50632 Federal Register / Vol. 76, No. 157 / Monday, August 15, 2011 / Notices 

1 76 FR 15058 (March 18, 2011). 

2Capitalized terms used but not defined in the 

Background Section have the meaning set forth in 

Section VI of the exemption. 

3While the Executive Committee may exercise 

the powers of the Board during intervals between 

Board meetings or at times when the Board is 

unable to convene, the Executive Committee has 

not met for over five (5) years. 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

[Prohibited Transaction Exemption 2011– 

17; Exemption Application No. D–11588] 

Grant of Individual Exemption 

Involving BlackRock, Inc. and Its 

Investment Advisory, Investment 

Management and Broker-Dealer 

Affiliates and Their Successors 

(Applicants) Located in New York, NY 

AGENCY: Employee Benefits Security 

Administration, U.S. Department of 

Labor. 

ACTION: Grant of individual exemption. 

SUMMARY: This document contains an 

individual exemption from certain 

prohibited transaction restrictions of the 

Employee Retirement Income Security 

Act of 1974, as amended (ERISA), the 

Federal Employees’ Retirement System 

Act of 1986, as amended (FERSA), and 

the Internal Revenue Code of 1986, as 

amended (the Code). The transactions 

involve BlackRock, Inc. and its 

investment advisory, investment 

management and broker-dealer affiliates 

and their successors. The individual 

exemption affects plans for which 

BlackRock, Inc. and its investment 

advisory, investment management and 

broker-dealer affiliates and their 

successors serve as fiduciaries, and the 

participants and beneficiaries of such 

plans. 

DATES: Effective Date: This exemption is 

effective as of December 1, 2009. 

SUPPLEMENTARY INFORMATION: On March 

18, 2011, the Department published a 

notice of proposed individual 

exemption from the restrictions of 

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

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

and the sanctions resulting from the 

application of Code section 4975, by 

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

Proposed Exemption).1 The Proposed 

Exemption was requested by BlackRock, 

Inc. and its investment advisory, 

investment management and brokerdealer affiliates and their successors 

pursuant to ERISA section 408(a), Code 

section 4975(c)(2) and FERSA section 

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

procedures set forth in 29 CFR part 

2570, subpart B (55 FR 32836, 32847, 

August 10, 1990). Effective December 

31, 1978, section 102 of the 

Reorganization Plan No. 4 of 1978, (43 

FR 47713, October 17, 1978) transferred 

the authority of the Secretary of the 

Treasury to issue exemptions of the type 

requested to the Secretary of Labor. 

Accordingly, this final individual 

exemption is being issued solely by the 

Department. 

Background 2

BlackRock, Inc. (BlackRock), based in 

New York, NY, is the largest publiclytraded investment management firm in 

the United States. BlackRock, through 

its investment advisory and investment 

management subsidiaries, currently 

manages assets for institutional and 

individual investors worldwide through 

a variety of equity, fixed income, cash 

management and alternative investment 

products. As of September 30, 2010, 

BlackRock, through its advisor 

subsidiaries, had approximately $3.446 

trillion in assets under management, 

including assets managed by BlackRock 

Institutional Trust Company, N.A. (BTC) 

(formerly known as Barclays Global 

Investors, N.A. (BGI)) and its affiliates. 

BTC is a national banking association 

headquartered in San Francisco, 

California. Prior to its acquisition by 

BlackRock on December 1, 2009 (the 

Acquisition), BTC (then BGI) was the 

largest asset manager in the U.S. A 

significant amount of BTC’s assets 

under management in the U.S. consist of 

assets of employee benefit plans subject 

to ERISA, FERSA and/or the Code. BTC 

is a market leader in index and modeldriven investment products. Until its 

sale to BlackRock, BGI was an indirect 

subsidiary of Barclays PLC. BTC, as of 

the date of the Acquisition, is now a 

wholly-owned subsidiary of BlackRock. 

Immediately following the 

Acquisition, (1) Barclays PLC (Barclays), 

(2) Bank of America Corporation (BOA), 

and (3) The PNC Financial Services 

Group, Inc. (PNC) (each of these, a 

Minority Passive Shareholder, or MPS) 

controlled the following interests in 

BlackRock: 

(a) BOA. BOA owned approximately 

3.7% of BlackRock voting common 

stock and approximately 34.2% of 

BlackRock equity by value. 

(b) PNC. PNC owned approximately 

35.2% of BlackRock voting common 

stock and approximately 24.5% of 

BlackRock equity by value. 

(c) Barclays. Barclays owned 

approximately 4.8% of BlackRock 

voting common stock and 

approximately 19.8% of BlackRock 

equity by value. 

Post-Acquisition, a secondary offering 

of BlackRock common stock was 

completed on November 15, 2010 (the 

Secondary Offering). BlackRock’s 

ownership structure following the 

Secondary Offering was as follows: (a) 

BOA controlled 0% of BlackRock’s 

voting common stock and 

approximately 7.1% of BlackRock’s 

equity by value; (b) PNC controlled 

approximately 25.3% of BlackRock’s 

voting common stock and 

approximately 20.3% of BlackRock’s 

equity by value; and (c) Barclays 

controlled approximately 2.3% of 

BlackRock’s voting common stock and 

approximately 19.6% of BlackRock’s 

equity by value. 

All BlackRock stock beneficially 

owned by each MPS (other than stock 

held in certain fiduciary capacities and 

customer or market making accounts) is 

subject to a stockholders agreement 

entered into by and between that MPS 

and BlackRock (collectively, the 

Stockholders Agreements). Pursuant to 

each Stockholders Agreement, each 

MPS has or had the right to identify to 

BlackRock two (2) prospective directors, 

and, if such nominees are reasonably 

acceptable to the BlackRock Board of 

Directors (the Board), BlackRock and 

each respective MPS agrees to use best 

efforts to cause the election of such 

nominees to the Board. As a result of the 

Secondary Offering, BOA fell below a 

ten percent (10%) equity interest, and, 

assuming that it remains below this 

level, it lost the right to identify to 

BlackRock one representative director 

on or about February 13, 2011. 

At least ten (10) of the current 

eighteen (18) BlackRock directors must 

be ‘‘independent’’ (within the meaning 

of New York Stock Exchange rules) of 

the MPSs and BlackRock management 

and each MPS must vote its BlackRock 

voting common stock in accordance 

with the recommendations of the Board. 

In addition, the Audit Committee, the 

Management Development and 

Compensation Committee, and the 

Nominating and Governance Committee 

of the Board consist entirely of 

independent directors, and a majority of 

each other Board committee (if any), 

with the exception of the Executive 

Committee,3 must consist of 

independent directors. As of the date 

hereof, none of the directors 

representing an MPS serve on any Board 

committee, except that one director 

representing PNC serves on the 

Executive Committee. Further, no MPS 

representative directors sit on any of the 

Board of Directors of BlackRock 

Managers. While each MPS monitors its 

investment in BlackRock through its 


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Federal Register / Vol. 76, No. 157 / Monday, August 15, 2011 / Notices 50633 

4 ‘‘Client Plan’’ means any plan subject to section 

406 of the Act, Code section 4975 or FERSA section 

8477(c) for which a BlackRock Manager is a 

fiduciary as described in section 3(21) of ERISA, 

including, but not limited to, any Pooled Fund, 

MPS Plan, Index Account or Fund, Model-Driven 

Account or Fund, Other Account or Fund, or InHouse Plan, except where specified to the contrary. 

5 ‘‘Covered Transaction’’ means each transaction 

set forth in Section III of the exemption by a 

BlackRock Manager for a Client Plan with or 

involving, directly or indirectly, an MPS and/or a 

BlackRock Entity. 

6 49 FR 9494 (Mar. 13, 1984), as amended, 70 FR 

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

38837 (July 6, 2010). 

Board representatives and each MPS has 

certain limited governance rights, no 

MPS has or will have any involvement 

in the day-to-day management of 

BlackRock, any BlackRock Manager or 

any other BlackRock Entity. In addition, 

the respective Stockholder Agreements 

impose standstill agreements, transfer 

restrictions and arm’s length transaction 

restrictions on the ability of an MPS to 

control BlackRock or any BlackRock 

Manager. 

A BlackRock Manager is a fiduciary 

with investment discretion with respect 

to the applicable Client Plan.4 As a 

result, the BlackRock Manager decides 

whether to enter into a Covered 

Transaction 5 with or involving an MPS. 

The ownership interest of the MPS in 

BlackRock could affect the BlackRock 

Manager’s best judgment as a fiduciary, 

raising issues under ERISA Section 

406(b). Therefore, the Applicants sought 

relief from the prohibitions of ERISA 

section 406(b). 

Further, if BlackRock and one or more 

MPS are deemed affiliates, each MPS 

and its affiliates will very likely be 

parties in interest within the meaning of 

ERISA section 3(14) with respect to 

many Client Plans. Therefore, the 

Applicants also sought relief from the 

prohibitions of ERISA section 406(a). 

Such ERISA section 406(a) and 

section 406(b) relief was sought solely 

with respect to certain enumerated 

types of Covered Transactions entered 

into after the Acquisition and, in certain 

cases, before the Acquisition and that 

have continued after the Acquisition. 

The structure of the requested relief is 

founded upon compliance with five sets 

of general conditions. The five sets of 

general conditions are: (a) Modified 

conditions derived from Prohibited 

Transaction Exemption 84–14, as 

amended (sometimes referred to as the 

QPAM Exemption) 6; (b) restrictions on 

the compensation of BlackRock 

Managers and their employees; (c) the 

establishment and implementation of 

certain policies and procedures; (d) the 

appointment by BlackRock of an 

Exemption Compliance Officer; and (e) 

the retention by BlackRock of an 

Independent Monitor. The purpose of 

these general conditions is, when 

coupled with the restrictions of the 

Stockholders Agreements and the 

BlackRock ownership structure, to foster 

independence of action by BlackRock 

notwithstanding the equity interests in 

BlackRock held by the MPSs. This 

unique overarching structure includes a 

comprehensive compliance function 

and an independent monitor, each of 

which work together for the benefit of 

Client Plans and their participants and 

beneficiaries by allowing Covered 

Transactions with or involving an MPS 

only if the Covered Transaction is, as 

best as can be determined, as favorable 

to the Client Plans as arm’s length 

transactions with third parties. 

In addition to the general conditions, 

each Covered Transaction has its own 

set of specific conditions deemed 

suitable for it in light of the nature of 

the transaction. Many of the conditions 

for individual Covered Transactions are 

derived from statutory exemptions, 

administrative class exemptions or 

administrative individual exemptions 

frequently relied upon by fiduciaries 

and parties in interest (sometimes 

affiliated and sometimes not) to exempt 

similar transactions. The general and 

transaction-specific conditions for relief 

attempt to strike a balance that takes 

into account both the MPSs’ unique 

equity interests in BlackRock and the 

ability of BlackRock acting on behalf of 

Client Plans to engage in arm’s length 

Covered Transactions with or involving 

institutions as significant in their 

markets as are the MPSs. 

Compliance with the exemption 

requires that all Violations must be 

completely corrected. No non-exempt 

prohibited transaction will be deemed 

to occur, however, if the Violation is 

completely corrected (within the 

meaning of the exemption) no later than 

fourteen (14) business days following 

the date on which the Exemption 

Compliance Officer submits the 

quarterly report to the Independent 

Monitor for the quarter in which the 

Covered Transaction first became a nonexempt prohibited transaction. 

Written Comments 

The Department invited all interested 

persons to submit written comments 

and/or requests for a public hearing 

with respect to the notice of proposed 

exemption on or before May 2, 2011. 

During the comment period, the 

Department received one (1) Comment 

letter on the proposed exemption. The 

sole comment letter was filed by 

BlackRock. The Department received no 

hearing requests during the comment 

period. The following is a discussion of 

BlackRock’s comments and the 

Department’s responses. 

Section III.D. of the Proposed 

Exemption. Section III.D. of the 

Proposed Exemption applies to certain 

transactions in the secondary market by 

BlackRock Managers of Fixed Income 

Obligations, including Fixed Income 

Obligations issued by or traded with an 

MPS. Specifically, BlackRock comments 

on the language in Section III.D.2(a) of 

the Proposed Exemption that states that 

‘‘[t]he purchase of the Fixed Income 

Obligation issued by an MPS is not 

made from the issuing MPS[.]’’ 

BlackRock believes that so long as the 

purchase of an MPS Fixed Income 

Obligation is the result of the Three 

Quote Process, as required by the 

Proposed Exemption, there is no reason 

why the purchase from the issuing MPS 

should not be permitted. 

BlackRock points out that, for ERISA 

purposes, the purchase of a Fixed 

Income Obligation issued by an MPS 

represents two separate transactions: (1) 

The purchase of a debt security and (2) 

an extension of credit, an ongoing 

relationship with an MPS, which could 

present the potential for an ERISA 

conflict of interest. The Proposed 

Exemption requires that all purchases 

(or sales) in the secondary market of 

Fixed Income Obligations issued by or 

traded with an MPS be conducted 

through the Three Quote Process in 

order to ensure that the purchase is 

executed on the best available economic 

terms. BlackRock believes that whether 

or not an MPS Fixed Income Obligation 

is purchased from the issuing MPS or 

some other dealer is irrelevant, and the 

potential for later conflict is unrelated to 

a purchase pursuant to the Three Quote 

Process. BlackRock further notes that 

other safeguards contained in the 

proposed exemption, particularly the 

existence of and involvement of the 

Exemption Compliance Officer and the 

Independent Monitor, serve to 

adequately mitigate the risk that an 

unaddressed conflict will arise during 

the holding of an MPS Fixed Income 

Obligation, whether acquired from the 

issuing MPS or another dealer. In order 

to address this issue, BlackRock 

requests that Section III.D.2(a) of the 

Proposed Exemption be deleted in its 

entirety. 

The Department agrees with the 

comment, and it has deleted Section 

III.D.2(a) from the exemption’s operative 

language. 

Section III.F. of the Proposed 

Exemption. Section III.F. of the 

Proposed Exemption applies to the 

purchase in an underwriting and 

holding by BlackRock Managers of 

Asset-Backed Securities, when an MPS 


emcdonald on DSK2BSOYB1PROD with NOTICES2
50634 Federal Register / Vol. 76, No. 157 / Monday, August 15, 2011 / Notices 

7See Preamble to the Proposed Exemption (76 FR 

at 15067). 

8BlackRock also points out that certain crossreferences were inadvertently omitted in Section 

III.M.3. of the Proposed Exemption. The 

Department agrees, and the language has been 

modified to apply the proper cross references to 

Sections VI.KK. and VI.JJ. of the exemption. 

9 51 FR 41686 (Nov. 18, 1986), as amended, 67 

FR 64137 (Oct. 17, 2002). 

10The Applicants believe such intent is set forth 

in the Summary of Facts and Representations 

published with the Proposed Exemption, 76 FR at 

15073. 

is an underwriter, in the capacity as 

either a manager or a member of the 

selling syndicate, trustee, or, in the case 

of Asset-Backed Securities which are 

CMBS, servicer. BlackRock states that 

the language of Section III.F. of the 

Proposed Exemption would not provide 

relief in circumstances where an MPS 

was acting as both an underwriter and 

a servicer of a CMBS Asset-Backed 

Security. BlackRock believes such a 

result was not intended by the 

Department.7 BlackRock comments that 

both the Affiliated Underwriting 

provisions of the Proposed Exemption 

(Section IV.A.) and the Affiliated 

Servicing provisions of the Proposed 

Exemption (Section IV.B.) should apply 

to the transaction. Specifically, in order 

to address this issue, BlackRock believes 

that: (1) In the first paragraph of Section 

III.F. of the Proposed Exemption, clause 

(iii) should be deleted in its entirety and 

the following should be substituted 

‘‘(iii) solely in the case of Asset-Backed 

Securities which are CMBS, serves as 

servicer of a trust that issued such 

CMBS, provided that:’’, and (2) in 

Section III.F.(1), ‘‘and’’ before ‘‘(b)’’ 

should be replaced with a comma, and 

the following should be inserted before 

the semi-colon: ‘‘and (c) if an MPS is an 

underwriter and an MPS is a servicer as 

described in clause (b), the conditions of 

both Section IV.A., as modified by 

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

must be satisfied.’’ 

The Department agrees with the 

comment, and it has modified Section 

III.F. of the exemption’s operative 

language accordingly. 

Section III.M. of the Proposed 

Exemption. Section III.M.1. of the 

Proposed Exemption applies to 

securities lending transactions involving 

Client Plan assets by BlackRock 

Managers to an MPS which is a U.S. 

Broker-Dealer, a U.S. Bank, a Foreign 

Broker-Dealer or a Foreign Bank. 

Conditions applicable to these 

transactions are set forth in Sections 

III.M.2. and III.M.3. of the Proposed 

Exemption. BlackRock points out that 

Sections III.M.2(d), III.M.3(b) and 

III.M.3(c) of the Proposed Exemption 

provide an alternative means of 

compliance with certain collateral 

requirements if the lending agent is a 

U.S. Broker-Dealer or U.S. Bank and 

agrees to provide an indemnity. 

BlackRock does not believe, however, 

that there are any significant policy 

issues presented with respect to these 

conditions in circumstances where a 

BlackRock Manager is acting as a 

lending agent through one of its U.S. 

registered investment advisor affiliates 

and not through a U.S. Bank or U.S. 

Broker-Dealer. BlackRock argues that, as 

the largest publicly-traded investment 

management firm in the world, there 

should be no concern that an indemnity 

delivered by a BlackRock Manager 

would not be honored.8

In order to address these issues, 

BlackRock believes that Section III.M. of 

the Proposed Exemption should be 

revised to include the phrase ‘‘, an 

investment advisor registered under the 

Investment Advisors Act of 1940, as 

amended’’ after the words ‘‘U.S. Bank’’ 

in the first sentence of Sections 

III.M.2(d), III.M.3(b)(ii) and III.M.3(c) of 

the Proposed Exemption. 

The Department agrees that under the 

unique factual scenario presented by 

this exemption, adding U.S. registered 

investment advisors does not present 

any significant policy concerns, 

provided that the registered investment 

advisor is required to meet additional 

requirements regarding assets under 

management and shareholders’ or 

partners’ equity. Such additional 

requirements will ensure that the 

applicable BlackRock Manager can meet 

the terms of an indemnity agreement. As 

a result, the Department has modified 

Section III.M. of the exemption’s 

operative language to include the term 

‘‘Registered Investment Advisor’’ after 

the words ‘‘U.S. Bank’’ in the first 

sentence of Sections III.M.2(d), 

III.M.3(b)(ii) and III.M.3(c) of the 

Proposed Exemption. Further, the 

Department has inserted a definition in 

Section VI.GGG. of the exemption that 

reads as follows: 

‘‘Registered Investment Advisor’’ means an 

investment advisor registered under the 

Investment Advisors Act of 1940, as 

amended, that has total client assets under its 

management or control in excess of $5 billion 

as of the last day of its most recent fiscal year 

and shareholders’ or partners’ equity in 

excess of $1 million, as shown in the most 

recent balance sheet prepared within the two 

years immediately preceding a Covered 

Transaction, in accordance with generally 

accepted accounting principles.’’ 

Section III.P. of the Proposed 

Exemption. Section III.P. of the 

Proposed Exemption applies to agency 

execution of equity and fixed income 

securities trades and related clearing as 

described in Prohibited Transaction 

Exemption 86–128, as amended 9 (PTE 

86–128), including agency cross trades, 

where the broker is an MPS. Section 

III.P.2. of the Proposed Exemption 

requires that Covered Transactions 

described in Section III.P. of the 

Proposed Exemption must satisfy the 

conditions of Section III(e), Section 

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

of PTE 86–128, which Sections require, 

among other things, the delivery of 

certain information to a Client Plan’s 

‘‘authorizing fiduciary.’’ BlackRock is 

concerned that this provision is 

inconsistent with Section III.P.3. of the 

Proposed Exemption which requires 

that the ECO Function receive the 

information required to be provided to 

the ‘‘authorizing fiduciary’’ under those 

sections of PTE 86–128. Applicants 

believe that it was the Department’s 

intention that the conditions of Section 

III of PTE 86–128 that relate to actions 

required of, or information to be 

provided to, the Client Plan’s 

authorizing fiduciary, may be satisfied if 

required of, or provided to, the ECO 

Function, including the authority to 

terminate the MPS broker-dealer.10

In order to address this ambiguity, 

BlackRock proposes that Section III.P.3. 

of the Proposed Exemption be deleted 

and Section III.P.2. of the Proposed 

Exemption be amended to read as 

follows: 

‘‘2. The conditions of PTE 86–128 set forth 

in the following sections of that exemption 

must be complied with: Section III(e); 

Section III(f); Section III(g)(2); and Section 

III(h); provided, however, that for purposes of 

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

III(g)(2) of PTE 86–128, the ECO Function is 

the ‘‘authorizing fiduciary’’ referred to 

therein; and the ECO has the authority to 

terminate the use of the MPS as broker-dealer 

without penalty to Client Plans at any time; 

and provided further that the first sentence 

of Section III(h) of PTE 86–128 is amended 

for purposes of this Section III.P.2. to provide 

as follows: * * *’’ 

The Department agrees that its intent 

was to permit the ECO Function to 

satisfy certain provisions that otherwise 

might be applicable to a Client Plan’s 

‘‘authorizing fiduciary’’ under PTE 86– 

128. While the Department does not 

believe that the language of the 

Proposed Exemption is unclear, in order 

to ensure clarity, it has modified Section 

III.P. of the exemption’s operative 

language as requested by BlackRock. 

Section III.U. of the Proposed 

Exemption. Section III.U. of the 

Proposed Exemption applies to 

purchases, sales and holdings by 

BlackRock Managers for Client Plans of 

commercial paper issued by ABCP 


emcdonald on DSK2BSOYB1PROD with NOTICES2
Federal Register / Vol. 76, No. 157 / Monday, August 15, 2011 / Notices 50635 

11See, e.g., Advisory Opinion 99–05A, regarding 

the Federal Agricultural Mortgage Corporation. 

Conduits, when an MPS has one or 

more roles. BlackRock points out that 

Section III.U. of the Proposed 

Exemption does not specifically apply 

to circumstances under which 

commercial paper issued by an ABCP 

Conduit in which an MPS is a 

placement agent and/or has one or more 

continuing roles is purchased from or 

sold to an MPS by a BlackRock 

Manager. BlackRock believes that this 

omission was unintentional and is 

inconsistent with the intent and 

subsequent provisions of Section III.U. 

of the Proposed Exemption. In order to 

address this issue, BlackRock requests 

that the first paragraph of Section III.U. 

of the Proposed Exemption should be 

revised to read: 

‘‘Relief under Section I of this exemption 

is available for the purchase or sale, 

including purchases from or sales to an MPS, 

and the holding by BlackRock Managers 

acting on behalf of Client Plans of 

commercial paper issued by an ABCP 

Conduit with respect to which an MPS acts 

as seller, placement agent, and/or in some 

continuing capacity such as program 

administrator, provider of liquidity or 

provider of credit support, provided that: 

* * *’’ 

Further, Section III.U.4. of the 

Proposed Exemption requires that 

purchases and sales of ABCP Conduit 

commercial paper must be conducted 

pursuant to the Three Quote Process 

even in situations where such purchase 

or sale is with a third party in the 

secondary market and the MPS’ sole 

involvement relates to its performance 

in a continuing role with respect such 

ABCP Conduit. BlackRock believes that 

if the sole involvement of an MPS is 

acting in a continuing role, then the 

Three Quote Process should not be 

required for purchases from or sales to 

third parties because there will be no 

additional compensation payable to 

and/or other benefits conferrable on 

such MPS in the secondary market by 

reason of such purchase or sale whether 

or not the Three Quote Process is 

followed. In order to address this issue, 

BlackRock believes that Section III.U.4. 

of the Proposed Exemption should be 

revised to delete the words ‘‘and/or an 

MPS performs a continuing role with 

respect to the Securities.’’ 

The Department agrees with the 

comments, and it has modified Section 

III.U. of the exemption’s operative 

language accordingly. 

Structured Securities, Including 

Guaranteed Governmental Mortgage 

Pool Certificates. BlackRock has 

determined that there is a common type 

of transaction which is superficially 

similar to the ‘‘guaranteed governmental 

mortgage pool certificate’’ TBA 

transactions covered by Section III.N. of 

the Proposed Exemption, but which in 

substance is more similar to a 

straightforward secondary market 

purchase of a ‘‘guaranteed governmental 

mortgage pool certificate’’ as defined in 

the Department’s regulations at 29 CFR 

2510.3–101(i). An example, BlackRock 

states, of such a transaction would be a 

‘‘specified pool’’ trade, wherein a 

BlackRock Manager identifies an 

existing specific mortgage pool listed on 

the FHLMC Web site, and asks a dealer 

(or dealers) for a quote on the delivery 

of a FHLMC pass-through certificate 

based on such specified pool in a few 

days time. BlackRock believes that this 

sort of purchase from an MPS was 

intended to be covered by the Proposed 

Exemption, subject to the credit quality 

determination set forth in Section III.N.2 

of the Proposed Exemption and the 

Three Quote Process. Accordingly, 

BlackRock requests that the definition of 

‘‘Fixed Income Obligation’’ be amended 

to explicitly include Securities which 

are guaranteed governmental mortgage 

pool certificates. 

BlackRock additionally believes 

purchases of Fixed Income Securities, 

including guaranteed governmental 

mortgage pool certificates, should be 

explicitly permitted where an MPS has 

either an ongoing function or can 

potentially incur liability. It notes that, 

pursuant to 29 CFR 2510.3–101(i)(1), 

when a plan invests in a guaranteed 

governmental mortgage pool, its assets 

include its investment in the certificate, 

but do not, solely by reason of such 

investment, include any of the 

underlying mortgages. However, private 

sector entities, such as an MPS, may 

perform services with respect to the 

underlying mortgages.11 BlackRock 

believes investments in guaranteed 

governmental pool certificates are 

analogous to investments in high quality 

asset-backed debt Securities. 

BlackRock observes that Sections 

III.B., III.C. and III.D. of the Proposed 

Exemption would permit BlackRock 

Managers to acquire Fixed Income 

Obligations issued by an MPS, subject to 

applicable conditions. On such grounds, 

BlackRock believes that BlackRock 

Managers should, therefore, be able to 

purchase Fixed Income Obligations, 

whether they are debt under 29 CFR 

2510.3–101, or they are guaranteed 

governmental mortgage pool certificates, 

if an MPS performs an ongoing function 

with respect to such Fixed Income 

Obligations, such as trustee or servicer 

of collateral of a private sector 

collateralized structured obligation 

constituting debt under the plan asset 

regulation, or such as a trustee or 

mortgage servicer under a FNMA 

certificate. 

The conditions of Sections III.D. and 

III.E. of the Proposed Exemption reflect 

the ability of a BlackRock Manager to 

purchase and hold third party Fixed 

Income Obligations under which an 

MPS has an ongoing function ‘‘such as 

debt trustee [or] servicer of collateral for 

asset-backed debt. * * *’’ BlackRock 

notes that the heading for Section III.E. 

mentions only one such role, that of 

‘‘[d]ebt [t]rustee’’, and the heading of 

Section III.D. does not mention any 

continuing roles. BlackRock believes 

that the exemption should clearly reflect 

the ability of BlackRock Managers to 

acquire and hold Fixed Income 

Obligations despite an MPS or MPSs 

performing one or more of a multiplicity 

of possible roles with respect to such 

Securities. BlackRock argues that, in the 

primary markets, the affiliated 

underwriting restrictions minimize the 

chance that a purchase may be intended 

to benefit an MPS. 

Accordingly, BlackRock believes that 

the following changes should be made 

to the exemption: 

1. Section VI.HH. should be amended 

to read as follows: ‘‘Fixed Income 

Obligations’’ means: 

(1) Fixed income obligations 

including structured debt or other 

instruments characterized as debt 

pursuant to 29 CFR 2510.3–101, 

including, but not limited to, debt 

convertible into equity, certificates of 

deposit and loans (other than loans with 

respect to which an MPS is the entity 

which acts as lead lender); and 

(2) guaranteed governmental mortgage 

pool certificates within the meaning of 

29 CFR 2510.3–101(i). 

(3) Asset-Backed Securities are not 

Fixed Income Obligations for purposes 

of this exemption. 

2. The title of Section III.D. and the 

opening paragraphs thereof should be 

revised to read as follows: 

‘‘D. Certain Transactions in the 

Secondary Market by BlackRock 

Managers of Fixed Income Obligations 

Including Fixed Income Obligations 

Issued by or Traded With an MPS, and/ 

or Under Which an MPS has Either an 

Ongoing Function or Can Potentially 

Incur Liability. Relief under Section I of 

this exemption is available for a 

purchase or sale in the secondary 

market or the holding by BlackRock 

Managers on behalf of Client Plans of (i) 

Fixed Income Obligations issued by an 

MPS, (ii) Fixed Income Obligations 

issued by a third party but purchased 

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

Fixed Income Obligations under which 


emcdonald on DSK2BSOYB1PROD with NOTICES2
50636 Federal Register / Vol. 76, No. 157 / Monday, August 15, 2011 / Notices 

12An ‘‘explicit U.S. Government guarantee’’ 

refers to the U.S. Government’s statutory guarantee 

of certain guaranteed governmental mortgage pool 

certificates. An ‘‘implicit U.S. Government 

guarantee’’ refers to guaranteed governmental 

mortgage pool certificates that are not statutorily 

guaranteed by the U.S. Government but are still 

issued by corporations chartered by the U.S. 

Government. 

13The exemption ceased to be available with 

respect to Bank of America Corporation and any 

entity directly or indirectly, through one or more 

intermediaries, controlling, controlled by or under 

common control with Bank of America Corporation 

(collectively, the BOA Group) on the day after the 

number of representatives of the BOA Group on the 

BlackRock Board of Directors was reduced to one 

(1). 

14For purposes of this exemption, references to 

ERISA section 406 should be read to refer as well 

to the corresponding provisions of Code section 

4975 and FERSA section 8477(c). 

an MPS has either an ongoing function 

or can potentially incur liability, 

provided that: 

(1) If the Fixed Income Obligations are 

purchased from or sold to an MPS, it is 

as a result of the Three Quote Process. 

(2) * * *’’ 

3. The title of Section III.E. and the 

opening paragraph thereof should be 

revised to ‘‘Purchase in an Underwriting 

and Holding by BlackRock Managers of 

Fixed Income Obligations Issued by a 

Third Party when an MPS is 

Underwriter, in Either a Manager or 

Member Capacity, and/or Under Which 

an MPS has Either an Ongoing Function 

or Can Potentially Incur Liability. Relief 

under Section I of this exemption is 

available for the purchase and holding 

by BlackRock Managers of Fixed Income 

Obligations issued by third parties in an 

underwriting when an MPS is an 

Underwriter, in either a manager or a 

member capacity, and/or Fixed Income 

Obligations under which an MPS has 

either an ongoing function or can 

potentially incur liability, provided that: 

* * *’’ 

4. A new subsection should be added 

to each of Sections III.D. and III.E. of the 

exemption, the text of which would 

be:12. 

‘‘( ) With respect to any Fixed Income 

Obligation acquired under this Section III 

which is a guaranteed governmental 

mortgage pool certificate within the meaning 

of 29 CFR 2510.3–101(i) which is 

accompanied by an implicit U.S. Government 

guarantee as opposed to an explicit U.S. 

Government guarantee (i) The BlackRock 

Manager initiating a purchase of such 

Securities makes a determination that such 

Securities are of substantially similar credit 

quality as guaranteed governmental mortgage 

pool certificates accompanied by an explicit 

U.S. Government guarantee, (ii) the ECO (in 

regular consultation with and under the 

supervision of the IM) monitors the credit 

spread between such implicitly and 

explicitly guaranteed certificates, and (iii) 

each of the ECO and the IM (independently) 

has the authority and responsibility to 

determine whether purchases of implicitly 

guaranteed certificates should not be 

permitted due to such credit spread, and 

such authority and responsibility is reflected 

in the EPPs.’’ 

The Department agrees with the 

comments, and it has modified the 

exemption’s operative language. 

Model or Quantitative Conformity. 

Sections III.B.1., III.D.2(c), III.R.1. and 

III.X.1. of the Proposed Exemption 

apply to Covered Transactions that 

involve Model-Driven Accounts or 

Funds and Index Accounts or Funds. 

The Applicants have noted that the 

provisions in Sections III.B.1., III.D.2(c), 

III.R.1. and III.X.1. of the Proposed 

Exemption that state that purchases 

must not ‘‘exceed the purchase amount 

necessary for such Model or quantitative 

conformity’’ present a practical issue for 

the Applicants due to the fact that in the 

ordinary course of trading in Securities 

under the specified Covered 

Transactions, the amount of the 

Securities purchased could 

inadvertently exceed the amount 

necessary for Model or quantitative 

conformity despite the responsible 

BlackRock Manager’s intention and 

reasonable attempt to comply with the 

condition. 

The Applicants have suggested that 

the language be revised as follows: 

‘‘And such purchase is reasonably 

calculated not to exceed the purchase 

amount necessary for such Model or 

quantitative conformity by more than a 

de minimis amount.’’ 

The Department agrees with the 

comment, and it has modified Sections 

III.B.1., III.D.2(c), III.R.1. and III.X.1. of 

the exemption’s operative language 

accordingly. 

Effective Dates. Section I of the 

Proposed Exemption states that the 

exemption will be effective from 

December 1, 2009, through the earlier of 

(1) The effective date of an individual 

exemption granting permanent relief for 

the Covered Transaction or (2) May 31, 

2011. BlackRock believes that it is 

unlikely that an individual exemption 

granting permanent relief for the 

Covered Transactions will be granted 

until late in 2011 or early 2012. As a 

result, BlackRock requests that the date 

May 31, 2011, set forth in Section I of 

the Proposed Exemption, should be 

revised to March 31, 2012. 

The Department agrees with the 

comment, and it has modified Section I 

of the final exemption accordingly. 

Following the Secondary Offering, 

BOA’s interest in BlackRock decreased 

significantly. As a result, the exemption 

ceased to be available with respect to 

Bank of America Corporation and any 

entity directly or indirectly, through one 

or more intermediaries, controlling, 

controlled by or under common control 

with Bank of America Corporation 

(collectively, the BOA Group) on the 

day after the number of representatives 

of the BOA Group on the BlackRock 

Board of Directors was reduced to one 

(1). 

Technical Corrections. BlackRock also 

sought a number of technical 

corrections to the Proposed Exemption. 

Where the Department agrees with such 

technical corrections, the technical 

corrections have been made. 

After giving full consideration to the 

entire record, including BlackRock’s 

written comment, the Department has 

decided to grant the exemption, as 

modified herein. For further information 

regarding BlackRock’s comments and 

other matters discussed herein, 

interested persons are encouraged to 

obtain copies of the exemption 

application file (Exemption Application 

No. D–11588) that the Department 

maintains with respect to this case. The 

complete application file, as well as 

supplemental submissions received by 

the Department, is made available for 

public inspection in the Public 

Documents room of the Employee 

Benefits Security Administration, Room 

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

Constitution Ave., NW., Washington, 

DC 20210. 

For a more complete statement of the 

facts and representations supporting the 

Department’s decision to grant this 

exemption, refer to the notice of 

proposed exemption published on 

March 18, 2011, at 76 FR 15058. 

FOR FURTHER INFORMATION CONTACT: 

Brian Shiker, Office of Exemption 

Determinations, Employee Benefits 

Security Administration, U.S. 

Department of Labor, telephone (202) 

693–8552. 

Exemption 

Section I: Covered Transactions 

Generally 

For the period from December 1, 

2009, through the earlier of (i) The 

effective date of an individual 

exemption granting permanent relief for 

the following transactions, or (ii) March 

31, 2012,13 the restrictions of ERISA 

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

sections 8477(c)(1) and (2), and the 

sanctions resulting from the application 

of Code section 4975, by reason of Code 

section 4975(c)(1),14 shall not apply to 

the Covered Transactions set forth in 

Section III and entered into on behalf of 

or with the assets of a Client Plan; 

provided, that (x) the generally 


emcdonald on DSK2BSOYB1PROD with NOTICES2
Federal Register / Vol. 76, No. 157 / Monday, August 15, 2011 / Notices 50637 

15 49 FR 9494 (Mar. 13, 1984), as amended, 70 FR 

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

38837 (July 6, 2010). 

16Solely for purposes of this Section II.A.2., no 

BlackRock Entity will be deemed to be an affiliate 

of an MPS. The Department is not making herein 

a determination as to whether any BlackRock Entity 

is an affiliate of an MPS under ERISA. 

17For purposes of this Section II.A.3.(b), the MPS 

Plans of each of the MPS Groups (the PNC MPSs, 

the BOA MPSs, and the Barclays MPSs) are 

separately aggregated (e.g., all MPS Plans of BOA 

MPSs are aggregated together but are not aggregated 

with MPS Plans of Barclays MPSs or PNC MPSs). 

18For the avoidance of doubt, all MPSs are 

excluded from the term ‘‘affiliate’’ for these 

purposes. 

19For the avoidance of doubt, all MPSs are 

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

applicable conditions of Section II of 

this exemption are satisfied, and, as 

applicable, the transaction-specific 

conditions set forth below in Sections III 

and IV of this exemption are satisfied, 

or (y) the Special Correction Procedure 

set forth in Section V of this exemption 

is satisfied. 

Section II: Generally Applicable 

Conditions 

A. Compliance with the QPAM 

Exemption. The following conditions of 

Part I of Prohibited Transaction 

Exemption 84–14, as amended (PTE 84– 

14 or the QPAM Exemption),15 must be 

satisfied with respect to each Covered 

Transaction: 

1. The BlackRock Manager engaging 

in the Covered Transaction is a 

Qualified Professional Asset Manager; 

2. Except as set forth in Section III of 

this exemption, at the time of the 

Covered Transaction (as determined 

under Section VI(i) of the QPAM 

Exemption) with or involving an MPS, 

such MPS, or its affiliate (within the 

meaning of Section VI(c) of the QPAM 

Exemption),16 does not have the 

authority to: 

(a) Appoint or terminate the 

BlackRock Manager as a manager of the 

Client Plan assets involved in the 

Covered Transaction, or 

(b) negotiate on behalf of the Client 

Plan the terms of the management 

agreement with the BlackRock Manager 

(including renewals or modifications 

thereof) with respect to the Client Plan 

assets involved in the Covered 

Transaction; 

3. (a) Notwithstanding the foregoing, 

in the case of an investment fund (as 

defined in Section VI(b) of the QPAM 

Exemption) in which two or more 

unrelated Client Plans have an interest, 

a Covered Transaction with an MPS will 

be deemed to satisfy the requirements of 

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

assets of a Client Plan on behalf of 

which the MPS or its affiliate possesses 

the authority set forth in Subsections 

2(a) and/or (b) above, and which are 

managed by the BlackRock Manager in 

the investment fund, when combined 

with the assets of other Client Plans 

established or maintained by the same 

employer (or an affiliate thereof 

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

QPAM Exemption) or by the same 

employee organization, on behalf of 

which the same MPS possesses such 

authority and which are managed in the 

same investment fund, represent less 

than ten percent (10%) of the assets of 

the investment fund; 

(b) For purposes of Section II.A.3.(a) 

of this exemption, and for purposes of 

Sections III.I.6, L.3(b), M.2.(b) and U.1. 

of this exemption, with respect to the 

assets of an MPS Plan invested in a 

Pooled Fund as of the date of the 

Acquisition, which Pooled Fund is a 

bank-maintained common or collective 

trust, such assets when aggregated with 

the assets of all other MPS Plans of the 

same MPS Group and invested in such 

Pooled Fund shall be deemed to 

constitute less than ten percent (10%) of 

the assets of such Pooled Fund from the 

date of the Acquisition through July 1, 

2010 (the Unwind Period); provided, 

that:17

(i) The fees paid by such MPS Plans 

to BlackRock Managers during the 

Unwind Period are not more than 

reasonable compensation and are 

substantially the same as fees paid to 

the same BlackRock Managers by other, 

comparable Client Plans which are not 

MPS Plans, invested in such Pooled 

Fund as of the date of the Acquisition; 

(ii) such MPS Plans do not pay to the 

same BlackRock Managers during the 

Unwind Period any type of fee or other 

compensation that was not charged to or 

otherwise borne by Client Plan 

investors, which are not MPS Plans, in 

the Pooled Fund as of the date of the 

Acquisition; 

(iii) during the Unwind Period, the IM 

reviews the investment by the MPS 

Plans in the Pooled Fund; all fees paid 

by the MPS Plans to BlackRock 

Managers are disclosed to the IM; the IM 

reviews the offering documents for the 

Pooled Funds and any advisory or 

management agreements with 

BlackRock Managers; and any material 

change in the terms and conditions of 

the investment by the MPS Plans in the 

Pooled Fund, including but not limited 

to fees paid to BlackRock Managers and 

the terms of the advisory or 

management agreements with 

BlackRock Managers, are promptly 

disclosed to the IM and are subject to 

the IM’s approval; and 

(iv) during the Unwind Period, each 

MPS Plan may terminate its investment 

in the Pooled Fund upon no more than 

thirty (30) days notice and without 

incurring a redemption fee paid to a 

BlackRock Manager; 

4. The terms of the Covered 

Transaction are negotiated on behalf of 

the investment fund by, or under the 

authority and general direction of, the 

BlackRock Manager and either the 

BlackRock Manager or (so long as the 

BlackRock Manager retains full 

fiduciary responsibility with respect to 

the Covered Transaction) a property 

manager acting in accordance with 

written guidelines established and 

administered by the BlackRock 

Manager, makes the decision on behalf 

of the investment fund to enter into the 

Covered Transaction, provided that the 

Covered Transaction is not part of an 

agreement, arrangement or 

understanding designed to benefit the 

MPS; 

5. The Covered Transaction is not 

entered into with an MPS which is a 

party in interest or disqualified person 

with respect to any Client Plan whose 

assets managed by the BlackRock 

Manager, when combined with the 

assets of other Client Plans established 

or maintained by the same employer (or 

affiliate thereof described in Section 

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

the same employee organization, and 

managed by the BlackRock Manager, 

represent more than twenty percent 

(20%) of the total client assets managed 

by the BlackRock Manager at the time of 

the Covered Transaction; 

6. At the time the Covered 

Transaction is entered into, and at the 

time of any subsequent renewal or 

modification thereof that requires the 

consent of the BlackRock Manager, the 

terms of the Covered Transaction are at 

least as favorable to the investment fund 

as the terms generally available in arm’s 

length transactions between unrelated 

parties; and 

7. Neither the BlackRock Manager nor 

any affiliate thereof (as defined in 

Section VI(d) of the QPAM 

Exemption),18 nor any owner, direct or 

indirect, of a five percent (5%) or more 

interest in the BlackRock Manager 19 is 

a person who within the ten years 

immediately preceding the Covered 

Transaction has been either convicted or 

released from imprisonment, whichever 

is later, as a result of: any felony 

involving abuse or misuse of such 

person’s employee benefit plan position 

or employment, or position or 

employment with a labor organization; 

any felony arising out of the conduct of 

the business of a broker, dealer, 

investment adviser, bank, insurance 


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50638 Federal Register / Vol. 76, No. 157 / Monday, August 15, 2011 / Notices 

20The first quarterly report covered a 4-month 

period ending March 31, 2010. 

company or fiduciary; income tax 

evasion; any felony involving the 

larceny, theft, robbery, extortion, 

forgery, counterfeiting, fraudulent 

concealment, embezzlement, fraudulent 

conversion, or misappropriation of 

funds or securities; conspiracy or 

attempt to commit any such crimes or 

a crime in which any of the foregoing 

crimes is an element; or any other crime 

described in ERISA section 411. For 

purposes of this section, a person shall 

be deemed to have been ‘‘convicted’’ 

from the date of the judgment of the trial 

court, regardless of whether that 

judgment remains under appeal. 

B. Compensation. None of the 

employees of a BlackRock Manager 

receive any compensation that is based 

on any Covered Transaction having 

taken place between Client Plans and 

any of the MPSs (as opposed to with 

another institution that is not an MPS). 

The fact that a specific Covered 

Transaction occurred with an MPS as 

opposed to a non-MPS counterparty is 

ignored by BlackRock and BlackRock 

Managers for compensation purposes. 

None of the employees of BlackRock or 

a BlackRock Manager receive any 

compensation from BlackRock or a 

BlackRock Manager which consists of 

equity Securities issued by an MPS, 

which fluctuates in value based on 

changes in the value of equity Securities 

issued by an MPS, or which is otherwise 

based on the financial performance of 

an MPS independent of BlackRock’s 

performance, provided that this 

condition shall not fail to be met 

because the compensation of an 

employee of a BlackRock Manager 

fluctuates with the value of a broadlybased index which includes equity 

Securities issued by an MPS. 

C. Exemption Policies and 

Procedures. BlackRock adopts and 

implements Exemption Policies and 

Procedures (EPPs) which address each 

of the types of Covered Transactions 

and which are designed to achieve the 

goals of: (1) Compliance with the terms 

of the exemption, (2) ensuring 

BlackRock’s decision-making with 

respect to the Covered Transactions on 

behalf of Client Plans with MPSs or 

BlackRock Entities is done in the 

interests of the Client Plans and their 

participants and beneficiaries, and (3) to 

the extent possible, verifying that the 

terms of such Covered Transactions are 

at least as favorable to the Client Plans 

as the terms generally available in arm’s 

length transactions with unrelated 

parties. The EPPs are developed with 

the cooperation of both the Exemption 

Compliance Officer (ECO) and the 

Independent Monitor (IM), and such 

EPPs are subject to the approval of the 

IM. The EPPs need not address 

transactions which are not within the 

definition of the term Covered 

Transactions. 

Transgressions of the EPPs which do 

not result in Violations require 

correction only if the amount involved 

in the transgression and the extent of 

deviation from the EPPs is material, 

taking into account the amount of Client 

Plan assets affected by such 

transgressions (EPP Corrections). The 

ECO will make a written determination 

as to whether such transgressions 

require EPP Correction, and, if the ECO 

determines an EPP Correction is 

required, the ECO will provide written 

notice to the IM of the EPP Correction. 

The ECO will provide summaries for the 

IM of any such EPP Corrections as part 

of the quarterly report referenced in 

Section II.D.11. 

D. Exemption Compliance Officer. 

BlackRock appoints an Exemption 

Compliance Officer (ECO) with respect 

to the Covered Transactions. If the ECO 

resigns or is removed, BlackRock shall 

appoint a successor ECO within a 

reasonable period of time, not to exceed 

thirty (30) days, which successor shall 

be subject to the affirmative written 

approval of the IM. With respect to the 

ECO, the following conditions shall be 

met: 

1. The ECO is a legal professional 

with at least ten years of experience and 

extensive knowledge of the regulation of 

financial services and products, 

including under ERISA and FERSA; 

2. A committee made up exclusively 

of members of the Board who are 

independent of BlackRock and the 

MPSs determines the ECO’s 

compensation package, with input from 

the general counsel of BlackRock; the 

ECO’s compensation is not set by 

BlackRock business unit heads, and 

there is no direct or indirect input 

regarding the identity or compensation 

of the ECO from any MPS; 

3. The ECO’s compensation is not 

based on performance of any BlackRock 

Entity or MPS, although a portion of the 

ECO’s compensation may be provided 

in the form of BlackRock stock or stock 

equivalents; 

4. The ECO can be terminated by 

BlackRock only with the approval of the 

IM; 

5. The EPPs prohibit any officer, 

director or employee of BlackRock or 

any MPS or any person acting under 

such person’s direction from directly or 

indirectly taking any action to coerce, 

manipulate, mislead, or fraudulently 

influence the ECO in the performance of 

his or her duties; 

6. The ECO is responsible for 

monitoring Covered Transactions and 

shall determine whether Violations have 

occurred, and the appropriate correction 

thereof, consistent with the 

requirements of Section V of this 

exemption; 

7. If the ECO determines a Violation 

has occurred, the ECO must determine 

why it occurred and what steps should 

be taken to avoid such a Violation in the 

future (e.g., additional training, 

additional procedures, additional 

monitoring, or additional and/or 

changed processes or systems); 

8. The ECO is responsible for 

monitoring and overseeing the 

implementation of the EPPs. The ECO 

may delegate such responsibilities to the 

ECO Function, but the ECO will remain 

responsible for monitoring and 

overseeing the ECO Function’s 

implementation of the EPPs. When 

appropriate, the ECO will recommend 

changes to the EPPs to BlackRock and 

the IM. The ECO will consult with the 

IM regarding the need for, timing, and 

form of EPP Corrections; 

9. The ECO carries out the 

responsibilities required of the ECO 

described in: (a) The definition of 

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

respect to loans of Securities to an MPS 

in Section III.M. of this exemption, and 

carries out such other responsibilities 

stipulated or described in Section III of 

this exemption including supervision of 

the ECO Function; 

10. The ECO, with the assistance of 

the ECO Function, monitors Covered 

Transactions and situations resulting 

from Covered Transactions with or 

involving an MPS with respect to 

which, because of the investment of the 

MPS in BlackRock, an action or inaction 

on the part of a BlackRock Manager 

might be thought to be motivated by an 

interest which may affect the exercise of 

such BlackRock Manager’s best 

judgment as a fiduciary. If a situation is 

identified by the ECO which poses the 

potential for a conflict, as specified in 

Section III, the ECO shall consult with 

the IM, or refer decision-making to the 

discretion of the IM; 

11. The ECO provides a quarterly 

report 20 to the IM summarizing the 

material activities of the ECO for the 

preceding quarter and setting forth any 

Violations discovered during the quarter 

and actions taken to correct such 

Violations. With respect to Violations, 

the ECO report details changes to 

process put in place to guard against a 

substantially similar Violation occurring 

again, and recommendations for 

additional training, additional 

procedures, additional monitoring, or 


emcdonald on DSK2BSOYB1PROD with NOTICES2
Federal Register / Vol. 76, No. 157 / Monday, August 15, 2011 / Notices 50639 

21The first annual compliance report covered the 

13-month period ending December 31, 2010. 

additional and/or changed processes or 

systems or training changes and 

BlackRock management’s actions on 

such recommendations. In connection 

with providing the quarterly report for 

the second quarter and fourth quarter of 

each year, upon the request of the IM, 

the ECO and the IM shall meet in person 

to review the content of the report. 

Other members of the ECO Function 

may attend such meetings at the request 

of either the ECO or the IM; 

12. In each quarterly report, the ECO 

certifies in writing to his or her 

knowledge that (a) The quarterly report 

is accurate; (b) BlackRock’s compliance 

program is working in a manner which 

is reasonably designed to prevent 

Violations; (c) any Violations discovered 

during the quarter and the related 

corrections taken to date have been 

identified in the report; and (d) 

BlackRock has complied with the EPPs 

in all material respects; 

13. No less frequently than annually, 

the ECO certifies to the IM as to whether 

BlackRock has provided the ECO with 

adequate resources, including, but not 

limited to, adequate staffing of the ECO 

Function, and, in connection with the 

quarterly report for the fourth quarter of 

each year, the ECO shall identify to the 

IM those BlackRock Managers that 

relied upon this exemption during the 

prior year and those that he reasonably 

anticipates relying on this exemption 

during the current year; and 

14. The ECO provides any further 

information regarding Covered 

Transactions reasonably requested by 

the IM. 

E. Independent Monitor. BlackRock 

retains an Independent Monitor (IM) 

with respect to the Covered 

Transactions. If the IM resigns or is 

removed, BlackRock shall appoint a 

successor IM within a reasonable period 

of time, not to exceed thirty (30) days. 

The IM: 

1. Agrees in writing to serve as IM, 

and he or she is independent within 

meaning of Section VI(OO); 

2. Approves the ECO selected by 

BlackRock, and as part of the approval 

process and annually thereafter 

approves in general terms the 

reasonableness of the ECO’s 

compensation, taking into account such 

information as the IM may request of 

BlackRock and which BlackRock must 

supply, and approves any termination of 

the ECO by BlackRock; 

3. Assists in the development of, and 

the granting of written approval of, the 

EPPs and any material alterations of the 

EPPs by determining that they are 

reasonably designed to achieve the goals 

of (a) compliance with the terms of the 

exemption, (b) ensuring BlackRock’s 

decision-making with respect to 

Covered Transactions on behalf of 

Client Plans with MPSs or BlackRock 

Entities is done in the interests of the 

Client Plans and their respective 

participants and beneficiaries and, (c) 

requiring, to the extent possible, 

verification that the terms of such 

Covered Transactions are at least as 

favorable to the Client Plans as the 

terms generally available in comparable 

arm’s length transactions with unrelated 

parties; 

4. Consults with the ECO regarding 

the need for, timing and form of any 

EPP Corrections. The IM has the 

responsibilities with respect to 

corrections of Violations, as set forth in 

Section V of this Exemption. In 

response to EPP Corrections or 

Violations, the IM considers whether, 

and must have the authority, to require 

further sampling, testing or corrective 

action if necessary; 

5. Exercises discretion for Client Plans 

in situations specified in Section III of 

this exemption where BlackRock 

Managers may be thought to have 

conflicts; 

6. Performs certain monitoring 

functions described in Section III, and 

carries out the responsibilities required 

of the IM, as set forth in the definition 

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

respect to loans of Securities to an MPS 

as set forth in Section III.M. of this 

exemption, and carries out such other 

responsibilities stipulated in Section III 

of this exemption; 

7. Reviews the quarterly reports of the 

ECO, obtains and reviews representative 

samples of the data underlying the 

quarterly reports of the ECO, and, if the 

IM deems it appropriate, obtains 

additional factual information on either 

an ad hoc basis or on a systematic basis; 

8. Reviews the certifications of the 

ECO as to whether (a) The quarterly 

report is accurate; (b) BlackRock’s 

compliance program is working in a 

manner which is reasonably designed to 

prevent Violations; (c) any Violations 

discovered during the quarter and the 

related corrections taken to date have 

been identified in the report; (d) 

BlackRock has complied with the EPPs 

in all material respects; and (e) 

BlackRock has provided the ECO with 

adequate resources, including, but not 

limited to, adequate staffing of the ECO 

Function; 

9. Determines, on the basis of the 

information supplied to the IM by 

BlackRock and the ECO, whether there 

has occurred a pattern or practice of 

insufficient diligence in adhering to the 

EPPs and/or the conditions of the 

exemption, and if such a determination 

is made, reports the same to the 

Department, and informs BlackRock and 

the ECO of any such report; 

10. Determines whether the purchases 

of equity Securities issued by an MPS 

on behalf of Client Plans that are Other 

Accounts or Funds by a BlackRock 

Manager has had a positive material 

impact on the market price for such 

Securities, notwithstanding any volume 

limitations imposed by Section III.S. of 

the exemption and/or imposed by the 

IM with respect to such equity 

Securities. The IM makes this 

determination based upon its review of 

the relevant monthly reports required by 

the exemption with respect to such 

Covered Transactions provided by the 

ECO and publicly available information 

materially related to the trading of the 

Securities of an MPS on its primary 

listing exchange (or market); 

11. Issues an annual compliance 

report,21 to be timely delivered to (i) the 

Chairman of the Board of Directors of 

BlackRock, (ii) the Chief Executive 

Officer of BlackRock and (iii) the 

General Counsel of BlackRock. The 

annual compliance report shall be based 

on a review of the EPPs, the quarterly 

reports provided by the ECO, any 

transactions reviewed by the IM as well 

as any additional information the IM 

requests from BlackRock, and certifying 

to each of the following (or describing 

any exceptions thereto) that: 

(a) The EPPs are reasonably designed 

to achieve the goals of (i) compliance 

with the terms of the exemption, (ii) 

ensuring BlackRock’s decision-making 

with respect to Covered Transactions on 

behalf of Client Plans with MPSs or 

BlackRock Entities is done in the 

interests of the Client Plans and the 

respective participants and 

beneficiaries, and (iii) requiring to the 

extent possible, verification that the 

terms of any Covered Transaction are at 

least as favorable to Client Plans as the 

terms generally available in comparable 

arm’s length transactions with unrelated 

parties; 

(b) the EPPs and the other terms of the 

exemption were complied with, with 

any material exceptions duly noted; 

(c) the IM has made the determination 

referred to in Section II.E.9. and the 

results of that determination; 

(d) BlackRock has provided the ECO 

with adequate resources, including but 

not limited to adequate staffing of the 

ECO Function; and 

(e) the compensation package for the 

ECO for the prior year is reasonable; 

12. The annual compliance report of 

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

shall contain a summary of Violations, 


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any corrections of Violations required 

by the IM and/or the ECO at any time 

during the prior year. In addition, the 

IM further certifies that BlackRock 

correctly implemented the prescribed 

corrections, based in part on 

certification from the ECO; and 

13. The annual compliance report of 

the IM shall also be timely delivered by 

the IM to the chief executive officer, the 

general counsel and the members of the 

boards of directors of each of the 

BlackRock Managers identified to the 

IM by the ECO as having relied upon 

this exemption during the prior year 

and those that the ECO reasonably 

anticipates will be relying on this 

exemption during the current year. The 

copies of the compliance report 

described in this Section II.E.13. shall 

be accompanied by a cover letter from 

the IM calling the attention of the 

recipients to any violations, material 

exceptions to compliance with the EPPs, 

or other shortfalls in compliance with 

the exemption to assist such officers and 

directors in carrying out their respective 

responsibilities. 

F. Special Notice Provisions. A 

Special Notice containing (i) A notice of 

all of the conditions for relief under 

Sections III.C., E., F., G., Q., R., S. and 

V. and (ii) a copy of the Notice to 

Interested Parties must be provided to 

affected Client Plans in writing (which 

may be provided by U.S. mail or 

electronically, including by e-mail or 

use of a centralized electronic mailbox, 

so long as such electronic 

communication is reasonably calculated 

to result in the applicable Client Plan’s 

receipt) as soon as practical, but no later 

than fifteen (15) days, following the date 

that the Notice to Interested Persons is 

provided to Client Plans generally, 

through publication in the Federal 

Register. As soon as practical following 

the Special Notice, a Client Plan 

fiduciary independent of any BlackRock 

Entity must be provided any additional 

material information regarding Covered 

Transactions described in Sections 

III.C., E., F., G., Q., R., S. and V. by the 

applicable BlackRock Manager on 

reasonable request; provided, that, 

solely for purposes of this subsection, 

the fiduciary of an In-House Plan is not 

required to be independent of any 

BlackRock Entity. 

Section III: Covered Transactions 

A. Continuing Transactions. Relief 

under Section I of this exemption is 

available for Type B Covered 

Transactions and Type C Covered 

Transactions and the unwind, 

settlement or other termination thereof 

provided that: 

1. A list of all Type B Covered 

Transactions and all Type C Covered 

Transactions (the B and C List) as of the 

date of the Acquisition is prepared by 

BlackRock and provided to the ECO. 

2. Any discretionary act by a 

BlackRock Manager with respect to a 

transaction on the B and C List is 

approved in advance in writing by the 

ECO. Such approval is required for, but 

not limited to, sales and other transfers 

to a third party, redemptions, the 

exercise of options, and the declaration 

of default or other credit impairmentdriven decisions. The ECO must 

determine that the terms of such 

discretionary act are in the interests of 

the affected Client Plans. 

3. The ECO Function periodically 

monitors outstanding transactions on 

the B and C List to inquire if an 

affirmative discretionary act, such as a 

credit driven action, would be 

appropriate. If the ECO makes such a 

determination, the ECO must direct the 

action be taken and must approve the 

terms thereof as being in the interests of 

the affected Client Plans. 

4. The ECO Function sends to the IM 

an updated copy of the B and C List as 

of the end of each fiscal quarter 

summarizing the Type B Covered 

Transactions and Type C Covered 

Transactions remaining at the end of the 

quarter and any discretionary actions 

taken during the quarter by BlackRock 

Managers with respect to such 

transactions. 

5. Upon the determination by the IM 

that an action taken with respect to a 

Type B Covered Transaction or Type C 

Covered Transaction was inappropriate 

or that the compensation the Client 

Plans received was inadequate, or that 

an action should have been taken but 

was not, the Client Plans are made 

whole by BlackRock. 

B. Purchases and Holdings by 

BlackRock Managers of Fixed Income 

Obligations Issued by an MPS in an 

Underwriting on Behalf of Client Plans 

Invested in an Index Account or Fund, 

or in a Model-Driven Account or Fund. 

Relief under Section I of this exemption 

is available for a purchase and holding 

by BlackRock Managers of Fixed Income 

Obligations issued by an MPS in an 

underwriting on behalf of Client Plans 

for an Index Account or Fund, or a 

Model-Driven Account or Fund, 

provided that: 

1. Such purchase is for the sole 

purpose of maintaining quantitative 

conformity with the weight of such 

Securities prescribed by the relevant 

Index, for Index Accounts or Funds, or 

the weight of such Securities prescribed 

by the relevant Model, for Model-Driven 

Accounts or Funds; and such purchase 

is reasonably calculated not to exceed 

the purchase amount necessary for such 

Model or quantitative conformity by 

more than a de minimis amount; 

2. Such purchase is not made from 

any MPS; 

3. No BlackRock Entity is in the 

selling syndicate; 

4. After purchase, the responsible 

BlackRock Manager notifies the ECO if 

circumstances arise in which an action 

or inaction on the part of the BlackRock 

Manager regarding an MPS Fixed 

Income Obligation so acquired might be 

thought to be motivated by an interest 

which may affect the exercise of such 

BlackRock Manager’s best judgment as a 

fiduciary, and complies with decisions 

of the ECO regarding the taking, or the 

refraining from taking, of actions in 

such circumstances; and 

5. After purchase, any decision 

regarding conversion of an MPS Fixed 

Income Obligation into equity in the 

MPS is made by the IM. 

C. Purchase and Holding by 

BlackRock Managers of Fixed Income 

Obligations Issued by an MPS in an 

Underwriting on Behalf of Client Plans 

Invested in an Other Account or Fund. 

Relief under Section I of this exemption 

is available for a purchase and holding 

by BlackRock Managers of Fixed Income 

Obligations issued by an MPS in an 

underwriting on behalf of Client Plans 

invested in an Other Account or Fund 

provided that: 

1. The conditions of Section IV.A. of 

this exemption are satisfied, except that 

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

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

Fixed Income Obligations at the time of 

purchase must be rated in one of the 

three highest rating categories by a 

Rating Organization and none of the 

Rating Organizations may rate the Fixed 

Income Obligations lower than in the 

third highest rating category; 

2. Such purchase is not made from an 

MPS; 

3. No BlackRock Entity is in the 

selling syndicate; 

4. After purchase, the responsible 

BlackRock Manager notifies the ECO if 

circumstances arise in which an action 

or inaction on the part of the BlackRock 

Manager regarding an MPS Fixed 

Income Obligation so acquired might be 

thought to be motivated by an interest 

which may affect the exercise of such 

BlackRock Manager’s best judgment as a 

fiduciary, and complies with decisions 

of the ECO regarding the taking, or the 

refraining from taking, of actions in 

such circumstances; 

5. After purchase, any decision 

regarding conversion of an MPS Fixed 

Income Obligation into equity in the 

MPS is made by the IM; and 


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6. Special Notice of all of the 

foregoing conditions for relief under this 

Section III.C. must be provided in 

accordance with the terms of Section 

II.F. 

D. Certain Transactions in the 

Secondary Market by BlackRock 

Managers of Fixed Income Obligations 

Including Fixed Income Obligations 

Issued by or Traded With an MPS, and/ 

or Under Which an MPS has Either an 

Ongoing Function or Can Potentially 

Incur Liability. Relief under Section I of 

this exemption is available for a 

purchase or sale in the secondary 

market or the holding by BlackRock 

Managers on behalf of Client Plans of (i) 

Fixed Income Obligations issued by an 

MPS, (ii) Fixed Income Obligations 

issued by a third party but purchased 

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

Fixed Income Obligations under which 

an MPS has either an ongoing function 

or can potentially incur liability, 

provided that: 

1. If the Fixed Income Obligations are 

purchased from or sold to an MPS, it is 

as a result of the Three Quote Process. 

2. With respect to Fixed Income 

Obligations that are issued by an MPS 

and are purchased and held by a 

BlackRock Manager for a Client Plan— 

(a) After purchase, the responsible 

BlackRock Manager notifies the ECO if 

circumstances arise in which an action 

or inaction on the part of the BlackRock 

Manager regarding an MPS Fixed 

Income Obligation so acquired might be 

thought to be motivated by an interest 

which may affect the exercise of such 

BlackRock Manager’s best judgment as a 

fiduciary, and complies with the 

decisions of the ECO regarding the 

taking, or the refraining from taking, of 

actions in such circumstances; 

(b) After purchase, any decision 

regarding conversion of an MPS Fixed 

Income Obligation into equity in the 

MPS is made by the IM; and 

(c) If purchased for an Index Account 

or Fund, or a Model-Driven Account or 

Fund, such purchase is for the sole 

purpose of maintaining quantitative 

conformity with the weight of such 

Securities prescribed by the relevant 

Index, for Index Accounts or Funds, or 

the weight of such Securities prescribed 

by the relevant Model, for Model-Driven 

Accounts or Funds and such purchase 

is reasonably calculated not to exceed 

the purchase amount necessary for such 

Model or quantitative conformity by 

more than a de minimis amount. 

3. With respect to Fixed Income 

Obligations (whether or not issued by an 

MPS) held by a BlackRock Manager for 

a Client Plan under which an MPS has 

an ongoing function, such as servicing 

of collateral for asset-backed debt, or the 

potential for liability, such as under 

representations or warranties made by 

an MPS with respect to collateral for 

such asset-backed debt which the MPS 

originated, the taking of or refraining 

from taking any action by the 

responsible BlackRock Manager which 

could have a material positive or 

negative effect upon the MPS is decided 

upon by the ECO. 

4. With respect to any Fixed Income 

Obligation acquired under this Section 

III.D. which is a guaranteed 

governmental mortgage pool certificate 

within the meaning of 29 CFR 2510.3– 

101(i) which is accompanied by an 

implicit U.S. Government guarantee as 

opposed to an explicit U.S. Government 

guarantee, (a) The BlackRock Manager 

initiating a purchase of such Securities 

makes a determination that such 

Securities are of substantially similar 

credit quality as guaranteed 

governmental mortgage pool certificates 

accompanied by an explicit U.S. 

Government guarantee, (b) the ECO (in 

regular consultation with and under the 

supervision of the IM) monitors the 

credit spread between such implicitly 

and explicitly guaranteed certificates, 

and (c) each of the ECO and the IM 

(independently) has the authority and 

responsibility to determine whether 

purchases of implicitly guaranteed 

certificates should not be permitted due 

to such credit spread, and such 

authority and responsibility is reflected 

in the EPPs. 

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

Asset-Backed Securities are not Fixed 

Income Obligations. 

E. Purchase in an Underwriting and 

Holding by BlackRock Managers of 

Fixed Income Obligations Issued by a 

Third Party when an MPS is 

Underwriter, in Either a Manager or 

Member Capacity, and/or Under Which 

an MPS has Either an Ongoing Function 

or Can Potentially Incur Liability. Relief 

under Section I of this exemption is 

available for the purchase and holding 

by BlackRock Managers of Fixed Income 

Obligations issued by third parties in an 

underwriting when an MPS is an 

Underwriter, in either a manager or a 

member capacity, and/or Fixed Income 

Obligations under which an MPS has 

either an ongoing function or can 

potentially incur liability, provided that: 

1. The conditions of Section IV.A. are 

satisfied. 

2. Such purchase is not made from an 

MPS. 

3. No BlackRock Entity is in the 

selling syndicate. 

4. With respect to Fixed Income 

Obligations under which an MPS has 

either an ongoing function, such as debt 

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

liability, such as under representations 

or warranties made by an MPS with 

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

the taking of or refraining from taking 

any action by the responsible BlackRock 

Manager which could have a material 

positive or negative effect upon the MPS 

is decided upon by the ECO. 

5. With respect to any Fixed Income 

Obligation acquired under this Section 

III.E. which is a guaranteed 

governmental mortgage pool certificate 

within the meaning of 29 CFR 2510.3– 

101(i) which is accompanied by an 

implicit U.S. Government guarantee as 

opposed to an explicit U.S. Government 

guarantee, (a) The BlackRock Manager 

initiating a purchase of such Securities 

makes a determination that such 

Securities are of substantially similar 

credit quality as guaranteed 

governmental mortgage pool certificates 

accompanied by an explicit U.S. 

Government guarantee, (b) the ECO (in 

regular consultation with and under the 

supervision of the IM) monitors the 

credit spread between such implicitly 

and explicitly guaranteed certificates, 

and (c) each of the ECO and the IM 

(independently) has the authority and 

responsibility to determine whether 

purchases of implicitly guaranteed 

certificates should not be permitted due 

to such credit spread, and such 

authority and responsibility is reflected 

in the EPPs. 

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

Asset-Backed Securities are not Fixed 

Income Obligations. 

7. Special Notice of all of the 

foregoing conditions for relief under this 

Section III.E. must be provided in 

accordance with the terms of Section 

II.F. 

F. Purchase in an Underwriting and 

Holding by BlackRock Managers of 

Asset-Backed Securities, when an MPS 

is an Underwriter, in the capacity as 

either a Manager or a Member of the 

Selling Syndicate, Trustee, or, in the 

case of Asset-Backed Securities Which 

Are CMBS, Servicer. Relief under 

Section I of this exemption is available 

for the purchase and holding by 

BlackRock Managers of Asset-Backed 

Securities issued in an underwriting 

where an MPS is (i) An underwriter, in 

the capacity as either a manager or a 

member of the selling syndicate, (ii) 

trustee, or (iii) solely in the case of 

Asset-Backed Securities which are 

CMBS, serves as servicer of a trust that 

issued such CMBS, provided that: 

1. The conditions of Section IV.A. are 

satisfied, except that (a) For purposes of 

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

Securities at the time of purchase must 


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be rated in one of the three highest 

rating categories by a Rating 

Organization and none of the Rating 

Organizations may rate the AssetBacked Securities lower than the third 

highest rating category, (b) in the case of 

Asset-Backed Securities which are 

CMBS and for which the MPS is 

servicer, the conditions of Section IV.B. 

are satisfied instead of the conditions of 

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

underwriter and an MPS is a servicer as 

described in clause (b), the conditions of 

both Section IV.A., as modified by 

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

must be satisfied; 

2. Such purchase is not made from an 

MPS; 

3. No BlackRock Entity is in the 

selling syndicate; 

4. In the case of Asset-Backed 

Securities with respect to which an MPS 

has either an ongoing function, such as 

trustee, servicer of collateral for CMBS, 

or the potential for liability, such as 

under representations or warranties 

made by an MPS with respect to 

collateral for CMBS which collateral the 

MPS originated, the taking of or 

refraining from taking of any action by 

a responsible BlackRock Manager which 

could have a material positive or 

negative effect upon the MPS is decided 

upon by the ECO; 

5. The purchase meets the conditions 

of an applicable Underwriter 

Exemption; and 

6. Special Notice of all of the 

foregoing conditions for relief under this 

Section III.F. must be provided in 

accordance with the terms of Section 

II.F. 

G. Purchase and Holding by 

BlackRock Managers of Equity 

Securities Issued by an Entity which is 

not an MPS and is Not a BlackRock 

Entity, in an Underwriting when an MPS 

is an Underwriter, in either a Manager 

or a Member Capacity. Relief under 

Section I of this exemption is available 

for the purchase and holding by 

BlackRock Managers of Equity 

Securities issued by an entity which is 

not an MPS and which is not a 

BlackRock Entity in an underwriting 

when an MPS is an underwriter, in 

either a manager or a member capacity, 

provided that: 

1. The conditions of Section IV.A. are 

satisfied; 

2. Such purchase is not made from an 

MPS; 

3. No BlackRock Entity is in the 

selling syndicate; 

4. The Securities are not Asset-Backed 

Securities; and 

5. Special Notice of all of the 

foregoing conditions for relief under this 

Section III.G. must be provided in 

accordance with the terms of Section 

II.F. 

H. Purchase and Sale by BlackRock 

Managers of Asset-Backed Securities in 

the Secondary Market, from or to an 

MPS, and/or when an MPS is Sponsor, 

Servicer, Originator, Swap 

Counterparty, Liquidity Provider, 

Trustee or Insurer, and the Holding 

Thereof. Relief under Section I of this 

exemption is available for a sale of 

Asset-Backed Securities by a BlackRock 

Manager to an MPS, or the purchase of 

Asset-Backed Securities by BlackRock 

Managers from an MPS and the holding 

thereof, and/or any such purchase or 

sale in the secondary market or holding 

when an MPS is a sponsor, a servicer, 

an originator, a swap counterparty, a 

liquidity provider, a trustee or an 

insurer, provided that: 

1. If the Asset-Backed Securities are 

purchased from or sold to an MPS, the 

purchase or sale is as a result of the 

Three Quote Process. 

2. Regardless of from whom the 

BlackRock Manager purchases the 

Asset-Backed Securities, the purchase 

and holding of the Asset-Backed 

Security otherwise meets the conditions 

of an applicable Underwriter 

Exemption. 

3. Regardless of from whom the 

BlackRock Manager purchased the 

Asset-Backed Securities, if an MPS is, 

with respect to such Asset-Backed 

Securities, a sponsor, servicer, 

originator, swap counterparty, liquidity 

provider, insurer or trustee, as those 

terms are utilized or defined in the 

Underwriter Exemptions, and 

circumstances arise in which the taking 

of or refraining from taking of any action 

by the responsible BlackRock Manager 

could have a material positive or 

negative effect upon the MPS, the taking 

of or refraining from taking of any such 

action is decided upon by the ECO. 

I. Repurchase Agreements when MPS 

is the Seller. Section I of this exemption 

applies to an investment by a BlackRock 

Manager of Client Plan assets which 

involves the purchase or other 

acquisition, holding, sale, exchange or 

redemption by or on behalf of a Client 

Plan of a repurchase agreement (or 

Securities or other instruments under 

cover of a repurchase agreement) in 

which the seller of the underlying 

Securities or other instruments is an 

MPS which is a bank supervised by the 

United States or a State, a broker-dealer 

registered under the 1934 Act, or a 

dealer who makes primary markets in 

Securities of the United States 

government or any agency thereof, or in 

banker’s acceptances, and reports daily 

to the Federal Reserve Bank of New 

York its positions with respect to these 

obligations, provided that each of the 

following conditions are satisfied: 

1. The repurchase agreement is 

embodied in, or is entered into pursuant 

to a written agreement. Such written 

agreement must be a standardized 

industry form; provided, that with the 

approval of the ECO on or about the 

date of the Acquisition, written 

agreements with an MPS that were in 

effect as of the date of the Acquisition 

may continue to be used until there is 

a material modification of the same, at 

which time standardized industry forms 

must be adopted; 

2. The repurchase agreement has a 

term of one year or less; 

3. The Client Plan receives interest no 

less than that which it would receive in 

a comparable arm’s length transaction 

with an unrelated party; 

4. The Client Plan receives Securities, 

banker’s acceptances, commercial paper 

or certificates of deposit having a market 

value equal to not less than one 

hundred percent (100%) of the purchase 

price paid by the Client Plan; 

5. Upon expiration of the repurchase 

agreement and return of the Securities 

or other instruments to the seller, the 

seller transfers to the Client Plan an 

amount equal to the purchase price plus 

the appropriate interest; 

6. Neither the MPS seller nor any 

MPS which is a member of the same 

MPS Group has discretionary authority 

or control with respect to the 

investment of the Client Plan assets 

involved in the transaction or renders 

investment advice (within the meaning 

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

such assets. This Section III.I.6. shall be 

deemed satisfied notwithstanding the 

investment of assets of an MPS Plan of 

the MPS which is the seller under such 

repurchase agreement in a Pooled Fund 

as of the date of the Acquisition, which 

Pooled Fund is a bank-maintained 

common or collective trust, provided 

that such assets, when aggregated with 

the assets of all other MPS Plans of the 

same MPS Group as that of the MPS 

seller and invested in such Pooled 

Fund, at all times since the date of the 

Acquisition, constitute or are deemed 

pursuant to Section II.A.3.(b) to 

constitute less than ten percent (10%) of 

the assets of such Pooled Fund. 

7. The Securities, banker’s 

acceptances, commercial paper or 

certificates of deposit received by the 

Client Plan: 

(a) could be acquired directly by the 

Client Plan in a transaction not covered 

by this Section III.I. without violating 

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

407(a); and, 

(b) if the Securities are subject to the 

provisions of the 1933 Act, they are 


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obligations that are not ‘‘restricted 

securities’’ within the meaning of Rule 

144 under the 1933 Act; provided that 

such restricted securities are permitted 

until July 31, 2010. 

8. If the market value of the 

underlying Securities or other 

instruments falls below the purchase 

price at any time during the term of the 

agreement, the Client Plan may, under 

the written agreement required by 

Section III.I.1., require the MPS seller to 

deliver, by the close of business on the 

following business day (as such term is 

defined for purposes of the relevant 

written agreement), additional 

Securities or other instruments the 

market value of which, together with the 

market value of Securities or other 

instruments previously delivered or 

sold to the Client Plan under the 

repurchase agreement, equals at least 

one hundred percent (100%) of the 

purchase price paid by the Client Plan. 

9. If the MPS seller does not deliver 

additional Securities or other 

instruments as required above, the 

Client Plan may terminate the 

agreement, and, if upon termination or 

expiration of the agreement, the amount 

owing is not paid to the Client Plan, the 

Client Plan may sell the Securities or 

other instruments and apply the 

proceeds against the obligations of the 

MPS seller under the agreement, and 

against any expenses associated with 

the sale. 

10. The MPS seller agrees to furnish 

the Client Plan with the most recent 

available audited statement of its 

financial condition as well as its most 

recent available unaudited statement, 

agrees to furnish additional audited and 

unaudited statements of its financial 

condition as they are issued and either: 

(a) Agrees that each repurchase 

agreement transaction pursuant to the 

agreement shall constitute a 

representation by the MPS seller that 

there has been no material adverse 

change in its financial condition since 

the date of the last statement furnished 

that has not been disclosed to the Client 

Plan with whom such written agreement 

is made; or (b) prior to each repurchase 

agreement transaction, the MPS seller 

represents that, as of the time the 

transaction is negotiated, there has been 

no material adverse change in its 

financial condition since the date of the 

last statement furnished that has not 

been disclosed to the Client Plan with 

whom such written agreement is made. 

11. In the event of termination and 

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

MPS seller pays to the Client Plan the 

amount of any remaining obligations 

and expenses not covered by the sale of 

the Securities or other instruments, plus 

interest at a reasonable rate. 

12. If an MPS seller involved in a 

repurchase agreement covered by this 

exemption fails to comply with any 

condition of this exemption in the 

course of engaging in the repurchase 

agreement, the BlackRock Manager who 

caused the plan to engage in such 

repurchase agreement shall not be 

deemed to have caused the plan to 

engage in a transaction prohibited by 

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

or ERISA section 406(b), Code section 

4975, or FERSA section 8477(c) solely 

by reason of the MPS seller’s failure to 

comply with the conditions of the 

exemption. 

13. In the event of any dispute 

between a BlackRock Manager and an 

MPS seller involving a Covered 

Transaction under this Section III.I., the 

IM has the responsibility to decide 

whether, and if so how, BlackRock is to 

pursue relief on behalf of the Client 

Plan(s) against the MPS Seller. 

14. At time of entry into or renewal 

of each Covered Transaction under this 

Section III.I., including both term 

repurchase transactions and daily 

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

transactions, either (a) each Covered 

Transaction under this Section III.I., is 

as a result of the Three Quote Process, 

or, (b) the BlackRock Manager 

determines that the yield on the 

proposed transaction, or the renewal 

thereof, is at least as favorable to the 

Client Plans as the yield of the Client 

Plan on two (2) other available 

transactions which are comparable in 

terms of size, collateral type, credit 

quality of the counterparty, term and 

rate. The methodology employed for 

purposes of the comparison in (b) above 

must (c) be approved in advance by the 

ECO Function and (d), to the extent 

possible, refer to objective external data 

points, such as the Eurodollar overnight 

time deposit bid rate, the rate for 

repurchase agreements with U.S. 

government Securities, or rates for 

commercial paper issuances or agency 

discount note issuances sourced from 

Bloomberg, or another third party 

pricing service or market data provider 

(which providers may use different 

terminology to refer to these same 

external data points). The applicable 

BlackRock Manager must record a 

description of the comparable 

transactions, if reliance is placed upon 

same, and such data must be 

periodically reviewed by the ECO 

Function. The procedures described in 

this Section III.I.14. must be designed to 

ensure that BlackRock Managers 

determine to only enter into Covered 

Transactions with MPS sellers which 

are in the interests of Plan Clients, and 

such procedures must be reviewed and 

may be commented on by the IM. 

J. Responding to Tender Offers and 

Exchange Offers Solicited by an MPS. 

Relief under Section I of this exemption 

is available for participation by 

BlackRock Managers on behalf of Client 

Plans in tender offers or exchange offers 

or similar transactions where an MPS 

acts as agent for the entity (which entity 

may not be an MPS) making the offer, 

provided that: 

1. The Client Plan pays no fees to the 

MPS in connection with this Covered 

Transaction; 

2. The BlackRock Manager submits to 

the ECO in advance of participation a 

written explanation of the reasons for 

such participation; and 

3. The ECO Function determines that 

the reasons for participation by the 

BlackRock Manager in the Covered 

Transaction are appropriate from the 

vantage point of the Client Plans. 

Effective as of October 1, 2010, the ECO 

Function must affirmatively make this 

determination in writing prior to the 

BlackRock Manager participating in the 

Covered Transactions under this Section 

III.J. 

K. Purchase in Underwritings of 

Securities Issued by an Entity which is 

not an MPS when the Proceeds are Used 

to Repay a Debt to an MPS. Relief under 

Section I of this exemption is available 

for the purchase by BlackRock Managers 

of Securities in underwritings issued by 

an entity which is not an MPS, but 

where the proceeds of the offering are 

used to repay a debt owed to an MPS, 

and the payment of such proceeds to the 

MPS, provided that the BlackRock 

Manager does not know that the 

proceeds will be applied to the 

repayment of debt owed to an MPS. If 

the BlackRock Manager does know that 

proceeds of the offering will be applied 

to the repayment of debt owed to an 

MPS, the purchase of the Securities and 

the payment of the proceeds to the MPS 

are exempt under Section I of this 

exemption provided that no more than 

twenty percent (20%) of the offering is 

purchased by BlackRock Managers for 

Client Plans, and no more than fifty 

percent (50%) of the offering in the 

aggregate is purchased by BlackRock, 

BlackRock Managers and other 

BlackRock Entities for Client Plans, 

other clients of BlackRock Managers, or 

as proprietary investments. 

L. Bank Deposits and Commercial 

Paper. Relief under Section I of this 

exemption is available for an investment 

by a BlackRock Manager of Client Plan 

assets which involves the purchase or 

other acquisition, holding, sale, 

exchange or redemption by or on behalf 


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of a Client Plan of certificates of deposit, 

time deposits or other bank deposits at 

an MPS, or in commercial paper issued 

by an MPS, provided that: 

1. With respect to bank deposits, 

either: 

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

United States or a State, and at the 

outset of the Covered Transaction or 

renewal thereof of, such bank has a 

credit rating in one of the top two (2) 

categories by at least one of the Rating 

Organizations; (ii) neither the bank nor 

an affiliate of the bank has discretionary 

authority or control with respect to the 

investment of Client Plan assets 

involved in the Covered Transaction or 

renders investment advice (within the 

meaning of 29 CFR 2510.3–21(c)) with 

respect to those assets; and (iii) such 

deposit bears a reasonable interest rate, 

or— 

(b) the BlackRock Manager and the 

MPS comply with ERISA section 

408(b)(4). 

2. With respect to commercial paper: 

(a) the Client Plan is not an MPS Plan 

of the MPS issuing the commercial 

paper; 

(b) the commercial paper has a stated 

maturity date of nine (9) months or less 

from the date of issue, exclusive of days 

of grace, or is a renewal of an issue of 

commercial paper the maturity of which 

is likewise limited; 

(c) neither the MPS issuer of the 

commercial paper, any MPS guarantor 

of the commercial paper, nor any 

member of the same MPS Group as such 

MPS issuer or guarantor has 

discretionary authority or control with 

respect to the investment of the Client 

Plan assets involved in the Covered 

Transaction or renders investment 

advice (within the meaning of 29 CFR 

2510.3–21(c)) with respect to those 

assets; and 

(d) at the time it is acquired, the 

commercial paper is ranked in one of 

the two (2) highest rating categories by 

at least one of the Rating Organizations. 

3. For purposes of the Covered 

Transactions set forth in this Section 

III.L.: 

(a) No BlackRock Entity shall be 

regarded as an affiliate of an MPS bank 

at which a deposit is made of Client 

Plan assets, nor of an MPS issuer of 

commercial paper in which a BlackRock 

Manager invests Client Plan assets, and 

(b) Section III.L.1.(a)(ii) and Sections 

III.L.2.(a) and (c) shall be deemed 

satisfied notwithstanding the 

investment of assets of an MPS Plan of 

the MPS which is the depository bank 

or issuer of commercial paper in a 

Pooled Fund as of the date of the 

Acquisition, which Pooled Fund is a 

bank-maintained common or collective 

trust, provided that such assets when 

aggregated with the assets of all other 

MPS Plans of the same MPS Group as 

the issuer of such asset and invested in 

such Pooled Fund, at all times since the 

date of the Acquisition, constitute or are 

deemed pursuant to Section II.A.3.(b) to 

constitute less than ten percent (10%) of 

such Pooled Fund. 

M. Securities Lending to an MPS. 

1. Relief under Section I of this 

exemption is available for: 

(a) the lending of Securities by a 

BlackRock Manager that are assets of a 

Client Plan to an MPS which is a U.S. 

Broker-Dealer or a U.S. Bank provided 

that the conditions set forth in Section 

III.M.2. are met; 

(b) the lending of Securities by a 

BlackRock Manager that are assets of a 

Client Plan to an MPS which is a 

Foreign Broker-Dealer or Foreign Bank; 

provided that, the conditions set forth in 

Section III.M.2. and Section III.M.3. 

below are met; and 

(c) the payment to a BlackRock 

Manager of compensation for services 

rendered in connection with loans of 

Client Plan assets that are Securities to 

an MPS; provided that, the conditions 

set forth in Section III.M.4. below are 

met. 

2. General Conditions for 

Transactions Described in Sections 

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

(a) The length of a Securities loan to 

an MPS does not exceed one year in 

term. 

(b) Neither the MPS borrower nor any 

MPS which is a member of the same 

MPS Group as the MPS borrower has or 

exercises discretionary authority or 

control with respect to the investment of 

the Client Plan assets involved in the 

transaction, or renders investment 

advice (within the meaning of 29 CFR 

2510.3–21(c)) with respect to those 

assets. This Section III.M.2.(b) shall be 

deemed satisfied notwithstanding the 

investment of the assets of an MPS Plan 

of the MPS which is the borrower under 

such Securities lending transaction in a 

Pooled Fund as of the date of the 

Acquisition, which Pooled Fund is a 

bank-maintained common or collective 

trust, provided that such assets when 

aggregated with the assets of all other 

MPS Plans of the same MPS Group as 

that of the MPS borrower and invested 

in such Pooled Fund, at all times since 

the date of the Acquisition, constitute or 

are deemed pursuant to Section 

II.A.3.(b) to constitute less than ten 

percent (10%) of the assets of such 

Pooled Fund. 

(c) The Client Plan receives from the 

MPS borrower by the close of the 

BlackRock Manager’s business on the 

day in which the Securities lent are 

delivered to the MPS, 

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

close of business on the preceding 

business day, a market value, or, in the 

case of bank letters of credit, a stated 

amount, equal to not less than one 

hundred percent (100%) of the then 

market value of the Securities lent; or 

(ii) Foreign Collateral having as of the 

close of business on the preceding 

business day, a market value, or, in the 

case of bank letters of credit, a stated 

amount, equal to not less than: 

(x) one hundred two percent (102%) 

of the then market value of the 

Securities lent as valued on a 

Recognized Securities Exchange or an 

Automated Trading System on which 

the Securities are primarily traded if the 

collateral posted is denominated in the 

same currency as the Securities lent, or 

(y) one hundred five percent (105%) 

of the then market value of the 

Securities lent as valued on a 

Recognized Securities Exchange or an 

Automated Trading System on which 

the Securities are primarily traded if the 

collateral posted is denominated in a 

different currency than the Securities 

lent. 

(d) Notwithstanding the foregoing, if 

the BlackRock Manager is a U.S. Bank, 

a Registered Investment Advisor, or U.S. 

Broker-Dealer, and such BlackRock 

Manager indemnifies the Client Plan 

with respect to the difference, if any, 

between the replacement cost of the 

borrowed Securities and the market 

value of the collateral on the date of a 

borrower default, the Client Plan 

receives from the MPS borrower by the 

close of the BlackRock Manager’s 

business on the day in which the 

Securities lent are delivered to the 

borrower, Foreign Collateral having as 

of the close of business on the preceding 

business day, a market value, or, in the 

case of bank letters of credit, a stated 

amount, equal to not less than: 

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

then market value of the Securities lent 

as valued on a Recognized Securities 

Exchange or an Automated Trading 

System on which the Securities are 

primarily traded if the collateral posted 

is denominated in the same currency as 

the Securities lent; or 

(ii) one hundred one percent (101%) 

of the then market value of the 

Securities lent as valued on a 

Recognized Securities Exchange or an 

Automated Trading System on which 

the Securities are primarily traded if the 

collateral posted is denominated in a 

different currency than the Securities 

lent and such currency is denominated 

in Euros, British pounds, Japanese yen, 

Swiss francs or Canadian dollars; or 


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(iii) one hundred five percent (105%) 

of the then market value of the 

Securities lent as valued on a 

Recognized Securities Exchange or an 

Automated Trading System if the 

collateral posted is denominated in a 

different currency than the Securities 

lent and such currency is other than 

those specified above. 

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

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

Plan receives such U.S. Collateral or 

Foreign Collateral from the MPS 

borrower by the close of the BlackRock 

Manager’s business on the day in which 

the Securities are delivered to the MPS 

borrower. Such collateral is received by 

the Client Plan either by physical 

delivery, wire transfer or by book entry 

in a Securities depository located in the 

United States, or, 

(ii) If the MPS borrower is a Foreign 

Bank or Foreign Broker-Dealer, the 

Client Plan receives U.S. Collateral or 

Foreign Collateral from the MPS 

borrower by the close of the BlackRock 

Manager’s business on the day in which 

the Securities are delivered to the 

borrower. Such collateral is received by 

the Client Plan either by physical 

delivery, wire transfer or by book entry 

in a Securities depository located in the 

United States or held on behalf of the 

Client Plan at an Eligible Securities 

Depository. The indicia of ownership of 

such collateral shall be maintained in 

accordance with section 404(b) of 

ERISA and 29 CFR 2550.404b–1. 

(f) Prior to making of any such loan, 

the MPS borrower shall have furnished 

the BlackRock Manager with: 

(i) The most recent available audited 

statement of the MPS borrower’s 

financial condition, as audited by a 

United States certified public 

accounting firm or in the case of an MPS 

borrower that is a Foreign Broker-Dealer 

or Foreign Bank, a firm which is eligible 

or authorized to issue audited financial 

statements in conformity with 

accounting principles generally 

accepted in the primary jurisdiction that 

governs the borrowing MPS Foreign 

Broker-Dealer or Foreign Bank; 

(ii) the most recent available 

unaudited statement of its financial 

condition (if the unaudited statement is 

more recent than such audited financial 

statement); and 

(iii) a representation that, at the time 

the loan is negotiated, there has been no 

material adverse change in its financial 

condition since the date of the most 

recent financial statement furnished to 

the BlackRock Manager that has not 

been disclosed to the BlackRock 

Manager. Such representations may be 

made by the MPS borrower’s agreement 

that each loan shall constitute a 

representation by the MPS borrower that 

there has been no such material adverse 

change. 

(g) The loan is made pursuant to a 

written loan agreement, the terms of 

which are at least as favorable to the 

Client Plan as an arm’s-length 

transaction with an unrelated party 

would be. Such loan agreement states 

that the Client Plan has a continuing 

security interest in, title to, or the rights 

of secured creditor with respect to the 

collateral. Such agreement may be in the 

form of a master agreement covering a 

series of Securities lending transactions. 

(h) The written loan agreement must 

be a standardized industry form; 

provided, that, with the approval of the 

ECO on or about the date of the 

Acquisition, written loan agreements 

with an MPS borrower that were in 

effect as of the date of the Acquisition 

may continue to be used until there is 

a material modification of the same, at 

which time standardized industry forms 

must be adopted. 

(i) In return for lending Securities, the 

Client Plan: 

(i) receives a reasonable fee (in 

connection with the Securities lending 

transaction), and/or 

(ii) has the opportunity to derive 

compensation through the investment of 

the currency collateral. Where the Client 

Plan has that opportunity, the Client 

Plan may pay a loan rebate or similar fee 

to the MPS borrower, if such fee is not 

greater than the Client Plan would pay 

in a comparable transaction with an 

unrelated party. 

(j) All fees and other consideration 

received by the Client Plan in 

connection with the loan of Securities 

are reasonable. The identity of the 

currency in which the payment of fees 

and rebates will be made is set forth 

either in the written loan agreement or 

the loan confirmation as agreed to by 

the MPS borrower and the BlackRock 

Manager prior to the making of the loan. 

(i) Pricing of a loan to an MPS 

borrower is based on (i) rates for 

comparable loans of the same Security 

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

(x) For loans of liquid Securities 

(sometimes referred to as general 

collateral loans), an automatic system 

may be used to price loans so long as 

the resulting rate the Client Plan 

receives from the MPS borrower is at 

least as favorable to the Client Plan as 

the rate the BlackRock Managers are 

receiving for Client Plans or other 

clients from non-MPS borrowers of the 

same Security; 

(y) For purposes of pricing loans of 

less liquid Securities (sometimes 

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

purposes of determining whether to 

terminate or continue a loan which does 

not have a set term, pricing may also be 

based on a BlackRock trader 

determination that continuing the loan 

is in the interest of the Client Plan based 

on all relevant factors, including price 

(provided that price is within the range 

of prices of other loans of the same 

Security to comparable non-MPS 

borrowers by BlackRock Managers for 

Client Plans or other clients) and 

potential adverse consequences to the 

Client Plan of terminating the loan, 

provided that the pricing data used in 

making these decisions is retained and 

made available for possible review by 

the ECO. 

(ii) Automatic pricing mechanisms 

and pricing decisions by traders are 

subject to ongoing periodic review by 

the ECO Function, and the results of 

such review are included in reports by 

the ECO to the IM. Specifically, the 

quarterly reports by the ECO to the IM 

must address the lending patterns of: 

(x) illiquid Securities to the MPS 

borrowers from all Client Plans, 

including the percentage that loans of 

such Securities to the MPSs represent of 

all loans of such Securities from all 

Client Plans; and 

(y) illiquid Securities to the MPS 

borrowers from all Other Accounts or 

Funds, including the percentage that 

loans of such Securities to the MPSs 

represent of all loans of such Securities 

from all Other Accounts or Funds. 

(k) The Client Plan receives the 

equivalent of all distributions made to 

holders of the borrowed Securities 

during the term of the loan including, 

but not limited to, dividends, interest 

payments, shares of stock as a result of 

stock splits and rights to purchase 

additional Securities; 

(l) If the market value of the collateral 

at the close of trading on a business day 

is less than the applicable percentage of 

the market value of the borrowed 

Securities at the close of trading on that 

day (as described in this Section 

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

MPS borrower shall deliver, by the close 

of business on the following business 

day, an additional amount of U.S. 

Collateral or Foreign Collateral the 

market value of which, together with the 

market value of all previously delivered 

collateral, equals at least the applicable 

percentage of the market value of all the 

borrowed Securities as of such 

preceding day. 

Notwithstanding the foregoing, part of 

the U.S. Collateral or Foreign Collateral 

may be returned to the MPS borrower if 

the market value of the collateral 

exceeds the applicable percentage 

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


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this exemption) of the market value of 

the borrowed Securities, as long as the 

market value of the remaining U.S. 

Collateral or Foreign Collateral equals at 

least the applicable percentage of the 

market value of the borrowed Securities. 

(m) The loan may be terminated by 

the Client Plan at any time, whereupon 

the MPS borrower shall deliver 

certificates for Securities identical to the 

borrowed Securities (or the equivalent 

thereof in the event of reorganization, 

recapitalization or merger of the issuer 

of the borrowed Securities) to the Client 

Plan within the lesser of: 

(i) The customary delivery period for 

such Securities, 

(ii) five business days, or 

(iii) the time negotiated for such 

delivery by the BlackRock Manager for 

the Client Plan, and the borrower. 

(n) In the event that the loan is 

terminated, and the MPS borrower fails 

to return the borrowed Securities or the 

equivalent thereof within the applicable 

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

BlackRock Manager for the Client Plan 

may, under the terms of the loan 

agreement: 

(i) Purchase Securities identical to the 

borrowed Securities (or their equivalent 

as described above) and may apply the 

collateral to the payment of the 

purchase price, any other obligations of 

the borrower under the agreement, and 

any expenses associated with the sale 

and/or purchase, and 

(ii) the MPS borrower is obligated, 

under the terms of the loan agreement, 

to pay, and does pay to the Client Plan 

the amount of any remaining obligations 

and expenses not covered by the 

collateral, including reasonable 

attorney’s fees incurred by the Client 

Plan for legal action arising out of 

default on the loans, plus interest at a 

reasonable rate. 

Notwithstanding the foregoing, the 

MPS borrower may, in the event the 

MPS borrower fails to return borrowed 

Securities as described above, replace 

collateral, other than U.S. currency, 

with an amount of U.S. currency that is 

not less than the then current market 

value of the collateral, provided such 

replacement is approved by the 

BlackRock Manager. 

(o) If the MPS borrower fails to 

comply with any provision of a loan 

agreement which requires compliance 

with this exemption, the BlackRock 

Manager who caused the Client Plan to 

engage in such transaction shall not be 

deemed to have caused the Client Plan 

to engage in a transaction prohibited by 

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

or ERISA section 406(b) or FERSA 

section 8477(c) solely by reason of the 

borrower’s failure to comply with the 

conditions of the exemption. 

(p) If the Securities being loaned to an 

MPS borrower are managed in an Index 

Account or Fund, or a Model-Driven 

Account or Fund where the Index or the 

Model are created or maintained by the 

MPS borrower, the ECO Function 

periodically performs a review, no less 

than quarterly, of the use of such MPSsponsored Index or Model, and the 

Securities loaned from such an account 

or fund to the MPS, which review is 

designed to enable a reasonable 

judgment as to whether the use of such 

Index or Model, or any changes thereto, 

were for the purpose of benefitting 

BlackRock or the MPS through the 

Securities lending activity described in 

this Section III.M. If the ECO forms a 

reasonable judgment that the use of 

such Index or Model, or any changes 

thereto, were for the purpose of 

benefitting BlackRock or the MPS, the 

ECO shall promptly inform the IM. 

(q) In the event of any dispute 

between the BlackRock Manager on 

behalf of a Client Plan and an MPS 

borrower involving a Covered 

Transaction under this Section III.M., 

the IM shall decide whether, and if so, 

how the BlackRock Manager is to 

pursue relief on behalf of the Client 

Plan(s) against the MPS borrower. 

(r) If the Securities being loaned to an 

MPS borrower are managed in an Other 

Account or Fund, the employees of the 

BlackRock Manager who exercise 

discretionary authority or control over 

the Other Account or Fund shall not 

have access to the information regarding 

whether the particular Securities are on 

loan to an MPS, with such access 

limitations imposed on or about 

September 30, 2010, and implemented 

through the EPPs on or about September 

30, 2010. 

3. Specific Conditions for 

Transactions Described in Section 

III.M.1.(b). 

(a) The BlackRock Manager maintains 

the written documentation for the loan 

agreement at a site within the 

jurisdiction of the courts of the United 

States. 

(b) Prior to entering into a transaction 

involving an MPS Foreign Broker-Dealer 

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

(2) or an MPS Foreign Bank that is 

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

(i) The MPS Foreign Broker-Dealer or 

Foreign Bank agrees to submit to the 

jurisdiction of the United States; agrees 

to appoint an agent for service of 

process in the United States, which may 

be an affiliate; consents to service of 

process on such agent; and agrees that 

any enforcement by a Client Plan of its 

rights under the Securities lending 

agreement will, as the option of the 

Client Plan, occur exclusively in the 

United States courts; or 

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

Bank, a Registered Investment Advisor, 

or U.S. Broker-Dealer, agrees to 

indemnify the Client Plan with respect 

to the difference, if any, between the 

replacement cost of the borrowed 

Securities and the market value of the 

collateral on the date of an MPS 

borrower default plus interest and any 

transaction costs incurred (including 

attorney’s fees of such Client Plan 

arising out of the default on the loans or 

the failure to indemnify properly under 

this provision) which the Client Plan 

may incur or suffer directly arising out 

of a borrower default by the MPS 

Foreign Broker-Dealer or Foreign Bank. 

(c) In the case of a Securities lending 

transaction involving an MPS Foreign 

Broker-Dealer that is described in 

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

Bank that is described in Section 

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

be a U.S. Bank, a Registered Investment 

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

prior to entering into the loan 

transaction, such BlackRock Manager 

must agree to indemnify the Client Plan 

with respect to the difference, if any, 

between the replacement cost of the 

borrowed Securities and the market 

value of the collateral on the date of an 

MPS borrower default plus interest and 

any transaction costs incurred 

(including attorney’s fees of such plan 

arising out of the default on the loans or 

the failure to indemnify properly under 

this provision) which the Client Plan 

may incur or suffer directly arising out 

of a borrower default by the MPS 

Foreign Broker-Dealer or Foreign Bank. 

4. Specific Conditions for 

Transactions Described in Section 

III.M.1.(c): 

(a) The loan of Securities is not 

prohibited by section 406(a) of ERISA or 

otherwise satisfies the conditions of this 

exemption. 

(b) The BlackRock Manager is 

authorized to engage in Securities 

lending transactions on behalf of the 

Client Plan. 

(c) The compensation, the terms of 

which are at least as favorable to the 

Client Plan as an arm’s length 

transaction with an unrelated party, is 

reasonable and is paid in accordance 

with the terms of a written instrument, 

which may be in the form of a master 

agreement covering a series of Securities 

lending transactions. 

(d) Except as otherwise provided in 

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

under which the compensation is paid: 

(i) Is subject to the prior written 

authorization of a fiduciary of a Client 


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Plan (the authorizing fiduciary), who is 

(other than in the case of an In-House 

Plan) independent of the BlackRock 

Manager, provided that for purposes of 

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

MPS Plan acting as the authorizing 

fiduciary shall be deemed independent 

of the BlackRock Manager so long as 

such fiduciary, as of the date of the 

authorization, is not a BlackRock Entity, 

and 

(ii) may be terminated by the 

authorizing fiduciary within: 

(x) the time negotiated for such notice 

of termination by the Client Plan and 

the BlackRock Manager, or 

(y) five business days, whichever is 

less, in either case without penalty to 

the Client Plan. 

(e) No such authorization is made or 

renewed unless the BlackRock Manager 

shall have furnished the authorizing 

fiduciary with any reasonably available 

information which the BlackRock 

Manager reasonably believes to be 

necessary to determine whether such 

authorization should be made or 

renewed, and any other reasonably 

available information regarding the 

matter that the authorizing fiduciary 

may reasonably request. 

(f) Special Rule for Commingled 

Investment Funds. In the case of a 

pooled separate account maintained by 

an insurance company qualified to do 

business in a State or a common or 

collective trust fund maintained by a 

bank or trust company supervised by a 

State or Federal agency, the 

requirements of Section III.M.4.(d) of 

this exemption shall not apply, 

provided that: 

(i) The information described in 

Section III.M.4.(e) (including 

information with respect to any material 

change in the arrangement) shall be 

furnished by the BlackRock Manager to 

the authorizing fiduciary described in 

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

Client Plan whose assets are invested in 

the account or fund, not less than 30 

days prior to implementation of the 

arrangement or material change thereto, 

and, where requested, upon the 

reasonable request of the authorizing 

fiduciary; 

(ii) in the event any such authorizing 

fiduciary submits a notice in writing to 

the BlackRock Manager objecting to the 

implementation of, material change in, 

or continuation of the arrangement, the 

Client Plan on whose behalf the 

objection was tendered is given the 

opportunity to terminate its investment 

in the account or fund, without penalty 

to the Client Plan, within such time as 

may be necessary to effect such 

withdrawal in an orderly manner that is 

equitable to all withdrawing plans and 

to the non-withdrawing plans. In the 

case of a Client Plan that elects to 

withdraw pursuant to the foregoing, 

such withdrawal shall be effected prior 

to the implementation of, or material 

change in, the arrangement; but an 

existing arrangement need not be 

discontinued by reason of a Client Plan 

electing to withdraw; and 

(iii) in the case of a Client Plan whose 

assets are proposed to be invested in the 

account or fund subsequent to the 

implementation of the compensation 

arrangement and which has not 

authorized the arrangement in the 

manner described in Sections 

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

investment in the account or fund shall 

be authorized in the manner described 

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

N. To-Be-Announced Trades (TBAs) 

of GNMA, FHLMC or FNMA MortgageBacked Securities with an MPS 

Counterparty. Relief under Section I of 

this exemption is available for trades 

(purchases and sales) on a principal 

basis of mortgage-backed Securities 

issued by FHLMC, FNMA or guaranteed 

by GNMA and meeting the definition of 

‘‘guaranteed governmental mortgage 

pool certificate’’ in 29 CFR 2510.3– 

101(i) with an MPS on a TBA basis, 

including, when applicable, delivery of 

the underlying Securities to a Client 

Plan, provided that: 

1. The Covered Transactions under 

this Section III.N. are a result of the 

Three Quote Process; provided that, 

solely for purposes of this Section 

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

Quote Process may also include firm 

quotes obtained on comparable 

Securities, as described below, when 

firm quotes with respect to the 

applicable TBA transactions are not 

reasonably attainable. 

2. With regard to purchases of FHLMC 

and FNMA mortgage-backed Securities 

on a TBA basis, (i) The BlackRock 

Manager makes a determination that 

such Securities are of substantially 

similar credit quality as GNMA 

guaranteed governmental mortgage pool 

certificates, (ii) the ECO (in regular 

consultation with and under the 

supervision of the IM) monitors the 

credit spread between GNMA and 

FHLMC/FNMA mortgage-backed 

Securities, and (iii) each of the ECO and 

the IM (independently) has the 

authority and responsibility to 

determine whether purchases of FHLMC 

and/or FNMA mortgage-backed 

Securities on a TBA basis should not be 

permitted due to such credit spread, and 

such authority and responsibility is 

reflected in the EPPs. 

3. With regard to possible delivery of 

underlying Securities to Client Plans, as 

opposed to cash settlement, the ECO 

Function approves any such delivery in 

advance. 

For purposes of Section III.N.1., 

‘‘comparable Securities’’ are Securities 

that: (a) Are issued and/or guaranteed 

by the same agency, (b) have the same 

coupon, (c) have a principal amount at 

least equal to but no more than two 

percent (2%) greater than the Security 

purchased or sold, (d) are of the same 

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

an aggregate weighted average monthly 

maturity within a 12-month variance of 

the Security purchased or sold, but in 

no case can the variance be more than 

ten percent (10%) of such aggregate 

weighted average maturity of the 

Securities purchased or sold, or (ii) meet 

some other comparable objective 

standard containing a range of variance 

that is no greater than that described in 

(i) above and that assures that the aging 

of the Securities is properly taken into 

account. 

O. Foreign Exchange Transactions 

with an MPS Counterparty. Relief under 

Section I of this exemption is available 

for a Foreign Exchange Transaction by 

a BlackRock Manager on behalf of Client 

Plans with an MPS as counterparty 

provided that: 

1. (a) The Foreign Exchange 

Transaction is as a result of the Three 

Quote Process; or (b) the total net 

amount of the Foreign Exchange 

Transaction on behalf of Client Plans by 

BlackRock Managers is greater than $1 

million and the exchange rate is within 

0.5% above or below the Interbank Rate 

as represented to the BlackRock 

Managers by the MPS; 

2. Foreign Exchange Transactions 

with an MPS counterparty only involve 

currencies of countries that are 

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

markets by a third party Index provider 

that divides national economies into 

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

markets. The Index provider shall be 

selected by BlackRock, provided, 

however, the IM shall have the right to 

reject the Index provider in its sole 

discretion at any time; and 

3. Each Foreign Exchange Transaction 

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

be set forth in the applicable quarterly 

reports of the ECO to the IM. 

P. Agency Execution of Equity and 

Fixed Income Securities Trades and 

Related Clearing as Described in PTE 

86–128, Including Agency Cross Trades, 

When the Broker is an MPS. Relief 

under Section I of this exemption is 

available for transactions in Securities 

described in Section II of Prohibited 

Transaction Exemption 86–128, as 


emcdonald on DSK2BSOYB1PROD with NOTICES2
50648 Federal Register / Vol. 76, No. 157 / Monday, August 15, 2011 / Notices 

22 51 FR 41686 (Nov. 18, 1986), as amended, 67 

FR 64137 (Oct. 17, 2002). 

amended 22 (PTE 86–18), as if 

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

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

the following conditions are satisfied: 

1. The MPS is selected to perform 

Securities brokerage services for Client 

Plans pursuant to the normal brokerage 

placement practices, policies and 

procedures of the BlackRock Manager 

designed to ensure best execution. 

2. The conditions of PTE 86–128 set 

forth in the following sections of that 

exemption must be complied with: 

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

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

however, that, for purposes of Section 

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

of PTE 86–128, the ECO Function is the 

‘‘authorizing fiduciary’’ referred to 

therein; and the ECO has the authority 

to terminate the use of the MPS as 

broker-dealer without penalty to Client 

Plans at any time; and provided further 

that the first sentence of Section III(h) of 

PTE 86–128 is amended for purposes of 

this Section III.P.2. to provide as 

follows: ‘‘A trustee [other than a 

nondiscretionary trustee] may only 

engage in a covered transaction with a 

plan that has total net assets with a 

value of at least $50 million and in the 

case of a pooled fund, the $50 million 

requirement will be met if fifty percent 

(50%) or more of the units of beneficial 

interest in such pooled fund are held by 

investors having total net assets with a 

value of at least $50 million.’’ 

3. With respect to agency cross 

transactions described in Section III(g) 

of PTE 86–128 that are being effected or 

executed by an MPS broker, (i) Neither 

the MPS broker effecting or executing 

the agency cross transaction nor any 

member of the same MPS Group as the 

MPS broker effecting or executing the 

agency cross transaction may have 

discretionary authority to act on behalf 

of, and/or provide investment advice to 

another party to the agency cross 

transaction which is a seller when the 

Client Plan is a buyer, or which is a 

buyer, when the Client Plan is a seller 

(Another Party), and (ii), the BlackRock 

Manager instituting the transaction for 

the Client Plan must not have 

knowledge that a BlackRock Entity has 

discretionary authority and/or provides 

investment advice to Another Party to 

the agency cross transaction. 

4. The exceptions in Sections IV(a), 

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

to this exemption. 

5. Notwithstanding the other 

conditions of this Section III.P., with 

respect to Client Plans which as of the 

date of the Acquisition had in place 

with BlackRock Managers either 

directed brokerage and/or wrap fee 

arrangements which required the 

BlackRock Managers to use an MPS as 

a Securities broker, BlackRock Managers 

may continue to use that MPS as the 

Securities broker for such Client Plans 

under the brokerage procedures in place 

as of the date of the Acquisition; 

provided that a list of all of such 

arrangements has been provided to the 

ECO and no material changes are made 

to such arrangements. 

Q. Use by BlackRock Managers of 

Exchanges and Automated Trading 

Systems on Behalf of Client Plans. Relief 

under Section I of this exemption is 

available for the direct or indirect use 

by, or directing of trades to, U.S. and 

non-U.S. exchanges or U.S. Automated 

Trading Systems (ATS) in which one or 

more MPSs have an ownership interest 

by BlackRock Managers for Client Plans, 

provided that: 

1. Prior to January 1, 2011, 

(a) No single MPS (together with other 

members of the same MPS Group) has 

a greater than twenty percent (20%) 

ownership interest in the exchange or 

the ATS; and 

(b) the ECO does not make a 

determination, summarized in the ECO 

quarterly report, that a BlackRock 

Manager or all BlackRock Managers 

must discontinue such direct or indirect 

use of or the directing of trades to any 

such exchange or ATS on the basis that 

either the amount of use or the volume 

of trades is unwarranted or not in the 

interests of the Client Plans and their 

participants and beneficiaries. 

2. Effective on and after January 1, 

2011, either 

(a) No one MPS (together with other 

members of the same MPS Group) has 

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

ownership interest in the exchange or 

ATS or (ii) the BlackRock Managers do 

not know the level of such ownership 

interest; or 

(b) if a BlackRock Manager knows that 

an MPS (together with other members of 

the same MPS Group) has an ownership 

interest that is greater than ten percent 

(10%) but not greater than twenty 

percent (20%) in the exchange or ATS, 

(i) The ECO makes a determination, 

summarized in the ECO quarterly 

report, that there is no reason for a 

BlackRock Manager or all BlackRock 

Managers to discontinue such direct or 

indirect use of or the directing of trades 

to any such exchange or ATS on the 

basis that the amount of use or the 

volume of trades is unwarranted or not 

in the interests of the Client Plans and 

their participants and beneficiaries, and 

does not make a determination that a 

BlackRock Manager or all BlackRock 

Managers must discontinue such direct 

or indirect use of or the directing of 

trades to any such exchange or ATS on 

the basis that the amount of use or the 

volume of trades is unwarranted or not 

in the interests of the Client Plans and 

their participants and beneficiaries. The 

IM may request any additional 

information relating to any such 

determination summarized in the ECO 

quarterly report and may, after 

consultation with the ECO, make a 

determination that a BlackRock Manager 

or all BlackRock Managers must 

discontinue such direct or indirect use 

of or the directing of trades to any such 

exchange or ATS on the basis that the 

amount of use or the volume of trades 

is unwarranted or not in the interests of 

the Client Plans and their participants 

and beneficiaries; 

(ii) the price and compensation 

associated with any purchases or sales 

utilizing such exchange or ATS are not 

greater than the price and compensation 

associated with an arm’s length 

transaction with an unrelated party; 

(iii) all such exchanges and ATSs 

shall be situated within the jurisdiction 

of the U.S. District Courts and regulated 

by a U.S. Federal regulatory body or a 

U.S. federally approved self-regulatory 

body, provided that this condition shall 

not apply to the direct or indirect use of 

or the directing of trades to an exchange 

in a country other than the United 

States which is regulated by a 

government regulator or a government 

approved self-regulatory body in such 

country and which involves trading in 

Securities (including the lending of 

Securities) or futures contracts; and 

(iv) Special Notice of all of the 

foregoing conditions for relief under this 

Section II.Q.2.(b) must be provided in 

accordance with the terms of Section 

II.F. 

R. Purchases in the Secondary Market 

of Common and Preferred Stock Issued 

by an MPS by BlackRock Managers for 

Client Plans Invested in an Index 

Account or Fund, or a Model-Driven 

Account or Fund. Relief under Section 

I of this exemption is available for the 

purchase in the secondary market of 

common or preferred stock issued by an 

MPS by BlackRock Managers for Client 

Plans invested in an Index Account or 

Fund, or a Model-Driven Account or 

Fund provided that: 

1. Such purchase is for the sole 

purpose of maintaining quantitative 

conformity with the weight of such 

Securities prescribed by the relevant 

Index, for Index Accounts or Funds, or 

the weight of such Securities prescribed 

by the relevant Model, for Model-Driven 

Accounts or Funds, and such purchase 


emcdonald on DSK2BSOYB1PROD with NOTICES2
Federal Register / Vol. 76, No. 157 / Monday, August 15, 2011 / Notices 50649 

23For example, if two or more portfolio managers 

send their purchase orders to the same trading desk 

and the traders on that trading desk coordinate the 

purchases of the same MPS equity Securities, the 

limitations apply to the trading desk; if two or more 

portfolio managers or two or more trading desks are 

coordinating purchases of MPS equity Securities, 

the limitations are applied across the group of 

portfolio managers or traders who are coordinating 

the purchase orders. 

is reasonably calculated not to exceed 

the purchase amount necessary for such 

Model or quantitative conformity by 

more than a de minimis amount. 

2. Such purchase is not made from the 

issuing MPS. 

3. Notwithstanding Section III.R.2., 

(a) With respect to Client Plans which 

as of the date of the Acquisition had in 

place with a BlackRock Manager either 

a directed brokerage and/or wrap fee 

arrangement which required the 

BlackRock Manager to use a certain 

MPS as a Securities broker, the 

BlackRock Manager may purchase MPS 

common or preferred stock through 

such MPS, including, if applicable, the 

issuing MPS, acting as agent under the 

brokerage arrangement in place as of the 

date of the Acquisition; provided that, a 

list of all of such arrangements has been 

provided to the ECO and no material 

changes are made to such arrangements. 

Special Notice of all of the foregoing 

conditions for relief under this Section 

III.R. must be provided in accordance 

with the terms of Section II.F. 

(b) BlackRock Managers may rely on 

other exemptive relief when acquiring 

stock of an MPS for Client Plans through 

an MPS broker, including the issuing 

MPS. 

S. Purchase in the Secondary Market 

of Common and Preferred Stock Issued 

by an MPS by BlackRock Managers for 

Client Plans Invested in an Other 

Account or Fund. Relief under Section 

I of this exemption is available for the 

purchase in the secondary market of 

common or preferred stock issued by an 

MPS by BlackRock Managers for Client 

Plans invested in an Other Account or 

Fund provided that: 

1. Such purchase is not made from the 

issuing MPS. 

2. Notwithstanding Section III.S.1., 

(a) With respect to Client Plans which 

as of the date of the Acquisition had in 

place with a BlackRock Manager either 

a directed brokerage and/or wrap fee 

arrangement which required the 

BlackRock Manager to use a certain 

MPS as a Securities broker, the 

BlackRock Manager may purchase MPS 

common or preferred stock through 

such MPS, including if applicable, the 

issuing MPS, acting as agent under the 

brokerage arrangements in place as of 

the date of the Acquisition; provided 

that, a list of all of such arrangements 

has been provided to the ECO and no 

material changes are made to such 

arrangements. Special Notice of all of 

the foregoing conditions for relief under 

this Section III.S. must be provided in 

accordance with the terms of Section 

II.F. 

(b) BlackRock Managers may rely on 

other exemptive relief when acquiring 

stock of an MPS for Client Plans under 

this Section III.S. through an MPS 

broker, including the issuing MPS. 

3. With respect to Client Plans 

described in Section III.S.2.(a), the ECO 

Function periodically monitors 

purchases of MPS stock for such Client 

Plans to ensure that the amount of stock 

of an MPS purchased for such Client 

Plans is not disproportionate to the 

amount of such stock of the same MPS 

purchased for Client Plans invested in 

Other Accounts or Funds not subject to 

directed brokerage and/or wrap fee 

arrangements and described in Section 

III.S.2.(a). 

4. As a consequence of a purchase of 

MPS stock, the class of stock purchased 

does not constitute more than five 

percent (5%) of the Other Account or 

Fund. In the case of a Pooled Fund, the 

class of stock purchased and attributed 

to each Client Plan does not exceed five 

percent (5%) of such Client Plan’s 

proportionate interest in the Pooled 

Fund. 

5. Aggregate daily purchases of a class 

of MPS stock for Client Plans do not 

exceed the greater of (i) Fifteen percent 

(15%) of the aggregate average daily 

trading volume (ADTV) for the previous 

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

percent (15%) of trading volume on the 

date of the purchase. These volume 

limitations must be met on a portfolio 

manager by portfolio manager basis 

unless purchases are coordinated among 

portfolio managers, in which case the 

limitations are applied to the 

coordinated purchase.23 Any 

coordinated purchases of the same class 

of MPS stock in the secondary market 

for Index Accounts or Funds or for 

Model-Driven Accounts or Funds must 

be taken into account when applying 

these ADTV limitations on purchases 

for an Other Account or Fund; provided, 

however, if coordinated purchases for 

Index Accounts or Funds, or for ModelDriven Accounts or Funds, would cause 

the fifteen percent (15%) limitation to 

be exceeded, BlackRock Managers can 

nonetheless acquire for Other Accounts 

or Funds up to the greater of five 

percent (5%) of ADTV for the previous 

ten (10) trading days or five percent 

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

Covered Transaction. For purposes of 

this Section III.S.5., cross trades of MPS 

equity Securities which comply with an 

applicable statutory or administrative 

prohibited transaction exemption are 

not taken into account. 

6. The ECO Function monitors the 

volume limits on purchases of MPS 

stock described in Section III.S.5. and 

provides a monthly report to the IM 

with respect to such purchases and 

limits. The IM shall impose lower 

volume limitations and take other 

appropriate action with respect to such 

purchases if the IM determines on the 

basis of these reports by the ECO and 

publicly available information 

materially related to the trading of the 

Securities of an MPS on its primary 

listing exchange (or market) that the 

purchases described have a material 

positive impact on the market price for 

such Securities. 

T. The Provision of Custodial, 

Administrative and Similar Ministerial 

Services by an MPS for a Client Plan as 

a Consequence of a BlackRock Manager 

Exercising Investment Discretion on 

Behalf of the Client Plan or Rendering 

Investment Advice to the Client Plan. 

Relief under Section I of this exemption 

is available for the provision of 

custodial, administrative and similar 

ministerial services by an MPS for a 

Client Plan as a consequence of a 

BlackRock Manager exercising 

investment discretion or rendering 

investment advice (in each case, within 

the meaning of ERISA section 3(21)(A)) 

for or to such Client Plan, provided that 

(1) the terms of such service are 

comparable to those a Client Plan would 

receive in an arm’s length transaction 

with an unrelated party and (2) the ECO 

approves in advance and in writing 

(which may include electronic 

communication if retrievable by the 

ECO) the choice or recommendation of 

the MPS by the BlackRock Manager and 

the terms of the services, including but 

not limited to, the associated fees. 

U. Purchases, Sales and Holdings by 

BlackRock Managers for Client Plans of 

Commercial Paper Issued by ABCP 

Conduits, When an MPS Has One or 

More Roles. Relief under Section I of 

this exemption is available for the 

purchase or sale, including purchases 

from or sales to an MPS, and the 

holding by BlackRock Managers acting 

on behalf of Client Plans of commercial 

paper issued by an ABCP Conduit with 

respect to which an MPS acts as seller, 

placement agent, and/or in some 

continuing capacity such as program 

administrator, provider of liquidity or 

provider of credit support, provided 

that: 

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

Plan of the MPS with whom the 

purchase or sale takes place, or an MPS 

Plan of another member of the same 


emcdonald on DSK2BSOYB1PROD with NOTICES2
50650 Federal Register / Vol. 76, No. 157 / Monday, August 15, 2011 / Notices 

24BlackRock requested such relief for the 

avoidance of any issue about the necessity for such 

relief in particular circumstances; the Department is 

not opining on the need for such relief herein. 

MPS Group as such MPS, and (ii) the 

Client Plan is not an MPS Plan of an 

MPS which is acting in a continuing 

capacity, or an MPS Plan of another 

member of the same MPS Group as such 

MPS, and (iii) no MPS described in 

Sections III.U.1.(a)(i) or (ii), or another 

member of the same MPS Group as such 

MPS, has discretionary authority or 

control with respect to the Client Plan 

assets involved in the Covered 

Transaction or renders investment 

advice (within the meaning of 29 CFR 

2510.3–21(c)) with respect to such 

assets; 

(b) This Section III.U.1 shall be 

deemed satisfied notwithstanding the 

investment of assets of an MPS Plan of 

the MPS, which is placement agent or 

otherwise is acting in a continuing 

capacity, in a Pooled Fund as of the date 

of the Acquisition, which Pooled Fund 

is a bank-maintained common or 

collective trust, provided that such 

assets when aggregated with the assets 

of all other MPS Plans of the same MPS 

Group as the MPS which is the 

placement agent or otherwise is acting 

in a continuing capacity and invested in 

such Pooled Fund, at all times since the 

date of the Acquisition, constitute or are 

deemed pursuant to Section II.A.3.(b) to 

constitute less than ten percent (10%) of 

such Pooled Fund. 

2. The commercial paper has a stated 

maturity date of nine months or less 

from the date of issue, exclusive of days 

of grace, or is a renewal of an issue of 

commercial paper the maturity of which 

is likewise limited; 

3. At the time it is acquired, the 

commercial paper is ranked in the 

highest rating category by at least one of 

the Rating Organizations; 

4. If the seller or purchaser of the 

ABCP Conduit commercial paper is an 

MPS, secondary market purchases and 

sales are pursuant to the Three Quote 

Process, provided that, for purposes of 

this Section III.U.4., firm quotes on 

comparable short-term money market 

instruments rated in the same category 

may be used as quotes for purposes of 

the Three Quote Process; 

5. If an MPS performs a continuing 

role and there is a default, the taking of 

or refraining from taking of any action 

by the responsible BlackRock Manager 

which could have a material positive or 

negative effect upon the MPS is decided 

upon by the IM; 

No BlackRock Entity is to be regarded 

as an affiliate of any MPS for purposes 

of the Covered Transactions set forth in 

this Section III.U. 

V. Purchase, Holding and Disposition 

by BlackRock Managers for Client Plans 

of Shares of Exchange-Traded OpenEnd Investment Companies Registered 

Under the 1940 Act (ETF) Managed by 

BlackRock Managers. Relief under 

Section I of this exemption is available 

for the purchase, holding and 

disposition by BlackRock Managers for 

Client Plans of shares of an ETF 

managed by a BlackRock Manager 

provided that: 

1. (a) the BlackRock Manager 

purchases such ETF shares from or 

through a person other than an MPS or 

a BlackRock Entity, and 

(b) no purchase is exempt under 

Section I of this exemption if the 

BlackRock Manager portfolio manager 

acting for the Client Plan knows or 

should know that the shares to be 

acquired for Client Plans are Creation 

Shares, or that the purchase for Client 

Plans will result in new Creation 

Shares. 

2. Notwithstanding Section III.V.1.(a), 

BlackRock Managers may purchase 

shares of ETFs managed by a BlackRock 

Manager through an MPS acting as agent 

for Client Plans which, as of the date of 

the Acquisition, had in place with a 

BlackRock Manager either a directed 

brokerage and/or wrap fee arrangement 

which required the BlackRock Manager 

to use such MPS as a Securities broker; 

provided that, (i) A list of all of such 

arrangements has been provided to the 

ECO and no material changes are made 

to such arrangements and (ii) the ECO 

Function periodically monitors 

purchases of Securities to ensure that 

the amount of BlackRock-managed ETF 

shares purchased for Client Plans under 

Section III.V.2. is not disproportionate 

to the amount of BlackRock-managed 

ETF shares purchased for Client Plans 

pursuant to Section III.V.1. Special 

Notice of all of the foregoing conditions 

for relief under this Section III.V.2. must 

be provided in accordance with the 

terms of Section II.F. 

W. Investment of Assets of MPS Plans 

in a BlackRock Bank-Maintained 

Common or Collective Trust as of the 

Date of the Acquisition—Fees Paid 

Outside the Trust. Relief under Section 

I of this exemption is available with 

respect to MPS Plans invested in Pooled 

Funds as of the date of the Acquisition, 

which Pooled Funds are common or 

collective trusts maintained by 

BlackRock Institutional Trust Company, 

N.A., and in connection with which 

investments such MPS Plans pay 

management fees directly to BlackRock 

Managers until the earliest of (i) 

Termination of the investment in the 

Pooled Fund, (ii) transition of the fee 

arrangement to one under which the 

BlackRock Manager’s fees are paid from 

assets of the Pooled Fund or by the MPS 

Plan sponsor, or (iii) December 31, 2010 

(Unwind Period 2) provided that: 

1. The fees paid by such MPS Plans 

to the BlackRock Managers during 

Unwind Period 2 are neither more than 

reasonable compensation nor 

significantly more than fees paid to the 

BlackRock Managers by other, 

comparable Client Plans invested in 

such Pooled Funds which are not MPS 

Plans; and 

2. The MPS Plans do not pay to 

BlackRock Managers during Unwind 

Period 2 any type of fee or other 

compensation that was not charged to or 

otherwise borne by MPS Client Plan 

investors in the Pooled Fund as of the 

date of the Acquisition. 

During Unwind Period 2, the IM must 

review the investment by the MPS Plans 

in the Pooled Fund; all fees paid by the 

affected MPS Plans to BlackRock 

Managers must be disclosed to the IM; 

the IM must review the offering 

documents for the Pooled Funds and 

any advisory or management agreements 

with BlackRock Managers; and any 

material change in the terms and 

conditions of the investment by the 

affected MPS Plans in the Pooled Fund, 

including but not limited to changes to 

fees paid to BlackRock Managers or the 

terms of the advisory or management 

agreements with BlackRock Managers, 

must be promptly disclosed to the IM 

and be subject to the IM’s written 

approval. Further, during Unwind 

Period 2, each such MPS Plan may 

terminate its investment in the Pooled 

Fund upon no more than thirty (30) 

days notice and without incurring a 

redemption fee paid to a BlackRock 

Manager. 

X. Purchase, Holding and Disposition 

of BlackRock Equity Securities in the 

Secondary Market by BlackRock 

Managers for an Index Account or Fund, 

or a Model-Driven Account or Fund, 

Including Buy-Ups.24 Relief under 

Section I of this exemption is available 

for the purchase, holding and 

disposition of common or preferred 

stock issued by BlackRock in the 

secondary market by BlackRock 

Managers for Client Plans in an Index 

Account or Fund, or in a Model-Driven 

Account or Fund provided that: 

1. The acquisition, holding and 

disposition of the BlackRock Securities 

is for the sole purpose of maintaining 

quantitative conformity with the weight 

of such Securities prescribed by the 

relevant Index, for Index Accounts or 

Funds, or the weight of such Securities 

prescribed by the relevant Model, for 

Model-Driven Accounts or Funds, and 


emcdonald on DSK2BSOYB1PROD with NOTICES2
Federal Register / Vol. 76, No. 157 / Monday, August 15, 2011 / Notices 50651 

such purchase is reasonably calculated 

not to exceed the purchase amount 

necessary for such Model or quantitative 

conformity by more than a de minimis 

amount. 

2. Any acquisition of BlackRock 

Securities does not involve any 

agreement, arrangement or 

understanding regarding the design or 

operation of the account or fund 

acquiring the BlackRock Securities 

which is intended to benefit BlackRock 

or any party in which BlackRock may 

have an interest. 

3. With respect to an acquisition of 

BlackRock Securities by such an 

account or fund which constitutes a 

Buy-Up, 

(a) The acquisition is made on a single 

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

MPS or a BlackRock Entity; provided, 

however, that if the volume limitation 

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

satisfied in a single trading day, the 

acquisition will be completed in as few 

trading days as possible in compliance 

with such volume limitation and such 

trades will be reviewed by the ECO and 

reported to the IM; 

(b) based upon the best available 

information, the acquisition is not the 

opening transaction of a trading day and 

is not made in the last half hour before 

the close of the trading day; 

(c) the price paid by the BlackRock 

Manager is not higher than the lowest 

current independent offer quotation, 

determined on the basis of reasonable 

inquiry from broker-dealers who are not 

MPSs or BlackRock Entities; 

(d) aggregate daily purchases do not 

exceed fifteen percent (15%) of 

aggregate average daily trading volume 

for the Security, as determined by the 

greater of (i) The trading volume for the 

Security occurring on the applicable 

Recognized Securities Exchange and/or 

Automated Trading System on the date 

of the transactions, or (ii) the aggregate 

average daily trading volume for the 

Security occurring on the applicable 

Recognized Securities Exchange and/or 

Automated Trading System for the 

previous ten (10) trading days, both 

based on the best information 

reasonably available at the time of the 

transaction. These volume limitations 

are applied on a portfolio manager by 

portfolio manager basis unless 

purchases of BlackRock Securities are 

coordinated by the portfolio managers 

or trading desks, in which case the 

limitations are aggregated for the 

coordinating portfolio managers or 

trading desks. Provided further, if 

BlackRock, without Client Plan 

direction or consent, initiates a new 

Index Account or Fund or Model-Driven 

Account or Fund on its own accord, 

with BlackRock Securities included 

therein, the volume restrictions for such 

new account or fund shall be 

determined by aggregating all portfolio 

managers purchasing for such new 

account of fund. Cross trades of 

BlackRock Securities which comply 

with an applicable statutory or 

administrative prohibited transaction 

exemption are not included in the 

amount of aggregate daily purchases to 

which the limitations of this Section 

III.X. apply; 

(e) All purchases and sales of 

BlackRock Securities occur either (i) On 

a Recognized Securities Exchange, (ii) 

through an Automated Trading System 

operated by a broker-dealer that is not 

a BlackRock Entity and is either 

registered under the 1934 Act, and 

thereby subject to regulation by the 

Securities and Exchange Commission, 

or subject to regulation and supervision 

by the Securities and Futures Authority 

of the UK or another applicable 

regulatory authority, which provides a 

mechanism for customer orders to be 

matched on an anonymous basis 

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

Trading System that is operated by a 

Recognized Securities Exchange, 

pursuant to the applicable securities 

laws, and provides a mechanism for 

customer orders to be matched on an 

anonymous basis without the 

participation of a broker-dealer; and 

(f) the ECO designs acquisition 

procedures for BlackRock Managers to 

follow in Buy-Ups, which the IM 

approves in advance of the 

commencement of any Buy-Up, and the 

ECO Function monitors BlackRock 

Manager’s compliance with such 

procedures. 

Y. Acquisition by BlackRock 

Managers of Financial Guarantees, 

Indemnities and Similar Protections for 

Client Plans from MPSs. Relief under 

Section I of this exemption is available 

for the provision by an MPS of a 

financial guarantee, indemnification 

arrangement or similar instrument or 

arrangement providing protection to a 

Client Plan against possible losses or 

risks provided that: 

1. The terms of the arrangement 

(including the identity of the provider) 

are approved by a fiduciary of the Client 

Plan which is independent of the MPS 

providing such protection and of 

BlackRock; 

2. The compensation owed the MPS 

under the arrangement is paid by a 

BlackRock Entity and not paid out of the 

assets of the Client Plan; 

3. In the event a Client Plan or the 

ECO concludes an event has occurred 

which should trigger the obligations of 

the MPS under the arrangement, and the 

MPS disagrees to any material extent, 

the IM determines the steps the 

BlackRock Manager must take to protect 

the interests of the Client Plan; and 

4. The MPS providing the 

arrangement is capable of being sued in 

United States courts, has contractually 

agreed to be subject to litigation in the 

United States with respect to any matter 

relating to this Section III.Y., and has 

sufficient assets in the United States to 

honor its commitments under the 

arrangement. 

Section IV: Affiliated Underwritings and 

Affilliated Servicing 

A. Affiliated Underwritings 

1. The Securities to be purchased are 

either: 

(a) Part of an issue registered under 

the 1933 Act, or, if Securities to be 

purchased are part of an issue that is 

exempt from such registration 

requirement, such Securities: 

(i) Are issued or guaranteed by the 

United States or by any person 

controlled or supervised by and acting 

as an instrumentality of the United 

States pursuant to authority granted by 

the Congress of the United States, 

(ii) are issued by a bank, 

(iii) are exempt from such registration 

requirement pursuant to a Federal 

statute other than the 1933 Act, or 

(iv) are the subject of a distribution 

and are of a class which is required to 

be registered under section 12 of the 

1934 Act, and are issued by an issuer 

that has been subject to the reporting 

requirements of section 13 of the 1934 

Act for a period of at least ninety (90) 

days immediately preceding the sale of 

such Securities and that has filed all 

reports required to be filed thereunder 

with the SEC during the preceding 

twelve (12) months; or 

(b) part of an issue that is an Eligible 

Rule 144A Offering. Where the Eligible 

Rule 144A Offering of the Securities is 

of equity securities, the offering 

syndicate shall obtain a legal opinion 

regarding the adequacy of the disclosure 

in the offering memorandum; or 

(c) municipal bonds taxable by the 

United States, including Build America 

Bonds created under section 54AA of 

the Code or successor thereto, under 

which the United States pays a subsidy 

to the state or local government issuer, 

but not including Building America 

Bonds which provide a tax credit to 

investors. 

2. The Securities to be purchased are 

purchased prior to the end of the first 

day on which any sales are made, 

pursuant to that offering, at a price that 


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is not more than the price paid by each 

other purchaser of the Securities in that 

offering or in any concurrent offering of 

the Securities, except that: 

(a) If such Securities are offered for 

subscription upon exercise of rights, 

they may be purchased on or before the 

fourth day preceding the day on which 

the rights offering terminates; or 

(b) if such Securities are debt 

Securities, they may be purchased at a 

price that is not more than the price 

paid by each other purchaser of the 

Securities in that offering or in any 

concurrent offering of the Securities and 

may be purchased on a day subsequent 

to the end of the first day on which any 

sales are made, pursuant to that offering, 

provided that the interest rates, as of the 

date of such purchase, on comparable 

debt Securities offered to the public 

subsequent to the end of the first day on 

which any sales are made and prior to 

the purchase date are less than the 

interest rate of the debt Securities being 

purchased; and 

3. The Securities to be purchased are 

offered pursuant to an underwriting or 

selling agreement under which the 

members of the syndicate are committed 

to purchase all of the Securities being 

offered, except if: 

(a) such Securities are purchased by 

others pursuant to a rights offering; or 

(b) such Securities are offered 

pursuant to an over-allotment option. 

4. The issuer of the Securities to be 

purchased pursuant to this exemption 

must have been in continuous operation 

for not less than three (3) years, 

including the operation of any 

predecessors, unless the Securities to be 

purchased: 

(a) Are non-convertible debt 

Securities rated in one of the four 

highest rating categories by a Rating 

Organization; provided that none of the 

Rating Organizations rates such 

Securities in a category lower than the 

fourth highest rating category; or 

(b)(i) are debt Securities issued or 

fully guaranteed by the United States or 

by any person controlled or supervised 

by and acting as an instrumentality of 

the United States pursuant to authority 

granted by the Congress of the United 

States; or 

(ii) are municipal bonds taxable by 

the United States, including Build 

America Bonds created under section 

54AA of the Code or successor thereto, 

under which the United States pays a 

subsidy to the state or local government 

issuer, but not including Building 

America Bonds which provide a tax 

credit to investors; or 

(c) are debt Securities which are fully 

guaranteed by a guarantor that has been 

in continuous operation for not less 

than three (3) years, including the 

operation of any predecessors, provided 

that such guarantor has issued other 

Securities registered under the 1933 

Act; or if such guarantor has issued 

other Securities which are exempt from 

such registration requirement, such 

guarantor has been in continuous 

operation for not less than three (3) 

years, including the operation of any 

predecessors, and such guarantor is: 

(i) a bank; 

(ii) an issuer of Securities which are 

exempt from such registration 

requirement, pursuant to a Federal 

statute other than the 1933 Act; or 

(iii) an issuer of Securities that are the 

subject of a distribution and are of a 

class which is required to be registered 

under section 12 of the 1934 Act, and 

are issued by an issuer that has been 

subject to the reporting requirements of 

section 13 of the 1934 Act for a period 

of at least ninety (90) days immediately 

preceding the sale of such Securities 

and that has filed all reports required to 

be filed hereunder with the SEC during 

the preceding twelve (12) months. 

5. The aggregate amount of Securities 

of an issue purchased, pursuant to this 

exemption, by the BlackRock Manager 

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

and (ii) the assets, calculated on a pro 

rata basis, of all Client Plans investing 

in Pooled Funds managed by the 

BlackRock Manager; and (iii) the assets 

of plans to which the BlackRock 

Manager renders investment advice 

within the meaning of 29 CFR 2510.3 

21(c) does not exceed: 

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

amount of the Securities being offered 

in an issue, if such Securities are equity 

securities; 

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

total amount of the Securities being 

offered in an issue, if such Securities are 

Asset-Backed Securities rated in one of 

the three highest rating categories by at 

least one of the Rating Organizations; 

provided that none of the Rating 

Organizations rates such Securities in a 

category lower than the third highest 

rating category; 

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

total amount of the Securities being 

offered in an issue, if such Securities are 

debt Securities rated in one of the four 

highest rating categories by at least one 

of the Rating Organizations; provided 

that none of the Rating Organizations 

rates such Securities in a category lower 

than the fourth highest rating category; 

or 

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

total amount of the Securities being 

offered in an issue, if such Securities are 

debt Securities rated in the fifth or sixth 

highest rating categories by at least one 

of the Rating Organizations; provided 

that none of the Rating Organizations 

rates such Securities in a category lower 

than the sixth highest rating category; 

and 

(e) the assets of any single Client Plan 

(and the assets of any Client Plans 

investing in Pooled Funds) may not be 

used to purchase any Securities being 

offered, if such Securities are debt 

Securities rated lower than the sixth 

highest rating category by any of the 

Rating Organizations; 

(f) notwithstanding the percentage of 

Securities of an issue permitted to be 

acquired, as set forth in Subsections 

A.(5)(a)–(d) of this Section IV., the 

amount of Securities in any issue 

(whether equity or debt Securities or 

Asset-Backed Securities) purchased, 

pursuant to this exemption, by the 

BlackRock Manager on behalf of any 

single Client Plan, either individually or 

through investment, calculated on a pro 

rata basis, in a Pooled Fund may not 

exceed three percent (3%) of the total 

amount of such Securities being offered 

in such issue, provided that a SubAdvised Pooled Fund described in 

Section VI.AAA. as a whole may 

purchase up to three percent (3%) of an 

issue; and 

(g) If purchased in an Eligible Rule 

144A Offering, the total amount of the 

Securities being offered for purposes of 

determining the percentages, described, 

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

is the total of: 

(i) The principal amount of the 

offering of such class of Securities sold 

by underwriters or members of the 

selling syndicate to QIBs; plus 

(ii) The principal amount of the 

offering of such class of Securities in 

any concurrent public offering. 

6. The aggregate amount to be paid by 

any single Client Plan in purchasing any 

Securities which are the subject of this 

exemption, including any amounts paid 

by any Client Plan in purchasing such 

Securities through a Pooled Fund, 

calculated on a pro rata basis, does not 

exceed three percent (3%) of the fair 

market value of the net assets of such 

Client Plan, as of the last day of the most 

recent fiscal quarter of such Client Plan 

prior to such transaction, provided that 

a Sub-Advised Pooled Fund as a whole 

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

market value of its net assets in 

purchasing such Securities. 

7. The covered transactions are not 

part of an agreement, arrangement, or 

understanding designed to benefit any 

BlackRock Entity or MPS. 

8. Each Client Plan shall have total 

net assets with a value of at least $50 

million (the $50 Million Net Asset 

Requirement). For purposes of engaging 


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in covered transactions involving an 

Eligible Rule 144A Offering, each Client 

Plan shall have total net assets of at least 

$100 million in Securities of issuers that 

are not affiliated with such Client Plan 

(the $100 Million Net Asset 

Requirement). 

For purposes of a Pooled Fund 

engaging in an Affiliated Underwriting, 

each Client Plan in such Pooled Fund 

other than a Sub-Advised Pooled Fund 

shall have total net assets with a value 

of at least $50 million. Notwithstanding 

the foregoing, if each such Client Plan 

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

total net assets with a value of at least 

$50 million, the $50 Million Net Asset 

Requirement will be met, if fifty percent 

(50%) or more of the units of beneficial 

interest in such Pooled Fund are held by 

investors, each of which has total net 

assets with a value of at least $50 

million. 

For purposes of a Pooled Fund 

engaging in an Affiliated Underwriting 

involving an Eligible Rule 144A 

Offering, each Client Plan in such 

Pooled Fund other than a Sub-Advised 

Pooled Fund shall have total net assets 

of at least $100 million in Securities of 

issuers that are not affiliated with such 

Client Plan. Notwithstanding the 

foregoing, if each such Client Plan in 

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

total net assets of at least $100 million 

in Securities of issuers that are not 

affiliated with such Client Plan, the 

$100 Million Net Asset Requirement 

will be met if fifty percent (50%) or 

more of the units of beneficial interest 

in such Pooled Fund are held by 

investors, each of which have total net 

assets of at least $100 million in 

Securities of issuers that are not 

affiliated with such investor, and the 

Pooled Fund itself qualifies as a QIB. 

For purposes of the net asset 

requirements described, above in 

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

Plans is maintained by a single 

employer or controlled group of 

employers, as defined in ERISA section 

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

Requirement (or in the case of an 

Eligible Rule 144A Offering, the $100 

Million Net Asset Requirement) may be 

met by aggregating the assets of such 

Client Plans, if the assets of such Client 

Plans are pooled for investment 

purposes in a single master trust. 

9. No more than twenty percent (20%) 

of the assets of a Pooled Fund, at the 

time of a covered transaction, are 

comprised of assets of In-House Plans 

for which the BlackRock Manager, or a 

BlackRock Entity exercises investment 

discretion. 

10. The BlackRock Manager must be 

a QPAM, and, in addition to satisfying 

the requirements for a QPAM under 

section VI(a) of PTE 84–14, the 

BlackRock Manager must also have total 

client assets under its management and 

control in excess of $5 billion, as of the 

last day of its most recent fiscal year and 

shareholders’ or partners’ equity in 

excess of $1 million. 

11. The BlackRock Manager 

maintains, or causes to be maintained, 

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

of any covered transaction such records 

as are necessary to enable the persons 

described below in Section IV.A.12.(a) 

to determine whether the conditions of 

this exemption have been met, except 

that: 

(a) No party in interest with respect to 

a plan which engages in the covered 

transactions, other than the BlackRock 

Manager, shall be subject to a civil 

penalty under ERISA section 502(i) or 

the taxes imposed by Code sections 

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

maintained, or not available for 

examination as required below by 

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

(b) A separate prohibited transaction 

shall not be considered to have occurred 

if, due to circumstances beyond the 

control of the BlackRock Manager, such 

records are lost or destroyed prior to the 

end of the six-year period. 

12. (a) Except as provided below, in 

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

notwithstanding the provisions of 

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

section 504, the records referred to, 

above, in Section IV.A.11. are 

unconditionally available at their 

customary location for examination 

during normal business hours by: 

(i) Any duly authorized employee or 

representative of the Department, the 

Internal Revenue Service, or the SEC; 

(ii) Any fiduciary of any plan that 

engages in the covered transactions, or 

any duly authorized employee or 

representative of such fiduciary; 

(iii) Any employer of participants and 

beneficiaries and any employee 

organization whose members are 

covered by a plan that engages in the 

covered transactions, or any authorized 

employee or representative of these 

entities; or 

(iv) Any participant or beneficiary of 

a plan that engages in the covered 

transactions, or duly authorized 

employee or representative of such 

participant or beneficiary; 

(b) None of the persons described in 

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

be authorized to examine trade secrets 

of the BlackRock Manager, or 

commercial or financial information 

which is privileged or confidential; and 

(c) Should the BlackRock Manager 

refuse to disclose information on the 

basis that such information is exempt 

from disclosure, pursuant to Section 

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

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

day following the request, provide a 

written notice advising that person of 

the reasons for the refusal and that the 

Department may request such 

information. 

B. Affiliated Servicing 

1. The Securities are CMBS that are 

rated in one of the three highest rating 

categories by a Rating Organization; 

provided that none of the Rating 

Organizations rates such Securities in a 

category lower than the third highest 

rating category. 

2. The purchase of the CMBS meets 

the conditions of an applicable 

Underwriter Exemption. 

3. (a) The aggregate amount of CMBS 

of an issue purchased, pursuant to this 

exemption, by the BlackRock Manager 

with: 

(i) The assets of all Client Plans; and 

(ii) The assets, calculated on a pro rata 

basis, of all Client Plans and In-House 

Plans investing in Pooled Funds 

managed by the Asset Manager; and 

(iii) The assets of plans to which the 

Asset Manager renders investment 

advice, within the meaning of 29 CFR 

Sec. 2510.3–21(c), does not exceed 

thirty five percent (35%) of the total 

amount of the CMBS being offered in an 

issue. 

(b) Notwithstanding the percentage of 

CMBS of an issue permitted to be 

acquired, as set forth in Section 

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

of CMBS in any issue purchased, 

pursuant to this exemption, by the Asset 

Manager on behalf of any single Client 

Plan, either individually or through 

investment, calculated on a pro rata 

basis, in a Pooled Fund may not exceed 

three percent (3%) of the total amount 

of such CMBS being offered in such 

issue, and 

(c) If purchased in an Eligible Rule 

144A Offering, the total amount of the 

CMBS being offered for purposes of 

determining the percentages described 

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

(i) The principal amount of the 

offering of such class of CMBS sold by 

underwriters or members of the selling 

syndicate to QIBs; plus 

(ii) The principal amount of the 

offering of such class of CMBS in any 

concurrent public offering. 

4. The aggregate amount to be paid by 

any single Client Plan in purchasing any 

CMBS which are the subject of this 

exemption, including any amounts paid 

by any Client Plan in purchasing such 


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50654 Federal Register / Vol. 76, No. 157 / Monday, August 15, 2011 / Notices 

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

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

26The definition of terms herein shall apply 

equally to the singular and plural forms of the terms 

defined. Section headings are for convenience only. 

CMBS through a Pooled Fund, 

calculated on a pro rata basis, does not 

exceed three percent (3%) of the fair 

market value of the net assets of such 

Client Plan, as of the last day of the most 

recent fiscal quarter of such Client Plan 

prior to such transaction. 

5. The Covered Transactions under 

this Section IV.B. are not part of an 

agreement, arrangement, or 

understanding designed to benefit any 

MPS. 

6. The requirements of Sections 

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

Section V: Correction Procedures 

A. 1. The ECO shall monitor Covered 

Transactions and shall determine 

whether a particular Covered 

Transaction constitutes a Violation. The 

ECO shall notify the IM within five (5) 

business days following the discovery of 

any Violation. 

2. The ECO shall make an initial 

determination as to how to correct a 

Violation and place the conclusion of 

such determination in writing, with 

such conclusion disclosed to the IM 

within five (5) business days of the 

placing of the conclusion of such 

determination in writing. Following the 

initial determination, the ECO must 

keep the IM apprised on a current basis 

of the process of correction and must 

consult with the IM regarding each 

Violation and the appropriate form of 

correction. The ECO shall report the 

correction of the Violation to the IM 

within five (5) business days following 

completion of the correction. For 

purposes of this Section V.A.2., 

‘‘correction’’ must be consistent with 

ERISA section 502(i) and Code section 

4975(f)(5). 

3. The IM shall determinate whether 

it agrees that the correction of a 

Violation by the ECO is adequate and 

shall place the conclusion of such 

determination in writing, and, if the IM 

does not agree with the adequacy of the 

correction, the IM shall have the 

authority to require additional 

corrective actions by BlackRock. 

4. A summary of Violations and 

corrections of Violations will be in the 

IM’s annual compliance report as 

described in Section II.E.12. 

B. Special Correction Procedure 

1. If a Covered Transaction which 

would otherwise constitute a Violation 

is corrected under this ‘‘Special 

Correction Procedure,’’ such Covered 

Transaction shall continue to be exempt 

under Section I of this exemption. 

2. (a) The Special Correction 

Procedure is a complete correction of 

the Violation no later than fourteen (14) 

business days following the date on 

which the ECO submits the quarterly 

report to the IM for the quarter in which 

the Covered Transaction first would 

become a non-exempt prohibited 

transaction by reason of constituting a 

Violation if not for this Section V.B. 

(b) Solely for purposes of the Special 

Correction Procedure, ‘‘correction’’ of a 

Covered Transaction which would 

otherwise be a Violation means either: 

(i) Restoring the Client Plan to the 

position it would have been in had the 

conditions of the exemption been 

complied with; 

(ii) correction consistent with ERISA 

section 502(i) and Code section 

4975(f)(5); or 

(iii) correction consistent with the 

Voluntary Fiduciary Correction 

Program.25

(c) Other than with respect to the 

definition of ‘‘correction’’ specified 

above, when utilizing the Special 

Correction Procedure the ECO and the 

IM shall comply with Section V.A. 

Section VI: Definitions 26

A. ‘‘1933 Act’’ means the Securities 

Act of 1933, as amended. 

B. ‘‘1934 Act’’ or ‘‘Exchange Act’’ 

means the Securities Exchange Act of 

1934, as amended. 

C. ‘‘1940 Act’’ means the Investment 

Company Act of 1940, as amended. 

D. ‘‘$50 Million Net Asset 

Requirement’’ shall have the meaning 

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

exemption. 

E. ‘‘$100 Million Net Asset 

Requirement’’ shall have the meaning 

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

exemption. 

F. ‘‘ABCP Conduit’’ means a special 

purpose vehicle that acquires assets 

from one or more originators and issues 

commercial paper to provide funding to 

the originator(s). Such vehicles are 

typically administered by a bank, but is 

not required to be administered by a 

bank, which provides liquidity support 

(standing ready to purchase the 

conduit’s commercial paper if it cannot 

be rolled over) and/or credit support 

(committing to cover losses in the event 

of default). The program administrator 

also typically acts as placement agent 

for the commercial paper, sometimes 

together with one or more other 

placement agents. Commercial paper 

issued by such a conduit may be 

purchased directly from the program 

administrator or other placement agent, 

or traded on the secondary market with 

another broker-dealer making a market 

in the Securities. 

G. ‘‘Acquisition’’ means the 

acquisition by BlackRock of Barclays 

Global Investors UK Holdings, Ltd. and 

its subsidiaries on December 1, 2009. 

H. ‘‘Affiliate’’ of another person 

means: 

(1) Any person directly or indirectly, 

through one or more intermediaries, 

controlling, controlled by, or under 

common control with such person; 

(2) Any officer, director, partner, 

employee, or relative (as defined in 

section 3(15) of ERISA) of such other 

person; and 

(3) Any corporation or partnership of 

which such other person is an officer, 

director, partner or employee. 

I. ‘‘Asset-Backed Securities’’ means 

Securities which are pass-through 

certificates or trust certificates 

characterized as equity pursuant to 29 

CFR 2510.3–101 that represent a 

beneficial ownership interest in the 

assets of an issuer which is a trust, with 

any such trust limited to (1) A single or 

multi-family residential or commercial 

mortgage investment trust, (2) a motor 

vehicle receivable investment trust, or 

(3) a guaranteed governmental mortgage 

pool certificate investment trust, and 

which entitles the holder to payments of 

principal, interest and/or other 

payments made with respect to the 

assets of the trust, the corpus or assets 

of which consist solely or primarily of 

secured obligations that bear interest or 

are purchased at a discount. For 

purposes of Section IV.A. of this 

exemption, Asset-Backed Securities are 

treated as debt Securities. 

J. ‘‘authorizing fiduciary’’ has the 

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

of this exemption. 

K. ‘‘Automated Trading System’’ or 

‘‘ATS’’ means an electronic trading 

system, ECN or electronic clearing 

network or similar venue that functions 

in a manner intended to simulate a 

Securities exchange by electronically 

matching orders from multiple buyers 

and sellers, such as an ‘‘alternative 

trading system’’ within the meaning of 

the SEC’s Reg. ATS (17 CFR part 

242.300), as such definition may be 

amended from time to time, or an 

‘‘automated quotation system’’ as 

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

the 1934 Act. 

L. ‘‘B and C List’’ has the meaning set 

forth in Section III.A.1. of this 

exemption. 

M. ‘‘BlackRock’’ means BlackRock, 

Inc. and any successors thereof. 

N. ‘‘BlackRock Entity’’ means 

BlackRock and any entity directly or 

indirectly, through one or more 

intermediaries, under the control of 


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BlackRock, and any other entity which 

subsequently becomes directly or 

indirectly, through one or more 

intermediaries, under the control of 

BlackRock, and successors of the 

foregoing. 

O. ‘‘BlackRock Manager’’ means any 

bank, investment advisor, investment 

manager directly or indirectly, through 

one or more intermediaries, under the 

control of BlackRock, and any other 

bank, investment advisor, or investment 

manager which subsequently becomes 

directly or indirectly, through one or 

more intermediaries, under the control 

of BlackRock, and successors of the 

foregoing, including but not limited to 

BlackRock Advisors, LLC, BlackRock 

Financial Management, Inc., BlackRock 

Capital Management, Inc., BlackRock 

Institutional Management Corporation, 

BlackRock International, Ltd., State 

Street Research and Management 

Company, BlackRock Realty Advisors, 

Inc., BlackRock Investment 

Management, LLC, BlackRock Fund 

Advisors, and BlackRock Institutional 

Trust Company, N.A. and any of the 

investment advisors and investment 

manager it controls. 

P. ‘‘Buy-Up’’ means an initial 

acquisition of Securities issued by 

BlackRock by a BlackRock Manager, if 

such acquisition exceeds one percent 

(1%) of the aggregate daily trading 

volume for such Security, for an Index 

Account or Fund, or a Model-Driven 

Account or Fund which is necessary to 

bring the fund’s or account’s holdings of 

such Securities either to its 

capitalization-weighted or other 

specified composition in the relevant 

Index, as determined by the 

organization maintaining such Index, or 

to its correct weighting as determined 

by the Model. 

Q. ‘‘Client Plan’’ means any plan 

subject to ERISA section 406, Code 

section 4975 or FERSA section 8477(c) 

for which a BlackRock Manager is a 

fiduciary as described in ERISA section 

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

Pooled Fund, MPS Plan, Index Account 

or Fund, Model-Driven Account or 

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

the contrary. 

R. ‘‘CMBS’’ means an Asset-Backed 

Security with respect to which the 

assets or corpus of the issuer consist 

solely or primarily of obligations 

secured by commercial real property 

(including obligations secured by 

leasehold interests on commercial real 

property). 

S. ‘‘Code’’ means the Internal Revenue 

Code of 1986, as amended. 

T. ‘‘control’’ means the power to 

exercise a controlling influence over the 

management or policies of a person 

other than an individual. 

U. ‘‘Covered Transaction’’ means each 

transaction set forth in Section III by a 

BlackRock Manager for a Client Plan 

with, affecting or involving, directly or 

indirectly, an MPS and/or a BlackRock 

Entity. 

V. ‘‘Creation Shares’’ means new 

shares in an ETF created by an exchange 

of a specified basket of Securities and/ 

or cash to the ETF for such new shares 

of the ETF. 

W. ‘‘ECO Function’’ means the ECO 

and such other BlackRock Entity 

employees in legal and compliance roles 

working under the supervision of the 

ECO in connection with the Covered 

Transactions. The list of BlackRock 

Entity employees shall be shared with 

the IM from time to time, not less than 

quarterly, and such employees will be 

made available to discuss the relevant 

Covered Transactions with the IM to the 

extent the IM or the ECO deem it 

reasonably prudent. 

X. ‘‘Electronic Communications 

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

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

Regulation NMS under the 1934 Act. 

Y. ‘‘Eligible Rule 144A Offering’’ shall 

have the same meaning as defined in 

SEC Rule 10f–3(a)(4) (17 CFR 270.10f– 

3(a)(4)) under the 1940 Act. 

Z. ‘‘Eligible Securities Depository’’ 

means an eligible securities depository 

as that term is defined under Rule 17f– 

7 of the 1940 Act, as such definition 

may be amended from time to time. 

AA. ‘‘EPP Correction’’ has the 

meaning set forth in Section II.C. of this 

exemption. 

BB. ‘‘ERISA’’ means the Employee 

Retirement Income Security Act of 1974, 

as amended. 

CC. ‘‘Exemption Compliance Officer’’ 

or ‘‘ECO’’ means an officer of BlackRock 

or of a BlackRock Entity appointed by 

BlackRock or such BlackRock Entity, 

subject to the approval of the IM, who 

is responsible for compliance with the 

exemption. The ECO, unless otherwise 

stated in this exemption, will be 

responsible for: monitoring all Covered 

Transactions and reviewing compliance 

with all of the conditions of the 

exemption applicable thereto; approving 

certain Covered Transactions in advance 

as required by the terms of the 

exemption; reviewing reports of 

Covered Transactions and the results of 

sampling of Covered Transactions; and 

determining when Covered Transactions 

transgress the EPPs and/or constitute a 

Violation. 

DD. ‘‘ETF’’ means an exchange-traded 

open-end investment company 

registered under the 1940 Act. 

EE. ‘‘Exemption Polices and 

Procedures’’ or ‘‘EPPs’’ means the 

written policy adopted and 

implemented by BlackRock for 

BlackRock Entities that is reasonably 

designed to ensure compliance with the 

terms of the exemption. The EPPs must 

reflect the specific requirements of the 

exemption, but must also be designed to 

ensure that the decisions to enter into 

Covered Transactions on behalf of 

Client Plans with the MPSs are in the 

interests of Client Plans and their 

participants and beneficiaries, including 

by ensuring to the extent possible that 

the terms of each Covered Transaction 

are at least as favorable to the Client 

Plan as the terms generally available in 

comparable arm’s length transactions 

with unrelated parties. 

FF. ‘‘FERSA’’ means the Federal 

Employees’ Retirement System Act of 

1986, as amended. 

GG. ‘‘FHLMC’’ means the Federal 

Home Loan Mortgage Corporation. 

HH. ‘‘Fixed Income Obligations’’ 

means: (1) Fixed income obligations 

including structured debt or other 

instruments characterized as debt 

pursuant to 29 CFR 2510.3–101, 

including, but not limited to, debt 

convertible into equity, certificates of 

deposit and loans (other than loans with 

respect to which an MPS is the entity 

which acts as lead lender) and (2) 

guaranteed governmental mortgage pool 

certificates within the meaning of 29 

CFR 2510.3–101(i). Asset-Backed 

Securities are not Fixed Income 

Obligations for purposes of this 

exemption. 

II. ‘‘FNMA’’ means the Federal 

National Mortgage Association. 

JJ. ‘‘Foreign Bank’’ means an 

institution that has substantially similar 

powers to a bank as defined in section 

202(a)(2) of the Investment Advisers 

Act, as amended, has as of the last day 

of its most recent fiscal year, equity 

capital which is the equivalent of no 

less than $200 million, and is: 

(1)(a) Registered and regulated under 

the laws of the Financial Services 

Authority in the United Kingdom, or 

(b)(i) registered and regulated by a 

securities commission of a Province of 

Canada that is a member of the 

Canadian Securities Administration, 

and (ii) is subject to the oversight of a 

Canadian self-regulatory authority; or 

(2) subject to regulation by the 

relevant governmental banking 

agency(ies) of a country other than the 

United States and the regulation and 

oversight of these banking agencies were 

applicable to a bank that received: (i) An 

individual exemption, granted by the 

Department under section 408(a) of 

ERISA, involving the loan of securities 


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

authorization by the Department to 

engage in an otherwise prohibited 

transaction pursuant to Prohibited 

Transaction Exemption 96–62, as 

amended (PTE 96–62), involving the 

loan of securities by a plan to a bank. 

On the date this exemption becomes 

effective, the following countries shall 

qualify for purposes of this clause (ii): 

United Kingdom, Canada, Germany, 

Japan, Australia, Switzerland, France, 

the Netherlands and Sweden. 

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

broker-dealer that has, as of the last day 

of its most recent fiscal year, equity 

capital that is the equivalent of no less 

than $200 million and is: 

(1) Registered and regulated under the 

laws of the Financial Services Authority 

in the United Kingdom; 

(2) Registered and regulated by a 

securities commission of a Province of 

Canada that is a member of the 

Canadian Securities Administration, 

and is subject to the oversight of a 

Canadian self-regulatory authority; or 

(3) Registered and regulated under the 

relevant securities laws of a 

governmental entity of a country other 

than the United States and such 

securities laws and regulation were 

applicable to a broker-dealer that 

received: (a) An individual exemption, 

granted by the Department under 

section 408(a) of ERISA, involving the 

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

Department to engage in an otherwise 

prohibited transaction pursuant to PTE 

96–62, as amended, involving the loan 

of securities by a plan to a broker-dealer. 

On the date this exemption becomes 

effective, the following countries shall 

qualify for purposes of this clause (2): 

United Kingdom, Canada, Germany, 

Japan, Australia, Switzerland, France, 

the Netherlands and Sweden. 

LL. ‘‘Foreign Collateral’’ means: 

(1) Securities issued by or guaranteed 

as to principal and interest by the 

following Multilateral Development 

Banks, the obligations of which are 

backed by the participating countries, 

including the United States: The 

International Bank for Reconstruction 

and Development, the Inter-American 

Development Bank, the Asian 

Development Bank, the African 

Development Bank, the European Bank 

for Reconstruction and Development 

and the International Finance 

Corporation; 

(2) Foreign sovereign debt securities 

provided that at least one nationally 

recognized statistical rating organization 

has rated in one of its two highest 

categories either the issue, the issuer or 

guarantor; 

(3) The British pound, the Canadian 

dollar, the Swiss franc, the Japanese yen 

or the Euro; 

(4) Irrevocable letters of credit issued 

by a Foreign Bank, other than the 

borrower or an affiliate thereof, which 

has a counterparty rating of investment 

grade or better as determined by a 

nationally recognized statistical rating 

organization; or 

(5) Any type of collateral described in 

Rule 15c3–3 of the 1934 Act as amended 

from time to time provided that the 

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

Broker-Dealer and such fiduciary 

indemnifies the plan with respect to the 

difference, if any, between the 

replacement cost of the borrowed 

Securities and the market value of the 

collateral on the date of a borrower 

default plus interest and any transaction 

costs which a plan may incur or suffer 

directly arising out of a borrower 

default. Notwithstanding the foregoing, 

collateral described in any of the 

categories enumerated in section V(e) of 

Prohibited Transaction Exemption 

2006–16 will be considered U.S. 

Collateral for purposes of the 

exemption. 

MM. ‘‘Foreign Exchange Transaction’’ 

means the exchange of the currency of 

one nation for the currency of another 

nation, or a contract for such an 

exchange. The term Foreign Exchange 

Transaction includes option contracts 

on foreign exchange transactions. 

Foreign Exchange Transactions may be 

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

depending on the settlement date of the 

transaction. 

NN. ‘‘GNMA’’ means the Government 

National Mortgage Association. 

OO. ‘‘Independent Monitor’’ or ‘‘IM’’ 

means an individual or entity appointed 

by BlackRock to carry out certain 

functions set forth in Sections II, III and 

V of the exemption and who (or which), 

given the number of types of Covered 

Transactions and the number of actual 

individual Covered Transactions 

potentially covered by the exemption, 

must be knowledgeable and experienced 

with respect to each Covered 

Transaction and able to demonstrate 

sophistication in relevant markets, 

instruments and trading techniques 

relative thereto, and, in addition, must 

understand and accept in writing its 

duties and responsibilities under ERISA 

and the exemption with respect to the 

Client Plans. The IM must be 

independent of and unrelated to 

BlackRock and any MPS. For purposes 

of this exemption, such individual or 

entity will not be deemed to be 

independent of and unrelated to 

BlackRock and the MPSs if: 

(1) Such individual or entity directly 

or indirectly controls, is controlled by, 

or is under common control with 

BlackRock or an MPS; 

(2) Such individual or entity, or any 

employee thereof performing services in 

connection with this exemption, or an 

officer, director, partner, or highly 

compensated employee (as defined in 

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

an officer, director, partner or highly 

compensated employee (as defined in 

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

BlackRock or an MPS; or any member of 

the business segment performing 

services in connection with this 

exemption is a relative of an officer, 

director, partner or highly compensated 

employee (as defined in Code section 

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

However, if an individual is a director 

of the IM and an officer, director, 

partner or highly compensated 

employee (as defined in Code section 

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

and if he or she abstains from 

participation in any of the services 

performed by the IM under this 

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

shall not apply. 

For purposes of this Subsection, the 

term officer means a president, any 

senior vice president in charge of a 

principal business unit, division or 

function (such as sales, administration, 

or finance), or any other officer who 

performs a policy-making function for 

the IM, BlackRock, or an MPS. 

(3) The IM directly or indirectly 

receives any compensation or other 

consideration for the IM’s personal 

account in connection with any Covered 

Transaction, except that the IM may 

receive compensation from BlackRock 

for acting as IM as contemplated herein 

if the amount or payment of such 

compensation is reasonable and not 

contingent upon or in any way affected 

by any decision made by the IM while 

acting as IM; or 

(4) The annual gross revenue received 

by the IM, during any year of its 

engagement, from the MPSs and 

BlackRock Entities for all services 

exceeds the greater of (a) Five percent 

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

from all sources for its prior tax year, or, 

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

revenue of the IM and its majority 

shareholder from all sources for their 

prior tax year. 

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

Securities or commodities index that 

represents the investment performance 

of a specific segment of the market for 

equity or debt Securities or commodities 

in the United States and/or an 

individual foreign country or any 


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collection of foreign countries, but only 

if— 

(1) The organization creating and 

maintaining the index is: 

(a) Engaged in the business of 

providing financial information, 

evaluation, advice or Securities 

brokerage services to institutional 

clients, 

(b) a publisher of financial news or 

information, or 

(c) a public Securities exchange or 

association of Securities dealers; and 

(2) The index is created and 

maintained by an organization 

independent of all BlackRock Entities. 

For purposes of this definition of 

‘‘Index,’’ every BlackRock Entity is 

deemed to be independent of every 

MPS. 

(3) The index is a generally accepted 

standardized index of Securities or 

commodities which is not specifically 

tailored for the use of a BlackRock 

Manager(s). 

(4) If the organization creating, 

providing or maintaining the Index is an 

MPS: 

(a) such Index must be widely-used in 

the market by independent institutional 

investors other than pursuant to an 

investment management or advisory 

relationship with a BlackRock Manager, 

and must be prepared or applied by 

such MPS in the same manner as for 

customers other than a BlackRock 

Manager(s); 

(b) BlackRock must certify to the ECO 

whether, in its reasonable judgment, 

such Index is widely-used in the 

market. In making this determination, 

BlackRock shall take into consideration 

factors such as (i) Publication of 

summary Index information by the MPS 

providing the Index, Bloomberg, 

Reuters, or a similar institution involved 

in the dissemination of financial 

information, and (ii) delivery of Index 

information including but not limited to 

Index component information by such 

MPS to clients or other subscribers 

including by electronic means including 

via the Internet; 

(c) BlackRock must notify the ECO if 

it becomes aware that: (i) Such Index is 

operated other than in accordance with 

objective rules, in the ordinary course of 

business, (ii) manipulation of any such 

Index has occurred for the purpose of 

benefiting BlackRock, or (iii) in the 

event that any rule change occurred in 

connection with the rules underlying 

such Index, such rule change was made 

by the MPS for the purpose of benefiting 

BlackRock; provided, however, this 

Subsection (c)(iii) expressly excludes 

instances where the rule changes were 

made in response to requests from 

clients/prospective clients of BlackRock 

even if BlackRock is ultimately hired to 

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

sponsor X requests a ‘‘Global ex-Sudan 

Fixed Income Index’’, an MPS decides 

to sponsor such index and plan sponsor 

X approaches BlackRock or otherwise 

issues a ‘‘Request for Proposal’’ for 

investment managers who could manage 

an index portfolio benchmarked to the 

Global ex-Sudan Fixed Income Index). 

(d) BlackRock must certify to the ECO 

annually that it is not aware of the 

occurrence of any of the events 

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

BlackRock cannot so certify, or if 

BlackRock provides the ECO with the 

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

the ECO shall notify the IM, and the IM 

must take appropriate remedial action 

which may include, but need not be 

limited to, instructions for relevant 

BlackRock Managers to cease using such 

Index. 

QQ. ‘‘Index Account or Fund’’ means 

any investment fund, account or 

portfolio sponsored, maintained, 

trusteed, or managed by a BlackRock 

Manager or a BlackRock Entity, in 

which one or more Client Plans invest, 

and— 

(1) Which is designed to track the rate 

of return, risk profile and other 

characteristics of an Index by either (i) 

replicating the same combination of 

Securities or commodities which 

compose such Index or (ii) sampling the 

Securities or commodities which 

compose such Index based on objective 

criteria and data; 

(2) for which the BlackRock Manager 

does not use its discretion, or data 

within its control, to affect the identity 

or amount of Securities or commodities 

to be purchased or sold; 

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

to either ERISA section 406, Code 

section 4975 or FERSA section 8477(c); 

and, 

(4) that involves no agreement, 

arrangement, or understanding 

regarding the design or operation of the 

Index Account or Fund which is 

intended to benefit a BlackRock Entity 

or an MPS, or any party in which a 

BlackRock Entity or an MPS may have 

an interest. 

For purposes of this definition of 

‘‘Index Account or Fund’’, every 

BlackRock Entity is deemed to be 

independent of each MPS. 

RR. ‘‘In-House Plan’’ means an 

employee benefit plan that is subject to 

ERISA section 406 and/or Code section 

4975, and that is sponsored by a 

BlackRock Entity for its employees. 

SS. ‘‘Interbank Rate’’ means the 

interbank bid and asked rate for foreign 

exchange transactions of comparable 

size and maturity at the time of the 

transaction as quoted on a nationally 

recognized service for facilitating 

foreign currency trades between large 

commercial banks and Securities 

dealers. 

TT. ‘‘know’’ means to have actual 

knowledge. BlackRock Managers will be 

deemed to have actual knowledge of 

information set forth in a written 

agreement or offering document as of 

the date the BlackRock Manager 

receives such agreement or document. 

UU. ‘‘Model’’ means a computer 

model that is based on prescribed 

objective criteria using independent 

data not within the control of a 

BlackRock Entity to transform an Index. 

VV. ‘‘Model-Driven Account or Fund’’ 

means any investment fund, account or 

portfolio sponsored, maintained, 

trusteed, or managed by a BlackRock 

Manager or a BlackRock Entity in which 

one or more Client Plans invest, and— 

(1) Which is composed of Securities 

or commodities the identity of which 

and the amount of which are selected by 

a Model; 

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

to either ERISA section 406, Code 

section 4975 or FERSA section 8477(c); 

and 

(3) that involves no agreement, 

arrangement, or understanding 

regarding the design or operation of the 

Model-Driven Account or Fund or the 

utilization of any specific objective 

criteria which is intended to benefit a 

BlackRock Entity or an MPS, or any 

party in which a BlackRock Entity or an 

MPS may have an interest. 

For purposes of this definition of 

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

BlackRock Entity is deemed to be 

independent of each MPS. 

WW. ‘‘MPS’’ or ‘‘Minority Passive 

Shareholder’’ means (1) Barclays PLC, 

(2) Bank of America Corporation, (3) 

The PNC Financial Services Group, Inc., 

or (4) each entity directly or indirectly, 

through one or more intermediaries, 

controlling, controlled by or under 

common control with one or more of 

Barclays PLC (Barclays MPSs), Bank of 

America Corporation (BOA MPSs) or 

The PNC Financial Services Group, Inc., 

(PNC MPSs) (each of the PNC MPSs, 

Barclays MPSs, and the BOA MPSs, an 

MPS Group) but excluding any and all 

BlackRock Entities. Bank of America 

Corporation and any entity directly or 

indirectly, through one or more 

intermediaries, controlling, controlled 

by or under common control with Bank 

of America Corporation (collectively, 

the BOA Group) shall cease to be an 

MPS on the day after the number of 

representatives of the BOA Group on the 

BlackRock Board of Directors is reduced 

to one (1). 


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XX. ‘‘MPS Group’’ shall have the 

meaning set forth in the definition of 

MPS. 

YY. ‘‘MPS Plans’’ means an employee 

benefit plan(s) that is subject to ERISA 

section 406 and/or Code section 4975, 

and that is sponsored by an MPS for its 

employees. 

ZZ. ‘‘Other Account or Fund’’ means 

any investment fund, account or 

portfolio sponsored, maintained, 

trusteed, or managed by a BlackRock 

Manager or a BlackRock Entity in which 

one or more Client Plans invest, and— 

(1) which is not an Index Account or 

Fund or a Model-Driven Account or 

Fund; and 

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

to either ERISA section 406, Code 

section 4975 or FERSA section 8477(c). 

AAA. ‘‘Pooled Fund’’ means a 

common or collective trust fund or other 

pooled investment fund: 

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

(2) for which a BlackRock Manager 

exercises discretionary authority or 

discretionary control respecting the 

management or disposition of the assets 

of such fund(s); and 

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

to either ERISA section 406, Code 

section 4975 or FERSA section 8477(c). 

Solely for purposes of Section IV of 

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

only include funds or trusts which 

otherwise meet this definition but 

which also are either (i) Maintained by 

a BlackRock Entity or (ii) maintained by 

a person which is not a BlackRock 

Entity but is sub-advised by a BlackRock 

Manager, provided that with respect to 

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

fund or trust is either a bank-maintained 

common or collective trust fund or an 

insurance company pooled separate 

account that holds assets of at least $250 

million, (B) the bank or insurance 

company sponsoring the pooled fund 

has total client assets under its 

management or control in excess of $5 

billion as of the last day of its most 

recent fiscal year, and shareholders’ or 

partners’ equity in excess of $1 million, 

and (C) the decision to invest the Client 

Plan into the bank-maintained common 

or collective trust or insurance company 

pooled separate account and to maintain 

such investment is made by a Client 

Plan fiduciary which is not a BlackRock 

Entity. Such sub-advised Pooled Funds 

are sometimes referred to herein as 

‘‘Sub-Advised Pooled Funds’’. 

BBB. ‘‘QPAM Exemption’’ or ‘‘PTE 

84–14’’ means Prohibited Transaction 

Exemption 84–14, as amended. 

CCC. ‘‘Qualified Professional Asset 

Manager’’ or ‘‘QPAM’’ shall have the 

meaning set forth in Section VI(a) of the 

QPAM Exemption. 

DDD. ‘‘Qualified Institutional Buyer’’ 

or ‘‘QIB’’ shall have the same meaning 

as defined in SEC Rule 144A (17 CFR 

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

EEE. ‘‘Rating Organizations’’ means 

Standard & Poor’s Rating Services, 

Moody’s Investors Service, Inc., Fitch 

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

or any similar agency subsequently 

recognized by the Department as a 

Rating Organization or any successors 

thereto. 

FFF. ‘‘Recognized Securities 

Exchange’’ means a U.S. securities 

exchange that is registered as a 

‘‘national securities exchange’’ under 

section 6 of the 1934 Act, or a 

designated offshore securities market, as 

defined in Regulation S of the SEC (17 

CFR part 230.902(b)), as such definition 

may be amended from time to time, 

which performs with respect to 

Securities the functions commonly 

performed by a stock exchange within 

the meaning of definitions under the 

applicable Securities laws (e.g., 17 CFR 

part 240.3b–16). 

GGG. ‘‘Registered Investment 

Advisor’’ means an investment advisor 

registered under the Investment 

Advisors Act of 1940, as amended, that 

has total client assets under its 

management or control in excess of $5 

billion as of the last day of its most 

recent fiscal year and shareholders’ or 

partners’ equity in excess of $1 million, 

as shown in the most recent balance 

sheet prepared within the two years 

immediately preceding a Covered 

Transaction, in accordance with 

generally accepted accounting 

principles. 

HHH. ‘‘SEC’’ means the United States 

Securities and Exchange Commission. 

III. ‘‘Securities’’ shall have the same 

meaning as defined in section 2(a)(36) of 

the 1940 Act. For purposes of Section IV 

of this exemption, except as where 

specifically identified, Asset-Backed 

Securities are treated as debt Securities. 

JJJ. ‘‘Special Notice’’ shall have the 

meaning set forth in Section II.F. of this 

exemption. 

KKK. ‘‘Three Quote Process’’ means 

three bids or offers (either of which 

being sometimes referred to as quotes) 

are received by a trader for a BlackRock 

Manager each of which such quotes 

such trader reasonably believes is an 

indication that the dealer presenting the 

bid or offer is willing to transact the 

trade at the stipulated volume under 

discussion, and all material terms 

(including volume) under discussion are 

materially similar with respect to each 

other such quote. In selecting the best of 

three such quotes, a BlackRock Manager 

shall maintain books and records for the 

three firm bids/offers in a convention 

that it reasonably believes is customary 

for the specific asset class (such as 

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

‘‘spread’’ quotes). For example, 

corporate bonds are often quoted on a 

spread basis and dealers customarily 

quote the spread above a certain 

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

size and direction such as a BlackRock 

trader may ask for quotes to sell $1 

million of a particular bond, dealer 1 

may quote 50 bps above the yield of the 

10 year treasury bond, dealer 2 might 

quote 52 bps above the yield of the 10 

year treasury bond and dealer 3 might 

quote 53 bps above the yield of the 10 

year treasury bond). If only two firm 

bids/offers can be obtained, the trade 

requires prior approval by the ECO and 

the ECO must inquire as to why three 

firm bids/offers could not be obtained. 

If in the case of a sale or purchase a 

trader for a BlackRock Manager 

reasonably believes it would be 

injurious to the Client Plan to specify 

the size of the intended trade to certain 

bidders, a bid on a portion of the 

intended trade may be treated as a firm 

bid if the trader documents (i) Why the 

bid price is a realistic indication of the 

economic terms for the actual amount 

being traded despite the difference in 

the size of the actual trade and (ii) why 

it would be harmful to the Client Plan 

to solicit multiple bids on the actual 

amount of the trade. If a trader for a 

BlackRock Manager solicits bids from 

three or more dealers on a sale or 

purchase of a certain volume of 

Securities, and receives back three or 

more bids, but at least one bid is not for 

the full amount of the intended sale, if 

the price offered by the partial bidder(s) 

is less than the price offered by the full 

bidder(s), the trader may assume a full 

bid by the partial bidder(s) would not be 

the best bid, and the trader can 

consummate the trade, in the case of at 

least two full bids, with the dealer 

making the better of the full bids, or in 

the case of only one full bid, with the 

dealer making that full bid. 

LLL. ‘‘Type A Transactions’’ means 

transactions between BlackRock 

Managers on behalf of Client Plans with 

MPSs which (i) are or were continuing 

transactions within the meaning of 

section VI(i) of PTE 84–14 and/or 

section IV(h) of Prohibited Transaction 

Exemption 91–38 in existence on the 

date of the Acquisition, and (ii) 

pursuant to which there is no discretion 

on the part of either party, other than 

the ability of the BlackRock Manager to 

sell or otherwise transfer the Client 

Plan’s position to a third party, or the 

ability of the MPS to sell or otherwise 

transfer its position to a third party, or 


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the ability of the MPS to otherwise 

terminate the transaction on previously 

specified terms. 

MMM. ‘‘Type B Covered 

Transactions’’ means transactions which 

meet the criteria to be Type A 

Transactions but which possess the 

additional feature that the BlackRock 

Manager, on behalf of a Client Plan, has 

the option to terminate the transaction 

with the MPS on previously specified 

terms. 

NNN. ‘‘Type C Covered Transactions’’ 

means transactions which meet the 

criteria to be Type B Covered 

Transactions but which possess the 

additional feature that the BlackRock 

Manager may terminate or modify the 

transaction on behalf of a Client Plan 

under certain circumstances, but only 

with negotiation and/or payment of 

consideration to the MPS or to the 

Client Plan which was not 

predetermined. 

OOO. ‘‘Underwriter Exemption(s)’’ 

means a group of individual exemptions 

granted by the Department to provide 

relief for the origination and operation 

of certain asset pool investment trusts 

and the acquisition, holding and 

disposition by plans of Asset-Backed 

Securities representing undivided 

interests in those trusts. Such group of 

individual exemptions was collectively 

amended by Prohibited Transaction 

Exemption 2009–31, 74 FR 59001 (Nov. 

16, 2009). 

PPP. ‘‘Unwind Period’’ shall have the 

meaning set forth in Section II.A.3.(b) of 

this exemption. 

QQQ. ‘‘Unwind Period 2’’ shall have 

the meaning set forth in Section III.W. 

of this exemption. 

RRR. ‘‘U.S. Bank’’ means a bank as 

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

Investment Advisers Act, as amended. 

SSS. ‘‘U.S. Broker-Dealer’’ means a 

broker-dealer registered under the 1934 

Act or exempted from registration under 

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

dealer in exempted government 

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

of the 1934 Act). 

TTT. ‘‘U.S. Collateral’’ means: 

(1) U.S. currency; 

(2) ‘‘government securities’’ as 

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

the 1934 Act; 

(3) ‘‘government securities’’ as 

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

1934 Act issued or guaranteed as to 

principal or interest by the following 

corporations: The Federal Home Loan 

Mortgage Corporation, the Federal 

National Mortgage Association, the 

Student Loan Marketing Association 

and the Financing Corporation; 

(4) mortgage-backed Securities 

meeting the definition of a ‘‘mortgage 

related security’’ set forth in section 

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

(5) negotiable certificates of deposit 

and bankers acceptances issued by a 

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

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

payable in the United States and 

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

term is defined in 17 CFR 240.15c3–1; 

or 

(6) irrevocable letters of credit issued 

by a U.S. Bank other than the borrower 

or an affiliate thereof, or any 

combination, thereof. 

WWW. ‘‘Violation’’ means a Covered 

Transaction which is a prohibited 

transaction under section 406 or 407 of 

ERISA, Code section 4975, or FERSA 

section 8477(c) and which is not exempt 

by reason of a failure to comply with 

this exemption or another 

administrative or statutory exemption. 

To the extent that the non-exempt 

prohibited transaction relates to an act 

or omission that is separate and distinct 

from a prior otherwise exempt 

transaction that may relate to the same 

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

instrument into an equity instrument or 

a creditor’s committee for a debt 

instrument), the Violation occurs only at 

the current point in time and no 

Violation shall be deemed to occur for 

the earlier transaction relating to the 

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

the asset) that was otherwise in 

compliance with ERISA, the Code or 

FERSA. 

Signed at Washington, DC, this 4th day of 

August, 2011. 

Ivan Strasfeld, 

Director of Exemption Determinations, 

Employee Benefits Security Administration, 

U.S. Department of Labor. 

[FR Doc. 2011–20344 Filed 8–12–11; 8:45 am] 

BILLING CODE 4510–29–P 


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