Federal Register / Vol. 74, No. 166 / Friday, August 28, 2009 / Notices 44387 

1The ‘‘Underwriter Exemptions’’ are a group of 

individual exemptions that provide substantially 

identical relief for the operation of certain assetbacked or mortgage-backed investment pools and 

the acquisition and holding by Plans of certain 

securities representing interests in those investment 

pools. 

2Section 102 of Reorganization Plan No. 4 of 

1978 (5 U.S.C. App. 1 [1996]) generally transferred 

the authority of the Secretary of the Treasury to 

issue exemptions under section 4975(c)(2) of the 

Code to the Secretary of Labor. 

telephone (202) 693–8668. Oral 

presentations will be limited to ten 

minutes, time permitting, but an 

extended statement may be submitted 

for the record. Individuals with 

disabilities who need special 

accommodations should contact Larry 

Good by September 8 at the address 

indicated. 

Signed at Washington, DC this 24th day of 

August 2009. 

Phyllis C. Borzi, 

Assistant Secretary, Employee Benefits 

Security Administration. 

[FR Doc. E9–20794 Filed 8–27–09; 8:45 am] 

BILLING CODE 4510–29–P 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

Notice of a Proposed Amendment to 

Prohibited Transaction Exemption 

(PTE) 96–22, 61 FR 14828 (April 3, 

1996), as Amended by PTE 97–34, 62 

FR 39021 (July 21, 1997), PTE 2000–58, 

65 FR 67765 (November 13, 2000), PTE 

2002–41, 67 FR 54487 (August 22, 

2002) and PTE 2007–05, 72 FR 13130 

(March 20, 2007) as Corrected at 72 FR 

16385 (April 4, 2007) (PTE 2007–05), 

(PTE 96–22), Involving the Wachovia 

Corporation and Its Affiliates 

(Wachovia), the Successor of First 

Union Corporation and PTE 2002–19, 

67 FR 14979 (March 28, 2002), as 

Amended by PTE 2007–05 (PTE 2002– 

19), Involving J.P. Morgan Chase & 

Company and Its Affiliates (D–11530) 

AGENCY: Employee Benefits Security 

Administration, Department of Labor. 

ACTION: Notice of a Proposed 

Amendment to PTE 96–22 and PTE 

2002–19. 

SUMMARY: This document contains a 

notice of pendency before the 

Department of Labor (the Department) of 

a proposed amendment to PTE 96–22 

and PTE 2002–19, Underwriter 

Exemptions.1 The Underwriter 

Exemptions are individual exemptions 

that provide relief for the origination 

and operation of certain asset pool 

investment trusts and the acquisition, 

holding and disposition by employee 

benefit plans (Plans) of certain assetbacked pass-through certificates 

representing undivided interests in 

those investment trusts. The proposed 

amendment to PTE 96–22 and PTE 

2002–19, if granted, would provide a 

six-month period to resolve certain 

affiliations, as a result of the Wells 

Fargo & Company (WFC) acquisition of 

Wachovia, between Wells Fargo Bank, 

N.A. (Wells Fargo) the Trustee, and 

Wachovia as members of the Restricted 

Group, as those terms are defined in the 

Underwriter Exemptions (the Proposed 

Amendment). The Proposed 

Amendment, if granted, would affect the 

participants and beneficiaries of the 

Plans participating in such transactions 

and the fiduciaries with respect to such 

Plans. 

DATE: Written comments and requests 

for a hearing should be received by the 

Department by September 28, 2009. 

ADDRESSES: All written comments and 

requests for a public hearing (preferably, 

three copies) should be sent to the 

Office of Exemption Determinations, 

Employee Benefits Security 

Administration, Room N–5700, U.S. 

Department of Labor, 200 Constitution 

Avenue, NW., Washington, DC 20210, 

(Attention: Exemption Application 

Number D–11530). Interested persons 

are invited to submit comments and/or 

hearing requests to the Department by 

the end of the scheduled comment 

period either by facsimile to (202) 219– 

0204 or by electronic mail to 

moffitt.betty@dol.gov. The application 

pertaining to the Proposed Amendment 

(Application) and the comments 

received will be available for public 

inspection in the Public Disclosure 

Room of the Employee Benefits Security 

Administration, U.S. Department of 

Labor, Room N–1513, 200 Constitution 

Avenue, NW., Washington, DC 20210. 

FOR FURTHER INFORMATION CONTACT: 

Wendy M. McColough of the 

Department, telephone (202) 693–8540. 

(This is not a toll-free number.) 

SUPPLEMENTARY INFORMATION: This 

document contains a notice of pendency 

before the Department of a proposed 

exemption to amend PTE 96–22 and 

PTE 2002–19, Underwriter Exemptions. 

The Underwriter Exemptions are a 

group of individual exemptions granted 

by the Department that provide 

substantially identical relief from 

certain of the restrictions of sections 406 

and 407 of the Employee Retirement 

Income Security Act of 1974 (ERISA or 

the Act) and from the taxes imposed by 

sections 4975(a) and (b) of the Internal 

Revenue Code of 1986, as amended 

(Code), by reason of certain provisions 

of section 4975(c)(1) of the Code for the 

operation of certain asset pool 

investment trusts and the acquisition, 

holding, and disposition by Plans of 

certain asset-backed pass-through 

certificates representing undivided 

interests in those investment trusts. 

All of the Underwriter Exemptions 

were amended by PTE 97–34, 62 FR 

39021 (July 21, 1997), PTE 2000–58, 65 

FR 67765 (November 13, 2000), and PTE 

2007–05, 72 FR 13130 (March 20, 2007), 

as corrected at 72 FR 16385 (April 4, 

2007). Certain of the Underwriter 

Exemptions were amended by PTE 

2002–41, 67 FR 54487 (August 22, 2002) 

or modified by PTE 2002–19. 

The Department is proposing this 

amendment to PTE 96–22 and PTE 

2002–19 pursuant to section 408(a) of 

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

Code, and in accordance with the 

procedures set forth in 29 CFR Part 

2570, Subpart B (55 FR 32836, 32847, 

August 10, 1990).2

1. The Underwriter Exemptions 

permit Plans to invest in pass-through 

securities representing undivided 

interests in asset-backed or mortgagebacked investment pools (Securities). 

The Securities generally take the form of 

certificates issued by a trust (Trust). The 

Underwriter Exemptions permit 

transactions involving a Trust, 

including the servicing, management 

and operation of the Trust, and the sale, 

exchange or transfer of Securities 

evidencing interests therein, in the 

initial issuance of the Securities or in 

the secondary market for such Securities 

(the Covered Transactions). The most 

recent amendment to the Underwriter 

Exemptions is PTE 2007–05, 72 FR 

13130 (March 20, 2007), as corrected at 

72 FR 16385 (April 4, 2007) (PTE 2007– 

05). One of the General Conditions of 

the Underwriter Exemptions, as 

amended, requires that the Trustee not 

be an ‘‘Affiliate’’ of any member of the 

‘‘Restricted Group’’ other than an 

‘‘Underwriter.’’ PTE 2007–05, 

subsection II.A.(4). The term ‘‘Restricted 

Group’’ is defined under section III.M. 

as: (1) Each Underwriter; (2) Each 

Insurer; (3) The Sponsor; (4) The 

Trustee; (5) Each Servicer; (6) Any 

Obligor with respect to obligations or 

receivables included in the Issuer 

constituting more than 5 percent of the 

aggregate unamortized principal balance 

of the assets in the Issuer, determined 

on the date of the initial issuance of 

Securities by the Issuer; (7) Each 

counterparty in an Eligible Swap 

Agreement; or (8) Any Affiliate of a 

person described in subsections 

III.M.(1)–(7).’’ The term ‘‘Servicer’’ is 

defined to include ‘‘the Master Servicer 

and any Subservicer.’’ PTE 2007–05, 


hsrobinson on DSK69SOYB1PROD with NOTICES
44388 Federal Register / Vol. 74, No. 166 / Friday, August 28, 2009 / Notices 

3Effective August 2004, the Securities and 

Exchange Commission (SEC) adopted rule 

amendments that established a voluntary, 

alternative method for computing net capital for 

certain broker-dealers. As a condition to its use of 

the alternative method, a broker-dealer’s ultimate 

holding company and affiliates (referred to 

collectively as a consolidated supervised entity or 

CSE) must consent to group-wide SEC supervision. 

These rules, among other things, respond to 

international developments. Specifically, affiliates 

of certain U.S. broker-dealers that conduct business 

in the European Union (EU) have stated that they 

must demonstrate that they are subject to 

consolidated supervision at the ultimate holding 

company level that is ‘‘equivalent’’ to EU 

consolidated supervision. SEC supervision 

incorporated into these rule amendments addresses 

this standard. These amendments and the SEC’s 

program for consolidated supervision of brokerdealers and affiliates will minimize duplicative 

regulatory burdens on firms that are active in the 

EU, as well as in other jurisdictions that may have 

similar laws. 

4But see, below at Paragraph 10., the 

Department’s discussion on the ‘‘Split Loan’’ 

Transactions. 

section III.G. The term ‘‘Affiliate’’ is 

defined, in part, to include ‘‘(1) Any 

person directly or indirectly, through 

one or more intermediaries, controlling, 

controlled by, or under common control 

with such other person; (2) Any officer, 

director, partner, employee * * * of 

such other person; and (3) Any 

corporation or partnership of which 

such other person is an officer, director 

or partner.’’ PTE 2007–05, section III.N. 

2. On April 3, 1996, PTE 96–22 was 

granted to First Union Corporation (First 

Union). On September 1, 2001, 

Wachovia merged into First Union, with 

First Union being the surviving entity in 

the merger. Simultaneously with this 

stock-for-stock merger, First Union 

changed its name to Wachovia 

Corporation (Wachovia). As a result of 

the merger, Wachovia, formerly known 

as First Union, became owned by the 

shareholders of both First Union and the 

former Wachovia, with the shareholders 

of First Union owning the majority of 

the outstanding shares. Prior to its 

acquisition by WFC, Wachovia was a 

diversified financial services company 

that provided a broad range of retail 

banking and brokerage, asset and wealth 

management, and corporate and 

investment banking products and 

services. Wachovia was one of the 

largest providers of financial services in 

the United States, with retail and 

commercial banking operations in 21 

states from Connecticut to Florida and 

west to Texas and California, and 

nationwide retail brokerage, mortgage 

lending and auto finance businesses. Its 

retail brokerage operations, under the 

Wachovia Securities brand name, 

managed client assets through offices 

nationwide. Globally, Wachovia served 

clients in selected corporate and 

institutional sectors and through more 

than 40 international offices. WFC 

acquired Wachovia on December 31, 

2008 and the successor continues to 

engage in the same broad range of 

activities conducted previously by 

Wachovia. 

3. The Applicant is Wells Fargo (the 

Applicant), the national banking 

subsidiary of WFC. The Applicant is the 

Trustee of each of the commercial 

mortgage-backed securitizations in the 

Covered Transactions. The Proposed 

Amendment was requested by 

application dated December 31, 2008, 

and as updated by Wells Fargo (the 

Application). The Applicant states that 

on December 31, 2008 (the Acquisition 

Date), WFC acquired Wachovia (the 

Acquisition). Wachovia is a holding 

company that, through its subsidiaries, 

provides broker-dealer, investment 

banking, financing, wealth management, 

advisory, insurance, lending and related 

products and services on a global basis. 

Wachovia is a ‘‘Consolidated 

Supervised Entity,’’ 3 and is subject to 

group-wide supervision by the 

Securities and Exchange Commission 

(SEC). On March 4, 2009, the Applicant 

explained that Wachovia is the ultimate 

parent of all of its subsidiaries, and was 

(prior to its acquisition by WFC) a 

publicly traded holding company. 

Among the direct subsidiaries of 

Wachovia, each 100% owned by 

Wachovia, are Wachovia Bank, N.A., 

Wachovia Capital Markets, LLC, 

Wachovia Securities, Inc., First Union 

National Bank, First Union Capital 

Markets and First Union Securities, Inc. 

For the Covered Transactions that are 

the subject of the Applicant’s request, 

First Union National Bank is the 

Sponsor of 4 transactions and Wachovia 

Bank, N.A. is the Sponsor of 35 

transactions. 

4. The Acquisition caused certain 

transactions previously subject to PTE 

96–22 or PTE 2002–19 to fail to satisfy 

the requirement under the Underwriter 

Exemptions that the Trustee not be an 

Affiliate of any member of the Restricted 

Group other than an Underwriter. PTE 

2007–05 subsection II.A.(4). Currently, 

for transactions where Wachovia is the 

Servicer, a six-month period is provided 

by the Underwriter Exemptions to sever 

the affiliation between the Servicer and 

the Trustee if the affiliation occurred 

after the initial issuance of the 

Securities. PTE 2007–05, subsection 

II.A.(4)(b).4 However, there is currently 

no transitional relief under PTE 96–22 

where Wachovia is a Sponsor, 

Underwriter or a Swap Counterparty 

and Wells Fargo is the Trustee. 

Accordingly, Wells Fargo seeks a 

temporary amendment to PTE 96–22 to 

provide for a six-month period for 

resolution of certain prohibited 

affiliations caused by the Acquisition of 

Wachovia by WFC, the parent of the 

Trustee. 

In addition, the Applicant requests 

that the amendment provide similar 

relief for one other Covered Transaction 

which is subject to PTE 2002–19. The 

specified Covered Transaction is the J.P. 

Morgan Chase Commercial Mortgage 

Securities Corp., Series 2002–C1 (Series 

2002–C1), where Wells Fargo is Trustee 

and Wachovia is the Sponsor and 

Master Servicer. In this transaction, one 

of the Underwriters is Wachovia 

Securities but PTE 96–22 was not relied 

on in the relevant disclosure 

documents. The other Underwriter in 

Series 2002–C1 is J.P. Morgan Securities 

Inc., which is unrelated to Wells Fargo, 

and relies upon PTE 2002–19, granted to 

J.P. Morgan Chase & Co. and its 

affiliates. The Applicant provides that 

J.P. Morgan Securities Inc. is the 

principal nonbank subsidiary of JP 

Morgan Chase & Co. (previously, J.P. 

Morgan Chase & Co.). JP Morgan Chase 

Commercial Mortgage Securities Corp. 

is 100% owned by JPMorgan Chase 

Bank, N.A., which in turn, is 100% 

owned by JPMorgan Chase & Co. J.P. 

Morgan Securities Inc. and J.P. Morgan 

Chase Commercial Mortgage Securities 

Corp. are ‘‘sister’’ companies, with 

JPMorgan Chase & Co. as the common 

parent. JPMorgan Chase & Co. has 

confirmed to the Applicant that it has 

been notified of the application for the 

Proposed Amendment and has agreed to 

coverage under the Proposed 

Amendment. 

Wells Fargo represents that it has 

placed a notice on its Web pages for 

each of the Covered Transactions 

affected by the Acquisition and that this 

notice would be updated upon 

publication of the Proposed 

Amendment, and if granted, the final 

amendment. Further, the Web pages 

will note the appointment of any cotrustee and the appointment of the 

replacement trustee. The Applicant 

states that Wells Fargo, in its role of 

Trustee, will bear the cost of appointing 

such co-trustee and that there will be no 

financial impact on any Underwriter. 

5. Wells Fargo represents that the 

Covered Transactions affected by the 

Acquisition consist of 39 commercial 

mortgage-backed securitizations (CMBS) 

(Securitizations) as detailed at section 

III.KK. or Section III.LL. of PTE 2002– 

19 of the Proposed Amendment (the 

Securitization List). Wells Fargo states 

that 38 of the Securitizations were 

structured and are managed to meet the 

requirements of PTE 96–22 and Series 

2002–C1 was structured and managed to 

meet the requirements of PTE 2002–19, 


hsrobinson on DSK69SOYB1PROD with NOTICES
Federal Register / Vol. 74, No. 166 / Friday, August 28, 2009 / Notices 44389 

5The London Interbank Offered Rate. 

in each case as amended by PTE 2007– 

05. Wells Fargo is the Trustee in each 

of the Securitizations. The Applicant 

represents that, in its role as Trustee, 

Wells Fargo is obligated under both the 

operative documents that securitize the 

loans, and under state law relating to 

fiduciaries, to protect the interests of 

security holders. Specifically, the 

Trustee is required to enforce the rights 

of security holders against other parties 

to the transaction, including Servicers, 

Swap Counterparties and loan sellers. 

The Applicant notes further that in 

practice, due to industry standards and 

reputation concerns by the various 

parties, little such protection or 

enforcement is necessary, and the 

Trustee’s role, while vigilant, is 

relatively passive. Wachovia is a party 

to each of the Securitizations in the 

capacity or capacities detailed in the 

Securitizations List. The Applicant 

states that, in any of these capacities, 

Wachovia is obligated, under the 

operative documents of the transaction, 

to perform its designated duties under 

contractual and, in some cases, industry 

standards for the benefit of security 

holders. The Applicant represents that 

each of the Pooling and Servicing 

Agreements has been structured to 

comply with PTE 96–22 or in the case 

of Series 2002–C1, PTE 2002–19, and 

that each of the Trusts has been 

managed in accordance with the related 

Pooling and Servicing Agreement. 

Consequently, Securities issued by each 

Trust currently are eligible for purchase 

by Plans that meet the requirements of 

PTE 96–22 or in the case of Series 2002– 

C1, PTE 2002–19. 

6. The Applicant states that none of 

the Trusts were formed or marketed 

with the knowledge that Wells Fargo 

and Wachovia would become affiliated. 

In this regard, the Applicant notes that 

there are no securitizations on the 

Securitization List that closed later than 

2007; the Acquisition was announced in 

the third quarter of 2008. The Applicant 

states that, in general, the Pooling and 

Servicing Agreements governing the 

applicable Securitizations permit the 

cures detailed in their Application by 

contemplating a Trustee’s resignation 

and replacement so as to comply with 

applicable law and providing the 

Trustee the ability to appoint co-trustees 

and other agents authorized to carry out 

the Trustees’ duties. The Applicant 

notes that the agreements do not 

provide specific qualifications for cotrustees. While the agreements vary in 

the detail, after due diligence, the 

Applicant asserts that it is not aware of 

any provisions of the agreements or SEC 

requirements that preclude the cures 

detailed in the Application. 

7. Wells Fargo represented in its 

Application that, during the proposed 

six month resolution period, for each 

Securitization on the Securitization List, 

the Trustee shall appoint a co-trustee, 

which is not an Affiliate of Wells Fargo, 

no later than the earlier of (a) March 31, 

2009 or (b) five business days after 

Wells Fargo, the Trustee, has become 

aware of a conflict between the Trustee 

and any member of the Restricted Group 

that is an Affiliate of the Trustee. The 

co-trustee would be solely responsible 

for resolving such conflict between the 

Trustee and any member of the 

Restricted Group that has become an 

Affiliate of the Trustee as a result of the 

Acquisition; provided that if the Trustee 

has resigned on or prior to March 31, 

2009, and no event described in clause 

(b) has occurred, no co-trustee shall be 

required since a replacement trustee 

would be in place by March 31, 2009. 

Wells Fargo represented that as Trustee, 

Wells Fargo would appoint a co-trustee 

with the knowledge and skill necessary 

to resolve any conflict arising between 

Wells Fargo and any Wells Fargo 

affiliated member of the Restricted 

Group. In the event that a co-trustee 

were appointed, such co-trustee would 

assume Wells Fargo’s role under the 

related Pooling and Servicing 

Agreement (solely with respect to any 

conflict between Wells Fargo and a 

Wells Fargo affiliate that is a member of 

the Restricted Group) until a 

replacement trustee replaced Wells 

Fargo. 

For purposes of this Proposed 

Amendment, a conflict would arise 

whenever (a) Wachovia is a member of 

the Restricted Group and fails to 

perform in accordance with the 

timeframes contained in the relevant 

Pooling and Servicing Agreement 

following a request for performance 

from Wells Fargo, as Trustee, or (b) 

Wells Fargo, as Trustee, fails to perform 

in accordance with the timeframes 

contained in the relevant Pooling and 

Servicing Agreement following a request 

for performance from Wachovia, a 

member of the Restricted Group. The 

time as of which a conflict occurs is the 

earlier of the day immediately following 

the last day on which compliance is 

required under the relevant Pooling and 

Servicing Agreement; or the day on 

which a party affirmatively responds 

that it will not comply with a request for 

performance. 

Additionally, for purposes of this 

Proposed Amendment, the term conflict 

includes but is not limited to, the 

following: (1) Wachovia’s failure, as 

Sponsor, to repurchase a loan for breach 

of representation within the time period 

prescribed in the relevant Pooling and 

Servicing Agreement, following Wells 

Fargo’s request, as Trustee, for 

performance; (2) Wachovia, as Sponsor, 

notifies Wells Fargo, as Trustee, that it 

will not repurchase a loan for breach of 

representation, following Wells Fargo’s 

request that Wachovia repurchase such 

loan within the time period prescribed 

in the relevant Pooling and Servicing 

Agreement (the notification occurs prior 

to the expiration of the prescribed time 

period for the repurchase); and (3) 

Wachovia, as Swap Counterparty, makes 

or requests a payment based on a value 

of LIBOR5 that Wells Fargo, as Trustee, 

considers erroneous. 

8. The Applicant stated that it 

intended to complete the negotiations 

and paperwork on an ongoing basis, 

with the effective date for all changes to 

be March 31, 2009. The Applicant noted 

that in contrast to co-trustees, any 

replacement trustee would have to meet 

the requirements of the related Trust 

agreement for qualification as a Trustee 

(i.e., would meet the same requirements 

that Wells Fargo had to meet). A copy 

of a typical Pooling and Servicing 

Agreement requirements for a Trustee 

was provided to the Department. The 

Applicant further noted that if a conflict 

were to arise prior to March 31, 2009, 

with respect to any Trust, the most 

likely course would be that Wells Fargo 

would promptly resign as Trustee and 

the replacement trustee would assume 

its role earlier than scheduled. The next 

most likely scenario is that the party 

that would become the replacement 

trustee (and hence meets the 

requirements of the related Pooling and 

Servicing Agreement for qualification as 

a Trustee) would be appointed cotrustee under the terms of the Proposed 

Amendment. The Applicant stated, 

however, there might be situations 

where either such course of action 

would be impossible or impractical, in 

which case the parties would have to 

appoint a different co-trustee until the 

replacement trustee assumed its role. 

The Applicant stated that in certain 

cases, Wells Fargo would continue as a 

securities administrator, retaining 

certain reporting requirements but be 

responsible to the replacement trustee. 

The replacement trustee would have 

legal title to the assets of the trust, 

would have fiduciary responsibility to 

the securities holders and would be 

responsible for supervising Wells Fargo 

in whatever role it retains. Wells Fargo 

stated that it would notify the 

Department of Labor of any conflict that 

arose prior to the replacement of Wells 


hsrobinson on DSK69SOYB1PROD with NOTICES
44390 Federal Register / Vol. 74, No. 166 / Friday, August 28, 2009 / Notices 

6The Applicant has provided the Department 

with a redacted intercreditor agreement, each of two 

public offering documents and each of two pooling 

and servicing agreements used in a typical loan 

splitting transaction. Because the two notes 

comprising the loan subject to this intercreditor 

agreement were securitized in publicly offered 

securitization transactions, the offering documents 

and pooling and servicing agreements for such 

securitizations were filed with the SEC and are 

public documents. The Applicant notes that the 

intercreditor agreement itself is not a public 

document (although the material features of the 

intercreditor agreement are described in the offering 

documents for the two securitizations). 

7The Applicant defines REO property as real 

property that has been acquired by a securitization 

trust via foreclosure or by deed in lieu of 

foreclosure. Tax law requires that such REO 

property be disposed of by the trust within a 

specified time period and imposes restrictions on 

income that can be earned with respect to the 

property. 

8The pooling and servicing agreement provides 

the definition of a ‘‘Servicing Transfer Event’’ and 

related definitions from the pooling agreement. 

Fargo as Trustee in any of the Covered 

Transactions. The Applicant noted that, 

as a technical matter, in the most likely 

case (e.g. the assertion of a breach of 

representation or warranty by the 

Sponsor), the Pooling and Servicing 

Agreements all require that the Trustee 

provide the offending party 90 days to 

cure the issue before the Trustee may 

take any action to do so itself. 

Consequently, if an issue arose after 

December 31, 2009, the Trustee would 

not have been able to take any action to 

cure the issue until after March 31, 

2009. The Applicant asserts that since it 

was expected that the Trustee 

replacements would be made by March 

31, 2009, it was not anticipated that a 

conflict would arise while Wells Fargo 

was the Trustee of any of the Covered 

Transactions. 

9. On June 3, 2009, the Applicant 

informed the Department that Wells 

Fargo is resigning as Trustee from a total 

of 115 transactions (this number 

includes transactions where the conflict 

is not ERISA-related and the transaction 

is not on the Securitization List). Wells 

Fargo resigned from 15 of these 

transactions on December 31, 2008, 

resigned from 41 of these transactions 

by March 31, 2009, and will resign from 

the remaining 59 no later than June 30, 

2009. Of the 15 transactions Wells Fargo 

resigned from on December 31, 2008, it 

resigned from 7 solely for ERISA 

purposes and 8 solely for securities law 

purposes. As of March 31, 2009, 56 

transactions had received replacement 

trustees. The Applicant represented that 

the replacement trustees for the 

remaining transactions were currently 

being negotiated. On May 7, 2009, the 

Applicant informed the Department that 

for all 39 of the Covered Transactions on 

the Securitization List, the replacement 

trustees were in place as of March 31, 

2009. Bank of America, N.A. will be the 

replacement trustee for 23 of the 

Covered Transactions and U.S. Bank 

National Association will be the 

replacement trustee for the remaining 16 

Covered Transactions. The Applicant 

has further indicated that there were no 

actual conflicts from the date that the 

affiliation arose, December 31, 2009, 

through March 31, 2009. Thus, no cotrustee had to be appointed during that 

period. The Applicant noted that in 

cases where the Trustee is also the 

securities administrator, Wells Fargo 

will resign as Trustee and remain 

securities administrator. 

10. The Applicant represents that in 

the financial services industry, large 

commercial mortgage loans may be 

securitized by splitting such loans into 

two or more pari passu portions and 

including each portion in a different 

securitization (Split Loan Transaction). 

This is a risk management technique 

that prevents the loan from representing 

too large a portion of a single 

securitization. From the borrower’s 

perspective, the loan remains a single 

debt instrument and, consequently, the 

loan is serviced as such. 

Servicing of the loan is the 

responsibility of the parties to the first 

securitization to close, with the other 

lenders (whether or not such lenders are 

themselves securitization vehicles) 

agreeing to a passive role. This 

arrangement is memorialized in an 

intercreditor agreement,6 which 

describes the rights and responsibilities 

of the parties to such agreement 

(Intercreditor Agreement). In many 

cases, the securitizations to which the 

other notes are to be contributed have 

not been determined as of the date of 

the Intercreditor Agreement. 

In a commercial mortgage 

securitization transaction, the Servicer 

is the entity that carries out the day-today collection and enforcement of the 

receivables which back the securities 

issued in a transaction. The two primary 

types of Servicers are the Master 

Servicer, which is generally the lead 

servicer for the transaction for 

performing assets, and the ‘‘Special 

Servicer’’, which is generally appointed 

to service non-performing assets such as 

defaulted loans and real estate owned 

(REO) properties.7 The Applicant notes 

that the term ‘‘Primary Servicer’’ is 

synonymous with Subservicer, and 

refers to the servicer who is actually 

responsible for collection of the 

mortgage payments with respect to a 

property. The Primary Servicer is 

responsible to the Master Servicer for 

the transaction; the details of the 

relationship are described in a servicing 

agreement between the Primary Servicer 

and the Master Servicer. 

The Applicant states that the trigger 

for transferring the servicing from the 

Master Servicer to the Special Servicer 

is a ‘‘Servicing Transfer Event’’ (which 

generally include the uncured failure (or 

expected failure) of the mortgagor to 

make payments when due; nonmonetary defaults that would materially 

impair the value of the mortgaged 

property as security for the loan; 

bankruptcy, insolvency or similar 

proceeding by the mortgagor; admission 

by the mortgagor of its inability to pay 

its debts; and commencement of 

foreclosure or similar proceedings with 

respect to the related mortgaged 

property).8 Although the first and 

foremost difference between a Special 

Servicer and a Master Servicer is in 

terms of the assets each one services 

(i.e., the Master Servicer with respect to 

performing assets and the Special 

Servicer with respect to non-performing 

assets), the Special Servicer is also 

involved in the servicing of performing 

assets with respect to certain ‘‘Special 

Actions’’ discussed below. 

Upon the occurrence of a Servicing 

Transfer Event with respect to an asset, 

the Master Servicer transfers the 

servicing files for such asset to the 

Special Servicer and the Special 

Servicer takes over the primary 

servicing for such asset (including, but 

not limited to, collection of payments 

from the mortgagor, maintenance of 

insurance, enforcement of alienation 

clauses, inspections, reports and record 

keeping) from the Master Servicer. In 

addition, due to the nature of nonperforming assets, the Special Servicer’s 

primary task is to resolve the asset, i.e., 

either to return the loan to performing 

status by negotiating a workout with the 

mortgagor or to realize value from such 

non-performing asset by undertaking 

court action and enforcement 

procedures including, but not limited 

to, liquidation of the asset through 

foreclosure and sale of the asset or 

conversion of the asset into an REO 

property. 

Due to the nature of non-performing 

assets, the Special Servicer also has 

additional servicing responsibilities 

with respect to such non-performing 

assets such as the production of asset 

status reports and approval of 

modifications, waivers, amendments 

and consents with respect to nonperforming assets. While the Special 

Servicer is generally engaged to service 

the non-performing assets, in certain 

instances set forth in the securitization 

documents, the Special Servicer also 


hsrobinson on DSK69SOYB1PROD with NOTICES
Federal Register / Vol. 74, No. 166 / Friday, August 28, 2009 / Notices 44391 

9The Applicant defines ‘‘earnout reserve funds’’ 

as amounts held back from a commercial borrower 

by the lender at the time of closing of the loan 

which may, upon satisfaction of conditions set forth 

in the loan documents and via the procedures set 

forth in the related pooling and servicing 

agreement, be released to the borrower for other 

purposes as set forth in the loan documents. If the 

conditions are not met, the earnout reserve fund is 

applied to reduce the outstanding principal balance 

of the loan. 

10 In the case of a loan split among more than a 

single transaction, special rules apply. Typically, 

the Directing Holder is the most subordinate class 

of each securitization whose assets include a 

portion of such loan, with voting based on the 

percentage interest of the loan held by the 

securitization. Tie votes are broken by the decision 

of an advisor appointed by the holders. 

Additionally, the ‘‘Controlling Class’’ is the most 

junior class of a securitization; this class is 

responsible for appointing and terminating the 

Special Servicer and for making certain decisions 

with respect to defaulted loans. If there is more than 

one holder of an interest in the Controlling Class, 

it is possible for there to be disagreement among 

such holders. In this case, the majority would rule. 

The holders forming such majority are known as 

‘‘Directing Certificateholders’’ or ‘‘Directing 

Holders’’ (the terms are interchangeable). 

11Because Directing Certificateholders are the 

most junior class, they are very unlikely (except in 

cases where securitization pools have suffered 

considerable losses) to include Plan investors. 

Moreover, because of the subordination structure of 

securitization pools, the interests of Directing 

Certificateholders are generally aligned to the 

interests of holders of more senior classes (i.e., 

because Directing Certificateholders suffer losses 

before more senior classes, any decision that 

reduces the likelihood of the most junior class 

suffering a loss will automatically reduce the 

likelihood of losses affecting more senior classes). 

12The Department notes that if this were to occur, 

the Underwriter Exemption would become 

unavailable to the transaction. 

has the right to consult with and 

sometimes to direct the Master Servicer 

to take or refrain from taking certain 

actions with respect to all assets 

(whether performing or non-performing) 

ordinarily referred to as ‘‘Special 

Actions’’. Typical examples of Special 

Actions include (1) Proposed or actual 

foreclosure upon an asset, (2) material 

modifications or waivers of assets, (3) 

proposed sales of assets, (4) the 

determination to bring a REO Property 

into compliance with applicable 

environmental laws or to otherwise 

address hazardous materials thereon, (5) 

acceptance of substitute or additional 

collateral (where there is lender 

discretion), (6) the waiver of a ‘‘due-onsale’’ clause or ‘‘due-on-encumbrance’’ 

clause, (7) assumption agreements that 

would release a borrower from liability, 

(8) the acceptance of a discounted 

payoff of an asset, (9) the release of 

earnout reserve funds 9 or letters of 

credit (where there is lender discretion), 

(10) approval of a material lease (where 

there is lender discretion), (11) any 

change in property manager or franchise 

(where there is lender discretion) and 

(12) with respect to certain loans, 

approval of defeasance (including 

confirmation that conditions to a 

permitted defeasance have been met). In 

servicing the non-performing assets or 

with respect to Special Actions, the 

Special Servicer is typically required to 

consult with and follow the directions 

of the Directing Holder, as defined 

below, unless doing so would violate 

the servicing standard under the 

securitization documents. 

The Special Servicer is typically 

appointed by, and can be terminated 

and replaced by, the ‘‘Directing Holder’’ 

(sometimes referred to as the 

‘‘Controlling Class’’) for the 

securitization. This is generally the 

owner of the most subordinate portion 

of such securitization.10 In addition, the 

Special Servicer (including a 

replacement Special Servicer) must 

meet the qualification requirements for 

a Special Servicer (e.g., required ratings 

by the ratings agencies) and must not 

trigger a Special Servicer event of 

default under the securitization 

documents to serve as Special Servicer. 

The Intercreditor Agreement is 

drafted in a manner that gives a great 

deal of, but not limitless, discretion to 

the Master Servicer and Special 

Servicer. Both the Master Servicer and 

the Special Servicer are obligated to act 

within the confines of the ‘‘Servicing 

Standard,’’ a somewhat amorphous set 

of guidelines—obviously not 

prescriptive but with boundaries 

commonly accepted by the lending 

industry. Further, certain major 

decisions with respect to the special 

servicing of troubled assets are subject 

to a vote by the Directing Holders, as 

described above. 

The purpose of the Intercreditor 

Agreement is twofold: first, to provide 

for the servicing of the various notes as 

a single loan, and second, to provide 

assurance that tax laws critical to 

securitizations will be observed. It is 

important to holders that the proper tax 

treatment of any securitizations is 

ensured. Violating the tax rules for 

securitizations can cause the 

securitization vehicle itself to become a 

taxable corporation, reducing returns to 

security holders, even tax-exempt 

holders, by the amount of the taxes due. 

The Intercreditor Agreement provides 

that a split loan will be serviced from 

the first transaction to close. Holders of 

the other notes comprising the loan, 

whether or not such notes are included 

in subsequent securitizations, agree to 

be bound by the pooling and servicing 

agreement for the first securitization 

with respect to the loan. The rights 

retained by the subsequent 

securitizations are exercisable by the 

Directing Certificateholders 11 for each 

such subsequent securitization, not by 

the trustee per se. The material terms of 

the Intercreditor Agreement are spelled 

out in the disclosure for each of the 

securitizations, so that all investors 

understand prior to their investment in 

the securitization that decision making 

with respect to the note representing the 

split loan has been ceded to the lead 

securitization. 

The Intercreditor Agreement provides 

that, if the contemplated servicing 

cannot be realized (e.g., because the first 

securitization is terminated), a 

substantially similar agreement will be 

reached. The Applicant states that, if 

other portions of the loan are in 

securitizations designed to comply with 

the Underwriter Exemptions, the trustee 

counsel, which is sensitive to the issues 

involved, would not permit any 

agreement that would cause the 

conditions of the Underwriter 

Exemptions to be violated. Either: (i) 

The subsequent agreement would 

provide for substantially the same 

limitation on trustee rights as was the 

case with the original Intercreditor 

Agreement; (ii) additional exemptive 

relief would be sought from the 

Department; or (iii) the trustee of the 

affected securitization would be 

replaced. 

The Applicant notes that in a split 

loan situation where the first 

securitization suffers considerable 

losses, since all of the notes making up 

the loan are pari passu, the first note 

would continue to be outstanding, even 

if it were no longer in a securitization; 

therefore, there would have to be a 

holder of that first note. The holder of 

the first note would continue to be 

responsible for any direction to be given 

to the Master Servicer and the Special 

Servicer of the first securitization 

(except for the times where directions 

would be given by the Directing 

Holder). Additionally, the servicing 

would have to be performed in a 

manner that did not jeopardize the passthrough tax status (normally, REMIC or 

grantor trust) of securitizations holding 

notes 2, 3, etc. These are the prime 

‘‘substantially similar’’ features. The 

remote possibility exists that the first 

holder would refuse to put itself in the 

controlling position. In that case, 

control would go to one of the other 

securitizations. At this point, the 

Applicant states that control would not 

end up in a securitization where there 

was an affiliated trustee 12 (and, as a last 

resort, the trustee would be replaced to 

ensure non-affiliation). 


hsrobinson on DSK69SOYB1PROD with NOTICES
44392 Federal Register / Vol. 74, No. 166 / Friday, August 28, 2009 / Notices 

As illustrated above, the depositing of 

portions of one loan into multiple 

transactions increases the potential 

relationship issues. Though the loan 

continues to be serviced solely by the 

Primary, Master and Special servicers 

(the Split Loan Servicers) under the first 

transaction, and notwithstanding that 

each other transaction discloses the fact 

that such loan is serviced under, and 

pursuant to, the terms of the initial 

transaction, these Split Loan Servicers 

may fall within the definition of 

Servicer in the Underwriter Exemptions, 

making such parties members of the 

Restricted Group for such other 

transactions. As a result, the pool of 

available unaffiliated trustees for each 

other transaction is narrowed. 

The December 31, 2008 Acquisition of 

Wachovia by WFC (Acquisition) caused 

a certain fact pattern illustrated by the 

following example to emerge in these 

nine CMBS transactions (Split Loan 

Transactions List): 

1. Banc of America Commercial 

Mortgage Trust 2006–4. 

2. Banc of America Commercial 

Mortgage Trust 2007–2. 

3. Banc of America Commercial 

Mortgage Trust 2008–LS1. 

4. Citigroup Commercial Mortgage 

Trust 2008–C7. 

5. COMM 2004–LNB–2. 

6. COMM 2007–C9. 

7. J.P. Morgan Chase Commercial 

Mortgage Securities Trust 2006–CIBC16. 

8. LB–UBS Commercial Mortgage 

Trust 2004–C2. 

9. Morgan Stanley Capital I Trust 

2005–HQ5. 

For example, a large commercial loan 

(Loan) is split among four transactions. 

Each securitization trust, S1, S2, S3 and 

S4, contains a pari passu portion of the 

Loan. Wachovia is the Primary Servicer 

of the Loan. Because S1 closes first, the 

entire Loan is serviced by Wachovia 

under the S1 securitization and the 

trustees of the four trusts sign an 

intercreditor agreement. An unaffiliated 

bank is Trustee of S1; Wachovia is 

Master Servicer of S1 and CW Capital is 

Special Servicer of S1. Pursuant to the 

Intercreditor Agreement, because 

Wachovia is Master Servicer of all the 

loans in S1, Wachovia is now the Master 

Servicer for the Loan in S1, S2, S3 and 

S4. As noted above, Wachovia is also 

the Primary Servicer. 

While S1, S2, S3 and S4 are all 

structured to comply with one or more 

of the Underwriter Exemptions, a 

problem may arise because Wells Fargo 

is the Trustee of S4. With the 

acquisition of Wachovia by Wells Fargo, 

Wells Fargo, in its role as Trustee of S4, 

is now affiliated with a member of the 

Restricted Group, i.e., Wachovia in its 

role as Primary Servicer and Master 

Servicer of the Loan. Wachovia has no 

other role in or connection with S4; in 

fact, all of its obligations arise only 

under the terms of S1 and the 

Intercreditor Agreement. The Applicant 

believes that the Underwriter 

Exemptions’ conditions may require 

that Wells Fargo resign as Trustee of S4, 

despite the Applicant’s belief that Wells 

Fargo has no control over Wachovia in 

its role as Master Servicer of the Loan 

(other than as a result of the already 

signed Intercreditor Agreement where it 

cedes control to the unaffiliated bank 

that is Trustee of S1). 

The Applicant notes that when this 

type of prohibited relationship is known 

before the transactions close, it is 

possible to appoint a co-trustee with 

respect to similarly divided 

participations in a loan. In this case, 

however, with the transactions already 

closed, the Applicant asserts that 

appointing a co-trustee would likely 

require an amendment to the pooling 

and servicing agreement, which may 

require the consent of all the security 

holders (a situation made even more 

problematic with book-entry securities). 

Consequently, the Applicant believes 

that the appointment of a co-trustee is 

not feasible. 

The Applicant represents that the 

presence of an independent trustee in 

S1 (the unaffiliated bank), which is 

responsible for the actions of the Master 

Servicer, provides sufficient protection 

against any harm the prohibited 

relationship in S4 could cause. As an 

additional safeguard, if the Loan were 

ever to become delinquent, servicing 

would be transferred to the Special 

Servicer who is unaffiliated with Wells 

Fargo. Further, the Intercreditor 

Agreement was negotiated and signed 

prior to any indication that a prohibited 

relationship would exist in any of the 

trusts. Thus, the Applicant asserts, that 

the agreement could not have been 

drafted in a manner as to favor Wells 

Fargo or Wachovia at the expense of any 

Plan, or to otherwise circumvent the 

conditions of the Underwriter 

Exemption. Additionally, the Applicant 

believes that the presence of an 

independent trustee for the Loan and 

the lack of discretion on the part of 

Wells Fargo as Trustee of S4 is factually 

similar to the situation created with the 

appointment of a co-trustee. The 

Applicant believes that, if responsibility 

for the servicing of the Loan is confined 

to the servicer of one of the 

securitization vehicles, such servicer 

should not be considered a member of 

the Restricted Group within the 

meaning of the Underwriter Exemptions 

in the other securitizations where 

portions of the loan are collateral. 

The Applicant notes that Holders, 

including fiduciaries holding on behalf 

of Plans, could bring suit against any 

parties to the transaction or could 

collectively order the trustee to bring 

such suits on behalf of the securitization 

(with the threat of replacing the trustee 

for failure to comply). As a practical 

matter, all transaction agreements 

provide mechanisms for replacing 

parties, a less expensive and more 

certain means of stopping bad behavior. 

Nonetheless, such suits are possible and 

it is impossible to predict the outcome 

of any such suit. Moreover, legislative 

and regulatory actions in response to the 

current economic situation could make 

such suits far more probable or, in the 

alternative, could preempt them 

completely. The legislative and 

regulatory situation, both at the federal 

and the state and local level, is too 

much in flux to even predict how the 

landscape might look one, two or ten 

years in the future. This lack of 

predictability, though, is pervasive in 

the capital markets. There is no feature 

of the split loan structure that makes it 

any more susceptible to legal action, 

legislative or regulatory decisions, etc. 

The Applicant believes that splitting a 

large loan among several securitizations 

is best viewed as a matter of prudence. 

While allowing large loans to be made 

when appropriate underwriting 

considerations are taken into account, 

splitting the loan into multiple notes 

spreads the risk among several 

transactions and prevents too great a 

concentration in any one transaction. 

The Applicant has provided the 

Department with a detailed description 

of one particular intercreditor agreement 

(the Agreement) and a redacted copy of 

the Agreement, as well as the related 

provisions in the applicable pooling and 

servicing agreements (PSAs). The 

Applicant states that in the subsequent 

loan transactions that arise from the 

initial securitizations identified in the 

Split Loan Transactions List, the 

trustees have agreed (or, more 

accurately, have inherited an agreement 

made by its predecessor in interest) to 

a passive role with limited rights 

exercisable only under extreme 

circumstances and that the PSAs for 

these subsequent securitizations 

confirm this passivity. Thus, the 

Applicant asserts that the obligations 

detailed in the PSAs are ministerial, not 

discretionary. The Applicant states that 

the PSAs are explicit that the loan is not 

serviced or administered from the 

subsequent securitizations and that the 

parties to these securitizations are not 

obligated or authorized to supervise the 


hsrobinson on DSK69SOYB1PROD with NOTICES
Federal Register / Vol. 74, No. 166 / Friday, August 28, 2009 / Notices 44393 

13The Mortgage File is defined in the PSA to 

include, among other documents, the original 

executed mortgage note and the original or in some 

cases, a copy of: The mortgage and any assignment 

and recordation; assignment of all unrecorded 

documents related to the mortgage loan; any 

modification, consolidation, assumption and 

substitution agreements; the policy or certificate of 

lender’s title insurance or irrevocable binding 

commitment; filings of relevant UCC Financial 

Statements; any ground lease and related 

documents; any relevant intercreditor agreement, 

loan agreement, letter of credit, management and 

franchise agreements; and any documents related to 

any companion loan. 

administration and servicing of the loan 

in the initial securitization. 

The Applicant represents further that 

a split loan is serviced in the first 

transaction to close and the Intercreditor 

Agreement governs the servicing of the 

split loan under the first transaction 

(and limits the rights and 

responsibilities of other holders of 

pieces of the loan). The terms of the 

PSA for any subsequent transaction 

containing a piece of the split loan 

specify that the master servicer, the 

special servicer and the trustee of such 

subsequent transaction ‘‘shall have no 

obligation or authority’’ to service the 

loan or to direct the servicing of the 

split loan or, subject to extremely 

limited exceptions, to make advances 

with respect to the split loan. The only 

responsibilities left for the trustee of a 

subsequent transaction are: (i) To keep 

photocopies of the ‘‘Mortgage File’’; 13

(ii) to release said Mortgage File upon 

payment in full of the loan; and (iii) to 

make advances with respect to the loan 

to the extent that the advance would be 

recoverable and such advance has not 

been made by the Master Servicer of the 

first transaction or the Master Servicer 

of the second transaction. 

The Applicant states that the first two 

responsibilities, keeping a photocopy of 

the Mortgage File and releasing it, are 

completely ministerial and involve no 

discretion. The third responsibility is 

also non-discretionary. The Master 

Servicer of the first transaction (MS1) is 

obligated under the PSA for the first 

transaction to either make the advance 

or certify that it would be 

nonrecoverable. If MS1 neither makes 

the advance nor certifies as to 

nonrecoverability, the same obligation 

falls on the Master Servicer of the 

related subsequent transaction (MS2). 

MS2 only has the obligation with 

respect to the piece of the loan in its 

transaction. If MS2 also neither 

advances nor certifies, the trustee of the 

second transaction either (i) must make 

the advance with respect to the piece of 

the loan in its transaction (with no 

authority under certain PSAs to pass 

judgment on non-recoverability) or (ii) 

must make either the advance with 

respect to the piece of the loan in its 

transaction or the certification of nonrecoverability (under the terms of other 

PSAs—there is some variance among 

pooling and servicing agreements 

between approach (i) and approach (ii)). 

Even in case (ii), the process is not 

discretionary. While there is admittedly 

some leeway (that could be interpreted 

as discretion) in valuing the loan, it is 

in the trustee’s economic interest to 

make an accurate determination. If the 

trustee places too high a value on the 

asset, it risks not being repaid the 

advance (and note that it is an advance, 

so there is the expectation of 

repayment). Too low a value, and the 

trustee risks action by securityholders 

that would have benefited from the 

advance (such holders eventually get 

their money, but lose the time value). If 

the trustee is bound by a PSA that 

permits a certification in lieu of the 

advance, such certification requires an 

explanation of the basis for the 

determination and such explanation 

requires an objective determination that 

would satisfy securityholders. The 

objectivity of the process indicates that 

discretion plays, at most, a minimal 

role. 

The Applicant concludes that 

consequently, it should not matter that 

the trustee for the subsequent 

securitization is related to the Master 

Servicer or Special Servicer for the 

initial securitization; provided that any 

such party is not otherwise a member of 

the Restricted Group with respect to the 

subsequent securitization. More 

generally, because the relevant features 

of the Agreement are substantially 

similar to those found in all 

intercreditor agreements used in the 

market, the Applicant requests that the 

Department determine that if the only 

potentially prohibited affiliation is 

between a trustee and a servicer of a 

loan serviced in another securitization 

under the eye of an independent trustee, 

the trustee of the subsequent 

securitization should not be disqualified 

in the case of an affiliation arising as a 

result of a merger between the trustee 

and servicer that occurs subsequent to 

the securitization solely because of such 

affiliation. 

Based on the representations and 

documents that the Applicant has 

provided to the Department, the 

Department is of the view that, if the 

affiliation between the Master Servicer 

of the first Securitization and a trustee 

of a loan serviced in a subsequent 

securitization is solely as a consequence 

of the acquisition of Wachovia by Wells 

Fargo, the Master Servicer of the first 

securitization would not be considered 

a member of the Restricted Group of a 

trustee of the subsequent securitizations 

in each Split Loan Transaction for the 

nine transactions identified in the Split 

Loan Transaction List, that are 

otherwise eligible for relief under the 

Underwriter Exemptions. 

11. The Applicant notes that Plans 

acquired Securities issued under the 

Securitizations in reliance on the 

exemptive relief provided by the 

Underwriter Exemptions. Absent 

additional relief, the Acquisition has 

caused these granted exemptions to 

cease to apply to several of the 

Securitizations. Wells Fargo represents 

that the Securities issued in transactions 

such as the Securitizations are attractive 

investments for Plans subject to Title I 

of ERISA or section 4975 of the Code 

and conversely, such plans are an 

important market for issuers of such 

Securities. Wells Fargo asserts that to 

force Wells Fargo to resign as Trustee in 

all of the Securitizations before the 

Acquisition was not administratively 

feasible because the number of available 

trustees is limited and there is work 

required in changing trustees. Similarly, 

to have the exemptions no longer apply 

to the Securitizations would force the 

Plans to sell their securities in the 

current unstable market, likely at a loss. 

The Applicant additionally notes that 

although the Acquisition has been 

widely covered, it is conceivable that 

Plan fiduciaries would not realize that 

the Underwriter Exemption relied upon 

by the Plans had ceased to apply, raising 

the possibility that a Plan would not sell 

and that non-exempt prohibited 

transactions would occur. 

12. Wells Fargo states that the Plans 

purchased Securities in reliance on PTE 

96–22 or PTE 2002–19. At that time, the 

Plans had no knowledge that the 

Trustee would become an Affiliate of 

one or more members of the Restricted 

Group. On or after the Acquisition, 

except in cases covered by PTE 96–22 

as amended by PTE 2000–58 (providing 

a six-month window for TrusteeServicer affiliations) or PTE 2002–41 

(Trustee-Underwriter affiliations), the 

purchased Securities would no longer 

be afforded coverage under the 

Underwriter Exemptions and the Plans 

would have been obligated to sell the 

Securities prior to December 31, 2008. 

The Applicant asserts that this is 

problematic for several reasons. First, as 

is customary for such transactions, the 

physical securities are not used in most 

cases. Rather, an electronic system, 

usually the Depository Trust Company’s 

electronic system, is utilized and the 

securities are in global form. In such 

cases, it is difficult (and may be 

impossible) to ascertain the beneficial 

ownership of the securities, meaning 


hsrobinson on DSK69SOYB1PROD with NOTICES
44394 Federal Register / Vol. 74, No. 166 / Friday, August 28, 2009 / Notices 

that it is not known whether Plans are 

owners and to what extent. The 

Applicant claims that identifying the 

affected Plans would be time consuming 

and expensive, and may be impossible 

to do with complete accuracy because of 

the book-entry system under which 

Securities were issued. As stated above, 

the Applicant represents that notice of 

this request for relief was posted on the 

Trustee’s Web site at the time this 

Application was submitted, which 

would be updated to reflect any action 

of the Department with respect to the 

Application. The Applicant has 

informed the Department that, as noted 

above, although Wells Fargo has been 

replaced as Trustee by March 31, 2009, 

Wells Fargo will remain as the securities 

administrator for any of the 

Securitizations on the Securitization 

List for which it was providing such 

services. Further, the Applicant has 

indicated that either Wells Fargo (in 

cases where Wells Fargo continues as 

securities administrator) or the 

replacement trustee (in all other cases) 

will continue to update its Web site 

concerning the status of the Proposed 

Amendment. In this regard, the 

Applicant also requests that the 

publication of the Proposed 

Amendment in the Federal Register 

serve as the Notice to Interested Persons 

for purposes of this submission. 

Second, and more importantly, The 

Applicant notes that the current 

disruption in the mortgage-backed 

securities market makes sales 

problematic, both in terms of finding 

buyers and establishing proper 

valuation. Granting the requested relief 

prevents these problems. The Applicant 

states further that the relief is of the 

same duration, six months, as that 

already provided by the Department for 

Trustee-Servicer affiliations, suggesting 

that the Department has already 

determined that this period is 

sufficiently brief to prevent serious 

conflicts of interest from arising. 

13. Wells Fargo requests that the 

relief, if granted, be made retroactive to 

December 31, 2008, the Acquisition 

Date. If the relief is granted 

retroactively, Plans would be able to 

retain their prior Securitization 

investments and to purchase Securities 

in the secondary market relying upon 

the Underwriter Exemptions once 

exemptive relief is granted, even if the 

transactions originally closed or will 

close prior to the date the final 

Amendment is published in the Federal 

Register, if granted by the Department. 

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 section 4975(c)(2) 

of the Code does not relieve a fiduciary 

or other party in interest or disqualified 

person from certain other provisions of 

the Act and the Code, including any 

prohibited transaction provisions to 

which the exemption does not apply 

and the general fiduciary responsibility 

provisions of section 404 of the Act, 

which require, among other things, a 

fiduciary to discharge his or her 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 

requirements of section 401(a) of the 

Code that the plan operate for the 

exclusive benefit of the employees of 

the employer maintaining the plan and 

their beneficiaries; 

2. Before an exemption can be granted 

under section 408(a) of the Act and 

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

Department must find that the 

exemption is administratively feasible, 

in the interest of the plans and of their 

participants and beneficiaries and 

protective of the rights of participants 

and beneficiaries of the plans; and 

3. The proposed amendment, if 

granted, will be supplemental to, and 

not in derogation of, any other 

provisions of the Act and/or the Code, 

including statutory or administrative 

exemptions and transitional rules. 

Furthermore, the fact that a transaction 

is subject to an administrative or 

statutory exemption is not dispositive of 

whether the transaction is in fact a 

prohibited transaction. 

Written Comments and Hearing 

Requests 

All interested persons are invited to 

submit written comments or requests for 

a hearing on the pending amendment to 

the address above, within the time 

frame set forth above, after the 

publication of this proposed 

amendment in the Federal Register. All 

comments will be made a part of the 

record. Comments received will be 

available for public inspection with the 

Application at the address set forth 

above. 

Proposed Exemption 

Based on the facts and representations 

set forth in the application, under the 

authority of section 408(a) of the Act 

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

in accordance with the procedures set 

forth in 29 CFR Part 2570, Subpart B (55 

FR 32836, August 10, 1990), the 

Department proposes to modify 

Prohibited Transaction Exemption (PTE) 

96–22, 61 FR 14828 (April 3, 1996), as 

amended by PTE 97–34, 62 FR 39021 

(July 21, 1997), PTE 2000–58, 65 FR 

67765 (November 13, 2000), PTE 2002– 

41, 67 FR 54487 (August 22, 2002) and 

PTE 2007–05, 72 FR 13130 (March 20, 

2007) as corrected at 72 FR 16385 (April 

4, 2007) (PTE 2007–05), (PTE 96–22) 

and PTE 2002–19, 67 FR 14979 (March 

28, 2002) as amended by PTE 2007–05, 

(PTE 2002–19). 

1. Subsection II.A.(4) of PTE 96–22 is 

amended to add a new subsection (c) 

and subsection II.A.(4) of PTE 2002–19 

is amended to add a new subsection (d) 

that read as follows: 

(c) [(d) of PTE 2002–19] Effective December 

31, 2008 through June 30, 2009, Wells Fargo, 

N.A., the Trustee, shall not be considered to 

be an Affiliate of any member of the 

Restricted Group solely as the result of the 

acquisition of Wachovia Corporation and its 

affiliates (Wachovia) by Wells Fargo & 

Company and its subsidiaries (WFC), the 

parent holding company of Wells Fargo, N.A. 

(the Acquisition), which occurred after the 

initial issuance of the Securities, provided 

that: 

(i) The Trustee, Wells Fargo, N.A., ceases 

to be an Affiliate of any member of the 

Restricted Group no later than June 30, 2009; 

(ii) Any member of the Restricted Group 

that is an Affiliate of the Trustee, Wells 

Fargo, N.A., did not breach any of its 

obligations under the Pooling and Servicing 

Agreement, unless such breach was 

immaterial and timely cured in accordance 

with the terms of such agreement, during the 

period from December 31, 2008 through the 

date the member of the Restricted Group 

ceased to be an Affiliate of the Trustee, Wells 

Fargo, N.A.; and 

(iii) In accordance with each Pooling and 

Servicing Agreement, the Trustee, Wells 

Fargo, N.A., appoints a co-trustee, which is 

not an Affiliate of Wachovia or any other 

member of the Restricted Group, no later 

than the earlier of (A) March 31, 2009 or (B) 

five business days after Wells Fargo, N.A. 

becomes aware of a conflict between the 

Trustee and any member of the Restricted 

Group that is an Affiliate of the Trustee. The 

co-trustee will be responsible for resolving 

any conflict between the Trustee and any 

member of the Restricted Group that has 

become an Affiliate of the Trustee as a result 

of the Acquisition; provided, that if the 

Trustee has resigned on or prior to March 31, 

2009 and no event described in clause (B) has 

occurred, no co-trustee shall be required. 

(iv) For purposes of this subsection 

II.A.(4)(c) [subsection II.A.(4)(d) of PTE 

2002–19], a conflict arises whenever (A) 

Wachovia, as a member of the Restricted 

Group, fails to perform in accordance with 

the timeframes contained in the relevant 

Pooling and Servicing Agreement following a 

request for performance from Wells Fargo, 

N.A., as Trustee, or (B) Wells Fargo, N.A., as 

Trustee, fails to perform in accordance with 

the timeframes contained in the relevant 

Pooling and Servicing Agreement following a 

request for performance from Wachovia, a 

member of the Restricted Group. 


hsrobinson on DSK69SOYB1PROD with NOTICES
Federal Register / Vol. 74, No. 166 / Friday, August 28, 2009 / Notices 44395 

The time as of which a conflict occurs is 

the earlier of: The day immediately following 

the last day on which compliance is required 

under the relevant Pooling and Servicing 

Agreement; or the day on which a party 

affirmatively responds that it will not comply 

with a request for performance. 

For purposes of this subsection II.A.(4)(c) 

[subsection II.A.(4)(d) of PTE 2002–19], the 

term ‘‘conflict’’ includes but is not limited to, 

the following: (1) Wachovia’s failure, as 

Sponsor, to repurchase a loan for breach of 

representation within the time period 

prescribed in the relevant Pooling and 

Servicing Agreement, following Wells Fargo, 

N.A.’s request, as Trustee, for performance; 

(2) Wachovia, as Sponsor, notifies Wells 

Fargo, N.A., as Trustee, that it will not 

repurchase a loan for breach of 

representation, following Wells Fargo, N.A.’s 

request that Wachovia repurchase such loan 

within the time period prescribed in the 

relevant Pooling and Servicing Agreement 

(the notification occurs prior to the 

expiration of the prescribed time period for 

the repurchase); and (3) Wachovia, as Swap 

Counterparty, makes or requests a payment 

based on a value of the London Interbank 

Offered Rate (LIBOR) that Wells Fargo, N.A., 

as Trustee, considers erroneous. 

2. The Definition of ‘‘Underwriter’’ at 

section III.C. of PTE 96–22 and PTE 

2002–19 is temporarily amended to 

include Wachovia and J.P. Morgan 

Securities Inc. for the period noted and 

reads: 

C. Effective December 31, 2008 through 

June 30, 2009, 

‘‘Underwriter’’ means: 

(1) Wachovia or J.P. Morgan Securities Inc.; 

(2) Any person directly or indirectly, 

through one or more intermediaries, 

controlling, controlled by or under common 

control with such entities; or 

(3) Any member of an underwriting 

syndicate or selling group of which such firm 

or person described in subsections III.C.(1) or 

(2) is a manager or co-manager with respect 

to the Securities. 

3. The Definition of ‘‘Sponsor’’ at 

section III.D. of PTE 96–22 and PTE 

2002–19 is temporarily extended to 

include language applicable to 

transactions on the Securitization List at 

section III.KK [or section III.LL. of PTE 

2002–19] and reads: 

D. ‘‘Sponsor’’ means: 

(1) The entity that organizes an Issuer by 

depositing obligations therein in exchange 

for Securities; or 

(2) Effective December 31, 2008 through 

June 30, 2009, for those transactions listed on 

the Securitization List at section III.KK. [at 

section III.LL. of PTE 2002–19], Wachovia. 

4. Section III. of PTE 96–22 is 

temporarily amended to add a new 

section III.KK and Section III. of PTE 

2002–19 is temporarily amended to add 

a new section III.LL. that read as 

follows: 

KK. [LL. of PTE 2002–19] Effective December 

31, 2008 through June 30, 2009, 

‘‘Securitization List’’ means: 

Name Issuance type Wachovia role Exemption 

First Union Commercial Mortgage Trust 

FUNB Series 1999–C1.

CMBS ...................... Master Servicer: First Union National Bank Sponsor: First 

Union National Bank Underwriter: First Union Capital Markets.

96–22 

Wachovia Bank Commercial Mortgage 

Trust, Series 2003–C6.

CMBS ...................... Master Servicer: Wachovia Bank, N.A. Sponsor: Wachovia 

Bank, N.A. Underwriter: Wachovia Capital Markets, LLC.

96–22 

Wachovia Bank Commercial Mortgage 

Trust, Series 2003–C8.

CMBS ...................... Master Servicer: Wachovia Bank, N.A. Sponsor: Wachovia 

Bank, N.A. Underwriter: Wachovia Capital Markets, LLC.

96–22 

Wachovia Bank Commercial Mortgage 

Trust, Series 2004–C10.

CMBS ...................... Master Servicer: Wachovia Bank, N.A. Sponsor: Wachovia 

Bank, N.A. Underwriter: Wachovia Capital Markets, LLC.

96–22 

Wachovia Bank Commercial Mortgage 

Trust, Series 2004–C11.

CMBS ...................... Master Servicer: Wachovia Bank, N.A. Sponsor: Wachovia 

Bank, N.A. Underwriter: Wachovia Capital Markets, LLC.

96–22 

Wachovia Bank Commercial Mortgage 

Trust, Series 2006–C23.

CMBS ...................... Master Servicer: Wachovia Bank, N.A. Sponsor: Wachovia 

Bank, N.A. Underwriter: Wachovia Capital Markets, LLC.

96–22 

Wachovia Bank Commercial Mortgage 

Trust, Series 2006–C25.

CMBS ...................... Master Servicer: Wachovia Bank, N.A. Sponsor: Wachovia 

Bank, N.A. Underwriter: Wachovia Capital Markets, LLC.

96–22 

Wachovia Bank Commercial Mortgage 

Trust, Series 2002–C01.

CMBS ...................... Master Servicer: Wachovia Bank, N.A. Sponsor: Wachovia 

Bank, N.A. Underwriter: First Union Securities, Inc.

96–22 

Wachovia Bank Commercial Mortgage 

Trust, Series 2002–C2.

CMBS ...................... Master Servicer: Wachovia Bank, N.A. Sponsor: Wachovia 

Bank, N.A. Underwriter: Wachovia Securities, Inc.

96–22 

Wachovia Bank Commercial Mortgage 

Trust, Series 2003—C3.

CMBS ...................... Master Servicer: Wachovia Bank, N.A. Sponsor: Wachovia 

Bank, N.A. Underwriter: Wachovia Securities, Inc.

96–22 

Wachovia Bank Commercial Mortgage 

Trust, Series 2003–C5.

CMBS ...................... Master Servicer: Wachovia Bank, N.A. Sponsor: Wachovia 

Bank, N.A. Underwriter: Wachovia Securities, Inc.

96–22 

Wachovia Bank Commercial Mortgage 

Trust, Series 2003–C7.

CMBS ...................... Master Servicer: Wachovia Bank, N.A. Sponsor: Wachovia 

Bank, N.A. Underwriter: Wachovia Securities, Inc.

96–22 

Wachovia Bank Commercial Mortgage 

Trust, Series 2004–C15.

CMBS ...................... Master Servicer: Wachovia Bank, N.A. Sponsor: Wachovia 

Bank, N.A. Underwriter: Wachovia Capital Markets, LLC.

96–22 

Banc of America Commercial Mortgage 

Trust, Series 2001–3.

CMBS ...................... Master Servicer: First Union National Bank Sponsor: First 

Union National Bank Underwriter: First Union Securities, Inc.

96–22 

First Union Commercial Mortgage Trust, 

Series 2001–C4.

CMBS ...................... Master Servicer: First Union National Bank Sponsor: First 

Union National Bank Underwriter: First Union Securities, Inc.

96–22 

Wachovia Bank Commercial Mortgage 

Trust, Series 2003–C4.

CMBS ...................... Master Servicer: Wachovia Bank, N.A. Sponsor: Wachovia 

Bank, N.A. Underwriter: Wachovia Securities, Inc.

96–22 

Wachovia Bank Commercial Mortgage 

Trust, Series 2003–C9.

CMBS ...................... Master Servicer: Wachovia Bank, N.A. Sponsor: Wachovia 

Bank, N.A. Underwriter: Wachovia Capital Markets, LLC.

96–22 

Wachovia Bank Commercial Mortgage 

Trust, Series 2005–C16.

CMBS ...................... Master Servicer: Wachovia Bank, N.A. Sponsor: Wachovia 

Bank, N.A. Underwriter: Wachovia Capital Markets, LLC.

96–22 

Wachovia Bank Commercial Mortgage 

Trust, Series 2005–C17.

CMBS ...................... Master Servicer: Wachovia Bank, N.A. Sponsor: Wachovia 

Bank, N.A. Underwriter: Wachovia Capital Markets, LLC.

96–22 

COBALT CMBS Commercial Mortgage 

Trust, Series 2006–C1.

CMBS ...................... Master Servicer: Wachovia Bank, N.A. Sponsor: Wachovia 

Bank, N.A. Underwriter: Wachovia Capital Markets, LLC.

96–22 

COBALT CMBS Commercial Mortgage 

Trust, Series 2007–C2.

CMBS ...................... Master Servicer: Wachovia Bank, N.A. Sponsor: Wachovia 

Bank, N.A. Underwriter: Wachovia Capital Markets, LLC.

96–22 

COBALT CMBS Commercial Mortgage 

Trust, Series 2007–C3.

CMBS ...................... Master Servicer: Wachovia Bank, N.A. Sponsor: Wachovia 

Bank, N.A. Underwriter: Wachovia Capital Markets, LLC.

96–22 


hsrobinson on DSK69SOYB1PROD with NOTICES
44396 Federal Register / Vol. 74, No. 166 / Friday, August 28, 2009 / Notices 

Name Issuance type Wachovia role Exemption 

Wachovia Bank Commercial Mortgage 

Trust, Series 2006–C27.

CMBS ...................... Master Servicer: Wachovia Bank, N.A. Sponsor: Wachovia 

Bank, N.A. Underwriter: Wachovia Capital Markets, LLC.

96–22 

Wachovia Bank Commercial Mortgage 

Trust, Series 2006–C29.

CMBS ...................... Master Servicer: Wachovia Bank, N.A. Sponsor: Wachovia 

Bank, N.A. Underwriter: Wachovia Capital Markets, LLC.

96–22 

Wachovia Bank Commercial Mortgage 

Trust, Series 2007–C32.

CMBS ...................... Master Servicer: Wachovia Bank, N.A. Swap Provider: 

Wachovia Bank, N.A. Sponsor: Wachovia Bank, N.A. Underwriter: Wachovia Capital Markets, LLC.

96–22 

Wachovia Bank Commercial Mortgage 

Trust, Series, 2005–C22.

CMBS ...................... Master Servicer: Wachovia Bank, N.A. Sponsor: Wachovia 

Bank, N.A. Underwriter: Wachovia Capital Markets, LLC.

96–22 

Wachovia Bank Commercial Mortgage 

Trust, Series 2007–C33.

CMBS ...................... Master Servicer: Wachovia Bank, N.A. Sponsor: Wachovia 

Bank, N.A. Underwriter: Wachovia Capital Markets, LLC.

96–22 

Wachovia Bank Commercial Mortgage 

Trust, Series 2007–C34.

CMBS ...................... Master Servicer: Wachovia Bank, N.A. Sponsor: Wachovia 

Bank, N.A. Underwriter: Wachovia Capital Markets, LLC.

96–22 

J.P. Morgan Chase Commercial Mortgage 

Securities Corp., Series 2002–C1.

CMBS ...................... Servicer: Wachovia Bank, N.A. Sponsor: Wachovia Bank, N.A. 

Underwriter: Wachovia Securities, Inc. (but note that PTE 

96–22 is not relied on in the disclosure document).

2002–19 

Wachovia Bank Commercial Mortgage 

Trust, Series 2006 WHALE 7.

CMBS ...................... Servicer: Wachovia Bank, N.A. Special Servicer: Wachovia 

Bank, N.A. Sponsor: Wachovia Bank, N.A. Underwriter: 

Wachovia Capital Markets, LLC.

96–22 

Wachovia Bank Commercial Mortgage 

Trust, Series 2005–C21.

CMBS ...................... Master Servicer: Wachovia Bank, N.A. Swap Provider: 

Wachovia Bank, N.A. Sponsor: Wachovia Bank, N.A. Underwriter: Wachovia Capital Markets, LLC.

96–22 

Wachovia Bank Commercial Mortgage 

Trust, Series 2005–C19.

CMBS ...................... Master Servicer: Wachovia Bank, N.A. Swap Provider: 

Wachovia Bank, N.A. Sponsor: Wachovia Bank, N.A. Underwriter: Wachovia Capital Markets, LLC.

96–22 

Wachovia Bank Commercial Mortgage 

Trust, Series 2006–C26.

CMBS ...................... Master Servicer: Wachovia Bank, N.A. Swap Provider: 

Wachovia Bank, N.A. Sponsor: Wachovia Bank, N.A. Underwriter: Wachovia Capital Markets, LLC.

96–22 

Wachovia Bank Commercial Mortgage 

Trust, Series 2006–C28.

CMBS ...................... Master Servicer: Wachovia Bank, N.A. Swap Provider: 

Wachovia Bank, N.A. Sponsor: Wachovia Bank, N.A. Underwriter: Wachovia Capital Markets, LLC.

96–22 

Wachovia Bank Commercial Mortgage 

Trust, Series 2007–C30.

CMBS ...................... Master Servicer: Wachovia Bank, N.A. Swap Provider: 

Wachovia Bank, N.A. Sponsor: Wachovia Bank, N.A. Underwriter: Wachovia Capital Markets, LLC.

96–22 

Wachovia Bank Commercial Mortgage 

Trust, Series 2007–C31.

CMBS ...................... Master Servicer: Wachovia Bank, N.A. Swap Provider: 

Wachovia Bank, N.A. Sponsor: Wachovia Bank, N.A. Underwriter: Wachovia Capital Markets, LLC.

96–22 

Wachovia Bank Commercial Mortgage 

Trust, Series 2007–ESH.

CMBS ...................... Master Servicer: Wachovia Bank, N.A. Special Servicer: 

Wachovia Bank, N.A. Swap Provider: Wachovia Bank, N.A. 

Sponsor: Wachovia Bank, N.A. Underwriter: Wachovia Capital Markets, LLC.

96–22 

Wachovia Bank Commercial Mortgage 

Trust, Series 2005–WHALE 6.

CMBS ...................... Servicer: Wachovia Bank, N.A. Special Servicer: Wachovia 

Bank, N.A. Sponsor: Wachovia Bank, N.A. Underwriter: 

Wachovia Capital Markets, LLC.

96–22 

First Union–Lehman Brothers Wells Fargo, 

Series 1998–C2.

CMBS ...................... Master Servicer: First Union National Bank Sponsor First 

Union National Bank Underwriter: First Union Capital Markets.

96–22 

Legend: CMBS = Commercial mortgage-backed securitizations 

The availability of this amendment, if 

granted, is subject to the express 

condition that the material facts and 

representations contained in the 

Application are true and complete and 

accurately describe all material terms of 

the transactions. In the case of 

continuing transactions, if any of the 

material facts or representations 

described in the Application change, the 

amendment will cease to apply as of the 

date of such change. In the event of any 

such change, an application for a new 

amendment must be made to the 

Department. 

Signed at Washington, DC, this 24th day of 

August 2009. 

Ivan L. Strasfeld, 

Director of Exemption Determinations, 

Employee Benefits Security Administration, 

U.S. Department of Labor. 

[FR Doc. E9–20736 Filed 8–27–09; 8:45 am] 

BILLING CODE 4510–29–P 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

[Application No. L–11482] 

Notice of Proposed Individual 

Exemption Involving The Alaska 

Laborers-Construction Industry 

Apprenticeship Training Trust (the 

Plan), Located in Seattle, WA 

AGENCY: Employee Benefits Security 

Administration, U.S. Department of 

Labor. 

ACTION: Notice of proposed individual 

exemption. 

SUMMARY: This document contains a 

notice of pendency before the 

Department of Labor (the Department) of 


hsrobinson on DSK69SOYB1PROD with NOTICES