Federal Register / Vol. 65, No. 219 / Monday, November 13, 2000 / Notices 67765

1The term ‘‘Underwriter Exemptions’’ refers to

the following individual Prohibited Transaction

Exemptions (PTEs): PTE 89–88, 54 FR 42582

(October 17, 1989); PTE 89–89, 54 FR 42569

(October 17, 1989); PTE 89–90, 54 FR 42597

(October 17, 1989); PTE 90–22, 55 FR 20542 (May

17, 1990); PTE 90–23, 55 FR 20545 (May 17, 1990);

PTE 90–24, 55 FR 20548 (May 17, 1990); PTE 90–

28, 55 FR 21456 (May 24, 1990); PTE 90–29, 55 FR

21459 (May 24, 1990); PTE 90–30, 55 FR 21461

(May 24, 1990); PTE 90–31, 55 FR 23144 (June 6,

1990); PTE 90–32, 55 FR 23147 (June 6, 1990); PTE

90–33, 55 FR 23151 (June 6, 1990); PTE 90–36, 55

FR 25903 (June 25, 1990); PTE 90–39, 55 FR 27713

(July 5, 1990); PTE 90–59, 55 FR 36724 (September

6, 1990); PTE 90–83, 55 FR 50250 (December 5,

1990); PTE 90–84, 55 FR 50252 (December 5, 1990);

PTE 90–88, 55 FR 52899 (December 24, 1990); PTE

91–14, 55 FR 48178 (February 22, 1991); PTE 91–

22, 56 FR 03277 (April 18, 1991); PTE 91–23, 56

FR 15936 (April 18, 1991); PTE 91–30, 56 FR 22452

(May 15, 1991); PTE 91–62, 56 FR 51406 (October

11, 1991); PTE 93–31, 58 FR 28620 (May 5, 1993);

PTE 93–32, 58 FR 28623 (May 14, 1993); PTE 94–

29, 59 FR 14675 (March 29, 1994); PTE 94–64, 59

FR 42312 (August 17, 1994); PTE 94–70, 59 FR

50014 (September 30, 1994); PTE 94–73, 59 FR

51213 (October 7, 1994); PTE 94–84, 59 FR 65400

(December 19, 1994); PTE 95–26, 60 FR 17586

(April 6, 1995); PTE 95–59, 60 FR 35938 (July 12,

1995); PTE 95–89, 60 FR 49011 (September 21,

1995); PTE 96–22, 61 FR 14828 (April 3, 1996); PTE

96–84, 61 FR 58234 (November 13, 1996); PTE 96–

92, 61 FR 66334 (December 17, 1996); PTE 96–94,

61 FR 68787 (December 30, 1996); PTE 97–05, 62

FR 1926 (January 14, 1997); PTE 97–28, 62 FR

28515 (May 23, 1997); PTE 97–34, 62 FR 39021

(July 21, 1997); PTE 98–08, 63 FR 8498 (February

19, 1998); PTE 99–11, 64 FR 11046 (March 8, 1999);

PTE 2000–19, 65 FR 25950 (May 4, 2000); PTE

2000–33, 65 FR 37171 (June 13, 2000); PTE 2000–

41, 65 FR 51039 (August 22, 2000); and PTE 2000–

55 (November, 2000).

In addition, the Department notes that it is also

granting individual exemptive relief for: Deutsche

Bank AG, New York Branch and Deutsche Morgan

Grenfell/C.J. Lawrence Inc., Final Authorization

Number (FAN) 97–03E (December 9, 1996); Credit

Lyonnais Securities (USA) Inc., FAN 97–21E

(September 10, 1997); ABN AMRO Inc., FAN 98–

08E (April 27, 1998); and Ironwood Capital Partners

Ltd., FAN 99–31E (December 20, 1999), which

received the approval of the Department to engage

in transactions substantially similar to the

transactions described in the Underwriter

Exemptions pursuant to PTE 96–62.

TN000040 (Feb. 11, 2000)

TN000041 (Feb. 11, 2000)

TN000042 (Feb. 11, 2000)

TN000043 (Feb. 11, 2000)

TN000045 (Feb. 11, 2000)

TN000048 (Feb. 11, 2000)

TN000061 (Feb. 11, 2000)

TN000062 (Feb. 11, 2000)

Volume IV

None

Volume V

Arkansas

AR000003 (Feb. 11, 2000)

Missouri

MO000001 (Feb. 11, 2000)

MO000006 (Feb. 11, 2000)

MO000009 (Feb. 11, 2000)

MO000013 (Feb. 11, 2000)

MO000050 (Feb. 11, 2000)

MO000063 (Feb. 11, 2000)

Volume VI

North Dakota

ND000002 (Feb. 11, 2000)

Utah

UT000009 (Feb. 11, 2000)

UT000011 (Feb. 11, 2000)

UT000012 (Feb. 11, 2000)

UT000013 (Feb. 11, 2000)

UT000015 (Feb. 11, 2000)

UT000023 (Feb. 11, 2000)

UT000024 (Feb. 11, 2000)

UT000025 (Feb. 11, 2000)

UT000026 (Feb. 11, 2000)

UT000028 (Feb. 11, 2000)

UT000029 (Feb. 11, 2000)

Volume VII

California

CA000002 (Feb. 11, 2000)

CA000004 (Feb. 11, 2000)

CA000009 (Feb. 11, 2000)

CA000028 (Feb. 11, 2000)

CA000029 (Feb. 11, 2000)

CA000030 (Feb. 11, 2000)

CA000031 (Feb. 11, 2000)

CA000032 (Feb. 11, 2000)

CA000034 (Feb. 11, 2000)

CA000035 (Feb. 11, 2000)

CA000036 (Feb. 11, 2000)

CA000037 (Feb. 11, 2000)

CA000038 (Feb. 11, 2000)

CA000039 (Feb. 11, 2000)

CA000040 (Feb. 11, 2000)

CA000041 (Feb. 11, 2000)

Nevada

NV000005 (Feb. 11, 2000)

General Wage Determination

Publication

General wage determinations issued

under the Davis-Bacon and related Acts,

including those noted above, may be

found in the Government Printing Office

(GPO) document entitled ‘‘General Wage

Determinations Issued Under The DavisBacon and Related Acts.’’ This

publication is available at each of the 50

Regional Government Depository

Libraries and many of the 1,400

Government Depository Libraries across

the country.

The general wage determinations

issued under the Davis-bacon and

related Acts are available electronically

by subscription to the FedWorld

Bulletin Board System of the National

Technical Information Service (NTIS) of

the U.S. Department of Commerce at 1–

800–363–2068

Hard-copy subscriptions may be

purchased from: Superintendent of

Documents, U.S. Government Printing

Office, Washington, DC 20402, (202)

512–1800.

When ordering hard-copy

subscription(s), be sure to specify the

State(s) of interest, since subscriptions

may be ordered for any or all of the

seven separate volumes, arranged by

State. Subscriptions include an annual

edition (issued in January or February)

which includes all current general wage

determinations for the States covered by

each volume. Throughout the remainder

of the year, regular weekly updates are

distributed to subscribers.

Dated: November 2, 2000.

Carl J. Poleskey,

Chief, Branch of Construction Wage

Determinations.

[FR Doc. 00–28537 Filed 11–9–00; 8:45 am]

BILLING CODE 4510–27–M

DEPARTMENT OF LABOR

Pension and Welfare Benefits

Administration

[Prohibited Transaction Exemption 2000–

58]

Amendment to Prohibited Transaction

Exemption (PTE) 97–34 Involving Bear,

Stearns & Co. Inc., Prudential

Securities Incorporated, et al. (D–

10829)

AGENCY: Pension and Welfare Benefits

Administration, Department of Labor.

ACTION: Grant of an amendment to the

Underwriter Exemptions.1

SUMMARY: This document contains a

final exemption issued by the

Department of Labor (the Department)

which amends the Underwriter

Exemptions. The Underwriter

Exemptions are individual exemptions

that provide relief for the origination

and operation of certain asset pool

investment trusts and the acquisition,

holding and disposition of certain assetbacked pass-through certificates

representing undivided interests in

those investment trusts. The

amendment: (1) Permits, for certain

categories of transactions, the offering of

‘‘investment grade’’ mortgage-backed

securities and asset-backed securities

which are either senior or subordinated;

(2) permits the use of eligible interest

rate swaps (both ratings dependent and

non-ratings dependent) under

circumstances described in this

amendment; (3) permits the use of yield

supplement agreements which involve

notional principal amounts; and (4)

makes certain changes to the

Underwriter Exemptions that reflects

the Department’s current interpretation

of the Underwriter Exemptions.

Finally, the amendment provides

exemptive relief for transactions

involving: (1) An Issuer of mortgagebacked securities or asset-backed

securities which is a trust (including a

grantor or owner trust), REMIC, FASIT,

special purpose corporation, limited

liability company or partnership and (2)

mortgage-backed securities or assetbacked securities issued which are

either debt or equity investments.

67766 Federal Register / Vol. 65, No. 219 / Monday, November 13, 2000 / Notices

2PTE 90–24, 55 FR 20548 (May 17, 1990).

3Section 102 of Reorganization Plan No. 4 of

1978 (43 FR 47713, October 17, 1978, 5 U.S.C. App.

1 [1995]) generally transferred the authority of the

Secretary of the Treasury to issue exemptions under

section 4975(c)(2) of the Code to the Secretary of

Labor. In the discussion of the exemption,

references to sections 406 and 408 of the Act should

be read to refer as well to the corresponding

provisions of section 4975 of the Code.

4 In this regard, the entities who received the

other Underwriter Exemptions were contacted

concerning their participation in this amendment

process.

EFFECTIVE DATE: This amendment to the

Underwriter Exemptions is effective for

transactions occurring on or after

August 23, 2000, except as otherwise

provided in sections I.C., II.A.(4)(b), and

III.JJ. of the amendment to the

Underwriter Exemptions.

FOR FURTHER INFORMATION CONTACT:

Wendy McColough of the Department,

telephone (202) 219–8971. (This is not

a toll-free number).

SUPPLEMENTARY INFORMATION: On August

23, 2000, notice was published in the

Federal Register (65 FR 51454) of the

pendency before the Department of a

proposed exemption to amend PTE 97–

34, 62 FR 39021 (July 21, 1997) (the

1997 Amendment). The 1997

Amendment amended over forty

individual Underwriter Exemptions.

The Underwriter Exemptions are a

group of individual exemptions that

provide substantially identical relief for

the operation of certain asset pool

investment trusts and the acquisition

and holding by plans of certain assetbacked pass-through certificates

representing interests in those trusts.

These exemptions provide relief from

certain of the restrictions of sections

406(a), 406(b) and 407(a) of the Act and

from the taxes imposed by section

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

of certain provisions of section

4975(c)(1) of the Code.

The amendment was requested by

application dated October 22, 1999, and

as restated in later submissions on

behalf of Morgan Stanley & Co.

Incorporated 2 (the Applicant). In

preparing the application, the Applicant

received input from members of The

Bond Market Association (TBMA).

The Department proposed the

amendment to this individual

exemption pursuant to 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).3 In addition, the Department

proposed to provide the same relief on

its own motion pursuant to the

authority described above for many of

the other Underwriter Exemptions

which have substantially similar terms

and conditions.4 The Department notes

that it also proposed the same

individual exemptive relief for:

Deutsche Bank AG, New York Branch

and Deutsche Morgan Grenfell/C.J.

Lawrence Inc., FAN 97–03E (December

9, 1996); Credit Lyonnais Securities

(USA) Inc., FAN 97–21E (September 10,

1997); ABN AMRO Inc., FAN 98–08E

(April 27, 1998); and Ironwood Capital

Partners Ltd., FAN 99–31E (December

20, 1999), which received the approval

of the Department to engage in

transactions substantially similar to the

transactions described in the

Underwriter Exemptions pursuant to

PTE 96–62.

The notice set forth a summary of

facts and representations contained in

the application for exemption and

referred interested persons to the

application for a complete statement of

the facts and representations. The

application has been available for public

inspection at the Department in

Washington, DC.

The notice also invited interested

persons to submit comments on the

requested exemption to the Department.

In addition, the notice stated that any

interested person might submit a

written request that a public hearing be

held. The Department received three

written comments in response to the

proposed amendment. No requests for a

hearing were received by the

Department in regard to the proposed

amendment.

The first commentator observed that it

has been his experience that certain

trustees of collectively bargained

qualified plans may incur unnecessary

risk with plan assets when they allow

investment managers to purchase debt

securities that can only be priced by the

underwriter or manually priced by the

investment manager. Plans that by their

nature are ‘‘marked to market’’ for

annual valuations, i.e., defined

contribution plans, may find that assets

are unintentionally misstated for plan

participants when there is a general

disruption in the debt market. Similarly,

defined benefit plans may be forced to

hold assets to maturity when an

investment manager buys a ‘‘BBB’’

securitization vehicle and the general

interest rate market rises. According to

the commentator, the underwriter may

not make a secondary market when

there is an absence of bidders for such

issues.

The Department notes that the

fiduciary responsibility provisions of

the Act would apply to any decision

made by a plan fiduciary or investment

manager to purchase asset-backed

securities or other debt securities as part

of its investment program. In this

regard, section 404(a) of the Act

requires, among other things, that a

fiduciary of a plan act prudently, solely

in the interest of the plan’s participants

and beneficiaries, and for the exclusive

purpose of providing benefits to

participants and beneficiaries when

making investment decisions on behalf

of the plan. The Department’s

determination to expand the

Underwriter Exemptions to permit the

offering of ‘‘investment grade’’ asset

backed securities, which may be senior

or subordinated, should not be viewed

as an endorsement by the Department of

the suitability of specific securities for

a particular plan. Rather, it is the

responsibility of the plan fiduciary to

act ‘‘prudently’’ with respect to the

selection of suitable investments, taking

into account the plan’s particular facts

and circumstances. The Department

further notes that plan fiduciaries would

be liable for any losses to the plan

resulting from a decision to purchase

asset-backed securities or other debt

securities if such purchase was not

prudent at the time the decision was

made.

Another commentator was concerned

that the proposed amendment may in

some way limit the exemptive relief

available under the previously granted

Underwriter Exemptions and the 1997

Amendment. The commentator

proposed that the following language be

added to the preamble of the final

exemption:

Nothing in this final exemption limits the

exemptive relief otherwise available under

any of the Underwriter Exemptions, as in

effect prior to the effective date of this final

exemption, to transactions related to any

securitization transaction that closed prior to

the date of publication of this final

exemption in the Federal Register.

In response to this comment, the

Department notes that this amendment

does not limit the exemptive relief

otherwise available under any of the

Underwriter Exemptions, the 1997

Amendment or the individual

exemptive relief for entities which

received the approval of the Department

to engage in transactions substantially

similar to the transactions described in

the Underwriter Exemptions pursuant to

PTE 96–62. In fact, the Department

notes that this amendment expands the

relief available under the Underwriter

Exemptions. In the Department’s view,

those transactions which meet the

requirements of the 1997 Amendment,

would fall within the scope of the relief

provided by this amendment.

The third commentator posed a

question regarding the application of the

Federal Register / Vol. 65, No. 219 / Monday, November 13, 2000 / Notices 67767

proposed amendment to subordinated

and ‘‘BBB’’ rated securities that were

issued prior to August 23, 2000. The

Department notes that the amendment is

applicable to the purchase by plans of

subordinated and ‘‘BBB’’ rated

securities after August 23, 2000,

provided that these transactions meet

the requirements set forth in the

amendment.

The commentator further noted that

the Department proposed to expand the

scope of the Underwriter Exemptions to

cover securitization transactions that

use ‘‘special purpose’’ corporations,

limited partnerships, limited liability

companies and owner trust structures.

As part of the proposed amendment, the

Department required, under section

II.A.(8), that certain provisions be

included in the documents establishing

the Issuer. The commentator was

concerned that some of the new

requirements under section II.A.(8)

would also be applicable to

securitization transactions that use

traditional ‘‘common law’’ trust

structures. As a result, the commentator

requested that the Department clarify

the requirements set forth in section

II.A.(8) of the proposed amendment.

The Department believes the following

explanation will clarify the intended

scope of the requirements of section

II.A.(8) of the amendment.

The Applicant provided the following

information to the Department during

the comment period. Trusts are

generally of two types under local or

state law. Those referred to as ‘‘common

law trusts,’’ and those referred to as

‘‘owner trusts’’ (or ‘‘business trusts,’’ for

example, Delaware business trusts).

While both types of trusts are created by

contract between a settlor and a trustee

for the benefit of beneficiaries, a

common law trust does not exist as a

separate entity and is governed under

common law; whereas an owner trust is

created under state statutes and is a

separate legal entity. The terms ‘‘grantor

trust,’’ ‘‘REMIC,’’ and ‘‘FASIT’’ are tax

classifications.

The Department notes that this

amendment generally is effective for

transactions occurring on or after

August 23, 2000. On that date, this

amendment would apply to the

expanded list of Issuers defined in

section III.B. of the amendment.

Accordingly, it is the view of the

Department that section II.A.(8) is

applicable to those Issuers that are

owner trusts, partnerships, special

purpose corporations or limited liability

companies which meet the conditions of

the amendment on or after August 23,

2000 including the requirements

contained in section II.A.(8).

Conversely, it is the view of the

Department that section II.A.(8) would

not apply to grantor trusts, REMICs or

FASITs which were eligible for relief

under the 1997 Amendment, provided

that the conditions of that exemption

were met.

Finally, the commentator requested

that the Department clarify whether

offshore entities (special purpose

corporations, limited partnerships,

limited liability companies and trusts

organized under non-United States law)

are permissible securitization vehicles

under the amendment. The Department

does not believe that a sufficient

showing has been made that inclusion

of offshore entities as securitization

vehicles would be protective of the

interests of participants and

beneficiaries. Accordingly, it is the view

of the Department that offshore entities

are beyond the scope of relief provided

by this amendment.

The Department notes that it has

modified the definition of ‘‘Qualified

Plan Investor,’’ at section III.HH. of the

amendment, to clarify that this

definition refers only to the swap

agreements described at section II.A.(10)

of the amendment.

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 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 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 require, among other things, a

fiduciary to discharge his or her 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

requirements of section 401(a) of the

Code that the plan operate for the

exclusive benefit of the employees of

the employer maintaining the plan and

their beneficiaries;

(2) In accordance with section 408(a)

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

Code and the procedures set forth in 29

CFR part 2570, Subpart B (55 FR 32836,

32847, August 10, 1990) and based upon

the entire record, the Department finds

that the exemption is administratively

feasible, in the interests of the plans and

their participants and beneficiaries and

protective of the rights of the

participants and beneficiaries;

(3) This exemption is supplemental

to, and not in derogation of, any other

provisions of the Act and/or the Code,

including statutory or administrative

exemptions and 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 availability of this exemption

is subject to the express condition that

the material facts and representations

contained in the application are true

and complete and accurately describe

all material terms of the transactions

which are the subjects of the exemption.

Exemption

Under section 408(a) of 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, August 10, 1990), the

Department amends the following

individual Prohibited Transaction

Exemptions (PTEs): PTE 89–88, 54 FR

42582 (October 17, 1989); PTE 89–89, 54

FR 42569 (October 17, 1989); PTE 89–

90, 54 FR 42597 (October 17, 1989); PTE

90–22, 55 FR 20542 (May 17, 1990); PTE

90–23, 55 FR 20545 (May 17, 1990); PTE

90–24, 55 FR 20548 (May 17, 1990); PTE

90–28, 55 FR 21456 (May 24, 1990); PTE

90–29, 55 FR 21459 (May 24, 1990); PTE

90–30, 55 FR 21461 (May 24, 1990); PTE

90–31, 55 FR 23144 (June 6, 1990); PTE

90–32, 55 FR 23147 (June 6, 1990); PTE

90–33, 55 FR 23151 (June 6, 1990); PTE

90–36, 55 FR 25903 (June 25, 1990); PTE

90–39, 55 FR 27713 (July 5, 1990); PTE

90–59, 55 FR 36724 (September 6,

1990); PTE 90–83, 55 FR 50250

(December 5, 1990); PTE 90–84, 55 FR

50252 (December 5, 1990); PTE 90–88,

55 FR 52899 (December 24, 1990); PTE

91–14, 55 FR 48178 (February 22, 1991);

PTE 91–22, 56 FR 03277 (April 18,

1991); PTE 91–23, 56 FR 15936 (April

18, 1991); PTE 91–30, 56 FR 22452 (May

15, 1991); PTE 91–62, 56 FR 51406

(October 11, 1991); PTE 93–31, 58 FR

28620 (May 5, 1993); PTE 93–32, 58 FR

28623 (May 14, 1993); PTE 94–29, 59 FR

14675 (March 29, 1994); PTE 94–64, 59

FR 42312 (August 17, 1994); PTE 94–70,

59 FR 50014 (September 30, 1994); PTE

94–73, 59 FR 51213 (October 7, 1994);

PTE 94–84, 59 FR 65400 (December 19,

1994); PTE 95–26, 60 FR 17586 (April

6, 1995); PTE 95–59, 60 FR 35938 (July

12, 1995); PTE 95–89, 60 FR 49011

(September 21, 1995); PTE 96–22, 61 FR

14828 (April 3, 1996); PTE 96–84, 61 FR

58234 (November 13, 1996); PTE 96–92,

61 FR 66334 (December 17, 1996); PTE

96–94, 61 FR 68787 (December 30,

1996); PTE 97–05, 62 FR 1926 (January

14, 1997); PTE 97–28, 62 FR 28515 (May

67768 Federal Register / Vol. 65, No. 219 / Monday, November 13, 2000 / Notices

5Section I.A. provides no relief from sections

406(a)(1)(E), 406(a)(2) and 407 of the Act for any

person rendering investment advice to an Excluded

Plan within the meaning of section 3(21)(A)(ii) of

the Act, and regulation 29 CFR 2510.3–21(c).

6For purposes of this Underwriter Exemption,

each plan participating in a commingled fund (such

as a bank collective trust fund or insurance

company pooled separate account) shall be

considered to own the same proportionate

undivided interest in each asset of the commingled

fund as its proportionate interest in the total assets

of the commingled fund as calculated on the most

recent preceding valuation date of the fund.

7 In the case of a private placement memorandum,

such memorandum must contain substantially the

same information that would be disclosed in a

prospectus if the offering of the securities were

made in a registered public offering under the

Securities Act of 1933. In the Department’s view,

the private placement memorandum must contain

sufficient information to permit plan fiduciaries to

make informed investment decisions. For purposes

of this exemption, references to ‘‘prospectus’’

include any related prospectus supplement thereto,

pursuant to which Securities are offered to

investors.

23, 1997); PTE 97–34, 62 FR 39021 (July

21, 1997); PTE 98–08, 63 FR 8498

(February 19, 1998); PTE 99–11, 64 FR

11046 (March 8, 1999); PTE 2000–19, 65

FR 25950 (May 4, 2000); PTE 2000–33,

65 FR 37171 (June 13, 2000); PTE 2000–

41, 65 FR 51039 (August 22, 2000); and

PTE 2000–55 (November, 2000).

In addition, the Department notes that

it is also granting individual exemptive

relief for: Deutsche Bank AG, New York

Branch and Deutsche Morgan Grenfell/

C.J. Lawrence Inc., Final Authorization

Number (FAN) 97–03E (December 9,

1996); Credit Lyonnais Securities (USA)

Inc., FAN 97–21E (September 10, 1997);

ABN AMRO Inc., FAN 98–08E (April

27, 1998); and Ironwood Capital

Partners Ltd., FAN 99–31E (December

20, 1999), which received the approval

of the Department to engage in

transactions substantially similar to the

transactions described in the

Underwriter Exemptions pursuant to

PTE 96–62.

I. Transactions

A. Effective for transactions occurring

on or after August 23, 2000, the

restrictions of sections 406(a) and 407(a)

of the Act, and the taxes imposed by

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

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

(D) of the Code shall not apply to the

following transactions involving Issuers

and Securities evidencing interests

therein:

(1) The direct or indirect sale,

exchange or transfer of Securities in the

initial issuance of Securities between

the Sponsor or Underwriter and an

employee benefit plan when the

Sponsor, Servicer, Trustee or Insurer of

an Issuer, the Underwriter of the

Securities representing an interest in the

Issuer, or an Obligor is a party in

interest with respect to such plan;

(2) The direct or indirect acquisition

or disposition of Securities by a plan in

the secondary market for such

Securities; and

(3) The continued holding of

Securities acquired by a plan pursuant

to subsection I.A.(1) or (2).

Notwithstanding the foregoing,

section I.A. does not provide an

exemption from the restrictions of

sections 406(a)(1)(E), 406(a)(2) and 407

of the Act for the acquisition or holding

of a Security on behalf of an Excluded

Plan by any person who has

discretionary authority or renders

investment advice with respect to the

assets of that Excluded Plan.5

B. Effective for transactions occurring

on or after August 23, 2000, the

restrictions of sections 406(b)(1) and

406(b)(2) of the Act and the taxes

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

the Code, by reason of section

4975(c)(1)(E) of the Code, shall not

apply to:

(1) The direct or indirect sale,

exchange or transfer of Securities in the

initial issuance of Securities between

the Sponsor or Underwriter and a plan

when the person who has discretionary

authority or renders investment advice

with respect to the investment of plan

assets in the Securities is (a) an Obligor

with respect to 5 percent or less of the

fair market value of obligations or

receivables contained in the Issuer, or

(b) an Affiliate of a person described in

(a); if:

(i) The plan is not an Excluded Plan;

(ii) Solely in the case of an acquisition

of Securities in connection with the

initial issuance of the Securities, at least

50 percent of each class of Securities in

which plans have invested is acquired

by persons independent of the members

of the Restricted Group and at least 50

percent of the aggregate interest in the

Issuer is acquired by persons

independent of the Restricted Group;

(iii) A plan’s investment in each class

of Securities does not exceed 25 percent

of all of the Securities of that class

outstanding at the time of the

acquisition; and

(iv) Immediately after the acquisition

of the Securities, no more than 25

percent of the assets of a plan with

respect to which the person has

discretionary authority or renders

investment advice are invested in

Securities representing an interest in an

Issuer containing assets sold or serviced

by the same entity.6 For purposes of this

paragraph (iv) only, an entity will not be

considered to service assets contained

in an Issuer if it is merely a Subservicer

of that Issuer;

(2) The direct or indirect acquisition

or disposition of Securities by a plan in

the secondary market for such

Securities, provided that the conditions

set forth in paragraphs (i), (iii) and (iv)

of subsection I.B.(1) are met; and

(3) The continued holding of

Securities acquired by a plan pursuant

to subsection I.B.(1) or (2).

C. Effective for transaction occurring

on or after August 23, 2000, the

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

and 407(a) of the Act, and the taxes

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

the Code by reason of section 4975(c) of

the Code, shall not apply to transactions

in connection with the servicing,

management and operation of an Issuer,

including the use of any Eligible Swap

transaction; or, effective January 1,

1999, the defeasance of a mortgage

obligation held as an asset of the Issuer

through the substitution of a new

mortgage obligation in a commercial

mortgage-backed Designated

Transaction, provided:

(1) Such transactions are carried out

in accordance with the terms of a

binding Pooling and Servicing

Agreement;

(2) The Pooling and Servicing

Agreement is provided to, or described

in all material respects in the prospectus

or private placement memorandum

provided to, investing plans before they

purchase Securities issued by the

Issuer; 7 and

(3) The defeasance of a mortgage

obligation and the substitution of a new

mortgage obligation in a commercial

mortgage-backed Designated

Transaction meet the terms and

conditions for such defeasance and

substitution as are described in the

prospectus or private placement

memorandum for such Securities,

which terms and conditions have been

approved by a Rating Agency and does

not result in the Securities receiving a

lower credit rating from the Rating

Agency than the current rating of the

Securities.

Notwithstanding the foregoing,

section I.C. does not provide an

exemption from the restrictions of

section 406(b) of the Act or from the

taxes imposed by reason of section

4975(c) of the Code for the receipt of a

fee by a Servicer of the Issuer from a

person other than the Trustee or

Sponsor, unless such fee constitutes a

Qualified Administrative Fee.

D. Effective for transactions occurring

on or after August 23, 2000, the

restrictions of sections 406(a) and 407(a)

of the Act, and the taxes imposed by

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

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

Federal Register / Vol. 65, No. 219 / Monday, November 13, 2000 / Notices 67769

(D) of the Code, shall not apply to any

transactions to which those restrictions

or taxes would otherwise apply merely

because a person is deemed to be a party

in interest or disqualified person

(including a fiduciary) with respect to a

plan by virtue of providing services to

the plan (or by virtue of having a

relationship to such service provider

described in section 3(14)(F), (G), (H) or

(I) of the Act or section 4975(e)(2)(F),

(G), (H) or (I) of the Code), solely

because of the plan’s ownership of

Securities.

II. General Conditions

A. The relief provided under section

I. is available only if the following

conditions are met:

(1) The acquisition of Securities by a

plan is on terms (including the Security

price) that are at least as favorable to the

plan as they would be in an arm’slength transaction with an unrelated

party;

(2) The rights and interests evidenced

by the Securities are not subordinated to

the rights and interests evidenced by

other Securities of the same Issuer,

unless the Securities are issued in a

Designated Transaction;

(3) The Securities acquired by the

plan have received a rating from a

Rating Agency at the time of such

acquisition that is in one of the three (or

in the case of Designated Transactions,

four) highest generic rating categories;

(4) The Trustee is not an Affiliate of

any member of the Restricted Group.

For purposes of this requirement:

(a) The Trustee shall not be

considered to be an Affiliate of a

Servicer solely because the Trustee has

succeeded to the rights and

responsibilities of the Servicer pursuant

to the terms of a Pooling and Servicing

Agreement providing for such

succession upon the occurrence of one

or more events of default by the

Servicer; and

(b) Effective for transactions occurring

on or after January 1, 1998, subsection

II.A.(4) will be deemed satisfied

notwithstanding a Servicer becoming an

Affiliate of the Trustee as the result of

a merger or acquisition involving the

Trustee, such Servicer and/or their

Affiliates which occurs after the initial

issuance of the Securities, provided

that:

(i) such Servicer ceases to be an

Affiliate of the Trustee no later than six

months after the later of August 23,

2000 or the date such Servicer became

an Affiliate of the Trustee; and

(ii) such Servicer did not breach any

of its obligations under the Pooling and

Servicing Agreement, unless such

breach was immaterial and timely cured

in accordance with the terms of such

agreement, during the period from the

closing date of such merger or

acquisition transaction through the date

the Servicer ceased to be an Affiliate of

the Trustee;

(5) The sum of all payments made to

and retained by the Underwriters in

connection with the distribution or

placement of Securities represents not

more than Reasonable Compensation for

underwriting or placing the Securities;

the sum of all payments made to and

retained by the Sponsor pursuant to the

assignment of obligations (or interests

therein) to the Issuer represents not

more than the fair market value of such

obligations (or interests); and the sum of

all payments made to and retained by

the Servicer represents not more than

Reasonable Compensation for the

Servicer’s services under the Pooling

and Servicing Agreement and

reimbursement of the Servicer’s

reasonable expenses in connection

therewith;

(6) The plan investing in such

Securities is an ‘‘accredited investor’’ as

defined in Rule 501(a)(1) of Regulation

D of the Securities and Exchange

Commission under the Securities Act of

1933; and

(7) In the event that the obligations

used to fund a Issuer have not all been

transferred to the Issuer on the Closing

Date, additional obligations of the types

specified in subsection III.B.(1) may be

transferred to the Issuer during the PreFunding Period in exchange for

amounts credited to the Pre-Funding

Account, provided that:

(a) The Pre-Funding Limit is not

exceeded;

(b) All such additional obligations

meet the same terms and conditions for

determining the eligibility of the

original obligations used to create the

Issuer (as described in the prospectus or

private placement memorandum and/or

Pooling and Servicing Agreement for

such Securities), which terms and

conditions have been approved by a

Rating Agency. Notwithstanding the

foregoing, the terms and conditions for

determining the eligibility of an

obligation may be changed if such

changes receive prior approval either by

a majority vote of the outstanding

securityholders or by a Rating Agency;

(c) The transfer of such additional

obligations to the Issuer during the PreFunding Period does not result in the

Securities receiving a lower credit rating

from a Rating Agency upon termination

of the Pre-Funding Period than the

rating that was obtained at the time of

the initial issuance of the Securities by

the Issuer;

(d) The weighted average annual

percentage interest rate (the average

interest rate) for all of the obligations

held by the Issuer at the end of the PreFunding Period will not be more than

100 basis points lower than the average

interest rate for the obligations which

were transferred to the Issuer on the

Closing Date;

(e) In order to ensure that the

characteristics of the receivables

actually acquired during the PreFunding Period are substantially similar

to those which were acquired as of the

Closing Date, the characteristics of the

additional obligations will either be

monitored by a credit support provider

or other insurance provider which is

independent of the Sponsor or an

independent accountant retained by the

Sponsor will provide the Sponsor with

a letter (with copies provided to the

Rating Agency, the Underwriter and the

Trustee) stating whether or not the

characteristics of the additional

obligations conform to the

characteristics of such obligations

described in the prospectus, private

placement memorandum and/or Pooling

and Servicing Agreement. In preparing

such letter, the independent accountant

will use the same type of procedures as

were applicable to the obligations which

were transferred as of the Closing Date;

(f) The Pre-Funding Period shall be

described in the prospectus or private

placement memorandum provided to

investing plans; and

(g) The Trustee of the Trust (or any

agent with which the Trustee contracts

to provide Trust services) will be a

substantial financial institution or trust

company experienced in trust activities

and familiar with its duties,

responsibilities and liabilities as a

fiduciary under the Act. The Trustee, as

the legal owner of the obligations in the

Trust or the holder of a security interest

in the obligations held by the Issuer,

will enforce all the rights created in

favor of securityholders of the Issuer,

including employee benefit plans

subject to the Act;

(8) In order to insure that the assets

of the Issuer may not be reached by

creditors of the Sponsor in the event of

bankruptcy or other insolvency of the

Sponsor:

(a) The legal documents establishing

the Issuer will contain:

(i) Restrictions on the Issuer’s ability

to borrow money or issue debt other

than in connection with the

securitization;

(ii) Restrictions on the Issuer merging

with another entity, reorganizing,

liquidating or selling assets (other than

in connection with the securitization);

67770 Federal Register / Vol. 65, No. 219 / Monday, November 13, 2000 / Notices

(iii) Restrictions limiting the

authorized activities of the Issuer to

activities relating to the securitization;

(iv) If the Issuer is not a Trust,

provisions for the election of at least one

independent director/partner/member

whose affirmative consent is required

before a voluntary bankruptcy petition

can be filed by the Issuer; and

(v) If the Issuer is not a Trust,

requirements that each independent

director/partner/member must be an

individual that does not have a

significant interest in, or other

relationships with, the Sponsor or any

of its Affiliates; and

(b) The Pooling and Servicing

Agreement and/or other agreements

establishing the contractual

relationships between the parties to the

securitization transaction will contain

covenants prohibiting all parties thereto

from filing an involuntary bankruptcy

petition against the Issuer or initiating

any other form of insolvency proceeding

until after the Securities have been paid;

and

(c) Prior to the issuance by the Issuer

of any Securities, a legal opinion is

received which states that either:

(i) A ‘‘true sale’’ of the assets being

transferred to the Issuer by the Sponsor

has occurred and that such transfer is

not being made pursuant to a financing

of the assets by the Sponsor; or

(ii) In the event of insolvency or

receivership of the Sponsor, the assets

transferred to the Issuer will not be part

of the estate of the Sponsor;

(9) If a particular class of Securities

held by any plan involves a Ratings

Dependent or Non-Ratings Dependent

Swap entered into by the Issuer, then

each particular swap transaction

relating to such Securities:

(a) Shall be an Eligible Swap;

(b) Shall be with an Eligible Swap

Counterparty;

(c) In the case of a Ratings Dependent

Swap, shall provide that if the credit

rating of the counterparty is withdrawn

or reduced by any Rating Agency below

a level specified by the Rating Agency,

the Servicer (as agent for the Trustee)

shall, within the period specified under

the Pooling and Servicing Agreement:

(i) Obtain a replacement swap

agreement with an Eligible Swap

Counterparty which is acceptable to the

Rating Agency and the terms of which

are substantially the same as the current

swap agreement (at which time the

earlier swap agreement shall terminate);

or

(ii) Cause the swap counterparty to

establish any collateralization or other

arrangement satisfactory to the Rating

Agency such that the then current rating

by the Rating Agency of the particular

class of Securities will not be

withdrawn or reduced.

In the event that the Servicer fails to

meet its obligations under this

subsection II.A.(9)(c), plan

securityholders will be notified in the

immediately following Trustee’s

periodic report which is provided to

securityholders, and sixty days after the

receipt of such report, the exemptive

relief provided under section I.C. will

prospectively cease to be applicable to

any class of Securities held by a plan

which involves such Ratings Dependent

Swap; provided that in no event will

such plan securityholders be notified

any later than the end of the second

month that begins after the date on

which such failure occurs.

(d) In the case of a Non-Ratings

Dependent Swap, shall provide that, if

the credit rating of the counterparty is

withdrawn or reduced below the lowest

level specified in section III.GG., the

Servicer (as agent for the Trustee) shall

within a specified period after such

rating withdrawal or reduction:

(i) Obtain a replacement swap

agreement with an Eligible Swap

Counterparty, the terms of which are

substantially the same as the current

swap agreement (at which time the

earlier swap agreement shall terminate);

or

(ii) Cause the swap counterparty to

post collateral with the Trustee in an

amount equal to all payments owed by

the counterparty if the swap transaction

were terminated; or

(iii) Terminate the swap agreement in

accordance with its terms; and

(e) Shall not require the Issuer to

make any termination payments to the

counterparty (other than a currently

scheduled payment under the swap

agreement) except from Excess Spread

or other amounts that would otherwise

be payable to the Servicer or the

Sponsor;

(10) Any class of Securities, to which

one or more swap agreements entered

into by the Issuer applies, may be

acquired or held in reliance upon this

Underwriter Exemption only by

Qualified Plan Investors; and

(11) Prior to the issuance of any debt

securities, a legal opinion is received

which states that the debt holders have

a perfected security interest in the

Issuer’s assets.

B. Neither any Underwriter, Sponsor,

Trustee, Servicer, Insurer or any

Obligor, unless it or any of its Affiliates

has discretionary authority or renders

investment advice with respect to the

plan assets used by a plan to acquire

Securities, shall be denied the relief

provided under section I., if the

provision of subsection II.A.(6) is not

satisfied with respect to acquisition or

holding by a plan of such Securities,

provided that (1) such condition is

disclosed in the prospectus or private

placement memorandum; and (2) in the

case of a private placement of

Securities, the Trustee obtains a

representation from each initial

purchaser which is a plan that it is in

compliance with such condition, and

obtains a covenant from each initial

purchaser to the effect that, so long as

such initial purchaser (or any transferee

of such initial purchaser’s Securities) is

required to obtain from its transferee a

representation regarding compliance

with the Securities Act of 1933, any

such transferees will be required to

make a written representation regarding

compliance with the condition set forth

in subsection II.A.(6).

III. Definitions

For purposes of this exemption:

A. ‘‘Security’’ means:

(1) A pass-through certificate or trust

certificate that represents a beneficial

ownership interest in the assets of an

Issuer which is a Trust and which

entitles the holder to payments of

principal, interest and/or other

payments made with respect to the

assets of such Trust; or

(2) A security which is denominated

as a debt instrument that is issued by,

and is an obligation of, an Issuer; with

respect to which the Underwriter is

either (i) the sole underwriter or the

manager or co-manager of the

underwriting syndicate, or (ii) a selling

or placement agent.

B. ‘‘Issuer’’ means an investment pool,

the corpus or assets of which are held

in trust (including a grantor or owner

Trust) or whose assets are held by a

partnership, special purpose

corporation or limited liability company

(which Issuer may be a Real Estate

Mortgage Investment Conduit (REMIC)

or a Financial Asset Securitization

Investment Trust (FASIT) within the

meaning of section 860D(a) or section

860L, respectively, of the Code); and the

corpus or assets of which consist solely

of:

(1)(a) Secured consumer receivables

that bear interest or are purchased at a

discount (including, but not limited to,

home equity loans and obligations

secured by shares issued by a

cooperative housing association); and/or

(b) Secured credit instruments that

bear interest or are purchased at a

discount in transactions by or between

business entities (including, but not

limited to, Qualified Equipment Notes

Secured by Leases); and/or

(c) Obligations that bear interest or are

purchased at a discount and which are

Federal Register / Vol. 65, No. 219 / Monday, November 13, 2000 / Notices 67771

8 In Advisory Opinion 99–05A (Feb. 22, 1999),

the Department expressed its view that mortgage

pool certificates guaranteed and issued by the

Federal Agricultural Mortgage Corporation

(‘‘Farmer Mac’’) meet the definition of a guaranteed

governmental mortgage pool certificate as defined

in 29 CFR 2510.3–101(i)(2).

9The Department wishes to take the opportunity

to clarify its view that the definition of Issuer

contained in subsection III.B. includes a two-tier

structure under which Securities issued by the first

Issuer, which contains a pool of receivables

described above, are transferred to a second Issuer

which issues Securities that are sold to plans.

However, the Department is of the further view that,

since the Underwriter Exemption generally

provides relief only for the direct or indirect

acquisition or disposition of Securities that are not

subordinated, no relief would be available if the

Securities held by the second Issuer were

subordinated to the rights and interests evidenced

by other Securities issued by the first Issuer, unless

such Securities were issued in a Designated

Transaction.

secured by single-family residential,

multi-family residential and/or

commercial real property (including

obligations secured by leasehold

interests on residential or commercial

real property); and/or

(d) Obligations that bear interest or

are purchased at a discount and which

are secured by motor vehicles or

equipment, or Qualified Motor Vehicle

Leases; and/or

(e) Guaranteed governmental

mortgage pool certificates, as defined in

29 CFR 2510.3–101(i)(2) 8; and/or

(f) Fractional undivided interests in

any of the obligations described in

clauses (a)–(e) of this subsection B.(1).9

Notwithstanding the foregoing,

residential and home equity loan

receivables issued in Designated

Transactions may be less than fully

secured, provided that: (i) The rights

and interests evidenced by the

Securities issued in such Designated

Transactions (as defined in section

III.DD.) are not subordinated to the

rights and interests evidenced by

Securities of the same Issuer; (ii) such

Securities acquired by the plan have

received a rating from a Rating Agency

at the time of such acquisition that is in

one of the two highest generic rating

categories; and (iii) any obligation

included in the corpus or assets of the

Issuer must be secured by collateral

whose fair market value on the Closing

Date of the Designated Transaction is at

least equal to 80% of the sum of: (I) the

outstanding principal balance due

under the obligation which is held by

the Issuer; and (II) the outstanding

principal balance(s) of any other

obligation(s) of higher priority (whether

or not held by the Issuer) which are

secured by the same collateral.

(2) Property which had secured any of

the obligations described in subsection

III.B.(1);

(3)(a) Undistributed cash or temporary

investments made therewith maturing

no later than the next date on which

distributions are made to

securityholders; and/or

(b) Cash or investments made

therewith which are credited to an

account to provide payments to

securityholders pursuant to any Eligible

Swap Agreement meeting the conditions

of subsection II.A.(9) or pursuant to any

Eligible Yield Supplement Agreement;

and/or

(c) Cash transferred to the Issuer on

the Closing Date and permitted

investments made therewith which:

(i) Are credited to a Pre-Funding

Account established to purchase

additional obligations with respect to

which the conditions set forth in

paragraphs (a)–(g) of subsection II.A.(7)

are met; and/or

(ii) Are credited to a Capitalized

Interest Account; and

(iii) Are held by the Issuer for a period

ending no later than the first

distribution date to securityholders

occurring after the end of the PreFunding Period.

For purposes of this paragraph (c) of

subsection III.B.(3), the term ‘‘permitted

investments’’ means investments which:

(i) are either: (x) direct obligations of, or

obligations fully guaranteed as to timely

payment of principal and interest by,

the United States or any agency or

instrumentality thereof, provided that

such obligations are backed by the full

faith and credit of the United States or

(y) have been rated (or the Obligor has

been rated) in one of the three highest

generic rating categories by a Rating

Agency; (ii) are described in the Pooling

and Servicing Agreement; and (iii) are

permitted by the Rating Agency.

(4) Rights of the Trustee under the

Pooling and Servicing Agreement, and

rights under any insurance policies,

third-party guarantees, contracts of

suretyship, Eligible Yield Supplement

Agreements, Eligible Swap Agreements

meeting the conditions of subsection

II.A.(9) or other credit support

arrangements with respect to any

obligations described in subsection

III.B.(1).

Notwithstanding the foregoing, the

term ‘‘Issuer’’ does not include any

investment pool unless: (i) the assets of

the type described in paragraphs (a)–(f)

of subsection III.B.(1) which are

contained in the investment pool have

been included in other investment

pools, (ii) Securities evidencing

interests in such other investment pools

have been rated in one of the three (or

in the case of Designated Transactions,

four) highest generic rating categories by

a Rating Agency for at least one year

prior to the plan’s acquisition of

Securities pursuant to this Underwriter

Exemption, and (iii) Securities

evidencing interests in such other

investment pools have been purchased

by investors other than plans for at least

one year prior to the plan’s acquisition

of Securities pursuant to this

Underwriter Exemption.

C. ‘‘Underwriter’’ means:

(1) An entity defined as an

Underwriter in subsection III.C.(1) of

each of the Underwriter Exemptions

that are being amended by this

exemption. In addition, the term

Underwriter includes Deutsche Bank

AG, New York Branch and Deutsche

Morgan Grenfell/C.J. Lawrence Inc,

Credit Lyonnais Securities (USA) Inc.,

ABN AMRO Inc. and Ironwood Capital

Partners Ltd. (which received the

approval of the Department to engage in

transactions substantially similar to the

transactions described in the

Underwriter Exemptions pursuant to

PTE 96–62);

(2) Any person directly or indirectly,

through one or more intermediaries,

controlling, controlled by or under

common control with such entity; or

(3) Any member of an underwriting

syndicate or selling group of which a

person described in subsections III.C.(1)

or (2) is a manager or co-manager with

respect to the Securities.

D. ‘‘Sponsor’’ means the entity that

organizes an Issuer by depositing

obligations therein in exchange for

Securities.

E. ‘‘Master Servicer’’ means the entity

that is a party to the Pooling and

Servicing Agreement relating to assets of

the Issuer and is fully responsible for

servicing, directly or through

Subservicers, the assets of the Issuer.

F. ‘‘Subservicer’’ means an entity

which, under the supervision of and on

behalf of the Master Servicer, services

loans contained in the Issuer, but is not

a party to the Pooling and Servicing

Agreement.

G. ‘‘Servicer’’ means any entity which

services loans contained in the Issuer,

including the Master Servicer and any

Subservicer.

H. ‘‘Trust’’ means an Issuer which is

a trust (including an owner trust,

grantor trust or a REMIC or FASIT

which is organized as a Trust).

I. ‘‘Trustee’’ means the Trustee of any

Trust which issues Securities and also

includes an Indenture Trustee.

‘‘Indenture Trustee’’ means the Trustee

appointed under the indenture pursuant

to which the subject Securities are

issued, the rights of holders of the

Securities are set forth and a security

interest in the Trust assets in favor of

67772 Federal Register / Vol. 65, No. 219 / Monday, November 13, 2000 / Notices

the holders of the Securities is created.

The Trustee or the Indenture Trustee is

also a party to or beneficiary of all the

documents and instruments transferred

to the Issuer, and as such, has both the

authority to, and the responsibility for,

enforcing all the rights created thereby

in favor of holders of the Securities,

including those rights arising in the

event of default by the servicer.

J. ‘‘Insurer’’ means the insurer or

guarantor of, or provider of other credit

support for, an Issuer. Notwithstanding

the foregoing, a person is not an insurer

solely because it holds Securities

representing an interest in an Issuer

which are of a class subordinated to

Securities representing an interest in the

same Issuer.

K. ‘‘Obligor’’ means any person, other

than the Insurer, that is obligated to

make payments with respect to any

obligation or receivable included in the

Issuer. Where an Issuer contains

Qualified Motor Vehicle Leases or

Qualified Equipment Notes Secured by

Leases, ‘‘Obligor’’ shall also include any

owner of property subject to any lease

included in the Issuer, or subject to any

lease securing an obligation included in

the Issuer.

L. ‘‘Excluded Plan’’ means any plan

with respect to which any member of

the Restricted Group is a ‘‘plan sponsor’’

within the meaning of section 3(16)(B)

of the Act.

M. ‘‘Restricted Group’’ with respect to

a class of Securities means:

(1) Each Underwriter;

(2) Each Insurer;

(3) The Sponsor;

(4) The Trustee;

(5) Each Servicer;

(6) Any Obligor with respect to

obligations or receivables included in

the Issuer constituting more than 5

percent of the aggregate unamortized

principal balance of the assets in the

Issuer, determined on the date of the

initial issuance of Securities by the

Issuer;

(7) Each counterparty in an Eligible

Swap Agreement; or

(8) Any Affiliate of a person described

in subsections III.M.(1)–(7).

N. ‘‘Affiliate’’ of another person

includes:

(1) Any person directly or indirectly,

through one or more intermediaries,

controlling, controlled by, or under

common control with such other

person;

(2) Any officer, director, partner,

employee, relative (as defined in section

3(15) of the Act), a brother, a sister, or

a spouse of a brother or sister of such

other person; and

(3) Any corporation or partnership of

which such other person is an officer,

director or partner.

O. ‘‘Control’’ means the power to

exercise a controlling influence over the

management or policies of a person

other than an individual.

P. A person will be ‘‘independent’’ of

another person only if:

(1) Such person is not an Affiliate of

that other person; and

(2) The other person, or an Affiliate

thereof, is not a fiduciary who has

investment management authority or

renders investment advice with respect

to any assets of such person.

Q. ‘‘Sale’’ includes the entrance into

a Forward Delivery Commitment,

provided:

(1) The terms of the Forward Delivery

Commitment (including any fee paid to

the investing plan) are no less favorable

to the plan than they would be in an

arm’s-length transaction with an

unrelated party;

(2) The prospectus or private

placement memorandum is provided to

an investing plan prior to the time the

plan enters into the Forward Delivery

Commitment; and

(3) At the time of the delivery, all

conditions of this Underwriter

Exemption applicable to sales are met.

R. ‘‘Forward Delivery Commitment’’

means a contract for the purchase or

sale of one or more Securities to be

delivered at an agreed future settlement

date. The term includes both mandatory

contracts (which contemplate obligatory

delivery and acceptance of the

Securities) and optional contracts

(which give one party the right but not

the obligation to deliver Securities to, or

demand delivery of Securities from, the

other party).

S. ‘‘Reasonable Compensation’’ has

the same meaning as that term is

defined in 29 CFR 2550.408c–2.

T. ‘‘Qualified Administrative Fee’’

means a fee which meets the following

criteria:

(1) The fee is triggered by an act or

failure to act by the Obligor other than

the normal timely payment of amounts

owing in respect of the obligations;

(2) The Servicer may not charge the

fee absent the act or failure to act

referred to in subsection III.T.(1);

(3) The ability to charge the fee, the

circumstances in which the fee may be

charged, and an explanation of how the

fee is calculated are set forth in the

Pooling and Servicing Agreement; and

(4) The amount paid to investors in

the Issuer will not be reduced by the

amount of any such fee waived by the

Servicer.

U. ‘‘Qualified Equipment Note

Secured By A Lease’’ means an

equipment note:

(1) Which is secured by equipment

which is leased;

(2) Which is secured by the obligation

of the lessee to pay rent under the

equipment lease; and

(3) With respect to which the Issuer’s

security interest in the equipment is at

least as protective of the rights of the

Issuer as the Issuer would have if the

equipment note were secured only by

the equipment and not the lease.

V. ‘‘Qualified Motor Vehicle Lease’’

means a lease of a motor vehicle where:

(1) The Issuer owns or holds a

security interest in the lease;

(2) The Issuer owns or holds a

security interest in the leased motor

vehicle; and

(3) The Issuer’s security interest in the

leased motor vehicle is at least as

protective of the Issuer’s rights as the

Issuer would receive under a motor

vehicle installment loan contract.

W. ‘‘Pooling and Servicing

Agreement’’ means the agreement or

agreements among a Sponsor, a Servicer

and the Trustee establishing a Trust.

‘‘Pooling and Servicing Agreement’’ also

includes the indenture entered into by

the Issuer and the Indenture Trustee.

X. ‘‘Rating Agency’’ means Standard &

Poor’s Ratings Services, a division of

The McGraw-Hill Companies Inc.,

Moody’s Investors Service, Inc., Duff &

Phelps Credit Rating Co., Fitch ICBA,

Inc. or any successors thereto.

Y. ‘‘Capitalized Interest Account’’

means an Issuer account: (i) Which is

established to compensate

securityholders for shortfalls, if any,

between investment earnings on the PreFunding Account and the interest rate

payable under the Securities; and (ii)

which meets the requirements of

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

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

Issuer is formed, the Securities are first

issued and the Issuer’s assets (other than

those additional obligations which are

to be funded from the Pre-Funding

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

are transferred to the Issuer.

AA. ‘‘Pre-Funding Account’’ means

an Issuer account: (i) Which is

established to purchase additional

obligations, which obligations meet the

conditions set forth in paragraph (a)–(g)

of subsection II.A.(7); and (ii) which

meets the requirements of paragraph (c)

of subsection III.B.(3).

BB. ‘‘Pre-Funding Limit’’ means a

percentage or ratio of the amount

allocated to the Pre-Funding Account,

as compared to the total principal

amount of the Securities being offered,

which is less than or equal to: (i) 40

percent, effective for transactions

occurring on or after January 1, 1992,

but prior to May 23, 1997; and (ii) 25

percent, for transactions occurring on or

after May 23, 1997.

Federal Register / Vol. 65, No. 219 / Monday, November 13, 2000 / Notices 67773

10PTE 84–14 provides a class exemption for

transactions between a party in interest with respect

to an employee benefit plan and an investment fund

(including either a single customer or pooled

separate account) in which the plan has an interest,

and which is managed by a QPAM, provided

certain conditions are met. QPAMs (e.g., banks,

insurance companies, registered investment

advisers with total client assets under management

in excess of $50 million) are considered to be

experienced investment managers for plan investors

that are aware of their fiduciary duties under

ERISA.

11PTE 96–23 permits various transactions

involving employee benefit plans whose assets are

managed by an INHAM, an entity which is

generally a subsidiary of an employer sponsoring

the plan which is a registered investment adviser

with management and control of total assets

attributable to plans maintained by the employer

and its affiliates which are in excess of $50 million.

CC. ‘‘Pre-Funding Period’’ means the

period commencing on the Closing Date

and ending no later than the earliest to

occur of: (i) The date the amount on

deposit in the Pre-Funding Account is

less than the minimum dollar amount

specified in the Pooling and Servicing

Agreement; (ii) the date on which an

event of default occurs under the

Pooling and Servicing Agreement or (iii)

the date which is the later of three

months or ninety days after the Closing

Date.

DD. ‘‘Designated Transaction’’ means

a securitization transaction in which the

assets of the Issuer consist of secured

consumer receivables, secured credit

instruments or secured obligations that

bear interest or are purchased at a

discount and are: (i) Motor vehicle,

home equity and/or manufactured

housing consumer receivables; and/or

(ii) motor vehicle credit instruments in

transactions by or between business

entities; and/or (iii) single-family

residential, multi-family residential,

home equity, manufactured housing

and/or commercial mortgage obligations

that are secured by single-family

residential, multi-family residential,

commercial real property or leasehold

interests therein. For purposes of this

section III.DD., the collateral securing

motor vehicle consumer receivables or

motor vehicle credit instruments may

include motor vehicles and/or Qualified

Motor Vehicle Leases.

EE. ‘‘Ratings Dependent Swap’’ means

an interest rate swap, or (if purchased

by or on behalf of the Issuer) an interest

rate cap contract, that is part of the

structure of a class of Securities where

the rating assigned by the Rating Agency

to any class of Securities held by any

plan is dependent on the terms and

conditions of the swap and the rating of

the counterparty, and if such Security

rating is not dependent on the existence

of the swap and rating of the

counterparty, such swap or cap shall be

referred to as a ‘‘Non-Ratings Dependent

Swap’’. With respect to a Non-Ratings

Dependent Swap, each Rating Agency

rating the Securities must confirm, as of

the date of issuance of the Securities by

the Issuer, that entering into an Eligible

Swap with such counterparty will not

affect the rating of the Securities.

FF. ‘‘Eligible Swap’’ means a Ratings

Dependent or Non-Ratings Dependent

Swap:

(1) Which is denominated in U.S.

dollars;

(2) Pursuant to which the Issuer pays

or receives, on or immediately prior to

the respective payment or distribution

date for the class of Securities to which

the swap relates, a fixed rate of interest,

or a floating rate of interest based on a

publicly available index (e.g., LIBOR or

the U.S. Federal Reserve’s Cost of Funds

Index (COFI)), with the Issuer receiving

such payments on at least a quarterly

basis and obligated to make separate

payments no more frequently than the

counterparty, with all simultaneous

payments being netted;

(3) Which has a notional amount that

does not exceed either: (i) The principal

balance of the class of Securities to

which the swap relates, or (ii) the

portion of the principal balance of such

class represented solely by those types

of corpus or assets of the Issuer referred

to in subsections III.B.(1), (2) and (3);

(4) Which is not leveraged (i.e.,

payments are based on the applicable

notional amount, the day count

fractions, the fixed or floating rates

designated in subsection III.FF.(2), and

the difference between the products

thereof, calculated on a one to one ratio

and not on a multiplier of such

difference);

(5) Which has a final termination date

that is either the earlier of the date on

which the Issuer terminates or the

related class of securities is fully repaid;

and

(6) Which does not incorporate any

provision which could cause a

unilateral alteration in any provision

described in subsections III.FF.(1)

through (4) without the consent of the

Trustee.

GG. ‘‘Eligible Swap Counterparty’’

means a bank or other financial

institution which has a rating, at the

date of issuance of the Securities by the

Issuer, which is in one of the three

highest long-term credit rating

categories, or one of the two highest

short-term credit rating categories,

utilized by at least one of the Rating

Agencies rating the Securities; provided

that, if a swap counterparty is relying on

its short-term rating to establish

eligibility under the Underwriter

Exemption, such swap counterparty

must either have a long-term rating in

one of the three highest long-term rating

categories or not have a long-term rating

from the applicable Rating Agency, and

provided further that if the class of

Securities with which the swap is

associated has a final maturity date of

more than one year from the date of

issuance of the Securities, and such

swap is a Ratings Dependent Swap, the

swap counterparty is required by the

terms of the swap agreement to establish

any collateralization or other

arrangement satisfactory to the Rating

Agencies in the event of a ratings

downgrade of the swap counterparty.

HH. ‘‘Qualified Plan Investor’’ means

a plan investor or group of plan

investors on whose behalf the decision

to purchase Securities is made by an

appropriate independent fiduciary that

is qualified to analyze and understand

the terms and conditions of any swap

transaction used by the Issuer and the

effect such swap would have upon the

credit ratings of the Securities. For

purposes of the Underwriter Exemption,

such a fiduciary is either:

(1) A ‘‘qualified professional asset

manager’’ (QPAM),10 as defined under

Part V(a) of PTE 84–14, 49 FR 9494,

9506 (March 13, 1984);

(2) An ‘‘in-house asset manager’’

(INHAM),11 as defined under Part IV(a)

of PTE 96–23, 61 FR 15975, 15982

(April 10, 1996); or

(3) A plan fiduciary with total assets

under management of at least $100

million at the time of the acquisition of

such Securities.

II. ‘‘Excess Spread’’ means, as of any

day funds are distributed from the

Issuer, the amount by which the interest

allocated to Securities exceeds the

amount necessary to pay interest to

securityholders, servicing fees and

expenses.

JJ. ‘‘Eligible Yield Supplement

Agreement’’ means any yield

supplement agreement, similar yield

maintenance arrangement or, if

purchased by or on behalf of the Issuer,

an interest rate cap contract to

supplement the interest rates otherwise

payable on obligations described in

subsection III.B.(1). Effective for

transactions occurring on or after April

7, 1998, such an agreement or

arrangement may involve a notional

principal contract provided that:

(1) It is denominated in U.S. dollars;

(2) The Issuer receives on, or

immediately prior to the respective

payment date for the Securities covered

by such agreement or arrangement, a

fixed rate of interest or a floating rate of

interest based on a publicly available

index (e.g., LIBOR or COFI), with the

67774 Federal Register / Vol. 65, No. 219 / Monday, November 13, 2000 / Notices

Issuer receiving such payments on at

least a quarterly basis;

(3) It is not ‘‘leveraged’’ as described

in subsection III.FF.(4);

(4) It does not incorporate any

provision which would cause a

unilateral alteration in any provision

described in subsections III.JJ.(1)–(3)

without the consent of the Trustee;

(5) It is entered into by the Issuer with

an Eligible Swap Counterparty; and

(6) It has a notional amount that does

not exceed either: (i) the principal

balance of the class of Securities to

which such agreement or arrangement

relates, or (ii) the portion of the

principal balance of such class

represented solely by those types of

corpus or assets of the Issuer referred to

in subsections III.B.(1), (2) and (3).

IV. Modifications

For the Underwriter Exemptions

provided to Residential Funding

Corporation, Residential Funding

Mortgage Securities, Inc., et al. and GE

Capital Mortgage Services, Inc. and

GECC Capital Markets (the Applicants)

(PTEs 94–29 and 94–73, respectively);

A. Section III.A. of this exemption is

modified to read as follows:

A. ‘‘Security’’ means:

(1) A pass-through certificate or trust

certificate that represents a beneficial

ownership interest in the assets of an

Issuer which is a Trust and which

entitles the holder to payments of

principal, interest and/or other

payments made with respect to the

assets of such Trust; or

(2) A security which is denominated

as a debt instrument that is issued by,

and is an obligation of, an Issuer; with

respect to which (i) one of the

Applicants or any of its Affiliates is the

Sponsor, [and] an entity which has

received from the Department an

individual prohibited transaction

exemption relating to Securities which

is similar to this exemption, is the sole

underwriter or the manager or comanager of the underwriting syndicate

or a selling or placement agent or (ii)

one of the Applicants or any of its

Affiliates is the sole underwriter or the

manager or co-manager of the

underwriting syndicate, or a selling or

placement agent.

B. Section III.C. of this exemption is

modified to read as follows:

C. Underwriter means:

(1) An entity defined as an

Underwriter in subsection III.C.(1) of

each of the Underwriter Exemptions

that are being amended by this

exemption. In addition, the term

Underwriter includes Ironwood Capital

Partners Ltd., Deutsche Bank AG, New

York Branch and Deutsche Morgan

Grenfell/C.J. Lawrence Inc.; ABN AMRO

and Credit Lyonnais Securities, Inc.

(which received the approval of the

Department to engage in transactions

substantially similar to the transactions

described in the Underwriter

Exemptions pursuant to PTE 96–62);

(2) Any person directly or indirectly,

through one or more intermediaries,

controlling, controlled by or under

common control with such entity;

(3) Any member of an underwriting

syndicate or selling group of which a

person described in subsections III.C.(1)

or (2) above is a manager or co-manager

with respect to the Securities; or

(4) Any entity which has received

from the Department an individual

prohibited transaction exemption

relating to Securities which is similar to

this exemption.

I. Effective Date

This exemption is effective for

transactions occurring on or after

August 23, 2000, except as otherwise

provided in section I.C., subsection

II.A.(4)(b), and section III.JJ. of the

exemption. Section I.C., relating to the

defeasance of mortgage obligations, is

applicable to transactions occurring on

or after January 1, 1999; subsection

II.A.(4)(b) is applicable to transactions

occurring on or after January 1, 1998;

and section III.JJ., relating to Eligible

Yield Supplement Agreements

involving notional principal contracts,

is applicable to transactions occurring

on or after April 7, 1998.

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

November, 2000.

Ivan L. Strasfeld,

Director of Exemption, Determinations,

Pension and Welfare Benefits Administration,

U.S. Department of Labor.

[FR Doc. 00–28855 Filed 11–9–00; 8:45 am]

BILLING CODE 4510–29–P

DEPARTMENT OF LABOR

Pension and Welfare Benefits

Administration

[Prohibited Transaction Exemption 2000–

55; Exemption Application No. D–10863, et

al.]

Grant of Individual Exemptions;

Country Securities Corporation

(Countrywide)

AGENCY: Pension and Welfare Benefits

Administration, Labor.

ACTION: Grant of individual exemptions.

SUMMARY: This document contains

exemptions issued by the Department of

Labor (the Department) from certain of

the prohibited transaction restrictions of

the Employee Retirement Income

Security Act of 1974 (the Act) and/or

the Internal Revenue Code of 1986 (the

Code).

Notices were published in the Federal

Register of the pendency before the

Department of proposals to grant such

exemptions. The notices set forth a

summary of facts and representations

contained in each application for

exemption and referred interested

persons to the respective applications

for a complete statement of the facts and

representations. The applications have

been available for public inspection at

the Department in Washington, DC. The

notices also invited interested persons

to submit comments on the requested

exemptions to the Department. In

addition the notices stated that any

interested person might submit a

written request that a public hearing be

held (where appropriate). The

applicants have represented that they

have complied with the requirements of

the notification to interested persons.

No public comments and no requests for

a hearing, unless otherwise stated, were

received by the Department.

The notices of proposed exemption

were issued and the exemptions are

being granted solely by the Department

because, effective December 31, 1978,

section 102 of Reorganization Plan No.

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

transferred the authority of the Secretary

of the Treasury to issue exemptions of

the type proposed to the Secretary of

Labor.

Statutory Findings

In accordance with section 408(a) of

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

Code and the procedures set forth in 29

CFR Part 2570, Subpart B (55 FR 32836,

32847, August 10, 1990) and based upon

the entire record, the Department makes

the following findings:

(a) The exemptions are

administratively feasible;

(b) They are in the interests of the

plans and their participants and

beneficiaries; and

(c) They are protective of the rights of

the participants and beneficiaries of the

plans.

Countrywide Securities Corporation

(Countrywide) Located in Calabasas,

California

[Prohibited Transaction Exemption 2000–55;

Exemption Application No. D–10863]

Exemption

I. Transactions

A. Effective January 28, 2000, the

restrictions of sections 406(a) and 407(a)

of the Act, and the taxes imposed by