[Federal Register Volume 80, Number 72 (Wednesday, April 15, 2015)]
[Notices]
[Pages 20261-20268]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-08672]


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DEPARTMENT OF LABOR

Employee Benefits Security Administration

[Prohibited Transaction Exemption 2015-06; Application No. D-11827]


Notice of Exemption Involving BNP Paribas, S.A. (BNP or the 
Applicant); Located in Paris, France

AGENCY: Employee Benefits Security Administration, U.S. Department of 
Labor.

ACTION: Notice of Exemption.

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SUMMARY: This document contains a notice of exemption issued by the 
Department of Labor (the Department) from certain prohibited 
transaction restrictions of the Employee Retirement Income Security Act 
of 1974, as amended (ERISA), and the Internal Revenue Code of 1986, as 
amended (the Code). The exemption affects the ability of certain 
entities with specified relationships to BNP to continue to rely upon 
the relief provided by Prohibited Transaction Class Exemption 84-14.

DATES: Effective Date: This exemption is effective as of the earliest 
date a judgment of conviction against BNP is entered in either: (1) 
Case Number 14-cr-00460 (LGS) in the District Court for the Southern 
District of New York; or (2) Case Number 2014 NY 051231 in the Supreme 
Court of the State of New York, County of New York.

FOR FURTHER INFORMATION CONTACT: Scott Ness, telephone (202) 693-8561, 
Office of Exemption Determinations, Employee Benefits Security 
Administration, U.S. Department of Labor (these are not toll-free 
numbers).

SUPPLEMENTARY INFORMATION: On November 26, 2014, the Department of 
Labor (the Department) published a notice of proposed exemption in the 
Federal Register at 79 FR 70661, for certain entities with specified 
relationships to BNP to continue rely upon the relief provided by 
Prohibited Transaction Class Exemption (PTE) 84-14,\1\ notwithstanding 
judgments of conviction against BNP in: (1) Case Number 14-cr-00460 
(LGS) in the District Court for the Southern District of New York for 
conspiracy to commit an offense against the United States in violation 
of Title 18, United States Code, Section 371, by conspiring to violate 
the International Emergency Economic Powers Act, codified at Title 50, 
United States Code, Section 1701 et seq., and regulations issued 
thereunder, and the Trading with the Enemy Act, codified at Title 50, 
United States Code Appendix, Section 1 et seq., and regulations issued 
thereunder; and (2) Case Number 2014 NY 051231 in the Supreme Court of 
the State of New York, County of New York for falsifying business 
records in the first degree, in violation of Penal Law Sec.  175.10, 
and conspiracy in the fifth degree, in violation of Penal Law Sec.  
105.05(1).
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    \1\ 49 FR 9494 (March 13, 1984), as corrected at 50 FR 41430 
(October 10, 1985), as amended at 70 FR 49305 (August 23, 2005), and 
as amended at 75 FR 38837 (July 6, 2010).
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    The proposed exemption contains conditions described in the QPAM 
class exemption, as well as a set of additional conditions, that must 
be satisfied in order for asset managers with specified relationships 
to BNP to engage in the transactions described in the QPAM class 
exemption. The individual exemption was requested by BNP pursuant to 
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 
(76 FR 66637, 66644, October 27, 2011). Effective December 31, 1978, 
section 102 of the Reorganization Plan No. 4 of 1978, 5 U.S.C. App. 1 
(1996), transferred the authority of the Secretary of the Treasury to 
issue administrative exemptions under section 4975(c)(2) of the Code to 
the Secretary of Labor.

[[Page 20262]]

Written Comments

    The Department invited all interested persons to submit written 
comments and/or requests for a public hearing with respect to the 
notice of proposed exemption published in the Federal Register. During 
the comment period, the Department received two written comments on the 
proposed exemption, one from Public Citizen (a public interest group) 
in opposition of the exemption, and the other from BNP.
    A discussion of Public Citizen's comment and BNP's comment follows 
below. Any capitalized terms used herein that are not otherwise defined 
have the meanings ascribed to them in the Summary of Facts and 
Representations in the notice of proposed exemption.

Public Citizen's Comments Relating to Criminal Activity of BNP

    Public Citizen stated that legal tools, such as denial of the 
exemption, should be used to prevent criminal behavior. Public Citizen 
further asserted that convicted entities should not be permitted to 
engage in ``[c]omplex or higher risk investments,'' and that the lack 
of a criminal record should be a prerequisite to manage investments. 
Public Citizen also questioned certain BNP representations that plans 
would incur substantial costs as a result of BNP Affiliated QPAMs and 
BNP Related QPAMs (collectively, the BNP QPAMs) losing their ability to 
rely upon the relief in PTE 84-14 due to the Convictions. Public 
Citizen stated further that while punishment that penalizes employees 
who did no wrong should be avoided, ``collateral damage'' cannot always 
justify an exemption. Instead, it argues that an appropriate inquiry 
should be whether plan clients of the affected BNP QPAMs receive better 
investment returns from investment activities requiring reliance on PTE 
84-14 than they would otherwise receive.

Department's Response

    The Department notes that PTE 84-14 was granted based on an effort 
to improve the administration of the prohibited transaction rules of 
ERISA. Those rules prohibit various transactions between plans and 
certain parties in interest. The prohibited transaction rules sweep 
very broadly and, in some circumstances, could work to prevent 
beneficial transactions. For example, large employers and funds 
necessarily engage in a wide range of transactions with parties in 
interest that pose little danger to plan participants. For example, all 
of the different service providers to plans are technically parties in 
interest. Accordingly, Congress gave the Department authority to issue 
exemptions from the broad reach of the prohibited transaction rules 
where it has determined that such exemptions are in the interest of, 
and protective of, affected plans and the participants and 
beneficiaries thereof, as well as administratively feasible.
    Prohibited Transaction Exemption 84-14 (the QPAM Exemption) is one 
such exemption. A QPAM is a ``Qualified Professional Asset Manager.'' 
By definition, QPAMs are large regulated banks, savings and loan 
associations, insurance companies or federally registered investment 
advisors that meet certain standards of size and independence. PTE 84-
14 permits these independent plan asset managers to engage in a variety 
of beneficial arm's length transactions with parties in interest that 
would otherwise be prohibited. Under Part I of the class exemption, 
QPAMs cannot: Engage in self-dealing transactions; act in their own 
interest or the interest of their affiliates; and/or engage in 
transactions with parties that are in a position to affect their 
independent judgment, such as persons with ownership interests in the 
QPAM.
    Primarily, PTE 84-14 simply permits QPAMs to engage in various 
arm's length transactions with parties in interest and obviates the 
need to undertake time consuming compliance checks for parties in 
interest, forego investment opportunities, or seek an individual 
exemption from the Department for each transaction. The conditions in 
the exemption were designed to ensure that the transactions covered 
therein are protective of and beneficial to affected plans.
    The scope of the anti-criminal provision set forth in section 
I(g)of PTE 84-14 is very broad and covers entities with various 
relationships to a convicted entity. Some of those entities may not 
have had the ability to influence the policies, procedures or practices 
of the convicted entity; and they may not have been in a position to be 
influenced by the policies, procedures or practices of the convicted 
entity. Nevertheless, a consequence of the conviction of an entity with 
a business relationship to one or more QPAMs is that the QPAMs lose the 
ability to rely on the exemption for 10 years following the date of the 
conviction, unless granted individual exemptions.
    In reviewing applications for such exemptions, the Department will 
on a case-by-case basis consider the circumstances relating to the loss 
of QPAM status, and the specific conditions necessary to prevent 
potential abuse. Of particular importance is the degree to which the 
investment and compliance operations of the QPAM can be sufficiently 
isolated from the influence of ``bad actors''. Based on such 
considerations, the Department has previously granted conditional 
individual exemptions that permit asset managers to continue to engage 
in the transactions described in PTE 84-14, notwithstanding that the 
asset managers were affiliated with, or otherwise related to, a 
convicted entity.
    The Department has carefully considered Public Citizen's argument 
that BNP's exemption application should be rejected in order to deter 
criminal activity, the Department has concluded, however, that the 
interests of plan participants would be better protected by imposition 
of the stringent conditions set forth herein. It is unclear that the 
denial of the exemption application would have any meaningful effect on 
BNP's behavior. Moreover, the final exemption granted herein should 
promote adherence to strict fiduciary standards, insulate plans from 
any bad actors, and provide much or all of the deterrent effect that 
would have been achieved through outright denial.
    In this regard, it should be emphasized that BNP itself cannot act 
as a QPAM under the terms of the exemption, and that the BNP QPAMs were 
not involved in the criminal activities that give rise to the 
Convictions. Nor is the Department aware of any evidence that the 
investment management activities of the BNP QPAMs were affected, in any 
way, by BNP's criminal activities. Moreover, denial of the requested 
exemption would deprive BNP-related asset managers from the ability to 
act as QPAMs. It would not bar them from continuing to manage plan 
assets, and such managers could continue to engage in a wide range of 
transactions on behalf of those plans.
    The Department also notes Public Citizen's comments regarding the 
complexity of the transactions engaged in by BNP QPAMs, the relative 
investment returns of funds managed by those QPAMs, and the cost to 
plans for switching to a new QPAM. Undoubtedly, these are important 
issues that should be considered by the independent plan fiduciaries 
who hire or retain BNP asset managers. The Department does not believe 
these considerations are relevant, however, to its determination as to 
whether the BNP QPAMs may continue to engage in the transactions 
described in PTE 84-14 in light of the Convictions.

[[Page 20263]]

Public Citizen's Comments Regarding BNP Employees

    Public Citizen states that none of the individuals involved in the 
conduct underlying the Convictions should be allowed to manage ERISA 
and IRA assets. Public Citizen additionally questions whether it can be 
verified that employees of the BNP QPAMs were not involved in the 
crimes, and asserts that BNP should identify the individuals that 
participated in the criminal conduct so that the Department can confirm 
that they are not involved in oversight of the BNP QPAMs.

The Department's Response

    The Department believes that Public Citizen's concern is 
substantially addressed in the exemption as originally proposed, 
through Subsection I(f), which requires that each ``BNP Affiliated 
QPAM,'' as defined in the exemption, ensure that none of its employees 
or agents, if any, that were involved in the criminal conduct that 
underlies the Convictions will engage in transactions on behalf of any 
investment fund subject to ERISA and managed by such BNP Affiliated 
QPAM.
    Unlike the conditions which are subject to correction in 
conjunction with the audit requirement, Subsection I(f) is not 
correctable through the audit process. Rather, a failure to abide by 
this condition will immediately and irrevocably disqualify a BNP 
Affiliated QPAM from the relief in this exemption for the entire period 
of the exemption. As with every condition of the exemption, the BNP 
Affiliated QPAMs must be able, at all times, to adequately demonstrate 
that this requirement has been met.

Public Citizen's Comment Regarding the Auditor

    Public Citizen also questions the independence of the auditor 
required under the proposed exemption, and makes a request that the 
auditor be chosen by the Department (or subject to the Department's 
approval), that the auditor's reports be made public, including a 
description of instances wherein BNP Affiliated QPAMs were required to 
take remedial action, and that the auditor's reports be provided to the 
Department so that it may review the auditor's findings.

The Department's Response

    The Department notes that a robust audit conducted by a 
sophisticated independent auditor, for the entire period covered by 
this exemption, is an important condition for relief under this 
exemption. The Department has taken care to ensure the independence and 
rigor of the audit; it has tightened the stringency of the audit 
conditions from the original proposal; and it has enhanced its ability 
to exercise oversight, if necessary. For example, new Subsection 
I(h)(2) provides that the BNP Affiliated QPAMs and, if applicable, BNP, 
will provide the auditor ``unconditional access to its business, 
including, but not limited to: Its computer systems, business records, 
transactional data, workplace locations, training materials, and 
personnel.'' Former Subsections I(h)(2) through I(h)(8) have been 
renumbered as I(h)(3) through I(h)(9). In former Subsection I(h)(4), 
now Subsection I(h)(5), the Department substituted the word 
``procedures'' for ``steps'' in the first sentence; the Department also 
added the phrase ``and compliance with'' to the second sentence to 
reinforce the requirement that the auditor test for operational 
compliance with the Policies and Training requirements. The Department 
also added a new Subsection I(h)(10), which requires the BNP Affiliated 
QPAMs and the auditor to submit to the Department ``(A) any engagement 
agreement(s) entered into pursuant to the engagement of the auditor 
under this exemption, and (B) any engagement agreement entered into 
with any other entities retained in connection with such QPAM's 
compliance with the Training or Policies conditions of this exemption, 
no later than nine months after the date of the earlier of the 
Convictions (and one month after the execution of any agreement 
thereafter).'' Additionally, the Department removed from former 
Subsection I(h)(5), now Subsection I(h)(6), the following two 
sentences: ``Upon request, the auditor shall provide OED with all of 
the relevant workpapers reflecting any instances of noncompliance. The 
workpapers shall include an explanation of any corrective or remedial 
actions taken by the respective BNP Affiliated QPAM.'' A similar 
requirement that will be more broadly applicable to all of Section I(h) 
was moved to new Subsection I(h)(11) and requires the auditor to 
provide to OED, upon request, ``all of the workpapers created and 
utilized in the course of the audit, including, but not limited to: The 
audit plan, audit testing, identification of any instances of 
noncompliance by the relevant BNP Affiliated QPAM, and an explanation 
of any corrective or remedial actions taken by the applicable BNP 
Affiliated QPAM.''
    The Department does not endorse the selection of any particular 
auditor. The Department instead sets a threshold for determining 
independence on behalf of the auditor and requires expertise in the 
appropriate field. With this in mind, Subsection I(h)(1) expressly 
requires retention of an ``independent auditor, who has been prudently 
selected and who has appropriate technical training and proficiency 
with ERISA.'' In the event that the Applicant contemplates replacing 
the current auditor, the exemption now requires BNP to notify the 
Department as to the identity of the replacement auditor at least 30 
days prior to any such replacement, and BNP must be prepared to 
demonstrate to the Department's satisfaction that such replaced auditor 
is independent of BNP, experienced in the matters that are the subject 
of the exemption, and capable of making the determinations required of 
this exemption.
    Importantly, the exemption language in Subsection I(h)(9), formerly 
Subsection I(h)(8), and new Subsection I(h)(11) expressly requires that 
the auditor's reports (including instances of remedial action taken) be 
submitted to the Department. Furthermore, the exemption contains a 
condition in Subsection I(g)(1)(v) requiring that the ``BNP Affiliated 
QPAM does not make any material misrepresentations or omit material 
information in its communications with such regulators with respect to 
ERISA-covered plans . . .'' which is an obligation specifically 
applicable to the audit reports submitted by the BNP Affiliated QPAMs 
and which is, therefore, a material condition for relief under this 
exemption. After the Department receives each audit report, the reports 
will become a part of the administrative record and available to the 
public through the Department's Public Disclosure Room.

Public Citizen's Hearing Request

    Finally, Public Citizen requests that the Department hold a public 
hearing in connection with the proposed exemption.

The Department's Response

    Pursuant to the Department's regulations at 29 CFR part 2570.46, 
the Department will grant a hearing request where it is necessary to 
fully explore material factual issues raised by the person who 
requested the hearing.
    The Department recognizes that Public Citizen's comment letter also 
contains numerous legal and policy objections that are similar to the 
legal and policy objections it raised during a public hearing the 
Department held on January 15, 2015. That public hearing related to a 
request by Credit Suisse AG for an individual exemption by Credit

[[Page 20264]]

Suisse AG, to permit Credit Suisse AG-related asset managers to 
continue to engage in the types of transactions described in the PTE 
84-14, notwithstanding certain convictions that were impending against 
Credit Suisse AG.
    Given that the legal and policy issues raised by Public Citizen in 
this case are not novel and were also raised and fully developed by 
them at a public hearing, and do not raise significant relevant factual 
issues concerning BNP, the Department has concluded that there is no 
need to hold an additional hearing in this case. Accordingly, the 
Department has determined not to hold a hearing.

BNP's Comment

    The Applicant's comment requests several confirmations regarding 
the conditions of the proposed exemption, and provides clarifications 
and additional information in support of the Summary of Facts and 
Representations in the proposed exemption. The Applicant's requests and 
clarifications, and the Department's responses thereto, are as follows:
1. Section I(e)
    The Applicant's comment requests confirmation with regard to 
Section I(e) of the proposed exemption, which provides that a BNP 
Affiliated QPAM will not use its authority or influence to direct an 
investment fund managed by the QPAM to enter into any transaction with 
BNP or engage BNP to provide additional services for a fee paid by the 
investment fund. The Applicant requests that the Department confirm 
that this condition would not disallow a BNP Affiliated QPAM from 
trading in markets where BNP provides local subcustody services to 
global custodians of ERISA plans that are unaffiliated with BNP. 
According to the Applicant, to the extent that a BNP Affiliated QPAM 
enters into a transaction in a market where BNP is the local 
subcustodian, BNP might receive additional compensation from such 
global custodian.
    The Department declines to provide the confirmation requested 
above. In this regard, the Department is concerned about the potential 
for self-dealing inasmuch as, depending on the facts and circumstances, 
a BNP Affiliated QPAM might effectively use its ``authority or 
influence to direct'' an investment fund to ``enter into'' a 
``transaction with'' BNP or ``provide additional services, for a fee 
borne by'' the investment fund. The Department notes however, that it 
is not expressing a view on whether any particular transaction would 
constitute a separate prohibited transaction under ERISA or the Code.
2. Section I(g)(2)
    The Applicant's comment requests confirmation with regard to 
Section I(g)(2) of the proposed exemption, which requires that each BNP 
Affiliated QPAM immediately develop and implement a program of training 
(the Training) conducted at least annually for relevant asset 
management, legal, compliance, and internal audit personnel and that 
``the Training shall be set forth in the Policies.'' The Applicant 
requests that the Department confirm that this condition requires the 
Policies to expressly provide for the Training, but that the actual 
Training materials may be separate from the Policies and need not be 
duplicated verbatim within the Policies.
    The Department notes that participation in the Training is a 
crucial component of adhering to the Policies and of the exemptive 
relief. Therefore, the Department confirms that the actual Training 
materials need not be duplicated within the Policies so long as the 
Policies provide for and incorporate the Training requirement and 
provide specific details regarding the Training materials, including 
the identification of the particular training program and the primary 
training materials, the effective date(s) of any training manuals, and 
a brief outline of any information on the topics covered within the 
materials.
3. Section I(h)(1)
    The Applicant's comment requests confirmation with regard to 
Section I(h)(1) of the proposed exemption. Section I(h)(1) requires 
that the BNP Affiliated QPAMs submit to an annual audit conducted by an 
independent auditor. Pursuant to this condition, the first audit must 
cover the first six months following the earlier of the convictions, 
with each subsequent audit covering a corresponding twelve-month 
period. The Applicant requests confirmation that the final audit need 
only cover the last six months of the disqualifying period under 
Section I(g) of PTE 84-14.
    The Department clarifies that the final audit need only cover the 
remaining period under which this individual exemption is required. The 
Department adds that because there are two simultaneous cases that will 
lead to two separate Convictions (federal and state) for the same 
underlying conduct, the final period may be slightly longer than six 
months. That is, this individual exemption is effective upon the 
earlier of the two Convictions, but will remain in effect until ten 
years after the later of the two Convictions.
4. Section I(l)
    The Applicant's comment requests confirmation with regard to 
Section I(l) of the proposed exemption, which requires BNP to provide 
to interested persons a notice of the proposed exemption along with a 
separate summary describing the facts that led to the Convictions, and 
a prominently displayed statement that the Convictions result in a 
failure to meet a condition in PTE 84-14. The Applicant requests 
confirmation that the notice to interested persons required in 
accordance with Section (I)(l) was required to be sent only to ERISA-
covered plans and IRAs that were clients as of the date the proposal 
was published in the Federal Register, and with respect to which PTE 
84-14 may be used. Furthermore, the Applicant notes that Part II of the 
Form ADV is provided to each new separately managed account client and 
to the sponsor of each pooled fund prior to the inception of any asset 
management mandate. In the case of any banks or other entities that are 
not Registered Investment Advisors (and therefore do not maintain a 
Form ADV), the following disclosure will be included in the asset 
management or other account agreement: ``In managing the account, [the 
Manager] may rely on the exemptive relief provided by U.S. Department 
of Labor Individual Prohibited Transaction Exemption 2015-[XX]. The 
exemption enables [Manager] to act as a ``qualified professional asset 
manager'' under PTE 84-14, notwithstanding the criminal conviction of 
an affiliate, BNP Paribas SA, for its role in certain U.S. dollar 
transactions involving parties subject to U.S. sanctions. [The Manager] 
was not involved in that conduct or that conviction. A copy of the 
proposed and final exemption may be found on the Department's Web site, 
[http://www.dol.gov/ebsa/regs/ind_exemptionsmain.html].''
    The Department confirms that the Applicant properly interpreted the 
requirements related to notifying interested persons of the proposed 
exemption, subject to the understanding that prospectively, notice of 
BNP's conviction must appear in both Part I and Part II of the Form 
ADVs of the BNP Affiliated QPAMs that are Registered Investment 
Advisers (RIAs) and remain there for ten years, and, in the case of BNP 
Affiliated QPAMs that are not RIAs, the additional disclosure noted 
above must be included in the asset

[[Page 20265]]

management or other account agreement.
5. The BNP Affiliated QPAMs
    The Applicant's comment makes certain clarifications to Paragraph 6 
of the Summary of Facts and Representations, which describes BNP's 
relationship with the BNP Affiliated QPAMs. In this regard, Paragraph 6 
provides that, ``the BNP Affiliated QPAMs include Fisher Francis Trees 
and Watt, Inc., BNP Paribas Investment Partners Trust Company, BNP 
Paribas Asset Management, Inc., BancWest Investment Services, and 
Bishop Street Capital Management which are subsidiaries of Bank of the 
West and First Hawaiian Bank, respectively, which themselves provide 
fiduciary services to ERISA-covered plans and IRAs. The Applicant 
represents that each of the above-named entities are third tier 
affiliates of BNP, and BNP owns all or substantially all interests, 
directly or indirectly, in such entities.''
    The Applicant's comment provides that the BNP subsidiaries 
described in Paragraph 6 either currently rely on PTE 84-14 or may wish 
to do so in the future on behalf of ERISA-covered plans or IRAs. The 
Applicant states further that the list of BNP Affiliated QPAMs may 
change at any time depending on an entity's ERISA-covered plan or IRA 
client base or a change in strategy. The Applicant also notes that, 
while the BNP Affiliated QPAMs identified as third-tier subsidiaries in 
the application are indeed third-tier subsidiaries, other entities 
identified as BNP Affiliated QPAMs may be on other tiers, such as First 
Hawaiian Bank and Bank of the West, which are second-tier subsidiaries. 
Nevertheless, according to the Applicant, BNP owns all or substantially 
all interests, directly or indirectly, in the entities identified as 
BNP Affiliated QPAMs. The Department takes note of the Applicant's 
clarifications to Paragraph 6 of the Summary of Facts and 
Representations.
    After giving full consideration to the entire record, including the 
written comments, subject to the Department's responses thereto, the 
Department has decided to grant the exemption. The complete application 
file, with copies of the comments, is available for public inspection 
in the Public Disclosure Room of the Employee Benefits Security 
Administration, Room N-1515, U.S. Department of Labor, 200 Constitution 
Avenue NW., Washington, DC 20210.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption, refer to 
the proposed exemption published in the Federal Register on November 
26, 2014, at 79 FR 70661.

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 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) In accordance with section 408(a) of ERISA and section 
4975(c)(2) of the Code, the Department makes the following 
determinations: The exemption is administratively feasible, the 
exemption is in the interests of the plan and of its participants and 
beneficiaries, and the exemption is protective of the rights of 
participants and beneficiaries of the plan;
    (3) The exemption is supplemental to, and not in derogation of, any 
other provisions of ERISA, 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 accurately describe all material terms of the transaction 
which is the subject of the exemption.
    Accordingly, the following exemption is granted under the authority 
of 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 
(76 FR 66637, 66644, October 27, 2011):

Exemption

Section I: Covered Transactions

    The BNP Affiliated QPAMs and the BNP Related QPAMs shall not be 
precluded from relying on the relief provided by Prohibited Transaction 
Class Exemption (PTE) 84-14 \2\ notwithstanding the Convictions (as 
defined in Section II(c)),\3\ provided the following conditions are 
satisfied:
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    \2\ 49 FR 9494 (March 13, 1984), as corrected at 50 FR 41430 
(October 10, 1985), as amended at 70 FR 49305 (August 23, 2005), and 
as amended at 75 FR 38837 (July 6, 2010).
    \3\ Section I(g) generally provides that ``[n]either the QPAM 
nor any affiliate thereof . . . nor any owner . . . of a 5 percent 
or more interest in the QPAM is a person who within the 10 years 
immediately preceding the transaction has been either convicted or 
released from imprisonment, whichever is later, as a result of'' 
certain felonies including: (1) Conspiracy to commit an offense 
against the United States in violation of Title 18, United States 
Code, Section 371, by conspiring to violate the International 
Emergency Economic Powers Act, codified at Title 50, United States 
Code, Section 1701 et seq., and regulations issued thereunder, and 
the Trading with the Enemy Act, codified at Title 50, United States 
Code Appendix, Section 1 et seq., and regulations issued thereunder; 
and (2) Falsifying business records in the first degree, in 
violation of Penal Law Sec.  175.10, and conspiracy in the fifth 
degree, in violation of Penal Law Sec.  105.05(1).
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    (a) Any failure of the BNP Affiliated QPAMs or the BNP Related 
QPAMs to satisfy Section I(g) of PTE 84-14 arose solely from the 
Convictions;
    (b) The BNP Affiliated QPAMs and the BNP Related QPAMs (including 
officers, directors, agents other than BNP, and employees of such 
QPAMs) did not participate in the criminal conduct of BNP that is the 
subject of the Convictions;
    (c) The BNP Affiliated QPAMs and the BNP Related QPAMs did not 
directly receive compensation in connection with the criminal conduct 
of BNP that is the subject of the Convictions;
    (d) The criminal conduct of BNP that is the subject of the 
Convictions did not directly or indirectly involve the assets of any 
plan subject to Part 4 of Title I of ERISA (an ERISA-covered plan) or 
section 4975 of the Code (an IRA);
    (e) A BNP Affiliated QPAM will not use its authority or influence 
to direct an ``investment fund'' (as defined in Section VI(b) of PTE 
84-14) that is subject to ERISA and managed by such BNP Affiliated QPAM 
to enter into any transaction with BNP or engage BNP to provide 
additional services to such investment fund, for a direct or indirect 
fee borne by such investment fund regardless of whether such 
transactions or services may otherwise be within the scope of relief 
provided by an administrative or statutory exemption;
    (f) Each BNP Affiliated QPAM will ensure that none of its employees 
or agents, if any, that were involved in the criminal conduct that 
underlies the Convictions will engage in transactions

[[Page 20266]]

on behalf of any ``investment fund'' (as defined in Section VI(b) of 
PTE 84-14) subject to ERISA and managed by such BNP Affiliated QPAM;
    (g)(1) Each BNP Affiliated QPAM immediately develops, implements, 
maintains, and follows written policies (the Policies) requiring and 
reasonably designed to ensure that: (i) The asset management decisions 
of the BNP Affiliated QPAM are conducted independently of BNP's 
management and business activities; (ii) the BNP Affiliated QPAM fully 
complies with ERISA's fiduciary duties and ERISA and the Code's 
prohibited transaction provisions and does not knowingly participate in 
any violations of these duties and provisions with respect to ERISA-
covered plans and IRAs; (iii) the BNP Affiliated QPAM does not 
knowingly participate in any other person's violation of ERISA or the 
Code with respect to ERISA-covered plans and IRAs; (iv) any filings or 
statements made by the BNP Affiliated QPAM to regulators, including but 
not limited to, the Department of Labor, the Department of the 
Treasury, the Department of Justice, and the Pension Benefit Guaranty 
Corporation, on behalf of ERISA-covered plans or IRAs are materially 
accurate and complete, to the best of such QPAM's knowledge at that 
time; (v) the BNP Affiliated QPAM does not make material 
misrepresentations or omit material information in its communications 
with such regulators with respect to ERISA-covered plans or IRAs, or 
make material misrepresentations or omit material information in its 
communications with ERISA-covered plan and IRA clients; (vi) the BNP 
Affiliated QPAM complies with the terms of this exemption; and (vii) 
any violations of or failure to comply with items (ii) through (vi) are 
corrected promptly upon discovery and any such violations or compliance 
failures not promptly corrected are reported, upon discovering the 
failure to promptly correct, in writing to appropriate corporate 
officers, the head of Compliance and the General Counsel of the 
relevant BNP Affiliated QPAM, the independent auditor responsible for 
reviewing compliance with the Policies, and a fiduciary of any affected 
ERISA-covered plan or IRA where such fiduciary is independent of BNP; 
however, with respect to any ERISA-covered plan or IRA sponsored by an 
``affiliate'' (as defined in Section VI(d) of PTE 84-14) of BNP or 
beneficially owned by an employee of BNP or its affiliates, such 
fiduciary does not need to be independent of BNP. BNP Affiliated QPAMs 
will not be treated as having failed to develop, implement, maintain, 
or follow the Policies, provided that they correct any instances of 
noncompliance promptly when discovered or when they reasonably should 
have known of the noncompliance (whichever is earlier), and provided 
that they adhere to the reporting requirements set forth in this item 
(vii);
    (2) Each Affiliated QPAM immediately develops and implements a 
program of training (the Training), conducted at least annually for 
relevant BNP Affiliated QPAM asset management, legal, compliance, and 
internal audit personnel; the Training shall be set forth in the 
Policies and, at a minimum, cover the Policies, ERISA and Code 
compliance (including applicable fiduciary duties and the prohibited 
transaction provisions) and ethical conduct, the consequences for not 
complying with the conditions of this exemption (including the loss of 
the exemptive relief provided herein), and prompt reporting of 
wrongdoing;
    (h)(1) Each BNP Affiliated QPAM submits to an audit conducted 
annually by an independent auditor, who has been prudently selected and 
who has appropriate technical training and proficiency with ERISA to 
evaluate the adequacy of, and compliance with, the Policies and 
Training described herein; the audit requirement must be incorporated 
in the Policies and the first of the audits must be completed no later 
than twelve (12) months after the earlier of the Convictions and must 
cover the first six-month period that begins on the date of the earlier 
of the Convictions; all subsequent audits must cover the following 
corresponding twelve-month periods and be completed no later than six 
(6) months after the period to which the audit applies;
    (2) To the extent necessary for the auditor, in its sole opinion, 
to complete its audit and comply with the conditions for relief 
described herein, each BNP Affiliated QPAM and, if applicable, BNP, 
will grant the auditor unconditional access to its business, including, 
but not limited to: Its computer systems, business records, 
transactional data, workplace locations, training materials, and 
personnel;
    (3) The auditor's engagement shall specifically require the auditor 
to determine whether each BNP Affiliated QPAM has developed, 
implemented, maintained, and followed Policies in accordance with the 
conditions of this exemption and developed and implemented the 
Training, as required herein;
    (4) The auditor's engagement shall specifically require the auditor 
to test each BNP Affiliated QPAM's operational compliance with the 
Policies and Training;
    (5) For each audit, the auditor shall issue a written report (the 
Audit Report) to BNP and the BNP Affiliated QPAM to which the audit 
applies that describes the procedures performed by the auditor during 
the course of its examination. The Audit Report shall include the 
auditor's specific determinations regarding the adequacy of, and 
compliance with, the Policies and Training; the auditor's 
recommendations (if any) with respect to strengthening such Policies 
and Training; and any instances of the respective BNP Affiliated QPAM's 
noncompliance with the written Policies and Training described in 
paragraph (g) above. Any determinations made by the auditor regarding 
the adequacy of the Policies and Training and the auditor's 
recommendations (if any) with respect to strengthening the Policies and 
Training of the respective BNP Affiliated QPAM shall be promptly 
addressed by such BNP Affiliated QPAM, and any actions taken by such 
BNP Affiliated QPAM to address such recommendations shall be included 
in an addendum to the Audit Report. Any determinations by the auditor 
that the respective BNP Affiliated QPAM has implemented, maintained, 
and followed sufficient Policies and Training shall not be based solely 
or in substantial part on an absence of evidence indicating 
noncompliance;
    (6) The auditor shall notify the respective BNP Affiliated QPAM of 
any instances of noncompliance identified by the auditor within five 
(5) business days after such noncompliance is identified by the 
auditor, regardless of whether the audit has been completed as of that 
date;
    (7) With respect to each Audit Report, an executive officer of the 
BNP Affiliated QPAM to which the Audit Report applies certifies in 
writing, under penalty of perjury, that the officer has reviewed the 
Audit Report and this exemption; addressed, corrected, or remediated 
any inadequacies identified in the Audit Report; and determined that 
the Policies and Training in effect at the time of signing are adequate 
to ensure compliance with the conditions of this exemption and with the 
applicable provisions of ERISA and the Code;
    (8) An executive officer of BNP reviews the Audit Report for each 
BNP Affiliated QPAM and certifies in writing, under penalty of perjury, 
that such officer has reviewed each Audit Report;

[[Page 20267]]

    (9) Each BNP Affiliated QPAM provides its certified Audit Report to 
the Department's Office of Exemption Determinations (OED), Suite 400, 
200 Constitution Avenue NW., Washington, DC 20210, no later than 30 
days following its completion, and each BNP Affiliated QPAM makes its 
Audit Report unconditionally available for examination by any duly 
authorized employee or representative of the Department, other relevant 
regulators, and any fiduciary of an ERISA-covered plan or IRA, the 
assets of which are managed by such BNP Affiliated QPAM;
    (10) Each BNP Affiliated QPAM and the auditor will submit to OED 
(A) any engagement agreement(s) entered into pursuant to the engagement 
of the auditor under this exemption, and (B) any engagement agreement 
entered into with any other entities retained in connection with such 
QPAM's compliance with the Training or Policies conditions of this 
exemption, no later than nine months after the date of the earlier of 
the Convictions (and one month after the execution of any agreement 
thereafter); and
    (11) The auditor shall provide OED, upon request, all of the 
workpapers created and utilized in the course of the audit, including, 
but not limited to: The audit plan, audit testing, identification of 
any instances of noncompliance by the relevant BNP Affiliated QPAM, and 
an explanation of any corrective or remedial actions taken by the 
applicable BNP Affiliated QPAM;
    (12) BNP must notify the Department at least 30 days prior to any 
substitution of an auditor, except that no such replacement will meet 
the requirements of this paragraph unless and until BNP demonstrates to 
the Department's satisfaction that such new auditor is independent of 
BNP, experienced in the matters that are the subject of the exemption, 
and capable of making the determinations required of this exemption;
    (i) The BNP Affiliated QPAMs comply with each condition of PTE 84-
14, as amended, with the only exceptions being the violations of 
Section I(g) that are attributable to the Convictions;
    (j) Effective from the date of publication of this granted 
exemption in the Federal Register, with respect to each ERISA-covered 
plan or IRA for which a BNP Affiliated QPAM provides asset management 
or other discretionary fiduciary services, each BNP Affiliated QPAM 
agrees: (1) To comply with ERISA and the Code, as applicable to the 
particular ERISA-covered plan or IRA, and refrain from engaging in 
prohibited transactions; (2) not to waive, limit, or qualify the 
liability of the BNP Affiliated QPAM for violating ERISA or the Code or 
engaging in prohibited transactions; (3) not to require the ERISA-
covered plan or IRA (or sponsor of such ERISA-covered plan or 
beneficial owner of such IRA) to indemnify the BNP Affiliated QPAM for 
violating ERISA or engaging in prohibited transactions, except for 
violations or prohibited transactions caused by an error, 
misrepresentation, or misconduct of a plan fiduciary or other party 
hired by the plan fiduciary who is independent of BNP; (4) not to 
restrict the ability of such ERISA-covered plan or IRA to terminate or 
withdraw from its arrangement with the BNP Affiliated QPAM; and (5) not 
to impose any fees, penalties, or charges for such termination or 
withdrawal with the exception of reasonable fees, appropriately 
disclosed in advance, that are specifically designed to prevent 
generally recognized abusive investment practices or specifically 
designed to ensure equitable treatment of all investors in a pooled 
fund in the event such withdrawal or termination may have adverse 
consequences for all other investors, provided that such fees are 
applied consistently and in like manner to all such investors. Within 
six (6) months of the date of publication of this granted exemption in 
the Federal Register, each BNP Affiliated QPAM will provide a notice to 
such effect to each ERISA-covered plan or IRA for which a BNP 
Affiliated QPAM provides asset management or other discretionary 
fiduciary services;
    (k) Each BNP Affiliated QPAM will maintain records necessary to 
demonstrate that the conditions of this exemption have been met for six 
(6) years following the date of any transaction for which such BNP 
Affiliated QPAM relies upon the relief in the exemption;
    (l) The BNP Affiliated QPAMs provided a notice of the proposed 
exemption along with a separate summary describing the facts that led 
to the Convictions, which has been submitted to the Department, and a 
prominently displayed statement that the Convictions result in a 
failure to meet a condition in PTE 84-14 to: (1) Each sponsor of an 
ERISA-covered plan and each beneficial owner of an IRA invested in an 
investment fund managed by a BNP Affiliated QPAM, or the sponsor of an 
investment fund in any case where a BNP Affiliated QPAM acts only as a 
sub-advisor to the investment fund; (2) each entity that may be a BNP 
Related QPAM; and (3) with respect to ERISA-covered plan and IRA 
investors in the Income Plus Fund, the identity of which is unknown, 
each distribution agent of the fund with a request that such 
distribution agent forward the documents to its clients.
    (m) A BNP Affiliated QPAM will not fail to meet the terms of this 
exemption solely because a BNP Related QPAM or a different BNP 
Affiliated QPAM fails to satisfy a condition for relief under this 
exemption. A BNP Related QPAM will not fail to meet the terms of this 
exemption solely because BNP, a BNP Affiliated QPAM, or a different BNP 
Related QPAM fails to satisfy a condition for relief under this 
exemption.

Section II: Definitions

    (a) The term ``BNP Affiliated QPAM'' means a ``qualified 
professional asset manager'' (as defined in Section VI(a) \4\ of PTE 
84-14) that relies on the relief provided by PTE 84-14 and with respect 
to which BNP is a current or future ``affiliate'' (as defined in 
Section VI(d) of PTE 84-14). The term ``BNP Affiliated QPAM'' excludes 
the parent entity, BNP.
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    \4\ In general terms, a QPAM is an independent fiduciary that is 
a bank, savings and loan association, insurance company, or 
investment adviser that meets certain equity or net worth 
requirements and other licensure requirements and that has 
acknowledged in a written management agreement that it is a 
fiduciary with respect to each plan that has retained the QPAM.
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    (b) The term ``BNP Related QPAM'' means any current or future 
``qualified professional asset manager'' (as defined in Section VI(a) 
of PTE 84-14) that relies on the relief provided by PTE 84-14, and with 
respect to which BNP owns a direct or indirect five percent or more 
interest, but with respect to which BNP is not an ``affiliate'' (as 
defined in Section VI(d) of PTE 84-14).
    (c) The term ``Convictions'' means the judgments of conviction 
against BNP in: (1) Case Number 14-cr-00460 (LGS) in the District Court 
for the Southern District of New York for conspiracy to commit an 
offense against the United States in violation of Title 18, United 
States Code, Section 371, by conspiring to violate the International 
Emergency Economic Powers Act, codified at Title 50, United States 
Code, Section 1701 et seq., and regulations issued thereunder, and the 
Trading with the Enemy Act, codified at Title 50, United States Code 
Appendix, Section 1 et seq., and regulations issued thereunder; and (2) 
Case Number 2014 NY 051231 in the Supreme Court of the State of New 
York, County of New York for falsifying business records in the first 
degree, in violation of Penal Law Sec.  175.10, and conspiracy in the 
fifth degree, in violation of Penal Law Sec.  105.05(1).

[[Page 20268]]

    Effective Date: This exemption is effective as of the earliest date 
a judgment of conviction against BNP is entered in either: (1) Case 
Number 14-cr-00460 (LGS) in the District Court for the Southern 
District of New York; or (2) Case Number 2014 NY 051231 in the Supreme 
Court of the State of New York, County of New York.

    Signed at Washington, DC, this 9th day of April 2015.
Lyssa Hall,
Director of Exemption Determinations, Employee Benefits Security 
Administration, U.S. Department of Labor.
[FR Doc. 2015-08672 Filed 4-14-15; 8:45 am]
 BILLING CODE 4510-29-P