19836 Federal Register / Vol. 77, No. 63 / Monday, April 2, 2012 / Notices 

1 77 FR 2798 (January 19, 2012). 

2For purposes of this exemption, references to 

ERISA section 406 should be read to refer as well 

to the corresponding provisions of Code section 

4975 and FERSA section 8477(c). 

3 49 FR 9494 (Mar. 13, 1984), as amended, 70 FR 

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

38837 (July 6, 2010). 4Solely for purposes of Section II.A.2. and 

Section II.A.3. of this exemption, no BlackRock 

Entity will be deemed to be an affiliate of an MPS. 

The Department is not making herein a 

determination as to whether any BlackRock Entity 

is an affiliate of an MPS under ERISA. 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

[Prohibited Transaction Exemption 2012– 

09; Exemption Application No. D–11673] 

Grant of Individual Exemption 

Involving BlackRock, Inc. and Its 

Investment Advisory, Investment 

Management and Broker-Dealer 

Affiliates and Their Successor Located 

in New York, NY 

AGENCY: Employee Benefits Security 

Administration, U.S. Department of 

Labor. 

ACTION: Grant of individual exemption. 

SUMMARY: This document contains an 

individual exemption from certain 

prohibited transaction restrictions of the 

Employee Retirement Income Security 

Act of 1974, as amended (ERISA), the 

Federal Employees’ Retirement System 

Act of 1986, as amended (FERSA), and 

the Internal Revenue Code of 1986, as 

amended (the Code). The transactions 

involve BlackRock, Inc. and its 

investment advisory, investment 

management and broker-dealer affiliates 

and their successors. The individual 

exemption affects plans for which 

BlackRock, Inc. and its investment 

advisory, investment management and 

broker-dealer affiliates and their 

successors serve as fiduciaries, and the 

participants and beneficiaries of such 

plans. 

DATES: Effective Date: The individual 

exemption will be effective March 31, 

2012, except that, with respect to 

Covered Transactions described in 

Section III.K. and S. of the individual 

exemption, the individual exemption 

will be effective October 1, 2011. 

SUPPLEMENTARY INFORMATION: On 

January 19, 2012, the Department of 

Labor (the Department) published a 

notice of proposed individual 

exemption from the restrictions of 

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

FERSA sections 8477(c)(1) and (c)(2) 

and the sanctions resulting from the 

application of Code section 4975, by 

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

Proposed Exemption).1 The Proposed 

Exemption was requested by BlackRock, 

Inc. and its investment advisory, 

investment management and brokerdealer affiliates and their successors 

pursuant to ERISA section 408(a), Code 

section 4975(c)(2) and FERSA section 

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

procedures set forth in 29 CFR Part 

2570, Subpart B (76 FR 66637, October 

27, 2011). Effective December 31, 1978, 

section 102 of the Reorganization Plan 

No. 4 of 1978, (43 FR 47713, October 17, 

1978) transferred the authority of the 

Secretary of the Treasury to issue 

exemptions of the type requested to the 

Secretary of Labor. Accordingly, this 

final individual exemption is being 

issued solely by the Department. 

For further information regarding the 

individual exemption, interested 

persons are encouraged to obtain copies 

of the exemption application file 

(Exemption Application No. D–11673) 

that the Department maintains with 

respect to the individual exemption. 

The complete application file, as well as 

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 Ave. NW., Washington, DC 

20210. 

For a more complete statement of the 

facts and representations supporting the 

Department’s decision to grant the 

individual exemption, refer to the notice 

of proposed exemption published on 

January 19, 2012, at 77 FR 2798. 

FOR FURTHER INFORMATION CONTACT: 

Brian Shiker, Office of Exemption 

Determinations, Employee Benefits 

Security Administration, U.S. 

Department of Labor, telephone (202) 

693–8552. 

Exemption 

Section I: Covered Transactions 

Generally 

Effective March 31, 2012 (or, in the 

case of Covered Transactions described 

in Section III.K or Section III.S. of this 

exemption, October 1, 2011), the 

restrictions of ERISA sections 406(a)(1) 

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

and (2), and the sanctions resulting from 

the application of Code section 4975, by 

reason of Code section 4975(c)(1),2 shall 

not apply to the Covered Transactions 

set forth in Section III and entered into 

on behalf of or with the assets of a 

Client Plan; provided, that (x) the 

generally applicable conditions of 

Section II of this exemption are 

satisfied, and, as applicable, the 

transaction-specific conditions set forth 

below in Sections III and IV of this 

exemption are satisfied, or (y) the 

Special Correction Procedure set forth 

in Section V of this exemption is 

satisfied. 

Section II: Generally Applicable 

Conditions 

A. Compliance With the QPAM 

Exemption 

The following conditions of Part I of 

Prohibited Transaction Exemption 84– 

14, as amended (PTE 84–14 or the 

QPAM Exemption),3 must be satisfied 

with respect to each Covered 

Transaction: 

1. The BlackRock Manager engaging 

in the Covered Transaction is a 

Qualified Professional Asset Manager; 

2. Except as set forth in Section III of 

this exemption, at the time of the 

Covered Transaction (as determined 

under Section VI(i) of the QPAM 

Exemption) with or involving an MPS, 

such MPS, or its affiliate (within the 

meaning of Section VI(c) of the QPAM 

Exemption),4 does not have the 

authority to: 

(a) Appoint or terminate the 

BlackRock Manager as a manager of the 

Client Plan assets involved in the 

Covered Transaction, or 

(b) negotiate on behalf of the Client 

Plan the terms of the management 

agreement with the BlackRock Manager 

(including renewals or modifications 

thereof) with respect to the Client Plan 

assets involved in the Covered 

Transaction; 

3.(a) Notwithstanding the foregoing, 

in the case of an investment fund (as 

defined in Section VI(b) of the QPAM 

Exemption) in which two or more 

unrelated Client Plans have an interest, 

and which is a Pooled Fund, a Covered 

Transaction with an MPS will be 

deemed to satisfy the requirements of 

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

assets of a Client Plan on behalf of 

which the MPS or its affiliate possesses 

the authority set forth in Section 

II.A.2.(a) and/or (b) above, and which 

are managed by the BlackRock Manager 

in the investment fund, when combined 

with the assets of other Client Plans 

established or maintained by the same 

employer (or an affiliate thereof 

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

QPAM Exemption) or by the same 

employee organization, on behalf of 

which the same MPS and/or its affiliates 

possess such authority and which are 

managed by the BlackRock Manager in 

the same investment fund, represent 

less than ten percent (10%) of the assets 

of the investment fund; and 


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5For the avoidance of doubt, all MPSs are 

excluded from the term ‘‘affiliate’’ for these 

purposes. 

6For the avoidance of doubt, all MPSs are 

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

(b) The conditions set forth in 

Subsections 14. and 15. of Section III.H., 

Subsections 2(e) and 3. of Section III.K., 

Section III.L.2.(b) and Subsections 1. 

and 2. of Section III.S. of this exemption 

shall be deemed satisfied if, with 

respect to the Covered Transaction in 

question, Section II.A.2. of this 

exemption is satisfied by reason of 

Section II.A.3.(a) of this exemption. 

4. The terms of the Covered 

Transaction are negotiated on behalf of 

the investment fund by, or under the 

authority and general direction of, the 

BlackRock Manager and either the 

BlackRock Manager or (so long as the 

BlackRock Manager retains full 

fiduciary responsibility with respect to 

the Covered Transaction) a property 

manager acting in accordance with 

written guidelines established and 

administered by the BlackRock 

Manager, makes the decision on behalf 

of the investment fund to enter into the 

Covered Transaction, provided that the 

Covered Transaction is not part of an 

agreement, arrangement or 

understanding designed to benefit the 

MPS; 

5. The Covered Transaction is not 

entered into with an MPS which is a 

party in interest or disqualified person 

with respect to any Client Plan whose 

assets managed by the BlackRock 

Manager, when combined with the 

assets of other Client Plans established 

or maintained by the same employer (or 

affiliate thereof described in Section 

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

the same employee organization, and 

managed by the BlackRock Manager, 

represent more than twenty percent 

(20%) of the total client assets managed 

by the BlackRock Manager at the time of 

the Covered Transaction; 

6. At the time the Covered 

Transaction is entered into, and at the 

time of any subsequent renewal or 

modification thereof that requires the 

consent of the BlackRock Manager, the 

terms of the Covered Transaction are at 

least as favorable to the investment fund 

as the terms generally available in arm’s 

length transactions between unrelated 

parties; and 

7. Neither the BlackRock Manager nor 

any affiliate thereof (as defined in 

Section VI(d) of the QPAM Exemption),5

nor any owner, direct or indirect, of a 

five percent (5%) or more interest in the 

BlackRock Manager 6 is a person who 

within the ten (10) years immediately 

preceding the Covered Transaction has 

been either convicted or released from 

imprisonment, whichever is later, as a 

result of: any felony involving abuse or 

misuse of such person’s employee 

benefit plan position or employment, or 

position or employment with a labor 

organization; any felony arising out of 

the conduct of the business of a broker, 

dealer, investment adviser, bank, 

insurance company or fiduciary; income 

tax evasion; any felony involving the 

larceny, theft, robbery, extortion, 

forgery, counterfeiting, fraudulent 

concealment, embezzlement, fraudulent 

conversion, or misappropriation of 

funds or securities; conspiracy or 

attempt to commit any such crimes or 

a crime in which any of the foregoing 

crimes is an element; or any other crime 

described in ERISA section 411. For 

purposes of this section, a person shall 

be deemed to have been ‘‘convicted’’ 

from the date of the judgment of the trial 

court, regardless of whether that 

judgment remains under appeal. 

B. Compensation 

None of the employees of a BlackRock 

Manager receives any compensation that 

is based on any Covered Transaction 

having taken place between Client Plans 

and any of the MPSs (as opposed to 

with another institution that is not an 

MPS). The fact that a specific Covered 

Transaction occurred with an MPS as 

opposed to a non-MPS counterparty is 

ignored by BlackRock and BlackRock 

Managers for compensation purposes. 

None of the employees of BlackRock or 

a BlackRock Manager receive any 

compensation from BlackRock or a 

BlackRock Manager which consists of 

equity Securities issued by an MPS, 

which fluctuates in value based on 

changes in the value of equity Securities 

issued by an MPS, or which is otherwise 

based on the financial performance of 

an MPS independent of BlackRock’s 

performance, provided that this 

condition shall not fail to be met 

because the compensation of an 

employee of a BlackRock Manager 

fluctuates with the value of a broadlybased index which includes equity 

Securities issued by an MPS. 

C. Exemption Policies and Procedures 

BlackRock adopts and implements 

Exemption Policies and Procedures 

(EPPs) which address each of the types 

of Covered Transactions and which are 

designed to achieve the goals of: (1) 

Compliance with the terms of the 

exemption, (2) ensuring BlackRock’s 

decision-making with respect to the 

Covered Transactions on behalf of 

Client Plans with MPSs or BlackRock 

Entities is done in the interests of the 

Client Plans and their participants and 

beneficiaries, and (3) to the extent 

possible, verifying that the terms of such 

Covered Transactions are at least as 

favorable to the Client Plans as the 

terms generally available in arm’s length 

transactions with unrelated parties. The 

EPPs are developed with the 

cooperation of both the Exemption 

Compliance Officer (ECO) and the 

Independent Monitor (IM), and such 

EPPs are subject to the approval of the 

IM. The EPPs need not address 

transactions which are not within the 

definition of the term Covered 

Transactions. 

Transgressions of the EPPs which do 

not result in Violations require 

correction only if the amount involved 

in the transgression and the extent of 

deviation from the EPPs is material, 

taking into account the amount of Client 

Plan assets affected by such 

transgressions (EPP Corrections). The 

ECO will make a written determination 

as to whether such transgressions 

require EPP Correction, and, if the ECO 

determines an EPP Correction is 

required, the ECO will provide written 

notice to the IM of the EPP Correction. 

The ECO will provide summaries for the 

IM of any such EPP Corrections as part 

of the quarterly report referenced in 

Section II.D.11. 

D. Exemption Compliance Officer 

BlackRock appoints an Exemption 

Compliance Officer (ECO) with respect 

to the Covered Transactions. If the ECO 

resigns or is removed, BlackRock shall 

appoint a successor ECO within a 

reasonable period of time, not to exceed 

thirty (30) days, which successor shall 

be subject to the affirmative written 

approval of the IM. With respect to the 

ECO, the following conditions shall be 

met: 

1. The ECO is a legal professional 

with at least ten years of experience and 

extensive knowledge of the regulation of 

financial services and products, 

including under ERISA and FERSA; 

2. A committee made up exclusively 

of members of the BlackRock Board of 

Directors (the Board) who are 

independent of BlackRock and the 

MPSs determines the ECO’s 

compensation package, with input from 

the general counsel of BlackRock; the 

ECO’s compensation is not set by 

BlackRock business unit heads, and 

there is no direct or indirect input 

regarding the identity or compensation 

of the ECO from any MPS; 

3. The ECO’s compensation is not 

based on performance of any BlackRock 

Entity or MPS, although a portion of the 

ECO’s compensation may be provided 

in the form of BlackRock stock or stock 

equivalents; 


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4. The ECO can be terminated by 

BlackRock only with the approval of the 

IM; 

5. The EPPs prohibit any officer, 

director or employee of BlackRock or 

any MPS or any person acting under 

such person’s direction from directly or 

indirectly taking any action to coerce, 

manipulate, mislead, or fraudulently 

influence the ECO or any member of the 

ECO Function in the performance of his 

or her duties; 

6. The ECO is responsible for 

monitoring Covered Transactions and 

shall determine whether Violations have 

occurred, and the appropriate correction 

thereof, consistent with the 

requirements of Section V of this 

exemption; 

7. If the ECO determines a Violation 

has occurred, the ECO must determine 

why it occurred and what steps should 

be taken to avoid such a Violation in the 

future (e.g., additional training, 

additional procedures, additional 

monitoring, or additional and/or 

changed processes or systems); 

8. The ECO is responsible for 

monitoring and overseeing the 

implementation of the EPPs and 

carrying out such other responsibilities 

stipulated or described in Section III of 

this exemption. The ECO may delegate 

such responsibilities to the ECO 

Function, but the ECO will remain 

responsible for monitoring and 

overseeing the ECO Function’s 

implementation of the EPPs. When 

appropriate, the ECO will recommend 

changes to the EPPs to BlackRock and 

the IM. The ECO will consult with the 

IM regarding the need for, timing, and 

form of EPP Corrections; 

9. The ECO, with the assistance of the 

ECO Function, carries out the 

responsibilities required of the ECO 

described in: (a) the definition of 

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

respect to loans of Securities to an MPS 

in Section III.L. of this exemption; 

10. The ECO, with the assistance of 

the ECO Function, monitors Covered 

Transactions and situations resulting 

from Covered Transactions with or 

involving an MPS with respect to 

which, because of the investment of the 

MPS in BlackRock, an action or inaction 

on the part of a BlackRock Manager 

might be thought to be motivated by an 

interest which may affect the exercise of 

such BlackRock Manager’s best 

judgment as a fiduciary. If a situation is 

identified by the ECO which poses the 

potential for a conflict, as specified in 

Section III of this exemption, the ECO 

shall consult with the IM, or refer 

decision-making to the discretion of the 

IM; 

11. The ECO provides a quarterly 

report to the IM summarizing the 

material activities of the ECO for the 

preceding quarter and setting forth any 

Violations discovered during the quarter 

and actions taken to correct such 

Violations. With respect to Violations, 

the ECO report details changes to 

process put in place to guard against a 

substantially similar Violation occurring 

again, and recommendations for 

additional training, additional 

procedures, additional monitoring, or 

additional and/or changed processes or 

systems or training changes and 

BlackRock management’s actions on 

such recommendations. In connection 

with providing the quarterly report for 

the second quarter and fourth quarter of 

each year, upon the request of the IM, 

the ECO and the IM shall meet in person 

to review the content of the report. 

Other members of the ECO Function 

may attend such meetings at the request 

of either the ECO or the IM; 

12. In each quarterly report, the ECO 

certifies in writing to his or her 

knowledge that (a) the quarterly report 

is accurate; (b) BlackRock’s compliance 

program is working in a manner which 

is reasonably designed to prevent 

Violations; (c) any Violations discovered 

during the quarter and the related 

corrections taken to date have been 

identified in the report; and (d) 

BlackRock has complied with the EPPs 

in all material respects; 

13. No less frequently than annually, 

the ECO certifies to the IM as to whether 

BlackRock has provided the ECO with 

adequate resources, including, but not 

limited to, adequate staffing of the ECO 

Function, and, in connection with the 

quarterly report for the fourth quarter of 

each year, the ECO shall identify to the 

IM those BlackRock Managers that 

relied upon this exemption during the 

prior year and those that the ECO 

reasonably anticipates relying on this 

exemption during the current year; and 

14. The ECO or ECO Function 

provides any further information 

regarding Covered Transactions that is 

reasonably requested by the IM. 

E. Independent Monitor 

BlackRock retains an Independent 

Monitor (IM) with respect to the 

Covered Transactions. If the IM resigns 

or is removed, BlackRock shall appoint 

a successor IM within a reasonable 

period of time, not to exceed thirty (30) 

days. The IM: 

1. Agrees in writing to serve as IM, 

and he or she is independent within 

meaning of Section VI.TT.; 

2. Approves the ECO selected by 

BlackRock, and as part of the approval 

process and annually thereafter 

approves in general terms the 

reasonableness of the ECO’s 

compensation, taking into account such 

information as the IM may request of 

BlackRock and which BlackRock must 

supply, and approves any termination of 

the ECO by BlackRock; 

3. Assists in the development of, and 

the granting of written approval of, the 

EPPs and any material alterations of the 

EPPs by determining that they are 

reasonably designed to achieve the goals 

of (a) compliance with the terms of the 

exemption, (b) ensuring BlackRock’s 

decision-making with respect to 

Covered Transactions on behalf of 

Client Plans with MPSs or BlackRock 

Entities is done in the interests of the 

Client Plans and their respective 

participants and beneficiaries and, (c) 

requiring, to the extent possible, 

verification that the terms of such 

Covered Transactions are at least as 

favorable to the Client Plans as the 

terms generally available in comparable 

arm’s length transactions with unrelated 

parties; 

4. Consults with the ECO regarding 

the need for, timing and form of any 

EPP Corrections. The IM has the 

responsibilities with respect to 

corrections of Violations, as set forth in 

Section V of this exemption. In response 

to EPP Corrections or Violations, the IM 

considers whether, and must have the 

authority, to require further sampling, 

testing or corrective action if necessary; 

5. Exercises discretion for Client Plans 

in situations specified in Section III of 

this exemption where BlackRock 

Managers may be thought to have 

conflicts; 

6. Performs certain monitoring 

functions described in Section III, and 

carries out the responsibilities required 

of the IM, as set forth in the definition 

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

respect to loans of Securities to an MPS 

as set forth in Section III.L. of this 

exemption, and carries out such other 

responsibilities stipulated in Section III 

of this exemption; 

7. Reviews the quarterly reports of the 

ECO, obtains and reviews representative 

samples of the data underlying the 

quarterly reports of the ECO, and, if the 

IM deems it appropriate, obtains 

additional factual information on either 

an ad hoc basis or on a systematic basis; 

8. Reviews the certifications of the 

ECO as to whether (a) the quarterly 

report is accurate; (b) BlackRock’s 

compliance program is working in a 

manner which is reasonably designed to 

prevent Violations; (c) any Violations 

discovered during the quarter and the 

related corrections taken to date have 

been identified in the report; (d) 

BlackRock has complied with the EPPs 


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in all material respects; and (e) 

BlackRock has provided the ECO with 

adequate resources, including, but not 

limited to, adequate staffing of the ECO 

Function; 

9. Determines, on the basis of the 

information supplied to the IM by 

BlackRock and the ECO or the ECO 

Function, whether there has occurred a 

pattern or practice of insufficient 

diligence in adhering to the EPPs and/ 

or the conditions of the exemption, and 

if such a determination is made, reports 

the same to the Department, and 

informs BlackRock and the ECO of any 

such report; 

10. Determines whether the purchases 

of equity Securities issued by an MPS 

on behalf of Client Plans that are Other 

Accounts or Funds by a BlackRock 

Manager has had a positive material 

impact on the market price for such 

Securities, notwithstanding any volume 

limitations imposed by Section III.R. of 

the exemption and/or imposed by the 

IM with respect to such equity 

Securities. The IM makes this 

determination based upon its review of 

the relevant monthly reports required by 

the exemption with respect to such 

Covered Transactions provided by the 

ECO and publicly available information 

materially related to the trading of the 

Securities of an MPS on its primary 

listing exchange (or market); 

11. Issues an annual compliance 

report, to be timely delivered to (i) the 

Chairman of the Board, (ii) the Chief 

Executive Officer of BlackRock and (iii) 

the General Counsel of BlackRock. The 

annual compliance report shall be based 

on a review of the EPPs, the quarterly 

reports provided by the ECO, any 

transactions reviewed by the IM as well 

as any additional information the IM 

requests from BlackRock, and certifying 

to each of the following (or describing 

any exceptions thereto) that: 

(a) The EPPs are reasonably designed 

to achieve the goals of (i) compliance 

with the terms of the exemption, (ii) 

ensuring BlackRock’s decision-making 

with respect to Covered Transactions on 

behalf of Client Plans with MPSs or 

BlackRock Entities is done in the 

interests of the Client Plans and the 

respective participants and 

beneficiaries, and (iii) requiring to the 

extent possible, verification that the 

terms of any Covered Transaction are at 

least as favorable to Client Plans as the 

terms generally available in comparable 

arm’s length transactions with unrelated 

parties; 

(b) The EPPs and the other terms of 

the exemption were complied with, 

with any material exceptions duly 

noted; 

(c) The IM has made the 

determination referred to in Section 

II.E.9. and the results of that 

determination; 

(d) BlackRock has provided the ECO 

with adequate resources, including but 

not limited to adequate staffing of the 

ECO Function; and 

(e) The compensation package for the 

ECO for the prior year is reasonable; 

12. The annual compliance report of 

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

shall contain a summary of Violations 

and a summary of any corrections of 

Violations required by the IM and/or the 

ECO at any time during the prior year. 

In addition, the IM further certifies that 

BlackRock correctly implemented the 

prescribed corrections, based in part on 

certification from the ECO; and 

13. The annual compliance report of 

the IM shall also be timely delivered by 

the IM to the chief executive officer, the 

general counsel and the members of the 

board of directors of each of the 

BlackRock Managers identified to the 

IM by the ECO or ECO Function as 

having relied upon this exemption 

during the prior year and those that the 

ECO reasonably anticipates will be 

relying on this exemption during the 

current year. The copies of the 

compliance report described in this 

Section II.E.13. shall be accompanied by 

a cover letter from the IM calling the 

attention of the recipients to any 

Violations, material exceptions to 

compliance with the EPPs, or other 

shortfalls in compliance with the 

exemption to assist such officers and 

directors in carrying out their respective 

responsibilities. 

Section III: Covered Transactions 

A. Purchases and Holdings by 

BlackRock Managers of Fixed Income 

Obligations Issued by an MPS in an 

Underwriting on Behalf of Client Plans 

Invested in an Index Account or Fund, 

or in a Model-Driven Account or Fund 

Relief under Section I of this 

exemption is available for a purchase 

and holding by BlackRock Managers of 

Fixed Income Obligations issued by an 

MPS in an underwriting on behalf of 

Client Plans for an Index Account or 

Fund, or a Model-Driven Account or 

Fund, provided that: 

1. Such purchase is for the sole 

purpose of maintaining quantitative 

conformity with the weight of such 

Securities prescribed by the relevant 

Index, for Index Accounts or Funds, or 

the weight of such Securities prescribed 

by the relevant Model, for Model-Driven 

Accounts or Funds; and such purchase 

is reasonably calculated not to exceed 

the purchase amount necessary for such 

Model or quantitative conformity by 

more than a de minimis amount; 

2. Such purchase is not made from 

any MPS; 

3. No BlackRock Entity is in the 

selling syndicate; 

4. After purchase, the responsible 

BlackRock Manager notifies the ECO if 

circumstances arise in which an action 

or inaction on the part of the BlackRock 

Manager regarding an MPS Fixed 

Income Obligation so acquired might be 

thought to be motivated by an interest 

which may affect the exercise of such 

BlackRock Manager’s best judgment as a 

fiduciary, and complies with decisions 

of the ECO regarding the taking, or the 

refraining from taking, of actions in 

such circumstances; and 

5. After purchase, any decision 

regarding conversion of an MPS Fixed 

Income Obligation into equity in the 

MPS is made by the IM. 

B. Purchase and Holding by BlackRock 

Managers of Fixed Income Obligations 

Issued by an MPS in an Underwriting on 

Behalf of Client Plans Invested in an 

Other Account or Fund 

Relief under Section I of this 

exemption is available for a purchase 

and holding by BlackRock Managers of 

Fixed Income Obligations issued by an 

MPS in an underwriting on behalf of 

Client Plans invested in an Other 

Account or Fund provided that: 

1. The conditions of Section IV.A. of 

this exemption are satisfied, except that 

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

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

Fixed Income Obligations at the time of 

purchase must be rated in one of the 

three highest rating categories by a 

Rating Organization and none of the 

Rating Organizations may rate the Fixed 

Income Obligations lower than in the 

third highest rating category; 

2. Such purchase is not made from an 

MPS; 

3. No BlackRock Entity is in the 

selling syndicate; 

4. After purchase, the responsible 

BlackRock Manager notifies the ECO if 

circumstances arise in which an action 

or inaction on the part of the BlackRock 

Manager regarding an MPS Fixed 

Income Obligation so acquired might be 

thought to be motivated by an interest 

which may affect the exercise of such 

BlackRock Manager’s best judgment as a 

fiduciary, and complies with decisions 

of the ECO regarding the taking, or the 

refraining from taking, of actions in 

such circumstances; and 

5. After purchase, any decision 

regarding conversion of an MPS Fixed 

Income Obligation into equity in the 

MPS is made by the IM. 


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C. Certain Transactions in the 

Secondary Market by BlackRock 

Managers of Fixed Income Obligations 

including Fixed Income Obligations 

Issued by and/or Traded With an MPS, 

and/or Under Which an MPS Has Either 

an Ongoing Function or Can Potentially 

Incur Liability 

Relief under Section I of this 

exemption is available for a purchase or 

sale in the secondary market or the 

holding by BlackRock Managers on 

behalf of Client Plans of (i) Fixed 

Income Obligations issued by an MPS, 

(ii) Fixed Income Obligations issued by 

a third party or an MPS and purchased 

from or sold to an MPS, and/or (iii) 

Fixed Income Obligations under which 

an MPS has either an ongoing function 

or can potentially incur liability, 

provided that: 

1. If the Fixed Income Obligations are 

purchased from or sold to an MPS, it is 

as a result of the Three Quote Process. 

2. With respect to Fixed Income 

Obligations that are issued by an MPS 

and are purchased and held by a 

BlackRock Manager for a Client Plan— 

(a) After purchase, the responsible 

BlackRock Manager notifies the ECO if 

circumstances arise in which an action 

or inaction on the part of the BlackRock 

Manager regarding an MPS Fixed 

Income Obligation so acquired might be 

thought to be motivated by an interest 

which may affect the exercise of such 

BlackRock Manager’s best judgment as a 

fiduciary, and complies with the 

decisions of the ECO regarding the 

taking, or the refraining from taking, of 

actions in such circumstances; 

(b) After purchase, any decision 

regarding conversion of an MPS Fixed 

Income Obligation into equity in the 

MPS is made by the IM; and 

(c) If purchased for an Index Account 

or Fund, or a Model-Driven Account or 

Fund, such purchase is for the sole 

purpose of maintaining quantitative 

conformity with the weight of such 

Securities prescribed by the relevant 

Index, for Index Accounts or Funds, or 

the weight of such Securities prescribed 

by the relevant Model, for Model-Driven 

Accounts or Funds and such purchase 

is reasonably calculated not to exceed 

the purchase amount necessary for such 

Model or quantitative conformity by 

more than a de minimis amount. 

3. With respect to Fixed Income 

Obligations (whether or not issued by an 

MPS) held by a BlackRock Manager for 

a Client Plan under which an MPS has 

an ongoing function, such as servicing 

of collateral for asset-backed debt, or the 

potential for liability, such as under 

representations or warranties made by 

an MPS with respect to collateral for 

such asset-backed debt which the MPS 

originated, the taking of or refraining 

from taking any action by the 

responsible BlackRock Manager which 

could have a material positive or 

negative effect upon the MPS is decided 

upon by the ECO. 

4. With respect to any Fixed Income 

Obligation acquired under this Section 

III.C. which is a guaranteed 

governmental mortgage pool certificate 

within the meaning of 29 CFR 2510.3– 

101(i) which is accompanied by an 

implicit U.S. Government guarantee as 

opposed to an explicit U.S. Government 

guarantee, (a) the BlackRock Manager 

initiating a purchase of such Securities 

makes a determination that such 

Securities are of substantially similar 

credit quality as guaranteed 

governmental mortgage pool certificates 

accompanied by an explicit U.S. 

Government guarantee, (b) the ECO (in 

regular consultation with and under the 

supervision of the IM) monitors the 

credit spread between such implicitly 

and explicitly guaranteed certificates, 

and (c) each of the ECO and the IM 

(independently) has the authority and 

responsibility to determine whether 

purchases of implicitly guaranteed 

certificates should not be permitted due 

to such credit spread, and such 

authority and responsibility is reflected 

in the EPPs. 

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

Asset-Backed Securities are not Fixed 

Income Obligations. 

D. Purchase in an Underwriting and 

Holding by BlackRock Managers of 

Fixed Income Obligations Issued by a 

Third Party When an MPS Is 

Underwriter, in Either a Manager or a 

Member Capacity, and/or Under Which 

an MPS Has Either an Ongoing Function 

or Can Potentially Incur Liability 

Relief under Section I of this 

exemption is available for the purchase 

and holding by BlackRock Managers of 

Fixed Income Obligations issued by 

third parties in an underwriting when 

an MPS is an underwriter, in either a 

manager or a member capacity, and/or 

Fixed Income Obligations under which 

an MPS has either an ongoing function 

or can potentially incur liability, 

provided that: 

1. The conditions of Section IV.A. are 

satisfied. 

2. Such purchase is not made from an 

MPS. 

3. No BlackRock Entity is in the 

selling syndicate. 

4. With respect to Fixed Income 

Obligations under which an MPS has 

either an ongoing function, such as debt 

trustee, servicer of collateral for assetbacked debt, or the potential for 

liability, such as under representations 

or warranties made by an MPS with 

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

the taking of or refraining from taking 

any action by the responsible BlackRock 

Manager which could have a material 

positive or negative effect upon the MPS 

is decided upon by the ECO. 

5. With respect to any Fixed Income 

Obligation acquired under this Section 

III.D. which is a guaranteed 

governmental mortgage pool certificate 

within the meaning of 29 CFR 2510.3– 

101(i) which is accompanied by an 

implicit U.S. Government guarantee as 

opposed to an explicit U.S. Government 

guarantee, (a) the BlackRock Manager 

initiating a purchase of such Securities 

makes a determination that such 

Securities are of substantially similar 

credit quality as guaranteed 

governmental mortgage pool certificates 

accompanied by an explicit U.S. 

Government guarantee, (b) the ECO (in 

regular consultation with and under the 

supervision of the IM) monitors the 

credit spread between such implicitly 

and explicitly guaranteed certificates, 

and (c) each of the ECO and the IM 

(independently) has the authority and 

responsibility to determine whether 

purchases of implicitly guaranteed 

certificates should not be permitted due 

to such credit spread, and such 

authority and responsibility is reflected 

in the EPPs. 

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

Asset-Backed Securities are not Fixed 

Income Obligations. 

E. Purchase in an Underwriting and 

Holding by BlackRock Managers of 

Asset-Backed Securities, When an MPS 

Is an Underwriter, in the Capacity as 

Either a Manager or a Member of the 

Selling Syndicate, Trustee, or, in the 

Case of Asset-Backed Securities Which 

Are CMBS, Servicer 

Relief under Section I of this 

exemption is available for the purchase 

and holding by BlackRock Managers of 

Asset-Backed Securities issued in an 

underwriting where an MPS is (i) an 

underwriter, in the capacity as either a 

manager or a member of the selling 

syndicate, (ii) trustee, or (iii) solely in 

the case of Asset-Backed Securities 

which are CMBS, serves as servicer of 

a trust that issued such CMBS, provided 

that: 

1. The conditions of Section IV.A. are 

satisfied, except that (a) for purposes of 

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

Securities at the time of purchase must 

be rated in one of the three highest 

rating categories by a Rating 

Organization and none of the Rating 

Organizations may rate the AssetVerDate Mar<15>2010 19:25 Mar 30, 2012 Jkt 226001 PO 00000 Frm 00006 Fmt 4701 Sfmt 4703 E:\FR\FM\02APN2.SGM 02APN2

TKELLEY on DSK3SPTVN1PROD with NOTICES2
Federal Register / Vol. 77, No. 63 / Monday, April 2, 2012 / Notices 19841 

Backed Securities lower than the third 

highest rating category, (b) in the case of 

Asset-Backed Securities which are 

CMBS and for which the MPS is 

servicer, the conditions of Section IV.B. 

are satisfied instead of the conditions of 

Section IV.A., and (c) if an MPS is an 

underwriter and an MPS is a servicer as 

described in clause (b), the conditions of 

both Section IV.A., as modified by 

Section III.E.1.(a), and Section IV.B. 

must be satisfied; 

2. Such purchase is not made from an 

MPS; 

3. No BlackRock Entity is in the 

selling syndicate; 

4. In the case of Asset-Backed 

Securities with respect to which an MPS 

has either an ongoing function, such as 

trustee, servicer of collateral for CMBS, 

or the potential for liability, such as 

under representations or warranties 

made by an MPS with respect to 

collateral for CMBS which collateral the 

MPS originated, the taking of or 

refraining from taking of any action by 

a responsible BlackRock Manager which 

could have a material positive or 

negative effect upon the MPS is decided 

upon by the ECO; and 

5. The purchase meets the conditions 

of an applicable Underwriter 

Exemption. 

F. Purchase and Holding by BlackRock 

Managers of Equity Securities Issued by 

an Entity Which Is Not an MPS and Is 

Not a BlackRock Entity, in an 

Underwriting When an MPS Is an 

Underwriter, in Either a Manager or a 

Member Capacity 

Relief under Section I of this 

exemption is available for the purchase 

and holding by BlackRock Managers of 

equity Securities issued by an entity 

which is not an MPS and which is not 

a BlackRock Entity in an underwriting 

when an MPS is an underwriter, in 

either a manager or a member capacity, 

provided that: 

1. The conditions of Section IV.A. are 

satisfied; 

2. Such purchase is not made from an 

MPS; 

3. No BlackRock Entity is in the 

selling syndicate; and 

4. The Securities are not Asset-Backed 

Securities. 

G. Purchase and Sale by BlackRock 

Managers of Asset-Backed Securities in 

the Secondary Market, From or to an 

MPS, and/or When an MPS Is Sponsor, 

Servicer, Originator, Swap 

Counterparty, Liquidity Provider, 

Trustee or Insurer, and the Holding 

Thereof 

Relief under Section I of this 

exemption is available for a sale of 

Asset-Backed Securities by a BlackRock 

Manager to an MPS, or the purchase of 

Asset-Backed Securities by BlackRock 

Managers from an MPS and the holding 

thereof, and/or any such purchase or 

sale in the secondary market or holding 

when an MPS is a sponsor, a servicer, 

an originator, a swap counterparty, a 

liquidity provider, a trustee or an 

insurer, provided that: 

1. If the Asset-Backed Securities are 

purchased from or sold to an MPS, the 

purchase or sale is as a result of the 

Three Quote Process. 

2. Regardless of from whom the 

BlackRock Manager purchases the 

Asset-Backed Securities, the purchase 

and holding of the Asset-Backed 

Security otherwise meets the conditions 

of an applicable Underwriter 

Exemption. 

3. Regardless of from whom the 

BlackRock Manager purchased the 

Asset-Backed Securities, if an MPS is, 

with respect to such Asset-Backed 

Securities, a sponsor, servicer, 

originator, swap counterparty, liquidity 

provider, insurer or trustee, as those 

terms are utilized or defined in the 

Underwriter Exemptions, and 

circumstances arise in which the taking 

of or refraining from taking of any action 

by the responsible BlackRock Manager 

could have a material positive or 

negative effect upon the MPS, the taking 

of or refraining from taking of any such 

action is decided upon by the ECO. 

H. Repurchase Agreements When an 

MPS Is the Seller 

Section I of this exemption applies to 

an investment by a BlackRock Manager 

of Client Plan assets which involves the 

purchase or other acquisition, holding, 

sale, exchange or redemption by or on 

behalf of a Client Plan of a repurchase 

agreement (or Securities or other 

instruments under cover of a repurchase 

agreement) in which the seller of the 

underlying Securities or other 

instruments is an MPS which is a bank 

supervised by the United States or a 

State, a broker-dealer registered under 

the 1934 Act, or a dealer who makes 

primary markets in Securities of the 

United States government or any agency 

thereof, or in banker’s acceptances, and 

reports daily to the Federal Reserve 

Bank of New York its positions with 

respect to these obligations, provided 

that each of the following conditions are 

satisfied: 

1. The repurchase agreement is 

embodied in, or is entered into pursuant 

to a written agreement, and such written 

agreement is a standardized industry 

form; 

2. The repurchase agreement has a 

term of one year or less; 

3. The Client Plan receives interest no 

less than that which it would receive in 

a comparable arm’s length transaction 

with an unrelated party; 

4. The Client Plan receives Securities, 

banker’s acceptances, commercial paper 

or certificates of deposit having a market 

value equal to not less than one 

hundred percent (100%) of the purchase 

price paid by the Client Plan; 

5. Upon expiration of the repurchase 

agreement and return of the Securities 

or other instruments to the seller, the 

seller transfers to the Client Plan an 

amount equal to the purchase price plus 

the appropriate interest; 

6. The Securities, banker’s 

acceptances, commercial paper or 

certificates of deposit received by the 

Client Plan: 

(a) Could be acquired directly by the 

Client Plan in a transaction not covered 

by this Section III.H. without violating 

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

407(a); and, 

(b) If the Securities are subject to the 

provisions of the 1933 Act, they are 

obligations that are not ‘‘restricted 

securities’’ within the meaning of Rule 

144 under the 1933 Act. 

7. If the market value of the 

underlying Securities or other 

instruments falls below the purchase 

price at any time during the term of the 

agreement, the Client Plan may, under 

the written agreement required by 

Section III.H.1., require the MPS seller 

to deliver, by the close of business on 

the following business day (as such term 

is defined for purposes of the relevant 

written agreement), additional 

Securities or other instruments the 

market value of which, together with the 

market value of Securities or other 

instruments previously delivered or 

sold to the Client Plan under the 

repurchase agreement, equals at least 

one hundred percent (100%) of the 

purchase price paid by the Client Plan. 

8. If the MPS seller does not deliver 

additional Securities or other 

instruments as required above, the 

Client Plan may terminate the 

agreement, and, if upon termination or 

expiration of the agreement, the amount 

owing is not paid to the Client Plan, the 

Client Plan may sell the Securities or 

other instruments and apply the 

proceeds against the obligations of the 

MPS seller under the agreement, and 

against any expenses associated with 

the sale. 

9. The MPS seller agrees to furnish 

the Client Plan with the most recent 

available audited statement of its 

financial condition as well as its most 

recent available unaudited statement, 

agrees to furnish additional audited and 

unaudited statements of its financial 


TKELLEY on DSK3SPTVN1PROD with NOTICES2
19842 Federal Register / Vol. 77, No. 63 / Monday, April 2, 2012 / Notices 

condition as they are issued and either: 

(a) Agrees that each repurchase 

agreement transaction pursuant to the 

agreement shall constitute a 

representation by the MPS seller that 

there has been no material adverse 

change in its financial condition since 

the date of the last statement furnished 

that has not been disclosed to the Client 

Plan with whom such written agreement 

is made; or (b) prior to each repurchase 

agreement transaction, the MPS seller 

represents that, as of the time the 

transaction is negotiated, there has been 

no material adverse change in its 

financial condition since the date of the 

last statement furnished that has not 

been disclosed to the Client Plan with 

whom such written agreement is made. 

10. In the event of termination and 

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

MPS seller pays to the Client Plan the 

amount of any remaining obligations 

and expenses not covered by the sale of 

the Securities or other instruments, plus 

interest at a reasonable rate. 

11. If an MPS seller involved in a 

repurchase agreement covered by this 

exemption fails to comply with any 

condition of this exemption in the 

course of engaging in the repurchase 

agreement, the BlackRock Manager who 

caused the plan to engage in such 

repurchase agreement shall not be 

deemed to have caused the plan to 

engage in a transaction prohibited by 

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

or ERISA section 406(b), Code section 

4975, or FERSA section 8477(c) solely 

by reason of the MPS seller’s failure to 

comply with the conditions of the 

exemption. 

12. In the event of any dispute 

between a BlackRock Manager and an 

MPS seller involving a Covered 

Transaction under this Section III.H., 

the IM has the responsibility to decide 

whether, and if so how, BlackRock is to 

pursue relief on behalf of the Client 

Plan(s) against the MPS seller. 

13. At time of entry into or renewal 

of each Covered Transaction under this 

Section III.H., including both term 

repurchase transactions and daily 

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

transactions, either (a) each Covered 

Transaction under this Section III.H., is 

as a result of the Three Quote Process, 

or, (b) the BlackRock Manager 

determines that the yield on the 

proposed transaction, or the renewal 

thereof, is at least as favorable to the 

Client Plans as the yield of the Client 

Plan on two (2) other available 

transactions which are comparable in 

terms of size, collateral type, credit 

quality of the counterparty, term and 

rate. The methodology employed for 

purposes of the comparison in (b) above 

must (c) be approved in advance by the 

ECO Function and (d), to the extent 

possible, refer to objective external data 

points, such as the Eurodollar overnight 

time deposit bid rate, the rate for 

repurchase agreements with U.S. 

government Securities, or rates for 

commercial paper issuances or agency 

discount note issuances sourced from 

Bloomberg, or another third party 

pricing service or market data provider 

(which providers may use different 

terminology to refer to these same 

external data points). The applicable 

BlackRock Manager must record a 

description of the comparable 

transactions, if reliance is placed upon 

same, and such data must be 

periodically reviewed by the ECO 

Function. The procedures described in 

this Section III.H.13. must be designed 

to ensure that BlackRock Managers 

determine to only enter into Covered 

Transactions with MPS sellers which 

are in the interests of Plan Clients, and 

such procedures must be reviewed and 

may be commented on by the IM. 

14. Neither the MPS Seller nor a 

member of the same MPS Group as the 

MPS Seller has discretionary authority 

or control with respect to the 

investment of Client Plan assets 

involved in a Covered Transaction 

under this Section III.H; provided that, 

this condition will be deemed met if a 

Client Plan meets the condition of 

Section II.A.2. by reason of Section 

II.A.3. of this exemption. 

15. The Client Plan is not an MPS 

Plan of the MPS with whom the 

purchase or sale takes place, or an MPS 

Plan of another MPS member of the 

same MPS Group as such MPS; 

provided that, this condition will be 

deemed met if a Client Plan meets the 

condition of Section II.A.2. by reason of 

Section II.A.3. of this exemption. 

I. Responding to Tender Offers and 

Exchange Offers Solicited by an MPS 

Relief under Section I of this 

exemption is available for participation 

by BlackRock Managers on behalf of 

Client Plans in tender offers or exchange 

offers or similar transactions where an 

MPS acts as agent for the entity (which 

entity may not be an MPS) making the 

offer, provided that: 

1. The Client Plan pays no fees to the 

MPS in connection with this Covered 

Transaction; 

2. The BlackRock Manager submits to 

the ECO in advance of participation a 

written explanation of the reasons for 

such participation; and 

3. The ECO Function determines that 

the reasons for participation by the 

BlackRock Manager in the Covered 

Transaction are appropriate from the 

vantage point of the Client Plans, with 

such determination affirmatively made 

in writing prior to the BlackRock 

Manager participating in the Covered 

Transactions under this Section III.I. 

J. Purchase in Underwritings of 

Securities Issued by an Entity Which Is 

not an MPS When the Proceeds Are 

Used To Repay a Debt to an MPS 

Relief under Section I of this 

exemption is available for the purchase 

by BlackRock Managers of Securities in 

underwritings issued by an entity which 

is not an MPS, but where the proceeds 

of the offering are used to repay a debt 

owed to an MPS, and the payment of 

such proceeds to the MPS, provided that 

the BlackRock Manager does not know 

that the proceeds will be applied to the 

repayment of debt owed to an MPS. If 

the BlackRock Manager does know that 

proceeds of the offering will be applied 

to the repayment of debt owed to an 

MPS, the purchase of the Securities and 

the payment of the proceeds to the MPS 

are exempt under Section I of this 

exemption provided that no more than 

twenty percent (20%) of the offering is 

purchased by BlackRock Managers for 

Client Plans, and no more than fifty 

percent (50%) of the offering in the 

aggregate is purchased by BlackRock, 

BlackRock Managers and other 

BlackRock Entities for Client Plans, 

other clients of BlackRock Managers, or 

as proprietary investments. 

K. Bank Deposits and Commercial Paper 

Relief under Section I of this 

exemption is available for an investment 

by a BlackRock Manager of Client Plan 

assets which involves the purchase or 

other acquisition, holding, sale, 

exchange or redemption by or on behalf 

of a Client Plan of certificates of deposit, 

time deposits or other bank deposits at 

an MPS and/or placed by an MPS and/ 

or sold to or purchased from an MPS, 

or in commercial paper issued by an 

MPS or with respect to which an MPS 

acts in some continuing capacity such 

as placement agent or administrator 

and/or which is sold to or purchased 

from an MPS, provided that: 

1. With respect to bank deposits, 

either: 

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

United States or a State, and at the 

outset of the Covered Transaction or 

renewal thereof of, such bank has a 

credit rating in one of the top two (2) 

categories by at least one of the Rating 

Organizations; and (ii) such deposit 

bears a reasonable interest rate, or — 

(b) The BlackRock Manager and the 

MPS comply with ERISA section 

408(b)(4). 

2. With respect to commercial paper: 


TKELLEY on DSK3SPTVN1PROD with NOTICES2
Federal Register / Vol. 77, No. 63 / Monday, April 2, 2012 / Notices 19843 

7For this purpose, MPS plans of Barclays MPSs 

and PNC MPSs are separately aggregated. 

(a) The Client Plan is not an MPS Plan 

of the MPS issuing the commercial 

paper, provided that, this condition will 

be deemed to be met if such a Client 

Plan meets the conditions of Section 

II.A.2. and II.A.3. of this exemption; 

(b) The commercial paper has a stated 

maturity date of nine (9) months or less 

from the date of issue, exclusive of days 

of grace, or is a renewal of an issue of 

commercial paper the maturity of which 

is likewise limited; 

(c) At the time it is acquired, the 

commercial paper is ranked in one of 

the two (2) highest rating categories by 

at least one of the Rating Organizations; 

(d) If the seller or purchaser of the 

commercial paper is an MPS, purchases 

and sales are made pursuant to the 

Three Quote Process, provided that for 

purposes of this Section III.K.2., firm 

quotes on comparable short-term money 

market instruments rated in the same 

category may be used for purposes of 

the Three Quote Process; and 

(e)(i) the Client Plan is not an MPS 

Plan of the MPS with whom the 

purchase or sale takes place, or an MPS 

Plan of another MPS member of the 

same MPS Group as such MPS; and (ii) 

the Client Plan is not an MPS Plan of 

an MPS which is acting in a continuing 

capacity, or an MPS Plan of another 

member of the same MPS Group as such 

MPS, provided that, the conditions set 

forth in clauses (i) and (ii) of this 

Section III.K.2.(e). will be deemed met 

if a Client Plan meets the condition of 

Section II.A.2. by reason of Section 

II.A.3. of this exemption. 

3. Neither the MPS involved in the 

Covered Transaction nor any member of 

the same MPS Group as the MPS 

involved in the Covered Transaction has 

discretionary authority or control with 

respect to the investment of Client Plan 

assets involved in the Covered 

Transaction under this Section III.K.; 

provided that, this condition will be 

deemed met if a Client Plan meets the 

condition of Section II.A.2. by reason of 

Section II.A.3. of this exemption. 

4. For purposes of the Covered 

Transactions set forth in this Section 

III.K. no BlackRock Entity shall be 

regarded as an affiliate of an MPS bank 

at which a deposit is made of Client 

Plan assets, nor of an MPS issuer of 

commercial paper in which a BlackRock 

Manager invests Client Plan assets. 

L. Securities Lending to an MPS 

1. Relief under Section I of this 

exemption is available for: 

(a) The lending of Securities by a 

BlackRock Manager that are assets of an 

Index Account or Fund or a ModelDriven Account or Fund to an MPS 

which is a U.S. Broker-Dealer or a U.S. 

Bank provided that the conditions set 

forth in Section III.L.2. are met; 

(b) the lending of Securities by a 

BlackRock Manager that are assets of an 

Index Account or Fund or a ModelDriven Account or Fund to an MPS 

which is a Foreign Broker-Dealer or 

Foreign Bank; provided that, the 

conditions set forth in Section III.L.2. 

and Section III.L.3. below are met; and 

(c) the payment to a BlackRock 

Manager of compensation for services 

rendered in connection with loans of 

assets of an Index Account or Fund or 

a Model-Driven Account or Fund that 

are Securities to an MPS; provided that, 

the conditions set forth in Section 

III.L.4. below are met. 

2. General Conditions for Covered 

Transactions Described in Sections 

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

(a) The length of a Securities loan to 

an MPS does not exceed one year in 

term. 

(b) Neither the MPS borrower nor any 

MPS which is a member of the same 

MPS Group as the MPS borrower has or 

exercises discretionary authority or 

control with respect to the investment of 

the Client Plan assets involved in the 

transaction. This Section III.L.2.(b) shall 

be deemed satisfied notwithstanding the 

investment of the assets of an MPS Plan 

of the MPS which is the borrower under 

such Securities lending transaction in a 

Pooled Fund as of the date of the 

Acquisition, which Pooled Fund is a 

bank-maintained common or collective 

trust, provided that such assets when 

aggregated with the assets of all other 

MPS Plans of the same MPS Group as 

that of the MPS borrower and invested 

in such Pooled Fund, at all times since 

the date of the Acquisition, constitute 

less than ten percent (10%) of the assets 

of such Pooled Fund; provided that, this 

Subsection III.L.2.(b) will be deemed 

met if a Client Plan meets the condition 

of Section II.A.2. by reason of Section 

II.A.3. of this exemption.7

(c) The Client Plan receives from the 

MPS borrower by the close of the 

BlackRock Manager’s business on the 

day in which the Securities lent are 

delivered to the MPS, 

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

close of business on the preceding 

business day, a market value, or, in the 

case of bank letters of credit, a stated 

amount, equal to not less than one 

hundred percent (100%) of the then 

market value of the Securities lent; or 

(ii) Foreign Collateral having as of the 

close of business on the preceding 

business day, a market value, or, in the 

case of bank letters of credit, a stated 

amount, equal to not less than: 

(x) One hundred two percent (102%) 

of the then market value of the 

Securities lent as valued on a 

Recognized Securities Exchange or an 

Automated Trading System on which 

the Securities are primarily traded if the 

collateral posted is denominated in the 

same currency as the Securities lent, or 

(y) One hundred five percent (105%) 

of the then market value of the 

Securities lent as valued on a 

Recognized Securities Exchange or an 

Automated Trading System on which 

the Securities are primarily traded if the 

collateral posted is denominated in a 

different currency than the Securities 

lent. 

(d) Notwithstanding the foregoing, if 

the BlackRock Manager is a U.S. Bank, 

a Registered Investment Advisor, or a 

U.S. Broker-Dealer, and such BlackRock 

Manager indemnifies the Client Plan 

with respect to the difference, if any, 

between the replacement cost of the 

borrowed Securities and the market 

value of the collateral on the date of a 

borrower default, the Client Plan 

receives from the MPS borrower by the 

close of the BlackRock Manager’s 

business on the day in which the 

Securities lent are delivered to the 

borrower, Foreign Collateral having as 

of the close of business on the preceding 

business day, a market value, or, in the 

case of bank letters of credit, a stated 

amount, equal to not less than: 

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

then market value of the Securities lent 

as valued on a Recognized Securities 

Exchange or an Automated Trading 

System on which the Securities are 

primarily traded if the collateral posted 

is denominated in the same currency as 

the Securities lent; or 

(ii) One hundred one percent (101%) 

of the then market value of the 

Securities lent as valued on a 

Recognized Securities Exchange or an 

Automated Trading System on which 

the Securities are primarily traded if the 

collateral posted is denominated in a 

different currency than the Securities 

lent and such currency is denominated 

in Euros, British pounds, Japanese yen, 

Swiss francs or Canadian dollars; or 

(iii) One hundred five percent (105%) 

of the then market value of the 

Securities lent as valued on a 

Recognized Securities Exchange or an 

Automated Trading System if the 

collateral posted is denominated in a 

different currency than the Securities 

lent and such currency is other than 

those specified above. 

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

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

Plan receives such U.S. Collateral or 


TKELLEY on DSK3SPTVN1PROD with NOTICES2
19844 Federal Register / Vol. 77, No. 63 / Monday, April 2, 2012 / Notices 

Foreign Collateral from the MPS 

borrower by the close of the BlackRock 

Manager’s business on the day in which 

the Securities are delivered to the MPS 

borrower. Such collateral is received by 

the Client Plan either by physical 

delivery, wire transfer or by book entry 

in a Securities depository located in the 

United States, or 

(ii) If the MPS borrower is a Foreign 

Bank or Foreign Broker-Dealer, the 

Client Plan receives U.S. Collateral or 

Foreign Collateral from the MPS 

borrower by the close of the BlackRock 

Manager’s business on the day in which 

the Securities are delivered to the 

borrower. Such collateral is received by 

the Client Plan either by physical 

delivery, wire transfer or by book entry 

in a Securities depository located in the 

United States or held on behalf of the 

Client Plan at an Eligible Securities 

Depository. The indicia of ownership of 

such collateral shall be maintained in 

accordance with ERISA section 404(b) 

and 29 CFR 2550.404b–1. 

(f) Prior to making of any such loan, 

the MPS borrower shall have furnished 

the BlackRock Manager with: 

(i) The most recent available audited 

statement of the MPS borrower’s 

financial condition, as audited by a 

United States certified public 

accounting firm or in the case of an MPS 

borrower that is a Foreign Broker-Dealer 

or Foreign Bank, a firm which is eligible 

or authorized to issue audited financial 

statements in conformity with 

accounting principles generally 

accepted in the primary jurisdiction that 

governs the borrowing MPS Foreign 

Broker-Dealer or Foreign Bank; 

(ii) The most recent available 

unaudited statement of its financial 

condition (if the unaudited statement is 

more recent than such audited financial 

statement); and 

(iii) A representation that, at the time 

the loan is negotiated, there has been no 

material adverse change in its financial 

condition since the date of the most 

recent financial statement furnished to 

the BlackRock Manager that has not 

been disclosed to the BlackRock 

Manager. Such representations may be 

made by the MPS borrower’s agreement 

that each loan shall constitute a 

representation by the MPS borrower that 

there has been no such material adverse 

change. 

(g) The loan is made pursuant to a 

written loan agreement, the terms of 

which are at least as favorable to the 

Client Plan as an arm’s-length 

transaction with an unrelated party 

would be. Such loan agreement states 

that the Client Plan has a continuing 

security interest in, title to, or the rights 

of secured creditor with respect to the 

collateral. Such agreement may be in the 

form of a master agreement covering a 

series of Securities lending transactions. 

(h) The written loan agreement must 

be a standardized industry form; 

provided, that, with the approval of the 

ECO on or about the date of the 

Acquisition, written loan agreements 

with an MPS borrower that were in 

effect as of the date of the Acquisition 

may continue to be used until there is 

a material modification of the same, at 

which time standardized industry forms 

must be adopted. 

(i) In return for lending Securities, the 

Client Plan: 

(i) Receives a reasonable fee (in 

connection with the Securities lending 

transaction), and/or 

(ii) Has the opportunity to derive 

compensation through the investment of 

the currency collateral. Where the Client 

Plan has that opportunity, the Client 

Plan may pay a loan rebate or similar fee 

to the MPS borrower, if such fee is not 

greater than the Client Plan would pay 

in a comparable transaction with an 

unrelated party. 

(j) All fees and other consideration 

received by the Client Plan in 

connection with the loan of Securities 

are reasonable. The identity of the 

currency in which the payment of fees 

and rebates will be made is set forth in 

either the written loan agreement or the 

loan confirmation as agreed to by the 

MPS borrower and the BlackRock 

Manager prior to the making of the loan. 

(i) Pricing of a loan to an MPS 

borrower is based on (i) rates for 

comparable loans of the same Security 

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

(x) For loans of liquid Securities 

(sometimes referred to as general 

collateral loans), an automatic system 

may be used to price loans so long as 

the resulting rate the Client Plan 

receives from the MPS borrower is at 

least as favorable to the Client Plan as 

the rate the BlackRock Managers are 

receiving for Client Plans or other 

clients from non-MPS borrowers of the 

same Security; 

(y) For purposes of pricing loans of 

less liquid Securities (sometimes 

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

purposes of determining whether to 

terminate or continue a loan which does 

not have a set term, pricing may also be 

based on a BlackRock trader 

determination that continuing the loan 

is in the interest of the Client Plan based 

on all relevant factors, including price 

(provided that price is within the range 

of prices of other loans of the same 

Security to comparable non-MPS 

borrowers by BlackRock Managers for 

Client Plans or other clients) and 

potential adverse consequences to the 

Client Plan of terminating the loan, 

provided that the pricing data used in 

making these decisions is retained and 

made available for possible review by 

the ECO. 

(ii) Automatic pricing mechanisms 

and pricing decisions by traders are 

subject to ongoing periodic review by 

the ECO Function, and the results of 

such review are included in reports by 

the ECO to the IM. Specifically, the 

quarterly reports by the ECO to the IM 

must address the lending patterns of 

illiquid Securities to the MPS borrowers 

from all Client Plans, including the 

percentage that loans of such Securities 

to the MPSs represent of all loans of 

such Securities from all Client Plans. 

(k) The Client Plan receives the 

equivalent of all distributions made to 

holders of the borrowed Securities 

during the term of the loan including, 

but not limited to, dividends, interest 

payments, shares of stock as a result of 

stock splits and rights to purchase 

additional Securities; 

(l) If the market value of the collateral 

at the close of trading on a business day 

is less than the applicable percentage of 

the market value of the borrowed 

Securities at the close of trading on that 

day (as described in this Section 

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

MPS borrower shall deliver, by the close 

of business on the following business 

day, an additional amount of U.S. 

Collateral or Foreign Collateral the 

market value of which, together with the 

market value of all previously delivered 

collateral, equals at least the applicable 

percentage of the market value of all the 

borrowed Securities as of such 

preceding day. 

Notwithstanding the foregoing, part of 

the U.S. Collateral or Foreign Collateral 

may be returned to the MPS borrower if 

the market value of the collateral 

exceeds the applicable percentage 

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

this exemption) of the market value of 

the borrowed Securities, as long as the 

market value of the remaining U.S. 

Collateral or Foreign Collateral equals at 

least the applicable percentage of the 

market value of the borrowed Securities. 

(m) The loan may be terminated by 

the Client Plan at any time, whereupon 

the MPS borrower shall deliver 

certificates for Securities identical to the 

borrowed Securities (or the equivalent 

thereof in the event of reorganization, 

recapitalization or merger of the issuer 

of the borrowed Securities) to the Client 

Plan within the lesser of: 

(i) The customary delivery period for 

such Securities, 

(ii) Five business days, or 


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Federal Register / Vol. 77, No. 63 / Monday, April 2, 2012 / Notices 19845 

(iii) The time negotiated for such 

delivery by the BlackRock Manager for 

the Client Plan, and the borrower. 

(n) In the event that the loan is 

terminated, and the MPS borrower fails 

to return the borrowed Securities or the 

equivalent thereof within the applicable 

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

the BlackRock Manager for the Client 

Plan may, under the terms of the loan 

agreement: 

(i) Purchase Securities identical to the 

borrowed Securities (or their equivalent 

as described above) and may apply the 

collateral to the payment of the 

purchase price, any other obligations of 

the borrower under the agreement, and 

any expenses associated with the sale 

and/or purchase, and 

(ii) The MPS borrower is obligated, 

under the terms of the loan agreement, 

to pay, and does pay to the Client Plan 

the amount of any remaining obligations 

and expenses not covered by the 

collateral, including reasonable 

attorney’s fees incurred by the Client 

Plan for legal action arising out of 

default on the loans, plus interest at a 

reasonable rate. 

Notwithstanding the foregoing, the 

MPS borrower may, in the event the 

MPS borrower fails to return borrowed 

Securities as described above, replace 

collateral, other than U.S. currency, 

with an amount of U.S. currency that is 

not less than the then current market 

value of the collateral, provided such 

replacement is approved by the 

BlackRock Manager. 

(o) If the MPS borrower fails to 

comply with any provision of a loan 

agreement which requires compliance 

with this exemption, the BlackRock 

Manager who caused the Client Plan to 

engage in such transaction shall not be 

deemed to have caused the Client Plan 

to engage in a transaction prohibited by 

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

or ERISA section 406(b) or FERSA 

section 8477(c) solely by reason of the 

borrower’s failure to comply with the 

conditions of the exemption. 

(p) If the Securities being loaned to an 

MPS borrower are managed in an Index 

Account or Fund, or a Model-Driven 

Account or Fund where the Index or the 

Model are created or maintained by the 

MPS borrower, the ECO Function 

periodically performs a review, no less 

frequently than quarterly, of the use of 

such MPS-sponsored Index or Model, 

and the Securities loaned from such an 

account or fund to the MPS, which 

review is designed to enable a 

reasonable judgment as to whether the 

use of such Index or Model, or any 

changes thereto, were for the purpose of 

benefitting BlackRock or the MPS 

through the Securities lending activity 

described in this Section III.L. If the 

ECO forms a reasonable judgment that 

the use of such Index or Model, or any 

changes thereto, were for the purpose of 

benefitting BlackRock or the MPS, the 

ECO shall promptly inform the IM. 

(q) In the event of any dispute 

between the BlackRock Manager on 

behalf of a Client Plan and an MPS 

borrower involving a Covered 

Transaction under this Section III.L., the 

IM shall decide whether, and if so, how 

the BlackRock Manager is to pursue 

relief on behalf of the Client Plan(s) 

against the MPS borrower. 

(r) Sophistication of Authorizing 

Fiduciary. Only Client Plans with total 

assets having an aggregate market value 

of a least $50 million are permitted to 

lend Securities to an MPS except as 

provided in clauses (1)–(3) below. 

(1) Master Trusts. In the case of two 

or more Client Plans which are 

maintained by the same employer, 

controlled group of corporations or 

employee organization, whose assets are 

commingled for investment purposes in 

a single master trust or any other entity 

the assets of which are ‘‘plan assets’’ 

under 29 CFR 2510.3–101, which entity 

is engaged in Securities lending 

arrangements with a BlackRock 

Manager, the foregoing $50 million 

requirement shall be deemed satisfied if 

such trust or other entity has aggregate 

assets which are in excess of $50 

million; provided that if the fiduciary 

responsible for making the investment 

decision on behalf of such master trust 

or other entity is not the employer or an 

affiliate of the employer, such fiduciary 

has total assets under its management 

and control, exclusive of the $50 million 

threshold amount attributable to plan 

investment in the commingled entity, 

which are in excess of $100 million. 

(2) Single Authorizing Fiduciary for 

Multiple Unaffiliated Client Plans. In 

the case of two or more Client Plans 

which are not maintained by the same 

employer, controlled group of 

corporations or employee organization, 

whose assets are commingled for 

investment purposes in a group trust or 

any other form of entity the assets of 

which are ‘‘plan assets’’ under 29 CFR 

2510.3–101, which entity is engaged in 

Securities lending arrangements with 

such BlackRock Manager as securities 

lending agent, the foregoing $50 million 

requirement is satisfied if such trust or 

other entity has aggregate assets which 

are in excess of $50 million (excluding 

the assets of any Client Plan with 

respect to which the fiduciary 

responsible for making the investment 

decision on behalf of such group trust 

or other entity or any member of the 

controlled group of corporations 

including such fiduciary is the 

employer maintaining such Plan or an 

employee organization whose members 

are covered by such Plan). However, the 

fiduciary responsible for making the 

investment decision on behalf of such 

group trust or other entity: 

(A) Has full investment responsibility 

with respect to plan assets invested 

therein; and 

(B) Has total assets under its 

management and control, exclusive of 

the $50 million threshold amount 

attributable to plan investment in the 

commingled entity, which are in excess 

of $100 million; and 

(3) Pooled Funds. In the case of two 

or more Client Plans invested in a 

Pooled Fund, whether or not through an 

entity described in paragraphs (r)(1) or 

(r)(2), the $50 million requirement shall 

be deemed satisfied if 50 percent or 

more of the units of beneficial interest 

in such Pooled Fund are held by 

investors each having total net assets of 

at least $50 million. Such investors may 

include Client Plans, entities described 

in paragraphs(r)(1) or (r)(2), or other 

investors that are not employee benefit 

plans covered by section 406 of ERISA, 

section 4975 of the Code, or section 

8477 of FERSA. 

In addition, none of the entities 

described in this Section III.L.2.(r) are 

formed for the sole purpose of making 

loans of Securities. 

(s) With respect to any calendar 

quarter, at least 50 percent or more of 

the outstanding dollar value of 

Securities loans negotiated on behalf of 

Client Plans will be to borrowers 

unrelated to MPSs. 

3. Specific Conditions for 

Transactions Described in Section 

III.L.1.(b). 

(a) The BlackRock Manager maintains 

the written documentation for the loan 

agreement at a site within the 

jurisdiction of the courts of the United 

States. 

(b) Prior to entering into a transaction 

involving an MPS Foreign Broker-Dealer 

that is described in Section VI.PP.(1) or 

(2) or an MPS Foreign Bank that is 

described in Section VI.OO.(1) either: 

(i) The MPS Foreign Broker-Dealer or 

Foreign Bank agrees to submit to the 

jurisdiction of the United States; agrees 

to appoint an agent for service of 

process in the United States, which may 

be an affiliate (a Process Agent); 

consents to service of process on the 

Process Agent; and agrees that any 

enforcement by a Client Plan of its 

rights under the Securities lending 

agreement will, as the option of the 

Client Plan, occur exclusively in the 

United States courts; or 


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19846 Federal Register / Vol. 77, No. 63 / Monday, April 2, 2012 / Notices 

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

Bank, a Registered Investment Advisor, 

or U.S. Broker-Dealer, agrees to 

indemnify the Client Plan with respect 

to the difference, if any, between the 

replacement cost of the borrowed 

Securities and the market value of the 

collateral on the date of an MPS 

borrower default plus interest and any 

transaction costs incurred (including 

attorney’s fees of such Client Plan 

arising out of the default on the loans or 

the failure to indemnify properly under 

this provision) which the Client Plan 

may incur or suffer directly arising out 

of a borrower default by the MPS 

Foreign Broker-Dealer or Foreign Bank. 

(c) In the case of a Securities lending 

transaction involving an MPS Foreign 

Broker-Dealer that is described in 

Section VI.PP.(3) or an MPS Foreign 

Bank that is described in Section 

VI.OO.(2), the BlackRock Manager must 

be a U.S. Bank, a Registered Investment 

Advisor, or U.S. Broker-Dealer, and 

prior to entering into the loan 

transaction, such BlackRock Manager 

must agree to indemnify the Client Plan 

with respect to the difference, if any, 

between the replacement cost of the 

borrowed Securities and the market 

value of the collateral on the date of an 

MPS borrower default plus interest and 

any transaction costs incurred 

(including attorney’s fees of such plan 

arising out of the default on the loans or 

the failure to indemnify properly under 

this provision) which the Client Plan 

may incur or suffer directly arising out 

of a borrower default by the MPS 

Foreign Broker-Dealer or Foreign Bank. 

4. Specific Conditions for Covered 

Transactions Described in Section 

III.L.1.(c): 

(a) The loan of Securities is not 

prohibited by section 406(a) of ERISA or 

otherwise satisfies the conditions of this 

exemption. 

(b) The BlackRock Manager is 

authorized to engage in Securities 

lending transactions on behalf of the 

Client Plan. 

(c) The compensation, the terms of 

which are at least as favorable to the 

Client Plan as an arm’s length 

transaction with an unrelated party, is 

reasonable and is paid in accordance 

with the terms of a written instrument, 

which may be in the form of a master 

agreement covering a series of Securities 

lending transactions. 

(d) Except as otherwise provided in 

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

under which the compensation is paid: 

(i) Is subject to the prior written 

authorization of a fiduciary of a Client 

Plan (the authorizing fiduciary), who is 

(other than in the case of an In-House 

Plan) independent of the BlackRock 

Manager, provided that for purposes of 

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

MPS Plan acting as the authorizing 

fiduciary shall be deemed independent 

of the BlackRock Manager so long as 

such fiduciary, as of the date of the 

authorization, is not a BlackRock Entity, 

and 

(ii) May be terminated by the 

authorizing fiduciary within: 

(x) The time negotiated for such 

notice of termination by the Client Plan 

and the BlackRock Manager, or 

(y) Five business days, whichever is 

less, in either case without penalty to 

the Client Plan. 

(e) No such authorization is made or 

renewed unless the BlackRock Manager 

shall have furnished the authorizing 

fiduciary with any reasonably available 

information which the BlackRock 

Manager reasonably believes to be 

necessary to determine whether such 

authorization should be made or 

renewed, and any other reasonably 

available information regarding the 

matter that the authorizing fiduciary 

may reasonably request. 

(f) Special Rule for Commingled 

Investment Funds. In the case of a 

pooled separate account maintained by 

an insurance company qualified to do 

business in a State or a common or 

collective trust fund maintained by a 

bank or trust company supervised by a 

State or Federal agency, the 

requirements of Section III.L.4.(d) of this 

exemption shall not apply, provided 

that: 

(i) The information described in 

Section III.L.4.(e) (including information 

with respect to any material change in 

the arrangement) shall be furnished by 

the BlackRock Manager to the 

authorizing fiduciary described in 

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

Client Plan whose assets are invested in 

the account or fund, not less than 30 

days prior to implementation of the 

arrangement or material change thereto, 

and, where requested, upon the 

reasonable request of the authorizing 

fiduciary; 

(ii) In the event any such authorizing 

fiduciary submits a notice in writing to 

the BlackRock Manager objecting to the 

implementation of, material change in, 

or continuation of the arrangement, the 

Client Plan on whose behalf the 

objection was tendered is given the 

opportunity to terminate its investment 

in the account or fund, without penalty 

to the Client Plan, within such time as 

may be necessary to effect such 

withdrawal in an orderly manner that is 

equitable to all withdrawing plans and 

to the non-withdrawing plans. In the 

case of a Client Plan that elects to 

withdraw pursuant to the foregoing, 

such withdrawal shall be effected prior 

to the implementation of, or material 

change in, the arrangement; but an 

existing arrangement need not be 

discontinued by reason of a Client Plan 

electing to withdraw; and 

(iii) In the case of a Client Plan whose 

assets are proposed to be invested in the 

account or fund subsequent to the 

implementation of the compensation 

arrangement and which has not 

authorized the arrangement in the 

manner described in Sections 

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

investment in the account or fund shall 

be authorized in the manner described 

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

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

GNMA, FHLMC, FarmerMac or FNMA 

Mortgage-Backed Securities With an 

MPS Counterparty 

Relief under Section I of this 

exemption is available for trades 

(purchases and sales) on a principal 

basis of mortgage-backed Securities 

issued by FHLMC, FNMA, FarmerMac 

or guaranteed by GNMA and meeting 

the definition of ‘‘guaranteed 

governmental mortgage pool certificate’’ 

in 29 CFR 2510.3–101(i) with an MPS 

on a TBA basis, including, when 

applicable, delivery of the underlying 

Securities to a Client Plan, provided 

that: 

1. The Covered Transactions under 

this Section III.M. are a result of the 

Three Quote Process; provided that, 

solely for purposes of this Section 

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

Quote Process may be obtained on 

‘‘comparable Securities,’’ as described 

below, when firm quotes with respect to 

the applicable TBA transactions are not 

reasonably obtainable; 

2. With regard to purchases of 

FHLMC, FarmerMac and FNMA 

mortgage-backed Securities on a TBA 

basis, (i) the BlackRock Manager makes 

a determination that such Securities are 

of substantially similar credit quality as 

GNMA guaranteed governmental 

mortgage pool certificates, (ii) the ECO 

(in regular consultation with and under 

the supervision of the IM) monitors the 

credit spread between GNMA and 

FHLMC/FNMA/FarmerMac mortgagebacked Securities, and (iii) each of the 

ECO and the IM (independently) has the 

authority and responsibility to 

determine whether purchases of 

FHLMC, FarmerMac and/or FNMA 

mortgage-backed Securities on a TBA 

basis should not be permitted due to 

such credit spread, and such authority 

and responsibility is reflected in the 

EPPs; and 

3. With regard to possible delivery of 

underlying Securities to Client Plans, as 


TKELLEY on DSK3SPTVN1PROD with NOTICES2
Federal Register / Vol. 77, No. 63 / Monday, April 2, 2012 / Notices 19847 

8 51 FR 41686 (Nov. 18, 1986), as amended, 67 

FR 64137 (Oct. 17, 2002). 

opposed to cash settlement, the ECO 

Function approves any such delivery in 

advance. 

For purposes of Section III.M.1., 

‘‘comparable Securities’’ are Securities 

that: (a) Are issued and/or guaranteed 

by the same agency, (b) have the same 

coupon, (c) have a principal amount at 

least equal to but no more than two 

percent (2%) greater than the Security 

purchased or sold, (d) are of the same 

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

an aggregate weighted average monthly 

maturity within a 12-month variance of 

the Security purchased or sold, but in 

no case can the variance be more than 

ten percent (10%) of such aggregate 

weighted average maturity of the 

Securities purchased or sold, or (ii) meet 

some other comparable objective 

standard containing a range of variance 

that is no greater than that described in 

(i) above and that assures that the aging 

of the Securities is properly taken into 

account. 

N. Foreign Exchange Transactions With 

an MPS Counterparty 

Relief under Section I of this 

exemption is available for a Foreign 

Exchange Transaction by a BlackRock 

Manager on behalf of Client Plans with 

an MPS as counterparty provided that: 

1. (a) The Foreign Exchange 

Transaction is as a result of the Three 

Quote Process; or (b) if the total net 

amount of the Foreign Exchange 

Transaction on behalf of Client Plans by 

BlackRock Managers is greater than $1 

million, the exchange rate is within 

0.5% above or below the Interbank Rate 

as represented to the BlackRock 

Managers by the MPS; 

2. The Foreign Exchange Transactions 

with an MPS counterparty only involve 

currencies of countries that are 

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

markets by a third party Index provider 

that divides national economies into 

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

markets. The Index provider shall be 

selected by BlackRock, provided, 

however, the IM shall have the right to 

reject the Index provider in its sole 

discretion at any time; and 

3. Each Foreign Exchange Transaction 

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

be set forth in the applicable quarterly 

reports of the ECO to the IM. 

O. Agency Execution of Equity and 

Fixed Income Securities Trades and 

Related Clearing as Described in PTE 

86–128, Including Agency Cross Trades, 

When the Broker Is an MPS 

Relief under Section I of this 

exemption is available for transactions 

in Securities described in Section II of 

Prohibited Transaction Exemption 86– 

128, as amended 8 (PTE 86–128), as if 

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

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

the following conditions are satisfied: 

1. The MPS is selected to perform 

Securities brokerage services for Client 

Plans pursuant to the normal brokerage 

placement practices, policies and 

procedures of the BlackRock Manager 

designed to ensure best execution. 

2. The conditions of PTE 86–128 set 

forth in the following sections of that 

exemption must be complied with: 

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

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

however, that, for purposes of Section 

III(e), Section III(f) and Section III(g)(2) 

of PTE 86–128, the ECO Function is the 

‘‘authorizing fiduciary’’ referred to 

therein; and the ECO has the authority 

to terminate the use of the MPS as 

broker-dealer without penalty to Client 

Plans at any time; and provided further 

that the first sentence of Section III(h) of 

PTE 86–128 is amended for purposes of 

this Section III.O.2. to provide as 

follows: ‘‘A trustee (other than a 

nondiscretionary trustee) may only 

engage in a covered transaction with a 

plan that has total net assets with a 

value of at least $50 million and in the 

case of a Pooled Fund, the $50 million 

requirement will be met if fifty percent 

(50%) or more of the units of beneficial 

interest in such Pooled Fund are held by 

investors having total net assets with a 

value of at least $50 million.’’ 

3. With respect to agency cross 

transactions described in Section III(g) 

of PTE 86–128 that are being effected or 

executed by an MPS broker, (i) neither 

the MPS broker effecting or executing 

the agency cross transaction nor any 

member of the same MPS Group as the 

MPS broker effecting or executing the 

agency cross transaction may have 

discretionary authority to act on behalf 

of, and/or provide investment advice to 

another party to the agency cross 

transaction which is a seller when the 

Client Plan is a buyer, or which is a 

buyer, when the Client Plan is a seller 

(Another Party), and (ii), neither the 

BlackRock Manager nor the trader for 

the BlackRock Manager instituting the 

transaction for the Client Plan may have 

knowledge that a BlackRock Entity has 

discretionary authority and/or provides 

investment advice to Another Party to 

the agency cross transaction. 

4. The exceptions in Sections IV(a), 

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

to this exemption. 

P. Use by BlackRock Managers of 

Exchanges and Automated Trading 

Systems on Behalf of Client Plans 

Relief under Section I of this 

exemption is available for the direct or 

indirect use by, or directing of trades to, 

U.S. and non-U.S. exchanges or U.S. 

Automated Trading Systems (ATS) in 

which one or more MPSs have an 

ownership interest by BlackRock 

Managers for Client Plans, if either: 

1. No one MPS (together with other 

members of the same MPS Group) has 

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

ownership interest in the exchange or 

ATS or (ii) the BlackRock Managers do 

not know the level of such ownership 

interest; or 

2. If a BlackRock Manager knows that 

an MPS (together with other members of 

the same MPS Group) has an ownership 

interest that is greater than ten percent 

(10%) but not greater than twenty 

percent (20%) in the exchange or ATS, 

(a) The ECO makes a determination, 

summarized in the ECO quarterly 

report, that there is no reason for a 

BlackRock Manager or all BlackRock 

Managers to discontinue such direct or 

indirect use of or the directing of trades 

to any such exchange or ATS on the 

basis that the amount of use or the 

volume of trades is unwarranted or not 

in the interests of the Client Plans and 

their participants and beneficiaries, and 

does not make a determination that a 

BlackRock Manager or all BlackRock 

Managers must discontinue such direct 

or indirect use of or the directing of 

trades to any such exchange or ATS on 

the basis that the amount of use or the 

volume of trades is unwarranted or not 

in the interests of the Client Plans and 

their participants and beneficiaries. The 

IM may request any additional 

information relating to any such 

determination summarized in the ECO 

quarterly report and may, after 

consultation with the ECO, make a 

determination that a BlackRock Manager 

or all BlackRock Managers must 

discontinue such direct or indirect use 

of or the directing of trades to any such 

exchange or ATS on the basis that the 

amount of use or the volume of trades 

is unwarranted or not in the interests of 

the Client Plans and their participants 

and beneficiaries; 

(b) The price and compensation 

associated with any purchases or sales 

utilizing such exchange or ATS are not 

greater than the price and compensation 

associated with an arm’s length 

transaction with an unrelated party; and 

(c) All such exchanges and ATSs shall 

be situated within the jurisdiction of the 

U.S. District Courts and regulated by a 

U.S. federal regulatory body or a U.S. 


TKELLEY on DSK3SPTVN1PROD with NOTICES2
19848 Federal Register / Vol. 77, No. 63 / Monday, April 2, 2012 / Notices 

9For example, if two or more portfolio managers 

send their purchase orders to the same trading desk 

and the traders on that trading desk coordinate the 

purchases of the same MPS equity Securities, the 

limitations apply to the trading desk; if two or more 

portfolio managers or two or more trading desks are 

coordinating purchases of MPS equity Securities, 

the limitations are applied across the group of 

portfolio managers or traders who are coordinating 

the purchase orders. 

federally approved self-regulatory body, 

provided that this condition shall not 

apply to the direct or indirect use of or 

the directing of trades to an exchange in 

a country other than the United States 

which is regulated by a government 

regulator or a government approved selfregulatory body in such country and 

which involves trading in Securities 

(including the lending of Securities) or 

futures contracts. 

Q. Purchases in the Secondary Market 

of Common and Preferred Stock Issued 

by an MPS by BlackRock Managers for 

Client Plans Invested in an Index 

Account or Fund, or a Model-Driven 

Account or Fund 

Relief under Section I of this 

exemption is available for the purchase 

in the secondary market of common or 

preferred stock issued by an MPS by 

BlackRock Managers for Client Plans 

invested in an Index Account or Fund, 

or a Model-Driven Account or Fund 

provided that: 

1. Such purchase is for the sole 

purpose of maintaining quantitative 

conformity with the weight of such 

Securities prescribed by the relevant 

Index, for Index Accounts or Funds, or 

the weight of such Securities prescribed 

by the relevant Model, for Model-Driven 

Accounts or Funds, and such purchase 

is reasonably calculated not to exceed 

the purchase amount necessary for such 

Model or quantitative conformity by 

more than a de minimis amount. 

2. Such purchase is not made from the 

issuing MPS. 

3. Notwithstanding Section III.Q.2., 

BlackRock Managers may rely on other 

exemptive relief when acquiring stock 

of an MPS for Client Plans through an 

MPS broker, including the issuing MPS. 

R. Purchase in the Secondary Market of 

Common and Preferred Stock Issued by 

an MPS by BlackRock Managers for 

Client Plans Invested in an Other 

Account or Fund 

Relief under Section I of this 

exemption is available for the purchase 

in the secondary market of common or 

preferred stock issued by an MPS by 

BlackRock Managers for Client Plans 

invested in an Other Account or Fund 

provided that: 

1. Such purchase is not made from the 

issuing MPS. 

2. Notwithstanding Section III.R.1., 

BlackRock Managers may rely on other 

exemptive relief when acquiring stock 

of an MPS for Client Plans under this 

Section III.R. through an MPS broker, 

including the issuing MPS. 

3. As a consequence of a purchase of 

MPS stock, the class of stock purchased 

does not constitute more than five 

percent (5%) of the Other Account or 

Fund. In the case of a Pooled Fund, the 

class of stock purchased and attributed 

to each Client Plan does not exceed five 

percent (5%) of such Client Plan’s 

proportionate interest in the Pooled 

Fund. 

4. Aggregate daily purchases of a class 

of MPS stock for Client Plans do not 

exceed the greater of (i) fifteen percent 

(15%) of the aggregate average daily 

trading volume (ADTV) for the previous 

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

percent (15%) of trading volume on the 

date of the purchase. These volume 

limitations must be met on a portfolio 

manager by portfolio manager basis 

unless purchases are coordinated among 

portfolio managers, in which case the 

limitations are applied to the 

coordinated purchase.9 Any coordinated 

purchases of the same class of MPS 

stock in the secondary market for Index 

Accounts or Funds or for Model-Driven 

Accounts or Funds must be taken into 

account when applying these ADTV 

limitations on purchases for an Other 

Account or Fund; provided, however, if 

coordinated purchases for Index 

Accounts or Funds, or for Model-Driven 

Accounts or Funds, would cause the 

fifteen percent (15%) limitation to be 

exceeded, BlackRock Managers can 

nonetheless acquire for Other Accounts 

or Funds up to the greater of five 

percent (5%) of ADTV for the previous 

ten (10) trading days or five percent 

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

Covered Transaction. For purposes of 

this Section III.R.4., cross trades of MPS 

equity Securities which comply with an 

applicable statutory or administrative 

prohibited transaction exemption are 

not taken into account. 

5. The ECO Function monitors the 

volume limits on purchases of MPS 

stock described in Section III.R.4. and 

provides a monthly report to the IM 

with respect to such purchases and 

limits. The IM shall impose lower 

volume limitations and take other 

appropriate action with respect to such 

purchases if the IM determines on the 

basis of these reports by the ECO and 

publicly available information 

materially related to the trading of the 

Securities of an MPS on its primary 

listing exchange (or market) that the 

purchases described have a material 

positive impact on the market price for 

such Securities. 

S. Purchases, Sales and Holdings by 

BlackRock Managers for Client Plans of 

Commercial Paper Issued by ABCP 

Conduits, When an MPS Has One or 

More Roles 

Relief under Section I of this 

exemption is available for the purchase 

and sale, including purchases from or 

sales to an MPS, and the holding by 

BlackRock Managers acting on behalf of 

Client Plans of commercial paper issued 

by an ABCP Conduit with respect to 

which an MPS acts as seller, placement 

agent, and/or in some continuing 

capacity such as program administrator, 

provider of liquidity or provider of 

credit support, provided that: 

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

Plan of the MPS with whom the 

purchase or sale takes place, or an MPS 

Plan of another MPS member of the 

same MPS Group as such MPS; and (b) 

the Client Plan is not an MPS Plan of 

an MPS which is acting in a continuing 

capacity, or an MPS Plan of another 

MPS member of the same MPS Group as 

such MPS; provided that, the conditions 

set forth in clauses (a) and (b) of this 

Section III.S.1. will be deemed met if a 

Client Plan meets the condition of 

Section II.A.2. by reason of Section 

II.A.3. of this exemption; 

2. Neither the MPS involved in the 

Covered Transaction nor any member of 

the same MPS Group as the MPS 

involved in such Covered Transaction 

has discretionary authority or control 

with respect to Client Plan assets 

involved in the Covered Transaction 

under this Section III.S.; provided that, 

this condition will be deemed met if a 

Client Plan meets the condition of 

Section II.A.2. by reason of Section 

II.A.3. of this exemption; 

3. The commercial paper has a stated 

maturity date of nine months or less 

from the date of issue, exclusive of days 

of grace, or is a renewal of an issue of 

commercial paper the maturity of which 

is likewise limited; 

4. At the time it is acquired, the 

commercial paper is ranked in the 

highest rating category by at least one of 

the Rating Organizations; 

5. If the seller or purchaser of the 

ABCP commercial paper is an MPS, 

purchases and sales are made pursuant 

to the Three Quote Process, provided 

that, for purposes of this Section III.S.5., 

firm quotes on comparable short-term 

money market instruments rated in the 

same category may be used for purposes 

of the Three Quote Process; and 

6. If an MPS performs a continuing 

role and there is a default, the taking or 

refraining from taking of any action by 


TKELLEY on DSK3SPTVN1PROD with NOTICES2
Federal Register / Vol. 77, No. 63 / Monday, April 2, 2012 / Notices 19849 

10BlackRock requested such relief for the 

avoidance of any issue about the necessity for such 

relief in particular circumstances; the Department is 

not opining on the need for such relief herein. 

the responsible BlackRock Manager 

which could have a material positive or 

negative effect upon the MPS is decided 

upon by the IM. 

No BlackRock Entity is to be regarded 

as an affiliate of any MPS for purposes 

of the Covered Transactions set forth in 

this Section III.S. 

T. Purchase, Holding and Disposition by 

BlackRock Managers for Client Plans of 

Shares of Exchange-Traded Open-End 

Investment Companies Registered 

Under the 1940 Act (ETF) Managed by 

BlackRock Managers 

Relief under Section I of this 

exemption is available for the purchase, 

holding and disposition by BlackRock 

Managers for Client Plans of shares of an 

ETF managed by a BlackRock Manager 

provided that: 

1. The BlackRock Manager purchases 

such ETF shares from or through a 

person other than an MPS or a 

BlackRock Entity; and 

2. No purchase is exempt under 

Section I of this exemption if the 

BlackRock Manager portfolio manager 

acting for the Client Plan knows or 

should know that the shares to be 

acquired for Client Plans are Creation 

Shares, or that the purchase for Client 

Plans will result in new Creation 

Shares. 

U. Purchase, Holding and/or Disposition 

of BlackRock Equity Securities in the 

Secondary Market by BlackRock 

Managers for an Index Account or Fund, 

or a Model-Driven Account or Fund, 

Including Buy-Ups 10

Relief under Section I of this 

exemption is available for the purchase, 

holding and disposition of common or 

preferred stock issued by BlackRock in 

the secondary market by BlackRock 

Managers for Client Plans in an Index 

Account or Fund, or in a Model-Driven 

Account or Fund provided that: 

1. The acquisition, holding and 

disposition of the BlackRock Securities 

is for the sole purpose of maintaining 

quantitative conformity with the weight 

of such Securities prescribed by the 

relevant Index, for Index Accounts or 

Funds, or the weight of such Securities 

prescribed by the relevant Model, for 

Model-Driven Accounts or Funds, and 

such purchase is reasonably calculated 

not to exceed the purchase amount 

necessary for such Model or quantitative 

conformity by more than a de minimis 

amount. 

2. Any acquisition of BlackRock 

Securities does not involve any 

agreement, arrangement or 

understanding regarding the design or 

operation of the account or fund 

acquiring the BlackRock Securities 

which is intended to benefit BlackRock 

or any party in which BlackRock may 

have an interest. 

3. With respect to an acquisition of 

BlackRock Securities by such an 

account or fund which constitutes a 

Buy-Up: 

(a) The acquisition is made on a single 

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

MPS or a BlackRock Entity; provided, 

however, that if the volume limitation 

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

satisfied in a single trading day, the 

acquisition will be completed in as few 

trading days as possible in compliance 

with such volume limitation and such 

trades will be reviewed by the ECO and 

reported to the IM; 

(b) Based upon the best available 

information, the acquisition is not the 

opening transaction of a trading day and 

is not made in the last half hour before 

the close of the trading day; 

(c) The price paid by the BlackRock 

Manager is not higher than the lowest 

current independent offer quotation, 

determined on the basis of reasonable 

inquiry from broker-dealers who are not 

MPSs or BlackRock Entities; 

(d) Aggregate daily purchases do not 

exceed fifteen percent (15%) of 

aggregate average daily trading volume 

for the Security, as determined by the 

greater of (i) the trading volume for the 

Security occurring on the applicable 

Recognized Securities Exchange and/or 

Automated Trading System on the date 

of the transactions, or (ii) the aggregate 

average daily trading volume for the 

Security occurring on the applicable 

Recognized Securities Exchange and/or 

Automated Trading System for the 

previous ten (10) trading days, both 

based on the best information 

reasonably available at the time of the 

transaction. These volume limitations 

are applied on a portfolio manager by 

portfolio manager basis unless 

purchases of BlackRock Securities are 

coordinated by the portfolio managers 

or trading desks, in which case the 

limitations are aggregated for the 

coordinating portfolio managers or 

trading desks. Provided further, if 

BlackRock, without Client Plan 

direction or consent, initiates a new 

Index Account or Fund or Model-Driven 

Account or Fund on its own accord, 

with BlackRock Securities included 

therein, the volume restrictions for such 

new account or fund shall be 

determined by aggregating all portfolio 

managers purchasing for such new 

account of fund. Cross trades of 

BlackRock Securities which comply 

with an applicable statutory or 

administrative prohibited transaction 

exemption are not included in the 

amount of aggregate daily purchases to 

which the limitations of this Section 

III.U. apply; 

(e) All purchases and sales of 

BlackRock Securities occur either (i) on 

a Recognized Securities Exchange, (ii) 

through an Automated Trading System 

operated by a broker-dealer that is not 

a BlackRock Entity and is either 

registered under the 1934 Act, and 

thereby subject to regulation by the 

Securities and Exchange Commission, 

or subject to regulation and supervision 

by the Securities and Futures Authority 

of the UK or another applicable 

regulatory authority, which provides a 

mechanism for customer orders to be 

matched on an anonymous basis 

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

Trading System that is operated by a 

Recognized Securities Exchange, 

pursuant to the applicable securities 

laws, and provides a mechanism for 

customer orders to be matched on an 

anonymous basis without the 

participation of a broker-dealer; and 

(f) The ECO designs acquisition 

procedures for BlackRock Managers to 

follow in Buy-Ups, which the IM 

approves in advance of the 

commencement of any Buy-Up, and the 

ECO Function monitors BlackRock 

Manager’s compliance with such 

procedures. 

V. Acquisition by BlackRock Managers 

of Financial Guarantees, Indemnities 

and Similar Protections for Client Plans 

from MPSs 

Relief under Section I of this 

exemption is available for the provision 

by an MPS of a financial guarantee, 

indemnification arrangement or similar 

instrument or arrangement providing 

protection to a Client Plan against 

possible losses or risks provided that: 

1. The terms of the arrangement 

(including the identity of the provider) 

are approved by a fiduciary of the Client 

Plan which is independent of the MPS 

providing such protection and of 

BlackRock; 

2. The compensation owed the MPS 

under the arrangement is paid by a 

BlackRock Entity and not paid out of the 

assets of the Client Plan; 

3. In the event a Client Plan or the 

ECO concludes an event has occurred 

which should trigger the obligations of 

the MPS under the arrangement, and the 

MPS disagrees to any material extent, 

the IM determines the steps the 

BlackRock Manager must take to protect 

the interests of the Client Plan; and 


TKELLEY on DSK3SPTVN1PROD with NOTICES2
19850 Federal Register / Vol. 77, No. 63 / Monday, April 2, 2012 / Notices 

11Proceeds of the Assigned Loan may be used by 

the relevant borrower to repay a debt owed to an 

MPS, provided that the conditions set forth in 

Section III.J. of this exemption are satisfied (for 

these purposes and for purposes of such conditions 

the Assigned Loan shall be deemed to be a 

Security). 

4. The MPS providing the 

arrangement is capable of being sued in 

United States courts, has contractually 

agreed to be subject to litigation in the 

United States with respect to any matter 

relating to this Section III.V., and has 

sufficient assets in the United States to 

honor its commitments under the 

arrangement. 

W. Purchase of a Portion or All of a 

Loan to an Entity Which Is Not an MPS 

and Is Not a BlackRock Entity From an 

MPS or Other Arranger and the Holding 

Thereof by BlackRock Managers Where 

an MPS Is an Arranger, and/or an MPS 

Has an Ongoing Function Regarding 

Such Loan 

Relief under Section I of this 

exemption is available for the purchase 

from an MPS or other Arranger by 

BlackRock Managers on behalf of Client 

Plans of all or a portion of a Loan and 

the holding thereof, where an MPS is an 

Arranger and/or an MPS has an ongoing 

function in relation to the Loan, 

provided that: 

1. The BlackRock Manager obtains an 

assignment of the Loan or portion 

thereof on behalf of the Client Plan, 

which assignment provides for the 

Client Plan to become the lender of 

record, and the transfer of title, voting 

rights and all other applicable rights to 

such Client Plan (the Loan or the 

portion thereof, an ‘‘Assigned Loan’’); 

2. The borrower under the Assigned 

Loan is not an MPS or a BlackRock 

Entity; 11

3. The Assigned Loan is purchased 

prior to the end of the first day on 

which any sales are made pursuant to 

that offering, at a price that is not more 

than the price paid by each other 

purchaser of Assigned Loans in that 

offering or in any concurrent offering of 

the Assigned Loans, except that 

Assigned Loans may be purchased at a 

price that is not more than the price 

paid by each other purchaser of the 

Assigned Loans in that offering or in 

any concurrent offering of the Assigned 

Loans and may be purchased on a day 

subsequent to the end of the first day on 

which any sales are made, pursuant to 

that offering, provided that the interest 

rates, as of the date of such purchase, on 

comparable Assigned Loans offered 

subsequent to the end of the first day on 

which any sales are made and prior to 

the purchase date are less than the 

interest rate of the Assigned Loans being 

purchased; 

4. The Assigned Loan is offered 

pursuant to a selling agreement or 

arrangement under which the Arrangers 

are committed to make the full amount 

of the loan commitment to the borrower; 

5. The borrower under the Assigned 

Loan to be purchased pursuant to this 

exemption must have been in 

continuous operation for not less than 

three (3) years, including the operation 

of any predecessors, unless: 

(a) The Assigned Loan has a Facility 

Rating in one of the four highest rating 

categories by a Rating Organization; 

provided that none of the Rating 

Organizations provides a Facility Rating 

in a category lower than the fourth 

highest rating category with respect to 

the Assigned Loan; provided further 

that if the Assigned Loan lacks a Facility 

Rating, the Assigned Loan shall have a 

Borrower Rating that meets the ratings 

standards set forth in this subsection; or 

(b) The Assigned Loan is fully 

guaranteed by a guarantor that has been 

in continuous operation for not less 

than three (3) years, including the 

operation of any predecessors, provided 

that such guarantor has issued 

Securities registered under the 1933 

Act; or if such guarantor has issued 

Securities which are exempt from such 

registration requirement, such guarantor 

has been in continuous operation for not 

less than three (3) years, including the 

operation of any predecessors, and such 

guarantor is: 

(i) A bank, 

(ii) An issuer of Securities which are 

exempt from such registration 

requirement, pursuant to a Federal 

statute other than the 1933 Act; or 

(iii) An issuer of Securities that are 

the subject of a distribution and are of 

a class which is required to be registered 

under Section 12 of the 1934 Act, and 

are issued by an issuer that has been 

subject to the reporting requirements of 

Section 13 of the 1934 Act for a period 

of at least ninety (90) days immediately 

preceding the sale of such Loans and 

that has filed all reports required to be 

filed hereunder with the SEC during the 

preceding twelve (12) months. 

6. The aggregate amount of an 

Assigned Loan being purchased in a 

Loan Offering pursuant to this 

exemption by the BlackRock Manager 

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

and (ii) the assets, calculated on a pro 

rata basis, of all Client Plans investing 

in Pooled Funds managed by the 

BlackRock Manager; and (iii) the assets 

of plans to which the BlackRock 

Manager renders investment advice 

within the meaning of 29 CFR 2510.3– 

21(c) does not exceed: 

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

total amount of the Assigned Loan being 

purchased in the Loan Offering, if the 

Facility Rating of such Assigned Loan 

is, or, if such Assigned Loan does not 

have a Facility Rating, the borrower 

thereunder has a Borrower Rating, in 

one of the four highest rating categories 

by at least one of the Rating 

Organizations; provided that none of the 

Rating Organizations provides a Facility 

Rating for such Assigned Loan or, if 

such Assigned Loan does not have a 

Facility Rating, a Borrower Rating, in a 

category lower than the fourth highest 

rating category; or 

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

total amount of the Assigned Loan being 

purchased in the Loan Offering, if the 

Facility Rating of such Assigned Loan 

is, or, if such Assigned Loan does not 

have a Facility Rating, the borrower 

thereunder has a Borrower Rating, in the 

fifth or sixth highest rating categories by 

at least one of the Rating Organizations; 

provided that none of the Rating 

Organizations provides a Facility Rating 

for such Assigned Loan or, if such 

Assigned Loan does not have a Facility 

Rating, a Borrower Rating, in a category 

lower than the sixth highest rating 

category; and provided that 

(c) The assets of any single Client Plan 

(and the assets of any Client Plans 

investing in Pooled Funds) may not be 

used to purchase any Assigned Loan if 

the Facility Rating of such Assigned 

Loan is, or, if such Assigned Loan does 

not have a Facility Rating, the borrower 

thereunder has a Borrower Rating that is 

lower than the sixth highest rating 

category by any of the Rating 

Organizations. 

7. Notwithstanding the percentage of 

a Loan Offering permitted to be 

acquired, as set forth in Subsections 6(a) 

or (b) of this Section III.W., the amount 

of Assigned Loans in a Loan Offering 

purchased pursuant to this exemption 

by the BlackRock Manager on behalf of 

any single Client Plan, either 

individually or through investment, 

calculated on a pro rata basis, in a 

Pooled Fund may not exceed three 

percent (3%) of the total amount of such 

Assigned Loans being offered in such 

Loan Offering, provided that a SubAdvised Pooled Fund as a whole may 

purchase up to three percent (3%) of a 

Loan Offering. 

8. The aggregate amount to be paid by 

any single Client Plan in purchasing any 

Assigned Loans which are the subject of 

this exemption, including any amounts 

paid by any Client Plan in purchasing 

such Assigned Loans through a Pooled 

Fund, calculated on a pro rata basis, 

does not exceed three percent (3%) of 

the fair market value of the net assets of 


TKELLEY on DSK3SPTVN1PROD with NOTICES2
Federal Register / Vol. 77, No. 63 / Monday, April 2, 2012 / Notices 19851 

such Client Plan, as of the last day of the 

most recent fiscal quarter of such Client 

Plan prior to such transaction, provided 

that a Sub-Advised Pooled Fund as a 

whole may pay up to one percent (1%) 

of fair market value of its net assets in 

purchasing such Assigned Loans. 

9. The BlackRock Manager has an 

opportunity to review the material terms 

of the Assigned Loan prior to agreeing 

to acquire the Assigned Loan, as well as 

review information which information 

may be obtained from one or more webbased sites (e.g., Intralinks) maintained 

for potential investors and lenders for 

this purpose. Information available to be 

reviewed shall include information 

regarding the borrower and draft loan 

documents (e.g., credit agreement, 

confidential information statement). 

10. The Covered Transactions in this 

Section III.W. are not part of an 

agreement, arrangement, or 

understanding designed to benefit any 

BlackRock Entity or MPS. 

11. Each Client Plan engaging in 

Covered Transactions pursuant to this 

Section III.W. shall have total net assets 

of at least $100 million in Securities of 

issuers that are not affiliated with such 

Client Plan (the $100 Million Net Asset 

Requirement). 

For purposes of a Pooled Fund 

engaging in the purchase of an Assigned 

Loan which is the subject of this 

exemption, each Client Plan in such 

Pooled Fund other than a Sub-Advised 

Pooled Fund shall have total net assets 

of at least $100 million in Securities of 

issuers that are not affiliated with such 

Client Plan. Notwithstanding the 

foregoing, if each Client Plan in such 

Pooled Fund other than a Sub-Advised 

Pooled Fund does not have total net 

assets of at least $100 million in 

Securities of issuers that are not 

affiliated with such Client Plan, the 

$100 Million Net Asset Requirement 

will be met if 50 percent (50%) or more 

of the units of beneficial interest in such 

Pooled Fund are held by investors, each 

of which have total net assets of at least 

$100 million in Securities of issuers that 

are not affiliated with such investor, and 

the Pooled Fund itself qualifies as a 

QIB. 

For purposes of the net asset 

requirements described in this Section 

III.W., where a group of Client Plans is 

maintained by a single employer or 

controlled group of employers, as 

defined in ERISA section 407(d)(7), the 

$100 Million Net Asset Requirement 

may be met by aggregating the assets of 

such Client Plans, if the assets of such 

Client Plans are pooled for investment 

purposes in a single master trust. 

12. No more than twenty percent 

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

the time of a Covered Transaction, are 

comprised of assets of In-House Plans 

for which the BlackRock Manager, or a 

BlackRock Entity exercises investment 

discretion. 

13. The BlackRock Manager must be 

a QPAM, and, in addition to satisfying 

the requirements for a QPAM under 

section VI(a) of PTE 84–14, the 

BlackRock Manager must also have total 

client assets under its management and 

control in excess of $5 billion, as of the 

last day of its most recent fiscal year and 

shareholders’ or partners’ equity in 

excess of $1 million. 

14. The conditions of Subsections 

IV.A.11. and 12. are satisfied with 

respect to the Covered Transactions 

described in this Section III.W. 

15. With respect to any Assigned Loan 

under which an MPS has an ongoing 

function, such as an administrative 

agent or collateral agent, the taking of or 

refraining from taking of any action by 

the responsible BlackRock Manager 

which could have a material positive or 

negative effect upon the MPS is decided 

upon by the IM. 

Section IV: Affiliated Underwritings 

and Affilliated Servicing 

A. Affiliated Underwritings 

1. The Securities to be purchased are 

either: 

(a) Part of an issue registered under 

the 1933 Act, or, if Securities to be 

purchased are part of an issue that is 

exempt from such registration 

requirement, such Securities: 

(i) Are issued or guaranteed by the 

United States or by any person 

controlled or supervised by and acting 

as an instrumentality of the United 

States pursuant to authority granted by 

the Congress of the United States, 

(ii) Are issued by a bank, 

(iii) Are exempt from such registration 

requirement pursuant to a federal 

statute other than the 1933 Act, or 

(iv) Are the subject of a distribution 

and are of a class which is required to 

be registered under section 12 of the 

1934 Act, and are issued by an issuer 

that has been subject to the reporting 

requirements of section 13 of the 1934 

Act for a period of at least ninety (90) 

days immediately preceding the sale of 

such Securities and that has filed all 

reports required to be filed thereunder 

with the SEC during the preceding 

twelve (12) months; or 

(b) Part of an issue that is an Eligible 

Rule 144A Offering. Where the Eligible 

Rule 144A Offering of the Securities is 

of equity Securities, the offering 

syndicate shall obtain a legal opinion 

regarding the adequacy of the disclosure 

in the offering memorandum; or 

(c) Municipal bonds taxable by the 

United States, including Build America 

Bonds created under section 54AA of 

the Code or successor thereto, under 

which the United States pays a subsidy 

to the state or local government issuer, 

but not including Build America Bonds 

which provide a tax credit to investors. 

2. The Securities to be purchased are 

purchased prior to the end of the first 

day on which any sales are made, 

pursuant to that offering, at a price that 

is not more than the price paid by each 

other purchaser of the Securities in that 

offering or in any concurrent offering of 

the Securities, except that: 

(a) If such Securities are offered for 

subscription upon exercise of rights, 

they may be purchased on or before the 

fourth day preceding the day on which 

the rights offering terminates; or 

(b) If such Securities are debt 

Securities, they may be purchased at a 

price that is not more than the price 

paid by each other purchaser of the 

Securities in that offering or in any 

concurrent offering of the Securities and 

may be purchased on a day subsequent 

to the end of the first day on which any 

sales are made, pursuant to that offering, 

provided that the interest rates, as of the 

date of such purchase, on comparable 

debt Securities offered to the public 

subsequent to the end of the first day on 

which any sales are made and prior to 

the purchase date are less than the 

interest rate of the debt Securities being 

purchased; and 

3. The Securities to be purchased are 

offered pursuant to an underwriting or 

selling agreement under which the 

members of the syndicate are committed 

to purchase all of the Securities being 

offered, except if: 

(a) Such Securities are purchased by 

others pursuant to a rights offering; or 

(b) Such Securities are offered 

pursuant to an over-allotment option. 

4. The issuer of the Securities to be 

purchased pursuant to this exemption 

must have been in continuous operation 

for not less than three (3) years, 

including the operation of any 

predecessors, unless the Securities to be 

purchased: 

(a) Are non-convertible debt 

Securities rated in one of the four 

highest rating categories by a Rating 

Organization; provided that none of the 

Rating Organizations rates such 

Securities in a category lower than the 

fourth highest rating category; or 

(b)(i) Are debt Securities issued or 

fully guaranteed by the United States or 

by any person controlled or supervised 

by and acting as an instrumentality of 

the United States pursuant to authority 

granted by the Congress of the United 

States; or 


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(ii) Are municipal bonds taxable by 

the United States, including Build 

America Bonds created under section 

54AA of the Code or successor thereto, 

under which the United States pays a 

subsidy to the state or local government 

issuer, but not including Build America 

Bonds which provide a tax credit to 

investors; or 

(c) Are debt Securities which are fully 

guaranteed by a guarantor that has been 

in continuous operation for not less 

than three (3) years, including the 

operation of any predecessors, provided 

that such guarantor has issued other 

Securities registered under the 1933 

Act; or if such guarantor has issued 

other Securities which are exempt from 

such registration requirement, such 

guarantor has been in continuous 

operation for not less than three (3) 

years, including the operation of any 

predecessors, and such guarantor is: 

(i) A bank; 

(ii) An issuer of Securities which are 

exempt from such registration 

requirement, pursuant to a Federal 

statute other than the 1933 Act; or 

(iii) An issuer of Securities that are 

the subject of a distribution and are of 

a class which is required to be registered 

under section 12 of the 1934 Act, and 

are issued by an issuer that has been 

subject to the reporting requirements of 

section 13 of the 1934 Act for a period 

of at least ninety (90) days immediately 

preceding the sale of such Securities 

and that has filed all reports required to 

be filed hereunder with the SEC during 

the preceding twelve (12) months. 

5. The aggregate amount of Securities 

of an issue purchased, pursuant to this 

exemption, by the BlackRock Manager 

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

and (ii) the assets, calculated on a pro 

rata basis, of all Client Plans investing 

in Pooled Funds managed by the 

BlackRock Manager; and (iii) the assets 

of plans to which the BlackRock 

Manager renders investment advice 

within the meaning of 29 CFR 2510.3 

21(c) does not exceed: 

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

amount of the Securities being offered 

in an issue, if such Securities are equity 

Securities; 

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

total amount of the Securities being 

offered in an issue, if such Securities are 

Asset-Backed Securities rated in one of 

the three highest rating categories by at 

least one of the Rating Organizations; 

provided that none of the Rating 

Organizations rates such Securities in a 

category lower than the third highest 

rating category; 

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

total amount of the Securities being 

offered in an issue, if such Securities are 

debt Securities rated in one of the four 

highest rating categories by at least one 

of the Rating Organizations; provided 

that none of the Rating Organizations 

rates such Securities in a category lower 

than the fourth highest rating category; 

or 

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

total amount of the Securities being 

offered in an issue, if such Securities are 

debt Securities (excluding Asset-Backed 

Securities) rated in the fifth or sixth 

highest rating categories by at least one 

of the Rating Organizations; provided 

that none of the Rating Organizations 

rates such Securities in a category lower 

than the sixth highest rating category; 

and 

(e) The assets of any single Client Plan 

(and the assets of any Client Plans 

investing in Pooled Funds) may not be 

used to purchase any Securities being 

offered, if such Securities are debt 

Securities rated lower than the sixth 

highest rating category by any of the 

Rating Organizations; 

(f) Notwithstanding the percentage of 

Securities of an issue permitted to be 

acquired, as set forth in Subsections 

A.5.(a)–(d) of this Section IV., the 

amount of Securities in any issue 

(whether equity or debt Securities or 

Asset-Backed Securities) purchased, 

pursuant to this exemption, by the 

BlackRock Manager on behalf of any 

single Client Plan, either individually or 

through investment, calculated on a pro 

rata basis, in a Pooled Fund may not 

exceed three percent (3%) of the total 

amount of such Securities being offered 

in such issue, provided that a SubAdvised Pooled Fund as a whole may 

purchase up to three percent (3%) of an 

issue; and 

(g) If purchased in an Eligible Rule 

144A Offering, the total amount of the 

Securities being offered for purposes of 

determining the percentages, described, 

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

is the total of: 

(i) The principal amount of the 

offering of such class of Securities sold 

by underwriters or members of the 

selling syndicate to QIBs; plus 

(ii) The principal amount of the 

offering of such class of Securities in 

any concurrent public offering. 

6. The aggregate amount to be paid by 

any single Client Plan in purchasing any 

Securities which are the subject of this 

exemption, including any amounts paid 

by any Client Plan in purchasing such 

Securities through a Pooled Fund, 

calculated on a pro rata basis, does not 

exceed three percent (3%) of the fair 

market value of the net assets of such 

Client Plan, as of the last day of the most 

recent fiscal quarter of such Client Plan 

prior to such transaction, provided that 

a Sub-Advised Pooled Fund as a whole 

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

market value of its net assets in 

purchasing such Securities. 

7. The Covered Transactions are not 

part of an agreement, arrangement, or 

understanding designed to benefit any 

BlackRock Entity or MPS. 

8. Each Client Plan shall have total 

net assets with a value of at least $50 

million (the $50 Million Net Asset 

Requirement). For purposes of engaging 

in Covered Transactions involving an 

Eligible Rule 144A Offering, each Client 

Plan shall have total net assets of at least 

$100 million in Securities of issuers that 

are not affiliated with such Client Plan 

(the $100 Million Net Asset 

Requirement). 

For purposes of a Pooled Fund 

engaging in an Affiliated Underwriting, 

each Client Plan in such Pooled Fund 

other than a Sub-Advised Pooled Fund 

shall have total net assets with a value 

of at least $50 million. Notwithstanding 

the foregoing, if each such Client Plan 

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

total net assets with a value of at least 

$50 million, the $50 Million Net Asset 

Requirement will be met, if fifty percent 

(50%) or more of the units of beneficial 

interest in such Pooled Fund are held by 

investors, each of which has total net 

assets with a value of at least $50 

million. 

For purposes of a Pooled Fund 

engaging in an Affiliated Underwriting 

involving an Eligible Rule 144A 

Offering, each Client Plan in such 

Pooled Fund other than a Sub-Advised 

Pooled Fund shall have total net assets 

of at least $100 million in Securities of 

issuers that are not affiliated with such 

Client Plan. Notwithstanding the 

foregoing, if each such Client Plan in 

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

total net assets of at least $100 million 

in Securities of issuers that are not 

affiliated with such Client Plan, the 

$100 Million Net Asset Requirement 

will be met if fifty percent (50%) or 

more of the units of beneficial interest 

in such Pooled Fund are held by 

investors, each of which have total net 

assets of at least $100 million in 

Securities of issuers that are not 

affiliated with such investor, and the 

Pooled Fund itself qualifies as a QIB. 

For purposes of the net asset 

requirements described, above in 

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

Plans is maintained by a single 

employer or controlled group of 

employers, as defined in ERISA section 

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

Requirement (or in the case of an 

Eligible Rule 144A Offering, the $100 


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Million Net Asset Requirement) may be 

met by aggregating the assets of such 

Client Plans, if the assets of such Client 

Plans are pooled for investment 

purposes in a single master trust. 

9. No more than twenty percent (20%) 

of the assets of a Pooled Fund, at the 

time of a Covered Transaction, are 

comprised of assets of In-House Plans 

for which the BlackRock Manager, or a 

BlackRock Entity exercises investment 

discretion. 

10. The BlackRock Manager must be 

a QPAM, and, in addition to satisfying 

the requirements for a QPAM under 

section VI(a) of PTE 84–14, the 

BlackRock Manager must also have total 

client assets under its management and 

control in excess of $5 billion, as of the 

last day of its most recent fiscal year and 

shareholders’ or partners’ equity in 

excess of $1 million. 

11. The BlackRock Manager 

maintains, or causes to be maintained, 

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

of any Covered Transaction such 

records as are necessary to enable the 

persons described below in Section 

IV.A.12.(a) to determine whether the 

conditions of this exemption have been 

met, except that: 

(a) No party in interest with respect to 

a plan which engages in the Covered 

Transactions, other than the BlackRock 

Manager, shall be subject to a civil 

penalty under ERISA section 502(i) or 

the taxes imposed by Code sections 

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

maintained, or not available for 

examination as required below by 

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

(b) A separate prohibited transaction 

shall not be considered to have occurred 

if, due to circumstances beyond the 

control of the BlackRock Manager, such 

records are lost or destroyed prior to the 

end of the six-year period. 

12. (a) Except as provided below, in 

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

notwithstanding the provisions of 

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

section 504, the records referred to, 

above, in Section IV.A.11. are 

unconditionally available at their 

customary location for examination 

during normal business hours by: 

(i) Any duly authorized employee or 

representative of the Department, the 

Internal Revenue Service, or the SEC; 

(ii) Any fiduciary of any Client Plan 

that engages in the Covered 

Transactions, or any duly authorized 

employee or representative of such 

fiduciary; 

(iii) Any employer of participants and 

beneficiaries and any employee 

organization whose members are 

covered by a Client Plan that engages in 

the Covered Transactions, or any 

authorized employee or representative 

of these entities; or 

(iv) Any participant or beneficiary of 

a Client Plan that engages in the 

Covered Transactions, or duly 

authorized employee or representative 

of such participant or beneficiary; 

(b) None of the persons described in 

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

be authorized to examine trade secrets 

of the BlackRock Manager, or 

commercial or financial information 

which is privileged or confidential; and 

(c) Should the BlackRock Manager 

refuse to disclose information on the 

basis that such information is exempt 

from disclosure, pursuant to Section 

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

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

day following the request, provide a 

written notice advising that person of 

the reasons for the refusal and that the 

Department may request such 

information. 

B. Affiliated Servicing 

1. The Securities are CMBS that are 

rated in one of the three highest rating 

categories by a Rating Organization; 

provided that none of the Rating 

Organizations rates such Securities in a 

category lower than the third highest 

rating category. 

2. The purchase of the CMBS meets 

the conditions of an applicable 

Underwriter Exemption. 

3. (a) The aggregate amount of CMBS 

of an issue purchased, pursuant to this 

exemption, by the BlackRock Manager 

with: 

(i) The assets of all Client Plans; and 

(ii) The assets, calculated on a pro rata 

basis, of all Client Plans and In-House 

Plans investing in Pooled Funds 

managed by the BlackRock Manager; 

and 

(iii) The assets of plans to which the 

BlackRock Manager renders investment 

advice, within the meaning of 29 CFR 

Sec. 2510.3–21(c), does not exceed 

thirty five percent (35%) of the total 

amount of the CMBS being offered in an 

issue. 

(b) Notwithstanding the percentage of 

CMBS of an issue permitted to be 

acquired, as set forth in Section 

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

of CMBS in any issue purchased, 

pursuant to this exemption, by the 

BlackRock Manager on behalf of any 

single Client Plan, either individually or 

through investment, calculated on a pro 

rata basis, in a Pooled Fund may not 

exceed three percent (3%) of the total 

amount of such CMBS being offered in 

such issue, and; 

(c) If purchased in an Eligible Rule 

144A Offering, the total amount of the 

CMBS being offered for purposes of 

determining the percentages described 

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

(i) The principal amount of the 

offering of such class of CMBS sold by 

underwriters or members of the selling 

syndicate to QIBs; plus 

(ii) The principal amount of the 

offering of such class of CMBS in any 

concurrent public offering. 

4. The aggregate amount to be paid by 

any single Client Plan in purchasing any 

CMBS which are the subject of this 

exemption, including any amounts paid 

by any Client Plan in purchasing such 

CMBS through a Pooled Fund, 

calculated on a pro rata basis, does not 

exceed three percent (3%) of the fair 

market value of the net assets of such 

Client Plan, as of the last day of the most 

recent fiscal quarter of such Client Plan 

prior to such transaction. 

5. The Covered Transactions under 

this Section IV.B. are not part of an 

agreement, arrangement, or 

understanding designed to benefit any 

MPS. 

6. The requirements of Sections 

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

Section V: Correction Procedures 

A. 1. The ECO shall monitor Covered 

Transactions and shall determine 

whether a particular Covered 

Transaction constitutes a Violation. The 

ECO shall notify the IM within five (5) 

business days following the discovery of 

any Violation. 

2. The ECO shall make an initial 

determination as to how to correct a 

Violation and place the conclusion of 

such determination in writing, with 

such conclusion disclosed to the IM 

within five (5) business days of the 

placing of the conclusion of such 

determination in writing. Following the 

initial determination, the ECO must 

keep the IM apprised on a current basis 

of the process of correction and must 

consult with the IM regarding each 

Violation and the appropriate form of 

correction. The ECO shall report the 

correction of the Violation to the IM 

within five (5) business days following 

completion of the correction. For 

purposes of this Section V.A.2., 

‘‘correction’’ must be consistent with 

ERISA section 502(i) and Code section 

4975(f)(5). 

3. The IM shall determinate whether 

it agrees that the correction of a 

Violation by the ECO is adequate and 

shall place the conclusion of such 

determination in writing, and, if the IM 

does not agree with the adequacy of the 

correction, the IM shall have the 

authority to require additional 

corrective actions by BlackRock. 

4. A summary of Violations and 

corrections of Violations will be in the 


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12PTE 2002–51, 67 FR 70623 (November 25, 

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

13The definition of terms herein shall apply 

equally to the singular and plural forms of the terms 

defined. Section headings are for convenience only. 

IM’s annual compliance report as 

described in Section II.E.12. 

B. Special Correction Procedure 

1. If a Covered Transaction which 

would otherwise constitute a Violation 

is corrected under this ‘‘Special 

Correction Procedure,’’ such Covered 

Transaction shall continue to be exempt 

under Section I of this exemption. 

2. (a) The Special Correction 

Procedure is a complete correction of 

the Violation no later than fourteen (14) 

business days following the date on 

which the ECO submits the quarterly 

report to the IM for the quarter in which 

the Covered Transaction first would 

become a non-exempt prohibited 

transaction by reason of constituting a 

Violation if not for this Section V.B. 

(b) Solely for purposes of the Special 

Correction Procedure, ‘‘correction’’ of a 

Covered Transaction which would 

otherwise be a Violation means either: 

(i) Restoring the Client Plan to the 

position it would have been in had the 

conditions of the exemption been 

complied with; 

(ii) correction consistent with ERISA 

section 502(i) and Code section 

4975(f)(5); or 

(iii) correction consistent with the 

Voluntary Fiduciary Correction 

Program.12

(c) Other than with respect to the 

definition of ‘‘correction’’ specified 

above, when utilizing the Special 

Correction Procedure the ECO and the 

IM shall comply with Section V.A. 

Section VI: Definitions 13

A. ‘‘1933 Act’’ means the Securities 

Act of 1933, as amended. 

B. ‘‘1934 Act’’ or ‘‘Exchange Act’’ 

means the Securities Exchange Act of 

1934, as amended. 

C. ‘‘1940 Act’’ means the Investment 

Company Act of 1940, as amended. 

D. ‘‘$50 Million Net Asset 

Requirement’’ shall have the meaning 

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

exemption. 

E. ‘‘$100 Million Net Asset 

Requirement’’ shall have the meaning 

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

exemption. 

F. ‘‘ABCP Conduit’’ means a special 

purpose vehicle that acquires assets 

from one or more originators and issues 

commercial paper to provide funding to 

the originator(s). Such vehicles are 

typically administered by a bank, but is 

not required to be administered by a 

bank, which provides liquidity support 

(standing ready to purchase the 

conduit’s commercial paper if it cannot 

be rolled over) and/or credit support 

(committing to cover losses in the event 

of default). The program administrator 

also typically acts as placement agent 

for the commercial paper, sometimes 

together with one or more other 

placement agents. Commercial paper 

issued by such a conduit may be 

purchased directly from the program 

administrator or other placement agent, 

or traded on the secondary market with 

another broker-dealer making a market 

in the Securities. 

G. ‘‘Acquisition’’ means the 

acquisition by BlackRock of Barclays 

Global Investors UK Holdings, Ltd. and 

its subsidiaries on December 1, 2009. 

H. ‘‘Affiliate’’ of another person 

means: 

(1) Any person directly or indirectly, 

through one or more intermediaries, 

controlling, controlled by, or under 

common control with such person; 

(2) Any officer, director, partner, 

employee, or relative (as defined in 

section 3(15) of ERISA) of such other 

person; and 

(3) Any corporation or partnership of 

which such other person is an officer, 

director, partner or employee. 

I. ‘‘Arranger’’ means a sophisticated 

financial institution, such as a 

commercial or investment bank, 

regularly engaged in structuring 

commercial loans. 

J. ‘‘Asset-Backed Securities’’ means 

Securities which are pass-through 

certificates or trust certificates 

characterized as equity pursuant to 29 

CFR 2510.3–101 that represent a 

beneficial ownership interest in the 

assets of an issuer which is a trust, with 

any such trust limited to (1) a single or 

multi-family residential or commercial 

mortgage investment trust, or (2) a 

motor vehicle receivable investment 

trust, and which entitles the holder to 

payments of principal, interest and/or 

other payments made with respect to 

the assets of the trust, the corpus or 

assets of which consist solely or 

primarily of secured obligations that 

bear interest or are purchased at a 

discount. For purposes of Section IV.A. 

of this exemption, excluding Section 

IV.A.5., Asset-Backed Securities are 

treated as debt Securities. 

K. ‘‘Assigned Loan’’ has the meaning 

set forth in Section III.W.1. of this 

exemption. 

L. ‘‘Authorizing fiduciary’’ has the 

meaning set forth in Section III.M.4(d)(i) 

of this exemption. 

M. ‘‘Automated Trading System’’ or 

‘‘ATS’’ means an electronic trading 

system, ECN or electronic clearing 

network or similar venue that functions 

in a manner intended to simulate a 

Securities exchange by electronically 

matching orders from multiple buyers 

and sellers, such as an ‘‘alternative 

trading system’’ within the meaning of 

the SEC’s Reg. ATS (17 CFR part 

242.300), as such definition may be 

amended from time to time, or an 

‘‘automated quotation system’’ as 

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

the 1934 Act. 

N. ‘‘BlackRock’’ means BlackRock, 

Inc. and any successors thereof. 

O. ‘‘BlackRock Entity’’ means 

BlackRock and any entity directly or 

indirectly, through one or more 

intermediaries, under the control of 

BlackRock, and any other entity which 

subsequently becomes directly or 

indirectly, through one or more 

intermediaries, under the control of 

BlackRock, and successors of the 

foregoing. 

P. ‘‘BlackRock Manager’’ means any 

bank, investment advisor, investment 

manager directly or indirectly, through 

one or more intermediaries, under the 

control of BlackRock, and any other 

bank, investment advisor, or investment 

manager which subsequently becomes 

directly or indirectly, through one or 

more intermediaries, under the control 

of BlackRock, and successors of the 

foregoing, including but not limited to 

BlackRock Advisors, LLC, BlackRock 

Financial Management, Inc., BlackRock 

Capital Management, Inc., BlackRock 

Institutional Management Corporation, 

BlackRock International, Ltd., 

BlackRock Realty Advisors, Inc., 

BlackRock Investment Management, 

LLC, BlackRock Fund Advisors, and 

BlackRock Institutional Trust Company, 

N.A. and any of the investment advisors 

and investment manager it controls. 

Q. ‘‘Board’’ means the Board of 

Directors of BlackRock. 

R. ‘‘Borrower Rating’’ means, solely 

for purposes of Section III.W. of this 

exemption, a rating assigned by a Rating 

Organization to a borrowing entity 

reflecting such borrower’s overall 

capacity and willingness to meet its 

financial obligations. More specifically, 

a Borrower’s Rating generally refers to 

the borrower’s ability and willingness to 

meet senior, unsecured obligations. 

S. ‘‘Buy-Up’’ means an initial 

acquisition of Securities issued by 

BlackRock by a BlackRock Manager, if 

such acquisition exceeds one percent 

(1%) of the aggregate daily trading 

volume for such Security, for an Index 

Account or Fund, or a Model-Driven 

Account or Fund which is necessary to 

bring the fund’s or account’s holdings of 

such Securities either to its 

capitalization-weighted or other 

specified composition in the relevant 


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Index, as determined by the 

organization maintaining such Index, or 

to its correct weighting as determined 

by the Model. 

T. ‘‘Client Plan’’ means any plan 

subject to ERISA section 406, Code 

section 4975 or FERSA section 8477(c) 

for which a BlackRock Manager is a 

fiduciary as described in ERISA section 

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

Pooled Fund, MPS Plan, Index Account 

or Fund, Model-Driven Account or 

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

the contrary. 

U. ‘‘CMBS’’ means an Asset-Backed 

Security with respect to which the 

assets or corpus of the issuer consist 

solely or primarily of obligations 

secured by commercial real property 

(including obligations secured by 

leasehold interests on commercial real 

property). 

V. ‘‘Code’’ means the Internal 

Revenue Code of 1986, as amended. 

W. ‘‘Control’’ means the power to 

exercise a controlling influence over the 

management or policies of a person 

other than an individual. 

X. ‘‘Covered Transaction’’ means each 

transaction set forth in Section III by a 

BlackRock Manager for a Client Plan 

with, affecting or involving, directly or 

indirectly, an MPS and/or a BlackRock 

Entity. 

Y. ‘‘Creation Shares’’ means new 

shares in an ETF created by an exchange 

of a specified basket of Securities and/ 

or cash to the ETF for such new shares 

of the ETF. 

Z. ‘‘ECO Function’’ means the ECO 

and such other BlackRock Entity 

employees in legal and compliance roles 

working under the supervision of the 

ECO in connection with the Covered 

Transactions. The list of BlackRock 

Entity employees shall be shared with 

the IM from time to time, not less than 

quarterly, and such employees will be 

made available to discuss the relevant 

Covered Transactions with the IM to the 

extent the IM or the ECO deem it 

reasonably prudent. 

AA. ‘‘Electronic Communications 

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

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

Regulation NMS under the 1934 Act. 

BB. ‘‘Eligible Rule 144A Offering’’ 

shall have the same meaning as defined 

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

CC. ‘‘Eligible Securities Depository’’ 

means an eligible securities depository 

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

may be amended from time to time. 

DD. ‘‘EPP Correction’’ has the 

meaning set forth in Section II.C. of this 

exemption. 

EE. ‘‘ERISA’’ means the Employee 

Retirement Income Security Act of 1974, 

as amended. 

FF. ‘‘ETF’’ means an exchange-traded 

open-end investment company 

registered under the 1940 Act. 

GG. ‘‘Exemption Compliance Officer’’ 

or ‘‘ECO’’ means an officer of BlackRock 

or of a BlackRock Entity appointed by 

BlackRock or such BlackRock Entity, 

subject to the approval of the IM, who 

is responsible for compliance with the 

exemption. The ECO, unless otherwise 

stated in this exemption, will be 

responsible for: monitoring all Covered 

Transactions and reviewing compliance 

with all of the conditions of the 

exemption applicable thereto; approving 

certain Covered Transactions in advance 

as required by the terms of the 

exemption; reviewing reports of 

Covered Transactions and the results of 

sampling of Covered Transactions; and 

determining when Covered Transactions 

transgress the EPPs and/or constitute a 

Violation. 

HH. ‘‘Exemption Polices and 

Procedures’’ or ‘‘EPPs’’ means the 

written policy adopted and 

implemented by BlackRock for 

BlackRock Entities that is reasonably 

designed to ensure compliance with the 

terms of the exemption. The EPPs must 

reflect the specific requirements of the 

exemption, but must also be designed to 

ensure that the decisions to enter into 

Covered Transactions on behalf of 

Client Plans with the MPSs are in the 

interests of Client Plans and their 

participants and beneficiaries, including 

by ensuring to the extent possible that 

the terms of each Covered Transaction 

are at least as favorable to the Client 

Plan as the terms generally available in 

comparable arm’s length transactions 

with unrelated parties. 

II. ‘‘Facility Rating’’ means, solely for 

purposes of Section III.W. of this 

exemption, a rating assigned by a Rating 

Organization to a specific loan, note or 

other financial obligation, a specific 

class of financial obligations, or a 

specific financial program within a 

borrower’s capital structure. The rating 

on a specific loan facility or other issue 

may reflect positive or negative 

adjustments relative to the borrower’s 

rating for (1) the presence of collateral, 

(2) explicit subordination, or (3) any 

other factors that affect the payment 

priority, expected recovery, or credit 

stability of the specific issue. 

JJ. ‘‘FarmerMac’’ means the Federal 

Agricultural Mortgage Corporation. 

KK. ‘‘FERSA’’ means the Federal 

Employees’ Retirement System Act of 

1986, as amended. 

LL. ‘‘FHLMC’’ means the Federal 

Home Loan Mortgage Corporation. 

MM. ‘‘Fixed Income Obligations’’ 

means: (1) Fixed income obligations 

including structured debt or other 

instruments characterized as debt 

pursuant to 29 CFR 2510.3–101, 

including, but not limited to, debt 

convertible into equity, certificates of 

deposit and loans (other than loans 

described in Section III.W. with respect 

to which an MPS is an Arranger) and (2) 

guaranteed governmental mortgage pool 

certificates within the meaning of 29 

CFR 2510.3–101(i). Asset-Backed 

Securities are not Fixed Income 

Obligations for purposes of this 

exemption. 

NN. ‘‘FNMA’’ means the Federal 

National Mortgage Association. 

OO. ‘‘Foreign Bank’’ means an 

institution that has substantially similar 

powers to a bank as defined in section 

202(a)(2) of the Investment Advisers 

Act, as amended, has as of the last day 

of its most recent fiscal year, equity 

capital which is the equivalent of no 

less than $200 million, and is subject to: 

(1)(a) Registration and regulation, as 

applicable, under the laws of the United 

Kingdom, or (b)(i) registration and 

regulation by a securities commission of 

a Province of Canada that is a member 

of the Canadian Securities 

Administration, and (ii) is subject to the 

oversight of a Canadian self-regulatory 

authority; or 

(2) Regulation by the relevant 

governmental banking agency(ies) of a 

country other than the United States 

and the regulation and oversight of 

these banking agencies were applicable 

to a bank that received: (a) An 

individual exemption, granted by the 

Department under section 408(a) of 

ERISA, involving the loan of Securities 

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

authorization by the Department to 

engage in an otherwise prohibited 

transaction pursuant to PTE 96–62, as 

amended, involving the loan of 

Securities by a plan to a bank. On the 

date this exemption becomes effective, 

the following countries shall qualify for 

purposes of this clause (2): United 

Kingdom, Canada, Germany, Japan, 

Australia, Switzerland, France, the 

Netherlands and Sweden. 

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

broker-dealer that has, as of the last day 

of its most recent fiscal year, equity 

capital that is the equivalent of no less 

than $200 million and is: 

(1) Registered and regulated under the 

laws of the United Kingdom; 

(2) Registered and regulated by a 

securities commission of a Province of 

Canada that is a member of the 

Canadian Securities Administration, 

and is subject to the oversight of a 

Canadian self-regulatory authority; or 


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(3) Registered and regulated under the 

relevant Securities laws of a 

governmental entity of a country other 

than the United States and such 

Securities laws and regulation were 

applicable to a broker-dealer that 

received: (a) An individual exemption, 

granted by the Department under 

section 408(a) of ERISA, involving the 

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

Department to engage in an otherwise 

prohibited transaction pursuant to PTE 

96–62, as amended, involving the loan 

of Securities by a plan to a brokerdealer. On the date this exemption 

becomes effective, the following 

countries shall qualify for purposes of 

this clause (2): United Kingdom, 

Canada, Germany, Japan, Australia, 

Switzerland, France, the Netherlands 

and Sweden. 

QQ. ‘‘Foreign Collateral’’ means: 

(1) Securities issued by or guaranteed 

as to principal and interest by the 

following Multilateral Development 

Banks, the obligations of which are 

backed by the participating countries, 

including the United States: The 

International Bank for Reconstruction 

and Development, the Inter-American 

Development Bank, the Asian 

Development Bank, the African 

Development Bank, the European Bank 

for Reconstruction and Development 

and the International Finance 

Corporation; 

(2) Foreign sovereign debt Securities 

provided that at least one nationally 

recognized statistical rating organization 

has rated in one of its two highest 

categories either the issue, the issuer or 

guarantor; 

(3) The British pound, the Canadian 

dollar, the Swiss franc, the Japanese yen 

or the Euro; 

(4) Irrevocable letters of credit issued 

by a Foreign Bank, other than the 

borrower or an affiliate thereof, which 

has a counterparty rating of investment 

grade or better as determined by a 

nationally recognized statistical rating 

organization; or 

(5) Any type of collateral described in 

Rule 15c3–3 of the 1934 Act as amended 

from time to time provided that the 

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

Broker-Dealer and such fiduciary 

indemnifies the plan with respect to the 

difference, if any, between the 

replacement cost of the borrowed 

Securities and the market value of the 

collateral on the date of a borrower 

default plus interest and any transaction 

costs which a plan may incur or suffer 

directly arising out of a borrower 

default. Notwithstanding the foregoing, 

collateral described in any of the 

categories enumerated in section V(e) of 

Prohibited Transaction Exemption 

2006–16 will be considered U.S. 

Collateral for purposes of the 

exemption. 

RR. ‘‘Foreign Exchange Transaction’’ 

means the exchange of the currency of 

one nation for the currency of another 

nation, or a contract for such an 

exchange. The term Foreign Exchange 

Transaction includes option contracts 

on foreign exchange transactions. 

Foreign Exchange Transactions may be 

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

depending on the settlement date of the 

transaction. 

SS. ‘‘GNMA’’ means the Government 

National Mortgage Association. 

TT. ‘‘Independent Monitor’’ or ‘‘IM’’ 

means an individual or entity appointed 

by BlackRock to carry out certain 

functions set forth in Sections II, III and 

V of the exemption and who (or which), 

given the number of types of Covered 

Transactions and the number of actual 

individual Covered Transactions 

potentially covered by the exemption, 

must be knowledgeable and experienced 

with respect to each Covered 

Transaction and able to demonstrate 

sophistication in relevant markets, 

instruments and trading techniques 

relative thereto, and, in addition, must 

understand and accept in writing its 

duties and responsibilities under ERISA 

and the exemption with respect to the 

Client Plans. The IM must be 

independent of and unrelated to 

BlackRock and any MPS. For purposes 

of this exemption, such individual or 

entity will not be deemed to be 

independent of and unrelated to 

BlackRock and the MPSs if: 

(1) Such individual or entity directly 

or indirectly controls, is controlled by, 

or is under common control with 

BlackRock or an MPS; 

(2) Such individual or entity, or any 

employee thereof performing services in 

connection with this exemption, or an 

officer, director, partner, or highly 

compensated employee (as defined in 

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

an officer, director, partner or highly 

compensated employee (as defined in 

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

BlackRock or an MPS; or any member of 

the business segment performing 

services in connection with this 

exemption is a relative of an officer, 

director, partner or highly compensated 

employee (as defined in Code section 

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

However, if an individual is a director 

of the IM and an officer, director, 

partner or highly compensated 

employee (as defined in Code section 

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

and if he or she abstains from 

participation in any of the services 

performed by the IM under this 

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

shall not apply. 

For purposes of this Subsection, the 

term officer means a president, any 

senior vice president in charge of a 

principal business unit, division or 

function (such as sales, administration, 

or finance), or any other officer who 

performs a policy-making function for 

the IM, BlackRock, or an MPS. 

(3) The IM directly or indirectly 

receives any compensation or other 

consideration for the IM’s personal 

account in connection with any Covered 

Transaction, except that the IM may 

receive compensation from BlackRock 

for acting as IM as contemplated herein 

if the amount or payment of such 

compensation is reasonable and not 

contingent upon or in any way affected 

by any decision made by the IM while 

acting as IM; or 

(4) The annual gross revenue received 

by the IM, during any year of its 

engagement, from the MPSs and 

BlackRock Entities for all services 

exceeds the greater of (a) five percent 

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

from all sources for its prior tax year, or, 

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

revenue of the IM and its majority 

shareholder from all sources for their 

prior tax year. 

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

Securities or commodities index that 

represents the investment performance 

of a specific segment of the market for 

equity or debt Securities or commodities 

in the United States and/or an 

individual foreign country or any 

collection of foreign countries, but only 

if— 

(1) The organization creating and 

maintaining the index is: 

(a) Engaged in the business of 

providing financial information, 

evaluation, advice or Securities 

brokerage services to institutional 

clients, 

(b) A publisher of financial news or 

information, or 

(c) A public Securities exchange or 

association of Securities dealers; and 

(2) The index is created and 

maintained by an organization 

independent of all BlackRock Entities. 

For purposes of this definition of 

‘‘Index,’’ every BlackRock Entity is 

deemed to be independent of every 

MPS. 

(3) The index is a generally accepted 

standardized index of Securities or 

commodities which is not specifically 

tailored for the use of a BlackRock 

Manager(s). 

(4) If the organization creating, 

providing or maintaining the Index is an 

MPS: 


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(a) Such Index must be widely-used 

in the market by independent 

institutional investors other than 

pursuant to an investment management 

or advisory relationship with a 

BlackRock Manager, and must be 

prepared or applied by such MPS in the 

same manner as for customers other 

than a BlackRock Manager(s); 

(b) BlackRock must certify to the ECO 

whether, in its reasonable judgment, 

such Index is widely-used in the 

market. In making this determination, 

BlackRock shall take into consideration 

factors such as (i) publication of 

summary Index information by the MPS 

providing the Index, Bloomberg, 

Reuters, or a similar institution involved 

in the dissemination of financial 

information, and (ii) delivery of Index 

information including but not limited to 

Index component information by such 

MPS to clients or other subscribers 

including by electronic means including 

via the Internet; 

(c) BlackRock must notify the ECO if 

it becomes aware that: (i) Such Index is 

operated other than in accordance with 

objective rules, in the ordinary course of 

business, (ii) manipulation of any such 

Index has occurred for the purpose of 

benefiting BlackRock, or (iii) in the 

event that any rule change occurred in 

connection with the rules underlying 

such Index, such rule change was made 

by the MPS for the purpose of benefiting 

BlackRock; provided, however, this 

Subsection (c)(iii) expressly excludes 

instances where the rule changes were 

made in response to requests from 

clients/prospective clients of BlackRock 

even if BlackRock is ultimately hired to 

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

sponsor X requests a ‘‘Global ex-Sudan 

Fixed Income Index’’, an MPS decides 

to sponsor such index and plan sponsor 

X approaches BlackRock or otherwise 

issues a ‘‘Request for Proposal’’ for 

investment managers who could manage 

an index portfolio benchmarked to the 

Global ex-Sudan Fixed Income Index). 

(d) BlackRock must certify to the ECO 

annually that it is not aware of the 

occurrence of any of the events 

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

BlackRock cannot so certify, or if 

BlackRock provides the ECO with the 

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

the ECO shall notify the IM, and the IM 

must take appropriate remedial action 

which may include, but need not be 

limited to, instructions for relevant 

BlackRock Managers to cease using such 

Index. 

VV. ‘‘Index Account or Fund’’ means 

any investment fund, account or 

portfolio sponsored, maintained, 

trusteed, or managed by a BlackRock 

Manager or a BlackRock Entity, in 

which one or more Client Plans invest, 

and— 

(1) Which is designed to track the rate 

of return, risk profile and other 

characteristics of an Index by either (i) 

replicating the same combination of 

Securities or commodities which 

compose such Index or (ii) sampling the 

Securities or commodities which 

compose such Index based on objective 

criteria and data; 

(2) For which the BlackRock Manager 

does not use its discretion, or data 

within its control, to affect the identity 

or amount of Securities or commodities 

to be purchased or sold; 

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

to either ERISA section 406, Code 

section 4975 or FERSA section 8477(c); 

and, 

(4) That involves no agreement, 

arrangement, or understanding 

regarding the design or operation of the 

Index Account or Fund which is 

intended to benefit a BlackRock Entity 

or an MPS, or any party in which a 

BlackRock Entity or an MPS may have 

an interest. 

For purposes of this definition of 

‘‘Index Account or Fund’’, every 

BlackRock Entity is deemed to be 

independent of each MPS. 

WW. ‘‘In-House Plan’’ means an 

employee benefit plan that is subject to 

ERISA section 406 and/or Code section 

4975, and that is sponsored by a 

BlackRock Entity for its employees. 

XX. ‘‘Interbank Rate’’ means the 

interbank bid and asked rate for foreign 

exchange transactions of comparable 

size and maturity at the time of the 

transaction as quoted on a nationally 

recognized service for facilitating 

foreign currency trades between large 

commercial banks and Securities 

dealers. 

YY. ‘‘Know’’ means to have actual 

knowledge. BlackRock Managers will be 

deemed to have actual knowledge of 

information set forth in a written 

agreement or offering document as of 

the date the BlackRock Manager 

receives such agreement or document. 

ZZ. ‘‘Lead Arranger’’ means, with 

respect to any Loan Offering involving 

more than one Arranger, the Arranger 

designated as such by all of such 

Arrangers. 

AAA. ‘‘Loan’’ means, solely for 

purposes of Section III.W. of this 

exemption, a delivery by a lender and 

receipt by a commercial borrower of a 

sum of money to fund current and 

ongoing operations or a specific 

transaction upon agreement that such 

borrower is to repay it upon agreed 

terms. For the avoidance of doubt, this 

term does not include any Fixed Income 

Obligations which are covered 

separately under Section IV.A. of this 

exemption. 

BBB. ‘‘Loan Offering’’ means, with 

respect to the aggregate principal 

amount of any Loan extended to a 

commercial borrower in any single 

transaction, the process of structuring, 

marketing and offering to banks, 

insurance companies, investment funds 

and other institutional investors the 

opportunity to purchase interests in 

such Loan. 

CCC. ‘‘Model’’ means a computer 

model that is based on prescribed 

objective criteria using independent 

data not within the control of a 

BlackRock Entity to transform an Index. 

DDD. ‘‘Model-Driven Account or 

Fund’’ means any investment fund, 

account or portfolio sponsored, 

maintained, trusteed, or managed by a 

BlackRock Manager or a BlackRock 

Entity in which one or more Client 

Plans invest, and— 

(1) Which is composed of Securities 

or commodities the identity of which 

and the amount of which are selected by 

a Model; 

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

to either ERISA section 406, Code 

section 4975 or FERSA section 8477(c); 

and 

(3) That involves no agreement, 

arrangement, or understanding 

regarding the design or operation of the 

Model-Driven Account or Fund or the 

utilization of any specific objective 

criteria which is intended to benefit a 

BlackRock Entity or an MPS, or any 

party in which a BlackRock Entity or an 

MPS may have an interest. 

For purposes of this definition of 

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

BlackRock Entity is deemed to be 

independent of each MPS. 

EEE. ‘‘MPS’’ or ‘‘Minority Passive 

Shareholder’’ means any of (1) Barclays 

PLC, (2) The PNC Financial Services 

Group, Inc., or (3) each entity directly or 

indirectly, through one or more 

intermediaries, controlling, controlled 

by or under common control with one 

or more of Barclays PLC (Barclays 

MPSs) or The PNC Financial Services 

Group, Inc., (PNC MPSs) (each of the 

PNC MPSs and the Barclays MPSs, an 

MPS Group) but excluding any and all 

BlackRock Entities. 

FFF. ‘‘MPS Group’’ shall have the 

meaning set forth in the definition of 

MPS. 

GGG. ‘‘MPS Plans’’ means an 

employee benefit plan(s) that is subject 

to ERISA section 406 and/or Code 

section 4975, and that is sponsored by 

an MPS for its employees. 

HHH. ‘‘Other Account or Fund’’ 

means any investment fund, account or 

portfolio sponsored, maintained, 


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trusteed, or managed by a BlackRock 

Manager or a BlackRock Entity in which 

one or more Client Plans invest, and— 

(1) Which is not an Index Account or 

Fund or a Model-Driven Account or 

Fund; and 

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

to either ERISA section 406, Code 

section 4975 or FERSA section 8477(c). 

III. ‘‘Pooled Fund’’ means a common 

or collective trust fund or other pooled 

investment fund: 

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

(2) For which a BlackRock Manager 

exercises discretionary authority or 

discretionary control respecting the 

management or disposition of the assets 

of such fund(s); and 

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

to either ERISA section 406, Code 

section 4975 or FERSA section 8477(c). 

Solely for purposes of Section IV of 

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

only include funds or trusts which 

otherwise meet this definition but 

which also are either (i) maintained by 

a BlackRock Entity or (ii) maintained by 

a person which is not a BlackRock 

Entity but is sub-advised by a BlackRock 

Manager, provided that with respect to 

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

fund or trust is either a bank-maintained 

common or collective trust fund or an 

insurance company pooled separate 

account that holds assets of at least $250 

million, (B) the bank or insurance 

company sponsoring the Pooled Fund 

has total client assets under its 

management or control in excess of $5 

billion as of the last day of its most 

recent fiscal year, and shareholders’ or 

partners’ equity in excess of $1 million, 

and (C) the decision to invest the Client 

Plan into the bank-maintained common 

or collective trust or insurance company 

pooled separate account and to maintain 

such investment is made by a Client 

Plan fiduciary which is not a BlackRock 

Entity. Such sub-advised Pooled Funds 

are sometimes referred to herein as 

‘‘Sub-Advised Pooled Funds’’. 

JJJ. ‘‘Qualified Institutional Buyer’’ or 

‘‘QIB’’ shall have the same meaning as 

defined in SEC Rule 144A (17 CFR 

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

KKK. ‘‘QPAM Exemption’’ or ‘‘PTE 

84–14’’ means Prohibited Transaction 

Exemption 84–14, as amended. 

LLL. ‘‘Qualified Professional Asset 

Manager’’ or ‘‘QPAM’’ shall have the 

meaning set forth in Section VI(a) of the 

QPAM Exemption. 

MMM. ‘‘Rating Organizations’’ means 

Standard & Poor’s Rating Services, 

Moody’s Investors Service, Inc., Fitch 

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

or any similar agency subsequently 

recognized by the Department as a 

Rating Organization or any successors 

thereto. 

NNN. ‘‘Recognized Securities 

Exchange’’ means a U.S. securities 

exchange that is registered as a 

‘‘national securities exchange’’ under 

section 6 of the 1934 Act, or a 

designated offshore securities market, as 

defined in Regulation S of the SEC (17 

CFR part 230.902(b)), as such definition 

may be amended from time to time, 

which performs with respect to 

Securities the functions commonly 

performed by a stock exchange within 

the meaning of definitions under the 

applicable Securities laws (e.g., 17 CFR 

part 240.3b–16). 

OOO. ‘‘Registered Investment 

Advisor’’ means an investment advisor 

registered under the Investment 

Advisors Act of 1940, as amended, that 

has total client assets under its 

management or control in excess of $5 

billion as of the last day of its most 

recent fiscal year and shareholders’ or 

partners’ equity in excess of $1 million, 

as shown in the most recent balance 

sheet prepared within the two years 

immediately preceding a Covered 

Transaction, in accordance with 

generally accepted accounting 

principles. 

PPP. ‘‘SEC’’ means the United States 

Securities and Exchange Commission. 

QQQ. ‘‘Securities’’ shall have the 

same meaning as defined in section 

2(a)(36) of the 1940 Act. For purposes of 

Section IV of this exemption, except as 

where specifically identified, AssetBacked Securities are treated as debt 

Securities. 

RRR. ‘‘Three Quote Process’’ means 

three bids or offers (either of which 

being sometimes referred to as quotes) 

are received by a trader for a BlackRock 

Manager each of which such quotes 

such trader reasonably believes is an 

indication that the dealer presenting the 

bid or offer is willing to transact the 

trade at the stipulated volume under 

discussion, and all material terms 

(including volume) under discussion are 

materially similar with respect to each 

other such quote. In selecting the best of 

three such quotes, a BlackRock Manager 

shall maintain books and records for the 

three firm bids/offers in a convention 

that it reasonably believes is customary 

for the specific asset class (such as 

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

‘‘spread’’ quotes). For example, 

corporate bonds are often quoted on a 

spread basis and dealers customarily 

quote the spread above a certain 

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

size and direction such as a BlackRock 

trader may ask for quotes to sell $1 

million of a particular bond, dealer 1 

may quote 50 bps above the yield of the 

10 year treasury bond, dealer 2 might 

quote 52 bps above the yield of the 10 

year treasury bond and dealer 3 might 

quote 53 bps above the yield of the 10 

year treasury bond). If only two firm 

bids/offers can be obtained, the trade 

requires prior approval by the ECO and 

the ECO must inquire as to why three 

firm bids/offers could not be obtained. 

If in the case of a sale or purchase a 

trader for a BlackRock Manager 

reasonably believes it would be 

injurious to the Client Plan to specify 

the size of the intended trade to certain 

bidders, a bid on a portion of the 

intended trade may be treated as a firm 

bid if the trader documents (i) why the 

bid price is a realistic indication of the 

economic terms for the actual amount 

being traded despite the difference in 

the size of the actual trade and (ii) why 

it would be harmful to the Client Plan 

to solicit multiple bids on the actual 

amount of the trade. If a trader for a 

BlackRock Manager solicits bids from 

three or more dealers on a sale or 

purchase of a certain volume of 

Securities, and receives back three or 

more bids, but at least one bid is not for 

the full amount of the intended sale, if 

the price offered by the partial bidder(s) 

is less than the price offered by the full 

bidder(s), the trader may assume a full 

bid by the partial bidder(s) would not be 

the best bid, and the trader can 

consummate the trade, in the case of at 

least two full bids, with the dealer 

making the better of the full bids, or in 

the case of only one full bid, with the 

dealer making that full bid. 

SSS. ‘‘Underwriter Exemption(s)’’ 

means a group of individual exemptions 

granted by the Department to provide 

relief for the origination and operation 

of certain asset pool investment trusts 

and the acquisition, holding and 

disposition by plans of Asset-Backed 

Securities representing undivided 

interests in those trusts. Such group of 

individual exemptions was collectively 

amended by Prohibited Transaction 

Exemption 2009–31, 74 FR 59001 (Nov. 

16, 2009). 

TTT. ‘‘U.S. Bank’’ means a bank as 

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

Investment Advisers Act, as amended. 

UUU. ‘‘U.S. Broker-Dealer’’ means a 

broker-dealer registered under the 1934 

Act or exempted from registration under 

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

dealer in exempted government 

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

of the 1934 Act). 

VVV. ‘‘U.S. Collateral’’ means: 

(1) U.S. currency; 

(2) ‘‘Government securities’’ as 

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

the 1934 Act; 


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(3) ‘‘Government securities’’ as 

defined in section 3(a)(42)(C) of the 

1934 Act issued or guaranteed as to 

principal or interest by the following 

corporations: The Federal Home Loan 

Mortgage Corporation, the Federal 

National Mortgage Association, the 

Student Loan Marketing Association 

and the Financing Corporation; 

(4) Mortgage-backed Securities 

meeting the definition of a ‘‘mortgage 

related security’’ set forth in section 

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

(5) Negotiable certificates of deposit 

and bankers acceptances issued by a 

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

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

payable in the United States and 

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

term is defined in 17 CFR 240.15c3–1; 

or 

(6) Irrevocable letters of credit issued 

by a U.S. Bank other than the borrower 

or an affiliate thereof, or any 

combination, thereof. 

WWW. ‘‘Violation’’ means a Covered 

Transaction which is a prohibited 

transaction under ERISA sections 406 or 

407, Code section 4975, or FERSA 

section 8477(c) and which is not exempt 

by reason of a failure to comply with 

this exemption or another 

administrative or statutory exemption. 

To the extent that the non-exempt 

prohibited transaction relates to an act 

or omission that is separate and distinct 

from a prior otherwise exempt 

transaction that may relate to the same 

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

instrument into an equity instrument or 

a creditor’s committee for a debt 

instrument), the Violation occurs only at 

the current point in time and no 

Violation shall be deemed to occur for 

the earlier transaction relating to the 

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

the asset) that was otherwise in 

compliance with ERISA, the Code or 

FERSA. 

Dated: Signed at Washington, DC, this 27th 

day of March, 2012. 

Lyssa Hall, 

Acting Director of Exemption Determinations, 

Employee Benefits Security Administration, 

U.S. Department of Labor. 

[FR Doc. 2012–7704 Filed 3–30–12; 8:45 am] 

BILLING CODE 4510–29–P 


TKELLEY on DSK3SPTVN1PROD with NOTICES2