Federal Register / Vol. 63, No. 103 / Friday, May 29, 1998 / Notices 29435

1The applicant represents that because Bankers

Trust may add new affiliates, the entities

comprising the BT Group may change. However,

the Affiliated Borrowers will always be BT Alex.

Brown Incorporated, Bankers Trust International

PLC and Bankers Trust (Australia) Limited (and

their corporate successors) for purposes of this

exemption.

2When the BT Group acts as sub-agent, rather

than the primary lending agent, the primary lending

agent is receiving no section 406(b) of the Act relief

herein. In such situations, the primary lending

agent may be provided relief by Prohibited

Transaction Class Exemption (PTE) 81–6 and PTE

82–63. PTE 81–6 was published at 46 FR 7527,

January 23, 1981, as amended at 52 FR 18754, May

19, 1987, and PTE 82–63 was published at 47 FR

14804, April 6, 1982.

DEPARTMENT OF LABOR

Pension and Welfare Benefits

Administration

[Prohibited Transaction Exemption 98–23;

Exemption Application No. D–10213, et al.]

Grant of Individual Exemptions;

Bankers Trust Company

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 (43 FR 47713, October 17,

1978) 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.

Bankers Trust Company (Bankers

Trust) Located in New York, New York

[Prohibited Transaction Exemption 98–23;

Exemption Application No. D–10213]

Exemption

The restrictions of sections 406(a),

406 (b)(1) and (b)(2) of the Act and the

sanctions resulting from the application

of section 4975 of the Code, by reason

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

the Code, shall not apply, effective

February 16, 1996, to the: (1) lending of

certain securities to BT Alex. Brown

Incorporated, Bankers Trust

International PLC, and Bankers Trust

(Australia) Limited (and their corporate

successors), which are affiliates of

Bankers Trust, (collectively; the

Affiliated Borrowers), by certain

employee benefit plans (including

commingled investment funds holding

plan assets) (the Client Plans), for which

Bankers Trust and certain other

affiliates (the BT Group) act as the

directed trustee or custodian or

securities lending agent or sub-agent; 1

and (2) receipt of compensation by the

BT Group in connection with these

transactions; provided that the

following conditions are satisfied:

1. Neither the Affiliated Borrowers

nor the BT Group has or exercises

discretionary authority or control with

respect to the investment of the assets

of the Client Plans involved in the

transaction (other than with respect to

the investment of cash collateral after

securities have been loaned and

collateral received), or renders

investment advice (within the meaning

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

those assets, including decisions

concerning a Client Plan’s acquisition

and disposition of securities available

for loan.

2. Before a Client Plan participates in

a securities lending program and before

any loan of securities to the Affiliated

Borrowers is affected, a Client Plan

fiduciary who is independent of the BT

Group and the Affiliated Borrowers

must have:

(a) Authorized and approved a

securities lending authorization

agreement with the BT Group, where

the BT Group is acting as the securities

lending agent;

(b) Authorized and approved the

primary securities lending authorization

agreement with the primary lending

agent, where BT Group is lending

securities under a sub-agency

arrangement with the primary lending

agent; 2 and

(c) Approved the general terms of the

securities loan agreement (the Loan

Agreement) between such Client Plan

and the Affiliated Borrowers, the

specific terms of which are negotiated

and entered into by BT Group.

3. The Client Plan may terminate the

agency or sub-agency agreement at any

time without penalty to such plan on

five (5) business days notice,

whereupon the Affiliated Borrowers

shall deliver securities identical to the

borrowed securities (or the equivalent in

the event of reorganization,

recapitalization or merger of the issuer

of the borrowed securities) to the plan

within (a) the customary delivery period

for such securities, (b) five (5) business

days, or (c) the time negotiated for such

delivery by the Client Plan and the

Affiliated Borrowers, whichever is less.

4. The Client Plan will receive from

the Affiliated Borrowers (either by

physical delivery or by book entry in a

securities depository located in the

United States, wire transfer or similar

means) by the close of business on or

before the day on which the loaned

securities are delivered to the Affiliated

Borrowers, collateral consisting of U.S.

currency, securities issued or

guaranteed by the U.S. Government or

its agencies or instrumentalities, or an

irrevocable bank letter of credit issued

by a U.S. bank, which is a person other

than the Affiliated Borrowers or an

affiliate thereof, or any combination

thereof, or other collateral permitted

under Prohibited Transaction

Exemption (PTE) 81–6 (as amended

from time to time or, alternatively, any

additional or superceding class

exemption that may be issued to cover

securities lending by employee benefit

plans), having, as of the close of

business on the preceding business day,

a market value (or, in the case of a letter

of credit, a stated amount) initially

equal to at least 102 percent of the

market value of the loaned securities.
29436 Federal Register / Vol. 63, No. 103 / Friday, May 29, 1998 / Notices

3See limitations discussed in Item I.5 of the

Written Comments.

If the market value of the collateral on

the close of trading on a business day

is less than 100 percent of the market

value of the borrowed securities at the

close of business on that day, the

Affiliated Borrowers will deliver

additional collateral on the following

day such that the market value of the

collateral in the aggregate will again

equal 102 percent. The Loan Agreement

will give the Client Plan a continuing

security interest in, title to, or the rights

of a secured creditor with respect to the

collateral and a lien on the collateral.

The BT Group will monitor the level of

the collateral daily.

5. When the BT Group lends

securities to the Affiliated Borrowers,

the following conditions must be met:

(a) the collateral will be maintained in

U.S. dollars, U.S. dollar-denominated

securities or letters of credit of U.S.

Banks, or any combination thereof, or

other collateral permitted under PTE

81–6 (as amended from time to time or,

alternatively, any additional or

superceding class exemption that may

be issued to cover securities lending by

employee benefit plans); 3 (b) all

collateral will be held in the United

States; (c) the situs of the loan

agreement will be maintained in the

United States; (d) the lending Client

Plans will be indemnified by Bankers

Trust in the United States for any

transactions covered by this exemption

with the foreign Affiliated Borrowers so

that the Client Plans will not have to

litigate in a foreign jurisdiction nor sue

the foreign Affiliated Borrowers to

realize on the indemnification; (e) prior

to the transaction, the foreign Affiliated

Borrowers will enter into a written

agreement with the Client Plan whereby

the Affiliated Borrowers consent to the

service of process in the United States

and to the jurisdiction of the courts of

the United States with respect to the

transactions described herein; and (f)(1)

Bankers Trust International PLC is a

deposit taking institution supervised by

the Bank of England; and (2) Bankers

Trust (Australia) Limited is a merchant

bank which is under the jurisdiction of

the Federal Reserve Bank of Australia.

6. Before entering into the Loan

Agreement and before a Client Plan

lends any securities to the Affiliated

Borrowers, the Affiliated Borrowers

shall have furnished the following items

to the Client Plan fiduciary: (a) the most

recent available audited and unaudited

statement of the Affiliated Borrowers’

financial condition; (b) at the time of the

loan, the Affiliated Borrowers must give

prompt notice to the Client Plan

fiduciary of any material adverse

changes in the Affiliated Borrowers’

financial condition since the date of the

most recently financial statement

furnished to the Client Plan; and (c) in

the event of any such changes, the BT

Group will request approval of the

Client Plan to continue lending to the

Affiliated Borrowers before making any

such additional loans. No such new

loans will be made until approval is

received. Each loan shall constitute a

representation by the Affiliated

Borrower that there has been no such

material adverse change.

7. The Client Plan: (a) receives a

reasonable fee that is related to the

value of the borrowed securities and the

duration of the loan, or (b) has the

opportunity to derive compensation

through the investment of cash

collateral. In the case of cash collateral,

the Client Plan may pay a loan rebate or

similar fee to the Affiliated Borrower, if

such fee is not greater than the fee

Client Plan would pay an unrelated

party in an arm’s length transaction.

8. All procedures regarding the

securities lending activities will at a

minimum conform to the applicable

provisions of PTEs 81–6 and 82–63 (as

amended from time to time or,

alternatively, any additional or

superceding class exemption that may

be issued to cover securities lending by

employee benefit plans).

9. In the event Bankers Trust

International PLC and/or Bankers Trust

(Australia) Limited default on a loan,

Bankers Trust will liquidate the loan

collateral to purchase identical

securities for the Client Plan. If the

collateral is insufficient to accomplish

such purchase, Bankers Trust will

indemnify the Client Plan for any

shortfall in the collateral plus interest

on such amount and any transaction

costs incurred (including attorney’s fees

of the Client Plan for legal actions

arising out of the default on the loans or

failure to properly indemnify under this

provision). Alternatively, if such

identical securities are not available on

the market, Bankers Trust will pay the

Client Plan cash equal to the market

value of the borrowed securities as of

the date they should have been returned

to the Client Plan plus all the accrued

financial benefits derived from the

beneficial ownership of such loaned

securities. The lending Client Plans will

be indemnified by Bankers Trust in the

United States for any loans to the

foreign Affiliated Borrowers.

10. In the event BT Alex. Brown

Incorporated, a U.S. registered brokerdealer, defaults on a loan, Bankers Trust

will liquidate the loan collateral to

purchase identical securities for the

Client Plan. If the collateral is

insufficient to accomplish such

purchase, BT Alex. Brown Incorporated

will indemnify the Client Plan for any

shortfall in the collateral plus interest

on such amount and any transaction

costs incurred (including attorney’s fees

of the Client Plan for legal actions

arising out of the default on the loans or

failure to properly indemnify under this

provision).

11. If the Affiliated Borrowers’ default

on the securities loan or enter

bankruptcy, the collateral will not be

available to the Affiliated Borrowers or

their creditors, but is used to make the

Client Plan whole.

12. The Client Plans will be entitled

to the equivalent of all distributions

made to holders of the borrowed

securities, including all interest,

dividends and distributions on the

loaned securities during the loan period.

13. Only Client Plans with total assets

having an aggregate market value of at

least $50 million are permitted to lend

securities to the Affiliated Borrowers;

provided however, that—

(a) In the case of two or more Client

Plans which are maintained by the same

employer, controlled group of

corporations or employee organization

(the Related Client Plans), whose assets

are commingled for investment

purposes in a single master trust or any

other entity the assets of which are

‘‘plan assets’’ under 29 CFR 2510.3–101

(the Plan Asset Regulation), which

entity is engaged in securities lending

arrangements with the Affiliated

Borrowers, the foregoing $50 million

requirement shall be deemed satisfied if

such trust or other entity has aggregate

assets which are in excess of $50

million; provided that if the fiduciary

responsible for making the investment

decision on behalf of such master trust

or other entity is not the employer or an

affiliate of the employer, such fiduciary

has total assets under its management

and control, exclusive of the $50 million

threshold amount attributable to plan

investment in the commingled entity,

which are in excess of $100 million.

(b) In the case of two or more Client

Plans which are not maintained by the

same employer, controlled group of

corporations or employee organization

(the Unrelated Client Plans), whose

assets are commingled for investment

purposes in a group trust or any other

form of entity the assets of which are

‘‘plan assets’’ under the Plan Asset

Regulation, which entity is engaged in

securities lending arrangements with

the Affiliated Borrowers, the foregoing

$50 million requirement is satisfied if

such trust or other entity has aggregate

assets which are in excess of $50
Federal Register / Vol. 63, No. 103 / Friday, May 29, 1998 / Notices 29437

million (excluding the assets of any Plan

with respect to which the fiduciary

responsible for making the investment

decision on behalf of such group trust

or other entity or any member of the

controlled group of corporations

including such fiduciary is the

employer maintaining such Plan or an

employee organization whose members

are covered by such Plan). However, the

fiduciary responsible for making the

investment decision on behalf of such

group trust or other entity—

(i) Has full investment responsibility

with respect to plan assets invested

therein; and

(ii) Has total assets under its

management and control, exclusive of

the $50 million threshold amount

attributable to plan investment in the

commingled entity, which are in excess

of $100 million. (In addition, none of

the entities described above are formed

for the sole purpose of making loans of

securities.)

14. For purposes of this exemption,

the Affiliated Borrowers will consist

only of BT Alex. Brown Incorporated,

Bankers Trust International PLC and

Bankers Trust (Australia) Limited, and

their corporate successors.

15. In any calendar quarter, on

average 50 percent or more of the

outstanding dollar value of securities

loans negotiated on behalf of the Client

Plans by the BT Group in the aggregate

will be to borrowers who are not

affiliated with the BT Group.

16. The terms of each loan of

securities by the Client Plans to any of

the Affiliated Borrowers will be at

market rates and at terms as favorable to

such plans as if made at the same time

and under the same circumstances to an

unaffiliated party.

17. Each Client Plan will receive a

monthly transaction report, including

but not limited to the information

described in paragraph 24 of the notice

of proposed exemption (the Notice), so

that the independent fiduciary of such

plan may monitor the securities lending

transactions with the Affiliated

Borrowers.

18. During the notification of

interested persons period, all Client

Plans (that were Client Plans during this

period) received a copy of the notice of

pendency of the proposed exemption. In

addition, current Client Plans will

receive a copy of the final exemption

and Bankers Trust will provide a copy

of the final exemption to any new Client

Plans.

19. Bankers Trust or the Affiliated

Borrowers maintain or cause to be

maintained within the United States for

a period of six years from the date of

such transaction such records as are

necessary to enable the persons

described in paragraph (20) below to

determine whether the conditions of

this exemption have been met; except

that a party in interest with respect to

an employee benefit plan, other than

Bankers Trust or the Affiliated

Borrowers, shall not be subject to a civil

penalty under section 502(i) of the Act

or the taxes imposed by section 4975(a)

or (b) of the Code, if such records are

not maintained, or are not available for

examination as required by this section,

and a prohibited transaction will not be

deemed to have occurred if, due to

circumstances beyond the control of

Bankers Trust or the Affiliated

Borrowers, such records are lost or

destroyed prior to the end of such six

year period.

(20)(i) Except as provided in

subparagraph (ii) of this paragraph (20)

and notwithstanding any provisions of

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

of the Act, the records referred to in

paragraph (19) are unconditionally

available at their customary location for

examination during normal business

hours by—

(a) Any duly authorized employee or

representative of the Department, the

Internal Revenue Service, or the

Securities and Exchange Commission,

(b) Any fiduciary of a Client Plan or

any duly authorized representative of

such fiduciary,

(c) Any contributing employer to any

Client Plan, or any duly authorized

employee or representative of such

employer, and

(d) Any participant or beneficiary of

any Client Plan, or any duly authorized

representative of such participant or

beneficiary.

(ii) None of the persons described in

subparagraphs (b)–(d) of this paragraph

(20) shall be authorized to examine

trade secrets of Bankers Trust or the

Affiliated Borrowers, or commercial or

financial information which is

privileged or confidential.

Effective Date: This exemption is

effective as of February 16, 1996.

For a more complete statement of the

facts and representations supporting the

Department’s decision to grant this

exemption, refer to the Notice published

on February 19, 1998 at 63 FR 8482.

Written Comments

The Department received one written

comment (the Comment) with respect to

the Notice and no requests for a public

hearing. The Comment was filed by

Bankers Trust and generally requests

clarifications and modifications to the

Notice. Set forth below in section I is a

discussion of those aspects of the

Comment which relate to the language

of the final exemption (the Exemption).

In addition, section II below discusses

the aspects of the Comment which relate

to the Summary of Facts and

Representations (the Summary)

contained in the Notice.

I. Discussion of the Comment Regarding

the Exemption

1. The introductory paragraph of the

Notice proposes to exempt, in relevant

part, the lending of securities to certain

affiliates of Bankers Trust. Bankers

Trust states that BT Securities

Corporation has merged with Alex.

Brown and Sons, Incorporated.

Accordingly, Bankers Trust requests

that the term ‘‘BT Alex. Brown

Incorporated’’ be substituted for ‘‘BT

Securities Corporation’’ in the relevant

sections of the Notice.

The Department acknowledges the

applicant’s request and has modified the

Exemption to reflect this substitution.

2. Bankers Trust states that it would

like to avoid the need to request a

clarification of the Exemption from the

Department in the future should another

change occur in the names of the

entities that comprise the BT Group.

Thus, the applicant suggests that the

term ‘‘Affiliated Borrowers’’ be defined

in the Exemption as BT Alex. Brown

Incorporated, Bankers Trust

International PLC, and Bankers Trust

(Australia) Limited and their corporate

successors [emphasis added]. Bankers

Trust requests that this modification be

made in the introductory paragraph of

the operative language of the

Exemption, in the last sentence of

footnote 1, and elsewhere in the

Exemption, as relevant.

The Department concurs with the

applicant’s suggestion and has modified

the Exemption accordingly. However,

with respect to corporate successors, the

Department notes that the Exemption

would not be effective for any new

entities created by the sale of the

underlying assets of an Affiliated

Borrower to an unrelated third party.

3. Bankers Trust comments that the

Affiliated Borrowers are sometimes only

the securities lending agent and not the

custodian or directed trustee of the

Client Plan. Therefore, Bankers Trust

requests that the word ‘‘or’’ should be

substituted for the word ‘‘and’’ in the

relevant places of the Exemption to

clarify that an Affiliated Borrower may

be only the securities agent for the

Client Plan.

The Department acknowledges the

applicant’s clarification and has

modified the Exemption accordingly.

4. Condition 3 of the Notice provides,

among other things, that the Client Plan

may terminate the agency or sub-agency
29438 Federal Register / Vol. 63, No. 103 / Friday, May 29, 1998 / Notices

agreement on five (5) days notice

whereupon the Affiliated Borrowers

shall deliver certificates for securities

identical to the borrowed securities to

the Client Plan within a specified time

period (as stated therein). Bankers Trust

states that because the certificates of

securities are not physically delivered to

the Client Plan in every instance, the

words ‘‘* * * certificates for’’ as used

in this Condition should be deleted.

The Department acknowledges the

applicant’s clarification and has

modified Condition 3 of the Exemption

accordingly.

5. Condition 5(a) of the Notice

requires that when the BT Group lends

securities to the Affiliated Borrowers,

the collateral will be maintained in U.S.

dollars, U.S. dollar-denominated

securities or letters of credit of U.S.

Banks. The applicant states that when

Bankers Trust lends securities to the

Affiliated Borrowers under the

Exemption, it should be able to use as

collateral any property or other

arrangement which may be permitted by

the Department in a future class

exemption for securities lending.

Therefore, Bankers Trust suggests

adding the following language as an

insert at the end of the language

contained in Condition 5(a):

* * * or any combination thereof, or other

collateral permitted under Prohibited

Transaction Exemption (PTE) 81–6 (as

amended from time to time or, alternatively,

any additional or superceding class

exemption that may be issued to cover

securities lending by employee benefit

plans).

The Department concurs with the

applicant’s suggested modification and

has added the above-referenced

language to Condition 5(a) of the

Exemption. However, the Department

notes that the Exemption provides relief

from the restrictions of section 406(a) as

well as section 406(b)(1) and (b)(2) of

the Act, whereas PTE 81–6 provides

relief only for securities lending

transactions which would violate

section 406(a) of the Act. Thus, any

amendments that may be made by the

Department to PTE 81–6 which would

permit different types of assets to be

used as collateral for a securities loan

would not allow the use of such assets

as collateral under this Exemption to the

extent that the transactions covered by

this Exemption would require relief

from section 406(b) of the Act.

6. Condition 8 of the Notice requires

that all procedures regarding the

securities lending activities will at a

minimum conform to the applicable

provisions of PTEs 81–6 and 82–63.

Bankers Trust comments that the

following language should be added at

the end of Condition 8 of the Notice.

* * * (as amended from time to time or,

alternatively, any additional or superceding

class exemption that may be issued to cover

securities lending by employee benefit

plans).

The Department concurs with the

applicant’s suggested modification and

has added the above-referenced

language to Condition 8 of the

Exemption.

7. Condition 13 of the Notice requires

that only Client Plans with total assets

having an aggregate market value of at

least $50 million will be permitted to

lend securities to the Affiliated

Borrowers. Bankers Trust requests that

the Client Plans be permitted to

aggregate their assets for purposes of

meeting the minimum Plan size

requirement for lending securities to the

Affiliated Borrowers under the

Exemption. Therefore, Bankers Trust

recommends that the following language

be substituted for Condition 13 of the

Notice:

‘‘Only Client Plans with total assets having

an aggregate market value of at least $50

million are permitted to lend securities to the

Affiliated Borrowers; provided however,

that—

(a) In the case of two or more Client Plans

which are maintained by the same employer,

controlled group of corporations or employee

organization (the Related Client Plans),

whose assets are commingled for investment

purposes in a single master trust or any other

entity the assets of which are ‘‘plan assets’’

under 29 CFR 2510.3–101 (the Plan Asset

Regulation), which entity is engaged in

securities lending arrangements with the

Affiliated Borrowers, the foregoing $50

million requirement shall be deemed

satisfied if such trust or other entity has

aggregate assets which are in excess of $50

million; provided that if the fiduciary

responsible for making the investment

decision on behalf of such master trust or

other entity is not the employer or an affiliate

of the employer, such fiduciary has total

assets under its management and control,

exclusive of the $50 million threshold

amount attributable to plan investment in the

commingled entity, which are in excess of

$100 million.

(b) In the case of two or more Client Plans

which are not maintained by the same

employer, controlled group of corporations or

employee organization (the Unrelated Client

Plans), whose assets are commingled for

investment purposes in a group trust or any

other form of entity the assets of which are

‘‘plan assets’’ under the Plan Asset

Regulation, which entity is engaged in

securities lending arrangements with the

Affiliated Borrowers, the foregoing $50

million requirement is satisfied if such trust

or other entity has aggregate assets which are

in excess of $50 million (excluding the assets

of any Plan with respect to which the

fiduciary responsible for making the

investment decision on behalf of such group

trust or other entity or any member of the

controlled group of corporations including

such fiduciary is the employer maintaining

such Plan or an employee organization

whose members are covered by such Plan).

However, the fiduciary responsible for

making the investment decision on behalf of

such group trust or other entity—

(i) Has full investment responsibility with

respect to plan assets invested therein; and

(ii) Has total assets under its management

and control, exclusive of the $50 million

threshold amount attributable to plan

investment in the commingled entity, which

are in excess of $100 million.

(In addition, none of the entities described

above are formed for the sole purpose of

making loans of securities.)’’ [emphasis

added]

The Department concurs with this

change to the language of Condition 13

of the Notice and has modified the

Exemption accordingly.

II. Discussion of the Comment

Regarding the Summary

1. Paragraph 4 of the Summary in the

Notice contains a discussion regarding

Federal Reserve Board’s Regulation T.

Bankers Trust comments that the

Regulation T provision that limited the

situations for which securities may be

borrowed or lent (the ‘‘purpose test’’)

has been amended to reflect recent

legislation, and now may not apply to

Bankers Trust securities lending

activities in every instance. Thus, the

representation previously made by

Bankers Trust, as stated in the first

sentence of Paragraph 4 of the

Summary, should be modified to read as

follows:

BT Alex. Brown Incorporated, a U.S.

registered broker-dealer, will comply with

the Federal Reserve Board’s Regulation T in

its securities lending activities to the extent

that Regulation T applies.

The Department concurs with this

modification.

2. Paragraph 17 of the Summary

discusses the written schedule of

lending fees and rebate rates established

by the BT Group. In this regard, in order

to clarify how these rates may relate to

the rates for a particular securities

lending transaction with a Client Plan,

Bankers Trust requests that the third

sentence in Paragraph 17 of the

Summary be changed as follows:

In no case will loans be made to the

Affiliated Borrowers at rates less favorable to

the Client Plans than those on the schedule.

[emphasis added]

The Department concurs with this

modification.

3. Bankers Trust comments that the

BT Group will provide notice of a

change in the lending fee formula or
Federal Register / Vol. 63, No. 103 / Friday, May 29, 1998 / Notices 29439

4Unless otherwise noted, for purposes of this

exemption, Goldman Sachs, the affiliated U.S.

registered broker-dealers of Goldman Sachs, GSI

and Goldman Sachs (Japan) are collectively referred

to herein as Goldman Sachs.

5The Department, herein, is not providing

exemptive relief for securities lending transactions

engaged in by primary lending agents, other than

GSTC, beyond that provided pursuant to Prohibited

Transaction Exemption (PTE) 81–6 (46 FR 7527,

January 23, 1981, as amended at 52 FR 18754, May

19, 1987) and PTE 82–63 (47 FR 14804, April 6,

1982).

rebate rate formula, as discussed in

paragraph 21 of the Summary. However,

because the formula rates are designed

to vary based on the operation of the

formula, the BT Group will provide

notice only of the formula change

(unless such formula change would

always be beneficial to the Client Plans),

and not of a decrease or increase in the

lending fee or rebate rate itself.

Therefore, Bankers Trust states that its

previous representations, which are

contained in first and second sentences

of Paragraph 21 of the Summary, should

be clarified as follows:

Should the BT Group recognize prior to the

end of a business day that, with respect to

new and/or existing loans, it must change the

rebate rate formula or lending fee formula in

the best interest of Client Plans, it may do so

with respect to the Affiliated Borrowers.

If the BT Group changes the lending fee

formula or the rebate rate formula on any

outstanding loan to the Affiliated Borrower

(except for any change resulting from a

change in the value of any third party

independent index with respect to which the

fee or rebate is calculated, or if the formula

will always be beneficial to the Client Plan),

the BT Group, by the close of business on the

date of such adjustment, shall provide the

independent fiduciary of the Client Plan with

notice that it has changed such fee formula

or rebate rate formula with respect to such

Affiliated Borrower and that the Client Plan

may terminate such loan at any time.

[emphasis added]

The Department acknowledges

Bankers Trust’s request for clarification

to the representations contained in

Paragraph 21 of the Summary as well as

the other clarifications to the current

record provided by the applicant.

Therefore, after giving full

consideration to the entire record,

including the Comment, the Department

has decided to grant the exemption,

subject to the modifications and

clarifications described above. The

Comment has been included as part of

the public record of the exemption

application. The complete exemption

file is available for public inspection in

the Public Disclosure Room of the

Pension and Benefits Administration,

Room N–5638, U.S. Department of

Labor, 200 Constitution Avenue, NW.,

Washington, DC 20210.

For Further Information Contact:

Ekaterina A. Uzlyan, U.S. Department of

Labor, telephone (202) 219–8883. (This

is not a toll-free number.)

Goldman Sachs & Co. (Goldman Sachs)

and The Goldman Sachs Trust

Company (GSTC) Located in New York,

NY

[Prohibited Transaction Exemption 98–24;

Exemption Application No. D–10306]

Exemption

The restrictions of sections

406(a)(1)(A) through (D) and 406(b)(1)

and (2) of the Act and the sanctions

resulting from the application of section

4975 of the Code, by reason of section

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

shall not apply, effective July 31, 1996,

to the past and continued lending of

securities to Goldman Sachs

International or any other Goldman

Sachs affiliate based in the United

Kingdom (together, GSI), Goldman

Sachs, affiliated U.S. registered brokerdealers of Goldman Sachs, or Goldman

Sachs (Japan), Ltd., including any of its

affiliates (together, Goldman Sachs

(Japan),4 by employee benefit plans (the

Client Plans), including commingled

investment funds holding Plan assets,

for which Goldman Sachs Trust

Company (GSTC), an affiliate of

Goldman Sachs, acts as securities

lending agent (or sub-agent) and to the

receipt of compensation by GSTC in

connection with these transactions,

provided that the following conditions

are met:

(a) For each Client Plan, neither

GSTC, Goldman Sachs nor an affiliate of

either has or exercises discretionary

authority or control with respect to the

investment of the Plan assets involved

in the transaction, or renders investment

advice (within the meaning of 29 CFR

2510.3–21(c)) with respect to those

assets.

(b) Any arrangement for GSTC to lend

Plan securities to Goldman Sachs in

either an agency or sub-agency capacity

is approved in advance by a Plan

fiduciary who is independent of

Goldman Sachs and GSTC.5 In this

regard, the independent Plan fiduciary

also approves the general terms of the

securities loan agreement (the Loan

Agreement) between the Client Plan and

Goldman Sachs, although the specific

terms of the Loan Agreement are

negotiated and entered into by GSTC

and GSTC acts as a liaison between the

lender and the borrower to facilitate the

lending transaction.

(c) The terms of each loan of

securities by a Client Plan to Goldman

Sachs is at least as favorable to such

Plans as those of a comparable arm’s

length transaction between unrelated

parties.

(d) A Client Plan may terminate the

agency or sub-agency arrangement at

any time without penalty to such Plan

on five business days notice.

(e) The Client Plan receives from

Goldman Sachs (either by physical

delivery or by book entry in a securities

depository located in the United States,

wire transfer or similar means) by the

close of business on or before the day

the loaned securities are delivered to

Goldman Sachs, collateral consisting of

cash, securities issued or guaranteed by

the United States Government or its

agencies or instrumentalities, or

irrevocable United States bank letters of

credit issued by a person other than

Goldman Sachs or an affiliate thereof, or

any combination thereof, or other

collateral permitted under PTE 81–6, as

it may be amended or superseded.

(f) As of the close of business on the

preceding business day, the fair market

value of the collateral initially equals at

least 102 percent of the market value of

the loaned securities and, if the market

value of the collateral falls below 100

percent, Goldman Sachs delivers

additional collateral on the following

day such that the market value of the

collateral again equals 102 percent.

(g) Prior to entering into the Loan

Agreement, Goldman Sachs furnishes

GSTC its most recently available

audited and unaudited statements,

which is, in turn, provided to a Client

Plan, as well as a representation by

Goldman Sachs, that as of each time it

borrows securities, there has been no

material adverse change in its financial

condition since the date of the most

recently-furnished statement that has

not been disclosed to such Client Plan;

provided, however, that in the event of

a material adverse change, GSTC does

not make any further loans to Goldman

Sachs unless an independent fiduciary

of the Client Plan is provided notice of

any material adverse change and

approves the loan in view of the

changed financial condition.

(h) In return for lending securities, the

Client Plan either—

(1) Receives a reasonable fee, which is

related to the value of the borrowed

securities and the duration of the loan;

or

(2) Has the opportunity to derive

compensation through the investment of

cash collateral. (Under such
29440 Federal Register / Vol. 63, No. 103 / Friday, May 29, 1998 / Notices

circumstances, the Client Plan may pay

a loan rebate or similar fee to Goldman

Sachs, if such fee is not greater than the

fee the Client Plan would pay in a

comparable arm’s length transaction

with an unrelated party.)

(i) All procedures regarding the

securities lending activities conform to

the applicable provisions of Prohibited

Transaction Exemptions PTE 81–6 and

PTE 82–63 as well as to applicable

securities laws of the United States, the

United Kingdom or Japan.

(j) Each Goldman Sachs entity

indemnifies and holds harmless each

lending Client Plan in the United States

against any and all losses, damages,

liabilities, costs and expenses (including

attorney’s fees) which the Client Plan

may incur or suffer directly arising out

of the lending of securities of such

Client Plan to such Goldman Sachs

entity. In the event that GSI or Goldman

Sachs (Japan) defaults on a loan, GSTC

will liquidate the loan collateral to

purchase identical securities for the

Client Plan. If the collateral is

insufficient to accomplish such

purchase, GSTC will indemnify the

Client Plan for any shortfall in the

collateral plus interest on such amount

and any transaction costs incurred

(including attorney’s fees of the Client

Plan for legal actions arising out of the

default on the loans or failure to

properly indemnify under such

provisions). Alternatively, if such

identical securities are not available on

the market, GSTC will pay the Client

Plan cash equal to (1) the market value

of the borrowed securities as of the date

they should have been returned to the

Client Plan, plus (2) all the accrued

financial benefits derived from the

beneficial ownership of such loaned

securities as of such date, plus (3)

interest from such date to the date of

payment.

(k) The Client Plan receives the

equivalent of all distributions made to

holders of the borrowed securities

during the term of the loan, including,

but not limited to, cash dividends,

interest payments, shares of stock as a

result of stock splits and rights to

purchase additional securities, or other

distributions.

(l) Except for Client Plans which have

or had outstanding securities loans to

Goldman Sachs before February 19,

1998, Goldman Sachs provides, prior to

any Client Plan’s approval of the

lending of its securities to Goldman

Sachs, copies of the notice of proposed

exemption (the Notice) and the final

exemption. With respect to Client Plans

which have or had outstanding

securities loans to Goldman Sachs

through GSTC prior to February 19,

1998, GSTC provides such Plans with

copies of the Notice.

(m) Each Client Plan receives monthly

reports with respect to its securities

lending transactions, including, but not

limited to the information described in

Representation 31 of the Notice, so that

an independent fiduciary of the Client

Plan may monitor such transactions

with Goldman Sachs.

(n) Only Client Plans with total assets

having an aggregate market value of at

least $50 million are permitted to lend

securities to Goldman Sachs; provided,

however, that—

(1) In the case of two or more Client

Plans which are maintained by the same

employer, controlled group of

corporations or employee organization

(the Related Client Plans), whose assets

are commingled for investment

purposes in a single master trust or any

other entity the assets of which are

‘‘plan assets’’ under 29 CFR 2510.3–101

(the Plan Asset Regulation), which

entity is engaged in securities lending

arrangements with Goldman Sachs, the

foregoing $50 million requirement shall

be deemed satisfied if such trust or

other entity has aggregate assets which

are in excess of $50 million; provided

that if the fiduciary responsible for

making the investment decision on

behalf of such master trust or other

entity is not the employer or an affiliate

of the employer, such fiduciary has total

assets under its management and

control, exclusive of the $50 million

threshold amount attributable to plan

investment in the commingled entity,

which are in excess of $100 million.

(2) In the case of two or more Client

Plans which are not maintained by the

same employer, controlled group of

corporations or employee organization

(the Unrelated Client Plans), whose

assets are commingled for investment

purposes in a group trust or any other

form of entity the assets of which are

‘‘plan assets’’ under the Plan Asset

Regulation, which entity is engaged in

securities lending arrangements with

Goldman Sachs, the foregoing $50

million requirement is satisfied if such

trust or other entity has aggregate assets

which are in excess of $50 million

(excluding the assets of any Plan with

respect to which the fiduciary

responsible for making the investment

decision on behalf of such group trust

or other entity or any member of the

controlled group of corporations

including such fiduciary is the

employer maintaining such Plan or an

employee organization whose members

are covered by such Plan). However, the

fiduciary responsible for making the

investment decision on behalf of such

group trust or other entity—

(i) Has full investment responsibility

with respect to plan assets invested

therein; and

(ii) Has total assets under its

management and control, exclusive of

the $50 million threshold amount

attributable to plan investment in the

commingled entity, which are in excess

of $100 million.

(In addition, none of the entities

described above are formed for the sole

purpose of making loans of securities.)

(o) With respect to any calendar

quarter, at least 50 percent or more of

the outstanding dollar value of

securities loans negotiated on behalf of

Client Plans will be to unrelated

borrowers.

(p) In addition to the above, all loans

involving GSI and Goldman Sachs

(Japan), have the following

supplemental requirements:

(1) Such broker-dealer is registered as

a broker-dealer with the Securities and

Futures Authority of the United

Kingdom or with the Ministry of

Finance and the Tokyo Stock Exchange;

(2) Such broker-dealer is in

compliance with all applicable

provisions of Rule 15a–6 (17 CFR

240.15a–6) under the Securities

Exchange Act of 1934 which provides

for foreign broker-dealers a limited

exemption from United States

registration requirements;

(3) All collateral is maintained in

United States dollars or dollardenominated securities or letters of

credit;

(4) All collateral is held in the United

States and GSTC maintains the situs of

the securities Loan Agreements in the

United States under an arrangement that

complies with the indicia of ownership

requirements under section 404(b) of the

Act and the regulations promulgated

under 29 CFR 2550.404(b)–1; and

(5) GSI or Goldman Sachs (Japan)

provides Goldman Sachs a written

consent to service of process in the

United States for any civil action or

proceeding brought in respect of the

securities lending transaction, which

consent provides that process may be

served on such borrower by service on

Goldman Sachs.

(q) Goldman Sachs and its affiliates

maintain, or cause to maintain within

the United States for a period of six

years from the date of such transaction,

in a manner that is convenient and

accessible for audit and examination,

such records as are necessary to enable

the persons described in paragraph (r)(1)

to determine whether the conditions of

the exemption have been met, except

that—

(1) A prohibited transaction will not

be considered to have occurred if, due
Federal Register / Vol. 63, No. 103 / Friday, May 29, 1998 / Notices 29441

6See SEC No-Action Letter dated April 9, 1997

to Giovanni P. Prezioso, Esq. of Cleary, Gottlieb,

Steen & Hamilton regarding Securities Activities of

U.S-Affiliated Foreign Dealers.

to circumstances beyond the control of

Goldman Sachs and/or its affiliates, the

records are lost or destroyed prior to the

end of the six year period; and

(2) No party in interest other than

Goldman Sachs shall be subject to the

civil penalty that may be assessed under

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

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

the Code, if the records are not

maintained, or are not available for

examination as required below by

paragraph (r)(1).

(r)(1) Except as provided in

subparagraph (r)(2) of this paragraph

and notwithstanding any provisions of

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

of the Act, the records referred to in

paragraph (q) are unconditionally

available at their customary location

during normal business hours by:

(i) Any duly authorized employee or

representative of the Department, the

Internal Revenue Service or the

Securities and Exchange Commission

(the SEC);

(ii) Any fiduciary of a participating

Client Plan or any duly authorized

representative of such fiduciary;

(iii) Any contributing employer to any

participating Client Plan or any duly

authorized employee representative of

such employer; and

(iv) Any participant or beneficiary of

any participating Client Plan, or any

duly authorized representative of such

participant or beneficiary.

(r)(2) None of the persons described

above in paragraphs (r)(1)(ii)–(r)(1)(iv) of

this paragraph (r)(1) are authorized to

examine the trade secrets of Goldman

Sachs or commercial or financial

information which is privileged or

confidential.

Effective date: This exemption is

effective as of July 31, 1996.

For a more complete statement of the

facts and representations supporting the

Department’s decision to grant this

exemption, refer to the Notice published

on February 19, 1998 at 63 FR 8489.

Written Comments

The Department received one written

comment with respect to the Notice and

no requests for a public hearing. The

comment, which was submitted by

Goldman Sachs, suggested

modifications to the operative language

of the Notice and recommended certain

changes to the Summary of Facts and

Representations (the Summary) of the

Notice. Presented below are the

modifications requested by Goldman

Sachs and the Department’s

accompanying responses.

1. Condition (l). Condition (l) of the

Notice requires that GSTC provide a

copy of the proposed and final

exemption to Client Plans prior to such

plans’ approval of loans to Goldman

Sachs. Given that the relief requested is

retroactive, Goldman Sachs proposes to

amend Condition (l) by inserting the

following phrase at the beginning of this

provision: ‘‘Except for Client Plans

which have or had outstanding

securities loans to Goldman through

GSTC prior to February 19, 1998.’’ In

addition, Goldman Sachs suggests

adding the following sentence to the

end of Condition (l): ‘‘With respect to

Client Plans which have or had

outstanding securities loans to Goldman

through GSTC prior to February 19,

1998, GSTC will provide such Plans

with the notice of pendency as set forth

in the Notice to Interested Persons

section of the proposed exemption.’’ In

response, the Department has modified

Condition (l) of the Notice to read as

follows:

(1) Except for Client Plans which have or

had outstanding securities loans to Goldman

Sachs before February 19, 1998, Goldman

Sachs provides, prior to any Client Plan’s

approval of the lending of its securities to

Goldman Sachs, copies of the notice of

proposed exemption (the Notice) and the

final exemption. With respect to Client Plans

which have or had outstanding securities

loans to Goldman Sachs through GSTC prior

to February 19, 1998, GSTC provides such

Plans with copies of the Notice.

2. Representations 7 and 8.

Representations 7 and 8 of the Summary

discuss compliance provisions with

Rule 15a–6 of the 1934 Act by Goldman

Sachs, GSI and Goldman Sachs (Japan).

As noted in the Summary, Rule 15a–6

provides foreign broker-dealers with a

limited exemption from SEC registration

requirements and offers additional

protections. Goldman Sachs states that

some of the provisions of Rule 15a–6

have been changed or modified as a

result of an SEC No-Action Letter

obtained by its counsel on behalf of it

and a group of broker-dealers on April

9, 1997.6 Although Goldman Sachs

represents that it intends to comply

with any applicable provisions of Rule

15a–6 as it may change from time to

time, for the sake of accuracy, it requests

that Representations 7 and 8 be

amended to reflect the rule and the noaction relief. Accordingly, Goldman

Sachs suggests the following changes

which have been made by the

Department:

a. Footnote 14. Footnote 14 of the

Summary states that GSI and Goldman

Sachs (Japan) may rely on a U.S. bank

or trust company, including GSTC,

instead of relying on a U.S. brokerdealer. Goldman Sachs requests that

Footnote 14 of the Summary be moved

to the end of the third sentence of

Representation 7.

b. Addition of Footnote to

Representation 7. Goldman Sachs

suggests that a new footnote be inserted

at the end of Representation 7 which

would read as follows:

‘‘See also SEC No-Action Letter issued to

Cleary, Gottlieb, Steen & Hamilton on April

9, 1997 (hereinafter, ‘‘the April 9 No-Action

Letter’’), expanding the definition of ‘‘Major

U.S. Institutional Investor.’’

c. Addition of Footnote to

Representation 8(c)(5). Representation

8(c)(5) of the Summary states that a

foreign broker-dealer that induces or

attempts to induce the purchase or sale

of any security by a U.S. institutional or

major institutional investor must

‘‘receive, deliver and safeguard funds

and securities in connection with

transactions on behalf of the U.S.

institutional investor or U.S. major

institutional investor in compliance

with Rule 15c3–3 of the 1934 Act

(Customer Protection—Reserves and

Custody of Securities).’’ To update this

provision, Goldman Sachs requests that

the following footnote be placed at the

end of paragraph (c)(5) of

Representation 8:

‘‘Under certain circumstances described in

the April 9, 1997 No-Action Letter (e.g.,

clearance and settlement transactions), there

may be direct transfers of funds and

securities between the Client Plan and GSI

and Goldman Sachs (Japan). Goldman Sachs

notes that in such situations, the U.S.

registered broker-dealer will not be acting as

a principal with respect to any duties it is

required to undertake pursuant to Rule 15a–

6.’’

d. Modification of Representation

8(c)(6). Representation 8(c)(6) of the

Summary states that a foreign brokerdealer that induces or attempts to

induce the purchase or sale of any

security by a U.S. institutional or major

institutional investor must ‘‘participate

in all oral communications (e.g.,

telephone calls) between the foreign

associated person and the U.S.

institutional investor (not the U.S. major

institutional investor), and accompany

the foreign associated person on all

visits with both U.S. institutional and

major institutional investors. By virtue

of this participation, the U.S. registered

broker-dealer would become responsible

for the content of all these

communications.’’

Given that the relief granted in the

April 9, 1997 No-Action Letter

significantly modified the

‘‘chaperoning’’ requirements of Rule

15a–6 to provide, under certain
29442 Federal Register / Vol. 63, No. 103 / Friday, May 29, 1998 / Notices

circumstances, direct communications

and contact between the foreign brokerdealer and the U.S. Institutional

Investor, Goldman Sachs requests that

the reference to ‘‘all communications’’

and ‘‘all visits’’ be amended to read

‘‘certain communications’’ and ‘‘certain

visits.’’ In addition, Goldman Sachs

requests that the last sentence of

Representation 8(c)(6) be deleted and

the following footnote be added to the

end of such section to read:

‘‘Under certain circumstances, the foreign

associated person may have direct

communications and contact with the U.S.

Institutional Investor. See April 9 SEC NoAction Letter.’’

3. Representation 12. The second

sentence of Representation 12 states that

‘‘for each Plan, neither GSTC, Goldman

Sachs nor any affiliate will have no

discretionary authority or control or

render investment advice over Client

Plans’ decisions concerning the

acquisition or disposition of securities

available for loan.’’ Goldman Sachs

requests that the word ‘‘no,’’ which

precedes the word ‘‘discretionary’’ be

deleted from this sentence as it is in

error. The Department concurs with this

change and has made the required

modification.

4. Representation 15. The third

paragraph of Representation 15 states

that the provisions of the Sub-Agency

Agreement will be comparable to those

of the Agency Agreement but it

erroneously cross-references the Agency

Agreement to Representation 9.

Goldman Sachs wishes to point out that

the correct cross-reference should be to

Representation 14 rather than

Representation 9. The Department

concurs with this change and has made

the required modification.

5. Representation 24. Goldman Sachs

states that the fourth sentence of

Representation 24 contains a

typographical error in that the

parenthetical should end after the

phrase ‘‘from such loan’’ instead of at

the end of the sentence. Therefore, the

Department has revised this sentence to

read as follows:

With respect to any loan to Goldman

Sachs, GSTC will never negotiate a rebate

rate with respect to such loan which would

be expected to produce a zero or negative

return to the Client Plan (assuming no default

on the investments related to the cash

collateral from such loan) where GSTC has

investment discretion over the cash

collateral.

6. Representation 33 and Condition

(n). Representation 22 of the Summary

and Condition (n) of the Notice exclude

from the securities lending program

commingled trust funds which contain

plan assets of more than one employer

if the fiduciary responsible for making

the investment decision is one of the

Client Plan’s employers. Goldman Sachs

does not believe this restriction is

necessary because it would preclude the

State Street Collective Trust Funds from

using GSTC as a securities lending agent

and lending to Goldman Sachs under

the exemption if one of State Street’s

employee benefit plans were invested in

the fund, even though the fund would

otherwise comply with the $50 million

in assets requirement and State Street as

a fiduciary to the fund would otherwise

satisfy the $100 million under

management requirement. Therefore,

Goldman Sachs suggests that the

Department revise paragraph (n)(2) of

the Conditions and subclause (a) of the

second paragraph of Representation 33

to read as follows:

(2) In the case of two or more Client Plans

which are not maintained by the same

employer, controlled group of corporations or

employee organization (the Unrelated Client

Plans), whose assets are commingled for

investment purposes in a group trust or any

other form of entity the assets of which are

‘‘plan assets’’ under the Plan Asset

Regulation, which entity is engaged in

securities lending arrangements with

Goldman Sachs, the foregoing $50 million

requirement is satisfied if such trust or other

entity has aggregate assets which are in

excess of $50 million (excluding the assets of

any Plan with respect to which the fiduciary

responsible for making the investment

decision on behalf of such group trust or

other entity or any member of the controlled

group of corporations including such

fiduciary is the employer maintaining such

Plan or an employee organization whose

members are covered by such Plan).

However, the fiduciary responsible for

making the investment decision on behalf of

such group trust or other entity—

(i) Has full investment responsibility with

respect to plan assets invested therein; and

(ii) Has total assets under its management

and control, exclusive of the $50 million

threshold amount attributable to plan

investment in the commingled entity, which

are in excess of $100 million.

After considering this comment, the

Department has made the changes

suggested by Goldman Sachs.

For further information regarding

Goldman Sachs’s comments or other

matters discussed herein, interested

persons are encouraged to obtain copies

of the exemption application file

(Exemption Application No. D–10306)

the Department is maintaining in this

case. The complete application file, as

well as all supplemental submissions

received by the Department, are made

available for public inspection in the

Public Documents Room of the Pension

and Welfare Benefits Administration,

Room N–5638, U.S. Department of

Labor, 200 Constitution Avenue, NW,

Washington, DC 20210.

Accordingly, after giving full

consideration to the entire record,

including the written comments

provided by Goldman Sachs, the

Department has made the

aforementioned changes to the Notice.

In addition, the Department has decided

to grant the exemption subject to the

modifications or clarifications described

above.

For Further Information Contact: Ms.

Jan D. Broady of the Department,

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

a toll-free number.)

General Information

The attention of interested persons is

directed to the following:

(1) The fact that a transaction is the

subject of an exemption under section

408(a) of the Act and/or section

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

a fiduciary or other party in interest or

disqualified person from certain other

provisions to which the exemptions

does not apply and the general fiduciary

responsibility provisions of section 404

of the Act, which among other things

require a fiduciary to discharge his

duties respecting the plan solely in the

interest of the participants and

beneficiaries of the plan and in a

prudent fashion in accordance with

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

it affect the requirement of section

401(a) of the Code that the plan must

operate for the exclusive benefit of the

employees of the employer maintaining

the plan and their beneficiaries;

(2) These exemptions are

supplemental to and not in derogation

of, any other provisions of the Act and/

or the Code, including statutory or

administrative exemptions and

transactional rules. Furthermore, the

fact that a transaction is subject to an

administrative or statutory exemption is

not dispositive of whether the

transaction is in fact a prohibited

transaction; and

(3) The availability of these

exemptions is subject to the express

condition that the material facts and

representations contained in each

application accurately describes all

material terms of the transaction which

is the subject of the exemption.

Signed at Washington, D.C., this 22nd day

of May, 1998.

Ivan Strasfeld,

Director of Exemption Determinations,

Pension and Welfare Benefits Administration,

U.S. Department of Labor.

[FR Doc. 98–14197 Filed 5–28–98; 8:45 am]

BILLING CODE 4510–29–P