Notice of Exemption Involving BNP Paribas S.A. (BNP Paribas) and Its Current and Future Affiliates, and Certain Related Entities (Collectively, the Applicant), Located in Paris, France, 24822-24832 [2018-11473]

Agencies

• Employee Benefits Security Administration
• DEPARTMENT OF LABOR

[Federal Register Volume 83, Number 104 (Wednesday, May 30, 2018)]
[Notices]
[Pages 24822-24832]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-11473]


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DEPARTMENT OF LABOR

Employee Benefits Security Administration

[Prohibited Transaction Exemption 2018-07; Exemption Application No. D-
11949]


Notice of Exemption Involving BNP Paribas S.A. (BNP Paribas) and 
Its Current and Future Affiliates, and Certain Related Entities 
(Collectively, the Applicant), Located in Paris, France

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

ACTION: Notice of exemption.

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SUMMARY: This document contains a notice of exemption issued by the 
Department of Labor (the Department) from certain of the prohibited 
transaction restrictions of the Employee Retirement Income Security Act 
of 1974 (ERISA or the Act) and/or the Internal Revenue Code of 1986 
(the Code). The exemption affects the ability of certain entities with 
specified relationships to BNP Paribas to continue to rely upon relief 
provided by Prohibited Transaction Exemption 84-14.

DATES: This exemption is effective for one year from the Conviction 
Date (Exemption Period).

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

SUPPLEMENTARY INFORMATION: On March 22, 2018, the Department published 
a notice of proposed exemption in the Federal Register at 83 FR 12596, 
for certain entities with specified relationships to BNP Paribas to 
continue to rely upon the relief provided by PTE

[[Page 24823]]

84-14 for a period of one year,\1\ notwithstanding certain criminal 
convictions, as described herein (the Convictions).
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    \1\ 49 FR 9494, March 13, 1984, as corrected at 50 FR 41430 
(October 10, 1985), as amended at 70 FR 49305 (August 23, 2005) and 
as amended at 75 FR 38837 (July 6, 2010), hereinafter referred to as 
PTE 84-14 or the QPAM exemption.
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    The Department is granting this exemption to ensure that Covered 
Plans \2\ with assets managed by an asset manager within the corporate 
family of BNP Paribas may continue to benefit from the relief provided 
by PTE 84-14. This exemption is effective for one year from the 
Conviction Date (Exemption Period).\3\
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    \2\ ``Covered Plan'' is a plan subject to Part 4 of Title 1 of 
ERISA (``ERISA-covered plan'') or a plan subject to section 4975 of 
the Code (``IRA'') with respect to which a BNP Affiliated QPAM 
relies on PTE 84-14, or with respect to which a BNP Affiliated QPAM 
(or any BNP Paribas affiliate) has expressly represented that the 
manager qualifies as a QPAM or relies on the QPAM class exemption 
(PTE 84-14). A Covered Plan does not include an ERISA-covered plan 
or IRA to the extent the BNP Affiliated QPAM has expressly 
disclaimed reliance on the QPAM status or PTE 84-14 in entering into 
its contract, arrangement, or agreement with the ERISA-covered plan 
or IRA.
    \3\ No inference should be drawn from the Department's granting 
of this one-year exemption that the Department will grant additional 
relief for BNP Affiliated QPAMs or BNP Related QPAMs to continue to 
rely on the relief in PTE 84-14 following the end of the one-year 
period.
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    No relief from a violation of any other law is provided by this 
exemption, including any criminal convictions described in the proposed 
exemption. Furthermore, the Department cautions that the relief in this 
exemption will terminate immediately if, among other things, an entity 
within the BNP Paribas corporate structure is convicted of a crime 
described in Section I(g) of PTE 84-14 (other than the Convictions) 
during the Exemption Period. The terms of this exemption are designed 
to promote adherence to basic fiduciary standards under ERISA and the 
Code. This exemption also aims to ensure that Covered Plans can 
terminate relationships in an orderly and cost effective fashion in the 
event the fiduciary of a Covered Plan determines it is prudent to 
terminate the relationship with a BNP Affiliated QPAM or BNP Related 
QPAM. The Department notes that its determination that the requisite 
findings under ERISA section 408(a) have been met is premised on 
adherence to all of the conditions of the exemption. Accordingly, 
affected parties should be aware that the conditions incorporated in 
this exemption are, taken as a whole, necessary for the Department to 
grant the relief requested by the Applicant. Absent these or similar 
conditions, the Department would not have granted this exemption.
    The individual exemption was requested by the Applicant pursuant to 
section 408(a) of ERISA and section 4975(c)(2) of the Code, and in 
accordance with the procedures set forth in 29 CFR part 2570, subpart B 
(76 FR 66637, 66644, October 27, 2011). Effective December 31, 1978, 
section 102 of the Reorganization Plan No. 4 of 1978, 5 U.S.C. App. 1 
(1996), transferred the authority of the Secretary of the Treasury to 
issue administrative exemptions under section 4975(c)(2) of the Code to 
the Secretary of Labor. Accordingly, this exemption is being granted 
solely by the Department.

Department's Comment

    The Department cautions that the relief in this exemption will 
terminate immediately if an entity within the BNP Paribas corporate 
structure is convicted of a crime described in Section I(g) of PTE 84-
14 (other than the Convictions) during the Exemption Period. Although 
BNP Paribas could apply for a new exemption in that circumstance, the 
Department would not be obligated to grant the exemption. The terms of 
this exemption have been specifically designed to permit plans to 
terminate their relationships in an orderly and cost effective fashion 
in the event of an additional conviction or a determination that it is 
otherwise prudent for a plan to terminate its relationship with an 
entity covered by the exemption.

Written Comments

    The Department invited all interested persons to submit written 
comments and/or requests for a public hearing with respect to the 
notice of proposed exemption, published in the Federal Register at 83 
FR 12596 on March 22, 2018. All comments and requests for a hearing 
were due by March 27, 2018. The Department received written comments 
from the Applicant. After considering the entire record developed in 
connection with the Applicant's exemption request, the Department has 
determined to grant the exemption, with revisions, as described below.

Comment 1--Conviction Date and Exemption Period

    Section II(j) of the proposed exemption refers to the Conviction 
Date of BNP Paribas USA as May 30, 2018. Section III(e) of the proposed 
exemption defines the term ``Conviction Date'' as the date that a 
judgment of Conviction against BNP Paribas USA is entered by the 
District Court in connection with the 2018 Conviction. Further, Section 
III(g) of the proposed exemption defines the term ``Exemption Period'' 
as the period from May 30, 2018 until the earlier of: (1) May 29, 2019; 
or (2) the date of final agency action made by the Department in 
connection with a new exemption application submitted by BNP Paribas 
for the covered transactions described herein.
    The Applicant states that it is possible that May 30, 2018 will not 
be the Conviction Date. The Applicant requests that Section III(e) read 
as follows:

    (e) The term ``Conviction Date'' means the date that a judgment 
of conviction against BNP Paribas USA is entered by the District 
Court in connection with the 2018 Conviction.

    In addition, the Applicant requests a corresponding change to the 
definition of ``Exemption Period'' in Section III(g), so that Section 
III(g) read as follows:

    (g) The term ``Exemption Period'' means the period from the 
Conviction Date until the earlier of: (1) one year from the 
Conviction Date or (2) the date of final agency action made by the 
Department in connection with a new exemption application submitted 
by BNP Paribas for the covered transactions described herein.

    The Department concurs with the Applicant's request regarding 
Section III(e) and has revised the exemption accordingly. In addition, 
the Department has modified Section III(g) to state that ``[t]he term 
`Exemption Period' means one year from the Conviction Date.

Comment 2--Sections II(a) and II(b)

    Section II(a) of the proposed exemption states: ``The BNP 
Affiliated QPAMs and the BNP Related QPAMs (including their officers, 
directors, agents other than BNP Paribas and BNP Paribas USA, Inc. (BNP 
Paribas USA)), and employees of such QPAMs and any other party engaged 
on behalf of such QPAMs who had responsibility for, or exercised 
authority in connection with the management of plan assets) did not 
know of, did not have reason to know of, or participate in: (1) The 
criminal conduct of BNP Paribas that is the subject of the 2015 
Convictions; or (2) the criminal conduct of BNP Paribas USA that is the 
subject of the 2018 Conviction (hereinafter, collectively, the BNP 
Convictions). `Participate in' means the knowing approval of the 
misconduct underlying the BNP Convictions;''
    Section II(b) of the proposed exemption states: ``The BNP 
Affiliated QPAMs and the BNP Related QPAMs (including their officers, 
directors, agents other than BNP Paribas and BNP Paribas USA, and 
employees of such QPAMs and any other parties engaged on behalf of such 
QPAMs) did not

[[Page 24824]]

receive direct compensation, or knowingly receive indirect 
compensation, in connection with the criminal conduct that is the 
subject of the BNP Convictions (the BNP Misconduct);''
    The Applicant states that the phrase ``and any other party engaged 
on behalf of such QPAMs'' could encompass any vendor or any entity 
hired for even the most ministerial or menial non-asset management 
jobs. Such a reading would be problematic because the Applicant has not 
identified this universe or done the diligence required to be certain 
that it can meet this condition. The Applicant requests that the phrase 
be deleted from both conditions.
    The Department does not agree that the phrase ``and any other 
party'' has the overly broad scope suggested by the Applicant. The 
Department notes that the phrase describes parties who had 
responsibility for, or exercised authority in connection with, the 
management of plan assets. Therefore, the Department declines to make 
the requested change.
    However, as clarification, the Department has amended its statement 
on what it means to ``participate in'' misconduct to state that: ``For 
purposes of this exemption, `participate in' refers not only to active 
participation in the misconduct underlying the BNP Convictions, but 
also to knowing approval of that misconduct, or knowledge of such 
misconduct without taking active steps to prohibit such conduct, such 
as reporting the conduct to supervisors, including the Board of 
Directors.''

Comment 3--Section II(h)(1)(vii)

    Section II(h)(1)(vii) of the proposed exemption provides: ``Any 
violation of, or failure to comply with an item in subparagraphs (ii) 
through (vi), is corrected as soon as reasonably possible upon 
discovery, or as soon after the QPAM reasonably should have known of 
the noncompliance (whichever is earlier), and any such violation or 
compliance failure not so corrected is reported, upon the discovery of 
such failure to so correct, in writing. Such report shall be made to 
the head of compliance and the General Counsel (or their functional 
equivalent) of the relevant BNP Affiliated QPAM that engaged in the 
violation or failure, and, the independent auditor responsible for 
reviewing compliance with the Policies, and a fiduciary of any affected 
Covered Plan where such fiduciary is independent of BNP.''
    The Applicant represents that this condition is unclear and states 
that the ``Department removed the requirement to notify the plan 
fiduciary in the QPAM exemptions granted at the end of December 2017, 
and the preamble does not explain whether or why the Department deemed 
it important to reinstate the requirement here.'' The Department notes 
that the provision at issue was set forth in PTE 2015-06,\4\ the 
earlier BNP Paribas exemption. At no time prior to publication of PTE 
2015-06 did the Applicant represent that the provision was not clear 
and since PTE 2015-06 was granted the Applicant has had to comply with 
that provision. Further, whether or not the provision is included in 
another exemption is not a persuasive reason for removing it from this 
exemption which is developed based on the facts and representations in 
this application. The Department declines to revise Section 
II(h)(1)(vii) as requested.
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    \4\ 80 FR 20261 (April 15, 2015). PTE 2015-06 is an exemption in 
respect of Exemption Application D-11863 that permits BNP Affiliated 
QPAMs to rely on the exemptive relief provided by PTE 84-14, 
notwithstanding the 2015 Convictions.
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Comments 4 and 5--Clarifications to Proposed Exemption

    See discussion in ``Other Comments'' section of this grant notice.

Comment 6--Section II(i)(1)

    Section II(i)(1) of the proposed one-year temporary exemption 
requires, in relevant part: ``Each BNP Affiliated QPAM submits to an 
audit conducted by an independent auditor'' and the ``audit must cover 
the Exemption Period and must be completed no later than six (6) months 
after the end of the Exemption Period.''
    The Applicant requests that the ``initial audit under this 
exemption cover the period from October 16, 2018 through the end of the 
first year after the Conviction Date.''
    The Department declines to make the requested revision. The 
Department has concluded that this exemption is adequately protective 
of Covered Plans only to the extent that, among other things, each BNP 
Affiliated QPAM remains subject to an in-depth audit performed by a 
qualified independent auditor during the entire period of time covered 
by this exemption. The audit required by PTE 2015-06 covers a period of 
time that ends on the day before the 2018 BNP Conviction Date, which 
may be on around May 30, 2018. However, the revision sought by the 
Applicant raises the possibility that the BNP Affiliated QPAMs would 
not be subject to an audit until October 16, 2018, which would be an 
unacceptably long gap between audit periods. In order to ensure that 
each BNP Affiliated QPAM remains continuously subject to an in-depth 
audit throughout the entire term of this exemption, the audit required 
herein covers a period of time that begins on the 2018 BNP Conviction 
Date.
    The Department has revised the term ``2014 Convictions'' to be the 
defined term ``2015 Convictions'' as it appears in Footnote 14, as 
numbered in the proposed one-year temporary exemption, in Section 
II(i)(1).

Comment 7--Section II(i)(5)(i)

    Section II(i)(5) of the proposed one-year temporary exemption 
states, in relevant part: ``[f]or the audit, on or before the end of 
the relevant period described in Section I(i)(1) for completing the 
audit, the auditor must issue a written report (the Audit Report) . . . 
[t]he Audit Report must include the auditor's specific determinations 
regarding: (i) [t]he adequacy of each BNP Affiliated QPAM's Policies 
and Training . . . The BNP Affiliated QPAM must promptly address or 
prepare a written plan of action to address any determination of 
inadequacy by the auditor regarding the adequacy of the Policies and 
Training. . . .''
    The Applicant requests that the phrase ``any determination of 
inadequacy by the auditor regarding the adequacy of the Policies and 
Training'' be revised to read ``any determination by the auditor 
regarding the adequacy of the Policies and Training.'' The Department 
modified Section II(i)(5)(i) as requested by the Applicant.
    Additionally, the Department has re-designated the references to 
``Section I(i)(1)'', ``Section I(h)'', ``Section I(i)(7)'', ``Section 
I(m)'', and ``Section I(i)(3) and (4)'' found in Section II(i)(5) as 
``Section II(i)(1)'', ``Section II(h)'', ``Section II(i)(7)'', 
``Section II(m)'', and ``Section II(i)(3) and (4).''

Comment 8--Section II(i)(7)

    Section II(i)(7) of the proposed exemption states, in relevant 
part: ``With respect to the Audit Report, the General Counsel, or one 
of the three most senior executive officers of the BNP Affiliated QPAM 
to which the Audit Report applies, must certify in writing, under 
penalty of perjury, that the officer has reviewed the Audit Report and 
this exemption; that, such BNP Affiliated QPAM has addressed, 
corrected, remedied any noncompliance and inadequacy or has an 
appropriate written plan to address any inadequacy regarding the 
Policies and Training identified in the Audit Report.''
    The Applicant requests that the requirements of Section II(i)(7) be 
modified to take into account BNP Paribas' business structure by 
providing

[[Page 24825]]

that an executive related to an asset/investment management line of 
business operating through the BNP Affiliated QPAM review and certify 
the Audit Report. In this regard, the Applicant requests Section 
II(i)(7) be revised in part as follows: ``[w]ith respect to the Audit 
Report the General Counsel or one of the three most senior executives 
of the line of business engaged in discretionary asset management 
activities through the BNP Affiliated QPAM with respect to which the 
Audit Report applies, must certify in writing, under penalties of 
perjury, that the officer has reviewed the Audit Report and this 
exemption. . . .''
    The Department concurs that a senior executive officer with 
knowledge of the asset management line of business within the BNP 
Affiliated QPAM should review and certify the Audit Report, and has 
modified the language of Section II(i)(7), accordingly. The Department 
also made certain clarifying grammar edits.

Comment 9--Section II(i)(8)

    Section II(i)(8) of the proposed exemption provides that: ``The 
Risk Committee of BNP's Board of Directors is provided a copy of the 
Audit Report; and a senior executive officer of BNP must review the 
Audit Report for each BNP Affiliated QPAM and must certify in writing, 
under penalty of perjury, that such officer has reviewed the Audit 
Report.''
    The Applicant requests the Audit Report be submitted to the Board 
of Directors of BNP Paribas USA, Inc., the intermediate holding company 
(IHC) of BNP Paribas, S.A. The Applicant states that BNP Paribas USA, 
Inc. as an IHC and a financial holding company is registered with and 
supervised by the Board of Governors of the Federal Reserve System. 
Furthermore, the Applicant represents that BNP Paribas USA, Inc.'s 
Board of Directors is familiar with the operations of the BNP 
Affiliated QPAMs and U.S. law. Lastly, the Applicant requests that 
Section II(i)(8) not reference the risk committee and allow the BNP 
Paribas USA, Inc.'s Board of Directors to determine which committee 
should receive the Audit Report.
    The Department has developed this exemption to ensure that the 
highest levels of BNP management are aware of on-going matters 
concerning BNP Paribas, the BNP Affiliated QPAMs, and compliance with 
this exemption. In the Department's view, as the parent company, BNP 
Paribas' Board of Directors is in the best position to ensure that any 
inadequacy identified by the auditor is appropriately addressed and 
that changes to corporate policy are effectuated if and where 
necessary. Requiring that the Audit Report be submitted to the Board of 
Directors of BNP Paribas provides assurance that the highest levels of 
management within BNP Paribas stay informed about BNP Paribas' and the 
BNP Affiliated QPAMs' compliance with the terms of this exemption. 
Accordingly, the Department declines to change the entity to which the 
Audit Report is submitted under Section II(i)(8) and in light of the 
importance of ensuring proper review of the Audit Report, the 
Department declines to alter this provision to permit BNP Paribas' 
Board of Directors to decide, in its discretion, which committee 
receives the Audit Report. To clarify that the entity receiving the 
Audit Report is the Board of Directors of BNP Paribas, S.A., the parent 
entity, the term ``BNP'' in Section II(i)(8) has been revised to be the 
defined term ``BNP Paribas.''
    Likewise, in Sections II(h)(1)(vii), II(i)(2), II(i)(5), II(i)(8), 
and II(i)(12) of this grant notice, the Department has revised the term 
``BNP'' to be the defined term ``BNP Paribas'' to clarify the original 
intent of the Department to reference BNP Paribas, S.A.

Comment 10--Section II(j)(2)

    Section II(j)(2) of the proposed exemption provides: ``As of May 
30, 2018 and throughout the Exemption Period, with respect to any 
arrangement, agreement, or contract between a BNP Affiliated QPAM and a 
Covered Plan, the BNP Affiliated QPAM agrees and warrants to Covered 
Plans: . . . (2) To indemnify and hold harmless the Covered Plan for 
any actual losses resulting directly from: A BNP Affiliated QPAM's 
violation of ERISA's fiduciary duties, as applicable, and of the 
prohibited transaction provisions of ERISA and the Code, as applicable; 
a breach of contract by the QPAM; or any claim arising out of the 
failure of such BNP Affiliated QPAM to qualify for the exemptive relief 
provided by PTE 84-14 as a result of a violation of Section I(g) of PTE 
84-14 other than the BNP Convictions. This condition applies only to 
actual losses caused by the BNP Affiliated QPAM's violations.''
    The Applicant states that BNP Affiliated QPAMs with several lines 
of businesses may have many contracts with Covered Plans. Accordingly, 
the Applicant requests that the condition be limited to breaches of an 
investment management contract between the BNP Affiliated QPAM and the 
Covered Plan.
    The Department declines to make the requested revision to this 
condition. The purpose of this indemnification provision is to protect 
Covered Plans with respect to its interactions with the BNP Affiliated 
QPAMs. The Department believes that limiting the scope of 
indemnification to investment management contracts unnecessarily 
narrows the protection of Covered Plans from damages within the control 
of the BNP Affiliated QPAMs.

Comment 11--Section II(j)(7)

    Section II(j)(7) of the proposed exemption provides that: (7) 
``[Six months from the Conviction Date], each BNP Affiliated QPAM must 
provide a notice of its obligations under this Section I(j) to each 
Covered Plan. For prospective Covered Plans that enter into a written 
asset or investment management agreement with a BNP Affiliated QPAM on 
or [six months after the Conviction Date], the BNP Affiliated QPAM will 
agree to its obligations under this Section I(j) in an updated 
investment management agreement between the BNP Affiliated QPAM and 
such clients or other written contractual agreement.''
    The Applicant states that a bilateral management agreement 
containing the obligations under Section II(j) should not be mandated. 
The Applicant states that the BNP Affiliated QPAM would be in violation 
of this condition if a client refuses to sign the updated agreement, 
even if the BNP Affiliated QPAM met the substantive requirements of 
Section II(j). Accordingly, the Applicant requests that the Department 
modify the condition so that the BNP Affiliated QPAM may satisfy the 
condition irrespective of whether the Plan or IRA client signs the 
updated investment management agreement.
    The Department has added the following to Section II(j)(7): 
``Notwithstanding the above, a BNP Affiliated QPAM will not violate the 
condition solely because a Plan or IRA refuses to sign an updated 
investment management agreement.'' The Department also revised the 
condition to reflect that May 30, 2018 may not be the Conviction Date.

Comment 12--Section II(j)(4)

    Section II(j)(4) of the proposed exemption states that: ``As of May 
30, 2018 and throughout the Exemption Period, with respect to any 
arrangement, agreement, or contract between a BNP Affiliated QPAM and a 
Covered Plan, the BNP Affiliated QPAM agrees and warrants to Covered 
Plans: . . .''
    (4) Not to restrict the ability of such Covered Plan to terminate 
or withdraw from its arrangement with the BNP Affiliated QPAM with the 
exception of reasonable restrictions, appropriately

[[Page 24826]]

disclosed in advance, that are specifically designed to ensure 
equitable treatment of all investors in a pooled fund in the event such 
withdrawal or termination may have adverse consequences for all other 
investors. In connection with any such arrangements involving 
investments in pooled funds subject to ERISA entered into after the 
effective date of this exemption, the adverse consequences must relate 
to a lack of liquidity of the underlying assets, valuation issues, or 
regulatory reasons that prevent the fund from promptly redeeming an 
ERISA-covered plan's or IRA's investment, and such restrictions must be 
applicable to all such investors and be effective no longer than 
reasonably necessary to avoid the adverse consequences; . . .''
    The Applicant represents that Section II(j)(4) omits the following 
language: ``. . . with respect to any investment in a separately 
managed account or pooled fund subject to ERISA and managed by such 
QPAM . . .'' The Applicant represents that this language is from recent 
prior QPAM Section I(g) exemptions that made it clear that the QPAMs 
were not to restrict a Covered Plan's ability to terminate or withdraw 
from its asset management relationship, either through a separate 
account or pooled fund. The language as written in the proposed 
exemption would apply to non-asset management mandates between the 
QPAMs and the Covered Plan. Therefore, the Applicant requests the same 
clarification made in the QPAM exemptions granted at the end of 
December 2017.
    The Department concurs with the Applicant's request and has revised 
the exemption accordingly.

Comment 13--Section II(k)

    Section II(k) of the proposed exemption states: ``By July 29, 2018, 
each BNP Affiliated QPAM will provide a notice of the exemption, along 
with a separate summary describing the facts that led to the 
Convictions (the Summary), which have been submitted to the Department, 
and a prominently displayed statement (the Statement) (collectively, 
Initial Notice) that the BNP Convictions result in a failure to meet a 
condition in PTE 84-14, to each sponsor and beneficial owner of a 
Covered Plan, or the sponsor of an investment fund in any case where a 
BNP Affiliated QPAM acts as a sub-advisor to the investment fund in 
which such ERISA-covered plan and IRA invests, and to each entity that 
may be a BNP Related QPAM. Effective as of the date of the Initial 
Notice, all prospective Covered Plan clients that enter into a written 
asset or investment management agreement with a BNP Affiliated QPAM 
must receive a copy of the exemption, the Summary, and the Statement 
prior to, or contemporaneously with, the Covered Plan's receipt of a 
written asset management agreement from the BNP Affiliated QPAM. 
Disclosures may be delivered electronically; . . .''
    The Applicant represents that Section II(k) provides that 
``Effective as of the date of the Initial Notice, all prospective 
Covered Plan clients that enter into a written asset or investment 
management agreement with a BNP Affiliated QPAM must receive'' the 
notice required under Section II(k). The Applicant states that because 
``the Initial Notice likely will be provided over a period of time 
between the Conviction Date and July 29, 2018, the Applicant requests 
clarification that the notice provision with respect to prospective 
Covered Plan clients is effective two months after the Conviction 
Date.''
    The Department concurs with the Applicant's request, and has 
revised Section II(k) to read: ``Effective as of the date that is 60 
days after the Conviction Date, all Covered Plan clients that enter 
into a written asset or investment management agreement with a BNP 
Affiliated QPAM after that date must receive . . .''

Comment 14--Section II(m)(1)(ii)

    Section II(m)(1)(ii) of the proposed exemption provides: With 
respect to the Compliance Officer, the following conditions must be met 
. . . ``(ii) The Compliance Officer must have a direct reporting line 
to the highest-ranking corporate officer in charge of legal compliance 
for asset management; . . .''
    The Applicant requests that the Department clarify, as it did in 
the technical corrections for the QPAM exemptions granted at the end of 
December 2017, that each QPAM may designate its own Compliance Officer. 
In addition, the Applicant requests that the Department delete the word 
``legal'' before compliance officer since many senior compliance 
officers are not lawyers and are not in the legal department of the 
QPAM.
    The Department accepts the Applicant's requests and has revised the 
exemption accordingly.

Comment 15--Section II(m)(2)(i)

    Section II(m)(2)(i) of the proposed exemption provides: ``With 
respect to the Exemption Review, the following conditions must be met: 
(i) The Exemption Review includes a review of the BNP QPAMs' compliance 
with and effectiveness of the Policies and Training and of the 
following: Any compliance matter related to the Policies or Training 
that was identified by, or reported to, the Compliance Officer or 
others within the compliance and risk control function (or its 
equivalent) during the previous year; the most recent Audit Report 
issued pursuant to this exemption or PTE 2015-06; any material change 
in the relevant business activities of the BNP Affiliated QPAMs; and 
any change to ERISA, the Code, or regulations related to fiduciary 
duties and the prohibited transaction provisions that may be applicable 
to the activities of the BNP Affiliated QPAMs; . . .''
    The Applicant states that the term ``BNP QPAM'' is undefined and, 
to avoid confusion, should be modified to require ``a review of the BNP 
Affiliated QPAMs' compliance . . . .'' In addition, the Applicant notes 
that this provision requires the Compliance Officer's review to 
encompass ``the most recent Audit Report issued pursuant to this 
exemption or PTE 2015-06.'' Only one audit report is required under 
this exemption, and, by the terms of the exemption, the Compliance 
Officer's review must be completed before the audit report is to be 
completed. Therefore, the Applicant requests that the Compliance 
Officer not be required to review the audit report under this exemption 
but only the most recent audit report under PTE 2015-06.
    The Department has modified the term ``BNP QPAM'' to ``BNP 
Affiliated QPAM.'' The Department also accepts the Applicant's request 
regarding the Compliance Officer. The Department concurs agrees that 
the Compliance Officer's review of the audit report under PTE 2015-06 
is sufficient. Accordingly, the Department is revising this exemption 
to more explicitly state this requirement.
    The Department also corrected certain cross-references in Section 
II(m)(2).

Comment 16--Section II(p)

    Section II(p) of the proposed exemption provides that: ``By 
November 29, 2018, each BNP Affiliated QPAM, in its agreements with, or 
in other written disclosures provided to Covered Plans, will clearly 
and prominently inform Covered Plan clients of their right to obtain a 
copy of the Policies or a description (Summary Policies) which 
accurately summarizes key components of the BNP Affiliated QPAM's 
written Policies developed in connection with this exemption. With 
respect to this requirement, the description may be continuously 
maintained on a website, provided that such website link to the 
Policies or Summary Policies is clearly

[[Page 24827]]

and prominently disclosed to each Covered Plan.''
    The Applicant requests that the Department clarify that, in the 
event Applicant meets this disclosure requirement through Summary 
Policies, changes to the Policies shall not result in the requirement 
for a new disclosure unless, as a result of changes to the Policies, 
the Summary Policies are no longer accurate. The Department agrees with 
this comment and has modified Section II(p) accordingly.

Comment 17--Section II(q)

    Section II(q) of the proposed temporary exemption provides that: 
``[a] BNP Affiliated QPAM will not fail to meet the terms of this 
exemption, solely because a different BNP QPAM fails to satisfy a 
condition for relief described in Sections I(c), (d), (h), (i), (j), 
(k), (l), (n), or (p); . . .''
    The Applicant requests that the Department modify Section II(q) by 
replacing ``a different BNP QPAM'' with ``a different BNP Affiliated 
QPAM.'' The Department agrees with this comment and has modified 
Section II(q), accordingly. Additionally, the Department has re-
designated the reference to ``Sections I(c), (d), (h), (i), (j), (k), 
(l), (n), or (p)'' found in Section II(q) as ``Sections II(c), (d), 
(h), (i), (j), (k), (l), (n), or (p).''

Comment 18--Section III(b)

    Section III(b) of the proposed exemption defines the term ``BNP 
Affiliated QPAM'' to mean: ``BNP Paribas Asset Management USA, Inc.; 
BNP Paribas Asset Management UK Limited; BNP Paribas Asset Management 
Singapore Limited; Bank of the West; First Hawaiian Bank; BancWest 
Investment Services, Inc.; and Bishop Street Capital Management Corp., 
to the extent these entities qualify as a `qualified professional asset 
manager' (as defined in Section VI(a) \5\ of PTE 84-14) and rely on the 
relief provided by PTE 84-14, and with respect to which BNP Paribas is 
an `affiliate' (as defined in Part VI(d) of PTE 84-14). The term `BNP 
Affiliated QPAM' excludes BNP Paribas USA, the entity implicated in the 
criminal conduct that is the subject of the 2018 Conviction, and BNP 
Paribas, the entity implicated in the 2015 Convictions.''
---------------------------------------------------------------------------

    \5\ In general terms, a QPAM is an independent fiduciary that is 
a bank, savings and loan association, insurance company, or 
investment adviser that meets certain equity or net worth 
requirements and other licensure requirements and that has 
acknowledged in a written management agreement that it is a 
fiduciary with respect to each plan that has retained the QPAM.
---------------------------------------------------------------------------

    The Applicant requests that the Department modify the definition of 
``BNP Affiliated QPAM'' to mean, ``all current and future Affiliated 
QPAMs, including but not limited to the enumerated entities, and not 
including the entities expressly excluded.'' The Department agrees with 
this comment and has modified Section III(b) accordingly.

Comment 19--Section III(c)

    Section III(c) of the proposed temporary exemption defines the term 
``BNP Related Affiliated QPAM'' to mean, ``any future `qualified 
professional asset manager' (as defined in section VI(a) of PTE 84-14) 
that relies on the relief provided by PTE 84-14, and with respect to 
which BNP Paribas owns a direct or indirect five percent or more 
interest, but with respect to which BNP Paribas is not an `affiliate' 
(as defined in Section VI(d)(1) of PTE 84-14).''
    The Applicant requests that the Department clarify that ``BNP 
Related QPAM'' means any ``current or future'' Related QPAM. The 
Department agrees with this comment and has modified Section III(c), 
accordingly.

Comment 20--Paragraph 13 of the Preamble

    The Applicant notes that paragraph 13 of the proposed exemption's 
preamble provides that the exemption will terminate if there is another 
conviction or ``if any conditions of PTE 84-14 are not met.'' The 
Applicant seeks clarification that relief under this exemption will 
remain available for transactions that meet the terms of this exemption 
and of PTE 84-14, notwithstanding that a prior transaction (intended to 
be covered by this exemption) failed to meet the terms of this 
exemption.
    The Department concurs with the Applicant's clarification. The 
relief herein does not extend to a particular transaction to the 
extent, with respect to such transaction, any condition in this 
exemption or in PTE 84-14 has not been met.

Other Comments

    The Applicant seeks certain clarifications to the proposed 
exemption that the Department does not view as relevant to its 
determination of whether to grant this exemption. These requested 
clarifications may be found as part of the public record for 
Application No. D-11949, in a letter to the Department, dated March 27, 
2018.
    After giving full consideration to the record, the Department has 
decided to grant the exemption, as described above. The complete 
application file (Application No. D-11949) is available for public 
inspection in the Public Disclosure Room of the Employee Benefits 
Security Administration, Room N-1515, U.S. Department of Labor, 200 
Constitution Avenue NW, Washington, DC 20210.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption, refer to 
the notice of proposed exemption published on March 22, 2018 at 83 FR 
12596.

General Information

    The attention of interested persons is directed to the following:
    (1) The fact that a transaction is the subject of an exemption 
under section 408(a) of the Act 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) In accordance with section 408(a) of ERISA and section 
4975(c)(2) of the Code, the Department makes the following 
determinations: The exemption is administratively feasible, the 
exemption is in the interests of affected plans and of their 
participants and beneficiaries, and the exemption is protective of the 
rights of participants and beneficiaries of such plans;
    (3) The exemption is supplemental to, and not in derogation of, any 
other provisions of ERISA, 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 availability of this exemption is subject to the express 
condition that the material facts and representations contained in the 
application accurately describe all material terms of the transaction 
which is the subject of the exemption.
    Accordingly, the following exemption is granted under the authority 
of section 408(a) of ERISA and section 4975(c)(2)

[[Page 24828]]

of the Code and in accordance with the procedures set forth in 29 CFR 
part 2570, subpart B (76 FR 66637, 66644, October 27, 2011):

Exemption

Section I. Covered Transactions

    Certain entities with specified relationships to BNP Paribas 
(hereinafter, the BNP Affiliated QPAMs and the BNP Related QPAMs, as 
defined in Sections III(b) and III(c), respectively) will not be 
precluded from relying on the exemptive relief provided by Prohibited 
Transaction Class Exemption 84-14 (PTE 84-14 or the QPAM Exemption),\6\ 
notwithstanding the 2015 Convictions of BNP Paribas (as defined in 
Section III(d)(1)) and the 2018 Conviction of BNP Paribas USA, Inc. (as 
defined in Section III(d)(2)).\7\
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    \6\ 49 FR 9494 (March 13, 1984), as corrected at 50 FR 41430, 
(October 10, 1985), as amended at 70 FR 49305 (August 23, 2005), and 
as amended at 75 FR 38837 (July 6, 2010), hereinafter referred to as 
``PTE 84-14'' or the ``QPAM Exemption.''
    \7\ Section I(g) of PTE 84-14 generally provides that 
``[n]either the QPAM nor any affiliate thereof . . . nor any owner . 
. . of a 5 percent or more interest in the QPAM is a person who 
within the 10 years immediately preceding the transaction has been 
either convicted or released from imprisonment, whichever is later, 
as a result of'' certain criminal activity therein described.
---------------------------------------------------------------------------

Section II. Conditions

    (a) The BNP Affiliated QPAMs and the BNP Related QPAMs (including 
their officers, directors, agents other than BNP Paribas and BNP 
Paribas USA, Inc. (BNP Paribas USA)), and employees of such QPAMs and 
any other party engaged on behalf of such QPAMs who had responsibility 
for, or exercised authority in connection with the management of plan 
assets did not know of, did not have reason to know of, or participate 
in: (1) The criminal conduct of BNP Paribas that is the subject of the 
2015 Convictions; or (2) the criminal conduct of BNP Paribas USA that 
is the subject of the 2018 Conviction (hereinafter, collectively, the 
BNP Convictions). For purposes of this exemption, ``participate in'' 
refers not only to active participation in the misconduct underlying 
the BNP Convictions, but also to knowing approval of that misconduct, 
or knowledge of such misconduct without taking active steps to prohibit 
such conduct, such as reporting the conduct to supervisors, including 
the Board of Directors.'';
    (b) The BNP Affiliated QPAMs and the BNP Related QPAMs (including 
their officers, directors, agents other than BNP Paribas and BNP 
Paribas USA, and employees of such QPAMs and any other parties engaged 
on behalf of such QPAMs) did not receive direct compensation, or 
knowingly receive indirect compensation, in connection with the 
criminal conduct that is the subject of the BNP Convictions (the BNP 
Misconduct);
    (c) The BNP Affiliated QPAMs will not employ or knowingly engage 
any of the individuals that participated in the BNP Misconduct;
    (d) At all times during the Exemption Period, no BNP Affiliated 
QPAM will use its authority or influence to direct an ``investment 
fund'' (as defined in Section VI(b) of PTE 84-14) that is subject to 
ERISA or the Code and managed by such BNP Affiliated QPAM with respect 
to one or more Covered Plans (as defined in Section III(f)) to enter 
into any transaction with BNP Paribas or BNP Paribas USA or to engage 
BNP Paribas or BNP Paribas USA to provide any service to such 
investment fund, for a direct or indirect fee borne by such investment 
fund, regardless of whether such transaction or service may otherwise 
be within the scope of relief provided by an administrative or 
statutory exemption;
    (e) Any failure of the BNP Affiliated QPAMs or the BNP Related 
QPAMs to satisfy Section I(g) of PTE 84-14 arose solely from the BNP 
Convictions;
    (f) A BNP Affiliated QPAM or a BNP Related QPAM did not exercise 
authority over the assets of any plan subject to Part 4 of Title I of 
ERISA (an ERISA-covered plan) or section 4975 of the Code (an IRA) in a 
manner that it knew or should have known would: Further the criminal 
conduct that is the subject of the BNP Convictions; or cause the BNP 
Affiliated QPAM, the BNP Related QPAM, or their affiliates to directly 
or indirectly profit from the criminal conduct that is the subject of 
the BNP Convictions;
    (g) Other than with respect to employee benefit plans maintained or 
sponsored for its own employees or the employees of an affiliate, BNP 
Paribas and BNP Paribas USA will not act as fiduciaries within the 
meaning of section 3(21)(A)(i) or (iii) of ERISA, or section 
4975(e)(3)(A) and (C) of the Code, with respect to ERISA-covered plan 
and IRA assets; provided, however, that BNP Paribas or BNP Paribas USA 
will not be treated as violating the conditions of this exemption 
solely because it acted as an investment advice fiduciary within the 
meaning of section 3(21)(A)(ii) of ERISA or section 4975(e)(3)(B) of 
the Code;
    (h)(1) Each BNP Affiliated QPAM must continue to maintain, adjust 
(to the extent necessary), implement, and follow written policies and 
procedures (the Policies). The Policies must require, and must be 
reasonably designed to ensure that:
    (i) The asset management decisions of the BNP Affiliated QPAM are 
conducted independently of the corporate management and business 
activities of BNP Paribas and BNP Paribas USA. This condition does not 
preclude a BNP Affiliated QPAM from receiving publicly available 
research and other widely available information from a BNP Paribas 
affiliate;
    (ii) The BNP Affiliated QPAM fully complies with ERISA's fiduciary 
duties, and with ERISA and the Code's prohibited transaction 
provisions, in each case as applicable with respect to each Covered 
Plan, and does not knowingly participate in any violation of these 
duties and provisions with respect to Covered Plans;
    (iii) The BNP Affiliated QPAM does not knowingly participate in any 
other person's violation of ERISA or the Code with respect to Covered 
Plans;
    (iv) Any filings or statements made by the BNP Affiliated QPAM to 
regulators, including, but not limited to, the Department, the 
Department of the Treasury, the Department of Justice, and the Pension 
Benefit Guaranty Corporation, on behalf of or in relation to Covered 
Plans, are materially accurate and complete, to the best of such QPAM's 
knowledge at that time;
    (v) To the best of the BNP Affiliated QPAM's knowledge at the time, 
the BNP Affiliated QPAM does not make material misrepresentations or 
omit material information in its communications with such regulators 
with respect to Covered Plans, or make material misrepresentations or 
omit material information in its communications with Covered Plans;
    (vi) The BNP Affiliated QPAM complies with the terms of this 
exemption;
    (2) Any violation of, or failure to comply with an item in 
subparagraphs ((h)(1)(ii) through (h)(1)(vi), is corrected as soon as 
reasonably possible upon discovery, or as soon after the QPAM 
reasonably should have known of the noncompliance (whichever is 
earlier), and any such violation or compliance failure not so corrected 
is reported, upon the discovery of such failure to so correct, in 
writing. Such report shall be made to the head of compliance and the 
General Counsel (or their functional equivalent) of the relevant BNP 
Affiliated QPAM that engaged in the violation or failure, and, the 
independent auditor responsible for reviewing compliance with the 
Policies, and a fiduciary of any affected Covered Plan where such 
fiduciary is independent of BNP Paribas.

[[Page 24829]]

Notwithstanding the foregoing, with respect to any Covered Plan 
sponsored by an ``affiliate'' (as defined in Section VI(d) of PTE 84-
14) of BNP Paribas or beneficially owned by an employee of BNP or its 
affiliates, such fiduciary does not need to be independent of BNP 
Paribas. A BNP Affiliated QPAM will not be treated as having failed to 
develop, implement, maintain, or follow the Policies, provided that it 
corrects any instance of noncompliance as soon as reasonably possible 
upon discovery, or as soon as reasonably possible after the QPAM 
reasonably should have known of the noncompliance (whichever is 
earlier), and provided that it adheres to the reporting requirements 
set forth in this subparagraph (vii);
    (3) Each BNP Affiliated QPAM will maintain, adjust (to the extent 
necessary) and implement a program of training during the Exemption 
Period, to be conducted during the Exemption Period, for all relevant 
BNP Affiliated QPAM asset/portfolio management, trading, legal, 
compliance, and internal audit personnel. The Training must:
    (i) At a minimum, cover the Policies, ERISA and Code compliance 
(including applicable fiduciary duties and the prohibited transaction 
provisions), ethical conduct, the consequences for not complying with 
the conditions of this exemption (including any loss of exemptive 
relief provided herein), and prompt reporting of wrongdoing; and
    (ii) Be conducted by a professional who has been prudently selected 
and who has appropriate technical training and proficiency with ERISA 
and the Code;
    (i)(1) Each BNP Affiliated QPAM submits to an audit conducted by an 
independent auditor, who has been prudently selected and who has 
appropriate technical training and proficiency with ERISA and the Code, 
to evaluate the adequacy of, and each BNP Affiliated QPAM's compliance 
with, the Policies and Training described herein. The audit requirement 
must be incorporated in the Policies. The audit must cover the 
Exemption Period and must be completed no later than six (6) months 
after the end of the Exemption Period. For time periods ending prior to 
the Conviction Date and covered by the audit required pursuant to PTE 
2015-06,\8\ the audit requirements in Section I(h) of PTE 2015-06 will 
remain in effect. The final audit under PTE 2015-06 covering the time 
period from October 15, 2017 until the Conviction Date must be 
completed within six (6) months of Conviction Date, and the 
corresponding certified Audit Report must be submitted to the 
Department no later than 30 days following the completion of such 
audit; \9\
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    \8\ 80 FR 20261 (April 15, 2015). PTE 2015-06 is an exemption in 
respect of Exemption Application D-11863 that permits BNP Affiliated 
QPAMs to rely on the exemptive relief provided by PTE 84-14, 
notwithstanding the 2015 Convictions.
    \9\ Pursuant to PTE 2015-06, the annual audit periods are from 
October 15th through October 14th of the following year. The audits 
are to be completed 6 (six) months after the end of the audit period 
and the Audit Report submitted to the Department within 30 days 
after completion. Accordingly, the last full twelve-month audit for 
the period October 15, 2016 through October 14, 2017 was submitted 
to the Department on April 30, 2018.
---------------------------------------------------------------------------

    (2) Within the scope of the audit and to the extent necessary for 
the auditor, in its sole opinion, to complete its audit and comply with 
the conditions for relief described herein, and only to the extent such 
disclosure is not prevented by state or federal statute, or involves 
communications subject to attorney client privilege, each BNP 
Affiliated QPAM and, if applicable, BNP Paribas, will grant the auditor 
unconditional access to its business, including, but not limited to: 
Its computer systems; business records; transactional data; workplace 
locations; training materials; and personnel. Such access is limited to 
information relevant to the auditor's objectives as specified by the 
terms of this exemption;
    (3) The auditor's engagement must specifically require the auditor 
to determine whether each BNP Affiliated QPAM has developed, 
implemented, maintained, and followed the Policies in accordance with 
the conditions of this exemption, and has developed and implemented the 
Training, as required herein;
    (4) The auditor's engagement must specifically require the auditor 
to test each BNP Affiliated QPAM's operational compliance with the 
Policies and Training. In this regard, the auditor must test, for each 
BNP Affiliated QPAM, a sample of such QPAM's transactions involving 
Covered Plans, sufficient in size and nature to afford the auditor a 
reasonable basis to determine such QPAM's operational compliance with 
the Policies and Training;
    (5) For the audit, on or before the end of the relevant period 
described in Section II(i)(1) for completing the audit, the auditor 
must issue a written report (the Audit Report) to BNP Paribas and the 
BNP Affiliated QPAM to which the audit applies that describes the 
procedures performed by the auditor in connection with its examination. 
The auditor, at its discretion, may issue a single consolidated Audit 
Report that covers all the BNP Affiliated QPAMs. The Audit Report must 
include the auditor's specific determinations regarding:
    (i) The adequacy of each BNP Affiliated QPAM's Policies and 
Training; each BNP Affiliated QPAM's compliance with the Policies and 
Training; the need, if any, to strengthen such Policies and Training; 
and any instance of the respective BNP Affiliated QPAM's noncompliance 
with the written Policies and Training described in Section II(h) 
above. The BNP Affiliated QPAM must promptly address any noncompliance. 
The BNP Affiliated QPAM must promptly address or prepare a written plan 
of action to address any determination as to the adequacy of the 
Policies and Training and the auditor's recommendations (if any) with 
respect to strengthening the Policies and Training of the respective 
BNP Affiliated QPAM. Any action taken or the plan of action to be taken 
by the respective BNP Affiliated QPAM must be included in an addendum 
to the Audit Report (such addendum must be completed prior to the 
certification described in Section II(i)(7) below). In the event such a 
plan of action to address the auditor's recommendation regarding the 
adequacy of the Policies and Training is not completed by the time of 
submission of the Audit Report, the following period's Audit Report 
must state whether the plan was satisfactorily completed. Any 
determination by the auditor that a BNP Affiliated QPAM has 
implemented, maintained, and followed sufficient Policies and Training 
must not be based solely or in substantial part on an absence of 
evidence indicating noncompliance. In this last regard, any finding 
that a BNP Affiliated QPAM has complied with the requirements under 
this subparagraph must be based on evidence that the particular BNP 
Affiliated QPAM has actually implemented, maintained, and followed the 
Policies and Training required by this exemption. Furthermore, the 
auditor must not solely rely on the Exemption Report created by the 
compliance officer (the Compliance Officer), as described in Section 
II(m) below, as the basis for the auditor's conclusions in lieu of 
independent determinations and testing performed by the auditor as 
required by Section II(i)(3) and (4) above; and
    (ii) The adequacy of the Exemption Review described in Section 
II(m);
    (6) The auditor must notify the BNP Affiliated QPAM of any instance 
of noncompliance identified by the auditor within five (5) business 
days after such noncompliance is identified by the auditor, regardless 
of whether the audit has been completed as of that date;

[[Page 24830]]

    (7) With respect to the Audit Report, the General Counsel, or one 
of the three most senior executives of the line of business engaged in 
discretionary asset management activities through the BNP Affiliated 
QPAM with respect to which the Audit Report applies, must certify in 
writing, under penalties of perjury, that the officer has reviewed the 
Audit Report and this exemption; that such BNP Affiliated QPAM has 
addressed, corrected, and remedied any instance of noncompliance or 
inadequacy, or has an appropriate written plan to address any 
inadequacy regarding the Policies and Training identified in the Audit 
Report. Such certification must also include the signatory's 
determination, that the Policies and Training in effect at the time of 
signing are adequate to ensure compliance with the conditions of this 
exemption and with the applicable provisions of ERISA and the Code. 
Notwithstanding the above, a BNP Affiliated QPAM will not violate the 
condition solely because a Plan or IRA refuses to sign an updated 
investment management agreement;
    (8) The Risk Committee of BNP Paribas's Board of Directors is 
provided a copy of the Audit Report; and a senior executive officer of 
BNP Paribas must review the Audit Report for each BNP Affiliated QPAM 
and must certify in writing, under penalty of perjury, that such 
officer has reviewed the Audit Report;
    (9) Each BNP Affiliated QPAM provides its certified Audit Report, 
by regular mail to: Office of Exemption Determinations (OED), 200 
Constitution Avenue NW, Suite 400, Washington, DC 20210; or by private 
carrier to: 122 C Street NW, Suite 400, Washington, DC 20001-2109. This 
delivery must take place no later than 30 days following completion of 
the Audit Report. The Audit Report will be made part of the public 
record regarding this exemption. Furthermore, each BNP Affiliated QPAM 
must make its Audit Report unconditionally available, electronically or 
otherwise, for examination upon request by any duly authorized employee 
or representative of the Department, other relevant regulators, and any 
fiduciary of a Covered Plan;
    (10) Any engagement agreement with an auditor to perform the audit 
required under the terms of this exemption must be submitted to OED no 
later than two (2) months after the Conviction Date;
    (11) The auditor must provide the Department, upon request, for 
inspection and review, access to all the work papers created and 
utilized in connection with the audit, provided such access and 
inspection is otherwise permitted by law; and
    (12) BNP Paribas must notify the Department of a change in the 
independent auditor no later than two (2) months after the engagement 
of a substitute or subsequent auditor and must provide an explanation 
for the substitution or change including a description of any material 
disputes between the terminated auditor and BNP;
    (j) As of the Conviction Date and throughout the Exemption Period, 
with respect to any arrangement, agreement, or contract between a BNP 
Affiliated QPAM and a Covered Plan, the BNP Affiliated QPAM agrees and 
warrants to Covered Plans:
    (1) To comply with ERISA and the Code, as applicable with respect 
to such Covered Plan; to refrain from engaging in prohibited 
transactions that are not otherwise exempt (and to promptly correct any 
inadvertent prohibited transactions); and to comply with the standards 
of prudence and loyalty set forth in section 404 of ERISA with respect 
to each such ERISA-covered plan and IRA to the extent that section is 
applicable;
    (2) To indemnify and hold harmless the Covered Plan for any actual 
losses resulting directly from: A BNP Affiliated QPAM's violation of 
ERISA's fiduciary duties, as applicable, and of the prohibited 
transaction provisions of ERISA and the Code, as applicable; a breach 
of contract by the QPAM; or any claim arising out of the failure of 
such BNP Affiliated QPAM to qualify for the exemptive relief provided 
by PTE 84-14 as a result of a violation of Section I(g) of PTE 84-14 
other than the BNP Convictions. This condition applies only to actual 
losses caused by the BNP Affiliated QPAM's violations.
    (3) Not to require (or otherwise cause) the Covered Plan to waive, 
limit, or qualify the liability of the BNP Affiliated QPAM for 
violating ERISA or the Code or engaging in prohibited transactions;
    (4) Not to restrict the ability of such Covered Plan to terminate 
or withdraw from its arrangement, with the BNP Affiliated QPAM with 
respect to any investment in a separately managed account or pooled 
fund subject to ERISA and managed by such QPAM, with the exception of 
reasonable restrictions, appropriately disclosed in advance, that are 
specifically designed to ensure equitable treatment of all investors in 
a pooled fund in the event such withdrawal or termination may have 
adverse consequences for all other investors. In connection with any 
such arrangements involving investments in pooled funds subject to 
ERISA entered into after the initial effective date of this exemption, 
the adverse consequences must relate to of a lack of liquidity of the 
underlying assets, valuation issues, or regulatory reasons that prevent 
the fund from promptly redeeming an ERISA-covered plan's or IRA's 
investment, and such restrictions must be applicable to all such 
investors and effective no longer than reasonably necessary to avoid 
the adverse consequences;
    (5) Not to impose any fees, penalties, or charges for such 
termination or withdrawal with the exception of reasonable fees, 
appropriately disclosed in advance, that are specifically designed to 
prevent generally recognized abusive investment practices or 
specifically designed to ensure equitable treatment of all investors in 
a pooled fund in the event such withdrawal or termination may have 
adverse consequences for all other investors, provided that such fees 
are applied consistently and in like manner to all such investors; and
    (6) Not to include exculpatory provisions disclaiming or otherwise 
limiting liability of the BNP Affiliated QPAM for a violation of such 
agreement's terms. To the extent consistent with Section 410 of ERISA, 
however, this provision does not prohibit disclaimers for liability 
caused by an error, misrepresentation, or misconduct of a plan 
fiduciary or other party hired by the plan fiduciary who is independent 
of BNP and its affiliates, or damages arising from acts outside the 
control of the BNP Affiliated QPAM;
    (7) By six months from the Conviction Date, each BNP Affiliated 
QPAM must provide a notice of its obligations under this Section II(j) 
to each Covered Plan. For prospective Covered Plans that enter into a 
written asset or investment management agreement with a BNP Affiliated 
QPAM on or six months after the Conviction Date, the BNP Affiliated 
QPAM will agree to its obligations under this Section II(j) in an 
updated investment management agreement between the BNP Affiliated QPAM 
and such clients or other written contractual agreement. 
Notwithstanding the above, a BNP Affiliated QPAM will not violate the 
condition solely because a Plan or IRA refuses to sign an updated 
investment management agreement.
    (k) By 60 days after the Conviction Date, each BNP Affiliated QPAM 
will provide a notice of the exemption, along with a separate summary 
describing the facts that led to the Convictions (the Summary), which 
have been submitted to the Department, and a prominently displayed 
statement (the Statement) (collectively, Initial Notice) that the BNP 
Convictions result in a failure to

[[Page 24831]]

meet a condition in PTE 84-14, to each sponsor and beneficial owner of 
a Covered Plan, or the sponsor of an investment fund in any case where 
a BNP Affiliated QPAM acts as a sub-advisor to the investment fund in 
which such ERISA-covered plan and IRA invests, and to each entity that 
may be a BNP Related QPAM. Effective as of the date that is 60 days 
after the Conviction Date, all Covered Plan clients that enter into a 
written asset or investment management agreement with a BNP Affiliated 
QPAM after that date must receive a copy of the exemption, the Summary, 
and the Statement prior to, or contemporaneously with, the Covered 
Plan's receipt of a written asset management agreement from the BNP 
Affiliated QPAM. Disclosures may be delivered electronically;
    (l) The BNP Affiliated QPAMs must comply with each condition of PTE 
84-14, as amended, with the sole exception of the violations of Section 
I(g) of PTE 84-14 that are attributable to the BNP Convictions;
    (m)(1) By six months from the Conviction Date, BNP Paribas 
designates a senior compliance officer (the Compliance Officer) who 
will be responsible for compliance with the Policies and Training 
requirements described herein. The Compliance Officer must conduct a 
review for the Exemption Period (the Exemption Review), to determine 
the adequacy and effectiveness of the implementation of the Policies 
and Training. With respect to the Compliance Officer, the following 
conditions must be met:
    (i) The Compliance Officer must be a professional who has extensive 
experience with, and knowledge of, the regulation of financial services 
and products, including under ERISA and the Code; and
    (ii) The Compliance Officer must have a direct reporting line to 
the highest-ranking corporate officer in charge of compliance for asset 
management;
    (2) With respect to the Exemption Review, the following conditions 
must be met:
    (i) The Exemption Review includes a review of the BNP Affiliated 
QPAMs' compliance with and effectiveness of the Policies and Training 
and of the following: Any compliance matter related to the Policies or 
Training that was identified by, or reported to, the Compliance Officer 
or others within the compliance and risk control function (or its 
equivalent) during the previous year; the most recent Audit Report 
under PTE 2015-06; any material change in the relevant business 
activities of the BNP Affiliated QPAMs; and any change to ERISA, the 
Code, or regulations related to fiduciary duties and the prohibited 
transaction provisions that may be applicable to the activities of the 
BNP Affiliated QPAMs;
    (ii) The Compliance Officer prepares a written report for the 
Exemption Review (an Exemption Report) that (A) summarizes his or her 
material activities during the Exemption Period; (B) sets forth any 
instance of noncompliance discovered during the Exemption Period, and 
any related corrective action; (C) details any change to the Policies 
or Training to guard against any similar instance of noncompliance 
occurring again; and (D) makes recommendations, as necessary, for 
additional training, procedures, monitoring, or additional and/or 
changed processes or systems, and management's actions on such 
recommendations;
    (iii) In the Exemption Report, the Compliance Officer must certify 
in writing that to his or her knowledge: (A) The report is accurate; 
(B) the Policies and Training are working in a manner which is 
reasonably designed to ensure that the Policies and Training 
requirements described herein are met; (C) any known instance of 
noncompliance during the Exemption Period and any related correction 
taken to date have been identified in the Exemption Report; and (D) the 
BNP Affiliated QPAMs have complied with the Policies and Training, and/
or corrected (or are correcting) any instances of noncompliance in 
accordance with Section II(h) above;
    (iv) The Exemption Report must be provided to appropriate corporate 
officers of BNP Paribas and each BNP Affiliated QPAM to which such 
report relates, and to the head of compliance and the General Counsel 
(or their functional equivalent) of the relevant BNP Affiliated QPAM; 
and the report must be made unconditionally available to the 
independent auditor described in Section II(i) above;
    (v) Each Exemption Review, including the Compliance Officer's 
written Exemption Report, must be completed within three (3) months 
following the end of the period to which it relates;
    (n) Each BNP Affiliated QPAM will maintain records necessary to 
demonstrate that the conditions of this exemption have been met, for 
six (6) years following the date of any transaction for which such BNP 
Affiliated QPAM relies upon the relief in the exemption;
    (o) During the Exemption Period, BNP Paribas must: (1) Immediately 
discloses to the Department any Deferred Prosecution Agreement (a DPA) 
or Non-Prosecution Agreement (an NPA) with the U.S. Department of 
Justice, entered into by BNP Paribas or any of its affiliates (as 
defined in Section VI(d) of PTE 84-14) in connection with conduct 
described in Section I(g) of PTE 84-14 or section 411 of ERISA; and (2) 
immediately provide the Department any information requested by the 
Department, as permitted by law, regarding the agreement and/or conduct 
and allegations that led to the agreement;
    (p) By six months from the Conviction Date, each BNP Affiliated 
QPAM, in its agreements with, or in other written disclosures provided 
to Covered Plans, will clearly and prominently inform Covered Plan 
clients of their right to obtain a copy of the Policies or a 
description (Summary Policies) which accurately summarizes key 
components of the BNP Affiliated QPAM's written Policies developed in 
connection with this exemption. If the Policies are thereafter changed, 
each Covered Plan client must receive a new disclosure within six (6) 
months following the end of the calendar year during which the Policies 
were changed.\10\ With respect to this requirement, the description may 
be continuously maintained on a website, provided that such website 
link to the Policies or Summary Policies is clearly and prominently 
disclosed to each Covered Plan; and
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    \10\ In the event the Applicant meets this disclosure 
requirement through Summary Policies, changes to the Policies shall 
not result in the requirement for a new disclosure unless, as a 
result of changes to the Policies, the Summary Policies are no 
longer accurate.
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    (q) A BNP Affiliated QPAM will not fail to meet the terms of this 
exemption, solely because a different BNP Affiliated QPAM fails to 
satisfy a condition for relief described in Sections II(c), (d), (h), 
(i), (j), (k), (l), (n), or (p); or if the independent auditor 
described in Section II(i) fails a provision of the exemption other 
than the requirement described in Section II(i)(11), provided that such 
failure did not result from any actions or inactions of BNP Paribas or 
its affiliates.

Section III. Definitions

    (a)(1) The term ``BNP Paribas'' means BNP Paribas, S.A., the parent 
entity, and its subsidiary, BNP Paribas Securities Corp., but does not 
include any other subsidiaries or other affiliates.
    (2) The term ``BNP Paribas USA'' means BNP Paribas USA, Inc., and 
includes its New York branch;
    (b) The term ``BNP Affiliated QPAM'' means all current and future 
affiliated QPAMs including, but not limited to the following enumerated 
entities, and not including the entities expressly

[[Page 24832]]

excluded: BNP Paribas Asset Management USA, Inc.; BNP Paribas Asset 
Management UK Limited; BNP Paribas Asset Management Singapore Limited; 
Bank of the West; First Hawaiian Bank; BancWest Investment Services, 
Inc.; and Bishop Street Capital Management Corp., to the extent these 
entities qualify as a ``qualified professional asset manager'' (as 
defined in Section VI(a) \11\ of PTE 84-14) and rely on the relief 
provided by PTE 84-14, and with respect to which BNP Paribas is an 
``affiliate'' (as defined in Part VI(d) of PTE 84-14). The term ``BNP 
Affiliated QPAM'' excludes BNP Paribas USA, the entity implicated in 
the criminal conduct that is the subject of the 2018 Conviction, and 
BNP Paribas, the entity implicated in the 2015 Convictions.
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    \11\ In general terms, a QPAM is an independent fiduciary that 
is a bank, savings and loan association, insurance company, or 
investment adviser that meets certain equity or net worth 
requirements and other licensure requirements and that has 
acknowledged in a written management agreement that it is a 
fiduciary with respect to each plan that has retained the QPAM.
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    (c) The term ``BNP Related QPAM'' means any current or future 
``qualified professional asset manager'' (as defined in section VI(a) 
of PTE 84-14) that relies on the relief provided by PTE 84-14, and with 
respect to which BNP Paribas owns a direct or indirect five percent or 
more interest, but with respect to which BNP Paribas is not an 
``affiliate'' (as defined in Section VI(d)(1) of PTE 84-14).
    (d) The term ``BNP Convictions'' mean the 2015 Convictions against 
BNP Paribas and the 2018 Conviction against BNP Paribas USA. More 
specifically:
    (1) The ``2015 Convictions'' refers to the judgments of conviction 
against BNP Paribas in: (A) Case number 14-cr-00460 (LGS) in the United 
States District Court for the Southern District of New York for 
conspiracy to commit an offense against the United States in violation 
of Title 18, United States Code, Section 371, by conspiring to violate 
the International Emergency Economic Powers Act, codified at Title 50, 
United States Code, Section 1701 et seq., and regulations issued 
thereunder, and the Trading with the Enemy Act, codified at Title 50, 
United States Code Appendix, Section 1 et seq., and regulations issued 
thereunder; and (B) case number 2014 NY 051231 in the Supreme Court of 
the State of New York, County of New York for falsifying business 
records in the first degree, in violation of Penal Law Sec.  175.10, 
and conspiracy in the fifth degree, in violation of Penal Law Sec.  
105.05(1).
    (2) The term ``2018 Conviction'' refers to the judgment of 
conviction against BNP Paribas USA for violation of the Sherman 
Antitrust Act, 15 U.S.C. 1, which is scheduled to be entered in the 
United States District Court for the Southern District of New York (the 
District Court) (case number 1:18-cr-61-JSR, in connection with BNP 
Paribas USA for certain foreign exchange misconduct (the FX 
Misconduct).
    (e) The term ``Conviction Date'' means the date that a judgment of 
conviction against BNP Paribas USA is entered by the District Court in 
connection with the 2018 Conviction;
    (f) The term ``Covered Plan'' means a plan subject to Part 4 of 
Title I of ERISA (an ``ERISA-covered plan'') or a plan subject to 
section 4975 of the Code (an ``IRA''), in each case, with respect to 
which a BNP Affiliated QPAM relies on PTE 84-14, or with respect to 
which a BNP Affiliated QPAM (or any BNP Paribas affiliate) has 
expressly represented that the manager qualifies as a QPAM or relies on 
the QPAM class exemption (PTE 84-14). A Covered Plan does not include 
an ERISA-covered plan or IRA to the extent the BNP Affiliated QPAM has 
expressly disclaimed reliance on QPAM status or PTE 84-14 in entering 
into a contract, arrangement, or agreement with the ERISA-covered plan 
or IRA.
    (g) The term ``Exemption Period'' means one year from the 
Conviction Date.
    (h) The term ``Plea Agreement'' means the agreement that was 
entered into on January 19, 2018, as between BNP Paribas USA and the 
United States Department of Justice, and filed in the District Court, 
involving the FX Misconduct.
    Effective Date: This exemption is effective for one year from the 
Conviction Date.

    Signed at Washington, DC, this 23rd day of May, 2018.
Lyssa Hall,
Director of Exemption Determinations, Employee Benefits Security 
Administration, U.S. Department of Labor.
[FR Doc. 2018-11473 Filed 5-29-18; 8:45 am]
 BILLING CODE 4510-29-P