85918 Federal Register / Vol. 88, No. 236 / Monday, December 11, 2023 / Notices 

1For purposes of this proposed exemption 

reference to specific provisions of Title I of ERISA, 

unless otherwise specified, should be read to refer 

as well to the corresponding Code provisions. 

2Part III and Part IV of Prohibited Transaction 

Exemption 75–1 (PTE 75–1 Parts III and IV)(40 FR 

50845, October 31, 1975); Prohibited Transaction 

Exemption 77–3 (PTE 77–3) (42 FR 18734, April 8, 

1977); Prohibited Transaction Exemption 77–4 (PTE 

77–4) (42 FR 18732, April 8, 1977); Prohibited 

Transaction Exemption 79–13 (PTE 79–13) (44 FR 

25533, May 1, 1979); Prohibited Transaction 

Exemption 86–128 (PTE 86–128) (51 FR 41686, 

November 18, 1986), as amended by (67 FR 64137, 

October 17, 2002); Prohibited Transaction 

Exemption 2002–12 (PTE 2002–12)(67 FR 9483, 

March 1, 2002). 

3For example, Section I(b) of PTE 86–128 defines 

an ‘‘affiliate’’ as, in relevant part, ‘‘any person 

directly controlling, controlled by, or under 

common control with the person . . .’’ where ‘‘[t]he 

term ‘control’ means the power to exercise a 

controlling influence over the management or 

policies of a person other than an individual.’’ By 

granting this exemption, the Department does not 

express any view on whether Mitsubishi and 

Morgan Stanley are or are not ‘‘affiliates’’ within the 

meaning of the Applicable Exemptions. 

TOTAL BURDEN HOURS—Continued 

Activity Number of 

respondents Frequency 

Total 

annual 

responses 

Average 

reporting 

time (min) 

Total 

annual 

burden 

(hours) 

Unduplicated Totals ............................................................................... 2,900 ................... .................. .................. 4,447 

2026 COJ 

Data collection .............................................................................................. 2,900 Annual ...... 2,900 80 3,867 

Data quality follow-up ................................................................................... 2,030 Annual ...... 2,030 10 338 

Jail status and point-of-contact verification .................................................. 2,900 Annual ...... 2,900 5 242 

Unduplicated Totals ............................................................................... 2,900 ................... .................. .................. 4,447 

Unduplicated Totals for 2024, 2025, and 2026 COJ ..................... 2,900 ................... .................. .................. 16,482 

If additional information is required 

contact: Darwin Arceo, Department 

Clearance Officer, United States 

Department of Justice, Justice 

Management Division, Policy and 

Planning Staff, Two Constitution 

Square, 145 N Street NE, 4W–218, 

Washington, DC. 

Dated: December 6, 2023. 

Darwin Arceo, 

Department Clearance Officer for PRA, U.S. 

Department of Justice. 

[FR Doc. 2023–27096 Filed 12–8–23; 8:45 am] 

BILLING CODE 4410–18–P 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

[Prohibited Transaction Exemption 2023– 

21; Exemption Application No. D–11955] 

Exemption From Certain Prohibited 

Transaction Restrictions Involving 

Morgan Stanley & Co. LLC, and 

Current and Future Affiliates and 

Subsidiaries (Morgan Stanley or the 

Applicant) Located in New York, New 

York 

AGENCY: Employee Benefits Security 

Administration, Labor. 

ACTION: Notice of exemption. 

SUMMARY: This document contains a 

notice of exemption 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). 

DATES: The exemption will be in effect 

on the date that this grant notice is 

published in the Federal Register. 

FOR FURTHER INFORMATION CONTACT: Mr. 

Joseph Brennan of the Department at 

(202) 693–8456. (This is not a toll-free 

number.) 

SUPPLEMENTARY INFORMATION: On 

November 18, 2021, the Department 

published a notice of proposed 

exemption in the Federal Register at 86 

FR 64695, permitting Morgan Stanley & 

Co. LLC, or an affiliate of Morgan 

Stanley & Co. LLC (together, Morgan 

Stanley) to engage in certain 

transactions with Mitsubishi UFJ 

Financial Group, Inc., or an affiliate of 

Mitsubishi UFJ Financial Group, Inc. 

(together Mitsubishi). 

Under the exemption, certain 

restrictions of ERISA sections 406(a) 

and 406(b) and certain sanctions 

resulting from the application of Code 

section 4975,1 shall not apply to 

transactions involving Morgan Stanley 

and Mitsubishi (described below) that 

are modeled after the following class 

exemptions: Prohibited Transaction 

Exemption (PTE) 75–1, Part III and Part 

IV, PTE 77–3, PTE 77–4, PTE 79–13, 

PTE 86–128, and PTE 2002–12, 

provided the conditions of this 

exemption are met.2 This exemption 

provides only the relief specified in its 

text and does not provide relief from 

violations of any law other than the 

prohibited transaction provisions of 

ERISA expressly stated herein. 

Accordingly, affected parties should be 

aware that the conditions incorporated 

in this exemption are, taken as a whole, 

necessary for the Department to grant 

the relief requested by the Applicant. 

Absent these or similar conditions, the 

Department would not have granted this 

exemption. 

The Applicant requested an 

individual exemption pursuant to 

ERISA section 408(a) in accordance 

with the Department’s procedures set 

forth in 29 CFR part 2570, subpart B (76 

FR 66637, 66644, October 27, 2011). 

Background 

Currently, Mitsubishi is the largest 

investor in Morgan Stanley, holding 

24.5 percent of Morgan Stanley’s 

outstanding common stock. Mitsubishi 

also currently nominates two directors 

to Morgan Stanley’s board of directors. 

Despite this ownership interest, the 

Applicant states that Mitsubishi does 

not have sufficient control over Morgan 

Stanley to warrant treatment of 

Mitsubishi and Morgan Stanley as 

‘‘affiliates’’ within the meaning of 

certain Applicable Class Exemptions, 

which are described below.3

The Department has granted a wide 

variety of class exemptions that permit 

affiliated parties to engage in specified 

plan-related transactions, provided that 

certain protective conditions are met. 

The following seven class exemptions 

(the Applicable Class Exemptions) are 

relevant to this exemption: 

PTE 75–1, Part III permits a fiduciary 

to cause a plan to purchase securities 

from a member of an underwriting 

syndicate, when the fiduciary is also a 

member of such syndicate, and the 

member selling the securities to the plan 

is not affiliated with the fiduciary. The 


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4As previously stated, the Department does not 

express any view on whether Mitsubishi and 

Morgan Stanley are or are not ‘‘affiliates’’ within the 

meaning of the Applicable Exemptions. 5 86 FR 64696. 

class exemption defines the term 

‘‘fiduciary’’ to include ‘‘affiliates’’ of the 

fiduciary. 

PTE 75–1, Part IV permits a plan to 

purchase or sell securities in a principal 

transaction with a fiduciary that is also 

a ‘‘market-maker’’ with respect to such 

securities. For purposes of the 

exemption, the term ‘‘fiduciary’’ 

includes ‘‘affiliates’’ of the fiduciary. 

PTE 77–3 permits the acquisition or 

sale of shares of a registered open-end 

investment company (a mutual fund) by 

a plan that covers only employees of the 

mutual fund, the mutual fund’s 

investment adviser, the mutual fund’s 

underwriter, or an affiliate thereof. 

PTE 77–4 permits the purchase or sale 

by a plan of shares of a mutual fund, 

where the mutual fund’s investment 

adviser is a plan fiduciary, or is 

affiliated with a plan fiduciary, but is 

not an employer of employees covered 

by the plan. 

PTE 79–13 permits the purchase, 

ownership, and sale of shares of a 

closed-end mutual fund by a plan, 

where such plan covers only employees 

of the closed-end mutual fund, 

employees of an investment adviser to 

the closed-end mutual fund, or 

employees of an affiliate of the closedend mutual fund or investment adviser. 

PTE 86–128 provides an exemption 

for certain fiduciaries and their affiliates 

to receive a fee from a plan or IRA for 

effecting or executing securities 

transactions as an agent on behalf of the 

plan or IRA. PTE 86–128 also allows a 

fiduciary (or an affiliate of a fiduciary) 

to act as an agent in an ‘‘agency cross 

transaction’’ for both a plan (or IRA) and 

for another party to the transaction, and 

to receive reasonable compensation 

from another party to the transaction. 

PTE 2002–12 permits the crosstrading of securities by and between 

certain index and model-driven funds 

managed by investment ‘‘managers,’’ 

and among index and model-driven 

funds, and certain large accounts, that 

engage such ‘‘managers.’’ For purposes 

of PTE 2002–12, the term ‘‘manager’’ 

includes affiliates of the ‘‘manager.’’ 

Assuming that Morgan Stanley and 

Mitsubishi are not affiliates for the 

purposes of the Applicable Class 

Exemptions, as they indicate,4 they 

could not engage in the affiliated 

transactions described above without 

violating ERISA Section 406. Morgan 

Stanley, therefore, requested an 

exemption that, in general terms, would 

allow Morgan Stanley and Mitsubishi to 

treat the other as an ‘‘affiliate’’ for 

purposes of the Applicable Class 

Exemptions when engaging in 

transactions that would otherwise 

mirror the affiliated transactions 

described above. 

The Applicant represents that the 

exemption would enhance plans 

investment and service provider 

options. According to Morgan Stanley, 

plan participants would have access to 

more counterparties and investment 

products in the market. In addition, the 

plans would have access to more 

efficient and less expensive brokerage 

services. 

This exemption contains certain new 

conditions that are not otherwise found 

in the Applicable Class Exemptions (the 

New Conditions). One New Condition 

requires the Morgan Stanley/Mitsubishi 

Entities to comply with a new 

‘‘Impartial Conduct Standard’’ and act 

in the Best Interest of plans. Another 

New Condition requires the Morgan 

Stanley/Mitsubishi Entity to provide 

plans with written notice that discloses 

(a) the ownership relationship between 

Morgan Stanley and Mitsubishi, and (b) 

that the transactions will provide a 

benefit to Morgan Stanley and/or 

Mitsubishi, and/or involve a conflict of 

interest. 

The Department granted each 

Applicable Class Exemption after 

determining on the record that each 

exemption was administratively feasible 

and in the interest of and protective of 

affected plans. Given that the 

transactions in this exemption are 

substantially similar to those permitted 

by the Applicable Class Exemptions, 

subject to not only essentially the same 

suite of conditions, but also to the New 

Conditions, the Department has 

determined that this exemption is 

administratively feasible and in the 

interest of, and protective of, affected 

plans and their participants and 

beneficiaries. 

Written Comments 

In the proposed exemption, the 

Department invited all interested 

persons to submit written comments 

and/or requests for a public hearing 

with respect to the notice of proposed 

exemption. All comments and requests 

for a hearing were due to the 

Department by January 18, 2022. The 

Department received one written 

comment from the Applicant. The 

Department did not receive any requests 

for a public hearing. 

Comments From the Applicant 

Factual Clarification 1: 

Representation 3 of the proposed 

exemption states as follows: 

‘‘Immediately after the conversion, 

Mitsubishi-owned shares of Morgan 

Stanley Common Stock represented 

approximately 22.56% of the 

outstanding shares of Morgan Stanley 

Common Stock. Subsequently, 

Mitsubishi’s ownership percentage of 

Morgan Stanley common stock 

gradually increased because of Morgan 

Stanley’s ongoing repurchases of stock 

from other investors.’’ 5

The Applicant states: (a) Mitsubishi’s 

ownership interest in Morgan Stanley 

has decreased since Morgan Stanley 

agreed to convert all Mitsubishi-owned 

Morgan Stanley Series B Preferred Stock 

into Morgan Stanley common stock; (b) 

it cannot represent that Mitsubishi’s 

ownership interest has decreased 

because of stock repurchases from 

others; and (c) it cannot confirm the 

22.56% ownership interest referenced 

in the proposed exemption, as that was 

not a fact that the Applicant provided to 

the Department. 

Department’s Response: The 

Department accepts the clarifications 

noted by the Applicant. 

Factual Clarification 2: 

Representation 3 of the proposed 

exemption states as follows: ‘‘Mitsubishi 

is currently the largest investor in 

Morgan Stanley, holding 24.5 percent of 

Morgan Stanley’s outstanding common 

stock.’’ The Applicant states that, while 

Mitsubishi did hold 24.5 percent of 

Morgan Stanley’s outstanding common 

stock on the date of the Applicant’s 

application to the Department (June 4, 

2018), Mitsubishi’s investment in 

Morgan Stanley had decreased to 20.2% 

as of March 22, 2021. 

Department’s Response: The 

Department accepts Applicant’s 

requested clarification but notes that, as 

of June 30, 2023, Mitsubishi’s 

investment in Morgan Stanley equaled 

22.76 percent. The Department also 

notes that, as of June 30, 2023, 

Mitsubishi remained the largest investor 

in Morgan Stanley. 

Department’s Note: The summary to 

the proposed exemption stated that 

relief granted in PTE 77–4 was limited 

to ERISA section 406(a)(1)(B) and ERISA 

section 406(b). Part IV of the proposed 

exemption, which extends exemptive 

relief for PTE 77–4-type transactions, 

erroneously included exemptive relief 

from ERISA section 406(a)(1)(D). The 

Department has revised Part IV of this 

exemption for consistency with the 

proposed exemption’s summary, and 

limited exemptive relief for PTE 77–4- 

type transactions to ERISA sections 

406(a)(1)(B) and 406(b). Further, the 

Department revised some of the 


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6 76 FR 66637, 66644 (October 27, 2011). 

language in the sections below for 

clarity. 

The complete application file (D– 

11955) is available for public inspection 

in the Public Disclosure Room of the 

Employee Benefits Security 

Administration, Room N–1515, U.S. 

Department of Labor, 200 Constitution 

Avenue NW, Washington, DC 20210. 

For a more complete statement of the 

facts and representations supporting the 

Department’s decision to grant this 

exemption, please refer to the notice of 

proposed exemption published in the 

Federal Register on November 18, 2021, 

at 86 FR 64695. 

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 ERISA 

section 408(a) does not relieve a 

fiduciary or other party in interest from 

requirements of other ERISA provisions, 

including any prohibited transaction 

provisions to which the exemption does 

not apply and the general fiduciary 

responsibility provisions of ERISA 

section 404, which, among other things, 

require fiduciaries to discharge their 

duties respecting the plan solely in the 

interest of the plan’s participants and 

beneficiaries and in a prudent fashion in 

accordance with ERISA section 

404(a)(1)(B). 

(2) As required by ERISA section 

408(a), the Department hereby finds that 

the exemption is: (a) administratively 

feasible; (b) in the interests of affected 

plans and of their participants and 

beneficiaries; and (c) protective of the 

rights of participants and beneficiaries 

of such plans. 

(3) This exemption is supplemental 

to, and not in derogation of, any other 

ERISA provisions, 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 determining whether 

the transaction is in fact a prohibited 

transaction. 

(4) The availability of this exemption 

is subject to the express condition that 

the material facts and representations 

contained in the application accurately 

describe all material terms of the 

transactions that are the subject of the 

exemption. 

Accordingly, after considering the 

entire record developed in connection 

with the Applicant’s exemption 

application, the Department has 

determined to grant the following 

exemption under the authority of ERISA 

section 408(a), and in accordance with 

the procedures set forth in 29 CFR part 

2570, subpart B: 6

Exemption 

Section II. Covered Transactions 

Part I. Proposed Exemption From the 

Prohibitions Respecting Certain Classes 

of Transactions Involving Plans and 

Certain Underwriters (Modeled After 

PTE 75–1, Part III) 

The restrictions of ERISA section 406 

and the taxes imposed Code section 

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

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

purchase or other acquisition of certain 

securities by a plan during the existence 

of an underwriting or selling syndicate 

with respect to such securities, from any 

person other than Morgan Stanley or 

Mitsubishi, when a Morgan Stanley/ 

Mitsubishi Entity is a fiduciary with 

respect to such plan, and a Related 

Entity is a member of such syndicate, 

provided that the following conditions 

are met: 

(a) No Morgan Stanley/Mitsubishi 

Entity or Related Entity that is involved 

in causing a plan to make the purchase 

is a manager of such underwriting or 

selling syndicate. The term ‘‘manager’’ 

means any member of an underwriting 

or selling syndicate who, either alone or 

together with other members of the 

syndicate, is authorized to act on behalf 

of the members of the syndicate in 

connection with the sale and 

distribution of the securities being 

offered or who receives compensation 

from the members of the syndicate for 

its services as a manager of the 

syndicate. 

(b) The securities to be purchased or 

otherwise acquired are: 

(1) Part of an issue registered under 

the Securities Act of 1933 (the 1933 Act) 

or, if exempt from such registration 

requirement, are: 

(i) Issued or guaranteed by the United 

States or by any person controlled or 

supervised by and acting as an 

instrumentality of the United States, 

pursuant to authority granted by the 

Congress of the United States, 

(ii) Issued by a bank, 

(iii) Issued by a common or contract 

carrier, if such issuance is subject to the 

provisions of section 20a of the 

Interstate Commerce Act, as amended, 

(iv) Exempt from such registration 

requirement, pursuant to a Federal 

statute other than the 1933 Act, or are 

(v) The subject of a distribution and 

are of a class which is required to be 

registered under section 12 of the 

Securities Exchange Act of 1934 (15 

U.S.C. 781) (the 1934 Act), and the 

issuer of which has been subject to the 

reporting requirements of section 13 of 

the 1934 Act (15 U.S.C. 78m) for a 

period of at least ninety (90) days 

immediately preceding the sale of 

securities and has filed all the reports 

required to be filed thereunder with the 

SEC during the preceding twelve (12) 

months. 

(2) Purchased at not more than the 

public offering price before the end of 

the first full business day after the final 

terms of the securities have been fixed 

and announced to the public, except 

that: 

(i) If such securities are offered for 

subscription upon exercise of rights, 

they are purchased on or before the 

fourth day preceding the day on which 

the rights offering terminates; or 

(ii) If such securities are debt 

securities, they may be purchased at a 

public offering price on a day after the 

end of such first full business day, 

provided that the interest rates on 

comparable debt securities offered to the 

public after such first full business day 

and before the purchase are less than 

the interest rate of the debt securities 

being purchased. 

(3) Offered pursuant to an 

underwriting agreement under which 

the members of the syndicate are 

committed to purchase all securities 

being offered, except if: 

(i) Such securities are purchased by 

others pursuant to a rights offering; or 

(ii) Such securities are offered 

pursuant to an over-allotment option. 

(c) The issuer of such securities has 

been in continuous operation for not 

less than three (3) years, including the 

operations of any predecessors, unless 

(1) Such securities are nonconvertible debt securities rated in one 

of the four (4) highest rating categories 

by at least one (1) of the Rating 

Agencies, as defined below in Part IX 

(e); 

(2) Such securities are issued or fully 

guaranteed by a person described above 

in subparagraph (b)(1)(i) of this Part I; or 

(3) Such securities are fully 

guaranteed by a person who has issued 

securities described above in 

subparagraph (b)(1)(ii), (iii), (iv), or (v) 

of Part I, and in this subparagraph (c) of 

Part I. 

(d) The amount of such securities to 

be purchased or otherwise acquired by 

a plan, pursuant to this exemption and 

PTE 75–1, Part III, does not exceed 3 

percent (3%) of the total amount of such 

securities being offered. 

(e) The consideration to be paid by a 

plan in purchasing or otherwise 

acquiring such securities pursuant to 

this exemption and PTE 75–1, Part III, 

does not exceed 3 percent (3%) of the 


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fair market value of the total assets of 

such plan as of the last day of the most 

recent fiscal quarter of such plan before 

to such transaction, provided that if 

such consideration exceeds $1 million, 

it does not exceed one percent (1%) of 

such fair market value of the total assets 

of such plan. 

If such securities are purchased by a 

plan from a party in interest or 

disqualified person with respect to such 

plan, such party in interest or 

disqualified person shall not be subject 

to the civil penalty which may be 

assessed under ERISA section 502(i) or 

the taxes imposed by Code section 

4975(a) and (b) if the conditions of this 

exemption are not met. However, if such 

securities are purchased from a party in 

interest or disqualified person with 

respect to a plan, the restrictions of 

ERISA section 406(a) shall apply to any 

Morgan Stanley/Mitsubishi Entity acting 

as fiduciary with respect to such plan, 

and the taxes imposed by Code section 

4975(a) and (b) by reason of Code 

section 4975(c)(1)(A) through (D), shall 

apply to such party in interest or 

disqualified person, unless the 

conditions for exemption of PTE 75–1 

(40 FR 50845, October 31, 1975), Part II 

(relating to certain principal 

transactions) are met. 

Part II. Proposed Exemption From 

Prohibitions Respecting Certain Classes 

of Transactions Involving Plans and 

Market-Makers (Modeled After PTE 75– 

1, Part IV) 

The restrictions of ERISA section 406, 

and the taxes imposed by Code section 

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

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

any purchase or sale of any securities by 

a plan from or to a Related Entity which 

is a market-maker with respect to such 

securities, when a Morgan Stanley/ 

Mitsubishi Entity is a fiduciary with 

respect to such plan, provided that the 

following conditions are met: 

(a) The issuer of such securities has 

been in continuous operation for not 

less than three (3) years, including the 

operations of any predecessors, unless 

such securities are: 

(1) non-convertible debt securities 

rated in one of the four (4) highest rating 

categories by at least one (1) of the 

Rating Agencies; 

(2) issued or guaranteed by the United 

States or by any person controlled or 

supervised by and acting as an 

instrumentality of the United States 

pursuant to authority granted by the 

Congress of the United States; or 

(3) fully guaranteed by a person 

described in this subparagraph (a). 

(b) As a result of purchasing such 

securities: 

(1) The fair market value of the 

aggregate amount of securities owned, 

directly or indirectly, by a plan and 

with respect to which a Morgan Stanley/ 

Mitsubishi Entity is a fiduciary, 

pursuant to this exemption and PTE 75– 

1, Part IV, does not exceed three percent 

(3%) of the fair market value of the 

plan’s assets with respect to which the 

Morgan Stanley/Mitsubishi Entity is a 

fiduciary, as of the last day of the most 

recent fiscal quarter of such plan before 

the transaction, provided that if the fair 

market value of such securities exceeds 

$1 million, it does not exceed one 

percent (1%) of the fair market value of 

the plan’s assets, except that this 

subparagraph shall not apply to 

securities described in subparagraph 

(a)(2) of this Part II, above; and 

(2) The fair market value of the 

aggregate amount of all securities for 

which any Related Entity is a marketmaker, which are owned, directly or 

indirectly, by a plan and with respect to 

which a Morgan Stanley/Mitsubishi 

Entity is a fiduciary, pursuant to this 

exemption and PTE 75–1, Part IV, does 

not exceed 10 percent (10%) of the fair 

market value of the plan’s assets with 

respect to which the Morgan Stanley/ 

Mitsubishi Entity is a fiduciary, as of the 

last day of the most recent fiscal quarter 

of such plan before such transaction, 

except that this subparagraph shall not 

apply to securities described in 

subparagraph (a)(2) of this Part II. 

(c) At least one (1) person other than 

a Related Entity is a market-maker with 

respect to such securities. 

(d) The transaction is executed at a 

net price to a plan for the number of 

shares or other units to be purchased or 

sold in the transaction that is more 

favorable to such plan than that which 

the Morgan Stanley/Mitsubishi Entity, 

acting as fiduciary and acting in good 

faith, reasonably believes to be available 

at the time of such transaction from all 

other market-makers with respect to the 

securities. 

For purposes of this Part II, the term 

‘‘market-maker’’ shall mean any 

specialist permitted to act as a dealer, 

and any dealer who, with respect to a 

security, holds themselves out as being 

willing to buy and sell such security for 

their own account on a regular or 

continuous basis by entering quotations 

in an inter-dealer communications 

system or otherwise. 

Part III. Proposed Exemption Involving 

Mutual Fund In-House Plans (Modeled 

After PTE 77–3) 

The restrictions of ERISA sections 406 

and 407(a) and the taxes imposed by 

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

of Code section 4975(c)(1), shall not 

apply to the acquisition or sale of shares 

of an open end investment company 

registered under the Investment 

Company Act of 1940 (the 1940 Act) by 

an benefit plan covering only employees 

of a Morgan Stanley/Mitsubishi Entity 

where a Related Entity is an investment 

adviser or principal underwriter with 

respect to the open-end investment 

company, provided the following 

conditions are met (whether or not such 

investment company, investment 

adviser, principal underwriter or any 

affiliated person thereof is a fiduciary 

with respect to the plan): 

(a) The plan does not pay any 

investment management, investment 

advisory or other fees or compensation 

to any Morgan Stanley/Mitsubishi 

Entity or Related Entity, except to the 

extent expressly permitted herein. This 

condition does not preclude the 

payment of investment advisory fees by 

the investment company under the 

terms of its investment advisory 

agreement adopted in accordance with 

section 15 of the 1940 Act. 

(b) The plan does not pay a 

redemption fee in connection with the 

sale by the plan to the investment 

company of such shares, unless (1) such 

redemption fee is paid only to the 

investment company, and (2) the 

existence of such redemption fee is 

disclosed in the investment company 

prospectus in effect both at the time of 

the acquisition of such shares and at the 

time of such sale. 

(c) The plan does not pay a sales 

commission in connection with such 

acquisition or sale. 

(d) All dealings between the plan and 

the investment company, the Related 

Entity, any other investment adviser or 

principal underwriter for the investment 

company, or any affiliated person (as 

defined in section 2(a)(3) of the 1940 

Act) of the Related Entity, other 

investment adviser, or principal 

underwriter, are on a basis no less 

favorable to the plan than such dealings 

are with other shareholders of the 

investment company. 

Part IV. Proposed Exemption for Certain 

Transactions Between Investment 

Companies and Plans (Modeled After 

PTE 77–4) 

The restrictions of ERISA section 

406(a)(1)(B) and 406(b) and the taxes 

imposed by Code section 4975(a) and 

(b), by reason of Code section 

4975(c)(1)(B), (D), (E) and (F), shall not 

apply to the purchase or sale by a plan 

of shares of an open-end investment 

company registered under the 1940 Act, 

where a Related Entity is the investment 

adviser of the investment company and 

a Morgan Stanley/Mitsubishi Entity is a 


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fiduciary with respect to the plan, but 

not an employer of employees covered 

by the plan, provided that the following 

conditions are met: 

(a) The plan does not pay a sales 

commission in connection with such 

purchase or sale. 

(b) The plan does not pay a 

redemption fee in connection with the 

sale by the plan to the investment 

company of such shares unless: 

(1) The redemption fee is paid only to 

the investment company, and 

(2) The existence of the redemption 

fee is disclosed in the investment 

company prospectus in effect both at the 

time of the purchase of the shares and 

at the time of the sale. 

(c) The plan does not pay an 

investment management, investment 

advisory or other fee or compensation, 

with respect to the plan assets invested 

in the shares for the entire period of the 

investment, except to the extent 

expressly permitted herein. This 

condition does not preclude the 

payment of investment advisory fees by 

the investment company under the 

terms of its investment advisory 

agreement adopted in accordance with 

section 15 of the 1940 Act. This 

condition also does not preclude 

payment of an investment advisory fee 

by the plan based on the total plan 

assets from which a credit has been 

subtracted representing the plan’s pro 

rata share of the investment advisory 

fees paid by the investment company. If, 

during any fee period for which the plan 

has prepaid its investment management, 

investment advisory or similar fee, the 

plan purchases shares of the investment 

company, the requirement of this 

subparagraph (c) shall be deemed met 

with respect to such prepaid fee if, by 

a method reasonably designed to 

accomplish the same, the amount of the 

prepaid fee that constitutes the fee with 

respect to the plan assets invested in the 

investment company shares: (1) is 

anticipated and subtracted from the 

prepaid fee at the time of payment of the 

fee; (2) is returned to the plan no later 

than during the immediately following 

fee period; or (3) is offset against the 

prepaid fee for the immediately 

following fee period or for the fee period 

immediately following thereafter. For 

purposes of this subparagraph (c), a fee 

shall be deemed to be prepaid for any 

fee period if the amount of the fee is 

calculated as of a date no later than the 

first day of such period. 

(d) A second fiduciary with respect to 

the plan, who is independent of and 

unrelated to Morgan Stanley and 

Mitsubishi, receives a current 

prospectus issued by the investment 

company, and full and detailed written 

disclosure of the investment advisory 

and other fees charged to or paid by 

such plan and the investment company, 

including the nature and extent of any 

differential between the rates of such 

fees, the reasons why the Morgan 

Stanley/Mitsubishi Entity may consider 

such purchases to be appropriate for the 

plan, and whether there are any 

limitations on the Morgan Stanley/ 

Mitsubishi Entity with respect to which 

plan assets may be invested in shares of 

the investment company and, if so, the 

nature of such limitations. For purposes 

of this subparagraph (d), the second 

fiduciary will not be deemed to be 

independent of and unrelated to Morgan 

Stanley and Mitsubishi if: 

(1) The second fiduciary directly or 

indirectly controls, is controlled by, or 

is under common control with Morgan 

Stanley or Mitsubishi; 

(2) The second fiduciary, or any 

officer, director, partner, employee or 

relative of such second fiduciary is an 

officer, director, partner or employee of 

Morgan Stanley or Mitsubishi; or 

(3) The second fiduciary directly or 

indirectly receives any compensation or 

other consideration for their own 

personal account in connection with 

any transaction described in this Part 

IV. 

Subparagraph (d)(2) of this Part IV 

shall not apply If an officer, director, 

partner, employee or relative of any 

Morgan Stanley or Mitsubishi entity is 

a director of such second fiduciary, and 

if they abstain from participation in: 

(i) The choice of the plan’s investment 

adviser, 

(ii) The approval of any purchase or 

sale between the plan and the 

investment company, and 

(iii) The approval of any change of 

fees charged to or paid by such plan. 

For purposes of subparagraph (d)(1) 

above, the term ‘‘control’’ means the 

power to exercise a controlling 

influence over the management or 

policies of a person other than an 

individual, and the term ‘‘relative’’ 

means a ‘‘relative’’ as that term is 

defined in ERISA section 3(15) (or a 

‘‘member of the family’’ as that term is 

defined in Code section 4975(e)(6)), or 

a brother, a sister, or a spouse of a 

brother or a sister. 

(e) On the basis of the prospectus and 

disclosure referred to in subparagraph 

(d), the second fiduciary referred to in 

subparagraph (d) approves such 

purchases and sales consistent with the 

responsibilities, obligations, and duties 

imposed on fiduciaries by Part 4 of Title 

I of ERISA. Such approval may be 

limited solely to the investment 

advisory and other fees paid by the 

mutual fund in relation to the fees paid 

by such plan and need not relate to any 

other aspects of such investments. In 

addition, such approval must be either: 

(1) Set forth in such plan’s plan 

documents or in the investment 

management agreement between the 

plan and the Morgan Stanley/Mitsubishi 

Entity, 

(2) Indicated in writing before each 

purchase or sale, or 

(3) Indicated in writing before 

commencement of a specified purchase 

or sale program in the shares of such 

investment company. 

(f) The second fiduciary referred to in 

subparagraph (d) above, or any 

successor thereto, is notified of any 

change in any of the rates and fees 

referred to in subparagraph (d) and 

approves in writing the continuation of 

such purchases or sales and the 

continued holding of any investment 

company shares acquired by such plan 

prior to such change and still held by 

such plan. Such approval may be 

limited solely to the investment 

advisory and other fees paid by the 

mutual fund in relation to the fees paid 

by such plan and need not relate to any 

other aspects of such investment. 

(g) Each Morgan Stanley/Mitsubishi 

Entity and Related Entity must satisfy 

ERISA section 408(b)(2) or Code section 

4975(d)(2), as applicable. 

Part V. Proposed Exemption Involving 

Closed-End Investment Company and 

In-House Plans (Modeled After PTE 79– 

13) 

The restrictions of ERISA sections 406 

and 407(a), and the taxes imposed by 

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

of Code section 4975(c)(1), shall not 

apply to the acquisition, ownership, or 

sale of shares of a closed-end 

investment company which is registered 

under the Investment Company Act of 

1940 Act (1940 Act) and is not a ‘‘small 

business investment company,’’ as 

defined in section 103 of the Small 

Business Investment Company Act of 

1958, with respect to which a Related 

Entity is an investment adviser, by an 

employee benefit plan covering only 

employees of a Morgan Stanley/ 

Mitsubishi Entity, provided that the 

following conditions are met (whether 

or not such investment company, 

investment adviser or any affiliated 

person thereof is a fiduciary with 

respect to the plan): 

(a) The plan does not pay any 

investment management, investment 

advisory, or other fee or compensation 

to any Morgan Stanley/Mitsubishi 

Entity or Related Entity, except as 

expressly permitted herein. This 

condition does not preclude the 

payment of investment advisory fees by 


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the investment company under the 

terms of its investment advisory 

agreement adopted in accordance with 

section 15 of the 1940 Act. 

(b) The plan does not pay a sales 

commission in connection with such 

acquisition or sale to any such 

investment company, or investment 

adviser, or any Morgan Stanley/ 

Mitsubishi Entity or Related Entity; and 

(c) All dealings between the plan and 

such investment company, the 

investment adviser, or any Morgan 

Stanley/Mitsubishi Entity or Related 

Entity, are on a basis no less favorable 

to the plan than such dealings are with 

other shareholders of the investment 

company. 

Part VI. Proposed Exemption for 

Securities Transactions Involving Plans 

and Broker-Dealers (Modeled After PTE 

86–128) 

Section I: Definition and Special Rules 

The following definitions and special 

rules apply to this Part VI: 

(a) The term ‘‘Morgan Stanley/ 

Mitsubishi Entity’’ means Morgan 

Stanley & Co. LLC (MS) or one of its 

‘‘affiliates,’’ or Mitsubishi UFJ Financial 

Group, Inc. (Mitsubishi UFJ) or one of 

its ‘‘affiliates,’’ acting as the plan 

fiduciary authorizing a transaction 

covered by this Part. 

(b) An ‘‘affiliate’’ of a Morgan Stanley/ 

Mitsubishi Entity or a Related Entity, 

which is defined below, includes the 

following: 

(1) Any person directly or indirectly 

controlling, controlled by, or under 

common control with, MS or with 

Mitsubishi UFJ; 

(2) Any officer, director, partner, 

employee, relative (as defined in ERISA 

section 3(15)), brother, sister, or spouse 

of a brother or sister, of a Morgan 

Stanley/Mitsubishi Entity or a Related 

Entity; and 

(3) Any corporation or partnership of 

which a Morgan Stanley/Mitsubishi 

Entity or a Related Entity is an officer(s), 

director(s), or partner(s). 

A person is not an affiliate of another 

person solely because such person has 

investment discretion over the other’s 

assets. The term ‘‘control’’ means the 

power to exercise a controlling 

influence over the management or 

policies of a person other than an 

individual. 

(c) An ‘‘agency cross transaction’’ is a 

securities transaction in which the same 

Related Entity acts as agent for both any 

seller and any buyer for the purchase or 

sale of a security. 

(d) The term ‘‘covered transaction’’ 

means an action described in Section II 

(a), (b), or (c) of this Part VI. 

(e) The term ‘‘effecting or executing a 

securities transaction’’ means the 

execution of a securities transaction as 

agent for another person and/or the 

performance of clearance, settlement, 

custodial, or other functions ancillary 

thereto. 

(f) A plan fiduciary is independent of 

a Morgan Stanley/Mitsubishi Entity and 

a Related Entity only if the fiduciary has 

no relationship to and no interest in MS 

and no interest in Mitsubishi UFJ that 

might affect the exercise of such 

fiduciary’s best judgment as a fiduciary. 

(g) The term ‘‘profit’’ includes all 

charges relating to effecting or executing 

securities transactions, less reasonable 

and necessary expenses including 

reasonable indirect expenses (such as 

overhead costs) properly allocated to the 

performance of these transactions under 

generally accepted accounting 

principles. 

(h) The term ‘‘securities transaction’’ 

means the purchase or sale of securities. 

(i) The term ‘‘nondiscretionary 

trustee’’ of a plan means a trustee or 

custodian whose powers and duties 

with respect to any assets of the plan are 

limited to: 

(1) The provision of nondiscretionary 

trust services to the plan, and 

(2) Duties imposed on the trustee by 

any provision or provisions ERISA or 

the Code. The term ‘‘nondiscretionary 

trust services’’ means custodial services 

and services ancillary to custodial 

services, none of which services are 

discretionary. For purposes of this Part 

VI, a person does not fail to be a 

nondiscretionary trustee solely by 

reason of having been delegated, by the 

sponsor of a master or prototype plan, 

the power to amend such plan. 

(j) The term ‘‘Related Entity’’ means 

MS or one of its ‘‘affiliates,’’ or 

Mitsubishi UFJ or one of its ‘‘affiliates,’’ 

where the entity is not the plan 

fiduciary authorizing a transaction 

covered by this Part. 

Section II: Covered Transactions 

If each condition in Section III below 

is either satisfied or not applicable 

under Section IV, the restrictions of 

ERISA section 406(b) and the taxes 

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

by reason of Code section 4975(c)(1)(E) 

and (F) shall not apply to: 

(a) a Morgan Stanley/Mitsubishi 

Entity, as a plan fiduciary, using its 

authority to cause the plan to pay a fee 

to a Related Entity, for effecting or 

executing securities transactions on 

behalf of the plan, but only to the extent 

that such transactions are not excessive, 

under the circumstances, in either 

amount or frequency; 

(b) a Related Entity, as the agent in an 

agency cross transaction, acting on 

behalf of: (1) a plan with a Morgan 

Stanley/Mitsubishi Entity as the plan 

fiduciary that used its authority to cause 

the transaction; and (2) one or more 

other parties to the agency cross 

transaction; and 

(c) the receipt of reasonable 

compensation by a Related Entity for 

effecting or executing an agency cross 

transaction on behalf of a plan with a 

Morgan Stanley/Mitsubishi Entity as the 

plan fiduciary that used its authority to 

cause the transaction, where the 

reasonable compensation is received 

from one or more other parties to the 

agency cross transaction. 

Section III: Conditions 

Except to the extent otherwise 

provided in Section IV below, Section II 

applies only if the following conditions 

are satisfied: 

(a) The Morgan Stanley/Mitsubishi 

Entity or Related Entity engaging in the 

covered transaction is not an 

administrator of the plan, or an 

employer any of whose employees are 

covered by the plan. 

(b) The covered transaction is 

performed under a written authorization 

executed in advance by a fiduciary of 

each plan whose assets are involved in 

the transaction that is independent of 

MS and Mitsubishi UFJ. 

(c) The authorization referred to above 

in subparagraph (b) of this Section III is 

terminable at will by the plan, without 

penalty to the plan, upon receipt by the 

authorized Morgan Stanley/Mitsubishi 

Entity of written notice of termination. 

A form expressly providing an election 

to terminate the authorization described 

in subparagraph (b) of this Section III 

with instructions on the use of the form 

must be supplied to the authorizing 

plan fiduciary no less than annually. 

The instructions for such form must 

include the following information: 

(1) The authorization is terminable at 

will by the plan, without penalty to the 

plan, upon receipt by the authorized 

Morgan Stanley/Mitsubishi Entity of 

written notice from the authorizing plan 

fiduciary or other plan official having 

authority to terminate the authorization; 

and 

(2) Failure to return the form will 

result in the continued authorization of 

the authorized Morgan Stanley/ 

Mitsubishi Entity to engage in the 

covered transactions on behalf of the 

plan. 

(d) Within three (3) months before an 

authorization is made, the authorizing 

plan fiduciary is furnished with any 

reasonably available information that 

the Morgan Stanley/Mitsubishi Entity 


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seeking authorization reasonably 

believes is necessary for the authorizing 

plan fiduciary to determine whether the 

authorization should be made, 

including (but not limited to) (i) a copy 

of this proposed exemption and the 

associated granted exemption, (ii) the 

form for termination of authorization 

described in Section III(c) of this Part 

VI, (iii) a description of the Morgan 

Stanley/Mitsubishi Entity’s brokerage 

placement practices, and (iv) any other 

reasonably available information 

regarding the matter that the authorizing 

plan fiduciary requests. 

(e) The authorizing plan fiduciary is 

furnished with either: 

(1) A confirmation slip for each 

securities transaction underlying a 

covered transaction within ten (10) 

business days after the securities 

transaction containing the information 

described in Rule 10b–10(a)(1–7) under 

the Securities and Exchange Act of 1934 

(1934 Act), 17 CFR 240.10b–10; or 

(2) At least once every three (3) 

months and not later than forty-five (45) 

days following the period to which it 

relates, a report disclosing: 

(i) A compilation of the information 

that would be provided to a plan 

pursuant to subparagraph (e)(1) of this 

Section III during the three-month 

period covered by the report; 

(ii) The total of all securities 

transaction-related charges incurred by 

the plan during such period in 

connection with such covered 

transactions; and 

(iii) The amount of the securities 

transaction-related charges retained by 

the Related Entity and the amount of 

such charges paid to other persons for 

execution or other services. 

For purposes of this subparagraph (e), 

the words ‘‘incurred by the plan’’ shall 

be construed to mean ‘‘incurred by the 

pooled fund’’ with respect to covered 

transactions engaged in on behalf of a 

pooled fund in which the plan 

participates. 

(f) The authorizing plan fiduciary is 

furnished with a summary of the 

information required under 

subparagraph (e)(1) of this Section III at 

least once per year. The summary must 

be furnished within forty-five (45) days 

after the end of the period to which it 

relates, and must contain the following: 

(1) The total of all securities 

transaction-related charges incurred by 

the plan during the period in 

connection with covered securities 

transactions. 

(2) The amount of the securities 

transaction-related charges retained by 

the authorized Related Entity and the 

amount of these charges paid to other 

persons and their affiliates for execution 

or other services. 

(3) A description of the Morgan 

Stanley/Mitsubishi Entity’s brokerage 

placement practices, if such practices 

have materially changed during the 

period covered by the summary. 

(4) (i) A portfolio turnover ratio, 

calculated in a manner which is 

reasonably designed to provide the 

authorizing plan fiduciary with the 

information needed to assist in 

discharging its duty of prudence. The 

requirements of this subparagraph 

(f)(4)(i) will be met if the ‘‘annualized 

portfolio turnover ratio’’, calculated in 

the manner described in subparagraph 

(f)(4)(ii), is contained in the summary. 

(ii) The ‘‘annualized portfolio 

turnover ratio’’ must be calculated as a 

percentage of the plan assets consisting 

of securities or cash over which the 

authorized Morgan Stanley/Mitsubishi 

Entity had discretionary investment 

authority, or with respect to which such 

Morgan Stanley/Mitsubishi Entity 

rendered, or had any responsibility to 

render, investment advice (the portfolio) 

at any time or times (management 

period(s)) during the period covered by 

the report. First, the ‘‘portfolio turnover 

ratio’’ (not annualized) is obtained by 

dividing: 

(A) The lesser of the aggregate dollar 

amounts of purchases or sales of 

portfolio securities during the 

management period(s) by 

(B) The monthly average of the market 

value of the portfolio securities during 

all management period(s). Such 

monthly average is calculated by 

totaling the market values of the 

portfolio securities as of the beginning 

and ending of each management period 

and as of the end of each month that 

ends within such period(s) and dividing 

the sum by the number of valuation 

dates so used. For purposes of this 

calculation, all debt securities whose 

maturities at the time of acquisition 

were one (1) year or less are excluded 

from both the numerator and the 

denominator. The ‘‘annualized portfolio 

turnover ratio’’ is then derived by 

multiplying the ‘‘portfolio turnover 

ratio’’ by an annualizing factor. The 

annualizing factor is obtained by 

dividing (C) the number twelve (12) by 

(D) the aggregate duration of the 

management period(s) expressed in 

months (and fractions thereof). 

(iii) The information described in this 

subparagraph (f)(4) is not required to be 

furnished in any case where the 

authorized Morgan Stanley/Mitsubishi 

Entity acting as plan fiduciary has not 

exercised discretionary authority over 

trading in the plan’s account during the 

period covered by the report. 

For purposes of this subparagraph (f), 

the words, ‘‘incurred by the plan,’’ shall 

be construed to mean ‘‘incurred by the 

pooled fund’’ with respect to covered 

transactions engaged in on behalf of a 

pooled fund in which the plan 

participates. 

(g) For an agency cross transaction 

with respect to which Section IV(a) of 

this Part VI does not apply, the 

following conditions must also be 

satisfied: 

(1) The information required under 

Section III(d) or Section IV(c)(1)(ii) of 

this Part VI includes a statement to the 

effect that with respect to agency cross 

transactions, the entity effecting or 

executing the transactions will have a 

potentially conflicting division of 

loyalties and responsibilities regarding 

the parties to the transactions; 

(2) The summary required under 

Section III(f) of this Part VI includes a 

statement identifying the total number 

of agency cross transactions during the 

period covered by the summary and the 

total amount of all commissions or other 

remuneration received or to be received 

from all sources by the Related Entity 

engaging in the transactions in 

connection with those transactions 

during the period; 

(3) The Morgan Stanley/Mitsubishi 

entity has the discretionary authority to 

act on behalf of, and/or provide 

investment advice to, either: 

(i) One or more sellers, or 

(ii) One or more buyers with respect 

to the transaction, but not both. 

(4) The agency cross transaction is a 

purchase or sale for no consideration 

other than cash payment against prompt 

delivery of a security for which market 

quotations are readily available; and 

(5) The agency cross transaction is 

executed or effected at a price that is at 

or between the independent bid and 

independent ask prices for the security 

prevailing at the time of the transaction. 

(h) A Morgan Stanley/Mitsubishi 

Entity serving as trustee (other than a 

nondiscretionary trustee) may only 

engage in a covered transaction with a 

plan that has total net assets with a 

value of at least $50 million. In the case 

of a pooled fund, the $50 million net 

asset requirement will be met, if 50 

percent or more of the units of 

beneficial interest in such pooled fund 

are held by plans each of which has 

total net assets with a value of at least 

$50 million. 

For purposes of the net asset tests 

described above, where a group of plans 

is maintained by a single employer or 

controlled group of employers, as 

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

$50 million net asset requirement may 

be met by aggregating the assets of such 


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plans, if the assets are pooled for 

investment purposes in a single master 

trust. 

(i) The Morgan Stanley/Mitsubishi 

Entity serving as trustee (other than a 

nondiscretionary trustee) engaging in a 

covered transaction furnishes, at least 

annually, to the authorizing plan 

fiduciary of each plan the following: 

(1) The aggregate brokerage 

commissions, expressed in dollars, paid 

by the plan to brokerage firms affiliated 

with such trustee; 

(2) The aggregate brokerage 

commissions, expressed in dollars, paid 

by the plan to brokerage firms not 

affiliated with such trustee; 

(3) The average brokerage 

commissions, expressed as cents per 

share, paid by the plan to brokerage 

firms affiliated with such trustee; and 

(4) The average brokerage 

commissions, expressed as cents per 

share, paid by the plan to brokerage 

firms not affiliated with such trustee. 

For purposes of this subparagraph (i), 

the words, ‘‘paid by the plan,’’ should 

be construed to mean ‘‘paid by the 

pooled fund’’ when the trustee engages 

in covered transactions on behalf of a 

pooled fund in which the plan 

participates. 

Section IV: Exceptions From Conditions 

(a) Certain agency cross transactions. 

Section III of this Part VI does not apply 

in the case of an agency cross 

transaction, provided that the Morgan 

Stanley/Mitsubishi Entity and/or 

Related Entity: 

(1) Does not render investment advice 

to any plan for a fee within the meaning 

of ERISA section 3(21)(A)(ii) with 

respect to the transaction; 

(2) Is not otherwise a fiduciary who 

has investment discretion with respect 

to any plan assets involved in the 

transaction, see 29 CFR 2510.3–21(d); 

and 

(3) Does not have the authority to 

engage, retain or discharge any person 

who is or is proposed to be a fiduciary 

regarding any such plan assets. 

(b) Recapture of profits. Section III(a) 

of this Part VI does not apply in any 

case where the entity engaging in a 

covered transaction returns or credits to 

the plan all profits earned by the entity 

in connection with the securities 

transactions associated with the covered 

transaction. 

(c) Special rules for pooled funds. In 

the case of a covered transaction 

involving an account or fund for the 

collective investment of the assets of 

more than one plan (pooled fund): 

(1) Section III (b), (c), and (d) of this 

Part VI do not apply if: 

(i) The arrangement under which the 

covered transaction is performed is 

subject to the prior and continuing 

authorization, in the manner described 

in this subparagraph (c)(1), of an 

authorizing plan fiduciary with respect 

to each plan whose assets are invested 

in the pooled fund who is independent 

of the Morgan Stanley/Mitsubishi Entity 

and the Related Entity. The requirement 

that the authorizing plan fiduciary be 

independent shall not apply in the case 

of a plan covering only employees of a 

Morgan Stanley/Mitsubishi Entity, if the 

requirements of Section IV(c)(2)(i) and 

(ii) of this Part VI are met. 

(ii) The authorizing plan fiduciary is 

furnished with any reasonably available 

information that the Morgan Stanley/ 

Mitsubishi Entity engaging or proposing 

to engage in the covered transactions 

reasonably believes to be necessary for 

the authorizing plan fiduciary to 

determine whether the authorization 

should be given or continued, not less 

than thirty (30) days prior to 

implementation of the arrangement or 

material change thereto, including (but 

not limited to) a description of the 

Morgan Stanley/Mitsubishi Entity’s 

brokerage placement practices, and, 

where requested, any reasonably 

available information regarding the 

matter upon the reasonable request of 

the authorizing plan fiduciary at any 

time. 

(iii) In the event an authorizing plan 

fiduciary submits a notice in writing to 

the Morgan Stanley/Mitsubishi Entity 

engaging in or proposing to engage in 

the covered transaction objecting to the 

implementation of, material change in, 

or continuation of, the arrangement, the 

plan on whose behalf the objection was 

tendered is given the opportunity to 

terminate its investment in the pooled 

fund, without penalty to the plan, 

within such time as may be necessary to 

effect the withdrawal in an orderly 

manner that is equitable to all 

withdrawing plans and to the nonwithdrawing plans. In the case of a plan 

that elects to withdraw under this 

subparagraph (c)(1)(iii), the withdrawal 

shall be effected prior to the 

implementation of, or material change 

in, the arrangement; but an existing 

arrangement need not be discontinued 

by reason of a plan electing to 

withdraw. 

(iv) In the case of a plan whose assets 

are proposed to be invested in the 

pooled fund after the implementation of 

the arrangement and that has not 

authorized the arrangement in the 

manner described in subparagraphs 

(c)(1)(ii) and (c)(1)(iii) of this Section IV, 

such plan’s investment in the pooled 

fund is subject to the prior written 

authorization of an authorizing 

fiduciary who satisfies the requirements 

of subparagraph (c)(1)(i). 

(2) To the extent that Section III(a) of 

this Part VI prohibits any Morgan 

Stanley/Mitsubishi Entity or Related 

Entity from being the employer of 

employees covered by a plan investing 

in a pool managed by the Morgan 

Stanley/Mitsubishi Entity, Section III(a) 

of this Part VI does not apply if: 

(i) The Morgan Stanley/Mitsubishi 

Entity is an ‘‘investment manager’’ as 

defined in ERISA section 3(38), and 

(ii) Either 

(A) The Morgan Stanley/Mitsubishi 

Entity returns or credits to the pooled 

fund all profits earned by the Related 

Entity in connection with all covered 

transactions engaged in by the Related 

Entity on behalf of the fund, or 

(B) The pooled fund satisfies the 

requirements of Section IV(c)(3) of this 

Part VI. 

(3) A pooled fund satisfies the 

requirements of this subparagraph for a 

fiscal year of the fund if: 

(i) On the first day of such fiscal year, 

and immediately following each 

acquisition of an interest in the pooled 

fund during the fiscal year by any plan 

covering employees of any Morgan 

Stanley/Mitsubishi Entity or Related 

Entity, the aggregate fair market value of 

the interests in such fund of all plans 

covering employees of any Morgan 

Stanley/Mitsubishi Entity and Related 

Entity, acquired under this exemption 

and PTE 86–128, does not exceed 20 

percent (20%) of the fair market value 

of the total assets of the fund; and 

(ii) The aggregate brokerage 

commissions received by any Related 

Entity, in connection with covered 

transactions engaged under this 

exemption and PTE 86–128, on behalf of 

all pooled funds in which a plan 

covering employees of any Morgan 

Stanley/Mitsubishi Entity or Related 

Entity participates, do not exceed five 

percent (5%) of the total brokerage 

commissions received by any Related 

Entity from all sources in such fiscal 

year. 

Part VII. Proposed Exemption for CrossTrades of Securities by Index and 

Model-Driven Funds (Modeled After 

PTE 2002–12) 

Section I. Proposed Exemption for 

Cross-Trading of Securities by Index 

and/or Model-Driven Funds 

The restrictions of ERISA sections 

406(a)(1)(A) and 406(b)(2), and the 

sanctions resulting from the application 

of Code section 4975, by reason of Code 

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

the transactions described below, if the 


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applicable conditions set forth in 

Sections II and III of this exemption, 

below, are satisfied. 

(a) The purchase and sale of securities 

between an Index Fund or a ModelDriven Fund, as defined in Section IV(a) 

and (b), below, and another Index Fund 

or Model-Driven Fund (hereinafter, 

either referred as a Fund), at least one 

of which holds ‘‘plan assets’’ subject to 

the Act; or 

(b) The purchase and sale of securities 

between a Fund and a Large Account, as 

defined in Section IV(e) of this Part VII, 

at least one of which holds ‘‘plan 

assets’’ subject to the Act, pursuant to a 

portfolio restructuring program, as 

defined in Section IV(f) of this Part VII, 

of the Large Account, where a Morgan 

Stanley entity is the Manager on one 

side of the cross-trade and a Mitsubishi 

entity is the Manager on the other side 

of the cross-trade. Each Manager must 

comply with each condition below and 

is deemed a Morgan Stanley/Mitsubishi 

Entity for purposes of Parts VIII and IX 

below. 

Notwithstanding the foregoing, this 

Part VII shall apply to cross-trades 

between two (2) or more Large Accounts 

pursuant to a portfolio restructuring 

program, if such cross-trades occur as 

part of a single cross-trading program 

involving both Funds and Large 

Accounts for which securities are crosstraded solely because of the objective 

operation of the program. 

Section II. Specific Conditions 

(a) The cross-trade is executed at the 

closing price, as defined below in 

Section IV(h) of this Part VII. 

(b) Any cross-trade of securities by a 

Fund occurs as a direct result of a 

‘‘triggering event,’’ as defined in Section 

IV(d), and is executed no later than the 

close of the third business day following 

such ‘‘triggering event.’’ 

(c) If the cross-trade involves a ModelDriven Fund, the cross-trade does not 

take place within three (3) business days 

following any change made by the 

Manager to the model underlying the 

Fund. 

(d) The Manager has allocated the 

opportunity for all Funds or Large 

Accounts to engage in the cross-trade on 

an objective basis which has been 

previously disclosed to the authorizing 

fiduciaries of plan investors, and which 

does not permit the exercise of 

discretion by the Manager (e.g., a pro 

rata allocation system). 

(e) No more than 20 percent (20%) of 

the assets of the Fund or Large Account 

at the time of the cross-trade is 

comprised of assets of plans maintained 

by the Manager for its own employees 

(the Manager Plan(s)) for which the 

Manager exercises investment 

discretion. 

(f)(1) Cross-trades of equity securities 

involve only securities that are widely 

held, actively traded, and for which 

market quotations are readily available 

from independent sources that are 

engaged in the ordinary course of 

business of providing financial news 

and pricing information to institutional 

investors and/or to the general public, 

and are widely recognized as accurate 

and reliable sources for such 

information. For purposes of this 

requirement, the terms, ‘‘widely-held’’ 

and ‘‘actively-traded,’’ shall be deemed 

to include any security listed in an 

Index, as defined in Section IV(c); and 

(2) Cross-trades of fixed-income 

securities involve only securities for 

which market quotations are readily 

available from independent sources that 

are engaged in the ordinary course of 

business of providing financial news 

and pricing information to institutional 

investors and/or to the general public 

and are widely recognized as accurate 

and reliable sources for such 

information. 

(g) The Manager receives no brokerage 

fees or commissions because of the 

cross-trade. 

(h) A plan’s participation in the crosstrading program of a Manager, as a 

result of investments made in any Index 

or Model-Driven Fund that holds plan 

assets is subject to a written 

authorization executed in advance of 

such investment by a fiduciary of such 

plan that is independent of Morgan 

Stanley and Mitsubishi (the 

independent plan fiduciary). 

For purposes of this Part VII, the 

requirement that the authorizing 

fiduciary be independent of the 

Manager shall not apply in the case of 

a Manager Plan. 

(i) With respect to existing plan 

investors in any Index or Model-Driven 

Fund that holds plan assets as of the 

date this proposed exemption is 

granted, the independent fiduciary is 

furnished with a written notice, not less 

than forty-five (45) days before the 

implementation of the cross-trading 

program, that describes the Fund’s 

participation in the cross-trading 

program of the Manager, provided that: 

(1) Such notice allows each plan an 

opportunity to object to such plan’s 

participation in the cross-trading 

program as a Fund investor by 

providing such plan with a special 

termination form; 

(2) The notice instructs the 

independent plan fiduciary that failure 

to return the termination form to the 

Manager, by a specified date (which 

shall be at least thirty (30) days 

following such plan’s receipt of the 

form) shall be deemed to be an approval 

by such plan of its participation in the 

Manager’s cross-trading program as a 

Fund investor; and 

(3) If the independent plan fiduciary 

objects to a plan’s participation in the 

cross-trading program as a Fund 

investor by returning the termination 

form to the Manager by the specified 

date, such plan is given the opportunity 

to withdraw from each Index or ModelDriven Fund without penalty before the 

implementation of the cross-trading 

program, within such time as may be 

reasonably necessary to effectuate the 

withdrawal in an orderly manner. 

(j) Prior to obtaining the authorization 

described in Section II(h) the notice 

described in Section II(i) of this Part VII, 

the following statement must be 

provided by the Manager to the 

independent plan fiduciary: 

Investment decisions for the Fund 

(including decisions regarding which 

securities to buy or sell, how much of 

a security to buy or sell, and when to 

execute a sale or purchase of securities 

for the Fund) will not be based in whole 

or in part by the Manager on the 

availability of cross-trade opportunities 

and will be made prior to the 

identification and determination of any 

cross-trade opportunities. In addition, 

all cross-trades by a Fund will be based 

solely upon a ‘‘triggering event’’ as set 

forth in this Part VII. Records 

documenting each cross-trade 

transaction will be retained by the 

Manager. 

(k) Before any authorization set forth 

in Section II(h) of this Part VII, and at 

the time of any notice described in 

Section II(i) of this Part VII, the 

independent plan fiduciary must be 

furnished with any reasonably available 

information necessary for the fiduciary 

to determine whether the authorization 

should be given, including (but not 

limited to) (i) a copy of this proposed 

exemption and the final exemption, if 

granted, (ii) an explanation of how the 

authorization may be terminated, (iii) 

detailed disclosure of the procedures to 

be implemented under the Manager’s 

cross-trading practices (including the 

‘‘triggering events’’ that will create the 

cross-trading opportunities, the 

independent pricing services that will 

be used by the Manager to price the 

cross-traded securities, and the methods 

that will be used for determining closing 

price), and (iv) any other reasonably 

available information regarding the 

matter that the authorizing plan 

fiduciary requests. The independent 

plan fiduciary must also be provided 

with a statement that the Manager will 

have a potentially conflicting division of 


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7However, for the Manager Plan to participate in 

a specific portfolio restructuring program as part of 

a Large Account, proper disclosures must be made 

to, and written authorization must be made by, an 

appropriate plan fiduciary. 

loyalties and responsibilities to the 

parties to any cross-trade transaction 

and must explain how the Manager’s 

cross-trading practices and procedures 

will mitigate such conflicts. 

With respect to Funds that are added 

to the Manager’s cross-trading program 

or changes to, or additions of, triggering 

events regarding Funds, following the 

authorizations described in Section II(h) 

or Section II(i) of this Part VII, the 

Manager shall provide a notice to each 

relevant independent plan fiduciary of 

each plan invested in the affected Funds 

before, or within ten (10) days 

following, such addition of Funds or 

change to, or addition of, triggering 

events, which contains a description of 

such Fund(s) or triggering event(s). Such 

notice will also include a statement that 

such plan has the right to terminate its 

participation in the cross-trading 

program and its investment in any Index 

Fund or Model-Driven Fund without 

penalty at any time, as soon as is 

necessary to effectuate the withdrawal 

in an orderly manner. 

(l) At least annually, the Manager 

notifies the independent fiduciary for 

each plan that has previously 

authorized participation in the 

Manager’s cross-trading program as a 

Fund investor, that such plan has the 

right to terminate its participation in the 

cross-trading program and its 

investment in any Index Fund or ModelDriven Fund that holds plan assets 

without penalty at any time, as soon as 

is necessary to effectuate the withdrawal 

in an orderly manner. This notice shall 

also provide each independent plan 

fiduciary with a special termination 

form and instruct the fiduciary that 

failure to return the form to the Manager 

by a specified date (which shall be at 

least thirty (30) days following such 

plan’s receipt of the form) shall be 

deemed an approval of the subject 

plan’s continued participation in the 

cross-trading program as a Fund 

investor. In lieu of providing a special 

termination form, the notice may permit 

the independent plan fiduciary to 

utilize another written instrument by 

the specified date to terminate a plan’s 

participation in the cross-trading 

program; provided that in such case the 

notification explicitly discloses that a 

termination form may be obtained from 

the Manager upon request. Such annual 

re-authorization must provide 

information to the relevant independent 

plan fiduciary regarding each Fund in 

which a plan is invested, as well as 

explicit notification that such plan 

fiduciary may request and obtain 

disclosures regarding any new Funds in 

which such plan is not invested that are 

added to the cross-trading program, or 

any new triggering events (as defined in 

Section IV(d) of this Part VII) that may 

have been added to any existing Funds 

in which such plan is not invested, 

since the time of the initial 

authorization described in Section II(h) 

of this Part VII, or the time of the 

notification described in Section II(i) of 

this Part VII. 

(m) With respect to a cross-trade 

involving a Large Account: 

(1) The cross-trade is executed in 

connection with a portfolio 

restructuring program, as defined in 

Section IV(f) of this Part VII, with 

respect to all or a portion of the Large 

Account’s investments which an 

independent fiduciary of the Large 

Account (other than in the case of any 

assets of a Manager Plan) has authorized 

the Manager to carry out or to act as a 

‘‘trading adviser,’’ as defined in Section 

IV(g) of this Part VII, in carrying out a 

Large Account-initiated liquidation or 

restructuring of its portfolio; 

(2) Before the cross-trade, a fiduciary 

of the Large Account who is 

independent of Morgan Stanley and 

Mitsubishi (other than in the case of any 

assets of a Manager Plan) 7 has been 

fully informed of the Manager’s crosstrading program, has been provided 

with the information required in Section 

II(k) of this Part VII, and has provided 

the Manager with advance written 

authorization to engage in cross-trading 

in connection with the restructuring, 

provided that: 

(i) Such authorization may be 

terminated at will by the Large Account 

upon receipt by the Manager of written 

notice of termination. 

(ii) A form expressly providing an 

election to terminate the authorization, 

with instructions on the use of the form, 

is supplied to the authorizing Large 

Account fiduciary concurrent with the 

receipt of the written information 

describing the cross-trading program. 

The instructions for such form must 

specify that the authorization may be 

terminated at will by the Large Account, 

without penalty to the Large Account, 

upon receipt by the Manager of written 

notice from the authorizing Large 

Account fiduciary; 

(3) All cross-trades made in 

connection with the portfolio 

restructuring program must be 

completed by the Manager within sixty 

(60) days of the initial authorization (or 

initial receipt of assets associated with 

the restructuring, if later) to engage in 

such restructuring by the Large 

Account’s independent fiduciary, unless 

such fiduciary agrees in writing to 

extend this period for another thirty (30) 

days; and, 

(4) No later than thirty (30) days after 

completion of the Large Account’s 

portfolio restructuring program, the 

Large Account’s independent fiduciary 

must be fully apprised in writing of all 

cross-trades executed in connection 

with the restructuring. Such writing 

shall include a notice that the Large 

Account’s independent fiduciary may 

obtain, upon request, the information 

described in Section III(a) of this Part 

VII, subject to the limitations described 

in Section III(b) of this Part VII. 

However, if the program takes longer 

than sixty (60) days to complete, interim 

reports containing the transaction 

results must be provided to the Large 

Account fiduciary no later than fifteen 

(15) days following the end of the initial 

sixty (60) day period and the succeeding 

thirty (30) day period. 

Section III. General Conditions 

(a) The Manager maintains or causes 

to be maintained for a period of six (6) 

years from the date of each cross-trade 

the records necessary to enable the 

persons described below in 

subparagraph (b) of this Section III to 

determine whether the conditions of 

this Part VII have been met, including 

records which identify: 

(1) On a Fund-by-Fund basis, the 

specific triggering events which result 

in the creation of the model prescribed 

output or trade list of specific securities 

to be cross-traded; 

(2) On a Fund-by-Fund basis, the 

model prescribed output or trade list 

which describes: 

(i) Which securities to buy or sell; and 

(ii) How much of each security to buy 

or sell; in detail sufficient to allow an 

independent plan fiduciary to verify 

that each of the above decisions for the 

Fund was made in response to specific 

triggering events; and 

(3) On a Fund-by-Fund basis, the 

actual trades executed by the Fund on 

a particular day and which of those 

trades resulted from triggering events. 

Such records must be readily 

available to assure accessibility and 

maintained so that an independent 

fiduciary, or other persons identified 

below in subparagraph (b) of this 

Section III, may obtain them within a 

reasonable period of time. However, a 

prohibited transaction will not be 

considered to have occurred if, due to 

circumstances beyond the control of the 

Manager, the records are lost or 

destroyed prior to the end of the sixyear period, and no party in interest 

other than the Manager shall be subject 


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to the civil penalty that may be assessed 

under ERISA section 502(i) or to the 

taxes imposed by Code section 4975(a) 

and (b) if the records are not maintained 

or are not available for examination as 

required by subparagraph (b)below of 

this Section III. 

(b)(1) Except as provided below in 

subparagraph (b)(2) of this Section III 

and notwithstanding any provisions of 

ERISA sections 504(a)(2) and (b), the 

records referred to in subparagraph (a) 

of this Section III are unconditionally 

available at their customary location for 

examination during normal business 

hours by: 

(i) Any duly authorized employee or 

representative of the Department or the 

IRS, 

(ii) Any fiduciary of a plan 

participating in a cross-trading program 

who has the authority to acquire or 

dispose of the assets of such plan, or 

any duly authorized employee or 

representative of such fiduciary, 

(iii) Any contributing employer with 

respect to any plan participating in a 

cross-trading program or any duly 

authorized employee or representative 

of such employer, and 

(iv) Any participant or beneficiary of 

any Manager Plan participating in a 

cross-trading program, or any duly 

authorized employee or representative 

of such participant or beneficiary. 

(2) If, in the course of seeking to 

inspect records maintained by a 

Manager pursuant to this Section III, 

any person described below in 

subparagraph (b)(1)(ii) through (iv) of 

this Section III seeks to examine trade 

secrets, or commercial or financial 

information of the Manager that is 

privileged or confidential, and the 

Manager is otherwise permitted by law 

to withhold such information from such 

person, the Manager may refuse to 

disclose such information provided that, 

by the close of the thirtieth (30th) day 

following the request, the Manager gives 

a written notice to such person advising 

the person of the reasons for the refusal 

and that the Department of Labor may 

request such information. 

(3) The information required to be 

disclosed to persons described above in 

subparagraph (b)(1)(ii) through (iv) of 

this Section III shall be limited to 

information that pertains to cross-trades 

involving a Fund or Large Account in 

which they have an interest. 

Section IV. Definitions 

The following definitions apply for 

purposes of this Part VII: 

(a) ‘‘Index Fund’’—Any investment 

fund, account or portfolio sponsored, 

maintained, trusteed, or managed by a 

Manager or an Affiliate, in which one or 

more investors invest, and: 

(1) Which is designed to track the rate 

of return, risk profile and other 

characteristics of an Index, as defined in 

Section IV(c) of this Part VII, by either 

(i) Replicating the same combination 

of securities which compose such Index, 

or 

(ii) Sampling the securities which 

compose such Index based on objective 

criteria and data; 

(2) For which the Manager does not 

use its discretion, or data within its 

control, to affect the identity or amount 

of securities to be purchased or sold; 

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

subject to ERISA, is an investment 

company registered under the 1940 Act, 

or contains assets of one or more 

institutional investors, which may 

include, but not be limited to, such 

entities as an insurance company 

separate account or general account, a 

governmental plan, a university 

endowment fund, a charitable 

foundation fund, a trust, or other fund 

which is exempt from taxation under 

Code section 501(a); and, 

(4) That involves no agreement, 

arrangement, or understanding 

regarding the design or operation of the 

Index Fund which is intended to benefit 

a Manager or an Affiliate, or any party 

in which a Manager or an Affiliate may 

have an interest. 

(b) ‘‘Model-Driven Fund’’—Any 

investment fund, account or portfolio 

sponsored, maintained, trusteed, or 

managed by the Manager or an Affiliate 

in which one or more investors invest, 

and: 

(1) Which is composed of securities 

the identity of which and the amount of 

which are selected by a computer model 

that is based on prescribed objective 

criteria using independent third-party 

data, not within the control of the 

Manager, to transform an Index, as 

defined in Section IV(c) of this Part VII; 

(2) Which either contains ‘‘plan 

assets’’ subject to ERISA, is an 

investment company registered under 

the 1940 Act, or contains assets of one 

or more institutional investors, which 

may include, but not be limited to, such 

entities as an insurance company 

separate account or general account, a 

governmental plan, a university 

endowment fund, a charitable 

foundation fund, a trust, or other fund 

which is exempt from taxation under 

Code section 501(a); and 

(3) That involves no agreement, 

arrangement, or understanding 

regarding the design or operation of the 

Model-Driven Fund or the utilization of 

any specific objective criteria which is 

intended to benefit a Manager or an 

Affiliate, or any party in which a 

Manager or an Affiliate may have an 

interest. 

(c) ‘‘Index’’—A securities index that 

represents the investment performance 

of a specific segment of the public 

market for equity or debt securities in 

the United States and/or foreign 

countries, but only if— 

(1) The organization creating and 

maintaining the index is: 

(i) Engaged in the business of 

providing financial information, 

evaluation, advice, or securities 

brokerage services to institutional 

clients, 

(ii) A publisher of financial news or 

information, or 

(iii) A public securities exchange or 

association of securities dealers; and, 

(2) The index is created and 

maintained by an organization 

independent of the Manager, as defined 

in Section IV(i) of this Part VII; and, 

(3) The index is a generally accepted 

standardized index of securities which 

is not specifically tailored for the use of 

the Manager. 

(d) ‘‘Triggering Event’’: 

(1) A change in the composition or 

weighting of the Index underlying a 

Fund by the independent organization 

creating and maintaining the Index; 

(2) A material amount of net change 

in the overall level of assets in a Fund, 

as a result of investments in and 

withdrawals from the Fund, provided 

that: 

(i) Such material amount has either 

been identified in advance as a specified 

amount of net change relating to such 

Fund and disclosed in writing as a 

‘‘triggering event’’ to an independent 

fiduciary of each plan having assets 

held in the Fund prior to, or within ten 

(10) days following, its inclusion as a 

‘‘triggering event’’ for such Fund or the 

Manager has otherwise disclosed in the 

description of its cross-trading practices, 

pursuant to Section II(k) of this Part VII, 

the parameters for determining a 

material amount of net change, 

including any amount of discretion 

retained by the Manager that may affect 

such net change, in sufficient detail to 

allow the independent fiduciary to 

determine whether the authorization to 

engage in cross-trading should be given; 

and 

(ii) Investments or withdrawals as a 

result of the Manager’s discretion to 

invest or withdraw assets of a Manager 

Plan, other than a Manager Plan which 

is a defined contribution plan under 

which participants direct the 

investment of their accounts among 

various investment options, including 

such Fund, will not be taken into 


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account in determining the specified 

amount of net change; 

(3) An accumulation in the Fund of a 

material amount of either: 

(i) Cash which is attributable to 

interest or dividends on, and/or tender 

offers for, portfolio securities; or 

(ii) Stock attributable to dividends on 

portfolio securities; provided that such 

material amount has either been 

identified in advance as a specified 

amount relating to such Fund and 

disclosed in writing as a ‘‘triggering 

event’’ to an independent fiduciary of 

each plan having assets held in the 

Fund prior to, or within ten (10) days 

after, its inclusion as a ‘‘triggering 

event’’ for such Fund, or the Manager 

has otherwise disclosed in the 

description of its cross-trading practices, 

pursuant to Section II(k) of this Part VII 

the parameters for determining a 

material amount of accumulated cash or 

securities, including any amount of 

discretion retained by the Manager that 

may affect such accumulated amount, in 

sufficient detail to allow the 

independent fiduciary to determine 

whether the authorization to engage in 

cross-trading should be given; 

(4) A change in the composition of the 

portfolio of a Model-Driven Fund 

mandated solely by operation of the 

formulae contained in the computer 

model underlying the Model-Driven 

Fund where the basic factors for making 

such changes (and any fixed frequency 

for operating the computer model) have 

been disclosed in writing to an 

independent fiduciary of each plan 

having assets held in the Model-Driven 

Fund, prior to, or within ten (10) days 

after, its inclusion as a ‘‘triggering 

event’’ for such Model-Driven Fund; or 

(5) A change in the composition or 

weighting of a portfolio for an Index 

Fund or a Model-Driven Fund which 

results from an independent fiduciary’s 

direction to exclude certain securities or 

types of securities from the Fund, 

notwithstanding that such securities are 

part of the index used by the Fund. 

(e) ‘‘Large Account’’—Any investment 

fund, account or portfolio that is not an 

Index Fund or a Model-Driven Fund 

sponsored, maintained, trusteed (other 

than a Fund for which the Manager is 

a nondiscretionary trustee), or managed 

by the Manager, which holds assets of 

either: 

(1) An employee benefit plan within 

the meaning of ERISA section 3(3) that 

has $50 million or more in total assets 

(for purposes of this requirement, the 

assets of one or more employee benefit 

plans maintained by the same employer, 

or controlled group of employers, may 

be aggregated provided that such assets 

are pooled for investment purposes in a 

single master trust); 

(2) An institutional investor that has 

total assets in excess of $50 million, 

such as an insurance company separate 

account or general account, a 

governmental plan, a university 

endowment fund, a charitable 

foundation fund, a trust, or other fund 

which is exempt from taxation under 

Code section 501(a); or 

(3) An investment company registered 

under the 1940 Act (e.g., a mutual fund) 

other than an investment company 

advised or sponsored by the Manager; 

provided that the Manager has been 

authorized to restructure all or a portion 

of the portfolio for such Large Account 

or to act as a ‘‘trading adviser’’ (as 

defined in Section IV(g) of this Part VII 

in connection with a portfolio 

restructuring program (as defined in 

Section IV(f) of this Part VII for the 

Large Account. 

(f) ‘‘Portfolio restructuring 

program’’—Buying and selling the 

securities on behalf of a Large Account 

in order to produce a portfolio of 

securities which will be an Index Fund 

or a Model-Driven Fund managed by the 

Manager or by another investment 

manager, or in order to produce a 

portfolio of securities the composition 

of which is designated by a party 

independent of the Manager, without 

regard to the requirements of Section 

IV(a)(3) or (b)(2) of this Part VII, or to 

carry out a liquidation of a specified 

portfolio of securities for the Large 

Account. 

(g) ‘‘Trading adviser’’—A Morgan 

Stanley or Mitsubishi entity whose role 

is limited with respect to a Large 

Account to the disposition of a 

securities portfolio in connection with a 

portfolio restructuring program that is a 

Large Account-initiated liquidation or 

restructuring within a stated period of 

time in order to minimize transaction 

costs. The Morgan Stanley or Mitsubishi 

Entity does not have discretionary 

authority or control with respect to any 

underlying asset allocation, 

restructuring or liquidation decisions 

for the account in connection with such 

transactions and does not render 

investment advice [within the meaning 

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

such transactions. 

(h) ‘‘Closing price’’—The price for a 

security on the date of the transaction, 

as determined by objective procedures 

disclosed to investors in advance and 

consistently applied with respect to 

securities traded in the same market, 

which procedures shall indicate the 

independent pricing source (and 

alternates, if the designated pricing 

source is unavailable) used to establish 

the closing price and the time frame 

after the close of the market in which 

the closing price will be determined. 

(i) ‘‘Manager’’—A Morgan Stanley 

entity acting as manager of a Fund or 

Large Account involved in one side of 

a cross-trade transaction involving a 

Mitsubishi entity acting as manager of a 

Fund or Large Account involved in the 

other side of the same cross-trade 

transaction; or a Mitsubishi entity acting 

as manager of a Fund or Large Account 

involved in one side of a cross-trade 

transaction involving a Morgan Stanley 

entity acting as manager of a Fund or 

Large Account involved in the other 

side of the same cross-trade transaction, 

where the Morgan Stanley entity and 

the Mitsubishi entity is: 

(1) A bank or trust company, or any 

Affiliate thereof, which is supervised by 

a state or federal agency; or 

(2) An investment adviser or any 

Affiliate thereof which is registered 

under the Investment Advisers Act of 

1940. 

(j) ‘‘Affiliate’’—An affiliate of a 

Manager is: 

(1) Any person, directly or indirectly, 

through one or more intermediaries, 

controlling, controlled by or under 

common control with the Manager: 

(2) Any officer, director, employee, or 

relative of such Manager, or partner of 

any such Manager; or 

(3) Any corporation or partnership of 

which such Manager is an officer, 

director, partner, or employee. 

(k) ‘‘Control’’—The power to exercise 

a controlling influence over the 

management or policies of a person 

other than an individual. 

(l) ‘‘Relative’’—A relative is a person 

that is defined in ERISA section 3(15) 

(or a ‘‘member of the family’’ as that 

term is defined in Code section 

4975(e)(6)), or a brother, a sister, or a 

spouse of a brother or sister). 

(m) ‘‘Nondiscretionary trustee’’—A 

plan trustee whose powers and duties 

with respect to any assets of a plan are 

limited to: 

(1) The provision of nondiscretionary 

trust services to such plan, and 

(2) Duties imposed on the trustee by 

any provision or provisions of ERISA or 

the Code. The term ‘‘nondiscretionary 

trust services’’ means custodial services 

and services ancillary to custodial 

services, none of which services are 

discretionary. For purposes of this Part 

VII, a person who is otherwise a 

nondiscretionary trustee will not fail to 

be a nondiscretionary trustee solely by 

reason of having been delegated, by the 

sponsor of a master or prototype plan, 

the power to amend such plan. 


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85930 Federal Register / Vol. 88, No. 236 / Monday, December 11, 2023 / Notices 

Part VIII. New Global Conditions 

Applicable to All Transactions Covered 

by This Exemption 

(a) Notwithstanding the requirements 

above, the applicable Morgan Stanley/ 

Mitsubishi Entity maintain(s) or cause(s) 

to be maintained for a period of six (6) 

years from the date of any transaction 

described herein, such records as are 

necessary to enable the persons 

described below in subparagraph (b) to 

determine whether the conditions of 

this proposed exemption were met, 

except that: 

(1) If the records necessary to enable 

the persons described below in 

subparagraph (b)(1)(i)–(iv) to determine 

whether the conditions of the proposed 

exemption have been met are lost or 

destroyed, due to circumstances beyond 

the control of the Morgan Stanley/ 

Mitsubishi Entity, then no prohibited 

transaction will be considered to have 

occurred solely on the basis of the 

unavailability of those records; and 

(2) No party in interest with respect 

to a plan which engages in the covered 

transactions, other than Morgan Stanley 

and Mitsubishi, shall be subject to the 

civil penalty that may be assessed under 

ERISA section 502(i) Act or to the taxes 

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

if the records have not been maintained 

or are not available for examination as 

required by subparagraph (b) below. 

(b)(1) Except as provided below in 

subparagraph (b)(2), and 

notwithstanding the provisions of 

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

section 504, the records referred to 

above in subparagraph (a) are 

unconditionally available for 

examination during normal business 

hours at their customary location to the 

following persons or an authorized 

representative thereof: 

(i) Any duly authorized employee or 

representative of the Department, the 

Internal Revenue Service (IRS), or the 

SEC; or 

(ii) Any fiduciary of any plan that 

engages in the covered transactions, or 

any duly authorized employee or 

representative of such fiduciary; or 

(iii) Any employer of participants and 

beneficiaries and any employee 

organization whose members are 

covered by any plan that engages in the 

transactions covered herein, or any 

authorized employee or representative 

of these entities; or 

(iv) Any participant or beneficiary of 

any plan that engages in the transactions 

covered herein, or duly authorized 

representative of such participant or 

beneficiary; 

(2) None of the persons described 

above in subparagraph (b)(1)(ii)–(iv) 

shall be authorized to examine the trade 

secrets of a Morgan Stanley/Mitsubishi 

Entity, or commercial or financial 

information, which is privileged or 

confidential; and 

(3) Should a Morgan Stanley/ 

Mitsubishi entity refuse to disclose 

information on the basis that such 

information is exempt from disclosure, 

pursuant to subparagraph (b)(2) above 

such Morgan Stanley/Mitsubishi Entity 

shall, by the thirtieth (30th) day 

following the request, provide a written 

notice advising that person of the 

reasons for the refusal and that the 

Department may request such 

information. 

(c) If an Applicable Class Exemption 

is amended, revised or revoked, or is 

subject to a new interpretation by the 

Department following the grant of this 

exemption, such change or 

interpretation will apply to the relevant 

transactions, conditions and/or terms in 

the relevant exemption herein. 

(d) Disclosure of Conflicts: The 

Morgan Stanley/Mitsubishi Entity 

engaging in a transaction covered by any 

Part of this exemption (with the 

exception of transactions described in 

Parts III and V) must provide a written 

notice to a fiduciary of that plan that is 

independent of both Mitsubishi and 

Morgan Stanley. The notice must 

clearly, and in plain English: (i) describe 

the ownership relationship between 

Morgan Stanley and Mitsubishi; (ii) 

describe the transactions that Morgan 

Stanley and Mitsubishi will engage in 

under this exemption on behalf of the 

plan or IRA; and (iii) alert the 

independent plan fiduciary that, as a 

result of the ownership relationship 

between Morgan Stanley and 

Mitsubishi, the previously identified 

transactions will provide a benefit to 

Morgan Stanley or Mitsubishi (i.e., the 

party that is not exercising discretion 

over the assets involved in the 

transaction) and/or involve a conflict of 

interest; 

(e) When relying on the relief in any 

Part of this exemption, the Morgan 

Stanley/Mitsubishi Entity must comply 

with the following ‘‘Impartial Conduct 

Standards’’: (1) The Morgan Stanley/ 

Mitsubishi Entity, at the time of the 

transaction, must act in the Best Interest 

of the plan. In this regard, acting in the 

Best Interest means acting with the care, 

skill, prudence, and diligence under the 

circumstances then prevailing that a 

prudent person acting in a like capacity 

and familiar with such matters would 

use in the conduct of an enterprise of a 

like character and with like aims, based 

on the investment objectives, risk 

tolerance, financial circumstances, and 

needs of affected plan, and not place the 

financial or other interests of the 

Morgan Stanley/Mitsubishi Entity, 

Related Entity, or other party ahead of 

the interests of the affected plan, or 

subordinate the plan’s interests to their 

own; (2)(A) The compensation received, 

directly or indirectly, by the Morgan 

Stanley/Mitsubishi Entity and Related 

Entities for their services may not 

exceed reasonable compensation within 

the meaning of ERISA section 408(b)(2) 

and Code section 4975(d)(2); and (B) As 

required by the federal securities laws, 

the Morgan Stanley/Mitsubishi Entity 

must obtain the best execution of the 

investment transaction reasonably 

available under the circumstances; and 

(3) The Morgan Stanley/Mitsubishi 

Entity’s statements to the plan about the 

covered transaction and other relevant 

matters must not be materially 

misleading at the time statements are 

made. 

(f) All Morgan Stanley/Mitsubishi 

Entities utilizing the exemption will 

have policies and procedures in place 

that are prudently designed to ensure 

that the conditions of the exemption are 

met. The policies and procedures must 

be in place prior to the occurrence of the 

transaction that is the subject of the 

relevant relief. 

Part IX. General Definitions 

(a) The term ‘‘Morgan Stanley/ 

Mitsubishi Entity’’ means an entity 

acting as a plan fiduciary in a 

transaction described in Parts I through 

VII: 

(1) That meets the definition of 

Morgan Stanley, as defined below; or 

(2) That meets the definition of 

Mitsubishi, as defined below; or 

(b) The term ‘‘Related Entity’’ means 

an entity that meets the definition of 

‘‘Morgan Stanley/Mitsubishi Entity,’’ 

except that the entity is not acting as a 

fiduciary with respect to the transaction 

that is the subject of the exemptive relief 

described in Parts I through VII of the 

exemption, if granted. 

(c) The term ‘‘Morgan Stanley’’ means 

Morgan Stanley & Co. LLC and any 

person, directly or indirectly, through 

one or more intermediaries, controlling, 

controlled by, or under common control 

with Morgan Stanley & Co. 

(d) The term ‘‘Mitsubishi’’ means 

Mitsubishi UFJ Financial Group, Inc., 

and any person, directly or indirectly, 

through one or more intermediaries, 

controlling, controlled by, or under 

common control with Mitsubishi UFJ 

Financial Group, Inc. 

(e) For purposes of Part IX (c) and (d) 

above, the term ‘‘control’’ means the 

power to exercise a controlling 

influence over the management or 


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Federal Register / Vol. 88, No. 236 / Monday, December 11, 2023 / Notices 85931 

8The Underwriter Exemptions are a group of 

individual exemptions granted by the Department 

to provide relief for the origination and operation 

of certain asset pool investment trusts and the 

acquisition, holding, and disposition by plans of 

certain asset-backed pass-through certificates 

representing undivided interests in those 

investment trusts. The most recent amendment to 

the Underwriter Exemptions is the Amendment to 

Prohibited Transaction Exemption 2007–05, 72 FR 

13130 (March 20, 2007), Involving Prudential 

Securities Incorporated, et al., To Amend the 

Definition of ‘‘Rating Agency,’’ [Prohibited 

Transaction Exemption 2012–08, 78 FR 41090 (July 

9, 2013); Exemption Application No. D–11718]. 

1 81 FR 75147 (October 28, 2016). 

2PTE 84–14 49 FR 9494, March 13, 1984, as 

corrected at 50 FR 41430 (October 10, 1985), as 

amended at 70 FR 49305 (August 23, 2005) and as 

amended at 75 FR 38837 (July 6, 2010), hereinafter 

referred to as PTE 84–14 or the QPAM exemption. 

3Section I(g) of PTE 84–14 prevents an entity that 

may otherwise meet the definition of a QPAM from 

utilizing the exemptive relief provided by PTE 84– 

14 for itself and its client plans, if that entity or an 

‘‘affiliate’’ thereof, or any owner, direct or indirect, 

of a five percent or more interest in the QPAM has 

within 10 years immediately preceding the 

transaction, been either convicted or released from 

imprisonment, whichever is later, as a result of 

criminal activity described in that section. 

4A ‘‘Covered Plan’’ is a plan subject to part 4 of 

title 1 of ERISA (‘‘ERISA-covered plan’’) or a plan 

subject to Section 4975 of the Code (‘‘IRA’’), with 

respect to which an RBC QPAM relies on PTE 84– 

14, or with respect to which an RBC QPAM (or any 

RBC affiliate) has expressly represented that the 

manager qualifies as a QPAM or relies on the 

QPAM class exemption. A Covered Plan does not 

include an ERISA-covered Plan or IRA to the extent 

the RBC QPAM has expressly disclaimed reliance 

on QPAM status or PTE 84–14 in entering into its 

contract, arrangement, or agreement with the 

ERISA-covered plan or IRA. 

5RBC’s exemption request (D–11868) is available 

by contacting EBSA’s Public Disclosure Room at 

(202) 693–8673. 

policies of a person other than an 

individual. 

(f) The term ‘‘Rating Agency’’ or 

collectively, ‘‘Rating Agencies’’ means a 

credit rating agency that: 

(1) Is currently recognized by the 

Securities and Exchange Commission 

(SEC) as a nationally recognized 

statistical ratings organization (NRSRO); 

(2) Has indicated on its most recently 

filed SEC Form NRSRO that it rates 

‘‘issuers of asset-backed securities;’’ and 

(3) Has had, within a period not 

exceeding twelve (12) months prior to 

the initial issuance of the securities, at 

least three (3) ‘‘qualified ratings 

engagements.’’ A ‘‘qualified ratings 

engagement’’ is one: 

(i) Requested by an issuer or 

underwriter of securities in connection 

with the initial offering of the securities; 

(ii) For which the credit rating agency 

is compensated for providing ratings; 

(iii) Which is made public to investors 

generally; and 

(iv) Which involves the offering of 

securities of the type that would be 

granted relief by the certain underwriter 

exemptions (the Underwriter 

Exemptions).8

(g) The term ‘‘Applicable Class 

Exemption’’ means PTE 75–1, Part III; 

PTE 75–1, Part IV; PTE 77–3; PTE 77– 

4; PTE 79–13; PTE 86–128; or PTE 

2002–12. 

Applicability Date: This exemption 

will be in effect on the date that this 

grant notice is published in the Federal 

Register. 

Signed at Washington, DC. 

George Christopher Cosby, 

Director, Office of Exemption Determinations, 

Employee Benefits Security Administration, 

U.S. Department of Labor. 

[FR Doc. 2023–27082 Filed 12–8–23; 8:45 am] 

BILLING CODE 4510–29–P 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

Technical Correction to PTE 2016–10, 

Exemption From Certain Prohibited 

Transaction Restrictions: Royal Bank 

of Canada (Together With Its Current 

and Future Affiliates, RBC or the 

Applicant) 

AGENCY: Employee Benefits Security 

Administration (EBSA), Labor. 

ACTION: Notice of technical correction. 

SUMMARY: This document makes a 

technical correction to Prohibited 

Transaction Exemption (PTE) 2016–10 

granted to the Royal Bank of Canada (D– 

11868) on October 28, 2016. 

DATES: 

Issuance date: These technical 

corrections are issued on December 11, 

2023 without further action or notice. 

Exemption Date: PTE 2016–10 will 

remain in effect for the period beginning 

on the Conviction Date (as corrected 

herein) until the earlier of: (1) the date 

that is twelve months following the 

Conviction Date; or (2) the effective date 

of a final agency action made by the 

Department in connection with an 

application for long-term exemptive 

relief for the covered transactions 

described in PTE 2016–10. 

FOR FURTHER INFORMATION CONTACT: Mr. 

Joseph Brennan of the Department, 

telephone (202) 693–8456. (This is not 

a toll-free number). 

SUPPLEMENTARY INFORMATION: 

Background 

On October 28, 2016, the Department 

published PTE 2016–10 in the Federal 

Register.1 PTE 2016–10 is a temporary 

administrative exemption that permits 

certain entities (the RBC Qualified 

Professional Asset Managers (QPAMs)) 

with specified relationships to Royal 

Bank of Canada (Bahamas) Limited 

(RBCTC Bahamas) to continue to rely 

upon the relief provided by the 

Department’s QPAM Exemption 2 for a 

one-year period, notwithstanding a 

potential judgment of conviction against 

RBCTC Bahamas for aiding and abetting 

tax fraud.3

The Department granted PTE 2016–10 

to protect Covered Plans 4 from the harm 

that may arise if and when RBCTC were 

convicted in the District Court of Paris.5

Therefore, PTE 2016–10, as initially 

granted, defined the term ‘‘Conviction’’ 

as ‘‘the potential judgment of conviction 

against RBCTC Bahamas for aiding and 

abetting tax fraud to be entered in 

France in the District Court of Paris, 

French Special Prosecutor No. 

1120392066, French Investigative Judge 

No. JIRSIF/11/12.’’ 

In January 2017, the trial court in 

France acquitted RBCTC of the aiding 

and abetting the tax fraud charge, so the 

exemptive relief provided in PTE 2016– 

01 was unnecessary. However, RBCTC 

recently informed the Department that 

the French prosecutor has appealed the 

lower court’s acquittal and the case is 

now being heard de novo as a new trial 

by a French appellate court. According 

to RBCTC, the alleged crime, the parties, 

and the case numbers remain the same 

as the District Court of Paris case that is 

defined as the ‘‘Conviction’’ in PTE 

2016–01. RBCTC has requested 

confirmation from the Department that 

the relief provided in PTE 2016–10 

would be available for one year, if 

RBCTC were ultimately convicted by 

the French appellate court. 

As noted above, PTE 2016–10 is 

intended to protect Covered Plans from 

harm if RBCTC were convicted for the 

alleged crime in France. This same harm 

would arise whether RBCTC is 

convicted for the same crime, stemming 

from the same conduct, in a French 

appellate court or ‘‘the District Court of 

Paris.’’ Therefore, to ensure that 

Covered Plans are protected from any 

harm that would arise from the 

appellate court’s conviction of RBCTC, 

the Department is revising the definition 

of ‘‘Conviction’’ in PTE 2016–10 to refer 

to ‘‘the potential judgment of conviction 

against RBCTC Bahamas for aiding and 

abetting tax fraud to be entered in 

France in the Court of Appeal, French 


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