Grant of Individual Exemption Involving BlackRock, Inc. and Its Investment Advisory, Investment Management and Broker-Dealer Affiliates and Their Successors (Applicants) Located in New York, NY, 50632-50659 [2011-20344]

Agencies

• Employee Benefits Security Administration
• DEPARTMENT OF LABOR

[Federal Register Volume 76, Number 157 (Monday, August 15, 2011)]
[Notices]
[Pages 50632-50659]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-20344]



[[Page 50631]]

Vol. 76

Monday,

No. 157

August 15, 2011

Part III





 Labor Department





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 Employee Benefits Security Administration





 Grant of Individual Exemption Involving BlackRock, Inc. and its 
Investment Advisory, Investment Management and Broker-Dealer Affiliates 
and their Successors (Applicants); Notice

Federal Register / Vol. 76 , No. 157 / Monday, August 15, 2011 / 
Notices

[[Page 50632]]


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DEPARTMENT OF LABOR

Employee Benefits Security Administration

[Prohibited Transaction Exemption 2011-17; Exemption Application No. D-
11588]


Grant of Individual Exemption Involving BlackRock, Inc. and Its 
Investment Advisory, Investment Management and Broker-Dealer Affiliates 
and Their Successors (Applicants) Located in New York, NY

AGENCY: Employee Benefits Security Administration, U.S. Department of 
Labor.

ACTION: Grant of individual exemption.

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SUMMARY: This document contains an individual exemption from certain 
prohibited transaction restrictions of the Employee Retirement Income 
Security Act of 1974, as amended (ERISA), the Federal Employees' 
Retirement System Act of 1986, as amended (FERSA), and the Internal 
Revenue Code of 1986, as amended (the Code). The transactions involve 
BlackRock, Inc. and its investment advisory, investment management and 
broker-dealer affiliates and their successors. The individual exemption 
affects plans for which BlackRock, Inc. and its investment advisory, 
investment management and broker-dealer affiliates and their successors 
serve as fiduciaries, and the participants and beneficiaries of such 
plans.

DATES: Effective Date: This exemption is effective as of December 1, 
2009.

SUPPLEMENTARY INFORMATION: On March 18, 2011, the Department published 
a notice of proposed individual exemption from the restrictions of 
ERISA sections 406(a)(1) and 406(b), FERSA sections 8477(c)(1) and 
(c)(2) and the sanctions resulting from the application of Code section 
4975, by reason of Code section 4975(c)(1) (the Proposed Exemption).\1\ 
The Proposed Exemption was requested by BlackRock, Inc. and its 
investment advisory, investment management and broker-dealer affiliates 
and their successors pursuant to ERISA section 408(a), Code section 
4975(c)(2) and FERSA section 8477(c)(3), and in accordance with the 
procedures set forth in 29 CFR part 2570, subpart B (55 FR 32836, 
32847, August 10, 1990). Effective December 31, 1978, section 102 of 
the Reorganization Plan No. 4 of 1978, (43 FR 47713, October 17, 1978) 
transferred the authority of the Secretary of the Treasury to issue 
exemptions of the type requested to the Secretary of Labor. 
Accordingly, this final individual exemption is being issued solely by 
the Department.
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    \1\ 76 FR 15058 (March 18, 2011).
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Background \2\
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    \2\ Capitalized terms used but not defined in the Background 
Section have the meaning set forth in Section VI of the exemption.
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    BlackRock, Inc. (BlackRock), based in New York, NY, is the largest 
publicly-traded investment management firm in the United States. 
BlackRock, through its investment advisory and investment management 
subsidiaries, currently manages assets for institutional and individual 
investors worldwide through a variety of equity, fixed income, cash 
management and alternative investment products. As of September 30, 
2010, BlackRock, through its advisor subsidiaries, had approximately 
$3.446 trillion in assets under management, including assets managed by 
BlackRock Institutional Trust Company, N.A. (BTC) (formerly known as 
Barclays Global Investors, N.A. (BGI)) and its affiliates.
    BTC is a national banking association headquartered in San 
Francisco, California. Prior to its acquisition by BlackRock on 
December 1, 2009 (the Acquisition), BTC (then BGI) was the largest 
asset manager in the U.S. A significant amount of BTC's assets under 
management in the U.S. consist of assets of employee benefit plans 
subject to ERISA, FERSA and/or the Code. BTC is a market leader in 
index and model-driven investment products. Until its sale to 
BlackRock, BGI was an indirect subsidiary of Barclays PLC. BTC, as of 
the date of the Acquisition, is now a wholly-owned subsidiary of 
BlackRock.
    Immediately following the Acquisition, (1) Barclays PLC (Barclays), 
(2) Bank of America Corporation (BOA), and (3) The PNC Financial 
Services Group, Inc. (PNC) (each of these, a Minority Passive 
Shareholder, or MPS) controlled the following interests in BlackRock:
    (a) BOA. BOA owned approximately 3.7% of BlackRock voting common 
stock and approximately 34.2% of BlackRock equity by value.
    (b) PNC. PNC owned approximately 35.2% of BlackRock voting common 
stock and approximately 24.5% of BlackRock equity by value.
    (c) Barclays. Barclays owned approximately 4.8% of BlackRock voting 
common stock and approximately 19.8% of BlackRock equity by value.
    Post-Acquisition, a secondary offering of BlackRock common stock 
was completed on November 15, 2010 (the Secondary Offering). 
BlackRock's ownership structure following the Secondary Offering was as 
follows: (a) BOA controlled 0% of BlackRock's voting common stock and 
approximately 7.1% of BlackRock's equity by value; (b) PNC controlled 
approximately 25.3% of BlackRock's voting common stock and 
approximately 20.3% of BlackRock's equity by value; and (c) Barclays 
controlled approximately 2.3% of BlackRock's voting common stock and 
approximately 19.6% of BlackRock's equity by value.
    All BlackRock stock beneficially owned by each MPS (other than 
stock held in certain fiduciary capacities and customer or market 
making accounts) is subject to a stockholders agreement entered into by 
and between that MPS and BlackRock (collectively, the Stockholders 
Agreements). Pursuant to each Stockholders Agreement, each MPS has or 
had the right to identify to BlackRock two (2) prospective directors, 
and, if such nominees are reasonably acceptable to the BlackRock Board 
of Directors (the Board), BlackRock and each respective MPS agrees to 
use best efforts to cause the election of such nominees to the Board. 
As a result of the Secondary Offering, BOA fell below a ten percent 
(10%) equity interest, and, assuming that it remains below this level, 
it lost the right to identify to BlackRock one representative director 
on or about February 13, 2011.
    At least ten (10) of the current eighteen (18) BlackRock directors 
must be ``independent'' (within the meaning of New York Stock Exchange 
rules) of the MPSs and BlackRock management and each MPS must vote its 
BlackRock voting common stock in accordance with the recommendations of 
the Board. In addition, the Audit Committee, the Management Development 
and Compensation Committee, and the Nominating and Governance Committee 
of the Board consist entirely of independent directors, and a majority 
of each other Board committee (if any), with the exception of the 
Executive Committee,\3\ must consist of independent directors. As of 
the date hereof, none of the directors representing an MPS serve on any 
Board committee, except that one director representing PNC serves on 
the Executive Committee. Further, no MPS representative directors sit 
on any of the Board of Directors of BlackRock Managers. While each MPS 
monitors its investment in BlackRock through its

[[Page 50633]]

Board representatives and each MPS has certain limited governance 
rights, no MPS has or will have any involvement in the day-to-day 
management of BlackRock, any BlackRock Manager or any other BlackRock 
Entity. In addition, the respective Stockholder Agreements impose 
standstill agreements, transfer restrictions and arm's length 
transaction restrictions on the ability of an MPS to control BlackRock 
or any BlackRock Manager.
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    \3\ While the Executive Committee may exercise the powers of the 
Board during intervals between Board meetings or at times when the 
Board is unable to convene, the Executive Committee has not met for 
over five (5) years.
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    A BlackRock Manager is a fiduciary with investment discretion with 
respect to the applicable Client Plan.\4\ As a result, the BlackRock 
Manager decides whether to enter into a Covered Transaction \5\ with or 
involving an MPS. The ownership interest of the MPS in BlackRock could 
affect the BlackRock Manager's best judgment as a fiduciary, raising 
issues under ERISA Section 406(b). Therefore, the Applicants sought 
relief from the prohibitions of ERISA section 406(b).
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    \4\ ``Client Plan'' means any plan subject to section 406 of the 
Act, Code section 4975 or FERSA section 8477(c) for which a 
BlackRock Manager is a fiduciary as described in section 3(21) of 
ERISA, including, but not limited to, any Pooled Fund, MPS Plan, 
Index Account or Fund, Model-Driven Account or Fund, Other Account 
or Fund, or In-House Plan, except where specified to the contrary.
    \5\ ``Covered Transaction'' means each transaction set forth in 
Section III of the exemption by a BlackRock Manager for a Client 
Plan with or involving, directly or indirectly, an MPS and/or a 
BlackRock Entity.
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    Further, if BlackRock and one or more MPS are deemed affiliates, 
each MPS and its affiliates will very likely be parties in interest 
within the meaning of ERISA section 3(14) with respect to many Client 
Plans. Therefore, the Applicants also sought relief from the 
prohibitions of ERISA section 406(a).
    Such ERISA section 406(a) and section 406(b) relief was sought 
solely with respect to certain enumerated types of Covered Transactions 
entered into after the Acquisition and, in certain cases, before the 
Acquisition and that have continued after the Acquisition.
    The structure of the requested relief is founded upon compliance 
with five sets of general conditions. The five sets of general 
conditions are: (a) Modified conditions derived from Prohibited 
Transaction Exemption 84-14, as amended (sometimes referred to as the 
QPAM Exemption) \6\; (b) restrictions on the compensation of BlackRock 
Managers and their employees; (c) the establishment and implementation 
of certain policies and procedures; (d) the appointment by BlackRock of 
an Exemption Compliance Officer; and (e) the retention by BlackRock of 
an Independent Monitor. The purpose of these general conditions is, 
when coupled with the restrictions of the Stockholders Agreements and 
the BlackRock ownership structure, to foster independence of action by 
BlackRock notwithstanding the equity interests in BlackRock held by the 
MPSs. This unique overarching structure includes a comprehensive 
compliance function and an independent monitor, each of which work 
together for the benefit of Client Plans and their participants and 
beneficiaries by allowing Covered Transactions with or involving an MPS 
only if the Covered Transaction is, as best as can be determined, as 
favorable to the Client Plans as arm's length transactions with third 
parties.
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    \6\ 49 FR 9494 (Mar. 13, 1984), as amended, 70 FR 49305 (Aug. 
23, 2005), and as amended, 75 FR 38837 (July 6, 2010).
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    In addition to the general conditions, each Covered Transaction has 
its own set of specific conditions deemed suitable for it in light of 
the nature of the transaction. Many of the conditions for individual 
Covered Transactions are derived from statutory exemptions, 
administrative class exemptions or administrative individual exemptions 
frequently relied upon by fiduciaries and parties in interest 
(sometimes affiliated and sometimes not) to exempt similar 
transactions. The general and transaction-specific conditions for 
relief attempt to strike a balance that takes into account both the 
MPSs' unique equity interests in BlackRock and the ability of BlackRock 
acting on behalf of Client Plans to engage in arm's length Covered 
Transactions with or involving institutions as significant in their 
markets as are the MPSs.
    Compliance with the exemption requires that all Violations must be 
completely corrected. No non-exempt prohibited transaction will be 
deemed to occur, however, if the Violation is completely corrected 
(within the meaning of the exemption) no later than fourteen (14) 
business days following the date on which the Exemption Compliance 
Officer submits the quarterly report to the Independent Monitor for the 
quarter in which the Covered Transaction first became a non-exempt 
prohibited transaction.

Written Comments

    The Department invited all interested persons to submit written 
comments and/or requests for a public hearing with respect to the 
notice of proposed exemption on or before May 2, 2011. During the 
comment period, the Department received one (1) Comment letter on the 
proposed exemption. The sole comment letter was filed by BlackRock. The 
Department received no hearing requests during the comment period. The 
following is a discussion of BlackRock's comments and the Department's 
responses.
    Section III.D. of the Proposed Exemption. Section III.D. of the 
Proposed Exemption applies to certain transactions in the secondary 
market by BlackRock Managers of Fixed Income Obligations, including 
Fixed Income Obligations issued by or traded with an MPS. Specifically, 
BlackRock comments on the language in Section III.D.2(a) of the 
Proposed Exemption that states that ``[t]he purchase of the Fixed 
Income Obligation issued by an MPS is not made from the issuing 
MPS[.]'' BlackRock believes that so long as the purchase of an MPS 
Fixed Income Obligation is the result of the Three Quote Process, as 
required by the Proposed Exemption, there is no reason why the purchase 
from the issuing MPS should not be permitted.
    BlackRock points out that, for ERISA purposes, the purchase of a 
Fixed Income Obligation issued by an MPS represents two separate 
transactions: (1) The purchase of a debt security and (2) an extension 
of credit, an ongoing relationship with an MPS, which could present the 
potential for an ERISA conflict of interest. The Proposed Exemption 
requires that all purchases (or sales) in the secondary market of Fixed 
Income Obligations issued by or traded with an MPS be conducted through 
the Three Quote Process in order to ensure that the purchase is 
executed on the best available economic terms. BlackRock believes that 
whether or not an MPS Fixed Income Obligation is purchased from the 
issuing MPS or some other dealer is irrelevant, and the potential for 
later conflict is unrelated to a purchase pursuant to the Three Quote 
Process. BlackRock further notes that other safeguards contained in the 
proposed exemption, particularly the existence of and involvement of 
the Exemption Compliance Officer and the Independent Monitor, serve to 
adequately mitigate the risk that an unaddressed conflict will arise 
during the holding of an MPS Fixed Income Obligation, whether acquired 
from the issuing MPS or another dealer. In order to address this issue, 
BlackRock requests that Section III.D.2(a) of the Proposed Exemption be 
deleted in its entirety.
    The Department agrees with the comment, and it has deleted Section 
III.D.2(a) from the exemption's operative language.
    Section III.F. of the Proposed Exemption. Section III.F. of the 
Proposed Exemption applies to the purchase in an underwriting and 
holding by BlackRock Managers of Asset-Backed Securities, when an MPS

[[Page 50634]]

is an underwriter, in the capacity as either a manager or a member of 
the selling syndicate, trustee, or, in the case of Asset-Backed 
Securities which are CMBS, servicer. BlackRock states that the language 
of Section III.F. of the Proposed Exemption would not provide relief in 
circumstances where an MPS was acting as both an underwriter and a 
servicer of a CMBS Asset-Backed Security. BlackRock believes such a 
result was not intended by the Department.\7\ BlackRock comments that 
both the Affiliated Underwriting provisions of the Proposed Exemption 
(Section IV.A.) and the Affiliated Servicing provisions of the Proposed 
Exemption (Section IV.B.) should apply to the transaction. 
Specifically, in order to address this issue, BlackRock believes that: 
(1) In the first paragraph of Section III.F. of the Proposed Exemption, 
clause (iii) should be deleted in its entirety and the following should 
be substituted ``(iii) solely in the case of Asset-Backed Securities 
which are CMBS, serves as servicer of a trust that issued such CMBS, 
provided that:'', and (2) in Section III.F.(1), ``and'' before ``(b)'' 
should be replaced with a comma, and the following should be inserted 
before the semi-colon: ``and (c) if an MPS is an underwriter and an MPS 
is a servicer as described in clause (b), the conditions of both 
Section IV.A., as modified by Section III.F.1(a), and Section IV.B. 
must be satisfied.''
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    \7\ See Preamble to the Proposed Exemption (76 FR at 15067).
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    The Department agrees with the comment, and it has modified Section 
III.F. of the exemption's operative language accordingly.
    Section III.M. of the Proposed Exemption. Section III.M.1. of the 
Proposed Exemption applies to securities lending transactions involving 
Client Plan assets by BlackRock Managers to an MPS which is a U.S. 
Broker-Dealer, a U.S. Bank, a Foreign Broker-Dealer or a Foreign Bank. 
Conditions applicable to these transactions are set forth in Sections 
III.M.2. and III.M.3. of the Proposed Exemption. BlackRock points out 
that Sections III.M.2(d), III.M.3(b) and III.M.3(c) of the Proposed 
Exemption provide an alternative means of compliance with certain 
collateral requirements if the lending agent is a U.S. Broker-Dealer or 
U.S. Bank and agrees to provide an indemnity. BlackRock does not 
believe, however, that there are any significant policy issues 
presented with respect to these conditions in circumstances where a 
BlackRock Manager is acting as a lending agent through one of its U.S. 
registered investment advisor affiliates and not through a U.S. Bank or 
U.S. Broker-Dealer. BlackRock argues that, as the largest publicly-
traded investment management firm in the world, there should be no 
concern that an indemnity delivered by a BlackRock Manager would not be 
honored.\8\
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    \8\ BlackRock also points out that certain cross-references were 
inadvertently omitted in Section III.M.3. of the Proposed Exemption. 
The Department agrees, and the language has been modified to apply 
the proper cross references to Sections VI.KK. and VI.JJ. of the 
exemption.
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    In order to address these issues, BlackRock believes that Section 
III.M. of the Proposed Exemption should be revised to include the 
phrase ``, an investment advisor registered under the Investment 
Advisors Act of 1940, as amended'' after the words ``U.S. Bank'' in the 
first sentence of Sections III.M.2(d), III.M.3(b)(ii) and III.M.3(c) of 
the Proposed Exemption.
    The Department agrees that under the unique factual scenario 
presented by this exemption, adding U.S. registered investment advisors 
does not present any significant policy concerns, provided that the 
registered investment advisor is required to meet additional 
requirements regarding assets under management and shareholders' or 
partners' equity. Such additional requirements will ensure that the 
applicable BlackRock Manager can meet the terms of an indemnity 
agreement. As a result, the Department has modified Section III.M. of 
the exemption's operative language to include the term ``Registered 
Investment Advisor'' after the words ``U.S. Bank'' in the first 
sentence of Sections III.M.2(d), III.M.3(b)(ii) and III.M.3(c) of the 
Proposed Exemption. Further, the Department has inserted a definition 
in Section VI.GGG. of the exemption that reads as follows:

    ``Registered Investment Advisor'' means an investment advisor 
registered under the Investment Advisors Act of 1940, as amended, 
that has total client assets under its management or control in 
excess of $5 billion as of the last day of its most recent fiscal 
year and shareholders' or partners' equity in excess of $1 million, 
as shown in the most recent balance sheet prepared within the two 
years immediately preceding a Covered Transaction, in accordance 
with generally accepted accounting principles.''

    Section III.P. of the Proposed Exemption. Section III.P. of the 
Proposed Exemption applies to agency execution of equity and fixed 
income securities trades and related clearing as described in 
Prohibited Transaction Exemption 86-128, as amended \9\ (PTE 86-128), 
including agency cross trades, where the broker is an MPS. Section 
III.P.2. of the Proposed Exemption requires that Covered Transactions 
described in Section III.P. of the Proposed Exemption must satisfy the 
conditions of Section III(e), Section III(f), Section III(g)(2) and 
Section III(h) of PTE 86-128, which Sections require, among other 
things, the delivery of certain information to a Client Plan's 
``authorizing fiduciary.'' BlackRock is concerned that this provision 
is inconsistent with Section III.P.3. of the Proposed Exemption which 
requires that the ECO Function receive the information required to be 
provided to the ``authorizing fiduciary'' under those sections of PTE 
86-128. Applicants believe that it was the Department's intention that 
the conditions of Section III of PTE 86-128 that relate to actions 
required of, or information to be provided to, the Client Plan's 
authorizing fiduciary, may be satisfied if required of, or provided to, 
the ECO Function, including the authority to terminate the MPS broker-
dealer.\10\
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    \9\ 51 FR 41686 (Nov. 18, 1986), as amended, 67 FR 64137 (Oct. 
17, 2002).
    \10\ The Applicants believe such intent is set forth in the 
Summary of Facts and Representations published with the Proposed 
Exemption, 76 FR at 15073.
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    In order to address this ambiguity, BlackRock proposes that Section 
III.P.3. of the Proposed Exemption be deleted and Section III.P.2. of 
the Proposed Exemption be amended to read as follows:

    ``2. The conditions of PTE 86-128 set forth in the following 
sections of that exemption must be complied with: Section III(e); 
Section III(f); Section III(g)(2); and Section III(h); provided, 
however, that for purposes of Section III(e), Section III(f) and 
Section III(g)(2) of PTE 86-128, the ECO Function is the 
``authorizing fiduciary'' referred to therein; and the ECO has the 
authority to terminate the use of the MPS as broker-dealer without 
penalty to Client Plans at any time; and provided further that the 
first sentence of Section III(h) of PTE 86-128 is amended for 
purposes of this Section III.P.2. to provide as follows: * * *''

    The Department agrees that its intent was to permit the ECO 
Function to satisfy certain provisions that otherwise might be 
applicable to a Client Plan's ``authorizing fiduciary'' under PTE 86-
128. While the Department does not believe that the language of the 
Proposed Exemption is unclear, in order to ensure clarity, it has 
modified Section III.P. of the exemption's operative language as 
requested by BlackRock.
    Section III.U. of the Proposed Exemption. Section III.U. of the 
Proposed Exemption applies to purchases, sales and holdings by 
BlackRock Managers for Client Plans of commercial paper issued by ABCP

[[Page 50635]]

Conduits, when an MPS has one or more roles. BlackRock points out that 
Section III.U. of the Proposed Exemption does not specifically apply to 
circumstances under which commercial paper issued by an ABCP Conduit in 
which an MPS is a placement agent and/or has one or more continuing 
roles is purchased from or sold to an MPS by a BlackRock Manager. 
BlackRock believes that this omission was unintentional and is 
inconsistent with the intent and subsequent provisions of Section 
III.U. of the Proposed Exemption. In order to address this issue, 
BlackRock requests that the first paragraph of Section III.U. of the 
Proposed Exemption should be revised to read:

    ``Relief under Section I of this exemption is available for the 
purchase or sale, including purchases from or sales to an MPS, and 
the holding by BlackRock Managers acting on behalf of Client Plans 
of commercial paper issued by an ABCP Conduit with respect to which 
an MPS acts as seller, placement agent, and/or in some continuing 
capacity such as program administrator, provider of liquidity or 
provider of credit support, provided that: * * *''

    Further, Section III.U.4. of the Proposed Exemption requires that 
purchases and sales of ABCP Conduit commercial paper must be conducted 
pursuant to the Three Quote Process even in situations where such 
purchase or sale is with a third party in the secondary market and the 
MPS' sole involvement relates to its performance in a continuing role 
with respect such ABCP Conduit. BlackRock believes that if the sole 
involvement of an MPS is acting in a continuing role, then the Three 
Quote Process should not be required for purchases from or sales to 
third parties because there will be no additional compensation payable 
to and/or other benefits conferrable on such MPS in the secondary 
market by reason of such purchase or sale whether or not the Three 
Quote Process is followed. In order to address this issue, BlackRock 
believes that Section III.U.4. of the Proposed Exemption should be 
revised to delete the words ``and/or an MPS performs a continuing role 
with respect to the Securities.''
    The Department agrees with the comments, and it has modified 
Section III.U. of the exemption's operative language accordingly.
    Structured Securities, Including Guaranteed Governmental Mortgage 
Pool Certificates. BlackRock has determined that there is a common type 
of transaction which is superficially similar to the ``guaranteed 
governmental mortgage pool certificate'' TBA transactions covered by 
Section III.N. of the Proposed Exemption, but which in substance is 
more similar to a straightforward secondary market purchase of a 
``guaranteed governmental mortgage pool certificate'' as defined in the 
Department's regulations at 29 CFR 2510.3-101(i). An example, BlackRock 
states, of such a transaction would be a ``specified pool'' trade, 
wherein a BlackRock Manager identifies an existing specific mortgage 
pool listed on the FHLMC Web site, and asks a dealer (or dealers) for a 
quote on the delivery of a FHLMC pass-through certificate based on such 
specified pool in a few days time. BlackRock believes that this sort of 
purchase from an MPS was intended to be covered by the Proposed 
Exemption, subject to the credit quality determination set forth in 
Section III.N.2 of the Proposed Exemption and the Three Quote Process. 
Accordingly, BlackRock requests that the definition of ``Fixed Income 
Obligation'' be amended to explicitly include Securities which are 
guaranteed governmental mortgage pool certificates.
    BlackRock additionally believes purchases of Fixed Income 
Securities, including guaranteed governmental mortgage pool 
certificates, should be explicitly permitted where an MPS has either an 
ongoing function or can potentially incur liability. It notes that, 
pursuant to 29 CFR 2510.3-101(i)(1), when a plan invests in a 
guaranteed governmental mortgage pool, its assets include its 
investment in the certificate, but do not, solely by reason of such 
investment, include any of the underlying mortgages. However, private 
sector entities, such as an MPS, may perform services with respect to 
the underlying mortgages.\11\ BlackRock believes investments in 
guaranteed governmental pool certificates are analogous to investments 
in high quality asset-backed debt Securities.
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    \11\ See, e.g., Advisory Opinion 99-05A, regarding the Federal 
Agricultural Mortgage Corporation.
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    BlackRock observes that Sections III.B., III.C. and III.D. of the 
Proposed Exemption would permit BlackRock Managers to acquire Fixed 
Income Obligations issued by an MPS, subject to applicable conditions. 
On such grounds, BlackRock believes that BlackRock Managers should, 
therefore, be able to purchase Fixed Income Obligations, whether they 
are debt under 29 CFR 2510.3-101, or they are guaranteed governmental 
mortgage pool certificates, if an MPS performs an ongoing function with 
respect to such Fixed Income Obligations, such as trustee or servicer 
of collateral of a private sector collateralized structured obligation 
constituting debt under the plan asset regulation, or such as a trustee 
or mortgage servicer under a FNMA certificate.
    The conditions of Sections III.D. and III.E. of the Proposed 
Exemption reflect the ability of a BlackRock Manager to purchase and 
hold third party Fixed Income Obligations under which an MPS has an 
ongoing function ``such as debt trustee [or] servicer of collateral for 
asset-backed debt. * * *'' BlackRock notes that the heading for Section 
III.E. mentions only one such role, that of ``[d]ebt [t]rustee'', and 
the heading of Section III.D. does not mention any continuing roles. 
BlackRock believes that the exemption should clearly reflect the 
ability of BlackRock Managers to acquire and hold Fixed Income 
Obligations despite an MPS or MPSs performing one or more of a 
multiplicity of possible roles with respect to such Securities. 
BlackRock argues that, in the primary markets, the affiliated 
underwriting restrictions minimize the chance that a purchase may be 
intended to benefit an MPS.
    Accordingly, BlackRock believes that the following changes should 
be made to the exemption:
    1. Section VI.HH. should be amended to read as follows: ``Fixed 
Income Obligations'' means:
    (1) Fixed income obligations including structured debt or other 
instruments characterized as debt pursuant to 29 CFR 2510.3-101, 
including, but not limited to, debt convertible into equity, 
certificates of deposit and loans (other than loans with respect to 
which an MPS is the entity which acts as lead lender); and
    (2) guaranteed governmental mortgage pool certificates within the 
meaning of 29 CFR 2510.3-101(i).
    (3) Asset-Backed Securities are not Fixed Income Obligations for 
purposes of this exemption.
    2. The title of Section III.D. and the opening paragraphs thereof 
should be revised to read as follows:
    ``D. Certain Transactions in the Secondary Market by BlackRock 
Managers of Fixed Income Obligations Including Fixed Income Obligations 
Issued by or Traded With an MPS, and/or Under Which an MPS has Either 
an Ongoing Function or Can Potentially Incur Liability. Relief under 
Section I of this exemption is available for a purchase or sale in the 
secondary market or the holding by BlackRock Managers on behalf of 
Client Plans of (i) Fixed Income Obligations issued by an MPS, (ii) 
Fixed Income Obligations issued by a third party but purchased from or 
sold to an MPS, and/or (iii) Fixed Income Obligations under which

[[Page 50636]]

an MPS has either an ongoing function or can potentially incur 
liability, provided that:
    (1) If the Fixed Income Obligations are purchased from or sold to 
an MPS, it is as a result of the Three Quote Process.
    (2) * * *''
    3. The title of Section III.E. and the opening paragraph thereof 
should be revised to ``Purchase in an Underwriting and Holding by 
BlackRock Managers of Fixed Income Obligations Issued by a Third Party 
when an MPS is Underwriter, in Either a Manager or Member Capacity, 
and/or Under Which an MPS has Either an Ongoing Function or Can 
Potentially Incur Liability. Relief under Section I of this exemption 
is available for the purchase and holding by BlackRock Managers of 
Fixed Income Obligations issued by third parties in an underwriting 
when an MPS is an Underwriter, in either a manager or a member 
capacity, and/or Fixed Income Obligations under which an MPS has either 
an ongoing function or can potentially incur liability, provided that: 
* * *''
    4. A new subsection should be added to each of Sections III.D. and 
III.E. of the exemption, the text of which would be:\12\.
---------------------------------------------------------------------------

    \12\ An ``explicit U.S. Government guarantee'' refers to the 
U.S. Government's statutory guarantee of certain guaranteed 
governmental mortgage pool certificates. An ``implicit U.S. 
Government guarantee'' refers to guaranteed governmental mortgage 
pool certificates that are not statutorily guaranteed by the U.S. 
Government but are still issued by corporations chartered by the 
U.S. Government.

    ``( ) With respect to any Fixed Income Obligation acquired under 
this Section III which is a guaranteed governmental mortgage pool 
certificate within the meaning of 29 CFR 2510.3-101(i) which is 
accompanied by an implicit U.S. Government guarantee as opposed to 
an explicit U.S. Government guarantee (i) The BlackRock Manager 
initiating a purchase of such Securities makes a determination that 
such Securities are of substantially similar credit quality as 
guaranteed governmental mortgage pool certificates accompanied by an 
explicit U.S. Government guarantee, (ii) the ECO (in regular 
consultation with and under the supervision of the IM) monitors the 
credit spread between such implicitly and explicitly guaranteed 
certificates, and (iii) each of the ECO and the IM (independently) 
has the authority and responsibility to determine whether purchases 
of implicitly guaranteed certificates should not be permitted due to 
such credit spread, and such authority and responsibility is 
---------------------------------------------------------------------------
reflected in the EPPs.''

    The Department agrees with the comments, and it has modified the 
exemption's operative language.
    Model or Quantitative Conformity. Sections III.B.1., III.D.2(c), 
III.R.1. and III.X.1. of the Proposed Exemption apply to Covered 
Transactions that involve Model-Driven Accounts or Funds and Index 
Accounts or Funds. The Applicants have noted that the provisions in 
Sections III.B.1., III.D.2(c), III.R.1. and III.X.1. of the Proposed 
Exemption that state that purchases must not ``exceed the purchase 
amount necessary for such Model or quantitative conformity'' present a 
practical issue for the Applicants due to the fact that in the ordinary 
course of trading in Securities under the specified Covered 
Transactions, the amount of the Securities purchased could 
inadvertently exceed the amount necessary for Model or quantitative 
conformity despite the responsible BlackRock Manager's intention and 
reasonable attempt to comply with the condition.
    The Applicants have suggested that the language be revised as 
follows: ``And such purchase is reasonably calculated not to exceed the 
purchase amount necessary for such Model or quantitative conformity by 
more than a de minimis amount.''
    The Department agrees with the comment, and it has modified 
Sections III.B.1., III.D.2(c), III.R.1. and III.X.1. of the exemption's 
operative language accordingly.
    Effective Dates. Section I of the Proposed Exemption states that 
the exemption will be effective from December 1, 2009, through the 
earlier of (1) The effective date of an individual exemption granting 
permanent relief for the Covered Transaction or (2) May 31, 2011. 
BlackRock believes that it is unlikely that an individual exemption 
granting permanent relief for the Covered Transactions will be granted 
until late in 2011 or early 2012. As a result, BlackRock requests that 
the date May 31, 2011, set forth in Section I of the Proposed 
Exemption, should be revised to March 31, 2012.
    The Department agrees with the comment, and it has modified Section 
I of the final exemption accordingly.
    Following the Secondary Offering, BOA's interest in BlackRock 
decreased significantly. As a result, the exemption ceased to be 
available with respect to Bank of America Corporation and any entity 
directly or indirectly, through one or more intermediaries, 
controlling, controlled by or under common control with Bank of America 
Corporation (collectively, the BOA Group) on the day after the number 
of representatives of the BOA Group on the BlackRock Board of Directors 
was reduced to one (1).
    Technical Corrections. BlackRock also sought a number of technical 
corrections to the Proposed Exemption. Where the Department agrees with 
such technical corrections, the technical corrections have been made.
    After giving full consideration to the entire record, including 
BlackRock's written comment, the Department has decided to grant the 
exemption, as modified herein. For further information regarding 
BlackRock's comments and other matters discussed herein, interested 
persons are encouraged to obtain copies of the exemption application 
file (Exemption Application No. D-11588) that the Department maintains 
with respect to this case. The complete application file, as well as 
supplemental submissions received by the Department, is made available 
for public inspection in the Public Documents room of the Employee 
Benefits Security Administration, Room N-1513, U.S. Department of 
Labor, 200 Constitution Ave., NW., Washington, DC 20210.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption, refer to 
the notice of proposed exemption published on March 18, 2011, at 76 FR 
15058.

FOR FURTHER INFORMATION CONTACT: Brian Shiker, Office of Exemption 
Determinations, Employee Benefits Security Administration, U.S. 
Department of Labor, telephone (202) 693-8552.

Exemption

Section I: Covered Transactions Generally

    For the period from December 1, 2009, through the earlier of (i) 
The effective date of an individual exemption granting permanent relief 
for the following transactions, or (ii) March 31, 2012,\13\ the 
restrictions of ERISA sections 406(a)(1) and 406(b), FERSA sections 
8477(c)(1) and (2), and the sanctions resulting from the application of 
Code section 4975, by reason of Code section 4975(c)(1),\14\ shall not 
apply to the Covered Transactions set forth in Section III and entered 
into on behalf of or with the assets of a Client Plan; provided, that 
(x) the generally

[[Page 50637]]

applicable conditions of Section II of this exemption are satisfied, 
and, as applicable, the transaction-specific conditions set forth below 
in Sections III and IV of this exemption are satisfied, or (y) the 
Special Correction Procedure set forth in Section V of this exemption 
is satisfied.
---------------------------------------------------------------------------

    \13\ The exemption ceased to be available with respect to Bank 
of America Corporation and any entity directly or indirectly, 
through one or more intermediaries, controlling, controlled by or 
under common control with Bank of America Corporation (collectively, 
the BOA Group) on the day after the number of representatives of the 
BOA Group on the BlackRock Board of Directors was reduced to one 
(1).
    \14\ For purposes of this exemption, references to ERISA section 
406 should be read to refer as well to the corresponding provisions 
of Code section 4975 and FERSA section 8477(c).
---------------------------------------------------------------------------

Section II: Generally Applicable Conditions

    A. Compliance with the QPAM Exemption. The following conditions of 
Part I of Prohibited Transaction Exemption 84-14, as amended (PTE 84-14 
or the QPAM Exemption),\15\ must be satisfied with respect to each 
Covered Transaction:
---------------------------------------------------------------------------

    \15\ 49 FR 9494 (Mar. 13, 1984), as amended, 70 FR 49305 (Aug. 
23, 2005), and as amended, 75 FR 38837 (July 6, 2010).
---------------------------------------------------------------------------

    1. The BlackRock Manager engaging in the Covered Transaction is a 
Qualified Professional Asset Manager;
    2. Except as set forth in Section III of this exemption, at the 
time of the Covered Transaction (as determined under Section VI(i) of 
the QPAM Exemption) with or involving an MPS, such MPS, or its 
affiliate (within the meaning of Section VI(c) of the QPAM 
Exemption),\16\ does not have the authority to:
---------------------------------------------------------------------------

    \16\ Solely for purposes of this Section II.A.2., no BlackRock 
Entity will be deemed to be an affiliate of an MPS. The Department 
is not making herein a determination as to whether any BlackRock 
Entity is an affiliate of an MPS under ERISA.
---------------------------------------------------------------------------

    (a) Appoint or terminate the BlackRock Manager as a manager of the 
Client Plan assets involved in the Covered Transaction, or
    (b) negotiate on behalf of the Client Plan the terms of the 
management agreement with the BlackRock Manager (including renewals or 
modifications thereof) with respect to the Client Plan assets involved 
in the Covered Transaction;
    3. (a) Notwithstanding the foregoing, in the case of an investment 
fund (as defined in Section VI(b) of the QPAM Exemption) in which two 
or more unrelated Client Plans have an interest, a Covered Transaction 
with an MPS will be deemed to satisfy the requirements of Section 
II.A.2. of this exemption if the assets of a Client Plan on behalf of 
which the MPS or its affiliate possesses the authority set forth in 
Subsections 2(a) and/or (b) above, and which are managed by the 
BlackRock Manager in the investment fund, when combined with the assets 
of other Client Plans established or maintained by the same employer 
(or an affiliate thereof described in section VI(c)(1) of the QPAM 
Exemption) or by the same employee organization, on behalf of which the 
same MPS possesses such authority and which are managed in the same 
investment fund, represent less than ten percent (10%) of the assets of 
the investment fund;
    (b) For purposes of Section II.A.3.(a) of this exemption, and for 
purposes of Sections III.I.6, L.3(b), M.2.(b) and U.1. of this 
exemption, with respect to the assets of an MPS Plan invested in a 
Pooled Fund as of the date of the Acquisition, which Pooled Fund is a 
bank-maintained common or collective trust, such assets when aggregated 
with the assets of all other MPS Plans of the same MPS Group and 
invested in such Pooled Fund shall be deemed to constitute less than 
ten percent (10%) of the assets of such Pooled Fund from the date of 
the Acquisition through July 1, 2010 (the Unwind Period); provided, 
that:\17\
---------------------------------------------------------------------------

    \17\ For purposes of this Section II.A.3.(b), the MPS Plans of 
each of the MPS Groups (the PNC MPSs, the BOA MPSs, and the Barclays 
MPSs) are separately aggregated (e.g., all MPS Plans of BOA MPSs are 
aggregated together but are not aggregated with MPS Plans of 
Barclays MPSs or PNC MPSs).
---------------------------------------------------------------------------

    (i) The fees paid by such MPS Plans to BlackRock Managers during 
the Unwind Period are not more than reasonable compensation and are 
substantially the same as fees paid to the same BlackRock Managers by 
other, comparable Client Plans which are not MPS Plans, invested in 
such Pooled Fund as of the date of the Acquisition;
    (ii) such MPS Plans do not pay to the same BlackRock Managers 
during the Unwind Period any type of fee or other compensation that was 
not charged to or otherwise borne by Client Plan investors, which are 
not MPS Plans, in the Pooled Fund as of the date of the Acquisition;
    (iii) during the Unwind Period, the IM reviews the investment by 
the MPS Plans in the Pooled Fund; all fees paid by the MPS Plans to 
BlackRock Managers are disclosed to the IM; the IM reviews the offering 
documents for the Pooled Funds and any advisory or management 
agreements with BlackRock Managers; and any material change in the 
terms and conditions of the investment by the MPS Plans in the Pooled 
Fund, including but not limited to fees paid to BlackRock Managers and 
the terms of the advisory or management agreements with BlackRock 
Managers, are promptly disclosed to the IM and are subject to the IM's 
approval; and
    (iv) during the Unwind Period, each MPS Plan may terminate its 
investment in the Pooled Fund upon no more than thirty (30) days notice 
and without incurring a redemption fee paid to a BlackRock Manager;
    4. The terms of the Covered Transaction are negotiated on behalf of 
the investment fund by, or under the authority and general direction 
of, the BlackRock Manager and either the BlackRock Manager or (so long 
as the BlackRock Manager retains full fiduciary responsibility with 
respect to the Covered Transaction) a property manager acting in 
accordance with written guidelines established and administered by the 
BlackRock Manager, makes the decision on behalf of the investment fund 
to enter into the Covered Transaction, provided that the Covered 
Transaction is not part of an agreement, arrangement or understanding 
designed to benefit the MPS;
    5. The Covered Transaction is not entered into with an MPS which is 
a party in interest or disqualified person with respect to any Client 
Plan whose assets managed by the BlackRock Manager, when combined with 
the assets of other Client Plans established or maintained by the same 
employer (or affiliate thereof described in Section VI(c)(1) of the 
QPAM Exemption) or by the same employee organization, and managed by 
the BlackRock Manager, represent more than twenty percent (20%) of the 
total client assets managed by the BlackRock Manager at the time of the 
Covered Transaction;
    6. At the time the Covered Transaction is entered into, and at the 
time of any subsequent renewal or modification thereof that requires 
the consent of the BlackRock Manager, the terms of the Covered 
Transaction are at least as favorable to the investment fund as the 
terms generally available in arm's length transactions between 
unrelated parties; and
    7. Neither the BlackRock Manager nor any affiliate thereof (as 
defined in Section VI(d) of the QPAM Exemption),\18\ nor any owner, 
direct or indirect, of a five percent (5%) or more interest in the 
BlackRock Manager \19\ is a person who within the ten years immediately 
preceding the Covered Transaction has been either convicted or released 
from imprisonment, whichever is later, as a result of: any felony 
involving abuse or misuse of such person's employee benefit plan 
position or employment, or position or employment with a labor 
organization; any felony arising out of the conduct of the business of 
a broker, dealer, investment adviser, bank, insurance

[[Page 50638]]

company or fiduciary; income tax evasion; any felony involving the 
larceny, theft, robbery, extortion, forgery, counterfeiting, fraudulent 
concealment, embezzlement, fraudulent conversion, or misappropriation 
of funds or securities; conspiracy or attempt to commit any such crimes 
or a crime in which any of the foregoing crimes is an element; or any 
other crime described in ERISA section 411. For purposes of this 
section, a person shall be deemed to have been ``convicted'' from the 
date of the judgment of the trial court, regardless of whether that 
judgment remains under appeal.
---------------------------------------------------------------------------

    \18\ For the avoidance of doubt, all MPSs are excluded from the 
term ``affiliate'' for these purposes.
    \19\ For the avoidance of doubt, all MPSs are excluded from the 
term ``owner'' for these purposes.
---------------------------------------------------------------------------

    B. Compensation. None of the employees of a BlackRock Manager 
receive any compensation that is based on any Covered Transaction 
having taken place between Client Plans and any of the MPSs (as opposed 
to with another institution that is not an MPS). The fact that a 
specific Covered Transaction occurred with an MPS as opposed to a non-
MPS counterparty is ignored by BlackRock and BlackRock Managers for 
compensation purposes. None of the employees of BlackRock or a 
BlackRock Manager receive any compensation from BlackRock or a 
BlackRock Manager which consists of equity Securities issued by an MPS, 
which fluctuates in value based on changes in the value of equity 
Securities issued by an MPS, or which is otherwise based on the 
financial performance of an MPS independent of BlackRock's performance, 
provided that this condition shall not fail to be met because the 
compensation of an employee of a BlackRock Manager fluctuates with the 
value of a broadly-based index which includes equity Securities issued 
by an MPS.
    C. Exemption Policies and Procedures. BlackRock adopts and 
implements Exemption Policies and Procedures (EPPs) which address each 
of the types of Covered Transactions and which are designed to achieve 
the goals of: (1) Compliance with the terms of the exemption, (2) 
ensuring BlackRock's decision-making with respect to the Covered 
Transactions on behalf of Client Plans with MPSs or BlackRock Entities 
is done in the interests of the Client Plans and their participants and 
beneficiaries, and (3) to the extent possible, verifying that the terms 
of such Covered Transactions are at least as favorable to the Client 
Plans as the terms generally available in arm's length transactions 
with unrelated parties. The EPPs are developed with the cooperation of 
both the Exemption Compliance Officer (ECO) and the Independent Monitor 
(IM), and such EPPs are subject to the approval of the IM. The EPPs 
need not address transactions which are not within the definition of 
the term Covered Transactions.
    Transgressions of the EPPs which do not result in Violations 
require correction only if the amount involved in the transgression and 
the extent of deviation from the EPPs is material, taking into account 
the amount of Client Plan assets affected by such transgressions (EPP 
Corrections). The ECO will make a written determination as to whether 
such transgressions require EPP Correction, and, if the ECO determines 
an EPP Correction is required, the ECO will provide written notice to 
the IM of the EPP Correction. The ECO will provide summaries for the IM 
of any such EPP Corrections as part of the quarterly report referenced 
in Section II.D.11.
    D. Exemption Compliance Officer. BlackRock appoints an Exemption 
Compliance Officer (ECO) with respect to the Covered Transactions. If 
the ECO resigns or is removed, BlackRock shall appoint a successor ECO 
within a reasonable period of time, not to exceed thirty (30) days, 
which successor shall be subject to the affirmative written approval of 
the IM. With respect to the ECO, the following conditions shall be met:
    1. The ECO is a legal professional with at least ten years of 
experience and extensive knowledge of the regulation of financial 
services and products, including under ERISA and FERSA;
    2. A committee made up exclusively of members of the Board who are 
independent of BlackRock and the MPSs determines the ECO's compensation 
package, with input from the general counsel of BlackRock; the ECO's 
compensation is not set by BlackRock business unit heads, and there is 
no direct or indirect input regarding the identity or compensation of 
the ECO from any MPS;
    3. The ECO's compensation is not based on performance of any 
BlackRock Entity or MPS, although a portion of the ECO's compensation 
may be provided in the form of BlackRock stock or stock equivalents;
    4. The ECO can be terminated by BlackRock only with the approval of 
the IM;
    5. The EPPs prohibit any officer, director or employee of BlackRock 
or any MPS or any person acting under such person's direction from 
directly or indirectly taking any action to coerce, manipulate, 
mislead, or fraudulently influence the ECO in the performance of his or 
her duties;
    6. The ECO is responsible for monitoring Covered Transactions and 
shall determine whether Violations have occurred, and the appropriate 
correction thereof, consistent with the requirements of Section V of 
this exemption;
    7. If the ECO determines a Violation has occurred, the ECO must 
determine why it occurred and what steps should be taken to avoid such 
a Violation in the future (e.g., additional training, additional 
procedures, additional monitoring, or additional and/or changed 
processes or systems);
    8. The ECO is responsible for monitoring and overseeing the 
implementation of the EPPs. The ECO may delegate such responsibilities 
to the ECO Function, but the ECO will remain responsible for monitoring 
and overseeing the ECO Function's implementation of the EPPs. When 
appropriate, the ECO will recommend changes to the EPPs to BlackRock 
and the IM. The ECO will consult with the IM regarding the need for, 
timing, and form of EPP Corrections;
    9. The ECO carries out the responsibilities required of the ECO 
described in: (a) The definition of ``Index'' in this exemption and (b) 
with respect to loans of Securities to an MPS in Section III.M. of this 
exemption, and carries out such other responsibilities stipulated or 
described in Section III of this exemption including supervision of the 
ECO Function;
    10. The ECO, with the assistance of the ECO Function, monitors 
Covered Transactions and situations resulting from Covered Transactions 
with or involving an MPS with respect to which, because of the 
investment of the MPS in BlackRock, an action or inaction on the part 
of a BlackRock Manager might be thought to be motivated by an interest 
which may affect the exercise of such BlackRock Manager's best judgment 
as a fiduciary. If a situation is identified by the ECO which poses the 
potential for a conflict, as specified in Section III, the ECO shall 
consult with the IM, or refer decision-making to the discretion of the 
IM;
    11. The ECO provides a quarterly report \20\ to the IM summarizing 
the material activities of the ECO for the preceding quarter and 
setting forth any Violations discovered during the quarter and actions 
taken to correct such Violations. With respect to Violations, the ECO 
report details changes to process put in place to guard against a 
substantially similar Violation occurring again, and recommendations 
for additional training, additional procedures, additional monitoring, 
or

[[Page 50639]]

additional and/or changed processes or systems or training changes and 
BlackRock management's actions on such recommendations. In connection 
with providing the quarterly report for the second quarter and fourth 
quarter of each year, upon the request of the IM, the ECO and the IM 
shall meet in person to review the content of the report. Other members 
of the ECO Function may attend such meetings at the request of either 
the ECO or the IM;
---------------------------------------------------------------------------

    \20\ The first quarterly report covered a 4-month period ending 
March 31, 2010.
---------------------------------------------------------------------------

    12. In each quarterly report, the ECO certifies in writing to his 
or her knowledge that (a) The quarterly report is accurate; (b) 
BlackRock's compliance program is working in a manner which is 
reasonably designed to prevent Violations; (c) any Violations 
discovered during the quarter and the related corrections taken to date 
have been identified in the report; and (d) BlackRock has complied with 
the EPPs in all material respects;
    13. No less frequently than annually, the ECO certifies to the IM 
as to whether BlackRock has provided the ECO with adequate resources, 
including, but not limited to, adequate staffing of the ECO Function, 
and, in connection with the quarterly report for the fourth quarter of 
each year, the ECO shall identify to the IM those BlackRock Managers 
that relied upon this exemption during the prior year and those that he 
reasonably anticipates relying on this exemption during the current 
year; and
    14. The ECO provides any further information regarding Covered 
Transactions reasonably requested by the IM.
    E. Independent Monitor. BlackRock retains an Independent Monitor 
(IM) with respect to the Covered Transactions. If the IM resigns or is 
removed, BlackRock shall appoint a successor IM within a reasonable 
period of time, not to exceed thirty (30) days. The IM:
    1. Agrees in writing to serve as IM, and he or she is independent 
within meaning of Section VI(OO);
    2. Approves the ECO selected by BlackRock, and as part of the 
approval process and annually thereafter approves in general terms the 
reasonableness of the ECO's compensation, taking into account such 
information as the IM may request of BlackRock and which BlackRock must 
supply, and approves any termination of the ECO by BlackRock;
    3. Assists in the development of, and the granting of written 
approval of, the EPPs and any material alterations of the EPPs by 
determining that they are reasonably designed to achieve the goals of 
(a) compliance with the terms of the exemption, (b) ensuring 
BlackRock's decision-making with respect to Covered Transactions on 
behalf of Client Plans with MPSs or BlackRock Entities is done in the 
interests of the Client Plans and their respective participants and 
beneficiaries and, (c) requiring, to the extent possible, verification 
that the terms of such Covered Transactions are at least as favorable 
to the Client Plans as the terms generally available in comparable 
arm's length transactions with unrelated parties;
    4. Consults with the ECO regarding the need for, timing and form of 
any EPP Corrections. The IM has the responsibilities with respect to 
corrections of Violations, as set forth in Section V of this Exemption. 
In response to EPP Corrections or Violations, the IM considers whether, 
and must have the authority, to require further sampling, testing or 
corrective action if necessary;
    5. Exercises discretion for Client Plans in situations specified in 
Section III of this exemption where BlackRock Managers may be thought 
to have conflicts;
    6. Performs certain monitoring functions described in Section III, 
and carries out the responsibilities required of the IM, as set forth 
in the definition of ``Index'' in this exemption, and with respect to 
loans of Securities to an MPS as set forth in Section III.M. of this 
exemption, and carries out such other responsibilities stipulated in 
Section III of this exemption;
    7. Reviews the quarterly reports of the ECO, obtains and reviews 
representative samples of the data underlying the quarterly reports of 
the ECO, and, if the IM deems it appropriate, obtains additional 
factual information on either an ad hoc basis or on a systematic basis;
    8. Reviews the certifications of the ECO as to whether (a) The 
quarterly report is accurate; (b) BlackRock's compliance program is 
working in a manner which is reasonably designed to prevent Violations; 
(c) any Violations discovered during the quarter and the related 
corrections taken to date have been identified in the report; (d) 
BlackRock has complied with the EPPs in all material respects; and (e) 
BlackRock has provided the ECO with adequate resources, including, but 
not limited to, adequate staffing of the ECO Function;
    9. Determines, on the basis of the information supplied to the IM 
by BlackRock and the ECO, whether there has occurred a pattern or 
practice of insufficient diligence in adhering to the EPPs and/or the 
conditions of the exemption, and if such a determination is made, 
reports the same to the Department, and informs BlackRock and the ECO 
of any such report;
    10. Determines whether the purchases of equity Securities issued by 
an MPS on behalf of Client Plans that are Other Accounts or Funds by a 
BlackRock Manager has had a positive material impact on the market 
price for such Securities, notwithstanding any volume limitations 
imposed by Section III.S. of the exemption and/or imposed by the IM 
with respect to such equity Securities. The IM makes this determination 
based upon its review of the relevant monthly reports required by the 
exemption with respect to such Covered Transactions provided by the ECO 
and publicly available information materially related to the trading of 
the Securities of an MPS on its primary listing exchange (or market);
    11. Issues an annual compliance report,\21\ to be timely delivered 
to (i) the Chairman of the Board of Directors of BlackRock, (ii) the 
Chief Executive Officer of BlackRock and (iii) the General Counsel of 
BlackRock. The annual compliance report shall be based on a review of 
the EPPs, the quarterly reports provided by the ECO, any transactions 
reviewed by the IM as well as any additional information the IM 
requests from BlackRock, and certifying to each of the following (or 
describing any exceptions thereto) that:
---------------------------------------------------------------------------

    \21\ The first annual compliance report covered the 13-month 
period ending December 31, 2010.
---------------------------------------------------------------------------

    (a) The EPPs are reasonably designed to achieve the goals of (i) 
compliance with the terms of the exemption, (ii) ensuring BlackRock's 
decision-making with respect to Covered Transactions on behalf of 
Client Plans with MPSs or BlackRock Entities is done in the interests 
of the Client Plans and the respective participants and beneficiaries, 
and (iii) requiring to the extent possible, verification that the terms 
of any Covered Transaction are at least as favorable to Client Plans as 
the terms generally available in comparable arm's length transactions 
with unrelated parties;
    (b) the EPPs and the other terms of the exemption were complied 
with, with any material exceptions duly noted;
    (c) the IM has made the determination referred to in Section 
II.E.9. and the results of that determination;
    (d) BlackRock has provided the ECO with adequate resources, 
including but not limited to adequate staffing of the ECO Function; and
    (e) the compensation package for the ECO for the prior year is 
reasonable;
    12. The annual compliance report of the IM, as described in Section 
II.E.11., shall contain a summary of Violations,

[[Page 50640]]

any corrections of Violations required by the IM and/or the ECO at any 
time during the prior year. In addition, the IM further certifies that 
BlackRock correctly implemented the prescribed corrections, based in 
part on certification from the ECO; and
    13. The annual compliance report of the IM shall also be timely 
delivered by the IM to the chief executive officer, the general counsel 
and the members of the boards of directors of each of the BlackRock 
Managers identified to the IM by the ECO as having relied upon this 
exemption during the prior year and those that the ECO reasonably 
anticipates will be relying on this exemption during the current year. 
The copies of the compliance report described in this Section II.E.13. 
shall be accompanied by a cover letter from the IM calling the 
attention of the recipients to any violations, material exceptions to 
compliance with the EPPs, or other shortfalls in