Federal Register / Vol. 65, No. 114 / Tuesday, June 13, 2000 / Notices 37175

(2) the trust owns or holds a security

interest in the leased motor vehicle; and

(3) the trust’s security interest in the

leased motor vehicle is at least as

protective of the trust’s rights as would

be the case if the trust consisted of

motor vehicle installment loan

contracts.

V. ‘‘Pooling and Servicing

Agreement’’ means the agreement or

agreements among a sponsor, a servicer

and the trustee establishing a trust. In

the case of certificates which are

denominated as debt instruments,

‘‘Pooling and Servicing Agreement’’ also

includes the indenture entered into by

the trustee of the trust issuing such

certificates and the indenture trustee.

W. ‘‘Rating Agency’’ means Standard

& Poor’s Structured Rating Group

(S&P’s), Moody’s Investors Service, Inc.

(Moody’s), Duff & Phelps Credit Rating

Co. (D&P) or Fitch IBCA, Inc. (Fitch) or

their successors;

X. ‘‘Capitalized Interest Account’’

means a trust account: (i) which is

established to compensate

certificateholders for shortfalls, if any,

between investment earnings on the prefunding account and the pass-through

rate payable under the certificates; and

(ii) which meets the requirements of

clause (c) of subsection III.B.(3).

Y. ‘‘Closing Date’’ means the date the

trust is formed, the certificates are first

issued and the trust’s assets (other than

those additional obligations which are

to be funded from the pre-funding

account pursuant to subsection II.A.(7))

are transferred to the trust.

Z. ‘‘Pre-Funding Account’’ means a

trust account: (i) Which is established to

purchase additional obligations, which

obligations meet the conditions set forth

in clauses (a)–(g) of subsection II.A.(7);

and (ii) which meets the requirements of

clause (c) of subsection III.B.(3).

AA. ‘‘Pre-Funding Limit’’ means a

percentage or ratio of the amount

allocated to the pre-funding account, as

compared to the total principal amount

of the certificates being offered which is

less than or equal to 25 percent.

BB. ‘‘Pre-Funding Period’’ means the

period commencing on the closing date

and ending no later than the earliest to

occur of: (i) the date the amount on

deposit in the pre-funding account is

less than the minimum dollar amount

specified in the pooling and servicing

agreement; (ii) the date on which an

event of default occurs under the

pooling and servicing agreement; or (iii)

the date which is the later of three

months or 90 days after the closing date.

CC. ‘‘McDonald’’ means McDonald

Investments Inc. and its affiliates.

The Department notes that this

exemption is included within the

meaning of the term ‘‘Underwriter

Exemption’’ as it is defined in section

V(h) of Prohibited Transaction

Exemption 95–60 (60 FR 35925, July 12,

1995), the Class Exemption for Certain

Transactions Involving Insurance

Company General Accounts at (see 60

FR 35932).

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 April

7, 2000 at 65 FR 18365.

FOR FURTHER INFORMATION CONTACT: Gary

Lefkowitz of the Department, telephone

(202) 219–8881. (This is not a toll-free

number.)

General Information

The attention of interested persons is

directed to the following:

(1) The fact that a transaction is the

subject of an exemption under section

408(a) of the Act and/or section

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

a fiduciary or other party in interest or

disqualified person from certain other

provisions to which the exemptions

does not apply and the general fiduciary

responsibility provisions of section 404

of the Act, which among other things

require a fiduciary to discharge his

duties respecting the plan solely in the

interest of the participants and

beneficiaries of the plan and in a

prudent fashion in accordance with

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

it affect the requirement of section

401(a) of the Code that the plan must

operate for the exclusive benefit of the

employees of the employer maintaining

the plan and their beneficiaries;

(2) These exemptions are

supplemental to and not in derogation

of, any other provisions of the Act and/

or the Code, including statutory or

administrative exemptions and

transactional rules. Furthermore, the

fact that a transaction is subject to an

administrative or statutory exemption is

not dispositive of whether the

transaction is in fact a prohibited

transaction; and

(3) The availability of these

exemptions is subject to the express

condition that the material facts and

representations contained in each

application accurately describes all

material terms of the transaction which

is the subject of the exemption.

Signed at Washington, DC, this 7th day of

June, 2000.

Ivan Strasfeld,

Director of Exemption Determinations,

Pension and Welfare Benefits Administration,

Department of Labor.

[FR Doc. 00–14809 Filed 6–12–00; 8:45 am]

BILLING CODE 4510–29–P

DEPARTMENT OF LABOR

Pension and Welfare Benefits

Administration

[Application No. D–10758, et al.]

Proposed Exemptions; Goldman,

Sachs & Co.

AGENCY: Pension and Welfare Benefits

Administration, Labor.

ACTION: Notice of proposed exemptions.

SUMMARY: This document contains

notices of pendency before the

Department of Labor (the Department) of

proposed exemptions from certain of the

prohibited transaction restrictions of the

Employee Retirement Income Security

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

Revenue Code of 1986 (the Code).

Written Comments and Hearing

Requests

All interested persons are invited to

submit written comments or request for

a hearing on the pending exemptions,

unless otherwise stated in the Notice of

Proposed Exemption, within 45 days

from the date of publication of this

Federal Register Notice. Comments and

requests for a hearing should state: (1)

the name, address, and telephone

number of the person making the

comment or request, and (2) the nature

of the person’s interest in the exemption

and the manner in which the person

would be adversely affected by the

exemption. A request for a hearing must

also state the issues to be addressed and

include a general description of the

evidence to be presented at the hearing.

ADDRESSES: All written comments and

request for a hearing (at least three

copies) should be sent to the Pension

and Welfare Benefits Administration,

Office of Exemption Determinations,

Room N–5649, U.S. Department of

Labor, 200 Constitution Avenue, NW.,

Washington, DC 20210. Attention:

Application No. ll, stated in each

Notice of Proposed Exemption. The

applications for exemption and the

comments received will be available for

public inspection in the Public

Documents Room of the Pension and

Welfare Benefits Administration, U.S.

Department of Labor, Room N–5638,

37176 Federal Register / Vol. 65, No. 114 / Tuesday, June 13, 2000 / Notices

200 Constitution Avenue, NW.,

Washington, DC 20210.

Notice to Interested Persons

Notice of the proposed exemptions

will be provided to all interested

persons in the manner agreed upon by

the applicant and the Department

within 15 days of the date of publication

in the Federal Register. Such notice

shall include a copy of the notice of

proposed exemption as published in the

Federal Register and shall inform

interested persons of their right to

comment and to request a hearing

(where appropriate).

SUPPLEMENTARY INFORMATION: The

proposed exemptions were requested in

applications filed pursuant to section

408(a) of the Act and/or section

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

accordance with procedures set forth in

29 CFR part 2570, subpart B (55 FR

32836, 32847, August 10, 1990).

Effective December 31, 1978, section

102 of Reorganization Plan No. 4 of

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

the authority of the Secretary of the

Treasury to issue exemptions of the type

requested to the Secretary of Labor.

Therefore, these notices of proposed

exemption are issued solely by the

Department.

The applications contain

representations with regard to the

proposed exemptions which are

summarized below. Interested persons

are referred to the applications on file

with the Department for a complete

statement of the facts and

representations.

Goldman, Sachs & Co., Located in New

York, New York

[Application No. D–10758]

Proposed Exemption

The Department is considering

granting an exemption under the

authority of section 408(a) of the Act

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

in accordance with the procedures set

forth in 29 CFR part 2570, subpart B (55

FR 32836, 32847, August 10, 1990).

Section I—Transactions

A. The restrictions of section

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

the sanctions resulting from the

application of section 4975 of the Code,

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

through (D) of the Code, shall not apply

to any purchase or sale of securities

between certain affiliates of Goldman,

Sachs & Co. (Goldman) which are

foreign broker-dealers or banks (the

Foreign Affiliates, as defined below) and

employee benefit plans (the Plans) with

respect to which the Foreign Affiliates

are parties in interest, including options

written by a Plan, Goldman, or a Foreign

Affiliate, provided that the following

conditions, and the General Conditions

of Section II, are satisfied:

(1) The Foreign Affiliate customarily

purchases and sells securities for its

own account in the ordinary course of

its business as a broker-dealer or bank;

(2) The terms of any transaction are at

least as favorable to the Plan as those

the Plan could obtain in a comparable

arm’s length transaction with an

unrelated party; and

(3) Neither the Foreign Affiliate nor

an affiliate thereof has discretionary

authority or control with respect to the

investment of the 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, and the Foreign Affiliate is a

party in interest or disqualified person

with respect to the Plan assets involved

in the transaction solely by reason of

section 3(14)(B) of the Act or section

4975(e)(2)(B) of the Code, or by reason

of a relationship to a person described

in such sections. For purposes of this

paragraph, the Foreign Affiliate shall

not be deemed to be a fiduciary with

respect to a Plan solely by reason of

providing securities custodial services

for a Plan.

B. The restrictions of sections

406(a)(1)(A) through (D) and 406(b)(2) of

the Act and the sanctions resulting from

the application of section 4975 of the

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

through (D) of the Code, shall not apply

to any extension of credit to the Plans

by the Foreign Affiliates to permit the

settlement of securities transactions,

regardless of whether they are effected

on an agency or a principal basis, or in

connection with the writing of options

contracts, provided that the following

conditions and the General Conditions

of Section II, are satisfied:

(1) The Foreign Affiliate is not a

fiduciary with respect to the Plan assets

involved in the transaction, unless no

interest or other consideration is

received by the Foreign Affiliate or an

affiliate thereof, in connection with

such extension of credit; and

(2) Any extension of credit would be

lawful under the Securities Exchange

Act of 1934 (the 1934 Act) and any rules

or regulations thereunder, if the 1934

Act, rules, or regulations were

applicable.

C. The restrictions of section

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

the sanctions resulting from the

application of section 4975 of the Code,

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

through (D) of the Code, shall not apply

to the lending of securities to the

Foreign Affiliates by the Plans, provided

that the following conditions, and the

General Conditions of Section II, are

satisfied:

(1) Neither the Foreign Affiliate nor

an affiliate thereof has discretionary

authority or control with respect to the

investment of the 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;

(2) The Plan receives from the Foreign

Affiliate (by physical delivery, by book

entry in a securities depository, wire

transfer, or similar means) by the close

of business on the day the loaned

securities are delivered to the Foreign

Affiliate, collateral consisting of cash,

securities issued or guaranteed by the

U.S. Government or its agencies or

instrumentalities, irrevocable U.S. bank

letters of credit issued by persons other

than the Foreign Affiliate or an affiliate

of the Foreign Affiliate, or any

combination thereof. All collateral shall

be in U.S. dollars, or dollardenominated securities or bank letters

of credit, and shall be held in the United

States;

(3) The collateral has, as of the close

of business on the preceding business

day, a market value equal to at least 100

percent of the then market value of the

loaned securities (or, in the case of

letters of credit, a stated amount equal

to same);

(4) The loan is made pursuant to a

written loan agreement (the Loan

Agreement), which may be in the form

of a master agreement covering a series

of securities lending transactions, and

which contains terms at least as

favorable to the Plan as those the Plan

could obtain in a comparable arm’s

length transaction with an unrelated

party;

(5) In return for lending securities, the

Plan either (a) receives a reasonable fee,

which is related to the value of the

borrowed securities and the duration of

the loan, or (b) has the opportunity to

derive compensation through the

investment of cash collateral. In the

latter case, the Plan may pay a loan

rebate or similar fee to the Foreign

Affiliate, if such fee is not greater than

what the Plan would pay in a

comparable arm’s length transaction

with an unrelated party;

(6) The Plan receives at least the

equivalent of all distributions on the

borrowed securities made during the

term of the loan, including, but not

limited to, cash dividends, interest

payments, shares of stock as a result of

stock splits, and rights to purchase

additional securities, that the Plan

would have received (net of applicable

Federal Register / Vol. 65, No. 114 / Tuesday, June 13, 2000 / Notices 37177

1The Department notes the applicant’s

representation that dividends and other

distributions on foreign securities payable to a

lending Plan may be subject to foreign tax

withholdings and that the Foreign Affiliate will

always put the Plan back in at least as good a

position as it would have been in had it not loaned

the securities.

2PTE 81–6 provides an exemption under certain

conditions from section 406(a)(1)(A) through (D) of

the Act and the corresponding provisions of section

4975(c) of the Code for the lending of securities that

are assets of an employee benefit plan to a U.S.

broker-dealer registered under the 1934 Act (or

exempted from registration under the 1934 Act as

a dealer in exempt Government securities, as

defined therein) or to a U.S. bank, that is a party

in interest with respect to such plan.

tax withholdings) 1 had it remained the

record owner of such securities;

(7) If the market value of the collateral

as of the close of trading on a business

day falls below 100 percent of the

market value of the borrowed securities

as of the close of trading on that day, the

Foreign Affiliate delivers additional

collateral, by the close of business on

the following business day, to bring the

level of the collateral back to at least 100

percent. However, if the market value of

the collateral exceeds 100 percent of the

market value of the borrowed securities,

the Foreign Affiliate may require the

Plan to return part of the collateral to

reduce the level of the collateral to 100

percent;

(8) Before entering into a Loan

Agreement, the Foreign Affiliate

furnishes to the independent Plan

fiduciary (a) the most recent available

audited statement of the Foreign

Affiliate’s financial condition, (b) the

most recent available unaudited

statement of its financial condition (if

more recent than the audited statement),

and (c) a representation that, at the time

the loan is negotiated, there has been no

material adverse change in its financial

condition that has not been disclosed

since the date of the most recent

financial statement furnished to the

independent Plan fiduciary. Such

representation may be made by the

Foreign Affiliate’s agreeing that each

loan of securities shall constitute a

representation that there has been no

such material adverse change;

(9) The Loan Agreement and/or any

securities loan outstanding may be

terminated by the Plan at any time,

whereupon the Foreign Affiliate 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 Plan within (a) the

customary delivery period for such

securities, (b) five business days, or (c)

the time negotiated for such delivery by

the Plan and the Foreign Affiliate,

whichever is least, or, alternatively,

such period as permitted by Prohibited

Transaction Class Exemption (PTE) 81–

6 (46 FR 7527, January 23, 1981, as

amended at 52 FR 18754, May 19, 1987),

as it may be amended or superseded; 2

(10) In the event that the loan is

terminated and the Foreign Affiliate

fails to return the borrowed securities,

or the equivalent thereof, within the

time described in paragraph 9, the Plan

may 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 Foreign Affiliate under the Loan

Agreement, and any expenses associated

with the sale and/or purchase. The

Foreign Affiliate is obligated to pay,

under the terms of the Loan Agreement,

and does pay, to the Plan the amount of

any remaining obligations and expenses

not covered by the collateral, plus

interest at a reasonable rate.

Notwithstanding the foregoing, the

Foreign Affiliate may, in the event it

fails to return borrowed securities as

described above, replace non-cash

collateral with an amount of cash not

less than the then current market value

of the collateral, provided that such

replacement is approved by the

independent Plan fiduciary; and

(11) The independent Plan fiduciary

maintains the situs of the Loan

Agreement in accordance with the

indicia of ownership requirements

under section 404(b) of the Act and the

regulations promulgated under 29 CFR

2550.404(b)–1. However, in the event

that the independent Plan fiduciary

does not maintain the situs of the Loan

Agreement in accordance with the

indicia of ownership requirements of

Section 404(b) of the Act, the Foreign

Affiliate shall not be subject to the civil

penalty which may be assessed under

section 502(i) of the Act, or the taxes

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

the Code.

If the Foreign Affiliate fails to comply

with any condition of the exemption in

the course of engaging in a securities

lending transaction, the Plan fiduciary

who caused the Plan to engage in such

transaction shall not be deemed to have

caused the Plan to engage in a

transaction prohibited by section

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

solely by reason of the Foreign

Affiliate’s failure to comply with the

conditions of the exemption.

Section II—General Conditions

A. The Foreign Affiliate is a registered

broker-dealer or bank subject to

regulation by a governmental agency, as

described in Section III.B, and is in

compliance with all applicable rules

and regulations thereof in connection

with any transactions covered by this

exemption;

B. The Foreign Affiliate, in

connection with any transactions

covered by this exemption, is in

compliance with the requirements of

Rule 15a–6 (17 CFR 240.15a–6) of the

1934 Act, and Securities and Exchange

Commission (SEC) interpretations

thereof, providing for foreign affiliates a

limited exemption from U.S. brokerdealer registration requirements;

C. Prior to any transaction, the

Foreign Affiliate enters into a written

agreement with the Plan in which the

Foreign Affiliate consents to the

jurisdiction of the courts of the United

States for any civil action or proceeding

brought in respect of the subject

transactions;

D. The Foreign Affiliate maintains, or

causes to be maintained, within the

United States for a period of six years

from the date of any transaction such

records as are necessary to enable the

persons described in paragraph E. to

determine whether the conditions of the

exemption have been met, except that—

(1) a party in interest with respect to

a Plan, other than the Foreign Affiliate,

shall not be subject to a civil penalty

under section 502(i) of the Act or the

taxes imposed by section 4975 (a) and

(b) of the Code, if such records are not

maintained, or not available for

examination, as required by paragraph

E; and

(2) a prohibited transaction shall not

be deemed to have occurred if, due to

circumstances beyond the Foreign

Affiliate’s control, such records are lost

or destroyed prior to the end of the six

year period; and

E. Notwithstanding any provisions of

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

of the Act, the Foreign Affiliate makes

the records referred to in paragraph D.

unconditionally available during normal

business hours at their customary

location to the following persons or a

duly authorized representative thereof:

(1) the Department, the Internal

Revenue Service, or the SEC; (2) any

fiduciary of a Plan; (3) any contributing

employer to a Plan; (4) any employee

organization any of whose members are

covered by a Plan; and (5) any

participant or beneficiary of a Plan.

However, none of the persons described

in (2) through (5) of this subsection are

authorized to examine the trade secrets

of the Foreign Affiliate or commercial or

financial information which is

privileged or confidential.

37178 Federal Register / Vol. 65, No. 114 / Tuesday, June 13, 2000 / Notices

Section III—Definitions

A. The term ‘‘affiliate’’ of another

person shall include: (1) any person

directly or indirectly, through one or

more intermediaries, controlling,

controlled by, or under common control

with such other person; (2) any officer,

director, or partner, employee or relative

(as defined in section 3(15) of the Act)

of such other person; and (3) any

corporation or partnership of which

such other person is an officer, director

or partner. For purposes of this

definition, the term ‘‘control’’ means the

power to exercise a controlling

influence over the management or

policies of a person other than an

individual;

B. The term ‘‘Foreign Affiliate’’ shall

mean an affiliate of Goldman, Sachs &

Co. that is subject to regulation as a

broker-dealer or bank by (1) the Ontario

Securities Commission and the

Investment Dealers Association in

Canada; (2) the Securities and Futures

Authority in the United Kingdom; (3)

the Deutsche Bundesbank and the

Federal Banking Supervisory Authority,

i.e., der Bundesaufsichtsamt fuer das

Kreditwesen (the BAK) in Germany; (4)

the Ministry of Finance and the Tokyo

Stock Exchange in Japan; (5) the

Australian Securities & Investments

Commission (the ASIC) in Australia; or

(6) the Swiss Federal Banking

Commission in Switzerland.

C. The term ‘‘security’’ shall include

equities, fixed income securities,

options on equity and on fixed income

securities, government obligations, and

any other instrument that constitutes a

security under U.S. securities laws. The

term ‘‘security’’ does not include swap

agreements or other notional principal

contracts.

Effective Date: This proposed

exemption, if granted, will be effective

as of April 15, 1999.

Summary of Facts and Representations

1. Goldman, Sachs & Co. (i.e.,

Goldman), a New York limited

partnership, is a wholly owned

subsidiary and the principal operating

subsidiary of The Goldman Sachs

Group, Inc. (the GS Group), a Delaware

corporation. Goldman, one of the largest

full-line investment services firms in the

United States, is registered with and

regulated by the SEC as a broker-dealer

and as an investment adviser, is

registered with and regulated by the

Commodity Futures Trading

Commission (the CFTC) as a futures

commission merchant, is a member of

the New York Stock Exchange (the

NYSE) and other principal securities

exchanges in the United States, and is

also a member of the National

Association of Securities Dealers, Inc.

(the NASD). As of August 27, 1999, the

GS Group had $236.3 billion in assets

and $8.6 billion in equity.

Goldman has several foreign affiliates

which are broker-dealers or banks.

Those covered by the proposed

exemption (i.e., the Foreign Affiliates),

and their respective regulating entities,

are as follows:

(a) Goldman Sachs Canada, located in

Toronto, is subject to regulation in

Canada by the Ontario Securities

Commission, as well as the Investment

Dealers Association, a self-regulatory

organization;

(b) Goldman Sachs International and

Goldman Sachs Equity Securities (U.K.),

both located in London, are subject to

regulation in the United Kingdom by the

Securities and Futures Authority;

(c) Goldman, Sachs & Co. oHG,

located in Frankfurt, is subject to

regulation in Germany by the Deutsche

Bundesbank and the

Bundesaufsichtsamt fuer das

Kreditwesen (i.e., the BAK);

(d) Goldman Sachs (Japan) Ltd.,

located in Tokyo, is subject to regulation

in Japan by the Ministry of Finance and

the Tokyo Stock Exchange;

(e) Goldman Sachs Australia, LLC (GS

Australia), located in Sydney, is subject

to regulation in Australia by the

Australian Securities & Investments

Commission (i.e., the ASIC); and

(f) Goldman, Sachs & Co. Bank,

located in Zurich, is subject to

regulation by the Swiss Federal Banking

Commission.

Goldman requests an individual

exemption to permit the Foreign

Affiliates identified above, as well as

those others who, in the future, may be

subject to governmental regulation in

Canada, the United Kingdom, Germany,

Japan, Australia, or Switzerland, to

engage in the securities transactions

described below with employee benefit

plans (i.e., the Plans). The proposed

exemption is necessary because the

Foreign Affiliates may be parties in

interest with respect to the Plans under

the Act, by virtue of being a fiduciary

(for assets of the Plans other than those

involved in the transactions) or a service

provider to such Plans, or by virtue of

a relationship to such fiduciary or

service provider.

2. Goldman represents that the

Foreign Affiliates are subject to

regulation by a governmental agency in

the foreign country in which they are

located. Goldman further represents that

registration of a foreign broker-dealer or

bank with the governmental agency in

these cases addresses regulatory

concerns similar to those concerns

addressed by registration of a brokerdealer with the SEC under the 1934 Act.

The rules and regulations set forth by

the above-referenced agencies and the

SEC share a common objective: the

protection of the investor by the

regulation of securities markets.

With respect to Canada, the United

Kingdom, Japan, and Australia, all these

countries have comprehensive financial

resource and reporting/disclosure rules

concerning broker-dealers. Brokerdealers are required to demonstrate their

capital adequacy. The reporting/

disclosure rules impose requirements on

broker-dealers with respect to risk

management, internal controls, and

records relating to counterparties. All

such records must be produced at the

request of the agency at any time. The

agencies’ registration requirements for

broker-dealers are enforced by fines and

penalties and thus constitute a

comprehensive disciplinary system for

the violation of such rules.

With respect to Germany, the BAK, an

independent federal institution with

ultimate responsibility to the Ministry

of Finance, in cooperation with the

Deutsche Bundesbank, the central bank

of the German banking system, provides

extensive regulation of the banking

sector. The BAK insures that Goldman,

Sachs & Co. oHG has procedures for

monitoring and controlling its

worldwide activities through various

statutory and regulatory standards, such

as requirements regarding adequate

internal controls, oversight,

administration and financial resources.

The BAK reviews compliance with

these limitations on operations and

internal control requirements through

an annual audit performed by the yearend auditor and through special audits,

e.g., on specific sections of the Banking

Act, as ordered by the BAK and the

respective State Central Bank auditors.

The BAK obtains information on the

condition of Goldman, Sachs & Co. oHG

by requiring submission of periodic,

consolidated financial reports and

through a mandatory annual report

prepared by the auditor. The BAK also

receives information regarding capital

adequacy, country risk exposure, and

foreign exchange exposure from

Goldman, Sachs & Co. oHG. German

banking law mandates penalties to

insure correct reporting to the BAK. The

auditors face penalties for gross

violation of their duties in auditing, for

reporting misleading information,

omitting essential information from the

audit report, failing to request pertinent

information, or failing to report to the

BAK.

With respect to Switzerland, the

powers of the Swiss Federal Banking

Federal Register / Vol. 65, No. 114 / Tuesday, June 13, 2000 / Notices 37179

3The Department notes that the proposed

principal transactions are subject to the general

fiduciary responsibility provisions of Part 4 of Title

I of the Act. Section 404(a) of the Act requires,

among other things, that a fiduciary of a plan act

prudently and solely in the interest of the plan and

its participants and beneficiaries, when making

investment decisions on behalf of the plan.

4PTE 75–1, Part II, provides an exemption, under

certain conditions, from section 406(a) of the Act

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

for principal transactions between employee benefit

plans and U.S. registered broker-dealers or U.S.

banks that are parties in interest with respect to

such plans.

Commission include licensing banks,

issuing directives to address violations

by or irregularities involving banks,

requiring information from a bank or its

auditor regarding supervisory matters

and revoking bank licenses. The Swiss

Federal Banking Commission exercises

oversight over Swiss banks, such as

Goldman, Sachs & Co. Bank, through

independent auditors known as

‘‘Recognized Auditors,’’ which act on

behalf of the Commission under

detailed statutory provisions. Each

Swiss bank, including Goldman, Sachs

& Co. Bank, must appoint a recognized

Auditor and notify the Swiss Federal

Banking Commission of an intent to

change its auditor. The Recognized

Auditor may take action within a bank

as deemed necessary or as instructed by

the Swiss Federal Banking Commission

and must inform the Commission of

supervisory matters. The Swiss Federal

Banking Commission insures that

Goldman, Sachs & Co. Bank has

procedures for monitoring and

controlling its worldwide activities

through various statutory and regulatory

standards. Among these standards are

requirements for adequate internal

controls, oversight, administration, and

financial resources. The Swiss Federal

Banking Commission reviews

compliance with these limitations on

operations and internal control

requirements through an annual audit

performed by the Recognized Auditor.

The Swiss Federal Banking

Commission obtains information on the

condition of Goldman, Sachs & Co. Bank

and its foreign offices and subsidiaries

by requiring submission of periodic,

consolidated financial reports and

through a mandatory annual report

prepared by the Recognized Auditor.

The Swiss Federal Banking Commission

also receives information regarding

capital adequacy, country risk exposure,

and foreign exchange exposures from

Goldman, Sachs & Co. Bank.

Swiss banking law mandates penalties

to insure correct reporting to the Swiss

Federal Banking Commission.

Recognized Auditors face penalties for

gross violations of their duties in

auditing, or reporting misleading

information, omitting essential

information from the audit report,

failing to request pertinent information

or failing to report to the Swiss Federal

Banking Commission.

With respect to Australia, GS

Australia is subject to regulation

primarily by the ASIC, and upon being

recognized as a participating

organization, by the Australian

Securities Exchange Limited (the ASX).

Until being recognized as a participating

organization by the ASX, GS Australia

will be subject to ASX regulation by the

ASIC. The rules of the ASX require each

firm that employs registered

representatives or registered traders to

have a positive tangible net worth and

be able to meet its obligations as they

may fall due. In addition, the rules of

the ASX set forth comprehensive

financial resource and reporting/

disclosure rules regarding capital

adequacy. Further, to demonstrate

capital adequacy, the rules of the ASX

impose reporting/disclosure

requirements on broker-dealers with

respect to risk management, internal

controls, and transaction reporting, and

recordkeeping requirements, to the

effect that required records must be

produced at the request of the ASIC.

Finally, the rules and regulations of the

ASX and the ASIC impose potential

fines and penalties on broker-dealers,

establishing a comprehensive

disciplinary system.

Goldman represents that, in

connection with the transactions

covered by this proposed exemption,

the Foreign Affiliates’ compliance with

any applicable requirements of Rule

15a–6 (17 CFR 240.15a–6) of the 1934

Act (as discussed further in Paragraph 6,

below), and SEC interpretations thereof,

providing for foreign affiliates a limited

exemption from U.S. registration

requirements, will offer additional

protections to the Plans.

Principal Transactions

3. Goldman represents that the

Foreign Affiliates operate as traders in

dealers’ markets wherein they

customarily purchase and sell securities

for their own account in the ordinary

course of their business as brokerdealers or banks and engage in

purchases and sales of securities,

including options on securities, with

their clients. Such trades are referred to

as principal transactions. Goldman

represents that the role of a brokerdealer in a principal transaction in the

subject foreign countries is virtually

identical to that of a broker-dealer in a

principal transaction in the United

States.

Goldman requests an individual

exemption to permit the Foreign

Affiliates to engage in principal

transactions with the Plans under terms

and conditions equivalent to those

required in Prohibited Transaction Class

Exemption 75–1 (PTE 75–1, 40 FR

50845, October 31, 1975), Part II.3

Goldman states that because PTE 75–1

provides an exemption only for U.S.

registered broker-dealers and U.S.

banks, the principal transactions at

issue would fall outside the scope of

relief provided by PTE 75–1.4

4. Goldman represents that like the

U.S. dealer markets, international equity

and debt markets, including the options

markets, are no less dependent on a

willingness of dealers to trade as

principals. Over the past decade, Plans

have increasingly invested in foreign

equity and debt securities, including

debt securities issued by foreign

governments. Thus, Plans seeking to

enter into such investments may wish to

increase the number of trading partners

available to them by trading with the

Foreign Affiliates.

5. Under the conditions of this

proposed exemption, as in PTE 75–1,

Part II, the Foreign Affiliate must

customarily purchase and sell securities

for its own account in the ordinary

course of its business as a broker-dealer

or bank. The terms of any principal

transaction will be at least as favorable

to the Plan as those the Plan could

obtain in a comparable arm’s length

transaction with an unrelated party.

Neither the Foreign Affiliate nor an

affiliate thereof will have discretionary

authority or control with respect to the

investment of the Plan assets involved

in the principal transaction, or render

investment advice (within the meaning

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

those assets. In addition, the Foreign

Affiliate will be a party in interest or

disqualified person with respect to the

Plan assets involved in the principal

transaction solely by reason of section

3(14)(B) of the Act or section

4975(e)(2)(B) of the Code (i.e., a service

provider to the Plan), or by reason of a

relationship to such a person as

described in such sections.

6. Goldman represents that Rule 15a–

6 of the 1934 Act provides an exemption

from U.S. registration requirements for a

foreign broker-dealer that induces or

attempts to induce the purchase or sale

of any security (including over-thecounter equity and debt options) by a

‘‘U.S. institutional investor’’ or a ‘‘major

U.S. institutional investor,’’ provided

that the foreign broker-dealer, among

other things, enters into these principal

37180 Federal Register / Vol. 65, No. 114 / Tuesday, June 13, 2000 / Notices

5Note that the categories of entities that qualify

as ‘‘major U.S. institutional investors’’ has been

expanded by an SEC No-Action letter. See NoAction Letter issued to Cleary, Gottlieb, Steen &

Hamilton on April 9, 1997 (the April 9, 1997 NoAction Letter).

6 Goldman represents that all such requirements

relating to record-keeping of principal transactions

would be applicable in respect of any Foreign

Affiliate in a transaction that would be covered by

this proposed exemption.

7Under certain circumstances described in the

April 9, 1997 No-Action Letter (e.g., clearance and

settlement transactions), there may be direct

transfers of funds and securities between a Plan and

a Foreign Affiliate. Please note that in such

situations (as in the other situations covered by

Rule 15a–6), the U.S. broker-dealer will not be

acting as a principal with respect to any duties it

is required to undertake pursuant to Rule 15a–6.

8PTE 75–1, Part V, provides an exemption, under

certain conditions, from section 406 of the Act and

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

credit, in connection with the purchase or sale of

securities, between employee benefit plans and U.S.

registered brokers or dealers that are parties in

interest with respect to such plans.

transactions through a U.S. registered

broker or dealer intermediary.

The term ‘‘U.S. institutional

investor,’’ as defined in Rule 15a–

6(b)(7), includes an employee benefit

plan within the meaning of the Act if:

(a) the investment decision is made by

a plan fiduciary, as defined in section

3(21) of the Act, which is either a bank,

savings and loan association, insurance

company or registered investment

adviser, or

(b) the employee benefit plan has total

assets in excess of $5 million, or

(c) the employee benefit plan is a selfdirected plan with investment decisions

made solely by persons that are

‘‘accredited investors,’’ as defined in

Rule 501(a)(1) of Regulation D of the

Securities Act of 1933, as amended.

The term ‘‘major U.S. institutional

investor,’’ as defined in Rule 15a–

6(b)(4), includes a U.S. institutional

investor that has total assets in excess of

$100 million.5 Goldman represents that

the intermediation of the U.S. registered

broker or dealer imposes upon the

foreign broker-dealer the requirement

that the securities transaction be

effected in accordance with a number of

U.S. securities laws and regulations

applicable to U.S. registered brokerdealers.

Goldman represents that under Rule

15a–6, a foreign broker-dealer that

induces or attempts to induce the

purchase or sale of any security by a

U.S. institutional or major U.S.

institutional investor in accordance

with Rule 15a–6 must, among other

things:

(a) provide written consent to service

of process for any civil action brought

by or proceeding before the SEC or a

self-regulatory organization;

(b) provide the SEC with any

information or documents within its

possession, custody or control, any

testimony of foreign associated persons,

and any assistance in taking the

evidence of other persons, wherever

located, that the SEC requests and that

relates to transactions effected pursuant

to the Rule;

(c) rely on the U.S. registered broker

or dealer through which the principal

transactions with the U.S. institutional

and major U.S. institutional investors

are effected, among other things, for:

(1) effecting the transactions, other

than negotiating their terms;

(2) issuing all required confirmations

and statements;

(3) as between the foreign brokerdealer and the U.S. registered broker or

dealer, extending or arranging for the

extension of any credit in connection

with the transactions;

(4) maintaining required books and

records relating to the transactions,

including those required by Rules 17a–

3 (Records to be Made by Certain

Exchange Members) and 17a–4 (Records

to be Preserved by Certain Exchange

Members, Brokers and Dealers) of the

1934 Act; 6

(5) receiving, delivering, and

safeguarding funds and securities in

connection with the transactions on

behalf of the U.S. institutional investor

or major U.S. institutional investor in

compliance with Rule 15c3–3 (Customer

Protection—Reserves and Custody of

Securities) of the 1934 Act; 7 and

(6) Participating in all oral

communications (e.g., telephone calls)

between the foreign associated person

and the U.S. institutional investor, other

than a major U.S. institutional investor.

Under certain circumstances, the foreign

associated person may have direct

communications and contact with the

U.S. institutional investor. (See April 9,

1997 No-Action Letter.)

Extensions of Credit

7. Goldman represents that a normal

part of the execution of securities

transactions by broker-dealers on behalf

of clients, including employee benefit

plans, is the extension of credit to

clients so as to permit the settlement of

transactions in the customary three-day

settlement period. Such extensions of

credit are also customary in connection

with the writing of option contracts.

Goldman requests that the proposed

exemption include relief for extensions

of credit to the Plans by the Foreign

Affiliates in the ordinary course of their

purchases or sales of securities,

regardless of whether they are effected

on an agency or a principal basis, or in

connection with the writing of options

contracts. In this regard, an exemption

for such extensions of credit is provided

under PTE 75–1, Part V, only for

transactions between plans and U.S.

registered brokers or dealers.8

8. Under the conditions of this

proposed exemption, as in PTE 75–1,

Part V, the Foreign Affiliate may not be

a fiduciary with respect to the Plan

assets involved in the transaction.

However, an exception to such

condition would be provided herein, as

in PTE 75–1, if no interest or other

consideration is received by the Foreign

Affiliate or an affiliate thereof, in

connection with any such extension of

credit. In addition, the extension of

credit must be lawful under the 1934

Act and any rules or regulations

thereunder, if the 1934 Act rules or

regulations were applicable. If the 1934

Act would not be applicable, the

extension of credit must still be lawful

under applicable foreign law, in the

country where the particular Foreign

Affiliate is domiciled.

Securities Lending

9. The Foreign Affiliates, acting as

principals, actively engage in the

borrowing and lending of securities,

typically foreign securities, from various

institutional investors, including

employee benefit plans.

Goldman requests an exemption for

securities lending transactions between

the Foreign Affiliates and the Plans

under terms and conditions equivalent

to those required in PTE 81–6 (see

Footnote 2). Because PTE 81–6 provides

an exemption only for U.S. registered

broker-dealers and U.S. banks, the

securities lending transactions at issue

would fall outside the scope of relief

provided by PTE 81–6.

10. The Foreign Affiliates utilize

borrowed securities either to satisfy

their own trading requirements or to relend to other broker-dealers and entities

which need a particular security for a

certain period of time. As described in

the Federal Reserve Board’s Regulation

T, borrowed securities are often used to

meet delivery obligations in the case of

short sales or the failure to receive

securities that a broker-dealer is

required to deliver. Goldman represents

that foreign broker-dealers are those

broker-dealers most likely to seek to

borrow foreign securities. Thus, the

requested exemption will increase the

lending demand for such securities,

providing the Plans with increased

securities lending opportunities, which

will earn such Plans additional rates of

Federal Register / Vol. 65, No. 114 / Tuesday, June 13, 2000 / Notices 37181

9Section 404(b) of the Act states that no fiduciary

may maintain the indicia of ownership of any assets

of a plan outside the jurisdiction of the district

courts of the United States, except as authorized by

regulation by the Secretary of Labor.

return on the borrowed securities (as

discussed below).

11. An institutional investor, such as

a pension fund, lends securities in its

portfolio to a broker-dealer or bank in

order to earn a fee while continuing to

enjoy the benefits of owning the

securities, (e.g., from the receipt of any

interest, dividends, or other

distributions due on those securities

and from any appreciation in the value

of the securities). The lender generally

requires that the securities loan be fully

collateralized, and the collateral usually

is in the form of cash, irrevocable bank

letters of credit, or high quality liquid

securities, such as U.S. Government or

Federal Agency obligations.

12. With respect to the subject

securities lending transactions, neither

the Foreign Affiliate nor an affiliate of

the Foreign Affiliate will have

discretionary authority or control with

respect to the investment of the Plan

assets involved in the transaction, or

render investment advice (within the

meaning of 29 CFR 2510.3–21(c)) with

respect to those assets.

13. By the close of business on the

day the loaned securities are delivered,

the Plan will receive from the Foreign

Affiliate (by physical delivery, book

entry in a securities depository, wire

transfer, or similar means) collateral

consisting of cash, securities issued or

guaranteed by the U.S. Government or

its agencies or instrumentalities,

irrevocable U.S. bank letters of credit

issued by persons other than the Foreign

Affiliate or an affiliate of the Foreign

Affiliate, or any combination thereof.

All collateral will be in U.S. dollars, or

dollar-denominated securities or bank

letters of credit, and will be held in the

United States. The collateral will have,

as of the close of business on the

business day preceding the day it is

posted by the Foreign Affiliate, a market

value equal to at least 100 percent of the

then market value of the loaned

securities (or, in the case of letters of

credit, a stated amount equal to same).

14. The loan will be made pursuant to

a written Loan Agreement, which may

be in the form of a master agreement

covering a series of securities lending

transactions between the Plan and the

Foreign Affiliate. The terms of the Loan

Agreement will be at least as favorable

to the Plan as those the Plan could

obtain in a comparable arm’s length

transaction with an unrelated party. The

Loan Agreement will also contain a

requirement that the Foreign Affiliate

pay all transfer fees and transfer taxes

relating to the securities loans.

15. In return for lending securities,

the Plan will either (a) receive a

reasonable fee, which is related to the

value of the borrowed securities and the

duration of the loan, or (b) have the

opportunity to derive compensation

through the investment of cash

collateral. In the latter case, the Plan

may pay a loan rebate or similar fee to

the Foreign Affiliate, if such fee is not

greater than what the Plan would pay in

a comparable arm’s length transaction

with an unrelated party.

Earnings generated by non-cash

collateral will be returned to the Foreign

Affiliate. The Plan will be entitled to at

least the equivalent of all distributions

on the borrowed securities made during

the term of the loan. Such distributions

will include cash dividends, interest

payments, shares of stock as a result of

stock splits, and rights to purchase

additional securities, that the Plan

would have received (net of any

applicable tax withholdings) had it

remained the record owner of such

securities.

16. If the market value of the

collateral as of the close of trading on a

business day falls below 100 percent of

the market value of the borrowed

securities as of the close of trading on

that day, the Foreign Affiliate will

deliver additional collateral, by the

close of business on the following

business day, to bring the level of the

collateral back to at least 100 percent.

However, if the market value of the

collateral exceeds 100 percent of the

market value of the borrowed securities,

the Foreign Affiliate may require the

Plan to return part of the collateral to

reduce the level of the collateral to 100

percent.

17. Before entering into a Loan

Agreement, the Foreign Affiliate will

furnish to the independent Plan

fiduciary (a) the most recent available

audited statement of the Foreign

Affiliate’s financial condition, (b) the

most recent available unaudited

statement of its financial condition (if

more recent than the audited statement),

and (c) a representation that, at the time

the loan is negotiated, there has been no

material adverse change in its financial

condition that has not been disclosed

since the date of the most recent

financial statement furnished to the

independent Plan fiduciary. Such

representation may be made by the

Foreign Affiliate’s agreeing that each

loan of securities shall constitute a

representation that there has been no

such material adverse change.

18. The Loan Agreement and/or any

securities loan outstanding may be

terminated by the Plan at any time,

whereupon the Foreign Affiliate will

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 Plan within (a) the

customary delivery period for such

securities, (b) five business days, or (c)

the time negotiated for such delivery by

the Plan and the Foreign Affiliate,

whichever is least, or, alternatively,

such period as permitted by PTE 81–6,

as it may be amended or superseded. In

the event that the Foreign Affiliate fails

to return the securities, or the

equivalent thereof, within the

designated time, the Plan will have

certain rights under the Loan Agreement

to realize upon the collateral. The Plan

may purchase securities identical to the

borrowed securities, or the equivalent

thereof, and may apply the collateral to

the payment of the purchase price, any

other obligations of the Foreign Affiliate

under the Loan Agreement, and any

expenses associated with replacing the

borrowed securities. The Foreign

Affiliate is obligated to pay to the Plan

the amount of any remaining obligations

and expenses not covered by the

collateral (the value of which shall be

determined as of the date the borrowed

securities should have been returned to

the Plan), plus interest at a reasonable

rate as determined in accordance with

an independent market source. If

replacement securities are not available,

the Foreign Affiliate will pay the Plan

an amount equal to (a) the value of the

securities as of the date such securities

should have been returned to the Plan,

plus (b) all the accrued financial

benefits derived from the beneficial

ownership of such borrowed securities

as of such date, plus (c) interest at a

reasonable rate determined in

accordance with an independent market

source from such date to the date of

payment. The amounts paid shall be

reduced by the amount or value of the

collateral determined as of the date the

borrowed securities should have been

returned to the Plan. Notwithstanding

the foregoing, the Foreign Affiliate may,

in the event it fails to return borrowed

securities as described above, replace

non-cash collateral with an amount of

cash not less than the then current

market value of the collateral, provided

that such replacement is approved by

the independent Plan fiduciary.

19. The independent Plan fiduciary

will maintain the situs of the Loan

Agreement in accordance with the

indicia of ownership requirements

under section 404(b) of the Act 9 and the

37182 Federal Register / Vol. 65, No. 114 / Tuesday, June 13, 2000 / Notices

regulations promulgated under 29 CFR

2550.404(b)–1.

20. In summary, the applicant

represents that the subject transactions

will satisfy the statutory criteria for an

exemption under section 408(a) of the

Act for the following reasons:

(a) With respect to the principal

transactions effected by the Foreign

Affiliates, the proposed exemption will

enable the Plans to realize the same

benefits of efficiency and convenience

which such Plans could derive from

principal transactions with U.S.

registered broker-dealers or U.S. banks,

pursuant to PTE 75–1, Part II;

(b) With respect to extensions of

credit in connection with purchases or

sales of securities, the proposed

exemption will enable the Foreign

Affiliates and the Plans to extend credit

in the ordinary course of the Foreign

Affiliate’s business to effect agency or

principal transactions within the

customary three-day settlement period,

or in connection with the writing of

option contracts, for transactions

between plans and U.S. registered

brokers or dealers, pursuant to PTE 75–

1, Part V;

(c) With respect to securities lending

transactions effected by the Foreign

Affiliates, the proposed exemption will

enable the Plans to realize a low-risk

return on securities that otherwise

would remain idle, as in securities

lending transactions between plans and

U.S. registered broker-dealers or U.S.

banks, pursuant to PTE 81–6; and

(d) The proposed exemption will

provide the Plans with virtually the

same protections as those provided by

PTE 75–1 and PTE 81–6.

FOR FURTHER INFORMATION CONTACT: Ms.

Karin Weng of the Department,

telephone (202) 219–8881. (This is not

a toll-free number.)

Washington County Hospital

Association Employees’ Cash Balance

Plan (the Plan), Located in Hagerstown,

Maryland;

[Application No. D–10839]

Proposed Exemption

The Department is considering

granting an exemption under the

authority of section 408(a) of the Act

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

in accordance with the procedures set

forth in 29 CFR part 2570, subpart B (55

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

the exemption is granted, the

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

and (b)(2) of the Act and the sanctions

resulting from the application of section

4975 of the Code, by reason of section

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

shall not apply to the past contribution

by Washington County Hospital

Association (the Hospital) to the Plan of

certain publicly-traded securities (the

Securities), provided: (a) the

contribution was a one-time transaction;

(b) the Securities were valued at their

fair market value as of the date of the

contribution, as determined by an

independent broker; (c) no commissions

were paid in connection with the

transaction; and (d) the Securities

represented less than 5% of the assets

of the Plan at the time of the

contribution.

Effective Date: If the proposed

exemption is granted, the exemption

will be effective June 18, 1998.

Summary of Facts and Representations

1. The Hospital is a tax-exempt

hospital described in section 501(c)(3)

of the Code. The Plan, which is

established and maintained by the

Hospital, is a defined benefit plan that

currently has 1,951 participants and had

assets of $27,896,007 as of July 31, 1999.

The Plan’s assets are held by

Hagerstown Trust Company, a Maryland

Banking Corporation, as custodian.

2. Marshfield Associates (Marshfield)

is one of four investment managers that

invest assets of the Plan. Marshfield also

manages a fund known as the

Washington County Hospital Pension

Restricted Fund (the Fund). The Fund is

a non-trusteed, non-qualified corporate

internal fund of the Hospital and was

established by the Hospital’s Board of

Trustees for the purpose of holding

future contributions to the Plan. The

assets in both the Plan and the Fund

that are managed by Marshfield are

subject to the same investment

guidelines and principles. The applicant

represents that at no time have any

assets of the Fund been applied by the

Hospital for any purpose other than

funding ERISA-qualified pension

benefits for the Hospital’s employees.

Marshfield represents that the fees it

collected from the accounts it manages

for the Hospital for the second quarter

of 1998 through the second quarter of

2000 represent, in the aggregate, less

than one percent of the total fee

revenues collected by Marshfield for

that same period.

3. On June 9, 1998, the Hospital sent

a letter to Marshfield directing them to

transfer $821,087 from the Fund’s

account to the Plan’s account. The

Hospital had requested the transfer in

order to satisfy its required minimum

funding contribution to the Plan for the

fiscal year ending June 30, 1998.

Accordingly, on June 18, 1998,

Marshfield transferred Securities valued

at approximately $745,100 from the

Fund to the Plan, and on June 23, 1998,

transferred $75,987 of cash from the

Fund to the Plan. The total value of

assets transferred to the Plan was

$821,087. The Securities consisted of

fixed income securities, e.g., corporate

bonds and notes, valued as of June 18,

1998 at approximately $328,000, and

publicly-traded equity securities valued

as of June 18, 1998 at approximately

$417,100. The Securities represent less

than 3% of the total assets of the Plan.

4. The Securities consisted of a

BankAmerica Corporate Subordinated

Note, paying interest at 9.20%, due May

15, 2003, with a market value of

$112,740, as of June 18, 1998; a

Honeywell, Inc. Bond paying 8.625%,

due April 15, 2006, with a market value

of $115,100, as of June 18, 1998; and

MCI Communications Corporation

Notes, paying 6.25%, due March 23,

1999, with a market value of $100,160,

as of June 18, 1998. In addition, the

Securities included 1,200 shares of

Gannett, Inc., valued at $79,725, as of

June 18, 1998; 4,000 shares of Pepsico,

Inc., valued at $167,500, as of June 18,

1998; and 3,600 shares of Student Loan

Corporation, valued at $169,875, as of

June 18, 1998. For purposes of

ascertaining the values of the Securities

on June 18, 1998, Marshfield represents

that Susan Neuwirth, its assistant

portfolio manager for the Hospital

accounts, consulted Bloomberg, L.P., an

independent pricing service.

5. Ms. Elise Hoffman (Ms. Hoffman),

a Principal of Marshfield, has

represented that the Hospital contacted

Marshfield on June 9, 1998, to make the

transfer from the Fund to the Plan. Ms.

Hoffman represents that she consulted

with Mr. Steven Barnhart, an Executive

of the Hospital, in order to determine

whether the Hospital had a preference

as to whether cash or securities should

be transferred. Mr. Barnhart informed

Ms. Hoffman that the Hospital was

indifferent as to which was transferred

to satisfy the contribution amount. Ms.

Hoffman represents that it was

Marshfield’s view that transferring the

Securities would be financially better

for the Plan than first converting them

into cash. Each of the equity and debt

instruments had been identified by

Marshfield’s research department as

high quality holdings with potential for

future appreciation and/or attractive

long-term returns. But for the need to

transfer assets out of the Fund,

Marshfield would have continued to

hold the Securities in the Fund as of the

date of the transfer. In addition,

transferring the Securities rather than

the cash proceeds of any sale of such

Securities would provide the Plan with

immediate investment in the financial

markets and result in savings in

Federal Register / Vol. 65, No. 114 / Tuesday, June 13, 2000 / Notices 37183

10The Department directs interested persons to

ERISA Advisory Opinion 81–69A (dated July 28,

1981) for the principle that contributions in-kind

that relieve an employer of an obligation to make

cash contributions to a plan are prohibited

exchanges (unless otherwise exempt).

transaction costs associated with a

reacquisition of the same or equivalent

securities. Thus, Ms. Hoffman

represents that Marshfield believed it

would be a prudent course for the Plan

to receive the Securities from the Fund

directly and to continue to hold them.

6. PricewaterhouseCoopers LLP

(PWC) in Baltimore, Maryland,

represents that PWC is the certified

public accounting firm for the Plan. Mr.

William L. Stulginsky, a Partner with

PWC, represents that in the process of

preparing the Plan’s audit for 1998, it

came to PWC’s attention that the

Employer had contributed the Securities

to the Plan. PWC informed the Hospital

that an in-kind contribution of the

Securities to the Plan would constitute

a prohibited transaction. The Hospital

had believed, based upon conversations

with Marshfield as described in rep. 5,

above, that the transfer of the Securities

to the Plan was permitted. To resolve

this apparent contradiction, the Hospital

contacted its attorneys, Venable, Baetjer

and Howard, LLP (Venable). Venable

reviewed the transaction and informed

the Hospital that the contribution

constituted a prohibited transaction

under section 406 of the Act.10 The

Hospital thereupon established

procedures to prevent future in-kind

contributions to the Plan, and Venable

followed up with the Hospital in

resolving this issue by filing a request

for the exemption proposed herein.

7. In summary, the applicant

represents that the subject transaction

satisfied the criteria contained in

section 408(a) of the Act because: (a)

The contribution was a one-time

transaction; (b) no commissions were

paid by the Plan in connection with the

transfer of the Securities; (c) the Plan’s

independent investment manager,

Marshfield, determined that the

transaction was appropriate for and in

the best interests of the Plan; (d)

Marshfield consulted Bloomberg, L.P.,

an independent pricing service for

purposes of ascertaining the values of

the Securities on June 18, 1998, the date

of transaction; and (e) when the

prohibited transaction was discovered

by the Plan’s independent C.P.A. firm,

the applicant requested the exemption

proposed herein.

FOR FURTHER INFORMATION CONTACT: Gary

H. Lefkowitz of the Department,

telephone (202) 219–8881. (This is not

a toll-free number.)

General Information

The attention of interested persons is

directed to the following:

(1) The fact that a transaction is the

subject of an exemption under section

408(a) of the Act and/or section

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

a fiduciary or other party in interest or

disqualified person from certain other

provisions of the Act and/or the Code,

including any prohibited transaction

provisions to which the exemption does

not apply and the general fiduciary

responsibility provisions of section 404

of the Act, which, among other things,

require a fiduciary to discharge his

duties respecting the plan solely in the

interest of the participants and

beneficiaries of the plan and in a

prudent fashion in accordance with

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

it affect the requirement of section

401(a) of the Code that the plan must

operate for the exclusive benefit of the

employees of the employer maintaining

the plan and their beneficiaries;

(2) Before an exemption may be

granted under section 408(a) of the Act

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

the Department must find that the

exemption is administratively feasible,

in the interests of the plan and of its

participants and beneficiaries, and

protective of the rights of participants

and beneficiaries of the plan;

(3) The proposed exemptions, if

granted, will be supplemental to, and

not in derogation of, any other

provisions of the Act and/or the Code,

including statutory or administrative

exemptions and transitional rules.

Furthermore, the fact that a transaction

is subject to an administrative or

statutory exemption is not dispositive of

whether the transaction is in fact a

prohibited transaction; and

(4) The proposed exemptions, if

granted, will be subject to the express

condition that the material facts and

representations contained in each

application are true and complete, and

that each application accurately

describes all material terms of the

transaction which is the subject of the

exemption.

Signed at Washington, DC, this 7th day of

June, 2000.

Ivan Strasfeld,

Director of Exemption Determinations,

Pension and Welfare Benefits Administration,

U.S. Department of Labor.

[FR Doc. 00–14808 Filed 6–12–00; 8:45 am]

BILLING CODE 4510–29–P

NATIONAL COUNCIL ON DISABILITY

International Watch Advisory

Committee; Notice of Meeting

AGENCY: National Council on Disability

(NCD).

SUMMARY: This notice sets forth the

schedule of the forthcoming meeting/

conference call for NCD’s advisory

committee—International Watch. Notice

of this meeting is required under

Section 10(a)(1)(2) of the Federal

Advisory Committee Act (Pub. L. 92–

463).

INTERNATIONAL WATCH: The purpose of

NCD’s International Watch is to share

information on international disability

issuers and to advise NCD’s Foreign

Policy Team on developing policy

proposals that will advocate for a

foreign policy that is consistent with the

values and goals of the Americans with

Disabilities Act.

DATES: June 23, 2000, 11 a.m. EDT.

For International Watch Information,

Contact: Kathleen A. Blank, Attorney/

Program Specialist, National Council on

Disability, 1331 F Street NW, Suite

1050, Washington, D.C. 20004; 202–

272–2004 (Voice), 202–272–2074 (TTY),

202–272–2022 (Fax), kblank@ncd.gov

(e-mail).

Agency Mission: The National Council

on Disability is an independent federal

agency composed of 15 members

appointed by the President of the

United States and confirmed by the U.S.

Senate. Its overall purpose is to promote

policies, programs, practices, and

procedures that guarantee equal

opportunity for all people with

disabilities, regardless of the nature or

severity of the disability; and to

empower people with disabilities to

achieve economic self-sufficiency,

independent living, and inclusion and

integration into all aspects of society.

This committee is necessary to

provide advice and recommendations to

NCD on international disability issues.

We currently have balanced

membership representing a variety of

disabling conditions from across the

United States.

Open Meeting/Conference Call: This

advisory committee meeting/conference

call of the National Council on

Disability will be open to the public.

However, due to fiscal constraints and

staff limitations, a limited number of

additional lines will be available.

Individuals can also participate in the

conference call at the NCD office. Those

interested in joining this conference call

should contact the appropriate staff

member listed above. Records will be

kept of all International Watch

meetings/conference calls and will be