60456 Federal Register / Vol. 65, No. 197 / Wednesday, October 11, 2000 / Notices

Diplomat Project) which was the subject

of PTE 99–46, and expressed concern

over the ASA Counselors’ authority

under the exemption to use assets of the

Fund for the operation of the Diplomat

Project. In response to the comment, the

applicants noted that the Department

previously granted PTE 99–46 which

permitted the investment. Further, the

applicants maintain that the Diplomat

Project involves a large hotel, country

club, and marina. Given the number of

participants, contributing employers,

and service providers for the Fund and

the scope of the Diplomat Project, in the

opinion of the applicants, there would

be significant administrative difficulties

in identifying and preventing

inadvertent prohibited transactions. In

the opinion of the applicants, the

granting of this exemption to ASA

Counselors, the Named Fiduciary, will

eliminate the risk that a prohibited

transaction will occur during the course

of building, selling, or operating the

Diplomat Project.

One commentator asked whether CS

Capital Management had any ties to

Capital Consultants, Inc. or Wilshire

Financial Services. In response, CS

Capital Management has confirmed that

they do not have ties to either

organization.

After giving full consideration to the

entire record, including the written

comments from the commentators, the

Department has decided to grant the

exemption. In this regard, the comment

letters submitted to the Department

have been included as part of the public

record of the exemption application.

The complete application file, including

all supplemental submissions received

by the Department, is made available for

public inspection in the Public

Documents Room of the Pension

Welfare Benefits Administration, Room

N–5638, U.S. Department of Labor, 200

Constitution Avenue, N.W.,

Washington, DC 20210.

For a more complete statement of the

facts and representations supporting the

Department’s decision to grant this

exemption refer to the Notice published

on June 26, 2000, at 65 FR 39435.

For Further Information Contact: Ms.

Angelena C. Le Blanc of the Department,

telephone (202) 219–8883 (this is not a

toll-free number).

General Information

The attention of interested persons is

directed to the following:

(1) The fact that a transaction is the

subject of an exemption under section

408(a) of the Act and/or section

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

a fiduciary or other party in interest or

disqualified person from certain other

provisions to which the exemption does

not apply and the general fiduciary

responsibility provisions of section 404

of the Act, which among other things

require a fiduciary to discharge his

duties respecting the plan solely in the

interest of the participants and

beneficiaries of the plan and in a

prudent fashion in accordance with

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

it affect the requirement of section

401(a) of the Code that the plan must

operate for the exclusive benefit of the

employees of the employer maintaining

the plan and their beneficiaries;

(2) These exemptions are

supplemental to and not in derogation

of, any other provisions of the Act and/

or the Code, including statutory or

administrative exemptions and

transactional rules. Furthermore, the

fact that a transaction is subject to an

administrative or statutory exemption is

not dispositive of whether the

transaction is in fact a prohibited

transaction; and

(3) The availability of these

exemptions is subject to the express

condition that the material facts and

representations contained in each

application accurately describes all

material terms of the transaction which

is the subject of the exemption.

Signed at Washington, D.C., this 4th day of

October, 2000.

Ivan Strasfeld,

Director of Exemption Determinations,

Pension and Welfare Benefits Administration,

U.S. Department of Labor.

[FR Doc. 00–26029 Filed 10–10–00; 8:45 am]

BILLING CODE 4510–29–P

DEPARTMENT OF LABOR

Pension and Welfare Benefits

Administration

[Application No. D–10538, et al.]

Proposed Exemptions; Sei

Investments Company (SEI

Investments), SEI Investments

Management Corporation (SIMC) and

SEI Trust Company (STC)

AGENCY: Pension and Welfare Benefits

Administration, Labor.

ACTION: Notice of Proposed Exemptions.

SUMMARY: This document contains

notices of pendency before the

Department of Labor (the Department) of

proposed exemptions from certain of the

prohibited transaction restrictions of the

Employee Retirement Income Security

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

Revenue Code of 1986 (the Code).

Written Comments and Hearing

Requests

All interested persons are invited to

submit written comments or request for

a hearing on the pending exemptions,

unless otherwise stated in the Notice of

Proposed Exemption, within 45 days

from the date of publication of this

Federal Register Notice. Comments and

requests for a hearing should state: (1)

The name, address, and telephone

number of the person making the

comment or request, and (2) the nature

of the person’s interest in the exemption

and the manner in which the person

would be adversely affected by the

exemption. A request for a hearing must

also state the issues to be addressed and

include a general description of the

evidence to be presented at the hearing.

ADDRESSES: All written comments and

request for a hearing (at least three

copies) should be sent to the Pension

and Welfare Benefits Administration,

Office of Exemption Determinations,

Room N–5649, U.S. Department of

Labor, 200 Constitution Avenue, N.W.,

Washington, D.C. 20210. Attention:

Application No. lll, stated in each

Notice of Proposed Exemption. The

applications for exemption and the

comments received will be available for

public inspection in the Public

Documents Room of the Pension and

Welfare Benefits Administration, U.S.

Department of Labor, Room N–5638,

200 Constitution Avenue, N.W.,

Washington, D.C. 20210.

Notice to Interested Persons

Notice of the proposed exemptions

will be provided to all interested

persons in the manner agreed upon by

the applicant and the Department

within 15 days of the date of publication

in the Federal Register. Such notice

shall include a copy of the notice of

proposed exemption as published in the

Federal Register and shall inform

interested persons of their right to

comment and to request a hearing

(where appropriate).

SUPPLEMENTARY INFORMATION: The

proposed exemptions were requested in

applications filed pursuant to section

408(a) of the Act and/or section

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

accordance with procedures set forth in

29 CFR part 2570, subpart B (55 FR

32836, 32847, August 10, 1990).

Effective December 31, 1978, section

102 of Reorganization Plan No. 4 of

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

the authority of the Secretary of the

Treasury to issue exemptions of the type

requested to the Secretary of Labor.

Therefore, these notices of proposed

Federal Register / Vol. 65, No. 197 / Wednesday, October 11, 2000 / Notices 60457

1For purposes of this proposed exemption,

references to provisions of Title I of the Act, unless

otherwise specified, refer also to corresponding

provisions of the Code.

exemption are issued solely by the

Department.

The applications contain

representations with regard to the

proposed exemptions which are

summarized below. Interested persons

are referred to the applications on file

with the Department for a complete

statement of the facts and

representations.

SEI Investments Company (SEI

Investments), SEI Investments

Management Corporation (SIMC) and

SEI Trust Company (STC), Located in

Oaks, PA

[Application No. D–10538]

Proposed Exemption

Based on the facts and representations

set forth in the application, the

Department is considering granting an

exemption under the authority of

section 408(a) of the Act (or ERISA) and

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

accordance with the procedures set

forth in 29 CFR part 2570, subpart B (55

FR 32836, 32847, August 10, 1990). 1

Section I. Proposed Exemption for the

Purchase of Fund Shares With Assets

Transferred in Kind From a Plan

Account

If the exemption is granted, the

restrictions of section 406(a) and section

406(b) of the Act and the sanctions

resulting from the application of section

4975 of the Code, by reason of section

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

shall not apply, effective June 19, 1996,

to the purchase of shares of one or more

open-end management investment

companies (the Fund or Funds)

registered under the Investment

Company Act of 1940 (the ICA), to

which SEI Investments, SIMC, STC, or

any of their affiliates (collectively, SEI)

serve as investment adviser and may

provide other services, by an employee

benefit plan (the Plan or Plans) whose

assets are held by SEI as trustee,

investment manager, or as a

discretionary fiduciary, in exchange for

securities held by the Plan in an account

(the Account) with SEI (the Purchase

Transaction), provided the following

conditions are met:

(a) A fiduciary (the Second Fiduciary)

who is acting on behalf of each affected

Plan and who is independent of and

unrelated to SEI, as defined in

paragraph (g) of Section III below,

receives advance written notice of the

Purchase Transaction and full and

written information concerning the

Funds which includes the following:

(1) A current prospectus for each

Fund to which the Plan’s assets may be

transferred;

(2) A statement describing the fees to

be charged to, or paid by, the Plan and

the Funds to SEI, including the nature

and extent of any differential between

the rates of the fees paid by the Fund

and the rates of the fees otherwise

payable by the Plan to SEI;

(3) A statement of the reasons why

SEI may consider the Purchase

Transaction to be appropriate for the

Plan;

(4) A statement of whether there are

any limitations on SEI with respect to

which Plan assets may be invested in

the Funds;

(5) The identity of all securities that

are deemed suitable by the Funds’ subadvisers for transfer to the Funds;

(6) The identity of all such securities

that will be valued in accordance with

the procedures set forth in Rule 17a–

7(b)(4) under the ICA; and

(7) Upon such fiduciary’s request,

copies of the proposed and final

exemptions pertaining to the exemptive

relief provided herein for Purchase

Transactions occurring after the date of

the final exemption.

(b) On the basis of the foregoing

information, the Second Fiduciary gives

SEI prior written approval with respect

to—

(1) Each Purchase Transaction,

consistent with the responsibilities,

obligations, and duties imposed on

fiduciaries by Part 4 of Title I of the Act;

(2) The transaction date proposed by

SEI; and

(3) The receipt of confirmation

statements, described below in

paragraph (g)(1) and (g)(2), by facsimile

or electronic mail.

(c) No sales commissions or other fees

are paid by the Plans in connection with

a Purchase Transaction.

(d) All transferred assets are securities

for which market quotations are readily

available, or cash.

(e) The transferred assets consist of

assets transferred to the Plan’s Account

at the direction of the Second Fiduciary

and constitute all of the assets held in

the Account immediately prior to the

transfer (other than Fund shares already

held in the Account). With respect to

any Plan assets transferred in-kind to an

Account wich are not suitable for

acquisition by the Funds, such assets

are liquidated as soon as reasonably

practicable and the cash proceeds are

invested directly in Fund shares.

(f) With respect to assets transferred

in-kind, each Plan receives shares of a

Fund which have a total net asset value

that is equal to the value of the assets

of the Plan exchanged for such shares,

based on the current market value of

such assets at the close of the business

day on which such Purchase

Transaction occurs, using independent

sources in accordance with the

procedures set forth in Rule 17a–7b

(Rule 17a–7) under the ICA and the

procedures established by the Funds

pursuant to Rule 17a–7 for the valuation

of such assets. Such procedures must

require that all securities for which a

current market price cannot be obtained

by reference to the last sale price for

transactions reported on a recognized

securities exchange or NASDAQ be

valued based on an average of the

highest current independent bid and

lowest current independent offer, as of

the close of business on the last

business day prior to the Purchase

Transaction determined on the basis of

reasonable inquiry from at least three

sources that are broker-dealers or

pricing services independent of SEI.

(g) SEI sends by regular mail or

personal delivery or, if applicable, by

facsimile or electronic mail to the

Second Fiduciary of each Plan that

engages in a Purchase Transaction, the

following information:

(1) Not later than 30 business days

after completion of each Purchase

Transaction, a written confirmation

which contains—

(A) The identity of each of the assets

that was valued for purposes of the

transaction in accordance with Rule

17a–7(b)(4) under the ICA;

(B) The current market price, as of the

date of the Purchase Transaction, of

each of the assets involved in the

Purchase Transaction; and

(C) The identity of each pricing

service or market maker consulted in

determining the value of such assets.

(2) Not later than 90 days after

completion of each Purchase

Transaction, a written confirmation

which contains—

(A) The aggregate dollar value of the

assets held in the Account immediately

before the Purchase Transaction; and

(B) The number of shares of the Funds

that are held by the Account following

the Purchase Transaction (and the

related per share net asset value and the

aggregate dollar value of the shares

received).

(h) With respect to each of the Funds

in which a Plan continues to hold

shares acquired in connection with a

Purchase Transaction, SEI provides the

Second Fiduciary with—

(1) A copy of an updated prospectus

of such Fund, at least annually; and

(2) Upon request of the Second

Fiduciary, a report or statement (which

60458 Federal Register / Vol. 65, No. 197 / Wednesday, October 11, 2000 / Notices

2 In relevant part, PTE 77–4 permits the purchase

and sale by an employee benefit plan of shares of

a registered open-end investment company when a

fiduciary with respect to such plan is also the

investment adviser for the mutual fund. Section

II(a) of PTE 77–4 requires that a plan does not pay

a sales commission in connection with such

purchase or sale. Section II(d) describes the

disclosures that are to be received by an

independent plan fiduciary. For example, the plan

fiduciary must receive a current prospectus for the

mutual fund as well as full and detailed written

disclosure of the investment advisory and other fees

that are charged to or paid by the plan and the

investment company. Section II(e) requires that the

independent plan fiduciary approve, in writing,

purchases and sales of mutual fund shares on the

basis of the disclosures give.

may take the form of the most recent

financial report, the current statement of

additional information, or some other

statement) containing a description of

all fees paid by the Fund to SEI.

(i) As to each Plan, the combined total

of all fees received by SEI for the

provision of services to the Plan, and in

connection with a Purchase

Transaction, is not in excess of

‘‘reasonable compensation’’ within the

meaning of section 408(b)(2) of the Act.

(j) All dealings in connection with the

Purchase Transaction between the Plan

and the Fund are on a basis no less

favorable to the Plan than dealings

between the Fund and other

shareholders.

(k) Between June 19, 1996 and the

date this final exemption is granted, no

Plan may enter into more than one

Purchase Transaction with the Funds.

However, subsequent to the granting of

this exemption, a Second Fiduciary may

engage in more than one Purchase

Transaction provided that such Second

Fiduciary allocates additional securities

representing a different asset class to a

Plan Account.

(l) SEI maintains for a period of six

years, in a manner that is accessible for

audit and examination, the records

necessary to enable the persons, as

described in paragraph (m) of this

Section I, to determine wither the

conditions of this proposed exemption

have been met, except that—

(1) A prohibited transaction will not

be considered to have occurred if, due

to circumstances beyond the control of

SEI, the records are lost or destroyed

prior to the end of the six year period;

and

(2) No party in interest, other than

SEI, shall be subject to the civil penalty

that may be assessed under section

502(i) of the Act, or to the taxes imposed

by section 4975(a) and (b) of the Code,

if the records are not maintained, or are

not available for examination as

required by paragraph (m) of this

Section I.

(m)(1) Except as provided in

paragraph (m)(2) of this Section II and

notwithstanding any provisions of

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

of the Act, the records referred to in

paragraph (l) of Section I above are

unconditionally available at their

customary location for examination

during normal business hours by—

(A) Any duly authorized employee or

representative of the Department, the

Internal Revenue Service or the

Securities and Exchange Commission

(the SEC);

(B) Any fiduciary of each of the Plans

who has authority to acquire or dispose

of shares of any of the Funds owned by

such a Plan, or any duly authorized

employee or representative of such

fiduciary; and

(C) Any participant or beneficiary of

the Plans or duly authorized employee

or representative of such participant or

beneficiary.

(2) None of the persons described in

paragraph (m)(1)(B) or (C) of this

Section I shall be authorized to examine

the trade secrets of SEI or commercial or

financial information which is

privileged or confidential.

Section II. Availability of Prohibited

Transaction Exemption (PTE) 77–4

Any purchase of Fund shares that

complies with the conditions of Section

I of this proposed exemption shall be

treated as a ‘‘purchase or sale’’ of shares

of an open-end investment company for

purposes of PTE 77–4 and shall be

deemed to have satisfied paragraphs (a),

(d) and (e) of Section II of PTE 77–4 (42

FR 18732, April 3, 1977).2

Section III. Definitions

For purposes of this proposed

exemption,

(a) The term ‘‘SEI’’ means SEI

Investments Company, SEI Investments

Management Corporation, SEI Trust

Company and any affiliate of SEI, as

defined in paragraph (b) of this Section

III.

(b) An ‘‘affiliate’’ of a person includes:

(1) Any person directly or indirectly

through one or more intermediaries,

controlling, controlled by, or under

common control with the person;

(2) Any officer, director, employee,

relative, or partner in any such person;

and

(3) Any corporation or partnership of

which such person is an officer,

director, partner, or employee.

(c) The term ‘‘control’’ means the

power to exercise a controlling

influence over the management or

policies of a person other than an

individual.

(d) The term ‘‘Fund’’ or ‘‘Funds’’

means any open-end investment

company or companies registered under

the ICA for which SEI serves as

investment adviser, and may also

provide custodial or other services as

approved by such Funds.

(e) The term ‘‘net asset value’’ means

the amount for purposes of pricing all

purchases and sales calculated by

dividing the value of all securities,

determined by a method as set forth in

a Fund’s prospectus and statement of

additional information, and other assets

belonging to each of the portfolios in

such Fund, less the liabilities charged to

each portfolio, by the number of

outstanding shares.

(f) The term ‘‘relative’’ means a

‘‘relative’’ as that term is defined in

section 3(15) of the Act (or a ‘‘member

of the family’’ as that term is defined in

section 4975(e)(6) of the Code), or a

brother, a sister, or a spouse of a brother

or a sister.

(g) The term ‘‘Second Fiduciary’’

means a fiduciary of a plan who is

independent of and unrelated to SEI.

For purposes of this exemption, the

Second Fiduciary will not be deemed to

be independent of and unrelated to SEI

if—

(1) Such Second Fiduciary directly or

indirectly controls, is controlled by, or

is under common control with SEI;

(2) Such Second Fiduciary, or any

officer, director, partner, employee, or

relative of such Second Fiduciary is an

officer, director, partner, or employee of

SEI (or is a relative of such persons); or

(3) Such Second Fiduciary directly or

indirectly receives any compensation or

other consideration from SEI for his or

her own personal account in connection

with any transaction described in this

proposed exemption.

If an officer, director, partner, or

employee of SEI (or a relative of such

persons), is a director of such Second

Fiduciary, and if he or she abstains from

participation in (A) the choice of the

Plan’s investment manager/adviser; (B)

the approval of any purchase, continued

holding or redemption by the Plan of

shares of the Funds; and (C) the

approval of any change of fees charged

to or paid by the Plan, in connection

with the transactions described above in

Section I, then paragraph (g)(2) of this

Section III, shall not apply.

Effective Date: If granted, this

proposed exemption will be effective as

of June 19, 1996, with the exception of

Section I(a)(7), which will applicable for

Purchase Transactions occurring after

the date of the final exemption.

Summary of Facts and Representations

Description of the Parties

1. SEI Investments, which is located

in Oaks, Pennsylvania, is a financial

Federal Register / Vol. 65, No. 197 / Wednesday, October 11, 2000 / Notices 60459

3Because SEI would like the exemption to apply

prospectively to any Fund in which a Plan invests

and with respect to which SEI or any of its affiliates

may provide services, SEI represents that all other

future Funds that utilize the requested exemption

will assume similar structures and the Plan

investments therein will be subject to the terms and

conditions of this exemption.

4 It should be noted that although the Emerging

Markets Equity Fund, the High Yield Bond Fund

and the International Fixed Income Fund constitute

part of the Investments Trust, these Funds are no

longer open.

5 It should be noted that the Bond Fund is

presently closed.

services company that was founded in

1968. SEI Investments and its affiliates

provide a broad range of financial

services to banks, institutional

investors, investment advisers, and

insurance companies, including funds

evaluation services, trust accounting

systems and brokerage and information

services and has offices located

throughout the United States and

Canada. As of December 31, 1999, SEI

Investments had total assets of

$253,779,000.

2. SIMC, a wholly owned subsidiary

of SEI Investments and also located in

Oaks, Pennsylvania, currently provides

the Funds described herein with overall

investment management services

(including selection and supervision of

investment advisers), and regulatory

reporting services. In addition, SIMC

serves as transfer agent with respect to

certain classes of Fund shares and as

investment adviser to certain Fund

portfolios. Further, SIMC serves as

manager or administrator to more than

40 investment companies and portfolios

as well as to various Plans. As of

December 31, 1999, SIMC had total

assets under management of

approximately $64.3 billion.

3. STC, a state-chartered trust

company incorporated under the laws of

the Commonwealth of Pennsylvania, is

located in Oaks, Pennsylvania. Formerly

known as Eagle Trust Company, STC is

a wholly owned subsidiary of SEI

Investments and serves as trustee/

investment manager of the Plans. As of

December 31, 1999, STC had custody of

approximately $35.5 billion in assets.

4. The Plans, as to which SIMC may

serve as an investment manager or STC

may serve as a trustee, consist of

retirement plans qualified under section

401(a) of the Code which constitute

‘‘pension plans’’ as defined in section

3(2) of the Act, certain welfare plans as

defined under section 3(1) of the Act

and ‘‘plans’’ as defined in section

4975(e)(1) of the Code. The Plans do not

include any plans sponsored by SEI.

5. The Funds to which the requested

exemption will apply currently consist

of the separate portfolios of the SEI

Institutional Investments Trust (the

Investments Trust), the SEI Institutional

Managed Trust (the Managed Trust) and

the SEI Institutional International Trust

(the SIT), all of which are investment

companies registered under the ICA.3

The Funds are further described as

follows:

(a) The Investments Trust is a

Massachusetts business trust established

on March 1, 1995. It is a no-load, openend management investment company

which is available only to Plans and

other institutional investors that retain

SIMC as investment manager. Currently,

nine portfolios comprise the

Investments Trust. They are the Large

Cap Fund, the Large Cap Value Fund,

the Large Cap Growth Fund, the Small

Cap Fund, the International Equity

Fund, the Core Fixed Income Fund, the

Emerging Markets Equity Fund, the

High Yield Bond Fund and the

International Fixed Income Fund.4 Each

of the portfolios of the Investments

Trust issues only one class of beneficial

interests (i.e., shares). No sales loads or

fees payable under Rule 12b–1 of the

ICA (the Rule 12b–1 Fees) are paid with

respect to Investments Trust shares.

(b) The Managed Trust is a

Massachusetts business trust that was

established on October 20, 1986. It is a

no-load, open-end management

investment company currently having

the following twelve portfolios: the

Large Cap Value Fund, the Large Cap

Growth Fund, the Tax-Managed Large

Cap Fund, the Small Cap Value Fund,

the Small Cap Growth Fund, the Capital

Appreciation Fund, the Balanced Fund,

the Mid-Cap Fund, the Equity Income

Fund, the Core Fixed Income Fund, the

Bond Fund and the High Yield Bond

Fund.5 Each of the Fund portfolios of

the Managed Trust issues two classes of

shares, only one of which, Institutional

Class A shares, is offered to institutional

investors, including Plans. No sales

loads or Rule 12b–1 Fees are paid with

respect to such shares.

(c) SIT, a Massachusetts business trust

established on June 30, 1988, currently

offers the following four portfolios: the

International Equity Fund, the Emerging

Markets Equity Fund, the Emerging

Markets Debt Fund and the

International Fixed Income Fund. Each

of the portfolios of the International

Trust issues two classes of shares, only

one of which, Institutional Class A

shares, is offered to institutional

investors including Plans. No sales

loads or Rule 12b-1 fees are paid with

respect to such shares.

6. SIMC (including its subsidiaries)

acts as the administrator of all of the

Funds and serves as investment adviser

to all of the Funds with the exception

of the International Trust’s International

Fixed Income Fund, which is advised

by Strategic Fixed Income LLC, an

unaffiliated investment adviser.

However, for this Fund, SIMC retains

overall investment advisory supervision

including the formulation of investment

policy. In addition, SIMC generally

follows a ‘‘manager of managers’’

approach to the Funds whereby all of

the assets of the Funds are advised by

sub-advisers which are independent of

SIMC.

As administrator and investment

adviser, SIMC retains independent subadvisers, makes overall investment

decisions with respect to the assets of

each Fund, and continuously reviews,

supervises and administers each Fund’s

investment program. SIMC receives an

investment advisory fee from each Fund

for such services and is responsible for

paying the sub-advisers. The Funds may

also pay certain transfer agent and

administrative fees to SIMC or to other

SEI affiliates.

The Funds are offered and sold

exclusively through the use of

prospectuses and materials (which have

been, or will be, filed, as required, with

the various federal and state securities

regulatory authorities prior to their

distribution) and are offered and sold in

full compliance with regulations of the

SEC. Shareholders of the Funds

periodically receive the following

disclosures concerning the Funds as

mandated by the SEC: (a) a copy of the

prospectus, which is updated annually;

(b) an annual report containing audited

financial statements of the Funds and

information regarding such Funds’

performance (unless such performance

information is included in the

prospectus of such Funds); and (c) a

semi-annual report containing

unaudited financial statements. With

respect to the Plans, SIMC or the

custodian reports all transactions in

shares of the Funds in periodic account

statements provided to each of the

Plans.

The Asset Allocation Strategy (the

Strategy)

7. According to SEI, the Strategy can

be viewed as a series of separate, but

interrelated, asset allocation

transactions provided by SIMC and its

affiliates to a Plan. In effect, the Strategy

constitutes a set of investment

guidelines established in advance by the

Second Fiduciary, under which SIMC

may be retained to exercise investment

discretion with respect to all of the

Plan’s assets covered by such Strategy.

As Representations 7 and 8 illustrate,

the specific steps involved in creating

60460 Federal Register / Vol. 65, No. 197 / Wednesday, October 11, 2000 / Notices

6The Strategy services that are subject to this

exemption relate only to defined benefit plans,

welfare plans and fiduciary-managed defined

contribution plans but they do not cover

participant-directed accounts.

7To the extent that SIMC is asked to manage only

a portion of a Plan, it may develop one or more

specific strategies, e.g., an Equity Strategy or a

Fixed Income Strategy.

8Although the requested exemption currently

covers unaffiliated sub-advisers, SEI represents that

it may wish to retain affiliated sub-advisers for the

Funds in the future so that the benefits of the

Purchase Transactions will not be diluted. SEI

points out that the only theoretical way that an

affiliated sub-adviser could act to the detriment of

a Plan would be to agree to accept a security for

in-kind transfer on terms that favored the Fund over

the Plan. However, SEI believes that several factors

protect the Plan from this action. First, when an

affiliated sub-adviser checks off the securities it is

willing to take in-kind, it is bidding for the same

securities against unaffiliated sub-advisers. Second,

when the sub-adviser determines which securities

it is willing to take, it does not set a price at that

time but agrees to take them at their fair market

value. Third, the price on such transfer date (SEI

will propose the transaction date but the Second

Fiduciary will make the actual determination.) will

be objectively determined in accordance with Rule

17a–7 (see Representation 13).

9A Sub-adviser will not be presented with the

option of purchasing securities held in a Plan’s

portfolio for which there is no corresponding Fund.

Instead, only those sub-advisers of Funds that may

be used to implement the Strategy will be presented

with a list of the Plan’s securities for possible

Purchase Transactions. Each sub-adviser will then

be limited to acquiring only those securities which

do not exceed in value the amount of Fund shares

the Plan will be purchasing.

10SEI represents that brokerage transactions with

respect to an Account may be executed by an

affiliate of SIMC in accordance with the terms of

PTE 86–128 (51 FR 41686, November 18, 1986).

However, the Department expresses no opinion

herein on whether such transactions will satisfy the

terms and conditions of PTE 86–128.

and implementing the Strategy generally

can be described as follows:

(a) The development of a Plan-level asset

allocation policy, i.e., the selection of broad

asset classes and percentages of Plan assets

to be allocated among those asset classes

(e.g., one such class may be ‘‘domestic

equities’’).

(b) The development of a more refined

asset allocation policy within each asset class

(e.g., ‘‘domestic equities’’ may be further

divided into ‘‘large-cap,’’ ‘‘small-cap,’’

‘‘growth,’’ etc.).

(c) The Second Fiduciary’s determination

of what asset classes SIMC will manage.

(d) With respect to each asset class that

will be invested in shares of the Funds, the

selection and liquidation of securities, and

the purchase of Fund shares (in-kind or in

cash).

(e) The retention of SIMC as the

discretionary asset manager with respect to

the Plan or specified asset classes.

Theoretically, a Plan may retain SIMC to

perform one or more component

Strategy functions separately, even

though they are all offered as part of the

same package (in other words, tasks (a)

through (e) may be purchased

separately), and the Strategy steps may

occur in different orders or

concurrently.

Thus, as a preliminary step, SIMC, as

investment adviser, must first develop

the overall asset allocation. Using its

own proprietary software, SIMC will

work with a Second Fiduciary of the

Plan 6 to develop an asset allocation

strategy that is based upon various

objective and measurable criteria such

as the Plan’s employee population

information, investment goals and risk

tolerance. For this purpose, SIMC will

assume that the Plan will implement the

Strategy by investing assets in the

Funds, irrespective of whether the

Strategy is being implemented through

in-kind or cash transfers.

A Strategy will represent a different

asset allocation model. If SIMC manages

all of the Plan’s assets, there will be

only one Strategy per Plan. 7 Once the

Strategy is proposed, it must be

reviewed, approved and adopted by the

Second Fiduciary. Although certain

information is obtained in writing,

generally this will be done in narrative

format through a series of meetings and

interviews. If two Plans provide the

same inputs, SIMC’s software will

present both investors with the same

generic Strategy.

Once a Strategy is selected by the

Second Fiduciary, it may be modified

only by such Second Fiduciary. No

separate fee is being charged for an asset

allocation. The fee for such services is

included in SEI’s Plan-level investment

management fee.

After reviewing the Strategy, the

Plan’s Second Fiduciary must decide

whether it will ask SIMC to manage part

or all of the Plan’s assets in accordance

with the Strategy. For example, the

Strategy may have a fixed income

allocation and an equity allocation.

Thus, it is possible that the Second

Fiduciary may retain SIMC to manage

Plan assets that are allocated to only one

asset allocation.

The Purchase Transaction

8. In conjunction with the hiring of

SIMC and the development and

adoption of the Strategy, the Second

Fiduciary will allocate certain assets of

the Plan to an Account that is

maintained by SIMC. In many cases,

this transfer of fiduciary authority

involves the Second Fiduciary’s

termination of one or more pre-existing

agreements with investment managers

who are not affiliated with SIMC. In

other situations, it may involve a

Second Fiduciary’s decision to retain

SIMC to manage only a portion (or

portions) of the Plan’s investment

portfolio and the continued use of

unaffiliated investment managers.

Accordingly, the assets to be transferred

to the Account may include an existing

portfolio of securities representing a

distinct asset class. However, because it

invests Plan assets in the Funds rather

than in individual securities and

because of fiduciary liability concerns

raised by taking responsibility for an

existing portfolio of securities acquired

at the direction of a different investment

manager, SIMC prefers that such assets

be liquidated before they are transferred

to the Account.

In many cases, an existing securities

portfolio may include securities that are

suitable for investment by the Funds.

Therefore, SEI recognizes that it may be

appropriate to transfer such securities

in-kind directly to the relevant Fund(s)

in order to avoid transaction costs and

potential market disruption that could

occur from a sale of those securities by

the Plan and the nearly simultaneous

repurchase of those same securities by

the Fund. Rather than require that the

existing portfolio be liquidated before it

is allocated to the Account, SIMC will

accept an in-kind allocation of such

securities to an Account, at the request

of the Second Fiduciary. Whatever

portfolio securities may be acceptable

for an in-kind transfer will be

determined by the sub-advisers to the

Funds.

Specifically, upon obtaining a new

client Plan that proposes to engage in a

Purchase Transaction, SIMC will

present to all Fund sub-advisers 8 a list

of the Plan’s portfolio securities.9 Each

sub-adviser will be asked to indicate

which of those securities (and in what

quantities) it would be interested in

acquiring in connection with the Fund

portfolio for which it is responsible.

SIMC will then compile the results and

forward them to the Second Fiduciary

for approval or rejection.

In addition, SIMC will accept the

entire securities portfolio, including

those securities that are not suitable for

investment by the Funds. Subsequently,

any securities that are acceptable to the

Funds will be transferred in-kind in

exchange for Fund shares. Any

securities that are not acceptable will be

liquidated at the direction of SIMC.10

Once SIMC has directed the liquidation

of any securities of the Account that are

not suitable for transfer to the Funds,

SIMC will use the cash proceeds to buy

Fund shares directly on behalf of the

Plan.

9. SEI maintains that the in-kind

transfers of Account assets in exchange

for shares of the Funds will be

ministerial transactions performed in

Federal Register / Vol. 65, No. 197 / Wednesday, October 11, 2000 / Notices 60461

11For example, a Second Fiduciary may hire

SIMC to manage a domestic equity Account only so

the initial Strategy would provide for allocation

among domestic equity Funds. If the Second

Fiduciary subsequently decides to expand the scope

of SIMC’s management authority to include

international equities, it will transfer to the Account

an existing portfolio of international equity

securities in another Purchase Transaction. At a

later date, the Second Fiduciary may decide to

retain SIMC to manage the Plan’s fixed income

securities. So, the Second Fiduciary would engage

in still another Purchase Transaction.

Under the foregoing circumstances, subsesquent

transfers of similar types of securities are not

contemplated. Instead, SEI represents that a Second

Fiduciary will be able to make a one-time, in-kind

transfer of a distinct portion of the Plan’s asset

portfolio.

12 It is represented that SIMC does not become a

fiduciary until after the Second Fiduciary has

specified which portion of the Plan’s assets

(including which specific assets) will be allocated

to the Account. It is also represented that SEI may

become a fiduciary with respect to a particular pool

of assets (e.g., helping the Plan develop its Strategy)

before those assets are ‘‘converted’’ into Fund

shares.

13See, for example, PTE 94–82 involving

Marshall & Ilsley Trust Company (59 FR 62422,

December 5, 1994); PTE 94–86 involving The Bank

of California, N.A. (59 FR 65403, December 19,

1994); PTE 95–33 involving Bank South, N.A. (60

FR 20773, April 27, 1995); PTE 95–48 involving

Mellon Bank, N.A. (60 FR 32995, June 26, 1995);

and PTE 95–49 involving Norwest Bank (60 FR

33000, June 26, 1995).

14SEI represents that SIMC accepted two or three

new Plan clients which elected to engage in

Purchase Transactions. In each case, the Plan (or its

outside manager) expressly retained responsibility

for (a) selecting the securities to be transferred and

directing their transfer; (b) directing the sale of all

other securities through SEI’s brokerage affiliates;

and (c) determining whether the securities were

valued in accordance with Rule 17a–7 for purposes

of the transfer. SEI further notes that its fiduciary

responsibilities only commenced after the

completion of the Purchase Transactions.

Accordingly, SEI does not believe that exemptive

relief is necessary with respect to these Purchase

Transactions. However, because the determination

of its fiduciary status is uncertain, SEI requests that

the exemption be made retroactive to June 19, 1996

to cover the Purchase Transactions that occurred at

that time.

accordance with pre-established

objective procedures which are

approved by the board of trustees of

each Fund. Such procedures require

that assets transferred to a Fund (a) be

consistent with the investment

objectives, policies and restrictions of

the corresponding portfolios of the

Fund, as determined by the Funds’ subadvisers; (b) satisfy the applicable

requirements of the ICA and the Code;

and (c) have a readily ascertainable

market value. In addition, any assets

that are transferred will be liquid and

will not be subject to restrictions on

resale. Assets which do not meet these

requirements will be sold in the open

market prior to any transfer in-kind.

Further, prior to entering into an in-kind

transfer, each affected Plan will receive

certain disclosures from SIMC and

approve such transaction in writing.

10. With certain exceptions, SEI

represents that the Purchase

Transactions are similar to the in-kind

exchange transactions described in PTE

93–72 (58 FR 51109, September 30,

1993) involving Western Asset

Management Co. (WAMC). The first

exception relates to the fact that SIMC

proposes that a Plan participate in more

than one Purchase Transaction over

time, i.e., as the Second Fiduciary

decides to allocate additional securities

representing a different asset class to the

Account, perhaps in connection with

changing the Strategy.11 In WAMC,

concern was expressed by the

Department about WAMC’s ability to

exercise its fiduciary authority to engage

in (or to influence) exchanges in a

manner that would allow WAMC to

‘‘time’’ transactions. In contrast to

WAMC, SEI notes that SIMC does not

(except for the limited purpose of

disposing of those assets that are not

suitable for in-kind transfer to the

Funds) manage assets both ‘‘inside’’ and

‘‘outside’’ the Funds and all fiduciary

discretion over which Plan assets will

be allocated to the Funds remains with

the Plan’s Second Fiduciary.12

According to SEI, the second exception

relates to the valuation of the securities

to be transferred. In this regard, SEI is

following the valuation procedures

under Rule 17a–7 of the ICA as set forth

in Representation 13.

Notwithstanding the above, SEI

represents that it will not permit a Plan

to engage in more than one Purchase

Transaction prior to the granting of this

exemption so as to conform the

Purchase Transaction more closely to

PTE 93–72, the WAMC exemption, and

the Rule 17a–7 valuation procedures

that are set forth in the Department’s

‘‘conversion’’ exemptions.13

Accordingly, SEI requests that the

exemption apply retroactively and be

made effective as of June 19, 1996 with

respect to Purchase Transactions

occurring at that time.14 The

Department concurs with this

retroactivity date. However, it has

imposed a requirement to the effect that

Section I(a)(7) of the proposal, relating

to SEI’s dissemination to Second

Fiduciaries of copies of the proposed

and final exemptions, will be applicable

to Purchase Transactions occurring after

the exemption is granted.

Rebalancing

11. The Investment Management

Agreement requires SIMC to rebalance

the Account periodically among the

Funds. In this regard, SIMC uses closeof-business values to determine the

daily net asset value of assets held in an

Account. Each Account has a pre-set

‘‘trigger’’ point for rebalancing purposes.

Although the exact trigger may vary

from Account to Account, SIMC

typically rebalances an Account if an

investment allocation varies by more

than 4 percent from the target

allocation. Generally, rebalancing

occurs automatically and on the last day

of any calendar month if any allocation

deviates from its target percentage by

more than an agreed upon percentage.

Advance Disclosure/Approval

12. Under the Investment

Management Agreement, a Second

Fiduciary will receive all of the

disclosures required by PTE 77–4. In

this regard, such information includes,

but is not limited to, (a) a current

prospectus for the Fund in which the

Plan’s assets may be transferred; (b) a

statement describing the fees to be

charged to, or paid by, the Plan and the

Fund to SEI, including the nature and

extent of any differential between the

rates of the fees paid by the Fund and

the rates of the fees otherwise payable

by the Plan to SEI; (c) a statement of the

reasons why SEI may consider the

Purchase Transaction to be appropriate

for the Plan; (d) a statement of whether

there are any limitations on SEI with

respect to which Plan assets may be

invested in the Funds; (e) the identity of

all securities that are deemed suitable

by the Funds’ sub-advisers for transfer

to the Funds; and (f) the identity of all

such securities that will be valued in

accordance with Rule 17a–7(b)(4). In

addition, for Purchase Transactions

occurring after the date of the grant

notice, SEI will provide copies of the

proposed and final exemptions to the

Second Fiduciary, upon request.

Based on these disclosures, the

Second Fiduciary by executing the

Investment Management Agreement will

approve, in writing, the transfer of the

Plan’s assets to the corresponding Fund

in exchange for shares of such Fund and

the receipt by SEI of fees for services to

the Fund. If the Second Fiduciary does

not approve the use of the Funds as Plan

investments, it will not retain SIMC as

the Plan’s investment manager.

Additionally, if the Second Fiduciary

does not approve the Purchase

Transaction, the securities held by the

Plan will be sold for cash on the open

market and the transaction will proceed

in accordance with PTE 77–4.

Valuation Procedures

13. The assets transferred by an

Account to the Funds in connection

with a Purchase Transaction will consist

entirely of cash and marketable

60462 Federal Register / Vol. 65, No. 197 / Wednesday, October 11, 2000 / Notices

15Securities of non-U.S. issuers may be traded on

U.S. exchanges or the NASDAQ, directly or in the

form of ADRs, or may be acquired on foreign

exchanges or foreign over-the-counter markets. In

the latter case, valuation will be in accordance with

Representation 13(d).

16 If STP is separately retained by a Plan as a nondiscretionary trustee or a custodian, STC will take

legal title to the Fund shares being acquired.

Otherwise, it will have no role with respect to the

Purchase Transactions and will act solely at the

directions of the Second Fiduciary and/or SIMC.

17Fees paid to third party sub-advisers that are

retained by SIMC are paid by SIMC out of its own

pocket and are not deducted prior to applying the

credit. Under such circumstances, SIMC credits

back a ‘‘gross’’ investment advisory fee to the Plan

as opposed to a ‘‘net’’ investment advisory fee.

18 In an arrangement involving a performance fee,

SEI may charge a Plan, at the Plan-level, an

annualized minimum (floor) fee calculated as a

fixed percentage of the Plan’s assets under SEI’s

management and ranging from 40 to 60 basis points.

Typically, the performance fee is calculated based

on the Plan’s return in excess of an annual hurdle

rate which represents a weighted average of several

generally recognized external mutual fund indices.

Both the weighting and the choice of indices are

negotiated between the Plan and SEI. The

performance fee may represent a percentage of the

excess return to the Plan, a fixed amount or

‘‘scaled’’ and have multiple hurdle rates. Thus, SEI

states that there is no standard or model

performance fee arrangement.

The Department expresses no opinion herein on

whether SEI’s performance fee arrangements

comply with the advisory opinions cited above.

securities. For this purpose, the value of

the securities in the Account will be

determined based on market value as of

the close of business on the last

business date prior to the transfer (the

Account Valuation Date). The values on

the Account Valuation Date will be

determined in a single valuation using

the valuation procedures described in

Rule 17a–7 under the ’40 Act. In this

regard, the ‘‘current market price’’ for

specific types of Account securities will

be determined as follows:

(a) If the security is a ‘‘reported security’’

as the term is defined in Rule 11Aa3–1 under

the 1934 Act, the last sale price with respect

to such security reported in the consolidated

transaction reporting system (the

Consolidated System) for the Account

Valuation Date; or if there are no reported

transactions in the Consolidated System that

day, the average of the highest current

independent bid and the lowest current

independent offer for such security (reported

pursuant to Rule 11Ac1–1 under the 1934

Act), as of the close of business on the

Account Valuation Date; or

(b) If the security is not a reported security,

and the principal market for such security is

an exchange, then the last sale on such

exchange on the Account Valuation Date; or

if there is no reported transaction on such

exchange that day, the average of the highest

current independent bid and lowest current

independent offer on such exchange as of the

close of business on the Account Valuation

Date; or

(c) If the security is not a reported security

and is quoted in the NASDAQ system, then

the average of the highest current

independent bid and lowest current

independent offer reported on Level 1 of

NASDAQ as of the close of business on the

Account Valuation Date; or

(d) For all other securities, the average of

the highest current independent bid and

lowest current independent offer as of the

close of business on the Account Valuation

Date, determined on the basis of reasonable

inquiry. For securities in this category, SIMC

intends to obtain quotations from at least

three sources that are either broker-dealers or

pricing services independent of and

unrelated to SEI and, where more than one

valid quotation is available, use the average

of the quotations to value the securities, in

conformance with interpretations by the SEC

and practice under Rule 17a–7.15

The securities received by a transferee

Fund portfolio will be valued by such

portfolio for purposes of the transfer in

the same manner and as of the same day

as such securities will be valued by the

corresponding transferor Account. The

per share value of the shares of each

Fund portfolio issued to the Accounts

will be based on the corresponding

portfolio’s then-current net asset value.

SEI will send by regular mail or

personal delivery, or if applicable, by

facsimile or electronic mail, the

following information to the Second

Fiduciary of a Plan that engages in a

Purchase Transaction:

(a) Not later than 30 business days after

completion of the transaction, a written

confirmation of the transaction to each

affected Plan. Such confirmation will contain

(1) the identity of each security that is valued

in accordance with Rule 17a–7(b)(4), as

described above; (2) the price of each such

security for purposes of the transaction; and

(3) the identity of each pricing service or

market maker consulted in determining the

value of such securities.

(b) Not later than 90 days after completion

of each Purchase Transaction, a written

confirmation which contains (1) the aggregate

dollar value of the assets held in the Account

immediately before the Purchase

Transaction; and (2) the number of shares of

the Funds that are held by the Account

following the Purchase Transaction (and the

related per net asset value and the aggregate

dollar value of the shares received).

Compliance With PTE 77–4

14. It is anticipated that most

Purchase Transactions will occur when

a Plan retains SIMC as a discretionary

fiduciary under the Investment

Management Agreement in connection

with an existing portfolio of assets or

possibly, STC may serve as a directed

trustee and be instructed by a Plan to

engage in a Purchase Transaction.16

Thus, once the Purchase Transactions

are completed, SIMC intends to

continue to manage an Account in

accordance with the terms of the

Investment Management Agreement and

under the exemptive relief afforded by

PTE 77–4 with respect to future

purchases and sales of Fund shares as

well as with respect to the receipt of

fees by SEI or its affiliates in connection

with such transactions. Therefore, SEI is

not requesting further administrative

exemptive relief from the Department

with respect to such transactions after

they are completed as described above.

Besides engaging in a Purchase

Transaction, SEI may invest a Plan’s

cash assets in the Funds as a directed or

discretionary fiduciary, pursuant to the

terms of PTE 77–4. Under certain

conditions, PTE 77–4 permits SEI to

receive fees from the Funds (a) where

the Plan does not pay any investment

management, investment advisory or

similar fees with respect to the assets of

such Plan invested in shares of the Fund

for the entire period of the investment;

or (b) where the Plan pays investment

management, investment advisory or

similar fees to SEI based on the total

assets of such Plans from which a credit

has been subtracted representing such

Plan’s pro rata share of such investment

advisory fees.

Each individual Plan (or Plan

sponsor) that retains SIMC as an

investment manager pays directly to

SIMC a Plan-level investment

management fee covering all services of

SIMC and its subsidiaries. With respect

to any Plan assets invested in the Funds,

SEI follows the second approach of PTE

77–4. Thus, each Plan’s pro rata share

of investment advisory fees paid to SEI

by the Funds is applied as a credit

against Plan-level fees.17 Investment

management fees charged with respect

to the Funds vary and are described in

the Fund prospectuses.

SEI’s Plan-level investment

management fees may also include a

performance fee which is calculated and

payable to it or its affiliates in

accordance with advisory opinions

issued by the Department to

Batterymarch Financial Management

(ERISA Advisory Opinion 86–20A,

August 29, 1986); BDN Advisers, Inc.

(ERISA Advisory Opinion 86–21A,

August 29, 1986); and Alliance Capital

Management Corporation (ERISA

Advisory Opinion 89–28A, September

25, 1989).18 The Fund-level fees which

do not include any performance fee

component, are applied as a credit

against such Plan-level fees.

In addition, STC may be separately

retained by the Plan (in which case it

may be paid an additional Plan-level

fee) as a non-discretionary trustee or

custodian where it is directed to invest

in the Funds by SIMC (if SIMC is the

Federal Register / Vol. 65, No. 197 / Wednesday, October 11, 2000 / Notices 60463

19The term ‘‘Secondary Service’’ means a service,

other than an investment management, investment

advisory or similar service which is provided by

SEI to the Funds, including, but not limited to

custodial, accounting, administrative, brokerage or

any other service.

20 In some cases, SEI executes brokerage

transactions for the investment portfolios of certain

of the Funds as a Secondary Service. To the extent

that SEI does not presently execute securities

brokerage transactions with respect to any Fund for

which an investment advisory fee is paid to SEI, but

proposes to do so in the future, for any Plan that

invests in the Fund (other than an SEI-sponsored

Plan investing in the Fund pursuant to PTE 77–3),

SEI will, at least 30 days in advance of the

implementation of such additional service, provide

a written notice to the Plan’s Second Fiduciary

which explains the nature of such additional

brokerage service and the amount of the fees.

Further, with respect to any Fund for which SEI

does or will provide such brokerage services, SEI

will provide, at least annually to each such Plan,

a written disclosure indicating (a) the total,

expressed in dollars, of brokerage commissions of

each Fund’s investment portfolio that are paid to

SEI by such Fund; (b) the total, expressed in dollars,

of brokerage commissions of each Fund’s

investment portfolio that are paid by such Fund to

brokerage firms unrelated to SEI; (c) the average

brokerage commissions per share, expressed as

cents per share, paid to SEI by each portfolio of a

Fund; and (d) the average brokerage commissions

per share, expressed as cents per share, paid by

each portfolio of a Fund to brokerage firms

unrelated to SEI.

investment manager), by a fiduciary

independent of SEI, or by Plan

participants and beneficiaries pursuant

to section 404(c) of the Act. As a nondiscretionary trustee or custodian, STC

receives no Plan-level fees for

investment management or investment

advisory services; its fees are strictly for

non-discretionary administrative,

custodial and similar services.

SEI may also receive other Fund-level

fees for administrative, transfer,

accounting, and other secondary

services (the Secondary Services) 19

provided to such Fund or to the

distributor of shares of such Funds and

its affiliates. However, no such fees will

be paid to SEI pursuant to a 12b–1 Plan.

SEI represents that the Funds’ Trustees

and the shareholders of the Funds

approve the compensation that SEI

receives from the Funds. Also, the

Funds’ Trustees approve any changes in

the compensation paid to SEI for

services rendered to the Funds.

Although currently under the

Investment Management Agreement all

such fees for Secondary Services are

credited back to the Plans in the same

manner as SEI credits back its Fundlevel advisory fees, it reserves the right

to retain such fees in the future in

accordance with the Department’s

advisory opinions involving PNC

Financial Corp (ERISA Advisory

Opinion 93–12A, April 27, 1993) and

the Frank Russell Company (ERISA

Advisory Opinion 93–13A, April 27,

1993).

SEI represents that, after all of the

foregoing credits are taken into account,

the combined total of all Plan-level and

Fund-level fees received by SEI for the

provision of services to the Plans and to

the Funds, respectively, are not in

excess of ‘‘reasonable compensation’’

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

of the Act.

Conditions for Exemption

15. If granted, this proposed

exemption will be subject to the

satisfaction of certain general conditions

that will further protect the interests of

the Plans. For example, the transactions

are subject to the prior authorization of

a Second Fiduciary, acting on behalf of

each of the Plans, who has been

provided with full written disclosure by

SEI. The Second Fiduciary will

generally be the administrator, sponsor,

or a committee appointed by the

sponsor to act as a named fiduciary for

a Plan.

With respect to disclosure, the Second

Fiduciary of such Plan will receive

advance written notice of the in-kind

transfer of assets of the Accounts and

full written disclosure of information

concerning the Funds as set forth in the

Investment Management Agreement,

including (a) a current prospectus for

each Fund to which the Plan’s assets

may be transferred; (b) a statement

describing the fees to be charged to, or

paid by, the Plan and the Funds to SEI,

including the nature and extent of any

differential between the rates of the fees

paid by the Fund and the rates of the

fees otherwise payable by the Plan to

SEI; (c) a statement of the reasons why

SEI may consider the Purchase

Transaction to be appropriate for the

Plan; (d) a statement of whether there

are any limitations on SEI with respect

to which Plan assets may be invested in

the Funds; (e) the identity of all

securities that are deemed suitable by

the Funds’ sub-advisers for transfer to

the Funds; (f) the identity of all such

securities that will be valued in

accordance with the procedures set

forth in Rule 17a–7(b)(4) under the ICA;

and (g) upon such fiduciary’s request,

copies of the proposed and final

exemptions pertaining to the exemptive

relief provided herein for Purchase

Transactions occurring after the date of

the grant notice.

On the basis of the information

disclosed, the Second Fiduciary, by

executing the Investment Management

Agreement, will authorize in writing the

investment of assets of the Plans in

shares of the Fund in connection with

the transactions set forth herein

(including the transaction date proposed

by SEI), the compensation received by

SEI in connection with its services to

the Funds, and the receipt of

confirmation statements by facsimile or

electronic mail. The Second Fiduciary’s

written authorization will extend to

those investment portfolios of the Funds

referenced in the Investment

Management Agreement, contingent

upon delivery of a prospectus to such

Second Fiduciary. Having obtained the

authorization of the Second Fiduciary,

SEI will invest the assets of a Plan

among the portfolios and in the manner

provided in the Investment Management

Agreement and the Strategy, subject to

satisfaction of the other terms and

conditions of this proposed exemption.

In addition to the disclosures

provided to the Plan prior to investment

in any of the Funds, SEI represents that

it will routinely provide at least

annually to the Second Fiduciary

updated prospectuses of the Funds in

accordance with the requirements of the

ICA and the SEC rules promulgated

thereunder. Further, the Second

Fiduciary will be supplied, upon

request, with a report or statement

(which may take the form of the most

recent financial report of such Funds,

the current statement of additional

information, or some other written

statement) which contains a description

of all fees paid by the Fund to SEI. 20

In addition to the foregoing, SEI

represents that (a) Plans and other

investors will purchase or redeem

shares in the Funds in accordance with

standard procedures adopted by each

Fund’s board of directors; (b) the Plans

will pay no sales commissions or

redemption fees in connection with

purchase or redemption of shares in the

Funds by the Plans; (c) SEI will not

purchase from or sell to any of the Plans

shares of any of the Funds; and (d) the

price paid or received by the Plans for

shares of the Funds will be the net asset

value per share at the time of such

purchase or redemption and will be the

same price as any other investor would

have paid or received at that time. The

value of the Funds’ shares and the value

of each Funds’ portfolios are determined

on a daily basis. Assets are valued at fair

market value, as required by Rule 17a–

7. Net asset value per share for purposes

of pricing purchases and redemptions is

determined by dividing the value of all

securities and other assets of each

portfolio, less the liabilities charged to

each portfolio, by the number of each

portfolio’s outstanding shares.

16. In summary, it is represented that

the transactions have satisfied or will

satisfy the statutory criteria for an

60464 Federal Register / Vol. 65, No. 197 / Wednesday, October 11, 2000 / Notices

21Pursuant to the provisions contained in 29 CFR

2510.3–2(d), the IRA is not subject to Title I of the

Employee Retirement Income Security Act of 1974

(the Act). However, the IRA is subject to Title II of

the Act, pursuant to section 4975 of the Code.

exemption under section 408(a) of the

Act because:

(a) A Second Fiduciary has authorized

or will authorize, in writing, a Purchase

Transaction prior to its consummation

after such Second Fiduciary has

received or will receive full written

disclosure of information concerning a

Fund.

(b) Each Plan has received or will

receive shares of a Fund, in connection

with a Purchase Transaction, that are

equal in value to the assets of the Plan

exchanged for such shares, as

determined in a single valuation

performed in the same manner and as of

the close of business on the same day in

accordance with the procedures set

forth in Rule 17a–7 under the ICA, as

amended from time to time or any

successor rule, regulation or similar

pronouncement.

(c) Not later than 30 business days

after completion of a Purchase

Transaction, a Second Fiduciary of a

Plan has received or will receive written

confirmation of the securities involved

in the exchange which were valued in

accordance with Rule 17a–7(b)(4), the

price of such securities and the identity

of the pricing service or market maker

consulted in determining the current

market price of such securities.

(d) Not later than 90 days after

completion of a Purchase Transaction, a

Second Fiduciary of a Plan has received

or will receive written confirmation of

the aggregate dollar value of the assets

held by the Plan in its Account

immediately before the Purchase

Transaction (and the related per share

net asset value and the aggregate dollar

value of the shares received).

(e) The price that has been or will be

paid or received by the Plans for shares

in the Funds is the net asset value per

share at the time of the transaction and

will be the same price for the shares

which would have been paid or

received by any other investor for shares

of the same class at that time.

(f) As to each individual Plan, the

combined total of all fees received by

SEI for the provision of services to a

Plan, and in connection with the

provision of services to any of the Funds

in which the Plan may invest, has not

been or will not be in excess of

‘‘reasonable compensation’’ within the

meaning of section 408(b)(2) of the Act.

(g) No sales commissions or Rule 12b–

1 Fees have been paid or will be paid

by a Plan in connection with a Purchase

Transaction.

(h) With respect to each Purchase

Transaction, the Second Fiduciary has

received or will receive a full and

detailed written disclosure of

information concerning such Fund,

including a current prospectus and a

statement describing the fee structure,

and such Second Fiduciary has

authorized or will authorize, in writing,

the investment of the Plan’s assets in the

Fund and the fees paid by the Fund to

SEI.

(i) In accordance with the

requirements of PTE 77–4 and advisory

opinions issued by the Department

thereunder, (1) the Plans have received

or will receive a full credit against Planlevel fees of any investment

management, investment advisory or

similar fees to SEI with respect to any

of the assets of such Plans that are or

will be invested in shares of any of the

Funds; and (2) SEI may retain fees for

certain Secondary Services it performs

on behalf of the Funds.

(j) SEI has provided or will provide

ongoing disclosures to Second

Fiduciaries of Plans so that such

fiduciaries may, among other things,

verify the fees charged by SEI to the

Funds.

(k) All dealings between the Plans and

any of the Funds have been or will be

on a basis that is no less favorable to

such Plans than dealings between the

Funds and other shareholders holding

shares of the same class as the Plans.

FOR FURTHER INFORMATION CONTACT: Ms.

Jan D. Broady of the Department,

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

a toll-free number.)

The David Mandelbaum IRA Rollover

Account (the IRA), Located in West

Orange, New Jersey

[Application No. D–10765]

Proposed Exemption

The Department is considering

granting an exemption under section

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

accordance with the procedures set

forth in 29 CFR part 2570, subpart B (55

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

the exemption is granted the sanctions

resulting from the application of section

4975 of the Code, by reason of section

4975(c)(1)(A) through (F) of the Code

shall not apply to the proposed cash

sale by the IRA to the David

Mandelbaum Family Trust (the Family

Trust) of a 50 percent (50%) undivided

interest in two (2) parcels of improved

real property subject to a long term lease

(the Property); provided the following

conditions are satisfied:

(1) The sale is a one time transaction

for cash; (2) the terms and conditions of

the sale are at least as favorable to the

IRA, as the terms of similar transactions

negotiated at arm’s length with

unrelated third parties; (3) the IRA

receives the greater of $4,307,000

dollars or the fair market value of the

IRA’s undivided interest in the

Property, as of the date of the sale; (4)

the fair market value of the IRA’s

undivided interest in the Property is

determined by an independent,

qualified appraiser, as of the date of the

sale; and (5) the IRA does not pay any

commissions, costs, finder’s fees, or

other expenses in connection with such

sale.

Summary of Facts and Representations

1. The IRA is a self-directed

individual retirement account, as

described under section 408(a) of the

Code.21 David Mandelbaum is the

owner of the IRA and retains discretion

with respect to the investment of the

assets in the IRA. As such, David

Mandelbaum is a fiduciary with regard

to the IRA and a disqualified person,

pursuant to section 4975(e)(2)(A) of the

Code. The primary beneficiaries under

the terms of the IRA are David

Mandelbaum’s four (4) sons, and as

such they are disqualified persons with

respect to the IRA, pursuant to section

4975(e)(2)(F) of the Code.

The IRA was established in 1989 with

the roll over distributions from the

Mandelbaum & Mandelbaum, P.A.

Employees Retirement Plan (the M&M

Plan). As of December 31, 1998, the IRA

held assets of approximately $19.6

million dollars with an estimated

annual income of $777,722. The

custodian of the IRA is Summit Bank

(formerly Summit Trust Company) of

Summit, New Jersey.

2. The M&M Plan was a tax qualified

money purchase plan which was

sponsored by Mandelbaum &

Mandelbaum P.A. Both David

Mandelbaum and his brother, Nathan

Mandelbaum, were participants in the

M&M Plan. The M&M Plan was

terminated, effective June 30, 1983. On

July 8, 1983, the M&M Plan acquired the

Property which is the subject of this

exemption, as a real estate investment

from Frank X. Weny and Mary E. Weny,

unrelated third parties. The M&M Plan

was subsequently liquidated in

December of 1989.

3. The Property, located in the

Municipality of Wayne, Passaic County,

New Jersey, consists of two parcels of

improved commercial real estate which

function as a single economic unit of

approximately 49.48 acres. Each of the

parcels is subject to a long term triple

net lease totaling 99 years, consisting of

an initial term that extends from

December 1, 1965, through November

Federal Register / Vol. 65, No. 197 / Wednesday, October 11, 2000 / Notices 60465

22The applicant maintains that if RMJJ is deemed

to be a disqualified person with respect to the IRA,

pursuant to section 4975(e)(2)(B) of the Code, the

provision of services RMJJ renders to the IRA and

to other parties would qualify for statutory

exemption, pursuant to section 4975(d)(2) of the

Code. In this regard, it is represented that RMJJ

receives no compensation for the services rendered

to the IRA and others in connection with the

collection and distribution of rents. The Department

is not opining, herein, whether RMJJ is a

disqualified person with respect to the IRA, nor has

the Department determined that the conditions, as

set forth in section 4975(d)(2) of the Code, have

been satisfied. Further, the Department is offering

no relief for transactions other than those proposed.

30, 2015; four (4) option periods of ten

(10) years each; and a final option

period of nine (9) years. Pursuant to

such leases, the right to use and occupy

the Property was conveyed to Westbelt

Realty Associates, an unrelated third

party.

The improvements on the Property

consist of a shopping center, which was

built in 1974 and subsequently

renovated and expanded in 1989 and

1997, professional landscaping, exterior

lighting, and a 38,000 space parking lot.

The shopping center is an enclosed

mall, commonly known as Wayne

Towne Center (a/k/a the Westbelt Mall)

which offers approximately 650,000

square feet of rental space to anchor

tenants, such as Fortunoff’s, J. C.

Penney, Borders Books and Music,

Loehmann’s, and Old Navy. It is

represented that no related party owns

any interest in the buildings or

improvements on the Property.

4. As a result of the liquidation of the

M&M Plan in 1989, David Mandelbaum

and Nathan Mandelbaum each received

a lump sum in-kind distribution of an

undivided interest in the ownership of

the Property. In this regard, together the

brothers owned 100 percent (100%) of

the interests in the Property, with David

and Nathan Mandelbaum receiving a

distribution of a 62.4% interest and a

37.6% interest, respectively, in such

Property.

5. On December 7, 1989, RMJJ

Associates (RMJJ) purchased a 20

percent (20%) interest in the Property

from David and Nathan Mandelbaum.

RMJJ is a New Jersey partnership, the

partners of which consist of four (4)

trusts, each of which own a 25 percent

(25%) interest in RMJJ. Each trust was

established to benefit one of David

Mandelbaum’s four sons. From a total

purchase price of $950,000 paid by RMJJ

for its interest in the Property, David

Mandelbaum received $589,000 and

Nathan Mandelbaum received $361,000.

Further, it is represented that, pursuant

to section 402(c)(6) of the Code, David

and Nathan Mandelbaum timely rolled

over into their respective individual

retirement accounts the proceeds from

the sale to RMJJ and their remaining

interests in the Property. Accordingly, it

is represented that, as of the filing of the

application for exemption, the IRA,

RMJJ, and the Nathan Mandelbaum IRA,

respectively, owned a 50 percent (50%),

a 20 percent (20%), and a 30 percent

(30%) undivided interest in the

Property, as tenants in common. It is

represented that the fair market value of

the IRA’s 50 percent (50%) undivided

interest in the Property constitutes

21.9% of the assets of such IRA.

It is represented that the sole purpose

of RMJJ is to facilitate collection and

proper disbursement of rents. In this

regard, RMJJ collects rents from various

properties owned by Mandelbaum

family members, including the Property

which is the subject of this exemption.

It is represented that the Property has

produced annual rental income

averaging $1,114,212 over the past four

(4) years. It is further represented that

such rental income has been

apportioned and distributed among the

owners of the Property in accordance

with each owner’s interest.22

6. Louis S. Izenberg (Mr. Izenberg),

MAI, SRPA, SRA, and Steven J.

Wetstein (Mr. Wetstein), both state

certified general real estate appraisers

associated with Izenberg Appraisal

Associates in Parsippany, New Jersey,

were hired to determine the value of the

leased fee interest in the Property. Mr.

Izenberg and Mr. Wetstein represent

that they are qualified real estate

appraisers with approximately twenty

(20) years and twelve (12) years of

experience, respectively, and are

familiar with the Property and with

similar properties located in the

surrounding area. In addition, Mr.

Izenberg and Mr. Wetstein represent

that they are independent in that they

have no present or prospective interest

in the Property and have no personal

interest or bias with respect to the

parties involved, and are unrelated to

David Mandelbaum.

Mr. Izenberg’s and Mr. Wetstein’s

appraisal of the leased fee interest in the

Property relied primarily on the income

capitalization approach to establish the

fair market value. Based on this analysis

and their inspection of the Property, Mr.

Izenberg and Mr. Wetstein concluded

that the fair market value of the leased

fee interest in the Property, as of May

27, 1998, was $16,565,000 dollars. It is

represented that Mr. Izenberg and Mr.

Wetstein will update their appraisal of

the value of the leased fee interest in the

Property at the time of the actual sale by

the IRA of its interest in the Property to

the Family Trust.

7. Because Mr. Izenberg’s and Mr.

Wetstein’s appraisal was based on the

fair market value of the leased fee

interest in the entire Property, Frank E.

Koehl, Jr. (Mr. Koehl) ASA, a certified

business valuation appraiser, and

Michael F. Nelson (Mr. Nelson), a

valuation analyst, both of Management

Planning, Inc. (MPI) were retained to

undertake a financial analysis of

undivided fractional interests in the

Property and to determine the fair

market value of the 50 percent (50%)

undivided interest in the Property

owned by the IRA. In this regard, it is

represented that MPI has been preparing

financial analyses of closely held

businesses and evaluating the securities

of such businesses since 1939. Mr.

Koehl and Mr. Nelson maintain they are

qualified in that they, respectively have

eighteen (18) years and three (3) years

of experience as employees of MPI. It is

represented that neither MPI nor its

employees have any present or

contemplated future financial interest in

the Property or any other interest that

might affect their performance in a

disinterested manner.

The analysis of the value of the IRA’s

50 percent (50%) undivided interest in

the Property included a discount of 20

percent (20%) for lack of control. In the

appraisal report Mr. Koehl and Mr.

Nelson noted that a majority ownership

position does not constitute control

where co-tenants of an undivided

interest in real property have equal

rights and cannot act upon those rights

without the consent of the other cotenants. For this reason, Mr. Koehl and

Mr. Nelson determined that a discount

for lack of control was appropriate to

the IRA’s undivided ownership interest

in the Property, even though Mr. Koehl

and Mr. Nelson acknowledged that all of

the co-tenants of the Property are

members of the Mandebaum family.

The analysis of the value of the IRA’s

50 percent (50%) undivided interest in

the Property also included a discount of

35 percent (35%) for lack of

marketability. In this regard, Mr. Koehl

and Mr. Nelson stated in their report

that a willing buyer would be aware that

the Property has three owners; there is

no ready market for fractional interests;

and that such buyer would be buying an

asset that could be sold only in a private

transaction.

Based on their analysis, Mr. Koehl

and Mr. Nelson concluded that the fair

market value of the IRA’s 50 percent

(50%) undivided interest in the

Property is $4,307,000 dollars, as of

December 31, 1998. In this regard, it is

represented that Mr. Koehl and Mr.

Nelson will update their appraisal at the

time of the actual sale of the IRA’s 50

60466 Federal Register / Vol. 65, No. 197 / Wednesday, October 11, 2000 / Notices

23The Department notes that the appraisers have

included in their calculations of the fair market

value of the IRA’s 50 percent (50%) interest in the

Property substantial discounts for lack of control

(20%) and lack of marketability (35%). In this

regard, the Department states that relief from the

prohibited transactions provisions of the Code

provided by this exemption would not be available,

if the amount received by the IRA for the sale of

its interest in the Property is not equal to the greater

of $4,307,000 dollars or the fair market value of the

IRA’s 50 percent (50%) undivided interest in the

Property, as determined by an independent,

qualified appraiser, as of the date of the sale of such

Property to the Family Trust.

24For purposes of this exemption, references to

specific provisions of Title I of the Act, unless

otherwise specified, refer to the corresponding

provisions of the Code.

25 49 FR 9494 (March 13, 1984), as amended, 50

FR 41430 (October 10, 1985).

percent (50%) interest in the Property to

the Family Trust.23

8. The Family Trust is an irrevocable

trust established by David Mandelbaum,

as the grantor. The trustee of the Family

Trust is Ronald Targan. One hundred

percent (100%) of the interest of the

Family Trust is held for the benefit of

David Mandelbaum’s grandchildren.

David Mandelbaum’s grandchildren, as

lineal descendants of a fiduciary, are

members of the family, within the

meaning of section 4975(e)(6) of the

Code, and disqualified persons,

pursuant to section 4975(e)(2)(F) of the

Code.

9. David Mandelbaum requests an

exemption for the sale by the IRA of a

50 percent (50%) undivided interest in

the Property to the Family Trust. In this

regard, the sale by the IRA to the Family

Trust would be an indirect sale by a

plan to the members of a fiduciary’s

family, pursuant to section 4975(c)(1)(A)

of the Code, and a direct transfer of a

plan’s assets for the benefit of such

fiduciary’s family, under section

4975(c)(1)(D) of the Code. Although

David Mandelbaum, the fiduciary of the

IRA, is not a beneficiary of the Family

Trust, he has an interest in his

grandchildren who are the beneficiaries

of the Family Trust which may effect his

best judgment as a fiduciary.

Accordingly, the application describes a

transaction for which relief from the

prohibitions of section 4975(c)(1)(A)–(F)

of the Code is requested.

10. The applicant maintains that the

proposed transaction is feasible in that

it involves a one-time sale of the IRA’s

interest in the Property in exchange for

cash. In this regard, it is represented

that the IRA will not pay any

commissions, costs, finder’s fees, or

other expenses in connection with such

sale. Further, David Mandelbaum shall

personally bear the cost of filing the

exemption application.

11. The transaction is in the interest

of the IRA, in that the IRA will be able

to dispose of an illiquid asset which

would otherwise be difficult to sell,

especially in a period of economic

downturn. In this regard, the IRA will

receive for its undivided interest in the

Property a price equal to the greater of

$4,307,000 dollars or the fair market

value of the such interest, as of the date

of the sale. It is represented that the

Property has appreciated in value, and

that the IRA will realize a gain on the

sale from the purchase price to be paid

by the Family Trust. Further, in selling

at this time the IRA will avoid the costly

annual appraisals which have been

required by the IRA’s trustees and

custodian, as a condition of the IRA’s

continuing to hold the asset.

12. The transaction is structured to

include certain safeguards for the

protective of the participant and

beneficiaries of the IRA. In this regard,

the terms of the transaction will be at

least as favorable as arm’s length terms

negotiated with unrelated parties.

Further, the fair market value of the

Property has been determined by

independent, qualified appraisers, and

such value will be updated at the time

the transaction is entered. In addition,

independent qualified financial analysts

have issued a certified business

valuation appraisal of the fair market

value of the IRA’s 50 percent (50%)

undivided interest in the Property, and

an updated appraisal will be used at the

time of the sale to determine the

purchase price to be paid by the Family

Trust.

13. In summary, the applicant

represents that the proposed transaction

will meet the statutory criteria of section

4975(c)(2) of the Code because: (a) The

sale by the IRA of the undivided interest

in the Property to the Family Trust will

be a one-time transaction for cash; (b)

the terms and conditions of the sale are

at least as favorable to the IRA as similar

terms negotiated at arm’s length with

unrelated parties; (c) the IRA will

receive the greater of $4,307,000 dollars

or the fair market value of the IRA’s

undivided interest in the Property, as of

the date of the sale; (d) the fair market

value of the Property and the fair market

value of the IRA’s undivided interest in

the Property will be determined by

independent, qualified appraisers, as of

the date of the sale; and (e) the IRA will

not pay any commissions, costs, finder’s

fees, or other expenses in connection

with the sale.

Notice to Interested Persons

Because David Mandelbaum is the

only participant in the IRA, it has been

determined that there is no need to

distribute the notice of proposed

exemption (the Notice) to interested

persons. Comments and requests for a

hearing must be received by the

Department within thirty (30) days of

the date of publication of the Notice in

the Federal Register.

FOR FURTHER INFORMATION CONTACT: Ms.

Angelena C. Le Blanc of the Department,

telephone (202) 219–8883. (This is not

a toll-free number.)

HSBC Holdings plc, Located in London,

England

[Exemption Application No.: D–10910]

Proposed Exemption

The Department of Labor is

considering granting an exemption

under the authority of section 408(a) of

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

Code and in accordance with the

procedures set forth 29 CFR Part 2570,

subpart B (55 FR 32836, 32847, August

10, 1990).24 If the exemption is granted,

HSBC Asset Management Americas, Inc.

(AMUS), HSBC Asset Management

Hong Kong, Ltd. (AMHK), HSBC Bank

USA (Bank USA), any current affiliate of

HSBC Holdings plc (HSBC) that in the

future becomes eligible to serve as a

qualified professional asset manager, as

defined in Prohibited Transaction Class

Exemption 84–14 (PTCE 84–14)

(QPAM),25 HSBC, itself, if in the future

it becomes a QPAM, and any newly

acquired or newly established affiliate

of HSBC that is a QPAM or in the future

becomes a QPAM, other than the

Bangkok Metropolitan Bank PLC (BMB),

shall not be precluded from functioning

as a QPAM, pursuant to the terms and

conditions of PTCE 84–14, for the

period beginning on June 16, 2000, and

ending ten (10) years from the date the

final exemption is published in the

Federal Register, solely because of a

failure to satisfy Section I(g) of PTCE

84–14, as a result of an affiliation with

BMB; provided that:

(a) BMB has not in the past acted, nor

does it now act, nor will it act as a

fiduciary with respect to any employee

benefit plans subject to the Act;

(b) This exemption is not applicable

if HSBC and/or any successor or affiliate

becomes affiliated with any person or

entity convicted of any of the crimes

described in Section I(g) of PTCE 84–14,

other than BMB; and

(c) This exemption is not applicable if

HSBC and/or any successor or affiliate

is convicted of any of the crimes

described in Section I(g) of PTCE 84–14,

including any such crimes subsequently

committed by BMB.

Effective Date: If granted, this

proposed exemption will be effective for

the period beginning on June 16, 2000,

the date the application for exemption

Federal Register / Vol. 65, No. 197 / Wednesday, October 11, 2000 / Notices 60467

26The Department expresses no opinion as to

whether AMUS, AMHK, or Bank USA would

qualify as a QPAM for purposes of PTCE 84–14.

27 It is represented that with respect to

transactions concerning employee benefit plans that

cover employees of one or more of the Applicants,

the Applicants will rely on Prohibited Transaction

Class Exemption 96–23.

28The Department notes that the general

standards of fiduciary conduct under the Act would

apply to the investment transactions permitted by

this proposed exemption, and that satisfaction of

the conditions of this proposed exemption should

not be viewed as an endorsement of any particular

investment by the Department. Section 404 of the

Act requires, among other things, that a fiduciary

discharge his duties with respect to a plan solely

in the interest of the plan’s participants and

beneficiaries and in a prudent fashion. Accordingly,

the manager or other plan fiduciary must act

prudently with respect to the decision to enter into

an investment transaction, as well as to the

negotiation of the specific terms under which the

plan will engage in such transaction. The

Department further emphasizes that it expects a

manager or other plan fiduciary to fully understand

Continued

was filed with the Department, and

ending ten (10) years from the date of

publication of the final exemption in the

Federal Register.

Summary of Facts and Representations

1. HSBC, a publicly owned holding

company headquartered in London,

England, provides banking and financial

services worldwide. The exemption is

requested for affiliates of HSBC, AMUS,

AMHK, and Bank USA, as well as for

any current affiliate of HSBC that in the

future becomes eligible to serve as a

QPAM, HSBC, itself, if it becomes a

QPAM, and any newly acquired or

newly established affiliate of HSBC that

is a QPAM or in the future becomes a

QPAM (collectively, the Applicants),

other than BMB.

It is represented that HSBC’s affiliate,

Bank USA, is a bank as defined in

section 202(a)(2) of the Investment

Advisers Act of 1940 (the Advisers Act)

and is subject to the anti-fraud

provisions of the Advisers Act, as well

as the fiduciary standards imposed by

the Office of the Comptroller of

Currency and pursuant to state law.

Further, Bank USA has equity capital in

excess of $1,000,000. Accordingly, the

Applicants represent that Bank USA

qualifies as a QPAM, pursuant to

Section V (a)(1) of PTCE 84–14.

Two other HSBC affiliates, AMUS and

AMHK, each are also currently qualified

to serve as a QPAM.26 In this regard,

both AMUS and AMHK are investment

advisers registered under the Advisers

Act, and, as such, are subject to the

jurisdiction of the Securities and

Exchange Commission and to the

substantive requirements of the

Advisers Act. It is represented that

AMUS has total assets under its

management and control well in excess

of $50,000,000. In this regard, $6.4

million, as of March 31, 2000, is

attributable to three (3) accounts subject

to the Act. As of March 31, 2000, AMHK

had total funds under management of

$13.1 billion of which $462 million was

attributable to two (2) accounts subject

to the Act. It is represented that

consistent with the requirements of

PTCE 84–14, a fiduciary independent of

the Applicants (typically a named

fiduciary other than a trustee) is or will

be involved in the appointment of a

QPAM with respect to the assets of any

plan that is or will be affected by this

proposed exemption.

2. The proposed exemption would

apply with respect to any employee

benefit plans to which the Applicants

now or in the future provide investment

management services, (collectively, the

ERISA Plan Clients).27 Given the

changing identity of such plans, the

Applicants maintain that such plans

could not definitely be identified at the

time the application was filed.

3. BMB is a commercial bank

incorporated in Thailand. Prior to 1994,

BMB maintained two agencies in the

United States (the US Agencies), one in

New York and one in California. In

1994, regulators in the United States

identified approximately twenty (20)

aspects of BMB’s operations in the

United States that fell short of

acceptable standards. Under the terms

of a written agreement dated July 29,

1994, between BMB and its regulators,

BMB agreed to rectify these deficiencies.

Following BMB’s failure to correct such

deficiencies in accordance with such

agreement, BMB’s license to maintain

its US Agencies in the United States was

revoked and its operations wound up

under the terms of a Consent Order,

dated July 25, 1996.

In a Joint Statement issued

concurrently with the Consent Order,

the Board of Governors of the Federal

Reserve System, the California State

Banking Department, and the New York

State Banking Department concluded

that BMB should no longer have a

banking presence in the United States.

This conclusion was based on the

following: (1) Both US Agencies made

loans knowing that the stated purposes

of the loans were false; (2) both US

Agencies made loans that were diverted

from their stated purposes, sometimes to

benefit insiders; (3) senior management

of BMB could not satisfactorily explain

the appearance of involvement in a

money laundering scheme; (4) officials

and employees at BMB and the US

Agencies were not forthright with

examiners; (5) both US Agencies had

misleading books and records; (6)

officers of the US Agencies admitted

that BMB’s home office mandated that

certain transactions occur in a manner

contrary to safe and sound banking

practices; and (7) management at BMB

and its US Agencies failed to rectify

problems identified by regulators.

In addition to the Consent Order,

under the terms of a plea agreement

with the United States Attorney for the

Southern District of New York and for

the Northern District of California, BMB

also pleaded guilty to four criminal

offenses in relation to the activities of its

US Agencies. In this regard, BMB

pleaded guilty to one count of obscuring

the examination of a fiscal institution in

violation of 18 U.S.C. § 1517 and three

(3) counts of falsifying its books, reports,

and statements in violation of 18 U.S.C.

1005.

4. After the Asian economic crisis, it

is represented that the Thai government

took control of 99 percent (99%) of the

voting shares of BMB, and subsequently,

conducted an auction sale of its

interests in BMB. It is represented that

HSBC was the winning bidder at the

auction sale and that HSBC expects to

finalize its acquisition of BMB within

the next several months. As of June 16,

2000, the date the application was

submitted, HSBC represents that no

transaction that is the subject of this

proposed exemption had been

consummated or is planned to be

consummated. However, it is

represented that the size and diversity

of the operations of the Applicants make

it impossible to say that a transaction

requiring the requested relief will not be

consummated before the final decision

is made on this proposed exemption.

Accordingly, the Applicants seek

retroactive relief, effective June 16,

2000, from the restrictions of section

406(a)(1)(A)–(D), 406(b)(1), 406(b)(2),

and 407(a) of the Act and 4975(c)(1)(A)–

(E) of the Code for the subject

transactions.

5. The requested exemption would

apply to a full range of transactions on

and after the acquisition by HSBC of

BMB from the Thai government. Such

transactions include, but are not limited

to sale and exchange transactions,

derivative transactions, leasing and

other real estate transactions, foreign

currency trading transactions, and

transactions involving the furnishing of

goods, services, and facilities to an

investment fund managed on a

discretionary basis by the Applicants. It

is represented that such transactions

will be evaluated by the Applicants,

consistent with their fiduciary

responsibilities under the Act.28

60468 Federal Register / Vol. 65, No. 197 / Wednesday, October 11, 2000 / Notices

the benefits and risks associated with engaging in

a specific transaction. In addition, such manager or

plan fiduciary must be capable of periodically

monitoring the investment, including any changes

in the value of the investment and the

creditworthiness of the issuer or other party to the

transaction. Thus, in considering whether to enter

into a transaction, a fiduciary should take into

account its ability to provide adequate oversight of

the particular investment.

29The term, ‘‘felony,’’ as set forth in Section I(g)

of PTCE 84–14 includes: (1) Any felony involving

abuse or misuse of such person’s employee benefit

plan position or employment, or position or

employment with a labor organization; (2) any

felony arising out of the conduct of the business of

a broker, dealer, investment adviser, bank,

insurance company, or fiduciary; (3) income tax

evasion; (4) any felony involving the larceny, theft,

robbery, extortion, forgery, counterfeiting,

fraudulent concealment, embezzlement, fraudulent

conversion, or misappropriation of funds or

securities; conspiracy or attempt to commit any

such crimes or a crime in which any of the

foregoing crimes is an element; or (5) any other

crimes described in section 411 of the Act.

30Bankers Trust Co., BT Alex Brown, Inc., and

Deutsche Bank, Prohibited Transaction Exemption

99–29, 64 FR 40623 (July 22, 1999); PanAngora

Management, Inc., Prohibited Transaction

Exemption 97–10, 62 FR 4813 (Jan. 31, 1997;

American Express Company and Affiliates,

Prohibited Transaction Exemption 94–34, 59 FR

19247 (April 22, 1994); CS Holding and its

Worldwide Affiliates, Prohibited Transaction

Exemption 94–31, 59 FR 17590 (April 13, 1994).

6. The Applicants represent that it

would not be uncommon for one of the

Applicants, as a fiduciary for one of the

ERISA Plan Clients, to propose a

transaction, such as those described

above, that involve a party in interest,

as defined under section 3(14) of the

Act. The proposed exemption would

apply to all current and future parties in

interest with respect to the ERISA Plan

Clients. Given the size and number of

such ERISA Plan Clients and the large

number of service providers

(particularly financial institutions) that

such ERISA Plan Clients engage, it is

impractical for the Applicants to

identify all the parties in interest that

might be involved in transactions

covered by the requested exemption.

Accordingly, the Applicants have not

attempted to do so in the application

file.

7. The proposed exemption, if

granted, will be subject to terms and

conditions, similar to those, as set forth

PTCE 84–14. PTCE 84–14, in general,

permits various parties in interest with

respect to an employee benefit plan to

engage in certain transactions involving

plan assets if, among other conditions,

the assets are managed by a QPAM, who

is independent and who meets specified

financial standards and other

conditions. One such condition, Section

I(g)of PTCE 84–14, requires that neither

the QPAM nor any affiliate of the QPAM

were convicted of certain felonies 29

within a ten (10) year period preceding

the subject transaction. Section V(d) of

PTCE 84–14, defines an ‘‘affiliate’’ of a

person to mean—

(1) Any person directly or indirectly

through one or more intermediaries,

controlling, controlled by, or under common

control with the person, (2) Any director of,

relative of, or partner in, any such person, (3)

Any corporation, partnership, trust, or

unincorporated enterprise of which such

person is an officer, director, or a 5 percent

(5%) or more partner or owner, and (4) Any

employee or officer of the person who —(A)

Is a highly compensated employee (as

defined in section 4975(e)(2)(H) of the Code)

or officer (earning 10 percent (10%) or more

of the yearly wages of such person), or (B)

Has direct or indirect authority,

responsibility or control regarding the

custody, management, or disposition of plan

assets.

Section V(e) of PTCE 84–14 states that

the term, ‘‘control,’’ means the power to

exercise a controlling influence over the

management or disposition of plan

assets.

8. Upon acquisition of BMB by HSBC

from the Thai government, the

Applicants will become affiliates of

BMB, pursuant to the definition of

‘‘affiliate,’’ as set forth in Section V(d)

of PTCE 84–14. Further, because BMB,

in 1996, entered a plea of guilty with

respect to a felony described in Section

I(g) of PTCE 84–14, the Applicants, as

affiliates of BMB, could not satisfy

Section I(g) of PTCE 84–14.

Furthermore, even though BMB’s plea

occurred well before HSBC acquisition

of BMB, any of the Applicants which

qualify as a QPAM (e.g., AMUS, AMHK

and Bank USA) would be precluded

from acting or continuing to act as a

QPAM. In order to avoid this result, the

Applicants have requested the proposed

exemption.

9. The Applicants maintain that the

requested exemption should be granted

notwithstanding the guilty plea entered

by BMB. In support of their position, the

Applicants state that no entity affiliated

with HSBC, other than BMC, nor any

employee of HSBC was involved in the

conduct that formed the basis of the

guilty plea. In this regard, it is

represented that the individuals

responsible for BMB’s misconduct have

not been and will not be employed at

any time by HSBC or any of its affiliates.

None of the acts underlying the guilty

plea involved any investment

management activities of BMB; nor did

such acts involve any assets of plans

subject to the Act. Further, all of the acts

that formed the factual basis of the

guilty plea occurred prior to HSBC’s

acquisition and control of BMB.

With regard to the future, it is

represented that BMB will not influence

or control the management or policies of

the Applicants, nor will BMB be

involved in the investment management

activities relating to any ERISA Plan

Clients. In this regard, BMB employees

will not have any involvement in the

investment management activities of the

Applicants. Finally, it is represented

that BMB has not in the past acted, nor

does it now act, nor does it intend to act

in the future as a fiduciary with respect

to any employee benefit plans subject to

the Act.

10. The Applicants maintain that the

requested exemption will afford

protection similar to that provided in

PTCE 84–14. In this regard, other than

Section I(g) of PTCE 84–14, all of the

conditions of PTCE 84–14 will apply to

this proposed exemption. Further, it is

represented that many of the

Applicants’ ERISA Plan Clients have

significant assets, and hence are

sophisticated and have access to

resources necessary to monitor

effectively the performance of the

investment manager.

The proposed exemption also

contains conditions, in addition to those

imposed by PTCE 84–14, which are

designed to ensure the presence of

adequate safeguards to protect the

interests of the ERISA Plan Clients

against wrongdoers now and in the

future. In this regard, the proposed

exemption will not be applicable if any

of the Applicants is convicted of or

becomes affiliated with any person or

entity convicted of any of the crimes

described in Section I(g) of PTCE 84–14,

including any such crimes subsequently

committed by BMB.

11. The Applicants represent that the

requested exemption is administratively

feasible because the relief would not

impose any administrative burdens on

the Department which are not already

imposed by PTCE 84–14. In the opinion

of the Applicants, the administrative

feasibility of the requested exemption is

also demonstrated by the fact that the

Department has previously granted

other individual exemptions for a

variety of similarly situated entities

under substantially the same

circumstances.30

12. The requested exemption would

allow the Applicants’ ERISA Plan

Clients to enter into transactions which

are in the best interest of such plans. In

this regard, such plans would not be

precluded from engaging in transactions

with parties in interest, where the terms

of such transactions are at least as

favorable to such plans as those of a

similar transaction with an unrelated

party. Absent the proposed exemption,

the Applicants would be required to

examine each transaction involving

Federal Register / Vol. 65, No. 197 / Wednesday, October 11, 2000 / Notices 60469

such ERISA Plan Clients to determine

parties in interest, no matter how

remote, with respect to such plans.

13. Denial of the exemption, in the

opinion of the Applicants, would be

unduly and disproportionately severe

and would have adverse consequences

for the ongoing business operation of

the Applicants. Disqualification from

serving or continuing to serve as a

QPAM would deprive the Applicants of

their ability to render diversified

investment advisory services to their

ERISA Plan Clients. Further, the

unavailability of the exemption would

work a hardship on the ERISA Plan

Clients which the Applicants serve. In

this regard, such ERISA Plan Clients

might be forced to forgo certain

attractive investment opportunities or

beneficial transactions that involve

parties in interest for which no existing

class exemptions apply. Finally, the

ERISA Plan Clients would have to incur

higher transaction costs and risks on

other investments by limiting the

number of parties that might engage in

transactions with such plans and by

limiting the number of high-credit

quality counter-parties available in

principal transactions.

14. In summary, the Applicants

represent that the proposed transactions

satisfy the statutory criteria for an

exemption under section 408(a) of the

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

because, among other things:

(a) no entity affiliated with HSBC,

other than BMB, nor any employee of

HSBC was involved in the conduct that

formed the basis of the guilty plea;

(b) all of the acts that formed the

factual basis of the guilty plea occurred

before the date that HSBC acquired

control of BMB;

(c) the individuals responsible for

BMB misconduct have not been and

will not be employed at any time by

HSBC or any other affiliates;

(d) absent the proposed exemption,

the ERISA Plan Clients may have to

forgo attractive investment

opportunities or incur higher

transaction costs and risks;

(e) AMUS and AMHK, as investment

advisors registered under the Advisers

Act, are subject to the jurisdiction of the

Securities and Exchange Commission

and the requirements of the Advisers

Act;

(f) Bank USA is a bank, as defined in

section 202(a)(2) of the Advisers Act),

and is subject to the anti-fraud

provisions of the Advisers Act, as well

as the fiduciary standards imposed by

the Office of the Comptroller of

Currency and pursuant to state law;

(g) BMB has not in the past acted, nor

does it now act, nor will it act in the

future as a fiduciary with respect to any

employee benefit plans subject to the

Act;

(h) BMB will not be involved in

investment management activities

relating to the ERISA Plan Clients, nor

will BMB influence or control the

management or policies of HBSC;

(i) other than Section I(g) of PTCE 84–

14, all of the conditions of PTCE 84–14

will apply to the transactions covered

by this exemption;

(j) this exemption, if granted, would

not be applicable if any of the

Applicants now or in the future

becomes affiliated with any person or

entity convicted of any of the crimes

described in Section I(g) of PTCE 84–14,

other than BMB; and

(k) this exemption, if granted, would

not be applicable if any of the

Applicants now or in the future

becomes convicted of any of the crimes

described in Section I(g) of PTCE 84–14,

including such crimes subsequently

committed by BMB.

Notice to Interested Persons

The Applicants will furnish a copy of

the Notice of Proposed Exemption (the

Notice) along with the supplemental

statement (the Supplemental

Statement), described at 29 CFR

2570.43(b)(2), to the trustee or other

fiduciary of each of the ERISA Plan

Clients for which one or more of the

Applicants have discretionary

investment authority.

The Notice and the Supplemental

Statement will be delivered by hand

delivery or first class mail, within

fifteen (15) days of the publication of

the Notice in the Federal Register.

Comments and requests for a hearing are

due on or before 45 days from the date

of publication of the Notice in the

Federal Register.

A copy of the final exemption, if

granted, will also be provided to the

trustee or fiduciary of each of the ERISA

Plan Clients for which one or more of

the Applicants have discretionary

investment authority.

FOR FURTHER INFORMATION CONTACT:

Angelena C. Le Blanc of the Department

telephone (202) 219–8883. (This is not

a toll-free number.)

Pembroke Construction Company, Inc.

Employees 401(k) Profit Sharing Plan

(the Plan), Located in Hampton,

Virginia

[Application No. D–10915]

Proposed Exemption

The Department is considering

granting an exemption under the

authority of section 408(a) of the Act

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

in accordance with the procedures set

forth in 29 CFR part 2570, subpart B (55

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

the exemption is granted, the

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

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

resulting from the application of section

4975 of the Code, by reason of section

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

shall not apply to the proposed sale of

a condominium (the Condo) by Thomas

N. Hunnicutt (Mr. Hunnicutt), and his

wife Ann N. Hunnicutt (collectively, the

Hunnicutts), to Mr. Hunnicutt’s selfdirected individual account (the

Account) in the Plan, with respect to

which the Hunnicutts are parties in

interest; provided that the following

conditions are satisfied:

(a) the proposed sale will be a onetime cash transaction;

(b) the Account will pay the current

fair market value for the Condo, as

established at the time of the purchase

by an independent qualified appraiser;

(c) the Account will pay no expenses

or commissions associated with the

purchase; and

(d) the purchase will enable the

Account to acquire the Condo, which is

expected to be a valuable asset that will

yield significant rental income.

Summary of Facts and Representations

1. The Plan was established on May

10, 1977, and was amended and restated

effective January 1, 1992. As of June 30,

1999, the Plan had 72 participants. As

of June 30, 1999, the Plan had

$4,899,548 in total assets, and the

Account had $2,272,573 in total assets.

Pembroke Construction Company, Inc.

(PCC) is the sponsor of the Plan. The

Hunnicutts are trustees of the Plan as

well as employees, officers and directors

of PCC. PCC was established on

September 12, 1961, and is a subchapter

‘‘S’’ corporation in the Commonwealth

of Virginia. PCC is in the business of

residential and commercial

construction.

2. On or about March 9, 1987, the

Hunnicutts purchased the Condo from

Busch Properties, for $140,000 in cash

and credit (i.e., the Condo is

encumbered by an existing mortgage).

However, the applicant states that when

the Condo will be transferred to the

Account, such mortgage will be paid off

and the Account will own the Condo

free and clear of any debt. It is

represented that the Hunnicutts have

not rented or leased the Condo to

anyone. The Hunnicutts currently use

the Condo for business purposes, such

as for overnight guests. As noted below

in paragraph 4, the Condo will only be

leased to, and used by, independent

third parties after it is sold to the

60470 Federal Register / Vol. 65, No. 197 / Wednesday, October 11, 2000 / Notices

31The Department notes that this proposed

exemption would not permit any leasing of the

Condo to, or use of the condo by, a party in interest

with respect to the Plan (e.g., employees of PCC).

Account. Thus, the Condo will not be

used by the Hunnicutts after the

purchase by the Account.31 The

applicant represents that the Condo is

not adjacent to any other property

owned by the Hunnicutts.

3. The Property, located at 314

Padgetts Ordinary, Williamsburg,

Virginia, was appraised on January 27,

2000 (the Appraisal). The Appraisal was

prepared by R. Epes McMurran, Jr., SRA

(Mr. McMurran), who is an independent

Virginia state certified appraiser. Mr.

McMurran is employed with Barker and

Associates, Inc., a real estate firm

located in Newport News, Virginia. In

the Appraisal, Mr. McMurran states that

the Condo consists of 1,686 square feet

and contains, among other things, three

bedrooms and three baths. The common

elements include a storage area,

swimming pool, tennis courts, and

clubhouse. Mr. McMurran represents in

the Appraisal that the monthly home

owners association unit charge for the

Condo is $237 (the Condo Fee). Mr.

McMurran states further that the Condo

has been well maintained, has received

periodic maintenance, and is in readily

marketable condition. Mr. McMurran

relied primarily on the sales comparison

approach to value the Condo. Based on

an analysis of recent sales of similar

properties in the local real estate area,

Mr. McMurran determined that the fair

market value of the Property was

$285,000, as of January 27, 2000.

4. The applicant maintains that after

the Account acquires the Condo, the

Condo will be leased to independent

third parties only. The applicant

represents that the Condo could yield

annual rental income for the Account in

the range of $80,000 to $85,000. In this

regard, the applicant submitted a

statement dated November 30, 1999,

from Barbara Eddins (Ms. Eddins),

Rental Property Manager of Kingsmill

Resort, located in Williamsburg,

Virginia. Ms. Eddins states that possible

rental revenue income for 3 bedroom

condominiums in the Padgett’s

Ordinary area of Kingsmill Resort may

be in the range of $80,000 to $85,000

during any calendar year. The applicant

also represents that after the transaction

is consummated, the Account will pay

the monthly Condo Fee for the Condo.

5. The applicant now proposes that

the Account purchase the Condo from

the Hunnicutts in a one-time cash

transaction. After the proposed

purchase, the Condo will represent

approximately 14% of the Account’s

total assets. The applicant represents

that the proposed transaction would be

in the best interest and protective of the

Account and the Plan because the

Account and the Plan will pay no

expenses or commissions associated

with the purchase. The Account will

pay the Hunnicutts the current fair

market value of the Condo, as

determined by an independent qualified

appraiser at the time of the transaction.

The acquisition of the Condo by the

Account will diversify the Account’s

portfolio, and will enable the Account

to realize an annual return of

approximately 28 percent (28%) if the

Condo can be fully leased throughout

the year.

6. In summary, the applicant

represents that the transaction satisfies

the statutory criteria of section 408(a) of

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

Code because:

(a) The proposed purchase of the

Condo by the Account will be a onetime cash transaction;

(b) The Account will pay the

Hunnicutts the current fair market value

for the Condo, as established at the time

of the transaction by an independent

qualified appraiser;

(c) The Condo will represent

approximately 14% of the Account’s

total assets at the time of the

transaction;

(d) The transaction will enable the

Account to acquire the Condo, which is

expected to be a valuable asset that will

yield significant rental income; and

(e) Mr. Hunnicutt is the only

participant in the Plan that will be

affected by this transaction, and he

desires that the transaction be

consummated.

Notice to Interested Persons

Because Mr. Hunnicutt is the only

participant in the Plan that will be

affected by the proposed transaction, it

has been determined that there is no

need to distribute the notice of proposed

exemption to interested persons.

Comments and requests for a hearing are

due thirty (30) days from the date of

publication of this notice in the Federal

Register.

FOR FURTHER INFORMATION CONTACT:

Ekaterina A. Uzlyan of the Department

at (202) 219–8883. (This is not a toll-free

number.)

General Information

The attention of interested persons is

directed to the following:

(1) The fact that a transaction is the

subject of an exemption under section

408(a) of the Act and/or section

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

a fiduciary or other party in interest or

disqualified person from certain other

provisions of the Act and/or the Code,

including any prohibited transaction

provisions to which the exemption does

not apply and the general fiduciary

responsibility provisions of section 404

of the Act, which, among other things,

require a fiduciary to discharge his

duties respecting the plan solely in the

interest of the participants and

beneficiaries of the plan and in a

prudent fashion in accordance with

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

it affect the requirement of section

401(a) of the Code that the plan must

operate for the exclusive benefit of the

employees of the employer maintaining

the plan and their beneficiaries;

(2) Before an exemption may be

granted under section 408(a) of the Act

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

the Department must find that the

exemption is administratively feasible,

in the interests of the plan and of its

participants and beneficiaries, and

protective of the rights of participants

and beneficiaries of the plan;

(3) The proposed exemptions, if

granted, will be supplemental to, and

not in derogation of, any other

provisions of the Act and/or the Code,

including statutory or administrative

exemptions and transitional rules.

Furthermore, the fact that a transaction

is subject to an administrative or

statutory exemption is not dispositive of

whether the transaction is in fact a

prohibited transaction; and

(4) The proposed exemptions, if

granted, will be subject to the express

condition that the material facts and

representations contained in each

application are true and complete, and

that each application accurately

describes all material terms of the

transaction which is the subject of the

exemption.

Signed at Washington, DC, this 4th day of

October, 2000.

Ivan Strasfeld,

Director of Exemption Determinations,

Pension and Welfare Benefits Administration,

U.S. Department of Labor.

[FR Doc. 00–26028 Filed 10–10–00; 8:45 am]

BILLING CODE 4510–29–P

MEDICARE PAYMENT ADVISORY

COMMISSION

Commission Meeting

AGENCY: Medicare Payment Advisory

Commission.

ACTION: Notice of meeting.

SUMMARY: The Commission will hold its

next public meeting on Thursday,

October 19, 2000, and Friday, October