68834 Federal Register / Vol. 77, No. 222 / Friday, November 16, 2012 / Notices 

that the above requirements of this 

exemption continue to be met. 

Section IV. Effective Dates 

Section I.A. of this exemption is 

effective as of August 1, 2006, through 

and until November 15, 2012, and 

Section I.B. of this exemption is 

effective as of November 16, 2012. 

The Department invited all interested 

persons to submit written comments 

with respect to the proposed exemption 

on or before September 30, 2012. During 

the comment period, the Department 

received one email inquiry which 

generally concerned the individual’s 

difficulty in understanding the notice of 

proposed exemption. However, the 

Department received no comments or 

requests for a hearing from interested 

persons. 

Therefore, after giving full 

consideration to the entire record, the 

Department has decided to grant the 

exemption. For further information 

regarding the individual exemption, 

interested persons are encouraged to 

obtain copies of the exemption 

application file (Application No. L– 

11688) 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 complete statement of the facts 

and representations supporting the 

Department’s decision to grant this 

exemption refer to the proposed 

exemption published in the Federal 

Register on August 28, 2012 at 77 FR 

52061. 

FOR FURTHER INFORMATION CONTACT: Mr. 

Warren Blinder, Office of Exemption 

Determinations, Employee Benefits 

Security Administration, U.S. 

Department of Labor, telephone (202) 

693–8553. (This is not a toll-free 

number.) 

General Information 

The attention of interested persons is 

directed to the following: 

(1) The fact that a transaction is the 

subject of an exemption under section 

408(a) of the Act and/or section 

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

a fiduciary or other party in interest or 

disqualified person from certain other 

provisions to which the exemption does 

not apply and the general fiduciary 

responsibility provisions of section 404 

of the Act, which among other things 

require a fiduciary to discharge his 

duties respecting the plan solely in the 

interest of the participants and 

beneficiaries of the plan and in a 

prudent fashion in accordance with 

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

it affect the requirement of section 

401(a) of the Code that the plan must 

operate for the exclusive benefit of the 

employees of the employer maintaining 

the plan and their beneficiaries; 

(2) Each exemption is supplemental to 

and not in derogation of, any other 

provisions of the Act and/or the Code, 

including statutory or administrative 

exemptions and transactional rules. 

Furthermore, the fact that a transaction 

is subject to an administrative or 

statutory exemption is not dispositive of 

whether the transaction is in fact a 

prohibited transaction; and 

(3) The availability of an exemption is 

subject to the express condition that the 

material facts and representations 

contained in the application accurately 

describes all material terms of the 

transaction which is the subject of the 

exemption. 

Signed at Washington, DC, this 9th day of 

November 2012. 

Lyssa E. Hall, 

Director of Exemption Determinations, 

Employee Benefits Security Administration, 

U.S. Department of Labor. 

[FR Doc. 2012–27848 Filed 11–15–12; 8:45 am] 

BILLING CODE 4510–29–P 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

Proposed Exemptions From Certain 

Prohibited Transaction Restrictions 

AGENCY: Employee Benefits Security 

Administration, Labor. 

ACTION: Notice of Proposed Exemptions. 

SUMMARY: This document contains 

notices of pendency before the 

Department of Labor (the Department) of 

proposed exemptions from certain of the 

prohibited transaction restrictions of the 

Employee Retirement Income Security 

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

the Internal Revenue Code of 1986 (the 

Code). This notice includes the 

following proposed exemptions: D– 

11610, UBS Financial Services, Inc. D– 

11666, Central Pacific Bank 401(k) 

Retirement and Savings Plan (the Plan); 

D–11672, Studley, Inc. Section 401(k) 

Plan Profit Sharing Plan (the Plan); and 

D–11724, EquiLend Holdings LLC 

(EquiLend). 

DATES: All interested persons are invited 

to submit written comments or requests 

for a hearing on the pending 

exemptions, unless otherwise stated in 

the Notice of Proposed Exemption, 

within 45 days from the date of 

publication of this Federal Register 

Notice. 

ADDRESSES: Comments and requests for 

a hearing should state: (1) The name, 

address, and telephone number of the 

person making the comment or request, 

and (2) the nature of the person’s 

interest in the exemption and the 

manner in which the person would be 

adversely affected by the exemption. A 

request for a hearing must also state the 

issues to be addressed and include a 

general description of the evidence to be 

presented at the hearing. All written 

comments and requests for a hearing (at 

least three copies) should be sent to the 

Employee Benefits Security 

Administration (EBSA), Office of 

Exemption Determinations, Room N– 

5700, U.S. Department of Labor, 200 

Constitution Avenue NW., Washington, 

DC 20210. Attention: Application 

No.lll, stated in each Notice of 

Proposed Exemption. Interested persons 

are also invited to submit comments 

and/or hearing requests to EBSA via 

email or FAX. Any such comments or 

requests should be sent either by email 

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

(202) 219–0204 by the end of the 

scheduled comment period. The 

applications for exemption and the 

comments received will be available for 

public inspection in the Public 

Documents Room of the Employee 

Benefits Security Administration, U.S. 

Department of Labor, Room N–1513, 

200 Constitution Avenue NW., 

Washington, DC 20210. 

Warning: If you submit written 

comments or hearing requests, do not 

include any personally-identifiable or 

confidential business information that 

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

requests are posted on the Internet 

exactly as they are received, and they 

can be retrieved by most Internet search 

engines. The Department will make no 

deletions, modifications or redactions to 

the comments or hearing requests 

received, as they are public records. 

SUPPLEMENTARY INFORMATION: 

Notice to Interested Persons 

Notice of the proposed exemptions 

will be provided to all interested 

persons in the manner agreed upon by 

the applicant and the Department 

within 15 days of the date of publication 

in the Federal Register. Such notice 

shall include a copy of the notice of 

proposed exemption as published in the 

Federal Register and shall inform 

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Federal Register / Vol. 77, No. 222 / Friday, November 16, 2012 / Notices 68835 

1The Department has considered exemption 

applications received prior to December 27, 2011 

under the exemption procedures set forth in 29 CFR 

Part 2570, Subpart B (55 FR 32836, 32847, August 

10, 1990). 2 71 FR 20262 (April 19, 2006). 

3 67 FR 70623 (Nov. 25, 2002), as amended, 71 

FR 20135 (April 19, 2006). 

interested persons of their right to 

comment and to request a hearing 

(where appropriate). 

The proposed exemptions were 

requested in applications filed pursuant 

to section 408(a) of the Act and/or 

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

accordance with procedures set forth in 

29 CFR Part 2570, Subpart B (76 FR 

66637, 66644, October 27, 2011).1

Effective December 31, 1978, section 

102 of Reorganization Plan No. 4 of 

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

the authority of the Secretary of the 

Treasury to issue exemptions of the type 

requested to the Secretary of Labor. 

Therefore, these notices of proposed 

exemption are issued solely by the 

Department. 

The applications contain 

representations with regard to the 

proposed exemptions which are 

summarized below. Interested persons 

are referred to the applications on file 

with the Department for a complete 

statement of the facts and 

representations. 

UBS Financial Services Inc., Located in 

Weehawken, New Jersey 

[Application No. D–11610] 

Proposed Exemption 

Based on the facts and representations 

set forth in the application, the 

Department is considering granting the 

following exemption under the 

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

and in accordance with the procedures 

set forth in 29 CFR Part 2570, subpart 

B (76 FR 66637, October 27, 2011), as 

follows: 

Section I: Covered Transactions 

If the proposed exemption is granted, 

the sanctions resulting from the 

application of Code section 4975, by 

reason of Code section 4975(c)(1)(A) and 

(D)–(E), shall not apply, effective 

January 4, 2002, until December 9, 2005, 

to (1) principal trades by UBS Financial 

Services Inc. (the Applicant) with 

certain plans, subject to Code section 

4975, but not subject to Title I of ERISA 

(the IRAs), which resulted in the IRAs 

purchasing or selling securities from the 

Applicant (collectively, the 

Transactions); and (2) compensation 

paid by the IRAs to the Applicant in 

connection with the Transactions (the 

Transaction Compensation). 

This proposed exemption is subject to 

the conditions set forth below in 

Sections II and III. 

Section II: Specific Conditions 

(a) The Transactions and the 

Transaction Compensation were 

corrected (1) pursuant to the 

requirements set forth in the 

Department’s Voluntary Fiduciary 

Correction Program (the VFC Program) 2

and (2) in a manner consistent with 

those transactions described in the 

Applicant’s VFC Program application, 

dated March 5, 2010 (the VFC Program 

Application), that were substantially 

similar to the Transactions but that 

involved plans described in Code 

section 4975(e)(1) and subject to Title I 

of ERISA (the Qualified Plan 

Transactions). 

(b) The Applicant received a ‘‘noaction letter’’ from the Department in 

connection with the Qualified Plan 

Transactions described in the VFC 

Program Application. 

(c) An independent fiduciary 

confirmed that the methods utilized to 

correct the Transactions and 

Transaction Compensation were 

sufficient to return each affected IRA to 

at least the position that it would have 

been in had the Transactions and 

Transaction Compensation not 

occurred, and that the correction 

methods were properly applied to the 

Transactions and Transaction 

Compensation based on a review of a 

representative sample of the corrections, 

selected at random by the independent 

fiduciary. 

For purposes of this exemption, a 

fiduciary is ‘‘independent’’ if it is 

independent of and unrelated to 

Applicant and its affiliates. In this 

regard, a fiduciary will not be deemed 

independent of Applicant and its 

affiliates if: (1) Such fiduciary directly 

or indirectly controls, is controlled by, 

or is under common control with 

Applicant or its affiliates, (2) such 

fiduciary directly or indirectly receives 

any compensation or other 

consideration in connection with any 

transaction described in this exemption, 

except that it may receive compensation 

for acting as an independent fiduciary 

from Applicant in connection with the 

transactions described herein, if the 

amount or payment of such 

compensation is not contingent upon, or 

in any way affected by such fiduciary’s 

decision; or (3) the annual gross revenue 

received by the fiduciary, in any fiscal 

year, from Applicant or its affiliates 

exceeds one percent (1%) of the 

fiduciary’s annual gross revenue from 

all sources (for federal income tax 

purposes) for its prior tax year. 

(d) The terms of the Transactions and 

the Transaction Compensation were at 

least as favorable to the IRAs as the 

terms generally available in arm’s-length 

transactions between unrelated parties. 

(e) The Transactions and Transaction 

Compensation were not part of an 

agreement, arrangement or 

understanding designed to benefit a 

disqualified person, as defined in Code 

section 4975(e)(2). 

(f) The Applicant did not take 

advantage of the relief provided by the 

VFC Program and Prohibited 

Transaction Exemption 2002–51 3 (PTE 

2002–51) for three (3) years prior to the 

date of the Applicant’s submission of 

the VFC Program Application. 

Section III: General Conditions 

(a) The Applicant maintains, or 

causes to be maintained, for a period of 

six (6) years from the date of any 

Transaction such records as are 

necessary to enable the persons 

described in Section III(b)(1) to 

determine whether the conditions of 

this exemption have been met, except 

that: 

(1) A separate prohibited transaction 

shall not be considered to have occurred 

if, due to circumstances beyond the 

control of Applicant, the records are lost 

or destroyed prior to the end of the sixyear period; and 

(2) No disqualified person with 

respect to an IRA, other than Applicant, 

shall be subject to excise taxes imposed 

by Code section 4975, if such records 

are not maintained, or are not available 

for examination, as required by Section 

III(b)(1). 

(b)(1) Except as provided in Section 

III(b)(2), the records referred to in 

Section III(a) are unconditionally 

available at their customary location for 

examination during normal business 

hours by: 

(A) Any duly authorized employee or 

representative of the Department, the 

Internal Revenue Service, or the 

Securities and Exchange Commission; 

(B) Any fiduciary of any IRA that 

engaged in a Transaction, or any duly 

authorized employee or representative 

of such fiduciary; or 

(C) Any owner or beneficiary of an 

IRA that engaged in a Transaction or a 

representative of such owner or 

beneficiary. 

(2) None of the persons described in 

Sections III(b)(1)(B) and (C) shall be 

authorized to examine trade secrets of 

Applicant, or commercial or financial 

information which is privileged or 

confidential. 

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68836 Federal Register / Vol. 77, No. 222 / Friday, November 16, 2012 / Notices 

(3) Should Applicant refuse to 

disclose information on the basis that 

such information is exempt from 

disclosure, Applicant shall, by the close 

of the thirtieth (30th) day following the 

request, provide a written notice 

advising that person of the reasons for 

the refusal and that the Department may 

request such information. 

Effective Date: If granted, this 

proposed exemption will be effective 

from January 4, 2002, until December 9, 

2005. 

Summary of Facts and Representations 

1. The Applicant is UBS Financial 

Services Inc., a wholly owned 

subsidiary of UBS AG. The Applicant is 

a large financial institution 

headquartered in Basel and Zurich, 

Switzerland. As of December 31, 2011, 

UBS AG had invested assets of 2,167 

billion CHF. 

2. From January 4, 2002, to December 

9, 2005, contrary to the Applicant’s 

policies, certain of Applicant’s financial 

advisors (the FAs) caused Applicant to 

engage in a number of principal 

transactions involving IRAs for which 

the Applicant or the FA acted as an 

ERISA fiduciary. These principal 

transactions included: (a) 711 principal 

purchases of bonds from the Applicant, 

with an aggregate purchase price of 

$18,359,746 in 88 IRAs (the Bond 

Purchase Transactions) (b) 110 principal 

sales of bonds to the Applicant, with an 

aggregate sales price of $4,257,643 in 45 

IRAs (the Bond Sale Transactions); (c) 

128 principal purchases of stock from 

the Applicant, for an aggregate purchase 

price of $1,882,230 in 37 IRAs (the 

Stock Purchase Transactions); and (d) 1 

principal sale of stock to the Applicant, 

for a sales price of less than $1 (the 

Stock Sale Transaction) (collectively, 

the Bond Purchase Transactions, the 

Bond Sale Transactions, the Stock 

Purchase Transactions and Stock Sale 

Transaction are referred to as the 

Transactions). A total of 105 IRAs were 

involved in the Transactions. (Some of 

the IRAs were involved in more than 

one type of transaction.) 

3. The Transactions caused the 

payment of compensation to the 

Applicant (Transaction Compensation). 

With respect to Bond Purchase 

Transactions and Bond Sale 

Transactions, the Applicant was 

compensated through a ‘‘mark-up’’ of 

the bond price; the aggregate amount of 

such mark-ups was $115,363. With 

respect to the Stock Purchase 

Transactions and the Stock Sale 

Transaction, the Applicant was 

compensated through commissions 

totaling $44,964. 

4. Upon discovering that certain of the 

FAs caused the Applicant to engage in 

the Transactions, the Applicant 

implemented changes to its policies and 

procedures to prohibit the opening of 

any brokerage accounts that would 

permit FAs to exercise discretion. The 

Applicant represents that the FAs can 

now only open accounts that would 

permit the exercise of discretion under 

a discretionary advisory program where 

principal trades are blocked. 

5. The Applicant seeks relief with 

respect to the Transactions and with 

respect to the payment of the 

Transaction Compensation. Specifically, 

the Applicant believes that: (a) The 

purchase and sale of securities, both 

bonds and stocks, between the IRAs and 

the Applicant was prohibited by Code 

section 4975(c)(1)(A); (b) both the 

Transactions and the payment of 

Transaction Compensation were 

prohibited by Code section 

4975(c)(1)(D); and (c) the Transactions 

and the receipt of Transaction 

Compensation were prohibited by Code 

section 4975(c)(1)(E). The Applicant 

believes that, if the proposed exemption 

is not granted, the IRAs would be 

subject to hardship resulting from the 

uncertainty of not having the prohibited 

transactions outlined herein resolved. 

Further, if the proposed exemption is 

not granted, the IRAs would be subject 

to additional hardship as a result of the 

resultant uncertainty regarding the 

correction methodology applied by the 

Applicant. 

6. The Applicant represents that as 

soon as the Transactions and the 

Qualified Plan Transactions were 

discovered it began an investigation that 

led to the correction process. The 

Applicant corrected the Qualified Plan 

Transactions pursuant to the 

requirements set forth in the VFC 

Program. The Applicant filed a VFC 

Program Application, dated March 5, 

2010, with respect to the Qualified Plan 

Transactions, and it received a no-action 

letter from the Department, dated 

February 4, 2011, with respect to the 

Qualified Plan Transactions. 

7. While the Qualified Plan 

Transactions were properly corrected 

under the VFC Program, the Applicant 

was not able to similarly correct the 

Transactions and the Transaction 

Compensation. Despite being 

substantially similar to the Qualified 

Plan Transactions, the Transactions and 

the Transaction Compensation are 

ineligible for relief under the VFC 

Program and PTE 2002–51 because they 

involved IRAs which are not covered 

under Title I of ERISA. The Applicant, 

however, believes that granting relief 

pursuant to the proposed exemption is 

consistent with the Department’s 

statement that ‘‘[the VFC Program] does 

not foreclose its future consideration of 

individual exemption requests for 

transactions involving IRAs that are 

outside the scope of relief provided by 

both the VFC Program and the class 

exemption under circumstance when, 

for example, a financial institution 

received a no action letter applicable 

only to plans subject to [the VFC 

Program] for a transaction(s) that 

involved both plans and * * * IRAs.’’ 

71 FR 20135, 20137 (April 19, 2006). 

8. The Applicant represents that the 

Transactions were corrected pursuant to 

the requirements set forth in the VFC 

Program and in a manner consistent 

with the Applicant’s VFC Program 

Application, with such representation 

made in the Applicant’s exemption 

application, dated March 5, 2010, under 

penalty of perjury. In this regard, the 

Applicant corrected the Transactions in 

the manner described below: 

(a) With respect to the Bond Purchase 

Transactions, since bonds are debt 

instruments, the Applicant corrected the 

Bond Purchase Transactions, based on 

economic similarity to a loan 

transaction correction, under the 

procedures for loans made at a fair 

market interest rate in Section 7.2(a) of 

the VFC Program. The correction 

method for a loan, which is set forth in 

Section 7.2(a)(2) of the VFC program, is 

for the party in interest to pay back the 

loan in full, including any prepayment 

penalties. The Applicant represents that 

the Bond Purchase Transactions were 

conducted at fair market values (FMVs) 

because, among other things, the 

transactions were conducted using 

trading systems and procedures 

designed to result in trades being 

conducted at prices that are as favorable 

as possible to the IRAs under prevailing 

market conditions and were in fact 

conducted at prices not less favorable to 

the IRAs than the prices the FAs could 

have obtained for the IRAs by 

conducting the trades in arm’s-length 

transactions with third-party market 

participants. 

(b) With respect to the Bond Sale 

Transactions and the Stock Sale 

Transaction, the Applicant corrected 

these Transactions under the procedures 

for sale of an asset by a plan to a party 

in interest under Section 7.4(b) of the 

VFC Program. Section 7.4(b)(2)(i) of the 

VFC Program generally requires that the 

asset be repurchased from the party in 

interest at the lower of the price for 

which it originally sold the property or 

the FMV of the property at the time of 

correction. As an alternative, Section 

7.4(b)(2)(ii) of the VFC Program 

provides that a plan may receive a cash 

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Federal Register / Vol. 77, No. 222 / Friday, November 16, 2012 / Notices 68837 

settlement of the ‘‘Principal Amount,’’ 

defined as the amount by which the 

FMV of the asset at the time of original 

sale exceeds the original sales price, 

plus the greater of ‘‘Lost Earnings,’’ 

which is generally defined as the 

approximate amount that would have 

been earned by a plan on the Principal 

Amount but for the prohibited 

transaction, or the ‘‘Restoration of 

Profits,’’ as described in Section 5(b) of 

the VFC Program, provided, that, an 

independent fiduciary determines that 

the applicable Plan would receive a 

greater benefit with such correction than 

by repurchase. The Applicant represents 

that ‘‘Restoration of Profits,’’ as defined 

under the VFC Program, did not apply 

with respect to the Transactions because 

no amounts were used for a specific 

purpose such that a profit was 

determinable. The Principal Amount for 

each of the Bond Sale Transactions and 

the Stock Sale Transaction was zero 

because the bond or the stock was sold 

at FMV. 

It was impractical or impossible for 

the IRAs to repurchase most of the 

bonds in the Bond Sale Transactions 

because most of the bonds had been 

called, matured, were thinly traded or 

not in the inventory of the Applicant or 

its affiliates. For the remaining bonds in 

the Bond Sale Transactions, none of the 

IRAs elected to repurchase the bond 

from the Applicant despite the 

Applicant’s offer to sell the bond back 

to the IRA at the lower of the price for 

which the IRA originally sold the bond 

or the FMV of the bond at the time of 

correction. Therefore, the Applicant 

corrected all of the Bond Sale 

Transactions by paying the IRAs the 

Transaction Compensation, if any, plus 

Lost Earnings on the Transaction 

Compensation from the time of the 

Transaction. 

For the Stock Sale Transaction, it was 

impossible to repurchase the stock 

because the company had dissolved. 

Further, because no commissions were 

charged by the Applicant for the Stock 

Sale Transaction, no payment to the IRA 

with respect to compensation was 

necessary to correct the Stock Sale 

Transaction. Finally, since the Principal 

Amount with respect to the Stock Sale 

Transaction was zero, there were no 

Lost Earnings on the Principal Amount 

to pay to the IRA. 

(c) With respect to the Stock Purchase 

Transactions, the Applicant corrected 

the Stock Purchase Transactions under 

the procedures for the purchase by a 

plan of an asset from a party in interest 

pursuant to Section 7.4(a) of the VFC 

Program. Section 7.4(a) generally 

requires that the asset be sold back to 

the party in interest who originally sold 

the asset to the plan or to a person who 

is not a party in interest for a price equal 

to the greater of (1) the FMV of the asset 

at the time of resale, without reduction 

for the costs of sale, plus restoration to 

the plan of the party in interest’s 

investment return from the proceeds of 

the sale, to the extent they exceed the 

plan’s net profits from owning the 

property, or (2) the plan’s original 

purchase price, plus the greater of Lost 

Earnings on the plan’s original purchase 

price or the Restoration of Profits, if any. 

As an alternative, the plan may retain 

the asset and receive (1) the greater of 

the Lost Earnings or the Restoration of 

Profits, if any, on the original purchase 

price, but only to the extent that such 

Lost Earnings or Restoration of Profits 

exceeds the difference between the FMV 

of the asset as of correction and the 

original purchase price and (2) the 

amount by which the original purchase 

price exceeded the FMV of the asset (at 

the time of the original purchase), plus 

the greater of Lost Earnings or 

Restoration of Profits, if any, on such 

excess; provided, an independent 

fiduciary determined that the plan will 

realize a greater benefit from this 

correction than it would from the resale 

described in section 7.4(a)(2)(i) of the 

VFC Program. The Applicant corrected 

the Stock Purchase Transactions under 

the alternative correction methodology, 

taking into account any prior 

disposition of the stock by an IRA 

subsequent to the original purchase. 

9. With respect to the Applicant’s 

correction of the Transactions, (a) the 

Applicant took into account all 

transaction costs (e.g., Transaction 

Compensation), if any, paid by the IRAs 

in calculating the corrective payments; 

and (b) the Applicant engaged an 

independent fiduciary, Evercore Trust 

Company. Evercore Trust Company 

stated that (x) the methods utilized to 

correct the Transactions were sufficient 

to return each affected IRA to at least 

the position that it would have been in 

had the Transactions not occurred, (y) 

the alternative correction method 

utilized for the Stock Purchase 

Transactions did not result in the 

affected IRAs being returned to more 

unfavorable financial positions than if 

the general correction method described 

in 7.4(a) of the VFC Program been used 

instead, and (z) the correction methods 

were properly applied to the 

Transactions based on a review of a 

representative sample of the corrections. 

10. Evercore Trust Company 

confirmed to the Applicant that (a) 

during the period beginning with the 

date on which the earliest Transaction 

occurred and ending with the date 

Evercore Trust Company completed its 

engagement as an independent fiduciary 

with respect to the Transactions and the 

Transaction Compensation, it was not 

an entity that was directly or indirectly 

controlling, controlled by, or under 

common control with, the Applicant or 

its affiliates, (b) the compensation 

received by Evercore Trust Company 

from the Applicant for its services as an 

independent fiduciary with respect to 

the Transactions and the Transaction 

Compensation was not contingent upon, 

or in any way affected by, Evercore 

Trust Company’s determination, and 

Evercore Trust Company did not, and 

will not, directly or indirectly receive 

any other compensation or 

consideration from the Applicant in 

connection with the Transactions or 

Transaction Compensation, and (c) for 

any fiscal year of Evercore Trust 

Company, during which, or during part 

of which, it acted as an independent 

fiduciary with respect to the 

Transactions or Transaction 

Compensation, or received any 

compensation from the Applicant for its 

services as an independent fiduciary 

with respect to the Transactions or 

Transaction Compensation (Subject 

Fiscal Year), the annual gross revenue 

received by Evercore Trust Company 

and its affiliates from the Applicant or 

its affiliates for the Subject Fiscal Year 

did not exceed one percent (1%) of the 

annual gross revenue received by 

Evercore Trust Company and its 

affiliates from all sources (for federal 

income tax purposes) for their most 

recent fiscal years that ended prior to 

the Subject Fiscal Year. 

11. The Applicant represents that it 

credited, or issued a check to, each IRA 

to which a corrective payment was due. 

12. The Applicant believes that the 

Transactions were inadvertent and 

resulted in the IRAs paying no more 

than the market price with respect to the 

Bond Purchase Transactions and the 

Stock Purchase Transactions, and 

receiving at least the market price with 

respect to the Bond Sale Transactions 

and the Stock Sale Transaction, because 

the Transactions were conducted using 

trading systems and procedures 

designed to result in trades being 

conducted at prices that are as favorable 

as possible to the IRAs under prevailing 

market conditions and were in fact 

conducted at prices not less favorable to 

the IRAs than the prices the FAs could 

have obtained for the IRAs by 

conducting the trades in arm’s-length 

transactions with third-party market 

participants. 

13. The Applicant represents that it 

has not taken advantage of the relief 

provided by the VFC Program and PTE 

2002–51 for the three (3) years prior to 

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68838 Federal Register / Vol. 77, No. 222 / Friday, November 16, 2012 / Notices 

4For purposes of this proposed exemption, 

references to specific provisions of Title I of the 

Act, unless otherwise specified, refer also to the 

corresponding provisions of the Code. 

the date of the Applicant’s submission 

of the VFC Program Application, and 

that the Transactions were not part of an 

agreement, arrangement or 

understanding designed to benefit a 

disqualified person. 

14. The Applicant represents that the 

proposed exemption is: (a) 

Administratively feasible because the 

Applicant has corrected the 

Transactions pursuant to the 

requirements set forth in the VFC 

Program; has obtained relief under the 

VFC Program for the Qualified Plan 

Transactions; has put procedures in 

place to ensure that no similar 

Transactions occur in the future; and 

has obtained an opinion from an 

independent fiduciary, Evercore Trust 

Company, confirming that the methods 

utilized to correct the Transactions and 

Transaction Compensation were 

sufficient to return each affected IRA to 

at least the position that it would have 

been in had the Transactions and 

Transaction Compensation not 

occurred, and that the correction 

methods were properly applied to the 

Transactions and Transaction 

Compensation based on a review of a 

representative sample of the corrections, 

selected at random by the independent 

fiduciary; (b) in the interests of the 

affected IRAs and their owners and 

beneficiaries because the Transactions 

have been corrected pursuant to the 

procedures set forth in the VFC 

Program, which are designed to ensure 

that the corrections are made in a 

manner that is in the interests of the 

IRAs and their owners and beneficiaries; 

and (c) protective of the rights of the 

owners and beneficiaries of the IRAs 

because the requested relief is only with 

respect to past transactions, which the 

Applicant believes were conducted at 

prices no less favorable to the IRAs than 

prices the IRAs could have paid or 

received in arm’s-length transactions 

with third party market participants, 

that have already been effectively 

unwound pursuant to the requirements 

set forth in the VFC Program. 

15. In summary, the Applicant 

represents that the Transactions and the 

Transaction Compensation satisfy the 

statutory criteria for an administrative 

exemption contained in Code section 

4975(c)(2) because, among other things: 

(a) The Transactions and Transaction 

Compensation were substantially 

similar to the Qualified Plan 

Transactions; (b) the Transactions and 

Transaction Compensation were 

corrected pursuant to the requirements 

set forth in the VFC Program and in a 

manner similar to those described in the 

Applicant’s VFC Program Application; 

(c) the Applicant received a ‘‘no-action 

letter’’ from the Department in 

connection with Applicant’s VFC 

Program Application; (d) the Applicant 

obtained an opinion from an 

independent fiduciary, Evercore Trust 

Company, confirming that the methods 

utilized to correct the Transactions and 

Transaction Compensation were 

sufficient to return each affected IRA to 

at least the position that it would have 

been in had the Transactions and 

Transaction Compensation not 

occurred, and that the correction 

methods were properly applied to the 

Transactions and Transaction 

Compensation based on a review of a 

representative sample of the corrections, 

selected at random by the independent 

fiduciary; (e) the terms of the 

Transactions and the Transaction 

Compensation were at least as favorable 

to the IRAs as the terms generally 

available in arm’s-length transactions 

between unrelated parties; (f) the 

Transactions and Transaction 

Compensation were not part of an 

agreement, arrangement or 

understanding designed to benefit a 

disqualified person; and (g) the 

Applicant did not take advantage of the 

relief provided by the VFC Program and 

PTE 2002–51 for three (3) years prior to 

the date of the Applicant’s submission 

of the VFC Program Application. 

FOR FURTHER INFORMATION CONTACT: Mr. 

Brian Shiker of the Department, 

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

a toll-free number.) 

Central Pacific Bank 401(k) Retirement 

and Savings Plan (the Plan), Located in 

Honolulu, HI 

[Application No. D–11666] 

Proposed Exemption 

The Department is considering 

granting an exemption under the 

authority of section 408(a) of the Act 

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

in accordance with the procedures set 

forth in 29 CFR part 2570, subpart B (55 

FR 32836, 32847, August 10, 1990). 

Section I: Transactions 

If the proposed exemption is granted, 

effective for the period beginning April 

11, 2011 and ending May 6, 2011, the 

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

406(a)(1)(E), 406(a)(2), 406(b)(1), 

406(b)(2), and 407(a)(1)(A) of the Act 

and the sanctions resulting from the 

application of section 4975 of the Code, 

by reason of section 4975(c)(1)(A) and 

4975(c)(1)(E) of the Code,4 shall not 

apply: 

(a) To the acquisition of certain 

subscription right(s) (the Right or 

Rights) by the individually-directed 

account(s) (the Account or Accounts) of 

certain participant(s) in the Plan in 

connection with an offering (the 

Offering) of shares of common stock (the 

Stock) of Central Pacific Financial 

Corporation (CPFC) by CPFC, a party in 

interest with respect to the Plan; and 

(b) To the holding of the Rights 

received by the Accounts during the 

subscription period of the Offering; 

provided that the conditions, as set forth 

in Section II of this proposed exemption 

were satisfied for the duration of the 

acquisition and holding. 

Section II: Conditions 

The relief provided in this proposed 

exemption is conditioned upon 

adherence to the material facts and 

representations described, herein, and 

as set forth in the application file, and 

upon compliance with the conditions, 

as set forth in this proposed exemption. 

(a) The receipt of the Rights by the 

Accounts occurred in connection with 

the Offering, and the Rights were made 

available by CPFC to all shareholders of 

the Stock of CPFC, including the 

Accounts; 

(b) The acquisition of the Rights by 

the Accounts resulted from an 

independent corporate act of CPFC; 

(c) Each shareholder of the Stock, 

including each of the Accounts, 

received the same proportionate number 

of Rights, and this proportionate 

number of Rights was based on the 

number of shares of Stock held by each 

such shareholder; 

(d) The Rights were acquired pursuant 

to, and in accordance with, provisions 

under the Plan for individually-directed 

investment of the Accounts by the 

individual participants in the Plan, all 

or a portion of whose Accounts in the 

Plan held the Stock (the Invested 

Participant(s)); 

(e) The decision with regard to the 

holding and disposition of the Rights by 

an Account was made by the Invested 

Participant whose Account received the 

Rights; 

(f) If any of the Invested Participants 

failed to give instructions as to the 

exercise of the Rights received in the 

Offering, such Rights were sold in blind 

transactions on the New York Stock 

Exchange (NYSE) and the proceeds from 

such sales were distributed pro-rata to 

the Accounts in the Plan of such 

Invested Participants; 

(g) No brokerage fees, no 

commissions, and no fees or expenses 

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5Effective July 1, 2003, December 31, 2004, 

December 31, 2006, and July 26, 2007, respectively, 

the Central Pacific Bank Employee Stock 

Ownership Plan, the CB Bancshares, Inc. Profit 

Sharing Retirement Saving Plan, the CB Bancshares, 

Inc. ESOP, and the Hawaii HomeLoans, Inc. 401(k) 

Retirement Savings Plan were merged into the Plan. 

were paid by the Plan or by the 

Accounts to any related broker in 

connection with the sale of any of the 

Rights or in connection with the 

exercise of any of the Rights, and no 

brokerage fees, no commissions, no 

subscription fees, and no other charges 

were paid by the Plan or by the 

Accounts with respect to the acquisition 

and holding of the Stock; and 

(h) Based on the difference ($1.13) 

between the average proceeds per Right 

($6.05) received by other holders who 

sold Rights during the Offering and the 

average proceeds per Right ($4.92) 

received by Invested Participants whose 

Accounts sold Rights, between April 26, 

2011 and May 3, 2011, CPFC will make 

a corrective payment to the Plan in the 

amount of $30,618.48 ($1.13 x 27,096 

Rights sold), plus a lost earnings 

component on such amount, calculated 

at a 2.83% annual rate of interest for the 

period from May 6, 2011 to the date of 

the grant of this proposed exemption, 

and will distribute such corrective 

payment, and the lost earnings 

component, pro rata to the Accounts of 

each of the 186 Invested Participants 

whose Accounts in the Plan sold the 

27,096 Rights. 

Effective Date: This proposed 

exemption, if granted, will be effective 

for the period beginning on April 11, 

2011, the commencement date of the 

Offering, and ending on May 6, 2011, 

the close of the Offering. 

Summary of Facts and Representations 

1. The Plan is a defined contribution 

401(k) retirement saving plan which 

provides for a cash and deferred 

arrangement. The Plan was adopted, 

effective as of November 1, 1985.5 The 

Plan obtained its latest determination 

letter from the Internal Revenue Service 

(the IRS) in 2002. Although the Plan has 

been amended since receiving the 

determination letter from the IRS, the 

administrator of the Plan and the tax 

counsel for the Plan believe that the 

Plan is designed and is currently being 

operated in compliance with the 

applicable requirements of the Code. 

As of April 11, 2011, there were 1,115 

participants in the Plan. The Plan is a 

participant directed account plan 

designed and operated to comply with 

the requirements of section 404(c) of the 

Act. 

The Plan is funded by elective 

employee contributions, as well as 

employer matching contributions, and 

discretionary employer profit sharing 

contributions in cash to the ESOP. It is 

represented that no discretionary 

contributions were made in 2008, 2009, 

and 2010. The fair market value of the 

total assets of the Plan, as of April 11, 

2011, was $85,827,254. As of August 30, 

2012, the fair market value of the Plan’s 

assets was $90,594,733. 2. CPFC is the 

sponsor of the Plan. CPFC is a bank 

holding company, incorporated in the 

State of Hawaii on February 1, 1982, as 

‘‘CPB Inc.’’ CPFC’s principal place of 

business is Honolulu, Hawaii. 

CPFC, a parent company, through its 

subsidiaries, offers full-service 

commercial banking throughout the 

State of Hawaii and offers limited 

commercial banking services in certain 

areas of California. CPFC does not 

employ any persons other than the 

officers of the Central Pacific Bank (the 

Bank) and from time to time the support 

staff of the Bank. It is represented that 

substantially all of the activities of CPFC 

are conducted through the Bank. 

According to the Form 10–Q, as of 

March 3, 2012, on a consolidated basis, 

CPFC and its subsidiaries had total 

assets of $4,158,288,000, total liabilities 

of $3,680,848,000, and total 

stockholders’ equity of $477,440,000. 

3. The Bank is a wholly-owned 

subsidiary of CPFC. The Bank is a fullservice commercial bank incorporated 

in the State of Hawaii on March 16, 

1982, with 34 branches and 120 ATMs 

located throughout the State of Hawaii. 

The Bank also has an office in 

California. The Bank offers a broad 

range of products and services, 

including accepting time and demand 

deposits, and originating commercial, 

construction, and consumer loans, and 

commercial and residential mortgages. 

All employees of the Bank, its 

subsidiaries, and certain other affiliated 

companies are covered by the Plan. 

4. Vanguard Fiduciary Trust Company 

(Vanguard) is the third party 

administrator, the trustee, and the 

custodian of the Plan. Vanguard, as 

trustee, has the responsibility of 

investing, holding, collecting, 

distributing, and accounting for the 

assets of the Plan in the trust. 

5. The Plan is administered by a 

committee (the Committee), which is 

composed of certain appointed 

employees of the Bank. The Committee 

has the responsibility of selecting the 

investment options of the trust into 

which the participants of the Plan can 

direct their contributions. 

6. Participants in the Plan are 

permitted to self-direct the investments 

in their Accounts based on certain 

options held under the Plan. Among the 

investment options offered to 

participants are various types of 

securities, including shares of the Stock 

held in the CPFC stock fund (the Stock 

Fund). Investment in the Stock Fund by 

the Accounts of participants in the Plan 

is entirely voluntary. It is represented 

that neither CPFC nor its subsidiaries 

contribute any capital Stock to the Plan. 

Instead all employer contributions are 

made in cash, and the Stock is acquired 

by the Accounts in the Plan only as a 

result of participant-directed investment 

decisions. 

The Plan provides that participants 

are entitled to direct the voting of the 

Stock held in their Accounts in the 

Plan. Vanguard, as trustee, has the 

responsibility of carrying out such 

directions. As of December 31, 2009, 

and December 31, 2010, respectively, 

the Plan investments included 938,180 

shares and 893,122 shares of the Stock 

held in the Stock Fund. 

7. The Stock of CPFC is publiclytraded on the NYSE under the symbol 

‘‘CPF.’’ The Stock has no par value. It 

is represented that the Stock is the same 

class of shares available to other 

investors. The Stock is a ‘‘qualifying 

employer security,’’ as defined under 

section 407(d)(5) of the Act and 4975(e) 

of the Code. 

Background 

8. On February 2, 2011, CPFC effected 

a one-for-twenty reverse stock split (the 

Reverse Stock Split) of the outstanding 

shares of Stock. As a result of the 

Reverse Stock Split, the outstanding 

shares of Stock decreased from 

30,539,999 shares to 1,528,935 shares. 

As part of its recapitalization plan to 

raise $325 million from accredited 

investors in a private placement (the 

Private Placement), CPFC, on February 

18, 2011, entered into subscription 

agreements with affiliates of the Carlyle 

Group and the Anchorage Capital 

Group, LLC and with various other 

investors. In this regard, CPFC sold 

32,500,000 shares of Stock at a price of 

$10 per share. 

On the same day, February 18, 2011, 

CPFC entered into an exchange 

agreement (the Exchange Agreement) 

with the United States Department of 

the Treasury (Treasury), pursuant to 

which the Treasury agreed, subject to 

the terms and conditions in the 

Exchange Agreement, to exchange 

135,000 shares of CPFC’s preferred stock 

designated as Fixed Rate Cumulative 

Preferred Stock, having a liquidation 

amount of $1,000 per share, held by the 

Treasury and accrued and unpaid 

dividends thereon for 5,620,117 shares 

of CPFC’s Stock, and amended a warrant 

held by the Treasury to reduce the 

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68840 Federal Register / Vol. 77, No. 222 / Friday, November 16, 2012 / Notices 

6 It is represented that the Accounts of the 

Invested Participants in the Plan rely on the relief 

provide by the statutory exemption, pursuant to 

section 408(e) of the Act for the exercise of the 

Rights. 

The Department is offering no view, as to whether 

the requirements of the statutory exemption 

provided in section 408(e) of the Act have been 

satisfied. Further, the Department, herein, is not 

providing any relief with respect to the exercise of 

the Rights. 

7 It is represented that the extra five (5) business 

days were required to provide sufficient time to 

process all such elections by the Accounts of 

Invested Participants in the Plan to exercise their 

Rights, tabulate and confirm the results, liquidate 

each such Invested Participant’s funds, confirm the 

orders and the availability of such funds, and remit 

payment to purchase the shares. It is represented 

that non-Plan shareholders were also required to 

submit their election forms five (5) days prior to the 

expiration of the Offering. 

number of shares of Stock issuable upon 

exercise of the warrant from 1,585,748 

to 79,288 (the TARP Exchange). 

Following the closing of the Private 

Placement and the TARP Exchange, 

CPFC had 39,649,052 shares of Stock 

outstanding, as of April 11, 2011. CPFC 

commenced the Offering whereby 

shareholders of record, as of 5 p.m. EST 

on the February 17, 2011 (the Record 

Date), would receive the Rights. CPFC 

represents that it conducted the 

Offering, because it wanted to provide 

existing shareholders and other 

investors, including the Accounts of 

Invested Participants in the Plan, who 

could not participate in the Private 

Placement, with the opportunity to 

purchase the Stock at the same price per 

share paid by the investors in the 

Private Placement. 

9. The Offering commenced on April 

11, 2011, and closed on May 6, 2011. It 

is represented that 2,000,000 shares of 

Stock were subscribed for by all 

shareholders. In this regard, the Offering 

was fully subscribed. There were valid 

exercises to purchase an aggregate of 

1,325,230 shares, pursuant to directions 

from holders of the basic Rights. The 

remaining 674,770 shares available to be 

issued in the Offering were allocated 

pro rata among the holders entitled to 

exercise the over-subscription privilege. 

It is represented that the exercise of the 

Rights resulted in gross proceeds for 

CPFC of $20,000,000. 

10. At the close of business on April 

11, 2011, the date of the Offering, the 

Stock was trading on the NYSE at 

$19.43 per share. The closing price of 

the Stock on the ending date of the 

Offering on May 6, 2011, was $13.70. 

11. Under the terms of the Offering, 

all shareholders of the Stock, including 

the Accounts of Invested Participants in 

the Plan, automatically received the 

Rights, at no charge. Each of the Rights 

entitled the shareholders of the Stock, 

including the Accounts of Invested 

Participants in the Plan, to purchase, 

through the exercise of such Rights, the 

Stock issued by CPFC in connection 

with the Offering. With respect to the 

Rights, under the terms of the Offering, 

one (1) Right was issued for each whole 

share of the Stock held by each 

shareholder, including the Accounts of 

Invested Participants in the Plan, on the 

Record Date. 

12. The Rights entitled the holders 

thereof to a basic right to subscribe for 

their pro rata share of $20 million 

dollars’ worth of Stock issued by CPFC, 

as well as an over-subscription privilege 

to subscribe for additional shares of 

Stock, subject to certain limitations and 

allocation procedures, up to the number 

of shares of Stock that were not 

subscribed for by the other holders of 

the Rights, pursuant to their basic 

Rights. 

However, the over-subscription 

privilege was conditioned on each 

shareholder first exercising their basic 

Rights in full. Because the Accounts of 

Invested Participants in the Plan did not 

exercise all of their basic Rights in full 

and, because, as a practical matter it was 

unlikely that all of the Accounts of 

Invested Participants in the Plan would 

do so, given the number of Invested 

Participants in the Plan whose Accounts 

held the Stock, the over-subscription 

privilege was not available to Rights 

attributable to the Accounts of Invested 

Participants in the Plan. 

13. All shareholders of the Stock, 

including the Accounts of Invested 

Participants in the Plan, held the Rights 

until such Rights were exercised, or 

such Rights were sold. With regard to 

the exercise of the Rights, it is 

represented that the Rights could only 

be exercised in whole numbers. Upon 

exercise, each of the Rights permitted a 

shareholder of the Stock, including each 

of the Accounts of Invested Participants 

in the Plan, to purchase 1.3081 shares 

of Stock at a subscription price of 

$10.00 per share (such amount is 

represented to take into account the 

Reverse Stock Split that occurred on 

February 2, 2011). Fractional shares of 

Stock resulting from the exercise of 

basic Rights on an aggregate basis as to 

any holder of such Rights, including the 

Accounts of Invested Participants in the 

Plan, were rounded down to the nearest 

whole number. 

A shareholder, including each of the 

Accounts of Invested Participants in the 

Plan, had the right to choose to exercise 

some, all, or none of its Rights. The 

election to exercise, some, all or none of 

its Rights had to be received by 5 p.m. 

EST on April 29, 2011, by the tabulation 

agent, Wells Fargo Bank, NA 

Shareowner Services (WFSS), in order 

to allow sufficient processing time. The 

election to exercise any of the Rights 

was irrevocable. 

14. With regard to the sale of the 

Rights, it is represented that the Rights 

were transferable. Further, it is 

represented that the Rights were traded 

on the NYSE. Any Rights that were not 

exercised either as a result of a partial 

exercise or as a result of insufficient 

assets in an Account to cover an 

exercise (excluding the assets in the 

Stock Fund), or as a result of a failure 

to timely return the election form were 

automatically sold on the NYSE to 

unrelated third parties by Vanguard, as 

trustee, acting on behalf of each such 

Account. The proceeds from such sale 

were credited pro rata to the Plan 

Accounts of Invested Participants. 

15. The Invested Participants were 

notified of the issuance of the Rights in 

a news release, in a posting on the 

CPFC’s Web site, and in various letters 

and email communications from CPFC 

during the month of April 2011. In 

addition, each of the Invested 

Participants was also provided detailed 

information regarding the Rights 

Offering, including a copy of the 

prospectus which described the 

Offering, a document providing 

frequently asked questions and answers 

regarding the Offering, an election form, 

a return envelope addressed to WFSS, 

the tabulating agent, and a statement 

indicating the number of shares of Stock 

each such Invested Participant held in 

his/her Account in the Plan, as of the 

Record Date. 

16. In order to exercise some or all of 

the Rights, an Invested Participant 6 had 

to complete an election form and to 

submit such election form to WFSS by 

the close of business on the fifth (5th) 

business day (April 29, 2011, at 5 p.m. 

EST), prior to the expiration of the 

Offering on May 6, 2011.7

Each Invested Participant who 

submitted an election form was required 

to indicate on such election form a 

sufficient amount of current 

investments in the Account of such 

Invested Participant in the Plan (other 

than the assets in the Stock Fund) to be 

liquidated on a pro-rated basis to cover 

the purchase of Stock in connection 

with the exercise of the Rights. The prorated funds were segregated from the 

other investments within the Invested 

Participant’s Account into a separate 

holding fund (the Rights Fund) at 

Vanguard which was established in 

anticipation of the Offering. Vanguard 

placed the order to purchase the Stock 

with the subscription agent, Wells Fargo 

Bank, N.A. (Wells Fargo Bank), a 

registered broker-dealer that is unrelated 

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Federal Register / Vol. 77, No. 222 / Friday, November 16, 2012 / Notices 68841 

to CPFC and the Plan. It is represented 

that the Rights Fund was liquidated, 

and cash equal to the necessary 

subscription payment was transferred to 

the Wells Fargo Bank. Following the 

closing of the Offering, the purchased 

shares of Stock were then converted 

back to the equivalent number of units 

of the Plan’s Stock Fund and credited to 

the Account of the Invested Participant. 

17. As of the Record Date, February 

17, 2011, 287 Accounts of Invested 

Participants in the Plan held the Stock. 

As of the Record Date, the approximate 

percentage of the fair market value of 

the total assets of the Plan invested in 

the Stock was two percent (2%). Also, 

as of the Record Date, the shares of 

Stock held in the Accounts of Invested 

Participants in the Plan constituted 

approximately three percent (3%) of the 

shares of Stock outstanding. 

18. It is represented that based on the 

ratio of one (1) Right for each share of 

Stock held by the Accounts of Invested 

Participants, the Plan acquired 46,327 

Rights as a result of the Offering. Of the 

Rights received by the Plan on behalf of 

Accounts of the Invested Participants, 

all such Rights were either exercised or 

sold. None of the Rights expired. 

Of the 46,327 Rights received by the 

Accounts of Invested Participants as a 

result of the Offering, it is represented 

that 19,231 Rights held by 102 Accounts 

of Invested Participants in the Plan were 

exercised for Stock. It is represented 

that on May 19, 2011, the Accounts of 

the Invested Participants in the Plan 

received the Stock purchased as a result 

of the exercise of the Rights. It is further 

represented that the Stock purchased in 

connection with the Offering was 

eligible for trading on NYSE by the 

Accounts of the Invested Participants in 

the Plan on May 19, 2011. 

Unlike the other holders of the Rights, 

the Invested Participants whose 

Accounts in the Plan received the Rights 

were not permitted to sell the Rights 

throughout the period April 11–25, 

2012, due to Plan administrative 

constraints. However, of the 46,327 

Rights received by the Accounts of 

Invested Participants as a result of the 

Offering, it is represented that over the 

period from April 26, 2011 to May 3, 

2011, the Invested Participants of 186 

Accounts sold 27,096 Rights on the 

NYSE. On May 9, 2011, the Accounts of 

those Invested Participants received the 

proceeds from the sales of such Rights 

totaling $133,339.44. 

Based on the difference ($1.13) 

between the average proceeds per Right 

($6.05) received by other holders who 

sold Rights during the Offering and the 

average proceeds per Right ($4.92) 

received by Invested Participants whose 

Accounts sold Rights, between April 26, 

2011 and May 3, 2011, CPFC will make 

a corrective payment to the Plan in the 

amount of $30,618.48 ($1.13 × 27,096 

Rights sold). Further, CPFC proposes to 

include a lost earnings component on 

the amount of the corrective payment 

calculated at a 2.83% annual rate of 

interest for the period from May 6, 2011, 

to the date of the grant of this proposed 

exemption. It is represented that the 

interest rate on the lost earnings 

component was calculated taking the 

greater of the weighted average return 

for all investment funds available under 

the Plan and the average return for the 

Retirement Savings Trust (the stable 

value fund under the Plan in which the 

proceeds from the sale of the Rights 

were distributed). CPFC will distribute 

such corrective contribution, plus the 

lost earnings component, pro rata to 

each of the 186 Invested Participants 

whose Accounts in the Plan sold Rights. 

19. No brokerage fees, no 

commissions, no subscription fees, and 

no other charges were paid by the Plan 

or by any of the Accounts of Invested 

Participants in the Plan with respect to 

the acquisition and holding of the Stock 

and no brokerage fees, no commissions, 

and no fees or expenses were paid by 

the Plan or by any of the Accounts of 

Invested Participants in the Plan to any 

related broker in connection with the 

sale of the Rights or in connection with 

the exercise of the Rights. 

Requested Relief 

20. The application was filed on 

behalf of CPFC. In this regard, CPFC has 

requested an exemption: (a) For the 

acquisition of the Rights by the 

Accounts of the Invested Participants in 

the Plan in connection with the Offering 

of Rights by CPFC; and (b) for the 

holding of the Rights by the Accounts of 

the Invested Participants in the Plan 

during the subscription period of the 

Offering. 

It is represented that the Rights 

acquired by the Accounts of Invested 

Participants in the Plan satisfy the 

definition of ‘‘employer securities,’’ 

pursuant to section 407(d)(1) of the Act. 

However, as the Rights were not stock 

or a marketable obligation, such Rights 

do not meet the definition of ‘‘qualifying 

employer securities,’’ as set forth in 

section 407(d)(5) of the Act. 

Accordingly, the subject transactions 

constitute an acquisition and holding on 

behalf of the Accounts of Invested 

Participants in the Plan, of employer 

securities which are not qualifying 

employer securities, in violation of 

section 407(a) of the Act, for which 

CPFC has requested relief from sections 

406(a)(1)(A), 406(a)(1)(E), 406(a)(2), and 

407(a)(1)(A) of the Act. CPFC has also 

requested relief from the prohibitions of 

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

Act. 

21. It is represented that the subject 

transactions have already been 

consummated. In this regard, the 

Accounts of Invested Participants in the 

Plan acquired the Rights pursuant to the 

Offering on April 11, 2011, and held 

such Rights pending the closing of the 

Offering on May 6, 2011, when such 

Rights either were exercised or sold. As 

there was insufficient time between the 

dates when the Accounts of Invested 

Participants in the Plan acquired the 

Rights and when such Rights were 

exercised or sold, to apply for and be 

granted an exemption, CPFC is seeking 

a retroactive exemption to be granted, 

effective from April 11, 2011, the date 

that the Accounts of Invested 

Participants in the Plan acquired the 

Rights, to May 6, 2011, the closing date 

of the Offering. 

22. CPFC represents that the proposed 

exemption is administratively feasible. 

In this regard, the acquisition and 

holding of the Rights by the Accounts of 

Invested Participants in the Plan were 

one-time transactions that involved an 

automatic distribution of the Rights to 

all shareholders. It is represented that it 

is customary for corporations to make a 

rights offering available to all 

shareholders. 

23. CPFC represents that the 

transactions which are the subject of 

this proposed exemption are in the 

interest of the Accounts of Invested 

Participants in the Plan, because the 

subject transactions represented a 

valuable opportunity to such Accounts 

to buy the Stock at a discount or to sell 

the Rights. It is represented that this 

discount could be realized by the 

Accounts of Invested Participants in the 

Plan by selling the Stock immediately 

after the exercise of the Rights and 

investing the proceeds from such sale of 

the Stock in other investment options 

under the Plan. 

24. CPFC represents that the proposed 

exemption provides sufficient 

safeguards for the protection of the 

Accounts of Invested Participants in the 

Plan and the beneficiaries of such 

Accounts. In this regard, participation 

in the Offering protected the Accounts 

of the Invested Participants in the Plan 

from having their interests in CPFC 

diluted as a result of the Offering. 

It is further represented that the 

interests of the Accounts of Invested 

Participants in the Plan were adequately 

protected in that such Accounts 

acquired and held the Rights 

automatically as a result of the Offering. 

In addition, CPFC made the Rights 

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68842 Federal Register / Vol. 77, No. 222 / Friday, November 16, 2012 / Notices 

available on the same terms to all 

shareholders of the Stock, including the 

Accounts. In this regard, each 

shareholder of the Stock, including each 

of the Accounts, received the same 

proportionate number of Rights, and 

this proportionate number of Rights was 

based on the number of shares of Stock 

held by such shareholder. 

The Accounts of Invested Participants 

in the Plan were protected against 

economic loss by exercising the Rights 

or by selling the Rights. It is represented 

that the closing price of the Stock on 

May 6, 2011, was $13.70 per share 

which was in excess of the strike price 

of $10.00 per share. 

25. In summary, CPFC represents that 

the subject transactions satisfy the 

statutory criteria of section 408(a) of the 

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

because: 

(a) The receipt of the Rights by the 

Accounts occurred in connection with 

the Offering, and the Rights were made 

available by CPFC to all shareholders of 

the Stock of CPFC, including the 

Accounts; 

(b) The acquisition of the Rights by 

the Accounts resulted from an 

independent corporate act of CPFC; 

(c) Each shareholder of the Stock, 

including each of the Accounts, 

received the same proportionate number 

of Rights, and this proportionate 

number of Rights was based on the 

number of shares of Stock held by such 

shareholder; 

(d) The Rights were acquired pursuant 

to, and in accordance with, provisions 

under the Plan for individually-directed 

investment of the Accounts by the 

Invested Participants, all or a portion of 

whose Accounts in the Plan held the 

Stock; 

(e) The decision with regard to the 

holding and disposition of the Rights by 

an Account was made by the Invested 

Participant whose Account received the 

Rights; 

(f) If any of the Invested Participants 

failed to give instructions as to the 

exercise of the Rights received in the 

Offering, such Rights were sold in blind 

transactions on the NYSE and the 

proceeds from such sales were 

distributed pro-rata to the Accounts in 

the Plan of such Invested Participants; 

(g) No brokerage fees, no 

commissions, and no fees or expenses 

were paid by the Plan or by the 

Accounts to any related broker in 

connection with the sale of any of the 

Rights or in connection with the 

exercise of any of the Rights, and no 

brokerage fees, no commissions, no 

subscription fees, and no other charges 

were paid by the Plan or by the 

Accounts with respect to the acquisition 

and holding of the Stock; and 

(h) Based on the difference ($1.13) 

between the average proceeds per Right 

($6.05) received by other holders who 

sold Rights during the Offering and the 

average proceeds per Right ($4.92) 

received by Invested Participants whose 

Accounts sold Rights, between April 26, 

2011 and May 3, 2011, CPFC will make 

a corrective payment to the Plan in the 

amount of $30,618.48 ($1.13 × 27,096 

Rights sold), plus a lost earnings 

component on such amount calculated 

at a 2.83% annual rate of interest for the 

period from May 6, 2011 to the date of 

the grant of this proposed exemption, 

and will distribute such corrective 

payment, and the lost earnings 

component, pro rata to the Accounts of 

each of the 186 Invested Participants 

whose Accounts in the Plan sold Rights. 

Notice to Interested Persons 

The persons who may be interested in 

the publication in the Federal Register 

of the Notice of Proposed Exemption 

(the Notice) include all Invested 

Participants whose Accounts in the Plan 

were invested in the Stock at the time 

of the Offering. 

It is represented that all such 

interested persons will be notified of the 

publication of the Notice by first class 

mail, to each such interested person’s 

last known address within fifteen (15) 

days of publication of the Notice in the 

Federal Register. Such mailing will 

contain a copy of the Notice, as it 

appears in the Federal Register on the 

date of publication, plus a copy of the 

Supplemental Statement, as required, 

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

will advise all interested persons of 

their right to comment and to request a 

hearing. All written comments and/or 

requests for a hearing must be received 

by the Department from interested 

persons within 45 days of the 

publication of this proposed exemption 

in the Federal Register. 

All comments will be made available 

to the public. Warning: Do not include 

any personally identifiable information 

(such as name, address, or other contact 

information) or confidential business 

information that you do not want 

publicly disclosed. All comments may 

be posted on the Internet and can be 

retrieved by most Internet search 

engines. 

FOR FURTHER INFORMATION CONTACT: Ms. 

Angelena C. Le Blanc of the Department, 

telephone (202) 693–8551. (This is not 

a toll-free number.) 

Studley, Inc. Section 401(k) Profit 

Sharing Plan (the Plan), Located in New 

York, NY 

[Application No. D–11672] 

Proposed Exemption 

The Department is considering 

granting an exemption under the 

authority of section 408(a) of the Act 

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

in accordance with the procedures set 

forth in 29 CFR Part 2570 Subpart B (55 

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

the proposed exemption is granted, the 

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

(D) and section 406(b) of the Act, and 

the sanctions resulting from the 

application of section 4975 of the Code, 

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

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

to the sale (the Sale) of an 8.828121% 

partnership interest (the Interest) in the 

Julien J. Studley N Street Partnership, a 

general partnership (the JJS 

Partnership), by the Plan to Studley, Inc. 

(the Employer), a party in interest with 

respect to the Plan, provided that the 

following conditions are satisfied: 

(a) The Sale is a one-time transaction 

for cash; 

(b) The terms and conditions of the 

Sale are at least as favorable to the Plan 

as those that the Plan could obtain in an 

arm’s length transaction with an 

unrelated third party; 

(c) The Interest is sold for $900,000; 

(d) The Sale is consummated within 

two weeks after the date a final 

exemption regarding the Sale is 

published in the Federal Register; 

(e) If, (1) within seven years of the 

date of the Sale of the Interest to the 

Employer, (i) the Employer sells the 

Interest, (ii) JJS Partnership sells its 

interest in N19 Associates LLC (N19 

Associates), or (iii) N19 Associates sells 

its building on N Street, Washington, 

DC, and (2) the net amount realized by 

the Employer in respect of the Interest 

upon and by reason of such sale, 

exceeds the sum of (i) the $900,000 

price paid for the Interest, and (ii) any 

capital contributed by the Employer to 

the JJS Partnership in respect of the 

Interest after the date of the Sale and 

any other funds paid or advanced by the 

Employer to, or on behalf of, the JJS 

Partnership in respect of the Interest 

after the date of the Sale, the Employer 

will contribute such excess amount to 

the Plan within two weeks of its receipt 

by the Employer; 

(f) The Plan pays no commissions, 

fees, or other expenses in connection 

with the Sale; and 

(g) The Plan has not waived or 

released and does not waive or release 

any claims, demands, and/or causes of 

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Federal Register / Vol. 77, No. 222 / Friday, November 16, 2012 / Notices 68843 

8Pursuant to the Ancillary Trust Agreement, a 

separate trust was established to hold the Plan’s real 

estate investments. As part of its investigation (see 

Representation 4, below), the Department’s New 

York Regional Office (NYRO) inquired whether the 

Plan’s acquisition of the Interest was a purchase or 

a contribution by the Employer. The Plan’s records 

are incomplete on this matter. 

9The reasons for these characterizations are 

discussed in Representation 5, below. 

10The Internal Revenue Service (the IRS) 

examined the Plan and determined that prohibited 

transactions had been entered into involving loans 

to the Plan from the Employer for the years 2002 

through 2006. The prohibited transactions were 

corrected on December 22, 2006 and the Employer 

filed Forms 5330 for the years 2002 through 2006 

and paid the resulting excise taxes. 

11This representation was made by the Applicant 

to both the Department’s Office of Exemption 

Determinations and the NYRO. 

12Although no records are available for the years 

1982 and 2001, the NYRO reviewed the available 

pertinent records and concluded that the Sale, 

based upon the terms described herein, would 

enable the NYRO to close its investigation. 

action that the Plan may have against 

the Employer or the Plan fiduciaries in 

connection with the acquisition and 

holding of the Interest or Sale of the 

Interest to the Employer. 

Summary of Facts and Representations 

1. The Studley, Inc. Section 401(k) 

Profit Sharing Plan (the Plan) is 

sponsored by Studley, Inc. (the 

Employer or the Applicant), located in 

New York, New York. Julien Studley 

(Mr. Studley) was the founder of the 

Employer. Pursuant to a buyout, all of 

his shares in the Employer not held in 

an employee benefit plan were 

purchased on December 12, 2002, by the 

Employer, at which time Mr. Studley 

resigned as a voting member from the 

Employer’s Board of Directors. He 

remained a non-voting member until 

June 2004. Since then, Mr. Studley has 

not held any position with, or interest 

in, the Employer (other than shares held 

in employee benefit plans). The 

Employer is in the business of providing 

commercial real estate advisory, 

brokerage and related services. 

The Plan had 61 participants and 

beneficiaries, as of November 14, 2011. 

Based on the most recently available 

audited financial statements, the total 

value of the Plan’s assets was 

$26,830,211, as of December 31, 2010. 

The Plan’s trustee is T. Rowe Price Trust 

Company. The trust agreement indicates 

that the trustee takes direction from the 

named fiduciary (the Named Fiduciary), 

which is the Employer. The Plan has a 

non-participant directed profit sharing 

component in which it holds real estate 

investments, as well as a 401(k) 

component which is participant 

directed. 

2. Among the assets of the Plan is an 

8.828121% interest (the Interest) in the 

Julien J. Studley N Street Partnership 

(JJS Partnership), a general partnership 

in which the Employer and the Plan are 

both general partners. The Applicant 

represents that there are currently eight 

other members in the JJS Partnership in 

addition to the Employer and the Plan. 

No other employee benefit plans are 

members of the JJS Partnership. 

The managing partners of the JJS 

Partnership are Mr. Studley and Mr. 

Peter Speier, and neither the Plan nor 

the Employer has management 

responsibilities. The JJS Partnership was 

formed and capitalized on or about 

December 28, 1976. The Applicant 

represents that the Interest was acquired 

by the Plan in 1982 for $45,000 and is 

held under an ancillary trust agreement 

(the Ancillary Trust Agreement), with 

Mitchell Steir and Michael Colacino as 

trustees.8 Mr. Steir is the Chairman of 

the Board and Chief Executive Officer of 

the Employer while Mr. Colacino is the 

President of the Employer. Under the 

Ancillary Trust Agreement, the trustees 

are subject to the direction of the 

Employer, as Named Fiduciary, with 

respect to the investment and 

disposition of the trust fund assets. 

3. The Applicant represents that the 

JJS Partnership was formed for the 

purpose of holding an interest in an 

entity known as N19 Associates. The JJS 

Partnership holds a 32% interest in N19 

Associates, which owns a building on N 

Street in Washington, DC (the Building). 

The Plan’s effective interest in the 

Building is 2.825%, which is 

8.828121% of 32%. 

4. The NYRO opened an investigation 

of the Plan and found that the Plan’s 

interest in the JJS Partnership is an 

illiquid and hard-to-value asset.9 The 

Plan has been unable, in at least two 

instances, to make requested 

distributions to Plan participants 

because of the Plan’s investment in the 

Interest. In addition, certain recent 

annual reports (Forms 5500) filed for the 

Plan have not reflected a current 

valuation for the Interest.10 The NYRO 

and the Applicant agreed that the Plan 

should liquidate its investment in the 

JJS Partnership in order to be able to 

make the distributions to eligible 

participants. Because the Interest is an 

illiquid asset, Studley is requesting an 

exemption that, if granted, would 

permit Studley to purchase the Interest 

from the Plan. 

5. The Applicant represents that N19 

Associates is controlled by Melvin and 

Edward Lenkin, who are not affiliated 

with the Employer or the JJS 

Partnership. The JJS Partnership has 

commenced litigation against the 

Lenkins based, in part, upon their 

refusal to provide current information 

regarding the Building. Due to the 

disagreement among the parties, the 

Applicant represents, among other 

things, that JJS Partnership has been 

unable to obtain and provide to the Plan 

the information that would enable the 

Plan to obtain a current appraisal of the 

Interest by an independent appraiser. 

The most recently available 

independent appraisal assigns the 

Interest a value of $670,000, as of 

November 3, 2006, which reflects a 25% 

minority discount by reason of the 

Plan’s holding a minority, noncontrolling interest. This was the value 

for the Interest used in the Plan’s 

audited financial statements as of 

December 31, 2010. 

6. The Applicant represents that the 

most recent expression of interest from 

an unrelated party [i.e., Goldstar Real 

Estate Fund II, LP (Goldstar)] in 

purchasing the Building received by the 

JJS Partnership on August 2, 2010 was 

$45 million. However, the potential sale 

of the Building to Goldstar could not be 

consummated in the absence of a 

current independent appraisal of the 

Building, which is currently not 

obtainable due to the lack of 

cooperation among the parties, as 

described in Representation 5, above. 

Therefore, the Employer proposes to 

purchase the Interest from the Plan for 

$900,000 on the following basis: After 

deducting N19 Associates’ mortgage and 

other liabilities and expenses associated 

with the sale, a $45 million purchase 

price for the Building would result in 

$900,000 of net proceeds to the Plan in 

respect of the Interest. It is represented 

that this price is very favorable to the 

Plan because it does not reflect any 

discount for the fact that the JJS 

Partnership and the Plan hold only 

minority, non-controlling interests, and 

the discounting of minority, noncontrolling interests is a recognized 

principle of valuation.11 Assuming a 

sale (the Sale) of the Interest for 

$900,000, the Applicant represents that 

the Plan will achieve an average annual 

rate of return of approximately 11.5% 

per annum, based on Plan records of 

cash amounts received or paid by the 

Plan during the term of this investment 

(except for two years 12 for which no 

records are available). This calculation 

includes capital calls paid by the Plan. 

The Applicant represents that 

according to its available records, the 

Plan has received approximately 

$167,690 in cash distributions from the 

JJS Partnership during the time it has 

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13The Applicant also represents that the Plan has 

paid approximately $18,645 in capital calls. Thus, 

based on the available figures, the Plan has received 

a net distribution of $149,045. 

14 It is represented that the Plan’s recordkeeper T. 

Rowe Price will determine the affected Plan 

accounts in connection with both the Sale of the 

Interest to the Employer and any future additional 

contribution by the Employer per the true-up 

provision of the Purchase and Sale Agreement. 

held the Interest.13 Specifically, 

according to the Applicant, the Plan has 

historically received a portion of the 

rental income generated by the 

Building. However, this source of 

revenue has been retained pending 

completion of the litigation described 

above. The Applicant requests that the 

scope of relief contained in this 

proposed exemption include relief from 

section 406(b)(3) of ERISA (as well as 

section 406(a)(1)(A) and (D) and section 

406(b)(1) and (2) of ERISA) since the 

Employer may receive from the 

Partnership, subsequent to the Sale, the 

Plan’s current share of the undistributed 

revenue. According to the Applicant, 

such amount is not currently 

quantifiable due to the litigation and 

other factors that are outside of the 

control of Studley. The Applicant 

stresses that it is in the best interests of 

the Plan to consummate the Sale as soon 

as possible in order to provide liquidity 

to the Plan, rather than to delay the date 

of the Sale until after the litigation is 

resolved. The Applicant reiterates that 

the amount of the Sale represents the 

best price the Plan may be expected to 

receive for the Interest. 

7. In addition, the Employer has 

included in the terms of the proposed 

Sale a ‘‘true-up’’ provision that the 

Employer will contribute an additional 

amount to the Plan if (a) within seven 

years of the date of the Sale of the 

Interest to the Employer, (i) the 

Employer sells the Interest, (ii) JJS 

Partnership sells its interest in N19 

Associates, or (iii) N19 Associates sells 

the Building, and (b) the net amount 

realized by the Employer in respect of 

the Interest upon and by reason of such 

Sale, exceeds the sum of (i) the $900,000 

price paid for the Interest, and (ii) any 

capital contributed by the Employer to 

the JJS Partnership in respect of the 

Interest after the date of the Sale and 

any other funds paid or advanced by the 

Employer to, or on behalf of, the JJS 

Partnership in respect of the Interest 

after the date of the Sale. The Employer 

will contribute such excess amount to 

the Plan within two weeks of its receipt 

by the Employer. Such contribution will 

be allocated to the Plan accounts of 

participants who were invested in the 

Interest at the time of the Sale.14 The 

Applicant also represents that if, within 

seven years of the date of the Sale of the 

Interest by the Plan to the Employer, the 

Employer, in its sole discretion, elects to 

fund any capital call in respect of its 

own interest (that it owned prior to the 

subject Sale) in the JJS Partnership, 

then, and only then, will the Employer 

be obligated to the Plan to fund such 

capital call in respect of the Interest. 

8. The Applicant represents that the 

requested exemption for the Sale of the 

Plan’s Interest to the Employer is in the 

interest of the Plan because it will 

enable the participants and beneficiaries 

to realize the value of the Interest and 

receive requested distributions in 

respect of their investment therein. The 

Applicant also represents that the 

requested exemption is also protective 

of the rights of the participants and 

beneficiaries of the Plan because the 

Sale price reflects the best information 

available to the Employer of the 

Interest’s current fair market value, with 

no discount taken for a minority, noncontrolling interest. Moreover, 

according to the Applicant, the ‘‘trueup’’ provision gives the participants and 

beneficiaries of the Plan protection 

against a down market and allows their 

full participation in any up market for 

the next seven years. 

The Applicant also represents that the 

Sale of the Interest will be a one-time 

transaction for cash, and the Plan will 

incur no fees, commissions, or other 

expenses in connection with the Sale. 

Further, the Employer will bear the 

costs of the exemption application and 

notification of interested persons. 

9. In consideration of the following 

conditions, the Department has 

tentatively determined that the Sale will 

satisfy the statutory criteria for an 

exemption under section 408(a) of the 

Act: (a) The Sale will be a one-time 

transaction for cash; (b) the terms and 

conditions of the Sale will be at least as 

favorable to the Plan as those that the 

Plan could obtain in an arm’s length 

transaction with an unrelated third 

party; (c) the Interest will be sold for 

$900,000; (d) the Sale will be 

consummated within two weeks after 

the date a final exemption regarding the 

Sale is published in the Federal 

Register; (e) If, (1) within seven years of 

the date of the Sale of the Interest to the 

Employer, (i) the Employer sells the 

Interest, (ii) JJS Partnership sells its 

interest in N19 Associates LLC (N19 

Associates), or (iii) N19 Associates sells 

its building on N Street, Washington, 

DC, and (2) the net amount realized by 

the Employer in respect of the Interest 

upon and by reason of such sale, 

exceeds the sum of (i) the $900,000 

price paid for the Interest, and (ii) any 

capital contributed by the Employer to 

the JJS Partnership in respect of the 

Interest after the date of the Sale and 

any other funds paid or advanced by the 

Employer to, or on behalf of, the JJS 

Partnership in respect of the Interest 

after the date of the Sale, the Employer 

will contribute such excess amount to 

the Plan within two weeks of its receipt 

by the Employer; (f) the Plan will pay 

no commissions, fees, or other expenses 

in connection with the Sale; and (g) the 

Plan has not waived or released and 

does not waive or release any claims, 

demands, and/or causes of action that 

the Plan may have against the Employer 

or the Plan fiduciaries in connection 

with the acquisition and holding of the 

Interest or Sale of the Interest to the 

Employer. 

Notice to Interested Persons 

All comments will be made available 

to the public. Warning: Do not include 

any personally identifiable information 

(such as name, address, or other contact 

information) or confidential business 

information that you do not want 

publicly disclosed. All comments may 

be posted on the Internet and can be 

retrieved by most Internet search 

engines. 

FOR FURTHER INFORMATION CONTACT: Mr. 

Eric A. Raps of the Department, 

telephone (202) 693–8532. (This is not 

a toll-free number.) 

EquiLend Holdings LLC (EquiLend), Located 

in New York, New York 

[Application No. D–11724] 

Proposed Amendment to Exemption 

Based on the facts and representations 

set forth in the application, the 

Department is considering granting the 

following amendment to Prohibited 

Transaction Exemption 2002–30 (67 FR 

39069) under the authority of ERISA 

section 408(a), section 8477(c)(3) of the 

Federal Employees’ Retirement System 

Act of 1986 (FERSA) and Code section 

4975(c)(2), and in accordance with the 

procedures set forth in 29 CFR Part 

2570, Subpart B (76 FR 66637, 66644, 

October 27, 2011), as follows: 

Section I. Sale of Equilend Products to 

Plans 

If the proposed exemption is granted, 

the restrictions of ERISA section 

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

resulting from the application of Code 

section 4975(a) and (b), by reason of 

Code section 4975(c)(1)(A) and (D), shall 

not apply, effective October 1, 2012, to 

the sale or licensing of certain data and/ 

or analytical tools to a plan by 

EquiLend, a party in interest with 

respect to such plan. 

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Federal Register / Vol. 77, No. 222 / Friday, November 16, 2012 / Notices 68845 

This exemption, if granted, would be 

subject to the following conditions: 

(a) The terms of any such sale or 

licensing are at least as favorable to the 

plan as the terms generally available in 

an arm’s-length transaction involving an 

unrelated party; 

(b) Any data sold/licensed to the plan 

will be limited to: 

(1) Current and historical data related 

to transactions, whether or not proposed 

or occurring on EquiLend’s electronic 

securities lending platform (the 

Platform) or, 

(2) Data derived from current and 

historical data using statistical or 

computational techniques; and 

(c) Each analytical tool sold/licensed 

to the plan will be an objective 

statistical or computational tool 

designed to permit the evaluation of 

securities lending activities. 

Section II. Use of Platform by Owner 

Lending Agent/Sale of Equilend 

Products to Plans Represented by 

Owner Lending Agent/Provision of 

Securities Lending Data Involving Plans 

to Equilend by Owner Lending Agent 

If the proposed exemption is granted, 

the restrictions of ERISA sections 

406(a)(1)(A) and (D) and 406(b), FERSA 

section 8477(c)(2), and the sanctions 

resulting from the application of Code 

section 4975(a) and (b), by reason of 

Code section 4975(c)(1)(A) and (D) 

through (F), shall not apply, effective 

October 1, 2012, to: (1) The 

participation in the Platform by an 

equity owner of EquiLend (an Equity 

Owner), in its capacity as a securities 

lending agent for a plan (an Owner 

Lending Agent); (2) the sale or licensing 

of certain data and/or analytical tools by 

EquiLend to a plan for which an Equity 

Owner acts as a securities lending agent; 

and (3) the provision by an Owner 

Lending Agent to EquiLend of securities 

lending data based on off-Platform 

securities lending transactions 

conducted by an Owner Lending Agent 

on behalf of a plan. 

This proposed exemption, if granted, 

would be subject to the following 

conditions: 

(a) In the case of participation in the 

Platform on behalf of a plan, to the 

extent an applicable exemption is 

required, the securities lending 

transactions conform to the provisions 

of Prohibited Transaction Class 

Exemption (PTE) 2006–16 (71 FR 63786 

(Oct. 31, 2006)) (or its successor), and/ 

or any applicable individual exemption; 

(b) None of the fees imposed by 

EquiLend for securities lending 

transactions conducted through the use 

of the Platform at the direction of an 

Owner Lending Agent will be charged to 

a plan; 

(c) Each securities lender and 

securities borrower participating in a 

securities lending transaction through 

EquiLend will be notified by EquiLend 

as to its responsibilities with respect to 

compliance, as applicable, with ERISA, 

the Code, and FERSA. This requirement 

may be met by including such 

notification in the participation, 

subscription or other user agreement 

required to be executed by each 

participant in EquiLend; 

(d) EquiLend will not act as a 

principal in any securities lending 

transaction involving plan assets; 

(e) Each Owner Lending Agent will 

provide prior written notice to its plan 

clients of its intention to participate in 

EquiLend; 

(f)(1) Except as otherwise provided in 

paragraph (i), the arrangement pursuant 

to which the Owner Lending Agent 

utilizes the services of EquiLend on 

behalf of a plan for securities lending: 

(A) Is subject to the prior written 

authorization of an independent 

fiduciary (an authorizing fiduciary) as 

defined in paragraph (b) of Section III). 

For purposes of subparagraph (f)(1), the 

requirement that the authorizing 

fiduciary be independent shall not 

apply in the case of an Equity Owner 

Plan; 

(B) May be terminated by the 

authorizing fiduciary, without penalty 

to the plan, within the lesser of: (i) The 

time negotiated for such notice of 

termination by the plan and the Owner 

Lending Agent, or (ii) five business 

days. Notwithstanding the foregoing, the 

requirement for prior written 

authorization will be deemed satisfied 

in the case of any plan for which the 

authorizing fiduciary has previously 

provided written authorization to the 

Owner Lending Agent pursuant to PTE 

2006–16 (or any predecessor or 

successor thereto), unless such 

authorizing fiduciary objects to 

participation in the Platform in writing 

to the Owner Lending Agent within 30 

days following disclosure of the 

information described in paragraphs (e) 

and (g) of this Section to such 

authorizing fiduciary; 

(2) Except as otherwise provided in 

paragraph (i), each purchase or license 

of a securities lending-related product 

from EquiLend on behalf of a plan by an 

Owner Lending Agent: 

(A) Is subject to the prior written 

authorization of an authorizing 

fiduciary. For purposes of subparagraph 

(f)(2), the requirement for prior written 

authorization shall not apply to any 

purchase or licensing of an EquiLend 

securities lending-related product by an 

Equity Owner Plan if the fee or cost 

associated with such purchase or 

licensing is not paid by the Equity 

Owner Plan; and 

(B) May be terminated by the 

authorizing fiduciary within: (i) The 

time negotiated for such notice of 

termination by the plan and the Owner 

Lending Agent; or (ii) five business 

days, whichever is lesser, in either case 

without penalty to the plan, provided 

that, such authorizing fiduciary shall be 

deemed to have given the necessary 

authorization in satisfaction of this 

subparagraph (f)(2) with respect to each 

specific product purchased or licensed 

pursuant thereto unless such 

authorizing fiduciary objects to the 

Owner Lending Agent within 15 days 

after the delivery of information 

regarding such specific product to the 

authorizing fiduciary in accordance 

with paragraph (g) of this exemption; 

and 

(3) Except as otherwise provided in 

paragraph (i), provision by an Owner 

Lending Agent to EquiLend of securities 

lending data based on off-Platform 

securities lending transactions 

conducted on behalf of a plan: 

(A) Is subject to the prior written 

authorization of an authorizing 

fiduciary; and 

(B) May be terminated by the 

authorizing fiduciary with respect to the 

future provision of data within the 

lesser of (i) the time negotiated for such 

notice of termination by the plan and 

the Owner Lending Agent or (ii) five 

business days, in either case without 

penalty to the plan. Notwithstanding the 

foregoing, the requirement for prior 

written authorization will be deemed 

satisfied unless such authorizing 

fiduciary objects to provision by the 

Owner Lending Agent to EquiLend of 

such data in writing to the Owner 

Lending Agent within 30 days following 

disclosure of the information described 

in paragraph (g) of this Section to such 

authorizing fiduciary. 

(g) The authorization(s) described in 

paragraph (f) of this Section shall not be 

deemed to have been made unless the 

Owner Lending Agent has furnished the 

authorizing fiduciary with any 

reasonably available information that 

the Owner Lending Agent reasonably 

believes to be necessary for the 

authorizing fiduciary to determine 

whether such authorization should be 

made, and any other reasonably 

available information regarding the 

matter that the authorizing fiduciary 

may reasonably request. This includes, 

but is not limited to: (1) a statement that 

the Equity Owner, as securities lending 

agent, has a financial interest in the 

successful operation of EquiLend, (2) a 

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68846 Federal Register / Vol. 77, No. 222 / Friday, November 16, 2012 / Notices 

statement, provided on an annual basis, 

that the authorizing fiduciary may 

terminate the arrangement(s) described 

in (f) above at any time, and (3) a 

statement that the Owner Lending Agent 

intends to provide to EquiLend 

securities lending data based on offPlatform securities lending transactions 

conducted by the Owner Lending Agent 

on behalf of the plan; 

(h) Any purchase or licensing of data 

and/or analytical tools with respect to 

securities lending activities by a plan 

pursuant to this Section complies with 

the relevant conditions of Section I and 

will be authorized in advance by an 

authorizing fiduciary in accordance 

with the applicable procedures of 

paragraphs (f), (g) and (i); 

(i) 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 (Commingled Investment 

Fund), the requirements of paragraph (f) 

of this Section shall not apply, provided 

that— 

(1) The information described in 

paragraph (g) (including information 

with respect to any material change in 

the arrangement) of this Section and a 

description of the operation of the 

Platform (including a description of the 

fee structure paid by securities lenders 

and borrowers), shall be furnished by 

the Owner Lending Agent to the 

authorizing fiduciary (described in 

paragraph (b) of Section III) with respect 

to each plan whose assets are invested 

in the account or fund, not less than 30 

days prior to implementation of any 

such arrangement or material change 

thereto, or, not less than 15 days prior 

to the purchase or license of any 

specific securities lending-related 

product, and, where requested, upon the 

reasonable request of the authorizing 

fiduciary. For purposes of this 

subparagraph, the requirement that the 

authorizing fiduciary be independent 

shall not apply in the case of an Equity 

Owner Plan; 

(2) In the event any such authorizing 

fiduciary notifies the Owner Lending 

Agent that it objects to participation in 

the Platform, or to the purchase or 

license of any EquiLend securities 

lending-related tool or product, or to the 

further provision by an Owner Lending 

Agent to EquiLend of securities lending 

data based on off-Platform securities 

lending transactions conducted on 

behalf of the plan, the 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 plan, within such 

time as may be necessary to effect the 

withdrawal in an orderly manner that is 

equitable to all withdrawing plans and 

to the non-withdrawing plans. In the 

case of a 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 or purchase or 

license, but any existing arrangement 

need not be discontinued by reason of 

a plan electing to withdraw; and 

(3) In the case of a plan whose assets 

are proposed to be invested in the 

pooled account or fund subsequent to 

the implementation of the arrangements 

and which has not authorized the 

arrangements in the manner described 

in paragraphs (i)(1) and (i)(2), the plan’s 

investment in the account or fund shall 

be authorized in the manner described 

in paragraph (f)(1)(A), (f)(2)(A), and 

(f)(3)(A); 

(j) The Equity Owner, together with 

its affiliates (as defined in Section III(a)), 

does not own at the time of the 

execution of a securities lending 

transaction on behalf of a plan by the 

Equity Owner (i.e., in its capacity as 

Owner Lending Agent) through 

EquiLend or at the time of the purchase, 

or commencement of licensing, of data 

and/or analytical tools by the plan, more 

than 20% of: 

(1) If EquiLend is a corporation, 

including a limited liability company 

taxable as a corporation, the combined 

voting power of all classes of stock 

entitled to vote or the total value of 

shares of all classes of stock of 

EquiLend, or 

(2) If EquiLend is a partnership, 

including a limited liability company 

taxable as a partnership, the capital 

interest or the profits interest of 

EquiLend; 

(k) Any information, authorization, or 

termination of authorization may be 

provided by mail or electronically; and 

(l) No Equity Owner Plan, as defined 

in Section III(e), will participate in the 

Platform, other than through a 

Commingled Investment Fund in which 

the aggregate investment of all Equity 

Owner Plans at the time of the 

transaction constitutes less than 20% of 

the total assets of such fund. 

Notwithstanding the foregoing, this 

prohibition shall not apply to the 

participation by an Equity Owner Plan 

as of the date that the aggregate loan 

balance of all securities lending 

transactions entered into through 

EquiLend by all participants 

outstanding on such date (excluding 

transactions entered into on behalf of 

Equity Owner Plans) is equal to or 

greater than $10 billion; provided that if 

such aggregate loan balance is later 

determined to be less than $10 billion, 

no additional participation by an Equity 

Owner Plan (other than through a 

Commingled Investment Fund) shall 

occur until such time as the $10 billion 

threshold amount is again met. 

Section III. Definitions 

For purposes of this proposed 

exemption: 

(a) An ‘‘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 other 

person; 

(2) Any officer, director, partner, 

employee, relative (as defined in ERISA 

section 3(15)) of such other person; and 

(3) Any corporation or partnership of 

which such other person is an officer, 

director or partner. 

For purposes of this paragraph, the 

term ‘‘control’’ means the power to 

exercise a controlling influence over the 

management or policies of a person 

other than an individual. 

(b) The term ‘‘authorizing fiduciary’’ 

means, with respect to an Owner 

Lending Agent, a plan fiduciary who is 

independent of such Owner Lending 

Agent. In this regard, an authorizing 

fiduciary will not be considered 

independent of an Owner Lending 

Agent if: 

(1) Such fiduciary directly or 

indirectly controls, is controlled by, or 

is under common control with the 

Owner Lending Agent; or 

(2) Such fiduciary directly or 

indirectly receives any compensation or 

other consideration from the Owner 

Lending Agent or an affiliate for his or 

her own personal account in connection 

with any securities lending transaction 

described herein; provided that 

Commingled Investment Funds and 

Equity Owner Plans maintained by such 

Owner Lending Agent or an affiliate will 

not be deemed affiliates of such Owner 

Lending Agent for purposes of this 

subparagraph (2). 

For purposes of Section II, no Equity 

Owner or any affiliate may be an 

authorizing fiduciary except in the case 

of an Equity Owner Plan. 

Notwithstanding the foregoing, the 

requirements for consent by an 

authorizing fiduciary with respect to 

participation in the Platform, and the 

annual right of such fiduciary to 

terminate such participation, shall be 

deemed met to the extent that the 

Owner Lending Agent’s proposed 

utilization of the services of EquiLend 

on behalf of a plan for securities lending 

has been approved by an order of a 

United States district court. 

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Federal Register / Vol. 77, No. 222 / Friday, November 16, 2012 / Notices 68847 

15The applicant represents that, to the best of its 

knowledge, EquiLend has complied with all 

applicable conditions set forth in PTE 2002–30. 

16The proposed amended exemption does not 

provide relief under Section I from ERISA section 

406(a)(1)(C) with respect to the use of the Platform 

on behalf of a plan by a lending fiduciary which 

is not an Equity Owner. In this regard, the applicant 

and the lending fiduciaries intend to rely on ERISA 

section 408(b)(2) to the extent any such relief is 

necessary. 

(c) The term ‘‘Owner Lending Agent’’ 

means an Equity Owner in its capacity 

as a fiduciary of a plan acting as 

securities lending agent in connection 

with the loan of plan assets that are 

securities. 

(d) The term ‘‘Equity Owner’’ means 

an entity that either directly or through 

an affiliate owns an equity ownership 

interest in EquiLend. 

(e) The term ‘‘Equity Owner Plan’’ 

means a plan which is established or 

maintained by an Equity Owner of 

EquiLend as an employer of employees 

covered by such plan, or by its affiliate. 

(f) The terms ‘‘plan’’ means: 

(1) An ‘‘employee benefit plan’’ 

within the meaning of ERISA section 

3(3), subject to Part 4 of Subtitle B of 

Title I of ERISA, 

(2) A ‘‘plan’’ that is within the 

meaning of Code section 4975(e)(1) and 

subject to Code section 4975, or 

(3) The Federal Thrift Savings Fund. 

Effective Date: The proposed 

exemption would be effective October 1, 

2012 with respect to arrangements 

entered into on or after that date. The 

provisions of PTE 2002–30 shall 

continue to apply to arrangements 

entered into before October 1, 2012. 

Summary of Facts and Representations 

1. The applicant is EquiLend, a 

Delaware limited liability company 

established on May 16, 2001. As of 

March 15, 2012, the equity owners of 

EquiLend were as follows: BlackRock, 

Credit Suisse, JP Morgan Clearing Corp., 

JP Morgan Chase, Merrill Lynch, 

Morgan Stanley, State Street, Goldman 

Sachs, Northern Trust and UBS, or 

affiliates of the foregoing entities. The 

applicant represents that, as of March 

15, 2012, each equity owner owned 10 

percent of EquiLend. 

2. The applicant submitted a request 

that Prohibited Transaction Exemption 

2002–30 (67 FR 39069) (PTE 2002–30) 

be amended. PTE 2002–30 was 

originally promulgated on June 6, 2002, 

and it permits: (1) The sale or licensing 

of certain data and/or analytical tools to 

an employee benefit plan by EquiLend; 

(2) participation in the Platform by an 

equity owner of EquiLend (an Equity 

Owner), in its capacity as a securities 

lending agent for the plan (an Owner 

Lending Agent); and (3) the sale or 

licensing of certain data and/or 

analytical tools by EquiLend to a plan 

for which an Equity Owner acts as an 

Owner Lending Agent. Unless otherwise 

noted, the facts and representations of 

PTE 2002–30, are integrated herein.15

3. The applicant represents that, as 

permitted under Section I of PTE 2002– 

30, EquiLend currently sells and/or 

licenses certain data to plans. Consistent 

with the terms of the individual 

exemption, this data is: (A) Historical in 

nature and relates to transactions 

proposed or occurring on the system; or 

(B) derived from current and historical 

data utilizing statistical or 

computational techniques. In this 

regard, the applicant notes that Section 

I(b) of PTE 2002–30 requires that, with 

respect to the sale or licensing of certain 

data and/or analytical tools to an 

employee benefit plan by EquiLend: 

(b) Any data sold/licensed to the plan will 

be limited to: (1) current and historical data 

related to transactions proposed or occurring 

on the Platform or, (2) data derived from 

current and historical data using statistical or 

computational techniques. 

4. The applicant is seeking to amend 

Section I(b) of PTE 2002–30, effective 

October 1, 2012. The applicant notes 

that Section I(b) of PTE 2002–30 limits 

the types of data that may be licensed 

or sold by EquiLend. Specifically, 

Section I(b) precludes the sale or 

licensing of data to a plan by Equilend 

where such data sold/licensed involves 

the use of current or historical data 

related to transactions that are proposed 

or occurring off the Platform. The 

applicant believes, however, that access 

to off-Platform securities lending data 

by plans will further enhance 

EquiLend’s existing client service 

functionality via the Platform by 

expanding the information that is 

available to plans. The applicant states 

that the addition of additional data to 

the Platform enhances the ability of a 

plan to evaluate the performance of 

lending agents and the returns on 

lending portfolios. 

5. The applicant, therefore, requests 

that the Department revise Section I(b) 

of PTE 2002–30 in a manner that would 

permit, effective October 1, 2012, 

EquiLend to use, sell or license data 

relating to transactions occurring off the 

Platform to plans. If this proposed 

amendment is granted, Section I(b) of 

PTE 2002–30 will provide that: 

(b) Any data sold/licensed to the plan will 

be limited to: 

(1) Current and historical data related to 

transactions, whether or not proposed or 

occurring on EquiLend’s electronic securities 

lending platform (the Platform) or, 

(2) Data derived from current and historical 

data using statistical or computational 

techniques. 

6. In the applicant’s view, affected 

plans would be adequately protected 

with respect to the sale and licensing by 

EquiLend of this off-Platform data. In 

this regard, the applicant notes that 

Section I(b) of PTE 2002–30 limits the 

type of data that may be sold and 

licensed by EquiLend to current and 

historical data related to securities 

lending transactions, or data derived 

from current and historical data using 

statistical or computational techniques. 

Further, the applicant notes that the 

terms of any sale or licensing of data 

must be at least as favorable to the plan 

as the terms generally available in an 

arm’s-length transaction involving an 

unrelated party. The applicant 

represents that these limitations/ 

conditions are sufficient to ensure that 

plans would be adequately protected to 

the extent Section I(b) of PTE 2002–30 

is revised to include any current and 

historical data related to transactions 

proposed occurring off the Platform.16

7. The applicant also seeks to amend 

Section II of PTE 2002–30, effective 

October 1, 2012. Section II presently 

permits: (1) Participation in the Platform 

by an Equity Owner, in its capacity as 

an Owner Lending Agent; and (2) the 

sale or licensing of certain data and/or 

analytical tools by EquiLend to a plan 

for which an Equity Owner acts as an 

Owner Lending Agent. The applicant 

notes that Section II of the individual 

exemption does not permit the 

provision by an Owner Lending Agent 

to EquiLend of securities lending data 

based on off-Platform securities lending 

transactions conducted by an Owner 

Lending Agent on behalf of a plan. 

8. However, for the same reasons 

stated above, the applicant believes that 

access to off-Platform securities lending 

data by plans will further enhance 

EquiLend’s existing client service 

functionality via the Platform by 

expanding the information that is 

available to plans. The applicant, 

therefore, requests that the Department 

amend PTE 2002–30 to permit, effective 

October 1, 2012, the provision by an 

Owner Lending Agent to EquiLend of 

securities lending data based on offPlatform securities lending transactions 

conducted by an Owner Lending Agent 

on behalf of a plan. The applicant notes 

that, if this proposed amendment is 

adopted, the three categories of 

transactions covered by Section II 

would be: (1) The participation in the 

Platform by an Equity Owner, in its 

capacity as an Owner Lending Agent; (2) 

the sale or licensing of certain data and/ 

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68848 Federal Register / Vol. 77, No. 222 / Friday, November 16, 2012 / Notices 

17The Department notes that ERISA’s general 

standards of fiduciary conduct also would apply. In 

this regard, ERISA section 404 requires, among 

other things, a fiduciary to discharge his duties 

respecting a plan solely in the interest of the plan’s 

participants and beneficiaries and in a prudent 

manner. Accordingly, an independent plan 

fiduciary must act prudently with respect to: (1) 

The decision to enter into the described 

arrangement; and (2) the negotiation of the terms of 

such arrangement including any payment of 

compensation. The Department further emphasizes 

that it expects plan fiduciaries, prior to entering 

into any of the proposed arrangements, to fully 

understand the extent of the services to be 

provided, the fee structure and the risks associated 

with these types of arrangements following 

disclosure by the service provider of all relevant 

information. In addition, the Department notes that 

such plan fiduciaries are responsible for 

periodically monitoring the services provided. 

or analytical tools by EquiLend to a plan 

for which an Equity Owner acts as a 

securities lending agent; and (3) the 

provision by an Owner Lending Agent 

to EquiLend of securities lending data 

based on off-Platform securities lending 

transactions conducted by an Owner 

Lending Agent on behalf of a plan. 

9. The applicant believes that affected 

plans would be adequately protected 

with respect to the proposed 

amendment to Section II. In this regard, 

a new condition is proposed in Section 

II that would be applicable to the new 

category of transactions that would be 

covered therein. To the extent an Owner 

Lending Agent provides to EquiLend 

data based on off-Platform securities 

lending transactions conducted on 

behalf of plans, prior to such provision 

of data, each Owner Lending Agent will 

disclose to a plan’s authorizing 

fiduciary who is independent of the 

Owner Lending Agent and EquiLend 

(other than in case of an Equity Owner 

Plan) that such Owner Lending Agent 

intends to provide to EquiLend data 

based on off-Platform securities lending 

transactions conducted on behalf the 

plan. Thereafter, the plan’s authorizing 

fiduciary must consent to provision of 

such data by the Owner Lending Agent 

to EquiLend (such authorizing fiduciary 

will be deemed to have given the 

required authorization unless such 

authorizing fiduciary objects in writing 

to the provision to EquiLend of data 

based on off-Platform securities lending 

transactions conducted on behalf of the 

plan to the Owner Lending Agent 

within 30 days after disclosure of such 

information). This authorization may be 

terminated with respect to the future 

provision of data by the authorizing 

fiduciary without penalty to the plan, 

within the lesser of: (i) The time 

negotiated for such notice of 

termination by the plan and the Owner 

Lending Agent, or (ii) five business 

days.17

10. The applicant notes that Section II 

of PTE 2002–30 contains other 

conditions that are designed to ensure 

that plans are adequately protected with 

respect to this amendment, if adopted. 

Specifically, conditions (a) through (j) of 

the individual exemption require that: 

(A) In the case of participation in the 

Platform on behalf of a plan, to the 

extent applicable the procedures 

regarding the securities lending 

activities conform to the provisions of 

PTE 2006–16 (or its successor), and/or 

any applicable individual exemption; 

(B) None of the fees imposed by 

EquiLend for securities lending 

transactions conducted through the use 

of the Platform at the direction of an 

Owner Lending Agent will be charged to 

a plan; 

(C) Each securities lender and 

securities borrower participating in a 

securities lending transaction through 

EquiLend will be notified by EquiLend 

as to its responsibilities with respect to 

compliance, as applicable, with ERISA, 

the Code, and FERSA; 

(D) Equilend will not act as a 

principal in any security lending 

transaction involving plan assets; 

(E) Each Equity Owner will provide 

prior written notice to its plan clients of 

its intention to participate in EquiLend; 

(F) The arrangement pursuant to 

which the Equity Owner utilizes the 

services of EquiLend on behalf of a plan: 

(1) Is subject to the prior written 

authorization of an authorizing 

fiduciary; 

(2) May be terminated by the 

authorizing fiduciary, without penalty 

to the plan, within the lesser of: (i) The 

time negotiated for such notice of 

termination by the plan and the Equity 

Owner, or (ii) five business days; 

(G) With certain limited exceptions, 

each purchase or license of a securities 

lending-related product from EquiLend 

is subject to the prior authorization of 

an authorizing fiduciary; 

(H) The Equity Owner will furnish 

each authorizing fiduciary with any 

reasonably available information which 

the Equity Owner reasonably believes to 

be necessary to determine whether such 

authorization should be made or 

renewed; 

(I) The provision by an Owner 

Lending Agent to EquiLend of data 

based on off-Platform securities lending 

transactions conducted on behalf of a 

plan: 

(1) Is subject to the prior authorization 

of an authorizing fiduciary ; 

(2) May be terminated by the 

authorizing fiduciary with respect to the 

future provision of data, without 

penalty to the plan, within the lesser of: 

(i) The time negotiated for such notice 

of termination by the plan and the 

Equity Owner, or (ii) five business days; 

and 

(J) The Equity Owner, together with 

its affiliates, does not own at the time 

of the execution of a securities lending 

transaction on behalf of a plan by the 

Equity Owner through EquiLend or at 

the time of the purchase, or 

commencement of licensing, of data 

and/or analytical tools by the plan, more 

than 20% of EquiLend. 

11. In summary, the applicant 

represents that this proposed 

amendment to PTE 2002–30 satisfies the 

statutory criteria for an administrative 

exemption contained in ERISA section 

408(a) and Code section 4975(c)(2) 

because, among other things: (a) The 

proposed amendment to Section I and 

Section II of PTE 2002–30 will be 

administratively feasible and protective 

of and in the best interests of the plans 

and their participants and beneficiaries 

because of the conditions set forth 

originally and for the same reasons as 

set forth originally in PTE 2002–30; and 

(b) the proposed amendment to Section 

II of PTE 2002–30 will be additionally 

protective of the rights of participants 

and beneficiaries because each Owner 

Lending Agent will disclose to a plan’s 

authorizing fiduciary who is 

independent of the Owner Lending 

Agent and EquiLend (other than in case 

of an Equity Owner Plan) that such 

Owner Lending Agent intends to 

provide to EquiLend data based on offPlatform securities lending transactions 

conducted on behalf a plan. Further, the 

plan’s authorizing fiduciary must 

consent to the provision of such data by 

the Owner Lending Agent to EquiLend. 

Notice to Interested Parties 

The applicant represents that the 

potentially interested participants and 

beneficiaries cannot all be identified 

and therefore the only practical means 

of notifying such participants and 

beneficiaries of this proposed 

exemption is by the publication of this 

notice in the Federal Register. 

Comments and requests for a hearing 

must be received by the Department not 

later than 30 days from the date of 

publication of this notice of proposed 

exemption in the Federal Register. 

FOR FURTHER INFORMATION CONTACT: 

Brian Shiker of the Department, 

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

a toll-free number.) 

General Information 

The attention of interested persons is 

directed to the following: 

(1) The fact that a transaction is the 

subject of an exemption under section 

408(a) of the Act and/or section 

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Federal Register / Vol. 77, No. 222 / Friday, November 16, 2012 / Notices 68849 

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

a fiduciary or other party in interest or 

disqualified person from certain other 

provisions of the Act and/or the Code, 

including any prohibited transaction 

provisions to which the exemption does 

not apply and the general fiduciary 

responsibility provisions of section 404 

of the Act, which, among other things, 

require a fiduciary to discharge his 

duties respecting the plan solely in the 

interest of the participants and 

beneficiaries of the plan and in a 

prudent fashion in accordance with 

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

it affect the requirement of section 

401(a) of the Code that the plan must 

operate for the exclusive benefit of the 

employees of the employer maintaining 

the plan and their beneficiaries; 

(2) Before an exemption may be 

granted under section 408(a) of the Act 

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

the Department must find that the 

exemption is administratively feasible, 

in the interests of the plan and of its 

participants and beneficiaries, and 

protective of the rights of participants 

and beneficiaries of the plan; 

(3) The proposed exemptions, if 

granted, will be supplemental to, and 

not in derogation of, any other 

provisions of the Act and/or the Code, 

including statutory or administrative 

exemptions and transitional rules. 

Furthermore, the fact that a transaction 

is subject to an administrative or 

statutory exemption is not dispositive of 

whether the transaction is in fact a 

prohibited transaction; and 

(4) The proposed exemptions, if 

granted, will be subject to the express 

condition that the material facts and 

representations contained in each 

application are true and complete, and 

that each application accurately 

describes all material terms of the 

transaction which is the subject of the 

exemption. 

Signed at Washington, DC, this 9th day of 

November, 2012. 

Lyssa E. Hall, 

Director of Exemption Determinations, 

Employee Benefits Security Administration, 

U.S. Department of Labor. 

[FR Doc. 2012–27849 Filed 11–15–12; 8:45 am] 

BILLING CODE 4510–29–P 

DEPARTMENT OF LABOR 

Occupational Safety and Health 

Administration 

[Docket No. OSHA–2012–0031] 

Standard on 4,4’—Methylenedianiline 

in Construction; Extension of the 

Office of Management and Budget’s 

(OMB) Approval of Information 

Collection (Paperwork) Requirements 

AGENCY: Occupational Safety and Health 

Administration (OSHA), Labor. 

ACTION: Request for public comments. 

SUMMARY: OSHA solicits public 

comments concerning its proposal to 

extend the Office of Management and 

Budget’s (OMB) approval of the 

information collection requirements 

specified in the Standard on 4,4’— 

Methylenedianiline in Construction (29 

CFR 1926.60). 

DATES: Comments must be submitted 

(postmarked, sent, or received) by 

January 15, 2013. 

ADDRESSES: Electronically: You may 

submit comments and attachments 

electronically at http:// 

www.regulations.gov, which is the 

Federal eRulemaking Portal. Follow the 

instructions online for submitting 

comments. 

Facsimile: If your comments, 

including attachments, are not longer 

than 10 pages, you may fax them to the 

OSHA Docket Office at (202) 693–1648. 

Mail, hand delivery, express mail, 

messenger, or courier service: When 

using this method, you must submit a 

copy of your comments and attachments 

to the OSHA Docket Office, Docket No. 

OSHA–2012–0031, Occupational Safety 

and Health Administration, U.S. 

Department of Labor, Room N–2625, 

200 Constitution Avenue NW., 

Washington, DC 20210. Deliveries 

(hand, express mail, messenger, and 

courier service) are accepted during the 

Department of Labor’s and Docket 

Office’s normal business hours, 8:15 

a.m. to 4:45 p.m., e.t. 

Instructions: All submissions must 

include the Agency name and OSHA 

docket number (OSHA–2012–0031) for 

the Information Collection Request 

(ICR). All comments, including any 

personal information you provide, are 

placed in the public docket without 

change, and may be made available 

online at http://www.regulations.gov. 

For further information on submitting 

comments see the ‘‘Public 

Participation’’ heading in the section of 

this notice titled SUPPLEMENTARY

INFORMATION. 

Docket: To read or download 

comments or other material in the 

docket, go to http://www.regulations.gov 

or the OSHA Docket Office at the 

address above. All documents in the 

docket (including this Federal Register 

notice) are listed in the http:// 

www.regulations.gov index; however, 

some information (e.g., copyrighted 

material) is not publicly available to 

read or download from the Web site. All 

submissions, including copyrighted 

material, are available for inspection 

and copying at the OSHA Docket Office. 

You may also contact Theda Kenney at 

the address below to obtain a copy of 

the ICR. 

FOR FURTHER INFORMATION CONTACT: 

Theda Kenney or Todd Owen, 

Directorate of Standards and Guidance, 

OSHA, U.S. Department of Labor, Room 

N–3609, 200 Constitution Avenue NW., 

Washington, DC 20210; telephone (202) 

693–2222. 

SUPPLEMENTARY INFORMATION: 

I. Background 

The Department of Labor, as part of its 

continuing effort to reduce paperwork 

and respondent (i.e., employer) burden, 

conducts a preclearance consultation 

program to provide the public with an 

opportunity to comment on proposed 

and continuing information collection 

requirements in accord with the 

Paperwork Reduction Act of 1995 (44 

U.S.C. 3506(c)(2)(A)). This program 

ensures that information is in the 

desired format, reporting burden (time 

and costs) is minimal, collection 

instruments are clearly understood, and 

OSHA’s estimate of the information 

collection burden is accurate. The 

Occupational Safety and Health Act of 

1970 (the OSH Act) (29 U.S.C. 651 et 

seq.) authorizes information collection 

by employers as necessary or 

appropriate for enforcement of the OSH 

Act or for developing information 

regarding the causes and prevention of 

occupational injuries, illnesses, and 

accidents (29 U.S.C. 657). The OSH Act 

also requires that OSHA obtain such 

information with minimum burden 

upon employers, especially those 

operating small businesses, and to 

reduce to the maximum extent feasible 

unnecessary duplication of efforts in 

obtaining information (29 U.S.C. 657). 

The information collection 

requirements specified in the 4,4’- 

Methylenedianiline Standard for 

Construction (the ‘‘MDA Standard’’) (29 

CFR 1926.60) protect workers from the 

adverse health effects that may result 

from their exposure to MDA, including 

cancer, liver and skin disease. The 

major paperwork requirements specify 

that employers must perform initial, 

periodic, and additional exposure 

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