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[Federal Register Volume 90, Number 11 (Friday, January 17, 2025)]
[Notices]
[Pages 6013-6028]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-01067]

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DEPARTMENT OF LABOR

Employee Benefits Security Administration

[Exemption Application No. D-12102]

Proposed Exemption for the Royal Bank of Canada and Its Current 
and Future Affiliates (Collectively, RBC or the Applicant) Located in 
Toronto, Ontario, Canada

AGENCY: Employee Benefits Security Administration, Labor.

ACTION: Notice of proposed exemption.

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SUMMARY: This document provides notice of the pendency before the 
Department of Labor (the Department) of a proposed individual exemption 
from certain of the prohibited transaction restrictions of the Employee 
Retirement Income Security Act of 1974 (ERISA or the Act) and the 
Internal Revenue Code of 1986 (the Code). This proposed exemption would 
permit certain qualified professional asset managers with specified 
relationships to Royal Bank of Canada Trust Company (Bahamas) Limited, 
and certain current and future affiliates of the Royal Bank of Canada 
(collectively, the RBC QPAMs), to continue to rely on the class 
exemptive relief granted in Prohibited Transaction Exemption (PTE) 84-
14 (PTE 84-14, or the QPAM Exemption), notwithstanding the March 5, 
2024 judgment of conviction against Royal Bank of Canada Trust Company 
(Bahamas) Limited (RBCTC Bahamas) for aiding and abetting tax fraud, 
entered in France in the Paris Court of Appeal.

DATES: 
    Exemption date: This proposed exemption would be in effect 
beginning on March 5, 2025, and ending on March 4, 2030 (the Exemption 
Period).
    Comments due: Written comments and requests for a public hearing on 
the proposed exemption should be submitted to the Department by March 
3, 2025.

ADDRESSES: All written comments and requests for a hearing should be 
submitted to the Employee Benefits Security Administration (EBSA), 
Office of Exemption Determinations, Attention: Application No. D-12102 
via email to [email protected] or online through https://www.regulations.gov. Any such comments or requests should be sent by 
the end of the scheduled comment period. The application for exemption 
and the comments received will be available for public inspection in 
the Public Disclosure Room of the Employee Benefits Security 
Administration, U.S. Department of Labor, Room N-1515, 200 Constitution 
Avenue NW, Washington, DC 20210 (202) 693-8673). See SUPPLEMENTARY 
INFORMATION below for additional information regarding comments.

FOR FURTHER INFORMATION CONTACT: Ms. Blessed Chuksorji-Keefe of the 
Department at (202) 693-8567. (This is not a toll-free number).

SUPPLEMENTARY INFORMATION: 
    Comments: Persons are encouraged to submit all comments 
electronically and not to submit paper copies. Comments should state 
the nature of the person's interest in the proposed exemption and how 
the person would be adversely affected by the exemption, if granted. 
Any person who may be adversely affected by an exemption can request a 
hearing on the exemption. A request for a hearing must state: (1) the 
name, address, telephone number, and email address of the person making 
the request; (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; and (3) a statement of the issues to be addressed and a 
general description of the evidence to be presented at the hearing. The 
Department will grant a request for a hearing made in accordance with 
the requirements above where a hearing is necessary to fully explore 
material factual issues identified by the person requesting the 
hearing. A notice of such hearing shall be published by the Department 
in the Federal Register. The Department may decline to hold a hearing 
if:
    (1) the request for the hearing does not meet the requirements 
above; (2) the only issues identified for exploration at the hearing 
are matters of law; or (3) the factual issues identified can be fully 
explored through the submission of evidence in written (including 
electronic) form.
    Warning: All comments received will be included in the public 
record without change and may be made available online at https://www.regulations.gov, including any personal information provided, 
unless the comment includes information claimed to be confidential or 
other information whose disclosure is restricted by statute. If you 
submit a comment, EBSA recommends that you include your name and other 
contact information in the body of your comment, but DO NOT submit 
information that you consider to be confidential, or otherwise 
protected (such as a Social Security number or an unlisted phone 
number) or confidential business information that you do not

[[Page 6014]]

want publicly disclosed. However, if EBSA cannot read your comment due 
to technical difficulties and cannot contact you for clarification, 
EBSA might not be able to consider your comment.
    Additionally, the https://www.regulations.gov website is an 
``anonymous access'' system, which means EBSA will not know your 
identity or contact information unless you provide it in the body of 
your comment. If you send an email directly to EBSA without going 
through https://www.regulations.gov, your email address will be 
automatically captured and included as part of the comment that is 
placed in the public record and made available on the internet.

Proposed Exemption

    The Department is considering granting the exemption pursuant to 
its authority under ERISA section 408(a) and Code section 4975(c)(2), 
and in accordance with the Department's exemption procedures.\1\ If the 
Department grants a final exemption, the RBC QPAMs will be allowed to 
continue their reliance on the QPAM Exemption) \2\ notwithstanding the 
March 5, 2024 judgment of conviction against Royal Bank of Canada Trust 
Company (Bahamas) Limited (RBCTC Bahamas) for aiding and abetting tax 
fraud, as described in more detail below (the Conviction), provided the 
conditions set forth in the exemption are met. The terms of this 
proposed exemption have been specifically designed to permit plans to 
terminate their relationships in an orderly and cost-effective fashion 
in the event of an additional conviction or a determination that it is 
otherwise prudent for a plan to terminate its relationship with an 
entity covered by the exemption.
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    \1\ 29 CFR part 2570, subpart B (75 FR 66637, 66644, October 27, 
2011).
    \2\ 49 FR 9494 (March 13, 1984), as corrected at 50 FR 41430 
(October 10, 1985), as amended at 70 FR 49305 (August 23, 2005), as 
amended at 75 FR 38837 (July 6, 2010), and as amended at 89 FR 23090 
(April 3, 2024).
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    This proposed exemption would provide relief from certain 
restrictions set forth in ERISA sections 406 and 407.\3\ It would not, 
however, provide relief from any other violation of law. Furthermore, 
the Department cautions that the relief in the exemption would 
terminate immediately if, among other things, RBC or an affiliate of 
RBC (as defined in section VI(d) of PTE 84-14) \4\ is convicted of a 
crime covered by, or otherwise violates, section I(g) of PTE 84-14 
(other than the Conviction) during the Exemption Period.\5\ Although 
RBC could apply for a new exemption in that circumstance, the 
Department would not be obligated to grant the exemption.\6\
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    \3\ For purposes of this proposed exemption, references to 
specific provisions of ERISA Title I, unless otherwise specified, 
should be read to refer as well to the corresponding provisions of 
Code section 4975.
    \4\ PTE 84-14 section VI(d) defines the term ``affiliate'' for 
purposes of section I(g) as ``(1) Any person directly or indirectly 
through one or more intermediaries, Controlling, Controlled by, or 
under Common Control with the person, (2) Any director of, Relative 
of, or partner in, any such person, (3) Any corporation, 
partnership, trust or unincorporated enterprise of which such person 
is an officer, director, or a 5 percent or more partner or owner, 
and (4) Any employee or officer of the person who-(A) Is a highly 
compensated employee (as defined in Code section 4975(e)(2)(H)) or 
officer (earning 10 percent or more of the yearly wages of such 
person), or (B) Has direct or indirect authority, responsibility or 
control regarding the custody, management or disposition of plan 
assets.'' For purposes of this definition, section VI(e) defines the 
terms ``Controlling,'' ``Controlled by,'' ``under Common Control 
with,'' and ``Controls'' means the power to exercise a controlling 
influence over the management or policies of a person other than an 
individual.
    \5\ See 89 FR 23090 at 23138 through 23140 (April 4, 2024).
    \6\ Id.
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Summary of Facts and Representations \7\
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    \7\ The Department notes that availability of this exemption 
would be subject to the express condition that the material facts 
and representations made by the Applicant in Application D-12102 are 
true and complete at all times and accurately describe all material 
terms of the transaction(s) covered by the exemption. If there is 
any material change in a transaction covered by the exemption, or in 
a material fact or representation described in the application, the 
exemption will cease to apply as of the date of the change.
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The Royal Bank of Canada

    1. The Royal Bank of Canada (RBC) is a Canadian corporation 
headquartered in Toronto, Ontario, Canada and is Canada's largest bank. 
RBC provides personal and commercial banking, wealth management 
services, insurance, investor services and capital markets products and 
services on a global basis. As of October 31, 2024, RBC had more than 
CAD$1.342 trillion (more than $932 billion in U.S. dollars) \8\ in 
assets under management, CAD$4.965 trillion (approximately $3.45 
trillion in U.S. dollars) \9\ in assets under administration, and 
equity attributable to shareholders of CAD$127 billion (approximately 
$88.3 billion in U.S. dollars).
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    \8\ The conversion amounts are current as of January 10, 2025.
    \9\ The figures included in this application are dated as of 
October 31, 2024, unless otherwise noted. Assets under management 
for U.S. managers are expressed in U.S. dollars.
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The Convicted Entity

    2. RBCTC Bahamas is a wholly-owned subsidiary of RBC located in the 
Bahamas and regulated by the Central Bank of the Bahamas. RBCTC Bahamas 
once provided trust and company management services in all major 
currencies to international clients. Currently, RBCTC Bahamas is not 
engaged in asset management activities and does not act as a fiduciary 
of any plans subject to part 4 of title I of ERISA or Internal Revenue 
Code (Code) section 4975.
    3. Over the last several years, RBCTC Bahamas's operations have 
been reduced in scope. In September 2014, RBCTC Bahamas ceased taking 
on new trust business. On November 4, 2015, RBCTC Bahamas announced 
that it had entered into a purchase and sale agreement with SMP 
Partners Group to sell its Trust, Custody and Fund Administration 
businesses in the Caribbean. This follows the announcement in November 
2014 that RBC would be exiting a number of its Wealth Management 
businesses in the Caribbean. On November 18, 2016, RBC completed the 
sale of the assets of RBCTC Bahamas to another financial institution, 
but did not sell the assets relating to the servicing of the Bahamian 
trust (the Delta Trust) that is connected to the allegations at issue 
in the criminal case and for which RBCTC Bahamas has served as 
successor trustee since 2004 (the Delta Trust).

The RBC QPAMs

    4. Certain current and future ``affiliates'' of RBCTC Bahamas, as 
that term is defined in section VI(d) of PTE 84-14, may manage the 
assets of ERISA-covered plans and individual retirement accounts 
subject to the Internal Revenue Code (collectively, Covered Plans) as 
RBC QPAMs in reliance on PTE 84-14.\10\ The primary U.S. bank and U.S. 
registered investment adviser affiliates in which RBC owns a 
significant interest, directly or indirectly, include the following: 
(1) RBC Global Asset Management (U.S.) Inc.; \11\ (2) RBC Global Asset 
Management (UK)

[[Page 6015]]

Limited; \12\ (3) RBC Capital Markets, LLC; \13\ (4) City National 
Bank; \14\ (5) City National Securities, Inc.; \15\ (6) City National 
Rochdale, LLC; \16\ and (7) Symphonic Financial Advisors, LLC.\17\
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    \10\ The term ``Covered Plan'' means a plan subject to Part IV 
of Title I of ERISA (an ``ERISA-covered plan'') or a plan subject to 
Code section 4975 (an ``IRA''), in each case, with respect to which 
RBC relies on PTE 84-14, or with respect to which RBC has expressly 
represented that the manager qualifies as a QPAM or relies on PTE 
84-14. A Covered Plan does not include an ERISA-covered plan or IRA 
to the extent that RBC has expressly disclaimed reliance on QPAM 
status or PTE 84-14 in entering into a contract, arrangement, or 
agreement with the ERISA-covered plan or IRA.
    \11\ In its most recent (at the time of the application) Form 
ADV Part I(A) reported assets of almost $80 billion managed on a 
discretionary basis, including ERISA assets including approximately 
$4.7 billion in public pension assets for state and local plans, 
which may by law or contract require it to comply with the 
prohibited transaction rules under ERISA.
    \12\ At the time of the application, managed assets of nearly 
$122 billion on a discretionary basis, including ERISA assets and 
approximately $993 million in public pension assets for state and 
local plans, which may by law or contract require it to comply with 
the prohibited transaction rules under ERISA.
    \13\ At the time of the application, this entity managed assets 
of approximately $149 billion managed on a discretionary basis, 
including ERISA and IRA assets.
    \14\ At the time of the application, this entity managed assets 
of approximately $24.2 billion on a discretionary basis, including 
ERISA and IRA assets.
    \15\ At the time of the application, this entity managed assets 
of nearly $1.5 billion on a discretionary basis, including ERISA and 
IRA assets.
    \16\ At the time of the application, this entity managed assets 
of over $60 billion on a discretionary basis, including ERISA and 
IRA assets, and including $29 million in public pension assets for 
state and local plans, which may by law or contract require it to 
comply with the prohibited transaction rules under ERISA.
    \17\ At the time of the application managed assets of over $125 
million on a discretionary basis, including ERISA and IRA assets. 
Symphonic is in the process of being dissolved, which process is 
expected to be completed in the second quarter of 2024.
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    5. RBC explains that the RBC QPAMs provide asset management 
services to thousands of Covered Plans. In managing these assets, the 
RBC QPAMs regularly rely on PTE 84-14 for, among other things, global 
fixed income, global equities, futures, options, swaps and other 
derivatives, alternative funds, including hedge funds, and similar 
instruments and strategies. The issuing documents for many instruments 
state that the investment manager is deemed to represent that it is 
relying, at least partially, on PTE 84-14.
    6. According to the Applicant, the investment management businesses 
that are operated out of the RBC QPAMs are separate from RBCTC Bahamas, 
and from the non-investment management business activities of RBCTC 
Bahamas that are the subject of criminal charges under French law. The 
Applicant states that RBC QPAMs have dedicated systems, management, 
risk and compliance officers. In this regard, the Applicant represents 
that the RBC QPAMs are insulated from RBCTC Bahamas. The RBC QPAMs use 
their own, separate systems for trade management, employee supervision, 
client management, surveillance, risk management, and accounting, which 
are only accessible by authorized QPAM employees. RBC also represents 
that the investment management businesses of the RBC QPAMs are subject 
to policies and procedures, and RBC QPAM personnel engage in training, 
designed to ensure that such businesses understand and abide by their 
fiduciary duties in accordance with applicable law.
    7. According to RBC, the RBC QPAMs' policies and procedures create 
information barriers designed to prevent employees of the RBC QPAMs 
from gaining access to inside information that an affiliate may have 
acquired or developed in connection with the investment banking, 
treasury services or other investor services business activities. These 
policies and procedures apply to employees, officers, and directors of 
the RBC QPAMs. The Applicant also maintains an employee hotline for 
employees to express anonymously any concerns of wrongdoing.

ERISA and Code Prohibited Transactions and PTE 84-14

    8. The rules set forth in ERISA section 406 and Code section 
4975(c) proscribe certain ``prohibited transactions'' between plans and 
parties in interest with respect to those plans. ERISA section 3(14) 
defines parties in interest with respect to a plan to include, among 
others, the plan fiduciary, a sponsoring employer of the plan, a union 
whose members are covered by the plan, service providers with respect 
to the plan, and certain of their affiliates.\18\ The transactions 
prohibited by ERISA section 406(a) that are relevant to this proposed 
exemption are (1) sales, leases, loans, or the provision of services 
between a party in interest and a plan (or an entity whose assets are 
deemed to constitute the assets of a plan), (2) the use of plan assets 
by or for the benefit of a party in interest, or (3) a transfer of plan 
assets to a party in interest.\19\
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    \18\ Under the Code, such parties, or similar parties, are 
referred to as ``disqualified persons.''
    \19\ The prohibited transaction provisions also include certain 
fiduciary prohibited transactions under ERISA section 406(b). These 
include transactions involving fiduciary self-dealing, fiduciary 
conflicts of interest, and kickbacks to fiduciaries.
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    9. ERISA section 408(a) gives the Department authority to grant an 
exemption from such ``prohibited transactions'' if the Department finds 
an exemption is: (a) administratively feasible for the Department; (b) 
in the interests of the plan and of its participants and beneficiaries; 
and (c) protective of the rights of participants and beneficiaries.
    10. PTE 84-14 exempts certain prohibited transactions between a 
party in interest and an ``investment fund'' (as defined in section 
VI(b) of PTE 84-14) in which a plan has an interest if the investment 
manager satisfies the definition of ``qualified professional asset 
manager'' (QPAM) and satisfies additional conditions of the 
exemption.\20\ PTE 84-14 was developed and granted based on the premise 
that broad relief could be afforded for all types of transactions in 
which a plan engages only if the commitments and the investments of 
plan assets and the negotiations leading thereto are the sole 
responsibility of an independent discretionary manager.\21\
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    \20\ PTE 84-14 was recently amended, effective June 17, 2024 to, 
among other things, (1) require a QPAM to provide a one-time notice 
to the Department that the QPAM is relying upon the exemption; (2) 
update the list of crimes enumerated under section I(g) to 
explicitly include foreign crimes that are substantially equivalent 
to the listed crimes; (3) expand the circumstances that may lead to 
ineligibility; and (4) provide a one-year transition period to help 
Covered Plans avoid or minimize possible negative impacts of 
terminating or switching QPAMs or adjusting asset management 
arrangements when a QPAM becomes ineligible pursuant to section I(g) 
and allow QPAMs a reasonable period of time to seek an individual 
exemption, if appropriate. See 89 FR 23090 (April 3, 2024).
    \21\ See 75 FR 38837, 38839 (July 6, 2010).
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    11. section I(g) of PTE 84-14 prevents an entity that may otherwise 
meet the definition of QPAM from utilizing the exemptive relief 
provided by the QPAM Exemption for itself and its client plans if that 
entity, an ``affiliate'' thereof,\22\ or any direct or indirect five 
percent or more owner of the QPAM has been either convicted or released 
from imprisonment, whichever is later, because of criminal activity 
described in section I(g), or otherwise violates section I(g), within 
the 10 years immediately preceding a transaction. section I(g) was 
included in PTE 84-14, in part, based on the Department's expectation 
that QPAMs, and those who may be in a position to influence the QPAM's 
policies, must maintain a high standard of integrity.\23\
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    \22\ Section VI(d) of PTE 84-14 defines the term ``affiliate'' 
for purposes of section I(g) as ``(1) Any person directly or 
indirectly through one or more intermediaries, controlling, 
controlled by, or under common control with the person, (2) Any 
director of, relative of, or partner in, any such person, (3) Any 
corporation, partnership, trust or unincorporated enterprise of 
which such person is an officer, director, or a 5 percent or more 
partner or owner, and (4) Any employee or officer of the person 
who--(A) Is a highly compensated employee (as defined in section 
4975(e)(2)(H) of the Code) or officer (earning 10 percent or more of 
the yearly wages of such person), or (B) Has direct or indirect 
authority, responsibility or control regarding the custody, 
management or disposition of plan assets.''
    \23\ See 47 FR 56947 (December 21, 1982).
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Investigation for Tax Fraud

    12. The Applicant has applied for an exemption in connection with 
the judgment of Conviction rendered on

[[Page 6016]]

March 5, 2024, by the French Court of Appeal against RBCTC Bahamas. The 
facts forming the basis of the Conviction reach back to 1998, when 
Daniel Wildenstein established the Delta Trust. In January 2012, RBCTC 
Bahamas was summoned to appear before a French Judge of Instruction 
(the Investigative Judge) concerning an investigation into nonpayment 
of French inheritance taxes by Guy Wildenstein and Alec Daniel Armand 
Wildenstein (the Wildensteins) following the death in 2001 of family 
patriarch Daniel Wildenstein. RBCTC Bahamas was placed under judicial 
investigation,\24\ and in December 2013, the Investigative Judge 
referred the case to the French national prosecutor of financial crimes 
(the Special Prosecutor) for a review and recommendation. In January 
2015, the Special Prosecutor submitted a recommendation that RBCTC 
Bahamas and several others be charged with complicity in the 
Wildensteins' alleged tax fraud and money laundering.
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    \24\ A judicial investigation in France is a proceeding run by 
an investigative judge that is required by French law to take place 
prior to a decision made by a prosecutor to charge a defendant. At 
the end of the investigation, the Prosecutor decides whether there 
is enough evidence against the identified suspect(s) and, in case 
there is, whether the suspect(s) should be judged by a criminal 
court. Babonneau et Associes: https://www.sba-avocats.com/Criminal-defense-attorney-paris-criminal-investigation-in-france.html.
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    13. On April 9, 2015, the Paris Court of Appeal for the District 
Court of Paris (the Court) issued an Order of Dismissal and Referral 
before the Criminal Court (the Referral Order). In the Referral Order, 
RBCTC Bahamas was charged with complicity in the Wildenstein's tax 
fraud involving taxes owed to France on assets held in the Delta 
Trust.\25\ Specifically, the Court found that the investigation 
produced sufficient evidence against RBCTC Bahamas for having, in the 
Bahamas, beginning on November 19, 2004, aided and abetted tax fraud 
committed in Paris by Daniel Wildenstein's heirs by deliberately 
concealing a portion of the sums subject to French taxation on Daniel 
Wildenstein's estate, in particular the works of art placed in the 
Delta Trust and deeds that are governed by and punishable under 
Articles 121-2, 121-6, 121-7, 321-1, 321-3, 321-12 of the French 
Criminal Code and Articles 1741 et 1745 of the French General Tax Code.
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    \25\ The Referral Order charges both of the Wildensteins with 
multiple counts of tax fraud, notably for failing to disclose and 
pay taxes on assets held in various trusts following the death of 
Daniel Wildenstein. The Wildensteins both were among the 
beneficiaries of the Delta Trust and have been charged with failing 
to report and pay inheritance taxes on the assets held in the Delta 
Trust following the death in 2001 of Daniel Wildenstein.
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    14. The pertinent facts that underlie these charges as set out in 
the Referral Order are as follows: on November 2, 1998, Daniel 
Wildenstein created a discretionary trust in the Bahamas called the 
Delta Trust. The Delta Trust was designed to be revocable up to the 
point of Daniel Wildenstein's death, then irrevocable thereafter. Upon 
the formation of the Delta Trust, Daniel Wildenstein contributed 
various works of art to be held as assets of the trust. Royal Bank of 
Scotland was the initial trustee of the Delta Trust. In early 2001, 
Royal Bank of Scotland was replaced as trustee by Coutts Trust Holdings 
Limited, which was succeeded by Coutts Trustees (Bahamas) Limited. On 
October 21, 2001, Daniel Wildenstein died in Paris. On April 28, 2002, 
Guy Wildenstein and his brother, Alec Wildenstein Sr., filed an 
inheritance tax statement in relation to the estate of their father, 
Daniel Wildenstein, as required by French tax laws. Guy Wildenstein and 
Alec Wildenstein Sr. did not disclose in this inheritance tax 
statement, the existence of the Delta Trust or the existence of the 
assets therein. At this point, RBCTC Bahamas was appointed trustee of 
the Delta Trust in November 2004, three years after Daniel 
Wildenstein's death and more than two years after Guy Wildenstein and 
Alec Wildenstein Sr. had filed their inheritance tax statement.
    15. The Applicant represents that according to the French 
authorities, the existence of the Delta Trust as well as the assets of 
the Delta Trust should have been disclosed to the French authorities by 
Guy Wildenstein and by Alec Wildenstein Sr. when they filed their 
inheritance tax statement in 2002 because an inheritance tax would have 
applied in relation to these assets. \26\
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    \26\ The authorities allege that this disclosure should have 
occurred because the assets in the Delta Trust were initially 
revocable (i.e., the assets in trust could be revoked by Daniel 
Wildenstein up to the time of his death). As such, the authorities 
state that the assets in the Delta Trust belonged to Daniel 
Wildenstein's estate and were therefore taxable under French tax 
laws.
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    16. The Referral Order provides that RBCTC Bahamas actually knew, 
or should have known, that Daniel Wildenstein was of French 
nationality, and that he died in France. The Referral Order also 
provides that, at the least, RBCTC should have investigated in greater 
detail the facts in relation to Daniel Wildenstein's residency and, 
likewise, the tax consequences of that residency. In addition, the 
Referral Order provides that the Delta Trust did not operate as a 
discretionary trust for purposes of French tax law, which would have 
generally required the trustee to have control over the management of 
the trust's assets. Further, among other things, the Referral Order 
points out that RBCTC Bahamas filed an amended declaration with the 
Internal Revenue Service to declare the paintings in the Delta Trust 
which were present on U.S. territory at the time of Daniel 
Wildenstein's death, even though the Delta Trust was purportedly 
discretionary and irrevocable.

PTE 2016-10

    17. In 2016, the Applicant submitted an application for an 
exemption to continue to rely upon the relief in PTE 84-14 
notwithstanding a conviction of RBCTC Bahamas in the District Court of 
Paris in connection with the criminal activity described in the 
Referral Order. After a review of the application and the public 
record, on October 28, 2016, the Department granted PTE 2016-10,\27\ in 
order to protect Covered Plans from the costs and/or investment losses 
RBC asserted could arise if RBC QPAMs became ineligible to rely on PTE 
84-14 due to the conviction of RBCTC Bahamas.\28\ The effective period 
was limited to one year from the date of the anticipated conviction in 
order to provide the Department ``more time to consider whether longer-
term relief is warranted.'' \29\
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    \27\ 81 FR 75147 (October 28, 2016).
    \28\ Id. at 75149.
    \29\ Id.
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    18. RBCTC Bahamas contested the charges in the French court and was 
acquitted, although further litigation ensued. Over the next few years, 
the French authorities appealed the case, and a new proceeding was 
scheduled. RBC requested that the Department confirm that PTE 2016-10 
would still apply in the event that RBCTC Bahamas was ultimately 
convicted of the same crime based on the same underlying facts. In 
response, on December 11, 2023 the Department issued a ``Technical 
Correction'' to PTE 2016-10 that revised the definition of 
``Conviction'' in PTE 2016-10 to refer to ``the potential judgment of 
conviction against RBCTC Bahamas for aiding and abetting tax fraud to 
be entered in France in the Court of Appeal, French Special Prosecutor 
No. 1120392066, French Investigative Judge No. JIRSIF/11/12 or another 
court of competent jurisdiction.''\30\
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    \30\ See 88 FR 85931 (December 11, 2023).
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    19. On March 5, 2024, the French Court of Appeal rendered its 
judgment of conviction against RBCTC Bahamas

[[Page 6017]]

and the other defendants. RBCTC Bahamas was ordered by the Court of 
Appeal to pay a fine of [euro]5,000 ($5,350.95 in U.S. dollars) in 
connection with the Conviction and held RBCTC Bahamas jointly and 
severally liable with the Wildensteins and Northern Trust Fiduciary 
Services (Guernsey) Limited, another trustee of separate trusts, for 
the unpaid inheritance taxes owing, plus penalties and interest (such 
aggregate amount will be determined in a separate proceeding before the 
tax courts).\31\ Pursuant to the Technical Correction, the relief in 
PTE 2016-10 became effective on March 5, 2024, and will expire on March 
4, 2025.
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    \31\ On March 7, 2024, RBCTC Bahamas appealed the decision to 
the French Supreme Court. The appeal is currently pending. The 
Department notes that a disqualifying ``Conviction'' under section 
I(g) of PTE 84-14 occurs as of the date of judgment of the trial 
court, regardless of whether that judgment is appealed. See also 
section I(h)(1) of PTE 84-14 at 89 FR 23090, 23139 (April 3, 2024).
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The Exemption Request

    20. The Applicant requests exemptive relief that would permit the 
RBC QPAMs to continue to rely on the relief provided by the QPAM 
Exemption, notwithstanding the disqualifying conviction, for the 
remaining nine-year period of disqualification upon the expiration of 
PTE 2016-10. The Department has determined to propose relief for five 
years, beginning on March 5, 2025, and ending on March 4, 2030, so that 
after five years, it may reevaluate the effectiveness of the protective 
conditions for relief as well as whether the QPAMs, and those in 
position to influence them, have continued to maintain a high standard 
of integrity. The Applicant represents that the conduct that is the 
subject of the potential conviction did not involve any of the RBC 
QPAMs acting in its role as an investment manager of any Covered Plan 
or otherwise relate to the asset management services provided by the 
RBC QPAMs. Furthermore, the asset management businesses of the RBC 
QPAMs did not know or have reason to know of the conduct underlying the 
charges and did not participate in or receive compensation in 
connection with the conduct underlying the charges. The convicted 
entity, RBCTC Bahamas, did not provide any fiduciary services to or act 
as a QPAM for ERISA plans or IRAs and RBCTC Bahamas does not provide 
investment management services to ERISA plans or IRAs or otherwise 
exercise discretionary control over ERISA plan or IRA assets.

Hardship to Covered Plans

    21. Overview of loss of QPAM. The Applicant represents that the 
requested exemption is in the interest of affected plans and their 
participants and beneficiaries, because it will enable the plans to 
continue their current investment strategy with their current 
investment manager or trustee. If the Department denies the requested 
exemption, the Applicant asserts that the many clients that depend on 
RBC's ability to engage in transactions in reliance on QPAM status 
would be forced to find another asset manager to remain invested in 
their preferred strategies. The Applicant explains that clients with 
strategies dependent upon the RBC QPAMs' ability to rely on PTE 84-14 
would likely terminate all of their contracts with RBC (even ones not 
dependent on PTE 84-14), and plan consultants likely would move their 
clients' assets away from RBC.\32\
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    \32\ The Applicant states that many of RBC's asset management 
clients are advised by the same relatively small group of 
consultants, magnifying the effect of any recommendation to 
terminate an RBC manager.
---------------------------------------------------------------------------

    22. The Applicant further represents that pension plans, including 
non-ERISA plans such as governmental plans, union plans, corporate 
plans and others, tend to treat an entity's eligibility to rely on PTE 
84-14 as a threshold prerequisite for entrusting an investment manager 
to manage plan assets. In the Applicant's view, this could lead 
participants and regulators to view remaining with a manager that 
becomes ineligible to rely on PTE 84-14 as a breach of fiduciary 
duties. As such, pension plans (ERISA and non-ERISA) could terminate 
their relationship with any manager that becomes ineligible to rely on 
the QPAM exemption, even if the plans do not technically require the 
entity to maintain its QPAM qualification to execute their investment 
strategies.\33\
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    \33\ For example, public plans that, like the Nebraska Public 
Employees Retirement System (NPERS), are not subject to ERISA have 
over $5.7 billion in assets invested through RBC. While such public 
plans are not subject to ERISA, some state and local laws are 
substantially similar to ERISA, and RBC has contractually agreed to 
treat certain public plans as if they were subject to ERISA. 
According to the applicant, if even some of these plans were to pull 
their business in the event RBC loses its QPAM status, the impact on 
plans would be substantial.
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    23. The Applicant states further that it is disruptive and 
expensive to cause plan fiduciaries to reconsider their arrangements 
with their chosen investment manager because of uncertainties relating 
to the QPAM Exemption. This uncertainty is disruptive to investment 
strategies and could result in significant redemptions from pooled 
funds, which would frustrate efforts to manage effectively the pooled 
funds' assets, harm remaining plan investors, and increase the expense 
ratios of the investment funds.
    Department's Request for More Information: The Department notes the 
Applicant's representations that denial of relief could have negative 
impacts on pooled funds but is unable to fully consider these comments 
due to a lack of supporting data. In order to properly weigh these 
costs as potential harms to plan in the event the Department denies 
exemptive relief, the Department requests additional information from 
the Applicant in its comment letter substantiating harms to pooled 
funds, including estimates of the costs and any assumptions relied upon 
in making the estimate.
    24. Transaction Costs/Harm to Plans. According to the Applicant, 
the transaction costs to plans of changing managers are significant, 
especially considering some of the investment strategies employed by 
the RBC QPAMs. For example, according to the Applicant, the cost of 
liquidating assets, identifying and selecting new managers, and 
reinvesting those assets would be borne by the plans and their 
participants. The Applicant represents that transactions that currently 
depend on the QPAM Exemption, or in which the counterparty relied on 
the QPAM exemption as the expected source of exemptive relief, could 
default and be terminated at a significant cost to the plans. 
Transaction costs may be higher in times of significant market 
volatility, especially with respect to certain strategies. Furthermore, 
the request for proposal process for transitioning to a new manager 
typically is lengthy and likely would involve numerous steps each of 
which could last several months--including retaining a consultant, 
reviewing request for proposals, negotiating contracts, and ultimately 
transitioning assets, as well as incurring additional transaction-
related expenses incurred in connection with the purchase of 
securities.
    Department's Request for More Information: The Department notes the 
Applicant's representations that the request for proposal process for 
transitioning to a new manager involves additional costs such as 
retaining a consultant, reviewing requests for proposal, negotiating 
contracts, etc. In order to properly weigh these costs as potential 
harms to plan in the event the Department denies exemptive relief, the 
Department requests additional information from the Applicant in its

[[Page 6018]]

comment letter substantiating these costs, including estimates of the 
costs and any assumptions relied upon.
    25. The Applicant states that the RBC QPAMs may rely on PTE 84-14 
when investing in various securities and financial instruments on 
behalf of ERISA clients. For example, the RBC QPAMs may rely on PTE 84-
14 when buying and selling fixed income products. Many counterparties 
in such transactions specifically require a representation that PTE 84-
14 applies, and those contracts could be in default if the requested 
exemption were not granted. Accounts managed by the RBC QPAMs invest in 
fixed income products, with a total portfolio of ERISA and public plan 
assets valued at over $18.5 billion. Fixed income securities and 
instruments in which those accounts are invested generally include 
corporate bonds, U.S. Treasury and agency-backed securities, asset-
backed securities, emerging market sovereign and corporate debt, 
convertible bonds, term loans, repurchase agreements, swaps, futures, 
options and foreign exchange transactions. The Applicant represents 
that if the RBC QPAMs become ineligible to rely on PTE 84-14, its plan 
clients could suffer additional transactions costs associated with 
liquidating fixed income securities depending on the strategy. The 
Applicants representations about these liquidation costs are further 
discussed below for each investment strategy.
    26. Liquidation Costs. According to the Applicant, if RBC QPAMs 
were required to liquidate investments because a Covered Plan opted to 
find another manager, the underlying investments of the following 
investment strategies could incur the following estimated transaction 
costs:
    a. Multi-Asset Credit: The multi-asset credit strategy invests in 
the following kinds of instruments: corporate bonds, government bonds, 
asset-backed securities, convertible bonds, mortgage-backed securities, 
loans, structured credit, contingent convertible bonds, convertible 
bonds, swaps, futures, options and foreign exchange transactions. These 
instruments are generally traded on the primary and secondary fixed 
income markets, over-the-counter or centrally cleared. The Applicant 
represents that if the RBC QPAMs were no longer able to rely on the 
QPAM Exemption, the estimated transaction costs associated with selling 
such instruments could range from 35 to 65 basis points.
    RBC QPAMs currently manage approximately $400,000,000 of ERISA plan 
assets that are invested in multi-asset credit investments. If PTE 84-
14 were lost, ERISA plan clients of the RBC QPAMs invested in this 
strategy could suffer liquidation costs of between 35 and 65 basis 
points, which equates to between $1,400,000 and $2,600,000, not 
including reinvestment costs.
    b. Core Fixed Income: The core fixed income strategies invest in 
the following kinds of instruments: corporate bonds, government bonds, 
asset-backed securities, mortgage-backed securities, municipal bonds, 
loans, swaps, futures, options, and foreign exchange transactions. 
These instruments are generally traded on the primary and secondary 
markets (including fixed income trading venues), over-the-counter or 
centrally cleared. If the RBC QPAMs become ineligible to rely on PTE 
84-14, the Applicant estimates the transaction costs on such 
instruments could range from 20 to 25 basis points.
    RBC QPAMs currently manage approximately $1.5 billion in market 
value of ERISA plan assets that are invested in core fixed income 
investments. If the RBC QPAMs become ineligible to rely on PTE 84-14, 
the Applicant represents that ERISA plan clients of the RBC QPAMs 
invested in this strategy could suffer liquidation costs of between 20 
and 25 basis points, which equates to between $3,000,000 and 
$3,750,000, not including reinvestment costs.
    c. Impact Investing: The impact investing strategies invest in the 
following kinds of instruments: U.S. Treasury securities, U.S. agency-
backed securities, mortgage-backed securities, Small Business 
Administration loans and pools, municipal bonds, corporate bonds, 
certificates of deposit (CDs), commercial paper, foreign sovereign 
debt, private placements and derivatives. These instruments are 
generally traded on primary and secondary fixed income trading markets 
(including via fixed income trading venues), over-the-counter or 
centrally cleared. If the RBC QPAMs become ineligible to rely on PTE 
84-14, the estimated transaction costs on such instruments could range 
from 15 to 25 basis points.
    RBC QPAMs currently manage approximately $36,000,000 in market 
value of ERISA plan assets that are engaged in impact investing. The 
Applicant represents that if it became ineligible to rely on PTE 84-14, 
the RBC QPAMs' ERISA plan clients invested in this strategy could 
suffer liquidation costs of between 15 and 25 basis points, which 
equates to between $54,000 and $90,000, not including reinvestment 
costs.
    d. Community Investing: The community investing strategy invests in 
the following kinds of instruments: U.S. Treasury securities, U.S. 
agency-backed securities, agency and non-agency mortgage-backed 
securities, SBA loans and pools, municipal bonds, corporate bonds, 
certificates of deposit (CDs), commercial paper, foreign sovereign 
debt, private placements and derivatives. These instruments are 
generally traded on primary and secondary fixed income trading markets 
(including via fixed income trading venues), over-the-counter or 
centrally cleared. If the RBC QPAMs became ineligible to rely on PTE 
84-14, the estimated transaction costs on such instruments could range 
from 10 to 20 basis points.
    RBC QPAMs currently manage approximately $450,000,000 in market 
value of ERISA and public plan assets that are invested in community 
investing. If the RBC QPAMs become ineligible to rely on PTE 84-14, the 
Applicant represents that their ERISA plan clients invested in this 
strategy could suffer liquidation costs of between 10 and 20 basis 
points, which equates to between $450,000 and $900,000, not including 
reinvestment costs.
    e. Emerging Markets Equity: The emerging markets strategies invest 
in the following kinds of instruments: common stock, real estate 
investment trusts (REITS), American depository receipts (ADRs), 
exchange-traded funds (ETFs) and certain derivatives. These instruments 
are generally traded on global stock exchanges, equity trading venues, 
over-the-counter or centrally cleared. If the RBC QPAMs were ineligible 
to rely on PTE 84-14, the estimated transaction costs on such 
instruments could range from 48 to 64 basis points.
    RBC QPAMs currently manage approximately $2.35 billion in ERISA 
plan assets that are invested in emerging markets equity. According to 
the Applicant, if RBC QPAMs were ineligible to rely on PTE 84-14, ERISA 
plan clients of the RBC QPAMs invested in this strategy could suffer 
liquidation costs of between 48 and 64 basis points, which equates to 
between $11,280,000 and over $15,000,000, not including reinvestment 
costs.
    f. Small and Mid-Cap Growth Equity: The small and mid-cap equity 
strategy invests in the following kinds of instruments: equity 
securities, REITS, ADRs and ETFs. These instruments are generally 
traded on national exchanges and equity trading venues. If the RBC 
QPAMs were no longer eligible to rely on PTE 84-14, the estimated 
transaction costs on such instruments could range from 34 to 85 basis 
points.

[[Page 6019]]

    RBC QPAMs currently manage approximately $9.6 million of ERISA and 
public plan assets that are invested in small and mid-cap equity. The 
Applicant represents that if the RBC QPAMs were ineligible to rely on 
PTE 84-14, its ERISA plan clients invested in this strategy could 
suffer liquidation costs of between 34 and 85 basis points, which 
equates to between $32,640 and $81,600, not including reinvestment 
costs.
    g. International Equity: The international equity strategy invests 
in the following kinds of instruments: common stock, REITs, ADRs, and 
ETFs. These instruments are generally traded on global stock exchanges 
or equity trading venues. The applicant represents that if the RBC 
QPAMs were no longer able to rely on PTE 84-14, the estimated 
transaction costs on such instruments could range from 30 to 60 basis 
points. RBC QPAMs currently manage approximately $292,000,000 of ERISA 
plan assets that are invested in international equity. If the RBC QPAMs 
were ineligible to rely on PTE 84-14, the Applicant represents that 
their ERISA plan clients invested in this strategy could suffer 
liquidation costs of between 30 and 60 basis points, which equates to 
between $876,000 and nearly $1,800,000, not including reinvestment 
costs.
    h. Small Cap Growth Equity: The small cap growth equity strategy 
invests primarily in the following kinds of instruments: equity 
securities, REITs, ADRs, and ETFs. These instruments are generally 
traded on national exchanges or equity trading venues. If the RBC QPAMs 
were ineligible to rely on PTE 84-14, the Applicant represents that the 
estimated transaction costs on such instruments could range from 34 to 
85 basis points.
    RBC QPAMs currently manage approximately $1.23 billion in market 
value of ERISA plan assets that are invested in small cap growth 
equity. If the RBC QPAMs become ineligible to rely on PTE 84-14, the 
Applicant represents that their ERISA plan clients invested in this 
strategy could suffer liquidation costs of between 34 and 85 basis 
points, which equates to between $4,200,000 and over $10,500,000, not 
including reinvestment costs.
    i. Emerging Markets Credit: The emerging markets credit strategies 
invest in the following kinds of instruments: government bonds, 
corporate bonds, loans, swaps, futures, foreign exchange transactions, 
options and repurchase transactions. These instruments are generally 
traded on the primary and secondary fixed income markets (including via 
fixed income trading venues), over-the-counter or centrally cleared. If 
the RBC QPAMs were ineligible to rely on PTE 84-14, the Applicant 
represents that the estimated transaction costs on such instruments 
could range from 35 to 70 basis points.
    RBC QPAMs currently manage approximately $510,000,000 in market 
value of ERISA assets that are invested in emerging markets credit. If 
the RBC QPAMs were ineligible to rely on PTE 84-14, the Applicant 
maintains that their ERISA plan clients of the RBC QPAMs invested in 
this strategy could suffer liquidation costs of between 35 and 70 basis 
points, which equates to between $1,800,000 and over $3,500,000, not 
including reinvestment costs.
    j. Cash Management: The cash management strategies invest in the 
following kinds of instruments: U.S. Treasury securities, U.S. agency-
backed securities, agency and non-agency mortgage-backed securities, 
municipal bonds, repurchase agreements, bank deposits, corporate bonds, 
certificates of deposit (CDs), commercial paper and foreign sovereign 
debt. These instruments are generally traded on primary and secondary 
market fixed income trading markets (including via fixed income trading 
venues). If the RBC QPAMs were ineligible to rely on PTE 84-14, the 
Applicant represents that the estimated transaction costs on such 
instruments could range from 10 to 20 basis points.
    RBC QPAMs manage approximately $1.12 billion of ERISA and public 
plan assets that are invested in cash management strategies. If the RBC 
QPAMs become ineligible to rely on PTE 84-14, the Applicant represents 
that ERISA plan clients of the RBC QPAMs invested in this strategy 
could suffer liquidation costs of between 10 and 20 basis points, which 
equates to between $1,120,000 and $2,240,000, not including 
reinvestment costs.
    k. Short Duration: The short duration strategy invests in the 
following kinds of instruments: U.S. Treasury securities, U.S. agency-
backed securities, agency and non-agency mortgage-backed securities, 
municipal bonds, corporate bonds, certificates of deposit (CDs), 
commercial paper, foreign sovereign debt, futures, private placements 
and derivatives. These instruments are generally traded on primary and 
secondary fixed income trading markets (including via fixed income 
trading venues) or centrally cleared. If the RBC QPAMs were ineligible 
to rely on PTE 84-14, the Applicant represents that the estimated 
transaction costs on such instruments could range from 10 to 20 basis 
points.
    RBC QPAMs manage a total portfolio of over $1.3 billion in market 
value of public plans that invest in short duration strategies. 
According to the Applicant, if the RBC QPAMs were ineligible to rely on 
PTE 84-14, the RBC QPAMs' ERISA plan clients invested in this strategy 
could suffer liquidation costs of between 10 and 20 basis points, which 
equates to between $1,300,000 and $2,600,000, not including 
reinvestment costs.
    l. Ultra Short Duration: The ultra short duration strategy invests 
in the following kinds of instruments: U.S. Treasury securities, U.S. 
agency-backed securities, agency and non-agency mortgage-backed 
securities, municipal bonds, corporate bonds, certificates of deposit 
(CDs), commercial paper, foreign sovereign debt, private placements, 
and futures. These instruments are generally traded on primary and 
secondary fixed income trading markets (including via fixed income 
trading venues), over-the-counter or centrally cleared. If the RBC 
QPAMs were ineligible to rely on PTE 84-14, the Applicant represents 
that the estimated transaction costs on such instruments could range 
from 15 to 25 basis points.
    RBC QPAMs manage public plan assets with a total portfolio of 
almost $374,000,000 in market value that are invested in ultra short 
duration strategies. If the RBC QPAMs were ineligible to rely on PTE 
84-14, the Applicant represents that ERISA plan clients of the RBC 
QPAMs invested in this strategy could suffer liquidation costs of 
between 15 and 25 basis points, which equates to between $561,000 and 
$935,000, not including reinvestment costs.

Department's Request for Comment and Notes Regarding Harms to Plans in 
Paragraphs 21 through 26

    The Department requests the Applicant to provide a clear 
description regarding their estimates of costs to Covered Plans in its 
comment letter. In this regard, the Applicant must provide:
    (1) a description, in itemized form, how the basis point range 
described above was derived by the Applicant, including the assumptions 
or methodologies relied upon.
    (2) an explanation of the amount of Covered Plan assets that are 
likely to be subject to the costs described above and an explanation of 
the Applicant's assumptions or methodologies in connection with such 
figures. For example: 50% of the Covered Plan assets will be likely to 
incur such costs because. . . .

[[Page 6020]]

    (3) an explanation of the likelihood of the costs occurring, for 
each of the transition costs described above. For example: with respect 
to violating representations as to QPAM status in an offering document, 
the Applicant should provide information regarding how likely that is 
to occur; etc.
    (4) an explanation of the circumstances under which the transition 
costs described above are being incurred (e.g., are these transition 
costs that the Applicant contends would be incurred by Covered Plans to 
remedy contractual violations due to loss of QPAM status, costs due to 
Covered Plans seeking to use a different investment manager that can 
rely on QPAM, costs, etc.).
    (5) a description of the extent to which any of the asserted costs 
reflect the QPAMs' imposition of additional charges or fees on Covered 
Plans resulting from the loss of QPAM status, and the cause of such 
additional charges or fees.
    (6) an explanation of the extent to which the costs described 
herein are not likely to be covered by the QPAMs indemnification 
obligations under section III(j)(2), described in more detail below, 
and an explanation why such costs are not attributable to the 
Applicant's violation of exemption conditions.
    The Department notes that Condition (j)(2) of the proposed 
exemption requires RBC QPAMs to ``indemnify and hold harmless'' Covered 
Plans for ``actual losses resulting directly from the RBC QPAM's 
violation of any conditions of this exemption, an RBC QPAM's violation 
of ERISA's fiduciary duties, as applicable, and of the prohibited 
transaction provisions of ERISA and the Code, as applicable; a breach 
of contract by the RBC QPAM; or any claim arising out of the failure of 
such RBC QPAM to qualify for the exemptive relief provided by PTE 84-14 
as a result of a violation of section I(g) of PTE 84-14 other than the 
Conviction.'' \34\ Furthermore, the Department notes that, to the 
extent Covered Plans ``feel forced'' to transition to new asset 
managers because the RBC QPAMs can no longer rely on PTE 84-14, the 
liquidation and additional costs arising from the transition constitute 
actual losses resulting directly from the failure of such QPAM to 
qualify for the exemptive relief provided by PTE 84-14 as a result of 
violation of section I(g) of PTE 84-14. If a plan's fiduciary is 
compelled to replace an RBC asset manager as a result of a violation of 
section I(g) and the asset manager's loss of QPAM status, the affected 
plan is entitled to indemnification of its associated losses, including 
the transitional expenses necessary to effectuate the switch to a 
qualified QPAM.
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    \34\ Section I(i)(7) of PTE 2016-10, under which RBC QPAMs are 
currently operating for the ability to rely on PTE 84-14, contains 
substantially similar language. In that regard, section I(i)(7) of 
PTE 2016-10 requires the RBC QPAMs to ``. . .indemnify and hold 
harmless the ERISA-covered plan or IRA for any damages resulting 
from a violation of applicable laws, a breach of contract, or any 
claim arising out of the failure of such RBC QPAM to qualify for the 
exemptive relief provided by PTE 84-14 as a result of a violation of 
section I(g) of PTE 84-14 other than the Conviction.''
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The Exemption's Protective Conditions

    27. In order to avail themselves of the relief provided under this 
proposed exemption, the RBC QPAMs will be required to meet the 
conditions described in this proposed exemption at all times. The first 
group of conditions for relief underscores the Department's expectation 
that the affected RBC QPAMs were not involved in the misconduct engaged 
in RBCTC Bahamas that is the subject of the Conviction or otherwise 
tainted by such misconduct. For example, relief under this proposed 
exemption only will be available to the extent that: (1) RBC QPAMs, 
including their officers, directors, agents other than RBCTC, and 
employees, did not know of, have reason to know of, or participate in 
the criminal conduct of RBCTC Bahamas that is the subject of the 
Conviction (here and throughout, ``participated in'' includes the 
knowing or tacit approval of the misconduct underlying the Conviction); 
\35\ (2) any failure of the RBC QPAMs to satisfy section I(g) of PTE 
84-14 arose solely from the Conviction; (3) the RBC QPAMs (including 
their officers, directors, agents other than RBCTC, and employees of 
such RBC QPAMs) did not receive direct compensation, or knowingly 
receive indirect compensation, in connection with the criminal 
misconduct that is the subject of the Conviction; and (4) no other 
party engaged on behalf of the RBC QPAMs who had responsibility for or 
exercised authority in connection with the management of plan assets 
knew or had reason to know of the criminal misconduct that is the 
subject of the Conviction nor did they participate in such misconduct.
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    \35\ The Applicant represents that, while certain other entities 
in the RBC corporate family were generally aware of RBCTC Bahamas's 
responsibilities, including the administration of various trusts, no 
such entity was involved in the day-to-day operations of the trusts 
and the alleged misconduct did not relate to the asset management 
services provided by the RBC QPAMs.
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    28. The Department expects the RBC QPAMs to rigorously ensure that 
the individuals associated with the criminal misconduct of RBCTC 
Bahamas will not be employed or knowingly engaged by such QPAMs. In 
this regard, the proposed exemption mandates that the RBC QPAMs will 
not employ or knowingly engage any of the individuals that participated 
in criminal misconduct that is the subject of the Conviction. Further, 
the RBC QPAMs will not use their authority or influence to direct an 
``investment fund,'' (as defined in section VI(b) of PTE 84-14) that is 
subject to ERISA or the Code and managed by such RBC QPAMs, to enter 
into any transaction with RBCTC Bahamas or engage RBCTC Bahamas to 
provide any service to such investment fund, for a direct or indirect 
fee borne by such investment fund, regardless of whether such 
transaction or service may otherwise be within the scope of relief 
provided by an administrative or statutory exemption.
    29. The RBC QPAMs must comply with each condition of PTE 84-14, as 
amended, with the sole exceptions of the violation of section I(g) of 
PTE 84-14 that is attributable to the Conviction. Furthermore, this 
exemption will terminate immediately if an affiliate of the RBC QPAMs 
(as defined in section VI(d) of PTE 84-14) violates section I(g) of PTE 
84-14 (other than with respect to the Conviction). The Department notes 
that PTE 84-14 was amended effective June 17, 2024 to, among other 
things, explicitly broaden the disqualifying circumstances under 
section I(g) to include (1) convictions in foreign courts for crimes 
that are substantially equivalent to the disqualifying convictions in 
U.S. federal or state courts (with the exception of certain foreign 
countries denominated as ``foreign adversaries'' by the U.S. Department 
of Commerce); (2) the execution of a non-prosecution agreement or 
deferred prosecution agreement with U.S. federal or state prosecutors 
or regulatory agencies; and (3) final judgments or court-approved 
settlements by a federal or state criminal or civil court in a 
proceeding brought by certain U.S. regulatory agencies, state 
regulators, or state attorneys general involving participation in 
certain categories of conduct.\36\ The Applicant

[[Page 6021]]

represents that RBC currently does not have a reasonable basis to 
believe that there are any pending criminal investigations involving 
RBC or any of its affiliated companies that would cause a reasonable 
plan or IRA customer not to hire or retain the institution as a QPAM.
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    \36\ See 89 FR 23090, 23143 (April 3, 2024). The amendment also 
provides a one-year transition period to help Covered Plans avoid or 
minimize possible negative impacts of terminating or switching QPAMs 
or adjusting asset management arrangements when a QPAM becomes 
ineligible pursuant to section I(g) and allow QPAMs a reasonable 
period of time to seek an individual exemption, if appropriate. Id. 
at 23139-140.
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    30. No relief will be provided by the exemption if any entities 
holding assets that constitute the assets of a Covered Plan were 
involved in the criminal misconduct that is the subject of the 
Conviction. Further, no relief will be provided to the extent RBCTC 
Bahamas provides any discretionary asset management services to Covered 
Plans or otherwise acts as a fiduciary with respect to Covered Plans.
    31. The second set of conditions underscores the Department's 
intent to ensure that RBC QPAMs adhere to their ERISA-mandated 
fiduciary duties and the conditions of this proposed exemption. In this 
regard, the Department believes that robust policies and training are 
warranted where, as here, alleged criminal misconduct has occurred 
within a corporate organization that is affiliated with one or more 
QPAMs managing plan investments in reliance on PTE 84-14. Therefore, 
this proposed exemption requires each RBC QPAM to immediately develop, 
implement, maintain, and follow written policies (the Policies) 
requiring and reasonably designed to ensure that: (i) the asset 
management decisions of the RBC QPAM are conducted independently of the 
management and business activities of RBC, including RBCTC Bahamas; 
(ii) the RBC QPAM fully complies with ERISA's fiduciary duties and with 
ERISA and the Code's prohibited transaction provisions, and does not 
knowingly participate in any violations of these duties and provisions 
with respect to Covered Plans; (iii) the RBC QPAM does not knowingly 
participate in any other person's violation of ERISA or the Code with 
respect to Covered Plans; any filings or statements made by the RBC 
QPAM to regulators, including but not limited to, the Department of 
Labor, the Department of the Treasury, the Department of Justice, and 
the Pension Benefit Guaranty Corporation, on behalf of Covered Plans 
are materially accurate and complete, to the best of such QPAM's 
knowledge at that time; (iv) the RBC QPAMs do not make material 
misrepresentations or omit material information in its communications 
with such regulators with respect to Covered Plans, or make material 
misrepresentations or omit material information in its communications 
with Covered Plan clients; and (v) the RBC QPAMs comply with the terms 
of this exemption, if granted. Any violation of or failure to comply 
with these items must be corrected promptly upon discovery and if any 
such violation or compliance failure is not promptly corrected, then 
upon discovering the failure to promptly correct, the failure must be 
reported in writing to appropriate corporate officers, the head of 
compliance and the General Counsel (or their functional equivalent) of 
the relevant RBC QPAM, and an appropriate fiduciary of any affected 
Covered Plan that is independent of RBC.
    32. The Department has also included a provision in the proposed 
exemption that would require each RBC QPAM to immediately develop and 
implement a training program (the Training) for its asset and portfolio 
management, trading, legal, compliance, and internal audit personnel. 
The Training must be set forth in the Policies and at a minimum, cover 
the Policies, ERISA and Code compliance (including applicable fiduciary 
duties and the prohibited transaction provisions), ethical conduct, the 
consequences for not complying with the conditions of this exemption, 
if granted (including any loss of exemptive relief provided herein), 
and prompt reporting of wrongdoing.
    33. The proposed exemption requires the RBC QPAMs to submit to an 
audit conducted every two years by an independent auditor that has been 
prudently selected and who has appropriate technical training and 
proficiency with ERISA and the Code. Each biennial audit must cover a 
consecutive 12-month period starting with the 24-month period that 
begins on the Conviction Date.
    34. The proposed exemption requires the RBC QPAMs to enter into 
certain contractual obligations in connection with the provision of 
services to their clients. For example, section III(j) of the proposed 
exemption requires any arrangement, agreement, or contract between a 
RBC QPAM and a Covered Plan for which a RBC QPAM provides asset 
management or other discretionary fiduciary services to provide that 
such RBC QPAM agrees to: (i) comply with ERISA and the Code, as 
applicable with respect to such Covered Plan and refrain from engaging 
in non-exempt prohibited transactions (and to promptly correct any 
inadvertent prohibited transactions); (ii) comply with the standards of 
prudence and loyalty set forth in ERISA section 404 with respect to 
each Covered Plan; (iii) indemnify and hold harmless the Covered Plan 
for any damages resulting from a violation of applicable laws, a breach 
of contract, or any claim arising out of the failure of such RBC QPAM 
to be eligible for the exemptive relief provided by PTE 84-14 as a 
result of a violation of section I(g) of PTE 84-14 other than the 
Conviction; (iv) not require (or otherwise cause) the Covered Plan to 
waive, limit, or qualify the liability of the RBC QPAM for violating 
ERISA or the Code or engaging in prohibited transactions; (v) not 
require the Covered Plan (or sponsor of such Covered Plan) to indemnify 
the RBC QPAM for violating ERISA or engaging in prohibited 
transactions, except for violations or prohibited transactions caused 
by an error, misrepresentation, or misconduct of a plan fiduciary or 
other party hired by the plan fiduciary who is independent of RBC; (vi) 
not restrict the ability of such Covered Plan to terminate or withdraw 
from its arrangement with the RBC QPAM (including any investment in a 
separately managed account or pooled fund subject to ERISA and managed 
by such QPAM), with the exception of reasonable restrictions, 
appropriately disclosed in advance, that are specifically designed to 
ensure equitable treatment of all investors in a pooled fund in the 
event such withdrawal or termination may have adverse consequences for 
all other investors as a result of an actual lack of liquidity of the 
underlying assets, provided that such restrictions are applied 
consistently and in like manner to all such investors; and (vii) not 
impose any fees, penalties, or charges for such termination or 
withdrawal with the exception of reasonable fees, appropriately 
disclosed in advance, that are specifically designed to prevent 
generally recognized abusive investment practices or specifically 
designed to ensure equitable treatment of all investors in a pooled 
fund in the event such withdrawal or termination may have adverse 
consequences for all other investors, provided that such fees are 
applied consistently and in like manner to all such investors. 
Furthermore, any contract, agreement or arrangement between an RBC QPAM 
and its Covered Plan client must not contain exculpatory provisions 
disclaiming or otherwise limiting liability of the RBC QPAM for a 
violation of such agreement's terms.
    35. Within six (6) months after the publication of a notice of 
final exemption in the Federal Register each RBC QPAM must: (i) provide 
a notice of its obligations under section III(j) to each Covered Plan 
for which the RBC QPAM provides asset management or other discretionary 
fiduciary services;

[[Page 6022]]

and (ii) separately warrant in writing to each such Covered Plan its 
obligations under subparagraph (1) of section III(j).
    36. The last set of conditions is intended to, among other things, 
ensure accountability on behalf of the RBC QPAMs for compliance with 
the conditions for relief and to provide Covered Plans, the Department, 
and other external stakeholders transparency regarding the RBC QPAMs 
compliance with the conditions for this exemption. Among other things, 
RBC must designate a senior compliance officer who is generally 
responsible for an annual review for each 12-month period of the 
effective period under the exemption, that determines the effectiveness 
of the Policies and the Training, reports on instances of noncompliance 
and their remediation, and makes recommendations to improve compliance 
activities. The RBC QPAMs must inform Covered Plan clients of their 
right to obtain a copy of the Policies or a summary thereof, and each 
RBC QPAM must maintain records necessary to demonstrate that the 
conditions of this exemption, if granted, have been met for six (6) 
years following the date of any transaction for which such RBC QPAM 
relies upon the relief in the exemption and must provide the Department 
with the records necessary to demonstrate that each condition of this 
exemption has been met within 30 days of a request.\37\
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    \37\ The Department notes that section I(l) of PTE 2016-10 
required RBC to: (i) disclose to the Department any Deferred 
Prosecution Agreement (DPA) or a Non-Prosecution Agreement (NPA) 
with the U.S. Department of Justice, entered into by RBC or any of 
its affiliates in connection with conduct described in section I(g) 
of PTE 84-14 and/or ERISA section 411; and (ii) provide the 
Department with any information it requests as permitted by law. The 
Department has determined not to include the same condition in this 
proposed exemption, because entering into DPAs and NPAs now is 
included in the list of disqualifying events under section I(g) of 
PTE 84-14, effective as of June 17, 2024.
---------------------------------------------------------------------------

    37. The Applicant must impose its internal procedures, controls, 
and systems to prevent a recurrence of the misconduct; comply with any 
remedial measures required by other regulators designed to address the 
misconduct underlying the Conviction; all the material facts and 
representations made by the Applicant in connection with the 
application, must be true and accurate.

Statutory Findings

    38. Based on the conditions included in this proposed exemption, 
the Department has tentatively determined that the relief sought by the 
Applicant would satisfy the statutory requirements for an exemption 
under ERISA section 408(a) for the reasons set forth below.
    39. The Proposed Exemption is ``Administratively Feasible.'' The 
Department has tentatively determined that the proposed exemption is 
administratively feasible because, among other things, a qualified 
independent auditor will be required to perform in-depth audit(s) 
covering, each RBC QPAM's compliance with the exemption, and a 
corresponding written audit report will be provided to the Department 
and be available to the public. The Department notes that the 
independent audit will provide an incentive for, and a measure of, 
compliance with the exemption conditions, while reducing the immediate 
need for review and oversight by the Department.
    40. ``The Proposed Exemption is ``In the Interest of the Covered 
Plans.'' The Department has tentatively determined that the proposed 
exemption is in the interests of the participants and beneficiaries of 
each affected Covered Plan because of the potential costs that Covered 
Plans would incur if the RBC QPAMs ability to rely on PTE 84-14 lapsed 
and the benefits plans would receive due to the RBC QPAMs' continued 
eligibility to rely on PTE 84-14 subject to the additional protective 
conditions set forth in this proposed exemption.\38\
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    \38\ The Department notes that, as requested above, in order to 
make its findings under ERISA section 408(a), it has requested 
specific information from the Applicant regarding the size and scope 
of the costs that Covered Plans are likely to incur and that are not 
subject to the hold harmless provision in section III(j)(2) of the 
exemption.
---------------------------------------------------------------------------

    41. ``The Proposed Exemption is ``Protective of the Plans.'' The 
Department has tentatively determined that the proposed exemption is 
protective of Covered Plans. The Department has imposed protective 
conditions that it has used in the most recent exemptions for relief 
from section I(g), and the Department has determined that those 
conditions would be protective of the rights of participants and 
beneficiaries of covered Plans. In addition, the relief provided under 
this proposed exemption is limited to five (5) years, so that the 
Department can reassess the RBC QPAMs' compliance with the exemption 
conditions and confirm that the exemption remains protective of the 
rights of participants and beneficiaries of Covered Plans. Finally, the 
Applicant's representation that it maintains a hotline for employees 
who wish to report any concerns about wrongdoing anonymously also will 
help ensure that this proposed exemption is protective of the rights of 
participants and beneficiaries of Covered Plans.

Summary

    42. Considering the revised and new conditions described above, the 
Department has tentatively determined that the relief sought by the 
Applicants in this proposed exemption satisfies the statutory 
requirements for an exemption under section 408(a) of ERISA. The 
proposed exemption provides relief from certain of the restrictions set 
forth in section 406 and 407 of ERISA. The proposed exemption does not 
provide relief from any other violation of law, including any criminal 
conviction not expressly described herein. Any criminal conviction not 
expressly described herein, or other violation of section I(g) of PTE 
84-14 that is attributable to the Applicant would result in the 
applicant's loss of this exemption.

Notice to Interested Persons

    Notice of the proposed exemption will be provided to all interested 
persons within fifteen (15) days of the publication of the notice of 
proposed exemption in the Federal Register. The Applicant must provide 
notice of the proposed exemption as published in the Federal Register, 
along with a separate summary describing the facts that led to the 
Conviction (the Summary), which have been submitted to the Department, 
and a prominently displayed statement (the Statement) that the 
Conviction results in a failure to meet a condition in PTE 84-14, to 
each sponsor and beneficial owner of a Covered Plan, or the sponsor of 
an investment fund in any case where a RBC QPAM acts only as a sub-
advisor to the investment fund in which such Covered Plan invests and a 
supplemental statement, as required pursuant to 29 CFR 2570.43(a)(2). 
The supplemental statement will inform interested persons of their 
right to comment on and request a hearing with respect to the proposed 
exemption. All written comments and/or requests for a hearing must be 
received by the Department within forty-five (45) days of the date of 
publication of this proposed exemption in the Federal Register and will 
be made available to the public.
    Warning: If you submit a comment, please include your name and 
other contact information in the body of your comment but DO NOT submit 
information that you consider to be confidential or otherwise protected 
(such as a Social Security number or an unlisted phone number) or 
confidential business information that you do not want publicly 
disclosed. All comments may be posted on the internet and can

[[Page 6023]]

be retrieved by most internet search engines.

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 ERISA section 408(a) and/or Code section 4975(c)(2) does not 
relieve a fiduciary or other party in interest or disqualified person 
from certain other provisions of ERISA and/or the Code, including any 
prohibited transaction provisions to which the exemption does not apply 
and the general fiduciary responsibility provisions of ERISA section 
404, which, among other things, require a fiduciary to discharge their 
duties respecting the plan solely in the interest of the participants 
and beneficiaries of the plan and in a prudent fashion in accordance 
with ERISA section 404(a)(1)(b); nor does it affect the requirement of 
Code section 401(a) 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 ERISA section 408(a) 
and/or Code section 4975(c)(2), 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 exemption would be supplemental to, and not in 
derogation of, any other provisions of ERISA 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 exemption would be subject to the express 
condition that the material facts and representations contained in each 
application are true and complete at all times, and that each 
application accurately describes all material terms of the transaction 
which is the subject of the exemption.

Proposed Exemption

    The Department is considering granting an exemption under the 
authority of ERISA section 408(a) and Code section 4975(c)(2) in 
accordance with the procedures set forth in 29 CFR part 2570, subpart B 
(76 FR 66637, 66644, October 27, 2011). Effective December 31, 1978, 
section 102 of 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 by the Applicant to the 
Secretary of Labor. Therefore, this notice of proposed exemption is 
issued solely by the Department.

Section I: Definitions

    (a) The term ``Conviction'' means the judgment of conviction 
against RBCTC Bahamas, an RBC ``affiliate'' (as defined in PTE 84-14, 
section VI(d)), entered on March 5, 2024, for aiding and abetting tax 
fraud in France in the Paris Court of Appeal, French Special Prosecutor 
No. 11203092066.
    (b) The term ``RBC QPAM'' means a ``qualified professional asset 
manager'' (as defined in section VI(a) 5 of PTE 84-14) that relies on 
the relief provided by PTE 84-14 and with respect to which RBCTC 
Bahamas is a current or future ``affiliate'' (as defined in section 
VI(d) of PTE 84-14). The RBC QPAMs do not and must not include RBCTC 
Bahamas.
    (c) The term ``RBC'' means Royal Bank of Canada, together with its 
current and future affiliates.
    (d) The term ``RBCTC Bahamas'' means Royal Bank of Canada Trust 
Company (Bahamas) Limited, a Bahamian ``affiliate'' of RBC (as defined 
in section VI(c) of PTE 84-14).
    (e) The term ``Covered Plan'' means a plan subject to ERISA title 
I, part 4 (an ERISA Plan) or a plan subject to Code section 4975 (an 
IRA), in each case, with respect to which a RBC QPAM relies on PTE 84-
14, or with respect to which an RBC QPAM (or any RBC affiliate) has 
expressly represented that the manager qualifies as a QPAM or relies on 
PTE 84-14 (the QPAM Exemption). A ``Covered Plan'' does not include an 
ERISA Plan or IRA to the extent the RBC QPAM has expressly disclaimed 
reliance on QPAM status or PTE 84-14 in entering into its contract, 
arrangement, or agreement with the Covered Plan. Notwithstanding the 
above, an RBC QPAM may disclaim reliance on QPAM status or PTE 84-14 in 
a written modification of a contract, arrangement, or agreement with a 
Covered Plan where: the modification is made in a bilateral document 
signed by the client; the client's attention is specifically directed 
toward the disclaimer; and the client is advised in writing that, with 
respect to any transaction involving the client's assets, the RBC QPAM 
will not represent that it is a QPAM and will not rely on the relief 
described in PTE 84-14.
    (f) The term ``Exemption Period'' means the period of time 
beginning on March 5, 2025, and ending on March 4, 2030.
    (g) Wherever found, any reference in this exemption to ``the best 
knowledge'' of a party, ``best of [a party's] knowledge,'' and similar 
formulations of the ``best knowledge'' standard, will be deemed to mean 
the actual knowledge of the party and the knowledge which they would 
have had if they had conducted their reasonable due diligence required 
under the circumstances into the relevant subject matter. If a 
condition of the exemption requires an individual to provide 
certification pursuant to their ``best knowledge,'' then such 
individual, in order to make such certification, must perform their 
reasonable due diligence required under the circumstances to determine 
whether the information such individual is certifying is complete and 
accurate in all respects. Furthermore, with respect to an entity other 
than a natural person, the ``best knowledge'' of the entity includes 
matters that are known to the directors and officers of the entity or 
should be known to such individuals upon the exercise of such 
individuals' due diligence required under the circumstances.
    (h) The terms ``participate,'' and ``participate in,'' when used to 
describe a person's role in the criminal conduct described in this 
exemption, refer not only to a person's active participation in the 
misconduct of RBCTC that is the subject of the Conviction, but also 
includes the knowing or tacit approval of the misconduct underlying the 
Conviction or knowledge of such conduct without taking active steps to 
prohibit it, including reporting the conduct to such individual's 
supervisors, and to RBC's board of directors.

Section II: Transactions

    The RBC QPAMs will not be precluded from relying on the exemptive 
relief provided by Prohibited Transaction Exemption 84-14 (PTE 84-14) 
\39\ notwithstanding the Conviction (as defined above) \40\ during the 
Exemption Period, provided that the conditions in section III are 
satisfied.
---------------------------------------------------------------------------

    \39\ 49 FR 9494 (March 13, 1984), as corrected at 50 FR 41430, 
(October 10, 1985), as amended at 70 FR 49305 (August 23, 2005), as 
amended at 75 FR 38837 (July 6, 2010), and as amended at 89 FR 23090 
(April 3, 2024).
    \40\ Section I(g) of PTE 84-14 generally provides that 
``[n]either the QPAM nor any affiliate thereof . . . nor any owner . 
. . of a 5 percent or more interest in the QPAM is a person who 
within the 10 years immediately preceding the transaction has been 
either convicted or released from imprisonment, whichever is later, 
as a result of'' certain felonies including income tax evasion, and 
aiding and abetting tax evasion.''

---------------------------------------------------------------------------

[[Page 6024]]

Section III: Conditions

    (a) The RBC QPAMs (including their officers, directors, agents 
other than RBCTC, and employees of such RBC QPAMs) did not know of, 
have reason to know of, and did not participate in the criminal 
misconduct of RBCTC Bahamas that is the subject of the Conviction. 
Further, any other party engaged on behalf of the RBC QPAMs who had 
responsibility for or exercised authority in connection with the 
management of plan assets did not know or have reason to know of and 
did not participate in the criminal misconduct that is the subject of 
the Conviction.
    (b) The RBC QPAMs (including their officers, directors, agents 
other than RBCTC, and employees of such RBC QPAMs) did not receive any 
direct compensation or knowingly receive any indirect compensation in 
connection with the criminal misconduct that is the subject of the 
Conviction. Further, any other party engaged on behalf of the RBC QPAMs 
who had responsibility for or exercised authority in connection with 
the management of plan assets did not receive any direct compensation 
or knowingly receive any indirect compensation in connection with the 
criminal misconduct that is the subject of the Conviction;
    (c) The RBC QPAMs will not employ or knowingly engage any of the 
individuals that participated in the criminal misconduct that is the 
subject of the Conviction;
    (d) At all times during the Exemption Period, no RBC QPAM will use 
its authority or influence to direct an ``investment fund,'' (as 
defined in section VI(b) of PTE 84-14) that is subject to ERISA or the 
Code and managed by an RBC QPAM in reliance of PTE 84-14, or with 
respect to which an RBC QPAM has expressly represented to a Covered 
Plan that it qualifies as a QPAM or relies on PTE 84-14, to enter into 
any transaction with RBCTC Bahamas or engage RBCTC Bahamas to provide 
any service to such Covered Plan for a direct or indirect fee borne by 
such Covered Plan regardless of whether such transaction or service may 
otherwise be within the scope of relief provided by an administrative 
or statutory exemption;
    (e) Any failure of the RBC QPAMs to satisfy PTE 84-14, section I(g) 
arose solely from the Conviction;
    (f) A RBC QPAM did not exercise authority over the assets of any 
Covered Plan in a manner that it knew or should have known would: (i) 
further the criminal misconduct that is the subject of the Conviction; 
or (ii) cause the RBC QPAM or its affiliates to directly or indirectly 
profit from the criminal misconduct that is the subject of the 
Conviction;
    (g) Other than with respect to employee benefit plans maintained or 
sponsored for its own employees or the employees of an affiliate, RBCTC 
Bahamas will not act as a fiduciary within the meaning of ERISA 
sections 3(21)(A)(i) or (iii) or Code sections 4975(e)(3)(A) and (C) 
with respect to Covered Plan assets; provided, however, that RBCTC 
Bahamas will not be treated as violating the conditions of this 
exemption solely because they acted as investment advice fiduciaries 
within the meaning of ERISA section 3(21)(A)(ii) or Code section 
4975(e)(3)(B);
    (h)(1) Each RBC QPAM must continue to maintain, adjust (to the 
extent necessary), implement, and follow written policies and 
procedures (the Policies). The Policies must require and be reasonably 
designed to ensure that:
    (i) the asset management decisions of the RBC QPAM are conducted 
independently of the management and business activities of RBC, 
including RBCTC Bahamas;
    (ii) the RBC QPAM fully complies with ERISA's fiduciary duties and 
with ERISA and the Code's prohibited transaction provisions as 
applicable with respect to each Covered Plan and does not knowingly 
participate in any violations of these duties and provisions with 
respect to Covered Plans;
    (iii) the RBC QPAM does not knowingly participate in any other 
person's violation of ERISA or the Code with respect to Covered Plans;
    (iv) any filings or statements made by the RBC QPAM to regulators, 
including but not limited to, the Department of Labor, the Department 
of the Treasury, the Department of Justice, and the Pension Benefit 
Guaranty Corporation, on behalf of or in relation to Covered Plans are 
materially accurate and complete to the best of such QPAM's knowledge 
at that time;
    (v) to the best of the RBC QPAM's knowledge at the time, the RBC 
QPAM does not make material misrepresentations or omit material 
information in its communications with such regulators with respect to 
Covered Plans or make material misrepresentations or omit material 
information in its communications with Covered Plans;
    (vi) the RBC QPAM complies with the terms of the exemption;
    (vii) any violation of or failure to comply with a requirement set 
forth in subparagraphs (h)(1)(ii) through (h)(1)(vi), is corrected 
promptly upon discovery or as soon after the RBC QPAM reasonably should 
have known of the noncompliance (whichever is earlier) and any such 
violation or compliance failure not promptly corrected is reported, 
upon discovering the failure to promptly correct, in writing, to 
appropriate corporate officers, the head of compliance and the General 
Counsel (or their functional equivalent) of the relevant RBC QPAM that 
engaged in the violation or failure, and the independent auditor 
responsible for reviewing compliance with the Policies. An RBC QPAM 
will not be treated as having failed to develop, implement, maintain, 
or follow the Policies, provided that it corrects any instance of 
noncompliance promptly when discovered or when it reasonably should 
have known of the noncompliance (whichever is earlier), and provided 
that it adheres to the reporting requirements set forth in this 
subparagraph (vii);
    (2) Each RBC QPAM must maintain, adjust (to the extent necessary) 
and implement a training program (the Training) that is conducted at 
least annually for all relevant RBC QPAM asset/portfolio management, 
trading, legal, compliance, and internal audit personnel. The Training 
must:
    (i) At a minimum, cover the Policies, ERISA and Code compliance 
(including applicable fiduciary duties and the prohibited transaction 
provisions), ethical conduct, the consequences for not complying with 
the conditions of this exemption (including any loss of exemptive 
relief provided herein), and prompt reporting of wrongdoing;
    (ii) Be conducted in-person, electronically or via a website by a 
professional who has been prudently selected and who has appropriate 
technical training and proficiency with ERISA and the Code to perform 
the tasks required by this exemption; and
    (iii) Be verified, through in-training knowledge checks, 
``graduation'' tests, and/or other technological tools designed to 
confirm that personnel fully and in good faith participate in the 
Training;
    (i)(1) The RBC QPAMs must submit to a 12-month audit conducted 
every two years by an independent auditor who has been prudently 
selected and has appropriate technical training and proficiency with 
ERISA and the Code to evaluate the adequacy of each RBC QPAM's 
compliance with the Policies and Training conditions described herein. 
The audit requirement must be incorporated in the Policies, and the 
first audit must cover a consecutive 12-month period starting on March 
5, 2025. The second audit must cover the consecutive 12-month period 
starting on

[[Page 6025]]

March 5, 2027, and the third audit must cover the consecutive 12-month 
period starting on March 5, 2029. Each audit must be completed no later 
than six (6) months after the corresponding audit's ending period;
    (2) Within the scope of the audit and to the extent necessary for 
the auditor, in its sole opinion, to complete its audit and comply with 
the conditions described herein, and only to the extent such disclosure 
is not prevented by state or federal statute, or involves 
communications subject to attorney client privilege, the RBC QPAMs and, 
if applicable, RBC, will grant the auditor unconditional access to its 
business, including, but not limited to: its computer systems; business 
records; transactional data; workplace locations; training materials; 
and personnel. Such access is limited to information relevant to the 
auditor's objectives, as specified by the terms of this exemption;
    (3) The auditor's engagement must specifically require the auditor 
to determine whether the RBC QPAMs have developed, implemented, 
maintained, and followed the Policies in accordance with the conditions 
of this exemption and have developed and implemented the Training, as 
required herein;
    (4) The auditor's engagement must specifically require the auditor 
to test the RBC QPAMs operational compliance with the Policies and 
Training. In this regard, the auditor must test a sample of each QPAM's 
transactions involving Covered Plans that are sufficient in size and 
nature to afford the auditor a reasonable basis to determine such RBC 
QPAM's operational compliance with the Policies and Training;
    (5) For each audit, the auditor must issue a written report (the 
Audit Report) to RBC and the RBC QPAM to which the audit applies that 
describes the procedures performed by the auditor in connection with 
its examination on or before the end of the relevant period described 
in section III(i)(1) for completing the audit. The auditor, at its 
discretion, may issue a single consolidated Audit Report that covers 
all of the RBC QPAMs. The Audit Report must include the auditor's 
specific determinations regarding:
    (i) The adequacy of each RBC QPAM's Policies and Training; each RBC 
QPAM's compliance with the Policies and Training; the need, if any, to 
strengthen such Policies and Training; and any instance of the 
respective RBC QPAM's noncompliance with the written Policies and 
Training. The non-compliant RBC QPAM must promptly address any 
noncompliance and prepare a written plan of action to address any 
determination by the auditor regarding the adequacy of the Policies and 
Training and the auditor's recommendations (if any) with respect to 
strengthening the Policies and Training of the respective RBC QPAM. Any 
action taken or the plan of action to be taken by the respective RBC 
QPAM must be included in an addendum to the Audit Report (and such 
addendum must be completed before the certification described in 
section III(i)(7) below). In the event such a plan of action to address 
the auditor's recommendation regarding the adequacy of the Policies and 
Training is not completed by the time the Audit Report is submitted, 
the following period's Audit Report must state whether the plan was 
satisfactorily completed. Any determination by the auditor that the 
respective RBC QPAM has implemented, maintained, and followed 
sufficient Policies and Training must not be based solely or in 
substantial part on an absence of evidence indicating noncompliance. In 
this last regard, any finding that an RBC QPAM has complied with the 
requirements under this subparagraph must be based on evidence that the 
particular RBC QPAM has actually implemented, maintained, and followed 
the Policies and Training required by this exemption. Furthermore, the 
auditor must not rely solely on the Annual Report created by the 
compliance officer (the Compliance Officer) as described in section 
III(m) below, as the basis for the auditor's conclusions in lieu of 
independent determinations and testing performed by the auditor as 
required by section III(i)(3) and (4) above; and
    (ii) The adequacy of the most recent Annual Review described in 
section III(m);
    (6) The auditor must notify the respective RBC QPAM of any instance 
of noncompliance identified by the auditor within five (5) business 
days after such noncompliance is identified by the auditor, regardless 
of whether the audit has been completed as of that date;
    (7) With respect to each Audit Report, the RBC QPAM's general 
counsel, or one of the three most senior executive officers of the line 
of business engaged in discretionary asset management services through 
the RBC QPAM with respect to which the Audit Report applies, must 
certify in writing, under penalty of perjury, that such signatory has 
reviewed the Audit Report and this exemption and that to the best of 
such signatory's knowledge at the time, such RBC QPAM has addressed, 
corrected, or remedied any noncompliance and inadequacy or has an 
appropriate written plan to address any inadequacy regarding the 
Policies and Training identified in the Audit Report. Such 
certification must also include the signatory's determination that, to 
the best of such signatory's knowledge at the time, the Policies and 
Training in effect at the time of signing are adequate to ensure 
compliance with the conditions of this proposed exemption, and with the 
applicable provisions of ERISA and the Code. Notwithstanding the above, 
no person who knew of, or should have known of, or participated in the 
criminal conduct that is the subject of the Conviction, by any party, 
may provide the certification required by this exemption, unless the 
person took active documented steps to stop the misconduct underlying 
the Conviction;
    (8) The Audit Committee of RBC's Supervisory Board is provided a 
copy of each Audit Report, and a senior executive officer with a direct 
reporting line to the highest-ranking compliance officer of RBC must 
review the Audit Report for each RBC QPAM and certify in writing and 
under penalty of perjury that such officer has reviewed each Audit 
Report. RBC must provide notice to the Department if there is a switch 
in the committee to which the Audit Report will be provided. With 
respect to this subsection (8), such certifying executive officer must 
not have known of, had reason to know of, or participated in, the 
criminal conduct that is the subject of the Conviction, unless such 
person took active documented steps to stop the misconduct underlying 
the Conviction;
    (9) Each RBC QPAM provides its certified Audit Report by electronic 
mail to: [email protected]. This delivery must take place no later than 
forty-five (45) days following completion of the Audit Report. The 
Audit Report will be made part of the public record regarding this 
exemption. Furthermore, each RBC QPAM must make its Audit Report 
unconditionally available, electronically or otherwise, for examination 
upon request by any duly authorized employee or representative of the 
Department, other relevant regulators, and any fiduciary of a Covered 
Plan;
    (10) Each RBC QPAM and the auditor must submit the following 
document(s) to OED via electronic mail to [email protected]: Any engagement 
agreement(s) entered into pursuant to the engagement of the auditor 
under this exemption, no later than two (2) months after the execution 
of any such engagement agreement;
    (11) The auditor must provide the Department, upon request, for

[[Page 6026]]

inspection and review, access to all the workpapers created and 
utilized in the course of the audit, provided such access and 
inspection is otherwise permitted by law; and
    (12) RBC must notify the Department of a change in the independent 
auditor no later than two (2) months after the engagement of a 
substitute or subsequent auditor and must provide an explanation for 
the substitution or change including a description of any material 
disputes between the terminated auditor, and RBC or any of its 
affiliates;
    (j) Throughout the Exemption Period, with respect to any 
arrangement, agreement, or contract between an RBC QPAM and a Covered 
Plan, the RBC QPAM agrees and warrants:
    (1) To comply with ERISA and the Code, as applicable with respect 
to such Covered Plan; to refrain from engaging in prohibited 
transactions that are not otherwise exempt (and to promptly correct any 
prohibited transactions in accordance with applicable rules under ERISA 
and the Code); and to comply with the standards of prudence and loyalty 
set forth in ERISA section 404 with respect to each such Covered Plan 
to the extent that section is applicable;
    (2) To indemnify and hold harmless the Covered Plan for any actual 
losses resulting directly from the RBC QPAM's violation of any 
conditions of this exemption, an RBC QPAM's violation of ERISA's 
fiduciary duties, as applicable, and of the prohibited transaction 
provisions of ERISA and the Code, as applicable; a breach of contract 
by the RBC QPAM; or any claim arising out of the failure of such RBC 
QPAM to qualify for the exemptive relief provided by PTE 84-14 as a 
result of a violation of section I(g) of PTE 84-14 other than the 
Conviction. Actual losses include, but are not limited to, losses and 
related costs arising from unwinding transactions with third parties 
and from transitioning Plan assets to an alternative asset manager as 
well as costs associated with any exposure to excise taxes under Code 
section 4975 as a result of a QPAM's inability to rely upon the relief 
in the QPAM Exemption.
    (3) Not to require or otherwise cause the Covered Plan to waive, 
limit, or qualify the liability of the RBC QPAM for violating ERISA or 
the Code or engaging in prohibited transactions;
    (4) Not to restrict the ability of such Covered Plan to terminate 
or withdraw from its arrangement with the RBC QPAM with respect to any 
investment in a separately managed account or pooled fund subject to 
ERISA and managed by such QPAM, with the exception of reasonable 
restrictions, appropriately disclosed in advance, that are specifically 
designed to ensure equitable treatment of all investors in a pooled 
fund in the event such withdrawal or termination may have adverse 
consequences for all other investors. In connection with any of these 
arrangements involving investments in pooled funds subject to ERISA 
entered into after the effective date of this exemption, the adverse 
consequences must relate to a lack of liquidity of the underlying 
assets, valuation issues, or regulatory reasons that prevent the fund 
from promptly redeeming a Covered Plan's investment, and such 
restrictions must be applicable to all investors in the pooled fund on 
equal terms and effective no longer than reasonably necessary to avoid 
the adverse consequences;
    (5) Not to impose any fees, penalties, or charges for such 
termination or withdrawal with the exception of reasonable fees, 
appropriately disclosed in advance, that are specifically designed to 
prevent generally recognized abusive investment practices or 
specifically designed to ensure equitable treatment of all investors in 
a pooled fund in the event such withdrawal or termination may have 
adverse consequences for all other investors, provided that such fees 
are applied consistently and in like manner to all such investors;
    (6) Not to include exculpatory provisions disclaiming or otherwise 
limiting liability of the RBC QPAM for a violation of such agreement's 
terms. To the extent consistent with ERISA section 410, however, this 
provision does not prohibit disclaimers for liability caused by an 
error, misrepresentation, or misconduct of a plan fiduciary or other 
party hired by the plan fiduciary who is independent of RBC and its 
affiliates, or damages arising from acts outside the control of the RBC 
QPAM; and
    (7) Within 60 calendar days after this exemption's effective date, 
each RBC QPAM must provide a notice of its obligations under this 
section III(j) to each Covered Plan. For Covered Plans that enter into 
a written asset or investment management agreement with an RBC QPAM on 
or after 60 calendar days from this exemption's effective date, the RBC 
QPAM must agree to its obligations under this section III(j) in an 
updated investment management agreement between the RBC QPAM and such 
clients or other written contractual agreement. This condition will be 
deemed met for each Covered Plan that received a notice pursuant to PTE 
2016-10 that meets the terms of this condition. This condition will 
also be met where the RBC QPAM has already agreed to the same 
obligations required by this section III(j) in an updated investment 
management agreement between the RBC QPAM and a Covered Plan. 
Notwithstanding the above, an RBC QPAM will not violate the condition 
solely because a Covered Plan client refuses to sign an updated 
investment management agreement;
    (k) Within 60 days after the effective date of this exemption, each 
RBC QPAM provides notice of the exemption as published in the Federal 
Register, along with a separate summary describing the facts that led 
to the Conviction (the Summary), which have been submitted to the 
Department, and a prominently displayed statement (the Statement) that 
the Conviction results in a failure to meet a condition in PTE 84-14, 
to each sponsor and beneficial owner of a Covered Plan, or the sponsor 
of an investment fund in any case where an RBC QPAM acts only as a sub-
advisor to the investment fund in which such Covered Plan invests. All 
prospective Covered Plan clients that enter into a written asset or 
investment management agreement with an RBC QPAM (including a 
participation or subscription agreement in a pooled fund managed by an 
RBC QPAM) after the date that is sixty days after the effective date of 
this exemption must receive the proposed and final exemptions with the 
Summary and the Statement prior to, or contemporaneously with, the 
client's receipt of a written asset management agreement from the RBC 
QPAM (for avoidance of doubt, all Covered Plan clients of an RBC QPAM 
during the Exemption Period must receive the disclosures described in 
this section by the later of (i) 60 days after the effective date of 
the exemption or (ii) the date that a Covered Plan client enters into a 
written asset or investment management agreement with an RBC QPAM). 
Disclosures required under this paragraph (k) may be delivered 
electronically (including by an email that has a link to this 
exemption). Notwithstanding the above paragraph, an RBC QPAM will not 
violate the condition solely because a Covered Plan client refuses to 
sign an updated investment management agreement;
    (l) The RBC QPAMs must comply with each condition of PTE 84-14, as 
amended, with the sole exception of the violation of PTE 84-14 section 
I(g) that is attributable to the Conviction. If, during the Exemption 
Period, an affiliate of an RBC QPAM (as defined in section VI(d) of PTE 
84-14) violates section I(g) of PTE 84-14 (other than with respect to 
the Conviction), relief

[[Page 6027]]

provided in this exemption would terminate immediately;
    (m)(1) Within 60 days after the date of publication of the 
exemption, each RBC QPAM designates a senior compliance officer (the 
Compliance Officer) who will be responsible for compliance with the 
Policies and Training requirements described herein. No person who 
participated in the criminal conduct that is the subject of the 
Conviction may be involved with the designation or responsibilities 
required by this condition, unless the person took active documented 
steps to stop the criminal conduct that is subject of the Conviction. 
The Compliance Officer must conduct a review of each twelve-month 
period comprising the Exemption Period (each, an Exemption Review) to 
determine the adequacy and effectiveness of the implementation of the 
Policies and Training. With respect to the Compliance Officer, the 
following conditions must be met:
    (i) The Compliance Officer must be a professional who has extensive 
experience with, and knowledge of, the regulation of financial services 
and products, including under ERISA and the Code; and
    (ii) The Compliance Officer must have a direct reporting line to 
the highest-ranking corporate officer in charge of compliance for asset 
management;
    (2) With respect to each Exemption Review, the following conditions 
must be met:
    (i) The Exemption Review includes a review of the RBC QPAM's 
compliance with and effectiveness of the Policies and Training and of 
the following: any compliance matter related to the Policies or 
Training that was identified by, or reported to, the Compliance Officer 
or others within the compliance and risk control function (or its 
equivalent) the twelve-month period under review; the most recent Audit 
Report issued pursuant to this exemption; the most recent Audit Report 
issued in connection with this exemption; (B) any material change in 
the relevant business activities of the RBC QPAMs; and (C) any change 
to ERISA, the Code, or regulations related to fiduciary duties and the 
prohibited transaction provisions that may be applicable to the 
activities of the RBC QPAMs;
    (ii) The Compliance Officer prepares a written report for each 
Exemption Review (each, an Exemption Report) that: (A) summarizes their 
material activities during the twelve-month period under review; (B) 
sets forth any instance of noncompliance discovered during the twelve-
month period under review, and any related corrective action; (C) 
details any change to the Policies or Training to guard against any 
similar instance of noncompliance occurring again; and (D) makes 
recommendations, as necessary, for additional training, procedures, 
monitoring, or additional and/or changed processes or systems, and 
management's actions on such recommendations;
    (iii) In each Exemption Report, the Compliance Officer must certify 
in writing that to the best of their knowledge at the time: (A) the 
report is accurate; (B) the Policies and Training are working in a 
manner which is reasonably designed to ensure that the Policies and 
Training requirements described herein are met; (C) any known instance 
of noncompliance during the twelve-month period under review and any 
prior period and any related correction taken to date have been 
identified in the Exemption Report; and (D) the RBC QPAMs have complied 
with the Policies and Training and/or corrected (or is correcting) any 
known instances of noncompliance in accordance with section III(h) 
above;
    (iv) Each Exemption Report must be provided to: (A) the appropriate 
corporate officers of RBC and each RBC QPAM to which such report 
relates, and (B) the head of compliance and the RBC QPAM's general 
counsel (or their functional equivalent) of the relevant RBC QPAM; and 
must be made unconditionally available to the independent auditor 
described in section III(i) above;
    (v) Each Exemption Review, including the Compliance Officer's 
written Exemption Report, must be completed within three (3) months 
following the end of the period to which it relates;
    (n) Each RBC QPAM will maintain records necessary to demonstrate 
that the conditions of this exemption have been met for six (6) years 
following the date of any transaction for which the RBC QPAM relies 
upon the relief in the exemption;
    (o) Within 60 days after the effective date of this exemption, each 
RBC QPAM, in its agreements with, or in other written disclosures 
provided to Covered Plans, clearly and prominently informs Covered Plan 
clients of the Covered Plan's right to obtain a copy of the Policies or 
a description (Summary Policies), which accurately summarizes key 
components of the QPAM's written Policies developed in connection with 
this exemption. If the Policies are thereafter changed, each Covered 
Plan client must receive a new disclosure within six (6) months 
following the end of the calendar year during which the Policies were 
changed. If the Applicant meets this disclosure requirement through 
Summary Policies, changes to the Policies shall not result in the 
requirement for a new disclosure unless, as a result of changes to the 
Policies, the Summary Policies are no longer accurate. With respect to 
this requirement, the description may be continuously maintained on a 
website, provided that such website link to the Policies or the Summary 
Policies is clearly and prominently disclosed to each Covered Plan;
    (p) An RBC QPAM will not fail to meet the terms of this exemption, 
solely because a different RBC QPAM fails to satisfy a condition for 
relief described in sections III(c), (d), (h), (i), (j), (k), (l), (m), 
(n),(o), and (u) or if the independent auditor described in section 
III(i) fails to comply with a provision of the exemption, other than 
the requirement described in section III(i)(11), provided that such 
failure did not result from any actions or inactions of RBC or its 
affiliates;
    (q) RBC imposes its internal procedures, controls, and protocols to 
reduce the likelihood of any recurrence of conduct that is the subject 
of the Conviction;
    (r) All the material facts and representations set forth in the 
Summary of Facts and Representations are true and accurate;
    (s) With respect to an asset manager that becomes an RBC QPAM after 
the effective date of the exemption by virtue of being acquired (in 
whole or in part) by RBC or a subsidiary or affiliate of RBC (a 
``newly-acquired RBC QPAM''), the newly-acquired RBC QPAM would not be 
precluded from relying on the exemptive relief provided by PTE 84-14 
notwithstanding the Conviction as of the closing date for the 
acquisition; however, the operative terms of the exemption shall not 
apply to the newly-acquired RBC QPAM until a date that is six (6) 
months after the closing date for the acquisition. To that end, the 
newly acquired RBC QPAM will initially submit to an audit pursuant to 
section III(i) of this exemption as of the first audit period that 
begins following the closing date for the acquisition. The period 
covered by the audit must begin on the acquisition date of the newly-
acquired RBC QPAM;
    (t) Relief in this exemption will terminate on the date that is 12 
months after the date a U.S. regulatory authority makes a final 
decision that RBC or an affiliate failed to comply in all material 
respects with any requirement imposed by such regulatory authority in 
connection with the Conviction; and
    (u) The RBC QPAM(s) must provide the Department with the records

[[Page 6028]]

necessary to demonstrate that each condition of this exemption has been 
met within 30 days after a request for the records by the Department.
    Exemption Date: This exemption will be in effect beginning on March 
5, 2025, and ending on March 4, 2030.

    Signed at Washington, DC.
George Christopher Cosby,
Director, Office of Exemption Determinations, Employee Benefits 
Security Administration, U.S. Department of Labor
[FR Doc. 2025-01067 Filed 1-16-25; 8:45 am]
BILLING CODE P
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