible market timing. The 

fees for providing Mutual Fund 

Administration Services to a Fund are 

paid to PNC by BlackRock, rather than 

by such Fund. 

DATES: Effective Date: This exemption is 

effective as of September 29, 2006. 

Written Comments 

In the Notice of Proposed Exemption 

(the Notice), the Department of Labor 

(the Department) invited all interested 

persons to submit written comments 

and requests for a hearing on the 

proposed exemption within forty-five 

(45) days of the date of the publication 

of the Notice in the Federal Register on 

March 26, 2009. The deadline for 

providing notice to all interested 

persons was April 10, 2009. All 

comments and requests for a hearing 

from interested persons were due by 

May 11, 2009. The Department received 

no requests for a hearing. However, 

three (3) commentators informed the 

Department that the mailing to them 

was not complete. 

In this regard, the first commentator 

did not receive a copy of the Notice. In 

response, the applicant indicated that 

the Notice had been inadvertently 

omitted from the initial mailing, dated 

April 3, 2009, to one group of interested 

persons, and that the mailing was resent 

to that group, including the Notice, 

before the deadline on April 10, 2009, 

for providing notice to interest persons. 

The second commentator indicated that 

certain enclosures were not included. In 

response, the applicant indicated that 

this commentator was part of the group 

that had received the mailing without 

the Notice, and that he should have 

subsequently received the second 

mailing, before the deadline on April 

10, 2009, for providing notice to interest 

persons. 

The third commentator indicated that 

he had received only the Notice and no 

cover letters. The applicant was unable 

to explain how this error could have 

occurred, because this part of the 

mailing was assembled by a machine 

designed to confirm that the inserts in 

each envelope were of the correct 

thickness. Accordingly, the applicant 

confirmed through a sampling of other 

packages that were part of this group 

that there were no other apparent 

instances of this error. In any event, the 

applicant mailed a complete package to 

the third commentator. 

During the comment period, the 

Department received 24 telephone 

inquiries from commentators seeking an 

explanation of the contents of the 

Notice. In response, the staff of the 

Office of Exemption Determinations 

spoke to each commentator and 

provided an explanation ‘‘in plain 

English’’ of the proposed exemption. 

In addition, eight (8) commentators 

wrote to the Department requesting a 

further explanation of the proposed 

exemption. In response to these 

commentators, the applicant states that 

the notice to interested persons 

provided by PNC contained all the 

information required by the 

Department’s exemption procedures, 

and also included an additional cover 

page that was intended to help the 

recipients understand the contents of 

the Notice. The applicant maintains that 

no further written explanation on PNC’s 

part was either required or permitted. 

Further, the applicant maintains that in 

any event, these comments do not raise 

any substantive issues on the proposed 

exemption itself. 

The Department concurs. 

During the comment period, the 

Department also received via e-mail, 

facsimile, and mail comments from 

three (3) commentators who raised 

substantive issues. Copies of these 

letters were posted on the Web site 

regulations.gov. At the close of the 

comment period, the Department 

forwarded a copy of these comments to 

the applicant for response. The 

comments and the applicant’s response 

thereto are summarized in the 

numbered paragraphs below. 

1. One commentator, identified as an 

IRA trustee, in an e-mail, dated April 

20, 2009, took the view that the 

requested exemption ‘‘appears to be an 

effort to modify the existing ERISA law 

to allow a corporate ‘sweetheart deal’ of 

two interlocked corporations (PNC and 

BLACKROCK),’’ and says that a change 

to the existing law ‘‘would be a step 

backward.’’ The commentator further 

characterizes the described arrangement 

as appearing ‘‘to have an intended 

benefit for the two corporations at the 

likely eventual expense of perhaps 

thousands of individuals with IRAs.’’ In 

addition, the commentator expresses 

concern that the costs of implementing 

the proposed exemption would be paid 

by either taxpayers or ‘‘The IRA owner 

who gets clobbered with higher and 

higher fees to pay the costs.’’ 

In response to this comment, the 

applicant maintains that the proposed 

exemption is not a modification to 

existing law, but rather an exception to 

certain provisions under existing law 

pursuant to a procedure contemplated 

by the statute. The applicant represents 

that PNC’s goal in requesting the relief 

mstockstill on DSKH9S0YB1PROD with NOTICES2

45288 Federal Register / Vol. 74, No. 168 / Tuesday, September 1, 2009 / Notices 

4 42 FR 18732, April 8, 1977. 

is not to favor BlackRock, but rather to 

preserve existing investments in plan 

and IRA accounts that may no longer be 

permitted after the changes in the 

ownership of BlackRock, and also to 

ensure that BlackRock Funds continue 

to be available as investments to 

accounts managed by PNC to the extent 

that investment in those funds is 

prudent and meets an account’s 

investment needs. Investments in 

BlackRock Funds under the exemption 

are not expected to increase IRA fees, as 

the structure for complying with the 

exemption is already in place. 

Furthermore, the applicant points out 

that to the extent the commentator 

objects to her IRA investing in 

BlackRock Funds, she can exercise her 

right under the proposed exemption to 

withhold her authorization of such 

investments or, if BlackRock Fund 

investments have previously been 

authorized, to terminate that 

authorization. 

Therefore, the applicant concludes 

that the commentator’s comment does 

not provide any reason why the 

exemption should not be granted. 

The Department concurs. 

2. One commentator, in an e-mail, 

dated April 28, 2009, argued that 

granting the exemption would be wrong 

because there is an inherent conflict of 

interest, giving the following reasons: 

(a) No amount of explanation, 

adjustment/manipulation of fees or 

documentation of facts can cancel out 

that conflict. 

(b) The very fact that PNC is 

requesting the exemption shows it is in 

their interest. 

(c) A massive mailing and 

disgorgement of data does not show this 

is good for investors. The commentator 

further argues that it must clearly be 

convenient and remunerative for PNC to 

utilize an ‘‘in-house organization’’ to 

control, invest and report on client 

money, but there is no claim or promise 

that BlackRock is or would be the best 

option. The commentator says that 

because of the bank being placed in 

conflict with its clients, a PNC manager, 

when faced with a choice, will opt for 

BlackRock. Therefore, the commentator 

concludes, the proposal should be 

withdrawn. 

In response, the applicant represents 

that the conditions of the exemption are 

designed to address the potential 

conflict, namely by requiring fee offsets 

or credits, disclosures and independent 

approvals. In the opinion of the 

applicant, the potential conflict in this 

case is attenuated in that PNC is a 

minority owner in BlackRock as a result 

of the transaction with Merrill Lynch, 

currently holding only a 33% interest 

(down slightly from the 34% interest 

described in the application). Any 

decisions by PNC portfolio managers to 

invest in the BlackRock Funds for plans 

are subject to fiduciary obligations 

imposed by section 404(a)(1) of the Act, 

including the duty to act solely in the 

interest of the plan and its participants 

and beneficiaries and to act in a prudent 

manner, and any investment decisions 

for IRA accounts are subject to similar 

obligations under State law. PNC’s 

objective is to have BlackRock Funds 

available in the event it would be 

prudent to use them, and PNC portfolio 

managers commonly use other fund 

families as well. 

Further, the applicant points out that 

if the commentator is concerned about 

these conflicts, he has the right under 

the proposed exemption to either 

withhold his authorization of PNC 

investing his account in BlackRock 

Funds or, if he has previously given his 

authorization, he can exercise his right 

to terminate that authorization at any 

time without penalty. 

Therefore, the applicant maintains 

that this comment by the commentator 

has not provided any reason why the 

proposed exemption should not be 

granted. 

The Department concurs. 

3. One commentator indicated her 

opposition to any exemption that would 

authorize additional fees to be charged 

by PNC Bank. The commentator did not 

give any further reason. 

In response, the applicant notes that 

the proposed exemption contains a 

series of protections to deal with the 

potential for PNC receiving additional 

fees, including fee offsets and credits. 

Furthermore, if the commentator 

continues to be concerned about PNC 

Bank charging additional fees, she 

would have the right under the 

exemption to withhold or terminate 

authorization of the investment of her 

account in BlackRock Funds. Therefore, 

the applicant maintains that the 

commentator has not provided any 

reason why the proposed exemption 

should not be granted. 

The Department concurs. 

In addition to the comments 

described above, the Department 

received, on May 8, 2009, an e-mail 

from the applicant, requesting certain 

changes to the operating language of the 

exemption. The applicant’s comment 

was also posted on the Web site 

regulation.gov. The applicant’s 

comments are summarized in the 

numbered paragraphs, below. 

1. Fee Disclosure and Differential 

Language—Section II(h)(2) 

Section II(h)(2)(iv), as set forth in the 

Notice on page 13243, column 2, line 

67, requires disclosure of, ‘‘All other 

fees to be charged to or paid by a Client 

Plan and by such Fund.’’ The applicant 

believes that disclosure of all Fund fees 

are within the scope of the exemption, 

but is not clear that all Client Plan fees 

should be subject to disclosure. The 

applicant believes that the focus on the 

fees charged to or paid by the Client 

Plan should only be those fees that are 

related to the investment in a Fund by 

a Client Plan. Accordingly, the 

applicant requests that the language of 

Section II(h)(2)(iv) should be amended 

to read as follows: ‘‘All other fees to be 

charged to or paid by a Client Plan in 

connection with its investment in such 

Fund and by such Fund.’’ 

In addition, the applicant has 

requested an amendment to Section 

II(h)(2), as set forth in the Notice on 

page 13243, column 2, lines 54–57. 

Section II(h)(2) requires: ‘‘A statement 

describing the fees, including the nature 

and extent of any differential between 

the rates of such fees’’ for: (i) Any 

investment advisory or similar services 

to be paid by a Fund to BlackRock, (ii) 

any Secondary Services to be paid by a 

Fund to PNC, (iii) any Mutual Fund 

Administration Services to be paid by 

BlackRock to PNC, and (iv) all other fees 

to be charges to or paid by a Client Plan 

and by a Fund. The applicant believes 

that the disclosure of the nature and 

extent of any differential between the 

rates of such fees should be limited to 

the fees paid for investment advisory or 

similar services. In this regard, the 

applicant request that the phrase, 

‘‘including the nature and extent of any 

differential between the rates of such 

fees,’’ be deleted from Section II(h)(2) 

and moved to the end of Section 

II(h)(2)(i) following the word, 

‘‘BlackRock.’’ Accordingly, the 

applicant has requested that Section 

II(h)(2)(i) be amended to read as follows: 

‘‘Any investment advisory or similar 

services to be paid by such Fund to 

BlackRock, including the nature and 

extent of any differential between the 

rates of such fees.’’ 

The limitations suggested by the 

applicant do not conform to the 

requirements as set forth in Prohibited 

Transaction Exemption 77–4 (PTE 77– 

4).4 In this regard, PTE 77–4 deals with 

the receipt of fees by a fiduciary of a 

plan in connection with the purchase or 

sale by a plan of shares of a registered, 

open-end investment company when 

mstockstill on DSKH9S0YB1PROD with NOTICES2

Federal Register / Vol. 74, No. 168 / Tuesday, September 1, 2009 / Notices 45289 

such fiduciary or an affiliate is also the 

investment adviser for such investment 

company. Section II(d) of PTE 77–4 

requires that a second fiduciary with 

respect to such plan, who is 

independent of and unrelated to the 

fiduciary/investment adviser or any 

affiliate thereof, receive full and 

detailed written disclosure of the 

investment advisory and other fees 

charged to or paid by such plan and by 

such investment company, including 

the nature and extent of any differential 

between the rates of such fees. 

Accordingly, the Department does not 

concur with the applicant’s request to 

alter the language of Section II(h)(2) and 

has not amended Section II(h)(2) in the 

final exemption. Nor does the 

Department concur with the applicant’s 

request to alter the language of Section 

II(h)(2)(iv) and has not amended Section 

II(h)(2)(iv) in the final exemption. 

2. Reference to Part 4 of Title I of the 

Act—Section II(i) 

Section II(i), as set forth in the Notice, 

requires that on the basis of certain 

disclosure, a Second Fiduciary, acting 

on behalf of the Client Plan, authorizes 

in writing: (1) The investment of the 

assets of a Client Plan in shares of a 

particular Fund and (2) the receipt of 

fees by PNC and by BlackRock in 

connection with services provided by 

PNC and by BlackRock to such Fund. 

The last sentence in Section II(i), as set 

forth in the Notice on page 13243, 

column 3, lines 25–29, requires that 

‘‘Such authorization by a Second 

Fiduciary must be consistent with the 

responsibilities, obligations, and duties 

imposed on fiduciaries by Part 4 of Title 

I of the Act.’’ The applicant maintains 

that ‘‘whether the Second Fiduciary 

violates its fiduciary duties in providing 

the authorization is outside the control 

of PNC and should not affect whether 

PNC has coverage under the 

exemption.’’ Further, the applicant 

notes that this language was not 

included in prior individual exemption 

providing analogous relief. Therefore, 

the applicants request that the sentence 

in Section II(i) referring to the Second 

Fiduciary’s responsibilities under Part 4 

of Title I of the Act should be deleted 

from the final exemption. 

The Department does not concur with 

the applicant’s request and has not 

deleted the last sentence from Section 

II(i) in the final exemption. In this 

regard, PTE 77–4 contains language 

similar to that set forth Section II(i) of 

the Notice. In this regard, Section II(e) 

of PTE 77–4, states that ‘‘On the basis 

of the prospectus and disclosure 

referred to in paragraph (d), the second 

fiduciary referred to in paragraph (d) 

approves such purchase and sales 

consistent with the responsibilities 

obligations, and duties imposed on 

fiduciaries by Part 4 of Title I of the 

Act.’’ 

3. Statement of Additional Information 

Disclosure—Section II(m)(2) 

Section II(m)(2), as set forth in the 

Notice on page 13244, column 2, lines 

49–52, requires on an annual basis that 

PNC, serving as fiduciary to a Client 

Plan, provide the Second Fiduciary of 

such Client Plan with certain 

disclosures. Such disclosures should 

include a copy of a Statement of 

Additional Information for a Fund, 

upon request by the Second Fiduciary. 

Further, such Statement of Additional 

Information should contain a 

description of all fees paid to PNC by a 

Fund and by BlackRock for services 

provided by PNC to such Fund. The 

applicant notes that while Statements of 

Additional Information for Funds do, in 

fact, describe the Mutual Fund 

Administration Services fees, such 

document does not specify the rate of 

such fees. The applicant argues that 

such disclosure should be sufficient 

because the rate of such fees would have 

been described in the initial disclosure 

to the Client Plan and cannot be 

changed without prior notice. 

The Department concurs with the 

applicant’s comment. 

4. Independent Audit Disclosure— 

Section II(m)(3) 

Section II(m)(3), as set forth in the 

Notice on page 13244, column 2, lines 

56–59, requires that PNC provide the 

Second Fiduciary of a Client Plan with 

‘‘a copy of the annual financial 

disclosure report which includes 

information about Fund portfolios, as 

well as the audit findings of the 

independent Auditor, within sixty (60) 

days of the preparation of such report.’’ 

The audit findings referred to in Section 

II(m)(3) are those required under 

Section II(a)(3) of the exemption in 

connection with the audit of the Credit 

Fee Method. The applicant suggests that 

the requirement to disclose a copy of the 

audit finding be deleted from Section 

II(m)(3) and be made a separate 

requirement, in a new Section II(m)(5) 

in the final exemption. Accordingly, the 

applicant requests that the requirement 

in Section II(m)(5) apply only to those 

Client Plans using the Credit Fee 

Method, described in Section II(a)(3) of 

the final exemption. 

The Department concurs with the 

applicant’s request and has amended 

Section II(m)(3) to delete the phrase, ‘‘as 

well as the audit findings of the 

independent Auditor.’’ Further, the 

Department has included in the final 

exemption a new Section II(m)(5) which 

reads, as follows: 

A copy of the audit findings prepared by 

the independent Auditor, as required by 

Section II(a)(3), is provided by PNC at least 

annually within sixty (60) days of the 

completion of the report of such audit 

findings, to the Second Fiduciary of those 

Client Plans using the Credit Fee Method, as 

described in Section II(a)(3). 

5. Change in Fee Method—Section 

IV(h)(3)(iii) 

Section IV(h), as set forth in the 

Notice on page 13245, column 1, lines 

33–68, and column 2, lines 1–4, defines 

the term, ‘‘Second Fiduciary,’’ as a 

fiduciary of a Client Plan who is 

independent of and unrelated to PNC 

and BlackRock. Section IV(h)(2) 

provides that a Second Fiduciary will 

not be deemed to be independent if 

such fiduciary, or any officer, director, 

partner, employee, or relative of the 

fiduciary is an officer, director, partner, 

or employee of PNC or of BlackRock (or 

is a relative of such person). However, 

Section IV(h)(3) provides an exception 

to the requirement, set forth in Section 

IV(2). In this regard, a director of a 

Second Fiduciary of a Client Plan who 

is also an officer, director, partner, or 

employee of PNC or of BlackRock (or a 

relative of such persons) is permitted to 

abstain from: (1) The selection of the 

Client Plan’s investment adviser; (2) the 

approval of any purchase or sale 

between a Client Plan and a Fund; and 

(3) ‘‘the approval of any change in fees, 

as described, above, in Section II (k) or 

(l), charged to or paid by such Client 

Plan in connection with any of the 

transactions described in Section I 

above.’’ 

The applicant requests that the 

language of Section IV(h)(3)(iii), as set 

forth in the Notice on page 13245, 

column 1, lines 67–68, be revised to 

insert the phrase, ‘‘or fee method,’’ after 

the phrase, ‘‘any change in fees,’’ in 

order to be consistent with other 

provisions in the exemption where 

references to changes of fees also apply 

to changes in fee methods. 

The Department concurs with the 

applicant’s suggestions, and 

accordingly, has amended the language 

of Section IV(h)(3)(iii) in the final 

exemption. 

After giving full consideration to the 

entire record, including the written 

comment from the applicant and from 

the commentators, the Department has 

decided to grant the exemption, as 

described and amended, above. In this 

regard, the comment letters from the 

applicant and from the commentators 

which were submitted to the 

mstockstill on DSKH9S0YB1PROD with NOTICES2

45290 Federal Register / Vol. 74, No. 168 / Tuesday, September 1, 2009 / Notices 

5The Department, herein, is not providing any 

retroactive or prospective relief for a transaction 

between a plan (a Verizon Plan or Verizon Plans), 

as defined, below, in section III(h) of this 

exemption, and a party in interest with respect to 

such Verizon Plan, if such transaction was entered 

into or is entered into in years other than 2001 and 

2003, nor is the Department, herein, providing any 

retroactive or prospective relief for any continuing 

transaction, or for any subsequent renewal or 

modification of a transaction that required or 

requires the consent of Verizon Investment 

Management Corporation (VIMCO), if entry into 

such continuing transaction, or entry into such 

renewal or modification occurred or occurs in years 

other than 2001 and 2003. In order to obtain relief 

for the entry into a transaction, or the entry into a 

continuing transaction or a subsequent renewal or 

modification of a transaction, as the case may be, 

VIMCO must have satisfied or must satisfy at the 

time of each such transaction, the terms and 

conditions as set forth in PTE 96–23 or, if 

applicable, the terms and conditions of PTE 96–23 

as hereafter amended. 

6 61 FR 15975, April 10, 1996. 

Department have been included as part 

of the public record of the exemption 

application. The complete application 

file, including all supplemental 

submissions received by the 

Department, is made available for public 

inspection in the Public Documents 

Room of the Employee Benefits Security 

Administration, Room N–1513, U.S. 

Department of Labor, 200 Constitution 

Avenue, NW., Washington, DC 20210. 

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 

March 26, 2009, at 74 FR 13242. 

FOR FURTHER INFORMATION CONTACT: 

Angelena Le Blanc of the Department, 

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

toll-free number). 

Verizon Investment Management 

Corporation, Located in Basking 

Ridge, New Jersey. 

[Prohibited Transaction Exemption 

2009–23, Exemption Application No. 

D–11447.] 

Exemption 

Section I—Transaction(s) 

The restrictions of section 

406(a)(1)(A) through (D) of the Act and 

the taxes imposed by section 4975(a) 

and (b) of the Code, by reason of section 

4975(c)(1)(A) through (D) of the Code,5

shall not apply, effective for the period 

January 1, through December 31, 2001, 

and for the period January 1, through 

December 31, 2003, to any transaction, 

as described in Part I of Prohibited 

Transaction Exemption 96–23 (PTE 96– 

23),6 between a Verizon Plan or Verizon 

Plans, as defined, below, in section 

III(h) of this exemption, and a party in 

interest, as defined, below, in section 

III(c) of this exemption, with respect to 

such Verizon Plan; provided that: 

during the period January 1, through 

December 31, 2001, and during the 

period January 1, through December 31, 

2003, VIMCO satisfied the definition of 

an in-house asset manager (INHAM), as 

defined, below, in section III(a) of this 

exemption, and had discretionary 

authority or control with respect to the 

assets of such Verizon Plan involved in 

each such transaction; and the 

conditions, as set forth, below, in 

section I(a) through (b) and section II of 

this exemption were satisfied and, the 

conditions, as set forth, below, in 

section I(c) and section II of this 

exemption are satisfied; 

(a) All the requirements of PTE 96–23 

were satisfied for the period January 1, 

through December 31, 2001, and the 

period January 1, through December 31, 

2003, except with respect to the annual 

audit requirement, as set forth in section 

I(h) of PTE 96–23; 

(b) An exemption audit, as defined, in 

Part IV(f) of PTE 96–23, for the period 

January 1, through December 31, 2001, 

must have been completed by no later 

than December 31, 2003, and an 

exemption audit for the period January 

1, through December 31, 2003, must 

have been completed by no later than 

December 31, 2005; and 

(c) If VIMCO, satisfies the definition 

of an INHAM, as defined, below, in 

section III(a) of this exemption, at any 

time during the period beginning on the 

date of the publication in the Federal 

Register of the final exemption for 

application D–11447 and ending on the 

effective date of a final amendment to 

PTE 96–23, then an independent 

auditor, who has appropriate technical 

training or experience and proficiency 

with the fiduciary responsibility 

provisions of the Act and who so 

represents in writing, must conduct an 

exemption audit, as defined, below, in 

section III(f) of this exemption, on an 

annual basis. Following completion of 

such exemption audit, the auditor shall 

issue a written report to the Verizon 

Plan or Verizon Plans that engage in 

transactions, described in Part I of PTE 

96–23, presenting such auditor’s 

specific findings regarding the level of 

compliance: (1) with the policies and 

procedures adopted by VIMCO in 

accordance with Part I(g) of PTE 96–23; 

and (2) with the objective requirements 

of PTE 96–23. The written report shall 

also contain the auditor’s overall 

opinion regarding whether VIMCO’s 

program complied: (1) With the policies 

and procedures adopted by VIMCO; and 

(2) with the objective requirements of 

PTE 96–23. The exemption audit and 

the written report must be completed 

within six (6) months following the end 

of the year to which the audit relates. 

Section II—General Conditions 

(a) VIMCO must maintain or cause to 

be maintained, for a period of six (6) 

years, such records as are necessary to 

enable the persons described, below, in 

section II(b) of this exemption, to 

determine whether the conditions of 

this exemption have been met, except 

that: 

(1) A prohibited transaction shall not 

be considered to have occurred solely 

because, due to circumstances beyond 

the control of VIMCO, such records are 

lost or destroyed prior to the end of the 

six-year period, and 

(2) No party in interest with respect 

to a Verizon Plan which engages in a 

transaction, described in section I of this 

exemption, other than VIMCO, shall be 

subject to a civil penalty under section 

502(i) of the Act or to the taxes imposed 

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

if such records are not maintained, or 

are not available for examination, as 

required, below, by section II(b) of this 

exemption. 

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

section II(b)(2) of this exemption, and 

notwithstanding any provisions of 

section 504(a)(2) of the Act, the records 

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

exemption, are unconditionally 

available at their customary location for 

examination during normal business 

hours by— 

(i) Any duly authorized employee or 

representative of the Department of 

Labor (the Department) or the Internal 

Revenue Service, 

(ii) Any fiduciary of a Verizon Plan 

that engages in a transaction, described 

in Part I of PTE 96–23, or any duly 

authorized employee or representative 

of such fiduciary, and 

(iii) Any participant or beneficiary of 

a Verizon Plan or duly authorized 

employee or representative of such 

participant or beneficiary. 

(2) None of the persons described, 

above, in section II(b)(1)(ii) and (iii) of 

this exemption, shall be authorized to 

examine trade secrets of VIMCO, or 

commercial or financial information 

which is privileged or confidential. 

Section III—Definitions 

For the purposes of this exemption: 

(a) The term, ‘‘in-house asset 

manager’’ or ‘‘INHAM,’’ means VIMCO, 

provided that VIMCO is: 

(1) Either (A) a direct or indirect 

wholly-owned subsidiary of Verizon 

Communications, Inc. (Verizon), or a 

direct or indirect wholly-owned 

subsidiary of a parent organization of 

Verizon, or (B) a membership non-profit 

mstockstill on DSKH9S0YB1PROD with NOTICES2

Federal Register / Vol. 74, No. 168 / Tuesday, September 1, 2009 / Notices 45291 

corporation a majority of whose 

members are officers or directors of 

Verizon or a parent organization; and 

(2) An investment adviser registered 

under the Investment Advisers Act of 

1940 that, as of the last day of its most 

recent fiscal year, has under its 

management and control total assets 

attributable to Verizon Plans maintained 

by affiliates of VIMCO, as defined, 

below, in section III(b) of this 

exemption, in excess of $50 million; and 

provided that if VIMCO had no prior 

fiscal year as a separate legal entity as 

a result of its constituting a division or 

group within Verizon’s organizational 

structure, then this requirement is 

deemed to have been met as of the date 

during VIMCO’s initial fiscal year as a 

separate legal entity that responsibility 

for the management of such assets in 

excess of $50 million was transferred to 

it from Verizon. 

In addition, Verizon Plans maintained 

by affiliates of VIMCO and/or by 

VIMCO, have aggregate assets of at least 

$250 million, calculated as of the last 

day of each such Verizon Plan’s 

reporting year. 

(b) For purposes of sections III(a) and 

III(h) of this exemption, an ‘‘affiliate’’ of 

VIMCO means a member of either: 

(1) a controlled group of corporations, 

as defined in section 414(b) of the Code, 

of which VIMCO is a member, or 

(2) A group of trades or businesses 

under common control, as defined in 

section 414(c) of the Code, of which 

VIMCO is a member; provided that ‘‘50 

percent’’ shall be substituted for ‘‘80 

percent’’ wherever ‘‘80 percent’’ appears 

in section 414(b) or 414(c) of the Code 

or the rules thereunder. 

(c) The term, ‘‘party in interest,’’ 

means a person described in section 

3(14) of the Act and includes a 

‘‘disqualified person,’’ as defined in 

section 4975(e)(2) of the Code. 

(d) The term, ‘‘control,’’ means the 

power to exercise a controlling 

influence over the management or 

policies of a person other than an 

individual. 

(e) For purposes of this exemption, 

the time as of which any transaction 

occurred is the date upon which the 

transaction was entered into. In 

addition, the time as of which any 

renewal or modification of any 

transaction occurred is the date upon 

which the renewal or the modification 

of the transaction was entered into. For 

any transaction that required the 

consent of VIMCO that was entered into, 

renewed, or modified, as the case may 

be, during the period from January 1, 

through December 31, 2001, or during 

the period from January 1, through 

December 31, 2003, the requirements of 

this exemption must have been satisfied 

at the time such transaction was entered 

into, or was renewed, or was modified, 

as the case may be. In addition, in the 

case of a transaction that is continuing, 

the transaction is deemed to occur until 

it is terminated. 

Nothing in this paragraph shall be 

construed as exempting a transaction 

entered into by a Verizon Plan which 

becomes a transaction described in 

section 406 of the Act or section 4975 

of the Code, while the transaction is 

continuing, unless the conditions of 

PTE 96–23 were met at the time the 

transaction was entered into, or at the 

time the transaction would have become 

prohibited but for PTE 96–23. In 

determining compliance with the 

conditions of PTE 96–23 at the time that 

the transaction was entered into for 

purposes of the preceding sentence, Part 

I(e) of PTE 96–23, will be deemed 

satisfied if the transaction was entered 

into between a Verizon Plan and a 

person who was not then a party in 

interest. 

(f) Exemption Audit. An ‘‘exemption 

audit’’ of a Verizon Plan must consist of 

the following: 

(1) A review by an independent 

auditor of the written policies and 

procedures adopted by VIMCO, 

pursuant to Part I(g) of PTE 96–23, for 

consistency with each of the objective 

requirements of PTE 96–23, as described 

below, in section III(g) of this 

exemption. 

(2) A test of a sample of VIMCO’s 

transactions during the audit period that 

is sufficient in size and nature to afford 

the auditor a reasonable basis: (A) to 

make specific findings regarding 

whether VIMCO is in compliance with 

(i) the written policies and procedures 

adopted by VIMCO, pursuant to Part I(g) 

of PTE 96–23 and (ii) the objective 

requirements of PTE 96–23, as described 

below, in section III(g) of this exemption 

and (B) to render an overall opinion 

regarding the level of compliance of 

VIMCO’s program with section 

III(f)(2)(A)(i) and (ii) of this exemption. 

(3) A determination as to whether 

VIMCO satisfied the definition of an 

INHAM, as defined, above, in section 

III(a), of this exemption; and 

(4) Issuance of a written report 

describing the steps performed by the 

auditor during the course of its review 

and the auditor’s findings. 

(g) For purposes of section III(f), 

above, of this exemption, the written 

policies and procedures must describe 

the following objective requirements of 

the exemption and the steps adopted by 

VIMCO to assure compliance with each 

of these requirements: 

(1) The definition of an INHAM in 

section III(a) of this exemption. 

(2) The requirements of Part I and Part 

I(a) of PTE 96–23 regarding the 

discretionary authority or control of 

VIMCO with respect to the assets of a 

Verizon Plan involved in the 

transaction, in negotiating the terms of 

the transaction, and with regard to the 

decision on behalf of such Verizon Plan 

to enter into the transaction. 

(3) That any procedure for approval or 

veto of the transaction meets the 

requirements of Part I(a) of PTE 96–23. 

(4) For a transaction described in Part 

I of PTE 96–23: 

(A) That the transaction is not entered 

into with any person who is excluded 

from relief under Part I(e)(1), Part I(e)(2) 

of PTE 96–23, to the extent such person 

has discretionary authority or control 

over the plan assets involved in the 

transaction, or Part I(f) of PTE 96–23, 

and 

(B) That the transaction is not 

described in any of the class exemptions 

listed in Part I(b) of PTE 96–23. 

(h) The term, ‘‘Verizon Plan(s),’’ 

means a plan or plans maintained by 

VIMCO or an affiliate of VIMCO. 

Effective Date: This exemption is 

effective for the period from January 1, 

through December 31, 2001, and for the 

period from January 1, through 

December 31, 2003. 

Written Comments 

In the Notice of Proposed Exemption 

(the Notice), the Department invited all 

interested persons to submit written 

comments and requests for a hearing on 

the proposed exemption within fortyfive (45) days of the date of the 

publication of the Notice in the Federal 

Register on February 25, 2009. All 

comments and requests for a hearing 

were due by April 13, 2009. 

During the comment period, the 

Department received no requests for a 

hearing. However, the Department 

received, on April 9, 2009, a facsimile 

from the applicant, informing the 

Department of a correction to the 

language of the exemption, as proposed 

in the Notice. In this regard, the 

references to ‘‘Verizon Investment 

Management Company,’’ as set forth in 

the heading of the Notice on page 8571, 

in the heading of the Proposed 

Exemption on page 8572, and in the 

language in footnote no. 2 on page 8572, 

should be revised to read ‘‘Verizon 

Investment Management Corporation.’’ 

The Department acknowledges the 

correction, as requested by the 

applicant, and in the final exemption 

has amended the references to Verizon 

Investment Management Corporation. 

mstockstill on DSKH9S0YB1PROD with NOTICES2

45292 Federal Register / Vol. 74, No. 168 / Tuesday, September 1, 2009 / Notices 

In addition to the correction described 

above, the applicant requested: (1) An 

amendment to the exemption audit 

conditions of section I(c); (2) a change 

of the effective date of section I(c); and 

(3) a change in the definition of an 

INHAM, in section III(a), as set forth in 

the Notice. The applicant’s comments 

are sumarized in the paragraphs, below. 

Timing of Exemption Audit 

Section I(c) of the Notice, as set forth 

on page 8572, column 3, in lines 56–59, 

requires that the exemption audit and 

the written audit report must be 

completed within six (6) months 

following the end of the year to which 

such audit relates. 

In its comment, VIMCO states that it 

understands the appropriateness of 

imposing a timing condition on future 

audits. However, VIMCO maintains that 

six (6) months after the end of the plan 

year is a relatively short period 

considering the volume of corporate and 

employee benefit activities that VIMCO 

engages in at that time of year. 

Accordingly, VIMCO requests that this 

deadline should be one (1) year 

following the end of the year to which 

such audit relates, rather than six (6) 

months. In this regard, VIMCO 

maintains that a one-year deadline 

would be consistent with the 

requirement that an exemption audit be 

performed annually and would avoid 

the unintended loss of the exemption 

due to inadvertent delays in the 

exemption audit process. 

The Department does not concur with 

the applicant’s request and has not 

amended the six (6) month audit 

requirement, set forth in section I(c) of 

this exemption. In this regard, it is the 

Department’s view that the six (6) 

month audit requirement is reasonable. 

The Department believes that extending 

the audit requirement beyond the six (6) 

month requirement would result in 

audit reports which would not be 

timely. 

Exemption Audit Conditions 

Section I(c), as set forth on page 8572, 

column 3, in lines 50–55, also requires 

that that the written report of the 

exemption audit must contain: 

The auditor’s overall opinion regarding 

whether VIMCO’s program complied: (1) 

With the policies and procedures adopted by 

VIMCO; and (2) with the objective 

requirements of PTE 96–23. 

The applicant believes that the 

requirement imposed in section I(c) of 

the Notice goes beyond the frameowrk 

envisioned by PTE 96–23. In this regard, 

VIMCO notes that in the preamble to 

PTE 96–23, the auditor was not required 

to reach any opinion regarding 

compliance. The auditor was simply to 

make the findings based on its review. 

In the opinion of the applicant, the 

requirement set forth in section I(c) of 

the Notice, would cause additional 

review and expense. In addition, the 

applicant points out that this 

requirement may trigger issues for 

accounting firms and law firms under 

their respective professional standards. 

The applicant suggests that, if the 

Department intends to impose this 

requirement generally on INHAMs in 

the course of amending PTE 96–23, then 

the Department should do so in that 

proceeding, at which time this 

requirement can be subject to a broader 

range of comments that would better 

define the issues. 

The Department does not concur with 

the applicant’s request and has not 

amended this requirement, as set forth 

in section I(c) of this exemption. It is the 

Department’s view that it is not 

unreasonable to require an auditor to 

issue a written report which presents 

such auditor’s specific findings 

regarding the level of compliance with 

the policies and procedures adopted by 

VIMCO, and with the objective 

requirements of PTE 96–23. Further, the 

Department believes that it is reasonable 

to require the auditor’s written report to 

contain such auditor’s overall opinion 

regarding whether VIMCO’s program 

complied with the policies and 

procedures adopted by VIMCO, and 

with the objective requirements of PTE 

96–23, based on a representative sample 

of the transactions. 

Effective Date for Condition I(c) of the 

Exemption 

The effective date for section I(c), as 

set forth in the Notice at page 8572, 

column 3, in lines 25–30, is stated as 

follows: 

(c) For the period beginning on the date of 

the publication in the Federal Register of the 

final exemption for application D–11447 and 

ending on the effective date of the final 

amendment to PTE 96–23, * * *. 

The applicant points out that the final 

exemption will not necessarily be 

published at the beginning or end of a 

calendar year or at the beginning or end 

of an audit period. Accordingly, the 

applicant is concerned that if an 

exemption audit covers an annual 

period which straddles the effective 

date, as set forth in section I(c) of the 

exemption, the exemption audit could 

be subject to two different sets of 

standards. To avoid this problem, the 

applicant requests that the effective date 

for section I(c) of the exemption should 

be changed to the beginning of the first 

fiscal year of VIMCO after publication of 

the final exemption in the Federal 

Register. 

The Department does not concur with 

the applicant’s request and has not 

amended the effective date, as set forth 

in section I(c) of this exemption. In this 

regard, the Department notes that 

satisfaction of the exemption audit 

requirement, as set forth in this 

exemption, will also satisfy the 

exemption audit requirements, as set 

forth in PTE 96–23 if the audit period 

straddles both this final exemption and 

PTE 96–23. Accordingly, any exemption 

audit covering an annual period that 

straddles the effective date, as set forth 

in section I(c) of this exempiton, will 

not be subject to two different sets of 

standards. 

Definition of an INHAM 

Section III(a) of the exemption, as set 

forth in the Notice on page 8573, 

column 1, in lines 50–68, and 

continuing on page 8573, column 2, in 

lines 1–21, defines the term, ‘‘in-house 

asset manager’’ or ‘‘INHAM.’’ The 

definition of an ‘‘in-house asset 

manager’’ or ‘‘INHAM,’’ as set forth in 

the Notice, requires that an INHAM 

must satisfy certain criteria on January 

1, 2001, and at all times thereafter. 

Specifically, section III(a) of the 

exemption reads as follows: 

(a) The term ‘‘in-house asset manager’’ or 

‘‘INHAM,’’ means VIMCO, provided that 

VIMCO on January 1, 2001, was and 

continued thereafter to be: 

(1) Either (A) a direct or indirect whollyowned subsidiary of Verizon, or a direct or 

indirect wholly-owned subsidiary of a parent 

organization of Verizon, or (B) a membership 

non-profit corporation a majority of whose 

members are officers or directors of such an 

employer or parent organization; and 

(2) An investment adviser registered under 

the Investment Advisers Act of 1940 that, as 

of the last day of its most recent fiscal year, 

had and continued thereafter to have under 

its management and control total assets 

attributable to Verizon Plans maintained by 

affiliates of VIMCO, as defined, below, in 

section III(b) of this exemption, in excess of 

$50 million; and provided that if VIMCO had 

no prior fiscal year as a separate legal entity 

as a result of its constituting a division or 

group within Verizon’s organizational 

structure, then this requirement is deemed to 

have been met as of the date during VIMCO’s 

initial fiscal year as a separate legal entity 

that responsibility for the management of 

such assets in excess of $50 million was 

transferred to it from Verizon. 

In addition, Verizon Plans maintained by 

affiliates of VIMCO and/or by VIMCO, had, 

as of January 1, 2001, and continued 

thereafter to have, aggregate assets of at least 

$250 million, calculated as of the last day of 

each such Verizon Plan’s reporting year. 

The applicant is concerned that the 

definition of an INHAM, as set forth in 

the proposed exemption, would require 

mstockstill on DSKH9S0YB1PROD with NOTICES2

Federal Register / Vol. 74, No. 168 / Tuesday, September 1, 2009 / Notices 45293 

that VIMCO continue to meet certain 

criteria at all times after January 1, 2001. 

According to the applicant, ‘‘this raises 

the question of whether VIMCO would 

lose all relief under the exemption in 

the event that it ceases at some point in 

the future to meet those criteria.’’ 

Accordingly, the applicant requests that 

‘‘to avoid this problem, the exemption 

should provide that in the event VIMCO 

ceases to meet the terms of the 

definition, it ceases to be an INHAM 

only prospectively, and therefore does 

not lose relief for prior transactions.’’ 

The Department concurs with the 

applicant’s request. In this regard, the 

Department notes that the retroactive 

exemptive relief effective for the period 

from January 1, through December 31, 

2001, and from January 1, through 

December 31, 2003, will continue to 

apply, even if in the future, VIMCO 

ceases to satisfy the definition of an 

INHAM, as set forth in section III(a) of 

this exemption. However, if VIMCO, 

satisfies the definition of an INHAM, as 

defined, above, in section III(a) of this 

exemption, at any time during the 

period, beginning on the date of the 

publication in the Federal Register of 

the final exemption for application D– 

11447 and ending on the effective date 

of a final amendment to PTE 96–23, 

then retroactive exemptive relief 

effective for the period from January 1, 

through December 31, 2001, and from 

January 1, through December 31, 2003, 

will not continue to apply, unless the 

conditions, as set forth, in section I(a) 

through (b) and section II of this 

exemption, were satisfied during the 

period January 1, through December 31, 

2001, and during the period January 1, 

through December 31, 2003, and the 

conditions, as set in section I(c) and 

section II of this exemption, are 

satisfied, during the period, beginning 

on the date of the publication in the 

Federal Register of the final exemption 

for application D–11447 and ending on 

the effective date of a final amendment 

to PTE 96–23. Accordingly, the 

Department has amended this 

exemption, as follows: 

(1) In section III(a) to delete the 

phrase, ‘‘on January 1, 2001, was and 

continued thereafter to be,’’ as set forth 

in the Notice on page 8573, column 1, 

in lines 52–53, and to insert the word, 

‘‘is,’’ after the phrase, ‘‘provided that 

VIMCO,’’ 

(2) In section III(a)(2) to delete the 

phrase, ‘‘had and continued thereafter to 

have,’’ as set forth in the Notice on page 

8573, column 1, in lines 64–66, and to 

add the word, ‘‘has,’’ after the word, 

‘‘year,’’ 

(3) In the last paragraph of section 

III(a)(2), as set forth in the Notice on 

page 8573, column 2, in lines 17–18, to 

delete the phrase, ‘‘had, as of January 1, 

2001, and continued thereafter to have,’’ 

and to add the word, ‘‘have,’’ after the 

word, ‘‘VIMCO,’’ 

(4) In section I, as set forth in the 

Notice on page 8572, column 2, in line 

45, to add the phrase, ‘‘during the 

period January 1, through December 31, 

2001, and during the period January 1, 

through December 31, 2003,’’ after the 

phrase, ‘‘provided that:,’’ 

(5) In section I, as set forth in the 

Notice on page 8572, column 3, in lines 

6–8, to delete the phrase, ‘‘in sections 

I(a) through (c) and section II of this 

proposed exemption were satisfied,’’ 

and to add the phrase, ‘‘in section I(a) 

through (b) and section II of this 

exemption were satisfied and, the 

conditions, as set forth, below, in 

section I(c) and section II of this 

exemption are satisfied,’’ and 

(6) To amend the first sentence in 

section I(c), as set forth in the Notice on 

page 8572, column 3, in lines 25–38 to 

read as follows: 

If VIMCO, satisfies the definition of 

INHAM, as defined, below, in section III(a) 

of this exemption, at any time during the 

period beginning on the date of the 

publication in the Federal Register of the 

final exemption for application D–11447 and 

ending on the effective date of a final 

amendment to PTE 96–23, then an 

independent auditor, who has appropriate 

technical training or experience and 

proficiency with the fiduciary responsibility 

provisions of the Act and who so represents 

in writing, must conduct an exemption audit, 

as defined, below, in section III(f) of this 

exemption, on an annual basis. 

Further, the Department wishes to 

make the following clarifying 

amendments to this exemption: 

(1) To amend the second sentence in 

section I(c), as set forth in the Notice on 

page 8572, column 3, in lines 42–43, to 

delete the phrase, ‘‘in section I of this 

proposed exemption,’’ and to substitute 

instead the phrase, ‘‘in Part I of PTE 96– 

23,’’ 

(2) To amend section II(b)(1)(ii), as set 

forth in the Notice on page 8573, 

column 1, in line 33, to delete the 

phrase, ‘‘in section I of this exemption,’’ 

and add the phrase, ‘‘in Part I of PTE 

96–23,’’ 

(3) To amend section III(a)(1), as set 

forth in the Notice on page 8573, 

column 1, in line 55, to delete the word, 

‘‘Verizon,’’ and substitute instead, the 

phrase, ‘‘Verizon Communications, Inc. 

(Verizon),’’ and 

(4) To amend section III(a)(1), as set 

forth in the Notice on page 8573, 

column 1, in lines 60–61, to delete the 

phrase, ‘‘such an employer,’’ and 

substutite instead, the word, ‘‘Verizon.’’ 

Request for an Extension of Time 

In addition to the applicant’s 

comment on the language of the final 

exemption, the applicant seeks a ninety 

(90) day extension of time to complete 

the audit for 2008, as set forth under 

section I(c) of this exemption. In this 

regard, section I(c) of this exemption 

requires the following, ‘‘The exemption 

audit and the written report must be 

completed within six (6) months 

following the end of the year to which 

the audit relates.’’ The applicant is 

concerned that VIMCO will not be able 

to meet a June 30, 2009, deadline for the 

2008 audit, as required pursuant to 

section I(c) of this exemption. In this 

regard, it is represented that the 

attorneys who have performed all of 

VIMCO’s audits, pursuant to PTE 96–23, 

beginning with the 2003 audit have 

moved to a new law firm early in 2009. 

Notwithstanding that VIMCO sent in the 

audit materials for 2008, and 

notwithstanding negotiations over a 

period of several months, VIMCO and 

the new law firm have thus far been 

unable to agree upon terms of an 

engagement letter. This result was not 

anticipated by VIMCO or the attorneys. 

It is represented that VIMCO is 

confident that it will be able to complete 

the audit within the requested extension 

period, including hiring new auditors 

who are qualified to conduct the audit 

should that be necessary. 

The Department concurs with the 

applicant’s request and will permit 

VIMCO a 90 day extension of time from 

the date of the publication in the 

Federal Register of the grant of this 

exemption to complete the exemption 

audit and the written report for 2008. 

After giving full consideration to the 

entire record, including the written 

comment from the applicant and the 

applicant’s request for an extension of 

time to complete the exemption audit 

and written report for 2008, the 

Department has decided to grant the 

exemption, as described and amended, 

above. In this regard, the comment letter 

and the request for an extension of time 

to complete the exemption audit and 

written report for 2008 which the 

applicant submitted to the Department 

have been included as part of the public 

record of the exemption application. 

The complete application file, including 

all supplemental submissions received 

by the Department, is made available for 

public inspection in the Public 

Documents Room of the Employee 

Benefits Security Administration, Room 

N–1513, U.S. Department of Labor, 200 

Constitution Avenue, NW., Washington, 

DC 20210. 

mstockstill on DSKH9S0YB1PROD with NOTICES2

45294 Federal Register / Vol. 74, No. 168 / Tuesday, September 1, 2009 / Notices 

7 46 FR 7527, January 23, 1981. PTE 81–6 was 

amended and replaced by PTE 2006–16 (71 FR 

63786, October 31, 2006). The effective date of PTE 

2006–16 was January 2, 2007, and PTE 81–6 was 

revoked as of that date. 

8 48 FR 895, January 7, 1983. 

9 53 FR 24811, June 30, 1988. 

For a more complete statement of the 

facts and representations supporting the 

Department’s decision to grant this 

exemption refer to the Notice published 

on February 25, 2009, at 74 FR 8572. 

For Further Information Contact: 

Angelena C. Le Blanc of the Department, 

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

toll-free number). 

United States Steel and Carnegie 

Pension Fund (the Applicant), 

Located in New York, NY. 

[Prohibited Transaction Exemption 

2009–24; Exemption Application No. 

D–11465.] 

Exemption 

I. Retroactive Relief 

The restrictions of section 

406(a)(1)(A) through (D) and the 

sanctions resulting from the application 

of section 4975 of the Code by reason of 

section 4975(c)(1)(A) through (D), shall 

not apply, for the period beginning 

February 15, 2003 through December 31, 

2007, to a transaction between a party 

in interest with respect to the Former 

U.S. Steel Related Plans, as defined in 

Section IV(e), below, and an investment 

fund in which such plans have an 

interest (the Investment Fund), as 

defined in Section IV(l), below, 

provided that United States Steel and 

Carnegie Pension Fund or its successor 

(collectively, UCF) has discretionary 

authority or control with respect to the 

plan assets involved in the transaction, 

and the following conditions are 

satisfied: 

(a) UCF is an investment adviser 

registered under the Investment 

Advisers Act of 1940 that has, as of the 

last day of its most recent fiscal year, 

total client assets, including in-house 

assets (In-house Plan Assets), as defined 

in Section IV(h), below, under its 

management and control in excess of 

$100,000,000 and equity, as defined in 

Section IV(k), below, in excess of 

$750,000; 

(b) At the time of the transaction, as 

defined in Section IV(n), below, the 

party in interest or its affiliate, as 

defined in Section IV(a), below, does 

not have, and during the immediately 

preceding one (1) year has not 

exercised, the authority to— 

(1) Appoint or terminate UCF as a 

manager of any of the Former U.S. Steel 

Related Plans’ assets, or 

(2) Negotiate the terms of the 

management agreement with UCF 

(including renewals or modifications 

thereof) on behalf of the Former U.S. 

Steel Related Plans; 

(c) The transaction is not described 

in— 

(1) Prohibited Transaction Exemption 

81–6 (PTE 81–6),7 relating to securities 

lending arrangements (as amended, 

superseded or replaced); 

(2) Prohibited Transaction Exemption 

83–1 (PTE 83–1),8 relating to 

acquisitions by plans of interests in 

mortgage pools (as amended or 

superseded), or 

(3) Prohibited Transaction Exemption 

88–59 (PTE 88–59),9 relating to certain 

mortgage financing arrangements (as 

amended or superseded); 

(d) The terms of the transaction are 

negotiated on behalf of the Investment 

Fund by, or under the authority and 

general direction of UCF, and either 

UCF, or (so long as UCF retains full 

fiduciary responsibility with respect to 

the transaction) a property manager 

acting in accordance with written 

guidelines established and administered 

by UCF, makes the decision on behalf of 

the Investment Fund to enter into the 

transaction; 

(e) At the time the transaction is 

entered into, and at the time of any 

subsequent renewal or modification 

thereof that requires the consent of UCF, 

the terms of the transaction are at least 

as favorable to the Investment Fund as 

the terms generally available in arm’slength transactions between unrelated 

parties; 

(f) Neither UCF nor any affiliate 

thereof, as defined in Section IV(b), 

below, nor any owner, direct or indirect, 

of a 5 percent (5%) or more interest in 

UCF is a person who, within the ten (10) 

years immediately preceding the 

transaction has been either convicted or 

released from imprisonment, whichever 

is later, as a result of: 

(1) Any felony involving abuse or 

misuse of such person’s employee 

benefit plan position or employment, or 

position or employment with a labor 

organization; 

(2) Any felony arising out of the 

conduct of the business of a broker, 

dealer, investment adviser, bank, 

insurance company, or fiduciary; 

(3) Income tax evasion; 

(4) Any felony involving the larceny, 

theft, robbery, extortion, forgery, 

counterfeiting, fraudulent concealment, 

embezzlement, fraudulent conversion, 

or misappropriation of funds or 

securities; conspiracy or attempt to 

commit any such crimes or a crime in 

which any of the foregoing crimes is an 

element; or 

(5) Any other crimes described in 

section 411 of the Act. 

For purposes of this Section I(f), a 

person shall be deemed to have been 

‘‘convicted’’ from the date of the 

judgment of the trial court, regardless of 

whether the judgment remains under 

appeal; 

(g) The transaction is not part of an 

agreement, arrangement, or 

understanding designed to benefit a 

party in interest; 

(h) The party in interest dealing with 

the Investment Fund: 

(1) Is a party in interest with respect 

to the Former U.S. Steel Related Plans 

(including a fiduciary) solely by reason 

of providing services to the Former U.S. 

Steel Related Plans, or solely by reason 

of a relationship to a service provider 

described in section 3(14)(F),(G),(H), or 

(I) of the Act; 

(2) Does not have discretionary 

authority or control with respect to the 

investment of plan assets involved in 

the transaction and does not render 

investment advice (within the meaning 

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

those assets; and 

(3) Is neither UCF nor a person related 

to UCF, as defined in Section IV(j), 

below; 

(i) UCF adopts written policies and 

procedures that are designed to assure 

compliance with the conditions of this 

exemption; 

(j) An independent auditor, who has 

appropriate technical training or 

experience and proficiency with the 

fiduciary responsibility provisions of 

the Act and who so represents in 

writing, conducts an exemption audit, 

as defined in Section IV(f), below, on an 

annual basis. Following completion of 

the exemption audit, the auditor shall 

issue a written report to the Former U.S. 

Steel Related Plans presenting its 

specific findings regarding the level of 

compliance: (1) With the policies and 

procedures adopted by UCF in 

accordance with Section I(i), above, of 

this exemption; and (2) with the 

objective requirements of this 

exemption. 

(k)(1) UCF or an affiliate maintains or 

causes to be maintained within the 

United States, for a period of six (6) 

years from the date of each transaction, 

the records necessary to enable the 

persons described in Section I(k)(2) to 

determine whether the conditions of 

this exemption have been met, except 

that (A) a separate prohibited 

transaction will not be considered to 

have occurred if, due to circumstances 

beyond the control of UCF and/or its 

affiliates, the records are lost or 

destroyed prior to the end of the six (6) 

year period, and (B) no party in interest 

mstockstill on DSKH9S0YB1PROD with NOTICES2

Federal Register / Vol. 74, No. 168 / Tuesday, September 1, 2009 / Notices 45295 

or disqualified person other than UCF 

shall be subject to the civil penalty that 

may be assessed under section 502(i) of 

the Act, or to the taxes imposed by 

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

the records have not been maintained or 

are not maintained, or have not been 

available or are not available for 

examination as required by Section 

I(k)(2), below, of this exemption. 

(2) Except as provided in Section 

I(k)(3), below, and notwithstanding any 

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

of section 504 of the Act, the records 

referred to in Section I(k)(1), above, of 

this exemption are unconditionally 

available for examination at their 

customary location during normal 

business hours by: 

(A) Any duly authorized employee or 

representative of the Department or of 

the Internal Revenue Service; 

(B) Any fiduciary of any of the Former 

U.S. Steel Related Plans investing in the 

Investment Fund or any duly authorized 

representative of such fiduciary; 

(C) Any contributing employer to any 

of the Former U.S. Steel Related Plans 

investing in the Investment Fund or any 

duly authorized employee 

representative of such employer; 

(D) Any participant or beneficiary of 

any of the Former U.S. Steel Related 

Plans investing in the Investment Fund, 

or any duly authorized representative of 

such participant or beneficiary; and 

(E) Any employee organization whose 

members are covered by such Former 

U.S. Steel Related Plans; 

(3) None of the persons described in 

Section I(k)(2)(B) through (E), above, of 

this exemption shall be authorized to 

examine trade secrets of UCF or its 

affiliates or commercial or financial 

information which is privileged or 

confidential; and 

(l) With respect to the transactions 

described in Section II and Section III of 

this exemption, the conditions 

contained in those Sections are satisfied 

through the date which is five (5) years 

from the date of the publication of this 

final exemption in the Federal Register. 

II. Interim Relief 

The restrictions of section 

406(a)(1)(A) through (D) and the 

sanctions resulting from the application 

of section 4975 of the Code by reason of 

section 4975(c)(1)(A) through (D), shall 

not apply, for the period beginning on 

January 1, 2008 and ending on the day 

preceding the first day of the first fiscal 

year of UCF beginning after the date of 

the publication of this final exemption 

in the Federal Register, to a transaction 

between a party in interest with respect 

to the Former U.S. Steel Related Plans, 

as defined in Section IV(e), below, and 

the Investment Fund, as defined in 

Section IV(l), below, provided that UCF 

has discretionary authority or control 

with respect to the plan assets involved 

in the transaction, and the following 

conditions are satisfied: 

(a) Each of the conditions contained 

in paragraphs (a) through (k) of Section 

I are met; and 

(b) With respect to the exemption 

audit and written report by the 

independent auditor described in 

Section I(j), the independent auditor 

must complete each such exemption 

audit and must issue such written report 

to the administrators, or other 

appropriate fiduciary of the Former U.S. 

Steel Related Plans within six (6) 

months following the end of the year to 

which each such exemption audit and 

report relates. 

III. Prospective Relief 

If the exemption is granted, the 

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

through (D) and the sanctions resulting 

from the application of section 4975 of 

the Code by reason of section 

4975(c)(1)(A) through (D), shall not 

apply, for the period beginning with the 

first day of the first fiscal year of UCF 

after the date of the publication of this 

final exemption in the Federal Register, 

and expiring five years from that date, 

to a transaction between a party in 

interest with respect to the Former U.S. 

Steel Related Plans, as defined in 

Section IV(e), below, and the Investment 

Fund, as defined in Section IV(l), below, 

provided that UCF has discretionary 

authority or control with respect to the 

plan assets involved in the transaction, 

and the following conditions are 

satisfied: 

(a) UCF is an investment adviser 

registered under the Investment 

Advisers Act of 1940 that has, as of the 

last day of its most recent fiscal year, 

total client assets, including In-house 

Plan Assets, under its management and 

control in excess of $100,000,000 and 

equity, as defined in Section IV(k), 

below, in excess of $1,000,000 (as 

measured yearly on UCF’s most recent 

balance sheet prepared in accordance 

with generally accepted accounting 

principles); 

(b) Each of the conditions contained 

in paragraphs (c) through (i), and (k) of 

Section I are met; 

(c) An independent auditor, who has 

appropriate technical training, or 

experience and proficiency with the 

fiduciary responsibility provisions of 

the Act, and who so represents in 

writing, conducts an exemption audit, 

as defined, below, in Section IV(g) of 

this exemption, on an annual basis. In 

conjunction with the completion of each 

such exemption audit, the independent 

auditor must issue a written report to 

the Former U.S. Steel Related Plans that 

engaged in such transactions, presenting 

its specific findings with respect to the 

audited sample regarding the level of 

compliance with the policies and 

procedures adopted by UCF, pursuant to 

Section I(i) of this exemption, and with 

the objective requirements of the 

exemption. The written report also shall 

contain the auditor’s overall opinion 

regarding whether UCF’s program as a 

whole complied with the policies and 

procedures adopted by UCF and with 

the objective requirements of this 

exemption. The independent auditor 

must complete each such exemption 

audit and must issue such written report 

to the administrators, or other 

appropriate fiduciary of the Former U.S. 

Steel Related Plans within six (6) 

months following the end of the year to 

which each such exemption audit and 

report relates; and 

(d) At the time of the transaction, as 

defined in Section IV(n), below, the 

party in interest or its affiliate, as 

defined in Section IV(p), below, does 

not have the authority to— 

(1) Appoint or terminate UCF as a 

manager of any of the plan assets of the 

Former U.S. Steel Related Plans 

involved in the transaction, or 

(2) Negotiate the terms of the 

management agreement with UCF 

(including renewals or modifications 

thereof) on behalf of the Former U.S. 

Steel Related Plans with respect to the 

plan assets involved in the transaction. 

IV. Definitions 

(a) For purposes of Section I(b) of this 

exemption, an ‘‘affiliate’’ of a person 

means— 

(1) Any person directly or indirectly, 

through one or more intermediaries, 

controlling, controlled by, or under 

common control with the person, 

(2) Any corporation, partnership, 

trust, or unincorporated enterprise of 

which such person is an officer, 

director, 5 percent (5%) or more partner, 

or employee (but only if the employer 

of such employee is the plan sponsor), 

and 

(3) Any director of the person or any 

employee of the person who is a highly 

compensated employee, as defined in 

section 4975(e)(2)(H) of the Code, or 

who has direct or indirect authority, 

responsibility, or control regarding the 

custody, management, or disposition of 

plan assets. 

A named fiduciary (within the 

meaning of section 402(a)(2) of the Act) 

of a plan, and an employer any of whose 

employees are covered by the plan will 

also be considered affiliates with respect 

mstockstill on DSKH9S0YB1PROD with NOTICES2

45296 Federal Register / Vol. 74, No. 168 / Tuesday, September 1, 2009 / Notices 

10 61 FR 15975, April 10, 1996. 

to each other for purposes of Section 

I(b), above, if such employer or an 

affiliate of such employer has the 

authority, alone or shared with others, 

to appoint or terminate the named 

fiduciary or otherwise negotiate the 

terms of the named fiduciary’s 

employment agreement. 

(b) For purposes of Section I(f), above, 

of this exemption, an ‘‘affiliate’’ of a 

person means— 

(1) Any person directly or indirectly 

through one or more intermediaries, 

controlling, controlled by, or under 

common control with the person, 

(2) Any director of, relative of, or 

partner in, any such person, 

(3) Any corporation, partnership, 

trust, or unincorporated enterprise of 

which such person is an officer, 

director, or a 5 percent (5%) or more 

partner or owner, and 

(4) Any employee or officer of the 

person who— 

(A) Is a highly compensated employee 

(as defined in section 4975(e)(2)(H) of 

the Code) or officer (earning 10 percent 

(10%) or more of the yearly wages of 

such person) or 

(B) Has direct or indirect authority, 

responsibility or control regarding the 

custody, management, or disposition of 

plan assets. 

(c) For purposes of Section IV(e) and 

(h), below, of this exemption, an 

‘‘affiliate’’ of UCF includes a member of 

either: 

(1) A controlled group of 

corporations, as defined in section 

414(b) of the Code, of which United 

States Steel Corporation or its successor 

(collectively, U.S. Steel) is a member, or 

(2) A group of trades or businesses 

under common control, as defined in 

section 414(c) of the Code, of which 

U.S. Steel is a member; provided that 

‘‘50 percent’’ shall be substituted for ‘‘80 

percent’’ wherever ‘‘80 percent’’ appears 

in section 414(b) or 414(c) of the rules 

thereunder. 

(d) The term, ‘‘control’’ means the 

power to exercise a controlling 

influence over the management or 

policies of a person other than an 

individual. 

(e) ‘‘Former U.S. Steel Related Plans’’ 

mean: 

(1) Retirement Plan of Marathon Oil 

Company, Marathon Petroleum LLC 

Retirement Plan and the Speedway 

SuperAmerica LLC Retirement Plan (the 

Marathon Plans); 

(2) Pension Plan of RMI Titanium 

Company (RMI), Pension Plan of 

Eligible Employees of RMI Titanium 

Company, Pension Plan for Eligible 

Salaried Employees of RMI Titanium 

Company, and Tradco Pension Plan (the 

RTI Plans); 

(3) Any plan the assets of which 

include or have included assets that 

were managed by UCF as an in-house 

asset manager (INHAM) pursuant to 

Prohibited Transaction Class Exemption 

96–23 (PTE 96–23) 10 but as to which 

PTE 96–23 is no longer available 

because such assets are not held under 

a plan maintained by an affiliate of UCF 

(as defined in Section IV(c) of this 

exemption); and 

(4) Any plan (an Add-On Plan) that is 

sponsored or becomes sponsored by an 

entity that was, but has ceased to be, an 

affiliate of UCF (as defined in Section 

IV(c), above, of this exemption); 

provided that: 

(A) The assets of the Add-On Plan are 

invested in a commingled fund (the 

Commingled Fund), as defined in 

Section IV(o) of this exemption, with 

the assets of a plan or plans (the 

Commingled Plans), described in 

Section IV(e)(1)–(3), above; and 

(B) The assets of the Add-On Plan in 

the Commingled Fund do not comprise 

more than 25 percent (25%) of the value 

of the aggregate assets of such fund, as 

measured on the day immediately 

following the initial commingling of 

their assets (the 25% Test). 

For purposes of the 25% Test, as set 

forth in Section IV(e)(4): 

(i) In the event that less than all of the 

assets of an Add-On Plan are invested 

in a Commingled Fund on the date of 

the initial transfer of such Add-On 

Plan’s assets to such fund, and if such 

Add-On Plan subsequently transfers to 

such Commingled Fund some or all of 

the assets that remain in such plan, then 

for purposes of compliance with the 

25% Test, the sum of the value of the 

initial and each additional transfer of 

assets of such Add-On Plan shall not 

exceed 25 percent (25%) of the value of 

the aggregate assets in such 

Commingled Fund, as measured on the 

day immediately following the addition 

of each subsequent transfer of such 

Add-On Plan’s assets to such 

Commingled Fund; 

(ii) Where the assets of more than one 

Add-On Plan are invested in a 

Commingled Fund with the assets of 

plans described in Section IV(e)(1)–(3), 

above, of the exemption, the 25% Test 

will be satisfied, if the aggregate amount 

of the assets of such Add-On Plans 

invested in such Commingled Fund do 

not represent more than 25 percent 

(25%) of the value of all of the assets of 

such Commingled Fund, as measured 

on the day immediately following each 

addition of Add-On Plan assets to such 

Commingled Fund; 

(iii) If the 25% Test is satisfied at the 

time of the initial and any subsequent 

transfer of an Add-On Plan’s assets to a 

Commingled Fund, as provided in 

Section IV(e), above, this requirement 

shall continue to be satisfied 

notwithstanding that the assets of such 

Add-On Plan in the Commingled Fund 

exceed 25 percent (25%) of the value of 

the aggregate assets of such fund solely 

as a result of: 

(AA) A distribution to a participant in 

a Former U.S. Steel Related Plan; 

(BB) Periodic employer or employee 

contributions made in accordance with 

the terms of the governing plan 

documents; 

(CC) The exercise of discretion by a 

Former U.S. Steel Related Plan 

participant to re-allocate an existing 

account balance in a Commingled Fund 

managed by UCF or to withdraw assets 

from a Commingled Fund; or 

(DD) An increase in the value of the 

assets of the Add-On Plan held in such 

Commingled Fund due to investment 

earnings or appreciation; 

(iv) If, as a result of a decision by an 

employer or a sponsor of a plan 

described in Section IV(e)(1)–(3) of the 

exemption to withdraw some or all of 

the assets of such plan from a 

Commingled Fund, the 25% Test is no 

longer satisfied with respect to any AddOn Plan in such Commingled Fund, 

then the exemption will immediately 

cease to apply to all of the Add-On 

Plans invested in such Commingled 

Fund; and 

(v) Where the assets of a Commingled 

Fund include assets of plans other than 

Former U.S. Steel Related Plans, as 

defined in Section IV(e), above, of this 

exemption, the 25% Test will be 

determined without regard to the assets 

of such other plans in such Commingled 

Fund. 

(f) For purposes of Sections I and II of 

this exemption, ‘‘Exemption Audit’’ of 

any of the Former U.S. Steel Related 

Plans must consist of the following: 

(1) A review by an independent 

auditor of the written policies and 

procedures adopted by UCF, pursuant to 

Section I(i) of this exemption, for 

consistency with each of the objective 

requirements of this exemption, as 

described, below, in Section IV(f)(5) of 

this exemption; and 

(2)(i) A test by an independent auditor 

of a representative sample of the Plan’s 

transactions in order to make findings 

regarding whether UCF is in compliance 

with: 

(I) The written policies and 

procedures adopted by UCF pursuant to 

Section I(i) of this exemption, and 

(II) The objective requirements 

described in Section I of this exemption; 

mstockstill on DSKH9S0YB1PROD with NOTICES2

Federal Register / Vol. 74, No. 168 / Tuesday, September 1, 2009 / Notices 45297 

(3) A determination as to whether 

UCF has satisfied the requirements of 

Section I(a), above, of this exemption; 

(4) The issuance by an independent 

auditor of a written report describing 

the steps performed by such 

independent auditor during the course 

of its review and such independent 

auditor’s findings. 

(5) For purposes of Section IV(f) of 

this exemption, the written policies and 

procedures must describe the following 

objective requirements of the exemption 

and the steps adopted by UCF to assure 

compliance with each of these 

requirements: 

(A) The requirements of Section I(a), 

above, of this exemption regarding 

registration under the Investment 

Advisers Act of 1940, total assets under 

management, and equity; 

(B) The requirements of Section I of 

this exemption, regarding the 

discretionary authority or control of 

UCF with respect to the assets of the 

Former U.S. Steel Related Plans 

involved in the transaction, in 

negotiating the terms of the transaction, 

and with regard to the decision on 

behalf of the Former U.S. Steel Related 

Plans to enter into the transaction; 

(C) The transaction is not entered into 

with any person who is excluded from 

relief under Section I(h)(1), above, of 

this exemption, or Section I(h)(2) to the 

extent that such person has 

discretionary authority or control over 

the plan assets involved in the 

transaction, or Section I(h)(3); and 

(D) The transaction is not described in 

any of the class exemptions listed in 

Section I(c), above, of this exemption. 

(g) For purposes of Section III of this 

exemption, ‘‘Exemption Audit’’ of any 

of the Former U.S. Steel Related Plans 

must consist of the following: 

(1) A review by an independent 

auditor of the written policies and 

procedures adopted by UCF pursuant to 

section I(i) for consistency with each of 

the objective requirements of this 

exemption (as described in section 

IV(g)(5)(A)–(D)). 

(2) A test of a sample of UCF’s 

transactions during the audit period that 

is sufficient in size and nature to afford 

the auditor a reasonable basis: (A) To 

make specific findings regarding 

whether UCF is in compliance with (i) 

the written policies and procedures 

adopted by UCF pursuant to section I(i) 

of the exemption and (ii) the objective 

requirements of the exemption; and (B) 

to render an overall opinion regarding 

the level of compliance of UCF’s 

program with this section 

IV(g)(2)(A)(i)and (ii) of the exemption; 

(3) A determination as to whether 

UCF has satisfied the requirements of 

Section III(a), above, of this exemption; 

(4) Issuance of a written report 

describing the steps performed by the 

auditor during the course of its review 

and the auditor’s findings; and 

(5) For purposes of this section IV(g), 

the written policies and procedures 

must describe the following objective 

requirements of the exemption and the 

steps adopted by UCF to assure 

compliance with each of these 

requirements: 

(A) The requirements of Section III(a), 

above, of this exemption regarding 

registration under the Investment 

Advisers Act of 1940, total assets under 

management, and equity; 

(B) The requirements of Section I(d) of 

this exemption, regarding the 

discretionary authority or control of 

UCF with respect to the assets of the 

Former U.S. Steel Related Plans 

involved in the transaction, in 

negotiating the terms of the transaction, 

and with regard to the decision on 

behalf of the Former U.S. Steel Related 

Plans to enter into the transaction; 

(C) The transaction is not entered into 

with any person who is excluded from 

relief under Section I(h)(1), above, of 

this exemption, or Section I(h)(2) to the 

extent that such person has 

discretionary authority or control over 

the plan assets involved in the 

transaction, or Section I(h)(3); and 

(D) The transaction is not described in 

any of the class exemptions listed in 

Section I(c), above, of this exemption. 

(h) ‘‘In-house Plan Assets’’ means the 

assets of any plan maintained by an 

affiliate of UCF, as defined in Section 

IV(c), above, of this exemption and with 

respect to which UCF has discretionary 

authority or control. 

(i) The term, ‘‘party in interest,’’ 

means a person described in section 

3(14) of the Act and includes a 

‘‘disqualified person,’’ as defined in 

section 4975(e)(2) of the Code. 

(j) UCF is ‘‘related’’ to a party in 

interest for purposes of Section I(h)(3) of 

this exemption, if the party in interest 

(or a person controlling, or controlled 

by, the party in interest) owns a 5 

percent (5%) or more interest in U.S. 

Steel, or if UCF (or a person controlling, 

or controlled by UCF) owns a 5 percent 

(5%) or more interest in the party in 

interest. For purposes of this definition: 

(1) The term, ‘‘interest,’’ means with 

respect to ownership of an entity— 

(A) The combined voting power of all 

classes of stock entitled to vote or the 

total value of the shares of all classes of 

stock of the entity if the entity is a 

corporation, 

(B) The capital interest or the profits 

interest of the entity if the entity is a 

partnership; or 

(C) The beneficial interest of the 

entity if the entity is a trust or 

unincorporated enterprise; and 

(2) A person is considered to own an 

interest held in any capacity if the 

person has or shares the authority— 

(A) To exercise any voting rights or to 

direct some other person to exercise the 

voting rights relating to such interest, or 

(B) To dispose or to direct the 

disposition of such interest. 

(k) For purposes of Section I(a) of this 

exemption, the term, ‘‘equity’’ means 

the equity shown on the most recent 

balance sheet prepared within the two 

(2) years immediately preceding a 

transaction undertaken pursuant to this 

exemption, in accordance with 

generally accepted accounting 

principles. 

(l) ‘‘Investment Fund’’ includes single 

customer and pooled separate accounts 

maintained by an insurance company, 

individual trust and common collective 

or group trusts maintained by a bank, 

and any other account or fund to the 

extent that the disposition of its assets 

(whether or not in the custody of UCF) 

is subject to the discretionary authority 

of UCF. 

(m) The term, ‘‘relative,’’ means a 

relative as that term is defined in 

section 3(15) of the Act, or a brother, 

sister, or a spouse of a brother or sister. 

(n) The ‘‘time’’ as of which any 

transaction occurs is the date upon 

which the transaction is entered into. In 

addition, in the case of a transaction 

that is continuing, the transaction shall 

be deemed to occur until it is 

terminated. If any transaction is entered 

into on or after the date when this 

exemption is published in the Federal 

Register or a renewal that requires the 

consent of UCF occurs on or after such 

publication date and the requirements 

of this exemption are satisfied at the 

time the transaction is entered into or 

renewed, respectively, the requirements 

will continue to be satisfied thereafter 

with respect to the transaction. Nothing 

in this subsection shall be construed as 

exempting a transaction entered into by 

an Investment Fund which becomes a 

transaction described in section 406(a) 

of the Act or section 4975(c)(1)(A) 

through (D) of the Code while the 

transaction is continuing, unless the 

conditions of this exemption were met 

either at the time the transaction was 

entered into or at the time the 

transaction would have become 

prohibited but for this exemption. In 

determining compliance with the 

conditions of the exemption at the time 

that the transaction was entered into for 

mstockstill on DSKH9S0YB1PROD with NOTICES2

45298 Federal Register / Vol. 74, No. 168 / Tuesday, September 1, 2009 / Notices 

purposes of the preceding sentence, 

Section I(h) of this exemption will be 

deemed satisfied if the transaction was 

entered into between a plan and a 

person who was not then a party in 

interest. 

(o) ‘‘Commingled Fund’’ means a trust 

fund managed by UCF containing assets 

of some or all of the plans described in 

Section IV(e)(1)–(3) of this exemption, 

plans other than Former U.S. Steel 

Related Plans, and if applicable, any 

Add-On Plan, as to which the 25% Test 

provided in Section IV(e)(4) of this 

exemption have been satisfied; provided 

that: 

(1) Where UCF manages a single subfund or investment portfolio within 

such trust, the sub-fund or portfolio will 

be treated as a single Commingled Fund; 

and 

(2) Where UCF manages more than 

one sub-fund or investment portfolio 

within such trust, the aggregate value of 

the assets of such sub-funds or 

portfolios managed by UCF within such 

trust will be treated as though such 

aggregate assets were invested in a 

single Commingled Fund. 

(p) For purposes of Section III(d) of 

this exemption, an ‘‘affiliate’’ of a 

person means— 

(1) Any person directly or indirectly, 

through one or more intermediaries, 

controlling, controlled by, or under 

common control with the person, 

(2) Any corporation, partnership, 

trust, or unincorporated enterprise of 

which such person is an officer, 

director, ten percent (10%) or more 

partner, or employee (but only if the 

employer of such employee is the plan 

sponsor), and 

(3) Any director of the person or any 

employee of the person who is a highly 

compensated employee, as defined in 

section 4975(e)(2)(H) of the Code, or 

who has direct or indirect authority, 

responsibility, or control regarding the 

custody, management, or disposition of 

plan assets. 

A named fiduciary (within the 

meaning of section 402(a)(2) of the Act) 

of a plan, and an employer any of whose 

employees are covered by the plan will 

also be considered affiliates with respect 

to each other for purposes of Section 

III(d), above, if such employer or an 

affiliate of such employer has the 

authority, alone or shared with others, 

to appoint or terminate the named 

fiduciary or otherwise negotiate the 

terms of the named fiduciary’s 

employment agreement. Reliance. The 

exemption is applicable to a particular 

transaction only if the transaction 

satisfies the conditions specified herein. 

Temporary Nature of Exemption 

The Department has determined that 

the relief provided by this exemption is 

temporary in nature. The exemption, is 

effective February 15, 2003, and will 

expire on the day which is five (5) years 

from the date of the publication of this 

final exemption in the Federal Register. 

Accordingly, the relief provided by this 

exemption will not be available upon 

the expiration of such five-year period 

for any new or additional transactions, 

as described herein, after such date, but 

would continue to apply beyond the 

expiration of such five-year period for 

continuing transactions entered into 

before the expiration of the five-year 

period. Should the Applicant wish to 

extend, beyond the expiration of such 

five-year period, the relief provided by 

this exemption to new or additional 

transactions, the Applicant may submit 

another application for exemption. 

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 (the Notice) 

published on December 24, 2008 at 73 

FR 79186. 

Written Comments 

The Department received one 

comment with respect to the Notice, 

which was filed by the Applicant. The 

Applicant addressed several points in 

the Notice in its comment letter. The 

Applicant’s commentary, a discussion 

of the Department’s views in response 

thereto and the modifications to the 

proposed exemption are discussed 

below. 

The Applicant’s first comment 

focused on condition III(c) of the Notice 

regarding the written report to be issued 

by an independent auditor. As a 

condition for prospective relief, such 

report must contain the auditor’s overall 

opinion regarding whether UCF’s 

program, as a whole, complied with the 

policies and procedures adopted by 

UCF and with the objective 

requirements of the exemption. The 

Applicant asked the Department to 

clarify or further explain this condition. 

In addition, the Applicant requested 

further guidance on the selection and 

testing of the representative sample of 

transactions. 

With regard to these comments, the 

Department wishes to note that because 

the auditor necessarily has to use its 

experience and judgment in designing 

and conducting a particular audit, the 

auditor must take into account the 

totality of the facts and circumstances in 

determining the appropriate size and 

types of transactions to audit. Based 

upon the specific sample of transactions 

tested during the audit period, we 

expect the auditor to render an overall 

opinion regarding the level of 

compliance of UCF’s program with the 

objective requirements of the 

exemption. The Department notes, 

however, that in certain instances, an 

auditor may need to construct and test 

more than one sample of transactions. 

For example, an auditor may initially 

believe that the most appropriate way to 

make the required findings is to 

construct a sample that represents a 

subset of the total universe of relevant 

transactions engaged in by UCF under 

the exemption. In testing the sample, 

however, the auditor should look for, 

and may find, patterns of compliance 

failures that indicate that certain types 

of transactions are more prone to 

compliance failures than others. If such 

patterns appear, the auditor may need to 

test additional transactions to more 

accurately assess the extent and causes 

of non-compliant transactions. 

Ultimately, an auditor must construct 

and test a sampling of transactions that 

is sufficient in size (i.e., number of 

transactions) and nature (i.e., type of 

transactions) to afford the auditor a 

reasonable basis to make its required 

determinations under the exemption. 

Since the sole purpose of the audit is to 

assure compliance with the exemption, 

the sample should be sufficient in size 

and nature for the auditor to render an 

overall opinion regarding whether 

UCF’s program complied with the 

objective requirements of the exemption 

and of its own policies and procedures. 

If the sample of transactions selected for 

testing by the independent auditor is 

properly designed so that it contains the 

appropriate weighting of representative 

transactions and if no instances of noncompliance are discovered, the auditor 

could then proceed to issue an overall 

opinion, without performing any further 

audit work, that, based upon its 

sampling of transactions, UCF’s program 

as a whole complied with the policies 

and procedures adopted by UCF and 

with the objective requirements of the 

exemption. If, on the other hand, the 

auditor determined that a single 

transaction from the representative 

sample did not conform to the 

conditions for exemptive relief, the 

auditor must then determine whether 

the overall opinion could be issued 

without expanding the scope of the 

audit and conducting further testing. If 

the auditor were to decide that further 

auditing would not be necessary based 

upon valid documented reasoning (e.g., 

the auditor’s report explains why the 

auditor was able to determine why nonmstockstill on DSKH9S0YB1PROD with NOTICES2

Federal Register / Vol. 74, No. 168 / Tuesday, September 1, 2009 / Notices 45299 

11 70 FR 49305, August 23, 2005. 

compliance with respect to the single 

transaction was an isolated violation), 

the auditor could then issue the 

required overall opinion. It is noted that 

in such a case, the exemptive relief 

would not be available for a single 

transaction that did not satisfy the 

conditions of the exemption, but that 

exemptive relief would continue to be 

available for the remaining transactions 

provided that they met the conditions of 

the exemption. 

The Applicant also raised some 

related questions that concerned item 

number 14 in the Summary of Facts and 

Representations of the Notice, which 

enumerated several items to be included 

in the auditor’s written report required 

for prospective relief. The Applicant 

asked the Department to explain the 

difference between the content of 

subparagraph (ii) of item 14 of the facts 

and representations and subparagraph 

(v), because both items relate to the 

sample selected for review by the 

auditor. The Department responds that 

subparagraph (ii) focuses on the general 

process and methodology used to select 

the representative sample, whereas 

subparagraph (v) requires an 

explanation regarding the 

appropriateness of the specific sample 

size selected for review and taking into 

account instances of non-compliance. 

In addition, the Applicant commented 

with respect to subparagraph (vi) of item 

number 14 in the Summary of Facts and 

Representations of the Notice. The 

Applicant commented that the 

subparagraph as written would require 

the auditor to determine the adequacy of 

the Plan’s written policies and 

procedures, described in Section I(i), 

and their administration by UCF. The 

Applicant requested that this provision 

be made consistent with PTE 96–23, 

which requires that the auditor review 

the written policies and procedures of 

the INHAM not for ‘‘adequacy,’’ but 

rather for ‘‘consistency’’ with the 

objective requirements of the 

exemption. The Department agrees with 

this comment and notes that the 

requirement that an auditor determine 

the adequacy of UCF’s written policies 

and procedures, described in Section 

I(i), is deleted. However, the Department 

notes that where there is a pattern of 

failure to comply rather than an isolated 

instance of non-compliance, the 

Department expects that the auditor 

would review UCF’s policies and 

procedures to determine whether the 

weakness of the written policies and 

procedures contributed to this general 

pattern of non-compliance. 

The Applicant next commented with 

respect to the requirement for 

prospective relief that the written audit 

reports be issued within six months 

following the end of the year to which 

the audit relates. The comment referred 

to other tasks which UCF must perform 

following the end of a year, and 

requested that the period be lengthened 

to one year following the end of the year 

to which the audit relates, rather than 

six months. The Department is not 

persuaded by this comment, and also 

believes that an additional six month 

delay is inconsistent with the 

underlying purposes of the annual audit 

requirement. Accordingly, the 

Department has not made the requested 

modification. 

The Applicant also commented with 

respect to the effective dates of Section 

II of the exemption, which provides 

‘‘Interim Relief,’’ and Section III, which 

provides ‘‘Prospective Relief.’’ The 

Applicant pointed out that as written in 

the Notice, there was a gap between the 

end of the effective period for interim 

relief and the beginning of the effective 

period for prospective relief. In 

addition, the Applicant noted that the 

effective dates will not necessarily come 

out at the beginning or end of a year or 

of an audit period. This would raise 

questions under two of the conditions of 

the prospective relief. First, the $1 

million equity requirement of Section 

III(a) must be met as of the date of UCF’s 

most recent balance sheet. Second, if an 

exemption audit covers an annual 

period that straddles the effective dates, 

the audit could be subject to two 

differing sets of standards. The 

Applicant recommended that to avoid 

these problems, the effective date for 

prospective relief should begin at the 

start of the first fiscal year of UCF after 

the date of publication of this final 

exemption in the Federal Register, and 

the end date of the interim relief should 

be concomitantly extended. The 

Department agrees with this comment 

and has modified the final exemption 

accordingly. 

The Applicant also pointed out a 

cross-reference in the Notice that should 

be changed. In Section IV(g)(1), the 

parenthetical should reference 

subparagraphs IV(g)(5)(A)–(D) instead of 

subparagraphs IV(f)(5)(A)–(D). The 

Department agrees and had made the 

change in the exemption. 

The Applicant also commented that 

in section II(a), the reference should be 

to subparagraphs (a) through (k) of 

Section I instead of subparagraphs (a) 

through (l), since subparagraph (l) refers 

to Section II. The Department agrees 

with this comment and has modified 

Section II(a) accordingly. Although it is 

the Department’s intention that the 

retroactive relief in this case be 

conditioned upon the Applicant’s good 

faith satisfaction of prospective 

conditions for future transactions, the 

Department believes that it is 

appropriate to make the retroactive 

relief contingent upon meeting the 

conditions for prospective relief for a 

finite period. Accordingly, in order for 

the Applicant to qualify for retroactive 

relief, it must comply with Sections II 

and III, as appropriate, through the date 

which is five (5) years from the date of 

the publication of the final exemption in 

the Federal Register. The Department 

has modified Section I(l) accordingly to 

reflect this requirement. 

The Applicant also requested that the 

Department clarify that in the second-tolast sentence in item 3(b) of the 

Summary of Facts and Representations 

in the Notice, ‘‘majority ownership on 

the UCF Board’’ should read ‘‘majority 

membership on the UCF Board.’’ The 

Department notes this correction. 

The Applicant also commented that 

item 11 of the Summary of Facts and 

Representations in the Notice could be 

read to imply that UCF represented it 

did not comply with the exemption 

audit requirement of FAN 2003–03E 

(the FAN). UCF, in its comment, 

maintained its position that it did 

indeed comply with the exemption 

audit requirement of the FAN, but it 

acknowledges the Department’s view 

that it did not comply and has requested 

retroactive relief to February 15, 2003 

for that reason. 

Finally, the Applicant requested three 

changes to the Notice with respect to the 

prospective relief provided in Section III 

so that the conditions and definitions 

would be made consistent with the 2005 

amendment to PTE 84–14.11 First, the 

Applicant requested that the 

Department delete the ‘‘one-year lookback rule’’ that makes the exemption 

unavailable to a party in interest if it 

had exercised the power of appointment 

over UCF within the one-year period 

preceding the transaction, and clarifying 

that the power of appointment refers 

only to the power to appoint UCF as 

manager of the assets used in the 

transaction. The Department concurs 

with this suggestion and has added 

Section III(d) for prospective 

transactions while deleting the 

requirement that such prospective 

transactions satisfy the condition 

contained in Section I(b). Second, the 

Applicant requested that Section IV(a) 

exclude from the definition of an 

‘‘affiliate’’ those partnerships in which 

the person has less than a 10% interest 

(rather than 5%). The Department 

concurs with this suggestion and made 

the requested change to the Notice by 

mstockstill on DSKH9S0YB1PROD with NOTICES2

45300 Federal Register / Vol. 74, No. 168 / Tuesday, September 1, 2009 / Notices 

12The Department notes that it is currently 

considering an amendment to PTE 96–23. The 

Department has under consideration an amendment 

to the ‘‘related to’’ definition in section IV(d) of PTE 

96–23. To the extent the Department adopts such 

changes, the Department would consider making 

similar changes to this exemption at such time. 

13 67 FR 59569, September 23, 2002. 14 73 FR 3274, January 17, 2008. 

adding Section IV(p). Third, the 

Applicant requested that Section IV(j) 

be revised for prospective transactions 

with respect to the definition of 

‘‘related’’ by changing the percentage of 

ownership in certain entities. The 

Department has determined not to make 

this requested modification to the final 

exemption. In this regard, the 

Department notes that the modification 

requested would conflict with other 

limitations contained in section I(h) in 

a number of instances.12

For Further Information, Contact: 

Gary H. Lefkowitz of the Department, 

telephone (202) 693–8546 (this is not a 

toll-free number). 

Barclays Global Investors, N.A. and its 

affiliates and successors (BGI) and 

Barclays Capital Inc. and its affiliates 

and successors (BarCap) (collectively 

Applicants); Located in San 

Francisco, CA, and New York, NY. 

[Prohibited Transaction Exemption 09– 

25; Application No. D–11508.] 

Exemption 

Section I—Temporary Exemption for 

Securities Lending Transactions 

Involving Index and Model-Driven 

Funds That Are Based on BarCapLehman Indices 

For the period from September 22, 

2008, through the earlier of (i) the 

effective date of an individual 

exemption granting permanent relief for 

the following transactions or (ii) one 

year from September 1, 2009 (the Relief 

Period), the restrictions of section 

406(a)(1)(A) through (D) and 406(b)(1) 

and (2) of the Act, section 8477(c)(2)(A) 

and (B) of FERSA, and the sanctions 

resulting from the application of section 

4975 of the Code, by reason of section 

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

shall not apply to the lending of 

securities carried out on behalf of Client 

Plans in reliance on Prohibited 

Transaction Exemption (PTE) 2002– 

46,13 where the applicable Index or 

Model-Driven Fund managed by BGI 

meets the definition of an ‘‘Index Fund’’ 

or a ‘‘Model-Driven Fund’’ as set forth 

in Section III of PTE 2002–46 but for the 

fact that the underlying index is a 

BarCap-Lehman Index, provided that all 

of the other conditions of PTE 2002–46 

and the conditions set forth in Section 

IV of this exemption are met. 

Section II—Temporary Exemption for 

Transactions Involving ExchangeTraded Funds That Are Index and 

Model-Driven Funds Based on BarCapLehman Indices 

Effective for the Relief Period, the 

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

the Act, section 8477(c)(2) of FERSA, 

and the taxes imposed by section 

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

of section 4975(c)(1)(A) through (F) of 

the Code, shall not apply to transactions 

carried out on behalf of Client Plans in 

reliance upon Prohibited Transaction 

Exemption (PTE) 2008–01,14 where the 

applicable Index or Model-Driven Fund 

would meet the definition of an ‘‘Index 

Fund’’ or a ‘‘Model-Driven Fund’’ as set 

forth in Section V of PTE 2008–01 but 

for the fact that the underlying index is 

a BarCap-Lehman Index, provided that 

all of the other conditions of PTE 2008– 

01 and the conditions set forth in 

Section IV of this exemption are met. 

Section III—Temporary Exemption for 

Principal Transactions With the 

BarCap-Lehman Broker-Dealer 

Effective for the Relief Period, the 

restrictions of section 406(a) and 

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

8477(c)(2)(A) and (B) of FERSA, and the 

taxes imposed by section 4975(a) and (b) 

of the Code by reason of section 

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

shall not apply to the purchase or sale 

of fixed income securities between BGI 

on behalf of Client Plans and the 

BarCap-Lehman Broker-Dealer (Covered 

Principal Transactions) provided that 

the conditions set forth in Section V are 

met. 

Section IV—Conditions Applicable to 

Sections I and II 

(a) Each BarCap-Lehman Index is a 

published Index widely used in the 

market by independent institutional 

investors other than pursuant to an 

investment management or advisory 

relationship with BGI and is prepared or 

applied in the same manner for nonaffiliated customers as for BGI. 

(b) Prior to the use of a BarCapLehman Index in connection with the 

exemption and on an annual basis 

thereafter (but in no event prior to the 

date that is 90 days following May 6, 

2009), BGI will provide BarCap with a 

list of BarCap Lehman Indices proposed 

to be used by BGI in connection with 

the exemption. BarCap will certify to 

BGI whether, in its reasonable 

judgment, each such index is widely 

used in the market. In making this 

determination, BarCap shall take into 

consideration factors such as (i) 

publication by Bloomberg, or a similar 

institution involved in the 

dissemination of financial information, 

(ii) hits on relevant Web sites including 

LehmanLive (or any successor Web site 

maintained by BarCap or its affiliate(s)) 

and Bloomberg.com (or similar Web 

site), and (iii) delivery of index 

information to clients by means other 

than through Web site access. 

(c) Any fees charged for the use of the 

BarCap-Lehman Index are paid by BGI 

and not Client Plans. 

(d) Information barriers are in place 

throughout the Relief Period between 

BGI and BarCap such that BGI is not 

provided access to information 

regarding the rules, decisions and data 

underlying the BarCap-Lehman Indices 

before such information is provided to 

users of such Indices who are 

independent of BarCap and such rules, 

decisions and data are determined 

objectively without regard to BGI’s use 

of such BarCap-Lehman Indices. 

(e) At the end of the Relief Period, a 

Qualified Independent Reviewer, as 

defined in Section VII(n), shall issue a 

written report (the Compliance Report), 

following its review of relevant BarCapLehman Indices and the underlying 

rules, certifying to each of the following: 

(i) Each BarCap-Lehman Index was 

operated in accordance with objective 

rules, in the ordinary course of business 

as would be conducted between 

unaffiliated parties; 

(ii) No manipulation of any BarCapLehman Index for the purpose of 

benefiting BGI, BarCap, or their affiliates 

occurred; 

(iii) In the event that any rule change 

occurred in connection with the rules 

underlying any BarCap-Lehman Index, 

such rule change was not made for the 

purpose of benefiting BGI, BarCap, or 

their affiliates; 

(iv) Based on a review of the factors 

cited in condition (b) above, each 

BarCap-Lehman Index was widely used 

in the market during the Relief Period; 

(v) Based on the result of the 

Qualified Independent Reviewer’s 

factual inquiries to the Applicants, 

condition (d) above was met; and 

(vi) Based on the Qualified 

Independent Reviewer’s review of paid 

bills or invoices, condition (c) above 

was met with respect to the fee or fees 

paid in connection with each 

transaction. 

The Compliance Report shall be 

issued no later than 90 days following 

the end of the Relief Period describing 

the steps performed during the course of 

the Qualified Independent Reviewer’s 

review, the level of compliance with 

conditions (e)(i) through (vi), and any 

specific instances of non-compliance. 

mstockstill on DSKH9S0YB1PROD with NOTICES2

Federal Register / Vol. 74, No. 168 / Tuesday, September 1, 2009 / Notices 45301 

15This does not preclude, in the case of a BGI 

Plan that is a defined contribution plan under 

which participants direct the investment of their 

accounts among various investment options, the 

discretionary authority to select and offer 

investment options under the plan. 

16Characteristics of the securities used in 

rebalancing a fixed income index would include 

changes in (a) amount of securities, (b) duration, (c) 

yield curve, and (d) convexity. 

The Compliance Report shall be 

included in the records maintained by 

BGI pursuant to Section VI of this 

exemption, and BGI shall notify the 

independent fiduciary(ies) of each 

Client Plan, as part of its regular 

disclosure with respect to the applicable 

Fund(s), that the Compliance Report is 

available for their review. 

(f) The Index or Model-Driven Funds 

described in Sections I and II meet the 

definition of Index Fund or ModelDriven Fund in Sections VII(k) or (l) of 

this exemption. 

Section V—Conditions Applicable to 

Section III 

(a) BGI exercises discretionary 

authority or control or renders 

investment advice with respect to the 

Client Plan assets involved in the 

Covered Principal Transaction solely in 

connection with an Index Fund or 

Model-Driven Fund in which Client 

Plans invest.15

(b) Each Covered Principal 

Transaction occurs as a direct result of 

a Triggering Event, as defined in Section 

VII(o), and is executed no later than the 

close of the third business day following 

such Triggering Event. 

(c) Each Covered Principal 

Transaction is a purchase or sale, for no 

consideration other than cash payment 

against prompt delivery of a security. 

(d) Each Covered Principal 

Transaction is on terms that BGI 

reasonably determines to be as favorable 

or more favorable to the Client Plan than 

the terms of an arm’s length transaction 

with an unaffiliated counterparty would 

have been. 

(e) Each Covered Principal 

Transaction is executed either: 

(i) Through an automated routing 

system reasonably designed to ensure 

execution at the best available net price 

to the Client Plan for the number of 

securities to be purchased or sold in the 

Covered Principal Transaction; or 

(ii) At a net price to the Client Plan 

for the number of securities to be 

purchased or sold in the Covered 

Principal Transaction which is as 

favorable or more favorable to the Client 

Plan as the prices at which at least two 

independent Approved Counterparties, 

who are ready and willing to trade the 

relevant security, offer to purchase or 

sell such security. 

(f) The Covered Principal Transaction 

does not involve any security issued by 

Barclays PLC. 

(g) At the end of the Relief Period, a 

Qualified Independent Reviewer shall 

issue a Compliance Report certifying to 

each of the following: 

(i) Based on a review of execution 

policies and procedures during the 

Relief Period and a sample of Covered 

Principal Transactions, that the policies 

and execution procedures used in 

connection with Covered Principal 

Transactions were reasonably designed 

to obtain best execution for the 

securities to be purchased or sold in the 

Covered Principal Transaction; and 

(ii) Each sampled Covered Principal 

Transaction occurred in accordance 

with conditions (a), (b), (c) and (e) 

above. 

The Compliance Report shall be 

issued no later than 90 days following 

the end of the Relief Period describing 

the steps performed during the course of 

the Qualified Independent Reviewer’s 

review, the level of compliance with 

conditions (g)(i) and (ii), and any 

specific instances of non-compliance. 

The Compliance Report shall be 

included in the records maintained by 

BGI pursuant to Section VI of this 

exemption, and BGI shall notify the 

independent fiduciary(ies) of each 

Client Plan, as part of its regular 

disclosure with respect to the applicable 

Fund(s), that the Compliance Report is 

available for their review. 

(h) In the case of any Covered 

Principal Transaction in connection 

with an Index Fund or a Model-Driven 

Fund with respect to which the 

underlying Index is a BarCap-Lehman 

Index, each of conditions (a) through (f) 

set forth in Section IV above is met. 

Section VI—Recordkeeping Conditions 

Applicable to Sections I, II and III 

(a) BGI maintains, or causes to be 

maintained, for a period of six (6) years 

following the end of the Relief Period 

the records necessary to enable the 

persons described in paragraph (b) 

Below to determine whether the 

conditions of the exemption have been 

met, including the Compliance Reports 

described in Sections IV(e) and V(g), 

and records which identify with respect 

to the Covered Principal Transactions: 

(i) On a Fund by Fund basis, the 

specific Triggering Events which result 

in the creation of the index or model 

prescribed output describing the 

characteristics of the securities to be 

traded; 16

(ii) On a Fund by Fund basis, the 

index or model prescribed output which 

described the characteristics of the 

securities to be traded in detail 

sufficient to allow an independent plan 

fiduciary or the Qualified Independent 

Reviewer to verify that each of the above 

decisions for the Fund was made in 

response to specific Triggering Events; 

and 

(iii) On a Fund by Fund basis, the 

actual trades executed by the Fund on 

a particular day, the identity of the 

counterparty, the prices offered by the 

Approved Counterparties, if relevant, 

and which of those trades resulted from 

Triggering Events. 

Such records must be readily 

available to assure accessibility and 

maintained so that an independent 

fiduciary, the Qualified Independent 

Reviewer, or other persons identified 

below in paragraph (b) of this Section, 

may obtain them within a reasonable 

period of time. However, a prohibited 

transaction will not be considered to 

have occurred if, due to circumstances 

beyond the control of BGI, the records 

are lost or destroyed prior to the end of 

the six-year period; and no party in 

interest other than BGI and its affiliates 

shall be subject to the civil penalty that 

may be assessed under section 502(i) of 

the Act, or to the taxes imposed by 

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

the records are not maintained, or are 

not available for examination as 

required by paragraph (b) below. 

(b)(1) Except as provided in Section 

(2) of this paragraph and 

notwithstanding any provisions of 

subsections (a)(2) and (b) of section 504 

of the Act, the records referred to in 

paragraph (a) are unconditionally 

available at their customary location 

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 a participating 

Client Plan or any duly authorized 

representative of such fiduciary; 

(C) Any contributing employer to any 

participating Client Plan or any duly 

authorized employee representative of 

such employer; 

(D) Any participant or beneficiary of 

any participating Client Plan, or any 

duly authorized representative of such 

Client Plan participant or beneficiary; 

and 

(E) The Qualified Independent 

Reviewer. 

(2) None of the persons described 

above in subparagraphs (B)–(E) of 

paragraph (b)(1) are authorized to 

examine the trade secrets of BGI or its 

affiliates or commercial or financial 

information that is privileged or 

confidential. 

mstockstill on DSKH9S0YB1PROD with NOTICES2

45302 Federal Register / Vol. 74, No. 168 / Tuesday, September 1, 2009 / Notices 

17This requirement does not preclude BGI’s 

payment of fees to BarCap for use of the Indices. 

18This requirement does not preclude BGI’s 

payment of fees to BarCap for use of the Indices or 

data. 

(3) Should BGI refuse to disclose 

information on the basis that such 

information is exempt from disclosure, 

BGI shall, by the close of the thirtieth 

(30th) day following the request, 

provide written notice advising that 

person of the reason for the refusal and 

that the Department may request such 

information. 

Section VII—Definitions 

(a) Approved Counterparty: A dealer 

that (x) is either (i) registered in 

accordance with section 15(b) of the 

Exchange Act or (ii) exempt from the 

requirement to register as a dealer under 

the Exchange Act because it is a bank 

that buys and sells government 

securities (as such terms are defined in 

the Exchange Act) and (y) meets the 

credit and execution standards of BGI as 

described in paragraph 20 of the 

summary of facts and representations of 

the notice of proposed exemption (74 

FR 20981, May 6, 2009). 

(b) Barclays: Barclays PLC and its 

direct and indirect subsidiaries. 

(c) BarCap: Barclays Capital Inc. and 

its successors. 

(d) BarCap-Lehman Broker-Dealer: 

BarCap’s U.S. broker-dealer business, 

including the broker-dealer business 

acquired by BarCap from Lehman on 

September 22, 2008. 

(e) BarCap-Lehman Index: A generally 

accepted standardized securities Index 

created by Lehman prior to the closing 

of the Asset Purchase Agreement on 

September 22, 2008, and maintained by 

its successor, BarCap. 

(f) BGI: Barclays Global Investors, 

N.A., its investment advisory affiliates 

and their respective successors. 

(g) BGI Plan: A Plan maintained by 

BGI or an affiliate for the benefit of its 

own employees. 

(h) Client Plan: An employee benefit 

plan subject to the Act, FERSA and/or 

the Code, whose assets are managed by 

or which is advised by BGI, or a BGImanaged fund or separate account in 

which assets of such plans are invested. 

(i) Exchange Act: The Securities 

Exchange Act of 1934, as amended. 

(j) Index: A securities index that 

represents the investment performance 

of a specific segment of the public 

market for equity or debt securities in 

the United States and/or foreign 

countries, but only if— 

(1) The organization creating and 

maintaining the index is— 

(A) Engaged in the business of 

providing financial information, 

evaluation, advice or securities 

brokerage services to institutional 

clients; 

(B) A publisher of financial news or 

information; or 

(C) A public stock exchange or 

association of securities dealers; and 

(2) The index is either (i) created and 

maintained by an organization 

independent of Barclays or (ii) a 

BarCap-Lehman Index; and 

(3) The index is a generally accepted 

standardized index of securities which 

is not specifically tailored for the use of 

BGI. 

(k) Index Fund: Any investment fund, 

account or portfolio sponsored, 

maintained, trusteed or managed by BGI 

in which one or more investors invest, 

and— 

(1) Which is designed to track the rate 

of return, risk profile and other 

characteristics of an Index by either (i) 

replicating the same combination of 

securities which compose such Index or 

(ii) sampling the securities which 

compose such Index based on objective 

criteria and data; 

(2) For which either (i) BGI or its 

affiliate does not use its discretion, or 

data within its control, to affect the 

identity or amount of securities to be 

purchased or sold or (ii) the underlying 

Index is a BarCap-Lehman Index; 

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

to the Act; and 

(4) That involves no agreement, 

arrangement or understanding regarding 

the design or operation of the Fund 

which is intended to benefit BGI its 

affiliate or any party in which BGI or its 

affiliate may have an interest.17

(l) Model-Driven Fund: Any 

investment fund, account or portfolio 

sponsored, maintained, trusteed or 

managed by BGI in which one or more 

investors invest and— 

(1) Which is composed of securities 

the identity of which and the amount of 

which are selected by a computer model 

that is based on prescribed objective 

criteria to transform an Index using 

either (i) independent third-party data 

not within the control of BGI or an 

affiliate or (ii) data provided by the 

BarCap-Lehman Broker-Dealer that is 

commercially available on a widespread 

basis to unaffiliated end users such as 

mutual funds and collective investment 

funds on the same terms and conditions; 

(2) Which contains ‘‘plan assets’’ 

subject to the Act; and 

(3) That involves no agreement, 

arrangement or understanding regarding 

the design or operation of the Fund or 

the utilization of any specific objective 

criteria which is intended to benefit BGI 

or its affiliate or any party in which BGI 

or its affiliate may have an interest.18

(m) Lehman: Lehman Brothers 

Holdings Inc. and, as the context 

requires, its subsidiaries and affiliates 

prior to September 15, 2008. 

(n) Qualified Independent Reviewer: 

A third party appointed by BGI that is 

independent of Barclays and its 

affiliates and has extensive experience 

in reviewing and/or auditing 

transactions and procedures involving 

assets of plans subject to the Act, 

FERSA and/or the Code for the purpose 

of confirming that the applicable 

transactions or procedures serve the best 

interests of such plans. 

(o) Triggering Event: Any of the 

following events in connection with an 

Index Fund or a Model-Driven Fund 

(together, ‘‘Funds’’): 

(1) A change in the composition or 

weighting of the Index underlying a 

Fund by either (i) the independent 

organization creating and maintaining 

the Index or (ii) in the case of a BarCapLehman Index, by the BarCap-Lehman 

Broker-Dealer. In the case of a change 

described in clause (ii) of the preceding 

sentence, the change is uniformly 

applied to all customers using the 

Index, including non-affiliated 

customers, and is not adopted for the 

purpose of benefiting BGI. 

(2) A material amount of net change 

in the overall level of assets in a Fund, 

as a result of investments in and 

withdrawals from the Fund, provided 

that: 

(A) Such material amount has either 

been identified in advance as a specified 

amount of net change relating to such 

Fund and disclosed in writing as a 

‘‘triggering event’’ to an independent 

fiduciary of each Client Plan having 

assets held in the Fund prior to, or 

within ten (10) days following, its 

inclusion as a ‘‘triggering event’’ for 

such Fund or BGI has otherwise 

disclosed to the independent fiduciary 

the parameters for determining a 

material amount of net change, 

including any amount of discretion 

retained by the BGI that may affect such 

net change; and 

(B) Investments or withdrawals as a 

result of BGI’s discretion to invest or 

withdraw assets of a BGI Plan, other 

than a BGI Plan which is a defined 

contribution plan under which 

participants direct the investment of 

their accounts among various 

investment options, including the 

applicable Fund, will not be taken into 

account in determining the specified 

amount of net change; 

(3) An accumulation in the Fund of a 

material amount of either: 

(A) Cash which is attributable to 

interest or dividends on, and/or tender 

offers for, portfolio securities; or 

mstockstill on DSKH9S0YB1PROD with NOTICES2

Federal Register / Vol. 74, No. 168 / Tuesday, September 1, 2009 / Notices 45303 

(B) Stock attributable to dividends on 

portfolio securities; provided that such 

material amount has been identified in 

advance as a specified amount relating 

to such Fund and disclosed in writing 

as a ‘‘triggering event’’ to an 

independent fiduciary of each Client 

Plan having assets held in the Fund 

prior to, or within ten (10) days 

following, its inclusion as a ‘‘triggering 

event’’ for such Fund, or BGI has 

otherwise disclosed to the independent 

fiduciary the parameters for determining 

a material amount of accumulated cash 

or securities, including any amount of 

discretion retained by the BGI that may 

affect such net change. 

(4) A change in the composition of the 

portfolio of a Model-Driven Fund 

mandated solely by operation of the 

formulae contained in the computer 

model underlying the Fund where the 

basic factors for making such changes 

(and any fixed frequency for operating 

the computer model) have been 

disclosed in writing to an independent 

fiduciary of each Client Plan having 

assets held in the Fund prior to, or 

within ten (10) days following, its 

inclusion as a ‘‘triggering event’’ for 

such Fund; or 

(5) A change in the composition or 

weighting of a portfolio for an Index or 

Model-Driven Fund which results from 

an independent fiduciary’s direction to 

exclude certain securities or types of 

securities from the Fund, 

notwithstanding that such securities are 

part of the Index used by the Fund. 

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 May 

6, 2009 at 74 FR 20981 (the Notice). 

Effective Date: The exemption is 

effective September 22, 2008. 

Written Comments 

The Department received one 

comment with respect to the Notice, 

which was filed by the Applicants. The 

Applicants’ comment concerns Section 

V(d) of the Notice, which provided that: 

[E]ach Covered Principal Transaction is on 

terms that BGI reasonably determines to be 

more favorable to the Client Plan than the 

terms of an arm’s length transaction with an 

unaffiliated counterparty would have been. 

The Applicants note that the Notice 

provided another standard for Covered 

Principal Transactions, relating to price. 

That condition, Section V(e), provides 

that: 

[E]ach Covered Principal Transaction is 

executed either: 

(i) Through an automated routing system 

reasonably designed to ensure execution at 

the best available net price to the Client Plan 

for the number of securities to be purchased 

or sold in the Covered Principal Transaction; 

or 

(ii) at a net price to the Client Plan for the 

number of securities to be purchased or sold 

in the Covered Principal Transaction which 

is as favorable or more favorable to the Client 

Plan as the prices at which at least two 

independent Approved Counterparties, who 

are ready and willing to trade the relevant 

security, offer to purchase or sell such 

security. 

In this regard, BGI represents that it 

is not currently executing transactions 

through an automated routing system. 

With respect to Covered Principal 

Transactions involving prices quoted by 

at least two independent Approved 

Counterparties (subsection (ii) above), 

BGI represents as follows: BGI’s fixed 

income policies and procedures include 

consideration of various factors (of 

which one—price—is quantifiable) that 

may go into the selection of a 

counterparty for execution. In the 

context of Covered Principal 

Transactions, each counterparty with 

whom BGI would trade through a 

trading platform (for example, 

Tradeweb) is already a BGI approved 

counterparty that has been subject to 

internal approvals, including approval 

by BGI’s credit group. For the execution 

of all Covered Principal Transactions 

made using the platform, the 

predominant (though not exclusive) 

factor used when comparing the terms 

offered by one of those Approved 

Counterparties is price. 

Accordingly, because in BGI’s view 

price is the only quantifiable factor and 

all the Approved Counterparties have 

been subject to prior internal approval, 

BGI is concerned that it may be difficult 

to prove that a Covered Principal 

Transaction is on terms ‘‘more favorable 

to the Client Plan than the terms of an 

arm’s length transaction with an 

unaffiliated counterparty’’ under 

circumstances in which the price is ‘‘as 

favorable or more favorable’’ than the 

prices offered by two independent 

Approved Counterparties. BGI’s concern 

also relates to the language governing 

transactions executed through an 

automated routing system (subsection (i) 

above), in the event that future trades 

are executed in that manner. The 

requirement that the trade be executed 

at ‘‘best available net price’’ would leave 

room for the possibility that two or more 

trading opportunities would exist at the 

same price, each of which could 

represent the ‘‘best available net price.’’ 

In such a case, BGI believes it may be 

difficult to demonstrate compliance 

with the requirement in Section V(d) 

that the terms of the transaction be 

‘‘more favorable to the Client Plan than 

the terms of an arm’s length transaction 

with an unaffiliated counterparty.’’ 

To address its concerns, BGI requests 

that the required standard for the overall 

terms of the Covered Principal 

Transaction (i.e., Section V(d)) be 

conformed to the same required 

standard for the specific term of price of 

the Covered Principal Transaction. 

Therefore, BGI requests that Section 

V(d) be revised as follows: 

Each Covered Principal Transaction is on 

terms that BGI reasonably determines to be 

as favorable or more favorable to the Client 

Plan than the terms of an arm’s length 

transaction with an unaffiliated counterparty 

would have been. 

Upon consideration of BGI’s 

comment, the Department has 

determined to make the change 

requested by BGI. 

For Further Information Contact: 

Karen E. Lloyd of the Department, 202– 

693–8554. (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. 

mstockstill on DSKH9S0YB1PROD with NOTICES2

45304 Federal Register / Vol. 74, No. 168 / Tuesday, September 1, 2009 / Notices 

Signed at Washington, DC, this 24th day of 

August, 2009. 

Ivan Strasfeld, 

Director of Exemption Determinations, 

Employee Benefits Security, Administration, 

U.S. Department of Labor. 

[FR Doc. E9–20724 Filed 8–31–09; 8:45 am] 

BILLING CODE 4510–29–P 

mstockstill on DSKH9S0YB1PROD with NOTICES2