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[Federal Register Volume 90, Number 9 (Wednesday, January 15, 2025)]
[Notices]
[Pages 3929-3947]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-00812]

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DEPARTMENT OF LABOR

Employee Benefits Security Administration

[Prohibited Transaction Exemption 2025-03; Exemption Application No. D-
12098]

Exemption From Certain Prohibited Transaction Restrictions 
Involving UBS AG (UBS), Located in Zurich, Switzerland

AGENCY: Employee Benefits Security Administration, Department of Labor.

ACTION: Notice of exemption.

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SUMMARY: This exemption provides conditional prospective relief that 
allows current and future asset managers under the UBS corporate 
umbrella (UBS QPAMs) to continue to rely on PTE 84-14 for the five-year 
period from June 12, 2024, through June 11, 2029, notwithstanding four 
judgments of conviction involving entities within the UBS and CSAG 
(Credit Suisse AG) corporate umbrellas. The exemption also provides 
conditional retroactive relief to UBS QPAMs covering their reliance on 
PTE 84-14 during the one-year period from June 12, 2023, through June 
11, 2024.

DATES: The exemption is in effect from June 12, 2023, through June 11, 
2029.

FOR FURTHER INFORMATION CONTACT: Nicholas Schroth of the Department at 
(202) 693-8571 (this is not a toll-free number).

SUPPLEMENTARY INFORMATION: On June 11, 2024, the Department published a 
notice of proposed exemption in the Federal Register,\1\ (the Proposal) 
that would permit UBS' Affiliated QPAMs and/or the Related QPAMs 
(referred to herein individually or collectively as the UBS QPAMs) \2\ 
to continue to rely on the exemptive relief provided by PTE 84-14, 
notwithstanding several judgments of conviction involving entities 
within the UBS and CSAG corporate umbrellas that are described 
below.\3\ The Department is hereby granting this exemption to ensure 
that participants and beneficiaries of ERISA-covered plans and 
Individual Retirement Accounts managed by UBS QPAMs (collectively 
referred to as Covered Plans) \4\ do not suffer harm that UBS 
represented would occur if the UBS QPAMs can no longer rely on PTE 84-
14. This exemption provides only the relief expressly specified herein 
and does not provide relief from violations of any law other than the 
prohibited transaction provisions of Title I of the Employee Retirement 
Income Security Act of 1974, as amended (ERISA), and the Internal 
Revenue Code of 1986, as amended (the Code).
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    \1\ 88 FR 30785 (May 12, 2023).
    \2\ For purposes of this exemption, the term ``Affiliated QPAM'' 
and ``Related QPAM'' mean, respectively: (1) UBS Americas, UBS Hedge 
Fund Solutions LLC, Credit Suisse Asset Management, LLC, and any 
future separate legal entity within the Asset Management or the 
Global Wealth Management Americas U.S. divisions of UBS that 
qualifies as a ``qualified professional asset manager'' (as defined 
in Section VI(a) of PTE 84-14) and that relies on the relief 
provided by PTE 84-14, and with respect to which UBS is an 
``affiliate'' (as defined in Part VI(d) of PTE 84-14) and (2) any 
current or future ``qualified professional asset manager'' (as 
defined in Section VI(a) of PTE 84-14) that relies on the relief 
provided by PTE 84-14, and with respect to which UBS owns a direct 
or indirect five (5) percent or more interest. The terms 
``Affiliated QPAM'' and ``Related QPAM'' exclude any Misconduct 
Entity, and the term ``Related QPAM'' excludes any entity with 
respect to which a Misconduct Entity is an ``affiliate'' (as defined 
in section VI(d)(1) of PTE 84-14).
    \3\ 89 FR 65, 23090 (April 3, 2024).
    \4\ 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 an 
Affiliated QPAM relies on PTE 84-14 or with respect to which an 
Affiliated QPAM (or any UBS affiliate) 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 the Affiliated QPAM 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. Notwithstanding the 
above, an Affiliated QPAM may disclaim reliance on QPAM status or 
PTE 84-14 in a written modification of a contract, arrangement, or 
agreement with an ERISA-covered plan or IRA, 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 Affiliated QPAM will not 
represent that it is a QPAM, and will not rely on the relief 
described in PTE 84-14.
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    As discussed below, based on the administration record, the 
Department makes the requisite findings under ERISA section 408(a) that 
this exemption is: (1) administratively feasible, (2) in the interest 
of Covered Plans and their participants and beneficiaries, and (3) 
protective of the rights of the participants and beneficiaries of 
Covered Plans. Effective December 31, 1978, section 102 of the 
Reorganization Plan No. 4 of 1978, (5 U.S.C. App. 1 (1996)) transferred 
the authority of the Secretary of the Treasury to issue exemptions of 
the type requested to the Secretary of Labor. Accordingly, this final 
individual exemption is being issued solely by the Department. Affected 
parties should be aware that the exemption's conditions are, 
individually and collectively, necessary for the Department to grant 
the requested relief. Absent these conditions, the Department would not 
have granted this exemption.
    Benefits of the Exemption:
    The Department's objective in granting this exemption is to protect 
Covered Plans from the harms and costs UBS represents would be imposed 
on them if the UBS QPAMs no longer could rely on the relief provided in 
PTE 84-14. Among other important conditions, this exemption ensures 
that Covered Plans can terminate their relationships with one of the 
UBS QPAMs in an orderly and cost-effective fashion when the fiduciary 
of a Covered Plan determines that it is prudent to do so. This 
exemption promotes adherence to basic fiduciary standards and 
responsibilities required by Title I of ERISA and the Code by the UBS 
QPAMs and reinforces their obligation to act with a high degree of 
integrity on behalf of their Covered Plan clients as required by PTE 
84-14.

Background

    1. UBS is a Swiss-based global financial services company organized 
under the laws of Switzerland. On June 12, 2023, UBS acquired CSAG, 
another Swiss-based global financial services firm. This acquisition 
brought Credit Suisse Asset Management, LLC, a subsidiary of CSAG and a 
QPAM, under the UBS corporate umbrella. UBS represents that on May 1, 
2024, Credit Suisse Asset Management, LLC was merged into UBS Asset 
Management (Americas) LLC. (UBS Americas), and UBS Americas is the 
surviving entity after the merger. As of November 5, 2024, UBS 
represents that UBS Americas is the only current Affiliated QPAM.

PTE 84-14

    2. PTE 84-14 reflects the Department's conclusion that it could 
provide broad relief from the prohibited transaction provisions of 
ERISA section 406(a) and Code section 4975(c)(1) only if the 
commitments and the investments of plan assets and the negotiations 
leading thereto are the sole responsibility of an independent 
discretionary manager called a Qualified

[[Page 3930]]

Plan Asset Manager or ``QPAM'' that meets the exemption's 
conditions.\5\
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    \5\ ``Qualified Plan Asset Manager'' or ``QPAM'' is defined in 
Section VI(a) of PTE 84-14. (See 89 FR 65, 23090, 23141 (April 3, 
2024)).
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    3. Section I(g) of PTE 84-14 provides that a QPAM becomes 
ineligible to rely on the relief provided by PTE 84-14 for ten years 
following: (1) a Criminal Conviction, as such term is defined in 
Section VI(s) of PTE 84-14, of the QPAM or an ``affiliate'' thereof,\6\ 
or any direct or indirect owner of a five percent or more interest in 
the QPAM; or (2) on or after June 17, 2024, the date on which the QPAM, 
an ``affiliate'' thereof, or any direct or indirect owner of a five 
percent or more interest in the QPAM is found or determined in a final 
judgment or court-approved settlement by a Federal or State criminal or 
civil court to have engaged in Prohibited Misconduct, as such term is 
defined in Section VI(t) of amended PTE 84-14.\7\
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    \6\ 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 five 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.'' (See 89 FR 23090, 23141 
(April 3, 2024)).
    \7\ The prohibited misconduct provision was effective on June 
17, 2024 (89 FR 65, 23090 (April. 3, 2024)).
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    4. The Department included Section I(g) in PTE 84-14 based on its 
expectation that QPAMs will maintain a high standard of integrity in 
order to remain eligible to receive the broad prohibited transaction 
relief provided in PTE 84-14. This expectation extends not only to the 
QPAM itself, but also to those who may be in a position to influence 
the QPAM's policies.
Relevant Convictions
    5. UBS-related entities are currently the subject of four criminal 
convictions that violate Section I(g) of PTE 84-14 (the Convictions). 
To protect Covered Plans from the costs and harms that UBS represents 
could arise if the UBS QPAMs suddenly lost their ability to engage in 
potentially beneficial transactions on behalf of their Covered Plan 
clients under PTE 84-14 due to these Convictions, the Department issued 
several temporary individual prohibited transaction exemptions over 
several years with protective conditions that are discussed below.\8\
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    \8\ In connection with the Credit Suisse-related convictions, 
the Department issued the following exemptions: PTE 2022-01 (87 FR 
1186 (Jan. 10, 2022)); PTE 2019-07 (84 FR 61928 (Nov. 14, 2019)); 
PTE 2015-14 (80 FR 59817 (Oct. 2, 2015)); PTE 2014-11 (79 FR 68716 
(Nov. 18, 2014)). In connection with the UBS-related convictions, 
the Department issued: PTE 2020-01 (85 FR 8020 (Feb. 12, 2020)); PTE 
2019-01 (84 FR 6163 (Feb. 26, 2019)); PTE 2017-07 (82 FR 61903 (Dec. 
29, 2017)); PTE 2016-17 (81 FR 94049 (Dec. 22, 2016)); PTE 2013-09 
(78 FR 56740 (Sep. 13, 2013)).
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    6. The 2017 UBS Conviction. In 2013, UBS Securities Japan Co. Ltd. 
(UBS Securities Japan) pled guilty to a crime arising out of its 
fraudulent submission of Yen London Interbank Offer (Yen LIBOR) rates 
between 2006 and 2009, and its participation in a scheme to defraud 
counterparties to interest rate derivatives trades executed on its 
behalf by secretly manipulating certain benchmark interest rates to 
which the profitability of those trades was tied (the 2013 UBS 
Conviction).\9\
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    \9\ The UBS QPAMs received exemptive relief to continue to rely 
on PTE 84-14 notwithstanding the 2013 Conviction. However, the 
Section I(g) disqualification period for the 2013 Conviction expired 
on or about February 19, 2023; therefore, the UBS QPAMs no longer 
require exemptive relief from the Department to continue their 
reliance on PTE 84-14 with respect to the 2013 conviction.
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    7. In connection with misconduct related to the 2013 UBS 
Conviction, UBS and the United States Department of Justice (DOJ) 
entered into a Non-Prosecution Agreement (the LIBOR NPA) wherein the 
DOJ agreed not to criminally prosecute UBS for any crimes related to 
UBS's misconduct involving its submission of Yen LIBOR rates and other 
benchmark rates between 2001 and 2010 (LIBOR Manipulation). A provision 
of DOJ's LIBOR NPA required UBS to avoid engaging in additional 
criminal activity for two years from the date of the LIBOR NPA.
    8. Separately from the LIBOR Manipulation and after entering into 
the LIBOR NPA, UBS also was determined by DOJ to have participated in 
deceptive currency trading and sales practices with respect to certain 
foreign exchange (FX) market transactions and collusive conduct in 
certain FX markets (FX Misconduct). DOJ determined that by engaging in 
the FX Misconduct, UBS had breached the terms of the LIBOR NPA. As a 
result, UBS entered a guilty plea and was convicted on January 10, 2017 
of engaging in the LIBOR Manipulation that was the subject of the LIBOR 
NPA. Specifically, UBS pled guilty to a scheme to defraud 
counterparties to interest rate derivatives transactions by secretly 
manipulating benchmark interest rates to which the profitability of 
those transactions was tied. This conviction is referred to as the 
``2017 UBS Conviction,'' \10\ which disqualifies UBS-related QPAMs from 
relying on the relief set forth in PTE 84-14 for a ten-year period from 
January 10, 2017, through January 9, 2027.
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    \10\ In PTE 2023-14, the Department erroneously referred to this 
conviction as the 2018 Conviction. The conviction actually occurred 
on January 10, 2017 (as described in PTE 2020-01, the prior UBS 
exemption).
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    9. The 2014 CSAG Conviction. On May 19, 2014, the Tax Division of 
DOJ and the U.S. Attorney's Office for the Eastern District of Virginia 
filed a one-count criminal information in the District Court for the 
Eastern District of Virginia charging CSAG with a conspiracy to violate 
Code section 7206(2) in contravention of Title 18, United States Code, 
Section 371. According to the Statement of Facts, for decades before 
and through approximately 2009, CSAG operated an illegal cross-border 
banking business that knowingly and willfully aided and assisted 
thousands of U.S. clients in opening and maintaining undeclared 
accounts that concealed offshore assets and income from the Internal 
Revenue Service. On May 19, 2014, pursuant to a plea agreement (the 
Plea Agreement), CSAG pleaded guilty to a charge of assisting U.S. 
citizens in federal income tax evasion. The District Court entered a 
judgment of conviction against CSAG on November 21, 2014, which 
disqualified CSAG-related (and, thus, UBS-related QPAMs due to the 
merger) from the relief set forth in PTE 84-14 from November 21, 2014, 
through November 20, 2024.
    10. The 2019 UBS France Conviction. In 2013, France opened an 
investigation into UBS, UBS France, and certain former employees of UBS 
France S.A. The investigation centered on the maintenance of foreign 
(``cross-border'') UBS bank accounts held for private citizens. 
Following a trial in the French First Instance Court, the French court 
convicted UBS and UBS France on February 20, 2019, of illegally 
soliciting clients from 2004 to 2012 and laundering the proceeds of tax 
fraud from 2004 to 2012. Based on this conviction, the UBS-related 
QPAMs were disqualified from relying on the relief provided in PTE 84-
14 from February 20, 2019, through February 19, 2029.
    11. The 2022 Credit Suisse Securities (Europe) Limited (CSSEL) 
Conviction.
    On October 19, 2021, DOJ's, Criminal Division, Money Laundering and 
Asset Recovery Section and Fraud Section and the United States 
Attorney's Office for the Eastern District of New York, filed a 
criminal information in the District Court for the Eastern District of 
New

[[Page 3931]]

York charging CSSEL with one count of conspiracy to commit wire fraud 
in violation of 18 U.S.C. 1349. CSSEL agreed to resolve the action 
through a plea agreement presented to the New York District Court on 
October 19, 2021 (the CSSEL Plea Agreement). Under the CSSEL Plea 
Agreement, CSSEL agreed to enter a guilty plea to the charge set out in 
the CSSEL information (the CSSEL Plea).
    The District Court entered a judgment of conviction against CSSEL 
on July 22, 2022. Due to the judgement of conviction, the CSAG-related 
QPAMs (and, thus, UBS-related QPAMs due to the merger) are ineligible 
from relying on the relief set forth in PTE 84-14 from July 22, 2022 
through July 21, 2032.

Requests for Relief and Additional Information

    12. On April 17, 2023, UBS and CSAG (and their affiliated QPAMs) 
submitted an exemption application to the Department that requested 
modifications to their existing exemptions due to their imminent 
merger. On June 2, 2023, the Department published PTE 2023-14, which 
allowed UBS-related and Credit Suisse-related QPAMs to continue to rely 
on PTE 84-14, notwithstanding the Convictions, for one year following 
the date of the merger, which UBS represents occurred on June 12, 2023 
(the Merger). PTE 2023-14 had an audit requirement tailored to the 
unique circumstances of the one-year exemption, which is referred to as 
the Stub Period Audit.\11\
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    \11\ Before the merger of UBS and CSAG, PTE 2020-01 required 
that the UBS QPAMs submit to annual audits covering periods from 
March 20 through March 19 of the following year (the CS QPAMs were 
on a different audit schedule). Upon the merger of UBS and CSAG on 
June 12, 2023, a one-year temporary exemption provided in PTE 2023-
14 became effective. PTE 2023-14 provided that the combined UBS-CSAG 
entity would resume audits on a unified schedule from June 12, 2023, 
through June 11, 2024. Thus, the last audit to occur under PTE 2020-
01, originally scheduled from March 20, 2023 through March 19, 2024, 
was modified to run from March 20, 2023, through June 11, 2023 and 
became known as the Stub Period Audit.
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    13. On February 22, 2024, UBS filed an exemption application with 
the Department that requested a five-year extension of PTE 2023-14 from 
June 12, 2024, through June 11, 2029. During the Department's review 
process for UBS' exemption application, the Department requested 
additional information from UBS regarding the auditor's findings for 
each audit that was performed before its application was submitted. In 
response, UBS' counsel notified the Department on May 3, 2024, that UBS 
failed to complete the Stub Period Audit report, and UBS did not submit 
the certified audit report to the Department until May 10, 2024.\12\ In 
fact, the record currently before the Department indicates that UBS did 
not engage the independent auditor, Fiduciary Counselors Inc, to 
complete the Stub Period Audit until March 18, 2024, notwithstanding 
the fact that PTE 2023-14 required the audit to be completed by 
December 9, 2023, and for the audit report to be certified and 
submitted to the Department by January 23, 2024. The Department stated 
in the proposed exemption that UBS should have engaged an independent 
auditor well in advance of the dates set forth in Section III(j) of the 
exemption for the audit to be timely completed and for the audit report 
to be timely certified and submitted to the Department.
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    \12\ In a supplemental letter to the Department dated May 29, 
2024, UBS' counsel informed the Department that the auditor notified 
UBS about the failure to complete the stub audit in January 2024, 
and the auditor sent a draft of the engagement letter to perform the 
audit to UBS on February 12, 2024. These events occurred before the 
Department received UBS' exemption application on February 23, 2024, 
and UBS should have disclosed them in its exemption application.
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    14. On June 11, 2024, the Department published a proposed exemption 
in the Federal Register with an effective period from June 12, 2024, 
through June 11, 2029. The Proposal alerted UBS that its failure to 
timely comply with the Stub Period Audit requirement violated an 
important condition of the relief the Department provided in PTE 2023-
14. UBS itself pointed out the importance of the audit requirement in 
its exemption application where it stated that, ``[t]he purpose of the 
independent audit is to give [Covered Plan] clients and the Department 
the confidence that the asset manager is complying with ERISA, and that 
continued exemptive relief is warranted.'' In the Proposal, the 
Department reiterated this point by stating that it included the 
independent audit requirements in the exemption to ensure that the UBS 
QPAMs remain insulated from the convicted UBS and Credit Suisse 
entities and could be trusted to safeguard plan assets, notwithstanding 
the convictions.
    15. Because the UBS QPAMs failed to comply with the audit 
conditions of the exemption, the Department determined that they were 
ineligible to rely on the relief provided by PTE 2023-14, and the 
Department indicated in the proposed exemption that it is considering 
whether it should grant retroactive relief extending back to June 12, 
2023 as part of this exemption, which would otherwise provide relief 
only from June 12, 2024 through June 11, 2029. The Department requested 
comments from UBS, the public, and interested parties on whether 
retroactive relief is appropriately including in this exemption, which 
would extend exemptive coverage to include the period from June 12, 
2023, through June 11, 2024, as well as June 12, 2024, through June 11, 
2029. The Department also requested UBS provide a detailed statement 
regarding how a grant of retroactive relief would be consistent with 
the requirements for such relief set forth in the Department's 
exemption procedure regulation.\13\
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    \13\ 29 CFR 2570.35(d).
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    16. In connection with the Department's request for comment on 
retroactive relief, in the Proposal, the Department also requested UBS 
to describe how Covered Plans were safeguarded in light of this failure 
to satisfy the Stub Audit condition and whether UBS acted in good faith 
despite its failure. UBS's comments and the Department's responses to 
those comments are discussed below.

Retroactive Relief Periods

    17. The exemption provides retroactive relief to UBS for two 
periods. The first period covers June 12, 2023, through June 11, 2024, 
and allows UBS QPAMs to rely on PTE 84-14 despite UBS' failure to 
comply with the Stub Period Audit requirement in Section III(j)(1) of 
PTE 2023-14. The second period of retroactive relief applies from June 
12, 2024, through January 15, 2025, and is needed because UBS failed to 
submit a complete exemption application with sufficient information 
(including a description of its failure to meet the Stub Period Audit 
Requirement) and enough lead time for the Department to develop a 
complete administrative record, publish a proposed exemption with an 
adequate public notice and comment period, consider the public comments 
received, and publish this grant notice exemption before the relief 
provided under PTE 2023-14 expired.
    Department's Note:
    18. The Department notes that this individual exemption would 
solely provide relief from the ineligibility under PTE 84-14 Section 
I(g) that occurred with respect to the four criminal convictions of 
entities within the UBS corporate family that are described above. The 
conditions of this exemption require the UBS QPAMs to adhere to every 
other specific condition for relief that is required under PTE 84-14, 
as amended, including the ineligibility provision in the amended 
version of PTE 84-14, which became effective on June 17, 2024. If any 
UBS-

[[Page 3932]]

Affiliated QPAMs violate any conditions of amended PTE 84-14 in the 
future, they would fail to comply with the requirements of the 
exemption, and the relief provided under this exemption would become 
unavailable.

Written Comments

    19. In the Proposal, the Department invited all interested persons 
to submit written comments and/or requests for a public hearing with 
respect to the notice of the Proposal by July 29, 2024.\14\ The 
Department received written comments from the following commenter: (1) 
UBS; (2) an anonymous commenter; (3) the ERISA Industry Committee; (4) 
SIFMA; and (5) a group of individuals referring to themselves as the 
``QPAM Coalition.'' \15\
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    \14\ PTE 2024-03's original deadline for the comment period was 
July 15, 2024. The Department extended the comment period to July 
29, 2024, based on two requests from commentors. (See 89 FR 137, 
58189).
    \15\ The Department also received comments three months after 
the end of the comment period, as extended, which the Department did 
not consider.
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    20. In granting this exemption, the Department has considered the 
public comments noted above, as well as representations by UBS. If any 
material statement or representation by UBS to the Department that is 
included in its application or its comment is not or has not remained 
completely and factually accurate, UBS must immediately alert the 
Department.\16\
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    \16\ The representations stated herein that are attributable to 
UBS or any commenter do not reflect factual findings or opinions of 
the Department. The Department notes that the availability of this 
exemption is subject to the express condition that the material 
facts and representations contained in the are true and complete at 
all times, and accurately describe all material terms of the 
transactions 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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Comments From UBS
Comment 1: Department's Request for Justification of Retroactive Relief 
for Failure To Perform Audit
    21. As stated above, in the Proposal, the Department requested that 
UBS demonstrate whether retroactive relief is appropriate, and that the 
UBS QPAMs at a minimum: (a) ensured that appropriate safeguards were 
established during the period of exemptive relief provided under PTE 
2023-14 from June 12, 2023 to June 11, 2024, to protect the interests 
of Covered Plan clients (the First Retroactive Period); (b) Covered 
Plan clients were not harmed by non-exempt transactions during the 
First Retroactive Period; (c) a responsible plan fiduciary acted in 
good faith and took appropriate steps that were necessary to protect 
the Covered Plans from abuse, loss, and risk during the First 
Retroactive Period; and (d) the UBS QPAMs have adjusted their policies 
and procedures in light of past failures to comply with PTE 2023-14 to 
ensure that such failures will not reoccur.
    22. Comment #1(a): UBS Ensured and will ensure that appropriate 
safeguards were established during the First Retroactive Period to 
protect the interests of Covered Plan. UBS stated that appropriate 
safeguards were established during the First Retroactive Period despite 
its failure to properly perform the required audit. Specifically, UBS 
represents that the UBS official responsible for overseeing the audits 
failed to meet the deadline, in part, because they mistakenly believed 
that the Stub Period Audit's findings would be rolled into the 
following year's audit report. UBS represents that, upon realizing the 
mistake, it engaged an independent auditor who completed the Stub 
Period Audit. The Auditor concluded that it found no deficiencies on 
behalf of UBS or the UBS QPAMs during the Stub Audit period, and the 
Auditor provided no recommendations for improvement. In its comment 
letter, UBS asserted that the successful completion of the Stub Period 
Audit, albeit late, evidences that UBS established adequate safeguards 
to protect Covered Plans during the First Retroactive Period.
    23. Comment #1(b): Covered Plan clients were not harmed by non-
exempt transactions during the First Retroactive Period. UBS 
represented that Covered Plans were not harmed by non-exempt 
transactions. To make that determination, UBS reviewed all Client Plan 
transactions that UBS conducted from June 2023 to June 2024, which 
encompassed more than 16,000 transactions. UBS' review determined that 
there were, in fact, no non-exempt prohibited transactions. In this 
regard, UBS determined that potentially implicated Client Plan 
transactions for which UBS QPAMs would otherwise rely on PTE 84-14 were 
either (1) covered, in the alternative, by other prohibited transaction 
exemptions or (2) were not, in fact, prohibited transactions.
    24. The transactions that UBS determined were not prohibited 
transactions in need of exemptive relief consisted of approximately 
three to four hundred loans held during the relevant period in which 
one component of the investment--a service fee paid to an 
administrative agent by the borrower, rather than the plan--was not 
covered by an alternative exemption and very likely involved a party in 
interest for many of the transactions. UBS confirmed to the Department, 
however, that the fee was not paid from plan assets. UBS provided that 
the fee was paid by the counterparty to the loans, not the plan or UBS, 
and the fee was not incorporated in the plan's payment for the loans' 
overarching investment because, as the lender, the plan's investment 
was in the form of lending money to the counterparty. UBS further 
stated that the borrower of these loans also selects the administrative 
agent on its own accord without direction from plans or UBS. 
Furthermore, the fees are usually negotiated between the administrative 
service agent and the borrower before the identity of the plan lender 
is even known.\17\
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    \17\ The Department is not opining on UBS' determination as to 
whether the transactions it has described are prohibited 
transactions as that is outside the scope of this prohibited 
transaction exemption.
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    25. Comment 1(c): A responsible plan fiduciary acted (and is 
acting) in good faith and took (and will take) appropriate steps that 
are necessary to protect the Covered Plans from abuse, loss, and risk 
during the Relief Period. UBS maintains that the UBS QPAMs acted in 
good faith to protect Covered Plans because they maintained extensive 
protocols to ensure it upheld its fiduciary responsibilities and no 
Covered Plans were harmed during the Relief Period. For example, UBS 
represents that its protocols required the UBS QPAMs to seek the best 
possible trade execution for each and every transaction regardless of 
the identity of the counterparty, and in accordance with each of the 
written investment guidelines approved by each Covered Plan. Further, 
UBS addressed the failure to perform the Stub Audit and proposed 
changes to its protocols, as discussed immediately below, to ensure 
that such a failure does not reoccur.
    26. Comment 1(d): The UBS QPAMs have adjusted their policies and 
procedures in light of past failures to comply with PTE 2023-14 to 
ensure that such failures will not reoccur. To prevent the reoccurrence 
of a missed Stub Period Audit, UBS proposed to take the following 
steps: (1) designate a second Compliance Officer both to facilitate the 
timely completion of exemption reviews and audits and check to ensure 
that exemption deadlines are correctly identified and completed; (2) 
inform the Auditor in writing within 45 days after receiving the 
Auditor's engagement agreement of the target dates for the Auditor to 
send UBS the initial document requests and for UBS to respond to those 
requests; (3)

[[Page 3933]]

require the Compliance Officers to provide the Auditor with the 
Exemption Report created pursuant to Section III(m)(4)(ii) of the 
exemption within seven days after the Exemption Report's completion; 
(4) allow the Department to receive audit updates from UBS and the 
Auditor upon request; and (5) provide the Department with a copy of the 
Auditor's engagement agreement within 15 days after its execution.
    27. The Department is persuaded that adding these conditions to the 
exemption's existing protective conditions will be beneficial to 
Covered Plans and has included them in this final exemption.
Comment 2: UBS' Materiality Argument
    28. UBS contends that failing to adhere to a condition of PTE 2023-
14 relating to the due date of the Stub Period Audit should not cause 
it to forfeit the exemptive relief provided in PTE 2023-14 because its 
failure to comply with the condition was not a ``material failure.''
    29. The Department strongly disagrees with UBS's materiality 
argument. First, each condition in an exemption is material to the 
Department's findings and must be adhered to in order for an ERISA-
covered plan, IRA, a party in interest, or disqualified person to rely 
on the exemption. Second, the independent audits required by PTE 2023-
14 and similar exemptions are particularly vital to the Department's 
findings, because they help ensure that, among other things: the QPAMs 
adhere to their basic fiduciary obligations under ERISA; transactions 
prohibited under ERISA section 406 are implemented in accordance with 
the requirements of PTE 84-14 and monitored in a way that protects 
participants; the Policies and Training requirements of the exemption 
are maintained; and violations of the Policies and Training 
requirements are promptly reported and remedied. The purpose of the 
audit requirement is not merely to ascertain possible past violations, 
but rather to promote and encourage an ongoing culture of compliance 
for personnel subject to the audit. The latter goal is ill-served when 
the QPAMs disregard their obligation to perform timely audits, 
irrespective of whether any particular audit would have found serious 
past violations of the exemption's conditions. Lastly, in contradiction 
of UBS' contention that the failure to comply with the condition was 
not a ``material failure,'' UBS acknowledged the importance of the 
independent audit requirement in its exemption application, which 
stated that, ``[t]he purpose of the independent audit is to give 
[Covered Plans] clients and the Department the confidence that the 
asset manager is complying with ERISA, and that continued exemptive 
relief is warranted.''
Comment 3: Covered Plans Would Be Harmed Without an Exemption
    30. UBS asserts that Covered Plans would incur harm if relief is 
not granted, because Covered Plans would likely terminate their 
relationships with the UBS QPAMs and hire new asset managers. UBS 
contends that Covered Plans would switch because the Covered Plan's 
fiduciaries would be uncertain as to which transactions would have 
prohibited transaction relief, and as to the specific conditions and 
limitations that would be imposed upon those transactions. UBS argues 
that Covered Plans that switch asset managers would be harmed because 
they would lose access to UBS's unique services and strategies. 
Further, the Covered Plans would spend additional fees and incur lost 
opportunities costs as a result of an asset manager switch, and the 
additional fees would include costs incurred to solicit and hire a new 
asset manager. UBS estimates Covered Plans would incur $90 million in 
liquidation and reinvestment costs as a result of liquidating all of 
the Covered Plan positions.\18\ In support of this estimate, UBS 
provided a report from an institutional investment consultant 
concluding that UBS' assumptions and methodology in calculating these 
liquidation costs were reasonable and the estimation of $90 million in 
liquidation costs was also reasonable.\19\
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    \18\ UBS submitted a report by an independent consultant in 
support of the estimated liquidation cost.
    \19\ The report was provided by John Minihan, Ph.D., a former 
Senior Lecturer of finance at MIT Sloan School of Management, a 
former associate editor of the Journal of Investing, and currently 
an investment management industry consultant with 30 years of 
experience in institutional investment consulting. Dr. Minahan 
provided, in summary, that UBS's estimates and assumptions were 
reasonable as expected values but with two minor caveats. First, 
asset managers can take several years to transition assets and if 
market conditions deteriorate during that time transitions could 
cause additional risk to ERISA clients. Second, new asset managers 
may decide that not all assets need to be liquidated and, if so, an 
assumption that all assets need to be liquidated would overstate 
transition costs. Dr. Minahan believes that these two caveats do not 
undermine the reasonableness of the estimated expected values ``as 
long as they do not overwhelm each other.'' He also provides that 
these caveats are difficult to quantify and work in opposite 
directions.
---------------------------------------------------------------------------

    31. Department's Note: While the Department recognizes that Covered 
Plans may incur certain liquidation and reinvestment costs as a result 
of liquidating their positions, UBS QPAMs are cautioned that if UBS 
engages in future conduct prohibited by PTE 84-14, the Department may 
not be able to make its required findings in order to grant future 
exemptive relief. UBS QPAMs must take all prudent steps pursuant to its 
obligations under ERISA section 404 to mitigate risks of losses to, and 
to defray the reasonable expenses related to the investment of, Covered 
Plan assets if UBS engages in future conduct prohibited by PTE 84-14. 
The Department believes that the failure to take such basic steps, in 
the event that the UBS QPAMs become ineligible for their exemptive 
relief under PTE 84-14, would likely constitute a violation of the 
QPAMs' fiduciary duties to act in the best interest of their Covered 
Plan clients.
Comment 4: Nonquantifiable Harms Should Be Considered
    32. UBS argues that the Department should include nonquantifiable 
harms in the Department's findings. UBS suggests that the Department 
has foreclosed including information about potential harms in its 
findings unless the harm is estimated in dollar amounts.\20\ The 
Department has no objection to considering any nonquantifiable harms 
identified by UBS. However, information concerning the dollar value of 
harms, including the methodology and assumptions made in reaching such 
dollar values, are important to the Department's analysis. The 
Department will consider representations about nonquantifiable harm to 
Covered Plans to the extent the Department is able to determine that 
the information presented is relevant, reliable, and necessary to the 
Department's findings. The Department notes, however, that depending on 
context and the type of harm that the applicant represents may occur, 
the Department will request to see additional, quantifiable data in 
order appropriately consider such representations.
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    \20\ In footnote 24 of the Proposal, ``[t]he Department notes 
that UBS provided information not mentioned in this proposal 
regarding the potential losses to ERISA clients, but without clearly 
identifying the dollar amount of losses to plans in concrete terms. 
In such cases, the Department does not have enough information to 
include such representations in its findings. However, the 
information that UBS provided that the Department can rely on is 
described below.'' 89 FR 49219 n.24
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Comment 5: Denying Exemptive Relief Would Negatively Impact the QPAM 
Program as a Whole
    33. UBS argues that denying prospective or retroactive relief would 
result in wide-ranging consequences for all retirement accounts within 
the

[[Page 3934]]

financial industry. UBS contends, for example, that denying relief 
would make it more difficult for counterparties to transact with any 
industry QPAMs because counterparties would be unsure if new 
convictions or later-discovered issues would result in crippling 
financial penalties for those counterparties. UBS argues that this 
increased risk would be priced into the market for all retirement 
plans, whether or not a QPAM is compliant with PTE 84-14 or an 
individual exemption with respect to a failure to comply with PTE 84-14 
I(g).
    34. The Department agrees that a denial of UBS' exemption request 
could have consequences for Covered Plans. However, these consequences 
would be due to the widespread UBS-related criminal behavior that 
occurred over long periods of time, involved massive amounts of client 
assets, and UBS' inability to comply with the terms of PTE 2023-14 that 
are described above. The Department does not believe that UBS' history 
of criminal sanctions is representative of the industry as a whole, or 
is likely to result in the sorts of consequences suggested by UBS with 
respect to entities that have far different compliance histories.
    35. Additionally, the Department notes that it is aware that UBS 
and/or its affiliates are the subject of additional investigations that 
could result in future violations of Section I(g) of PTE 84-14.\21\ 
While the Department cannot opine on the likelihood that UBS asset 
managers will receive additional exemptive relief if it engages in 
additional violations of Section I(g) of PTE 84-14, the Department may 
take a proactive approach to protecting Covered Plans in light of the 
uncertainty created by these additional investigations. Especially 
given the history and extent of criminal conduct at issue, the 
Department is considering proposing an individual exemption that would, 
in certain circumstances, permit UBS asset managers to continue to 
engage in the same covered transactions described in Section I of PTE 
84-14, if the UBS QPAMs become ineligible again to rely on PTE 84-14 
due to another violation of Section I(g) of PTE 84-14.\22\
---------------------------------------------------------------------------

    \21\ See, for example, the following publicly available news 
articles describing inquiries into possible UBS/Credit Suisse-
related misconduct: UBS's French unit placed under formal 
investigation at https://www.fnlondon.com/articles/ubs-french-division-placed-under-formal-investigation-20160304; Credit Suisse 
has violated US tax evasion deal, Senate Committee finds [verbar] 
The Business Standard, at https://www.tbsnews.net/world/global-economy/credit-suisse-has-violated-us-tax-evasion-deal-senate-committee-finds-607578.
    \22\ It is expected that a number of conditions would apply, 
including that no QPAM or its personnel were involved in the 
Prohibited Misconduct.
---------------------------------------------------------------------------

    36. As currently contemplated, the relief that would be provided in 
the individual exemption would not be linked to PTE 84-14, and the 
asset managers that rely on the individual exemption would not be 
referred to as QPAMs.\23\ If the Department takes this approach, the 
proposed individual exemption would be subject to a full notice and 
comment period, and UBS, plan fiduciaries and plan counterparties would 
have ample opportunity to comment.
---------------------------------------------------------------------------

    \23\ The Department notes that, should UBS QPAMs become 
disqualified from the relief in this exemption due to additional 
UBS-related prohibited misconduct described in Section I(g) of PTE 
84-14, Section I(i) of PTE 84-14 may permit UBS QPAMs to continue to 
rely on the class exemption for one year, if the terms and 
conditions of the class exemption are met. In that instance, the 
effective date of the above-described individual exemption, if 
granted, would begin following the period covered by Section I(i) of 
PTE 84-14.
---------------------------------------------------------------------------

    37. The Department previously raised the possibility of this type 
of individual exemption in the preamble to the PTE 2023-14 proposal and 
requested comment from UBS. UBS responded that current QPAMs have 
existing contracts that expressly rely on the QPAM exemption or include 
representations that the asset manager is a QPAM, and those contracts 
do not account for an alternative individual exemption such as the one 
the Department described in the preamble to the proposal for PTE 2023-
14. Moreover, UBS asserted that the QPAM exemption is widely accepted 
and understood by sophisticated clients; therefore, the Department's 
withdrawal of the availability of the relief provided in PTE 84-14 for 
a particular asset manager and substituting an alternative individual 
exemption would put that asset manager at a competitive disadvantage. 
UBS claimed that this result is directly contrary to the financial 
strength and stability that regulators intended to be achieved by the 
Merger, and that if the Department is interested in creating an 
alternative individual exemption to the QPAM exemption, it should make 
the alternative available to all asset managers concurrently with the 
QPAM exemption, so that the alternative can gain broad market adoption.
    38. The Department is not persuaded by UBS' response. The fact that 
UBS QPAMs may have existing contracts with the provisions and 
limitations described above, is not dispositive to the Department's 
determination whether UBS QPAMs should be permitted to continue to rely 
on PTE 84-14, especially considering UBS' multiple violations of 
Section I(g) of the class exemption that call its integrity and 
compliance culture into question. The Department is also skeptical of 
assertions that it should rely on the parties' contract provisions as a 
basis for disregarding exemption conditions or limiting the 
consequences of violating those provisions. A QPAM cannot simply 
contract with a client in a manner that ensures the QPAM will always be 
able to remain a QPAM, regardless of the QPAM's or its affiliates' 
behavior.
    39. Further, the fact that the QPAM exemption is widely accepted 
and understood by sophisticated clients suggests to the Department that 
these counterparties would not be confused by an individual exemption 
that clearly states it has the same scope of relief as Section I of PTE 
84-14. UBS' ``competitive disadvantage'' arguments also do not support 
a finding under ERISA Section 408(a) that UBS QPAMs should be permitted 
to rely on PTE 84-14; particularly where to the Department's knowledge, 
none of UBS' ``competitors'' have as many disqualifying convictions as 
UBS.
    40. Regarding UBS's suggestion that the Department should make the 
individual exemption approach ``available to all asset managers 
concurrently with the QPAM exemption, so that the alternative can gain 
broad market adoption,'' the Department notes that the scope, 
seriousness, and recurrent nature of UBS' prohibited misconduct are 
unique. Therefore, the Department is not persuaded that making such an 
individual exemption available for broad market adoption is presently 
warranted.
Comment 6: Indemnification
    41. Section III(k) of PTE 2023-14 requires UBS to ``indemnify and 
hold harmless the Covered Plans for any actual losses resulting 
directly from UBS QPAM's violation of fiduciary duties, prohibited 
transactions, breach of contract, or any claim arising out of 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.'' \24\ 
Given this

[[Page 3935]]

requirement, the Department requested in the Proposal that UBS comment 
on why Covered Plans would incur the liquidation and other costs 
identified by UBS if the Department does not grant relief.
---------------------------------------------------------------------------

    \24\ PTE 2023-14, Section III(k)(2) requires UBS QPAMs ``[t]o 
indemnify and hold harmless the Covered Plan for any actual losses 
resulting directly from the 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 QP 
AM; or any claim arising out of the failure of such 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 a Conviction 
covered under this exemption. This condition applies only to actual 
losses caused by the QPAM's violations.''
---------------------------------------------------------------------------

    42. In its response, UBS argues that liquidation and additional 
costs do not result ``directly'' from UBS's criminal convictions and 
failures to comply with exemptive conditions. UBS argues instead that a 
Covered Plan fiduciary and new asset manager's decision to liquidate 
and reinvest plan assets is an intervening decision by a separate 
agent, which is inconsistent with one of many definitions of 
``directly'' contained in the Oxford Dictionary.
    43. The Department disagrees with UBS's analysis. The condition 
requires indemnification for costs that result ``directly'' from, among 
other things, ``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.'' As UBS itself noted in a letter to the Department, 
dated July 29, 2024, ``[i]n fact, Dr. Minahan, an expert in the field 
of ERISA plan transitions, projects that if the Department does not 
grant UBS a new exemption, ``then most, and likely all, UBS ERISA 
Clients would feel forced to replace UBS as their asset manager.'' 
Certainly, to the extent Covered Plans ``feel forced'' to transition to 
new asset managers because the UBS QPAMs could 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 a UBS 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.
Comment 7. Violation Notice
    44. Section III(t) of the Proposal includes a condition that would 
require UBS to send a Violation Notice, as defined therein, to Covered 
Plans if UBS fails to comply with an exemption condition. UBS commented 
that this proposed condition would be too difficult to administer and 
would not materially increase protection for Covered Plans.
    45. The Department disagrees. Providing timely information to 
Covered Plans will allow their fiduciaries to take prudent and timely 
steps, as necessary to protect themselves from loss of the exemption's 
protections. This Violation Notice is particularly relevant to UBS due 
to its history of recidivism.
    46. However, the Department understands UBS' position that certain 
aspects of the Violation Notice requirement may be difficult to 
administer. In particular, UBS raised concerns regarding the difficulty 
it would confront to determine whether a Violation Notice must be 
issued. In response to this concern, and as a recognition that UBS may 
need more time to make its required determination that sending a 
violations notice is required, the Department has revised the deadline 
in Section III to extend the time a Violation Notice must be provided 
to Covered Plans as a result of a breach of an exemption condition, 
from 14 to 30 days after the violation is discovered. In situations 
where the auditor discovers a violation that the UBS QPAM had not 
previously detected, the UBS QPAM may comply with the Violation Notice 
condition by sending the Violation Notice to all affected Covered Plans 
and the Department within 30-days after the completion of the audit, if 
the notice includes an addendum describing the reason for the UBS 
QPAM's failure to send the Violation Notice. This last provision is not 
a substitute for UBS' own responsibility to take reasonable steps to 
determine whether a violation has occurred.
Comment 8: Written Processes Related to Indemnification
    47. Section III(v) of the Proposal would require all UBS QPAMs to 
develop written processes that clearly describe: (a) how the QPAM 
identifies and quantifies ``actual losses'' for purposes of Section 
III(j)(2) of the exemption; and (b) how Covered Plans may recover or 
avoid incurring the losses that the UBS QPAM must indemnify or hold 
Covered Plans harmless from incurring pursuant to Section III(j)(2) of 
the exemption. UBS commented that losses are too specific to each 
Covered Plan for it to develop an effective written indemnification 
process. Additionally, UBS asserted that it would be unable to develop 
written processes for indemnification because the party seeking 
indemnification would have to identify the specific covered losses or 
expenses.
    48. The Department disagrees with UBS' interpretation of this 
condition. The condition simply requires UBS to establish a process 
that would apply when Covered Plans submit indemnification claims, not 
to identify all the specific losses or expenses that could conceivably 
be covered in advance of violation. The process should, at a minimum, 
inform Covered Plans of how to initiate a claim for indemnification 
with a UBS QPAM (including a description of the information required to 
be submitted) and provide reasonable time frames for the resolution of 
claims. The process should also ensure that substantially similar 
claims are treated alike, and Covered Plans are equitably treated based 
on the merits of the claim rather than type or size of client. The 
process also should require the UBS QPAM to fully and fairly notify 
Covered Plans of the indemnification requirement and inform them that 
they can submit questions relating to the final indemnification 
provision to the Department's email inbox ([email protected]). The 
Department believes that these clarifications address the concerns 
raised by UBS.
    49. Further, the Department has revised the provision in the final 
exemption to require each UBS QPAM to complete the development of the 
indemnification claims process and deliver a copy of the process to 
each Covered Plan within 90 days after January 15, 2025, rather than 
within 30 days as originally proposed. The extended timelines give the 
UBS QPAMs enough time to specify appropriate processes and make any 
required internal changes to operationalize such processes. The 
exemption requires the UBS QPAMs to notify Covered Plans of any 
subsequent material changes to the processes within 30 days after the 
effective date of such changes.
Comment 9: Seconded Employee Definition
    50. UBS commented that it has no fundamental objection to the 
Department's proposed definition of ``UBS Seconded Employee'' in 
Section I(l) of the Proposal.\25\ However, UBS

[[Page 3936]]

believes that the definition should reflect the language in the recent 
Deutsche Bank exemption (PTE 2024-02), which does not contain this new 
definition of Seconded Employee, to promote greater consistency across 
individual QPAM exemptions.\26\
---------------------------------------------------------------------------

    \25\ The Proposal added a new definition of the term ``UBS 
Seconded Employee'' that means, an individual nominally employed by 
a Misconduct Entity who performs work on behalf of a qualified UBS 
QPAM, provided that such UBS QPAM is solely responsible for the 
management and control of the employee's job activities performed on 
behalf of such QPAM. The UBS QPAM must be solely responsible for the 
establishment of the employee's job duties and terms of employment 
(including compensation, promotions, and benefits), and must have 
supervisory responsibility with respect to, among other things, the 
employee's performance, training, and disciplinary actions. The 
definition of UBS Seconded Employee is used in Sections III(d) to 
clarify that an employee of a Misconduct Entity may provide services 
to a UBS QPAM, as long as the individual is a ``Seconded Employee.'' 
Sections III(a) and (b) require that Seconded Employees did not 
participate in the conduct underlying the Criminal Activity or 
receive compensation in connection therewith.
    \26\ See 89 FR 76, 27789 (April 18, 2024).
---------------------------------------------------------------------------

    51. The Department has decided to retain the proposed language in 
the final exemption. Conditions in the Department's individual 
exemptions may evolve over time as it becomes clear that additional 
clarity or substantive improvements are appropriate. The Department 
notes that prior QPAM Section I(g) exemptions relied on the term 
``seconded employee'' to permit certain employees to perform services 
for QPAMs notwithstanding the fact that such employees were nominally 
employed by a corporate entity that had been involved in 
misconduct.\27\ In the recent Deutsche Bank exemption, PTE 2024-02, 
that the Applicant points out, the Department declined to use the term 
``seconded employee'' and instead included a description of the type of 
employees permitted to perform services under these circumstances.\28\ 
In the Proposal, the Department created a defined term ``UBS Seconded 
Employee'' in order to further streamline the operative language of the 
exemption. The defined term also slightly modified the language from 
that which was in the Deutsche Bank exemption to more clearly set forth 
the requirement that the QPAMs have control over the seconded employee. 
For example, the term ``oversight'' was changed to ``control'' and the 
term ``day to day activities'' was changed to ``job activities.''
---------------------------------------------------------------------------

    \27\ These employees were required not to have participated in, 
been aware of, and received compensation in respect of, any of the 
misconduct.
    \28\ Section III(g) of PTE 2024-02 provides that, ``Other than 
with respect to employee benefit plans maintained or sponsored for 
its own employees or the employees of an affiliate, DB Group 
Services 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 ERISA-covered plan and IRA assets; provided, 
however, that DB Group Services will not be treated as violating the 
conditions of this exemption solely because . . . . (2) DB Group 
Services' employees perform work on behalf of a DB QPAM that is 
solely responsible for the management and oversight of the DB Group 
Services' employee's day to day activities performed on behalf of 
such QPAM, including the employee's performance, training, and terms 
of employment (including compensation, promotions, and benefits), 
including any such employees acting in a discretionary fiduciary 
capacity with respect to the DB QPAM.'' See also 89 FR 76, 27795-96.
---------------------------------------------------------------------------

Comment 10: Other Edits
    52. UBS requested that the Department make the following edits to 
the Proposal's operative text, which it characterizes as clarification 
of facts or technical corrections:
    (a) The definition of ``CSAG'' in Section I(a)(1) should be revised 
to clarify that CSAG merged into UBS AG on May 31, 2024, with UBS AG as 
the surviving entity.
    Department Response: The Department concurs and has made the 
change.
    (b) The definition of ``UBS Americas'' in Section I(a)(5) should be 
revised to reflect that UBS AM Americas no longer is wholly owned by 
UBS Americas, Inc.
    Department Response: The Department concurs and has revised Section 
I(a)(5) to reflect that UBS AM is majority-owned by UBS Americas, Inc.
    (c) The definition of ``UBS Hedge Fund Solutions LLC'' in Section 
I(a)(7) should be deleted because UBS Hedge Fund Solutions LLC merged 
with UBS Asset Management (Americas) LLC, on April 1, 2024.
    Department's Response: The Department has not made the requested 
change, because the definition in the Proposal provides clarity that 
the retroactive relief covers the subject entity as well.
    (d) The definition of ``Affiliated QPAM'' should be modified to 
reflect that UBS AM Americas is the only current UBS QPAM, and a future 
additional QPAM may sit within a successor of the Asset Management or 
Global Wealth Management Americas U.S. divisions of UBS.
    Department's Response: The Department has not made UBS' requested 
changes, because the retrospective nature of this exemption warrants 
defining the term ``Affiliated QPAM'' consistent with PTE 2023-14, and 
UBS' requested change would allow an entity to qualify as an Affiliated 
QPAM notwithstanding that it also fits within the definition of 
Misconduct Entity.
    (e) The footnote in Section I(b) should be deleted.\29\ This 
footnote is unnecessary. Moreover, UBS O'Connor LLC no longer exists; 
it merged with UBS AM Americas on April 1, 2024, with UBS AM Americas 
as the surviving entity.
---------------------------------------------------------------------------

    \29\ This footnote states that ``UBS represents that UBS 
O'Connor LLC and UBS Realty Investors LLC are entities under the UBS 
corporate umbrella that currently offer investment products which 
are accessible by ERISA-covered plans, but do not currently rely on 
Class PTE 84-14 when managing those products.''
---------------------------------------------------------------------------

    Department's Response: The Department concurs and has made the 
change.
    (f) The definition of ``Misconduct Entity'' in Section I(i) should 
be revised to remove ``CSAG,'' as CSAG no longer exists.
    Department's Response: The Department has not made the requested 
change, because the proposed definition provides clarity that 
retroactive relief covers periods of time that CSAG existed.
    (g) The reference to ``CS Affiliated QPAM[s]'' in the footnote in 
Section III(h)(1) should be deleted.\30\
---------------------------------------------------------------------------

    \30\ The referenced footnote states that ``[t]he exemption does 
not preclude the UBSQPAMs and CS Affiliated QPAM from maintaining 
separate Policies provided that the Policies comply with this 
exemption.''
---------------------------------------------------------------------------

    Department's Response: The Department concurs and has made the 
change.
    (h) Section III(i) should be revised to require provision of a copy 
of the audit report to the Risk Committee of UBS Group AG's Board of 
Directors and to a senior executive officer of UBS Group AG's 
Compliance and Operational Risk Control function.
    Department's Response: The Department concurs and has made the 
requested change.
    (i) The phrase ``one-year exemption'' should be revised to ``five-
year exemption'' in Sections III(i)(3) and III(k).
    Department's Response: The Department concurs that the operative 
language in Sections III(i)(3) and III(k) should not read ``one-year 
exemption'' and has modified the provisions to read ``exemption.''
    (j) Section III(m)(1)(ii) should be revised to require that the 
compliance officer (or officers) have a direct reporting line to either 
the highest-ranking corporate officer in charge of compliance for the 
applicable Affiliated QPAM or the highest-ranking corporate officer in 
charge of the applicable Affiliated QPAM. This would allow the QPAM to 
designate the highest-ranking corporate compliance officer as a 
``compliance officer'' under the exemption.
    Department's Response: The Department concurs and has made the 
requested change.
    (k) Section III(l) should be included in the list in the first 
clause of Section III(s), and the reference in the second clause of 
Section III(s) should be to Section III(i)(10), not Section III(i)(11).

[[Page 3937]]

    Department's Response: The Department concurs and has made UBS' 
requested changes, although due to changes to Section III(i) described 
above, the latter change was made to Section III(i)(12) not Section 
III(i)(11).
    (l) The phrase ``at all times'' should be deleted from Section 
III(u),\31\ because that phrase is inconsistent with the Proposed 
Exemption's statement that only ``material change[s]'' in ``material 
fact[s] or representation[s]'' would affect the status of the 
exemption.
---------------------------------------------------------------------------

    \31\ Section III(u) provides that, ``All the material facts and 
representations set forth in the Summary of Facts and 
Representations are true and accurate at all times.''
---------------------------------------------------------------------------

    Department's Response: The Department disagrees with this revision. 
If, at any time, a material representation UBS made to the Department 
is no longer accurate, UBS must immediately inform the Department. If 
UBS has questions regarding the materiality of a representation, it 
should contact the Office of Exemption Determinations immediately.
Industry Comments
SIFMA (Securities Industry and Financial Markets Association) and the 
ERISA Industry Committee (ERIC)
    53. SIFMA and ERIC's comment letters argue that if the Department 
does not grant UBS retroactive relief, it will cause wide ranging 
disruption to the securities markets.
    54. The Department notes that it has addressed these broad concerns 
in its response to Comment 5, above. The Department reiterates that it 
must make the findings required by ERISA section 408(a) in order to 
grant an exemption with respect to the particular applicant seeking 
relief and for the transactions described in the application. If a QPAM 
or related party's behavior precludes such a finding, any wide-ranging 
disruption to the securities markets that results would be solely 
attributable to behavior of such QPAM or related party. As such, many 
of the concerns raised in SIFMA and ERIC's comments are outside the 
scope of this exemption.
Anonymous
    55. An anonymous commenter stated without specificity that the 
Department should not grant the proposed exemption in order to better 
protect the financial industry from corruption. Since the comment 
offered no further reasoning or substance, the Department cannot 
respond with specificity to this comment. This exemption, however, has 
taken the commenter's position into account by ensuring that Covered 
Plans are insulated from UBS' malfeasance.
The QPAM Coalition Comment 1: Hearing Request
    56. A commenter entitled the ``QPAM Coalition,'' is comprised of, 
at various times, Mr. James S. Henry; Mr. John Christensen; Dr. Paul J. 
Morganoff; Mr. Ralph Nader; Mr. Khadija Sharife; Mr. Ke Francis Karugu; 
and Mr. and Mrs. Andreas and Dagmar Frank. The coalition made two 
separate submissions during the comment period, which are considered 
together for purposes of this granted notice. As a preliminary matter, 
the QPAM Coalition requested a public hearing to provide a ``more 
thorough examination and interrogation.'' In the view of the QPAM 
Coalition, the Application omitted critical data required by the 
Department's exemption procedure regulation, and a public hearing is 
needed to fully air the universe of relevant lawsuits and criminal 
investigations concerning UBS' and Credit Suisse's conduct as a 
fiduciary . . . .\32\ The QPAM Coalition states that ``extraordinary 
new details about UBS/CS misconduct [discussed below] really do deserve 
to be aired in public.'' The QPAM Coalition states that its members 
``would be available to present even more [i]mportant evidence directly 
related to the question of whether UBS/CS deserve to have their 
(collectively) 14th QPAM Exemption since 1994, despite serial criminal 
convictions.''
---------------------------------------------------------------------------

    \32\ 29 CFR 2570.35(a)(5). The QPAM Coalition also takes issue 
with UBS' representation that the ``number of plans and IRAs to 
which the exemption will apply are too numerous to identify.''
---------------------------------------------------------------------------

    57. The Department notes that most of the exemptions identified by 
the QPAM Coalition were either extensions of existing exemptions or 
necessitated by the merger of UBS and Credit Suisse. Such extensions do 
not involve new instances of misconduct, and it is inappropriate to 
treat them as if they were the result of new, distinct, and separate 
violations of exemption conditions. To the contrary, the grants of 
extensions generally reflected the Department's view that the QPAMs had 
complied with the conditions of the initial exemptions. Similarly, it 
is inappropriate to penalize the UBS QPAMs solely because they received 
exemptions (including this one) that arose from the merger of Credit 
Suisse and UBS; particularly when considering that these exemptions did 
not arise from any additional criminal misconduct or failure to 
supervise by UBS or its affiliates.
    58. As the Department notes in its exemption procedure regulation 
(the Procedures),\33\ ``[t]he Department will grant a request for a 
hearing . . . where a hearing is necessary to fully explore material 
factual issues identified by the person requesting the hearing.'' \34\ 
The QPAM Coalition provided an expansive and detailed description of 
the ``extraordinary new details'' that needed to be discussed at a 
public hearing in their comment letter. Although the QPAM Coalition 
suggests that it could provide more evidence at a hearing, the 
Department's regulations provide that it may decline to hold a hearing 
if, among other things, ``the factual issues identified can be fully 
explored through the submission of evidence in written (including 
electronic) form.'' \35\
---------------------------------------------------------------------------

    \33\ 29 CFR part 2570 (76 FR 66637 (Oct. 27, 2011)).
    \34\ See Section 2570.46(b).
    \35\ See Section 2570.46(b)(3).
---------------------------------------------------------------------------

    59. In the Department's view, the ``factual issues'' identified by 
the QPAM Coalition could be and have been fully explored through the 
submission of its written and electronically provided evidence. The 
Department also notes that its Procedures provide that hearing 
requestors must state, among other things, ``the nature of the person's 
interest in the exemption and the manner in which the person would be 
adversely affected by the exemption.'' \36\ The QPAM Coalition did not 
state in their comment letters how they would be ``materially affected 
by the exemption.''
---------------------------------------------------------------------------

    \36\ See Section 2570.46(a)(2).
---------------------------------------------------------------------------

    60. The Department notes that in processing UBS' exemption request, 
it thoroughly reviewed UBS' application. The Department relied on 
public comments and a robust exchange of information with UBS and 
external stakeholders to fill in factual gaps in the public record. The 
QPAM Coalition's own comment provided information concerning a number 
of past and current investigations and prosecutions that form part of 
the public record that the Department has reviewed in making its 
requisite findings under ERISA section 408(a) Among other materials 
provided in their comments, the QPAM Coalition provided the text of a 
decision of the French Court of Cassation, Criminal Division, dated 
November 15, 2023 dealing with UBS' participation in a cross-border tax 
evasion via French and Swiss branches of UBS; a copy of the criminal 
complaint filed by the U.S. Department of Justice against UBS 
Securities LLC, et al. on November 08, 2018 in Case No. 1:18-cv-06369-
RPK-PK; a comment letter describing additional lawsuits and criminal 
trials that they believe should be taken into

[[Page 3938]]

consideration by the Department; \37\ copies of letters written by 
members of the QPAM Coalition to the UBS General Counsel \38\ 
describing shortcomings in the compliance and controls of Credit 
Suisse' banking systems and generally detailing efforts to inform UBS 
and Credit Suisse of ``entrenched criminal structures'' within Credit 
Suisse; a transcript of comments at the Department's November 2022 
hearing regarding amendments to the QPAM Exemption; and a copy of a 
letter to the Department \39\ advocating for the denial of Credit 
Suisse's exemption application No. D-11819.\40\
---------------------------------------------------------------------------

    \37\ The comment letter provides information about: United 
States v. UBS Securities, LLC, et al. (generally, UBS' conduct in 
the mortgage crisis); Murray v. UBS Securities, LLC 601 U.S. 23 
(2024) (regarding an employee's claim that UBS forced him to 
fraudulently certify his analyst reports); U.S. v. Birkenfeld, Case 
No. 08-60099-CR-ZLOCH (concerning offshore bank accounts and 
suppression of whistleblower activity); and links to various French 
and German tax fraud matters involving UBS.
    \38\ Letter from Dr. Paul Morjanoff, Financial Recovery and 
Consulting Services Pty Ltd to Ms. Barbara Levi, UBS Group General 
Counsel, dated July 11, 2023.
    \39\ Letter from Dr. Paul Morjanoff, Financial Recovery and 
Consulting Services Pty Ltd to Thomas Perez, U.S. Secretary of 
Labor, dated June 23, 2014.
    \40\ Credit Suisse was granted PTE 2014-11 on November 18, 2014 
(79 FR 68716).
---------------------------------------------------------------------------

    61. The QPAM Coalition's comment further supplemented the record 
with articles written by its members that describe, among other things: 
the role of Swiss banks in money laundering and corrupt banking 
practices in Kenya; how, in the QPAM Coalition's view, Swiss bank 
secrecy laws facilitate participation by UBS and Credit Suisse in 
various criminal and political activities, including Swiss banks' past 
involvement in South Africa's ``apartheid machinery''; political 
activities in Yemen, the Democratic Republic of Congo, and Mozambique; 
circumvention of European Union sanctions on various governments; the 
facilitation of corrupt finance and banking activities in various 
developing countries; and UBS' leveraging of the British Channel 
Island's legal jurisdiction to avoid criminal prosecution for various 
acts.
    62. Finally, the QPAM Coalition submitted a brief article 
advocating for an ``institutional grey list'' similar to ones 
established by various inter-governmental organizations, such as the 
Organization for Economic Co-operation and Development, that would 
assist the Department in evaluating financial institutions that 
repeatedly find themselves in violation of applicable law. Even though 
the information provided by the QPAM Coalition does not lead the 
Department to conclude that a hearing is necessary to further explore 
any of the issues presented in its comment, the information provided by 
the QPAM Coalition validates the importance of one of the exemption's 
critical conditions: an in-depth annual audit of each UBS QPAM by a 
qualified, independent auditor. In this regard, the scope of ongoing 
investigations and potential misconduct identified by the QPAM 
Coalition in its comments illustrates the need for an independent audit 
to verify on an annual basis that the UBS QPAMs continue to adhere to 
applicable fiduciary provisions and the terms of this exemption and 
maintain a strong culture of compliance.
    63. Based on the record developed by the Department, it does not 
appear to the Department that UBS QPAM personnel participated in the 
conduct described by the QPAM Coalition. In fact, the Department is 
able to make its findings that the UBS QPAMs may continue to rely on 
PTE 84-14 in part because the QPAMs and their personnel are insulated 
from the corporate management and business activities of UBS entities 
that were involved in criminal activity described above. In this 
regard, the independent auditor must continue to validate, among other 
things, that the asset management decisions of the QPAM are conducted 
independently of the corporate and management and business activities 
of each Misconduct Entity, and any failures of the QPAMs to maintain or 
follow the Policies must be corrected and reported to the QPAM's head 
of compliance and general counsel.
The QPAM Coalition Comment 2: Rebutting UBS
    64. The QPAM Coalition's comment focuses on rebutting UBS' five 
``principal reasons'' justifying the Department's grant of a five-year 
exemption. As described by the QPAM Coalition, UBS argues that (1) the 
convictions and the pending French charge do not relate to the UBS 
QPAMs, which are operated as separate businesses from the entities 
involved in the underlying conduct; (2) the disqualifying conduct 
described in the convictions and the pending French charge is 
historical in nature; (3) the UBS QPAMs have documented proof that 
ERISA plan assets have been safeguarded, as evidenced by their ERISA 
audit results for many years; (4) it is in the best interest of plans 
and their participants and beneficiaries for plan fiduciaries, well 
versed in their obligations to protect plan assets, to be able to 
select the asset managers they judge best, particularly when DOL-
supervised audits confirm the managers' capability; and (5) UBS and the 
UBS QPAMs should not be punished, in effect, for the acquisition of 
Credit Suisse AG by UBS Group AG at the strong encouragement of the 
Swiss government.\41\
---------------------------------------------------------------------------

    \41\ See UBS Exemption Application, dated February 22, 2024, pp. 
1-2.
---------------------------------------------------------------------------

    65. In response to these arguments, the QPAM Coalition states that 
(1) is irrelevant because the QPAM Exemption's required standard of 
integrity relates to the ``corporate family's culture of compliance,'' 
and the exemption is a privilege to execute transactions which would 
otherwise be illegal; (2) is irrelevant because ``UBS and Credit Suisse 
repeatedly engaged in stonewalling and obstruction of investigations, 
as well as legal tactics of interminable delays, even when they knew of 
their own guilt;'' (3) the UBS and Credit Suisse audit reports are not 
``proof'' because they did not assess all relevant factors, ``including 
if financial instruments were being illegitimately laundered through 
pension funds;'' (4) UBS and Credit Suisse should have taken its 
responsibility more seriously before engaging in criminal activity; 
moreover, according to the QPAM Coalition, the UBS entities are still 
engaging in some of these behaviors; and (5) UBS benefitted greatly 
from taking over Credit Suisse AG. The QPAM Coalition also points out 
in their comment that the UBS QPAMs violated various conditions of the 
exemption, including the requirement for the stub audit.
    66. The Department has considered and rejected the QPAM Coalition's 
request to deny the UBS QPAMs' exemption application. The QPAM 
Coalition's points are addressed in turn:
    (1) The Department agrees with the principle that the required 
standard of integrity in PTE 84-14 relates not just to the QPAM's 
compliance culture, but also to its ``corporate family's culture of 
compliance.'' Therefore, an important aspect of the Proposal is that 
the UBS QPAMs are operated separately from the parts of the UBS 
organization that engaged in criminal misconduct underlying the 
Convictions (Criminal Misconduct). The record in this case demonstrates 
that the UBS QPAMs have been insulated from UBS' corporate and business 
decisions, and from the parts of UBS that were involved in the Criminal 
Misconduct. Furthermore, the Department designed the Proposal's first 
six conditions for relief to ensure that the UBS QPAMs: (1) had no 
involvement with the Criminal

[[Page 3939]]

Misconduct; and (2) continue to have no relationship with any entity or 
individual that was involved in the Criminal Misconduct. In order to 
further support the UBS QPAMs' insulation from the rest of UBS and to 
strengthen their own culture of compliance, the Department included 
other conditions in the Proposal that would require the UBS QPAMs to 
maintain their own policies, procedures, and training program, perform 
internal compliance reporting, and submit to a publicly available 
independent audit;
    (2) The Department agrees that it is important that the Department 
consider the Criminal Misconduct irrespective of the applicant's 
suggestion that it is ``historical in nature,'' and the Department has, 
accordingly, considered all the Criminal Misconduct in connection with 
this exemption. The Department considered the numerous convictions, and 
the extent of UBS' cooperation (or non-cooperation) with investigators, 
as well as the information provided by UBS, commenters (including the 
QPAM Coalition), and other internal and external stakeholders, in 
formulating the conditions for relief described in this exemption and 
making its findings under ERISA section 408(a);
    (3) The Department notes that the independent audits are meant to 
verify that the assets of Covered Plans are managed in accordance with 
the requirements of Title I of ERISA and the Code, as applicable, and 
that the requirements of the individual exemptions from Section I(g) of 
PTE 84-14 are met. The Department determined in this exemption and in 
others that an independent audit with the requirements described 
herein, provides a sufficient mechanism for the Department to make its 
findings that the Proposal is protective of the rights of participants 
and beneficiaries of Covered Plans; \42\
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    \42\ The Department notes that the record does not contain any 
information that the UBS QPAMs illegally laundered financial 
instruments through pension plans, and this has not been a specific 
target of the independent audits required by the Department in 
numerous individual exemptions. If the QPAM Coalition or any other 
commenter has evidence demonstrating that the UBS QPAMs had used or 
permitted money laundering through pension funds, this would be of 
great import to the Department, and likely also to a number of other 
Federal and international regulators.
---------------------------------------------------------------------------

    (4) The QPAM Coalition is not clear which responsibilities it is 
referring to in its statement that UBS should have taken its 
responsibilities more seriously before engaging in criminal activity. 
In this regard, the Department notes that the Proposal is focused on 
the actions of the UBS QPAMS and is not aware that the UBS QPAMs failed 
to take their responsibilities under ERISA seriously prior to the 
criminal activity engaged in by other UBS entities. However, the 
conditions for relief in this grant notice require the UBS QPAMs to 
adhere to Policies and Training designed to promote adherence to basic 
fiduciary standards under Title I of ERISA and the Code and reinforce 
their obligation to act with a high degree of integrity on behalf of 
their Covered Plan clients as required by PTE 84-14. The Department 
acknowledges the QPAM Coalition's statement that certain UBS entities 
continue to be investigated for their participation in various forms of 
misconduct, but it has not seen evidence of wrongdoing sufficient to 
warrant a different approach to the exemption than that taken by the 
Department. Also, when considering past and continuing Criminal 
Misconduct by other corporate entities, the Department must consider 
the potential harms to Covered Plans that may result from a denial of 
the exemption. The final exemption reflects the Department's primary 
focus on protecting Covered Plans and their participants and 
beneficiaries from the costs that they may incur if the UBS QPAMs 
become ineligible to rely on PTE 84-14, subject to the QPAMs' adherence 
to protective conditions that insulate UBS QPAMs, and by extension 
Covered Plans, from potential concerns based on the compliance culture 
in other parts of the organization; and
    (5) Lastly, the QPAM Coalition states that UBS benefitted greatly 
from taking over Credit Suisse, thus undercutting the Applicant's 
argument that UBS should not be punished, in effect for acquiring 
Credit Suisse AG at the behest of the Swiss government. The Department 
notes that its primary concern is to ensure that an exemption is in the 
interest and protective of the rights of Covered Plans and their 
participants and beneficiaries--not whether UBS benefitted from the 
acquisition of Credit Suisse AG.
    67. In sum, in response to the QPAM Coalition's rebuttal of UBS, 
the Department acknowledges the severity of the misconduct at issue, 
but also notes that none of the specific entities responsible for the 
wrongdoing are granted relief under the terms of this exemption. In 
addition to considering past misconduct, the Department must consider 
the potential harms to Covered Plans that may result from a denial of 
the exemption. Based on the written administrative record for this 
exemption, the Department has concluded that the exemption's conditions 
will appropriately ensure that Covered Plans are protected from future 
violations, and insulated from the injury they could experience from 
denial of the requested exemption. The Department also has determined 
that a hearing is not necessary to further explore the issues raised in 
the commenter's written submission.
The QPAM Coalition Comment 3: Request for Changes to the Exemption
    68. The QPAM Coalition made a series of requests if the Department 
determines to grant exemptive relief for the UBS QPAMs. Generally, the 
QPAM Coalition requested that the Department: (1) require UBS to 
provide additional information regarding the plans for which it 
provides services; prohibit UBS from managing plan assets due to a 
self-perception that it is ``above the law''; (2) limit the exemption's 
effective period to two-years; (3) require UBS to pay monetary 
penalties (presumably in order to rely on the QPAM Exemption); 
implement a regime for monitoring UBS compliance with the exemption's 
conditions that includes a panel of independent auditors; (4) establish 
a public registry for all financial actors involved in working with 
QPAMs; and (5)collaborate with financial regulators from around the 
world in making its determinations regarding UBS' exemption request, 
and other financial entities that on the relief provided in PTE 84-14.
    69. The Department carefully considered the QPAM Coalition's 
comments and determined not to make their requested changes for the 
following reasons. First, the Department does not have the authority to 
make some of the requested changes. For example, in connection with the 
exemption process, the Department does not have the authority to 
prohibit the UBS QPAMs from managing plan assets if the UBS QPAMs rely 
on other available prohibited transaction exemptions or to require the 
UBS QPAMs to pay additional monetary penalties based on the Covered 
Convictions.
    70. Second, in the Department's view, several of the QPAM 
Coalition's recommendations would not provide meaningful protections to 
Covered Plans. For example, limiting relief in the exemption to two 
years as suggested by coalition would not provide much additional 
protection to Covered Plans especially considering the exemption 
condition requiring the UBS QPAMs to undergo an in-depth annual audit 
by an independent auditor. The audit reports are publicly available and 
could form the basis for the Department to revise or revoke this 
exemption, if warranted or lead to a referral of the UBS QPAMs to

[[Page 3940]]

EBSA's Office of Enforcement in the event that violations of ERISA were 
revealed through the audit. UBS QPAMs are well aware of these potential 
consequences, which makes the audit an effective means to ensure 
compliance with the provisions of Title I of ERISA and the terms of 
this exemption. The Department also is not persuaded that a panel of 
auditors would provide significant additional protection to Covered 
Plans as compared to a single independent auditor experienced and 
knowledgeable about ERISA and the terms of this exemption.\43\ The 
Department reviews each audit and is empowered to seek additional 
information from the auditor if the audit appears lacking in any 
respect. The Department notes that Covered Plans already receive a copy 
of the proposed exemption, the final exemption, the Summary and the 
Statement. Further, the annual independent audit is available to all 
Covered Plan fiduciaries through EBSA's Public Disclosure Room (see 
above). This final exemption also adds two additional disclosure 
requirements (the Violation Notice, and disclosure of the QPAMs' 
indemnification procedures). The Department is skeptical that, under 
the circumstances, more disclosure of the kind suggested by the QPAM 
Coalition \44\ will benefit Covered Plans, and the QPAM Commenters 
Coalition has not made a showing to the contrary.
---------------------------------------------------------------------------

    \43\ The ERISA Coalition also failed to provide any detail 
regarding how the ``panel of auditors'' could be operationalized as 
a condition for relief. Important unanswered questions include how a 
panel of auditors would be chosen, how they would coordinate their 
audit findings, and how any conflicts in their findings would be 
resolved.
    \44\ The QPAM Coalition, suggests, among other things, that 
``foreign banks should provide information on why they wish to open 
branches in the E.U. financial market, including submission of all 
possible convictions, deferred prosecution agreements, and 
equivalent measures, transparently and publicly.''
---------------------------------------------------------------------------

    71. Regarding the comment that the Department should coordinate 
with regulators around the world, the Department notes that it has 
communicated with other regulators in the past during its consideration 
of exemption requests and will continue to do so in the future when 
appropriate to protect affected plans.
    The conditions of this exemption are not intended to punish UBS or 
burden the UBS QPAMs in a manner that will not provide meaningful 
protections to Covered Plans. Instead, the Department's objective in 
granting this exemption is to (i) insulate UBS QPAMs from the business 
and corporate decision making of UBS and its affiliates and any 
Criminal Misconduct or potential future misconduct of UBS and its 
affiliates; (ii) allow Covered Plans to terminate their relationship 
with the UBS QPAMs with minimal disruption to the Covered Plans; (iii) 
create an annual reliable and independent public record that documents 
the UBS QPAMs' level of compliance with the terms of this exemption and 
adherence to their basic fiduciary duties; and (iv) provide the 
Department with the flexibility to revise or revoke the relief in this 
exemption in a manner most protective of Covered Plans if UBS engages 
in future criminal activity.
Modifications to the Proposal the Department Is Making on Its Own 
Motion
    72. The Department has decided to make several minor changes to the 
Proposal in the final exemption to correct scrivener's errors in the 
operative text, renumber sections of the operative text, and make 
certain updates to the factual record.
    73. The Department also revised Section III(l) of the Proposal by 
replacing text referencing the exemption's termination if a UBS entity 
is convicted of a crime described in Section I(g) of PTE 84-14 and 
replacing this text with the exemption's termination if a UBS entity 
engages in conduct prohibited by Section I(g) of PTE 84-14 (see Section 
III (l) in this exemption). The Department made this modification to 
ensure consistency with the ineligibility requirements of the recently 
amended PTE 84-14.
    74. Section III(o) of the Proposal reads: ``Relief in this 
exemption will terminate on the date that is six months following the 
date that a U.S. regulatory authority makes a final decision that UBS 
or an affiliate of either failed to comply in all material respects 
with any requirement imposed by such regulatory authority in connection 
with the Covered Convictions.'' The Department inadvertently omitted 
the words ``or CSAG'' following ``UBS.'' Further, the Department has 
determined to extend the relief period to one year to make the 
provision consistent with the one-year transition period requirement in 
Section I(i) of amended PTE 84-14. After these edits, Condition (o) of 
this final exemption reads: ``this exemption will terminate on the date 
that is one year following the date that a U.S. regulatory authority 
makes a final decision that UBS or CSAG or an affiliate of either 
failed to comply in all material respects with any requirement imposed 
by such regulatory authority in connection with the Covered Convictions 
[emphasis added].''
    75. Finally, the Department modified Section III(s) of the Proposal 
by adding language that an Affiliated QPAM will not fail to meet the 
terms of this exemption if a different Affiliated QPAM failed to 
provide Covered Plans with a Violation Notice required by Section 
III(t) of this exemption. The Department is making this revision 
because it did not intend for a QPAM to lose exemptive relief under the 
exemption solely when a different QPAM fails to provide a Violation 
Notice.
    Publicly Available Information:
    76. The complete application file (D-12098) is available for public 
inspection in the Public Disclosure Room of the Employee Benefits 
Security Administration, Room N-1515, U.S. Department of Labor, 200 
Constitution Avenue NW, Washington, DC 20210, reachable by phone at 
(202) 693-8673. For a more complete statement of the facts and 
representations supporting the Department's decision to grant this 
exemption, please refer to the notice of proposed exemption published 
on June 11, 2024 (89 FR 49213).

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 from certain 
requirements of other provisions of ERISA or the Code, including but 
not limited to 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 plan's participants and beneficiaries 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) As required by ERISA section 408(a) and/or Code section 
4975(c)(2), the Department finds that the exemption is: (a) 
administratively feasible for the Department; (b) in the interests of 
Covered Plans and their participants and beneficiaries; and (c) 
protective of the rights of the Covered Plan's participants and 
beneficiaries.
    (3) This exemption is supplemental to and not in derogation of any 
other provisions of ERISA and/or the Code, including statutory or 
administrative

[[Page 3941]]

exemptions and transitional rules. Furthermore, the fact that a 
transaction is subject to an administrative or statutory exemption is 
not dispositive for determining whether the transaction is in fact a 
prohibited transaction.
    (4) The availability of this exemption is subject to the express 
condition that the facts and representations contained in the 
application accurately describe all material terms of the transactions 
that are the subject of the exemption and are true at all times.
    Accordingly, after considering the entire record developed in 
connection with UBS's exemption application, the Department has 
determined to grant the following exemption under the authority of 
ERISA section 408(a) and Code section 4975(c)(2) and in accordance with 
the Department's exemption procedures set forth in 29 CFR part 2570, 
subpart B.\45\
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    \45\ 76 FR 66637, 66644, October 27, 2011.
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Exemption

Section I. Definitions

    (a) Names of Certain Corporate Entities:
    (1) The term ``CSAG'' means Credit Suisse AG, which was 100% owned 
by Credit Suisse Group AG, before UBS acquired Credit Suisse Group AG 
on June 12, 2024, and became the sole surviving entity.
    (2) The term ``CSAM LLC'' means Credit Suisse Asset Management, 
LLC. On May 1, 2024, CSAM LLC was merged into UBS Americas, with UBS 
Americas as the surviving entity.
    (3) The term ``CSSEL'' means Credit Suisse Securities (Europe) 
Limited an indirectly a wholly owned subsidiary of UBS Group AG.
    (4) The term ``UBS'' means UBS AG which is a wholly owned 
subsidiary of UBS Group AG.
    (5) The term ``UBS Americas'' means UBS Asset Management (Americas) 
LLC, which is majority owned by UBS Americas, Inc., a wholly owned 
subsidiary of UBS AG.
    (6) The term ``UBS Europe'' means UBS Europe SE. UBS Europe is the 
successor to UBS (France) S.A. UBS (France) S.A. was a wholly owned 
subsidiary of UBS under the laws of France until 2023. In July of 2023, 
UBS France S.A. merged into UBS Europe and set up a branch in France 
called UBS Europe SE France Branch.
    (7) The term ``UBS Hedge Fund Solutions LLC'' was formerly known as 
UBS Alternative and Quantitative Investments, LLC and is wholly owned 
by UBS Americas Holding LLC, a wholly owned subsidiary of UBS. UBS 
Hedge Fund Solutions merged into UBS Americas on April 1, 2024.
    (8) The term ``UBS Securities Japan'' means UBS Securities Japan 
Co. Ltd, a wholly owned subsidiary of UBS incorporated under the laws 
of Japan.
    (b) The term ``Affiliated QPAM'' means: UBS Americas, UBS Hedge 
Fund Solutions LLC, Credit Suisse Asset Management, LLC, and any future 
separate legal entity within the Asset Management or the Global Wealth 
Management Americas U.S. divisions of UBS that qualifies as a 
``qualified professional asset manager'' (as defined in Section VI(a) 
of PTE 84-14) and that relies on the relief provided by PTE 84-14, and 
with respect to which UBS is an ``affiliate'' (as defined in Part VI(d) 
of PTE 84-14). The term Affiliated QPAM excludes a Misconduct Entity.
    (c) The term ``Criminal Activity'' means the Covered Convictions, 
the 2013 UBS Conviction, and the FX Misconduct.
    (d) The term ``Covered Convictions'' means (1) the judgment of 
conviction against CSAG for one count of conspiracy to violate section 
7206(2) of the Internal Revenue Code in violation of Title 18, United 
States Code, Section 371, that was entered in the District Court for 
the Eastern District of Virginia in Case Number 1:14-cr-188-RBS, on 
November 21, 2014 (the ``2014 CSAG Conviction''); (2) the judgment of 
conviction against CSSEL in Case Number 1:21-cr-00520-WFK (the ``2022 
CSSEL Conviction''); (3) the judgment of conviction against UBS in case 
number 3:15-cr-00076-RNC in the U.S. District Court for the District of 
Connecticut for one count of wire fraud in violation of Title 18, 
United States Code, Sections 1343 and 2 in connection with UBS's 
submission of Yen London Interbank Offered Rates and other benchmark 
interest rates between 2001 and 2010; and (4) the judgment of 
conviction on February 20, 2019, against UBS and UBS France in case 
Number 1105592033 in the French First Instance Court (the ``2019 UBS 
France Conviction'').
    (e) The term ``2013 UBS Conviction'' means the judgment of 
conviction against UBS Securities Japan Co. Ltd. in case number 3:12 cr 
00268 RNC in the U.S. District Court of the District of Connecticut for 
one count of wire fraud in violation of Title 18, United States Code, 
sections 1343 and 2 in connection with submission of YEN London 
Interbank Offered Rates and other benchmark interest rates.
    (f) The term ``FX Misconduct'' means the conduct engaged in by UBS 
personnel described in Exhibit 1 of the Plea Agreement (Factual Basis 
for Breach) entered into between UBS and the Department of Justice 
Criminal Division, on May 20, 2015, in connection with Case Number 
3:15-cr-00076-RNC filed in the US District Court for the District of 
Connecticut.
    (g) 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 an 
Affiliated QPAM relies on PTE 84-14, or with respect to which an 
Affiliated QPAM (or any UBS affiliate) 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 the 
Affiliated QPAM 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. Notwithstanding the above, an Affiliated 
QPAM may disclaim reliance on QPAM status or PTE 84-14 in a written 
modification of a contract, arrangement, or agreement with an ERISA-
covered plan or IRA, 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 Affiliated QPAM will not represent that it is a QPAM, and will not 
rely on the relief described in PTE 84-14.
    (h) The term ``Exemption Period'' means the period beginning on 
June 12, 2024, and ending on June 11, 2029.
    (i) The term ``Misconduct Entity'' means any one of the following: 
an entity subject to one of the Covered Convictions, i.e., UBS, UBS 
France (recently merged into UBS Europe), CSAG and CSSEL; the entity 
subject to the 2013 UBS Conviction, i.e., UBS Securities Japan; or an 
entity that was the subject of the FX Misconduct, i.e., UBS.
    (j) The term ``Related QPAM'' means any current or future 
``qualified professional asset manager'' (as defined in Section VI(a) 
of PTE 84-14) that relies on the relief provided by PTE 84-14, and with 
respect to which UBS owns a direct or indirect five (5) percent or more 
interest, but with respect to which a Misconduct Entity is not an 
``affiliate'' (as defined in section VI(d)(1) of PTE 84-14). The term 
``Related QPAM'' excludes a Misconduct Entity.
    (k) The term ``best knowledge,'' ``to the best of one's 
knowledge,'' ``best knowledge at that time,'' and other similar ``best 
knowledge'' terms shall include matters that are known to the

[[Page 3942]]

applicable individual or should be known to such individual upon the 
exercise of such individual's due diligence required under the 
circumstances, and, with respect to an entity other than a natural 
person, such term 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.
    (l) The term ``UBS Seconded Employee'' means, an individual 
nominally employed by a Misconduct Entity who performs work on behalf 
of a UBS QPAM; provided that such UBS QPAM is solely responsible for 
the management and control of the employee's job activities performed 
on behalf of such QPAM. Notwithstanding the preceding sentence, the UBS 
QPAM must be solely responsible for the establishment of the employee's 
job duties and terms of employment (including compensation, promotions, 
and benefits); and must have supervisory responsibility with respect 
to, among other things, the employee's performance, training, and 
disciplinary actions.
    (m) The term ``UBS QPAMs'' means, individually or collectively, the 
Affiliated QPAMs and/or the Related QPAMs.
    (n) The ``conduct'' of any person or entity that is the ``subject 
of'' the Criminal Activity encompasses any misconduct of CSAG, CSSEL, 
UBS, UBS France (later merged with UBS Europe), UBS Securities Japan, 
and/or their personnel: (i) that is described in Exhibit 3 to the Plea 
Agreement entered into between UBS and the Department of Justice 
Criminal Division, on May 20, 2015, in connection with case number 
3:15-cr-00076-RNC; (ii) that is described in Exhibits 3 and 4 to the 
Plea Agreement entered into between UBS Securities Japan and the 
Department of Justice Criminal Division, on December 19, 2012, in 
connection with case number 3:12-cr-00268-RNC; (iii) that is described 
in Exhibit 1 of the Plea Agreement (Factual Basis for Breach) entered 
into between UBS and the Department of Justice Criminal Division, on 
May 20, 2015, in connection with Case Number 3:15-cr-00076-RNC filed in 
the US District Court for the District of Connecticut; (iv) that is the 
basis of the 2019 UBS France Conviction; and (v) that is the subject of 
the 2014 CSAG Conviction and the 2022 CSSEL Conviction described in 
Section I(c)(1) and (c)(2).
    (o) The term ``participate in'' when used to describe an individual 
or entity's participation in the Criminal Activity refers not only to 
active participation in the Criminal Activity but also includes an 
individual or entity's knowledge or approval of the Criminal Activity, 
without taking active steps to prohibit such conduct, such as reporting 
the conduct to the individual's supervisors, and to the Board of 
Directors.

Section II. Covered Transactions

    (a) UBS QPAMs are not precluded from relying on the exemptive 
relief provided by Prohibited Transaction Exemption 84-14 (PTE 84-14) 
\46\ during the Exemption Period, notwithstanding the ``Covered 
Convictions,'' provided that the definitions in Section I and the 
conditions in Section III are satisfied.
---------------------------------------------------------------------------

    \46\ 49 FR 9494 (March 13, 1984), as corrected at 50 FR 41430, 
(Oct. 10, 1985), as amended at 70 FR 49305 (Aug. 23, 2005), as 
amended at 75 FR 38837 (July 6, 2010), and as amended at 89 FR 23090 
(April 3, 2024).
---------------------------------------------------------------------------

    (b) UBS QPAMS are not precluded from relying on the exemptive 
relief provided by PTE 84-14 during the period from June 12, 2023, to 
June 11, 2024, notwithstanding UBS's failure to comply with Section 
III(j)(1) of PTE 2023-14.

Section III. Conditions

    (a) The UBS QPAMs (including their officers, directors, agents 
other than the Misconduct Entities, employees of such QPAMs, and UBS 
Seconded Employees) did not know nor have reason to know of and did not 
participate in the conduct underlying the Criminal Activity. Further, 
any other party engaged on behalf of the UBS 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 conduct underlying the Criminal 
Activity.
    (b) The UBS QPAMs (including their officers, directors, agents 
other than the Misconduct Entities, employees of such QPAMs, and UBS 
Seconded Employees) did not receive direct compensation, or knowingly 
receive indirect compensation, in connection with the criminal conduct 
that is the subject of the Criminal Activity. Further, any other party 
engaged on behalf of the UBS QPAMs who had responsibility for, or 
exercised authority in connection with the management of plan assets 
did not receive direct compensation, or knowingly receive indirect 
compensation, in connection with the Criminal Activity.
    (c) The Affiliated QPAMs do not currently and will not in the 
future employ or knowingly engage any of the individuals who 
participated in the criminal conduct underlying the Criminal Activity.
    (d) At all times during the Exemption Period, no Affiliated 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 such Affiliated QPAM with respect to one or 
more Covered Plans, to enter into any transaction with a Misconduct 
Entity or to engage a Misconduct Entity 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. An Affiliated QPAM will not fail this condition 
solely because:
    (1) A UBS (or successor) affiliate serves as a local sub-custodian 
that is selected by an unaffiliated global custodian that, in turn, is 
selected by someone other than a UBS QPAM; or
    (2) Services are provided by UBS Seconded Employees.
    (e) Any failure of an Affiliated QPAM to satisfy Section I(g) of 
PTE 84-14 arose solely from the Covered Convictions.
    (f) A UBS QPAM did not exercise authority over the assets of any 
plan subject to Part 4 of Title I of ERISA (an ``ERISA-covered plan'') 
or Code section 4975 (an ``IRA'') in a manner that it knew or should 
have known would further the criminal conduct underlying the Criminal 
Activity; or cause the UBS QPAM or its affiliates to directly or 
indirectly profit from the criminal conduct underlying the Criminal 
Activity.
    (g) No Misconduct Entity will act as a fiduciary within the meaning 
of ERISA section 3(21)(A)(i) or (iii) or Code section 4975(e)(3)(A) and 
(C) with respect to ERISA-covered Plan and IRA assets, except that each 
may act as such a fiduciary with respect to employee benefit plans 
sponsored for its own employees or employees of an affiliate. No 
Misconduct Entity will be treated as violating the conditions of the 
exemption solely because it acted as an investment advice fiduciary 
within the meaning of ERISA section 3(21)(A)(ii) or Code section 
4975(e)(3)(B).
    (h)(1) Each Affiliated QPAM must maintain, adjust (to the extent 
necessary), implement, and follow the written policies and procedures 
described below (Policies). The Policies must require and must be 
reasonably designed to ensure that:
    (i) The asset management decisions of the QPAM are conducted 
independently of the corporate and management and

[[Page 3943]]

business activities of each Misconduct Entity, and without considering 
any fee a related local sub-custodian may receive from those decisions. 
This condition does not preclude an Affiliated QPAM, as defined in 
Section I(b)(1), from receiving publicly available research and other 
widely available information from a UBS affiliate;
    (ii) The QPAM fully complies with ERISA's fiduciary duties, and 
with ERISA and the Code's prohibited transaction provisions, in each 
case as applicable with respect to each Covered Plan, and does not 
knowingly participate in any violation of these duties and provisions 
with respect to Covered Plans;
    (iii) The 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 QPAM to regulators, 
including but not limited to, the Department, 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 its knowledge at that time, the 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; and
    (vi) The QPAM complies with the terms of this exemption;
    (2) Any violation of or failure to comply with an item in 
subparagraphs (h)(1)(ii) through (vi) is corrected as soon as 
reasonably possible upon discovery, or as soon after the QPAM 
reasonably should have known of the noncompliance (whichever is 
earlier), and any such violation or compliance failure not so corrected 
is reported, upon the discovery of such failure to so correct, in 
writing. This report must be made to the head of compliance and the 
general counsel (or their functional equivalent) of the relevant UBS 
QPAM that engaged in the violation or failure and the independent 
auditor responsible for reviewing compliance with the Policies. A QPAM 
will not be treated as having failed to develop, implement, maintain, 
or follow the Policies, if it corrects any instance of noncompliance as 
soon as reasonably possible upon discovery, or as soon as reasonably 
possible after the QPAM reasonably should have known of the 
noncompliance (whichever is earlier), and provided that it adheres to 
the reporting requirements set forth in this subparagraph (2);
    (3) Each Affiliated QPAM must maintain, adjust (to the extent 
necessary), and implement or continue a program of training during the 
Exemption Period (the Training) that is conducted at least annually for 
all relevant Affiliated QPAM asset/portfolio management, trading, 
legal, compliance, and internal audit personnel.\47\ The Training must:
---------------------------------------------------------------------------

    \47\ The exemption does not preclude an Affiliated QPAM from 
maintaining separate training programs provided each training 
program complies with this exemption.
---------------------------------------------------------------------------

    (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 the requirement for prompt reporting of 
any wrongdoing;
    (ii) Be conducted 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 conducted in-person, electronically, or via a website.
    (i)(1) Each Affiliated QPAM submits to an audit conducted by an 
independent auditor, who has been prudently selected and who has 
appropriate technical training and proficiency with ERISA and the Code, 
to evaluate the adequacy of, and each Affiliated QPAM's compliance 
with, the Policies and Training described above in Section (h). The 
audit requirement must be incorporated in the Policies.
    (2) UBS shall provide the Department a copy of the engagement 
agreement with the independent auditor within 15 days after its 
execution. Within 45 days after executing the engagement agreement with 
the independent auditor, and after consultation with the auditor, UBS 
must finalize and provide to the independent auditor a schedule for 
completion of the audit. The schedule must include target dates for the 
auditor to send initial information and document requests to UBS and 
for UBS to respond to those requests. The Department's receipt and 
incorporation of the engagement agreement into the record, with or 
without comment, should not be taken as an indication that the 
Department has approved of the engagement agreement.
    (3) The initial audit under this exemption must cover the period 
that begins on June 12, 2024, and ends on June 11, 2025, and the audit 
must be completed by Thursday, December 11, 2025. The second audit must 
cover the period that begins on June 12, 2025, and ends on June 11, 
2026, and must be completed by Friday, December 11, 2026. The third 
audit must cover the period that begins on June 12, 2026, and ends on 
June 11, 2027, and must be completed by Monday, December 13, 2027. The 
fourth audit must cover the period that begins on June 12, 2027, and 
ends on June 11, 2028, and must be completed by Monday, December 11, 
2028. The fifth audit must cover the period that begins on June 12, 
2028, and ends on June 11, 2029, and must be completed by Tuesday, 
December 11, 2029. Notwithstanding the audit periods described above, 
the audit required under PTE 2023-14 must be completed for the prior 
period of June 12, 2023, through June 11, 2024 and delivered to the 
Department in accordance with the terms of that exemption. The prior 
exemption audit report(s) must be submitted in accordance with section 
III(i)(9) below;
    (4) 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 for relief 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, each Affiliated 
QPAM and, if applicable, UBS, must 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;
    (5) The auditor's engagement must specifically require the auditor 
to annually determine whether each Affiliated QPAM has developed, 
implemented, maintained, and followed the Policies in accordance with 
the conditions of this exemption, and has developed and implemented the 
Training, as required herein;
    (6) The auditor's engagement must specifically require the auditor 
to test each Affiliated QPAM's operational compliance with the Policies 
and Training. In this regard, the auditor must test, for each 
Affiliated QPAM, a sample of such Affiliated QPAM's transactions 
involving Covered Plans, sufficient in size and nature to afford the 
auditor a reasonable basis to determine such Affiliated QPAM's 
operational compliance with the Policies and Training;

[[Page 3944]]

    (7) For the audit, on or before the end of the relevant period 
described in Section III(i)(1) for completing the audit, the auditor 
must issue a written report (the Audit Report) to UBS and the 
Affiliated QPAM to which the audit applies that describes the 
procedures performed by the auditor in connection with its examination. 
The auditor, at its discretion, may issue a single consolidated Audit 
Report that covers all the Affiliated QPAMs. The Audit Report must 
include the auditor's specific determinations regarding:
    (i) The adequacy of each Affiliated QPAM's Policies and Training; 
each Affiliated QPAM's compliance with the Policies and Training; the 
need, if any, to strengthen such Policies and Training; and any 
instance of the respective Affiliated QPAM's noncompliance with the 
written Policies and Training described in Section III(h) above. The 
Affiliated QPAM must promptly address any noncompliance and prepare a 
written plan of action to address any determination as to 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 Affiliated QPAM. Any action taken or the plan of action to 
be taken by the respective Affiliated QPAM must be included in an 
addendum to the Audit Report (such addendum must be completed prior to 
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 
of submission of the Audit Report, the following period's Audit Report 
must state whether the plan was satisfactorily completed. Any 
determination by the auditor that an Affiliated 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 
Affiliated QPAM has complied with the requirements under this 
subparagraph must be based on evidence that each Affiliated QPAM has 
implemented, maintained, and followed the Policies and Training 
required by this exemption. Furthermore, the auditor must not solely 
rely on the Exemption Report created by the Compliance Officers, 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 Exemption Review described in Section 
III(m);
    (8) The auditor must notify the respective Affiliated 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;
    (9) With respect to the Audit Report, the General Counsel, or one 
of the three most senior executive officers of the Affiliated QPAM to 
which the Audit Report applies, must certify in writing, under penalty 
of perjury, that the officer has reviewed the Audit Report and this 
exemption; that, to the best of such officer's knowledge at the time, 
such Affiliated QPAM has addressed, corrected, and 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 officer'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 exemption 
and with the applicable provisions of ERISA and the Code;
    (10) The Risk Committee of UBS's Group AG's Board of Directors is 
provided a copy of the Audit Report; and a senior executive officer of 
UBS Group AG's Compliance and Operational Risk Control function must 
review the Audit Report for each Affiliated QPAM and must certify in 
writing, under penalty of perjury, that such officer has reviewed the 
Audit Report;
    (11) Each Affiliated QPAM provides its certified Audit Report, by 
regular mail to: Office of Exemption Determinations (OED), 200 
Constitution Avenue NW, Washington, DC 20001; or via email to e-
[email protected]. This delivery must take place no later than 45 days 
following completion of the Audit Report. The Audit Reports will be 
made part of the public record regarding this exemption. Furthermore, 
each Affiliated QPAM must make its Audit Reports 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;
    (12) The auditor must provide the Department, upon request, for 
inspection and review, access to all the workpapers created and used in 
connection with the audit, provided such access and inspection is 
otherwise permitted by law;
    (13) UBS must notify the Department of Labor's Office of Exemption 
Determinations (OED) no later than 90 days after the Effective Date of 
this exemption, of the auditor selected to complete audits required by 
Section III(i)(1) above for the periods covering June 12, 2024, through 
June 11, 2029. Any engagement agreement with an auditor to perform the 
audit required by this exemption that is entered into subsequent to the 
effective date of this exemption must be submitted to OED no later than 
two months after the execution of such agreement;
    (14) At the Department's request, UBS and the Auditor shall provide 
the Department with updates about the progress of the audit. The 
Department's requests may be directed to UBS and/or the auditor;
    (15) For only the initial audit required by Section III(i)(1) above 
for the period covering June 12, 2024, through June 11, 2025, the 
auditor must consult with the auditors who performed the audits 
required pursuant to PTE 2023-14 for the period of June 12, 2023, 
through June 11, 2024, unless such auditor is the same auditor selected 
under paragraph 11 of this subsection. UBS must notify OED if for any 
reason the consultation required by this paragraph 12 cannot occur and 
must provide an explanation for why the consultation cannot occur. Such 
consultation may, but need not, occur for subsequent audits; and
    (16) UBS must notify the Department of a change in the independent 
auditor no later than two 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 UBS.
    (j) As of the effective date of this exemption, with respect to any 
arrangement, agreement, or contract between an Affiliated QPAM and a 
Covered Plan, the QPAM agrees and warrants to Covered Plans:
    (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); and to comply with the standards of prudence 
and loyalty set forth in ERISA section 404 with respect to each such 
ERISA-covered plan and IRA to the extent that ERISA section 404 is 
applicable;
    (2) To indemnify and hold harmless the Covered Plan for any actual 
losses resulting directly from the QPAM's

[[Page 3945]]

violation of any conditions of this exemption, 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 QPAM; or 
any claim arising out of the failure of such 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 a Conviction covered under this 
exemption. The term ``actual losses'' includes, but is 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 PTE 84-14;
    (3) Not to require (or otherwise cause) the Covered Plan to waive, 
limit, or qualify the liability of the QPAM for violating ERISA or the 
Code for engaging in prohibited transactions;
    (4) Not to restrict the ability of the Covered Plan to terminate or 
withdraw from its arrangement with the 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 such 
arrangement 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 an ERISA-covered plan's or IRA's investment, 
and such restrictions must be applicable to all such investors and be 
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 a like manner to all such investors;
    (6) Not to include exculpatory provisions disclaiming or otherwise 
limiting liability of the 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 UBS (and 
affiliates), or damages arising from acts outside the control of the 
Affiliated QPAM; and
    (7) Within 120 days after the effective date of this exemption, 
each QPAM must provide a notice of its obligations under this Section 
III(j) to each Covered Plan. For prospective Covered Plans that enter 
into a written asset or investment management agreement with a QPAM on 
or after a date that is 120 days after the effective date of this 
exemption, the QPAM must agree to its obligations under this Section 
III(j) in an updated investment management agreement between the QPAM 
and such clients or other written contractual agreement. 
Notwithstanding the above, a QPAM will not violate the condition solely 
because a Covered Plan refuses to sign an updated investment management 
agreement. For new Covered Plans that were provided an investment 
management agreement prior to the effective date of this exemption, 
returning it within 120 days after the effective date of this 
exemption, and that signed investment management agreement requires 
amendment to meet the terms of the exemption, the QPAM may provide the 
new Covered Plan with amendments that need not be signed with any 
documents required by this subsection (j) within ten (10) business days 
after receipt of the signed agreement.
    (k) Within 60 days after the publication date of the notice of 
final exemption in the Federal Register, each Affiliated QPAM provides 
notice of the proposed and final exemption as published in the Federal 
Register, along with a summary describing the facts that led to the 
Covered Convictions (the Summary), which has been submitted to the 
Department, and a prominently displayed statement (the Statement) that 
the Covered Convictions result in a failure to meet a condition in PTE 
84-14, to each sponsor and beneficial owner of a Covered Plan that has 
entered into a written asset or investment management agreement with an 
Affiliated QPAM, or the sponsor of an investment fund in any case where 
an Affiliated QPAM acts as a sub-adviser to the investment fund in 
which such ERISA-covered plan and IRA invests. The Summary will be 
submitted to OED before it is distributed by each Affiliated QPAM. All 
prospective Covered Plan clients that enter into a written asset or 
investment management agreement with an Affiliated QPAM after a date 
that is 60 days after the effective date of this exemption must receive 
a copy of the notice of the exemption, the Summary, and the Statement 
before, or contemporaneously with, the Covered Plan's receipt of a 
written asset or investment management agreement from the Affiliated 
QPAM. The notices may be delivered electronically (including by an 
email that has a link to the exemption).
    (l) The Affiliated QPAMs must comply with each condition of PTE 84-
14, as amended, with the sole exception of the violation of Section 
I(g) of PTE 84-14 that is attributable to the Covered Convictions. If, 
during the Exemption Period, an entity within UBS's corporate structure 
engages in conduct prohibited by Section I(g) of PTE 84-14 (other than 
the Covered Convictions), relief in this exemption would terminate 
immediately.
    (m)(1) Within 60 days after the date of publication of the 
exemption, each Affiliated QPAM must designate two senior Compliance 
Officers (the Compliance Officers) who will be responsible for 
compliance with the Policies and Training requirements described 
herein. For purposes of this condition (m), each relevant line of 
business within an Affiliated QPAM may designate its own two Compliance 
Officers. Notwithstanding the above, the appointed Compliance Officers 
must not be a person who: (i) participated in the criminal conduct 
underlying the Criminal Activity, or knew of, or (ii) had reason to 
know of, the Criminal Activity without taking active documented steps 
to stop the misconduct.
    (2) The Compliance Officers must conduct a review of each twelve-
month period of the Exemption Period (the Exemption Review), to 
determine the adequacy and effectiveness of the implementation of the 
Policies and Training.\48\
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    \48\ Pursuant to PTE 2023-14, the Compliance Officer also must 
conduct and complete an exemption review within three months of June 
11, 2024.
---------------------------------------------------------------------------

    (3) With respect to the Compliance Officers, the following 
conditions must be met:
    (i) Each Compliance Officer must be a professional who has 
extensive experience with, and knowledge of, the regulation of 
financial services and

[[Page 3946]]

products, including under ERISA and the Code;
    (ii) Each Compliance Officer must have a direct reporting line to 
the highest-ranking corporate officer in charge of compliance for the 
applicable Affiliated QPAM or the highest-ranking corporate officer in 
charge of the applicable Affiliated QPAM and
    (iii) The Compliance Officers responsible for the Exemption Review 
must provide the Exemption Report described in Section III(m)(4)(ii) 
below to the Auditor within seven (7) days of completing the report.
    (4) With respect to the Exemption Review, the following conditions 
must be met:
    (i) The Annual Exemption Review includes a review of the Affiliated 
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 
Officers or others within the compliance and risk control function (or 
its equivalent) during the time period; the most recent Audit Report 
issued pursuant to this exemption or PTE 2023-14; any material change 
in the relevant business activities of the Affiliated QPAMs; and 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 Affiliated QPAMs;
    (ii) The Compliance Officers must prepare a written report for the 
Exemption Review (an Exemption Report) that (A) summarizes their 
material activities during the prior year; (B) sets forth any instance 
of noncompliance discovered during the prior year, 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 the Exemption Report, each Compliance Officer must certify 
in writing that to the best of his or her 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 prior year and any related correction taken 
to date have been identified in the Exemption Report; and (D) the 
Affiliated QPAMs have complied with the Policies and Training, and/or 
corrected (or are correcting) any known instances of noncompliance in 
accordance with Section III(h) above;
    (iv) The Exemption Report must be provided to appropriate corporate 
officers of UBS and to each Affiliated QPAM to which such report 
relates, and to the head of compliance and the general counsel (or 
their functional equivalent) of UBS, and the relevant Affiliated QPAM. 
The Exemption Report must be made unconditionally available to the 
independent auditor described in Section III(i) above; and
    (v) The Exemption Review, including the Compliance Officers' 
written Annual Exemption Report, must cover the Exemption Period, and 
the Annual Review, including the Compliance Officers' written Report, 
must be completed within three (3) months following the end of the 
period to which it relates.
    (n) UBS imposes its internal procedures, controls, and protocols on 
each Misconduct Entity to reduce the likelihood of any recurrence of 
conduct that is the subject of the Criminal Activity.
    (o) Relief in this exemption will terminate on the date that is one 
year following the date that a U.S. regulatory authority makes a final 
decision that UBS or CSAG or an affiliate of either failed to comply in 
all material respects with any requirement imposed by such regulatory 
authority in connection with the Covered Convictions.
    (p) Each Affiliated QPAM will maintain records necessary to 
demonstrate that the conditions of this exemption have been met for six 
(6) years following the date of any transaction for which the 
Affiliated QPAM relies upon the relief in this exemption.
    (q) During the Exemption Period, UBS must: (1) immediately disclose 
to the Department any Deferred Prosecution Agreement (a DPA) or Non-
Prosecution Agreement (an NPA) with the U.S. Department of Justice, 
entered into by UBS or any of its affiliates (as defined in Section 
VI(d) of PTE 84-14) in connection with conduct described in Section 
I(g) of PTE 84-14 or section 411 of ERISA via email addressed to e-
[email protected]; and (2) immediately provide the Department with any 
information requested by the Department, as permitted by law, regarding 
the agreement and/or conduct and allegations that led to the agreement 
via email addressed to [email protected].
    (r) Within 60 days after the effective date of this exemption, each 
Affiliated QPAM, in its agreements with, or in other written 
disclosures provided to Covered Plans, will clearly and prominently 
inform Covered Plan clients of their 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.\49\ With respect to this requirement, the description may 
be continuously maintained on a website, provided that such website 
link to the Policies or Summary Policies is clearly and prominently 
disclosed to each Covered Plan.
---------------------------------------------------------------------------

    \49\ If the UBS 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.
---------------------------------------------------------------------------

    (s) An Affiliated QPAM will not fail to meet the terms of this 
exemption solely because a different Affiliated QPAM fails to satisfy a 
condition for relief described in Section III(c), (d), (h), (i), (j), 
(k), (l), (m), (p), (r), or (t); 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)(12), 
provided that such failure did not result from any actions or inactions 
of UBS or its affiliates;
    (t) If the independent auditor or UBS or its affiliates learns of 
any material noncompliance with a condition of this exemption, UBS must 
send a notice (a ``Violation Notice'') to all affected Covered Plans 
and the Department that prominently and conspicuously states or 
describes: (1) that UBS, or the UBS QPAM, as applicable, failed to meet 
the terms of this exemption (and describes the failure); (2) the extent 
to which UBS QPAMs have potentially been operating without an exemption 
due to the failure; (3) whether UBS plans to apply for retroactive 
relief from the Department for this failed condition; (4) any further 
transactions engaged in by the UBS QPAMs on behalf of Covered Plans 
that may be non-exempt prohibited transactions unless the Department 
grants retroactive relief for the period in which the transactions 
occurred; and (5) UBS must indemnify and hold harmless the Covered Plan 
for any actual losses resulting directly from the QPAM's failure to 
comply with any conditions of this exemption, ERISA's fiduciary duties 
and of the prohibited transaction provisions of ERISA and the Code, a

[[Page 3947]]

breach of contract by the QPAM, or any claim arising out of the failure 
of such QPAM to qualify for the exemptive relief provided by PTE 84-14 
as a result of a violation of PTE 84-14 Section I(g), other than a 
Conviction covered under the exemption. The Violation Notice must be 
sent to all affected Covered Plans and the Department within 30 days 
after the independent auditor becomes aware of the violation. If the 
Violation Notice is not sent within the 30-day period, the UBS QPAM may 
self-correct the failure by sending the Violation Notice to all 
affected Covered Plans and the Department with an addendum describing 
the failure within 30 days after the completion of next scheduled 
audit.
    (u) All the material facts and representations set forth in the 
Summary of Facts and Representations are true and accurate at all 
times.
    (v) Each UBS QPAM must develop written processes that clearly 
describe: (1) how the QPAM identifies and quantifies ``actual losses'' 
for purposes of Section III(j)(2); and (2) how Covered Plans may 
recover or avoid incurring the losses that the UBS QPAM must indemnify 
or hold Covered Plans harmless from incurring pursuant to Section 
III(j)(2). Each UBS QPAM must develop these processes and deliver a 
copy of the processes to each Covered Plan within 90 days after the 
date the Department publishes a final exemption in the Federal Register 
and notify Covered Plans of any subsequent material changes to the 
processes within 30 days of the effective date of such changes. 
Applicability Date: This exemption will be in effect for the period 
beginning on June 12, 2024 and ending on June 11, 2029, as well as the 
period of June 12, 2023, through June 11, 2024.

    Signed at Washington, DC.
George Christopher Cosby,
Director, Office of Exemption Determinations, Employee Benefits 
Security Administration, U.S. Department of Labor.
[FR Doc. 2025-00812 Filed 1-14-25; 8:45 am]
BILLING CODE 4510-29-P
```