Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Notices 13235 

1For purposes of this exemption reference to 

specific provisions of Title I of the Act, unless 

otherwise specified, refer also to the corresponding 

provisions of the Code. 

Section III(b) of the Definitions, as long 

as the following conditions were met: 

(1) The Merger Transaction resulted 

in Citigroup receiving, among other 

things, approximately 4 percent of the 

Legg Mason voting common stock (Legg 

Mason Common Stock), and non-voting 

convertible preferred stock (Legg Mason 

Preferred Stock) which was convertible 

into approximately 10 percent of Legg 

Mason Common Stock (together, Legg 

Mason Stock). 

(2) Following the Merger Transaction, 

Legg Mason Stock was being held by a 

subsidiary of Citigroup that is not in the 

vertical chain of ownership with CGMI, 

and CGMI was not controlling or 

controlled by the entity holding Legg 

Mason Stock. 

(3) Legg Mason Preferred Stock was 

converted into Legg Mason Common 

Stock only after it was sold by 

Citigroup. 

(4) Citigroup engaged in efforts to sell 

Legg Mason Preferred Stock within a 

reasonable amount of time pursuant to 

an underwritten broadly distributed 

public offering. 

(5) Citigroup reduced its holdings in 

Legg Mason Stock below 10 percent 

within three months following the 

consummation of the Merger 

Transaction. 

(6) Citigroup did not participate in 

any proxy contest or other activities 

concerning the management of Legg 

Mason. 

(7) Citigroup did not acquire more 

than 5 percent of Legg Mason Common 

Stock at any time. 

(8) Brandywine and Western operated 

as separate and autonomous business 

units within Legg Mason. 

(9) The Consulting Group had no 

ability to exercise control or influence 

over the business of Brandywine or 

Western. Similarly, Brandywine and 

Western had no ability to exercise 

control or influence over the business of 

the Consulting Group. 

(10) For so long as Citigroup’s 

ownership interest in Legg Mason 

remained greater than 10 percent, with 

respect to each Portfolio for which 

Brandywine or Western currently serves 

as a Sub-Adviser, the percentage of 

Portfolio assets allocated for 

management purposes to these entities 

by the Consulting Group was not 

increased. 

(11) For so long as Citigroup’s 

ownership interest in Legg Mason 

remained greater than 10 percent, 

Brandywine and Western were not 

permitted to manage assets for any other 

Portfolio in the TRAK Program. 

(12) For so long as Citigroup’s 

ownership interest in Legg Mason 

remained greater than 10 percent, the 

fee rates paid to Brandywine and 

Western were not increased. 

(13) For so long as Citigroup’s 

ownership interest in Legg Mason 

remained greater than 10 percent, no 

other affiliates of Legg Mason were 

retained to act as Sub-Advisers in the 

TRAK Program. 

(14) The Board of Trustees of the 

Trust for the Consulting Group 

subjected Brandywine and Western to 

the same review process and fiduciary 

requirements as in effect for all other 

Sub-Advisers, and to the same 

performance standards. 

Section V. Effective Dates 

This exemption is effective: (1) 

December 1, 2005 until March 10, 2006 

with respect to the limited exception 

described in Section IV; (2) as of 

December 1, 2005 with respect to the 

Covered Transactions, the General 

Conditions and the Definitions that are 

described in Sections I, II and III; and 

(3) as of January 1, 2008 with respect to 

the new fee offset procedure. 

Signed at Washington, DC, this 20th day of 

March, 2009. 

Ivan L. Strasfeld, 

Director of Exemption Determinations, 

Employee Benefits Security Administration, 

U.S. Department of Labor. 

[FR Doc. E9–6621 Filed 3–25–09; 8:45 am] 

BILLING CODE 4510–29–P 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

Prohibited Transaction Exemptions 

and Grant of Individual Exemptions 

Involving: 2009–10, Camino Medical 

Group, Inc. Employee Retirement Plan 

(the Retirement Plan) D–11336; and 

2009–11, JPMorgan Chase Bank, 

National Association, D–11471 

AGENCY: Employee Benefits Security 

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 (ERISA or the Act) 

and/or the Internal Revenue Code of 

1986 (the Code). 

A notice was published in the Federal 

Register of the pendency before the 

Department of a proposal to grant such 

exemption. The notice set forth a 

summary of facts and representations 

contained in the application for 

exemption and referred interested 

persons to the application for a 

complete statement of the facts and 

representations. The application has 

been available for public inspection at 

the Department in Washington, DC. The 

notice also invited interested persons to 

submit comments on the requested 

exemption to the Department. In 

addition the notice stated that any 

interested person might submit a 

written request that a public hearing be 

held (where appropriate). The applicant 

has represented that it has complied 

with the requirements of the notification 

to interested persons. No requests for a 

hearing were received by the 

Department. Public comments were 

received by the Department as described 

in the granted exemption. 

The notice of proposed exemption 

was issued and the exemption is being 

granted solely by the Department 

because, effective December 31, 1978, 

section 102 of Reorganization Plan No. 

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

transferred the authority of the Secretary 

of the Treasury to issue exemptions of 

the type proposed to the Secretary of 

Labor. 

Statutory Findings 

In accordance with section 408(a) of 

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

Code and the procedures set forth in 29 

CFR Part 2570, Subpart B (55 FR 32836, 

32847, August 10, 1990) and based upon 

the entire record, the Department makes 

the following findings: 

(a) The exemption is administratively 

feasible; 

(b) The exemption is in the interests 

of the plan and its participants and 

beneficiaries; and 

(c) The exemption is protective of the 

rights of the participants and 

beneficiaries of the plan. 

Camino Medical Group, Inc. Employee 

Retirement Plan 

(the Retirement Plan) 

Located in Sunnyvale, CA 

[Prohibited Transaction Exemption 

2009–10; 

Exemption Application No. D–11336] 

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,1 shall not apply, effective July 

1, 2003 until December 14, 2007, to (1) 

the leasing (the 2003 Leases) of a 

medical facility (the Urgent Care 

Facility) and a single family residence 

13236 Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Notices 

2Unless otherwise noted, Global Capital Markets 

will consist collectively of the above referenced 

entities. 

converted to an office (the Residence) by 

the Retirement Plan to CMG, the 

sponsor of the Retirement Plan and a 

party in interest with respect to such 

plan; and (2) the exercise, by CMG, of 

options to renew the 2003 Lease with 

respect to the Residence for one year 

and the 2003 Lease with respect to the 

Urgent Care Facility for three years, 

provided that the following conditions 

were or will be met: 

(a) The terms and conditions of each 

2003 Lease were no less favorable to the 

Retirement Plan than those obtainable 

by the Retirement Plan under similar 

circumstances when negotiated at arm’s 

length with unrelated third parties. 

(b) The Retirement Plan was 

represented for all purposes under the 

2003 Leases, and during each renewal 

term, by a qualified, independent 

fiduciary. 

(c) The independent fiduciary 

negotiated, reviewed, and approved the 

terms and conditions of the 2003 Leases 

and the options to renew such leases on 

behalf of the Retirement Plan and 

determined that the transactions were 

appropriate investments for the 

Retirement Plan and were in the best 

interests of the Retirement Plan and its 

participants and beneficiaries. 

(d) The rent paid to the Retirement 

Plan under each 2003 Lease, and during 

each renewal term, was no less than the 

fair market rental value of the Urgent 

Care Facility and the Residence, as 

established by a qualified, independent 

appraiser. 

(e) The rent was subject to adjustment 

at the commencement of the second 

year of each 2003 Lease and each year 

thereafter by way of an independent 

appraisal. A qualified, independent 

appraiser was selected by the 

independent fiduciary to conduct the 

appraisal. If the appraised fair market 

rent of the Urgent Care Facility or the 

Residence was greater than that of the 

current base rent, then the base rent was 

revised to reflect the appraised increase 

in fair market rent. If the appraised fair 

market rent of the Urgent Care Facility 

or the Residence was less than or equal 

to the current base rent, then the base 

rent remained the same. 

(f) Each 2003 Lease was triple net, 

requiring all expenses for maintenance, 

taxes, utilities and insurance to be paid 

by CMG, as lessee. 

(g) The independent fiduciary— 

(1) Monitored CMG’s compliance with 

the terms of each 2003 Lease and the 

conditions of the exemption throughout 

the duration of such leases and the 

renewal terms, and was responsible for 

legally enforcing the payment of the rent 

and the proper performance of all other 

obligations of CMG under the terms of 

such leases. 

(2) Expressly approved the renewals 

of the 2003 Leases beyond their initial 

terms. 

(3) Determined whether the rent had 

been paid on a monthly basis and in a 

timely manner based on documentation 

provided by CMG. 

(4) Determined whether CMG owed 

the Camino Medical Group, Inc. 

Matching 401(k) Plan (the 401(k) Plan) 

or the Retirement Plan additional rent 

by reason of CMG’s leasing of the Urgent 

Care Facility and/or the Residence from 

such plans prior to July 1, 2003 and 

ensured that CMG made such payments 

to the Plans, including reasonable 

interest. 

(h) At all times throughout the 

duration of each 2003 Lease and each 

respective renewal term, the fair market 

value of the Urgent Care Facility and the 

Residence did not exceed 25 percent of 

the value of the total assets of the 

Retirement Plan. 

(i) Within 90 days of the publication 

of the grant notice in the Federal 

Register, Palo Alto Medical Foundation, 

the successor in interest to CMG, (1) 

files a Form 5330 with the Internal 

Revenue Service and pays all applicable 

excise taxes that are due with respect to 

the leasing of the Urgent Care Facility 

and the Residence to CMG by the 401(k) 

Plan and/or the Retirement Plan prior to 

July 1, 2003; and (2) provides a copy of 

the cancelled check and other 

documentary evidence to the 

Department indicating that the taxes 

were correctly computed and paid 

within 45 days of such payment. 

DATES: Effective Date: This exemption is 

effective from July 1, 2003 until 

December 14, 2007. 

For a more complete statement of the 

facts and representations supporting the 

Department’s decision to grant this 

exemption, refer to the notice of 

proposed exemption published on 

December 24, 2008 at 73 FR 79168. 

FOR FURTHER INFORMATION CONTACT: Ms. 

Jan D. Broady of the Department, 

telephone (202) 693–8556. (This is not 

a toll-free number.) 

JPMorgan Chase Bank, National 

Association, Located in Columbus, 

Ohio 

[Prohibited Transaction Exemption 

2009–11; Exemption Application No. 

D–11471] 

Exemption 

Section I. Covered Transactions 

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 to the lending of 

securities to affiliates of JPMorgan Chase 

& Co. Inc. (JPMCC), which are engaged 

in JPMCC’s capital markets line of 

business (referred to herein as Global 

Capital Markets), by employee benefit 

plans (the Client Plans), including 

commingled investment funds holding 

Client Plan assets, for which JPMCC 

through its Financing & Market Products 

or any other similar division of JPMCB 

or a U.S. affiliate of JPMCC (collectively, 

FMP) acts as securities lending agent or 

sub-agent, and for which JPMCC, 

through its Investor Services line of 

Business, as operated through JPMCB 

and its affiliates (Investor Services), may 

also act as directed trustee or custodian, 

and (2) to the receipt of compensation 

by FMP in connection with the 

proposed transactions, provided the 

general conditions set forth below in 

Section II are met. 

Section II. General Conditions 

(a) This exemption applies to loans of 

securities to Global Capital Markets, as 

operated in the United States (J. P. 

Morgan Securities Inc., or the U.S. 

Affiliated Borrower) and in the 

following foreign countries: the United 

Kingdom (J. P. Morgan Securities Ltd.), 

Canada (J. P. Morgan Securities Canada 

Inc.), Australia (J. P. Morgan Securities 

Australia Limited), Japan (J. P. Morgan 

Securities Japan Co. Ltd) (collectively, 

the Foreign Affiliated Borrowers). 

Global Capital Markets will also include 

other companies or their successors 

which are affiliated with either JPMCB 

or JPMCC within these countries.2

(b) For each Client Plan, neither 

Investor Services, Global Capital 

Markets, FMP, nor any other division or 

affiliate of JPMCC has or exercises 

discretionary authority or control with 

respect to the investment of the assets 

of Client Plans involved in the 

transaction (other than with respect to 

the lending of securities designated by 

an independent fiduciary of a Client 

Plan as being available to lend and 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. 

(i) Notwithstanding the foregoing, for 

the period from March 16, 2008, 

Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Notices 13237 

3The Department, herein, is not providing 

exemptive relief for securities lending transactions 

engaged in by primary lending agents, other than 

FMP, beyond that provided pursuant to PTE 2006– 

16. 

through June 14, 2008, section II(b) shall 

not apply to the lending of securities by 

a Client Plan to Bear Stearns Affiliates, 

provided that (i) no division or affiliate 

of JPMCC that has discretionary 

authority or control with respect to the 

investment of the assets of the Client 

Plan involved in the transaction, or 

renders investment advice (within the 

meaning of 29 CFR 2510.3–21(c)) with 

respect to those assets, has access to 

information regarding whether the 

particular securities have been loaned to 

a Bear Stearns Affiliate, and (ii) an 

Independent Fiduciary (as defined in 

section IV(f)) conducts a Review (as 

defined in section IV(g)) of Client Plan 

securities loans to Bear Stearns 

Affiliates and within 180 days of the 

date of publication of this proposed 

amendment in the Federal Register, 

issues a written report presenting its 

specific findings. 

(c) Before a Client Plan participates in 

a securities lending program and before 

any loan of securities to Global Capital 

Markets is effected, a Client Plan 

fiduciary which is independent of 

Global Capital Markets must have— 

(1) Authorized and approved a 

securities lending authorization 

agreement with FMP, where FMP is 

acting as the securities lending agent; 

(2) Authorized and approved the 

primary securities lending authorization 

agreement with the primary lending 

agent where FMP is lending securities 

under a sub-agency agreement with the 

primary lending agent; 3 and 

(3) Approved the general terms of the 

securities loan agreement (the Loan 

Agreement) between such Client Plan 

and Global Capital Markets, the specific 

terms of which are negotiated and 

entered into by FMP. 

Notwithstanding the foregoing, 

effective March 16, 2008, section II(c)(3) 

shall be deemed satisfied with respect to 

loans of securities by Client Plans to 

Bear Stearns Affiliates by FMP as 

securities lending agent or sub-agent, 

provided (i) FMP provided to such 

Client Plans no later than April 15, 

2008, a description of the general terms 

of the securities loan agreements 

between such Client Plans and the Bear 

Stearns Affiliates and (ii) at the time of 

providing such information, FMP 

notified each Client Plan that it had 10 

days to object in writing to the 

continued lending of securities to the 

Bear Stearns Affiliates. If a written 

objection is received from a Client Plan 

within the 10-day period, FMP shall 

cease to make any new securities loans 

on behalf of that Client Plan to Bear 

Stearns Affiliates; any securities loans 

made on behalf of that Client Plan to 

Bear Stearns Affiliates prior to the date 

the objection is received shall be 

covered by this exemption, and FMP 

shall seek to expeditiously terminate 

such securities loan in a manner 

approved by the Client Plan. 

(d) Each loan of securities by a Client 

Plan to Global Capital Markets is at 

market rates and terms which are at 

least as favorable to such Client Plan as 

if made at the same time and under the 

same circumstances to an unrelated 

party. 

(e) The Client Plan may terminate the 

agency or sub-agency arrangement at 

any time without penalty to such Client 

Plan on five business days notice 

whereupon Global Capital Markets 

delivers 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 Client 

Plan within— 

(1) The customary delivery period for 

such securities; 

(2) Five business days; or 

(3) The time negotiated for such 

delivery by the Client Plan and Global 

Capital Markets, whichever is less. 

(f) The Client Plan receives from 

Global Capital Markets (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 Global Capital Markets, 

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 

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

Global Capital Markets or an affiliate 

thereof, or any combination thereof, or 

other collateral permitted under PTE 

2006–16 (as amended from time to time 

or, alternatively, any additional or 

superseding 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 the 

percentage required in PTE 2006–16 (as 

amended from time to time) but in no 

case less than 102 percent of the market 

value of the loaned securities. 

(g) 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, Global 

Capital Markets delivers additional 

collateral on the following day such that 

the market value of the collateral again 

equals 102 percent or the percentage 

otherwise required by 2006–16. 

(h) The Loan Agreement gives 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 

and FMP monitors the level of the 

collateral daily. 

(i) Before entering into a Loan 

Agreement, Global Capital Markets 

furnishes FMP the most recently 

available audited and unaudited 

statements of the financial condition of 

the applicable borrower within Global 

Capital Markets. Such statements are, in 

turn, provided by FMP to the Client 

Plan. At the time of the loan, Global 

Capital Markets gives prompt notice to 

the Client Plan fiduciary of any material 

adverse change in the borrower’s 

financial condition since the date of the 

most recent financial statement 

furnished to the Client Plan. In the 

event of any such changes, FMP 

requests approval of the Client Plan to 

continue lending to Global Capital 

Markets before making any such 

additional loans. No new securities 

loans will be made until approval is 

received and each loan constitutes a 

representation by Global Capital 

Markets that there has been no such 

material adverse change. 

Notwithstanding the foregoing, 

effective March 16, 2008, section II(i) 

shall be deemed satisfied with respect to 

loans of securities by Client Plans to 

Bear Stearns Affiliates by FMP as 

securities lending agent or sub-agent, 

provided (i) FMP provided to such 

Client Plans no later than April 15, 

2008, the most recently available 

audited and unaudited consolidated 

statements of the financial condition of 

the parent company of the applicable 

Bear Stearns Affiliates and the parent 

company’s subsidiaries, and notice of 

any material adverse change in financial 

condition since the date of the most 

recent financial statement being 

furnished to the Client Plans, and (ii) at 

the time of providing such information, 

FMP notified each Client Plan that it 

had 10 days to object in writing to the 

continued lending of securities to the 

Bear Stearns Affiliates. If a written 

objection is received from a Client Plan 

within the 10-day period, FMP shall 

cease to make any new securities loans 

on behalf of that Client Plan to Bear 

Stearns Affiliates; any securities loans 

made on behalf of that Client Plan to 

Bear Stearns Affiliates prior to the date 

the objection is received shall be 

covered by this exemption, and FMP 

13238 Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Notices 

shall seek to expeditiously terminate 

such securities loan in a manner 

approved by the Client Plan. Loans of 

securities by such Client Plans to a Bear 

Stearns Affiliate entered into on or after 

April 15, 2008, under the same 

securities loan agreement terms 

disclosed in accordance with the second 

paragraph of section II(c)(3) above shall 

be deemed to satisfy this section II(i), 

absent a material adverse change in the 

financial condition of the particular 

Bear Stearns Affiliate since April 15, 

2008 (in which event the provisions of 

the first paragraph of this section II(i) 

shall apply). 

(j) 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. (In the case of cash 

collateral, the Client Plan may pay a 

loan rebate or similar fee to Global 

Capital Markets if such fee is not greater 

than the fee the Client Plan would pay 

an unrelated party in a comparable 

arm’s length transaction.) 

(k) All procedures regarding the 

securities lending activities conform to 

the applicable provisions of PTE 2006– 

16 (as amended from time, or 

alternatively, any additional or 

superseding class exemption that may 

be issued to cover securities lending by 

employee benefit plans). 

(l) If Global Capital Markets defaults 

on the securities loan or enters 

bankruptcy, the collateral will not be 

available to Global Capital Markets or its 

creditors, but will be used to make the 

Client Plan whole. In this regard, 

(1) In the event a Foreign Affiliated 

Borrower defaults on a loan, JPMCB will 

liquidate the loan collateral to purchase 

identical securities for the Client Plan. 

If the collateral is insufficient to 

accomplish such purchase, JPMCB 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 indemnify properly under this 

provision). Alternatively, if such 

identical securities are not available on 

the market, FMP will pay the Client 

Plan cash equal to— 

(i) The market value of the borrowed 

securities as of the date they should 

have been returned to the Client Plan, 

plus 

(ii) All the accrued financial benefits 

derived from the beneficial ownership 

of such loaned securities as of such 

date, plus 

(iii) Interest from such date to the date 

of payment. 

The lending Client Plans will be 

indemnified in the United States for any 

loans to the Foreign Affiliated 

Borrowers. 

(2) In the event the U.S. Affiliated 

Borrower defaults on a loan, JPMCB will 

liquidate the loan collateral to purchase 

identical securities for the Client Plan. 

If the collateral is insufficient to 

accomplish such purchase, either 

JPMCB or the U.S. Affiliated Borrower 

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 indemnify property under this 

provision). 

(m) The Client Plan receives the 

equivalent of all distributions made to 

holders of the borrowed securities 

during the term of the loan, including 

all interest, dividends and distributions 

on the loaned securities during the loan 

period. 

(n) Prior to any Client Plan’s approval 

of the lending of its securities to Global 

Capital Markets, copies of the notice of 

proposed exemption and the final 

exemption, and, effective November 7, 

2008, the proposed amendment to the 

exemption and, upon publication in the 

Federal Register, the final amendment 

to the exemption, are provided to the 

Client Plan; provided, that for Client 

Plans of FMP as of the date of the 

proposed amendment or final 

amendment, as applicable, is published 

in the Federal Register, section II(n) 

shall be deemed satisfied if such notice 

is provided to the Client Plan within 15 

days of publication in the Federal 

Register. 

(o) Each Client Plan receives a 

monthly report with respect to its 

securities lending transactions, 

including but not limited to the 

information described in Representation 

24 of the proposed exemption for PTE 

99–34 (64 FR 34281, 6/25/99), so that an 

independent fiduciary of the Client Plan 

may monitor the securities lending 

transactions with Global Capital 

Markets. 

(p) Only Client Plans with total assets 

having an aggregate market value of at 

least $50 million are permitted to lend 

securities to Global Capital Markets; 

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 

(i.e., 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 Global Capital 

Markets, 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 

(i.e., 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 

Global Capital Markets, 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 

Client 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.) 

(q) With respect to each successive 

two week period, on average, at least 50 

percent or more of the outstanding 

dollar value of securities loans 

negotiated on behalf of Client Plans by 

FMP, in the aggregate, will be to 

unrelated borrowers. 

Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Notices 13239 

(r) In addition to the above, all loans 

involving Foreign Affiliated Borrowers 

within Global Capital Markets have the 

following supplemental requirements: 

(1) Such Foreign Affiliated Borrower 

is registered as a bank or broker-dealer 

with— 

(i) The Financial Services Authority 

in the case of J. P. Morgan Securities 

Ltd.; 

(ii) The Office of the Superintendent 

of Financial Institutions (OSFI), in the 

case of J.P. Morgan Securities Canada 

Inc.; 

(iii) The Australian Securities & 

Investments Commission in the case of 

J.P. Morgan Securities Australia Ltd.; 

and 

(iv) The Financial Services Agency in 

the case of J.P. Morgan Securities Japan 

Ltd. 

(2) Such broker-dealer or bank is in 

compliance with all applicable 

provisions of Rule 15a–6 (17 CFR 

240.15a–6) under the Securities 

Exchange Act of 1934 (the 1934 Act) 

which provides for foreign brokerdealers a limited exemption from 

United States registration requirements; 

(3) All collateral is maintained in 

United States dollars or dollardenominated securities or letters of 

credit of U.S. banks or any combination 

thereof, or other collateral permitted 

under PTE 2006–16 (as amended from 

time to time, or alternatively, any 

additional or superseding class 

exemption that may be issued to cover 

securities lending by employee benefit 

plans); 

(4) All collateral is held in the United 

States; 

(5) The situs of the Loan Agreement 

is maintained in the United States; 

(6) The lending Client Plans are 

indemnified by JPMCB in the United 

States for any transactions covered by 

this exemption with the Foreign 

Affiliated Borrower so that the Client 

Plans do not have to litigate in a foreign 

jurisdiction nor sue the Foreign 

Affiliated Borrower to realize on the 

indemnification; and 

(7) Prior to the transaction, each 

Foreign Affiliated Borrower enters into 

a written agreement with FMP on behalf 

of the Client Plan whereby the Foreign 

Affiliated Borrower consents to 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. 

(s) JPMCB or J.P. Morgan Securities 

Inc. (JPMSI) maintains, or causes to be 

maintained 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 (t)(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 

to circumstances beyond the control of 

JPMCB or JPMSI, the records are lost or 

destroyed prior to the end of the six year 

period; and 

(2) No party in interest other than 

JPMCB or JPMSI 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 (t)(1). 

(t)(1) Except as provided in 

subparagraph (t)(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 (s) 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; 

(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. 

(t)(2) None of the persons described 

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

this paragraph (t)(1) are authorized to 

examine the trade secrets of JPMCB, the 

U.S. Affiliated Borrowers, or the Foreign 

Affiliated Borrowers or commercial or 

financial information which is 

privileged or confidential. 

Section III. Temporary Exemption for 

Investment in Bear Stearns Master Note 

The restrictions of sections 

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

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 to the 

investment of securities lending 

collateral by JPMCB, as the investment 

manager of such collateral on behalf of 

the Client Plan or Collective Fund that 

has lent the securities, in the Bear 

Stearns Master Note (as defined in 

paragraph (b) below), provided that the 

condition set forth below in paragraph 

(a) is met. 

(a) Repayment of the Bear Stearns 

Master Note is unconditionally 

guaranteed by JPMCB. 

(b) For purposes of this Section III, the 

term ‘‘Bear Stearns Master Note’’ means 

the $750 million Evergreen Advance 

dated October 23, 2007, under the 

Master Note Agreement dated February 

9, 2007, by and between JPMCB as agent 

for a group of lending entities and 

certain subsidiaries of The Bear Stearns 

Companies Inc., which matured on June 

13, 2008, and was paid in full. 

Section IV. Definitions 

For purposes of this exemption, 

(a) The terms ‘‘JPMCB’’ and ‘‘JPMCC’’ 

as referred to herein in Sections I, II and 

III, refer to JPMorgan Chase Bank, 

National Association, and its parent, 

JPMorgan Chase & Co., Inc. 

(b) The term ‘‘affiliate’’ means any 

entity now or in the future, directly or 

indirectly, controlling, controlled by, or 

under common control with JPMCC or 

its successors. (For purposes of this 

definition, the term ‘‘control’’ means the 

power to exercise a controlling 

influence over the management or 

policies of a person other than an 

individual.) 

(c) The term ‘‘U.S. Affiliated 

Borrower’’ means an affiliate of JPMCC 

that is a bank supervised by the United 

States or a State, or a broker-dealer 

registered under the 1934 Act. 

(d) The term ‘‘Foreign Affiliated 

Borrower’’ means an affiliate of JPMCC 

that is a bank or a broker-dealer which 

is supervised by— 

(i) The Financial Services Authority 

in the United Kingdom; 

(ii) OSFI in Canada; 

(iii) The Australian Securities & 

Investments Commission in Australia; 

and 

(iv) The Financial Services Agency in 

Japan. 

(e) The term ‘‘Bear Stearns Affiliate’’ 

means The Bear Stearns Companies Inc. 

and its affiliates as constituted on March 

15, 2008. 

(f) The term ‘‘Independent Fiduciary’’ 

means a fiduciary who is independent 

of and unrelated to JPMCB and Bear 

Stearns Affiliates. For purposes of this 

exemption, a fiduciary will not be 

deemed to be independent of and 

unrelated to JPMCB and Bear Stearns 

Affiliates if: 

(i) Such fiduciary directly or 

indirectly controls, is controlled by, or 

is under common control with JPMCB 

or a Bear Stearns Affiliate; 

(ii) Such fiduciary, or any employee 

of the fiduciary who will be involved in 

the Review (as defined in section IV(g)), 

or any officer, director, partner, or 

highly compensated employee (as 

13240 Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Notices 

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

Code) of the fiduciary, is an officer, 

director, partner or highly compensated 

employee (as defined in section 

4975(e)(2)(H) of the Code) of JPMCB or 

a Bear Stearns Affiliate; or any member 

of the business segment performing the 

independent fiduciary services is a 

relative of an officer, director, partner or 

highly compensated employee (as 

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

Code) of JPMCB or a Bear Stearns 

Affiliate. 

However, if an individual is a director 

of the fiduciary and an officer, director, 

partner or highly compensated 

employee (as defined in section 

4975(e)(2)(H) of the Code) of JPMCB or 

a Bear Stearns Affiliate, and if he or she 

abstains from participation in the 

Review, then this section IV(f)(ii) shall 

not apply. 

For purposes of this section IV(f)(ii), 

the term officer means a president, any 

vice president in charge of a principal 

business unit, division or function (such 

as sales, administration, or finance), or 

any other officer who performs a policymaking function for the fiduciary, 

JPMCB, or a Bear Stearns Affiliate. 

(iii) Such fiduciary directly or 

indirectly receives any compensation or 

other consideration for his or her own 

personal account in connection with 

any transaction described in this 

exemption, except that the Independent 

Fiduciary may receive compensation 

from JPMCB for acting as Independent 

Fiduciary as contemplated herein if the 

amount or payment of such 

compensation is not contingent upon or 

in any way affected by the Independent 

Fiduciary’s ultimate decision; or 

(iv) The annual gross revenue 

received by such fiduciary, during any 

year of its engagement, from JPMCB and 

Bear Stearns Affiliates exceeds five 

percent (5%) of the fiduciary’s annual 

gross revenue from all sources for its 

prior tax year. 

(g) The term ‘‘Review’’ means a test by 

an Independent Fiduciary of a 

representative sample of transactions 

falling under section II(b)(i) of this 

Exemption that is sufficient in size to 

afford the Independent Fiduciary a 

reasonable basis to make findings as to 

compliance with the following: 

(i) Whether allocation of the 

opportunity to lend securities to the 

applicable client plan account was in 

accordance with JPMCB’s internal 

securities loan allocation procedures; 

(ii) Whether the loan of securities by 

the Client Plan to Bear Stearns Affiliates 

was at market rates and terms which 

were at least as favorable to such Client 

Plan as if made at the same time and 

under the same circumstances to an 

unrelated party (as required by section 

II(d) hereof); 

(iii) Whether with respect to each 

successive two-week period, on average, 

at least 50 percent or more of the 

outstanding dollar value of securities 

loans negotiated on behalf of Client 

Plans by FMP, in the aggregate, were to 

unrelated borrowers (as required by 

section II(q) of the exemption); and 

(iv) Whether investment by the 

applicable Client Plan in the underlying 

securities that were loaned was 

consistent with the investment 

guidelines for the particular Client Plan 

account. 

For a more complete statement of 

facts and representations supporting the 

Department’s decision to grant PTE 99– 

34, refer to the proposed exemption (64 

FR 34281, June 25, 1999), the grant 

notice (64 FR 46419, August 25, 1999) 

and the notice of proposed amendment 

(the Notice)(73 FR 63200, October 23, 

2008). 

DATES: Effective Date: Except as 

otherwise specified herein, the 

amendment is effective as of August 25, 

1999. 

Written Comments: The Department 

received one comment with respect to 

the Notice, which was filed by the 

Applicants. The Applicants’ 

commentary, a discussion of the 

Department’s views in response thereto 

and the modifications to the proposed 

exemption are discussed below. 

The Applicants noted that the 

proposed amendments to sections 

II(c)(3) and II(i) would deem certain 

disclosure conditions of the exemption 

to be satisfied with respect to Bear 

Stearns Affiliate loans ‘‘for the period 

between March 16, 2008, and April 15, 

2008,’’ provided that the required 

information was furnished to the plans 

no later than April 15, 2008. The special 

relief would expire on April 15, 2008, 

and then preexisting disclosure 

conditions, which require disclosure 

prior to participating in a securities 

lending program and before any loans 

are effected, would apply. Applicants 

believe that loans to Bear Stearns 

Affiliates that were made before April 

15, 2008, in reliance on the special 

relief, might be deemed non-compliant 

after April 15, 2008. Additionally, 

according to the Applicants, reinstating 

the general rule as of April 15, 2008, 

might also mean that further loans to 

Bear Stearns Affiliates could not be 

made after that date even though the 

required information has now been 

provided. 

The Applicants suggest that removing 

the end date on the period for which 

relief is provided would address this 

concern. Relief would be limited to 

loans for those Client Plans that were 

clients of FMP during the March 16 to 

April 15 period, because those are the 

only plans that will have received the 

required disclosures by the April 15, 

2008 date. For post-April 15 clients, the 

general rules of the exemption would 

apply. With that understanding of the 

applicability of the special relief, the 

Department has revised the final 

exemption accordingly. 

The Applicants also suggest that with 

respect to section II(i), language be 

added to clarify that the special relief 

would not supersede the requirement to 

update the provided information in the 

event of a material adverse change to the 

borrower’s financial condition. The 

Applicants provided the following 

sentence to be added to section II(i): 

Loans of securities by such Client Plans to 

a Bear Stearns Affiliate entered into on or 

after April 15, 2008, under the same 

securities loan agreement terms disclosed in 

accordance with the second paragraph of 

section II(c)(3) above shall be deemed to 

satisfy this section II(i), absent a material 

adverse change in the financial condition of 

the particular Bear Stearns Affiliate since 

April 15, 2008 (in which event the provisions 

of the first paragraph of this section II(i) shall 

apply). 

The Department has added Applicants’ 

proposed sentence at the end of the new 

paragraph in section II(i). 

Applicants request that an additional 

sentence be added to the new 

paragraphs in section II(c)(3) and II(i) to 

give effect to certain provisions 

previously only described in the 

disclosure provisions of these 

paragraphs. The disclosure provisions 

in question require that FMP notify each 

Client Plan of its ability to object to 

continued securities lending to Bear 

Stearns Affiliates, and detail the process 

that will occur if a Client Plan objects. 

Applicants’ proposed sentence states 

that: 

If a written objection is received from a 

Client Plan within the 10-day period, FMP 

shall cease to make any new securities loans 

on behalf of that Client Plan to Bear Stearns 

Affiliates; any securities loans made on 

behalf of that Client Plan to Bear Stearns 

Affiliates prior to the date the objection is 

received shall be covered by this exemption, 

and FMP shall seek to expeditiously 

terminate such securities loan in a manner 

approved by the Client Plan. 

The Department concurs; however, to 

avoid redundancy, the Department 

shortened the disclosure provisions 

preceding Applicants’ requested 

sentences. 

With respect to section II(n), which 

requires copies of the notice of proposed 

exemption and final exemption to be 

Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Notices 13241 

provided to Client Plans, Applicants 

suggest that the section be amended to 

require disclosure of the notice of 

proposed amendment and final 

amendment. The Department has 

revised that section as suggested. 

Applicants additionally request a 

revision of the definition of 

‘‘Independent Fiduciary,’’ in particular, 

the language describing the 

relationships that will cause the 

fiduciary not to be independent. The 

language in question, section IV(f)(ii) of 

the exemption, reads: ‘‘Such fiduciary, 

or any officer, director, partner, 

employee or relative of the fiduciary, is 

an officer, director, partner or employee 

of JPMCB or a Bear Stearns Affiliate (or 

is a relative of such persons).’’ 

Applicants state that the firm that has 

been retained as Independent Fiduciary 

is U.S. Trust, Bank of America Private 

Wealth Management, a business unit of 

Bank of America, N.A. Bank of America 

has entered into a definitive agreement 

to sell the Special Fiduciary Services 

(‘‘SFS’’) business segment of U.S. Trust, 

which is performing the Independent 

Fiduciary services for purposes of the 

exemption, to Evercore Partners 

(Evercore), in a transaction expected to 

close in early 2009, before U.S. Trust 

will be issuing its Independent 

Fiduciary report. Following this 

transaction, SFS will operate as 

Evercore Trust Company, N.A., a 

subsidiary of Evercore, which will 

assume the Independent Fiduciary role. 

Given the size of JPMCB and Bear 

Stearns, Applicants assert that 

relationships of individuals within 

these organizations would be difficult to 

monitor, and should not affect the 

fiduciary’s independence unless they 

involve persons with responsibility for 

the particular transaction. More 

specifically, Applicants informed the 

Department that monitoring relatives of 

the various classes of people was 

administratively burdensome. 

Applicants additionally request that a 

director of the fiduciary who is also an 

officer, director, partner or highly 

compensated employee of JPMCB or a 

Bear Stearns Affiliate be permitted to 

abstain from participation in the Review 

rather than cause the fiduciary to fail to 

be independent. Finally, Applicants 

requested that the exemption contain a 

definition of the term ‘‘officer.’’ 

The Department has revised the 

language to reduce the administrative 

burden to Applicants while continuing 

to protect plan participants and 

beneficiaries. In particular, the 

Department notes that the definition 

requires tracking the relatives only of 

the members of the SFS business unit 

performing the independent fiduciary 

services. The language, as revised, 

reads: 

(f) The term ‘‘Independent Fiduciary’’ 

means a fiduciary who is independent of and 

unrelated to JPMCB and Bear Stearns 

Affiliates. For purposes of this exemption, a 

fiduciary will not be deemed to be 

independent of and unrelated to JPMCB and 

Bear Stearns Affiliates if: 

* * * 

(ii) Such fiduciary, or any employee of the 

fiduciary who will be involved in the Review 

(as defined in section IV(g)), or any officer, 

director, partner, or highly compensated 

employee (as defined in section 4975(e)(2)(H) 

of the Code) of the fiduciary, is an officer, 

director, partner or highly compensated 

employee (as defined in section 4975(e)(2)(H) 

of the Code) of JPMCB or a Bear Stearns 

Affiliate; or any member of the business 

segment performing the independent 

fiduciary services is a relative of an officer, 

director, partner or highly compensated 

employee (as defined in section 4975(e)(2)(H) 

of the Code) of JPMCB or a Bear Stearns 

Affiliate. 

However, if an individual is a director of 

the fiduciary and an officer, director, partner 

or highly compensated employee (as defined 

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

JPMCB or a Bear Stearns Affiliate, and if he 

or she abstains from participation in the 

Review, then this section IV(f)(ii) shall not 

apply. 

For purposes of this section IV(f)(ii), the 

term officer means a president, any vice 

president in charge of a principal business 

unit, division or function (such as sales, 

administration, or finance), or any other 

officer who performs a policy-making 

function for the fiduciary, JPMCB, or a Bear 

Stearns Affiliate. 

Finally, Applicants address the 

definition of ‘‘Review’’ (section IV(g)(ii)) 

which states that the Independent 

Fiduciary will conduct a review of: 

[w]hether the loan of securities by the 

Client Plan to Global Capital Markets was at 

market rates and terms which were at least 

as favorable to such Client Plan as if made 

at the same time and under the same 

circumstances to an unrelated party * * *. 

Applicants’ position is that the scope of 

the Independent Fiduciary’s review is 

limited to securities loans to Bear 

Stearns Affiliates, and accordingly, 

references in this section to Global 

Capital Markets should be changed to 

Bear Stearns Affiliates. The Department 

has made the requested change. 

DATES: Effective Date: Except as 

otherwise specified herein, the 

amendment is effective as of August 25, 

1999. 

FOR FURTHER INFORMATION CONTACT: 

Karen E. Lloyd of the Department at 

(202) 693–8554. (This is not a toll-free 

number.) 

General Information 

The attention of interested persons is 

directed to the following: 

(1) The fact that a transaction is the 

subject of an exemption under section 

408(a) of the Act and/or section 

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

a fiduciary or other party in interest or 

disqualified person from certain other 

provisions to which the exemption does 

not apply and the general fiduciary 

responsibility provisions of section 404 

of the Act, which among other things 

require a fiduciary to discharge his 

duties respecting the plan solely in the 

interest of the participants and 

beneficiaries of the plan and in a 

prudent fashion in accordance with 

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

it affect the requirement of section 

401(a) of the Code that the plan must 

operate for the exclusive benefit of the 

employees of the employer maintaining 

the plan and their beneficiaries; 

(2) This exemption is supplemental to 

and not in derogation of, any other 

provisions of the Act and/or the Code, 

including statutory or administrative 

exemptions and 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 this exemption 

is subject to the express condition that 

the material facts and representations 

contained in the application accurately 

describes all material terms of the 

transaction which is the subject of the 

exemption. 

Signed at Washington, DC, this 20th day of 

March, 2009. 

Ivan Strasfeld, 

Director of Exemption, Determinations 

Employee Benefits Security Administration, 

U.S. Department of Labor. 

[FR Doc. E9–6620 Filed 3–25–09; 8:45 am] 

BILLING CODE 4510–29–P