Exemptions From Certain Prohibited Transaction Restrictions, 75147-75157 [2016-26089]
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Federal Register / Vol. 81, No. 209 / Friday, October 28, 2016 / Notices
In accordance with the applicable
regulations under 30 CFR parts 762 and
764 and the requirements of the
National Environmental Policy Act of
1969 (NEPA), as amended, OSMRE
evaluated the merits of the unsuitability
petition and analyzed the impacts of
these alternatives. This analysis is
reflected in the Final PED/EIS, which
notes the potential impacts of the
project and alternatives on earth
resources (geology, topography and
physiography), air quality and
greenhouse gases, groundwater, surface
water, wetlands, vegetation, fish and
wildlife including special status species,
land use, aesthetics including visual
resources and soundscapes,
socioeconomics and environmental
justice, cultural resources including
archaeological, historic and
ethnographic resources, and public
health and safety. Mitigation measures
to be included as part of project
implementation will be noted in the
final decision.
In accordance with Department of the
Interior regulations (43 CFR 46.425),
OSMRE identified Alternative 3 as the
preferred alternative in the Draft EIS.
However, based on public and agency
comments, as well as the state’s input,
OSMRE has now identified alternative 4
as the preferred alternative because it is
the most consistent with the state’s
request. OSMRE reached that decision
based on its analysis and conclusion
that the ‘‘agency’s preferred alternative’’
is the alternative the agency believes
would best accomplish the purpose of
and need for action, and fulfill its
statutory mission and responsibilities,
while still giving consideration to
economic, environmental, technical,
and other factors. Alternative 4 is also
the environmentally preferred
alternative because of its long-term
environmental benefits.
The OSMRE will prepare a Record of
Decision (ROD) for the proposed
petition after a 30-day period following
publication of the NOA.
Authority: 40 CFR 1506.6, 40 CFR 1506.1.
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Dated: October 7, 2016.
Thomas D. Shope,
Regional Director, Appalachian Region.
[FR Doc. 2016–25868 Filed 10–27–16; 8:45 am]
BILLING CODE 4310–05–P
DEPARTMENT OF LABOR
Employee Benefits Security
Administration
Exemptions From Certain Prohibited
Transaction Restrictions
Employee Benefits Security
Administration, Labor.
AGENCY:
ACTION:
Grant of individual exemptions.
This document contains
exemptions issued by the Department of
Labor (the Department) from certain of
the prohibited transaction restrictions of
the Employee Retirement Income
Security Act of 1974 (ERISA or the Act)
and/or the Internal Revenue Code of
1986 (the Code). This notice includes
the following: 2016–10, Royal Bank of
Canada, D–11868; 2016–11, Northern
Trust Corporation, D–11875; and, 2016–
12, Extension of PTE 2015–15 involving
Deutsche Bank AG, D–11879.
SUMMARY:
A notice
was published in the Federal Register of
the pendency before the Department of
a proposal to grant such exemption. The
notice set forth a summary of facts and
representations contained in the
application for exemption and referred
interested persons to the application for
a complete statement of the facts and
representations. The application has
been available for public inspection at
the Department in Washington, DC. The
notice also invited interested persons to
submit comments on the requested
exemption to the Department. In
addition the notice stated that any
interested person might submit a
written request that a public hearing be
held (where appropriate). The applicant
has represented that it has complied
with the requirements of the notification
to interested persons. No requests for a
hearing were received by the
Department. Public comments were
received by the Department as described
in the granted exemption.
The notice of proposed exemption
was issued and the exemption is being
granted solely by the Department
because, effective December 31, 1978,
section 102 of Reorganization Plan No.
4 of 1978, 5 U.S.C. App. 1 (1996),
transferred the authority of the Secretary
of the Treasury to issue exemptions of
the type proposed to the Secretary of
Labor.
SUPPLEMENTARY INFORMATION:
Statutory Findings
In accordance with section 408(a) of
the Act and/or section 4975(c)(2) of the
Code and the procedures set forth in 29
CFR part 2570, subpart B (76 FR 66637,
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75147
66644, October 27, 2011) 1 and based
upon the entire record, the Department
makes the following findings:
(a) The exemption is administratively
feasible;
(b) The exemption is in the interests
of the plan and its participants and
beneficiaries; and
(c) The exemption is protective of the
rights of the participants and
beneficiaries of the plan.
Royal Bank of Canada (Together With
Its Current and Future Affiliates, RBC
or the Applicant), Located in Toronto,
Ontario, Canada
[Prohibited Transaction Exemption 2016–10;
Exemption Application No. D–11868]
Temporary Exemption
Section I—Covered Transactions
Certain entities with specified
relationships to Royal Bank of Canada
Trust Company (Bahamas) Limited
(RBCTC Bahamas) (hereinafter, the RBC
QPAMs, as further defined in Section
II(b)) will not be precluded from relying
on the exemptive relief provided by
Prohibited Transaction Exemption (PTE)
84–14,2 notwithstanding a judgment of
conviction against RBCTC Bahamas for
aiding and abetting tax fraud, to be
entered in France in the District Court
of Paris (the Conviction, as further
defined in Section II(a)),3 for a period of
up to twelve months beginning on the
date of the Conviction (the Conviction
Date), provided that the following
conditions are satisfied:
(a) The RBC QPAMs (including their
officers, directors, agents other than
RBC, and employees of such RBC
QPAMs) did not know of, have reason
to know of, or participate in the
criminal conduct of RBCTC Bahamas
that is the subject of the Conviction (for
purposes of this paragraph (a),
‘‘participate in’’ includes the knowing
or tacit approval of the misconduct
underlying the Conviction);
(b) The RBC QPAMs (including their
officers, directors, agents other than
RBC, and employees of such RBC
1 The Department has considered exemption
applications received prior to December 27, 2011
under the exemption procedures set forth in 29 CFR
part 2570, subpart B (55 FR 32836, 32847, August
10, 1990).
2 49 FR 9494 (March 13, 1984), as corrected at 50
FR 41430 (October 10, 1985), as amended at 70 FR
49305 (August 23, 2005), and as amended at 75 FR
38837 (July 6, 2010).
3 Section I(g) of PTE 84–14 generally provides
that ‘‘[n]either the QPAM nor any affiliate thereof
. . . nor any owner . . . of a 5 percent or more
interest in the QPAM is a person who within the
10 years immediately preceding the transaction has
been either convicted or released from
imprisonment, whichever is later, as a result of’’
certain felonies including income tax evasion, and
aiding and abetting tax evasion.
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QPAMs) did not receive direct
compensation, or knowingly receive
indirect compensation, in connection
with the criminal conduct that is the
subject of the Conviction;
(c) The RBC QPAMs will not employ
or knowingly engage any of the
individuals that participated in the
criminal conduct that is the subject of
the Conviction (for purposes of this
paragraph (c), ‘‘participated in’’
includes the knowing or tacit approval
of the misconduct underlying the
Conviction);
(d) An RBC QPAM will not 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 RBC QPAM, to enter
into any transaction with RBCTC
Bahamas or engage RBCTC Bahamas to
provide any service to such investment
fund, for a direct or indirect fee borne
by such investment fund, regardless of
whether such transaction or service may
otherwise be within the scope of relief
provided by an administrative or
statutory exemption;
(e) Any failure of the RBC QPAMs to
satisfy Section I(g) of PTE 84–14 arose
solely from the Conviction;
(f) The criminal conduct that is the
subject of the Conviction did not
directly or indirectly involve the assets
of any plan subject to Part 4 of Title I
of ERISA (an ERISA-covered plan) or
section 4975 of the Code (an IRA);
(g) RBCTC Bahamas has not provided
nor will provide discretionary asset
management services to ERISA-covered
plans or IRAs, nor will it otherwise act
as a fiduciary with respect to ERISAcovered plan and IRA assets;
(h)(1) Within four months of the date
of the Conviction, each RBC QPAM
must develop, implement, maintain,
and follow written policies (the
Policies) requiring and reasonably
designed to ensure that:
(i) The asset management decisions of
the RBC QPAM are conducted
independently of the management and
business activities of RBCTC Bahamas;
(ii) The RBC QPAM fully complies
with ERISA’s fiduciary duties and with
ERISA and the Code’s prohibited
transaction provisions, and does not
knowingly participate in any violations
of these duties and provisions with
respect to ERISA-covered plans and
IRAs;
(iii) The RBC QPAM does not
knowingly participate in any other
person’s violation of ERISA or the Code
with respect to ERISA-covered plans
and IRAs;
(iv) Any filings or statements made by
the RBC QPAM to regulators, including
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but not limited to, the Department of
Labor, the Department of the Treasury,
the Department of Justice, and the
Pension Benefit Guaranty Corporation,
on behalf of ERISA-covered plans or
IRAs are materially accurate and
complete, to the best of such QPAM’s
knowledge at that time;
(v) The RBC QPAM does not make
material misrepresentations or omit
material information in its
communications with such regulators
with respect to ERISA-covered plans or
IRAs, or make material
misrepresentations or omit material
information in its communications with
ERISA-covered plan and IRA clients;
(vi) The RBC QPAM complies with
the terms of this temporary exemption;
and
(vii) Any violation of, or failure to
comply with, an item in subparagraph
(ii) through (vi), is corrected promptly
upon discovery, and any such violation
or compliance failure not promptly
corrected is reported, upon discovering
the failure to promptly correct, in
writing, to appropriate corporate
officers, the head of compliance and the
General Counsel (or their functional
equivalent) of the relevant RBC QPAM,
and an appropriate fiduciary of any
affected ERISA-covered plan or IRA
where such fiduciary is independent of
RBC; however, with respect to any
ERISA-covered plan or IRA sponsored
by an ‘‘affiliate’’ (as defined in Section
VI(d) of PTE 84–14) of RBC or
beneficially owned by an employee of
RBC or its affiliates, such fiduciary does
not need to be independent of RBC. An
RBC QPAM will not be treated as having
failed to develop, implement, maintain,
or follow the Policies, provided that it
corrects any instance of noncompliance
promptly when discovered or when it
reasonably should have known of the
noncompliance (whichever is earlier),
and provided that it adheres to the
reporting requirements set forth in this
subparagraph (vii);
(2) Within four months of the date of
the Conviction, each RBC QPAM must
develop and implement a program of
training (the Training), conducted at
least annually, for all relevant RBC
QPAM asset/portfolio management,
trading, legal, compliance, and internal
audit personnel. The Training must be
set forth in the Policies and at a
minimum, cover the Policies, ERISA
and Code compliance (including
applicable fiduciary duties and the
prohibited transaction provisions),
ethical conduct, the consequences for
not complying with the conditions of
this temporary exemption (including
any loss of exemptive relief provided
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herein), and prompt reporting of
wrongdoing;
(i) Effective as of the effective date of
this temporary exemption, with respect
to any arrangement, agreement, or
contract between an RBC QPAM and an
ERISA-covered plan or IRA for which an
RBC QPAM provides asset management
or other discretionary fiduciary services,
each RBC QPAM agrees:
(1) To comply with ERISA and the
Code, as applicable with respect to such
ERISA-covered plan or IRA; to refrain
from engaging in prohibited transactions
that are not otherwise exempt (and to
promptly correct any inadvertent
prohibited transactions); and to comply
with the standards of prudence and
loyalty set forth in section 404 of ERISA
with respect to each such ERISAcovered plan and IRA;
(2) Not to require (or otherwise cause)
the ERISA-covered plan or IRA to
waive, limit, or qualify the liability of
the RBC QPAM for violating ERISA or
the Code or engaging in prohibited
transactions;
(3) Not to require the ERISA-covered
plan or IRA (or sponsor of such ERISAcovered plan or beneficial owner of
such IRA) to indemnify the RBC QPAM
for violating ERISA or engaging in
prohibited transactions, except for
violations or prohibited transactions
caused by an error, misrepresentation,
or misconduct of a plan fiduciary or
other party hired by the plan fiduciary
who is independent of RBC;
(4) Not to restrict the ability of such
ERISA-covered plan or IRA to terminate
or withdraw from its arrangement with
the RBC QPAM (including any
investment in a separately managed
account or pooled fund subject to ERISA
and managed by such QPAM), with the
exception of reasonable restrictions,
appropriately disclosed in advance, that
are specifically designed to ensure
equitable treatment of all investors in a
pooled fund in the event such
withdrawal or termination may have
adverse consequences for all other
investors as a result of an actual lack of
liquidity of the underlying assets,
provided that such restrictions are
applied consistently and in like manner
to all such investors;
(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
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investors, provided that such fees are
applied consistently and in like manner
to all such investors;
(6) Not to include exculpatory
provisions disclaiming or otherwise
limiting liability of the RBC QPAM for
a violation of such agreement’s terms,
except for liability caused by an error,
misrepresentation, or misconduct of a
plan fiduciary or other party hired by
the plan fiduciary who is independent
of RBC; and
(7) To indemnify and hold harmless
the ERISA-covered plan or IRA for any
damages resulting from a violation of
applicable laws, a breach of contract, or
any claim arising out of the failure of
such RBC QPAM to qualify for the
exemptive relief provided by PTE 84–14
as a result of a violation of Section I(g)
of PTE 84–14 other than the Conviction.
Within six (6) months of the date of
the Conviction, each RBC QPAM will:
Provide a notice of its obligations under
this Section I(i) to each ERISA-covered
plan and IRA for which an RBC QPAM
provides asset management or other
discretionary fiduciary services;
(j) The RBC QPAMs comply with each
condition of PTE 84–14, as amended,
with the sole exceptions of the
violations of Section I(g) of PTE 84–14
that are attributable to the Conviction;
(k) Each RBC QPAM will maintain
records necessary to demonstrate that
the conditions of this temporary
exemption have been met, for six (6)
years following the date of any
transaction for which such RBC QPAM
relies upon the relief in the temporary
exemption;
(l) During the effective period of this
temporary exemption, RBC: (1)
Immediately discloses to the
Department any Deferred Prosecution
Agreement (a DPA) or Non-Prosecution
Agreement (an NPA) that RBC or an
affiliate enters into with the U.S
Department of Justice, to the extent such
DPA or NPA involves conduct described
in Section I(g) of PTE 84–14 or section
411 of ERISA; and (2) immediately
provides the Department any
information requested by the
Department, as permitted by law,
regarding the agreement and/or the
conduct and allegations that led to the
agreements; and
(m) An RBC QPAM will not fail to
meet the terms of this temporary
exemption, solely because a different
RBC QPAM fails to satisfy a condition
for relief under this temporary
exemption, described in Sections I(c),
(d), (h), (i), (j), and (k).
Section II—Definitions
(a) The term ‘‘Conviction’’ means the
potential judgment of conviction against
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RBCTC Bahamas for aiding and abetting
tax fraud to be entered in France in the
District Court of Paris, French Special
Prosecutor No. 1120392066, French
Investigative Judge No. JIRSIF/11/12;
(b) The term ‘‘RBC QPAM’’ means a
‘‘qualified professional asset manager’’
(as defined in section VI(a) 4 of PTE 84–
14) that relies on the relief provided by
PTE 84–14 and with respect to which
RBCTC Bahamas is a current or future
‘‘affiliate’’ (as defined in section VI(d) of
PTE 84–14);
(c) The term ‘‘RBCTC Bahamas’’
means Royal Bank of Canada Trust
Company (Bahamas) Limited, a
Bahamian ‘‘affiliate’’ of RBC (as defined
in section VI(c) of PTE 84–14);
(d) The terms ‘‘ERISA-covered plan’’
and ‘‘IRA’’ mean, respectively, a plan
subject to Part 4 of Title I of ERISA and
a plan subject to section 4975 of the
Code; and
(e) The term ‘‘RBC’’ means Royal
Bank of Canada, together with its
current and future affiliates.
Effective Date: This temporary
exemption is effective for the period
beginning on the Conviction Date until
the earlier of: The date that is twelve
months following the Conviction Date;
or the effective date of a final agency
action made by the Department in
connection with an application for longterm exemptive relief for the covered
transactions described herein.
Supplementary Information
On October 12, 2016, the Department
of Labor (the Department) published a
notice of proposed temporary
exemption in the Federal Register at 81
FR 70562, proposing that certain entities
with specified relationships to RBCTC
Bahamas could continue to rely upon
the relief provided by PTE 84–14 (49 FR
9494 (March 13, 1984), as corrected at
50 FR 41430 (October 10, 1985), as
amended at 70 FR 49305 (August 23,
2005), and as amended at 75 FR 38837
(July 6, 2010)), notwithstanding a
judgment of conviction against RBCTC
Bahamas for aiding and abetting tax
fraud, to be entered in France in the
District Court of Paris (the Conviction,
as further defined in Section II(a)),5 for
4 In general terms, a QPAM is an independent
fiduciary that is a bank, savings and loan
association, insurance company, or investment
adviser that meets certain equity or net worth
requirements and other licensure requirements and
that has acknowledged in a written management
agreement that it is a fiduciary with respect to each
plan that has retained the QPAM.
5 Section I(g) of PTE 84–14 generally provides
that ‘‘[n]either the QPAM nor any affiliate thereof
. . . nor any owner . . . of a 5 percent or more
interest in the QPAM is a person who within the
10 years immediately preceding the transaction has
been either convicted or released from
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75149
a period of up to twelve months
beginning on the date of the Conviction.
The Department is today granting this
temporary exemption in order to protect
ERISA-covered plans and IRAs from
certain costs and/or investment losses
that may arise to the extent entities with
a corporate relationship to RBCTC
Bahamas lose their ability to rely on
PTE 84–14 as of the Conviction Date, as
described in the proposed temporary
exemption. The Department is
considering proposing longer-term relief
for RBC QPAMs to rely on PTE 84–14
notwithstanding the Conviction, in
Application No. D–11912. The relief in
this temporary exemption provides the
Department more time to consider
whether longer-term relief is warranted.
No relief from a violation of any other
law is provided by this temporary
exemption, including any criminal
conviction described in the proposed
temporary exemption. Furthermore, the
Department cautions that the relief in
this temporary exemption will terminate
immediately if, among other things, an
entity within the RBC corporate
structure is convicted of a crime
described in Section I(g) of PTE 84–14
(other than the Conviction) during the
effective period of the temporary
exemption. While such an entity could
apply for a new exemption in that
circumstance, the Department would
not be obligated to grant the exemption.
The terms of this temporary exemption
have been specifically designed to
permit plans to terminate their
relationships in an orderly and cost
effective fashion in the event of an
additional conviction or a determination
that it is otherwise prudent for a plan to
terminate its relationship with an entity
covered by the temporary exemption.
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
temporary exemption, published on
October 12, 2016. All comments and
requests for hearing were due by
October 19, 2016. During the comment
period, the Department received written
comments from RBC and from The
Clearing House. Although the
Department has, for the most part,
revised the proposed temporary
exemption in the manner requested by
RBC, the Department cautions that it
may decline to include those revisions
in any decision to grant more permanent
relief.
imprisonment, whichever is later, as a result of’’
certain felonies including income tax evasion, and
aiding and abetting tax evasion.
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RBC’s Comment
RBC seeks several revisions to the
conditions set forth in the proposed
temporary exemption. First, RBC states
that Section I(f) of the proposed
temporary exemption may be
unintentionally broad. As proposed,
that condition states: ‘‘No entities
holding assets that constitute the assets
of any plan subject to Part 4 of Title I
of ERISA (an ERISA-covered plan) or
section 4975 of the Code (an IRA) were
involved in the criminal conduct that is
the subject of the Conviction.’’ RBC
seeks to revise the condition to read:
‘‘The criminal conduct that is the
subject of the Conviction did not
directly or indirectly involve the assets
of any plan subject to Part 4 of Title I
of ERISA (an ERISA-covered plan) or
section 4975 of the Code (an IRA).’’ The
Department has decided to revise the
condition in the manner requested by
RBC.
Next, RBC notes that Section I(h) of
the proposed temporary exemption
requires that each RBC QPAM
‘‘immediately:’’ Develop, implement,
maintain and follow certain written
policies; and develop and implement a
program of training. RBC seeks a period
of up to four months following the date
of its impending conviction to meet
these requirements. The Department
agrees that four months is a reasonable
period of time with which to comply
with the requirement of Section I(h) and
has revised the condition accordingly.
RBC seeks another change to Section
I(h)(1)(i), through the deletion of the
bolded language, ‘‘The asset
management decisions of the RBC
QPAM are conducted independently of
the management and business activities
of RBC, including RBCTC Bahamas.
RBC represents that it has neither
committed, nor been accused of
committing, a crime. The Department
has revised the condition accordingly.
RBC also seeks to change the start
date of the notice requirement set forth
in Section I(i), such that each RBC must
provide such notice within six months
of the Conviction Date, rather than
within six months of the date of
publication of this granted temporary
exemption. The Department concurs
with this request, and has revised the
temporary exemption accordingly.
RBC seeks deletion of the requirement
in Section I(i) that requires each RBC
QPAM to separately warrant in writing
its obligations to ERISA-Covered Plans
and IRAs. While the Department has
made such revision for purposes of the
limited relief herein, the Department reemphasizes, as noted above, that it may
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decide to propose more permanent relief
that does not contain this revision.
RBC seeks deletion of requirement set
forth in Section I(i)(6) that, each RBC
QPAM agrees: ‘‘Not to include
exculpatory provisions disclaiming or
otherwise limiting liability of the RBC
QPAM for a violation of such
agreement’s terms.’’ The Department
declines to make such deletion, but has
revised the condition to read: ‘‘Not to
include exculpatory provisions
disclaiming or otherwise limiting
liability of the RBC QPAM for a
violation of such agreement’s terms,
except for liability caused by an error,
misrepresentation, or misconduct of a
plan fiduciary or other party hired by
the plan fiduciary who is independent
of RBC.’’
RBC notes that, in addition to the
asset managers identified in the
proposed exemption, the following
managers are owned in whole or in part
by RBC: BlueBay Asset Management
USA, LLC; City National Bank; City
National Rochdale, LLC; City National
Securities, Inc.; Convergent Wealth
Advisors, LLC; LMCG Investments, LLC;
Mid-Continent Capital, L.L.C.; and
Symphonic Financial Advisors LLC be
added to the list of primary U.S. bank
and U.S. registered adviser affiliates in
which RBC owns a significant interest.
Three additional managers are owned in
part but not currently controlled by
RBC: Matthews International Capital
Management, LLC; SKBA Capital
Management, LLC; and O’Shaughnessy
Asset Management, LLC. Further, RBC
believes that Footnote 16 of the
proposed exemption implies that the
Hong Kong investigation is connected to
RBCTC Bahamas’ alleged conduct that is
the subject of the French prosecution
described in Section II(a) of the
proposal. According to RBC, the Hong
Kong investigation is entirely unrelated
to the matter that is the subject of the
French prosecution described in Section
II(a).
Condition (l) set forth in the proposed
exemption provided that during the
effective period of this temporary
exemption, neither RBC nor any affiliate
enters into a Deferred Prosecution
Agreement (a DPA) or a NonProsecution Agreement (an NPA) with
the U.S Department of Justice, in
connection with conduct described in
Section I(g) of PTE 84–14 or section 411
of ERISA. RBC sought to reserve its right
to comment on this condition in
connection with the Department’s
consideration of more permanent relief.
The Department has nonetheless revised
condition (l) such that it now reads:
During the effective period of this
temporary exemption, RBC: (1)
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Immediately discloses to the
Department any Deferred Prosecution
Agreement (a DPA) or Non-Prosecution
Agreement (an NPA) that RBC or an
affiliate enters into with the U.S
Department of Justice, to the extent such
DPA or NPA involves conduct described
in Section I(g) of PTE 84–14 or section
411 of ERISA; and (2) immediately
provides the Department any
information requested by the
Department, as permitted by law,
regarding the agreement and/or the
conduct and allegations that led to the
agreements.
The Clearing House Comment
The Clearing House Association
L.L.C. (TCH) submitted a comment that
expresses concern regarding condition
(l) in Section I of the proposed
temporary exemption. As noted above,
the Department has revised that
condition. The Department will
continue to consider TCH’s comment in
connection with its consideration of
more permanent relief for RBC.
After giving full consideration to the
record, the Department has decided to
grant the temporary exemption, as
described above. The complete
application file (Application No. D–
11868) 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.
For a more complete statement of the
facts and representations supporting the
Department’s decision to grant this
temporary exemption, refer to the notice
of proposed temporary exemption
published on October 12, 2016 at 81 FR
70562.
Ms.
Anna Mpras Vaughan of the
Department, telephone (202) 693–8565.
(This is not a toll-free number.)
FOR FURTHER INFORMATION CONTACT:
Northern Trust Corporation (Together
With Its Current and Future Affiliates,
Northern or the Applicant), Located in
Chicago, Illinois
[Prohibited Transaction Exemption 2016–11;
Exemption Application No. D–11875]
Temporary Exemption
Section I—Covered Transactions
Certain entities with specified
relationships to Northern Trust
Fiduciary Services (Guernsey) ltd.
(NTFS) (hereinafter, the Northern
QPAMs, as further defined in Section
II(b)) will not be precluded from relying
on the exemptive relief provided by
Prohibited Transaction Exemption 84–
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14 (PTE) 84–14,6 notwithstanding a
judgment of conviction against NTFS for
aiding and abetting tax fraud, to be
entered in France in the District Court
of Paris (the Conviction, as further
defined in Section II(a)),7 for a period of
up to twelve months beginning on the
date of the Conviction (the Conviction
Date), provided that the following
conditions are satisfied:
(a) The Northern QPAMs (including
their officers, directors, agents other
than Northern, and employees of such
Northern QPAMs) did not know of, have
reason to know of, or participate in the
criminal conduct of NTFS that is the
subject of the Conviction (for purposes
of this paragraph (a), ‘‘participate in’’
includes the knowing or tacit approval
of the misconduct underlying the
Conviction);
(b) The Northern QPAMs (including
their officers, directors, agents other
than Northern, and employees of such
Northern QPAMs) did not receive direct
compensation, or knowingly receive
indirect compensation, in connection
with the criminal conduct that is the
subject of the Conviction;
(c) The Northern QPAMs will not
employ or knowingly engage any of the
individuals that participated in the
criminal conduct that is the subject of
the Conviction (for purposes of this
paragraph (c), ‘‘participated in’’
includes the knowing or tacit approval
of the misconduct underlying the
Conviction);
(d) A Northern QPAM will not 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 Northern QPAM, to
enter into any transaction with NTFS or
engage NTFS 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;
(e) Any failure of the Northern
QPAMs to satisfy Section I(g) of PTE
84–14 arose solely from the Conviction;
6 49 FR 9494 (March 13, 1984), as corrected at 50
FR 41430 (October 10, 1985), as amended at 70 FR
49305 (August 23, 2005), and as amended at 75 FR
38837 (July 6, 2010).
7 Section I(g) of PTE 84–14 generally provides
that ‘‘[n]either the QPAM nor any affiliate thereof
. . . nor any owner . . . of a 5 percent or more interest
in the QPAM is a person who within the 10 years
immediately preceding the transaction has been
either convicted or released from imprisonment,
whichever is later, as a result of’’ certain felonies
including income tax evasion, and aiding and
abetting tax evasion.
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(f) No entities holding assets that
constitute the assets of any plan subject
to Part 4 of Title I of ERISA (an ERISAcovered plan) or section 4975 of the
Code (an IRA) were involved in the
criminal conduct that is the subject of
the Conviction;
(g) NTFS has not provided nor will
provide discretionary asset management
services to ERISA-covered plans or
IRAs, nor will it otherwise act as a
fiduciary with respect to ERISA-covered
plan and IRA assets;
(h)(1) Within four months of the date
of the Conviction, each Northern QPAM
must develop, implement, maintain,
and follow written policies (the
Policies) requiring and reasonably
designed to ensure that:
(i) The asset management decisions of
the Northern QPAM are conducted
independently of the management and
business activities of NTFS;
(ii) The Northern QPAM fully
complies with ERISA’s fiduciary duties
and with ERISA and the Code’s
prohibited transaction provisions, and
does not knowingly participate in any
violations of these duties and provisions
with respect to ERISA-covered plans
and IRAs;
(iii) The Northern QPAM does not
knowingly participate in any other
person’s violation of ERISA or the Code
with respect to ERISA-covered plans
and IRAs;
(iv) Any filings or statements made by
the Northern QPAM to regulators,
including but not limited to, the
Department of Labor, the Department of
the Treasury, the Department of Justice,
and the Pension Benefit Guaranty
Corporation, on behalf of ERISAcovered plans or IRAs are materially
accurate and complete, to the best of
such QPAM’s knowledge at that time;
(v) The Northern QPAM does not
make material misrepresentations or
omit material information in its
communications with such regulators
with respect to ERISA-covered plans or
IRAs, or make material
misrepresentations or omit material
information in its communications with
ERISA-covered plan and IRA clients;
(vi) The Northern QPAM complies
with the terms of this temporary
exemption; and
(vii) Any violation of, or failure to
comply with, an item in subparagraph
(ii) through (vi), is corrected promptly
upon discovery, and any such violation
or compliance failure not promptly
corrected is reported, upon discovering
the failure to promptly correct, in
writing, to appropriate corporate
officers, the head of compliance and the
General Counsel (or their functional
equivalent) of the relevant Northern
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75151
QPAM, and an appropriate fiduciary of
any affected ERISA-covered plan or IRA
where such fiduciary is independent of
Northern; however, with respect to any
ERISA-covered plan or IRA sponsored
by an ‘‘affiliate’’ (as defined in Section
VI(d) of PTE 84–14) of Northern or
beneficially owned by an employee of
Northern or its affiliates, such fiduciary
does not need to be independent of
Northern. A Northern QPAM will not be
treated as having failed to develop,
implement, maintain, or follow the
Policies, provided that it corrects any
instance of noncompliance promptly
when discovered or when it reasonably
should have known of the
noncompliance (whichever is earlier),
and provided that it adheres to the
reporting requirements set forth in this
subparagraph (vii);
(2) Within four months of the date of
the Conviction, Northern QPAM must
develop and implement a program of
training (the Training), conducted at
least annually, for all relevant Northern
QPAM asset/portfolio management,
trading, legal, compliance, and internal
audit personnel. The Training must be
set forth in the Policies and at a
minimum, cover the Policies, ERISA
and Code compliance (including
applicable fiduciary duties and the
prohibited transaction provisions),
ethical conduct, the consequences for
not complying with the conditions of
this temporary exemption (including
any loss of exemptive relief provided
herein), and prompt reporting of
wrongdoing;
(i) Effective as of the effective date of
this temporary exemption, with respect
to any arrangement, agreement, or
contract between a Northern QPAM and
an ERISA-covered plan or IRA for which
a Northern QPAM provides asset
management or other discretionary
fiduciary services, each Northern QPAM
agrees:
(1) To comply with ERISA and the
Code, as applicable with respect to such
ERISA-covered plan or IRA; to refrain
from engaging in prohibited transactions
that are not otherwise exempt (and to
promptly correct any inadvertent
prohibited transactions); and to comply
with the standards of prudence and
loyalty set forth in section 404 of ERISA
with respect to each such ERISAcovered plan and IRA;
(2) Not to require (or otherwise cause)
the ERISA-covered plan or IRA to
waive, limit, or qualify the liability of
the Northern QPAM for violating ERISA
or the Code or engaging in prohibited
transactions;
(3) Not to require the ERISA-covered
plan or IRA (or sponsor of such ERISAcovered plan or beneficial owner of
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such IRA) to indemnify the Northern
QPAM for violating ERISA or engaging
in prohibited transactions, except for
violations or prohibited transactions
caused by an error, misrepresentation,
or misconduct of a plan fiduciary or
other party hired by the plan fiduciary
who is independent of Northern;
(4) Not to restrict the ability of such
ERISA-covered plan or IRA to terminate
or withdraw from its arrangement with
the Northern QPAM (including any
investment in a separately managed
account or pooled fund subject to ERISA
and managed by such QPAM), with the
exception of reasonable restrictions,
appropriately disclosed in advance, that
are specifically designed to ensure
equitable treatment of all investors in a
pooled fund in the event such
withdrawal or termination may have
adverse consequences for all other
investors as a result of an actual lack of
liquidity of the underlying assets,
provided that such restrictions are
applied consistently and in like manner
to all such investors;
(5) Not to impose any fees, penalties,
or charges for such termination or
withdrawal with the exception of
reasonable fees, appropriately disclosed
in advance, that are specifically
designed to prevent generally
recognized abusive investment practices
or specifically designed to ensure
equitable treatment of all investors in a
pooled fund in the event such
withdrawal or termination may have
adverse consequences for all other
investors, provided that such fees are
applied consistently and in like manner
to all such investors;
(6) Not to include exculpatory
provisions disclaiming or otherwise
limiting liability of the Northern QPAM
for a violation of such agreement’s
terms, except 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 Northern Trust; and
(7) To indemnify and hold harmless
the ERISA-covered plan or IRA for any
damages resulting from a violation of
applicable laws, a breach of contract, or
any claim arising out of the failure of
such Northern QPAM to qualify for the
exemptive relief provided by PTE 84–14
as a result of a violation of Section I(g)
of PTE 84–14 other than the Conviction.
Within six (6) months of the date of
the Conviction, each Northern QPAM
will: Provide a notice of its obligations
under this Section I(i) to each ERISAcovered plan and IRA for which a
Northern QPAM provides asset
management or other discretionary
fiduciary services;
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(j) The Northern QPAMs comply with
each condition of PTE 84–14, as
amended, with the sole exceptions of
the violations of Section I(g) of PTE 84–
14 that are attributable to the
Conviction;
(k) Each Northern QPAM will
maintain records necessary to
demonstrate that the conditions of this
temporary exemption have been met, for
six (6) years following the date of any
transaction for which such Northern
QPAM relies upon the relief in the
temporary exemption;
(l) During the effective period of this
temporary exemption, Northern Trust:
(1) Immediately discloses to the
Department any Deferred Prosecution
Agreement (a DPA) or Non-Prosecution
Agreement (an NPA) that Northern
Trust enters into with the U.S
Department of Justice, to the extent such
DPA or NPA involves conduct described
in Section I(g) of PTE 84–14 or section
411 of ERISA; and (2) immediately
provides the Department any
information requested by the
Department, as permitted by law,
regarding the agreement and/or the
conduct and allegations that led to the
agreements; and
(m) A Northern QPAM will not fail to
meet the terms of this temporary
exemption, solely because a different
Northern QPAM fails to satisfy a
condition for relief under this temporary
exemption, described in Sections I(c),
(d), (h), (i), (j), and (k).
Section II—Definitions
(a) The term ‘‘Conviction’’ means the
potential judgment of conviction against
NTFS for aiding and abetting tax fraud
to be entered in France in the District
Court of Paris, French Special
Prosecutor No. 1120392066, French
Investigative Judge No. JIRSIF/11/12;
(b) The term ‘‘Northern QPAM’’
means a ‘‘qualified professional asset
manager’’ (as defined in section VI(a) 8
of PTE 84–14) that relies on the relief
provided by PTE 84–14 and with
respect to which NTFS is a current or
future ‘‘affiliate’’ (as defined in section
VI(d) of PTE 84–14);
(c) The term ‘‘NTFS’’ means Northern
Trust Fiduciary Services (Guernsey) ltd.,
an affiliate’’ of Northern (as defined in
section VI(c) of PTE 84–14) located in
Guernsey;
(d) The terms ‘‘ERISA-covered plan’’
and ‘‘IRA’’ mean, respectively, a plan
8 In
general terms, a QPAM is an independent
fiduciary that is a bank, savings and loan
association, insurance company, or investment
adviser that meets certain equity or net worth
requirements and other licensure requirements and
that has acknowledged in a written management
agreement that it is a fiduciary with respect to each
plan that has retained the QPAM.
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subject to Part 4 of Title I of ERISA and
a plan subject to section 4975 of the
Code; and
(e) The term ‘‘Northern’’ means
Northern Trust Corporation, together
with its current and future affiliates.
Effective Date: This temporary
exemption is effective for the period
beginning on the Conviction Date until
the earlier of: The date that is twelve
months following the Conviction Date;
or the effective date of a final agency
action made by the Department in
connection with an application for longterm exemptive relief for the covered
transactions described herein.
Supplementary Information
On October 12, 2016, the Department
of Labor (the Department) published a
notice of proposed temporary
exemption in the Federal Register at 81
FR 70562, proposing that certain entities
with specified relationships to NTFS
could continue to rely upon the relief
provided by PTE 84–14 (49 FR 9494
(March 13, 1984), as corrected at 50 FR
41430 (October 10, 1985), as amended at
70 FR 49305 (August 23, 2005), and as
amended at 75 FR 38837 (July 6, 2010)),
notwithstanding a judgment of
conviction against NTFS for aiding and
abetting tax fraud, to be entered in
France in the District Court of Paris (the
Conviction, as further defined in
Section II(a)),9 for a period of up to
twelve months beginning on the date of
the Conviction.
The Department is today granting this
temporary exemption in order to protect
ERISA-covered plans and IRAs from
certain costs and/or investment losses
that may arise to the extent entities with
a corporate relationship to NTFS lose
their ability to rely on PTE 84–14 as of
the Conviction Date, as described in the
proposed temporary exemption. The
Department is considering proposing
longer-term relief for Northern QPAMs
to rely on PTE 84–14 notwithstanding
the Conviction, in Application No. D–
11911. The relief in this temporary
exemption provides the Department
more time to consider whether longerterm relief is warranted.
No relief from a violation of any other
law is provided by this temporary
exemption, including any criminal
conviction described in the proposed
temporary exemption. Furthermore, the
9 Section I(g) of PTE 84–14 generally provides
that ‘‘[n]either the QPAM nor any affiliate thereof
. . . nor any owner . . . of a 5 percent or more
interest in the QPAM is a person who within the
10 years immediately preceding the transaction has
been either convicted or released from
imprisonment, whichever is later, as a result of’’
certain felonies including income tax evasion, and
aiding and abetting tax evasion.
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Department cautions that the relief in
this temporary exemption will terminate
immediately if, among other things, an
entity within the Northern corporate
structure is convicted of a crime
described in Section I(g) of PTE 84–14
(other than the Conviction) during the
effective period of the temporary
exemption. While such an entity could
apply for a new exemption in that
circumstance, the Department would
not be obligated to grant the exemption.
The terms of this temporary exemption
have been specifically designed to
permit plans to terminate their
relationships in an orderly and cost
effective fashion in the event of an
additional conviction or a determination
that it is otherwise prudent for a plan to
terminate its relationship with an entity
covered by the temporary exemption.
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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
temporary exemption, published on
October 12, 2016. All comments and
requests for hearing were due by
October 18, 2016. The Department
received two written comments, one
from Northern Trust, the other from
Clearing House Association L.L.C.
(TCH), both of which are described
below.
Although the Department has revised,
in part, the proposed exemption in the
manner requested by Northern Trust,
the Department cautions that it may
decline to include such revisions in any
decision to grant more permanent relief.
Northern Trust Comment
Northern Trust notes that Section I(h)
of the proposed exemption requires that
each Northern QPAM ‘‘immediately:’’
Develop, implement, maintain and
follow certain written policies; and
develop and implement a program of
training. Northern Trust seeks a period
of up to four months following the date
of its impending conviction to meet
these requirements. The Department
agrees that four months is a reasonable
period of time with which to comply
with the requirement of Section I(h) and
has revised the condition accordingly.
Northern Trust seeks another change
to Section I(h)(1)(i), through the deletion
of the bracketed language, ‘‘The asset
management decisions of the Northern
QPAM are conducted independently of
the management and business activities
of [Northern, including] NTFS [and
Northern’s non-asset management
affiliates.]’’ Northern Trust represents
that it has neither committed, nor been
accused of committing, a crime. The
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Department has revised the condition
accordingly.
Northern Trust seeks deletion of the
requirement in Section I(i) that requires
each Northern QPAM to separately
warrant in writing its obligations to
ERISA-Covered Plans and IRAs. While
the Department has made such revision
for purposes of the limited relief herein,
the Department re-emphasizes, as noted
above, that it may decide to propose
more permanent relief that does not
contain this revision.
Northern Trust seeks deletion of the
requirement set forth in Section I(i)(6)
that, each Northern QPAM agrees: ‘‘Not
to include exculpatory provisions
disclaiming or otherwise limiting
liability of the Northern QPAM for a
violation of such agreement’s terms.’’
The Department declines to make such
deletion, but has revised the condition
to read: ‘‘Not to include exculpatory
provisions disclaiming or otherwise
limiting liability of the Northern QPAM
for a violation of such agreement’s
terms, except 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 Northern Trust.’’
Condition (l) of the proposed
exemption provided that neither
Northern Trust nor any affiliate could
enter into a Deferred Prosecution
Agreement (a DPA) or a NonProsecution Agreement (an NPA) with
the U.S. Department of Justice, in
connection with conduct described in
Section I(g) of PTE 84–14 or section 411
of ERISA. Northern Trust sought to
reserve its right to comment on this
condition in connection with the
Department’s consideration of more
permanent relief. The Department has
nonetheless determined to revise
condition (l), to require that, during the
effective period of this temporary
exemption, Northern Trust: (1)
Immediately discloses to the
Department any Deferred Prosecution
Agreement (a DPA) or Non-Prosecution
Agreement (an NPA) that Northern
Trust enters into with the U.S.
Department of Justice, to the extent such
DPA or NPA involves conduct described
in Section I(g) of PTE 84–14 or section
411 of ERISA; and (2) immediately
provides the Department any
information requested by the
Department, as permitted by law,
regarding the agreement and/or the
conduct and allegations that led to the
agreements.
The Clearing House Comment
The Clearing House Association
L.L.C. (TCH) submitted a comment that
expresses concern regarding condition
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75153
(l) in Section I of the proposed
temporary exemption. Although the
Department has revised condition (l) in
the manner described above, the
Department will continue to consider
TCH’s comment in connection with its
consideration of more permanent relief
for Northern Trust.
After giving full consideration to the
record, the Department has decided to
grant the temporary exemption, as
described above. The complete
application file (Application No. D–
11875) 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.
For a more complete statement of the
facts and representations supporting the
Department’s decision to grant this
temporary exemption, refer to the notice
of proposed temporary exemption
published on October 12, 2016 at 81 FR
70569.
FOR FURTHER INFORMATION CONTACT: Ms.
Anna Mpras Vaughan of the
Department, telephone (202) 693–8565.
(This is not a toll-free number.)
Extension of PTE 2015–15 (the
Extension) Involving Deutsche Bank AG
(Deutsche Bank), Located in Frankfurt,
Germany
[Prohibited Transaction Exemption 2016–12;
Exemption Application No. D–11879]
Exemption
Section I—Covered Transactions
Certain asset managers with specified
relationships to Deutsche Bank
(hereinafter, the DB QPAMs, as further
defined in Section II(b)) shall not be
precluded from relying on the
exemptive relief provided by Prohibited
Transaction Exemption (PTE) 84–14,10
notwithstanding a judgment of
conviction against Deutsche Securities
Korea Co., a South Korean affiliate of
Deutsche Bank (hereinafter, DSK, as
further defined in Section II(c)), entered
on January 25, 2016 (the Korean
Conviction, as further defined in
Section II(a)),11 provided that the
following conditions are satisfied:
10 49 FR 9494 (March 13, 1984), as corrected at
50 FR 41430 (October 10, 1985), as amended at 70
FR 49305 (August 23, 2005), and as amended at 75
FR 38837 (July 6, 2010).
11 Section I(g) of PTE 84–14 generally provides
that ‘‘[n]either the QPAM nor any affiliate thereof
. . . nor any owner . . . of a 5 percent or more
interest in the QPAM is a person who within the
10 years immediately preceding the transaction has
been either convicted or released from
imprisonment, whichever is later, as a result of’’
certain felonies including income tax evasion and
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(a) The DB QPAMs (including their
officers, directors, agents other than
Deutsche Bank, and employees of such
DB QPAMs) did not know of, have
reason to know of, or participate in the
criminal conduct of DSK that is the
subject of the Korean Conviction;
(b) Any failure of the DB QPAMs to
satisfy Section I(g) of PTE 84–14 arose
solely from the Korean Conviction;
(c) The DB QPAMs (including their
officers, directors, agents other than
Deutsche Bank, and employees of such
DB QPAMs) did not receive direct
compensation, or knowingly receive
indirect compensation, in connection
with the criminal conduct that is the
subject of the Conviction;
(d) A DB QPAM will not 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 and managed by such
DB QPAM to enter into any transaction
with DSK or engage DSK to provide
additional services to such investment
fund, for a direct or indirect fee borne
by such investment fund regardless of
whether such transactions or services
may otherwise be within the scope of
relief provided by an administrative or
statutory exemption;
(e)(1) Each DB QPAM maintains and
follows written policies (the Policies)
requiring and reasonably designed to
ensure that: (i) The asset management
decisions of the DB QPAM are
conducted independently of Deutsche
Bank’s management and business
activities; (ii) the DB QPAM fully
complies with ERISA’s fiduciary duties
and ERISA and the Code’s prohibited
transaction provisions and does not
knowingly participate in any violations
of these duties and provisions with
respect to ERISA-covered plans and
IRAs; (iii) the DB QPAM does not
knowingly participate in any other
person’s violation of ERISA or the Code
with respect to ERISA-covered plans
and IRAs; (iv) any filings or statements
made by the DB QPAM to regulators,
including but not limited to, the
Department of Labor, the Department of
the Treasury, the Department of Justice,
and the Pension Benefit Guaranty
Corporation, on behalf of ERISAcovered plans or IRAs are materially
accurate and complete, to the best of
such DB QPAM’s knowledge at that
time; (v) the DB QPAM does not make
material misrepresentations or omit
material information in its
communications with such regulators
with respect to ERISA-covered plans or
IRAs, or make material
conspiracy or attempt to commit income tax
evasion.
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misrepresentations or omit material
information in its communications with
ERISA-covered plan and IRA clients;
(vi) the DB QPAM complies with the
terms of this Extension; and (vii) any
violations of or failure to comply with
items (ii) through (vi) are corrected
promptly upon discovery and any such
violations or compliance failures not
promptly corrected are reported, upon
discovering the failure to promptly
correct, in writing to appropriate
corporate officers, the head of
Compliance and the General Counsel of
the relevant DB QPAM (or their
functional equivalent), the independent
auditor responsible for reviewing
compliance with the Policies, and an
appropriate fiduciary of any affected
ERISA-covered plan or IRA that is
independent of Deutsche Bank;
however, with respect to any ERISAcovered plan or IRA sponsored by an
‘‘affiliate’’ (as defined in Section VI(d) of
PTE 84–14) of Deutsche Bank or
beneficially owned by an employee of
Deutsche Bank or its affiliates, such
fiduciary does not need to be
independent of Deutsche Bank. DB
QPAMs will not be treated as having
failed to develop, implement, maintain,
or follow the Policies, provided that
they correct any instances of
noncompliance promptly when
discovered or when they reasonably
should have known of the
noncompliance (whichever is earlier),
and provided that they adhere to the
reporting requirements set forth in this
item (vii);
(2) Each DB QPAM maintains and
follows a program of training (the
Training), conducted during the
effective period of this Extension, for
relevant DB QPAM asset management,
legal, compliance, and internal audit
personnel (other than personnel who
received training in a manner that meets
the requirements of PTE 2015–15 within
the prior 12 months); the Training must
be set forth in the Policies and, at a
minimum, cover the Policies, ERISA
and Code compliance (including
applicable fiduciary duties and the
prohibited transaction provisions) and
ethical conduct, the consequences for
not complying with the conditions of
this Extension, (including the loss of the
exemptive relief provided therein), and
prompt reporting of wrongdoing;
(f)(1) Each DB 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 compliance with, the
Policies and Training described herein;
the audit requirement must be
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incorporated in the Policies. The audit
must cover the period of time during
which this Extension is effective, and
must be completed no later than six (6)
months after the period to which the
audit applies;
(2) 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 as permitted by law, each DB
QPAM and, if applicable, Deutsche
Bank, will grant the auditor
unconditional access to its business,
including, but not limited to: its
computer systems, business records,
transactional data, workplace locations,
training materials, and personnel;
(3) The auditor’s engagement must
specifically require the auditor to
determine whether each DB QPAM has
developed, implemented, maintained,
and followed Policies in accordance
with the conditions of this Extension
and developed and implemented the
Training, as required herein;
(4) The auditor’s engagement shall
specifically require the auditor to test
each DB QPAM’s operational
compliance with the Policies and
Training. In this regard, the auditor
must test a sample of the QPAM’s
transactions involving ERISA-covered
plans and IRAs sufficient in size and
nature to afford the auditor a reasonable
basis to determine the operational
compliance with the Policies and
Training;
(5) On or before the end of the period
described in Section I(f)(1) for
completing the audit, the auditor must
issue a written report (the Audit Report)
to Deutsche Bank and the DB QPAM to
which the audit applies that describes
the procedures performed by the auditor
during the course of its examination.
The Audit Report must include the
auditor’s specific determinations
regarding the adequacy of, and
compliance with, the Policies and
Training; the auditor’s
recommendations (if any) with respect
to strengthening such Policies and
Training; and any instances of the
respective DB QPAM’s noncompliance
with the written Policies and Training
described in paragraph (e) above. Any
determinations made by the auditor
regarding the adequacy of the Policies
and Training and the auditor’s
recommendations (if any) with respect
to strengthening the Policies and
Training of the respective DB QPAM
must be promptly addressed by such DB
QPAM, and any actions taken by such
DB QPAM to address such
recommendations must be included in
an addendum to the Audit Report. Any
determinations by the auditor that the
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respective DB QPAM has maintained
and followed sufficient Policies and
Training shall not be based solely or in
substantial part on an absence of
evidence indicating noncompliance. In
this last regard, any finding that the DB
QPAM has complied with the
requirements under this subsection
must be based on evidence that
demonstrates the DB QPAM has actually
maintained and followed the Policies
and Training required by this Extension
and not solely on a lack of evidence that
the DB QPAM has violated ERISA;
(6) The auditor shall notify the
respective DB QPAM of any instances of
noncompliance identified by the auditor
within five (5) business days after such
noncompliance is identified by the
auditor, regardless of whether the audit
has been completed as of that date;
(7) With respect to each Audit Report,
the General Counsel or one of the three
most senior executive officers of the DB
QPAM to which the Audit Report
applies certifies in writing, under
penalty of perjury, that the officer has
reviewed the Audit Report and this
Extension; addressed, corrected, or
remedied any inadequacies identified in
the Audit Report; and determined that
the Policies and Training in effect at the
time of signing are adequate to ensure
compliance with the conditions of this
Extension and with the applicable
provisions of ERISA and the Code;
(8) An executive officer of Deutsche
Bank reviews the Audit Report for each
DB QPAM and certifies in writing,
under penalty of perjury, that such
officer has reviewed each Audit Report;
(9) Each DB QPAM provides its
certified Audit Report to the
Department’s Office of Exemption
Determinations (OED), 200 Constitution
Avenue NW., Suite 400, Washington DC
20210, no later than 45 days following
its completion, and each DB QPAM
makes its Audit Report unconditionally
available for examination by any duly
authorized employee or representative
of the Department, other relevant
regulators, and any fiduciary of an
ERISA-covered plan or IRA, the assets of
which are managed by such DB QPAM;
(10) Each DB QPAM and the auditor
will submit to OED (A) any engagement
agreement(s) entered into pursuant to
the engagement of the auditor under this
Extension, and (B) any engagement
agreement entered into with any other
entities retained in connection with
such QPAM’s compliance with the
Training or Policies conditions of this
Extension, no later than three (3)
months after the effective date of the
Extension (and one month after the
execution of any agreement thereafter);
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18:12 Oct 27, 2016
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(11) The auditor shall provide OED,
upon request, all of the workpapers
created and utilized in the course of the
audit, including, but not limited to: the
audit plan, audit testing, identification
of any instances of noncompliance by
the relevant DB QPAM, and an
explanation of any corrective or
remedial actions taken by the applicable
DB QPAM; and
(12) Deutsche Bank must notify the
Department at least 30 days prior to any
substitution of an auditor, except that
no such replacement will meet the
requirements of this paragraph unless
and until Deutsche Bank demonstrates
to the Department’s satisfaction that
such new auditor is independent of
Deutsche Bank, experienced in the
matters that are the subject of the
Extension, and capable of making the
determinations required of this
Extension.
Notwithstanding the above, this audit
requirement will be deemed met to the
extent the Department issues more
permanent relief that expressly
supersedes this paragraph (f), and the
terms of such new audit requirement
have been met;
(g) With respect to each ERISAcovered plan or IRA for which a DB
QPAM provides asset management or
other discretionary fiduciary services,
each DB QPAM agrees: (1) To comply
with ERISA and the Code, as applicable
with respect to such ERISA-covered
plan or IRA, and refrain from engaging
in prohibited transactions that are not
otherwise exempt; (2) not to waive,
limit, or qualify the liability of the DB
QPAM for violating ERISA or the Code
or engaging in prohibited transactions;
(3) not to require the ERISA-covered
plan or IRA (or sponsor of such ERISAcovered plan or beneficial owner of
such IRA) to indemnify the DB QPAM
for violating ERISA or engaging in
prohibited transactions, except for
violations or prohibited transactions
caused by an error, misrepresentation,
or misconduct of a plan fiduciary or
other party hired by the plan fiduciary
who is independent of Deutsche Bank;
(4) not to restrict the ability of such
ERISA-covered plan or IRA to terminate
or withdraw from its arrangement with
the DB 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,
provided that such restrictions are
applied consistently and in like manner
to all such investors; and (5) not to
impose any fees, penalties, or charges
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75155
for such termination or withdrawal with
the exception of reasonable fees,
appropriately disclosed in advance, that
are specifically designed to prevent
generally recognized abusive investment
practices or specifically designed to
ensure equitable treatment of all
investors in a pooled fund in the event
such withdrawal or termination may
have adverse consequences for all other
investors, provided that such fees are
applied consistently and in like manner
to all such investors. Within two (2)
months of the date of publication of this
notice of Extension in the Federal
Register, each DB QPAM will provide a
notice to such effect to each ERISAcovered plan or IRA for which a DB
QPAM provides asset management or
other discretionary fiduciary services in
reliance on PTE 84–14, unless such
notice was previously provided
consistent with PTE 2015–15;
(h) Each DB QPAM will maintain
records necessary to demonstrate that
the conditions of this Extension have
been met, for six (6) years following the
date of any transaction for which such
DB QPAM relies upon the relief in the
Extension;
(i) The DB QPAMs comply with each
condition of PTE 84–14, as amended,
with the sole exception of the violation
of Section I(g) that is attributable to the
Korean Conviction;
(j) The DB QPAMs will not employ
any of the individuals that engaged in
the spot/futures-linked market
manipulation activities that led to the
Korean Conviction;
(k) Deutsche Bank disgorged all of its
profits generated by the spot/futureslinked market manipulation activities of
DSK personnel that led to the Korean
Conviction;
(l) Deutsche Bank imposes internal
procedures, controls, and protocols on
DSK designed to reduce the likelihood
of any recurrence of the conduct that is
the subject of the Korean Conviction, to
the extent permitted by local law;
(m) DSK will not provide fiduciary or
QPAM services to ERISA-covered Plans
or IRAs, and will not otherwise exercise
discretionary control over plan assets;
(n) No DB QPAM is a subsidiary of
DSK, and DSK is not a subsidiary of any
DB QPAM;
(o) The criminal conduct of DSK that
is the subject of the Korean Conviction
did not directly or indirectly involve the
assets of any plan subject to Part 4 of
Title I of ERISA or section 4975 of the
Code; and
(p) A DB QPAM will not fail to meet
the terms of this Extension solely
because a different DB QPAM fails to
satisfy the conditions for relief under
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this Extension described in Sections
I(d), (e), (f), (g), (h), (i) and (j).
Section II—Definitions
(a) The term ‘‘Korean Conviction’’
means the judgment of conviction
against DSK entered on January 25,
2016, in Seoul Central District Court,
relating to charges filed against DSK
under Articles 176, 443, and 448 of
South Korea’s Financial Investment
Services and Capital Markets Act for
spot/futures-linked market price
manipulation;
(b) The term ‘‘DB QPAM’’ means a
‘‘qualified professional asset manager’’
(as defined in section VI(a) 12 of PTE 84–
14) that relies on the relief provided by
PTE 84–14 and with respect to which
DSK is a current or future ‘‘affiliate’’ (as
defined in section VI(d) of PTE 84–14).
For purposes of this Extension,
Deutsche Bank Securities, Inc. (DBSI),
including all entities over which it
exercises control; and Deutsche Bank
AG, including all of its branches, are
excluded from the definition of a DB
QPAM; and
(c) The term ‘‘DSK’’ means Deutsche
Securities Korea Co., a South Korean
‘‘affiliate’’ of Deutsche Bank (as the term
‘‘affiliate’’ is defined in section VI(c) of
PTE 84–14).
Effective Date: This Extension will be
effective for the period beginning
October 24, 2016 and ending on the
earlier of: April 23, 2017 or the effective
date of a final agency action made by
the Department in connection with
Exemption Application No. D–11856.13
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Supplementary Information
On October 12, 2016, the Department
of Labor (the Department) published a
notice of proposed extension in the
Federal Register at 81 FR 70577,
proposing that certain entities with
specified relationships to DSK could
continue to rely upon the relief
provided by PTE 84–14 (49 FR 9494
(March 13, 1984), as corrected at 50 FR
41430 (October 10, 1985), as amended at
70 FR 49305 (August 23, 2005), and as
amended at 75 FR 38837 (July 6, 2010)),
notwithstanding the Korean Conviction.
The Department is today granting this
Extension in order to protect ERISAcovered plans and IRAs from certain
12 In general terms, a QPAM is an independent
fiduciary that is a bank, savings and loan
association, insurance company, or investment
adviser that meets certain equity or net worth
requirements and other licensure requirements and
that has acknowledged in a written management
agreement that it is a fiduciary with respect to each
plan that has retained the QPAM.
13 In this regard, as noted below, the Applicant
has requested substantially similar relief to the
relief described herein, but on a more permanent
basis.
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18:12 Oct 27, 2016
Jkt 241001
costs and/or investment losses that may
arise to the extent entities with a
corporate relationship to DSK lose their
ability to rely on PTE 84–14 as of the
expiration of PTE 2015–15. The relief in
this Extension provides the Department
more time to consider whether more
permanent relief is warranted.
No relief from a violation of any other
law is provided by this Extension,
including any criminal conviction
described in the proposed extension or
in PTE 2015–15. Furthermore, the
Department cautions that the relief in
this Extension will terminate
immediately if, among other things, an
entity within the Deutsche Bank
corporate family is convicted of a crime
described in Section I(g) of PTE 84–14
during the effective period of the
Extension. While such an entity could
apply for a new exemption in that
circumstance, the Department would
not be obligated to grant that exemption.
The terms of this Extension have been
specifically designed to permit plans to
terminate their relationships in an
orderly and cost effective fashion in the
event of an additional conviction or a
determination that it is otherwise
prudent for a plan to terminate its
relationship with an entity covered by
the Extension.
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
extension, published on October 12,
2016, at 81 FR 70577. All comments and
requests for hearing were due by
October 19, 2016. Because of the
abbreviated comment period, the
Department will consider comments
received within a reasonable period of
time after October 19, 2016 in
connection with its consideration of
long-term exemptive relief for the DB
QPAMs in connection with Exemption
Application No. D–11908, described
above. During the comment period, the
Department received two written
comments, one from the independent
auditor and one from Deutsche Bank
AG, both of which are described below.
Although the Department has, for the
most part, revised the proposed
exemption in the manner requested by
Deutsche Bank AG, the Department
cautions that it may decline to include
those revisions in any decision to grant
more permanent relief.
Independent Auditor’s Comment
Section I(f)(1) of the proposed
extension requires that the audit, along
with the report, must be completed no
later than three months after the period
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Sfmt 4703
to which the audit relates. In its
comment, the auditor requested that the
audit requirement described in Section
I(f)(1) of the proposed extension be
modified to require that the audit report
must be completed no later than six
months after the period to which the
audit relates. The auditor explains that,
during the course of its audit, it needs
to review an extensive amount of
materials, relevant systems and training,
and digest the information provided in
response to various requests for
information. Furthermore, the auditor
states that it will take a significant
amount of time to develop and review
follow-up questions based upon its
initial analysis of the materials and
systems; and the report that the auditor
provides to the Department needs to be
robust, comprehensive and detailed.
The Department views a rigorous,
transparent, and comprehensive audit as
essential to ensuring that the conditions
for exemptive relief described herein are
followed by the DB QPAMs. As such,
the Department has extended the
deadline by which point the audit must
be completed from three months
following the period to which the audit
applies to six months.
Deutsche Bank’s Comment
Deutsche Bank seeks several changes
and/or clarifications to the proposed
extension. First, Deutsche Bank requests
that the Department revise the proposed
exemption in a manner that would
potentially extend the duration of this
Extension. The Department declines to
extend this duration of the Extension in
the manner requested by Deutsche
Bank, but notes that it is currently
considering proposing more permanent
relief pursuant to Application Numbers
D–11879 and D–11908.
Regarding the audit, Deutsche Bank
seeks to extend the certification period
set forth in Section I(f)(9) from 30 days
to 45 days. The Department has revised
the condition accordingly. Deutsche
Bank also requests that the timing of the
audit be adjusted in the same manner
sought by the auditor. This adjustment
is discussed above.
Deutsche requests certain changes to
the training requirement described in
Section I(e)(2) of the proposed
extension. Deutsche Bank seeks to
coordinate that condition with the
training requirement set forth in PTE
2015–15, such that duplicative training
is not required over a short period of
time. The Department has revised
Section I(e)(2) to exclude training for
personnel who received training in a
manner that meets the requirements of
PTE 2015–15 within the prior 12
months.
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Deutsche Bank also seeks changes to
the notice requirement described in
Section I(g) of the proposed exemption.
Deutsche Bank seeks to add the
following bracketed language, such that
Section I(g) reads: ‘‘Within two (2)
months of the date of publication of this
notice of Extension in the Federal
Register, each DB QPAM will provide a
notice to such effect to each ERISAcovered plan or IRA for which a DB
QPAM provides asset management or
other discretionary fiduciary services [in
reliance on PTE 84–14], unless such
notice was previously provided
consistent with PTE 2015–15.’’ The
Department has revised the condition
accordingly.
Deutsche Bank requests an adjustment
to certain restrictions the proposed
exemption places on DSK. In this
regard, Deutsche Bank seeks to add the
following bracketed language, and to
delete the following italicized language,
such that Section I(m) reads: ‘‘DSK has
not, and will not, provide [discretionary
asset management services or other
discretionary] fiduciary or QPAM
services to ERISA-covered Plans or
IRAs, and will not otherwise exercise
discretionary control over plan assets.’’
The Department declines Deutsche
Bank’s request, but has revised the
condition to more clearly require that
this condition is intended to be met
prospectively, not retroactively.
Deutsche Bank also seeks clarification
that for purposes of the Extension, the
auditor, and not the QPAMs, must
provide the relevant workpapers to the
Department. The Department agrees
with that interpretation of the condition.
In its letter to the Department,
Deutsche Bank states that footnotes 38
and 42, which reference tax-related
crimes, are unrelated to Deutsche Bank’s
application and should be deleted.
Deutsche Bank also requests that the
Department note for the record that
‘‘Deutsche Bank identified Mr. Ripley
both as an employee of DBSI and a
subject of the Korean case on numerous
prior occasions, including as far back as
2011, as well as more recently.’’
After giving full consideration to the
entire record, the Department has
decided to grant the Extension. The
complete application file for the
Extension (Exemption Application No.
D–11879), including all supplemental
submissions received by the
Department, as well as the application
file for PTE 2015–15 (Exemption
Application No. D–11696), are available
for public inspection in the Public
Disclosure Room of the Employee
Benefits Security Administration, Room
N–1515, U.S. Department of Labor, 200
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18:12 Oct 27, 2016
Jkt 241001
Constitution Avenue NW., Washington,
DC 20210.
For a more complete statement of the
facts and representations supporting the
Department’s decision to grant this
Extension, refer to the notice of
proposed extension, published on
October 12, 2016, at 81 FR 70577.
Mr.
Scott Ness of the Department, telephone
(202) 693–8561. (This is not a toll-free
number.)
FOR FURTHER INFORMATION CONTACT:
General Information
The attention of interested persons is
directed to the following:
(1) The fact that a transaction is the
subject of an exemption under section
408(a) of the Act and/or section
4975(c)(2) of the Code does not relieve
a fiduciary or other party in interest or
disqualified person from certain other
provisions to which the exemption does
not apply and the general fiduciary
responsibility provisions of section 404
of the Act, which among other things
require a fiduciary to discharge his
duties respecting the plan solely in the
interest of the participants and
beneficiaries of the plan and in a
prudent fashion in accordance with
section 404(a)(1)(B) of the Act; nor does
it affect the requirement of section
401(a) of the Code that the plan must
operate for the exclusive benefit of the
employees of the employer maintaining
the plan and their beneficiaries;
(2) These exemptions are
supplemental to and not in derogation
of, any other provisions of the Act and/
or the Code, including statutory or
administrative exemptions and
transactional rules. Furthermore, the
fact that a transaction is subject to an
administrative or statutory exemption is
not dispositive of whether the
transaction is in fact a prohibited
transaction; and
(3) The availability of these
exemptions is subject to the express
condition that the material facts and
representations contained in the
application accurately describes all
material terms of the transaction which
is the subject of the exemption.
Signed at Washington, DC, this 24th day of
October, 2016.
Lyssa E. Hall,
Director of Exemption Determinations,
Employee Benefits Security Administration,
U.S. Department of Labor.
[FR Doc. 2016–26089 Filed 10–27–16; 8:45 am]
BILLING CODE 4510–29–P
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75157
DEPARTMENT OF LABOR
Employee Benefits Security
Administration
Proposed Extension of Information
Collection Requests Submitted for
Public Comment
Employee Benefits Security
Administration, Department of Labor
ACTION: Notice
AGENCY:
The Department of Labor (the
Department), in accordance with the
Paperwork Reduction Act of 1995 (PRA
95) (44 U.S.C. 3506(c)(2)(A)), provides
the general public and Federal agencies
with an opportunity to comment on
proposed and continuing collections of
information. This helps the Department
assess the impact of its information
collection requirements and minimize
the public’s reporting burden. It also
helps the public understand the
Department’s information collection
requirements and provide the requested
data in the desired format. The
Employee Benefits Security
Administration (EBSA) is soliciting
comments on the proposed extension of
the information collection requests
(ICRs) contained in the documents
described below. A copy of the ICRs
may be obtained by contacting the office
listed in the ADDRESSES section of this
notice. ICRs also are available at
reginfo.gov (https://www.reginfo.gov/
public/do/PRAMain).
DATES: Written comments must be
submitted to the office shown in the
Addresses section on or before
December 27, 2016.
ADDRESSES: G. Christopher Cosby,
Department of Labor, Employee Benefits
Security Administration, 200
Constitution Avenue NW., Room
N–5718, Washington, DC 20210,
ebsa.opr@dol.gov, (202) 693–8410, FAX
(202) 693–4745 (these are not toll-free
numbers).
SUMMARY:
This
notice requests public comment on the
Department’s request for extension of
the Office of Management and Budget’s
(OMB) approval of ICRs contained in
the rules and prohibited transaction
exemptions described below. The
Department is not proposing any
changes to the existing ICRs at this time.
An agency may not conduct or sponsor,
and a person is not required to respond
to, an information collection unless it
displays a valid OMB control number. A
summary of the ICRs and the current
burden estimates follows:
Agency: Employee Benefits Security
Administration, Department of Labor.
SUPPLEMENTARY INFORMATION:
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[Federal Register Volume 81, Number 209 (Friday, October 28, 2016)]
[Notices]
[Pages 75147-75157]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-26089]
=======================================================================
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DEPARTMENT OF LABOR
Employee Benefits Security Administration
Exemptions From Certain Prohibited Transaction Restrictions
AGENCY: Employee Benefits Security Administration, Labor.
ACTION: Grant of individual exemptions.
-----------------------------------------------------------------------
SUMMARY: This document contains exemptions issued by the Department of
Labor (the Department) from certain of the prohibited transaction
restrictions of the Employee Retirement Income Security Act of 1974
(ERISA or the Act) and/or the Internal Revenue Code of 1986 (the Code).
This notice includes the following: 2016-10, Royal Bank of Canada, D-
11868; 2016-11, Northern Trust Corporation, D-11875; and, 2016-12,
Extension of PTE 2015-15 involving Deutsche Bank AG, D-11879.
SUPPLEMENTARY INFORMATION: A notice was published in the Federal
Register of the pendency before the Department of a proposal to grant
such exemption. The notice set forth a summary of facts and
representations contained in the application for exemption and referred
interested persons to the application for a complete statement of the
facts and representations. The application has been available for
public inspection at the Department in Washington, DC. The notice also
invited interested persons to submit comments on the requested
exemption to the Department. In addition the notice stated that any
interested person might submit a written request that a public hearing
be held (where appropriate). The applicant has represented that it has
complied with the requirements of the notification to interested
persons. No requests for a hearing were received by the Department.
Public comments were received by the Department as described in the
granted exemption.
The notice of proposed exemption was issued and the exemption is
being granted solely by the Department because, effective December 31,
1978, section 102 of Reorganization Plan No. 4 of 1978, 5 U.S.C. App. 1
(1996), transferred the authority of the Secretary of the Treasury to
issue exemptions of the type proposed to the Secretary of Labor.
Statutory Findings
In accordance with section 408(a) of the Act and/or section
4975(c)(2) of the Code and the procedures set forth in 29 CFR part
2570, subpart B (76 FR 66637, 66644, October 27, 2011) \1\ and based
upon the entire record, the Department makes the following findings:
---------------------------------------------------------------------------
\1\ The Department has considered exemption applications
received prior to December 27, 2011 under the exemption procedures
set forth in 29 CFR part 2570, subpart B (55 FR 32836, 32847, August
10, 1990).
---------------------------------------------------------------------------
(a) The exemption is administratively feasible;
(b) The exemption is in the interests of the plan and its
participants and beneficiaries; and
(c) The exemption is protective of the rights of the participants
and beneficiaries of the plan.
Royal Bank of Canada (Together With Its Current and Future Affiliates,
RBC or the Applicant), Located in Toronto, Ontario, Canada
[Prohibited Transaction Exemption 2016-10; Exemption Application No. D-
11868]
Temporary Exemption
Section I--Covered Transactions
Certain entities with specified relationships to Royal Bank of
Canada Trust Company (Bahamas) Limited (RBCTC Bahamas) (hereinafter,
the RBC QPAMs, as further defined in Section II(b)) will not be
precluded from relying on the exemptive relief provided by Prohibited
Transaction Exemption (PTE) 84-14,\2\ notwithstanding a judgment of
conviction against RBCTC Bahamas for aiding and abetting tax fraud, to
be entered in France in the District Court of Paris (the Conviction, as
further defined in Section II(a)),\3\ for a period of up to twelve
months beginning on the date of the Conviction (the Conviction Date),
provided that the following conditions are satisfied:
---------------------------------------------------------------------------
\2\ 49 FR 9494 (March 13, 1984), as corrected at 50 FR 41430
(October 10, 1985), as amended at 70 FR 49305 (August 23, 2005), and
as amended at 75 FR 38837 (July 6, 2010).
\3\ Section I(g) of PTE 84-14 generally provides that
``[n]either the QPAM nor any affiliate thereof . . . nor any owner .
. . of a 5 percent or more interest in the QPAM is a person who
within the 10 years immediately preceding the transaction has been
either convicted or released from imprisonment, whichever is later,
as a result of'' certain felonies including income tax evasion, and
aiding and abetting tax evasion.
---------------------------------------------------------------------------
(a) The RBC QPAMs (including their officers, directors, agents
other than RBC, and employees of such RBC QPAMs) did not know of, have
reason to know of, or participate in the criminal conduct of RBCTC
Bahamas that is the subject of the Conviction (for purposes of this
paragraph (a), ``participate in'' includes the knowing or tacit
approval of the misconduct underlying the Conviction);
(b) The RBC QPAMs (including their officers, directors, agents
other than RBC, and employees of such RBC
[[Page 75148]]
QPAMs) did not receive direct compensation, or knowingly receive
indirect compensation, in connection with the criminal conduct that is
the subject of the Conviction;
(c) The RBC QPAMs will not employ or knowingly engage any of the
individuals that participated in the criminal conduct that is the
subject of the Conviction (for purposes of this paragraph (c),
``participated in'' includes the knowing or tacit approval of the
misconduct underlying the Conviction);
(d) An RBC QPAM will not 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 RBC QPAM, to enter
into any transaction with RBCTC Bahamas or engage RBCTC Bahamas to
provide any service to such investment fund, for a direct or indirect
fee borne by such investment fund, regardless of whether such
transaction or service may otherwise be within the scope of relief
provided by an administrative or statutory exemption;
(e) Any failure of the RBC QPAMs to satisfy Section I(g) of PTE 84-
14 arose solely from the Conviction;
(f) The criminal conduct that is the subject of the Conviction did
not directly or indirectly involve the assets of any plan subject to
Part 4 of Title I of ERISA (an ERISA-covered plan) or section 4975 of
the Code (an IRA);
(g) RBCTC Bahamas has not provided nor will provide discretionary
asset management services to ERISA-covered plans or IRAs, nor will it
otherwise act as a fiduciary with respect to ERISA-covered plan and IRA
assets;
(h)(1) Within four months of the date of the Conviction, each RBC
QPAM must develop, implement, maintain, and follow written policies
(the Policies) requiring and reasonably designed to ensure that:
(i) The asset management decisions of the RBC QPAM are conducted
independently of the management and business activities of RBCTC
Bahamas;
(ii) The RBC QPAM fully complies with ERISA's fiduciary duties and
with ERISA and the Code's prohibited transaction provisions, and does
not knowingly participate in any violations of these duties and
provisions with respect to ERISA-covered plans and IRAs;
(iii) The RBC QPAM does not knowingly participate in any other
person's violation of ERISA or the Code with respect to ERISA-covered
plans and IRAs;
(iv) Any filings or statements made by the RBC QPAM to regulators,
including but not limited to, the Department of Labor, the Department
of the Treasury, the Department of Justice, and the Pension Benefit
Guaranty Corporation, on behalf of ERISA-covered plans or IRAs are
materially accurate and complete, to the best of such QPAM's knowledge
at that time;
(v) The RBC QPAM does not make material misrepresentations or omit
material information in its communications with such regulators with
respect to ERISA-covered plans or IRAs, or make material
misrepresentations or omit material information in its communications
with ERISA-covered plan and IRA clients;
(vi) The RBC QPAM complies with the terms of this temporary
exemption; and
(vii) Any violation of, or failure to comply with, an item in
subparagraph (ii) through (vi), is corrected promptly upon discovery,
and any such violation or compliance failure not promptly corrected is
reported, upon discovering the failure to promptly correct, in writing,
to appropriate corporate officers, the head of compliance and the
General Counsel (or their functional equivalent) of the relevant RBC
QPAM, and an appropriate fiduciary of any affected ERISA-covered plan
or IRA where such fiduciary is independent of RBC; however, with
respect to any ERISA-covered plan or IRA sponsored by an ``affiliate''
(as defined in Section VI(d) of PTE 84-14) of RBC or beneficially owned
by an employee of RBC or its affiliates, such fiduciary does not need
to be independent of RBC. An RBC QPAM will not be treated as having
failed to develop, implement, maintain, or follow the Policies,
provided that it corrects any instance of noncompliance promptly when
discovered or when it reasonably should have known of the noncompliance
(whichever is earlier), and provided that it adheres to the reporting
requirements set forth in this subparagraph (vii);
(2) Within four months of the date of the Conviction, each RBC QPAM
must develop and implement a program of training (the Training),
conducted at least annually, for all relevant RBC QPAM asset/portfolio
management, trading, legal, compliance, and internal audit personnel.
The Training must be set forth in the Policies and at a minimum, cover
the Policies, ERISA and Code compliance (including applicable fiduciary
duties and the prohibited transaction provisions), ethical conduct, the
consequences for not complying with the conditions of this temporary
exemption (including any loss of exemptive relief provided herein), and
prompt reporting of wrongdoing;
(i) Effective as of the effective date of this temporary exemption,
with respect to any arrangement, agreement, or contract between an RBC
QPAM and an ERISA-covered plan or IRA for which an RBC QPAM provides
asset management or other discretionary fiduciary services, each RBC
QPAM agrees:
(1) To comply with ERISA and the Code, as applicable with respect
to such ERISA-covered plan or IRA; to refrain from engaging in
prohibited transactions that are not otherwise exempt (and to promptly
correct any inadvertent prohibited transactions); and to comply with
the standards of prudence and loyalty set forth in section 404 of ERISA
with respect to each such ERISA-covered plan and IRA;
(2) Not to require (or otherwise cause) the ERISA-covered plan or
IRA to waive, limit, or qualify the liability of the RBC QPAM for
violating ERISA or the Code or engaging in prohibited transactions;
(3) Not to require the ERISA-covered plan or IRA (or sponsor of
such ERISA-covered plan or beneficial owner of such IRA) to indemnify
the RBC QPAM for violating ERISA or engaging in prohibited
transactions, except for violations or prohibited transactions caused
by an error, misrepresentation, or misconduct of a plan fiduciary or
other party hired by the plan fiduciary who is independent of RBC;
(4) Not to restrict the ability of such ERISA-covered plan or IRA
to terminate or withdraw from its arrangement with the RBC QPAM
(including any investment in a separately managed account or pooled
fund subject to ERISA and managed by such QPAM), with the exception of
reasonable restrictions, appropriately disclosed in advance, that are
specifically designed to ensure equitable treatment of all investors in
a pooled fund in the event such withdrawal or termination may have
adverse consequences for all other investors as a result of an actual
lack of liquidity of the underlying assets, provided that such
restrictions are applied consistently and in like manner to all such
investors;
(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
[[Page 75149]]
investors, provided that such fees are applied consistently and in like
manner to all such investors;
(6) Not to include exculpatory provisions disclaiming or otherwise
limiting liability of the RBC QPAM for a violation of such agreement's
terms, except for liability caused by an error, misrepresentation, or
misconduct of a plan fiduciary or other party hired by the plan
fiduciary who is independent of RBC; and
(7) To indemnify and hold harmless the ERISA-covered plan or IRA
for any damages resulting from a violation of applicable laws, a breach
of contract, or any claim arising out of the failure of such RBC QPAM
to qualify for the exemptive relief provided by PTE 84-14 as a result
of a violation of Section I(g) of PTE 84-14 other than the Conviction.
Within six (6) months of the date of the Conviction, each RBC QPAM
will: Provide a notice of its obligations under this Section I(i) to
each ERISA-covered plan and IRA for which an RBC QPAM provides asset
management or other discretionary fiduciary services;
(j) The RBC QPAMs comply with each condition of PTE 84-14, as
amended, with the sole exceptions of the violations of Section I(g) of
PTE 84-14 that are attributable to the Conviction;
(k) Each RBC QPAM will maintain records necessary to demonstrate
that the conditions of this temporary exemption have been met, for six
(6) years following the date of any transaction for which such RBC QPAM
relies upon the relief in the temporary exemption;
(l) During the effective period of this temporary exemption, RBC:
(1) Immediately discloses to the Department any Deferred Prosecution
Agreement (a DPA) or Non-Prosecution Agreement (an NPA) that RBC or an
affiliate enters into with the U.S Department of Justice, to the extent
such DPA or NPA involves conduct described in Section I(g) of PTE 84-14
or section 411 of ERISA; and (2) immediately provides the Department
any information requested by the Department, as permitted by law,
regarding the agreement and/or the conduct and allegations that led to
the agreements; and
(m) An RBC QPAM will not fail to meet the terms of this temporary
exemption, solely because a different RBC QPAM fails to satisfy a
condition for relief under this temporary exemption, described in
Sections I(c), (d), (h), (i), (j), and (k).
Section II--Definitions
(a) The term ``Conviction'' means the potential judgment of
conviction against RBCTC Bahamas for aiding and abetting tax fraud to
be entered in France in the District Court of Paris, French Special
Prosecutor No. 1120392066, French Investigative Judge No. JIRSIF/11/12;
(b) The term ``RBC QPAM'' means a ``qualified professional asset
manager'' (as defined in section VI(a) \4\ of PTE 84-14) that relies on
the relief provided by PTE 84-14 and with respect to which RBCTC
Bahamas is a current or future ``affiliate'' (as defined in section
VI(d) of PTE 84-14);
---------------------------------------------------------------------------
\4\ In general terms, a QPAM is an independent fiduciary that is
a bank, savings and loan association, insurance company, or
investment adviser that meets certain equity or net worth
requirements and other licensure requirements and that has
acknowledged in a written management agreement that it is a
fiduciary with respect to each plan that has retained the QPAM.
---------------------------------------------------------------------------
(c) The term ``RBCTC Bahamas'' means Royal Bank of Canada Trust
Company (Bahamas) Limited, a Bahamian ``affiliate'' of RBC (as defined
in section VI(c) of PTE 84-14);
(d) The terms ``ERISA-covered plan'' and ``IRA'' mean,
respectively, a plan subject to Part 4 of Title I of ERISA and a plan
subject to section 4975 of the Code; and
(e) The term ``RBC'' means Royal Bank of Canada, together with its
current and future affiliates.
Effective Date: This temporary exemption is effective for the
period beginning on the Conviction Date until the earlier of: The date
that is twelve months following the Conviction Date; or the effective
date of a final agency action made by the Department in connection with
an application for long-term exemptive relief for the covered
transactions described herein.
Supplementary Information
On October 12, 2016, the Department of Labor (the Department)
published a notice of proposed temporary exemption in the Federal
Register at 81 FR 70562, proposing that certain entities with specified
relationships to RBCTC Bahamas could continue to rely upon the relief
provided by PTE 84-14 (49 FR 9494 (March 13, 1984), as corrected at 50
FR 41430 (October 10, 1985), as amended at 70 FR 49305 (August 23,
2005), and as amended at 75 FR 38837 (July 6, 2010)), notwithstanding a
judgment of conviction against RBCTC Bahamas for aiding and abetting
tax fraud, to be entered in France in the District Court of Paris (the
Conviction, as further defined in Section II(a)),\5\ for a period of up
to twelve months beginning on the date of the Conviction.
---------------------------------------------------------------------------
\5\ Section I(g) of PTE 84-14 generally provides that
``[n]either the QPAM nor any affiliate thereof . . . nor any owner .
. . of a 5 percent or more interest in the QPAM is a person who
within the 10 years immediately preceding the transaction has been
either convicted or released from imprisonment, whichever is later,
as a result of'' certain felonies including income tax evasion, and
aiding and abetting tax evasion.
---------------------------------------------------------------------------
The Department is today granting this temporary exemption in order
to protect ERISA-covered plans and IRAs from certain costs and/or
investment losses that may arise to the extent entities with a
corporate relationship to RBCTC Bahamas lose their ability to rely on
PTE 84-14 as of the Conviction Date, as described in the proposed
temporary exemption. The Department is considering proposing longer-
term relief for RBC QPAMs to rely on PTE 84-14 notwithstanding the
Conviction, in Application No. D-11912. The relief in this temporary
exemption provides the Department more time to consider whether longer-
term relief is warranted.
No relief from a violation of any other law is provided by this
temporary exemption, including any criminal conviction described in the
proposed temporary exemption. Furthermore, the Department cautions that
the relief in this temporary exemption will terminate immediately if,
among other things, an entity within the RBC corporate structure is
convicted of a crime described in Section I(g) of PTE 84-14 (other than
the Conviction) during the effective period of the temporary exemption.
While such an entity could apply for a new exemption in that
circumstance, the Department would not be obligated to grant the
exemption. The terms of this temporary exemption have been specifically
designed to permit plans to terminate their relationships in an orderly
and cost effective fashion in the event of an additional conviction or
a determination that it is otherwise prudent for a plan to terminate
its relationship with an entity covered by the temporary exemption.
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 temporary exemption, published on October 12, 2016.
All comments and requests for hearing were due by October 19, 2016.
During the comment period, the Department received written comments
from RBC and from The Clearing House. Although the Department has, for
the most part, revised the proposed temporary exemption in the manner
requested by RBC, the Department cautions that it may decline to
include those revisions in any decision to grant more permanent relief.
[[Page 75150]]
RBC's Comment
RBC seeks several revisions to the conditions set forth in the
proposed temporary exemption. First, RBC states that Section I(f) of
the proposed temporary exemption may be unintentionally broad. As
proposed, that condition states: ``No entities holding assets that
constitute the assets of any plan subject to Part 4 of Title I of ERISA
(an ERISA-covered plan) or section 4975 of the Code (an IRA) were
involved in the criminal conduct that is the subject of the
Conviction.'' RBC seeks to revise the condition to read: ``The criminal
conduct that is the subject of the Conviction did not directly or
indirectly involve the assets of any plan subject to Part 4 of Title I
of ERISA (an ERISA-covered plan) or section 4975 of the Code (an
IRA).'' The Department has decided to revise the condition in the
manner requested by RBC.
Next, RBC notes that Section I(h) of the proposed temporary
exemption requires that each RBC QPAM ``immediately:'' Develop,
implement, maintain and follow certain written policies; and develop
and implement a program of training. RBC seeks a period of up to four
months following the date of its impending conviction to meet these
requirements. The Department agrees that four months is a reasonable
period of time with which to comply with the requirement of Section
I(h) and has revised the condition accordingly.
RBC seeks another change to Section I(h)(1)(i), through the
deletion of the bolded language, ``The asset management decisions of
the RBC QPAM are conducted independently of the management and business
activities of RBC, including RBCTC Bahamas. RBC represents that it has
neither committed, nor been accused of committing, a crime. The
Department has revised the condition accordingly.
RBC also seeks to change the start date of the notice requirement
set forth in Section I(i), such that each RBC must provide such notice
within six months of the Conviction Date, rather than within six months
of the date of publication of this granted temporary exemption. The
Department concurs with this request, and has revised the temporary
exemption accordingly.
RBC seeks deletion of the requirement in Section I(i) that requires
each RBC QPAM to separately warrant in writing its obligations to
ERISA-Covered Plans and IRAs. While the Department has made such
revision for purposes of the limited relief herein, the Department re-
emphasizes, as noted above, that it may decide to propose more
permanent relief that does not contain this revision.
RBC seeks deletion of requirement set forth in Section I(i)(6)
that, each RBC QPAM agrees: ``Not to include exculpatory provisions
disclaiming or otherwise limiting liability of the RBC QPAM for a
violation of such agreement's terms.'' The Department declines to make
such deletion, but has revised the condition to read: ``Not to include
exculpatory provisions disclaiming or otherwise limiting liability of
the RBC QPAM for a violation of such agreement's terms, except for
liability caused by an error, misrepresentation, or misconduct of a
plan fiduciary or other party hired by the plan fiduciary who is
independent of RBC.''
RBC notes that, in addition to the asset managers identified in the
proposed exemption, the following managers are owned in whole or in
part by RBC: BlueBay Asset Management USA, LLC; City National Bank;
City National Rochdale, LLC; City National Securities, Inc.; Convergent
Wealth Advisors, LLC; LMCG Investments, LLC; Mid-Continent Capital,
L.L.C.; and Symphonic Financial Advisors LLC be added to the list of
primary U.S. bank and U.S. registered adviser affiliates in which RBC
owns a significant interest. Three additional managers are owned in
part but not currently controlled by RBC: Matthews International
Capital Management, LLC; SKBA Capital Management, LLC; and
O'Shaughnessy Asset Management, LLC. Further, RBC believes that
Footnote 16 of the proposed exemption implies that the Hong Kong
investigation is connected to RBCTC Bahamas' alleged conduct that is
the subject of the French prosecution described in Section II(a) of the
proposal. According to RBC, the Hong Kong investigation is entirely
unrelated to the matter that is the subject of the French prosecution
described in Section II(a).
Condition (l) set forth in the proposed exemption provided that
during the effective period of this temporary exemption, neither RBC
nor any affiliate enters into a Deferred Prosecution Agreement (a DPA)
or a Non-Prosecution Agreement (an NPA) with the U.S Department of
Justice, in connection with conduct described in Section I(g) of PTE
84-14 or section 411 of ERISA. RBC sought to reserve its right to
comment on this condition in connection with the Department's
consideration of more permanent relief. The Department has nonetheless
revised condition (l) such that it now reads: During the effective
period of this temporary exemption, RBC: (1) Immediately discloses to
the Department any Deferred Prosecution Agreement (a DPA) or Non-
Prosecution Agreement (an NPA) that RBC or an affiliate enters into
with the U.S Department of Justice, to the extent such DPA or NPA
involves conduct described in Section I(g) of PTE 84-14 or section 411
of ERISA; and (2) immediately provides the Department any information
requested by the Department, as permitted by law, regarding the
agreement and/or the conduct and allegations that led to the
agreements.
The Clearing House Comment
The Clearing House Association L.L.C. (TCH) submitted a comment
that expresses concern regarding condition (l) in Section I of the
proposed temporary exemption. As noted above, the Department has
revised that condition. The Department will continue to consider TCH's
comment in connection with its consideration of more permanent relief
for RBC.
After giving full consideration to the record, the Department has
decided to grant the temporary exemption, as described above. The
complete application file (Application No. D-11868) 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.
For a more complete statement of the facts and representations
supporting the Department's decision to grant this temporary exemption,
refer to the notice of proposed temporary exemption published on
October 12, 2016 at 81 FR 70562.
FOR FURTHER INFORMATION CONTACT: Ms. Anna Mpras Vaughan of the
Department, telephone (202) 693-8565. (This is not a toll-free number.)
Northern Trust Corporation (Together With Its Current and Future
Affiliates, Northern or the Applicant), Located in Chicago, Illinois
[Prohibited Transaction Exemption 2016-11; Exemption Application No. D-
11875]
Temporary Exemption
Section I--Covered Transactions
Certain entities with specified relationships to Northern Trust
Fiduciary Services (Guernsey) ltd. (NTFS) (hereinafter, the Northern
QPAMs, as further defined in Section II(b)) will not be precluded from
relying on the exemptive relief provided by Prohibited Transaction
Exemption 84-
[[Page 75151]]
14 (PTE) 84-14,\6\ notwithstanding a judgment of conviction against
NTFS for aiding and abetting tax fraud, to be entered in France in the
District Court of Paris (the Conviction, as further defined in Section
II(a)),\7\ for a period of up to twelve months beginning on the date of
the Conviction (the Conviction Date), provided that the following
conditions are satisfied:
---------------------------------------------------------------------------
\6\ 49 FR 9494 (March 13, 1984), as corrected at 50 FR 41430
(October 10, 1985), as amended at 70 FR 49305 (August 23, 2005), and
as amended at 75 FR 38837 (July 6, 2010).
\7\ Section I(g) of PTE 84-14 generally provides that
``[n]either the QPAM nor any affiliate thereof . . . nor any owner .
. . of a 5 percent or more interest in the QPAM is a person who
within the 10 years immediately preceding the transaction has been
either convicted or released from imprisonment, whichever is later,
as a result of'' certain felonies including income tax evasion, and
aiding and abetting tax evasion.
---------------------------------------------------------------------------
(a) The Northern QPAMs (including their officers, directors, agents
other than Northern, and employees of such Northern QPAMs) did not know
of, have reason to know of, or participate in the criminal conduct of
NTFS that is the subject of the Conviction (for purposes of this
paragraph (a), ``participate in'' includes the knowing or tacit
approval of the misconduct underlying the Conviction);
(b) The Northern QPAMs (including their officers, directors, agents
other than Northern, and employees of such Northern QPAMs) did not
receive direct compensation, or knowingly receive indirect
compensation, in connection with the criminal conduct that is the
subject of the Conviction;
(c) The Northern QPAMs will not employ or knowingly engage any of
the individuals that participated in the criminal conduct that is the
subject of the Conviction (for purposes of this paragraph (c),
``participated in'' includes the knowing or tacit approval of the
misconduct underlying the Conviction);
(d) A Northern QPAM will not 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 Northern
QPAM, to enter into any transaction with NTFS or engage NTFS 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;
(e) Any failure of the Northern QPAMs to satisfy Section I(g) of
PTE 84-14 arose solely from the Conviction;
(f) No entities holding assets that constitute the assets of any
plan subject to Part 4 of Title I of ERISA (an ERISA-covered plan) or
section 4975 of the Code (an IRA) were involved in the criminal conduct
that is the subject of the Conviction;
(g) NTFS has not provided nor will provide discretionary asset
management services to ERISA-covered plans or IRAs, nor will it
otherwise act as a fiduciary with respect to ERISA-covered plan and IRA
assets;
(h)(1) Within four months of the date of the Conviction, each
Northern QPAM must develop, implement, maintain, and follow written
policies (the Policies) requiring and reasonably designed to ensure
that:
(i) The asset management decisions of the Northern QPAM are
conducted independently of the management and business activities of
NTFS;
(ii) The Northern QPAM fully complies with ERISA's fiduciary duties
and with ERISA and the Code's prohibited transaction provisions, and
does not knowingly participate in any violations of these duties and
provisions with respect to ERISA-covered plans and IRAs;
(iii) The Northern QPAM does not knowingly participate in any other
person's violation of ERISA or the Code with respect to ERISA-covered
plans and IRAs;
(iv) Any filings or statements made by the Northern QPAM to
regulators, including but not limited to, the Department of Labor, the
Department of the Treasury, the Department of Justice, and the Pension
Benefit Guaranty Corporation, on behalf of ERISA-covered plans or IRAs
are materially accurate and complete, to the best of such QPAM's
knowledge at that time;
(v) The Northern QPAM does not make material misrepresentations or
omit material information in its communications with such regulators
with respect to ERISA-covered plans or IRAs, or make material
misrepresentations or omit material information in its communications
with ERISA-covered plan and IRA clients;
(vi) The Northern QPAM complies with the terms of this temporary
exemption; and
(vii) Any violation of, or failure to comply with, an item in
subparagraph (ii) through (vi), is corrected promptly upon discovery,
and any such violation or compliance failure not promptly corrected is
reported, upon discovering the failure to promptly correct, in writing,
to appropriate corporate officers, the head of compliance and the
General Counsel (or their functional equivalent) of the relevant
Northern QPAM, and an appropriate fiduciary of any affected ERISA-
covered plan or IRA where such fiduciary is independent of Northern;
however, with respect to any ERISA-covered plan or IRA sponsored by an
``affiliate'' (as defined in Section VI(d) of PTE 84-14) of Northern or
beneficially owned by an employee of Northern or its affiliates, such
fiduciary does not need to be independent of Northern. A Northern QPAM
will not be treated as having failed to develop, implement, maintain,
or follow the Policies, provided that it corrects any instance of
noncompliance promptly when discovered or when it reasonably should
have known of the noncompliance (whichever is earlier), and provided
that it adheres to the reporting requirements set forth in this
subparagraph (vii);
(2) Within four months of the date of the Conviction, Northern QPAM
must develop and implement a program of training (the Training),
conducted at least annually, for all relevant Northern QPAM asset/
portfolio management, trading, legal, compliance, and internal audit
personnel. The Training must be set forth in the Policies and at a
minimum, cover the Policies, ERISA and Code compliance (including
applicable fiduciary duties and the prohibited transaction provisions),
ethical conduct, the consequences for not complying with the conditions
of this temporary exemption (including any loss of exemptive relief
provided herein), and prompt reporting of wrongdoing;
(i) Effective as of the effective date of this temporary exemption,
with respect to any arrangement, agreement, or contract between a
Northern QPAM and an ERISA-covered plan or IRA for which a Northern
QPAM provides asset management or other discretionary fiduciary
services, each Northern QPAM agrees:
(1) To comply with ERISA and the Code, as applicable with respect
to such ERISA-covered plan or IRA; to refrain from engaging in
prohibited transactions that are not otherwise exempt (and to promptly
correct any inadvertent prohibited transactions); and to comply with
the standards of prudence and loyalty set forth in section 404 of ERISA
with respect to each such ERISA-covered plan and IRA;
(2) Not to require (or otherwise cause) the ERISA-covered plan or
IRA to waive, limit, or qualify the liability of the Northern QPAM for
violating ERISA or the Code or engaging in prohibited transactions;
(3) Not to require the ERISA-covered plan or IRA (or sponsor of
such ERISA-covered plan or beneficial owner of
[[Page 75152]]
such IRA) to indemnify the Northern QPAM for violating ERISA or
engaging in prohibited transactions, except for violations or
prohibited transactions caused by an error, misrepresentation, or
misconduct of a plan fiduciary or other party hired by the plan
fiduciary who is independent of Northern;
(4) Not to restrict the ability of such ERISA-covered plan or IRA
to terminate or withdraw from its arrangement with the Northern QPAM
(including any investment in a separately managed account or pooled
fund subject to ERISA and managed by such QPAM), with the exception of
reasonable restrictions, appropriately disclosed in advance, that are
specifically designed to ensure equitable treatment of all investors in
a pooled fund in the event such withdrawal or termination may have
adverse consequences for all other investors as a result of an actual
lack of liquidity of the underlying assets, provided that such
restrictions are applied consistently and in like manner to all such
investors;
(5) Not to impose any fees, penalties, or charges for such
termination or withdrawal with the exception of reasonable fees,
appropriately disclosed in advance, that are specifically designed to
prevent generally recognized abusive investment practices or
specifically designed to ensure equitable treatment of all investors in
a pooled fund in the event such withdrawal or termination may have
adverse consequences for all other investors, provided that such fees
are applied consistently and in like manner to all such investors;
(6) Not to include exculpatory provisions disclaiming or otherwise
limiting liability of the Northern QPAM for a violation of such
agreement's terms, except 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 Northern Trust; and
(7) To indemnify and hold harmless the ERISA-covered plan or IRA
for any damages resulting from a violation of applicable laws, a breach
of contract, or any claim arising out of the failure of such Northern
QPAM to qualify for the exemptive relief provided by PTE 84-14 as a
result of a violation of Section I(g) of PTE 84-14 other than the
Conviction.
Within six (6) months of the date of the Conviction, each Northern
QPAM will: Provide a notice of its obligations under this Section I(i)
to each ERISA-covered plan and IRA for which a Northern QPAM provides
asset management or other discretionary fiduciary services;
(j) The Northern QPAMs comply with each condition of PTE 84-14, as
amended, with the sole exceptions of the violations of Section I(g) of
PTE 84-14 that are attributable to the Conviction;
(k) Each Northern QPAM will maintain records necessary to
demonstrate that the conditions of this temporary exemption have been
met, for six (6) years following the date of any transaction for which
such Northern QPAM relies upon the relief in the temporary exemption;
(l) During the effective period of this temporary exemption,
Northern Trust: (1) Immediately discloses to the Department any
Deferred Prosecution Agreement (a DPA) or Non-Prosecution Agreement (an
NPA) that Northern Trust enters into with the U.S Department of
Justice, to the extent such DPA or NPA involves conduct described in
Section I(g) of PTE 84-14 or section 411 of ERISA; and (2) immediately
provides the Department any information requested by the Department, as
permitted by law, regarding the agreement and/or the conduct and
allegations that led to the agreements; and
(m) A Northern QPAM will not fail to meet the terms of this
temporary exemption, solely because a different Northern QPAM fails to
satisfy a condition for relief under this temporary exemption,
described in Sections I(c), (d), (h), (i), (j), and (k).
Section II--Definitions
(a) The term ``Conviction'' means the potential judgment of
conviction against NTFS for aiding and abetting tax fraud to be entered
in France in the District Court of Paris, French Special Prosecutor No.
1120392066, French Investigative Judge No. JIRSIF/11/12;
(b) The term ``Northern QPAM'' means a ``qualified professional
asset manager'' (as defined in section VI(a) \8\ of PTE 84-14) that
relies on the relief provided by PTE 84-14 and with respect to which
NTFS is a current or future ``affiliate'' (as defined in section VI(d)
of PTE 84-14);
---------------------------------------------------------------------------
\8\ In general terms, a QPAM is an independent fiduciary that is
a bank, savings and loan association, insurance company, or
investment adviser that meets certain equity or net worth
requirements and other licensure requirements and that has
acknowledged in a written management agreement that it is a
fiduciary with respect to each plan that has retained the QPAM.
---------------------------------------------------------------------------
(c) The term ``NTFS'' means Northern Trust Fiduciary Services
(Guernsey) ltd., an affiliate'' of Northern (as defined in section
VI(c) of PTE 84-14) located in Guernsey;
(d) The terms ``ERISA-covered plan'' and ``IRA'' mean,
respectively, a plan subject to Part 4 of Title I of ERISA and a plan
subject to section 4975 of the Code; and
(e) The term ``Northern'' means Northern Trust Corporation,
together with its current and future affiliates.
Effective Date: This temporary exemption is effective for the
period beginning on the Conviction Date until the earlier of: The date
that is twelve months following the Conviction Date; or the effective
date of a final agency action made by the Department in connection with
an application for long-term exemptive relief for the covered
transactions described herein.
Supplementary Information
On October 12, 2016, the Department of Labor (the Department)
published a notice of proposed temporary exemption in the Federal
Register at 81 FR 70562, proposing that certain entities with specified
relationships to NTFS could continue to rely upon the relief provided
by PTE 84-14 (49 FR 9494 (March 13, 1984), as corrected at 50 FR 41430
(October 10, 1985), as amended at 70 FR 49305 (August 23, 2005), and as
amended at 75 FR 38837 (July 6, 2010)), notwithstanding a judgment of
conviction against NTFS for aiding and abetting tax fraud, to be
entered in France in the District Court of Paris (the Conviction, as
further defined in Section II(a)),\9\ for a period of up to twelve
months beginning on the date of the Conviction.
---------------------------------------------------------------------------
\9\ Section I(g) of PTE 84-14 generally provides that
``[n]either the QPAM nor any affiliate thereof . . . nor any owner .
. . of a 5 percent or more interest in the QPAM is a person who
within the 10 years immediately preceding the transaction has been
either convicted or released from imprisonment, whichever is later,
as a result of'' certain felonies including income tax evasion, and
aiding and abetting tax evasion.
---------------------------------------------------------------------------
The Department is today granting this temporary exemption in order
to protect ERISA-covered plans and IRAs from certain costs and/or
investment losses that may arise to the extent entities with a
corporate relationship to NTFS lose their ability to rely on PTE 84-14
as of the Conviction Date, as described in the proposed temporary
exemption. The Department is considering proposing longer-term relief
for Northern QPAMs to rely on PTE 84-14 notwithstanding the Conviction,
in Application No. D-11911. The relief in this temporary exemption
provides the Department more time to consider whether longer-term
relief is warranted.
No relief from a violation of any other law is provided by this
temporary exemption, including any criminal conviction described in the
proposed temporary exemption. Furthermore, the
[[Page 75153]]
Department cautions that the relief in this temporary exemption will
terminate immediately if, among other things, an entity within the
Northern corporate structure is convicted of a crime described in
Section I(g) of PTE 84-14 (other than the Conviction) during the
effective period of the temporary exemption. While such an entity could
apply for a new exemption in that circumstance, the Department would
not be obligated to grant the exemption. The terms of this temporary
exemption have been specifically designed to permit plans to terminate
their relationships in an orderly and cost effective fashion in the
event of an additional conviction or a determination that it is
otherwise prudent for a plan to terminate its relationship with an
entity covered by the temporary exemption.
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 temporary exemption, published on October 12, 2016.
All comments and requests for hearing were due by October 18, 2016. The
Department received two written comments, one from Northern Trust, the
other from Clearing House Association L.L.C. (TCH), both of which are
described below.
Although the Department has revised, in part, the proposed
exemption in the manner requested by Northern Trust, the Department
cautions that it may decline to include such revisions in any decision
to grant more permanent relief.
Northern Trust Comment
Northern Trust notes that Section I(h) of the proposed exemption
requires that each Northern QPAM ``immediately:'' Develop, implement,
maintain and follow certain written policies; and develop and implement
a program of training. Northern Trust seeks a period of up to four
months following the date of its impending conviction to meet these
requirements. The Department agrees that four months is a reasonable
period of time with which to comply with the requirement of Section
I(h) and has revised the condition accordingly.
Northern Trust seeks another change to Section I(h)(1)(i), through
the deletion of the bracketed language, ``The asset management
decisions of the Northern QPAM are conducted independently of the
management and business activities of [Northern, including] NTFS [and
Northern's non-asset management affiliates.]'' Northern Trust
represents that it has neither committed, nor been accused of
committing, a crime. The Department has revised the condition
accordingly.
Northern Trust seeks deletion of the requirement in Section I(i)
that requires each Northern QPAM to separately warrant in writing its
obligations to ERISA-Covered Plans and IRAs. While the Department has
made such revision for purposes of the limited relief herein, the
Department re-emphasizes, as noted above, that it may decide to propose
more permanent relief that does not contain this revision.
Northern Trust seeks deletion of the requirement set forth in
Section I(i)(6) that, each Northern QPAM agrees: ``Not to include
exculpatory provisions disclaiming or otherwise limiting liability of
the Northern QPAM for a violation of such agreement's terms.'' The
Department declines to make such deletion, but has revised the
condition to read: ``Not to include exculpatory provisions disclaiming
or otherwise limiting liability of the Northern QPAM for a violation of
such agreement's terms, except 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 Northern Trust.''
Condition (l) of the proposed exemption provided that neither
Northern Trust nor any affiliate could enter into a Deferred
Prosecution Agreement (a DPA) or a Non-Prosecution Agreement (an NPA)
with the U.S. Department of Justice, in connection with conduct
described in Section I(g) of PTE 84-14 or section 411 of ERISA.
Northern Trust sought to reserve its right to comment on this condition
in connection with the Department's consideration of more permanent
relief. The Department has nonetheless determined to revise condition
(l), to require that, during the effective period of this temporary
exemption, Northern Trust: (1) Immediately discloses to the Department
any Deferred Prosecution Agreement (a DPA) or Non-Prosecution Agreement
(an NPA) that Northern Trust enters into with the U.S. Department of
Justice, to the extent such DPA or NPA involves conduct described in
Section I(g) of PTE 84-14 or section 411 of ERISA; and (2) immediately
provides the Department any information requested by the Department, as
permitted by law, regarding the agreement and/or the conduct and
allegations that led to the agreements.
The Clearing House Comment
The Clearing House Association L.L.C. (TCH) submitted a comment
that expresses concern regarding condition (l) in Section I of the
proposed temporary exemption. Although the Department has revised
condition (l) in the manner described above, the Department will
continue to consider TCH's comment in connection with its consideration
of more permanent relief for Northern Trust.
After giving full consideration to the record, the Department has
decided to grant the temporary exemption, as described above. The
complete application file (Application No. D-11875) 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.
For a more complete statement of the facts and representations
supporting the Department's decision to grant this temporary exemption,
refer to the notice of proposed temporary exemption published on
October 12, 2016 at 81 FR 70569.
FOR FURTHER INFORMATION CONTACT: Ms. Anna Mpras Vaughan of the
Department, telephone (202) 693-8565. (This is not a toll-free number.)
Extension of PTE 2015-15 (the Extension) Involving Deutsche Bank AG
(Deutsche Bank), Located in Frankfurt, Germany
[Prohibited Transaction Exemption 2016-12; Exemption Application No. D-
11879]
Exemption
Section I--Covered Transactions
Certain asset managers with specified relationships to Deutsche
Bank (hereinafter, the DB QPAMs, as further defined in Section II(b))
shall not be precluded from relying on the exemptive relief provided by
Prohibited Transaction Exemption (PTE) 84-14,\10\ notwithstanding a
judgment of conviction against Deutsche Securities Korea Co., a South
Korean affiliate of Deutsche Bank (hereinafter, DSK, as further defined
in Section II(c)), entered on January 25, 2016 (the Korean Conviction,
as further defined in Section II(a)),\11\ provided that the following
conditions are satisfied:
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\10\ 49 FR 9494 (March 13, 1984), as corrected at 50 FR 41430
(October 10, 1985), as amended at 70 FR 49305 (August 23, 2005), and
as amended at 75 FR 38837 (July 6, 2010).
\11\ Section I(g) of PTE 84-14 generally provides that
``[n]either the QPAM nor any affiliate thereof . . . nor any owner .
. . of a 5 percent or more interest in the QPAM is a person who
within the 10 years immediately preceding the transaction has been
either convicted or released from imprisonment, whichever is later,
as a result of'' certain felonies including income tax evasion and
conspiracy or attempt to commit income tax evasion.
---------------------------------------------------------------------------
[[Page 75154]]
(a) The DB QPAMs (including their officers, directors, agents other
than Deutsche Bank, and employees of such DB QPAMs) did not know of,
have reason to know of, or participate in the criminal conduct of DSK
that is the subject of the Korean Conviction;
(b) Any failure of the DB QPAMs to satisfy Section I(g) of PTE 84-
14 arose solely from the Korean Conviction;
(c) The DB QPAMs (including their officers, directors, agents other
than Deutsche Bank, and employees of such DB QPAMs) did not receive
direct compensation, or knowingly receive indirect compensation, in
connection with the criminal conduct that is the subject of the
Conviction;
(d) A DB QPAM will not 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 and managed by such DB QPAM to enter into any
transaction with DSK or engage DSK to provide additional services to
such investment fund, for a direct or indirect fee borne by such
investment fund regardless of whether such transactions or services may
otherwise be within the scope of relief provided by an administrative
or statutory exemption;
(e)(1) Each DB QPAM maintains and follows written policies (the
Policies) requiring and reasonably designed to ensure that: (i) The
asset management decisions of the DB QPAM are conducted independently
of Deutsche Bank's management and business activities; (ii) the DB QPAM
fully complies with ERISA's fiduciary duties and ERISA and the Code's
prohibited transaction provisions and does not knowingly participate in
any violations of these duties and provisions with respect to ERISA-
covered plans and IRAs; (iii) the DB QPAM does not knowingly
participate in any other person's violation of ERISA or the Code with
respect to ERISA-covered plans and IRAs; (iv) any filings or statements
made by the DB QPAM to regulators, including but not limited to, the
Department of Labor, the Department of the Treasury, the Department of
Justice, and the Pension Benefit Guaranty Corporation, on behalf of
ERISA-covered plans or IRAs are materially accurate and complete, to
the best of such DB QPAM's knowledge at that time; (v) the DB QPAM does
not make material misrepresentations or omit material information in
its communications with such regulators with respect to ERISA-covered
plans or IRAs, or make material misrepresentations or omit material
information in its communications with ERISA-covered plan and IRA
clients; (vi) the DB QPAM complies with the terms of this Extension;
and (vii) any violations of or failure to comply with items (ii)
through (vi) are corrected promptly upon discovery and any such
violations or compliance failures not promptly corrected are reported,
upon discovering the failure to promptly correct, in writing to
appropriate corporate officers, the head of Compliance and the General
Counsel of the relevant DB QPAM (or their functional equivalent), the
independent auditor responsible for reviewing compliance with the
Policies, and an appropriate fiduciary of any affected ERISA-covered
plan or IRA that is independent of Deutsche Bank; however, with respect
to any ERISA-covered plan or IRA sponsored by an ``affiliate'' (as
defined in Section VI(d) of PTE 84-14) of Deutsche Bank or beneficially
owned by an employee of Deutsche Bank or its affiliates, such fiduciary
does not need to be independent of Deutsche Bank. DB QPAMs will not be
treated as having failed to develop, implement, maintain, or follow the
Policies, provided that they correct any instances of noncompliance
promptly when discovered or when they reasonably should have known of
the noncompliance (whichever is earlier), and provided that they adhere
to the reporting requirements set forth in this item (vii);
(2) Each DB QPAM maintains and follows a program of training (the
Training), conducted during the effective period of this Extension, for
relevant DB QPAM asset management, legal, compliance, and internal
audit personnel (other than personnel who received training in a manner
that meets the requirements of PTE 2015-15 within the prior 12 months);
the Training must be set forth in the Policies and, at a minimum, cover
the Policies, ERISA and Code compliance (including applicable fiduciary
duties and the prohibited transaction provisions) and ethical conduct,
the consequences for not complying with the conditions of this
Extension, (including the loss of the exemptive relief provided
therein), and prompt reporting of wrongdoing;
(f)(1) Each DB 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 compliance with, the Policies and Training
described herein; the audit requirement must be incorporated in the
Policies. The audit must cover the period of time during which this
Extension is effective, and must be completed no later than six (6)
months after the period to which the audit applies;
(2) 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 as permitted by law, each DB QPAM and, if
applicable, Deutsche Bank, will grant the auditor unconditional access
to its business, including, but not limited to: its computer systems,
business records, transactional data, workplace locations, training
materials, and personnel;
(3) The auditor's engagement must specifically require the auditor
to determine whether each DB QPAM has developed, implemented,
maintained, and followed Policies in accordance with the conditions of
this Extension and developed and implemented the Training, as required
herein;
(4) The auditor's engagement shall specifically require the auditor
to test each DB QPAM's operational compliance with the Policies and
Training. In this regard, the auditor must test a sample of the QPAM's
transactions involving ERISA-covered plans and IRAs sufficient in size
and nature to afford the auditor a reasonable basis to determine the
operational compliance with the Policies and Training;
(5) On or before the end of the period described in Section I(f)(1)
for completing the audit, the auditor must issue a written report (the
Audit Report) to Deutsche Bank and the DB QPAM to which the audit
applies that describes the procedures performed by the auditor during
the course of its examination. The Audit Report must include the
auditor's specific determinations regarding the adequacy of, and
compliance with, the Policies and Training; the auditor's
recommendations (if any) with respect to strengthening such Policies
and Training; and any instances of the respective DB QPAM's
noncompliance with the written Policies and Training described in
paragraph (e) above. Any determinations made by the auditor regarding
the adequacy of the Policies and Training and the auditor's
recommendations (if any) with respect to strengthening the Policies and
Training of the respective DB QPAM must be promptly addressed by such
DB QPAM, and any actions taken by such DB QPAM to address such
recommendations must be included in an addendum to the Audit Report.
Any determinations by the auditor that the
[[Page 75155]]
respective DB QPAM has maintained and followed sufficient Policies and
Training shall not be based solely or in substantial part on an absence
of evidence indicating noncompliance. In this last regard, any finding
that the DB QPAM has complied with the requirements under this
subsection must be based on evidence that demonstrates the DB QPAM has
actually maintained and followed the Policies and Training required by
this Extension and not solely on a lack of evidence that the DB QPAM
has violated ERISA;
(6) The auditor shall notify the respective DB QPAM of any
instances of noncompliance identified by the auditor within five (5)
business days after such noncompliance is identified by the auditor,
regardless of whether the audit has been completed as of that date;
(7) With respect to each Audit Report, the General Counsel or one
of the three most senior executive officers of the DB QPAM to which the
Audit Report applies certifies in writing, under penalty of perjury,
that the officer has reviewed the Audit Report and this Extension;
addressed, corrected, or remedied any inadequacies identified in the
Audit Report; and determined that the Policies and Training in effect
at the time of signing are adequate to ensure compliance with the
conditions of this Extension and with the applicable provisions of
ERISA and the Code;
(8) An executive officer of Deutsche Bank reviews the Audit Report
for each DB QPAM and certifies in writing, under penalty of perjury,
that such officer has reviewed each Audit Report;
(9) Each DB QPAM provides its certified Audit Report to the
Department's Office of Exemption Determinations (OED), 200 Constitution
Avenue NW., Suite 400, Washington DC 20210, no later than 45 days
following its completion, and each DB QPAM makes its Audit Report
unconditionally available for examination by any duly authorized
employee or representative of the Department, other relevant
regulators, and any fiduciary of an ERISA-covered plan or IRA, the
assets of which are managed by such DB QPAM;
(10) Each DB QPAM and the auditor will submit to OED (A) any
engagement agreement(s) entered into pursuant to the engagement of the
auditor under this Extension, and (B) any engagement agreement entered
into with any other entities retained in connection with such QPAM's
compliance with the Training or Policies conditions of this Extension,
no later than three (3) months after the effective date of the
Extension (and one month after the execution of any agreement
thereafter);
(11) The auditor shall provide OED, upon request, all of the
workpapers created and utilized in the course of the audit, including,
but not limited to: the audit plan, audit testing, identification of
any instances of noncompliance by the relevant DB QPAM, and an
explanation of any corrective or remedial actions taken by the
applicable DB QPAM; and
(12) Deutsche Bank must notify the Department at least 30 days
prior to any substitution of an auditor, except that no such
replacement will meet the requirements of this paragraph unless and
until Deutsche Bank demonstrates to the Department's satisfaction that
such new auditor is independent of Deutsche Bank, experienced in the
matters that are the subject of the Extension, and capable of making
the determinations required of this Extension.
Notwithstanding the above, this audit requirement will be deemed
met to the extent the Department issues more permanent relief that
expressly supersedes this paragraph (f), and the terms of such new
audit requirement have been met;
(g) With respect to each ERISA-covered plan or IRA for which a DB
QPAM provides asset management or other discretionary fiduciary
services, each DB QPAM agrees: (1) To comply with ERISA and the Code,
as applicable with respect to such ERISA-covered plan or IRA, and
refrain from engaging in prohibited transactions that are not otherwise
exempt; (2) not to waive, limit, or qualify the liability of the DB
QPAM for violating ERISA or the Code or engaging in prohibited
transactions; (3) not to require the ERISA-covered plan or IRA (or
sponsor of such ERISA-covered plan or beneficial owner of such IRA) to
indemnify the DB QPAM for violating ERISA or engaging in prohibited
transactions, except for violations or prohibited transactions caused
by an error, misrepresentation, or misconduct of a plan fiduciary or
other party hired by the plan fiduciary who is independent of Deutsche
Bank; (4) not to restrict the ability of such ERISA-covered plan or IRA
to terminate or withdraw from its arrangement with the DB 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,
provided that such restrictions are applied consistently and in like
manner to all such investors; and (5) not to impose any fees,
penalties, or charges for such termination or withdrawal with the
exception of reasonable fees, appropriately disclosed in advance, that
are specifically designed to prevent generally recognized abusive
investment practices or specifically designed to ensure equitable
treatment of all investors in a pooled fund in the event such
withdrawal or termination may have adverse consequences for all other
investors, provided that such fees are applied consistently and in like
manner to all such investors. Within two (2) months of the date of
publication of this notice of Extension in the Federal Register, each
DB QPAM will provide a notice to such effect to each ERISA-covered plan
or IRA for which a DB QPAM provides asset management or other
discretionary fiduciary services in reliance on PTE 84-14, unless such
notice was previously provided consistent with PTE 2015-15;
(h) Each DB QPAM will maintain records necessary to demonstrate
that the conditions of this Extension have been met, for six (6) years
following the date of any transaction for which such DB QPAM relies
upon the relief in the Extension;
(i) The DB QPAMs comply with each condition of PTE 84-14, as
amended, with the sole exception of the violation of Section I(g) that
is attributable to the Korean Conviction;
(j) The DB QPAMs will not employ any of the individuals that
engaged in the spot/futures-linked market manipulation activities that
led to the Korean Conviction;
(k) Deutsche Bank disgorged all of its profits generated by the
spot/futures-linked market manipulation activities of DSK personnel
that led to the Korean Conviction;
(l) Deutsche Bank imposes internal procedures, controls, and
protocols on DSK designed to reduce the likelihood of any recurrence of
the conduct that is the subject of the Korean Conviction, to the extent
permitted by local law;
(m) DSK will not provide fiduciary or QPAM services to ERISA-
covered Plans or IRAs, and will not otherwise exercise discretionary
control over plan assets;
(n) No DB QPAM is a subsidiary of DSK, and DSK is not a subsidiary
of any DB QPAM;
(o) The criminal conduct of DSK that is the subject of the Korean
Conviction did not directly or indirectly involve the assets of any
plan subject to Part 4 of Title I of ERISA or section 4975 of the Code;
and
(p) A DB QPAM will not fail to meet the terms of this Extension
solely because a different DB QPAM fails to satisfy the conditions for
relief under
[[Page 75156]]
this Extension described in Sections I(d), (e), (f), (g), (h), (i) and
(j).
Section II--Definitions
(a) The term ``Korean Conviction'' means the judgment of conviction
against DSK entered on January 25, 2016, in Seoul Central District
Court, relating to charges filed against DSK under Articles 176, 443,
and 448 of South Korea's Financial Investment Services and Capital
Markets Act for spot/futures-linked market price manipulation;
(b) The term ``DB QPAM'' means a ``qualified professional asset
manager'' (as defined in section VI(a) \12\ of PTE 84-14) that relies
on the relief provided by PTE 84-14 and with respect to which DSK is a
current or future ``affiliate'' (as defined in section VI(d) of PTE 84-
14). For purposes of this Extension, Deutsche Bank Securities, Inc.
(DBSI), including all entities over which it exercises control; and
Deutsche Bank AG, including all of its branches, are excluded from the
definition of a DB QPAM; and
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\12\ In general terms, a QPAM is an independent fiduciary that
is a bank, savings and loan association, insurance company, or
investment adviser that meets certain equity or net worth
requirements and other licensure requirements and that has
acknowledged in a written management agreement that it is a
fiduciary with respect to each plan that has retained the QPAM.
---------------------------------------------------------------------------
(c) The term ``DSK'' means Deutsche Securities Korea Co., a South
Korean ``affiliate'' of Deutsche Bank (as the term ``affiliate'' is
defined in section VI(c) of PTE 84-14).
Effective Date: This Extension will be effective for the period
beginning October 24, 2016 and ending on the earlier of: April 23, 2017
or the effective date of a final agency action made by the Department
in connection with Exemption Application No. D-11856.\13\
---------------------------------------------------------------------------
\13\ In this regard, as noted below, the Applicant has requested
substantially similar relief to the relief described herein, but on
a more permanent basis.
---------------------------------------------------------------------------
Supplementary Information
On October 12, 2016, the Department of Labor (the Department)
published a notice of proposed extension in the Federal Register at 81
FR 70577, proposing that certain entities with specified relationships
to DSK could continue to rely upon the relief provided by PTE 84-14 (49
FR 9494 (March 13, 1984), as corrected at 50 FR 41430 (October 10,
1985), as amended at 70 FR 49305 (August 23, 2005), and as amended at
75 FR 38837 (July 6, 2010)), notwithstanding the Korean Conviction.
The Department is today granting this Extension in order to protect
ERISA-covered plans and IRAs from certain costs and/or investment
losses that may arise to the extent entities with a corporate
relationship to DSK lose their ability to rely on PTE 84-14 as of the
expiration of PTE 2015-15. The relief in this Extension provides the
Department more time to consider whether more permanent relief is
warranted.
No relief from a violation of any other law is provided by this
Extension, including any criminal conviction described in the proposed
extension or in PTE 2015-15. Furthermore, the Department cautions that
the relief in this Extension will terminate immediately if, among other
things, an entity within the Deutsche Bank corporate family is
convicted of a crime described in Section I(g) of PTE 84-14 during the
effective period of the Extension. While such an entity could apply for
a new exemption in that circumstance, the Department would not be
obligated to grant that exemption. The terms of this Extension have
been specifically designed to permit plans to terminate their
relationships in an orderly and cost effective fashion in the event of
an additional conviction or a determination that it is otherwise
prudent for a plan to terminate its relationship with an entity covered
by the Extension.
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 extension, published on October 12, 2016, at 81 FR
70577. All comments and requests for hearing were due by October 19,
2016. Because of the abbreviated comment period, the Department will
consider comments received within a reasonable period of time after
October 19, 2016 in connection with its consideration of long-term
exemptive relief for the DB QPAMs in connection with Exemption
Application No. D-11908, described above. During the comment period,
the Department received two written comments, one from the independent
auditor and one from Deutsche Bank AG, both of which are described
below. Although the Department has, for the most part, revised the
proposed exemption in the manner requested by Deutsche Bank AG, the
Department cautions that it may decline to include those revisions in
any decision to grant more permanent relief.
Independent Auditor's Comment
Section I(f)(1) of the proposed extension requires that the audit,
along with the report, must be completed no later than three months
after the period to which the audit relates. In its comment, the
auditor requested that the audit requirement described in Section
I(f)(1) of the proposed extension be modified to require that the audit
report must be completed no later than six months after the period to
which the audit relates. The auditor explains that, during the course
of its audit, it needs to review an extensive amount of materials,
relevant systems and training, and digest the information provided in
response to various requests for information. Furthermore, the auditor
states that it will take a significant amount of time to develop and
review follow-up questions based upon its initial analysis of the
materials and systems; and the report that the auditor provides to the
Department needs to be robust, comprehensive and detailed.
The Department views a rigorous, transparent, and comprehensive
audit as essential to ensuring that the conditions for exemptive relief
described herein are followed by the DB QPAMs. As such, the Department
has extended the deadline by which point the audit must be completed
from three months following the period to which the audit applies to
six months.
Deutsche Bank's Comment
Deutsche Bank seeks several changes and/or clarifications to the
proposed extension. First, Deutsche Bank requests that the Department
revise the proposed exemption in a manner that would potentially extend
the duration of this Extension. The Department declines to extend this
duration of the Extension in the manner requested by Deutsche Bank, but
notes that it is currently considering proposing more permanent relief
pursuant to Application Numbers D-11879 and D-11908.
Regarding the audit, Deutsche Bank seeks to extend the
certification period set forth in Section I(f)(9) from 30 days to 45
days. The Department has revised the condition accordingly. Deutsche
Bank also requests that the timing of the audit be adjusted in the same
manner sought by the auditor. This adjustment is discussed above.
Deutsche requests certain changes to the training requirement
described in Section I(e)(2) of the proposed extension. Deutsche Bank
seeks to coordinate that condition with the training requirement set
forth in PTE 2015-15, such that duplicative training is not required
over a short period of time. The Department has revised Section I(e)(2)
to exclude training for personnel who received training in a manner
that meets the requirements of PTE 2015-15 within the prior 12 months.
[[Page 75157]]
Deutsche Bank also seeks changes to the notice requirement
described in Section I(g) of the proposed exemption. Deutsche Bank
seeks to add the following bracketed language, such that Section I(g)
reads: ``Within two (2) months of the date of publication of this
notice of Extension in the Federal Register, each DB QPAM will provide
a notice to such effect to each ERISA-covered plan or IRA for which a
DB QPAM provides asset management or other discretionary fiduciary
services [in reliance on PTE 84-14], unless such notice was previously
provided consistent with PTE 2015-15.'' The Department has revised the
condition accordingly.
Deutsche Bank requests an adjustment to certain restrictions the
proposed exemption places on DSK. In this regard, Deutsche Bank seeks
to add the following bracketed language, and to delete the following
italicized language, such that Section I(m) reads: ``DSK has not, and
will not, provide [discretionary asset management services or other
discretionary] fiduciary or QPAM services to ERISA-covered Plans or
IRAs, and will not otherwise exercise discretionary control over plan
assets.'' The Department declines Deutsche Bank's request, but has
revised the condition to more clearly require that this condition is
intended to be met prospectively, not retroactively.
Deutsche Bank also seeks clarification that for purposes of the
Extension, the auditor, and not the QPAMs, must provide the relevant
workpapers to the Department. The Department agrees with that
interpretation of the condition.
In its letter to the Department, Deutsche Bank states that
footnotes 38 and 42, which reference tax-related crimes, are unrelated
to Deutsche Bank's application and should be deleted. Deutsche Bank
also requests that the Department note for the record that ``Deutsche
Bank identified Mr. Ripley both as an employee of DBSI and a subject of
the Korean case on numerous prior occasions, including as far back as
2011, as well as more recently.''
After giving full consideration to the entire record, the
Department has decided to grant the Extension. The complete application
file for the Extension (Exemption Application No. D-11879), including
all supplemental submissions received by the Department, as well as the
application file for PTE 2015-15 (Exemption Application No. D-11696),
are 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.
For a more complete statement of the facts and representations
supporting the Department's decision to grant this Extension, refer to
the notice of proposed extension, published on October 12, 2016, at 81
FR 70577.
FOR FURTHER INFORMATION CONTACT: Mr. Scott Ness of the Department,
telephone (202) 693-8561. (This is not a toll-free number.)
General Information
The attention of interested persons is directed to the following:
(1) The fact that a transaction is the subject of an exemption
under section 408(a) of the Act and/or section 4975(c)(2) of the Code
does not relieve a fiduciary or other party in interest or disqualified
person from certain other provisions to which the exemption does not
apply and the general fiduciary responsibility provisions of section
404 of the Act, which among other things require a fiduciary to
discharge his duties respecting the plan solely in the interest of the
participants and beneficiaries of the plan and in a prudent fashion in
accordance with section 404(a)(1)(B) of the Act; nor does it affect the
requirement of section 401(a) of the Code that the plan must operate
for the exclusive benefit of the employees of the employer maintaining
the plan and their beneficiaries;
(2) These exemptions are supplemental to and not in derogation of,
any other provisions of the Act and/or the Code, including statutory or
administrative exemptions and transactional rules. Furthermore, the
fact that a transaction is subject to an administrative or statutory
exemption is not dispositive of whether the transaction is in fact a
prohibited transaction; and
(3) The availability of these exemptions is subject to the express
condition that the material facts and representations contained in the
application accurately describes all material terms of the transaction
which is the subject of the exemption.
Signed at Washington, DC, this 24th day of October, 2016.
Lyssa E. Hall,
Director of Exemption Determinations, Employee Benefits Security
Administration, U.S. Department of Labor.
[FR Doc. 2016-26089 Filed 10-27-16; 8:45 am]
BILLING CODE 4510-29-P
