Proposed Exemptions From Certain Prohibited Transaction Restrictions, 14505-14516 [2018-06849]

Download as PDF Federal Register / Vol. 83, No. 65 / Wednesday, April 4, 2018 / Notices revocation of registration) has been redelegated to the Assistant Administrator of the DEA Diversion Control Division (‘‘Assistant Administrator’’) pursuant to section 7 of 28 CFR part 0, appendix to subpart R. In accordance with 21 CFR 1301.34(a), this is notice that on January 17, 2018, Catalent Pharma Solutions, LLC, 3031 Red Lion Road, Philadelphia, Pennsylvania 19114 applied to be registered as an importer of Gamma Hydroxybutyric Acid (2010), a basic class of controlled substance listed in schedule I. The company plans to import finished dosage unit products containing gammahydroxybutyric acid for clinical trials, research, and analytical activities. Approval of permit applications will occur only when the registrant’s business activity is consistent with what is authorized under to 21 U.S.C. 952(a)(2). Authorization will not extend to the import of FDA approved or nonapproved finished dosage forms for commercial sale. Dated: March 27, 2018. Susan A. Gibson, Deputy Assistant Administrator. Attn: DEA Federal Register Representative/DRW, 8701 Morrissette Drive, Springfield, Virginia 22152. SUPPLEMENTARY INFORMATION: The Attorney General has delegated his authority under the Controlled Substances Act to the Administrator of the Drug Enforcement Administration (DEA), 28 CFR 0.100(b). Authority to exercise all necessary functions with respect to the promulgation and implementation of 21 CFR part 1301, incident to the registration of manufacturers, distributors, dispensers, importers, and exporters of controlled substances (other than final orders in connection with suspension, denial, or revocation of registration) has been redelegated to the Assistant Administrator of the DEA Diversion Control Division (‘‘Assistant Administrator’’) pursuant to section 7 of 28 CFR part 0, appendix to subpart R. In accordance with 21 CFR 1301.34(a), this is notice that on February 6, 2018 Wildlife Laboratroies Inc., 1230 West Ash, Suite D Windsor, CO 80550 applied to be registered as an importer of the following basic classes of controlled substances: [FR Doc. 2018–06872 Filed 4–3–18; 8:45 am] Controlled substance BILLING CODE 4410–09–P Etorphine HCl ....... Thiafentanil ........... DEPARTMENT OF JUSTICE Drug Enforcement Administration 9059 9729 Schedule II II The company plans to import the listed controlled substances for distribution to its customers. [Docket No. DEA–392] Importer of Controlled Substances Application: Wildlife Laboratories Inc. ACTION: Drug code Notice of application. Dated: March 27, 2018. Susan A. Gibson, Deputy Assistant Administrator. [FR Doc. 2018–06871 Filed 4–3–18; 8:45 am] Registered bulk manufacturers of the affected basic classes, and applicants therefore, may file written comments on or objections to the issuance of the proposed registration on or before May 4, 2018. Such persons may also file a written request for a hearing on the application on or before May 4, 2018. ADDRESSES: Written comments should be sent to: Drug Enforcement Administration, Attention: DEA Federal Register Representative/DRW, 8701 Morrissette Drive, Springfield, Virginia 22152. All requests for hearing must be sent to: Drug Enforcement Administration, Attn: Administrator, 8701 Morrissette Drive, Springfield, Virginia 22152. All request for hearing should also be sent to: (1) Drug Enforcement Administration, Attn: Hearing Clerk/LJ, 8701 Morrissette Drive, Springfield, Virginia 22152; and (2) Drug Enforcement Administration, amozie on DSK30RV082PROD with NOTICES DATES: VerDate Sep<11>2014 18:12 Apr 03, 2018 Jkt 244001 BILLING CODE 4410–09–P DEPARTMENT OF LABOR Employee Benefits Security Administration Proposed Exemptions From Certain Prohibited Transaction Restrictions Employee Benefits Security Administration, Labor. ACTION: Notice of Proposed Exemptions. AGENCY: This document contains notices of pendency before the Department of Labor (the Department) of proposed exemptions from certain of the prohibited transaction restrictions of the Employee Retirement Income Security Act of 1974 (ERISA or the Act) and/or the Internal Revenue Code of 1986 (the Code). If granted, these proposed exemptions allow designated parties to SUMMARY: PO 00000 Frm 00096 Fmt 4703 Sfmt 4703 14505 engage in transactions that would otherwise be prohibited provided the conditions stated there in are met. This notice includes the following proposed exemptions: D–11890, Liberty Media 401(k) Savings Plan; D–11931, CLS Investments, LLC and Affiliates. DATES: All interested persons are invited to submit written comments or requests for a hearing on the pending exemptions, unless otherwise stated in the Notice of Proposed Exemption, within 45 days from the date of publication of this Federal Register Notice. ADDRESSES: Comments and requests for a hearing should state: (1) The name, address, and telephone number of the person making the comment or request, and (2) the nature of the person’s interest in the exemption and the manner in which the person would be adversely affected by the exemption. A request for a hearing must also state the issues to be addressed and include a general description of the evidence to be presented at the hearing. All written comments and requests for a hearing (at least three copies) should be sent via mail to the Employee Benefits Security Administration (EBSA), Office of Exemption Determinations, U.S. Department of Labor, 200 Constitution Avenue NW, Suite 400, Washington, DC 20210. Attention: Application No.ll, stated in each Notice of Proposed Exemption or via private delivery service or courier to the Employee Benefits Security Administration (EBSA), Office of Exemption Determinations, U.S. Department of Labor, 122 C St. NW, Suite 400, Washington, DC 20001. Attention: Application No.ll, stated in each Notice of Proposed Exemption. Interested persons are also invited to submit comments and/or hearing requests to EBSA via email or FAX. Any such comments or requests should be sent either by email to: e-OED@dol.gov, by FAX to (202) 693–8474, or online through http://www.regulations.gov by the end of the scheduled comment period. The applications for exemption and the comments received will be available for public inspection in the Public Documents Room of the Employee Benefits Security Administration, U.S. Department of Labor, Room N–1515, 200 Constitution Avenue NW, Washington, DC 20210. Warning: All comments will be made available to the public. Do not include any personally identifiable information (such as Social Security number, name, address, or other contact information) or confidential business information that you do not want publicly disclosed. All E:\FR\FM\04APN1.SGM 04APN1 14506 Federal Register / Vol. 83, No. 65 / Wednesday, April 4, 2018 / Notices comments may be posted on the internet and can be retrieved by most internet search engines. SUPPLEMENTARY INFORMATION: Notice to Interested Persons Notice of the proposed exemptions will be provided to all interested persons in the manner agreed upon by the applicant and the Department, unless otherwise stated in the Notice of Proposed Exemption, within 15 days of the date of publication in the Federal Register. Such notice shall include a copy of the notice of proposed exemption as published in the Federal Register and shall inform interested persons of their right to comment and to request a hearing (where appropriate). The proposed exemptions were requested in applications filed pursuant to section 408(a) of the Act and/or section 4975(c)(2) of the Code, and in accordance with procedures set forth in 29 CFR part 2570, subpart B (76 FR 66637, 66644, October 27, 2011).1 Effective December 31, 1978, section 102 of Reorganization Plan No. 4 of 1978, 5 U.S.C. App. 1 (1996), transferred the authority of the Secretary of the Treasury to issue exemptions of the type requested to the Secretary of Labor. Therefore, these notices of proposed exemption are issued solely by the Department. The applications contain representations with regard to the proposed exemptions which are summarized below. Interested persons are referred to the applications on file with the Department for a complete statement of the facts and representations. Liberty Media 401(k) Savings Plan (the Plan) Located in Englewood, CO [Application No. D–11890] Proposed Exemption amozie on DSK30RV082PROD with NOTICES The Department is considering granting an exemption under the authority of section 408(a) of the Employee Retirement Income Security Act of 1974, as amended (ERISA or the Act) and in accordance with the procedures set forth in 29 CFR part 2570, subpart B (76 FR 66637, 66644, October 27, 2011).2 If the proposed exemption is granted, the restrictions of 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 For purposes of this proposed exemption, references to the provisions of Title I of the Act, unless otherwise specified, should be read to refer as well to the corresponding provisions of section 4975 of the Code. VerDate Sep<11>2014 18:12 Apr 03, 2018 Jkt 244001 sections 406(a)(1)(E), 406(a)(2), and 407(a)(1)(A) of the Act shall not apply, for the period beginning May 24, 2016, and ending June 16, 2016, to: (1) The acquisition by the Plan of certain stock subscription rights (the Rights) to purchase shares of Series C Liberty Braves common stock (the Series C Liberty Braves Stock), in connection with a rights offering (the Rights Offering) held by Liberty Media Corporation (LMC), the Plan sponsor and a party in interest with respect to the Plan; and (2) The holding of the Rights by the Plan during the subscription period of the Rights Offering, provided that certain conditions are satisfied. Summary of Facts and Representations 3 Background 1. LMC (or the Applicant) is a Delaware corporation with its principal place of business in Englewood, Colorado. LMC is a publicly-traded corporation primarily engaged in media, communications and entertainment operating businesses in North America, through several subsidiaries that include: Sirius XM Holdings Inc. (Sirius XM), Braves Holdings, LLC (Braves Holdings), and Live Nation Entertainment, Inc. (Live Nation), an equity affiliate. 2. LMC sponsors and maintains the Plan, a defined contribution plan which enables participating employees of LMC and its qualifying subsidiaries to direct the investment of their Plan accounts across 22 investment alternatives, including certain employer securities issued by LMC, as well as employer securities issued by other participating employers in the Plan. Plan Assets are Held in the Liberty Media 401(k) Savings Plan Trust (the Trust). LMC adopted and maintains the Plan and Trust for the exclusive benefit of employee-participants and their beneficiaries. As designed, the Plan is intended to qualify under sections 401(a) and 401(k) of the Code, and the Trust is intended to be exempt under section 501(a) of the Code. As of December 31, 2016, the Plan had total assets of $100,814,000 and 784 participants. Fidelity Management Trust Company (Fidelity) is the trustee of the Plan, and acts as the custodian of the Plan assets, holding legal title to the Plan’s assets, 3 The Summary of Facts and Representations is based on LMC’s representations and does not reflect the views of the Department, unless indicated otherwise. PO 00000 Frm 00097 Fmt 4703 Sfmt 4703 and executing investment directions in accordance with the written instructions of participants. The Liberty Media 401(k) Savings Plan Administrative Committee (the Committee) serves as the Plan Administrator and is the fiduciary responsible for Plan matters. The Committee, which was appointed by LMC’s Board of Directors, has investment discretion over the Plan’s investments, except to the extent participants direct the investment of their Plan accounts. Solely with respect to the Rights described below, the Committee acted as trustee of a temporary separate trust (the Rights Trust) established to hold the Rights, and Fidelity acted as custodian of those Rights. As of May 16, 2016, The Plan held a total of $1,550,227.31 in Series C Liberty Braves Common Stock, which represented 0.595% of total Plan assets. The Tracking Stock Proposal 3. On April 11, 2016, LMC shareholders met and approved a tracking stock proposal (the Tracking Stock Proposal), which resulted in the amendment and restatement of LMC’s certificate of incorporation to exchange existing shares of LMC’s common stock (LMC Stock) for newly-issued shares of three new tracking stocks (collectively, the Tracking Stocks), to be designated as: ‘‘Liberty SiriusXM common stock’’ (Liberty SiriusXM Stock); ‘‘Liberty Braves common stock’’ (Liberty Braves Stock); and ‘‘Liberty Media common stock’’ (Liberty Media Stock). The Tracking Stock structure was designed to provide LMC with greater operational and financial flexibility in the execution of its business strategies by permitting LMC to bring greater flexibility to its business and assets, thereby allowing the stock related to each group to move in line with the fundamentals of the businesses and assets attributed to that group. Therefore, the Tracking Stock Proposal allowed the businesses, assets, and liabilities of LMC to be divided among a new SiriusXM Group, a new Braves Group, and a new Media Group. The Applicant represents that Plan participants were sent a proxy statement (identical to the proxy statement sent to all shareholders of LMC stock) prior to that meeting, so that they could direct how the shares allocated to their accounts would be voted at that meeting. Description of the Tracking Stocks 4. Liberty SiriusXM Stock is a newlyauthorized and issued series of LMC Stock intended to track and reflect the separate economic performance of the businesses, assets, and liabilities to be E:\FR\FM\04APN1.SGM 04APN1 amozie on DSK30RV082PROD with NOTICES Federal Register / Vol. 83, No. 65 / Wednesday, April 4, 2018 / Notices attributed to the SiriusXM Group, which would initially include: (a) LMC’s approximate 60% interest in Sirius XM Holdings, Inc.; (b) a $250 million margin loan obligation incurred by a whollyowned special purpose subsidiary of LMC, which is secured primarily by shares of Sirius XM Stock; (c) certain deferred tax liabilities; and (d) $50 million in cash. LMC is authorized to issue up to 4.075 billion shares of Liberty SiriusXM Stock, of which 2 billion are designated as Series A Liberty SiriusXM Stock, 75 million shares are designated as Series B Liberty SiriusXM Stock, and 2 billion shares are designated as Series C Liberty SiriusXM Stock. 5. Liberty Braves Stock is a newlyauthorized and issued series of LMC Stock intended to track and reflect the separate economic performance of the businesses, assets, and liabilities to be attributed to the Braves Group, which would initially include: (a) LMC’s wholly-owned subsidiary, Braves Holdings, LLC, which indirectly owns the Atlanta Braves Major League Baseball Club; (b) certain assets and liabilities associated with the Atlanta Braves’ stadium and mixed use development project; (c) all liabilities arising under a note from Braves Holdings, LLC (Braves Holdings) to LMC, with total capacity of up to $165 million of borrowings by Braves Holdings (the Intergroup Note); and (d) $61 million in cash. LMC is authorized to issue up to 407.5 million shares of Liberty Braves Stock, of which 200 million shares are designated as Series A Liberty Braves Stock, 7.5 million shares are designated as Series B Liberty Braves Stock, and 200 million shares are designated as Series C Liberty Braves Stock. 6. Liberty Media Stock is a newlyauthorized and issued series of LMC Stock intended to track and reflect the separate economic performance of the businesses, assets, and liabilities to be attributed to the Media Group, which would consist of the remainder of LMC’s businesses, assets and liabilities, including: (a) LMC’s approximate 27% interest in Live Nation; (b) LMC’s other public company minority investments; (c) all receivables under the Intergroup Note; (d) an approximately 20% intergroup interest in the Braves Group; (e) LMC’s interest in any recovery received in connection with a 2013 judgment against Vivendi Universal S.A.; (f) $50 million in cash; (g) LMC’s interest in certain 1.375% cash convertible senior notes, in the principal amount of $1 billion that are due in 2023, as well as bond and hedge warrant transactions that were executed concurrently with VerDate Sep<11>2014 18:12 Apr 03, 2018 Jkt 244001 the issuance of such notes; and (h) 1,018,750,000 shares of LMC Stock. 7. Following the April 11, 2016 shareholder approval of the Tracking Stock Proposal, each holder of Series A, B, and C LMC Stock participated in a reclassification and exchange (the Reclassification and Exchange), under which each holder received the following upon the cancellation of their existing shares of LMC Stock: (a) One newly-issued share of the corresponding series of Liberty SiriusXM Stock; (b) 0.1 of a newly-issued share of the corresponding series of Liberty Braves Stock; and (c) 0.25 of a newly-issued share of the corresponding shares of LMC Stock. LMC shareholders also received cash instead of receiving fractional shares for their interests in LMC Stock. The Rights Offering 8. Pursuant to the Reclassification and Exchange described above, LMC also conducted a Rights Offering in order to raise capital to repay the Intergroup Note referenced above, and for general corporate purposes. Under the Rights Offering, each holder of Series A, B, or C Liberty Braves Stock, held as of May 16, 2016 (the Record Date), received 0.47 of a subscription right, entitling the holders to purchase one share of Series C Liberty Braves Stock at a subscription price of $12.80 per share. The subscription price represented a 20% discount to the 20-trading day volume weighted average trading price of Series C Liberty Braves Stock, beginning on April 28, 2016, and ending on May 11, 2016. The Series C Liberty Braves Stock is traded on the NASDAQ Global Select Market (the NASDAQ), under the symbol ‘‘BATRK.’’ 9. The Rights Offering commenced on May 18, 2016 and remained open until June 16, 2016. The Plan received the Rights on or about May 24, 2016. The Applicant states that the Plan’s delayed receipt of the Rights was attributable to certain administrative functions performed by Fidelity; Computershare Trust Company, N.A. (ComputerShare), the subscription agent with respect to the Rights Offering, and Depository Trust Company. 10. With respect to the Rights allocated to their Plan accounts (including Rights attributable to 40l(k) contributions and employer matching contributions), Plan participants could either elect to exercise their Rights or sell the Rights on the open market. To assist with this decision, the Plan prepared and provided to participants a detailed explanation of their alternatives with respect to the Rights Offering, including: (a) Questions and answers PO 00000 Frm 00098 Fmt 4703 Sfmt 4703 14507 that explained the Rights issuance and the participants’ option to exercise or sell their Rights; (b) instructions, which explained the steps for the participants to take to exercise or sell their Rights; and (c) a copy of LMC’s prospectus filed with the Securities and Exchange Commission. In order to sell the Rights, a Plan participant was required to contact a Fidelity representative and specify the whole percentage of the Rights such participant desired to sell between May 26, 2016 and June 7, 2016. Those participants who initially elected to exercise only a portion of their Rights could later elect to exercise additional Rights to the extent sufficient time existed prior to June 7, 2016. The Applicant represents that the June 7th participant notification deadline was necessary to ensure that Fidelity could process and execute all participant directives with respect to the Rights by June 16, 2016. The Plan Administrative Committee determined that the oversubscription option, which entitled holders of LMC stock to subscribe to purchase shares in excess of the shares reflected by the Rights, would not be made available to Plan participants. The Applicant represents that, to exercise their oversubscription rights, participants had to transmit cash from their Plan accounts to LMC to be held, uninvested and not through a trust, until such time as the shares available for the oversubscription elections could be determined. The Applicant represents that, under this scenario, the Plan sponsor held Plan assets outside of the Plan’s trust: A scenario which involved a different set of prohibited transactions and fiduciary issues that the Plan Administrative Committee determined were not feasible to address. 11. Due to securities law restrictions, certain participants deemed to be ‘‘reporting persons’’ under Rule 16(b) 4 of the Securities Exchange Act of 1934 (Rule 16(b)) with respect to LMC did not have the right to instruct Fidelity to either sell or exercise the Rights credited to their Plan Accounts. As provided by the Plan, and as directed by the Committee, Fidelity sold the Rights credited to these 16(b) participant accounts as soon as administratively feasible, after the receipt and allocation of the Rights to the affected Plan participant accounts. 4 Rule 16(b) requires an officer, director, or any shareholder holding more than 10% of the outstanding shares of a publicly-traded company who makes a profit on a transaction with respect to the company’s stock during a given six month period, to pay the difference back to the company. E:\FR\FM\04APN1.SGM 04APN1 14508 Federal Register / Vol. 83, No. 65 / Wednesday, April 4, 2018 / Notices amozie on DSK30RV082PROD with NOTICES Temporary Investment Funds 12. The Plan established two temporary investment funds to hold the Rights. The first fund, the ‘‘Braves Rights Holding Fund,’’ was a separate fund established under the Rights Trust to hold the Rights upon issuance. Rights were credited to Plan participants accounts based on their respective holdings of Liberty Braves Stock as of the Record Date. The second fund, the ‘‘Braves Rights Holding Account Fund,’’ reflected the approximate value of the Series C Liberty Braves Stock due from the subscription agent following the exercise of Rights on or before June 16, 2016, as directed by Plan participants. 13. With the exception of those reporting persons under Rule 16(b), as described above, each participant could elect to exercise any percentage of the Rights allocated to their account. Under the Rights Offering, each participant could elect to exercise the Rights by speaking to a Fidelity representative at any time prior to 4:00 p.m. Eastern Time, on June 7, 2016 (the Election Close-Out Date). Participants also had the opportunity to revoke or change instructions to exercise prior to the Election Close-Out Date by: (a) Electing a new percentage of Rights to exercise, (b) placing an order to sell the Rights (as described below), or (c) a combination of both. With respect to each participant, the dollar amount required to exercise the Rights was exchanged from other investments in such participant’s account into the Braves Rights Holding Account Fund. The dollar amount required to exercise the Rights equaled the percentage of Rights exercised (as elected by the participant) multiplied by the number of Rights credited to the participant’s account and multiplied by the exercise price for the Rights Offering. 14. On or before June 16, 2016, the Rights to be exercised and necessary funds were submitted by Fidelity to ComputerShare, which is not affiliated with either LMC or Fidelity. Each Plan participant’s balance in the Rights Holding Fund was reduced by the number of Rights exercised on such participant’s behalf. Fidelity attempted to sell all remaining Rights on the open market between June 10, 2016 and June 16, 2016, at which time the Rights expired. Upon receipt of the new shares, the Braves Rights Holding Account Fund was closed and the newlyreceived shares were allocated to participants’ Plan accounts. The Applicant represents that the Election Close-Out Date was established to permit sufficient time for Fidelity to VerDate Sep<11>2014 18:12 Apr 03, 2018 Jkt 244001 liquidate the participants’ other assets in an orderly manner so that the necessary cash would be available to exercise the Rights before the June 16, 2016 Rights Offering expiration date. Unexercised Rights after June 7, 2016 were offered for sale on the open market by Fidelity, from on or about June 10, 2016 through June 16, 2016. Rights that remained unsold at the close of the market on June 16, 2016 expired. 15. In connection with the Rights Offering, the Plan received a total of 15,821 Rights. Of the Rights received, 12,334 were sold by Fidelity,5 3,486 were exercised by participants,6 and 1 Right expired. The Rights were sold at an average price of $1.90 per Right, net of fees. The Applicant represents that Fidelity sold 1,921 Rights (rounded to the nearest whole Right) at the direction of participants, and 10,413 Rights (rounded to the nearest whole Right) after June 7, 2016. Analysis 16. LMC represents that the acquisition and holding of the Rights by the Plan constitute prohibited transactions in violation of sections 406(a)(1)(E), 406(a)(2), and 407(a)(1)(A) of the Act. Section 406(a)(1)(E) of the Act provides that a fiduciary with respect to a plan shall not cause the plan to engage in a transaction if he or she knows or should know that such transaction constitutes the acquisition, on behalf of the plan, of any employer security in violation of section 407(a) of the Act. Section 406(a)(2) of the Act provides that a fiduciary of a plan shall not permit the plan to hold any employer security if he or she knows or should know that holding such security violates section 407(a) of the Act. Under 5 The Applicant represents that the brokerage services and fees received by Fidelity or by Computershare in connection with the sale of the Rights held by Plan participants, are exempt under section 408(b)(2) of the Act. The Department, herein, is not providing any relief for the receipt of any commissions, fees, or expenses in connection with the sale of the Rights in blind transactions to unrelated third parties on the NASDAQ, beyond that provided under section 408(b)(2) of the Act. In this regard, the Department is not opining herein on whether the conditions set forth in section 408(b)(2) of the Act and the Department’s regulations, pursuant to 29 CFR 2550.408(b)(2) have been satisfied. 6 The Applicant represents that the Plan accounts relied on the relief provided by the statutory exemption, pursuant to section 408(e) of the Act for the exercise of the Rights. The Department is not providing any relief herein from such prohibited transaction provisions with respect to the exercise of the Rights. In addition, the Department is offering no view on whether the requirements of the statutory exemption provided in section 408(e) of the Act and the Department’s regulations, pursuant to 29 CFR 2550.408(e) were satisfied or whether the statutory exemption is applicable to the exercise of the Rights. PO 00000 Frm 00099 Fmt 4703 Sfmt 4703 section 407(a)(1)(A) of the Act, a plan may not acquire or hold any ‘‘employer security’’ which is not a ‘‘qualifying employer security.’’ Under section 407(d)(1) of the Act, ‘‘employer securities’’ are defined, in relevant part, as securities issued by an employer of employees covered by the plan, or by an affiliate of such employer. Section 407(d)(5) of the Act provides, in relevant part, that ‘‘qualifying employer securities’’ are stock or marketable obligations. The Applicant states that the Plan was a holder of Series C Liberty Braves Stock on the date of the Rights Offering. As such, the grant of the Rights to the Plan was a grant of ‘‘employer securities’’ under section 407(d)(l) of the Act. Because the Rights do not constitute either stock or marketable obligations, the Rights are not ‘‘qualifying employer securities.’’ Therefore, the Applicant requests a retroactive exemption from sections 406(a)(1)(E), 406(a)(2), and 407(a)(1)(A) of the Act with respect to the acquisition and holding of the Rights by the Plan in connection with the Rights Offering. If granted, the exemption will be effective for the period May 24, 2016, through June 16, 2016. Statutory Findings 17. The Applicant represents that the proposed exemption is administratively feasible because it involved the acquisition and short-term holding of the Rights by the individual accounts of Plan participants. The Applicant also represents that all shareholders, including the Plan participants, were treated in a like manner with respect to the acquisition and holding of the Rights, with two exceptions: (a) The oversubscription option available under the Rights Offering was not available to participants in the Plan; and (b) certain participants deemed to be reporting persons under Rule 16(b) with respect to LMC did not have the right to instruct Fidelity to sell or exercise the Rights credited to their Plan Accounts. The Applicant represents that Plan participants would suffer a hardship were the exemption to be denied because the issuance of the Rights to the Plan was not within the control of the Plan or the Plan’s fiduciaries, as LMC issued subscription rights to all holders of Liberty Braves Stock, including the Plan. If the exemption were denied, the Applicant states that the transactions would have to be undone and those participants who elected to use their Plan accounts to purchase shares of Series C Liberty Braves Stock at a discount would be required to return those shares for the price they paid. E:\FR\FM\04APN1.SGM 04APN1 Federal Register / Vol. 83, No. 65 / Wednesday, April 4, 2018 / Notices This, according to the Applicant, would result in those participants losing earnings attributable to those shares. 18. The Applicant represents that the proposed exemption is also in the interests of the Plan and its participants and beneficiaries because: (a) Plan participants were notified of the Rights Offering and the procedure for instructing Fidelity regarding their desire with respect to the exercise or sale of the Rights; (b) all shareholders of Liberty Braves Stock, including the Plan, were treated in a like manner, with two exceptions, which are noted above in paragraph 17; (c) the Plan was treated in the same manner as other shareholders with respect to the granting and the exercise or sale of the Rights; and (d) the pass-through of the decision to exercise or sell the Rights, from Fidelity to the Plan participants allowed each participant to decide whether to liquidate his or her account to purchase additional shares of employer securities at a discount. 19. Finally, the Applicant represents that the proposed exemption is protective of the rights of participants because the Rights were sold by Fidelity, at the direction of the affected Plan participants, on the NASDAQ for their fair market value, in arms’-length transactions between unrelated parties. Furthermore, the Applicant represents that the Plan did not pay any fees or commissions with respect to the acquisition or holding of the Rights, and it did not pay any commissions to any affiliate of LMC in connection therewith. Summary 20. Given the conditions described below, the Department has tentatively determined that the relief sought by the Applicant satisfies the statutory requirements for an exemption under section 408(a) of the Act. amozie on DSK30RV082PROD with NOTICES Proposed Exemption Operative Language The Department is considering granting an exemption under the authority of section 408(a) of the Act (or ERISA) and in accordance with the procedures set forth in 29 CFR part 2570, subpart B (76 FR 46637, 66644, October 27, 2011). If the exemption is granted, the restrictions of sections 406(a)(1)(E), 406(a)(2), and 407(a)(1)(A) of the Act shall not apply, for the period May 24, 2016, through June 16, 2016, to: (1) The acquisition by the Plan of the Rights in connection with the Rights Offering; and (2) the holding of the Rights by the Plan during the subscription period of the Rights VerDate Sep<11>2014 18:12 Apr 03, 2018 Jkt 244001 Offering, provided that the following conditions are satisfied: (a) The Plan’s acquisition of the Rights resulted solely from an independent corporate act of LMC; (b) All holders of Series A, Series B, or Series C Liberty Braves common stock (Series A, B, or C Liberty Braves Stock), including the Plan, were issued the same proportionate number of Rights based on the number of shares of the Series A, B, or C Liberty Braves Stock held by each such shareholder; (c) For purposes of the Rights Offering, all holders of Series A, B, or C Liberty Braves Stock, including the Plan, were treated in a like manner, with two exceptions: (1) The oversubscription option available under the Rights Offering was not available to participants in the Plan; and (2) certain participants deemed to be reporting persons under Rule 16(b) with respect to LMC did not have the right to instruct Fidelity to either sell or exercise the Rights credited to their Plan Accounts; (d) The acquisition of the Rights by the Plan was made in a manner that was consistent with provisions of the Plan for the individually-directed investment of participant accounts; (e) The Committee directed the Plan trustee to sell the Rights on the NASDAQ Global Select Market (the NASDAQ), in accordance with Plan provisions that precluded the Plan from acquiring additional shares of Series C Liberty Braves Stock; (f) The Committee did not exercise any discretion with respect to the acquisition and holding of the Rights; and (g) The Plan did not pay any fees or commissions in connection with the acquisition or holding of the Rights, and it did not pay any commissions to any affiliates of LMC in connection with the sale of the Rights. Effective Date: This proposed exemption, if granted, will be effective from May 24, 2016, the date that the Plan received the Rights, through June 16, 2016, the last date the Rights were sold on the NASDAQ. Notice To Interested Persons Notice of the proposed exemption will be given to all Interested Persons within 7 days of the publication of the notice of proposed exemption in the Federal Register, by first class U.S. mail to the last known address of all such individuals. Such notice will contain a copy of the notice of proposed exemption, as published in the Federal Register, and a supplemental statement, as required pursuant to 29 CFR 2570.43(a)(2). The supplemental statement will inform interested persons PO 00000 Frm 00100 Fmt 4703 Sfmt 4703 14509 of their right to comment on the pending exemption. Written comments are due within 37 days of the publication of the notice of proposed exemption in the Federal Register. All comments will be made available to the public. Warning: If you submit a comment, EBSA recommends that you include your name and other contact information in the body of your comment, but DO NOT submit information that you consider to be confidential, or otherwise protected (such as Social Security number or an unlisted phone number) or confidential business information that you do not want publicly disclosed. All comments may be posted on the internet and can be retrieved by most internet search engines. FOR FURTHER INFORMATION CONTACT: Joseph Brennan of the Department, telephone (202) 693–8456. (This is not a toll-free number.) CLS Investments, LLC and Affiliates (CLS or the Applicant) Located in Omaha, NE [Application No. D–11931] Proposed Exemption The Department is considering granting an exemption under the authority of 408(a) of the Act and section 4975(c)(2) of the Code, in accordance with the procedures set forth in 29 CFR part 2570, subpart B (76 FR 46637, 66644, October 27, 2011). If the exemption is granted, the restrictions of sections 406(a)(1)(D) and 406(b) of the Act, and the sanctions resulting from the application of section 4975 of the Code, by reason of sections 4975(c)(1)(D) through (F) of the Code,7 shall not apply to the receipt of a fee by CLS from a registered, open-end investment company for which CLS serves as an investment advisor (an Affiliated Fund), in connection with the investment by an employee benefit plan in shares of such Affiliated Fund, where CLS serves as an investment advisor or investment manager with respect to such plan (Client Plan), provided the conditions of this exemption are met. Summary of Facts and Representations 8 1. CLS is an investment adviser registered with the U.S. Securities and 7 For purposes of this proposed exemption reference to specific provisions of Title I of the Act, unless otherwise specified, should be read to refer as well to the corresponding provisions of the Code. 8 The Summary of Facts and Representations is based on the Applicant’s representations, unless indicated otherwise. E:\FR\FM\04APN1.SGM 04APN1 amozie on DSK30RV082PROD with NOTICES 14510 Federal Register / Vol. 83, No. 65 / Wednesday, April 4, 2018 / Notices Exchange Commission. CLS offers a variety of financial services and operates primarily as an Exchange Traded Funds strategist working with more than 2,500 financial advisors and 1,300 qualified plan sponsors to manage more than 35,000 investor portfolios. CLS also acts as a sub-advisor and investment research provider to many broker-dealer self-clearing platforms, brokerage custodians, Registered Investment Advisors (RIAs), and overlay portfolio management enterprises. 2. CLS acts an investment adviser to the Affiliated Funds. The Affiliated Funds are diversified open-end investment companies registered with the U.S. Securities and Exchange Commission under the Investment Company Act, as amended. CLS may also provide certain ‘‘secondary services’’ to the Affiliated Funds, including custodial, accounting, administrative services and brokerage services (hereinafter, Secondary Services). 3. The Applicant seeks an exemption that would permit the receipt of a fee by CLS from an Affiliated Fund, in connection with the investment by a Client Plan in shares of such Affiliated Fund, where CLS serves as an investment advisor or investment manager with respect to such Client Plan. Absent an exemption, such investment may violate several provisions of the Act. In this regard, CLS, as investment manager or investment adviser to the Client Plans, is a fiduciary with respect to the Client Plans, pursuant to section 3(21)(A)(i) and (ii) of the Act. Section 3(21)(A) of the Act provides, in relevant part, that a person is a fiduciary with respect to a plan to the extent that the person: (i) Exercises any discretionary authority or control respecting management of the Plan or any authority or control respecting management or disposition of its assets, or (ii) renders investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property of a plan or has any authority or responsibility to do so. 4. Section 406(a)(l)(D) of the Act prohibits a fiduciary with respect to a plan from causing such plan to engage in a transaction, if such fiduciary knows or should know, that such transaction constitutes a transfer to, or use by or for the benefit of, a party in interest, of any assets of such plan. Section 406(b) of the Act provides that a fiduciary with respect to a plan may not: (1) Deal with the assets of a plan in his own interest or for his own account; (2) act, in his individual or in any other capacity, in any transaction involving a plan on VerDate Sep<11>2014 18:12 Apr 03, 2018 Jkt 244001 behalf of a party (or represent a party) whose interests are adverse to the interests of such plan or the interests of its participants or beneficiaries; or (3) receive any consideration for his own personal account from any party dealing with a plan in connection with a transaction involving the assets of such plan. 5. An arrangement whereby CLS, as investment adviser or manager to a Client Plan, invests plan assets in shares of a mutual fund that is advised by CLS and receives an advisory or Secondary Services fee from the Affiliated Fund in connection therewith, may be viewed as an impermissible use of Client Plan assets, in violation of section 406(a)(1)(D) of the Act. In connection with such investment, the increased compensation of CLS could be viewed as a violation of section 406(b)(1) and (b)(2) of the Act. Further, the receipt by CLS of compensation from an Affiliated Fund could also be viewed as a violation of section 406(b)(3) of the Act. 6. PTE 77–4 provides an exemption from section 406 of the Act and section 4975 of the Code for the purchase and for the sale by a plan of shares of a registered, open-end investment company, where the investment adviser of such fund: (a) Is a plan fiduciary or affiliated with a plan fiduciary; and (b) is not an employer of employees covered by the plan. Prior to implementing any fee increase, an investment adviser relying on PTE 77– 4 must provide prior disclosures to each affected second fiduciary, and must obtain written authorization from each such second fiduciary. PTE 77–4 prohibits the payment by a plan of commissions, 12b–1 fees, redemption fees, and similar fees, as well as the payment of double investment advisory fees and similar fees with respect to plan assets invested in such shares for the entire period of such investment. 7. CLS states that obtaining advance written consent from each Second Fiduciary (which refers, in general terms, to a Client Plan fiduciary who is independent of and unrelated to CLS) prior to any Fee Increase can be extremely difficult due to both the large number of Client Plans involved and the difficulty in obtaining responses from individual IRA owners. According to CLS, absent the requested exemptive relief, CLS’s failure to receive affirmative written approval on an individual Client Plan basis could require CLS to transfer Client Plan investments out of one or more Funds, where such Client Plans may not desire such an outcome. 8. CLS seeks relief that is essentially the same as that afforded by PTE 77–4, PO 00000 Frm 00101 Fmt 4703 Sfmt 4703 with the exception of the use of a ‘‘negative consent’’ procedure, which would constitute a Client Plan’s approval of a Fee Increase.9 For purposes of the exemption, a Fee Increase is: (a) Any change by CLS in a rate of fee; (b) any increase in any fee that results from the addition of a service for which a fee is charged; (c) any increase in fee that results from a decrease in the number of services; (d) any increase in any fee that results from a decrease in the kind of services provided by CLS for such fee over an existing rate of fee for each such service previously authorized by a Second Fiduciary; (e) any change in fee that results from CLS changing from one fee method to another; and (f) any change in the amount of operating expenses of a Fund reimbursed or otherwise waived by CLS or its affiliates to the extent that such change results in an increase in the total operating expenses payable by the Fund. 9. The exemption contains several conditions that are consistent with the conditions found in PTE 77–4. For example, the exemption requires, among other things, that each Client Plan which is invested in shares of an Affiliated Fund, either: Does not pay to CLS, for the entire period of such investment, any investment management fee, or any investment advisory fee, or any similar fee at the plan-level, with respect to any of the assets of such Client Plan which are invested in shares of such Affiliated Fund; or pays to CLS a Plan-Level Management Fee, based on total assets of such Client Plan under management by CLS at the plan-level, from which a credit has been subtracted from such Plan-Level Management Fee. Further, no sales commission or no other similar fee may be paid in connection with any purchase and in connection with any sale by a Client Plan in shares of an Affiliated Fund. The payment of a redemption fee is permitted only if: Such redemption fee is paid only to an Affiliated Fund; and the existence of such redemption fee is disclosed in the summary prospectus for such Affiliated Fund in effect both at the time of any purchase of shares in such Affiliated Fund and at the time of any sale of such shares. 10. Additionally, in general terms, the combined total of all fees received by 9 The Applicant represents that all of the CLSaffiliated entities to which the exemption would apply are currently part of the same controlled group. CLS represents that, if and to the extent that CLS invests Client Plan assets in Affiliated Funds, such CLS-affiliated entities can rely on the relief provided pursuant to PTE 77–4 (42 FR 18732 (April 8, 1977)), except as described below. E:\FR\FM\04APN1.SGM 04APN1 amozie on DSK30RV082PROD with NOTICES Federal Register / Vol. 83, No. 65 / Wednesday, April 4, 2018 / Notices CLS may not be in excess of reasonable compensation within the meaning of section 408(b)(2) of the Act. CLS may not receive any fees payable pursuant to Rule 12b–1 under the Investment Company Act in connection with transactions covered by the exemption. Further, no Client Plan may be an employee benefit plan sponsored or maintained by CLS. 11. This exemption contains extensive notification requirements. The Second Fiduciary must receive, in writing, in advance of any investment by such Client Plan in shares of such Affiliated Fund, a full and detailed disclosure of information concerning such Affiliated Fund, including: A current summary prospectus issued by each such Affiliated Fund; a statement describing the fees; and the reasons why CLS may consider investment in shares of such Affiliated Fund by such Client Plan to be appropriate for such Client Plan. 12. The Second Fiduciary must authorize, in writing, among other things: The investment of the assets of such Client Plan in shares of an Affiliated Fund; the Affiliated FundLevel Advisory Fee received by CLS for investment advisory services and similar services provided by CLS to such Affiliated Fund; and the fee received by CLS for Secondary Services provided by CLS to such Affiliated Fund. Any such authorization made by a Second Fiduciary is terminable at will by such Second Fiduciary, without penalty to such Client Plan (including any fee or charge related to such penalty). The process for termination includes the Second Fiduciary’s receipt, at least annually, of a form (the Termination Form), which expressly provides for an election to terminate an authorization. Notwithstanding this, the instructions for the Termination Form must also inform the Second Fiduciary that, among other things, as of the date that is at least thirty (30) days from the date that CLS sent the Termination Form to such Second Fiduciary, the failure by such Second Fiduciary to return such Termination Form or the failure by such Second Fiduciary to provide some other written notification of the Client Plan’s intent to terminate an authorization that is subject to a negative consent arrangement covered by this exemption, will be deemed to be an approval by such Second Fiduciary. 13. The exemption also requires that CLS, at least thirty (30) days in advance of the implementation of a fee increase, provide to the Second Fiduciary of each Client Plan, a notice of change in fees (the Notice of Change in Fees) which explains the nature and the amount of such Fee Increase. Such Notice of VerDate Sep<11>2014 18:12 Apr 03, 2018 Jkt 244001 Change in Fees must be accompanied by a Termination Form and by instructions on the use of such Termination Form. The notice must explain that, as of the date that is at least thirty (30) days from the date that CLS sends the Notice of Change of Fees and the Termination Form to such Second Fiduciary, the failure by such Second to return such Termination Form or the failure by such Second Fiduciary to provide some other written notification of the Client Plan’s intent to terminate the authorization, will be deemed to be an approval by such Second Fiduciary of such Fee Increase. 14. The exemption contains other safeguards designed to protect affected Client Plans. In this regard, in general terms: CLS must provide reasonably available information regarding the covered transactions that the Second Fiduciary of such Client Plan requests; all dealings between a Client Plan and an Affiliated Fund are on a basis no less favorable to such Client Plan, than dealings between such Affiliated Fund and other similar shareholders; in the event a Client Plan invests in shares of an Affiliated Fund, if such Affiliated Fund places brokerage transactions with CLS, CLS must provide to the Second Fiduciary of each such Client Plan, so invested, an annual statement specifying relevant commission information; the purchase price paid and the sales price received by a Client Plan for shares in an Affiliated Fund purchased or sold directly must be the net asset value per share, and must be the same purchase price that would have been paid, and the same sales price that would have been received, for such shares by any other shareholder of the same class of shares in such Affiliated Fund at that time; and CLS, including any officer and any director of CLS, may not purchase any shares of an Affiliated Fund from, and may not sell any shares of an Affiliated Fund to, any Client Plan which invests directly in such Affiliated Fund. The exemption also contains recordkeeping requirements. 15. Importantly, the conditions of PTE 77–4, as amended and/or restated, must be met. Further, if CLS is a fiduciary within the meaning of section 3(21)(A)(i) or (ii) of the Act, or section 4975(e)(3)(A) or (B) of the Code, with respect to the assets of a Client Plan involved in the transaction, CLS must comply with the following conditions with respect to the transaction: (1) CLS must act in the Best Interest (as described below) of the Client Plan; (2) all compensation received by CLS in connection with the transaction in relation to the total services the fiduciary provides to the Client Plan PO 00000 Frm 00102 Fmt 4703 Sfmt 4703 14511 must not exceed reasonable compensation within the meaning of section 408(b)(2) of the Act; and (3) CLS’s statements about recommended investments, fees, material conflicts of interest,10 and any other matters relevant to a Client Plan’s investment decisions must not be materially misleading at the time they are made. In the last regard, CLS acts in the ‘‘Best Interest’’ of the Client Plan when CLS acts with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent person would exercise based on the investment objectives, risk tolerance, financial circumstances, and needs of the plan or IRA, without regard to the financial or other interests of the fiduciary, any affiliate or other party. 16. CLS represents that it will ‘‘actively’’ satisfy the various disclosure requirements of this proposed exemption by transmitting emails, rather than relying on ‘‘passive’’ postings on a website. CLS represents that Client Plans that do not authorize electronic delivery will receive, in advance, hard copies of the required documents, and that hard copies of required documents will be available to Client Plans upon request. CLS represents that the disclosure methods under this exemption will be consistent with the Department’s regulations at 29 CFR 2520.104b–1. 17. The Applicant represents that the proposed exemption is in the interest of Client Plans because it will allow CLS to manage Client Plan assets more efficiently. The Applicant states that the Affiliated Funds provide certain advantages to Client Plans, including access to professional management services and lower costs, including no sales commission costs in connection with the purchase or sale of shares in any of the Funds and no 12b–1 fees. The Applicant also represents that the Affiliated Funds provide a means for Client Plans with limited assets to achieve diversification of investment in a manner that may not be attainable through direct investment by a plan participant. For these reasons, CLS maintains that the availability of the Funds as investments enables CLS, as investment manager, to better meet the investment goals and strategies of a Client Plan. 10 A ‘‘material conflict of interest’’ exists when a fiduciary has a financial interest that could affect the exercise of its best judgment as a fiduciary in rendering advice to a Client Plan. For this purpose, the failure of CLS to disclose a material conflict of interest relevant to the services it is providing to a Client Plan, or other actions it is taking in relation to a Client Plan’s investment decisions, is deemed to be a misleading statement. E:\FR\FM\04APN1.SGM 04APN1 14512 Federal Register / Vol. 83, No. 65 / Wednesday, April 4, 2018 / Notices amozie on DSK30RV082PROD with NOTICES 18. The Applicant represents that the proposed exemption is protective of Client Plans because it contains sufficient safeguards for the protection of the Client Plans invested in the Funds. In this regard, prior to any investment by a Client Plan in a Fund, the investment must be authorized in writing by the Second Fiduciary of such Client Plan, based on a full and detailed written disclosure concerning such Fund. The Applicant states that, in addition to the initial disclosures provided to the Second Fiduciary of a Client Plan invested in a Fund, CLS provides such Second Fiduciary with ongoing disclosures regarding such Fund and the fee methods. Specifically, CLS provides the Second Fiduciary with the current Fund prospectuses, the annual financial disclosure reports containing information about the Funds, and audit findings. The Applicant states that CLS will respond to inquiries from a Second Fiduciary and, upon request, will provide: Copies of the Statements of Additional Information for the Funds, a copy of the proposed exemption, and a copy of the final exemption, if granted, once such documents are published in the Federal Register. Further, the Applicant states that Client Plan investments in Affiliated Funds will be subject to the ongoing ability of the Second Fiduciary of such Client Plan to terminate the investment without penalty to such Client Plan, at any time, upon written notice of termination. In this regard, the Applicant states that the Second Fiduciary will have sufficient opportunity to terminate a Client Plan’s investment in a Fund, without penalty to the Client Plan, and withdraw the Client Plan’s investment from such Fund in advance of any such change in fee. Also in this regard, the Applicant states that any and all changes in fees payable to CLS by Affiliated Funds will be on terms monitored by the Second Fiduciary who will be prompted by the Termination Form with a means to avoid the effect of such changes. Summary 19. Given the conditions applicable to the transactions covered by this exemption, if granted, the Department has tentatively determined that the relief sought by the Applicant satisfies the statutory requirements for an exemption under section 408(a) of the Act. Proposed Exemption Operative Language The Department is considering granting an exemption under the authority of section 408(a) of the Act (or VerDate Sep<11>2014 18:12 Apr 03, 2018 Jkt 244001 ERISA) and in accordance with the procedures set forth in 29 CFR part 2570, subpart B (76 FR 46637, 66644, October 27, 2011). Section I. Transactions If the proposed exemption is granted, the restrictions of sections 406(a)(1)(D) and 406(b) of the Act, and the sanctions resulting from the application of section 4975 of the Code, by reason of sections 4975(c)(1)(D) through (F) of the Code,11 shall not apply to the receipt of a fee by CLS, from an open-end investment company (Affiliated Fund), in connection with the investment in shares of any such Affiliated Fund, by an employee benefit plan (a Client Plan), as defined in Section IV(b), where CLS serves as a fiduciary with respect to such Client Plan, and where CLS: (a) Provides investment advisory services, or similar services to any such Affiliated Fund; and (b) provides to any such Affiliated Fund any other services (Secondary Services), as defined below in Section IV(i). Section II. Specific Conditions (a) Each Client Plan which is invested in shares of an Affiliated Fund either: (1) Does not pay to CLS, for the entire period of such investment, any investment management fee, or any investment advisory fee, or any similar fee at the plan-level (the Plan-Level Management Fee), as defined below in Section IV(l), with respect to any of the assets of such Client Plan which are invested in shares of such Affiliated Fund; or (2) Pays to CLS a Plan-Level Management Fee, based on total assets of such Client Plan under management by CLS at the plan-level, from which a credit has been subtracted from such Plan-Level Management Fee, where the amount subtracted represents such Client Plan’s pro rata share of any investment advisory fee and any similar fee (the Affiliated Fund Level Advisory Fee), as defined below in Section IV(m), paid by such Affiliated Fund to CLS. If, during any fee period, in the case of a Client Plan invested in shares of an Affiliated Fund, such Client Plan has prepaid its Plan Level Management Fee, and such Client Plan purchases shares of an Affiliated Fund, the requirement of this Section II(a)(2) shall be deemed met with respect to such prepaid PlanLevel Management Fee, if, by a method reasonably designed to accomplish the same, the amount of the prepaid PlanLevel Management Fee that constitutes 11 For purposes of this proposed exemption reference to specific provisions of Title I of the Act, unless otherwise specified, should be read to refer as well to the corresponding provisions of the Code. PO 00000 Frm 00103 Fmt 4703 Sfmt 4703 the fee with respect to the assets of such Client Plan invested in shares of an Affiliated Fund: (i) Is anticipated and subtracted from the prepaid Plan-Level Management Fee at the time of the payment of such fee; or (ii) Is returned to such Client Plan, no later than during the immediately following fee period; or (iii) Is offset against the Plan-Level Management Fee for the immediately following fee period or for the fee period immediately following thereafter. For purposes of Section II(a)(2), a Plan-Level Management Fee shall be deemed to be prepaid for any fee period, if the amount of such Plan-Level Management Fee is calculated as of a date not later than the first day of such period. (b) No sales commissions, no redemption fees, and no other similar fees are paid in connection with any purchase and in connection with any sale by a Client Plan in shares of an Affiliated Fund. However, this Section II(b) does not prohibit the payment of a redemption fee, if: (1) Such redemption fee is paid only to an Affiliated Fund; and (2) The existence of such redemption fee is disclosed in the summary prospectus for such Affiliated Fund in effect both at the time of any purchase of shares in such Affiliated Fund and at the time of any sale of such shares. (c) The combined total of all fees received by CLS is not in excess of reasonable compensation within the meaning of section 408(b)(2) of the Act, for services provided: (1) By CLS to each Client Plan; and (2) By CLS to each Affiliated Fund in which a Client Plan invests in shares of such Affiliated Fund; (d) CLS does not receive any fees payable pursuant to Rule 12b–1 under the Investment Company Act in connection with the transactions covered by this proposed exemption; (e) No Client Plan is an employee benefit plan sponsored or maintained by CLS; (f) In the case of a Client Plan investing in shares of an Affiliated Fund, the Second Fiduciary, as defined below in Section IV(h), acting on behalf of such Client Plan, receives, in writing, in advance of any investment by such Client Plan in shares of such Affiliated Fund, a full and detailed disclosure via first class mail or via personal delivery of (or, if the Second Fiduciary consents to such means of delivery, through electronic email, in accordance with Section II(n), as set forth below) information concerning such Affiliated E:\FR\FM\04APN1.SGM 04APN1 amozie on DSK30RV082PROD with NOTICES Federal Register / Vol. 83, No. 65 / Wednesday, April 4, 2018 / Notices Fund, including but not limited to the items listed below: (1) A current summary prospectus issued by each such Affiliated Fund; (2) A statement describing the fees, including the nature and extent of any differential between the rates of such fees for: (i) Investment advisory and similar services to be paid to CLS by each Affiliated Fund; (ii) Secondary Services to be paid to CLS by each such Affiliated Fund; and (iii) All other fees to be charged by CLS to such Client Plan and to each such Affiliated Fund and all other fees to be paid to CLS by each such Client Plan and by each such Affiliated Fund; (3) The reasons why CLS may consider investment in shares of such Affiliated Fund by such Client Plan to be appropriate for such Client Plan; (4) A statement describing whether there are any limitations applicable to CLS with respect to which assets of such Client Plan may be invested in shares of such Affiliated Fund, and if so, the nature of such limitations; and (5) Upon the request of the Second Fiduciary acting on behalf of such Client Plan, a copy of the Notice of Proposed Exemption (the Notice), a copy of the final exemption, if granted, and any other reasonably available information regarding the transactions which are the subject of this proposed exemption; (g) On the basis of the information described above in Section II(f), a Second Fiduciary acting on behalf of a Client Plan authorizes, in writing: (1) The investment of the assets of such Client Plan in shares of an Affiliated Fund; (2) The Affiliated Fund-Level Advisory Fee received by CLS for investment advisory services and similar services provided by CLS to such Affiliated Fund; (3) The fee received by CLS for Secondary Services provided by CLS to such Affiliated Fund; (4) The Plan-Level Management Fee received by CLS for investment management and similar services provided by CLS to such Client Plan at the plan-level; and (5) The selection, by CLS, of the applicable fee method, as described above in Section II(a)(1)–(2); All authorizations made by a Second Fiduciary pursuant to this Section II(g) must be consistent with the responsibilities, obligations, and duties imposed on fiduciaries by Part 4 of Title I of the Act; (h)(1) Any authorization, described above in Section II(g), and any authorization made pursuant to negative VerDate Sep<11>2014 18:12 Apr 03, 2018 Jkt 244001 consent, as described below in Section II(i), made by a Second Fiduciary, acting on behalf of a Client Plan, shall be terminable at will by such Second Fiduciary, without penalty to such Client Plan (including any fee or charge related to such penalty), upon receipt by CLS via first class mail, via personal delivery, or via electronic email of a written notification of the intent of such Second Fiduciary to terminate any such authorization; (2) A form (the Termination Form), expressly providing an election to terminate any authorization, described above in Section II(g), or to terminate any authorization made pursuant to negative consent, as described below in Section II(i), with instructions on the use of such Termination Form, must be provided to such Second Fiduciary at least annually, either in writing via first class mail or via personal delivery (or if such Second Fiduciary consents to such means of delivery, through electronic email, in accordance with Section II(n), as set forth below). However, if a Termination Form has been provided to such Second Fiduciary pursuant to Section II(i), then a Termination Form need not be provided pursuant to this Section II(h), until at least six (6) months, but no more than twelve (12) months, have elapsed, since the prior Termination Form was provided; (3) The instructions for the Termination Form must include the following statements: (i) Any authorization, described above in Section II(g), and any authorization made pursuant to negative consent, as described below in Section II(i), is terminable at will by a Second Fiduciary, acting on behalf of a Client Plan, without penalty to such Client Plan, upon receipt by CLS, via first class mail or via personal delivery or via electronic email, of the Termination Form, or some other written notification of the intent of such Second Fiduciary to terminate such authorization; and (ii) As of the date that is at least thirty (30) days from the date that CLS sends the Termination Form to such Second Fiduciary, the failure by such Second Fiduciary to return such Termination Form or the failure by such Second Fiduciary to provide some other written notification of the Client Plan’s intent to terminate any authorization, described in Section II(g), or intent to terminate any authorization made pursuant to negative consent, as described below in Section II(i), will be deemed to be an approval by such Second Fiduciary; (4) In the event that a Second Fiduciary, acting on behalf of a Client Plan, at any time returns a Termination Form or returns some other written PO 00000 Frm 00104 Fmt 4703 Sfmt 4703 14513 notification of intent to terminate any authorization, as described above in Section II(g), or intent to terminate any authorization made pursuant to negative consent, as described below in Section II(i), the termination will be implemented by the withdrawal of all investments made by such Client Plan in the affected Affiliated Fund, and such withdrawal will be implemented by CLS within one (1) business day of the date that CLS receives such Termination Form or receives from the Second Fiduciary, acting on behalf of such Client Plan, some other written notification of intent to terminate any such authorization; (5) From the date a Second Fiduciary, acting on behalf of a Client Plan that invests in shares of an Affiliated Fund, returns a Termination Form or returns some other written notification of intent to terminate such Client Plan’s investment in such Affiliated Fund, such Client Plan will not be subject to pay a pro rata share of any Affiliated Fund-Level Advisory Fee and will not be subject to pay any fees for Secondary Services paid to CLS by such Affiliated Fund, or any other fees or charges; (i)(1) CLS, at least thirty (30) days in advance of the implementation of each fee increase (Fee Increase(s)), as defined below in Section IV(k), must provide in writing via first class mail or via personal delivery (or if the Second Fiduciary consents to such means of delivery through electronic email, in accordance with Section II(n), as set forth below), a notice of change in fees (the Notice of Change in Fees) (which may take the form of a proxy statement, letter, or similar communication which is separate from the summary prospectus of such Affiliated Fund) and which explains the nature and the amount of such Fee Increase to the Second Fiduciary of each affected Client Plan. Such Notice of Change in Fees shall be accompanied by a Termination Form and by instructions on the use of such Termination Form, as described above in Section II(h); and (2) As of the date that is at least thirty (30) days from the date that CLS sends the Notice of Change of Fees and the Termination Form to such Second Fiduciary, the failure by such Second to return such Termination Form and the failure by such Second Fiduciary to provide some other written notification of the Client Plan’s intent to terminate the authorization, described in Section II(g), or to terminate the negative consent authorization, as described in Section II(i), will be deemed to be an approval by such Second Fiduciary of such Fee Increase. E:\FR\FM\04APN1.SGM 04APN1 amozie on DSK30RV082PROD with NOTICES 14514 Federal Register / Vol. 83, No. 65 / Wednesday, April 4, 2018 / Notices (j) CLS is subject to the requirement to provide within a reasonable period of time any reasonably available information regarding the covered transactions that the Second Fiduciary of such Client Plan requests CLS to provide. (k) All dealings between a Client Plan and an Affiliated Fund are on a basis no less favorable to such Client Plan, than dealings between such Affiliated Fund and other shareholders of the same class of shares in such Affiliated Fund. (l) In the event a Client Plan invests in shares of an Affiliated Fund, if such Affiliated Fund places brokerage transactions with CLS, CLS will provide to the Second Fiduciary of each such Client Plan, so invested, at least annually a statement specifying: (1) The total, expressed in dollars, of brokerage commissions that are paid to CLS by each such Affiliated Fund; (2) The total, expressed in dollars, of brokerage commissions that are paid by each such Affiliated Fund to brokerage firms unrelated to CLS; (3) The average brokerage commissions per share, expressed as cents per share, paid to CLS by each such Affiliated Fund; and (4) The average brokerage commissions per share, expressed as cents per share, paid by each such Affiliated Fund to brokerage firms unrelated to CLS; (m)(1) CLS provides to the Second Fiduciary of each Client Plan invested in shares of an Affiliated Fund with the disclosures, as set forth below, and at the times set forth below in Section II(m)(1)(i)-(v), either in writing via first class mail or via personal delivery (or if the Second Fiduciary consents to such means of delivery, through electronic email, in accordance with Section II(q) as set forth below): (i) Annually, with a copy of the current summary prospectus for each Affiliated Fund in which such Client Plan invests in shares of such Affiliated Fund; (ii) Upon the request of such Second Fiduciary, a copy of the statement of additional information for each Affiliated Fund in which such Client Plan invests in shares of such Affiliated Fund which contains a description of all fees paid by such Affiliated Fund to CLS; (iii) Oral or written responses to the inquiries posed by the Second Fiduciary of such Client Plan, as such inquiries arise; and (iv) Annually, with a Termination form, as described in Section II(h)(1), and instructions on the use of such form, as described in Section II(h)(3), except that if a Termination Form has VerDate Sep<11>2014 18:12 Apr 03, 2018 Jkt 244001 been provided to such Second Fiduciary pursuant to Section II(i), then a Termination Form need not be provided again pursuant to this Section II(m)(1)(v) until at least six (6) months but no more than twelve (12) months have elapsed since a Termination Form was provided; (n) Any disclosure required herein to be made by CLS to a Second Fiduciary may be delivered by electronic email containing direct hyperlinks to the location of each such document required to be disclosed, which are maintained on a website by CLS, provided: (1) CLS obtains from such Second Fiduciary prior consent in writing to the receipt by such Second Fiduciary of such disclosure via electronic email; (2) Such Second Fiduciary has provided to CLS a valid email address; and (3) The delivery of such electronic email to such Second Fiduciary is provided by CLS in a manner consistent with the relevant provisions of the Department’s regulations at 29 CFR 2520.104b–1(c) (substituting the word ‘‘CLS’’ for the word ‘‘administrator’’ as set forth therein, and substituting the phrase ‘‘Second Fiduciary’’ for the phrase ‘‘the participant, beneficiary or other individual’’ as set forth therein). (o) The authorizations described in Section II(i) may be made affirmatively, in writing, by a Second Fiduciary, in a manner that is otherwise consistent with the requirements of those sections; (p) All of the conditions of PTE 77– 4, as amended and/or restated, are met. Notwithstanding this, if PTE 77–4 is amended and/or restated, the requirements of paragraph (e) therein will be deemed to be met with respect to authorizations described in Section II(i) above, but only to the extent the requirements of Section II(i) are met. Similarly, if PTE 77–4 is amended and/ or restated, the requirements of paragraph (d) therein will be deemed to be met with respect to authorizations described in Section II(i) above, if the requirements of Section II(i) are met; (q) Standards of Impartial Conduct. If CLS is a fiduciary within the meaning of section 3(21)(A)(i) or (ii) of the Act, or section 4975(e)(3)(A) or (B) of the Code, with respect to the assets of a Client Plan involved in the transaction, CLS must comply with the following conditions with respect to the transaction: (1) CLS acts in the Best Interest (as defined below, in Section IV(o)) of the Client Plan; (2) all compensation received by CLS in connection with the transaction in relation to the total services the fiduciary provides to the Client Plan does not exceed reasonable PO 00000 Frm 00105 Fmt 4703 Sfmt 4703 compensation within the meaning of section 408(b)(2) of the Act; and (3) CLS’s statements about recommended investments, fees, material conflicts of interest,12 and any other matters relevant to a Client Plan’s investment decisions are not materially misleading at the time they are made. For purposes of this paragraph, CLS acts in the ‘‘Best Interest’’ of the Client Plan when CLS acts with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent person would exercise based on the investment objectives, risk tolerance, financial circumstances, and needs of the plan or IRA, without regard to the financial or other interests of the fiduciary, any affiliate or other party; (r) The purchase price paid and the sales price received by a Client Plan for shares in an Affiliated Fund purchased or sold directly is the net asset value per share (NAV), as defined below in Section IV(f), at the time of the transaction, and is the same purchase price that would have been paid, and the same sales price that would have been received, for such shares by any other shareholder of the same class of shares in such Affiliated Fund at that time; and (s) CLS, including any officer and any director of CLS, does not purchase any shares of an Affiliated Fund from, and does not sell any shares of an Affiliated Fund to, any Client Plan which invests directly in such Affiliated Fund. Section III. General Conditions (a) CLS maintains for a period of six (6) years the records necessary to enable the persons, described below in Section III(b), to determine whether the conditions of this proposed exemption have been met, except that: (1) A prohibited transaction will not be considered to have occurred, if solely because of circumstances beyond the control of CLS, the records are lost or destroyed prior to the end of the sixyear period; and (2) No party in interest other than CLS shall be subject to the civil penalty that may be assessed under section 502(i) of the Act or to the taxes imposed by section 4975(a) and (b) of the Code, if the records are not maintained or are not available for examination, as required below by Section III(b). 12 A ‘‘material conflict of interest’’ exists when a fiduciary has a financial interest that could affect the exercise of its best judgment as a fiduciary in rendering advice to a Client Plan. For this purpose, the failure of CLS to disclose a material conflict of interest relevant to the services it is providing to a Client Plan, or other actions it is taking in relation to a Client Plan’s investment decisions, is deemed to be a misleading statement. E:\FR\FM\04APN1.SGM 04APN1 Federal Register / Vol. 83, No. 65 / Wednesday, April 4, 2018 / Notices amozie on DSK30RV082PROD with NOTICES (b)(1) Except as provided in Section III(b)(2) and notwithstanding any provisions of section 504(a)(2) of the Act, the records referred to in Section III(a) are unconditionally available at their customary location for examination during normal business hours by: (i) Any duly authorized employee or representative of the Department or the Internal Revenue Service, or the Securities & Exchange Commission; (ii) Any fiduciary of a Client Plan invested in shares of an Affiliated Fund and any duly authorized employee or representative of such fiduciary; and (iii) Any participant or beneficiary of a Client Plan invested in shares of an Affiliated Fund and any representative of such participant or beneficiary; (2) None of the persons described in Section III(b)(1)(ii) and (iii) shall be authorized to examine trade secrets of CLS, or commercial or financial information which is privileged or confidential. Section IV. Definitions For purposes of this proposed exemption: (a) The term ‘‘CLS’’ means CLS Investments, LLC and any affiliate thereof, as defined below, in Section IV(c). (b) The term ‘‘Client Plan(s)’’ means a 401(k) plan(s), an individual retirement account(s), other tax-qualified plan(s), and other plan(s) as defined in the Act and Code, but does not include any employee benefit plan sponsored or maintained by CLS, as defined above in Section IV(a). (c) An ‘‘affiliate’’ of a person includes: (1) Any person directly or indirectly, through one or more intermediaries, controlling, controlled by, or under common control with the person; (2) Any officer, director, employee, relative, or partner in any such person; and (3) Any corporation or partnership of which such person is an officer, director, partner, or employee. (d) The term ‘‘control’’ means the power to exercise a controlling influence over the management or policies of a person other than an individual. (e) The term ‘‘Affiliated Fund’’ means a diversified open-end investment company registered with the U.S. Securities and Exchange Commission under the Investment Company Act, as amended, for which CLS serves as an investment adviser. (f) The term ‘‘net asset value per share’’ and the term ‘‘NAV’’ mean the amount for purposes of pricing all purchases and sales of shares of an VerDate Sep<11>2014 18:12 Apr 03, 2018 Jkt 244001 Affiliated Fund, calculated by dividing the value of all securities, determined by a method as set forth in the summary prospectus for such Affiliated Fund and in the statement of additional information, and other assets belonging to such Affiliated Fund or portfolio of such Affiliated Fund, less the liabilities charged to each such portfolio or each such Affiliated Fund, by the number of outstanding shares. (g) The term ‘‘relative’’ means a relative as that term is defined in section 3(15) of the Act (or a member of the family as that term is defined in section 4975(e)(6) of the Code), or a brother, a sister, or a spouse of a brother or a sister. (h) The term ‘‘Second Fiduciary’’ means the fiduciary of a Client Plan who is independent of and unrelated to CLS. For purposes of this proposed exemption, the Second Fiduciary will not be deemed to be independent of and unrelated to CLS if: (1) Such Second Fiduciary, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with CLS; (2) Such Second Fiduciary, or any officer, director, partner, employee, or relative of such Second Fiduciary, is an officer, director, partner, or employee of CLS (or is a relative of such person); or (3) Such Second Fiduciary, directly or indirectly, receives any compensation or other consideration for his or her personal account in connection with any transaction described in this proposed exemption. If an officer, director, partner, or employee of CLS (or relative of such person) is a director of such Second Fiduciary, and if he or she abstains from participation in: (i) The decision of a Client Plan to invest in and to remain invested in shares of an Affiliated Fund; (ii) Any authorization in accordance with Section II(g), and any authorization, pursuant to negative consent, as described in Section II(i); and (iii) The choice of such Client Plan’s investment adviser, then Section IV(h)(2) above shall not apply. (i) The term ‘‘Secondary Service(s)’’ means a service or services other than an investment management service, investment advisory service, and any similar service which is provided by CLS to an Affiliated Fund, including, but not limited to, custodial, accounting, administrative services, and brokerage services. CLS may also serve as a dividend disbursing agent, shareholder servicing agent, transfer agent, fund accountant, or provider of PO 00000 Frm 00106 Fmt 4703 Sfmt 4703 14515 some other Secondary Service, as defined in this Section IV(i). (j) The term ‘‘business day’’ means any day that: (1) CLS is open for conducting all or substantially all of its business; and (2) The New York Stock Exchange (or any successor exchange) is open for trading. (k) The term ‘‘Fee Increase(s)’’ includes any increase by CLS in a rate of a fee previously authorized in writing by the Second Fiduciary of each affected Client Plan pursuant to Section II(g) above, and in addition includes, but is not limited to: (1) Any fee increase that results from the addition of a service; (2) Any increase in any fee that results from a decrease in the number of services and any increase in any fee that results from a decrease in the kind of service(s) performed by CLS for such fee over an existing rate of fee for each such service previously authorized by the Second Fiduciary, in accordance with Section II(g) above; (3) Any increase in any fee that results from CLS changing from one of the fee methods, as described above in Section II(a)(1)–(4), to another of the fee methods, as described above in Section II(a)(1)–(4); and (4) Any change in the amount of operating expenses of a Fund that is reimbursed or otherwise waived by CLS or its affiliates to the extent that such change results in an increase in the total operating payable by the Fund. (l) The term ‘‘Plan-Level Management Fee’’ includes any investment management fee, investment advisory fee, and any similar fee paid by a Client Plan to CLS for any investment management services, investment advisory services, and similar services provided by CLS to such Client Plan at the plan-level. The term ‘‘Plan-Level Management Fee’’ does not include a separate fee paid by a Client Plan to CLS for asset allocation service(s) (Asset Allocation Service(s)), as defined below in Section IV(n), provided by CLS to such Client Plan at the plan-level. (m) The term ‘‘Affiliated Fund-Level Advisory Fee’’ includes any investment advisory fee and any similar fee paid by an Affiliated Fund to CLS under the terms of an investment advisory agreement adopted in accordance with section 15 of the Investment Company Act. (n) The term ‘‘Asset Allocation Service(s)’’ means a service or services to a Client Plan relating to the selection of appropriate asset classes or targetdate ‘‘glidepath’’ and the allocation or reallocation (including rebalancing) of the assets of a Client Plan among the E:\FR\FM\04APN1.SGM 04APN1 14516 Federal Register / Vol. 83, No. 65 / Wednesday, April 4, 2018 / Notices amozie on DSK30RV082PROD with NOTICES selected asset classes. Such services do not include the management of the underlying assets of a Client Plan, the selection of specific funds or manager, and the management of the selected Affiliated Funds. (o) The term ‘‘Best Interest’’ means acting with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims, based on the investment objectives, risk tolerance, financial circumstances, and needs of the plan or IRA, without regard to the financial or other interests of CLS, any affiliate or other party. Effective Date: If granted, this proposed exemption will be effective as of the date the notice granting the final exemption is published in the Federal Register. Notice to Interested Persons Those persons who may be interested in the publication in the Federal Register of the Notice include each Client Plan invested in shares of an Affiliated Fund and each plan for which CLS provides discretionary management services at the time the proposed exemption is published in the Federal Register. It is represented that notification will be provided to each of these interested persons by first class mail, within fifteen (15) calendar days of the date of the publication of the Notice in the Federal Register. Such mailing will contain a copy of the Notice, as it appears in the Federal Register on the date of publication, plus a copy of the Supplemental Statement, as required, pursuant to 29 CFR 2570.43(b)(2), which will advise such interested persons of their right to comment and to request a hearing. The Department must receive all written comments and requests for a hearing no later than forty-five (45) days from the date of the publication of the Notice in the Federal Register. All comments will be made available to the public. Warning: Do not include any personally identifiable information (such as name, address, or other contact information) or confidential business information that you do not want publicly disclosed. All comments may be posted on the internet and can be retrieved by most internet search engines. FOR FURTHER INFORMATION CONTACT: Mr. Joseph Brennan of the Department, telephone (202) 693–8456. (This is not a toll-free number.) VerDate Sep<11>2014 18:12 Apr 03, 2018 Jkt 244001 General Information DEPARTMENT OF LABOR The attention of interested persons is directed to the following: (1) The fact that a transaction is the subject of an exemption under section 408(a) of the Act and/or section 4975(c)(2) of the Code does not relieve a fiduciary or other party in interest or disqualified person from certain other provisions of the Act and/or the Code, including any prohibited transaction provisions to which the exemption does not apply and the general fiduciary responsibility provisions of section 404 of the Act, which, among other things, require a fiduciary to discharge his duties respecting the plan solely in the interest of the participants and beneficiaries of the plan and in a prudent fashion in accordance with section 404(a)(1)(b) of the Act; nor does it affect the requirement of section 401(a) of the Code that the plan must operate for the exclusive benefit of the employees of the employer maintaining the plan and their beneficiaries; (2) Before an exemption may be granted under section 408(a) of the Act and/or section 4975(c)(2) of the Code, the Department must find that the exemption is administratively feasible, in the interests of the plan and of its participants and beneficiaries, and protective of the rights of participants and beneficiaries of the plan; (3) The proposed exemptions, if granted, will be supplemental to, and not in derogation of, any other provisions of the Act and/or the Code, including statutory or administrative exemptions and transitional rules. Furthermore, the fact that a transaction is subject to an administrative or statutory exemption is not dispositive of whether the transaction is in fact a prohibited transaction; and (4) The proposed exemptions, if granted, will be subject to the express condition that the material facts and representations contained in each application are true and complete, and that each application accurately describes all material terms of the transaction which is the subject of the exemption. Office of the Secretary Signed at Washington, DC, this 30th day of March, 2018. Lyssa Hall, Director, Office of Exemption Determinations, Employee Benefits Security Administration, U.S. Department of Labor. [FR Doc. 2018–06849 Filed 4–3–18; 8:45 am] BILLING CODE 4510–29–P PO 00000 Frm 00107 Fmt 4703 Sfmt 4703 Agency Information Collection Activities; Submission for OMB Review; Comment Request; DOL-Only Performance Accountability, Information, and Reporting System Notice of availability; request for comments. ACTION: The Department of Labor (DOL) is submitting the Employment and Training Administration (ETA) sponsored information collection request (ICR) revision titled, ‘‘DOL-Only Performance Accountability, Information, and Reporting System,’’ to the Office of Management and Budget (OMB) for review and approval for use in accordance with the Paperwork Reduction Act (PRA) of 1995. Public comments on the ICR are invited. DATES: The OMB will consider all written comments that agency receives on or before May 4, 2018. ADDRESSES: A copy of this ICR with applicable supporting documentation; including a description of the likely respondents, proposed frequency of response, and estimated total burden may be obtained free of charge from the RegInfo.gov website at http:// www.reginfo.gov/public/do/ PRAViewICR?ref_nbr=201802-1205-003 (this link will only become active on the day following publication of this notice) or by contacting Michel Smyth by telephone at 202–693–4129, TTY 202– 693–8064, (these are not toll-free numbers) or sending an email to DOL_ PRA_PUBLIC@dol.gov. Submit comments about this request by mail to the Office of Information and Regulatory Affairs, Attn: OMB Desk Officer for DOL–ETA, Office of Management and Budget, Room 10235, 725 17th Street NW, Washington, DC 20503; by Fax: 202–395–5806 (this is not a toll-free number); or by email: OIRA_submission@omb.eop.gov. Commenters are encouraged, but not required, to send a courtesy copy of any comments by mail or courier to the U.S. Department of Labor—OASAM, Office of the Chief Information Officer, Attn: Departmental Information Compliance Management Program, Room N1301, 200 Constitution Avenue NW, Washington, DC 20210; or by email: DOL_PRA_PUBLIC@dol.gov. FOR FURTHER INFORMATION CONTACT: Michel Smyth by telephone at 202–693– 4129, TTY 202–693–8064, (these are not toll-free numbers) or sending an email to DOL_PRA_PUBLIC@dol.gov. SUMMARY: E:\FR\FM\04APN1.SGM 04APN1

Agencies

[Federal Register Volume 83, Number 65 (Wednesday, April 4, 2018)]
[Notices]
[Pages 14505-14516]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-06849]


=======================================================================
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DEPARTMENT OF LABOR

Employee Benefits Security Administration


Proposed Exemptions From Certain Prohibited Transaction 
Restrictions

AGENCY: Employee Benefits Security Administration, Labor.

ACTION: Notice of Proposed Exemptions.

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SUMMARY: This document contains notices of pendency before the 
Department of Labor (the Department) of proposed exemptions from 
certain of the prohibited transaction restrictions of the Employee 
Retirement Income Security Act of 1974 (ERISA or the Act) and/or the 
Internal Revenue Code of 1986 (the Code). If granted, these proposed 
exemptions allow designated parties to engage in transactions that 
would otherwise be prohibited provided the conditions stated there in 
are met. This notice includes the following proposed exemptions: D-
11890, Liberty Media 401(k) Savings Plan; D-11931, CLS Investments, LLC 
and Affiliates.

DATES: All interested persons are invited to submit written comments or 
requests for a hearing on the pending exemptions, unless otherwise 
stated in the Notice of Proposed Exemption, within 45 days from the 
date of publication of this Federal Register Notice.

ADDRESSES: Comments and requests for a hearing should state: (1) The 
name, address, and telephone number of the person making the comment or 
request, and (2) the nature of the person's interest in the exemption 
and the manner in which the person would be adversely affected by the 
exemption. A request for a hearing must also state the issues to be 
addressed and include a general description of the evidence to be 
presented at the hearing.
    All written comments and requests for a hearing (at least three 
copies) should be sent via mail to the Employee Benefits Security 
Administration (EBSA), Office of Exemption Determinations, U.S. 
Department of Labor, 200 Constitution Avenue NW, Suite 400, Washington, 
DC 20210. Attention: Application No.__, stated in each Notice of 
Proposed Exemption or via private delivery service or courier to the 
Employee Benefits Security Administration (EBSA), Office of Exemption 
Determinations, U.S. Department of Labor, 122 C St. NW, Suite 400, 
Washington, DC 20001. Attention: Application No.__, stated in each 
Notice of Proposed Exemption. Interested persons are also invited to 
submit comments and/or hearing requests to EBSA via email or FAX. Any 
such comments or requests should be sent either by email to: [email protected], by FAX to (202) 693-8474, or online through http://www.regulations.gov by the end of the scheduled comment period. The 
applications for exemption and the comments received will be available 
for public inspection in the Public Documents Room of the Employee 
Benefits Security Administration, U.S. Department of Labor, Room N-
1515, 200 Constitution Avenue NW, Washington, DC 20210.
    Warning: All comments will be made available to the public. Do not 
include any personally identifiable information (such as Social 
Security number, name, address, or other contact information) or 
confidential business information that you do not want publicly 
disclosed. All

[[Page 14506]]

comments may be posted on the internet and can be retrieved by most 
internet search engines.

SUPPLEMENTARY INFORMATION: 

Notice to Interested Persons

    Notice of the proposed exemptions will be provided to all 
interested persons in the manner agreed upon by the applicant and the 
Department, unless otherwise stated in the Notice of Proposed 
Exemption, within 15 days of the date of publication in the Federal 
Register. Such notice shall include a copy of the notice of proposed 
exemption as published in the Federal Register and shall inform 
interested persons of their right to comment and to request a hearing 
(where appropriate).
    The proposed exemptions were requested in applications filed 
pursuant to section 408(a) of the Act and/or section 4975(c)(2) of the 
Code, and in accordance with procedures set forth in 29 CFR part 2570, 
subpart B (76 FR 66637, 66644, October 27, 2011).\1\ Effective December 
31, 1978, section 102 of Reorganization Plan No. 4 of 1978, 5 U.S.C. 
App. 1 (1996), transferred the authority of the Secretary of the 
Treasury to issue exemptions of the type requested to the Secretary of 
Labor. Therefore, these notices of proposed exemption are issued solely 
by the Department.
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    \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).
---------------------------------------------------------------------------

    The applications contain representations with regard to the 
proposed exemptions which are summarized below. Interested persons are 
referred to the applications on file with the Department for a complete 
statement of the facts and representations.

Liberty Media 401(k) Savings Plan (the Plan) Located in Englewood, CO

[Application No. D-11890]

Proposed Exemption

    The Department is considering granting an exemption under the 
authority of section 408(a) of the Employee Retirement Income Security 
Act of 1974, as amended (ERISA or the Act) and in accordance with the 
procedures set forth in 29 CFR part 2570, subpart B (76 FR 66637, 
66644, October 27, 2011).\2\ If the proposed exemption is granted, the 
restrictions of sections 406(a)(1)(E), 406(a)(2), and 407(a)(1)(A) of 
the Act shall not apply, for the period beginning May 24, 2016, and 
ending June 16, 2016, to:
---------------------------------------------------------------------------

    \2\ For purposes of this proposed exemption, references to the 
provisions of Title I of the Act, unless otherwise specified, should 
be read to refer as well to the corresponding provisions of section 
4975 of the Code.
---------------------------------------------------------------------------

    (1) The acquisition by the Plan of certain stock subscription 
rights (the Rights) to purchase shares of Series C Liberty Braves 
common stock (the Series C Liberty Braves Stock), in connection with a 
rights offering (the Rights Offering) held by Liberty Media Corporation 
(LMC), the Plan sponsor and a party in interest with respect to the 
Plan; and
    (2) The holding of the Rights by the Plan during the subscription 
period of the Rights Offering, provided that certain conditions are 
satisfied.

Summary of Facts and Representations \3\
---------------------------------------------------------------------------

    \3\ The Summary of Facts and Representations is based on LMC's 
representations and does not reflect the views of the Department, 
unless indicated otherwise.
---------------------------------------------------------------------------

Background

    1. LMC (or the Applicant) is a Delaware corporation with its 
principal place of business in Englewood, Colorado. LMC is a publicly-
traded corporation primarily engaged in media, communications and 
entertainment operating businesses in North America, through several 
subsidiaries that include: Sirius XM Holdings Inc. (Sirius XM), Braves 
Holdings, LLC (Braves Holdings), and Live Nation Entertainment, Inc. 
(Live Nation), an equity affiliate.
    2. LMC sponsors and maintains the Plan, a defined contribution plan 
which enables participating employees of LMC and its qualifying 
subsidiaries to direct the investment of their Plan accounts across 22 
investment alternatives, including certain employer securities issued 
by LMC, as well as employer securities issued by other participating 
employers in the Plan.

Plan Assets are Held in the Liberty Media 401(k) Savings Plan Trust 
(the Trust).

    LMC adopted and maintains the Plan and Trust for the exclusive 
benefit of employee-participants and their beneficiaries. As designed, 
the Plan is intended to qualify under sections 401(a) and 401(k) of the 
Code, and the Trust is intended to be exempt under section 501(a) of 
the Code. As of December 31, 2016, the Plan had total assets of 
$100,814,000 and 784 participants.
    Fidelity Management Trust Company (Fidelity) is the trustee of the 
Plan, and acts as the custodian of the Plan assets, holding legal title 
to the Plan's assets, and executing investment directions in accordance 
with the written instructions of participants. The Liberty Media 401(k) 
Savings Plan Administrative Committee (the Committee) serves as the 
Plan Administrator and is the fiduciary responsible for Plan matters. 
The Committee, which was appointed by LMC's Board of Directors, has 
investment discretion over the Plan's investments, except to the extent 
participants direct the investment of their Plan accounts.
    Solely with respect to the Rights described below, the Committee 
acted as trustee of a temporary separate trust (the Rights Trust) 
established to hold the Rights, and Fidelity acted as custodian of 
those Rights. As of May 16, 2016, The Plan held a total of 
$1,550,227.31 in Series C Liberty Braves Common Stock, which 
represented 0.595% of total Plan assets.

The Tracking Stock Proposal

    3. On April 11, 2016, LMC shareholders met and approved a tracking 
stock proposal (the Tracking Stock Proposal), which resulted in the 
amendment and restatement of LMC's certificate of incorporation to 
exchange existing shares of LMC's common stock (LMC Stock) for newly-
issued shares of three new tracking stocks (collectively, the Tracking 
Stocks), to be designated as: ``Liberty SiriusXM common stock'' 
(Liberty SiriusXM Stock); ``Liberty Braves common stock'' (Liberty 
Braves Stock); and ``Liberty Media common stock'' (Liberty Media 
Stock). The Tracking Stock structure was designed to provide LMC with 
greater operational and financial flexibility in the execution of its 
business strategies by permitting LMC to bring greater flexibility to 
its business and assets, thereby allowing the stock related to each 
group to move in line with the fundamentals of the businesses and 
assets attributed to that group. Therefore, the Tracking Stock Proposal 
allowed the businesses, assets, and liabilities of LMC to be divided 
among a new SiriusXM Group, a new Braves Group, and a new Media Group.
    The Applicant represents that Plan participants were sent a proxy 
statement (identical to the proxy statement sent to all shareholders of 
LMC stock) prior to that meeting, so that they could direct how the 
shares allocated to their accounts would be voted at that meeting.

Description of the Tracking Stocks

    4. Liberty SiriusXM Stock is a newly-authorized and issued series 
of LMC Stock intended to track and reflect the separate economic 
performance of the businesses, assets, and liabilities to be

[[Page 14507]]

attributed to the SiriusXM Group, which would initially include: (a) 
LMC's approximate 60% interest in Sirius XM Holdings, Inc.; (b) a $250 
million margin loan obligation incurred by a wholly-owned special 
purpose subsidiary of LMC, which is secured primarily by shares of 
Sirius XM Stock; (c) certain deferred tax liabilities; and (d) $50 
million in cash. LMC is authorized to issue up to 4.075 billion shares 
of Liberty SiriusXM Stock, of which 2 billion are designated as Series 
A Liberty SiriusXM Stock, 75 million shares are designated as Series B 
Liberty SiriusXM Stock, and 2 billion shares are designated as Series C 
Liberty SiriusXM Stock.
    5. Liberty Braves Stock is a newly-authorized and issued series of 
LMC Stock intended to track and reflect the separate economic 
performance of the businesses, assets, and liabilities to be attributed 
to the Braves Group, which would initially include: (a) LMC's wholly-
owned subsidiary, Braves Holdings, LLC, which indirectly owns the 
Atlanta Braves Major League Baseball Club; (b) certain assets and 
liabilities associated with the Atlanta Braves' stadium and mixed use 
development project; (c) all liabilities arising under a note from 
Braves Holdings, LLC (Braves Holdings) to LMC, with total capacity of 
up to $165 million of borrowings by Braves Holdings (the Intergroup 
Note); and (d) $61 million in cash. LMC is authorized to issue up to 
407.5 million shares of Liberty Braves Stock, of which 200 million 
shares are designated as Series A Liberty Braves Stock, 7.5 million 
shares are designated as Series B Liberty Braves Stock, and 200 million 
shares are designated as Series C Liberty Braves Stock.
    6. Liberty Media Stock is a newly-authorized and issued series of 
LMC Stock intended to track and reflect the separate economic 
performance of the businesses, assets, and liabilities to be attributed 
to the Media Group, which would consist of the remainder of LMC's 
businesses, assets and liabilities, including: (a) LMC's approximate 
27% interest in Live Nation; (b) LMC's other public company minority 
investments; (c) all receivables under the Intergroup Note; (d) an 
approximately 20% inter-group interest in the Braves Group; (e) LMC's 
interest in any recovery received in connection with a 2013 judgment 
against Vivendi Universal S.A.; (f) $50 million in cash; (g) LMC's 
interest in certain 1.375% cash convertible senior notes, in the 
principal amount of $1 billion that are due in 2023, as well as bond 
and hedge warrant transactions that were executed concurrently with the 
issuance of such notes; and (h) 1,018,750,000 shares of LMC Stock.
    7. Following the April 11, 2016 shareholder approval of the 
Tracking Stock Proposal, each holder of Series A, B, and C LMC Stock 
participated in a reclassification and exchange (the Reclassification 
and Exchange), under which each holder received the following upon the 
cancellation of their existing shares of LMC Stock: (a) One newly-
issued share of the corresponding series of Liberty SiriusXM Stock; (b) 
0.1 of a newly-issued share of the corresponding series of Liberty 
Braves Stock; and (c) 0.25 of a newly-issued share of the corresponding 
shares of LMC Stock. LMC shareholders also received cash instead of 
receiving fractional shares for their interests in LMC Stock.

The Rights Offering

    8. Pursuant to the Reclassification and Exchange described above, 
LMC also conducted a Rights Offering in order to raise capital to repay 
the Intergroup Note referenced above, and for general corporate 
purposes. Under the Rights Offering, each holder of Series A, B, or C 
Liberty Braves Stock, held as of May 16, 2016 (the Record Date), 
received 0.47 of a subscription right, entitling the holders to 
purchase one share of Series C Liberty Braves Stock at a subscription 
price of $12.80 per share. The subscription price represented a 20% 
discount to the 20-trading day volume weighted average trading price of 
Series C Liberty Braves Stock, beginning on April 28, 2016, and ending 
on May 11, 2016. The Series C Liberty Braves Stock is traded on the 
NASDAQ Global Select Market (the NASDAQ), under the symbol ``BATRK.''
    9. The Rights Offering commenced on May 18, 2016 and remained open 
until June 16, 2016. The Plan received the Rights on or about May 24, 
2016. The Applicant states that the Plan's delayed receipt of the 
Rights was attributable to certain administrative functions performed 
by Fidelity; Computershare Trust Company, N.A. (ComputerShare), the 
subscription agent with respect to the Rights Offering, and Depository 
Trust Company.
    10. With respect to the Rights allocated to their Plan accounts 
(including Rights attributable to 40l(k) contributions and employer 
matching contributions), Plan participants could either elect to 
exercise their Rights or sell the Rights on the open market. To assist 
with this decision, the Plan prepared and provided to participants a 
detailed explanation of their alternatives with respect to the Rights 
Offering, including: (a) Questions and answers that explained the 
Rights issuance and the participants' option to exercise or sell their 
Rights; (b) instructions, which explained the steps for the 
participants to take to exercise or sell their Rights; and (c) a copy 
of LMC's prospectus filed with the Securities and Exchange Commission.
    In order to sell the Rights, a Plan participant was required to 
contact a Fidelity representative and specify the whole percentage of 
the Rights such participant desired to sell between May 26, 2016 and 
June 7, 2016. Those participants who initially elected to exercise only 
a portion of their Rights could later elect to exercise additional 
Rights to the extent sufficient time existed prior to June 7, 2016. The 
Applicant represents that the June 7th participant notification 
deadline was necessary to ensure that Fidelity could process and 
execute all participant directives with respect to the Rights by June 
16, 2016.
    The Plan Administrative Committee determined that the 
oversubscription option, which entitled holders of LMC stock to 
subscribe to purchase shares in excess of the shares reflected by the 
Rights, would not be made available to Plan participants. The Applicant 
represents that, to exercise their oversubscription rights, 
participants had to transmit cash from their Plan accounts to LMC to be 
held, uninvested and not through a trust, until such time as the shares 
available for the oversubscription elections could be determined. The 
Applicant represents that, under this scenario, the Plan sponsor held 
Plan assets outside of the Plan's trust: A scenario which involved a 
different set of prohibited transactions and fiduciary issues that the 
Plan Administrative Committee determined were not feasible to address.
    11. Due to securities law restrictions, certain participants deemed 
to be ``reporting persons'' under Rule 16(b) \4\ of the Securities 
Exchange Act of 1934 (Rule 16(b)) with respect to LMC did not have the 
right to instruct Fidelity to either sell or exercise the Rights 
credited to their Plan Accounts. As provided by the Plan, and as 
directed by the Committee, Fidelity sold the Rights credited to these 
16(b) participant accounts as soon as administratively feasible, after 
the receipt and allocation of the Rights to the affected Plan 
participant accounts.
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    \4\ Rule 16(b) requires an officer, director, or any shareholder 
holding more than 10% of the outstanding shares of a publicly-traded 
company who makes a profit on a transaction with respect to the 
company's stock during a given six month period, to pay the 
difference back to the company.

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[[Page 14508]]

Temporary Investment Funds

    12. The Plan established two temporary investment funds to hold the 
Rights. The first fund, the ``Braves Rights Holding Fund,'' was a 
separate fund established under the Rights Trust to hold the Rights 
upon issuance. Rights were credited to Plan participants accounts based 
on their respective holdings of Liberty Braves Stock as of the Record 
Date. The second fund, the ``Braves Rights Holding Account Fund,'' 
reflected the approximate value of the Series C Liberty Braves Stock 
due from the subscription agent following the exercise of Rights on or 
before June 16, 2016, as directed by Plan participants.
    13. With the exception of those reporting persons under Rule 16(b), 
as described above, each participant could elect to exercise any 
percentage of the Rights allocated to their account. Under the Rights 
Offering, each participant could elect to exercise the Rights by 
speaking to a Fidelity representative at any time prior to 4:00 p.m. 
Eastern Time, on June 7, 2016 (the Election Close-Out Date). 
Participants also had the opportunity to revoke or change instructions 
to exercise prior to the Election Close-Out Date by: (a) Electing a new 
percentage of Rights to exercise, (b) placing an order to sell the 
Rights (as described below), or (c) a combination of both.
    With respect to each participant, the dollar amount required to 
exercise the Rights was exchanged from other investments in such 
participant's account into the Braves Rights Holding Account Fund. The 
dollar amount required to exercise the Rights equaled the percentage of 
Rights exercised (as elected by the participant) multiplied by the 
number of Rights credited to the participant's account and multiplied 
by the exercise price for the Rights Offering.
    14. On or before June 16, 2016, the Rights to be exercised and 
necessary funds were submitted by Fidelity to ComputerShare, which is 
not affiliated with either LMC or Fidelity. Each Plan participant's 
balance in the Rights Holding Fund was reduced by the number of Rights 
exercised on such participant's behalf. Fidelity attempted to sell all 
remaining Rights on the open market between June 10, 2016 and June 16, 
2016, at which time the Rights expired. Upon receipt of the new shares, 
the Braves Rights Holding Account Fund was closed and the newly-
received shares were allocated to participants' Plan accounts.
    The Applicant represents that the Election Close-Out Date was 
established to permit sufficient time for Fidelity to liquidate the 
participants' other assets in an orderly manner so that the necessary 
cash would be available to exercise the Rights before the June 16, 2016 
Rights Offering expiration date. Unexercised Rights after June 7, 2016 
were offered for sale on the open market by Fidelity, from on or about 
June 10, 2016 through June 16, 2016. Rights that remained unsold at the 
close of the market on June 16, 2016 expired.
    15. In connection with the Rights Offering, the Plan received a 
total of 15,821 Rights. Of the Rights received, 12,334 were sold by 
Fidelity,\5\ 3,486 were exercised by participants,\6\ and 1 Right 
expired. The Rights were sold at an average price of $1.90 per Right, 
net of fees. The Applicant represents that Fidelity sold 1,921 Rights 
(rounded to the nearest whole Right) at the direction of participants, 
and 10,413 Rights (rounded to the nearest whole Right) after June 7, 
2016.
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    \5\ The Applicant represents that the brokerage services and 
fees received by Fidelity or by Computershare in connection with the 
sale of the Rights held by Plan participants, are exempt under 
section 408(b)(2) of the Act. The Department, herein, is not 
providing any relief for the receipt of any commissions, fees, or 
expenses in connection with the sale of the Rights in blind 
transactions to unrelated third parties on the NASDAQ, beyond that 
provided under section 408(b)(2) of the Act. In this regard, the 
Department is not opining herein on whether the conditions set forth 
in section 408(b)(2) of the Act and the Department's regulations, 
pursuant to 29 CFR 2550.408(b)(2) have been satisfied.
    \6\ The Applicant represents that the Plan accounts relied on 
the relief provided by the statutory exemption, pursuant to section 
408(e) of the Act for the exercise of the Rights. The Department is 
not providing any relief herein from such prohibited transaction 
provisions with respect to the exercise of the Rights. In addition, 
the Department is offering no view on whether the requirements of 
the statutory exemption provided in section 408(e) of the Act and 
the Department's regulations, pursuant to 29 CFR 2550.408(e) were 
satisfied or whether the statutory exemption is applicable to the 
exercise of the Rights.
---------------------------------------------------------------------------

Analysis

    16. LMC represents that the acquisition and holding of the Rights 
by the Plan constitute prohibited transactions in violation of sections 
406(a)(1)(E), 406(a)(2), and 407(a)(1)(A) of the Act. Section 
406(a)(1)(E) of the Act provides that a fiduciary with respect to a 
plan shall not cause the plan to engage in a transaction if he or she 
knows or should know that such transaction constitutes the acquisition, 
on behalf of the plan, of any employer security in violation of section 
407(a) of the Act. Section 406(a)(2) of the Act provides that a 
fiduciary of a plan shall not permit the plan to hold any employer 
security if he or she knows or should know that holding such security 
violates section 407(a) of the Act. Under section 407(a)(1)(A) of the 
Act, a plan may not acquire or hold any ``employer security'' which is 
not a ``qualifying employer security.'' Under section 407(d)(1) of the 
Act, ``employer securities'' are defined, in relevant part, as 
securities issued by an employer of employees covered by the plan, or 
by an affiliate of such employer. Section 407(d)(5) of the Act 
provides, in relevant part, that ``qualifying employer securities'' are 
stock or marketable obligations.
    The Applicant states that the Plan was a holder of Series C Liberty 
Braves Stock on the date of the Rights Offering. As such, the grant of 
the Rights to the Plan was a grant of ``employer securities'' under 
section 407(d)(l) of the Act. Because the Rights do not constitute 
either stock or marketable obligations, the Rights are not ``qualifying 
employer securities.'' Therefore, the Applicant requests a retroactive 
exemption from sections 406(a)(1)(E), 406(a)(2), and 407(a)(1)(A) of 
the Act with respect to the acquisition and holding of the Rights by 
the Plan in connection with the Rights Offering. If granted, the 
exemption will be effective for the period May 24, 2016, through June 
16, 2016.

Statutory Findings

    17. The Applicant represents that the proposed exemption is 
administratively feasible because it involved the acquisition and 
short-term holding of the Rights by the individual accounts of Plan 
participants. The Applicant also represents that all shareholders, 
including the Plan participants, were treated in a like manner with 
respect to the acquisition and holding of the Rights, with two 
exceptions: (a) The oversubscription option available under the Rights 
Offering was not available to participants in the Plan; and (b) certain 
participants deemed to be reporting persons under Rule 16(b) with 
respect to LMC did not have the right to instruct Fidelity to sell or 
exercise the Rights credited to their Plan Accounts.
    The Applicant represents that Plan participants would suffer a 
hardship were the exemption to be denied because the issuance of the 
Rights to the Plan was not within the control of the Plan or the Plan's 
fiduciaries, as LMC issued subscription rights to all holders of 
Liberty Braves Stock, including the Plan. If the exemption were denied, 
the Applicant states that the transactions would have to be undone and 
those participants who elected to use their Plan accounts to purchase 
shares of Series C Liberty Braves Stock at a discount would be required 
to return those shares for the price they paid.

[[Page 14509]]

This, according to the Applicant, would result in those participants 
losing earnings attributable to those shares.
    18. The Applicant represents that the proposed exemption is also in 
the interests of the Plan and its participants and beneficiaries 
because: (a) Plan participants were notified of the Rights Offering and 
the procedure for instructing Fidelity regarding their desire with 
respect to the exercise or sale of the Rights; (b) all shareholders of 
Liberty Braves Stock, including the Plan, were treated in a like 
manner, with two exceptions, which are noted above in paragraph 17; (c) 
the Plan was treated in the same manner as other shareholders with 
respect to the granting and the exercise or sale of the Rights; and (d) 
the pass-through of the decision to exercise or sell the Rights, from 
Fidelity to the Plan participants allowed each participant to decide 
whether to liquidate his or her account to purchase additional shares 
of employer securities at a discount.
    19. Finally, the Applicant represents that the proposed exemption 
is protective of the rights of participants because the Rights were 
sold by Fidelity, at the direction of the affected Plan participants, 
on the NASDAQ for their fair market value, in arms'-length transactions 
between unrelated parties. Furthermore, the Applicant represents that 
the Plan did not pay any fees or commissions with respect to the 
acquisition or holding of the Rights, and it did not pay any 
commissions to any affiliate of LMC in connection therewith.

Summary

    20. Given the conditions described below, the Department has 
tentatively determined that the relief sought by the Applicant 
satisfies the statutory requirements for an exemption under section 
408(a) of the Act.

Proposed Exemption Operative Language

    The Department is considering granting an exemption under the 
authority of section 408(a) of the Act (or ERISA) and in accordance 
with the procedures set forth in 29 CFR part 2570, subpart B (76 FR 
46637, 66644, October 27, 2011). If the exemption is granted, the 
restrictions of sections 406(a)(1)(E), 406(a)(2), and 407(a)(1)(A) of 
the Act shall not apply, for the period May 24, 2016, through June 16, 
2016, to: (1) The acquisition by the Plan of the Rights in connection 
with the Rights Offering; and (2) the holding of the Rights by the Plan 
during the subscription period of the Rights Offering, provided that 
the following conditions are satisfied:
    (a) The Plan's acquisition of the Rights resulted solely from an 
independent corporate act of LMC;
    (b) All holders of Series A, Series B, or Series C Liberty Braves 
common stock (Series A, B, or C Liberty Braves Stock), including the 
Plan, were issued the same proportionate number of Rights based on the 
number of shares of the Series A, B, or C Liberty Braves Stock held by 
each such shareholder;
    (c) For purposes of the Rights Offering, all holders of Series A, 
B, or C Liberty Braves Stock, including the Plan, were treated in a 
like manner, with two exceptions: (1) The oversubscription option 
available under the Rights Offering was not available to participants 
in the Plan; and (2) certain participants deemed to be reporting 
persons under Rule 16(b) with respect to LMC did not have the right to 
instruct Fidelity to either sell or exercise the Rights credited to 
their Plan Accounts;
    (d) The acquisition of the Rights by the Plan was made in a manner 
that was consistent with provisions of the Plan for the individually-
directed investment of participant accounts;
    (e) The Committee directed the Plan trustee to sell the Rights on 
the NASDAQ Global Select Market (the NASDAQ), in accordance with Plan 
provisions that precluded the Plan from acquiring additional shares of 
Series C Liberty Braves Stock;
    (f) The Committee did not exercise any discretion with respect to 
the acquisition and holding of the Rights; and
    (g) The Plan did not pay any fees or commissions in connection with 
the acquisition or holding of the Rights, and it did not pay any 
commissions to any affiliates of LMC in connection with the sale of the 
Rights.
    Effective Date: This proposed exemption, if granted, will be 
effective from May 24, 2016, the date that the Plan received the 
Rights, through June 16, 2016, the last date the Rights were sold on 
the NASDAQ.

Notice To Interested Persons

    Notice of the proposed exemption will be given to all Interested 
Persons within 7 days of the publication of the notice of proposed 
exemption in the Federal Register, by first class U.S. mail to the last 
known address of all such individuals. Such notice will contain a copy 
of the notice of proposed exemption, as published in the Federal 
Register, and a supplemental statement, as required pursuant to 29 CFR 
2570.43(a)(2). The supplemental statement will inform interested 
persons of their right to comment on the pending exemption. Written 
comments are due within 37 days of the publication of the notice of 
proposed exemption in the Federal Register. All comments will be made 
available to the public.
    Warning: If you submit a comment, EBSA recommends that you include 
your name and other contact information in the body of your comment, 
but DO NOT submit information that you consider to be confidential, or 
otherwise protected (such as Social Security number or an unlisted 
phone number) or confidential business information that you do not want 
publicly disclosed. All comments may be posted on the internet and can 
be retrieved by most internet search engines.

FOR FURTHER INFORMATION CONTACT: Joseph Brennan of the Department, 
telephone (202) 693-8456. (This is not a toll-free number.)

CLS Investments, LLC and Affiliates (CLS or the Applicant) Located in 
Omaha, NE

[Application No. D-11931]

Proposed Exemption

    The Department is considering granting an exemption under the 
authority of 408(a) of the Act and section 4975(c)(2) of the Code, in 
accordance with the procedures set forth in 29 CFR part 2570, subpart B 
(76 FR 46637, 66644, October 27, 2011). If the exemption is granted, 
the restrictions of sections 406(a)(1)(D) and 406(b) of the Act, and 
the sanctions resulting from the application of section 4975 of the 
Code, by reason of sections 4975(c)(1)(D) through (F) of the Code,\7\ 
shall not apply to the receipt of a fee by CLS from a registered, open-
end investment company for which CLS serves as an investment advisor 
(an Affiliated Fund), in connection with the investment by an employee 
benefit plan in shares of such Affiliated Fund, where CLS serves as an 
investment advisor or investment manager with respect to such plan 
(Client Plan), provided the conditions of this exemption are met.
---------------------------------------------------------------------------

    \7\ For purposes of this proposed exemption reference to 
specific provisions of Title I of the Act, unless otherwise 
specified, should be read to refer as well to the corresponding 
provisions of the Code.
---------------------------------------------------------------------------

Summary of Facts and Representations \8\
---------------------------------------------------------------------------

    \8\ The Summary of Facts and Representations is based on the 
Applicant's representations, unless indicated otherwise.
---------------------------------------------------------------------------

    1. CLS is an investment adviser registered with the U.S. Securities 
and

[[Page 14510]]

Exchange Commission. CLS offers a variety of financial services and 
operates primarily as an Exchange Traded Funds strategist working with 
more than 2,500 financial advisors and 1,300 qualified plan sponsors to 
manage more than 35,000 investor portfolios. CLS also acts as a sub-
advisor and investment research provider to many broker-dealer self-
clearing platforms, brokerage custodians, Registered Investment 
Advisors (RIAs), and overlay portfolio management enterprises.
    2. CLS acts an investment adviser to the Affiliated Funds. The 
Affiliated Funds are diversified open-end investment companies 
registered with the U.S. Securities and Exchange Commission under the 
Investment Company Act, as amended. CLS may also provide certain 
``secondary services'' to the Affiliated Funds, including custodial, 
accounting, administrative services and brokerage services 
(hereinafter, Secondary Services).
    3. The Applicant seeks an exemption that would permit the receipt 
of a fee by CLS from an Affiliated Fund, in connection with the 
investment by a Client Plan in shares of such Affiliated Fund, where 
CLS serves as an investment advisor or investment manager with respect 
to such Client Plan. Absent an exemption, such investment may violate 
several provisions of the Act. In this regard, CLS, as investment 
manager or investment adviser to the Client Plans, is a fiduciary with 
respect to the Client Plans, pursuant to section 3(21)(A)(i) and (ii) 
of the Act. Section 3(21)(A) of the Act provides, in relevant part, 
that a person is a fiduciary with respect to a plan to the extent that 
the person: (i) Exercises any discretionary authority or control 
respecting management of the Plan or any authority or control 
respecting management or disposition of its assets, or (ii) renders 
investment advice for a fee or other compensation, direct or indirect, 
with respect to any moneys or other property of a plan or has any 
authority or responsibility to do so.
    4. Section 406(a)(l)(D) of the Act prohibits a fiduciary with 
respect to a plan from causing such plan to engage in a transaction, if 
such fiduciary knows or should know, that such transaction constitutes 
a transfer to, or use by or for the benefit of, a party in interest, of 
any assets of such plan. Section 406(b) of the Act provides that a 
fiduciary with respect to a plan may not: (1) Deal with the assets of a 
plan in his own interest or for his own account; (2) act, in his 
individual or in any other capacity, in any transaction involving a 
plan on behalf of a party (or represent a party) whose interests are 
adverse to the interests of such plan or the interests of its 
participants or beneficiaries; or (3) receive any consideration for his 
own personal account from any party dealing with a plan in connection 
with a transaction involving the assets of such plan.
    5. An arrangement whereby CLS, as investment adviser or manager to 
a Client Plan, invests plan assets in shares of a mutual fund that is 
advised by CLS and receives an advisory or Secondary Services fee from 
the Affiliated Fund in connection therewith, may be viewed as an 
impermissible use of Client Plan assets, in violation of section 
406(a)(1)(D) of the Act. In connection with such investment, the 
increased compensation of CLS could be viewed as a violation of section 
406(b)(1) and (b)(2) of the Act. Further, the receipt by CLS of 
compensation from an Affiliated Fund could also be viewed as a 
violation of section 406(b)(3) of the Act.
    6. PTE 77-4 provides an exemption from section 406 of the Act and 
section 4975 of the Code for the purchase and for the sale by a plan of 
shares of a registered, open-end investment company, where the 
investment adviser of such fund: (a) Is a plan fiduciary or affiliated 
with a plan fiduciary; and (b) is not an employer of employees covered 
by the plan. Prior to implementing any fee increase, an investment 
adviser relying on PTE 77-4 must provide prior disclosures to each 
affected second fiduciary, and must obtain written authorization from 
each such second fiduciary. PTE 77-4 prohibits the payment by a plan of 
commissions, 12b-1 fees, redemption fees, and similar fees, as well as 
the payment of double investment advisory fees and similar fees with 
respect to plan assets invested in such shares for the entire period of 
such investment.
    7. CLS states that obtaining advance written consent from each 
Second Fiduciary (which refers, in general terms, to a Client Plan 
fiduciary who is independent of and unrelated to CLS) prior to any Fee 
Increase can be extremely difficult due to both the large number of 
Client Plans involved and the difficulty in obtaining responses from 
individual IRA owners. According to CLS, absent the requested exemptive 
relief, CLS's failure to receive affirmative written approval on an 
individual Client Plan basis could require CLS to transfer Client Plan 
investments out of one or more Funds, where such Client Plans may not 
desire such an outcome.
    8. CLS seeks relief that is essentially the same as that afforded 
by PTE 77-4, with the exception of the use of a ``negative consent'' 
procedure, which would constitute a Client Plan's approval of a Fee 
Increase.\9\ For purposes of the exemption, a Fee Increase is: (a) Any 
change by CLS in a rate of fee; (b) any increase in any fee that 
results from the addition of a service for which a fee is charged; (c) 
any increase in fee that results from a decrease in the number of 
services; (d) any increase in any fee that results from a decrease in 
the kind of services provided by CLS for such fee over an existing rate 
of fee for each such service previously authorized by a Second 
Fiduciary; (e) any change in fee that results from CLS changing from 
one fee method to another; and (f) any change in the amount of 
operating expenses of a Fund reimbursed or otherwise waived by CLS or 
its affiliates to the extent that such change results in an increase in 
the total operating expenses payable by the Fund.
---------------------------------------------------------------------------

    \9\ The Applicant represents that all of the CLS-affiliated 
entities to which the exemption would apply are currently part of 
the same controlled group. CLS represents that, if and to the extent 
that CLS invests Client Plan assets in Affiliated Funds, such CLS-
affiliated entities can rely on the relief provided pursuant to PTE 
77-4 (42 FR 18732 (April 8, 1977)), except as described below.
---------------------------------------------------------------------------

    9. The exemption contains several conditions that are consistent 
with the conditions found in PTE 77-4. For example, the exemption 
requires, among other things, that each Client Plan which is invested 
in shares of an Affiliated Fund, either: Does not pay to CLS, for the 
entire period of such investment, any investment management fee, or any 
investment advisory fee, or any similar fee at the plan-level, with 
respect to any of the assets of such Client Plan which are invested in 
shares of such Affiliated Fund; or pays to CLS a Plan-Level Management 
Fee, based on total assets of such Client Plan under management by CLS 
at the plan-level, from which a credit has been subtracted from such 
Plan-Level Management Fee. Further, no sales commission or no other 
similar fee may be paid in connection with any purchase and in 
connection with any sale by a Client Plan in shares of an Affiliated 
Fund. The payment of a redemption fee is permitted only if: Such 
redemption fee is paid only to an Affiliated Fund; and the existence of 
such redemption fee is disclosed in the summary prospectus for such 
Affiliated Fund in effect both at the time of any purchase of shares in 
such Affiliated Fund and at the time of any sale of such shares.
    10. Additionally, in general terms, the combined total of all fees 
received by

[[Page 14511]]

CLS may not be in excess of reasonable compensation within the meaning 
of section 408(b)(2) of the Act. CLS may not receive any fees payable 
pursuant to Rule 12b-1 under the Investment Company Act in connection 
with transactions covered by the exemption. Further, no Client Plan may 
be an employee benefit plan sponsored or maintained by CLS.
    11. This exemption contains extensive notification requirements. 
The Second Fiduciary must receive, in writing, in advance of any 
investment by such Client Plan in shares of such Affiliated Fund, a 
full and detailed disclosure of information concerning such Affiliated 
Fund, including: A current summary prospectus issued by each such 
Affiliated Fund; a statement describing the fees; and the reasons why 
CLS may consider investment in shares of such Affiliated Fund by such 
Client Plan to be appropriate for such Client Plan.
    12. The Second Fiduciary must authorize, in writing, among other 
things: The investment of the assets of such Client Plan in shares of 
an Affiliated Fund; the Affiliated Fund-Level Advisory Fee received by 
CLS for investment advisory services and similar services provided by 
CLS to such Affiliated Fund; and the fee received by CLS for Secondary 
Services provided by CLS to such Affiliated Fund. Any such 
authorization made by a Second Fiduciary is terminable at will by such 
Second Fiduciary, without penalty to such Client Plan (including any 
fee or charge related to such penalty). The process for termination 
includes the Second Fiduciary's receipt, at least annually, of a form 
(the Termination Form), which expressly provides for an election to 
terminate an authorization. Notwithstanding this, the instructions for 
the Termination Form must also inform the Second Fiduciary that, among 
other things, as of the date that is at least thirty (30) days from the 
date that CLS sent the Termination Form to such Second Fiduciary, the 
failure by such Second Fiduciary to return such Termination Form or the 
failure by such Second Fiduciary to provide some other written 
notification of the Client Plan's intent to terminate an authorization 
that is subject to a negative consent arrangement covered by this 
exemption, will be deemed to be an approval by such Second Fiduciary.
    13. The exemption also requires that CLS, at least thirty (30) days 
in advance of the implementation of a fee increase, provide to the 
Second Fiduciary of each Client Plan, a notice of change in fees (the 
Notice of Change in Fees) which explains the nature and the amount of 
such Fee Increase. Such Notice of Change in Fees must be accompanied by 
a Termination Form and by instructions on the use of such Termination 
Form. The notice must explain that, as of the date that is at least 
thirty (30) days from the date that CLS sends the Notice of Change of 
Fees and the Termination Form to such Second Fiduciary, the failure by 
such Second to return such Termination Form or the failure by such 
Second Fiduciary to provide some other written notification of the 
Client Plan's intent to terminate the authorization, will be deemed to 
be an approval by such Second Fiduciary of such Fee Increase.
    14. The exemption contains other safeguards designed to protect 
affected Client Plans. In this regard, in general terms: CLS must 
provide reasonably available information regarding the covered 
transactions that the Second Fiduciary of such Client Plan requests; 
all dealings between a Client Plan and an Affiliated Fund are on a 
basis no less favorable to such Client Plan, than dealings between such 
Affiliated Fund and other similar shareholders; in the event a Client 
Plan invests in shares of an Affiliated Fund, if such Affiliated Fund 
places brokerage transactions with CLS, CLS must provide to the Second 
Fiduciary of each such Client Plan, so invested, an annual statement 
specifying relevant commission information; the purchase price paid and 
the sales price received by a Client Plan for shares in an Affiliated 
Fund purchased or sold directly must be the net asset value per share, 
and must be the same purchase price that would have been paid, and the 
same sales price that would have been received, for such shares by any 
other shareholder of the same class of shares in such Affiliated Fund 
at that time; and CLS, including any officer and any director of CLS, 
may not purchase any shares of an Affiliated Fund from, and may not 
sell any shares of an Affiliated Fund to, any Client Plan which invests 
directly in such Affiliated Fund. The exemption also contains 
recordkeeping requirements.
    15. Importantly, the conditions of PTE 77-4, as amended and/or 
restated, must be met. Further, if CLS is a fiduciary within the 
meaning of section 3(21)(A)(i) or (ii) of the Act, or section 
4975(e)(3)(A) or (B) of the Code, with respect to the assets of a 
Client Plan involved in the transaction, CLS must comply with the 
following conditions with respect to the transaction: (1) CLS must act 
in the Best Interest (as described below) of the Client Plan; (2) all 
compensation received by CLS in connection with the transaction in 
relation to the total services the fiduciary provides to the Client 
Plan must not exceed reasonable compensation within the meaning of 
section 408(b)(2) of the Act; and (3) CLS's statements about 
recommended investments, fees, material conflicts of interest,\10\ and 
any other matters relevant to a Client Plan's investment decisions must 
not be materially misleading at the time they are made. In the last 
regard, CLS acts in the ``Best Interest'' of the Client Plan when CLS 
acts with the care, skill, prudence, and diligence under the 
circumstances then prevailing that a prudent person would exercise 
based on the investment objectives, risk tolerance, financial 
circumstances, and needs of the plan or IRA, without regard to the 
financial or other interests of the fiduciary, any affiliate or other 
party.
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    \10\ A ``material conflict of interest'' exists when a fiduciary 
has a financial interest that could affect the exercise of its best 
judgment as a fiduciary in rendering advice to a Client Plan. For 
this purpose, the failure of CLS to disclose a material conflict of 
interest relevant to the services it is providing to a Client Plan, 
or other actions it is taking in relation to a Client Plan's 
investment decisions, is deemed to be a misleading statement.
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    16. CLS represents that it will ``actively'' satisfy the various 
disclosure requirements of this proposed exemption by transmitting 
emails, rather than relying on ``passive'' postings on a website. CLS 
represents that Client Plans that do not authorize electronic delivery 
will receive, in advance, hard copies of the required documents, and 
that hard copies of required documents will be available to Client 
Plans upon request. CLS represents that the disclosure methods under 
this exemption will be consistent with the Department's regulations at 
29 CFR 2520.104b-1.
    17. The Applicant represents that the proposed exemption is in the 
interest of Client Plans because it will allow CLS to manage Client 
Plan assets more efficiently. The Applicant states that the Affiliated 
Funds provide certain advantages to Client Plans, including access to 
professional management services and lower costs, including no sales 
commission costs in connection with the purchase or sale of shares in 
any of the Funds and no 12b-1 fees. The Applicant also represents that 
the Affiliated Funds provide a means for Client Plans with limited 
assets to achieve diversification of investment in a manner that may 
not be attainable through direct investment by a plan participant. For 
these reasons, CLS maintains that the availability of the Funds as 
investments enables CLS, as investment manager, to better meet the 
investment goals and strategies of a Client Plan.

[[Page 14512]]

    18. The Applicant represents that the proposed exemption is 
protective of Client Plans because it contains sufficient safeguards 
for the protection of the Client Plans invested in the Funds. In this 
regard, prior to any investment by a Client Plan in a Fund, the 
investment must be authorized in writing by the Second Fiduciary of 
such Client Plan, based on a full and detailed written disclosure 
concerning such Fund. The Applicant states that, in addition to the 
initial disclosures provided to the Second Fiduciary of a Client Plan 
invested in a Fund, CLS provides such Second Fiduciary with ongoing 
disclosures regarding such Fund and the fee methods. Specifically, CLS 
provides the Second Fiduciary with the current Fund prospectuses, the 
annual financial disclosure reports containing information about the 
Funds, and audit findings. The Applicant states that CLS will respond 
to inquiries from a Second Fiduciary and, upon request, will provide: 
Copies of the Statements of Additional Information for the Funds, a 
copy of the proposed exemption, and a copy of the final exemption, if 
granted, once such documents are published in the Federal Register.
    Further, the Applicant states that Client Plan investments in 
Affiliated Funds will be subject to the ongoing ability of the Second 
Fiduciary of such Client Plan to terminate the investment without 
penalty to such Client Plan, at any time, upon written notice of 
termination. In this regard, the Applicant states that the Second 
Fiduciary will have sufficient opportunity to terminate a Client Plan's 
investment in a Fund, without penalty to the Client Plan, and withdraw 
the Client Plan's investment from such Fund in advance of any such 
change in fee. Also in this regard, the Applicant states that any and 
all changes in fees payable to CLS by Affiliated Funds will be on terms 
monitored by the Second Fiduciary who will be prompted by the 
Termination Form with a means to avoid the effect of such changes.

Summary

    19. Given the conditions applicable to the transactions covered by 
this exemption, if granted, the Department has tentatively determined 
that the relief sought by the Applicant satisfies the statutory 
requirements for an exemption under section 408(a) of the Act.

Proposed Exemption Operative Language

    The Department is considering granting an exemption under the 
authority of section 408(a) of the Act (or ERISA) and in accordance 
with the procedures set forth in 29 CFR part 2570, subpart B (76 FR 
46637, 66644, October 27, 2011).

Section I. Transactions

    If the proposed exemption is granted, the restrictions of sections 
406(a)(1)(D) and 406(b) of the Act, and the sanctions resulting from 
the application of section 4975 of the Code, by reason of sections 
4975(c)(1)(D) through (F) of the Code,\11\ shall not apply to the 
receipt of a fee by CLS, from an open-end investment company 
(Affiliated Fund), in connection with the investment in shares of any 
such Affiliated Fund, by an employee benefit plan (a Client Plan), as 
defined in Section IV(b), where CLS serves as a fiduciary with respect 
to such Client Plan, and where CLS: (a) Provides investment advisory 
services, or similar services to any such Affiliated Fund; and (b) 
provides to any such Affiliated Fund any other services (Secondary 
Services), as defined below in Section IV(i).
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    \11\ For purposes of this proposed exemption reference to 
specific provisions of Title I of the Act, unless otherwise 
specified, should be read to refer as well to the corresponding 
provisions of the Code.
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Section II. Specific Conditions

    (a) Each Client Plan which is invested in shares of an Affiliated 
Fund either:
    (1) Does not pay to CLS, for the entire period of such investment, 
any investment management fee, or any investment advisory fee, or any 
similar fee at the plan-level (the Plan-Level Management Fee), as 
defined below in Section IV(l), with respect to any of the assets of 
such Client Plan which are invested in shares of such Affiliated Fund; 
or
    (2) Pays to CLS a Plan-Level Management Fee, based on total assets 
of such Client Plan under management by CLS at the plan-level, from 
which a credit has been subtracted from such Plan-Level Management Fee, 
where the amount subtracted represents such Client Plan's pro rata 
share of any investment advisory fee and any similar fee (the 
Affiliated Fund Level Advisory Fee), as defined below in Section IV(m), 
paid by such Affiliated Fund to CLS.
    If, during any fee period, in the case of a Client Plan invested in 
shares of an Affiliated Fund, such Client Plan has prepaid its Plan 
Level Management Fee, and such Client Plan purchases shares of an 
Affiliated Fund, the requirement of this Section II(a)(2) shall be 
deemed met with respect to such prepaid Plan-Level Management Fee, if, 
by a method reasonably designed to accomplish the same, the amount of 
the prepaid Plan-Level Management Fee that constitutes the fee with 
respect to the assets of such Client Plan invested in shares of an 
Affiliated Fund:
    (i) Is anticipated and subtracted from the prepaid Plan-Level 
Management Fee at the time of the payment of such fee; or
    (ii) Is returned to such Client Plan, no later than during the 
immediately following fee period; or
    (iii) Is offset against the Plan-Level Management Fee for the 
immediately following fee period or for the fee period immediately 
following thereafter.
    For purposes of Section II(a)(2), a Plan-Level Management Fee shall 
be deemed to be prepaid for any fee period, if the amount of such Plan-
Level Management Fee is calculated as of a date not later than the 
first day of such period.
    (b) No sales commissions, no redemption fees, and no other similar 
fees are paid in connection with any purchase and in connection with 
any sale by a Client Plan in shares of an Affiliated Fund. However, 
this Section II(b) does not prohibit the payment of a redemption fee, 
if:
    (1) Such redemption fee is paid only to an Affiliated Fund; and
    (2) The existence of such redemption fee is disclosed in the 
summary prospectus for such Affiliated Fund in effect both at the time 
of any purchase of shares in such Affiliated Fund and at the time of 
any sale of such shares.
    (c) The combined total of all fees received by CLS is not in excess 
of reasonable compensation within the meaning of section 408(b)(2) of 
the Act, for services provided:
    (1) By CLS to each Client Plan; and
    (2) By CLS to each Affiliated Fund in which a Client Plan invests 
in shares of such Affiliated Fund;
    (d) CLS does not receive any fees payable pursuant to Rule 12b-1 
under the Investment Company Act in connection with the transactions 
covered by this proposed exemption;
    (e) No Client Plan is an employee benefit plan sponsored or 
maintained by CLS;
    (f) In the case of a Client Plan investing in shares of an 
Affiliated Fund, the Second Fiduciary, as defined below in Section 
IV(h), acting on behalf of such Client Plan, receives, in writing, in 
advance of any investment by such Client Plan in shares of such 
Affiliated Fund, a full and detailed disclosure via first class mail or 
via personal delivery of (or, if the Second Fiduciary consents to such 
means of delivery, through electronic email, in accordance with Section 
II(n), as set forth below) information concerning such Affiliated

[[Page 14513]]

Fund, including but not limited to the items listed below:
    (1) A current summary prospectus issued by each such Affiliated 
Fund;
    (2) A statement describing the fees, including the nature and 
extent of any differential between the rates of such fees for:
    (i) Investment advisory and similar services to be paid to CLS by 
each Affiliated Fund;
    (ii) Secondary Services to be paid to CLS by each such Affiliated 
Fund; and
    (iii) All other fees to be charged by CLS to such Client Plan and 
to each such Affiliated Fund and all other fees to be paid to CLS by 
each such Client Plan and by each such Affiliated Fund;
    (3) The reasons why CLS may consider investment in shares of such 
Affiliated Fund by such Client Plan to be appropriate for such Client 
Plan;
    (4) A statement describing whether there are any limitations 
applicable to CLS with respect to which assets of such Client Plan may 
be invested in shares of such Affiliated Fund, and if so, the nature of 
such limitations; and
    (5) Upon the request of the Second Fiduciary acting on behalf of 
such Client Plan, a copy of the Notice of Proposed Exemption (the 
Notice), a copy of the final exemption, if granted, and any other 
reasonably available information regarding the transactions which are 
the subject of this proposed exemption;
    (g) On the basis of the information described above in Section 
II(f), a Second Fiduciary acting on behalf of a Client Plan authorizes, 
in writing:
    (1) The investment of the assets of such Client Plan in shares of 
an Affiliated Fund;
    (2) The Affiliated Fund-Level Advisory Fee received by CLS for 
investment advisory services and similar services provided by CLS to 
such Affiliated Fund;
    (3) The fee received by CLS for Secondary Services provided by CLS 
to such Affiliated Fund;
    (4) The Plan-Level Management Fee received by CLS for investment 
management and similar services provided by CLS to such Client Plan at 
the plan-level; and
    (5) The selection, by CLS, of the applicable fee method, as 
described above in Section II(a)(1)-(2);
    All authorizations made by a Second Fiduciary pursuant to this 
Section II(g) must be consistent with the responsibilities, 
obligations, and duties imposed on fiduciaries by Part 4 of Title I of 
the Act;
    (h)(1) Any authorization, described above in Section II(g), and any 
authorization made pursuant to negative consent, as described below in 
Section II(i), made by a Second Fiduciary, acting on behalf of a Client 
Plan, shall be terminable at will by such Second Fiduciary, without 
penalty to such Client Plan (including any fee or charge related to 
such penalty), upon receipt by CLS via first class mail, via personal 
delivery, or via electronic email of a written notification of the 
intent of such Second Fiduciary to terminate any such authorization;
    (2) A form (the Termination Form), expressly providing an election 
to terminate any authorization, described above in Section II(g), or to 
terminate any authorization made pursuant to negative consent, as 
described below in Section II(i), with instructions on the use of such 
Termination Form, must be provided to such Second Fiduciary at least 
annually, either in writing via first class mail or via personal 
delivery (or if such Second Fiduciary consents to such means of 
delivery, through electronic email, in accordance with Section II(n), 
as set forth below). However, if a Termination Form has been provided 
to such Second Fiduciary pursuant to Section II(i), then a Termination 
Form need not be provided pursuant to this Section II(h), until at 
least six (6) months, but no more than twelve (12) months, have 
elapsed, since the prior Termination Form was provided;
    (3) The instructions for the Termination Form must include the 
following statements:
    (i) Any authorization, described above in Section II(g), and any 
authorization made pursuant to negative consent, as described below in 
Section II(i), is terminable at will by a Second Fiduciary, acting on 
behalf of a Client Plan, without penalty to such Client Plan, upon 
receipt by CLS, via first class mail or via personal delivery or via 
electronic email, of the Termination Form, or some other written 
notification of the intent of such Second Fiduciary to terminate such 
authorization; and
    (ii) As of the date that is at least thirty (30) days from the date 
that CLS sends the Termination Form to such Second Fiduciary, the 
failure by such Second Fiduciary to return such Termination Form or the 
failure by such Second Fiduciary to provide some other written 
notification of the Client Plan's intent to terminate any 
authorization, described in Section II(g), or intent to terminate any 
authorization made pursuant to negative consent, as described below in 
Section II(i), will be deemed to be an approval by such Second 
Fiduciary;
    (4) In the event that a Second Fiduciary, acting on behalf of a 
Client Plan, at any time returns a Termination Form or returns some 
other written notification of intent to terminate any authorization, as 
described above in Section II(g), or intent to terminate any 
authorization made pursuant to negative consent, as described below in 
Section II(i), the termination will be implemented by the withdrawal of 
all investments made by such Client Plan in the affected Affiliated 
Fund, and such withdrawal will be implemented by CLS within one (1) 
business day of the date that CLS receives such Termination Form or 
receives from the Second Fiduciary, acting on behalf of such Client 
Plan, some other written notification of intent to terminate any such 
authorization;
    (5) From the date a Second Fiduciary, acting on behalf of a Client 
Plan that invests in shares of an Affiliated Fund, returns a 
Termination Form or returns some other written notification of intent 
to terminate such Client Plan's investment in such Affiliated Fund, 
such Client Plan will not be subject to pay a pro rata share of any 
Affiliated Fund-Level Advisory Fee and will not be subject to pay any 
fees for Secondary Services paid to CLS by such Affiliated Fund, or any 
other fees or charges;
    (i)(1) CLS, at least thirty (30) days in advance of the 
implementation of each fee increase (Fee Increase(s)), as defined below 
in Section IV(k), must provide in writing via first class mail or via 
personal delivery (or if the Second Fiduciary consents to such means of 
deliver