13242 Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Notices 

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. 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

[Application Nos. and Proposed 

Exemptions; D–11397, PNC Financial 

Services Group, Inc. (PNC Financial); D– 

11552, Barclays Bank PLC and Barclays 

Capital Inc. (Collectively, Barclays or the 

Applicants; D–11536 Through D–11550, 

Individual Retirement Accounts (the IRAs) 

for Ralph Hartwell, Harold Latin, Kenlon 

Johnson, Carol Johnson, Shanon Taylor, 

Michael Ball, Dianne Barkas, Roy Barkas, 

Harry DeWall, Alice Pike, Steven Larsen, 

C. Timothy Hopkins, Wayne Meuleman, 

Robert L. Miller, and Richard T. Scott 

(Collectively, the Participants), et al.] 

Notice of Proposed Exemptions 

AGENCY: Employee Benefits Security 

Administration, Labor. 

ACTION: Notice of proposed exemptions. 

SUMMARY: This document contains 

notices of pendency before the 

Department of Labor (the Department) of 

proposed exemptions from certain of the 

prohibited transaction restrictions of the 

Employee Retirement Income Security 

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

the Internal Revenue Code of 1986 (the 

Code). 

Written Comments and Hearing 

Requests 

All interested persons are invited to 

submit written comments or requests for 

a hearing on the pending exemptions, 

unless otherwise stated in the Notice of 

Proposed Exemption, within 45 days 

from the date of publication of this 

Federal Register Notice. Comments and 

requests for a hearing should state: (1) 

the name, address, and telephone 

number of the person making the 

comment or request, and (2) the nature 

of the person’s interest in the exemption 

and the manner in which the person 

would be adversely affected by the 

exemption. A request for a hearing must 

also state the issues to be addressed and 

include a general description of the 

evidence to be presented at the hearing. 

ADDRESSES: All written comments and 

requests for a hearing (at least three 

copies) should be sent to the Employee 

Benefits Security Administration 

(EBSA), Office of Exemption 

Determinations, Room N–5700, U.S. 

Department of Labor, 200 Constitution 

Avenue, NW., Washington, DC 20210. 

Attention: Application No. ll, stated 

in each Notice of Proposed Exemption. 

Interested persons are also invited to 

submit comments and/or hearing 

requests to EBSA via e-mail or FAX. 

Any such comments or requests should 

be sent either by e-mail to: 

‘‘moffitt.betty@dol.gov’’, or by FAX to 

(202) 219–0204 by the end of the 

scheduled comment period. The 

applications for exemption and the 

comments received will be available for 

public inspection in the Public 

Documents Room of the Employee 

Benefits Security Administration, U.S. 

Department of Labor, Room N–1513, 

200 Constitution Avenue, NW., 

Washington, DC 20210. 

Notice to Interested Persons 

Notice of the proposed exemptions 

will be provided to all interested 

persons in the manner agreed upon by 

the applicant and the Department 

within 15 days of the date of publication 

in the Federal Register. Such notice 

shall include a copy of the notice of 

proposed exemption as published in the 

Federal Register and shall inform 

interested persons of their right to 

comment and to request a hearing 

(where appropriate). 

SUPPLEMENTARY INFORMATION: The 

proposed exemptions were requested in 

applications filed pursuant to section 

408(a) of the Act and/or section 

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

accordance with procedures set forth in 

29 CFR Part 2570, Subpart B (55 FR 

32836, 32847, August 10, 1990). 

Effective December 31, 1978, section 

102 of Reorganization Plan No. 4 of 

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

the authority of the Secretary of the 

Treasury to issue exemptions of the type 

requested to the Secretary of Labor. 

Therefore, these notices of proposed 

exemption are issued solely by the 

Department. 

The applications contain 

representations with regard to the 

proposed exemptions which are 

summarized below. Interested persons 

are referred to the applications on file 

with the Department for a complete 

statement of the facts and 

representations. 

PNC Financial Services Group, Inc. 

(PNC Financial) Located in 

Pittsburgh, Pennsylvania [Application 

No. D–11397] 

Proposed Exemption 

The Department is considering 

granting an exemption under the 

authority of section 408(a) of the Act 

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

in accordance with the procedures set 

forth in 29 CFR part 2570, subpart B (55 

FR 32836, 32847, August 10, 1990): 

Section I—Exemption for Receipt of 

Fees 

In connection with the investment in 

an open-end investment company (a 

Fund or Funds), as defined, below, in 

Section IV(e), by certain employee 

benefit plans (Client Plan or Client 

Plans) for which PNC, as defined, 

below, in Section IV(a), serves as a 

fiduciary and is a party in interest with 

respect to such Client Plan(s), if the 

exemption is granted, the restrictions of 

sections 406(a) and 406(b) of the Act 

and the sanctions resulting from the 

application of section 4975 of the Code, 

by reason of sections 4975(c)(1)(A) 

through (F) 1 of the Code, shall not 

apply, effective September 29, 2006, to: 

(a) The receipt of fees by PNC from a 

Fund where BlackRock, as defined, 

below, in Section IV(b), acts as the 

investment adviser for such Fund, and 

the receipt of fees by BlackRock for the 

provision of investment advisory 

services, or similar services, to such 

Fund; 

(b) the receipt of fees by PNC from a 

Fund for providing certain service(s) 

(Secondary Service(s)), as defined, 

below, in Section IV(i), to such Fund; 

and 

(c) the receipt of fees by PNC from 

BlackRock in connection with 

administrative service(s) (Mutual Fund 

Administration Service(s)), as defined, 

below, in Section IV(l), provided to a 

Fund in which a Client Plan invests; 

provided that the conditions, as set forth 

in Section II and Section III, below, 

were satisfied, as of the effective date of 

this exemption and thereafter. 

Section II—Specific Conditions 

(a) PNC, serving as a fiduciary for a 

Client Plan, satisfies any one (but not 

all) of the following: 

(1) A Client Plan invested in a Fund 

does not pay any plan-level investment 

management fee, investment advisory 

fee, or similar fee (Plan-Level Fee(s)) to 

PNC with respect to any of the assets of 

such Client Plan which are invested in 

shares of such Fund for the entire 

period of such investment (the Offset 

Fee Method). This condition does not 

preclude the payment of investment 

advisory fees or similar fees (Fund-Level 

Fee(s)) by a Fund to BlackRock under 

the terms of an investment advisory 

agreement adopted in accordance with 

section 15 of the Investment Company 

Act of 1940 (the Investment Company 

Act); 

(2) A Client Plan invested in a Fund 

pays an investment management fee or 

similar fee based on total assets of such 

Client Plan from which a credit has 

been subtracted representing such 

Client Plan’s pro rata share of 

Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Notices 13243 

2PNC Financial represents that it would be 

accurate to describe ‘‘the credit’’ as a ‘‘credited 

dollar amount’’ to cover situations in which the 

credited amount is used to acquire additional 

shares of a Fund, rather than being held by a Client 

Plan in the form of cash. It is represented that the 

standard practice is to reinvest the ‘‘credited dollar 

amount’’ in additional shares of the same Fund 

with respect to which the fees were credited. 

investment advisory fees or similar fees 

paid by such Fund to BlackRock (the 

Subtraction Fee Method). If, during any 

fee period for which a Client Plan has 

prepaid its investment management or 

similar fee, such Client Plan purchases 

shares of such Fund, the requirement of 

this Section II(a)(2) shall be deemed met 

with respect to such prepaid fee if, by 

a method reasonably designed to 

accomplish the same, the amount of the 

prepaid fee that constitutes the fee with 

respect to the assets of such Client Plan 

invested in shares of such Fund: (i) Is 

anticipated and subtracted from the 

prepaid fee at the time of payment of 

such fee, (ii) is returned to such Client 

Plan no later than during the 

immediately following fee period, or 

(iii) is offset against the prepaid fee for 

the immediately following fee period or 

for the fee period immediately following 

thereafter. For purposes of this Section 

II(a)(2), a fee shall be deemed to be 

prepaid for any fee period, if the amount 

of such fee is calculated as of a date not 

later than the first day of such period; 

or 

(3) A Client Plan invested in a Fund 

receives a ‘‘a credit’’ 2 (the Credit Fee 

Method) of such Client Plan’s 

proportionate share of all fees charged 

to such Fund by BlackRock for 

investment advisory services or similar 

services for a particular month: (1) 

Effective for the period, September 29, 

2006, through December 31, 2008, on 

the earlier of either: (a) The same day as 

PNC receives a fee from BlackRock for 

Mutual Fund Administration Services 

provided for that month to such Fund 

by PNC, or (b) the fifth business day 

before the end of the month following 

the month in which fees for investment 

advisory services, or similar services, 

accrued, or (2) effective for the period 

beginning, January 1, 2009, and 

continuing thereafter, on a date which is 

no later than one business day after 

BlackRock receives fees from the Fund 

for investment advisory services, or 

similar services, provided for that 

month to such Fund by BlackRock. The 

crediting of all such fees to such Client 

Plan by PNC is audited by an 

independent accounting firm (the 

Auditor) on at least an annual basis to 

verify the proper crediting of such fees 

to such Client Plan. 

(b) The price paid or received by a 

Client Plan for shares in a Fund is the 

net asset value per share, as defined, 

below, in Section IV(f), at the time of the 

transaction, and is the same price which 

would have been paid or received for 

such shares by any other investor in 

such Fund at that time; 

(c) PNC, including any officer or 

director of PNC, does not purchase 

shares of a Fund from any Client Plan 

or sell shares of a Fund to any Client 

Plan; 

(d) A Client Plan does not pay sales 

commissions in connection with any 

purchase or sale of shares of a Fund, 

and a Client Plan does not pay 

redemption fees in connection with any 

sale of shares to a Fund, unless (1) such 

redemption fee is paid only to a Fund, 

and 

(2) The existence of such redemption 

fee is disclosed in the prospectus for 

such Fund in effect both at the time of 

any purchase of such shares and at the 

time of such sale; 

(e) The combined total of all fees 

received by PNC for services provided 

by PNC: 

(1) To Client Plans, and 

(2) To Funds in which Client Plans 

invest is not in excess of reasonable 

compensation within the meaning of 

section 408(b)(2) of the Act; 

(f) PNC does not receive any fees 

payable pursuant to Rule 12b–1 under 

the Investment Company Act in 

connection with the subject 

transactions; 

(g) A Client Plan is not an employee 

benefit plan sponsored or maintained by 

PNC; 

(h) A second fiduciary (Second 

Fiduciary), as defined, below, in Section 

IV(h), who is acting on behalf of a Client 

Plan receives, in advance of any initial 

investment by a Client Plan in a Fund, 

full and detailed written disclosure of 

information concerning such Fund, 

including but not limited to: 

(1) A current prospectus for each 

Fund in which such Client Plan is 

considering investing; 

(2) A statement describing the fees, 

including the nature and extent of any 

differential between the rates of such 

fees for: 

(i) Any investment advisory or similar 

services to be paid by such Fund to 

BlackRock, 

(ii) Any Secondary Services to be paid 

by such Fund to PNC, 

(iii) Any Mutual Fund Administration 

Services to be paid by BlackRock to 

PNC, and 

(iv) All other fees to be charged to or 

paid by a Client Plan and by such Fund; 

(3) The reasons why PNC, acting as 

fiduciary for such Client Plan, may 

consider investment in such Fund to be 

appropriate for such Client Plan; 

(4) A statement describing whether 

there are any limitations applicable to 

PNC with respect to which assets of a 

Client Plan that may be invested in such 

Fund, and if so, the nature of such 

limitations; and 

(5) Upon the request of the Second 

Fiduciary, acting on behalf of a Client 

Plan, a copy of the proposed exemption 

and a copy of the final exemption, if 

granted, once such documents are 

published in the Federal Register. 

(i) On the basis of the information 

described, above, in Section II(h), a 

Second Fiduciary, acting on behalf of a 

Client Plan, authorizes in writing: (1) 

The investment of the assets of such 

Client Plan in shares of each particular 

Fund; and (2) the fees received by PNC 

and by BlackRock in connection with 

services provided by PNC and by 

BlackRock to such Fund. Such 

authorization by a Second Fiduciary 

must be consistent with the 

responsibilities, obligations, and duties 

imposed on fiduciaries by Part 4 of Title 

I of the Act. 

(j)(1) All authorizations, described, 

above, in Section II(i), made by a 

Second Fiduciary, regarding: (i) 

Investments by a Client Plan in a Fund, 

(ii) fees paid for investment advisory 

services or similar services provided by 

BlackRock to such Fund, (iii) fees paid 

for Secondary Services provided by PNC 

to such Fund, and (iv) fees paid by 

BlackRock to PNC for Mutual Fund 

Administration Services provided by 

PNC to such Fund, shall be terminable 

at will by the Second Fiduciary, acting 

on behalf of such Client Plan, without 

penalty to such Client Plan, upon 

receipt by PNC of a written notice of 

termination. A form (the Termination 

Form), as defined, below, in Section 

IV(j), expressly providing an election to 

terminate the authorizations, described, 

above, in Section II(i), with instructions 

on the use of such Termination Form 

must be provided to such Second 

Fiduciary at least annually. However, if 

a Termination Form has been provided 

to such Second Fiduciary, pursuant to 

Section II(k) and (l), below, then a 

Termination Form need not be provided 

again, pursuant to this Section II(j), 

unless at least six (6) months but no 

more than twelve (12) months have 

elapsed, since a Termination Form was 

provided, pursuant to Section II(k) and 

(l), below. 

(2) The instructions for the 

Termination Form must include the 

following statements: 

(i) The authorization, described, 

above, in Section II(i), is terminable at 

will by the Second Fiduciary, acting on 

13244 Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Notices 

3 It is represented that PNC furnished only 

disclosure, not advanced notice, of a mid-2007 

advisory fee change to the Second Fiduciaries of 

Client Plans invested in Funds using the Credit Fee 

Method. The change, which resulted in increased 

fees to BlackRock of 0.5 basis points, (which it is 

represented was credited back to the Client Plans) 

occurred effective June 1, 2007, with the disclosure 

being provided in October 2007, after the effective 

date of such change. As the Second Fiduciaries of 

the Client Plans did not receive notification of such 

increase at least thirty (30) days in advance of the 

implementation of such increase, the Department, 

herein, is not providing relief for the receipt of such 

fee increase by BlackRock. 

behalf of a Client Plan, without penalty 

to such Client Plan, upon receipt by 

PNC of written notice from such Second 

Fiduciary. 

(ii) Failure by such Second Fiduciary 

to return the Termination Form on 

behalf of such Client Plan will be 

deemed to be an approval by the Second 

Fiduciary and will result in the 

continuation of the authorization, as 

described, above, in Section II(i), of PNC 

to engage in the transactions which are 

the subject of this exemption. 

(k) For a Client Plan invested in a 

Fund which uses one of the fee methods 

described, above, in Section II(a)(1), 

(a)(2), or (a)(3), in the event of a 

proposed change from one of the fee 

methods to another or in the event of a 

proposed increase in the rate of any fee 

paid by a Fund to BlackRock for any 

investment advisory service, or similar 

service that BlackRock provides to such 

Fund over an existing rate for such 

services or method of determining the 

fee for such services, which had been 

authorized, in accordance with Section 

II(i), above, by the Second Fiduciary for 

such Client Plan, at least thirty (30) days 

in advance of the implementation of 

such change from one of the fee 

methods to another or such increase in 

a fee, PNC will provide a written notice 

(which may take the form of a proxy 

statement, letter, or similar 

communication that is separate from the 

prospectus of such Fund and which 

explains the nature and amount of such 

change from one of the fee methods to 

another or increase in fee) to the Second 

Fiduciary of each Client Plan affected by 

such change from one of the fee 

methods to another or increased fee. 

Such notice shall be accompanied by a 

Termination Form, with instructions on 

the use of such Termination Form, as 

described, above, in Section II(j).3

(l) In the event of: 

(i) A proposed addition of a 

Secondary Service for which an 

additional fee is charged; or 

(ii) A proposed addition of a Mutual 

Fund Administration Service provided 

by PNC to a Fund in which a Client Plan 

invests and for which an additional fee 

is charged; or 

(iii) A proposed increase in the rate of 

any fee paid by a Fund to PNC for any 

Secondary Service, or 

(iv) A proposed increase in the rate of 

any fee paid by BlackRock to PNC for 

Mutual Fund Administration Services 

provided to such Fund, or 

(v) A proposed increase in the rate of 

any fee paid for Secondary Services or 

for Mutual Fund Administration 

Services that results from the decrease 

in the number or kind of services 

performed by PNC for such fee over an 

existing rate for services which had 

been authorized, in accordance with 

Section II(i), by the Second Fiduciary 

for a Client Plan invested in such Fund, 

PNC, at least thirty (30) days in advance 

of the implementation of such fee 

increase or additional service for which 

an additional fee is charged, will 

provide a written notice (which may 

take the form of a proxy statement, 

letter, or similar communication that is 

separate from the prospectus of such 

Fund and which explains the nature 

and amount of the additional service for 

which an additional fee is charged or 

the nature and amount of the increase 

in fees) to the Second Fiduciary of each 

Client Plan invested in such Fund 

which is proposing to increase fees or 

add services for which an additional fee 

is charged. Such notice shall be 

accompanied by a Termination Form, 

with instructions on the use of such 

Termination Form, as described, above 

in Section II(j). 

(m) On an annual basis, PNC, serving 

as fiduciary to a Client Plan, provides 

the Second Fiduciary of such Client 

Plan invested in a Fund with: 

(1) A copy of the current prospectus 

for such Fund in which such Client Plan 

invests; 

(2) Upon the request of such Second 

Fiduciary, a copy of the Statement of 

Additional Information for such Fund 

which contains a description of all fees 

paid by such Fund to PNC and all fees 

paid by BlackRock to PNC for Mutual 

Fund Administration Services; 

(3) A copy of the annual financial 

disclosure report which includes 

information about Fund portfolios, as 

well as the audit findings of the 

independent Auditor, within sixty (60) 

days of the preparation of such report; 

and 

(4) Oral or written responses to 

inquiries of the Second Fiduciary of 

such Client Plan, as such inquiries arise. 

(n) All dealings between a Client Plan 

and a Fund are on a basis no less 

favorable to such Client Plan than 

dealings between such Fund and other 

shareholders invested in such Fund. 

Section III—General Conditions 

(a) PNC maintains for a period of six 

(6) years the records necessary to enable 

the persons described, below, in Section 

III(b) to determine whether the 

conditions of this exemption have been 

met, except that: 

(1) A prohibited transaction will not 

be considered to have occurred, if solely 

because of circumstances beyond the 

control of PNC, the records are lost or 

destroyed prior to the end of the sixyear period, and 

(2) No party in interest other than 

PNC shall be subject to the civil penalty 

that may be assessed under section 

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

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

if the records are not maintained or are 

not available for examination as 

required by Section III(b), below. 

(b)(1) Except as provided in Section 

III(b)(2) and notwithstanding any 

provisions of section 504(a)(2) of the 

Act, the records referred to in Section 

III(a) are unconditionally available at 

their customary location for 

examination during normal business 

hours by— 

(i) Any duly authorized employee or 

representative of the Department or the 

Internal Revenue Service, 

(ii) Any fiduciary of a Client Plan who 

has authority to acquire or dispose of 

shares of a Fund owned by such Client 

Plan, or any duly authorized employee 

or representative of such fiduciary, and 

(iii) Any participant or beneficiary of 

a Client Plan or duly authorized 

employee or representative of such 

participant or beneficiary. 

(2) None of the persons described in 

Section III(b)(1)(ii) and (iii) shall be 

authorized to examine trade secrets of 

PNC, or commercial or financial 

information which is privileged or 

confidential. 

Section IV—Definitions 

For purposes of this exemption: 

(a) The term, ‘‘PNC,’’ means PNC 

Financial, and any affiliate thereof, as 

defined, below in Section IV(c). 

(b) The term, ‘‘BlackRock,’’ means 

BlackRock, Inc., and any affiliate 

thereof, as defined, below in Section 

IV(c). 

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

(1) Any person directly or indirectly, 

through one or more intermediaries, 

controlling, controlled by, or under 

common control with the person; 

(2) Any officer, director, employee, 

relative, or partner in any such person; 

and 

(3) Any corporation or partnership of 

which such person is an officer, 

director, partner, or employee. 

Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Notices 13245 

4The Department, herein, is not providing any 

relief for brokerage services provided to the Funds 

by affiliated brokers for the execution of securities 

transactions engaged in by the Funds. 

(d) The term, ‘‘control,’’ means the 

power to exercise a controlling 

influence over the management or 

policies of a person other than an 

individual. 

(e) The term, ‘‘Fund(s),’’ shall mean 

any diversified open-end investment 

company or companies registered with 

the Securities and Exchange 

Commission under the Investment 

Company Act, as amended, for which 

BlackRock serves as an investment 

adviser (but not sub-adviser). 

(f) The term, ‘‘net asset value,’’ means 

the amount for purposes of pricing all 

purchases and sales of shares of a Fund 

calculated by dividing the value of all 

securities, determined by a method as 

set forth in the prospectus for such 

Fund and in the statement of additional 

information, and other assets belonging 

to the Fund or portfolio of the Fund, 

less the liabilities charged to each such 

portfolio or Fund, by the number of 

outstanding shares. 

(g) The term, ‘‘relative,’’ means a 

relative as that term is defined in 

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

the family as that term is defined in 

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

brother, a sister, or a spouse of a brother 

or a sister. 

(h) The term, ‘‘Second Fiduciary,’’ 

means a fiduciary of a Client Plan who 

is independent of and unrelated to PNC 

and BlackRock. For purposes of this 

exemption, the Second Fiduciary will 

not be deemed to be independent of and 

unrelated to PNC and BlackRock if: 

(1) Such fiduciary, directly or 

indirectly controls, through one or more 

intermediaries, is controlled by, or is 

under common control with PNC or 

with BlackRock; 

(2) Such fiduciary, or any officer, 

director, partner, employee, or relative 

of the fiduciary, is an officer, director, 

partner, or employee of PNC or of 

BlackRock (or is a relative of such 

persons); or 

(3) Such fiduciary, directly or 

indirectly, receives any compensation or 

other consideration for his or her 

personal account in connection with 

any transaction described in this 

exemption. 

If an officer, director, partner, or 

employee of PNC or of BlackRock (or 

relative of such persons) is a director of 

such Second Fiduciary, and if he or she 

abstains from participation in: 

(i) The choice of such Client Plan’s 

investment adviser, 

(ii) The approval of any such 

purchase or sale between such Client 

Plan and a Fund, and 

(iii) The approval of any change in 

fees, as described, above, in Section II(k) 

or (l), charged to or paid by such Client 

Plan in connection with any of the 

transactions described in Section I 

above, then Section IV(h)(2), above, 

shall not apply. 

(i) The term, ‘‘Secondary Service(s),’’ 

means a service or services which is/are 

provided by PNC to a Fund, including 

but not limited to custodial, accounting, 

or administrative services. The fees for 

providing Secondary Services to a Fund 

are paid to PNC by such Fund. 

(j) The term, ‘‘Termination Form,’’ 

means the form supplied to a Second 

Fiduciary which expressly provides an 

election to such Second Fiduciary to 

terminate on behalf of a Client Plan the 

authorization described, above, in 

Section II(i). 

(k) The term, ‘‘business day,’’ means 

any day that 

(i) PNC Financial is open for 

conducting all or substantially all of its 

banking functions, and 

(ii) The New York Stock Exchange (or 

any successor exchange) is open for 

trading. 

(l) The term, ‘‘Mutual Fund 

Administration Services,’’ means a 

service or services which is/are 

provided by PNC to, or on behalf of, a 

Fund, including PNC’s maintaining 

records of investments by Client Plans 

in such Fund, processing Fund 

transactions for Client Plans, 

transmitting account statements and 

shareholder communications, 

responding to inquiries from Client 

Plans regarding account balances and 

dividends, and providing information to 

such Fund on sales and assisting in 

monitoring possible market timing. The 

fees for providing Mutual Fund 

Administration Services to a Fund are 

paid to PNC by BlackRock, rather than 

by such Fund. 

DATES: Effective Date: If granted, this 

proposed exemption will be effective as 

of September 29, 2006. 

Summary of Facts and Representations 

1. PNC Financial is a bank holding 

company that owns or controls two 

banks and a number of non-bank 

subsidiaries. PNC Financial provides, 

through its subsidiaries, a wide variety 

of trust and banking services to 

individuals, corporations, and 

institutions. Through its banking 

subsidiaries, PNC Financial provides 

investment management, fiduciary and 

trustee services to employee benefit 

plans and charitable and endowment 

assets, and provides non-discretionary 

services and investment options for 

defined contribution plans. PNC 

Financial also provides a range of 

tailored investment, trust, and private 

banking products to affluent individuals 

and families. In addition, PNC Financial 

and its affiliates provide various types 

of administrative services to mutual 

funds, including acting as transfer and 

disbursing agents and providing 

custodial and accounting services. 

As of June 30, 2006, PNC Financial 

had $50 billion in assets under 

management. 

2. The Funds are open-end 

investment companies registered with 

the Securities and Exchange 

Commission under the Investment 

Company Act, as amended. The 

investment adviser to the Fund is 

BlackRock Advisors, Inc. (BlackRock 

Advisors), a wholly-owned subsidiary of 

BlackRock, Inc. which is a subsidiary of 

PNC Financial. BlackRock Advisors had 

$464.1 billion in assets under 

management, as of June 30, 2006. Based 

in New York, BlackRock Advisors 

currently manages assets for 

institutional and individual investors 

worldwide through a variety of equity, 

fixed income, cash management, and 

alternative investment products. 

The overall management of the Funds, 

including the negotiation of investment 

advisory contracts, rests with the Board 

of Trustees that are elected by the 

shareholders of the Funds. 

3. PFPC Inc. serves as coadministrator, transfer agent, and 

dividend disbursing agent for the 

Funds, and its parent company, PFPC 

Trust Company, serves as custodian for 

the Funds. Both are indirect whollyowned subsidiaries of PNC Financial. 

The distributor for the Funds is 

BlackRock Distributors, Inc., a whollyowned subsidiary of PFPC Inc. In the 

application file, PNC Financial 

represents that the Funds or their agents 

may pay fees to broker-dealers that are 

affiliates of PNC for omnibus account 

services with regard to shareholders that 

have invested through such brokerdealers. In this regard, PNC Financial 

has agreed to the exclusion from the 

scope of relief under this proposed 

exemption of brokerage services 

provided to the Funds by affiliated 

brokers for the execution of securities 

transactions engaged in by the Funds.4

4. The Client Plans which are the 

subject of this exemption, include 

employee benefit plans, as defined in 

section 3(3) of the Act, and plans, as 

defined in section 4975(e)(1) of the 

Code. 

PNC Financial, through its 

subsidiaries and affiliates serves as 

trustee, investment manager, and in 

other similar fiduciary capacities with 

13246 Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Notices 

5Reprinted at [August 1983–August 1985 

Transfer Binder] Pens. Plan Guide (CCH) ¶ 23,672D. 

respect to retirement plans qualified 

under section 401(a) of the Code, 

individual retirement accounts (IRAs) 

described in section 408 of the Code, 

and welfare or other employee benefit 

plans that constitute ‘‘employee plans,’’ 

as defined in section 3(3) of the Act 

and/or plans, as defined in section 

4975(e)(1) of the Code. These services 

include discretionary investment 

management programs under which 

PNC Financial and its affiliates invest 

the assets of plans in securities, 

including shares of open-end 

investment companies registered under 

the Investment Company Act, the 

investment advisers of which may or 

may not be affiliated with PNC 

Financial and its affiliates. 

The specific Client Plans for which 

this exemption has been requested are 

Client Plans to which PNC Financial or 

one of its affiliates is a fiduciary with 

investment discretion and whose assets 

either: (1) Are currently invested in the 

Funds; or (2) may in the future be 

invested in the Funds. 

The exemption is not being requested 

for in-house plans of PNC Financial or 

its affiliates. 

5. PNC provides discretionary 

investment management services to a 

number of its Client Plans. As of June 

30, 2006, PNC performed discretionary 

asset management services, including 

through the management of asset 

allocation models, for 1,102 employee 

benefit accounts with total assets of 

$4.299 billion. PNC receives asset-based 

compensation for its services to the 

Client Plans, which is paid for either by 

a Client Plan from its assets or by the 

sponsor of a Client Plan. In the course 

of managing assets for Client Plans, PNC 

may invest the assets of such Client 

Plans in the Funds as a means of 

obtaining more specialized management 

along with enhanced liquidity, 

economies of scale, and greater 

diversification than would be available 

through a separate account arrangement. 

Investments by Client Plans in the 

Funds occur through direct purchases of 

shares of the Funds on an ongoing basis. 

PNC also offers an asset allocation 

product, Capital Directions, which 

utilizes the Funds. 

6. Section 406(a)(1)(A) of the Act 

prohibits a fiduciary with respect to a 

plan from causing such plan to engage 

in a direct or indirect sale or exchange 

of any property with a party in interest. 

Section 406(a)(1)(D) of the Act prohibits 

a fiduciary with respect to a plan from 

causing such plan to engage in a 

transaction, if he knows or should 

know, that such transaction constitutes 

a transfer to, or use by or for the benefit 

of, a party in interest, of any assets of 

such plan. 

Sections 3(14)(A) and (B) of the Act 

define the term, ‘‘party in interest,’’ to 

include, respectively, any fiduciary of a 

plan and any person providing services 

to a plan. Under section 3(21)(A)(i) of 

the Act, a person is a fiduciary with 

respect to a plan to the extent such 

person exercises authority or control 

with respect to the management or 

disposition of a plan’s assets. 

Under section 406(b) of the Act, a 

fiduciary with respect to a plan may not: 

(1) Deal with the assets of a plan in his 

own interest or for his own account, (2) 

in his individual or in any other 

capacity act in any transaction involving 

a plan on behalf of a party (or represent 

a party) whose interests are adverse to 

the interests of such plan or the interests 

of its participants or beneficiaries, or (3) 

receive any consideration for his own 

personal account from any party dealing 

with a plan in connection with a 

transaction involving the assets of such 

plan. 

Where PNC is a fiduciary with respect 

to a Client Plan, the investment of that 

Client Plan’s assets in a Fund advised 

by BlackRock may potentially raise 

issues under sections 406(a)(1)(D), 

406(b)(1), 406(b)(2) and 406(b)(3) of the 

Act, unless an exemption is available. 

Reliance on PTE 77–4 

7. PTE 77–4 provides an exemption 

from section 406 of the Act and section 

4975 of the Code for the purchase or 

sale by a plan of mutual fund shares 

where the investment adviser of such 

fund: (1) Is a plan fiduciary or affiliated 

with a plan fiduciary; and (2) is not an 

employer of employees covered by the 

plan. The conditions of the PTE 77–4 

prohibit the payment of commissions by 

a plan, limit the payment of redemption 

fees by such plan, require prior 

disclosure to and approval by a second 

fiduciary, and prohibit the payment of 

double investment advisory fees. 

PNC is considered a fiduciary with 

respect to Client Plans for which it has 

investment discretion. PNC has in the 

past used and continues using 

investment discretion to invest the 

assets of Client Plans in the Funds. In 

the past, PNC has relied on the relief 

provided by PTE 77–4. 

Description of Merger 

8. On September 29, 2006, Merrill 

Lynch and Co., Inc. (Merrill Lynch) 

merged its asset management group, 

Merrill Lynch Investment Managers 

(MLIM), with BlackRock Advisors, in 

return for an interest in BlackRock 

Advisors. The new company formed by 

the merger operates under the 

‘‘BlackRock’’ name and is governed by 

a Board of Directors with a majority of 

independent members. As a result of the 

merger, Merrill Lynch holds a 49.8 

percent (49.8%) economic stake and 

about 45 percent (45%) of the common 

stock of the new company, and the 

interest of PNC in the common stock 

was reduced from approximately 70 

percent (70%) to approximately 34 

percent (34%) of the new company. 

Further, as a result of the merger, 

mutual funds previously advised by 

MLIM now have BlackRock Advisors, 

acting as the investment adviser. The 

Funds previously advised by BlackRock 

continue to operate as before. It is 

represented that certain Funds with 

similar investment objectives will be 

merged to simplify investment offerings. 

All Funds will be labeled with the 

‘‘BlackRock’’ name. For purposes of this 

proposed exemption, the term, 

‘‘Fund(s),’’ includes those former 

Merrill Lynch funds that, following the 

merger, have BlackRock Advisors as the 

investment adviser. 

Availability of PTE 77–4 after the 

Merger 

9. As discussed above, PTE 77–4 

provides relief for investments in a 

Fund by a Client Plan for which PNC is 

a fiduciary with investment discretion. 

However, PTE 77–4 applies only where 

the investment adviser to such Fund is 

also a fiduciary to such Client Plan, or 

an affiliate of such a fiduciary. 

BlackRock is the investment adviser to 

the Funds. However, because PNC, 

rather than BlackRock, is the fiduciary 

to the Client Plan, PNC is concerned 

with its reliance on the relief provided 

under PTE 77–4. 

Retroactive Relief 

10. The Applicant has requested 

retroactive relief pursuant to ERISA 

Technical Release 85–1.5 It is 

represented that after the merger was 

initially approved in February of 2006, 

PNC decided in June of 2006, to seek an 

individual exemption. On September 

26, 2006, the Department received an 

application for exemption filed on 

behalf of PNC which was dated 

September 25, 2006. It is represented 

that the application was submitted as 

soon as possible under the 

circumstances. In going forward on the 

basis of the requested relief, PNC 

represents that it acted in good faith in 

this matter. Accordingly, PNC requests 

that the proposed exemption be granted 

Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Notices 13247 

6 It is the view of PNC that the Credit Fee Method 

is covered by PTE 77–4. The Department does not 

concur with PNC’s view that the Credit Fee Method 

is covered under PTE 77–4. Accordingly, the 

Department has determined that no relief is 

available under 77–4 for PNC’s use of the Credit Fee 

Method. 

7 It is represented that while fees above a certain 

limit may be waived or rebated by BlackRock, as 

a technical matter the Funds may pay the excess 

fees and then simultaneously receive a rebate of the 

excess amount. For purposes of the Subtraction Fee 

Method, described in this section, PNC intends to 

credit to Client Plans only the net fees that 

BlackRock receives, and not to credit any of the 

excess fees that have been rebated to the Funds. 8See supra., footnote 6. 

retroactively to September 29, 2006, the 

date of the merger. 

Receipt of Fees pursuant to the Fee 

Methods 

11. PNC represents that, prior to the 

effective date of this proposed 

exemption, it relied on PTE 77–4 for 

exemptive relief for each of the fee 

methods: (a) The Offset Fee Method, (b) 

the Subtraction Fee Method, and (c) the 

Credit Fee Method,6 as described in 

Section II(a)(1), (a)(2), and (a)(3) of this 

proposed exemption. PNC has 

confirmed that all three fee methods 

were in place on the effective date of 

this exemption, September 29, 2006. As 

of this effective date, the proposed 

exemption, if granted, would 

specifically permit PNC to use any one 

of these three (3) fee methods to comply 

with the prohibition against a Client 

Plan paying double investment 

management fees, investment advisory 

or similar fees for assets of Client Plans 

invested in a Fund, provided that the 

conditions of this exemption are 

satisfied. 

It is represented that where a Client 

Plan is investing in a Fund, all FundLevel Fees for advisory or similar 

services related to that Client Plan’s 

investment in such Fund are subject to 

the same fee method. It is represented 

that the fee methods are not applied on 

a fund-by-fund basis. PNC Financial 

determines the fee method to be used, 

subject to plan approval. As a general 

rule, Client Plan accounts use the Credit 

Fee Method. An exception to the general 

rule involves Client Plan accounts 

investing through Capital Directions, an 

asset allocation program, which uses the 

Subtraction Fee Method. IRA’s also use 

the Subtraction Fee Method. The fee 

method to be used is described in the 

disclosure provided at the opening of a 

Client Plan account, and affirmatively 

approved at that time by the Second 

Fiduciary for such Client Plan. It is 

represented that the Second Fiduciary 

of such Client Plan is notified in 

advance of any change in the fee 

method and is provided with a 

Termination Form. Failure by the 

Second Fiduciary of such Client Plan to 

return the Termination Form on behalf 

of such Client Plan is deemed to be an 

approval by the Second Fiduciary of a 

change in the fee method. 

Offset Fee Method 

12. With regard to the Offset Fee 

Method, PNC represents that it does not 

charge a Client Plan any direct fees for 

investment management with respect to 

such Client Plan’s assets invested in the 

Funds. Such Client Plan pays fees to 

PNC solely for non-investment trust or 

custody services. The fees a Client Plan 

pays for those assets invested in the 

Funds come solely from the Funds in 

accordance with certain advisory 

agreements. The result is that the PlanLevel Fees are offset, and the Client Plan 

pays only an investment advisory or 

similar Fund-Level Fee with respect to 

those plan assets invested in a Fund. 

Subtraction Fee Method 

13. With regard to the Subtraction Fee 

Method, PNC represents that under this 

method, PNC charges a Client Plan a 

direct investment management fee but 

credits to the benefit of such Client 

Plan, as a subtraction to such Client 

Plan’s Plan-Level Fees, its proportionate 

share of the investment advisory fee for 

Client Plan assets invested in a Fund 

and paid to BlackRock (as reduced by 

any waiver or rebate by BlackRock of 

such fees to the Fund due to state law 

or other limits on Fund expenses).7 The 

result is that a Client Plan pays only one 

investment management fee with 

respect to those assets. The subtraction 

is solely against those Plan-Level Fees 

charged by PNC for serving as 

investment manager, and does not 

include non-investment management 

trustee fees. 

The credit under this Subtraction Fee 

Method and the credit under the Credit 

Fee Method, as discussed below, do not 

include the co-administrator, custodial, 

transfer agent, or other non-advisory 

fees payable by the Funds to PNC, 

because these services rendered to the 

Fund are not duplicative of any services 

provided directly to a Client Plan. The 

co-administrator services assist in the 

administration and operation of a Fund, 

which are matters particular to such 

Fund. The custodial services provided 

by PNC to a Fund involve maintaining 

custody and providing reporting relative 

to the individual securities owned by 

such Fund. The custodial services 

provided by PNC to a Client Plan, by 

contrast, involve maintaining custody 

over all or a portion of the Client Plan’s 

assets, which would include the Client 

Plan’s shares in a Fund, but not the 

assets underlying such Fund shares. 

These Client Plan custody services are 

necessary regardless of whether such 

Client Plan’s assets are invested in the 

Funds. 

Credit Fee Method 

14. PNC represents that in 1989 at the 

time PNC converted its collective 

investment funds into mutual funds, it 

started using the Credit Fee Method to 

avoid duplicative investment advisory 

fees. PNC’s understanding at the time 

was that the Credit Fee Method was 

covered by PTE 77–4.8

Under the Credit Fee Method, PNC 

charges standard fees, as applicable to 

each Client Plan, for serving as trustee 

and investment manager, without any 

offset. In this method, a Client Plan 

receives ‘‘a credited dollar amount’’ 

from BlackRock of such Client Plan’s 

proportionate share of all investment 

advisory fees charged by BlackRock to 

the Funds for the particular month (as 

reduced by any waiver or rebate by 

BlackRock of such fees, as described 

above). The result of the Credit Fee 

Method is that a Client Plan pays its 

proportionate share of the Fund-Level 

Fees, but receives a ‘‘credited dollar 

amount’’ of such payment. 

It is represented that the standard 

practice is to reinvest the ‘‘credited 

dollar amount’’ in additional shares of 

the same Fund with respect to which 

the fees were credited. The additional 

shares so acquired are valued at the net 

asset value on the date the purchase 

request is transmitted to the Fund, 

which is the same day the ‘‘credited 

dollar amount’’ is made to the Client 

Plan’s account. 

It is represented that the Client Plans 

could, in theory, request that the 

‘‘credited dollar amount’’ be made in 

cash, instead of additional shares. No 

such request has occurred to date, 

because it has not been the practice of 

PNC to notify Client Plans that they 

have the option to request cash, rather 

than additional shares. If such a request 

were to be made, it is represented that 

the cash would be invested in a money 

market account pending an investment 

direction from the investment officer for 

the account. 

The applicant points out that in other 

exemptions granted by the Department, 

the timing of the credits generally 

occurred within one business day of the 

date that the mutual fund investment 

adviser received investment advisory 

fees. In the subject case, the applicant 

represents that the fees for investment 

13248 Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Notices 

9With respect to the relief available under PTE 

77–4, pursuant to Advisory Opinion 93–12A, no 

reference is made to the Credit Fee Method. 

Accordingly, the Department has determined that 

the relief available under PTE 77–4, pursuant to 

Advisory Opinion 93–12A was not in the past and 

is not now available for the Credit Fee Method. 

advisory services, or similar services, 

provided by BlackRock to a Fund that 

have accrued for a given month are not 

paid out to BlackRock until certain 

calculations are confirmed between 

BlackRock and the accountant for such 

Fund, which is generally not before the 

third week of the next month. For 

example, the fees for investment 

advisory services, or similar services, 

which accrue for the month of January, 

may not be paid to BlackRock until the 

third week of February, or later. 

However, it is represented that there is 

no consistent period of time after 

BlackRock receives such fees for 

investment advisory services, or similar 

services, that BlackRock then pays PNC 

the fees for Mutual Fund 

Administration Services provided by 

PNC to such Fund. For instance, under 

this example, BlackRock may not pay 

PNC until the following month, i.e., 

March. For this reason, PNC has 

adopted a practice of crediting the 

accrued fees for investment advisory 

services, or similar services, for a given 

month to its Client Plans no later than 

the fifth business day before the end of 

the month following the month in 

which fees for investment advisory 

services or similar services accrued—in 

this example, by the fifth business day 

before the end of February—even if PNC 

has not yet received payment from 

BlackRock of the fees for the provision 

of Mutual Fund Administrations 

Services by PNC to such Fund. It is 

represented that PNC is implementing a 

system whereby it will be notified when 

BlackRock receives its fees for 

investment advisory services, or similar 

services, which will allow PNC to make 

the credits to its Client Plans within one 

business day of when BlackRock is paid. 

However, this system will not be in 

place until January 2009. Therefore, 

while PNC agrees that the credit of the 

fees for investment advisory services, or 

similar services, to the Client Plans will 

occur no later than one business day 

after the receipt of such fees by 

BlackRock, this condition is effective 

only for the fees for investment advisory 

services, or similar services, accrued 

after January 1, 2009. For prior periods, 

PNC has requested that consistent with 

the original language in its application 

for exemption and with PNC’s practice 

prior to January 1, 2009, the 

requirement should be that the credit of 

the fees for investment advisory 

services, or similar services, accrued for 

a given month be made no later than the 

earlier of either: (1) The same day as the 

receipt by PNC of the fees from 

BlackRock for the provision of Mutual 

Fund Administration Services to a Fund 

for that month, or (2) the fifth business 

day before the end of the month 

following the month in which fees for 

investment advisory services, or similar 

services, accrued. Accordingly, section 

II(a)(3) of this proposed exemption reads 

as follows: 

A Client Plan invested in a Fund receives 

a ‘‘a credit’’ of such Client Plan’s 

proportionate share of all fees charged to 

such Fund by BlackRock for investment 

advisory services, or similar services, for a 

particular month: (1) Effective for the period, 

September 29, 2006, through December 31, 

2008, on the earlier of either: (a) The same 

day as PNC receives a fee from BlackRock for 

Mutual Fund Administration Services 

provided for that month to such Fund by 

PNC, or (b) the fifth business day before the 

end of the month following the month in 

which fees for investment advisory services, 

or similar services, accrued, or (2) effective 

for the period beginning, January 1, 2009, 

and continuing thereafter, on a date which is 

no later than one business day after 

BlackRock receives fees from the Fund for 

investment advisory services, or similar 

services, provided for that month to such 

Fund by BlackRock. 

Audit of the Credit Fee Method 

15. It is represented that there are 

sufficient safeguards to permit 

exemptive relief for the use by PNC of 

the Credit Fee Method. In this regard, 

PNC will establish and maintain a 

system of internal accounting controls 

for crediting the fees under the Credit 

Fee Method. In addition, PNC will 

retain the services of an independent 

Auditor to audit annually the crediting 

of fees to the Client Plans under the 

Credit Fee Method. Such audits will 

provide independent verification of the 

proper crediting to such Client Plans. 

In the annual audit of the Credit Fee 

Method, the Auditor will use 

procedures designed to review and test 

compliance with the specific 

operational controls and procedures 

established by PNC for making the 

credits. Specifically, the Auditor will: (i) 

Verify on a test basis the investment 

advisory fees paid by the Funds to 

BlackRock; (ii) verify on a test basis the 

monthly factors used to determine the 

investment advisory fees; (iii) verify on 

a test basis the credits paid in total for 

a one-month period; (iv) re-compute, on 

a test basis, using the monthly factors 

described above, the amount of the 

credit determined for selected Client 

Plans; (v) verify on a test basis the 

proper assignment of identification 

fields for receipt of fee credits to the 

Client Plans; and (vi) verify on a test 

basis that the credits were posted to the 

Client Plans within the required 

timeframe. 

In the event either the internal audit 

made by PNC or the independent audit 

made by the Auditor identifies an error 

in the crediting of fees to a Client Plan, 

PNC will correct the error. With respect 

to any shortfall in credited fees to a 

Client Plan, PNC will make a cash 

payment to such Client Plan equal to the 

amount of the error, plus interest paid 

at money market rates offered by PNC 

for the period involved. Any excess 

credits made to a Client Plan will be 

corrected by an appropriate deduction 

from such Client Plan or reallocation of 

cash during the next payment period 

after discovery of the error to reflect 

accurately the amount of total credits 

due to such Client Plan for the period 

involved. 

Receipt of Secondary Services Fees 

16. Prior to the effective date of this 

proposed exemption, it is represented 

that the receipt by PNC of fees paid out 

of the assets of a Fund for Secondary 

Services, such as custodial, 

administrative, accounting, and transfer 

agency services, provided by PNC to 

such Fund were treated as exempt 

under PTE 77–4, pursuant to Advisory 

Opinion 93–12A (Apr. 27, 1993, 

addressed to PNC Financial). It is 

further represented that Advisory 

Opinion 93–12A permits such fees for 

Secondary Services: (a) To be paid to 

PNC by a Fund where PNC also receives 

fees as the investment adviser to such 

Fund, and (b) to be retained by PNC 

without the need for PNC to offset or 

waive such fees.9

PNC requests an administrative 

exemption, effective as of September 29, 

2006, for receipt of fees by PNC for the 

provision of Secondary Services to the 

Funds, because it is no longer clear that 

relief for the receipt of Secondary 

Services fees by PNC, which prior to the 

merger was treated as exempt under 

PTE 77–4, pursuant to Advisory 

Opinion 93–12A, continues to be 

available after the merger. 

Receipt of Mutual Fund Administration 

Services Fees 

17. It is represented that PNC also has 

provided in the past and continues to 

provide Mutual Fund Administration 

Services to, or on behalf of, the Funds. 

Mutual Fund Administration Services 

are part of an omnibus arrangement 

which includes maintaining records of 

investments by Client Plans in the 

Funds, processing Fund transactions for 

Client Plans, transmitting account 

Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Notices 13249 

statements and shareholder 

communications, responding to 

inquiries from Client Plans regarding 

account balances and dividends, and 

providing information to the Funds on 

sales and assisting in monitoring 

possible market timing. 

PNC has received fees in the past and 

continues to receive fees for the 

provision of Mutual Fund 

Administration Services to the Funds. 

The Funds do not pay the fees for the 

Mutual Fund Administration Services 

provided by PNC. Instead, BlackRock, 

the investment adviser to the Fund, 

pays the fees to PNC for Mutual Fund 

Administration Services. It is 

represented that many mutual fund 

advisers have adopted the practice of 

covering service costs out of their own 

assets, a practice referred to as ‘‘adviser 

pay.’’ 

It is represented that the fees for the 

provision of Mutual Fund 

Administration Services by PNC are 

currently fifteen (15) basis points for 

assets in money market funds, twenty 

(20) basis points for assets in fixed 

income funds (except three funds as to 

which the fee is five (5) basis points), 

and twenty-five (25) basis points for 

assets in equity funds (except one fund 

as to which the fee is four (4) basis 

points). It is represented that the fees for 

such Mutual Fund Administration 

Services are subject to negotiation. 

The Department believes that the 

receipt of fees by PNC from BlackRock 

for the provision of Mutual Fund 

Administration Services by PNC to the 

Funds is beyond the scope of relief 

provided by PTE 77–4. PNC has not 

requested, and the Department is not 

providing, relief in this proposed 

exemption for the payment, prior to the 

date of the merger, by BlackRock of fees 

for the provision of Mutual Fund 

Administration Services by PNC to the 

Funds. 

However, PNC has requested an 

individual administrative exemption, 

effective as of September 29, 2006, the 

date of the merger, to cover the payment 

by BlackRock to PNC Bank, National 

Association (PNC Bank), an affiliate of 

PNC, of fees for the provision of Mutual 

Fund Administration Services by PNC 

Bank to the assets in a Fund for which 

BlackRock serves as investment adviser. 

In the Interest of Client Plans 

18. The applicant represents that the 

proposed exemption is in the interest of 

the Client Plans and their participants 

and beneficiaries. In this regard, the 

Funds provide advantages for Client 

Plans, including professional 

management, the ability to monitor 

performance on a daily basis, and the 

flexibility to purchase and redeem 

shares on a daily basis. It is represented 

that no sales commissions are charged 

to Client Plans in connection with the 

purchase or sale of shares in any of the 

Funds. In addition, these investments in 

the Funds by Client Plans are made in 

certain classes of shares, which are not 

subject to 12b–1 fees. Redemption fees 

are charged only if disclosed in the 

prospectuses in effect at both the time 

of the original investment in the shares 

of a Fund and the time of redemption. 

It is further represented that the 

Funds provide a means for Client Plans 

with limited assets to achieve 

diversification of investment in a 

manner that may not be attainable 

through direct investment. For these 

reasons, the applicant maintains that the 

availability of the Funds as investments 

enable PNC, as investment manager, to 

better meet the investment goals and 

strategies of a Client Plan. 

Protective of Client Plans 

19. It is represented that the proposed 

exemption contains sufficient 

safeguards for the protection of the 

Client Plans invested in the Funds. In 

this regard, prior to any investment by 

a Client Plan in a Fund, the investment 

must be authorized in writing by the 

Second Fiduciary of such Client Plan, 

based on full and detailed written 

disclosure concerning such Fund. 

In addition to the initial disclosures 

received by the Second Fiduciary of a 

Client Plan invested in a Fund, PNC 

provides to such Second Fiduciary 

ongoing disclosures regarding such 

Fund and the fee methods. Specifically, 

on an annual basis, such Second 

Fiduciary receives copies of the current 

Fund prospectuses, as well as copies of 

the annual financial disclosure reports 

containing information about the Funds 

and audit findings of the Auditor within 

sixty (60) days of the preparation of 

such report. 

Further, it is represented that PNC 

Financial or an appropriate affiliate, 

thereof, will respond to inquiries from 

a Second Fiduciary. In addition, a 

Second Fiduciary, upon request, will 

receive copies of the Statements of 

Additional Information for the Funds 

and a copy of the proposed exemption 

and a copy of the final exemption, if 

granted, once such documents are 

published in the Federal Register. 

Furthermore, each investment of the 

assets of a Client Plan in a Fund will be 

subject to the ongoing ability of the 

Second Fiduciary of such Client Plan to 

terminate the investment in such Fund 

without penalty to such Client Plan at 

any time upon written notice of 

termination to PNC. In this regard, a 

Termination Form, expressly providing 

an election to terminate the 

authorization, with instructions on the 

use of such Termination Form, will be 

supplied to the Second Fiduciary at 

least annually. 

The Termination Form may be used to 

notify PNC, in writing to effect a 

termination by selling the shares of the 

Funds held by a Client Plan. Such sales 

are to occur within one (1) business day, 

as defined in Section IV(k) of this 

exemption, following receipt by PNC of 

the Termination Form. If, due to 

circumstances beyond the control of 

PNC, the sale cannot be executed within 

one (1) business day, PNC will be 

obligated to complete the sale within 

the next business day. 

In addition, by using the Termination 

Form that PNC provides thirty (30) days 

in advance of any increase in the rate of 

fees and change in services, the Second 

Fiduciary will have sufficient 

opportunity to terminate a Client Plan’s 

investment in a Fund, without penalty 

to the Client Plan, and withdraw the 

Client Plan’s investment from such 

Fund in advance of any such increase in 

fee and change in services. 

Feasibility 

20. The applicant represents that the 

proposed exemption is feasible in that 

compliance with the terms of the 

exemption will be monitored by the 

Second Fiduciary of a Client Plan who 

is independent of PNC. Further, PNC 

provides internal accounting safeguards 

to ensure the accuracy of the calculation 

of the ‘‘credited dollar amounts’’ under 

the Credit Fee Method, and an 

independent Auditor will provide 

assurance that the Credit Fee Method is 

properly administered. For these 

reasons, the applicant maintains that the 

Department will not have to monitor the 

implementation and enforcement of the 

exemption. 

Further, it is represented that the 

negative consent procedure, as 

described in the proposed exemption, 

for obtaining the approval from the 

Second Fiduciary of each Client Plan 

invested in a Fund for increases in fees 

and the addition of services for which 

a fee is charged is more efficient, cost 

effective, and administratively feasible 

than written affirmative consent 

approval, as described in PTE 77–4. 

Under PTE 77–4, an increase in fees 

and any change in services may not be 

implemented until written approval of 

such increase or change is obtained 

from every Second Fiduciary of Client 

Plans invested in a Fund. A 

communication failure that results in 

not obtaining an affirmative written 

approval from a Second Fiduciary of a 

13250 Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Notices 

10For more information, see item number 3 under 

the heading entitled ‘‘Summary of Facts and 

Representations.’’ 

Client Plan could force PNC to transfer 

a Client Plan’s investments out of a 

Fund. 

Under the negative consent 

procedure, as set forth in this proposed 

exemption, the difficulties of obtaining 

written affirmative approval from the 

Second Fiduciary of each Client Plan 

and coordinating any fee increases and 

any additional services for which a fee 

is charged will be avoided while such 

Second Fiduciary will still receive the 

necessary disclosures. Specifically, each 

Second Fiduciary of a Client Plan 

invested in a Fund will receive 

advanced notice in a statement separate 

from such Fund’s prospectus of any 

proposed change from one fee method 

to another or any proposed increase in 

a rate of fee for investment advisory 

services, or similar services, paid to 

BlackRock that was previously 

disclosed in the Fund prospectus. In 

addition, each Second Fiduciary will 

receive advanced notice of any 

additional Secondary Service or Mutual 

Fund Administration Service for which 

a fee is charged and any increase of any 

rate of any fee paid for Mutual Fund 

Administration Services and any 

Secondary Services to PNC or an 

increase in a rate of any fee that results 

from an addition or elimination in the 

number or kind of service performed by 

PNC in connection with a previously 

authorized fee for such service. With 

regard to the affected Fund, the 

advanced notice will contain an 

explanation of the nature and amount of 

the increase in fees and the nature and 

amount of the addition (or elimination) 

of a service for which an additional fee 

is charged. The Second Fiduciary will 

receive such advanced notice thirty (30) 

days prior to the effective date of such 

increase in the rate of fees and change 

in services with respect to a Client 

Plan’s investment in a Fund. Such 

advanced notice must be accompanied 

by a Termination Form that would 

allow the Second Fiduciary to 

terminate, without penalty to the Client 

Plan, the authorization to invest in the 

Funds. The notice requirement would 

not apply if an increase is the result of 

the cessation of a voluntary temporary 

waiver of fees by PNC, and the full fee 

level had previously been described in 

writing to and authorized by the Second 

Fiduciary. Failure to return the 

Termination Form by the thirtieth (30th) 

day will result in the negative consent 

of the Second Fiduciary to the increase 

in the fees and to the addition of 

services for which an additional fee is 

charged. 

21. In summary, the applicant 

represents that the proposed 

transactions satisfy the statutory criteria 

for an exemption under section 408(a) of 

the Act for the following reasons: 

(a) The Funds will provide Client 

Plans with an effective investment 

vehicle; 

(b) The investment by Client Plan in 

the Funds and the payment of fees for 

Secondary Services by the Funds to 

PNC, the payment of fees for Mutual 

Fund Administration Services by 

BlackRock to PNC, and the payment of 

fees for investment advisory or similar 

services by the Funds to BlackRock in 

connection the investment in the Funds 

by Client Plans will require an 

authorization in writing in advance by 

a Second Fiduciary after full written 

disclosure, including current 

prospectuses for the Funds and a 

statement describing the fee method to 

be used; 

(c) Any authorization made by a 

Second Fiduciary will be terminable at 

will by that Second Fiduciary, without 

penalty to the Client Plan, within one 

(1) business day or one additional 

business day, if necessary, following 

receipt by PNC of written notice of 

termination from the Second Fiduciary 

on a form expressly providing an 

election to terminate the authorization, 

which will be supplied to the Second 

Fiduciary at least annually, or any other 

written notice of termination; 

(d) No sales commissions will be paid 

by Client Plans in connection with the 

acquisition or sale of shares of the 

Funds and only redemption fees 

disclosed in a Fund’s prospectus will be 

paid by Client Plans; 

(e) All dealings among the Client 

Plans, any of the Funds, PNC, and 

BlackRock will be on a basis no less 

favorable to such Client Plans than such 

dealings with the other shareholders of 

the Funds; 

(f) Client Plans investing in the Funds 

will pay only a single level of 

investment management, investment 

advisory, or similar fees with respect to 

the assets of such Client Plans so 

invested; and 

(g) PNC will require annual audits by 

an independent accounting firm to 

verify that the Client Plans using the 

Credit Fee Method receive proper 

credits for the fees paid to PNC by the 

Funds. 

Notice to Interested Persons 

Those persons who may be interested 

in the publication in the Federal 

Register of the Notice of Proposed 

Exemption (the Notice) include the 

Second Fiduciary of each Client Plan 

invested in any of the Funds. 

It is represented that notification will 

be provided to these interested persons 

by first class mail, within fifteen (15) 

calendar days of the date of the 

publication of the Notice in the Federal 

Register. Such mailing will contain a 

copy of the Notice, as it appears in the 

Federal Register on the date of 

publication, plus a copy of the 

Supplemental Statement, as required, 

pursuant to 29 CFR 2570.43(b)(2), which 

will advise all interested person of their 

right to comment and to request a 

hearing. 

The Department must receive all 

written comments and requests for a 

hearing no later than forty-five (45) days 

from the date of the publication of the 

Notice in the Federal Register. 

FOR FURTHER INFORMATION CONTACT: 

Angelena Le Blanc of the Department, 

telephone (202) 693–8540 (This is not a 

toll-free number.) 

Barclays Bank PLC and Barclays Capital 

Inc. (Collectively, Barclays or the 

Applicants) 

Located, respectively, in London, 

England and New York, New York 

[Application No. D–11552] 

Background 

Barclays has requested an individual 

exemption that would replace and 

modify exemptive relief, previously 

provided pursuant to Prohibited 

Transaction Exemption 96–62,10 for its 

securitization activities, which generally 

permits employee benefit plans to 

purchase, hold, sell or exchange certain 

securities representing interests in assetbacked or mortgage-backed investment 

pools. Barclays requests exemptive 

relief for sales of ‘‘pass through’’ notes/ 

securities to investors, including 

employee benefit plans, representing 

pools of secured notes and senior 

unsecured notes issued by small and 

mid-sized banks. 

In response to the current financial 

and liquidity crisis, the FDIC adopted 

the TLG Program, which guarantees 

newly issued senior unsecured debt of 

certain financial institutions. The FDIC 

guarantee is backed by the full faith and 

credit of the United States. In general, 

the requested exemption would permit 

Barclays and its affiliates to underwrite 

and sell the pass through notes/ 

securities and also to service, manage 

and operate the trust holding the pools 

of bank debt guaranteed under the TLG 

Program. 

Because Barclays has represented that 

the FDIC is considering whether the 

Debt Guarantee Program should be 

extended to secured bank debt that 

supports new consumer lending, the 

Department also specifically solicits 

Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Notices 13251 

11Section I.A. provides no relief from sections 

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

person rendering investment advice, within the 

meaning of section 3(21)(A)(ii) of the Act and 

regulation 29 CFR 2510.3–21(c), to an Excluded 

Plan. 

12For purposes of this proposed exemption, each 

plan participating in a commingled fund (such as 

a bank collective trust fund or insurance company 

pooled separate account) shall be considered to 

own the same proportionate undivided interest in 

each asset of the commingled fund as its 

proportionate interest in the total assets of the 

commingled fund as calculated on the most recent 

preceding valuation date of the fund. 

13 In the case of a private placement 

memorandum, such memorandum must contain 

substantially the same information that would be 

disclosed in a prospectus if the offering of the 

securities were made in a registered public offering 

under the Securities Act of 1933. In the 

Department’s view, the private placement 

memorandum must contain sufficient information 

to permit plan fiduciaries to make informed 

investment decisions. For purposes of this 

exemption, references to the term ‘‘prospectus’’ 

include any related prospectus supplement thereto, 

pursuant to which Securities are offered to 

investors. 

comments on extending the scope of the 

proposed exemptive relief to include 

such debt. The Department believes that 

in order to make the requisite section 

408(a) findings for the proposed 

exemptive relief with respect to such 

secured debt, the debt must be explicitly 

included in the Debt Guarantee Program 

and also must be subject to the same 

protections that the FDIC affords to 

senior unsecured debt. To the extent 

that this would not be the case, the 

Department will consider, based upon 

public comments, whether to retain or 

eliminate such secured debt issuances 

from the exemptive relief granted by the 

Department. 

Proposed Exemption 

The Department is considering 

granting an exemption under the 

authority of section 408(a) of the Act 

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

in accordance with the procedures set 

forth in 29 CFR part 2570, subpart B (55 

FR 32836, 32847, August 10, 1990): 

I. Transactions 

A. The restrictions of sections 406(a) 

and 407(a) of the Act and the taxes 

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

the Code, by reason of section 

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

shall not apply to the following 

transactions involving Issuers and 

Securities evidencing interests therein: 

(1) The direct or indirect sale, 

exchange or transfer of Securities in the 

initial issuance of Securities between 

the Sponsor or Underwriter and an 

employee benefit plan when the 

Sponsor, Servicer, Trustee or Insurer of 

an Issuer, the Underwriter of the 

Securities representing an interest in the 

Issuer, or an Obligor is a party in 

interest with respect to such plan; 

(2) The direct or indirect acquisition 

or disposition of Securities by a plan in 

the secondary market for such 

Securities; and 

(3) The continued holding of 

Securities acquired by a plan pursuant 

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

Notwithstanding the foregoing, 

section I.A. does not provide an 

exemption from the restrictions of 

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

of the Act for the acquisition or holding 

of a Security on behalf of an Excluded 

Plan by any person who has 

discretionary authority or renders 

investment advice with respect to the 

assets of that Excluded Plan.11

B. The restrictions of sections 

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

the taxes imposed by sections 4975(a) 

and (b) of the Code, by reason of section 

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

to: 

(1) The direct or indirect sale, 

exchange or transfer of Securities in the 

initial issuance of Securities between 

the Sponsor or Underwriter and a plan 

when the person who has discretionary 

authority or renders investment advice 

with respect to the investment of plan 

assets in the Securities is (a) an Obligor 

with respect to 5 percent or less of the 

fair market value of obligations or 

receivables contained in the Issuer, or 

(b) an Affiliate of a person described in 

(a), if: 

(i) The plan is not an Excluded Plan; 

(ii) Solely in the case of an acquisition 

of Securities in connection with the 

initial issuance of the Securities, at least 

50 percent of each class of Securities in 

which plans have invested is acquired 

by persons independent of the members 

of the Restricted Group, and at least 50 

percent of the aggregate interest in the 

Issuer is acquired by persons 

independent of the Restricted Group; 

(iii) A plan’s investment in each class 

of Securities does not exceed 25 percent 

of all of the Securities of that class 

outstanding at the time of the 

acquisition; and 

(iv) Immediately after the acquisition 

of the Securities, no more than 25 

percent of the assets of a plan with 

respect to which the person has 

discretionary authority or renders 

investment advice are invested in 

Securities representing an interest in an 

Issuer containing assets sold or serviced 

by the same entity.12 For purposes of 

this paragraph B.(1)(iv) only, an entity 

will not be considered to service assets 

contained in an Issuer if it is merely a 

Subservicer of that Issuer; 

(2) The direct or indirect acquisition 

or disposition of Securities by a plan in 

the secondary market for such 

Securities, provided that conditions set 

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

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

(3) The continued holding of 

Securities acquired by a plan pursuant 

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

C. The restrictions of sections 406(a), 

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

taxes imposed by sections 4975(a) and 

(b) of the Code by reason of section 

4975(c) of the Code, shall not apply to 

transactions in connection with the 

servicing, management and operation of 

an Issuer, including the use of any 

Eligible Swap transaction; or the 

defeasance of a mortgage obligation held 

as an asset of the Issuer through the 

substitution of a new mortgage 

obligation in a commercial mortgagebacked Designated Transaction, 

provided: 

(1) Such transactions are carried out 

in accordance with the terms of a 

binding Pooling and Servicing 

Agreement; 

(2) The Pooling and Servicing 

Agreement is provided to, or described 

in all material respects in the prospectus 

or private placement memorandum 

provided to, investing plans before they 

purchase Securities issued by the 

Issuer; 13 and 

(3) The defeasance of a mortgage 

obligation and the substitution of a new 

mortgage obligation in a commercial 

mortgage-backed Designated 

Transaction meet the terms and 

conditions for such defeasance and 

substitution as are described in the 

prospectus or private placement 

memorandum for such Securities, 

which terms and conditions have been 

approved by a Rating Agency and does 

not result in the Securities receiving a 

lower credit rating from the Rating 

Agency than the current rating of the 

Securities. 

Notwithstanding the foregoing, 

Section I.C. does not provide an 

exemption from the restrictions of 

section 406(b) of the Act or from the 

taxes imposed by reason of section 

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

fee by a Servicer of the Issuer from a 

person other than the Trustee or 

Sponsor, unless such fee constitutes a 

Qualified Administrative Fee. 

D. The restrictions of sections 406(a) 

and 407(a) of the Act and the taxes 

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

the Code by reason of Code section 

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

shall not apply to any transactions to 

which those restrictions or taxes would 

otherwise apply merely because a 

13252 Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Notices 

person is deemed to be a party in 

interest or disqualified person 

(including a fiduciary), with respect to 

the plan by virtue of providing services 

to the plan (or by virtue of having a 

relationship to such service provider 

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

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

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

because of the plan’s ownership of 

Securities. 

II. General Conditions 

A. The relief provided under section 

I. is available only if the following 

conditions are met: 

(1) The acquisition of Securities by a 

plan is on terms (including the Security 

price) that are at least as favorable to the 

plan as such terms would be in an arm’s 

length transaction with an unrelated 

party; 

(2) The rights and interests evidenced 

by the Securities are not subordinated to 

the rights and interests evidenced by 

other Securities of the same Issuer, 

unless the Securities are issued in a 

Designated Transaction; 

(3) The Securities acquired by the 

plan have received a rating from a 

Rating Agency at the time of such 

acquisition that is in one of the three (or 

in the case of Designated Transactions, 

four) highest generic rating categories. 

(4) The Trustee is not an Affiliate of 

any member of the Restricted Group, 

other than an Underwriter. For purposes 

of this requirement: 

(a) The Trustee shall not be 

considered an Affiliate of a Servicer 

solely because the Trustee has 

succeeded to the rights and 

responsibilities of the Servicer pursuant 

to the terms of a Pooling and Servicing 

Agreement providing for such 

succession upon the occurrence of one 

or more events of default by the 

Servicer; and 

(b) Subsection II.A.(4) will be deemed 

satisfied notwithstanding a Servicer 

becoming an Affiliate of the Trustee as 

a result of a merger or acquisition 

involving the Trustee, such Servicer 

and/or their Affiliates which occurs 

after the initial issuance of the 

Securities, provided that: 

(i) Such Servicer ceases to be an 

Affiliate of the Trustee no later than six 

months after the date such Servicer 

became an Affiliate of the Trustee; and 

(ii) Such Servicer did not breach any 

of its obligations under the Pooling and 

Servicing Agreement, unless such 

breach was immaterial and timely cured 

in accordance with the terms of such 

agreement, during the period from the 

closing date of such merger or 

acquisition transaction through the date 

the Servicer ceased to be an Affiliate of 

the Trustee; 

(5) The sum of all payments made to 

and retained by the Underwriters in 

connection with the distribution or 

placement of Securities represents not 

more than Reasonable Compensation for 

underwriting or placing the Securities; 

the sum of all payments made to and 

retained by the Sponsor pursuant to the 

assignment of obligations (or interests 

therein) to the Issuer represents not 

more than the fair market value of such 

obligations (or interests); and the sum of 

all payments made to and retained by 

the Servicer represents not more than 

Reasonable Compensation for the 

Servicer’s services under the Pooling 

and Servicing Agreement and 

reimbursement of the Servicer’s 

reasonable expenses in connection 

therewith; 

(6) The plan investing in such 

Securities is an ‘‘accredited investor’’ as 

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

D of the Securities and Exchange 

Commission under the Securities Act of 

1933; and 

(7) In the event that the obligations 

used to fund an Issuer have not all been 

transferred to the Issuer on the Closing 

Date, additional obligations as specified 

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

to the Issuer during the Pre-Funding 

Period in exchange for amounts credited 

to the Pre-Funding Account, provided 

that: 

(a) The Pre-Funding Limit is not 

exceeded; 

(b) All such additional obligations 

meet the same terms and conditions for 

eligibility as the original obligations 

used to create the Issuer (as described in 

the prospectus or private placement 

memorandum and/or Pooling and 

Servicing Agreement for such 

Securities), which terms and conditions 

have been approved by a Rating Agency. 

Notwithstanding the foregoing, the 

terms and conditions for determining 

the eligibility of an obligation may be 

changed if such changes receive prior 

approval either by a majority vote of the 

outstanding securityholders or by a 

Rating Agency; 

(c) The transfer of such additional 

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

Securities receiving a lower credit rating 

from a Rating Agency, upon termination 

of the Pre-Funding Period than the 

rating that was obtained at the time of 

the initial issuance of the Securities by 

the Issuer; 

(d) The weighted average annual 

percentage interest rate (the average 

interest rate) for all of the obligations in 

the Issuer at the end of the Pre-Funding 

Period will not be more than 100 basis 

points lower than the average interest 

rate for the obligations which were 

transferred to the Issuer on the Closing 

Date; 

(e) In order to ensure that the 

characteristics of the receivables 

actually acquired during the PreFunding Period are substantially similar 

to those which were acquired as of the 

Closing Date, the characteristics of the 

additional obligations will either be 

monitored by a credit support provider 

or other insurance provider which is 

independent of the Sponsor or an 

independent accountant retained by the 

Sponsor will provide the Sponsor with 

a letter (with copies provided to the 

Rating Agency, the Underwriter and the 

Trustee) stating whether or not the 

characteristics of the additional 

obligations conform to the 

characteristics of such obligations 

described in the prospectus, private 

placement memorandum and/or Pooling 

and Servicing Agreement. In preparing 

such letter, the independent accountant 

will use the same type of procedures as 

were applicable to the obligations which 

were transferred on the Closing Date; 

(f) The Pre-Funding Period shall be 

described in the prospectus or private 

placement memorandum provided to 

investing plans; and 

(g) The Trustee of the Trust (or any 

agent with which the Trustee contracts 

to provide Trust services) will be a 

substantial financial institution or trust 

company experienced in trust activities 

and familiar with its duties, 

responsibilities, and liabilities as a 

fiduciary under the Act. The Trustee, as 

the legal owner of the obligations in the 

Trust or the holder of a security interest 

in the obligations held by the Issuer, 

will enforce all the rights created in 

favor of securityholders of the Issuer, 

including employee benefit plans 

subject to the Act. 

(8) In order to ensure that the assets 

of the Issuer may not be reached by 

creditors of the Sponsor in the event of 

bankruptcy or other insolvency of the 

Sponsor: 

(a) The legal documents establishing 

the Issuer will contain: 

(i) Restrictions on the Issuer’s ability 

to borrow money or issue debt other 

than in connection with the 

securitization; 

(ii) Restrictions on the Issuer merging 

with another entity, reorganizing, 

liquidating or selling assets (other than 

in connection with the securitization); 

(iii) Restrictions limiting the 

authorized activities of the Issuer to 

activities relating to the securitization; 

(iv) If the Issuer is not a Trust, 

provisions for the election of at least one 

Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Notices 13253 

independent director/partner/member 

whose affirmative consent is required 

before a voluntary bankruptcy petition 

can be filed by the Issuer; and 

(v) If the Issuer is not a Trust, 

requirements that each independent 

director/partner/member must be an 

individual that does not have a 

significant interest in, or other 

relationships with, the Sponsor or any 

of its Affiliates; and 

(b) The Pooling and Servicing 

Agreement and/or other agreements 

establishing the contractual 

relationships between the parties to the 

securitization transaction will contain 

covenants prohibiting all parties thereto 

from filing an involuntary bankruptcy 

petition against the Issuer or initiating 

any other form of insolvency proceeding 

until after the Securities have been paid; 

and 

(c) Prior to the issuance by the Issuer 

of any Securities, a legal opinion is 

received which states that either: 

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

transferred to the Issuer by the Sponsor 

has occurred and that such transfer is 

not being made pursuant to a financing 

of the assets by the Sponsor; or 

(ii) In the event of insolvency or 

receivership of the Sponsor, the assets 

transferred to the Issuer will not be part 

of the estate of the Sponsor; 

(9) If a particular class of Securities 

held by any plan involves a Ratings 

Dependent or a Non-Ratings Dependent 

Swap entered into by the Issuer, then 

each particular swap transaction 

relating to such Securities: 

(a) Shall be an Eligible Swap; 

(b) Shall be with an Eligible Swap 

Counterparty; 

(c) In the case of a Ratings Dependent 

Swap, shall provide that if the credit 

rating of the counterparty is withdrawn 

or reduced by any Rating Agency below 

a level specified by the Rating Agency, 

the Servicer (as agent for the Trustee) 

shall, within the period specified under 

the Pooling and Servicing Agreement: 

(i) Obtain a replacement swap 

agreement with an Eligible Swap 

Counterparty which is acceptable to the 

Rating Agency and the terms of which 

are substantially the same as the current 

swap agreement (at which time the 

earlier swap agreement shall terminate); 

or 

(ii) Cause the swap counterparty to 

establish any collateralization or other 

arrangement satisfactory to the Rating 

Agency such that the then current rating 

by the Rating Agency of the particular 

class of Securities will not be 

withdrawn or reduced. 

In the event that the Servicer fails to 

meet its obligations under this 

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

securityholders will be notified in the 

immediately following Trustee’s 

periodic report which is provided to 

securityholders, and sixty days after the 

receipt of such report, the exemptive 

relief provided under section I.C. will 

prospectively cease to be applicable to 

any class of Securities held by a plan 

which involves such Ratings Dependent 

Swap; provided that in no event will 

such plan securityholders be notified 

any later than the end of the second 

month that begins after the date on 

which such failure occurs. 

(d) In the case of a Non-Ratings 

Dependent Swap, shall provide that, if 

the credit rating of the counterparty is 

withdrawn or reduced below the lowest 

level specified in section III.GG., the 

Servicer (as agent for the Trustee) shall 

within a specified period after such 

rating withdrawal or reduction: 

(i) Obtain a replacement swap 

agreement with an Eligible Swap 

Counterparty, the terms of which are 

substantially the same as the current 

swap agreement (at which time the 

earlier swap agreement shall terminate); 

or 

(ii) Cause the swap counterparty to 

post collateral with the Trustee in an 

amount equal to all payments owed by 

the counterparty if the swap transaction 

were terminated; or 

(iii) Terminate the swap agreement in 

accordance with its terms; and 

(e) Shall not require the Issuer to 

make any termination payments to the 

counterparty (other than a currently 

scheduled payment under the swap 

agreement) except from Excess Spread 

or other amounts that would otherwise 

be payable to the Servicer or the 

Sponsor; 

(10) Any class of Securities, to which 

one or more swap agreements entered 

into by the Issuer applies, may be 

acquired or held in reliance upon this 

exemption only by Qualified Plan 

Investors; and 

(11) Prior to the issuance of any debt 

securities, a legal opinion is received 

which states that the debt holders have 

a perfected security interest in the 

Issuer’s assets. 

B. Neither any Underwriter, Sponsor, 

Trustee, Servicer, Insurer, nor any 

Obligor, unless it or any of its Affiliates 

has discretionary authority or renders 

investment advice with respect to the 

plan assets used by a plan to acquire 

Securities, shall be denied the relief 

provided under section I., if the 

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

satisfied with respect to acquisition or 

holding by a plan of such Securities, 

provided that (1) such condition is 

disclosed in the prospectus or private 

placement memorandum; and (2) in the 

case of a private placement of 

Securities, the Trustee obtains a 

representation from each initial 

purchaser which is a plan that it is in 

compliance with such condition, and 

obtains a covenant from each initial 

purchaser to the effect that, so long as 

such initial purchaser (or any transferee 

of such initial purchaser’s Securities) is 

required to obtain from its transferee a 

representation regarding compliance 

with the Securities Act of 1933, any 

such transferees will be required to 

make a written representation regarding 

compliance with the condition set forth 

in subsection II.A.(6). 

III. Definitions 

For purposes of this proposed 

exemption: 

A. ‘‘Security’’ means: 

(1) A pass-through certificate or trust 

certificate that represents a beneficial 

ownership interest in the assets of an 

Issuer which is a Trust and which 

entitles the holder to payments of 

principal, interest and/or other 

payments made with respect to the 

assets of such Trust; or 

(2) A security which is denominated 

as a debt instrument that is issued by, 

and is an obligation of, an Issuer; with 

respect to which the Underwriter is 

either (i) the sole underwriter or the 

manager or co-manager of the 

underwriting syndicate, or (ii) a selling 

or placement agent. 

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

the corpus or assets of which are held 

in trust (including a grantor or owner 

Trust) or whose assets are held by a 

partnership, special purpose 

corporation or limited liability company 

(which Issuer may be a Real Estate 

Mortgage Investment Conduit (REMIC) 

or a Financial Asset Securitization 

Investment Trust (FASIT) within the 

meaning of section 860D(a) or section 

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

corpus or assets of which consists solely 

of: 

(1)(a) Secured consumer receivables 

that bear interest or are purchased at a 

discount (including, but not limited to, 

home equity loans and obligations 

secured by shares issued by a 

cooperative housing association); and/or 

(b) Secured credit instruments that 

bear interest or are purchased at a 

discount in transactions by or between 

business entities (including, but not 

limited to, Qualified Equipment Notes 

Secured by Leases); and/or 

(c) Obligations that bear interest or are 

purchased at a discount and which are 

secured by single-family residential, 

multi-family residential and/or 

commercial real property (including 

obligations secured by leasehold interest 

13254 Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Notices 

14 In ERISA Advisory Opinion 99–05A (February 

22, 1999), the Department expressed its view that 

mortgage pool certificates guaranteed and issued by 

the Federal Agricultural Mortgage Corporation meet 

the definition of a guaranteed governmental 

mortgage pool certificate as defined in 29 CFR 

2510.3–101(i)(2). 

15 It is the Department’s view that the definition 

of ‘‘Issuer’’ contained in section III.B. includes a 

two-tier structure under which Securities issued by 

the first Issuer, which contains a pool of receivables 

described above, are transferred to a second Issuer 

which issues Securities that are sold to plans. 

However, the Department is of the further view that, 

since the Underwriter Exemptions generally 

provide relief for the direct or indirect acquisition 

or disposition of Securities that are not 

subordinated, no relief would be available if the 

Securities held by the second Issuer were 

subordinated to the rights and interests evidenced 

by other Securities issued by the first Issuer, unless 

such Securities were issued in a Designated 

Transaction. 

on residential or commercial real 

property); and/or 

(d) Obligations that bear interest or 

are purchased at a discount and which 

are secured by motor vehicles or 

equipment, or Qualified Motor Vehicle 

Leases; and/or 

(e) Guaranteed governmental 

mortgage pool certificates, as defined in 

29 CFR 2510.3–101(i)(2) 14; and/or 

(f) Secured debt and senior unsecured 

debt (excluding mandatory convertible 

debt), issued by an eligible entity, as 

defined in 12 CFR 370.2(a), that are 

fully guaranteed as to timely payment of 

principal and interest by the Federal 

Deposit Insurance Corporation (FDIC) 

under the Debt Guarantee Program of 

the Temporary Liquidity Guarantee 

Program (TLG Program) and that are 

backed by the full faith and credit of the 

United States; and/or 

(g) Fractional undivided interests in 

any of the obligations described in 

clauses (a)–(f) of this subsection B.(1).15

Notwithstanding the foregoing, 

residential and home equity loan 

receivables issued in Designated 

Transactions may be less than fully 

secured, provided that: (i) the rights and 

interests evidenced by Securities issued 

in such Designated Transactions (as 

defined in section III.DD.) are not 

subordinated to the rights and interests 

evidenced by Securities of the same 

Issuer; (ii) such Securities acquired by 

the plan have received a rating from a 

Rating Agency at the time of such 

acquisition that is in one of the two 

highest generic rating categories; and 

(iii) any obligation included in the 

corpus or assets of the Issuer must be 

secured by collateral whose fair market 

value on the Closing Date of the 

Designated Transaction is at least equal 

to 80% of the sum of: (I) The 

outstanding principal balance due 

under the obligation which is held by 

the Trust and (II) the outstanding 

principal balance(s) of any other 

obligation(s) of higher priority (whether 

or not held by the Issuer) which are 

secured by the same collateral. 

(2) Property which had secured any of 

the obligations described in subsection 

III.B.(1); 

(3)(a) Undistributed cash or temporary 

investments made therewith maturing 

no later than the next date on which 

distributions are to be made to 

securityholders; and/or 

(b) Cash or investments made 

therewith which are credited to an 

account to provide payments to 

securityholders pursuant to any Eligible 

Swap Agreement meeting the conditions 

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

Eligible Yield Supplement Agreement, 

and/or 

(c) Cash transferred to the Issuer on 

the Closing Date and permitted 

investments made therewith which: 

(i) Are credited to a Pre-Funding 

Account established to purchase 

additional obligations with respect to 

which the conditions set forth in 

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

are met; and/or 

(ii) Are credited to a Capitalized 

Interest Account; and 

(iii) Are held by the Issuer for a period 

ending no later than the first 

distribution date to securityholders 

occurring after the end of the PreFunding Period. 

For purposes of this clause (c) of 

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

investments’’ means investments which: 

(i) Are either (A) direct obligations of, or 

obligations fully guaranteed as to timely 

payment of principal and interest by, 

the United States or any agency or 

instrumentality thereof, provided that 

such obligations are backed by the full 

faith and credit of the United States, or 

(B) have been rated (or the Obligor has 

been rated) in one of the three highest 

generic rating categories by a Rating 

Agency; (ii) are described in the Pooling 

and Servicing Agreement; and (iii) are 

permitted by the Rating Agency. 

(4) Rights of the Trustee under the 

Pooling and Servicing Agreement, and 

rights under any insurance policies, 

third-party guarantees, contracts of 

suretyship, Eligible Yield Supplement 

Agreements, Eligible Swap Agreements 

meeting the conditions of subsection 

II.A.(9) or other credit support 

arrangements with respect to any 

obligations described in section III.B.(1). 

However, notwithstanding the 

foregoing, the term ‘‘Issuer’’ does not 

include any investment pool unless: (i) 

The assets of the type described in 

paragraphs (a)–(e) and paragraph (g) 

(excluding fractional interests in any of 

the obligations described in paragraph 

(f) of this subsection B.(1)) of section 

III.B.(1) which are contained in the 

investment pool have been included in 

other investment pools, (ii) Securities 

evidencing interests in such other 

investment pools have been rated in one 

of the three (or in the case of Designated 

Transactions, four) highest generic 

rating categories by a Rating Agency for 

at least one year prior to the plan’s 

acquisition of Securities pursuant to this 

exemption, and (iii) Securities 

evidencing interests in such other 

investment pools have been purchased 

by investors other than plans for at least 

one year prior to the plan’s acquisition 

of such Securities pursuant to this 

exemption. For purposes of this 

paragraph, Securities evidencing 

interests in investment pools containing 

assets described in Section III.B.(1)(f) 

are rated in one of the three highest 

generic rating categories by a Rating 

Agency at the time of such acquisition. 

C. ‘‘Underwriter’’ means: 

(1) The Applicants, 

(2) Any person directly or indirectly, 

through one or more intermediaries, 

controlling, controlled by or under 

common control with the Applicants, or 

(3) Any member of an underwriting 

syndicate or selling group of which a 

person described in Section III.C.(1) or 

(2) is a manager or co-manager with 

respect to the Securities. 

D. ‘‘Sponsor’’ means the entity that 

organizes an Issuer by depositing 

obligations therein in exchange for 

Securities. 

E. ‘‘Master Servicer’’ means the entity 

that is a party to the Pooling and 

Servicing Agreement relating to assets of 

the Issuer and is fully responsible for 

servicing, directly or through 

Subservicers, the assets of the Issuer. 

F. ‘‘Subservicer’’ means an entity 

which, under the supervision of and on 

behalf of the Master Servicer, services 

loans contained in the Issuer, but is not 

a party to the Pooling and Servicing 

Agreement. 

G. ‘‘Servicer’’ means any entity which 

services loans contained in the Issuer, 

including the Master Servicer and any 

Subservicer. 

H. ‘‘Trust’’ means an Issuer, which is 

a trust (including an owner trust, 

grantor trust or a REMIC or FASIT 

which is organized as a Trust). 

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

Trust, which issues Securities, and also 

includes an Indenture Trustee. 

‘‘Indenture Trustee’’ means the Trustee 

appointed under the indenture pursuant 

to which the subject Securities are 

issued, the rights of holders of the 

Securities are set forth and a security 

interest in the Trust assets in favor of 

the holders of the Securities is created. 

Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Notices 13255 

The Trustee or the Indenture Trustee is 

also a party to or beneficiary of all the 

documents and instruments transferred 

to the Issuer, and as such, has both the 

authority to, and the responsibility for, 

enforcing all the rights created thereby 

in favor of holders of the Securities, 

including those rights arising in the 

event of default by the Servicer. 

J. ‘‘Insurer’’ means the insurer or 

guarantor of, or provider of other credit 

support for, an Issuer. Notwithstanding 

the foregoing, a person is not an insurer 

solely because it holds Securities 

representing an interest in an Issuer, 

which are of a class subordinated to 

Securities representing an interest in the 

same Issuer. 

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

than the Insurer, that is obligated to 

make payments with respect to any 

obligation or receivable included in the 

Issuer. Where an Issuer contains 

Qualified Motor Vehicle Leases or 

Qualified Equipment Notes Secured by 

Leases, ‘‘Obligor’’ shall also include any 

owner of property subject to any lease 

included in the Issuer, or subject to any 

lease securing an obligation included in 

the Issuer. 

L. ‘‘Excluded Plan’’ means any plan 

with respect to which any member of 

the Restricted Group is a ‘‘plan sponsor’’ 

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

of the Act. 

M. ‘‘Restricted Group’’ with respect to 

a class of Securities means: 

(1) Each Underwriter; 

(2) Each Insurer; 

(3) The Sponsor; 

(4) The Trustee; 

(5) Each Servicer; 

(6) Any Obligor with respect to 

obligations or receivables included in 

the Issuer constituting more than 5 

percent of the aggregate unamortized 

principal balance of the assets in the 

Issuer, determined on the date of the 

initial issuance of Securities by the 

Issuer; 

(7) Each counterparty in an Eligible 

Swap Agreement; or 

(8) Any Affiliate of a person described 

in subsections III.M.(1)–(7). 

N. ‘‘Affiliate’’ of another person 

includes: 

(1) Any person, directly or indirectly, 

through one or more intermediaries, 

controlling, controlled by or under 

common control with such other 

person; 

(2) Any officer, director, partner, 

employee, relative (as defined in section 

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

a spouse of a brother or sister of such 

other person; and 

(3) Any corporation or partnership of 

which such other person is an officer, 

director or partner. 

O. ‘‘Control’’ means the power to 

exercise a controlling influence over the 

management or policies of a person 

other than an individual. 

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

another person only if: 

(1) Such person is not an Affiliate of 

that other person; and 

(2) The other person, or an Affiliate 

thereof, is not a fiduciary who has 

investment management authority or 

renders investment advice with respect 

to assets of such person. 

Q. ‘‘Sale’’ includes the entrance into 

a Forward Delivery Commitment, 

provided: 

(1) The terms of the Forward Delivery 

Commitment (including any fee paid to 

the investing plan) are no less favorable 

to the plan than they would be in an 

arm’s length transaction with an 

unrelated party; 

(2) The prospectus or private 

placement memorandum is provided to 

an investing plan prior to the time the 

plan enters into the Forward Delivery 

Commitment; and 

(3) At the time of the delivery, all 

conditions of this exemption applicable 

to sales are met. 

R. ‘‘Forward Delivery Commitment’’ 

means a contract for the purchase or 

sale of one or more Securities to be 

delivered at an agreed future settlement 

date. The term includes both mandatory 

contracts (which contemplate obligatory 

delivery and acceptance of the 

Securities) and optional contracts 

(which give one party the right but not 

the obligation to deliver Securities to, or 

demand delivery of Securities from, the 

other party). 

S. ‘‘Reasonable Compensation’’ has 

the same meaning as that term is 

defined in 29 CFR 2550.408c–2. 

T. ‘‘Qualified Administrative Fee’’ 

means a fee which meets the following 

criteria: 

(1) The fee is triggered by an act or 

failure to act by the Obligor other than 

the normal timely payment of amounts 

owing in respect of the obligations; 

(2) The Servicer may not charge the 

fee absent the act or failure to act 

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

(3) The ability to charge the fee, the 

circumstances in which the fee may be 

charged, and an explanation of how the 

fee is calculated are set forth in the 

Pooling and Servicing Agreement; and 

(4) The amount paid to investors in 

the Issuer will not be reduced by the 

amount of any such fee waived by the 

Servicer. 

U. ‘‘Qualified Equipment Note 

Secured By a Lease’’ means an 

equipment note: 

(1) Which is secured by equipment 

which is leased; 

(2) Which is secured by the obligation 

of the lessee to pay rent under the 

equipment lease; and 

(3) With respect to which the Issuer’s 

security interest in the equipment is at 

least as protective of the rights of the 

Issuer as the Issuer would have if the 

equipment note were secured only by 

the equipment and not the lease. 

V. ‘‘Qualified Motor Vehicle Lease’’ 

means a lease of a motor vehicle where: 

(1) The Issuer owns or holds a 

security interest in the lease; 

(2) The Issuer owns or holds a 

security interest in the leased motor 

vehicle; and 

(3) The Issuer’s security interest in the 

leased motor vehicle is at least as 

protective of the Issuer’s rights as the 

Issuer would receive under a motor 

vehicle installment loan contract. 

W. ‘‘Pooling and Servicing 

Agreement’’ means the agreement or 

agreements among a Sponsor, a Servicer 

and the Trustee establishing a Trust. 

‘‘Pooling and Servicing Agreement’’ also 

includes the indenture entered into by 

the Issuer and the Indenture Trustee. 

X. ‘‘Rating Agency’’ means Standard & 

Poor’s Ratings Services, a division of 

The McGraw-Hill Companies, Inc.; 

Moody’s Investors Service, Inc.; Fitch 

Ratings; DBRS Limited; or DBRS, Inc.; 

or any successors thereto. 

Y. ‘‘Capitalized Interest Account’’ 

means an Issuer account: (i) which is 

established to compensate 

securityholders for shortfalls, if any, 

between investment earnings on the PreFunding Account and the interest rate 

payable under the Securities; and (ii) 

which meets the requirements of 

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

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

Issuer is formed, the Securities are first 

issued and the Issue’s assets (other than 

those additional obligations which are 

to be funded from the Pre-Funding 

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

are transferred to the Issuer. 

AA. ‘‘Pre-Funding Account’’ means 

an Issuer account: (i) which is 

established to purchase additional 

obligations, which obligations meet the 

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

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

meets the requirements of paragraph (c) 

of subsection III.B.(3). 

BB. ‘‘Pre-Funding Limit’’ means a 

percentage or ratio of the amount 

allocated to the Pre-Funding Account, 

as compared to the total principal 

amount of the Securities being offered, 

which is less than or equal to 25 

percent. 

CC. ‘‘Pre-Funding Period’’ means the 

period commencing on the Closing Date 

and ending no later than the earliest to 

occur of: (i) The date the amount on 

13256 Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Notices 

16PTE 84–14 provides a class exemption for 

transactions between a party in interest with respect 

to an employee benefit plan and an investment fund 

(including either a single customer or pooled 

separate account) in which the plan has an interest, 

and which is managed by a QPAM, provided 

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

insurance companies, registered investment 

advisers with total client assets under management 

in excess of $85 million) are considered to be 

experienced investment managers for plan investors 

that are aware of their fiduciary duties under 

ERISA. 

17PTE 96–23 permits various transactions 

involving employee benefit plans whose assets are 

managed by an INHAM, an entity which is 

generally a subsidiary of an employer sponsoring 

the plan which is a registered investment adviser 

with management and control of total assets 

attributable to plans maintained by the employer 

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

deposit in the Pre-Funding Account is 

less than the minimum dollar amount 

specified in the Pooling and Servicing 

Agreement; (ii) the date on which an 

event of default occurs under the 

Pooling and Servicing Agreement; or 

(iii) the date which is the later of three 

months or 90 days after the Closing 

Date. 

DD. ‘‘Designated Transaction’’ means 

a securitization transaction in which the 

assets of the Issuer consist of secured 

consumer receivables, secured credit 

instruments or secured obligations that 

bear interest or are purchased at a 

discount and are: (i) Motor vehicle, 

home equity and/or manufactured 

housing consumer receivables; and/or 

(ii) motor vehicle credit instruments in 

transactions by or between business 

entities; and/or (iii) single-family 

residential, multi-family residential, 

home equity, manufactured housing 

and/or commercial mortgage obligations 

that are secured by single-family 

residential, multi-family residential, 

commercial real property or leasehold 

interests therein. For purposes of this 

section III.DD., the collateral securing 

motor vehicle consumer receivables or 

motor vehicle credit instruments may 

include motor vehicles and/or Qualified 

Motor Vehicle Leases. 

EE. ‘‘Ratings Dependent Swap’’ means 

an interest rate swap, or (if purchased 

by or on behalf of the Issuer) an interest 

rate cap contract, that is part of the 

structure of a class of Securities where 

the rating assigned by the Rating Agency 

to any class of Securities held by any 

plan is dependent on the terms and 

conditions of the swap and the rating of 

the counterparty, and if such Security 

rating is not dependent on the existence 

of the swap and rating of the 

counterparty, such swap or cap shall be 

referred to as a ‘‘Non-Ratings Dependent 

Swap.’’ With respect to a Non-Ratings 

Dependent Swap, each Rating Agency 

rating the Securities must confirm, as of 

the date of issuance of the Securities by 

the Issuer, that entering into an Eligible 

Swap with such counterparty will not 

affect the rating of the Securities. 

FF. ‘‘Eligible Swap’’ means a Ratings 

Dependent or Non-Ratings Dependent 

Swap: 

(1) Which is denominated in U.S. 

dollars; 

(2) Pursuant to which the Issuer pays 

or receives, on or immediately prior to 

the respective payment or distribution 

date for the class of Securities to which 

the swap relates, a fixed rate of interest, 

or a floating rate of interest based on a 

publicly available index (e.g., LIBOR or 

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

Index (COFI)), with the Issuer receiving 

such payments on at least a quarterly 

basis and obligated to make separate 

payments no more frequently than the 

counterparty, with all simultaneous 

payments being netted; 

(3) Which has a notional amount that 

does not exceed either: (i) The principal 

balance of the class of Securities to 

which the swap relates, or (ii) the 

portion of the principal balance of such 

class represented solely by those types 

of corpus or assets of the Issuer referred 

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

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

payments are based on the applicable 

notional amount, the day count 

fractions, the fixed or floating rates 

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

the difference between the products 

thereof, calculated on a one to one ratio 

and not on a multiplier of such 

difference); 

(5) Which has a final termination date 

that is either the earlier of the date on 

which the Issuer terminates or the 

related class of Securities is fully repaid; 

and 

(6) Which does not incorporate any 

provision which could cause a 

unilateral alteration in any provision 

described in subsections III.FF. (1) 

through (4) without the consent of the 

Trustee. 

GG. ‘‘Eligible Swap Counterparty’’ 

means a bank or other financial 

institution which has a rating, at the 

date of issuance of the Securities by the 

Issuer, which is in one of the three 

highest long-term credit rating 

categories, or one of the two highest 

short-term credit rating categories, 

utilized by at least one of the Rating 

Agencies rating the Securities; provided 

that, if a swap counterparty is relying on 

its short-term rating to establish 

eligibility under this exemption, such 

swap counterparty must either have a 

long-term rating in one of the three 

highest long-term rating categories or 

not have a long-term rating from the 

applicable Rating Agency, and provided 

further that if the class of Securities 

with which the swap is associated has 

a final maturity date of more than one 

year from the date of issuance of the 

Securities, and such swap is a Ratings 

Dependent Swap, the swap counterparty 

is required by the terms of the swap 

agreement to establish any 

collateralization or other arrangement 

satisfactory to the Rating Agencies in 

the event of a ratings downgrade of the 

swap counterparty. 

HH. ‘‘Qualified Plan Investor’’ means 

a plan investor or group of plan 

investors on whose behalf the decision 

to purchase Securities is made by an 

appropriate independent fiduciary that 

is qualified to analyze and understand 

the terms and conditions of any swap 

transaction used by the Issuer and the 

effect such swap would have upon the 

credit ratings of the Securities. For 

purposes of the exemption, such a 

fiduciary is either: 

(1) A ‘‘qualified professional asset 

manager’’ (QPAM), 16 as defined 

under Part V(a) of Prohibited 

Transaction Exemption (PTE) 84–14, 49 

FR 9494, 9506, (March 13, 1984), as 

amended by 70 FR 49305, August 23, 

2005); 

(2) An ‘‘in-house asset manager’’ 

(INHAM),17 as defined under Part IV(a) 

of PTE 96–23, 61 FR 15975, 15982 

(April 10, 1996); or 

(3) A plan fiduciary with total assets 

under management of at least $100 

million at the time of the acquisition of 

such Securities. 

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

day funds are distributed from the 

Issuer, the amount by which the interest 

allocated to Securities exceeds the 

amount necessary to pay interest to 

securityholders, servicing fees and 

expenses. 

JJ. ‘‘Eligible Yield Supplement 

Agreement’’ means any yield 

supplement agreement, similar yield 

maintenance arrangement or, if 

purchased by or on behalf of the Issuer, 

an interest rate cap contract to 

supplement the interest rates otherwise 

payable on obligations described in 

subsection III.B.(1). Such an agreement 

or arrangement may involve a notional 

principal contract provided that: 

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

(2) The Issuer receives on, or 

immediately prior to the respective 

payment date for the Securities covered 

by such agreement or arrangement, a 

fixed rate of interest or a floating rate of 

interest based on a publicly available 

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

Issuer receiving such payments on at 

least a quarterly basis; 

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

in subsection III.FF. (4); 

Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Notices 13257 

18The Underwriter Exemptions, including PTE 

2002–41, 67 FR 54487 (August 22, 2002) and PTE 

2000–58, 65 FR 67765 (November 13, 2000), and 

PTE 97–34, 62 FR 39021 (July 21, 1997), were 

amended by PTE 2007–05, 72 FR 13130 (March 20, 

2007) and PTE 2008–08, 73 FR 27570 (May 13, 

2008). Additional information about the 

Underwriter Exemptions also is available in the 

notices of proposed exemption with respect to each 

of the foregoing individual exemptions. 

19On March 4, 2009, the FDIC published an 

interim rule that extends its guarantee to certain 

new issues of mandatory convertible debt into 

common shares of the issuing entity at a specified 

date no later than the expiration of the FDIC’s 

guarantee. Because the requested exemptive relief 

relates to pools of debt, the proposed exemption 

would not apply to such mandatory convertible 

debt. 

(4) It does not incorporate any 

provision which would cause a 

unilateral alteration in any provision 

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

without the consent of the Trustee; 

(5) It is entered into by the Issuer with 

an Eligible Swap Counterparty; and 

(6) It has a notional amount that does 

not exceed either: (i) The principal 

balance of the class of Securities to 

which such agreement or arrangement 

relates, or (ii) the portion of the 

principal balance of such class 

represented solely by those types of 

corpus or assets of the Issuer referred to 

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

Effective Date: If granted, and except 

as otherwise provided, this proposed 

exemption will be effective as of 

February 4, 2004. The exemptive relief, 

if granted, for investment pools 

consisting solely of debt described in 

section III.B.(1)(f) will be effective as of 

February 27, 2009 and will expire on 

the later of: July 1, 2012; or the 

expiration of the FDIC’s Debt Guarantee 

Program, which is part of the TLG 

Program. 

Summary of Facts and Representations 

1. Barclays Bank PLC is an authorized 

institution under the Banking Act of 

1987 in the United Kingdom and is 

regulated by the Bank of England. As of 

December 31, 2007, Barclays Bank PLC 

(Consolidated Balance Sheet) had 

approximately £1,227,583,000,000 in 

assets and £31,821,000,000 in 

stockholders’ equity. Barclays Bank PLC 

has several affiliates that are brokerdealers or banks. Barclays Capital Inc., 

a subsidiary of Barclays Bank PLC, is 

incorporated under the laws of the State 

of Connecticut and is registered and 

regulated by the Securities and 

Exchange Commission as a U.S. brokerdealer under Section 15 of the Securities 

and Exchange Act of 1934, as amended. 

As of June 30, 2008, Barclays Capital 

Inc. (Unaudited Consolidated Balance 

Sheet) has approximately US$ 

269,433,856,000 in assets and US$ 

2,518,536,000 in stockholders’ equity. 

2. Barclays Bank PLC and Barclays 

Capital Inc. (hereinafter Barclays), alone 

or together with other broker-dealers, 

act as underwriter or placement agent 

with respect to the sale of securities. 

Barclays also may act as the manager or 

co-manager for a syndicate of securities 

underwriters or selling group. 

3. Barclays received authorization 

from the Department pursuant to 

Prohibited Transaction Exemption (PTE) 

96–62, 67 FR 44622 (July 3, 2002), that 

certain prohibited transaction 

provisions do not apply to transactions 

substantially similar to transactions 

described in the Underwriter 

Exemptions as described in its 2003 

‘‘EXPRO’’ authorization request (File #: 

E00342). See Final Authorization 

Number (FAN) 04–03E, February 4, 

2004 (hereinafter FAN 04–03E). The 

information contained in the 

administrative file for E00342 as well as 

the facts and representations contained 

in FAN 04–03E also were considered 

and relied upon by the Department for 

purposes of this notice.18 The 

Underwriter Exemptions are a group of 

individual exemptions that provide 

substantially identical relief for the 

servicing, management and operation of 

certain asset-backed or mortgage-backed 

investment pools and the acquisition, 

holding, sale or transfer by employee 

benefit plans of certain securities 

representing interests in those 

investment pools. These exemptions 

provide relief from certain of the 

prohibited transaction restrictions of 

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

Employee Retirement Income Security 

Act of 1974, as amended (ERISA or the 

Act) and from the taxes imposed by 

section 4975(a) and (b) of the Internal 

Revenue Code of 1986, as amended (the 

Code), by reason of certain provisions of 

section 4975(c)(1) of the Code. 

4. The Applicants are requesting, 

among other things, individual 

exemptive relief that would add senior 

unsecured debt guaranteed by the 

Federal Deposit Insurance Corporation 

(FDIC) pursuant to its Temporary 

Liquidity Guarantee Program (TLG 

Program) to the permissible assets of an 

Issuer, which currently are restricted to 

certain secured receivables, certain 

secured instruments, certain secured 

obligations and guaranteed 

governmental mortgage pool certificates 

as defined in 29 CFR 2510.3–101(i)(2). 

If this proposed exemption is granted by 

the Department, it would replace and 

expand the exemptive relief authorized 

in FAN 04–03E. 

5. The TLG Program was announced 

by the FDIC on October 14, 2008, as an 

initiative to deal with the recent 

disruptions in the financial markets that 

have impaired the ability of 

creditworthy companies to issue 

commercial paper, particularly at 

maturities longer than 30 days. The TLG 

Program is designed to encourage 

liquidity in the banking system in order 

to ease lending to creditworthy 

businesses and consumers. 

6. One component of the TLG 

Program is the Debt Guarantee Program, 

by which the FDIC will guarantee the 

payment of certain newly-issued senior 

unsecured debt by entities described in 

12 CFR 370.2(a) (i.e., insured depositary 

institutions, certain U.S. bank holding 

companies, certain U.S. savings and 

loan holding companies, and certain 

affiliates of an insured depositary 

institution that the FDIC designates as 

an eligible entity). The FDIC’s payment 

obligation is triggered by a payment 

default rather than bankruptcy or 

receivership. 

7. Under the TLG Program, effective 

as of December 6, 2008, the term ‘‘senior 

unsecured debt’’ excludes any 

obligation with a stated maturity of 30 

days or less (including debt with a 

maturity of ‘‘one month’’). The 

guarantee on any previously issued 

senior unsecured debt instrument 

issued with a stated maturity of 30 days 

or less will expire on the earlier of: (i) 

the date the issuer ‘‘opts out’’ pursuant 

to the TLG Program, or the maturity date 

of the instrument. 

8. The debt instruments covered by 

the TLG Program are unsecured 

borrowings that: (i) Are evidenced by a 

written agreement or trade confirmation; 

(ii) have a specific and fixed principal 

to be paid in full on demand or on a 

date certain; (iii) are not contingent and 

contain no embedded options, forwards, 

swaps or other derivatives; and (iv) are 

not, by their terms, subordinated to any 

other liability. The debt may pay 

interest at a fixed or floating rate. Any 

floating interest rate must be based on 

a commonly used reference rate, 

including a single index of a Treasury 

bill rate, the prime rate, or the London 

Interbank Offered Rate (LIBOR). For 

more information about the TLG 

Program, see the FDIC’s final rule at 73 

FR 72244 (November 26, 2008) 19 and 

the FDIC Internet site at http:// 

www.fdic.gov/. 

9. Barclays represents that the debt 

covered by the TLG Program is 

substantially similar to, and in some 

respects more secure, than guaranteed 

governmental mortgage pool certificates. 

The applicant states that although 

interest and principal payable pursuant 

to a guaranteed governmental mortgage 

13258 Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Notices 

20See, for example, PTE 84–14 and PTE 96–23, 

which are referenced, respectively, in earlier 

footnotes to this proposed exemption. 

21See FDIC Press Release (PR) 4–2009. To date, 

the FDIC has not published such a rule in the 

Federal Register. See the caption in the preamble 

entitled ‘‘Supplementary Information’’ as to the 

Department’s solicitation of comments with respect 

to secured debt. 

22Because each IRA has only one Participant, 

there is no jurisdiction under 29 CFR § 2510.3–3(b). 

However, there is jurisdiction under Title II of the 

Act pursuant to section 4975 of the Code. 

pool certificate are guaranteed by an 

agency of instrumentality thereof (e.g., 

Freddie Mac, Fannie Mae and Farmer 

Mac), such agencies are not backed by 

the full faith and credit of the United 

States unlike the FDIC. The full faith 

and credit backing is significant because 

it represents an unconditional 

commitment from the United States to 

pay interest on defaulted notes. The 

Applicant further represents that 

because of the full faith and credit 

backing of the debt, there likely also 

will be a ready market for these notes. 

In this regard, Barclays states that plans 

already may invest directly in senior 

unsecured bank debt under the TLG 

PROGRAM in accordance with investorbased exemptions.20

10. The FDIC board announced on 

January 16, 2009, that it will soon 

propose rule changes to its Temporary 

Liquidity Guarantee Program to extend 

the maturity of the guarantee from three 

to up to 10 years where the debt is 

supported by collateral and the issuance 

supports new consumer lending.21

Barclays also has requested in its 

application that the individual 

exemptive relief apply to such debt. 

11. The underwriter (i.e., Barclays, 

their affiliates, or a member of an 

underwriting syndicate or selling group 

of which Barclays or their affiliate is a 

manager or co-manager) will be a 

registered broker-dealer that acts as 

underwriter or placement agent with 

respect to the sale of securities. 

12. The issuer is established under a 

pooling and servicing agreement 

between a sponsor, a servicer and a 

trustee. The sponsor or servicer of an 

issuer selects assets to be included in a 

trust, partnership, special purpose 

corporation or limited liability 

company. 

13. As a general matter, 

Securityholders will be entitled to 

receive distributions of principal and/or 

interest, adjusted, in the case of 

payments of interest, to a specified 

rate—the pass through rate—which may 

be fixed or variable. These distributions 

will be made monthly, quarterly, semiannually, or at such other intervals and 

dates as specified in the related 

prospectus or private placement 

memorandum. 

14. The trustee of a trust is the legal 

owner of the obligations in the trust and 

is responsible for enforcing all the rights 

in favor of securityholders pursuant to 

the documents and instruments 

deposited in the trust. The trustee will 

be an independent entity, and therefore 

will be unrelated to any member of the 

Restricted Group (as defined in section 

III.M.) other than an underwriter. 

15. The servicer of an issuer 

administers the receivables on behalf of 

the securityholders (e.g., notifying 

borrowers of amounts due on 

receivables, maintaining payment 

records, and instituting foreclosure or 

similar proceedings in the event of 

default). The issuer will be maintained 

as an essentially passive entity. 

Therefore, both the plan sponsor’s 

discretion and the servicer’s discretion 

with respect to assets included in an 

issuer are severely limited. 

16. The Applicants request that the 

exemptive relief, for bank debt 

guaranteed under the TLG Program by 

the FDIC, if granted, be made retroactive 

to February 27, 2009. 

Notice to Interested Persons and 

Hearing Requests 

All interested persons are invited to 

submit written comments or requests for 

a hearing on the proposed exemption to 

the address above, within time frame set 

forth above, after the publication of this 

proposed exemption in the Federal 

Register. All comments will be made 

part of the record. Comments received 

will be available for public inspection 

with the application at the address set 

forth above. 

With respect to notification of 

interested persons, the Applicants will 

distribute this notice of proposed 

exemption by first class mail to an 

independent plan fiduciary for all 

ERISA pension plans for which the 

Applicants and their subsidiaries 

provide fiduciary services. All 

notifications will be mailed within three 

business days after publication of the 

proposed exemption in the Federal 

Register. 

FOR FURTHER INFORMATION CONTACT: Eric 

A. Raps, Office of Exemption 

Determinations, Employee Benefits 

Security Administration, US. 

Department of Labor, telephone (202) 

693–8532. (This is not a toll-free 

number). 

Individual Retirement Accounts (the 

IRAs) for Ralph Hartwell, Harold Latin, 

Kenlon Johnson, Carol Johnson, Shanon 

Taylor, Michael Ball, Dianne Barkas, 

Roy Barkas, Harry DeWall, Alice Pike, 

Steven Larsen, C. Timothy Hopkins, 

Wayne Meuleman, Robert L. Miller, and 

Richard T. Scott (Collectively, the 

Participants), Located in Idaho Falls, 

Idaho, and Elsewhere [Exemption 

Application Numbers: D–11536 through 

D–11550] 

Proposed Exemption 

The Department is considering 

granting an exemption under the 

authority of section 4975(c)(2) of the 

Code and in accordance with the 

procedures set forth in 29 CFR Part 2570 

Subpart B (55 FR 32836, 32847, August 

10, 1990). If the exemption is granted, 

the sanctions resulting from the 

application of section 4975 of the Code, 

by reason of sections 4975(c)(1)(A), (D), 

and (E) of the Code, shall not apply to 

the cash sales (the Sales) of certain 

shares of closely held common stock 

(the Stock) of the Bank of Idaho Holding 

Company (the Company) by the IRAs 22

to the Participants, disqualified persons 

with respect to their respective IRAs, 

provided that the following conditions 

are satisfied: 

(a) The Sale of the Stock by each IRA 

is a one-time transaction for cash; 

(b) The terms and conditions of each 

Sale are at least as favorable to each IRA 

as those obtainable in an arm’s length 

transaction with an unrelated party; 

(c) Each IRA receives the fair market 

value of the Stock on the date of the 

Sale as determined by a qualified, 

independent appraiser; and 

(d) Each IRAs does not pay any 

commissions, costs, or other expenses in 

connection with each Sale. 

Summary of Facts and Representations 

1. The IRAs are individual retirement 

accounts, as described in section 408(a) 

of the Code. Each of the IRAs is selfdirected. Among the assets of each IRA 

are shares of closely-held stock in the 

Company, a one-bank holding company 

domiciled in the state of Idaho and 

registered with the Board of Governors 

of the Federal Reserve System. The sole 

asset of the Company is the Bank of 

Idaho (the Bank), located in Idaho Falls, 

Idaho. The applicants describe the 

Participants, the IRAs, and their 

holdings of the Stock as follows: 

(a) The IRA of Ralph Hartwell, a 

Director of the Bank, currently holds 

total assets of approximately 

$975,897.07, which includes 41,004 

shares of the Stock. The IRA of Ralph 

Hartwell acquired all of the Stock from 

the Company on August 28, 1985. 

(b) The IRA of Harold Latin, a Director 

of the Bank, currently holds total assets 

of approximately $28,703.51, which 

includes 1,071 shares of the Stock. The 

IRA of Harold Latin acquired all of the 

Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Notices 13259 

23The Department notes that, to the extent that 

the Company or the other sellers were not 

disqualified persons with respect to the IRAs under 

section 4975(e) of the Code, the purchase of the 

Stock would not have constituted a prohibited 

transaction under section 4975(c)(1) of the Code. 

Accordingly, to the extent that there were violations 

of section 4975(c)(1) of the Code with respect to the 

purchases and holdings of the Stock by the IRAs, 

the Department is extending no relief for these 

transactions. 

Further, the purchase and holding of the Stock by 

the IRAs whose Participants are officers or directors 

of the Company and/or the Bank raises questions 

under section 4975(c)(1)(D) and (E) of the Code 

depending on the degree (if any) of the IRA 

Participant’s interest in the transaction. Section 

4975(c)(1)(D) and (E) of the Code prohibits the use 

by or for the benefit of a disqualified person of the 

income or assets of a plan and prohibits a fiduciary 

from dealing with the income or assets of a plan in 

his own interest or for his own account. Those IRA 

Participants who are officers and/or directors of the 

Company or of the Bank, may have had interests in 

the transactions which affected their best judgment 

as fiduciaries of their IRAs. In such circumstances, 

the transactions may have violated sections 

4975(c)(1)(D) and (E) of the Code. See Advisory 

Opinion 90–20A (June 15, 1990). Accordingly, to 

the extent that there were violations of section 

4975(c)(1)(D) and (E) of the Code with respect to the 

purchases and holdings of the Stock by the IRAs, 

the Department is extending no relief for these 

transactions. 

24Section 4975(d)(16) of the Code provides a 

statutory exemption from the prohibited transaction 

provisions of the Code for the sale of stock held by 

a trust which constitutes an individual retirement 

account under section 408(a) of the Code to the 

individual for whose benefit such account is 

established, provided that: (i) Such stock is in a 

bank (as defined in section 581 of the Code) or a 

depository institution holding company (as defined 

in section 3(w)(1) of the Federal Deposit Insurance 

Act (12 U.S.C. 1813(w)(1)); (ii) such stock is held 

by such trust as of the date of the enactment of this 

paragraph; (iii) such sale is pursuant to an election 

under section 1362(a) of the Code by such bank or 

company; (iv) such sale is for fair market value at 

the time of sale (as established by an independent 

appraiser) and the terms of the sale are otherwise 

at least as favorable to such trust as the terms that 

would apply on a sale to an unrelated party; (v) 

such trust does not pay any commissions, costs, or 

other expenses in connection with the sale; and (vi) 

the stock is sold in a single transaction for cash not 

later than 120 days after the S corporation election 

is made. 

The applicants represent that, because the Stock 

of the Company was not sold within 120 days of 

the Company’s S Corporation election on January 1, 

2007, the proposed Sales of the Stock would not 

qualify for exemptive relief under section 

4975(d)(16) of the Code. The applicants further 

represent that advisors to the Company at the time 

of the Subchapter S election were unaware of the 

negative income tax ramifications of the election on 

the IRA holders, and did not inform the holders that 

the election had been made. The applicants also 

represent that, had the IRA holders been made 

aware of the election, the IRA holders would have 

taken action consistent with the statutory 

exemption. Accordingly, the applicants have 

applied to the Department for an administrative 

exemption under section 4975(c)(2) of the Code for 

the proposed Sale of the Stock. 

Stock from the Company on August 28, 

1985. 

(c) The IRA of Kenlon Johnson, a 

Director of the Bank, currently holds 

total assets of approximately 

$448,673.63, which includes 400 shares 

of the Stock. The IRA of Kenlon Johnson 

acquired all of the Stock from the 

Company on July 12, 2004. 

(d) The IRA of Carol Johnson, the 

spouse of Kenlon Johnson, currently 

holds total assets of approximately 

$120,165.26, which includes 1,000 

shares of the Stock. The IRA of Carol 

Johnson acquired all of the Stock from 

the Company on February 16, 2000. 

(e) The IRA of Shanon Taylor, an 

employee of the Bank, currently holds 

total assets of approximately $23,641.36, 

which includes 910 shares of the Stock. 

The IRA of Shanon Taylor is a Roth IRA 

that acquired all of the Stock from the 

Company on November 15, 1996. 

(f) The IRA of Michael Ball currently 

holds total assets of approximately 

$27,438.54, which includes 1,050 shares 

of the Stock. The IRA of Michael Ball 

acquired all of the Stock from the 

Company on January 18, 1999. 

(g) The IRA of Dianne Barkas 

currently holds total assets of 

approximately $162,479.85, which 

includes 6,380 shares of the Stock. The 

IRA of Dianne Barkas acquired all of the 

Stock from the Company on August 28, 

1985. 

(h) The IRA of Roy Barkas currently 

holds total assets of approximately 

$83,554.74, which includes 3,262 shares 

of the Stock. The IRA of Roy Barkas 

acquired all of the Stock from the 

Company on August 28, 1985. 

(i) The IRA of Harry DeWall currently 

holds total assets of approximately 

$419,921.88, which includes 10,000 

shares of the Stock. The IRA of Harry 

DeWall acquired all of the Stock from 

the Company on September 11, 1999. 

(j) The IRA of Alice Pike currently 

holds total assets of approximately 

$36,165.72, which includes 1,117 shares 

of the Stock. The IRA of Alice Pike 

acquires all of the Stock from the 

Company on September 28, 2000. 

(k) The IRA of Steven Larsen 

currently holds total assets of 

approximately $792,100.40, which 

includes 3,877 shares of the Stock. The 

IRA of Steven Larsen acquired all of the 

Stock from the Company on August 28, 

1985. 

(l) The IRA of C. Timothy Hopkins 

currently holds total assets of 

approximately $488,139.96, which 

includes 2,000 shares of the Stock. The 

IRA of C. Timothy Hopkins acquired all 

of the Stock from the Company on 

September 11, 1999. 

(m) The IRA of Wayne Meuleman 

currently holds total assets of 

approximately $42,651.09, which 

includes 1,680 shares of the Stock. The 

IRA of Wayne Meuleman acquired all of 

the Stock from the Company on August 

28, 1985. 

(n) The IRA of Robert L. Miller 

currently holds total assets of 

approximately $39,816.46, which 

includes 1,543 shares of the Stock. The 

IRA of Robert L. Miller acquired all of 

the Stock from the Company on August 

28, 1985. 

(o) The IRA of Richard T. Scott 

currently holds total assets of 

approximately $17,209.21, which 

includes 653 shares of the Stock. The 

IRA of Richard T. Scott acquired all of 

the Stock from the Company on 

February 16, 2000. 

The applicants represent that the 

Bank is the custodian for all of the IRAs, 

except that: (i) The custodian of the IRA 

of Kenlon Johnson is Wachovia 

Securities (Wachovia); (ii) the custodian 

of the IRA of Michael Ball is TD 

Ameritrade Institutional (TD 

Ameritrade); (iii) the custodian of the 

IRA of Steven Larsen is Merrill Lynch 

Pierce Fenner & Smith (Merrill Lynch); 

and (iv) the custodian of the IRA of C. 

Timothy Hopkins is Raymond James 

Financial Services, Inc (Raymond 

James). Wachovia, TD Ameritrade, 

Merrill Lynch, and Raymond James are 

all national brokerage firms. 

2. The applicants request an 

administrative exemption for the Sale of 

the Stock by each individual IRA to its 

respective Participant. The applicants 

also represent that the IRAs acquired the 

Stock directly from the issuer (i.e., the 

Company).23 Prior to January 1, 2007, 

the applicants represent that the 

Company was a Subchapter C 

corporation. The applicants state that 

business and income tax considerations 

caused the Company to elect to be taxed 

as a Subchapter S corporation pursuant 

to the Code, effective on January 1, 

2007. The applicants further represent 

that, while section 1361(c)(2)(vi) of the 

Code permits an IRA to be an eligible 

shareholder in a bank holding company 

upon the company’s conversion to a 

Subchapter S corporation, the 

applicants nevertheless remain liable for 

unrelated business tax income (UBTI) in 

their respective IRAs subsequent to the 

conversion, which negatively impacts 

the accounts. Accordingly, the 

applicants seek to effectuate the Sale of 

the Stock from their IRAs.24 The 

applicants also represent that the 

acquisition of the Stock by each IRA 

was done for investment purposes and 

that, in fact, each IRA made a profit on 

its original investment. 

3. The Stock was initially appraised 

by the valuation firm of Southard 

Financial, which is located in Memphis, 

Tennessee. In an appraisal report dated 

October 9, 2008, Southard Financial 

13260 Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Notices 

offered its opinion of the fair market 

value of the Stock as of August 31, 2008. 

The appraisal report was signed by Mr. 

Douglas K. Southard (Mr. Southard), Mr. 

David A. Harris (Mr. Harris), and Mr. 

Mark A. Orndorff (Mr. Orndorff), each of 

whom is an accredited appraiser with 

the firm. Mr. Southard, Mr. Harris, and 

Mr. Orndorff (collectively, the 

Appraisers) each represent that they are 

full-time, qualified appraisers and are 

senior members of the American Society 

of Appraisers (ASA). In addition, Mr. 

Southard and Mr. Harris, as principals 

of Southard Financial, represent that 

they and their firm are independent of, 

and unrelated to, the Participants, the 

Company, and the Bank. 

In arriving at a value for the Stock, the 

Appraisers utilized a combined 

valuation methodology, according 

weight to both the income approach and 

the market approach (in the latter 

approach, the Appraisers took into 

account the price/book valuation 

method, the price/earnings method, and 

the prior transactions method). 

Applying these combined 

methodologies, the Appraisers arrived at 

a per share value for the Stock of $23.82. 

In this connection, the Appraisers 

determined that, because there is often 

local demand for the ownership of 

closely held community bank stock (as 

opposed to other businesses in a local 

market), no discount for a lack of 

marketability of the Stock should be 

taken in the appraisal. The Appraisers 

rounded the $23.82 figure for the value 

of the Stock to $23.80 to reflect what 

they believed was the imprecision 

inherent in the various assumptions 

used in the fair market value 

determination. 

Applying the $23.80 per share 

valuation, the aggregate fair market 

value of the Stock held by the respective 

IRAs of the Participants as of August 31, 

2008 is reflected in the following table: 

Individual retirement account (IRA) of 

Number of 

shares of 

stock held in 

each IRA 

Fair market 

value of the 

stock in each 

IRA as of 

8/31/2008 

Percentage of 

total IRA 

assets 

represented by 

the stock 

Ralph Hartwell ............................................................................................................................. 41,004 $975,895.20 99.99 

Harold Latin ................................................................................................................................. 1,071 25,489.80 88.80 

Kenlon Johnson ........................................................................................................................... 400 9,520 2.12 

Carol Johnson .............................................................................................................................. 1,000 23,800 19.81 

Shanon Taylor ............................................................................................................................. 910 21,658 91.61 

Michael Ball ................................................................................................................................. 1,050 24,990 91.08 

Dianne Barkas ............................................................................................................................. 6,380 151,844 93.45 

Roy Barkas .................................................................................................................................. 3,262 77,635.60 92.92 

Harry DeWall ............................................................................................................................... 10,000 238,000 56.68 

Alice Pike ..................................................................................................................................... 1,117 26,584.60 73.51 

Steven Larsen .............................................................................................................................. 3,877 92,272.60 11.65 

C. Timothy Hopkins ..................................................................................................................... 2,000 47,600 9.75 

Wayne Meuleman ........................................................................................................................ 1,680 39,984 93.75 

Robert L. Miller ............................................................................................................................ 1,543 36,723.40 92.23 

Richard T. Scott ........................................................................................................................... 653 15,541.40 90.31 

4. The applicants represent that the 

combined Stock held by each of the 

IRAs (i.e., 75,947 shares) represents only 

5.75% of the 1,319,757 shares of the 

Stock of the Company that are currently 

outstanding. The applicants also 

represent that the proposed Sales of the 

Stock by the IRAs will not result in any 

of the Participants becoming holders of 

10% or more of the shares of the 

Company, nor will the Sales give any of 

the Participants a controlling interest in 

the Company. The applicants further 

state that, if the Department grants an 

administrative exemption for the 

proposed Sales, an updated appraisal 

will be undertaken by a qualified, 

independent appraiser to determine the 

fair market value of the Stock as of the 

date that the Sales are consummated. 

5. The applicants represent that the 

transactions are administratively 

feasible because each Sale will be a onetime transaction for cash. The 

applicants also represent that the 

transactions are in the interests of the 

IRAs because each IRA will dispose of 

all its shares of the Stock at a price 

which equals the Stock’s fair market 

value at the time of the Sale. As a result, 

greater diversification of the IRAs’ assets 

will be achieved by reinvesting the 

proceeds of the Sales in other assets. 

Furthermore, the applicants represent 

that the transactions are protective of 

the rights of the Participants and 

beneficiaries of the IRAs because each 

IRA will receive the fair market value of 

the Stock currently owned by each IRA 

as of the date of the Sale, as determined 

by a qualified, independent appraiser. 

Finally, the IRAs will not incur any 

commissions, costs, or other expenses as 

a result of the Sales. 

6. In summary, the applicants 

represent that the transactions will 

satisfy the statutory criteria of section 

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

Sale of the Stock by each IRA is a onetime transaction for cash; (b) The terms 

and conditions of each Sale is at least 

as favorable to each IRA as those 

obtainable in an arm’s length 

transaction with an unrelated party; (c) 

Each IRA receives the fair market value 

of the Stock on the date of the Sale as 

determined by a qualified, independent 

appraiser; and (d) Each IRAs does not 

pay any commissions, costs, or other 

expenses in connection with each Sale. 

Notice To Interested Persons: Because 

the applicants are the only participants 

in the IRAs, it has been determined that 

there is no need to distribute this notice 

of proposed exemption (the Notice) to 

interested persons. Comments and 

requests for a hearing are due thirty (30) 

days after publication of the Notice in 

the Federal Register. 

FOR FURTHER INFORMATION CONTACT: Mr. 

Mark Judge of the Department, 

telephone (202) 693–8339. (This is not 

a toll-free number.) 

General Information 

The attention of interested persons is 

directed to the following: 

(1) The fact that a transaction is the 

subject of an exemption under section 

408(a) of the Act and/or section 

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

a fiduciary or other party in interest or 

disqualified person from certain other 

provisions of the Act and/or the Code, 

including any prohibited transaction 

provisions to which the exemption does 

not apply and the general fiduciary 

responsibility provisions of section 404 

of the Act, which, among other things, 

require a fiduciary to discharge his 

Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Notices 13261 

duties respecting the plan solely in the 

interest of the participants and 

beneficiaries of the plan and in a 

prudent fashion in accordance with 

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

it affect the requirement of section 

401(a) of the Code that the plan must 

operate for the exclusive benefit of the 

employees of the employer maintaining 

the plan and their beneficiaries; 

(2) Before an exemption may be 

granted under section 408(a) of the Act 

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

the Department must find that the 

exemption is administratively feasible, 

in the interests of the plan and of its 

participants and beneficiaries, and 

protective of the rights of participants 

and beneficiaries of the plan; 

(3) The proposed exemptions, if 

granted, will be supplemental to, and 

not in derogation of, any other 

provisions of the Act and/or the Code, 

including statutory or administrative 

exemptions and transitional rules. 

Furthermore, the fact that a transaction 

is subject to an administrative or 

statutory exemption is not dispositive of 

whether the transaction is in fact a 

prohibited transaction; and 

(4) The proposed exemptions, if 

granted, will be subject to the express 

condition that the material facts and 

representations contained in each 

application are true and complete, and 

that each application accurately 

describes all material terms of the 

transaction which is the subject of the 

exemption. 

Signed at Washington, DC, this 20th day of 

March, 2009. 

Ivan Strasfeld, 

Director of Exemption Determinations, 

Employee Benefits Security Administration, 

U.S. Department of Labor. 

[FR Doc. E9–6619 Filed 3–25–09; 8:45 am] 

BILLING CODE 4510–29–P 

DEPARTMENT OF LABOR 

Employment and Training 

Administration 

Wage and Hour Division 

Withdrawal of Interpretation of the Fair 

Labor Standards Act Concerning 

Relocation Expenses Incurred by H–2A 

and H–2B Workers 

AGENCY: Employment and Training 

Administration, Department of Labor in 

concurrence with the Wage and Hour 

Division, Employment Standards 

Administration, Department of Labor. 

ACTION: Notice of withdrawal of 

interpretation. 

SUMMARY: The Department of Labor 

(DOL or the Department) withdraws for 

further consideration an interpretation 

of the Fair Labor Standards Act (FLSA) 

published on December 18 and 19, 

2008. The interpretation, which was 

published at 73 FR 77148–52 (H–2A 

program) and 73 FR 78039–41 (H–2B 

program), articulated an opinion that 

the FLSA and its implementing 

regulations do not require employers to 

reimburse workers under the H–2A and 

H–2B nonimmigrant visa programs, 

respectively, for relocation expenses 

even when such costs result in the 

workers being paid less than the 

minimum wage. This interpretation is 

hereby withdrawn for further 

consideration by the Department and 

may not be relied upon as a statement 

of agency policy. 

DATES: Effective Date: March 26, 2009. 

FOR FURTHER INFORMATION CONTACT: 

Richard Brennan, Director of Office of 

Interpretations and Regulatory Analysis, 

Wage and Hour Division, Employment 

Standards Administration, U.S. 

Department of Labor, 200 Constitution 

Avenue, NW., Room S–3506, 

Washington, DC 20210; Telephone (202) 

693–0051 (this is not a toll-free 

number). Individuals with hearing or 

speech impairments may access the 

telephone numbers above via TTY by 

calling the toll-free Federal Information 

Relay Service at 1–800–877–8339. 

SUPPLEMENTARY INFORMATION: The Fair 

Labor Standards Act (FLSA), 29 U.S.C. 

201 et seq., requires covered employers 

to pay their nonexempt employees a 

federal minimum wage and overtime 

premium pay of time and one-half the 

regular rate of pay for hours worked in 

excess of 40 in a week. The agency 

responsible for administration of the 

FLSA is the Wage and Hour Division, 

Employment Standards Administration, 

of the Department of Labor. The FLSA 

and its regulations prohibit an employer 

from either deducting from an 

employee’s pay or imposing an expense 

upon an employee for costs that are 

primarily for the benefit of the 

employer, if to do so results in an 

employee receiving less than the 

minimum wage. 29 U.S.C. 203(m); 29 

CFR part 531. Thus, during the first 

workweek, workers must be 

compensated at a rate that would bring 

their wages up to minimum wage, 

taking into account pre-employment 

expenses that primarily benefit the 

employer. In Arriaga v. Florida Pacific 

Farms, L.L.C., 305 F.3d 1228 (11th Cir. 

2002), the U.S. Court of Appeals for the 

Eleventh Circuit held that, under the 

FLSA regulations, the transportation 

from Mexico to Florida and visa costs of 

temporary nonimmigrant workers 

coming to the U.S. under the H–2A visa 

program, see 8 U.S.C. 

1101(a)(15)(H)(ii)(a), were primarily for 

the grower’s benefit because such costs 

were necessary and incident to the 

employment of such workers. A number 

of U.S. district courts have extended the 

Arriaga holding regarding the FLSA 

requirements to temporary 

nonimmigrant workers admitted into 

the U.S. under the H–2B visa program, 

8 U.S.C. 1101(a)(15)(H)(ii)(b). See, e.g., 

De Leon-Granados v. Eller & Sons Trees 

Inc., 2008 WL 4531813 (N.D. Ga., Oct. 

7, 2008); Rosales v. Hispanic Employee 

Leasing Program, 2008 WL 363479 

(W.D. Mich. Feb. 11, 2008); Rivera v. 

Brickman Group, 2008 WL 81570 (E.D. 

Pa. Jan. 7, 2008); Recinos-Recinos v. 

Express Forestry Inc., 2006 WL 197030 

(E.D. La. Jan. 24, 2006); but see 

Castellanos-Contreras v. Decatur Hotels 

LLC, No. 07–30942 (5th Cir. Feb. 11, 

2009), pet. for reh’g filed (Mar. 11, 

2009), rev’g, 488 F. Supp. 2d 565 (E.D. 

La. 2007). 

On December 18, 2008, DOL 

published final regulations revising the 

procedures for the issuance of labor 

certifications to employers sponsoring 

H–2A nonimmigrants for admission to 

perform temporary agricultural labor or 

services and the procedures for 

enforcing compliance with attestations 

made by those employers. 73 FR 77110. 

The H–2A Final Rule became effective 

on January 17, 2009. The preamble 

accompanying the H–2A Final Rule 

included a discussion of the Arriaga 

issue, concluding that the Eleventh 

Circuit’s decision was wrongly decided 

and that inbound travel expenses of H– 

2A workers do not primarily benefit 

their employers. 73 FR 77148–52. DOL 

characterized this discussion as an 

interpretation of the FLSA, 73 FR 77151, 

and did not seek public comment on the 

issue when it issued the H–2A Notice of 

Proposed Rulemaking, 73 FR 8538 (Feb. 

13, 2008). Prior to the issuance of the 

preamble discussion, courts uniformly 

had held that relocation expenses were 

primarily for the benefit of employers. 

On December 19, 2008, DOL 

published final regulations revising the 

procedures for the issuance of labor 

certifications to employers sponsoring 

H–2B nonimmigrants for admission to 

perform temporary nonagricultural labor 

or services and the procedures for 

enforcing compliance with attestations 

made by those employers. 73 FR 78019. 

The Final Rule became effective on 

January 18, 2009. The preamble 

accompanying the Final H–2B Rule 

included a discussion of the Arriaga 

issue, concluding that the Eleventh 

Circuit’s decision and the district court