[Federal Register Volume 72, Number 53 (Tuesday, March 20, 2007)]
[Notices]
[Pages 13126-13137]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-4982]


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DEPARTMENT OF LABOR

Employee Benefits Security Administration

[Prohibited Transaction Exemption 2007-04; Exemption Application Nos. 
D-11345, and D-11370]


Grant of Individual Exemptions Involving; D-11342, Mellon 
Financial Corporation (Mellon); and D-11370, Amendment to Prohibited 
Exemption (PTE) 2000-58 and (PTE) 2002-41 Involving Bear Stearns & Co. 
Inc., Prudential Securities Incorporated, et al. to add Dominion Bond 
Rating Service Limited and Dominion Bond Rating Service, Inc.

AGENCY: Employee Benefits Security Administration, Labor.

ACTION: Grant of Individual Exemptions.

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SUMMARY: This document contains exemptions issued by the Department of 
Labor (the Department) from certain of the prohibited transaction 
restrictions of the Employee Retirement Income Security Act of 1974 
(ERISA or the Act) and/or the Internal Revenue Code of 1986 (the Code).
    A notice was published in the Federal Register of the pendency 
before the Department of a proposal to grant such exemption. The notice 
set forth a summary of facts and representations contained in the 
application for exemption and referred interested persons to the 
application for a complete statement of the facts and representations. 
The application has been available for public inspection at the 
Department in Washington, DC. The notice also invited interested 
persons to submit comments on the requested exemption to the 
Department. In addition the notice stated that any interested person 
might submit a written request that a public hearing be held (where 
appropriate). The applicant has represented that it has complied with 
the requirements of the notification to interested persons. No requests 
for a hearing were received by the Department. Public comments were 
received by the Department as described in the granted exemption.
    The notice of proposed exemption was issued and the exemption is 
being granted solely by the Department because, 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 proposed to the Secretary of Labor.

Statutory Findings

    In accordance with section 408(a) of the Act and/or section 
4975(c)(2) of the Code and the procedures set forth in 29 CFR part 
2570, subpart B (55 FR 32836, 32847, August 10, 1990) and based upon 
the entire record, the Department makes the following findings:
    (a) The exemption is administratively feasible;
    (b) The exemption is in the interests of the plan and its 
participants and beneficiaries; and
    (c) The exemption is protective of the rights of the participants 
and beneficiaries of the plan.

Mellon Financial Corporation (Mellon), Located in Pittsburgh, PA

[Prohibited Transaction Exemption 2007-04; Exemption Application No. D-
11342]

Exemption

Section I--Exemption for In-Kind Redemption of Assets

    The restrictions in sections 406(a)(1)(A) through (D) and 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, effective November 30, 2005, to 
certain in-kind redemptions (the Redemption(s)) by the Mellon 401(k) 
Retirement Savings Plan or by any other employee benefit plan sponsored 
by Mellon or an affiliate (the Plan(s)), of shares (the Shares) of 
certain proprietary mutual funds in which the Plans were invested as of 
November 30, 2005 (the Funds), for which Mellon or an affiliate 
(collectively, referred to also as Mellon) provides investment advisory 
and other services, provided that the following conditions are 
satisfied:
    (A) The Plan pays no sales commissions, redemption fees, or other 
similar fees in connection with the Redemption--other than customary 
transfer charges paid to parties other than Mellon;
    (B) The assets transferred to the Plan pursuant to the Redemption 
consist entirely of cash and Transferable Securities, as such term is 
defined in Section II, below. Notwithstanding the foregoing, 
Transferable Securities that are odd lot securities, fractional shares, 
and accruals on such securities may be distributed in cash;
    (C) With certain exceptions described below, the Plan receives in 
any Redemption its pro rata portion of the securities of the Funds 
equal in value to that of the number of Shares redeemed, as determined 
in a single valuation (using sources independent of Mellon) performed 
in the same manner and as of the close of business on the same day, in 
accordance with the procedures established by the Fund pursuant to Rule 
2a-4 under the Investment Company Act of 1940, as amended from time to 
time (the 1940 Act), and the then-existing procedures established by 
the board of the Funds that are in compliance with the rules 
administered by the Securities Exchange Commission (SEC);
    (D) Mellon does not receive any direct or indirect compensation or 
any fees, including any fees payable pursuant to Rule 12b-1 under the 
1940 Act, in connection with any Redemption of the Shares;
    (E) Prior to a Redemption, Mellon provides in writing to an 
independent fiduciary (Independent Fiduciary, as such term is defined 
in Section II, below), a full and detailed written disclosure of 
information regarding the Redemption;
    (F) The Independent Fiduciary provides written authorization in 
advance of the Redemption to Mellon, such authorization being 
terminable at any time prior to the date of the Redemption without 
penalty to the Plan, provided that the termination is effectuated by 
the close of business following the date of receipt by Mellon of 
written or electronic notice regarding such termination (unless 
circumstances beyond the control of Mellon delay termination for no 
more than one additional business day);
    (G) Before approving a Redemption, based on the disclosures 
provided by the Funds to the Independent Fiduciary and discussions with 
appropriate operational personnel of the Plan, the Independent 
Fiduciary determines that the terms of the Redemption are fair to the 
Plan and comparable to, and no less favorable than, terms obtainable at 
arm's length between unaffiliated parties, and that the Redemption is 
in the best interests of the Plan and its participants and 
beneficiaries;
    (H) Mellon makes a ``make-whole payment'' to ensure that the dollar 
value of the interests received by the Plan from the collective 
investment funds is not diminished by transaction costs nor by 
valuation differences as a result of the Redemption;

[[Page 13127]]

    (I) No later than thirty (30) business days after the completion of 
a Redemption, Mellon or the relevant Funds provides to the Independent 
Fiduciary a written confirmation regarding such Redemption containing:
    (i) The number of Shares held by the Plan immediately before the 
Redemption and the related per Share net asset value and the total 
dollar value of the Shares held;
    (ii) The identity and related aggregate dollar value of each 
security provided to the Plan pursuant to the Redemption, including 
each security valued (using sources independent of Mellon) in 
accordance with Rule 2a-4 under the 1940 Act and the then-existing 
procedures established by the board of the Fund for obtaining current 
prices from independent pricing services or market-makers;
    (iii) The current market price of each security received by the 
Plan pursuant to the Redemption; and
    (iv) The identity of each pricing service or market-maker consulted 
in determining the value of such securities;
    (J) The value of the securities and cash received by the Plan for 
each redeemed Share equals the net asset value of such Share at the 
time of the transaction, and such value equals the value that would 
have been received by any other investor for shares of the same class 
of the relevant Fund at that time;
    (K) Subsequent to a Redemption, the Independent Fiduciary performs 
a post-transaction review which will include, among other things, 
testing a sampling of material aspects of the Redemption deemed in its 
judgment to be representative, including pricing;
    (L) Each of the Plan's dealings with the Funds, the principal 
underwriter for the Funds, or any affiliate thereof, or with Mellon, 
are on a basis no less favorable to the Plan than dealings between the 
Funds and other shareholders holding shares of the same class as the 
Shares;
    (M) Mellon maintains, or causes to be maintained, for a period of 
six years from the date of any covered transaction, such records as are 
necessary to enable the persons described in paragraph (N)(1)(i)-(v), 
below, to determine whether the conditions described in this Section I 
have been met, except that:
    (i) if the records necessary to enable the persons described in 
paragraph (N)(1)(i)-(v), below, to determine whether the conditions of 
this exemption have been met are lost, or destroyed, due to 
circumstances beyond the control of Mellon, then no prohibited 
transaction will be considered to have occurred, solely on the basis of 
the unavailability of those records; and
    (ii) no party in interest with respect to the Plan other than 
Mellon shall be subject to the civil penalty that may be assessed under 
section 502(i) of the Act, or to the taxes imposed by section 4975(a) 
and (b) of the Code, if such records are not maintained or are not 
available for examination as required by paragraph (N) below.
    (N)(1) Except as provided in subparagraph (2) of this paragraph 
(N), and notwithstanding any provisions of section 504(a)(2) and (b) of 
the Act, the records referred to in paragraph (M), above, are 
unconditionally available at their customary locations 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 the Plan or any duly authorized 
representative of such fiduciary,
    (iii) any participant or beneficiary of the Plan or duly authorized 
representative of such participant or beneficiary,
    (iv) any employer whose employees are covered by the Plan, and
    (v) any employee organization whose members are covered by such 
Plan;
    (2) None of the persons described in paragraphs (N)(1)(ii) through 
(v) shall be authorized to examine trade secrets of Mellon or the 
Funds, or commercial or financial information which is privileged or 
confidential; and
    (3) Should Mellon or the Funds refuse to disclose information on 
the basis that such information is exempt from disclosure pursuant to 
paragraph (N)(2) above, Mellon or the Funds shall, by the close of the 
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.

Section II--Definitions

    (A) The term ``affiliate'' means:
    (1) Any person (including a corporation or partnership) directly or 
indirectly through one or more intermediaries, controlling, controlled 
by, or under common control with the person;
    (2) Any officer, director, employee, relative, or partner in any 
such person; and
    (3) Any corporation or partnership of which such person is an 
officer, director, partner, or employee.
    (B) The term ``control'' means the power to exercise a controlling 
influence over the management or policies of a person other than an 
individual.
    (C) The term ``net asset value'' means the amount for purposes of 
pricing all purchases and sales calculated by dividing the value of all 
securities, determined by a method as set forth in the Fund's 
prospectus and statement of additional information, and other assets 
belonging to the Fund, less the liabilities charged to each such Fund, 
by the number of outstanding shares.
    (D) The term ``Independent Fiduciary'' means a fiduciary who is:
    (i) Independent of and unrelated to Mellon and its affiliates, and
    (ii) Appointed to act on behalf of the Plan with respect to the in-
kind transfer of assets from one or more Funds to, or for the benefit 
of, the Plan. A fiduciary will not be independent of, and unrelated to, 
Mellon if:
    (i) Such fiduciary directly or indirectly controls, is controlled 
by or is under common control with, Mellon;
    (ii) Such fiduciary, directly or indirectly, receives any 
compensation or other consideration in connection with any transaction 
described herein (except that an Independent Fiduciary may receive 
compensation from Mellon in connection with the transactions 
contemplated herein, if the amount or payment of such compensation is 
not contingent upon, or in any way affected by any decision made by the 
Independent Fiduciary); or
    (iii) More than 1 percent (1%) of such fiduciary's gross income, 
for federal income tax purposes, in its prior tax year, will be paid by 
Mellon in the fiduciary's current tax year.
    (E) The term ``Transferable Securities'' means securities--
    (1) for which market quotations are readily available, as 
determined pursuant to procedures established by the Funds under Rule 
2a-4 of the 1940 Act; and
    (2) that are not:
    (i) Securities that, if publicly offered or sold, would require 
registration under the Securities Act of 1933;
    (ii) Securities issued by entities in countries that (a) restrict 
or prohibit the holding of securities by non-nationals other than 
through qualified investment vehicles, such as the Funds, or (b) permit 
transfers of ownership of securities to be effected only by 
transactions conducted on a local stock exchange;
    (iii) Certain portfolio positions (such as forward foreign currency 
contracts, futures and options contracts, swap transactions, 
certificates of deposit and repurchase agreements) that, although 
liquid and marketable, involve the assumption of contractual 
obligations,

[[Page 13128]]

require special trading facilities, or can be traded only with the 
counter-party to the transaction to effect a change in beneficial 
ownership;
    (iv) Cash equivalents (such as certificates of deposit, commercial 
paper, and repurchase agreements);
    (v) Other assets that are not readily distributable (including 
receivables and prepaid expenses), net of all liabilities (including 
accounts payable); and
    (vi) Securities subject to ``stop transfer'' instructions or 
similar contractual restrictions on transfer.
    (F) The term ``relative'' means a ``relative'' as that term is 
defined in section 3(15) of the Act (or a ``member of the family,'' as 
that term is defined in section 4975(e)(6) of the Code), or a brother, 
sister, or a spouse of a brother or a sister.
    Effective Date: This exemption is effective as of November 30, 
2005.
    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 August 21, 2006 at 71 FR 
48781.

Written Comments

    The Department received three written comments with respect to the 
notice of proposed exemption (the Proposal). The comments were 
submitted by the applicant and by two Plan participants.
    The comment by the applicant first raises an issue concerning the 
scope of exemptive relief provided in the Proposal from sections 
406(a)(1)(A) through (D) and 406(b)(2) of the Act. The applicant had 
originally requested relief from all of sections 406(a) and 406(b), 
consistent with prior exemptions for similar in-kind redemption 
transactions. The Department informed the applicant that the current 
policy is to provide relief as narrow as possible and requested an 
explanation of the need for the requested relief; the applicant 
responded with a letter dated July 14, 2006 focusing on a potential 
violation of section 406(b)(2). The applicant notes, however, that the 
Department included language in the Summary of Facts and 
Representations (the Summary), at Item 4 (71 FR 48784, column 3), 
describing the in-kind redemptions ``as raising the possibility of 
self-dealing,'' implying a need for relief from section 406(b)(1), as 
well. The applicant requests, therefore, that the Department either 
expand this exemption to include relief from section 406(b)(1) or 
clarify that the transactions do not raise the possibility of self-
dealing. To resolve this issue, the Department has revised the 
exemption to provide relief from section 406(b)(1) of the Act.
    The applicant further notes that the Department has defined 
``Mellon'' in Section I of the Proposal to include Mellon affiliates. 
However, there are two places requiring revision to avoid reaching 
affiliates of Mellon affiliates. To resolve this issue, the Department 
has revised Section I(L) (71 FR 48782, column 1) and the definition of 
``Independent Fiduciary'' at Section II(D) (71 FR 48782, column 2) of 
the exemption as follows (with underlining indicating new language and 
italics for deleted language).

    ``(L) Each of the Plan's dealings with the Funds, Mellon, the 
principal underwriter for the Funds, or any affiliate thereof, or 
with Mellon, are on a basis no less favorable to the Plan than 
dealings between the Funds and other shareholders holding shares of 
the same class as the Shares;'' and
    ``(D)(iii) More than 1 percent (1%) of such fiduciary's gross 
income, for federal income tax purposes, in its prior tax year, will 
be paid by Mellon and its affiliates in the fiduciary's current tax 
year.''
    The applicant also notes certain formatting problems with the two 
charts in the Summary as printed in the Federal Register, such that it 
is unclear how the information in the first column of the chart related 
to the information in the second column. To resolve this issue, the 
Department notes the applicant's corrections as follows. In the first 
chart (71 FR 48783), under the title ``Actively Managed Funds,'' 
``Dreyfus LifeTime Portfolios'' appears on the same line as ``Mellon 
Stable Value,'' making it appear as if the two are a single Fund 
holding $92.6 million in assets. The $92.6 million should be attributed 
solely to the Mellon Stable Value Fund. ``Dreyfus LifeTime Portfolios'' 
is the name of a subgroup of Dreyfus Funds that consists of the 
following three Funds on the list--Income Portfolio, Growth and Income 
Portfolio and Growth Portfolio. The second chart (71 FR 48784) fails to 
make clear which Actively Managed Funds are mapped into which recipient 
basic funds. The following chart shows the mapping:

                                       Fund Transfer or ``Mapping'' Chart
----------------------------------------------------------------------------------------------------------------
        Actively managed fund          [rtrif]                        Recipient basic fund
----------------------------------------------------------------------------------------------------------------
Dreyfus LifeTime Portfolios, Inc.
    Income Portfolio................  [rtrif]   Daily Liquidity Asset Allocation Fund.
    Growth and Income Portfolio
    Growth Portfolio
Dreyfus Appreciation
Dreyfus Premier Core Value
Dreyfus Disciplined Stock...........  [rtrif]   Daily Liquidity Stock Index.
Dreyfus Premier Third Century Fund,
 Inc.
Dreyfus Premier Technology Growth
Dreyfus Founders Growth
Dreyfus Premier New Leaders
Dreyfus Founders Discovery            [rtrif]   Daily Liquidity Small Cap Stock Index.
Dreyfus Founders Worldwide Growth
Dreyfus Premier International Value.  [rtrif]   Daily Liquidity International Stock Index.
The Boston Company International
 Small Cap
----------------------------------------------------------------------------------------------------------------

    Finally, the applicant notes that, as printed in the Federal 
Register, footnote 21 erroneously references footnotes 3 and 4, due to 
the inadvertent failure to adjust the cross-references to reflect the 
continuation of footnote numbers from other proposed exemption notices 
in the same package. To resolve this issue, the Department revises the 
cross-references in footnote 21 so that the original footnote 3 is now 
footnote 19 and the original footnote 4 is now footnote 20.
    In the second comment, a Plan participant notes his displeasure 
about the change in investment options offered under the Mellon Plan: 
(a) The literature describing the change in funds was confusing so that 
the participant

[[Page 13129]]

did not understand the need to take immediate action in order to be 
able to fully utilize the self-directed brokerage account feature; (b) 
Following the transfer, the self-directed brokerage account would be 
permanently unavailable for amounts greater than 50% of his account. 
Those assets can only be reallocated within the ``core'' Basic Funds, 
limiting the potential for investment gains; (c) Public information 
regarding the Basic Funds is limited--they do not appear in daily/
weekly newspapers; (d) The effect of the changes was self-serving, done 
in the interests of Mellon, because it has required 50% of the Plan's 
assets to be tied up in Mellon collective funds, increasing Mellon's 
assets under management. The participant requested a hearing and hoped 
that Mellon would be forced to rescind the entire transfer of assets to 
the Basic Funds and to make up any losses to participants.
    In the third comment, another Plan participant expressed the 
following concerns: (a) The Plan trustees should not have engaged in a 
non-permitted transaction without first obtaining an exemption, as they 
should have known of the need for an exemption several months in 
advance; (b) He questioned the need to adhere to an ``arbitrary'' date 
that exposed the Plan to potential risk should the exemption not be 
granted. He questioned whether the rush to complete the transaction was 
done to benefit outside parties, or perhaps Mellon Plan committee 
members that served on the boards of other companies with a financial 
interest in the transactions; (c) He requested that a penalty be 
imposed that would send a message to the financial/legal community that 
no financial institution is above the law.
    The applicant responds that both commenters misunderstood the 
nature of the transfers and the reasons underlying the transfers, as 
well as the nature of the exemption process. As described in the 
Summary, there were two reasons for the changes in Plan investment 
options that were made at the end of 2005: (a) To simplify the 
investment offerings by eliminating the ``Actively Managed Funds'' 
category, which overlapped in several respects with the ``Basic Funds'' 
category--the third category, a self-directed brokerage window, was not 
affected; (b) to reduce investment management expenses borne by 
participants, as Mellon absorbs all the costs for the Basic Funds (as 
they are Mellon collective investment funds) but did not absorb the 
internal costs of the Actively Managed Funds.
    The applicant also asserts that no financial interest of Mellon, 
any related company, or any Plan committee member was served through 
these changes. To the contrary, the changes were undertaken with the 
goal of better serving the interests of the Plan participants and 
beneficiaries, in accordance with the fiduciary responsibilities of the 
Plan committee, by simplifying investments and reducing costs in the 
manner described above. In fact, as several of the Actively Managed 
Funds that were eliminated are advised by Mellon affiliates, those 
affiliates will receive reduced Plan-related income (to the extent that 
participants chose to continue to invest in those Funds in the self-
directed brokerage account). Furthermore, as the Plan committee members 
do not serve on the boards of other financial services companies, one 
commenter's concern that committee members were enriched by the change 
in fund line-up through their outside board affiliations has no basis 
in fact.
    The applicant adds that information about the Basic Funds is not 
available in public newspapers because they are collective funds, 
available only to institutional investors. However, the information is 
readily available to Plan participants and beneficiaries on Mellon's 
401(k) Plan website, the address for which is included in participant 
statements and other mailings. The website includes fund closing prices 
for the prior business day and performance information for each fund 
for the preceding quarter, year-to-date, and for the prior one-year, 
three-year and five-year periods.
    As represented in the Summary, Plan participants were notified of 
the changes in investment offerings by an announcement (Exhibit E to 
the application) distributed on or about October 6, 2005. The new fund 
line-up was to be implemented December 1st, with the increased self-
directed account limit available until December 30th. The Plan 
committee believes that the three-page announcement was clearly written 
and sufficiently explained that the 50% limitation on investment in the 
self-directed brokerage window would be suspended only for a limited 
time period (see the bottom of page 2). Even so, to assure that its 
employees understood the changes, Mellon provided the same information 
in several additional ways prior to the December 30th deadline. A list 
of ``Frequently Asked Questions'' regarding the changes was posted on 
the Mellon intranet site, accessible through an ``In the Spotlight'' 
section that contains information for employees, and the changes also 
were the subject of a three-page article in a December employee 
newsletter, ``EC News.'' In addition, Mellon Human Resources sponsored 
``in person'' and web-based presentations on the changes, giving 
employees the opportunity to ask questions of a knowledgeable 
presenter. As a result, the Plan participants had notice in several 
formats of what was taking place and almost three months to preserve 
their investments in the Actively Managed Funds that were being removed 
as designated investment options.
    The applicant states that the fund change deadline of December 1st 
had already been communicated to the participants and beneficiaries 
when it became clear that exemptive relief would be necessary, as a 
result of the discovery by the Plan committee that two of the Fund 
transfers would have to be made in kind. It would have been detrimental 
to the interests of the participants and beneficiaries to have delayed 
the transfers at that point because they had already received the 
October notices and may have begun to make adjustments or taken (or not 
taken) other action in light of the upcoming changes. Therefore, the 
Plan committee decided to proceed and to request retroactive relief. 
The risks of the exemption's not being granted were on Mellon and the 
Plan committee, as they, not the Plan, would be liable for any losses 
or prohibited transaction excise taxes in the event that the Fund 
transfers were prohibited without coverage under an exemption.
    Finally, the applicant explains that the 50% limitation on the 
investment of a participant's account in the self-directed brokerage 
window was imposed by the Plan committee when the brokerage window was 
first added to the Plan in 2001. The committee's view was that the 
Funds available as designated investment options under the Plan offered 
a broad range of well-performing and diverse investments and that 
participants should not be permitted to place more than half of their 
assets in potentially higher-risk investments. While the number of 
designated investment options has been reduced as a result of the 2005 
changes, it is the committee's view that the remaining Funds still 
provide a range of well-performing and diverse investments. Therefore, 
it has kept in place the 50% limitation, subject to the one-time, 
limited exception to permit participants to preserve their existing 
investments in the Funds being removed as Plan investment options.
    After a careful consideration of the entire record, including the 
written comments and the applicant's responses thereto, the Department 
has determined

[[Page 13130]]

that a public hearing in this instance is unwarranted and that the 
proposed exemption should be granted as modified herein.

FOR FURTHER INFORMATION CONTACT: Ms. Karin Weng of the Department, 
telephone (202) 693-8557. (This is not a toll-free number.)

Amendment to Prohibited Transaction Exemption (PTE) 2000-58, 65 FR 
67765 (November 13, 2000) and PTE 2002-41, 67 FR 54487 (August 22, 
2002) Involving Bear, Stearns & Co. Inc., Prudential Securities 
Incorporated, et al. to add Dominion Bond Rating Service Limited and 
Dominion Bond Rating Service, Inc. to the Definition of ``Rating 
Agency''

[Prohibited Transaction Exemption 2007-05; Application Number D-11370]

 Exemption

    In accordance with section 408(a) of the Act and section 4975(c)(2) 
of the Code and the procedures set forth in 29 CFR Part 2570, Subpart B 
(55 FR 32836, August 10, 1990) and based upon the entire record, the 
Department amends the following individual Prohibited Transaction 
Exemptions (PTEs), as set forth below: PTE 89-88, 54 FR 42582 (October 
17, 1989); PTE 89-89, 54 FR 42569 (October 17, 1989); PTE 89-90, 54 FR 
42597 (October 17, 1989); PTE 90-22, 55 FR 20542 (May 17, 1990); PTE 
90-24, 55 FR 20548 (May 17, 1990); PTE 90-28, 55 FR 21456 (May 24, 
1990); PTE 90-29, 55 FR 21459 (May 24, 1990); PTE 90-30, 55 FR 21461 
(May 24, 1990); PTE 90-32, 55 FR 23147 (June 6, 1990); PTE 90-36, 55 FR 
25903 (June 25, 1990); PTE 90-39, 55 FR 27713 (July 5, 1990); PTE 90-
59, 55 FR 36724 (September 6, 1990); PTE 90-83, 55 FR 50250 (December 
5, 1990); PTE 90-84, 55 FR 50252 (December 5, 1990); PTE 90-88, 55 FR 
52899 (December 24, 1990); PTE 91-14, 55 FR 48178 (February 22, 1991); 
PTE 91-22, 56 FR 03277 (April 18, 1991); PTE 91-23, 56 FR 15936 (April 
18, 1991); PTE 91-30, 56 FR 22452 (May 15, 1991); PTE 91-62, 56 FR 
51406 (October 11, 1991); PTE 93-31, 58 FR 28620 (May 5, 1993); PTE 93-
32, 58 FR 28623 (May 14, 1993); PTE 94-29, 59 FR 14675 (March 29, 
1994); PTE 94-64, 59 FR 42312 (August 17, 1994); PTE 94-70, 59 FR 50014 
(September 30, 1994); PTE 94-73, 59 FR 51213 (October 7, 1994); PTE 94-
84, 59 FR 65400 (December 19, 1994); PTE 95-26, 60 FR 17586 (April 6, 
1995); PTE 95-59, 60 FR 35938 (July 12, 1995); PTE 95-89, 60 FR 49011 
(September 21, 1995); PTE 96-22, 61 FR 14828 (April 3, 1996); PTE 96-
84, 61 FR 58234 (November 13, 1996); PTE 96-92, 61 FR 66334 (December 
17, 1996); PTE 96-94, 61 FR 68787 (December 30, 1996); PTE 97-05, 62 FR 
1926 (January 14, 1997); PTE 97-28, 62 FR 28515 (May 23, 1997); PTE 98-
08, 63 FR 8498 (February 19, 1998); PTE 99-11, 64 FR 11046 (March 8, 
1999); PTE 2000-19, 65 FR 25950 (May 4, 2000); PTE 2000-33, 65 FR 37171 
(June 13, 2000); PTE 2000-41, 65 FR 51039 (August 22, 2000); PTE 2000-
55, 65 FR 37171 (November 13, 2000); PTE 2002-19, 67 FR 14979 (March 
28, 2002); PTE 2003-31, 68 FR 59202 (October 14, 2003); and PTE 2006-
07, 71 FR 32134 (June 2, 2006), each as subsequently amended by PTE 97-
34, 62 FR 39021 (July 21, 1997) and PTE 2000-58, 65 FR 67765 (November 
13, 2000) and for certain of the exemptions, amended by PTE 2002-41, 67 
FR 54487 (August 22, 2002) (collectively, the Underwriter Exemptions).
    In addition, the Department notes that it is also granting 
individual exemptive relief for: Deutsche Bank A.G., New York Branch 
and Deutsche Morgan Grenfell/C.J. Lawrence Inc., Final Authorization 
Number (FAN) 97-03E (December 9, 1996); Credit Lyonnais Securities 
(USA) Inc., FAN 97-21E (September 10, 1997); ABN AMRO Inc., FAN 98-08E 
(April 27, 1998); Ironwood Capital Partners Ltd., FAN 99-31E (December 
20, 1999) (supersedes FAN 97-02E (November 25, 1996)); William J. Mayer 
Securities LLC, FAN 01-25E (October 15, 2001); Raymond James & 
Associates Inc. & Raymond James Financial Inc., FAN 03-07E (June 14, 
2003); WAMU Capital Corporation, FAN 03-14E (August 24, 2003); and 
Terwin Capital LLC, FAN 04-16E (August 18, 2004); which received the 
approval of the Department to engage in transactions substantially 
similar to the transactions described in the Underwriter Exemptions 
pursuant to PTE 96-62, 61 FR 39988 (July 31, 1996).

I. Transactions

    A. Effective for transactions occurring on or after April 5, 2006, 
the restrictions of sections 406(a) and 407(a) of the Act, and the 
taxes imposed by sections 4975(a) and (b) of the Code, by reason of 
section 4975(c)(1)(A) through (D) of the Code shall not apply to the 
following transactions involving Issuers and Securities evidencing 
interests therein:
    (1) The direct or indirect sale, exchange or transfer of Securities 
in the initial issuance of Securities between the Sponsor or 
Underwriter and an employee benefit plan when the Sponsor, Servicer, 
Trustee or Insurer of an Issuer, the Underwriter of the Securities 
representing an interest in the Issuer, or an Obligor is a party in 
interest with respect to such plan;
    (2) The direct or indirect acquisition or disposition of Securities 
by a plan in the secondary market for such Securities; and
    (3) The continued holding of Securities acquired by a plan pursuant 
to subsection I.A.(1) or (2).
    Notwithstanding the foregoing, section I.A. does not provide an 
exemption from the restrictions of sections 406(a)(1)(E), 406(a)(2) and 
407 of the Act for the acquisition or holding of a Security on behalf 
of an Excluded Plan by any person who has discretionary authority or 
renders investment advice with respect to the assets of that Excluded 
Plan.\1\
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    \1\ Section I.A. provides no relief from sections 406(a)(1)(E), 
406(a)(2) and 407 of the Act for any person rendering investment 
advice to an Excluded Plan within the meaning of section 
3(21)(A)(ii) of the Act, and regulation 29 CFR 2510.3-21(c).
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    B. Effective for transactions occurring on or after April 5, 2006, 
the restrictions of sections 406(b)(1) and 406(b)(2) of the Act and the 
taxes imposed by sections 4975(a) and (b) of the Code, by reason of 
section 4975(c)(1)(E) of the Code, shall not apply to:
    (1) The direct or indirect sale, exchange or transfer of Securities 
in the initial issuance of Securities between the Sponsor or 
Underwriter and a plan when the person who has discretionary authority 
or renders investment advice with respect to the investment of plan 
assets in the Securities is (a) an Obligor with respect to 5 percent or 
less of the fair market value of obligations or receivables contained 
in the Issuer, or (b) an Affiliate of a person described in (a); if:
    (i) The plan is not an Excluded Plan;
    (ii) Solely in the case of an acquisition of Securities in 
connection with the initial issuance of the Securities, at least 50 
percent of each class of Securities in which plans have invested is 
acquired by persons independent of the members of the Restricted Group 
and at least 50 percent of the aggregate interest in the Issuer is 
acquired by persons independent of the Restricted Group;
    (iii) A plan's investment in each class of Securities does not 
exceed 25 percent of all of the Securities of that class outstanding at 
the time of the acquisition; and
    (iv) Immediately after the acquisition of the Securities, no more 
than 25 percent of the assets of a plan with respect to which the 
person has discretionary authority or renders investment advice are 
invested in Securities representing an interest in an Issuer containing 
assets sold or serviced by the same entity.\2\ For purposes of this

[[Page 13131]]

paragraph (iv) only, an entity will not be considered to service assets 
contained in an Issuer if it is merely a Subservicer of that Issuer;
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    \2\ For purposes of this Underwriter Exemption, each plan 
participating in a commingled fund (such as a bank collective trust 
fund or insurance company pooled separate account) shall be 
considered to own the same proportionate undivided interest in each 
asset of the commingled fund as its proportionate interest in the 
total assets of the commingled fund as calculated on the most recent 
preceding valuation date of the fund.
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    (2) The direct or indirect acquisition or disposition of Securities 
by a plan in the secondary market for such Securities, provided that 
the conditions set forth in paragraphs (i), (iii) and (iv) of 
subsection I.B.(1) are met; and
    (3) The continued holding of Securities acquired by a plan pursuant 
to subsection I.B.(1) or (2).
    C. Effective for transactions occurring on or after April 5, 2006, 
the restrictions of sections 406(a), 406(b) and 407(a) of the Act, and 
the taxes imposed by section 4975(a) and (b) of the Code by reason of 
section 4975(c) of the Code, shall not apply to transactions in 
connection with the servicing, management and operation of an Issuer, 
including the use of any Eligible Swap transaction; or the defeasance 
of a mortgage obligation held as an asset of the Issuer through the 
substitution of a new mortgage obligation in a commercial mortgage-
backed Designated Transaction, provided:
    (1) Such transactions are carried out in accordance with the terms 
of a binding Pooling and Servicing Agreement;
    (2) The Pooling and Servicing Agreement is provided to, or 
described in all material respects in the prospectus or private 
placement memorandum provided to, investing plans before they purchase 
Securities issued by the Issuer;\3\ and
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    \3\ In the case of a private placement memorandum, such 
memorandum must contain substantially the same information that 
would be disclosed in a prospectus if the offering of the securities 
were made in a registered public offering under the Securities Act 
of 1933. In the Department's view, the private placement memorandum 
must contain sufficient information to permit plan fiduciaries to 
make informed investment decisions. For purposes of this exemption, 
references to ``prospectus'' include any related prospectus 
supplement thereto, pursuant to which Securities are offered to 
investors.
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    (3) The defeasance of a mortgage obligation and the substitution of 
a new mortgage obligation in a commercial mortgage-backed Designated 
Transaction meet the terms and conditions for such defeasance and 
substitution as are described in the prospectus or private placement 
memorandum for such Securities, which terms and conditions have been 
approved by a Rating Agency and does not result in the Securities 
receiving a lower credit rating from the Rating Agency than the current 
rating of the Securities.
    Notwithstanding the foregoing, section I.C. does not provide an 
exemption from the restrictions of section 406(b) of the Act or from 
the taxes imposed by reason of section 4975(c) of the Code for the 
receipt of a fee by a Servicer of the Issuer from a person other than 
the Trustee or Sponsor, unless such fee constitutes a Qualified 
Administrative Fee.
    D. Effective for transactions occurring on or after April 5, 2006, 
the restrictions of sections 406(a) and 407(a) of the Act, and the 
taxes imposed by section 4975(a) and (b) of the Code by reason of 
section 4975(c)(1)(A) through (D) of the Code, shall not apply to any 
transactions to which those restrictions or taxes would otherwise apply 
merely because a person is deemed to be a party in interest or 
disqualified person (including a fiduciary) with respect to a plan by 
virtue of providing services to the plan (or by virtue of having a 
relationship to such service provider described in section 3(14)(F), 
(G), (H) or (I) of the Act or section 4975(e)(2)(F), (G), (H) or (I) of 
the Code), solely because of the plan's ownership of Securities.

II. General Conditions

    A. The relief provided under section I. is available only if the 
following conditions are met:
    (1) The acquisition of Securities by a plan is on terms (including 
the Security price) that are at least as favorable to the plan as they 
would be in an arm's-length transaction with an unrelated party;
    (2) The rights and interests evidenced by the Securities are not 
subordinated to the rights and interests evidenced by other Securities 
of the same Issuer, unless the Securities are issued in a Designated 
Transaction;
    (3) The Securities acquired by the plan have received a rating from 
a Rating Agency at the time of such acquisition that is in one of the 
three (or in the case of Designated Transactions, four) highest generic 
rating categories;
    (4) The Trustee is not an Affiliate of any member of the Restricted 
Group, other than an Underwriter. For purposes of this requirement:
    (a) The Trustee shall not be considered to be an Affiliate of a 
Servicer solely because the Trustee has succeeded to the rights and 
responsibilities of the Servicer pursuant to the terms of a Pooling and 
Servicing Agreement providing for such succession upon the occurrence 
of one or more events of default by the Servicer; and
    (b) Subsection II.A.(4) will be deemed satisfied notwithstanding a 
Servicer becoming an Affiliate of the Trustee as the result of a merger 
or acquisition involving the Trustee, such Servicer and/or their 
Affiliates which occurs after the initial issuance of the Securities, 
provided that:
    (i) Such Servicer ceases to be an Affiliate of the Trustee no later 
than six months after the date such Servicer became an Affiliate of the 
Trustee; and
    (ii) Such Servicer did not breach any of its obligations under the 
Pooling and Servicing Agreement, unless such breach was immaterial and 
timely cured in accordance with the terms of such agreement, during the 
period from the closing date of such merger or acquisition transaction 
through the date the Servicer ceased to be an Affiliate of the Trustee;
    (5) The sum of all payments made to and retained by the 
Underwriters in connection with the distribution or placement of 
Securities represents not more than Reasonable Compensation for 
underwriting or placing the Securities; the sum of all payments made to 
and retained by the Sponsor pursuant to the assignment of obligations 
(or interests therein) to the Issuer represents not more than the fair 
market value of such obligations (or interests); and the sum of all 
payments made to and retained by the Servicer represents not more than 
Reasonable Compensation for the Servicer's services under the Pooling 
and Servicing Agreement and reimbursement of the Servicer's reasonable 
expenses in connection therewith;
    (6) The plan investing in such Securities is an ``accredited 
investor'' as defined in Rule 501(a)(1) of Regulation D of the 
Securities and Exchange Commission under the Securities Act of 1933; 
and
    (7) In the event that the obligations used to fund an Issuer have 
not all been transferred to the Issuer on the Closing Date, additional 
obligations of the types specified in subsection III.B.(1) may be 
transferred to the Issuer during the Pre-Funding Period in exchange for 
amounts credited to the Pre-Funding Account, provided that:
    (a) The Pre-Funding Limit is not exceeded;
    (b) All such additional obligations meet the same terms and 
conditions for determining the eligibility of the original obligations 
used to create the Issuer (as described in the prospectus or private 
placement memorandum and/or Pooling and Servicing Agreement for such 
Securities), which terms and

[[Page 13132]]

conditions have been approved by a Rating Agency.
    Notwithstanding the foregoing, the terms and conditions for 
determining the eligibility of an obligation may be changed if such 
changes receive prior approval either by a majority vote of the 
outstanding securityholders or by a Rating Agency;
    (c) The transfer of such additional obligations to the Issuer 
during the Pre-Funding Period does not result in the Securities 
receiving a lower credit rating from a Rating Agency upon termination 
of the Pre-Funding Period than the rating that was obtained at the time 
of the initial issuance of the Securities by the Issuer;
    (d) The weighted average annual percentage interest rate (the 
average interest rate) for all of the obligations held by the Issuer at 
the end of the Pre-Funding Period will not be more than 100 basis 
points lower than the average interest rate for the obligations which 
were transferred to the Issuer on the Closing Date;
    (e) In order to ensure that the characteristics of the receivables 
actually acquired during the Pre-Funding Period are substantially 
similar to those which were acquired as of the Closing Date, the 
characteristics of the additional obligations will either be monitored 
by a credit support provider or other insurance provider which is 
independent of the Sponsor or an independent accountant retained by the 
Sponsor will provide the Sponsor with a letter (with copies provided to 
the Rating Agency, the Underwriter and the Trustee) stating whether or 
not the characteristics of the additional obligations conform to the 
characteristics of such obligations described in the prospectus, 
private placement memorandum and/or Pooling and Servicing Agreement. In 
preparing such letter, the independent accountant will use the same 
type of procedures as were applicable to the obligations which were 
transferred as of the Closing Date;
    (f) The Pre-Funding Period shall be described in the prospectus or 
private placement memorandum provided to investing plans; and
    (g) The Trustee of the Trust (or any agent with which the Trustee 
contracts to provide Trust services) will be a substantial financial 
institution or trust company experienced in trust activities and 
familiar with its duties, responsibilities and liabilities as a 
fiduciary under the Act. The Trustee, as the legal owner of the 
obligations in the Trust or the holder of a security interest in the 
obligations held by the Issuer, will enforce all the rights created in 
favor of securityholders of the Issuer, including employee benefit 
plans subject to the Act;
    (8) In order to insure that the assets of the Issuer may not be 
reached by creditors of the Sponsor in the event of bankruptcy or other 
insolvency of the Sponsor:
    (a) The legal documents establishing the Issuer will contain:
    (i) Restrictions on the Issuer's ability to borrow money or issue 
debt other than in connection with the securitization;
    (ii) Restrictions on the Issuer merging with another entity, 
reorganizing, liquidating or selling assets (other than in connection 
with the securitization);
    (iii) Restrictions limiting the authorized activities of the Issuer 
to activities relating to the securitization;
    (iv) If the Issuer is not a Trust, provisions for the election of 
at least one independent director/partner/member whose affirmative 
consent is required before a voluntary bankruptcy petition can be filed 
by the Issuer; and
    (v) If the Issuer is not a Trust, requirements that each 
independent director/partner/member must be an individual that does not 
have a significant interest in, or other relationships with, the 
Sponsor or any of its Affiliates; and
    (b) The Pooling and Servicing Agreement and/or other agreements 
establishing the contractual relationships between the parties to the 
securitization transaction will contain covenants prohibiting all 
parties thereto from filing an involuntary bankruptcy petition against 
the Issuer or initiating any other form of insolvency proceeding until 
after the Securities have been paid; and
    (c) Prior to the issuance by the Issuer of any Securities, a legal 
opinion is received which states that either:
    (i) A ``true sale'' of the assets being transferred to the Issuer 
by the Sponsor has occurred and that such transfer is not being made 
pursuant to a financing of the assets by the Sponsor; or
    (ii) In the event of insolvency or receivership of the Sponsor, the 
assets transferred to the Issuer will not be part of the estate of the 
Sponsor;
    (9) If a particular class of Securities held by any plan involves a 
Ratings Dependent or Non-Ratings Dependent Swap entered into by the 
Issuer, then each particular swap transaction relating to such 
Securities:
    (a) Shall be an Eligible Swap;
    (b) Shall be with an Eligible Swap Counterparty;
    (c) In the case of a Ratings Dependent Swap, shall provide that if 
the credit rating of the counterparty is withdrawn or reduced by any 
Rating Agency below a level specified by the Rating Agency, the 
Servicer (as agent for the Trustee) shall, within the period specified 
under the Pooling and Servicing Agreement:
    (i) Obtain a replacement swap agreement with an Eligible Swap 
Counterparty which is acceptable to the Rating Agency and the terms of 
which are substantially the same as the current swap agreement (at 
which time the earlier swap agreement shall terminate); or
    (ii) Cause the swap counterparty to establish any collateralization 
or other arrangement satisfactory to the Rating Agency such that the 
then current rating by the Rating Agency of the particular class of 
Securities will not be withdrawn or reduced.
    In the event that the Servicer fails to meet its obligations under 
this subsection II.A.(9)(c), plan securityholders will be notified in 
the immediately following Trustee's periodic report which is provided 
to securityholders, and sixty days after the receipt of such report, 
the exemptive relief provided under section I.C. will prospectively 
cease to be applicable to any class of Securities held by a plan which 
involves such Ratings Dependent Swap; provided that in no event will 
such plan securityholders be notified any later than the end of the 
second month that begins after the date on which such failure occurs.
    (d) In the case of a Non-Ratings Dependent Swap, shall provide 
that, if the credit rating of the counterparty is withdrawn or reduced 
below the lowest level specified in section III.GG., the Servicer (as 
agent for the Trustee) shall within a specified period after such 
rating withdrawal or reduction:
    (i) Obtain a replacement swap agreement with an Eligible Swap 
Counterparty, the terms of which are substantially the same as the 
current swap agreement (at which time the earlier swap agreement shall 
terminate); or
    (ii) Cause the swap counterparty to post collateral with the 
Trustee in an amount equal to all payments owed by the counterparty if 
the swap transaction were terminated; or
    (iii) Terminate the swap agreement in accordance with its terms; 
and
    (e) Shall not require the Issuer to make any termination payments 
to the counterparty (other than a currently scheduled payment under the 
swap agreement) except from Excess Spread or other amounts that would 
otherwise be payable to the Servicer or the Sponsor;
    (10) Any class of Securities, to which one or more swap agreements 
entered into by the Issuer applies, may be

[[Page 13133]]

acquired or held in reliance upon this Underwriter Exemption only by 
Qualified Plan Investors; and
    (11) Prior to the issuance of any debt securities, a legal opinion 
is received which states that the debt holders have a perfected 
security interest in the Issuer's assets.
    B. Neither any Underwriter, Sponsor, Trustee, Servicer, Insurer or 
any Obligor, unless it or any of its Affiliates has discretionary 
authority or renders investment advice with respect to the plan assets 
used by a plan to acquire Securities, shall be denied the relief 
provided under section I., if the provision of subsection II.A.(6) is 
not satisfied with respect to acquisition or holding by a plan of such 
Securities, provided that (1) such condition is disclosed in the 
prospectus or private placement memorandum; and (2) in the case of a 
private placement of Securities, the Trustee obtains a representation 
from each initial purchaser which is a plan that it is in compliance 
with such condition, and obtains a covenant from each initial purchaser 
to the effect that, so long as such initial purchaser (or any 
transferee of such initial purchaser's Securities) is required to 
obtain from its transferee a representation regarding compliance with 
the Securities Act of 1933, any such transferees will be required to 
make a written representation regarding compliance with the condition 
set forth in subsection II.A.(6).

III. Definitions

    For purposes of this exemption:
    A. ``Security'' means:
    (1) A pass-through certificate or trust certificate that represents 
a beneficial ownership interest in the assets of an Issuer which is a 
Trust and which entitles the holder to payments of principal, interest 
and/or other payments made with respect to the assets of such Trust; or
    (2) A security which is denominated as a debt instrument that is 
issued by, and is an obligation of, an Issuer; with respect to which 
the Underwriter is either (i) the sole underwriter or the manager or 
co-manager of the underwriting syndicate, or (ii) a selling or 
placement agent.
    B. ``Issuer'' means an investment pool, the corpus or assets of 
which are held in trust (including a grantor or owner Trust) or whose 
assets are held by a partnership, special purpose corporation or 
limited liability company (which Issuer may be a Real Estate Mortgage 
Investment Conduit (REMIC) or a Financial Asset Securitization 
Investment Trust (FASIT) within the meaning of section 860D(a) or 
section 860L, respectively, of the Code); and the corpus or assets of 
which consist solely of:
    (1)(a) Secured consumer receivables that bear interest or are 
purchased at a discount (including, but not limited to, home equity 
loans and obligations secured by shares issued by a cooperative housing 
association); and/or
    (b) Secured credit instruments that bear interest or are purchased 
at a discount in transactions by or between business entities 
(including, but not limited to, Qualified Equipment Notes Secured by 
Leases); and/or
    (c) Obligations that bear interest or are purchased at a discount 
and which are secured by single-family residential, multi-family 
residential and/or commercial real property (including obligations 
secured by leasehold interests on residential or commercial real 
property); and/or
    (d) Obligations that bear interest or are purchased at a discount 
and which are secured by motor vehicles or equipment, or Qualified 
Motor Vehicle Leases; and/or
    (e) Guaranteed governmental mortgage pool certificates, as defined 
in 29 CFR 2510.3-101(i)(2) \4\; and/or
    (f) Fractional undivided interests in any of the obligations 
described in clauses (a)-(e) of this subsection B.(1).\5\
    (1) Notwithstanding the foregoing, residential and home equity loan 
receivables issued in Designated Transactions may be less than fully 
secured, provided that: (i) the rights and interests evidenced by the 
Securities issued in such Designated Transactions (as defined in 
section III.DD.) are not subordinated to the rights and interests 
evidenced by Securities of the same Issuer; (ii) such Securities 
acquired by the plan have received a rating from a Rating Agency at the 
time of such acquisition that is in one of the two highest generic 
rating categories; and (iii) any obligation included in the corpus or 
assets of the Issuer must be secured by collateral whose fair market 
value on the Closing Date of the Designated Transaction is at least 
equal to 80% of the sum of: (I) the outstanding principal balance due 
under the obligation which is held by the Issuer and (II) the 
outstanding principal balance(s) of any other obligation(s) of higher 
priority (whether or not held by the Issuer) which are secured by the 
same collateral.
    (2) Property which had secured any of the obligations described in 
subsection III.B.(1);
    (3)(a) Undistributed cash or temporary investments made therewith 
maturing no later than the next date on which distributions are made to 
securityholders; and/or
    (b) Cash or investments made therewith which are credited to an 
account to provide payments to securityholders pursuant to any Eligible 
Swap Agreement meeting the conditions of subsection II.A.(9) or 
pursuant to any Eligible Yield Supplement Agreement; and/or
    (c) Cash transferred to the Issuer on the Closing Date and 
permitted investments made therewith which:
    (i) Are credited to a Pre-Funding Account established to purchase 
additional obligations with respect to which the conditions set forth 
in paragraphs (a)-(g) of subsection II.A.(7) are met; and/or
    (ii) Are credited to a Capitalized Interest Account; and
    (iii) Are held by the Issuer for a period ending no later than the 
first distribution date to securityholders occurring after the end of 
the Pre-Funding Period.
    For purposes of this paragraph (c) of subsection III.B.(3), the 
term ``permitted investments'' means investments which: (i) are either: 
(x) direct obligations of, or obligations fully guaranteed as to timely 
payment of principal and interest by, the United States or any agency 
or instrumentality thereof, provided that such obligations are backed 
by the full faith and credit of the United States or (y) have been 
rated (or the Obligor has been rated) in one of the three highest 
generic rating categories by a Rating Agency; (ii) are described in the 
Pooling and Servicing Agreement; and (iii) are permitted by the Rating 
Agency.
    (4) Rights of the Trustee under the Pooling and Servicing 
Agreement, and rights under any insurance policies, third-party 
guarantees, contracts of suretyship, Eligible Yield Supplement 
Agreements, Eligible Swap Agreements meeting the conditions of 
subsection II.A.(9) or other credit support arrangements with respect 
to any obligations described in subsection III.B.(1).
    Notwithstanding the foregoing, the term ``Issuer'' does not include 
any investment pool unless: (i) the assets of the type described in 
paragraphs (a)-(f) of subsection III.B.(1) which are contained in the 
investment pool have been included in other investment pools, (ii) 
Securities evidencing interests in such other investment pools have 
been rated in one of the three (or in the case of Designated 
Transactions, four) highest generic rating categories by a Rating 
Agency for at least one year prior to the plan's acquisition of 
Securities pursuant to this Underwriter Exemption, and (iii) Securities

[[Page 13134]]

evidencing interests in such other investment pools have been purchased 
by investors other than plans for at least one year prior to the plan's 
acquisition of Securities pursuant to this Underwriter Exemption.
    C. ``Underwriter'' means:
    (1) An entity defined as an Underwriter in subsection III.C.(1) of 
each of the Underwriter Exemptions that are being amended by this 
exemption. In addition, the term Underwriter includes Deutsche Bank AG, 
New York Branch and Deutsche Morgan Grenfell/C.J. Lawrence Inc, Credit 
Lyonnais Securities (USA) Inc., ABN AMRO Inc., Ironwood Capital 
Partners Ltd., William J. Mayer Securities LLC, Raymond James & 
Associates Inc. & Raymond James Financial Inc., WAMU Capital 
Corporation, and Terwin Capital LLC (which received the approval of the 
Department to engage in transactions substantially similar to the 
transactions described in the Underwriter Exemptions pursuant to PTE 
96-62);
    (2) Any person directly or indirectly, through one or more 
intermediaries, controlling, controlled by or under common control with 
such entity; or
    (3) Any member of an underwriting syndicate or selling group of 
which a person described in subsections III.C.(1) or (2) is a manager 
or co-manager with respect to the Securities.
    D. ``Sponsor'' means the entity that organizes an Issuer by 
depositing obligations therein in exchange for Securities.
    E. ``Master Servicer'' means the entity that is a party to the 
Pooling and Servicing Agreement relating to assets of the Issuer and is 
fully responsible for servicing, directly or through Subservicers, the 
assets of the Issuer.
    F. ``Subservicer'' means an entity which, under the supervision of 
and on behalf of the Master Servicer, services loans contained in the 
Issuer, but is not a party to the Pooling and Servicing Agreement.
    G. ``Servicer'' means any entity which services loans contained in 
the Issuer, including the Master Servicer and any Subservicer.
    H. ``Trust'' means an Issuer which is a trust (including an owner 
trust, grantor trust or a REMIC or FASIT which is organized as a 
Trust).
    I. ``Trustee'' means the Trustee of any Trust which issues 
Securities and also includes an Indenture Trustee. ``Indenture 
Trustee'' means the Trustee appointed under the indenture pursuant to 
which the subject Securities are issued, the rights of holders of the 
Securities are set forth and a security interest in the Trust assets in 
favor of the holders of the Securities is created. The Trustee or the 
Indenture Trustee is also a party to or beneficiary of all the 
documents and instruments transferred to the Issuer, and as such, has 
both the authority to, and the responsibility for, enforcing all the 
rights created thereby in favor of holders of the Securities, including 
those rights arising in the event of default by the Servicer.
    J. ``Insurer'' means the insurer or guarantor of, or provider of 
other credit support for, an Issuer. Notwithstanding the foregoing, a 
person is not an insurer solely because it holds Securities 
representing an interest in an Issuer which are of a class subordinated 
to Securities representing an interest in the same Issuer.
    K. ``Obligor'' means any person, other than the Insurer, that is 
obligated to make payments with respect to any obligation or receivable 
included in the Issuer. Where an Issuer contains Qualified Motor 
Vehicle Leases or Qualified Equipment Notes Secured by Leases, 
``Obligor'' shall also include any owner of property subject to any 
lease included in the Issuer, or subject to any lease securing an 
obligation included in the Issuer.
    L. ``Excluded Plan'' means any plan with respect to which any 
member of the Restricted Group is a ``plan sponsor'' within the meaning 
of section 3(16)(B) of the Act.
    M. ``Restricted Group'' with respect to a class of Securities 
means:
    (1) Each Underwriter;
    (2) Each Insurer;
    (3) The Sponsor;
    (4) The Trustee;
    (5) Each Servicer;
    (6) Any Obligor with respect to obligations or receivables included 
in the Issuer constituting more than 5 percent of the aggregate 
unamortized principal balance of the assets in the Issuer, determined 
on the date of the initial issuance of Securities by the Issuer;
    (7) Each counterparty in an Eligible Swap Agreement; or
    (8) Any Affiliate of a person described in subsections III.M.(1)-
(7).
    N. ``Affiliate'' of another person includes:
    (1) Any person directly or indirectly, through one or more 
intermediaries, controlling, controlled by, or under common control 
with such other person;
    (2) Any officer, director, partner, employee, relative (as defined 
in section 3(15) of the Act), a brother, a sister, or a spouse of a 
brother or sister of such other person; and
    (3) Any corporation or partnership of which such other person is an 
officer, director or partner.
    O. ``Control'' means the power to exercise a controlling influence 
over the management or policies of a person other than an individual.
    P. A person will be ``independent'' of another person only if:
    (1) Such person is not an Affiliate of that other person; and
    (2) The other person, or an Affiliate thereof, is not a fiduciary 
who has investment management authority or renders investment advice 
with respect to any assets of such person.
    Q. ``Sale'' includes the entrance into a Forward Delivery 
Commitment, provided:
    (1) The terms of the Forward Delivery Commitment (including any fee 
paid to the investing plan) are no less favorable to the plan than they 
would be in an arm's-length transaction with an unrelated party;
    (2) The prospectus or private placement memorandum is provided to 
an investing plan prior to the time the plan enters into the Forward 
Delivery Commitment; and
    (3) At the time of the delivery, all conditions of this Underwriter 
Exemption applicable to sales are met.
    R. ``Forward Delivery Commitment'' means a contract for the 
purchase or sale of one or more Securities to be delivered at an agreed 
future settlement date. The term includes both mandatory contracts 
(which contemplate obligatory delivery and acceptance of the 
Securities) and optional contracts (which give one party the right but 
not the obligation to deliver Securities to, or demand delivery of 
Securities from, the other party).
    S. ``Reasonable Compensation'' has the same meaning as that term is 
defined in 29 CFR 2550.408c-2.
    T. ``Qualified Administrative Fee'' means a fee which meets the 
following criteria:
    (1) The fee is triggered by an act or failure to act by the Obligor 
other than the normal timely payment of amounts owing in respect of the 
obligations;
    (2) The Servicer may not charge the fee absent the act or failure 
to act referred to in subsection III.T.(1);
    (3) The ability to charge the fee, the circumstances in which the 
fee may be charged, and an explanation of how the fee is calculated are 
set forth in the Pooling and Servicing Agreement; and
    (4) The amount paid to investors in the Issuer will not be reduced 
by the amount of any such fee waived by the Servicer.
    U. ``Qualified Equipment Note Secured By A Lease'' means an 
equipment note:
    (1) Which is secured by equipment which is leased;

[[Page 13135]]

    (2) Which is secured by the obligation of the lessee to pay rent 
under the equipment lease; and
    (3) With respect to which the Issuer's security interest in the 
equipment is at least as protective of the rights of the Issuer as the 
Issuer would have if the equipment note were secured only by the 
equipment and not the lease.
    V. ``Qualified Motor Vehicle Lease'' means a lease of a motor 
vehicle where:
    (1) The Issuer owns or holds a security interest in the lease;
    (2) The Issuer owns or holds a security interest in the leased 
motor vehicle; and
    (3) The Issuer's security interest in the leased motor vehicle is 
at least as protective of the Issuer's rights as the Issuer would 
receive under a motor vehicle installment loan contract.
    W. ``Pooling and Servicing Agreement'' means the agreement or 
agreements among a Sponsor, a Servicer and the Trustee establishing a 
Trust. ``Pooling and Servicing Agreement'' also includes the indenture 
entered into by the Issuer and the Indenture Trustee.
    X. ``Rating Agency'' means Standard & Poor's Ratings Services, a 
division of The McGraw-Hill Companies, Inc.; Moody's Investors Service, 
Inc.; FitchRatings, Inc.; Dominion Bond Rating Service Limited, or 
Dominion Bond Rating Service, Inc.; or any successors thereto.
    Y. ``Capitalized Interest Account'' means an Issuer account: (i) 
which is established to compensate securityholders for shortfalls, if 
any, between investment earnings on the Pre-Funding Account and the 
interest rate payable under the Securities; and (ii) which meets the 
requirements of paragraph (c) of subsection III.B.(3).
    Z. ``Closing Date'' means the date the Issuer is formed, the 
Securities are first issued and the Issuer'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 Issuer.
    AA. ``Pre-Funding Account'' means an Issuer account: (i) Which is 
established to purchase additional obligations, which obligations meet 
the conditions set forth in paragraph (a)-(g) of subsection II.A.(7); 
and (ii) which meets the requirements of paragraph (c) of subsection 
III.B.(3).
    BB. ``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 Securities being offered, which is less than or 
equal to 25 percent.
    CC. ``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 ninety days after the Closing Date.
    DD. ``Designated Transaction'' means a securitization transaction 
in which the assets of the Issuer consist of secured consumer 
receivables, secured credit instruments or secured obligations that 
bear interest or are purchased at a discount and are: (i) Motor 
vehicle, home equity and/or manufactured housing consumer receivables; 
and/or (ii) motor vehicle credit instruments in transactions by or 
between business entities; and/or (iii) single-family residential, 
multi-family residential, home equity, manufactured housing and/or 
commercial mortgage obligations that are secured by single-family 
residential, multi-family residential, commercial real property or 
leasehold interests therein. For purposes of this section III.DD., the 
collateral securing motor vehicle consumer receivables or motor vehicle 
credit instruments may include motor vehicles and/or Qualified Motor 
Vehicle Leases.
    EE. ``Ratings Dependent Swap'' means an interest rate swap, or (if 
purchased by or on behalf of the Issuer) an interest rate cap contract, 
that is part of the structure of a class of Securities where the rating 
assigned by the Rating Agency to any class of Securities held by any 
plan is dependent on the terms and conditions of the swap and the 
rating of the counterparty, and if such Security rating is not 
dependent on the existence of the swap and rating of the counterparty, 
such swap or cap shall be referred to as a ``Non-Ratings Dependent 
Swap''. With respect to a Non-Ratings Dependent Swap, each Rating 
Agency rating the Securities must confirm, as of the date of issuance 
of the Securities by the Issuer, that entering into an Eligible Swap 
with such counterparty will not affect the rating of the Securities.
    FF. ``Eligible Swap'' means a Ratings Dependent or Non-Ratings 
Dependent Swap:
    (1) Which is denominated in U.S. dollars;
    (2) Pursuant to which the Issuer pays or receives, on or 
immediately prior to the respective payment or distribution date for 
the class of Securities to which the swap relates, a fixed rate of 
interest, or a floating rate of interest based on a publicly available 
index (e.g., LIBOR or the U.S. Federal Reserve's Cost of Funds Index 
(COFI)), with the Issuer receiving such payments on at least a 
quarterly basis and obligated to make separate payments no more 
frequently than the counterparty, with all simultaneous payments being 
netted;
    (3) Which has a notional amount that does not exceed either: (i) 
the principal balance of the class of Securities to which the swap 
relates, or (ii) the portion of the principal balance of such class 
represented solely by those types of corpus or assets of the Issuer 
referred to in subsections III.B.(1), (2) and (3);
    (4) Which is not leveraged (i.e., payments are based on the 
applicable notional amount, the day count fractions, the fixed or 
floating rates designated in subsection III.FF.(2), and the difference 
between the products thereof, calculated on a one to one ratio and not 
on a multiplier of such difference);
    (5) Which has a final termination date that is either the earlier 
of the date on which the Issuer terminates or the related class of 
securities is fully repaid; and
    (6) Which does not incorporate any provision which could cause a 
unilateral alteration in any provision described in subsections 
III.FF.(1) through (4) without the consent of the Trustee.
    GG. ``Eligible Swap Counterparty'' means a bank or other financial 
institution which has a rating, at the date of issuance of the 
Securities by the Issuer, which is in one of the three highest long-
term credit rating categories, or one of the two highest short-term 
credit rating categories, utilized by at least one of the Rating 
Agencies rating the Securities; provided that, if a swap counterparty 
is relying on its short-term rating to establish eligibility under the 
Underwriter Exemption, such swap counterparty must either have a long-
term rating in one of the three highest long-term rating categories or 
not have a long-term rating from the applicable Rating Agency, and 
provided further that if the class of Securities with which the swap is 
associated has a final maturity date of more than one year from the 
date of issuance of the Securities, and such swap is a Ratings 
Dependent Swap, the swap counterparty is required by the terms of the 
swap agreement to establish any collateralization or other arrangement 
satisfactory to the Rating Agencies in the event of a ratings downgrade 
of the swap counterparty.
    HH. ``Qualified Plan Investor'' means a plan investor or group of 
plan investors on whose behalf the decision to purchase Securities is 
made by an appropriate independent fiduciary that

[[Page 13136]]

is qualified to analyze and understand the terms and conditions of any 
swap transaction used by the Issuer and the effect such swap would have 
upon the credit ratings of the Securities. For purposes of the 
Underwriter Exemption, such a fiduciary is either:
    (1) A ``qualified professional asset manager'' (QPAM),\6\ as 
defined under Part V(a) of PTE 84-14, 49 FR 9494, 9506 (March 13, 
1984), as amended by 70 FR 49305 (August 23, 2005);
---------------------------------------------------------------------------

    \6\ PTE 84-14 provides a class exemption for transactions 
between a party in interest with respect to an employee benefit plan 
and an investment fund (including either a single customer or pooled 
separate account) in which the plan has an interest, and which is 
managed by a QPAM, provided certain conditions are met. QPAMs (e.g., 
banks, insurance companies, registered investment advisers with 
total client assets under management in excess of $85 million) are 
considered to be experienced investment managers for plan investors 
that are aware of their fiduciary duties under ERISA.
---------------------------------------------------------------------------

    (2) An ``in-house asset manager'' (INHAM),\7\ as defined under Part 
IV(a) of PTE 96-23, 61 FR 15975, 15982 (April 10, 1996); or
---------------------------------------------------------------------------

    \7\ PTE 96-23 permits various transactions involving employee 
benefit plans whose assets are managed by an INHAM, an entity which 
is generally a subsidiary of an employer sponsoring the plan which 
is a registered investment adviser with management and control of 
total assets attributable to plans maintained by the employer and 
its affiliates which are in excess of $50 million.
---------------------------------------------------------------------------

    (3) A plan fiduciary with total assets under management of at least 
$100 million at the time of the acquisition of such Securities.
    II. ``Excess Spread'' means, as of any day funds are distributed 
from the Issuer, the amount by which the interest allocated to 
Securities exceeds the amount necessary to pay interest to 
securityholders, servicing fees and expenses.
    JJ. ``Eligible Yield Supplement Agreement'' means any yield 
supplement agreement, similar yield maintenance arrangement or, if 
purchased by or on behalf of the Issuer, an interest rate cap contract 
to supplement the interest rates otherwise payable on obligations 
described in subsection III.B.(1). Such an agreement or arrangement may 
involve a notional principal contract provided that:
    (1) It is denominated in U.S. dollars;
    (2) The Issuer receives on, or immediately prior to the respective 
payment date for the Securities covered by such agreement or 
arrangement, a fixed rate of interest or a floating rate of interest 
based on a publicly available index (e.g., LIBOR or COFI), with the 
Issuer receiving such payments on at least a quarterly basis;
    (3) It is not ``leveraged'' as described in subsection III.FF.(4);
    (4) It does not incorporate any provision which would cause a 
unilateral alteration in any provision described in subsections 
III.JJ.(1)-(3) without the consent of the Trustee;
    (5) It is entered into by the Issuer with an Eligible Swap 
Counterparty; and
    (6) It has a notional amount that does not exceed either: (i) the 
principal balance of the class of Securities to which such agreement or 
arrangement relates, or (ii) the portion of the principal balance of 
such class represented solely by those types of corpus or assets of the 
Issuer referred to in subsections III.B.(1), (2) and (3).

IV. Modifications

    For the Underwriter Exemptions provided to Residential Funding 
Corporation, Residential Funding Mortgage Securities, Inc., et al. and 
GE Capital Mortgage Services, Inc. and GECC Capital Markets (the 
Applicants) (PTEs 94-29 and 94-73, respectively);
    A. Section III.A. of this exemption is modified to read as follows:
    A. ``Security'' means:
    (1) A pass-through certificate or trust certificate that represents 
a beneficial ownership interest in the assets of an Issuer which is a 
Trust and which entitles the holder to payments of principal, interest 
and/or other payments made with respect to the assets of such Trust; or
    (2) A security which is denominated as a debt instrument that is 
issued by, and is an obligation of, an Issuer; with respect to which 
(i) one of the Applicants or any of its Affiliates is the Sponsor, 
[and] an entity which has received from the Department an individual 
prohibited transaction exemption relating to Securities which is 
similar to this exemption, is the sole underwriter or the manager or 
co-manager of the underwriting syndicate or a selling or placement 
agent or (ii) one of the Applicants or any of its Affiliates is the 
sole underwriter or the manager or co-manager of the underwriting 
syndicate, or a selling or placement agent.
    B. Section III.C. of this exemption is modified to read as follows:
    C. Underwriter means:
    (1) An entity defined as an Underwriter in subsection III.C.(1) of 
each of the Underwriter Exemptions that are being amended by this 
exemption. In addition, the term Underwriter includes Deutsche Bank AG, 
New York Branch and Deutsche Morgan Grenfell/C.J. Lawrence Inc., Credit 
Lyonnais Securities (USA) Inc., ABN AMRO Inc., Ironwood Capital 
Partners Ltd., William J. Mayer Securities LLC, Raymond James & 
Associates Inc. & Raymond James Financial Inc., WAMU Capital 
Corporation, and Terwin Capital LLC (which received the approval of the 
Department to engage in transactions substantially similar to the 
transactions described in the Underwriter Exemptions pursuant to PTE 
96-62);
    (2) Any person directly or indirectly, through one or more 
intermediaries, controlling, controlled by or under common control with 
such entity;
    (3) Any member of an underwriting syndicate or selling group of 
which a person described in subsections III.C.(1) or (2) above is a 
manager or co-manager with respect to the Securities; or
    (4) Any entity which has received from the Department an individual 
prohibited transaction exemption relating to Securities which is 
similar to this exemption.
    Effective Date: This amendment is effective for transactions 
occurring on or after April 5, 2006.
    For a more complete statement of the facts and representations 
supporting the Department's decision to amend the Underwriter 
Exemptions, refer to the notice of proposed exemption that was 
published on January 24, 2007 in the Federal Register at 72 FR 3152.

FOR FURTHER INFORMATION CONTACT: Wendy M. McColough of the Department, 
telephone (202) 693-8540. (This is not a toll-free number.)

General Information

    The attention of interested persons is directed to the following:
    (1) The fact that a transaction is the subject of an exemption 
under section 408(a) of the Act and/or section 4975(c)(2) of the Code 
does not relieve a fiduciary or other party in interest or disqualified 
person from certain other provisions to which the exemption does not 
apply and the general fiduciary responsibility provisions of section 
404 of the Act, which among other things require a fiduciary to 
discharge his duties respecting the plan solely in the interest of the 
participants and beneficiaries of the plan and in a prudent fashion in 
accordance with section 404(a)(1)(B) of the Act; nor does it affect the 
requirement of section 401(a) of the Code that the plan must operate 
for the exclusive benefit of the employees of the employer maintaining 
the plan and their beneficiaries;
    (2) This exemption is supplemental to and not in derogation of any 
other provisions of the Act and/or the Code, including statutory or 
administrative exemptions and transactional rules. Furthermore, the 
fact that a transaction is subject to an administrative or statutory 
exemption is not dispositive of

[[Page 13137]]

whether the transaction is in fact a prohibited transaction; and
    (3) The availability of this exemption is subject to the express 
condition that the material facts and representations contained in the 
application accurately describes all material terms of the transaction 
which is the subject of the exemption.

    Signed at Washington, DC this 14th day of March, 2007.
Ivan Strasfeld
Director of Exemption Determinations, Employee Benefits Security 
Administration, Department of Labor.
 [FR Doc. E7-4982 Filed 3-19-07; 8:45 am]
BILLING CODE 4510-29-P