Notice of Exemption Involving Credit Suisse Group AG (CSG) and Its Current and Future Affiliates, Including Credit Suisse AG (CSAG) (Collectively, Credit Suisse or the Applicant), Located in Zurich, Switzerland, 61928-61940 [2019-24750]

Download as PDF 61928 Federal Register / Vol. 84, No. 220 / Thursday, November 14, 2019 / Notices preferred alternative. The Draft RP/EA describes the Trustees’ natural resource damage assessment, identifies and evaluates various alternatives considered by the Trustees to restore, replace or acquire the equivalent of injured natural resources, and identifies the Trustees’ preferred alternative. Under the preferred alternative described in the Draft RP/EA, Dow would implement a set of projects to protect, enhance, and restore habitat for natural resources as well as provide recreational fishing, hunting, park-use, and tribal-use services relevant to the impacted area; provide funding for a set of projects for the Trustees to implement either directly or through partnerships; and provide funding for future projects to be selected by the Trustees with public input, as well as funding to support long-term stewardship of the projects beyond Dow’s obligations. The publication of this notice opens a period for public comment on both the proposed Consent Decree and the Draft RP/EA. Comments on the proposed Consent Decree should be addressed to the Deputy Assistant Attorney General, Environment and Natural Resources Division, and should refer to United States of America, State of Michigan, and the Saginaw Chippewa Indian Tribe of Michigan v. The Dow Chemical Company, D.J. Ref. No. 90–11–3–08593. All comments on the Consent Decree must be submitted no later than forty five (45) days after the publication date of this notice. Comments may be submitted either by email or by mail: States Treasury. For a paper copy of the Consent Decree without the Draft RP/ EA, the cost is $64.00. For a paper copy of only the Draft RP/EA, the cost is $43.50. Comments on the Draft RP/EA should be addressed to Lisa L. Williams, U.S. Fish and Wildlife Service, and reference ‘‘TR RP/EA comment’’ in the subject line. All comments on the Draft RP/EA must be submitted no later than fortyfive (45) days after the publication date of this notice. Comments may be submitted either by email or by mail: To submit comments: Send them to: By email ...... By mail ........ t.river.nrda@fws.gov. Lisa L. Williams, U.S. Fish and Wildlife Service, 2651 Coolidge Road, East Lansing, MI 48823. During the public comment period, the Draft RP/EA may be examined and downloaded at this U.S. Fish and Wildlife Service Midwest Region Natural Resource Damage Assessment website: https://www.fws.gov/Midwest/ es/ec/nrda/TittabawasseeRiverNRDA/. As described above, a paper copy of the Draft RP/EA may be obtained from the Department of Justice upon written request and payment of reproduction costs. Randall M. Stone, Acting Assistant Section Chief, Environmental Enforcement Section, Environment and Natural Resources Division. [FR Doc. 2019–24718 Filed 11–13–19; 8:45 am] BILLING CODE 4410–15–P To submit comments: Send them to: By email ...... pubcomment-ees.enrd@ usdoj.gov. Deputy Assistant Attorney General, U.S. DOJ—ENRD, P.O. Box 7611, Washington, DC 20044–7611. khammond on DSKJM1Z7X2PROD with NOTICES By mail ........ During the public comment period, the Consent Decree may be examined and downloaded at this Justice Department website: https:// www.justice.gov/enrd/consent-decrees. The Justice Department will provide a paper copy of the Consent Decree and/ or the Draft RP/EA upon written request and payment of reproduction costs. Please mail your request and payment to: Consent Decree Library, U.S. DOJ— ENRD, P.O. Box 7611, Washington, DC 20044–7611. If requesting a paper copy of both the Consent Decree and the Draft RP/EA, please enclose a check or money order for $107.50 (25 cents per page reproduction cost) payable to the United VerDate Sep<11>2014 17:47 Nov 13, 2019 Jkt 250001 DEPARTMENT OF LABOR Employee Benefits Security Administration and/or the Internal Revenue Code of 1986 (the Code). This notice is for the following granted exemption: 2019–07, Credit Suisse AG, D–11962. DATES: This five-year exemption will be in effect for five years beginning on the expiration of PTE 2015–14. FOR FURTHER INFORMATION CONTACT: Mrs. Blessed Chuksorji-Keefe of the Department, telephone (202) 693–8567. (This is not a toll-free number.) SUPPLEMENTARY INFORMATION: A notice was published in the Federal Register of the pendency before the Department of a proposal to grant this exemption. The notice set forth a summary of facts and representations contained in the application for exemption and referred interested persons to the application for a complete statement of the facts and representations. The application has been available for public inspection at the Department in Washington, DC. The notice also invited interested persons to submit comments on the requested exemption to the Department. In addition, the notice stated that any interested person might submit a written request that a public hearing be held (where appropriate). The applicant has represented that it has complied with the requirements of the notification to interested persons. One request for a hearing was received by the Department. Public comments were received by the Department as described in the granted exemption. The notice of proposed exemption was issued and the exemption is being granted solely by the Department because, effective December 31, 1978, section 102 of Reorganization Plan No. 4 of 1978, 5 U.S.C. App. 1 (1996), transferred the authority of the Secretary of the Treasury to issue exemptions of the type proposed to the Secretary of Labor. Employee Benefits Security Administration, U.S. Department of Labor. ACTION: Notice of individual exemption. Discussion On July 16, 2019, the Department of Labor (the Department) published a notice of proposed exemption in the Federal Register at 84 FR 33966, for certain entities with specified relationships to CSAG (CS Affiliated QPAMs) to continue to rely upon the relief provided by PTE 84–14 for a period of five years,1 notwithstanding CSAG’s criminal conviction, as described herein. The Department is granting this exemption in order to ensure that Covered Plans 2 whose This document contains an 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) 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. 2 The term ‘‘Covered Plan’’ is a plan subject to Part 4 of Title 1 of ERISA (‘‘ERISA-covered plan’’) [Prohibited Transaction Exemption 2019– 07; Exemption Application No. D–11962] Notice of Exemption Involving Credit Suisse Group AG (CSG) and Its Current and Future Affiliates, Including Credit Suisse AG (CSAG) (Collectively, Credit Suisse or the Applicant), Located in Zurich, Switzerland AGENCY: SUMMARY: PO 00000 Frm 00061 Fmt 4703 Sfmt 4703 E:\FR\FM\14NON1.SGM 14NON1 Federal Register / Vol. 84, No. 220 / Thursday, November 14, 2019 / Notices assets are managed by a CS Affiliated QPAM may continue to benefit from the relief provided by PTE 84–14. The exemption is effective from November 21, 2019 through November 20, 2024 (the Exemption Period). No relief from a violation of any other law is provided by this exemption, including any criminal conviction described in the proposed exemption, as clarified herein. Furthermore, the Department cautions that the relief in this exemption will terminate immediately if, among other things, an entity within the Credit Suisse corporate structure is convicted of a crime described in Section I(g) of PTE 84–14 (other than the Conviction) during the Exemption Period. The terms of this exemption have been specifically designed to promote conduct that adheres to basic fiduciary standards under ERISA and the Code. The exemption also aims to ensure that plans and IRAs can terminate relationships in an orderly and cost effective fashion in the event a plan or IRA fiduciary determines it is prudent for the plan or IRA to sever its relationship with an entity covered by the exemption. khammond on DSKJM1Z7X2PROD with NOTICES 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. All comments and requests for a hearing were due by August 30, 2019. The Department received three comment letters in response to the proposed exemption.3 One letter did not identify substantive issues. Credit Suisse commented, and requested numerous revisions to the proposed exemption. Three individuals (Dr. Paul Morjanoff, James S. Henry and Andreas Frank) joined together in one letter (the Morjanoff Letter).4 In the Morjanoff or a plan subject to Section 4975 of the Code (‘‘IRA’’) with respect to which a CS Affiliated QPAM relies on PTE 84–14, or with respect to which a CS Affiliated QPAM (or any CS 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 CS Affiliated QPAM has expressly disclaimed reliance on QPAM status or PTE 84–14 in entering into its contract, arrangement, or agreement with the ERISA-covered plan or IRA. 3 The letters are summarized below. The commenters’ letters are available in their entirety by contacting 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, and referencing Application No. D–11962. 4 The letter included a statement that, ‘‘Mr. Bartlett Naylor, Senior Financial Policy Advocate, Public Citizen’s Congress Watch, also formally requests a hearing.’’ However, Mr. Naylor did not VerDate Sep<11>2014 17:47 Nov 13, 2019 Jkt 250001 Letter, the individuals: Requested a hearing; commented on Credit Suisse’s letter; and requested revisions to the proposed exemption.5 After considering these submissions, the Department has determined to grant the proposed exemption, with revisions, as described below. I. The Credit Suisse Comment Letter Credit Suisse Comment 1. Credit Suisse requested that the Department reconsider its decision to impose the exemption’s annual audit requirement. Credit Suisse contends: (1) The conviction occurred outside of the CS Affiliated QPAMs, in an entity that is separate from the asset management business; (2) the audit proposed for the second five-year term of relief is more burdensome than the audit imposed under the existing exemption for the first five-year term; and (3) the exemption’s Compliance Officer requirement is a reasonable substitute for a full audit. Credit Suisse represents that it has demonstrated a strong culture of compliance and commitment to addressing the Department’s articulated concerns. Department’s Response: The Department is not eliminating the exemption’s audit requirement. CSAG, which is the corporate parent of the CS Affiliated QPAMs, knowingly and willfully engaged in serious, substantial, pervasive and decades-long criminal misconduct. The audits required by this exemption are structured to ensure that CS Affiliated QPAMs remain insulated from CSAG and the criminal misconduct that gave rise to the Conviction. Each future annual audit is essential to the Department’s determination that, prospectively, this exemption will be in the interest of, and protective of, Covered Plans, and will be administratively feasible, as required by Section 408(a) of ERISA. Credit Suisse Comment 2. Credit Suisse requests that, if the audit requirement is not eliminated, the Department revise the certification process for an Audit Report’s addendum. In this regard, Section I(i)(5) of the exemption provides, in pertinent part, that the CS Affiliated QPAM must promptly address or prepare a written plan of action to address any determination as to the adequacy of the submit any information that validates or supports this request. 5 The Department requested that Credit Suisse respond, on the record, to the Morjanoff Letter. Credit Suisse’s response may be requested through the Public Disclosure Office in the Employee Benefits Security Administration, Room N–1515, U.S. Department of Labor, 200 Constitution Avenue NW, Washington, DC 20210, by referencing Application No. D–11962. PO 00000 Frm 00062 Fmt 4703 Sfmt 4703 61929 Policies and Training and the auditor’s recommendations (if any) with respect to strengthening the Policies and Training of the respective CS Affiliated QPAM. Any action taken or the plan of action to be taken by the respective CS Affiliated QPAM must be included in an addendum to the Audit Report (such addendum must be completed prior to the certification described in Section I(i)(7) below). Section I(i)(7) of the exemption requires, in relevant part, that a senior executive officer of the CS Affiliated QPAM certify in writing, under penalty of perjury, that the CS Affiliated QPAM addressed, corrected, or 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. Credit Suisse states that ‘‘it would be preferable’’ to require that the addendum be completed as part of the senior executive officer certification process, rather than prior to it. According to Credit Suisse, requiring completion of addenda as part of the certification process would allow for meaningful, comprehensive input by the certifying officer. Department’s Response: The Department is not making the requested modification. The certification of a completed addendum by a CS executive officer ensures that a senior, knowledgeable corporate officer with relevant experience has reviewed the actual actions taken, or the actual plans of action that will be taken, by the CS Affiliated QPAM, to address any instances of the CS Affiliated QPAM’s noncompliance or inadequacy. The Department is not persuaded that certification of actions, or plans of action, that are not finalized provides meaningful protection to Covered Plans. Further, nothing in the exemption precludes a certifying officer from providing meaningful, comprehensive input prior to the finalization of the addendum. Credit Suisse Comment 3. Section I(i)(8) provides, in part: ‘‘The Risk Committee, the Audit Committee, and CSAG’s Board of Directors are provided a copy of each Audit Report. . . and the head of Compliance and the General Counsel must review the Audit Report for each CS Affiliated QPAM and must certify in writing, under penalty of perjury, that such officer has reviewed each Audit Report . . . .’’ First, Credit Suisse states that the requirement that the Audit Report be provided to the Risk Committee, Audit Committee, and Board of Directors is an escalation compared to not only the E:\FR\FM\14NON1.SGM 14NON1 61930 Federal Register / Vol. 84, No. 220 / Thursday, November 14, 2019 / Notices khammond on DSKJM1Z7X2PROD with NOTICES existing exemption but to prior exemptions for similarly situated applicants. PTE 2015–14 contains no requirement to provide the audit report to a committee of the Board of Directors. Credit Suisse notes that the Department granted exemptions arising from criminal convictions of entities that conspired to manipulate the price of U.S. dollars and euros exchanged in the foreign currency exchange (FX) spot market (the FX exemptions),6 and the Audit Reports in those exemptions were required to be provided to either the Risk Committee or the Audit Committee of the entity’s Board of Directors (depending on their structure), not both, and not to the full Board. Second, Credit Suisse requests that the condition be revised to require that an executive officer of Credit Suisse AG must review the Audit Report for each CS Affiliated QPAM and must certify in writing, under penalty of perjury, that such officer has reviewed each Audit Report. Department’s Response: The Department is not persuaded that the conditions in this exemption must mirror the conditions in the FX exemptions. First, the Department’s individual exemptions and the conditions therein are not precedential. Further, the Department does not view all criminal convictions as analogous when determining whether to grant an individual exemption and how best to protect affected plans and IRAs. Each applicant for an exemption must demonstrate, and the Department must affirmatively find, on the record, that the requested relief is in the interest of, and protective of, affected plans and IRAs, and administratively feasible. Finally, the Department will not fail to impose a condition it believes will enhance the protection of affected plans and IRAs, merely because an earlier exemption does not contain that condition. It is the Department’s understanding that the primary function of Credit Suisse’s Risk Committee is to assist the Credit Suisse Group AG Board of Directors in fulfilling its risk management responsibilities as defined by applicable law and regulations as well as Credit Suisse Group AG’s articles of association and internal 6 Citicorp, JPMorgan Chase & Co. and Barclays PLC were criminally convicted for conspiring to manipulate the price of U.S. dollars and euros exchanged in the foreign currency exchange (FX) spot market (the FX convictions). QPAMs related to those entities received five year exemptions (the FX exemptions) allowing them to continue to rely on the relief provided by PTE 84–14, notwithstanding the FX convictions. See PTE 2017–05 (Citicorp), PTE 2017–03 (JPMorgan Chase & Co.) and PTE 2017–06 (Barclays). VerDate Sep<11>2014 17:47 Nov 13, 2019 Jkt 250001 regulations. Additionally, it is the Department’s understanding that the primary function of Credit Suisse’s Audit Committee is to assist the Board of Directors in its oversight role by monitoring and assessing the financial statements of Credit Suisse. Given those roles, the Department believes that receipt of the Audit Report by either the Risk Committee or the Audit Committee will provide a meaningful protection to Covered Plans. Consistent with this requirement, the exemption mandates that a senior executive officer of the Risk or Audit Committee that received the Audit Report must review the Audit Report, and must certify in writing, under penalty of perjury, that the officer has reviewed the Audit Report. Credit Suisse Comment 4. Section I(i)(9) requires, in part, that each CS Affiliated QPAM must provide its certified Audit Report to the Department no more than 30 days following the completion of the Audit Report. Credit Suisse requests that the time for delivering the audit report to the Department be extended from 30 days to 45 days. Department’s Response: The Department has revised Section I(i)(9) as requested. Credit Suisse Comment 5. Credit Suisse requests that relief to the CS Affiliated QPAMs and to Covered Plans not be conditioned upon the independent auditor’s cooperation with the Department or disclosure of work papers. In this regard, Section I(i)(11) provides, in part: ‘‘The auditor must provide the Department, upon request, for inspection and review, access to all of the work papers created and used in connection with the audit, provided the access and inspection are otherwise permitted by law. . . .’’ And Section I(q) provides, in part: ‘‘A CS Affiliated QPAM will not fail to meet the terms of this five-year exemption solely because a different CS Affiliated QPAM fails to satisfy a condition for relief described in Sections I(c), (d), (h), (i), (j), (k), (l), (n), and (p); or, if the independent auditor described in Section I(i) fails a provision of the exemption other than the requirement described in Section I(i)(11), provided that such failure did not result from any actions or inactions of CSAG or its affiliates.’’ Department’s Response: The Department is not making the requested revision. The Department expects the CS Affiliated QPAMs and the Independent Auditor will make every effort to ensure that their respective responsibilities under the exemption are fulfilled, and to contact the Office of Exemption Determinations in a timely manner any time guidance is needed. PO 00000 Frm 00063 Fmt 4703 Sfmt 4703 The Department is not aware of any instance where an independent auditor has failed to meet its responsibilities under a QPAM Section I(g) individual exemption. Credit Suisse Comment 6. Section I(a) of the proposed exemption provides, in part: ‘‘For purposes of this exemption, including paragraph (c) below, ‘‘participate in’’ refers not only to active participation in the criminal conduct of CSAG that is the subject of the Conviction, but also to knowing approval of the criminal conduct, or knowledge of such conduct without taking active steps to prohibit such conduct, including reporting the conduct to such individual’s supervisors, and to the Board of Directors. In this regard, unless the individual reasonably believed that his or her initial report was given an appropriate response within a reasonable time, the individual must further report the criminal conduct to the person or persons the individual reasonably expected would carry out the appropriate response.’’ Credit Suisse requests that this condition be replaced with the language in the FX exemptions. No prior exemption has contained a requirement that an individual determine whether his or her initial report of criminal conduct was appropriately addressed, and Credit Suisse submits that this requirement is not necessary to protect Covered Plans, and the requirement is inherently problematic. According to Credit Suisse, instead of reflecting a state of affairs that existed at the time of the criminal conduct, the condition appears to be prospective in that it requires further action by any individual with knowledge of the criminal conduct. Credit Suisse states that even the parallel conditions in the exemptions granted to BNP Paribas in May 2018 and to UBS in February 2019, both for third convictions, applied only to the criminal conduct at issue and did not contain a prospective component. Credit Suisse performed the diligence required by the Department under the existing exemption. Credit Suisse states that the requirement is unjust and, with the significant passage of time, potentially impossible, to now require the investigation and diligence required by this provision. Credit Suisse additionally argues that the condition as written involves a subjective assessment of the state of mind of the reporting individual at the time of the criminal conduct. According to Credit Suisse, this analysis requires the Applicant to speculate about what an individual may have been thinking, which is nearly impossible to comply E:\FR\FM\14NON1.SGM 14NON1 khammond on DSKJM1Z7X2PROD with NOTICES Federal Register / Vol. 84, No. 220 / Thursday, November 14, 2019 / Notices with or confirm, especially five years removed from the criminal conduct. The applicant also complains that the term ‘‘reasonably’’ is used three times and is not defined, resulting in a further lack of clarity as to whether and how this condition could be satisfied. Credit Suisse submits that this condition is not practically enforceable and that there is no need to deviate from the objective conditions used in the FX exemptions. Department’s Response: The Department is revising the exemption in part in response to the Credit Suisse request. The condition, as written, is consistent with an essential premise of the QPAM class exemption: That the QPAM, and those persons and entities that control the QPAM, act with integrity. The condition, as written, is also consistent with representations by Credit Suisse: That the criminal misconduct did not occur within any CS Affiliated QPAM. The Department carefully considered those representations when structuring the protective conditions of PTE 2015–14 and this exemption. The Department expects that each CS Affiliated QPAM will use every effort to ensure that this condition is met throughout the duration of the exemption. The Department is revising the condition by removing the last sentence of Section I(a) beginning with ‘‘In this regard . . .’’ as requested by Credit Suisse. Credit Suisse Comment 7. Section I(d) of the proposed exemption provides, in part: At all times during the Exemption Period, a CS Affiliated QPAM will not use its authority or influence to direct an ‘‘investment fund’’ (as defined in Section VI(b) of PTE 84–14) that is subject to ERISA or the Code and managed by such CS Affiliated QPAM with respect to one or more Covered Plans, to enter into any transaction with CSAG or to engage CSAG 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. A Credit Suisse Affiliated QPAM will not fail this condition solely because: (1) A CSAG affiliate serves as a local sub-custodian that is selected by an unaffiliated global custodian that, in turn, is selected by someone other than a CS Affiliated QPAM or CS Related QPAM; (2) CSAG provides only necessary, non-investment, nonfiduciary services that support the operations of CS Affiliated QPAMs, at the CS Affiliated QPAM’s own expense, and the Covered Plan is not required to pay any VerDate Sep<11>2014 17:47 Nov 13, 2019 Jkt 250001 additional fee beyond its agreed-to asset management fee. This exception does not permit CSAG or its branches to provide any service to an investment fund managed by a CS Affiliated QPAM or CS Related QPAM; or (3) CSAG employees are doublehatted, seconded, supervised, or subject to the control of a CS Affiliated QPAM. First, regarding Section I(d)(1), Credit Suisse states: ‘‘the formulation here is not practically workable and must be revised. Although Section I(d)(1) allows a CSAG affiliate to serve as a local subcustodian, this condition does not benefit the Covered Plan clients of Credit Suisse because only the Bank and its branches—not an affiliate—currently serve as local sub-custodians for the four largest plan global custodians. While in some markets, it might be possible for a global custodian to select an affiliate or subsidiary of a bank, that situation is very rare.’’ Department’s Response: The Department is not revising Section I(d)(1). The criminal wrong-doing that is the subject of the Conviction was committed by CSAG, and the charging documents cite participation by CSAG subsidiaries. In this regard, as noted in the proposed exemption, on May 19, 2014, in the U.S. District Court for the Eastern District of Virginia (the District Court),7 the U.S. Department of Justice charged CSAG with, and CSAG pled guilty to, one criminal count of conspiracy to violate Code section 7206(2).8 The charging documents cited Credit Suisse and its subsidiaries, Credit Suisse Fides and Clariden Leu Ltd., for willfully aiding, assisting in, procuring, counseling, and advising the preparation and presentation of false income tax returns and other documents to the Internal Revenue Service of the Treasury Department (IRS), for decades, prior to and through approximately 2009. On May 19, 2014, pursuant to a plea agreement, CSAG entered a guilty plea for assisting U.S. citizens in federal income tax evasion. On November 21, 2014, the District Court entered a judgment of conviction against CSAG. Credit Suisse has not adequately demonstrated that permitting CSAG and its subsidiaries and branches to participate in the sub-custody transactions described in Section I(d)(1) of the exemption would be in the 7 United States of America v. Credit Suisse AG, Case Number 1:14–cr–188–RBS. 8 Section 7206(2) of the Code prohibits willfully aiding, assisting, procuring, counseling, or advising the preparation or presentation of false income tax returns. Section 371 of Title 18 of the United States Code generally prohibits two or more persons from conspiring either to commit any offense against the United States or to defraud the United States. PO 00000 Frm 00064 Fmt 4703 Sfmt 4703 61931 interest of, and protective of, affected Covered Plans. Second, regarding Section I(d)(2), Credit Suisse states: The condition should be clarified to permit CSAG to provide support services to the CS Affiliated QPAMs regardless of whether such support also benefits an investment fund managed by a QPAM, as long as the Covered Plan pays no additional fee. According to Credit Suisse, the condition, as written, creates confusion in any situation where CSAG may provide services to the CS Affiliated QPAMs because of the prohibition on services to investment funds managed by the QPAMs. Department’s Response: The Department is not revising the condition. Credit Suisse has not demonstrated that the condition creates confusion. In the Department’s view, the condition is clear and unambiguous: CSAG may only provide necessary, noninvestment, non-fiduciary services that support the operations of CS Affiliated QPAMs, at the CS Affiliated QPAM’s own expense. Further, the Department notes that if it is unclear whether a particular arrangement or situation satisfies a term in the exemption, the CS Affiliated QPAM should resolve the ambiguity in light of the exemption’s protective purposes. To the extent additional clarification is necessary, persons or entities should contact EBSA’s Office of Exemption Determinations, at 202–693–8540. Credit Suisse Comment 8. Section I(l) of the proposed exemption provides, in part: ‘‘The CS Affiliated QPAM must comply with each condition of PTE 84– 14, as amended, with the sole exception of the violation of Section I(g) of PTE 84–14 that is attributable to the Conviction. If, during the Exemption Period, an entity within the Credit Suisse corporate structure is convicted of a crime described in Section I(g) of PTE 84–14, (other than the Conviction), including a conviction in a foreign jurisdiction for a crime described in Section I(g) of PTE 84–14, relief in this exemption would terminate immediately.’’ Credit Suisse requests that the Department ‘‘reconsider its additional condition that a conviction in a foreign jurisdiction automatically would disqualify Credit Suisse from relief under Section I(g) of PTE 84–14 and under this individual exemption, as stated in Section I(l).’’ Credit Suisse submits that, should the Department include the condition in Section I(l) for Credit Suisse and later reconsider its view, the CS Affiliated QPAMs would be treated differently from similarly E:\FR\FM\14NON1.SGM 14NON1 khammond on DSKJM1Z7X2PROD with NOTICES 61932 Federal Register / Vol. 84, No. 220 / Thursday, November 14, 2019 / Notices situated applicants and the regulated community as a whole. Department’s Response: The Department has removed the condition’s reference to foreign convictions. This revision should not be interpreted, however, as the Department’s affirmation that a violation of Section I(g) of PTE 84–14 does not occur when a person or entity is convicted in a foreign jurisdiction for a crime described in Section I(g) of PTE 84–14. Credit Suisse Comment 9. Credit Suisse requests three revisions to Sections I(a) and I(b) of the proposed exemption. Section I(a) provides, in relevant part: ‘‘The CS Affiliated QPAMs (including their officers, directors, agents other than CSAG, employees of such QPAMs, and CSAG employees described in subparagraph (d) above) did not know of, have reason to know of, or participate in the criminal conduct of CSAG that is the subject of the Conviction . . ’’ Section I(b) of the proposed exemption provides: ‘‘The CS Affiliated QPAMs and the CS Related QPAMs (including their officers, directors, agents other than CSAG, employees of such QPAMs, and CSAG employees described in subparagraph (d) above) did not receive direct compensation, or knowingly receive indirect compensation, in connection with the criminal conduct of CSAG that is the subject of the Conviction.’’ First, Credit Suisse requests that the Department qualify that the conditions apply only to employees of the CS Affiliated and Related QPAMs who had responsibility for or exercised authority in connection with the management of plan assets. Credit Suisse states that comparable sections in the FX exemptions covered only QPAM employees ‘‘who had responsibility for, or exercised authority in connection with the management of plan assets.’’ Second, Credit Suisse states that the phrase ‘‘or knowingly receive indirect compensation’’ implicates the same problems as the definition of ‘‘participated in,’’ described above. Credit Suisse states that it performed the diligence required by the Department under the existing exemption, and it is potentially impossible, given the passage of time, to perform the investigation and diligence required by this provision. Third, Credit Suisse requests that the Department clarify that references to CSAG employees described in subparagraph (d) of the proposed exemption, is intended to refer only to subparagraph (d)(3). Department’s Response: The Department is not making the first two VerDate Sep<11>2014 17:47 Nov 13, 2019 Jkt 250001 requested revisions. The FX convictions involve criminal misconduct that occurred within non-asset management divisions of certain entities that acted as QPAMs. Consistent with those facts, Section I(a) of each FX exemption precludes relief if a QPAM’s asset management division employs an individual who knew of the misconduct, had reason to know of the misconduct, or who participated in the relevant FX criminal misconduct. Also consistent with those facts, Section I(b) of each FX exemption precludes relief if an employee in a QPAM’s asset management division received direct compensation or knowingly received indirect compensation from participating in the criminal conduct that gave rise to the relevant FX conviction. It is the Department’s understanding, consistent with Credit Suisse’s representations, that the CSAG Conviction arose from criminal misconduct that occurred outside any CS Affiliated QPAM. No CS Affiliated QPAM employee (asset management or otherwise) knew of, had reason to know of, or participated in, the criminal misconduct that gave rise to the CSAG Conviction. Section I(a) and Section I(b) of the exemption are structured consistent with both the record and with Credit Suisse’s representations. Credit Suisse has not demonstrated that it would be in the interest of Covered Plans if individuals who participated in, or were compensated from, the CSAG criminal misconduct were permitted to work in a non-asset management division of a CS Affiliated QPAM. Regarding Credit Suisse’s comment regarding the difficulty a CS Affiliated QPAM may have in complying with these conditions, the Department expects that each CS Affiliated QPAM will use every effort to ensure that the conditions are complied with throughout the duration of the exemption. Credit Suisse’s third requested revision is consistent with the Department’s intent, and the Department has made the requested revision. Credit Suisse Comment 10. Section I(f) provides: ‘‘A CS Affiliated QPAM or a CS 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 criminal conduct that is the subject of the Conviction; or cause the CS Affiliated QPAM or CS Related QPAM, its affiliates, or related parties to directly or indirectly profit from the PO 00000 Frm 00065 Fmt 4703 Sfmt 4703 criminal conduct that is the subject of the Conviction.’’ Credit Suisse requests that the term ‘‘related parties’’ be removed from this condition. Credit Suisse states that the term is undefined and should be removed. For clarity, the Department is removing the term ‘‘related parties.’’ Credit Suisse Comment 11. Section I(h)(1) provides, in pertinent part: ‘‘Each CS Affiliated QPAM must continue to maintain, adjust (to the extent necessary) or immediately implement and follow written policies and procedures (the Policies). The Policies must require and be reasonably designed to ensure that: (i) The asset management decisions of the CS Affiliated QPAMs are conducted independently of CSAG’s corporate management and business activities, and without considering any fee a CSrelated local sub-custodian may receive from those decisions. This condition does not preclude a CS Affiliated QPAM from receiving publicly available research and other widely available information from a CSAG affiliate; * * * * * (vi) The CS Affiliated QPAM complies with the terms of this five-year exemption, and CSAG complies with the terms of Section I(d)(2).’’ First, Credit Suisse states that the phrase ‘‘or immediately implement’’ should be deleted. ‘‘Immediately’’ is not defined, and in Credit Suisse’s view, it is unrealistic for the CS Affiliated QPAMs to ‘‘immediately implement’’ the policies required under the exemption. Credit Suisse requests that the Department revise the condition, such that each CS Affiliated QPAM must continue to maintain and follow or, within six (6) months of the effective date of this exemption, adjust (to the extent necessary) and implement written policies. Department’s Response: Credit Suisse has not demonstrated or supported its contention that it would be ‘‘unrealistic’’ for the CS Affiliated QPAMs to ‘‘immediately implement’’ the policies required by the exemption. However, the Department believes that Covered Plans would be adequately protected if the CS Affiliated QPAMs continue to follow and maintain policies the Policies required by PTE 2015–14 for six months following the effective date of this exemption (i.e., until May 20, 2020). Notwithstanding this, the Department notes that the policies required by PTE 2015–14 do not cover transactions or arrangements described in Section I(d) of this exemption. Therefore, the Department is E:\FR\FM\14NON1.SGM 14NON1 khammond on DSKJM1Z7X2PROD with NOTICES Federal Register / Vol. 84, No. 220 / Thursday, November 14, 2019 / Notices revising Section I(h)(1), which now begins as follows: Prior to May 21, 2020, a CS Affiliated QPAM may continue to maintain, follow and implement the policies described in Section I(h)(1) of PTE 2015–14. Otherwise, each CS Affiliated QPAM must maintain, adjust (to the extent necessary), implement, and follow the written policies and procedures described below (the Policies). Notwithstanding the preceding sentence, a CS Affiliated QPAM may not engage in any transaction or arrangement described in Section I(d)(1) through (3) of this exemption prior to the date the Policies have been developed, implemented and followed. Second, Credit Suisse notes that Section I(h)(1)(i) includes the additional prohibition that asset management decisions are made ‘‘without considering any fee a CS-related local sub-custodian may receive from those decisions.’’ Credit Suisse states that the scope of this condition is unclear by virtue of the ambiguous word ‘‘considering. . .’’ Credit Suisse requests that the Department substitute the following language: ‘‘without putting the fact of any fee a CS-related local sub-custodian may receive before the interest of the plan client.’’ Department’s Response: The Department is not revising the condition. Credit Suisse has not demonstrated why the term ‘‘considering’’ is ambiguous. As written, the condition makes it clear that the Policies must require and be reasonably designed to ensure that the CS Affiliated QPAM’s asset management decisions do not take into account the fee a CSrelated local sub-custodian may receive from those decisions. Third, Credit Suisse states that the second clause of Section I(h)(1)(vi) ‘‘is impracticable for the reasons [Credit Suisse raised] in connection with Section I(d)(2).’’ Department’s Response: The Department is not revising the second clause of Section I(h)(1)(vi) for the same reasons the Department expressed in response to Credit Suisse’s request to revise Section I(d)(2). Credit Suisse Comment 12. Section I(h)(2) provides: ‘‘Any violation of, or failure to comply with, an item in subparagraphs (h)(1)(ii) through (vi) of this section, 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 discovery of such failure to so correct, in writing, to appropriate VerDate Sep<11>2014 17:47 Nov 13, 2019 Jkt 250001 corporate officers, the head of Compliance and the General Counsel (or their functional equivalent) of the relevant CS Affiliated QPAM, and the independent auditor responsible for reviewing compliance with the Policies. A CS 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 paragraph (2).’’ Credit Suisse states that the notification requirements of this condition are unclear by virtue of the phrase ‘‘appropriate corporate officers.’’ Credit Suisse suggests instead that subsection (h)(2) read as follows: ‘‘Any violation of, or failure to comply with, an item in subparagraphs (h)(1)(ii) through (vi) of this section, 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 discovery of such failure to so correct, in writing, to the head of Compliance and the General Counsel (or their functional equivalent) of the relevant CS Affiliated QPAM, and the independent auditor responsible for reviewing compliance with the Policies. A CS 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), or provided that it adheres to the reporting requirements set forth in this paragraph (2), if applicable.’’ Department’s Response: The Department is removing the condition’s reference to ‘‘appropriate corporate officers.’’ However, the Department is not making Credit Suisse’s remaining requested revisions. Credit Suisse has not demonstrated why a CS Affiliated QPAM should not be treated as having failed to develop, implement, maintain or follow the Policies merely because it adheres to the condition’s reporting requirements. Credit Suisse Comment 13. Section I(h)(3) provides, in part: ‘‘Each CS Affiliated QPAM must maintain, adjust (to the extent necessary), and implement a program of training (the Training), PO 00000 Frm 00066 Fmt 4703 Sfmt 4703 61933 conducted at least annually, for all relevant CS Affiliated QPAM asset/ portfolio management, trading, legal, compliance, and internal audit personnel. The Training must: * * * * * (ii) Be conducted by a professional who has been prudently selected and who has appropriate technical training and proficiency with ERISA and the Code.’’ Credit Suisse requests confirmation that the training may be conducted electronically or via a website. In addition, Credit Suisse requests a period of six (6) months from the effective date of the exemption to adjust and implement training as necessary. Department’s Response: The Department declines to incorporate the Applicant’s requested language regarding the use of electronic or webbased methods in conducting the Training. Further, the training required by this exemption is substantially similar to the training required by PTE 2015–14, and Credit Suisse has not demonstrated the need to delay the training required by this exemption for six months. Given the importance of this condition, the Department is not revising the condition to allow the six month adjustment/implementation period sought by Credit Suisse. Credit Suisse Comment 14. Section I(k)(1) provides: ‘‘Each CS Affiliated QPAM provides a notice of the five-year exemption, along with a separate summary describing the facts that led to the Conviction (the Summary), which have been submitted to the Department, and a prominently displayed statement (the Statement) that the Conviction results in a failure to meet a condition in PTE 84–14, to each sponsor and beneficial owner of a Covered Plan that entered into a written asset or investment management agreement with a CS Affiliated QPAM, or the sponsor of an investment fund in any case where a CS Affiliated QPAM acts as a subadviser to the investment fund in which such ERISA-covered plan and IRA invests. The notice, Summary and Statement must be provided prior to, or contemporaneously with, the client’s receipt of a written asset management agreement from the CS Affiliated QPAM. If this five-year exemption is granted, the clients must receive a Federal Register copy of the notice of final five-year exemption within sixty (60) days of its publication in the Federal Register. The notice may be delivered electronically (including by an email that has a link to the five-year exemption).’’ Credit Suisse requests that the sixtyday period to provide notice of the final E:\FR\FM\14NON1.SGM 14NON1 61934 Federal Register / Vol. 84, No. 220 / Thursday, November 14, 2019 / Notices khammond on DSKJM1Z7X2PROD with NOTICES exemption run from the effective date, rather than the date of publication in the Federal Register. Department’s Response. The Department has revised the condition as requested. Credit Suisse Comment 15. Section I(m)(1) provides: ‘‘By May 20, 2020, CSAG 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 an annual review for each twelve month period, beginning on November 21, 2019, (the Annual 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: * * * * * (ii) The Compliance Officer must have a direct reporting line to the highest ranking corporate officer in charge of compliance for asset management.’’ Credit Suisse requests that the condition be changed to require a CS Affiliated QPAM, rather than the parent company, to designate the senior compliance officer. In addition, Credit Suisse requests that the Department clarify that each relevant line of business may designate its own compliance officer. Finally, Credit Suisse requests clarification that the designated compliance officer report to (or be) the highest ranking corporate officer in charge of compliance for the CS Affiliated QPAM. Department’s Response: The Department is making the requested revisions. Credit Suisse Technical Corrections Request In addition to the substantive comments above, Credit Suisse requested that certain technical clarifications be made to the proposed exemption. The Department’s responses are described below. Technical Correction Request 1. Section I(h)(1)(iv) provides: ‘‘Any filings or statements made by the CS Affiliated QPAM to regulators, including but not limited to, the Department of Labor, the Department of the Treasury, the Department of Justice, and the Pension Benefit Guaranty Corporation, on behalf of, or in relation to Covered Plans are materially accurate and complete, to the best of such QPAM’s knowledge at that time . . . .’’ Credit Suisse requests that the Department strike the phrase ‘‘in relation to Covered Plans’’ in Section (I)(h)(1)(iv). Section (I)(h)(1)(v) includes VerDate Sep<11>2014 17:47 Nov 13, 2019 Jkt 250001 ‘‘communications with such regulators with respect to Covered Plans,’’ which encompasses all communications that would potentially be covered by Section I(h)(1)(iv). Because a similar requirement is included in both subsections, the assumption is that a different meaning is intended. Department’s Response: The Department is not making the requested revision. The phrase ‘‘in relation to Covered Plans’’ is sufficiently clear such that the requested revision is not warranted. Technical Correction Request 2. Section I(i)(5)(i) provides, in part, that ‘‘the Audit Report must include the auditor’s specific determinations regarding the adequacy of the CS Affiliated QPAM’s Policies and Training; the CS 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 CS Affiliated QPAM’s noncompliance with the written Policies and Training described in Section I(h) above. The CS Affiliated QPAMs must promptly address any noncompliance. The CS 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 CS Affiliated QPAM.’’ Credit Suisse requests that the requirement in Section I(i)(5)(i) to ‘‘promptly’’ address any noncompliance be revised to be ‘‘as soon as reasonably possible.’’ This would align the procedure with the provisions for addressing noncompliance relating to the policies, set forth in Section I(h)(2), which require action ‘‘as soon as reasonably possible.’’ Department’s Response: The Department is not making the requested revision. The term ‘‘promptly’’ is consistent with the Department’s view that addressing any noncompliance must be an important and high priority for a CS Affiliated QPAM. Technical Correction Request 3. Section I(i)(7) provides, in part: ‘‘With respect to each Audit Report, the General Counsel, or one of the three most senior executive officers of the CS Affiliated QPAMs to which the Audit Report applies, must certify in writing, under penalty of perjury, that the officer has reviewed the Audit Report and this five-year exemption; and that to the best of such officer’s knowledge at the time the CS Affiliated QPAM addressed, corrected, or remedied any noncompliance and inadequacy or has PO 00000 Frm 00067 Fmt 4703 Sfmt 4703 an appropriate written plan to address any inadequacy regarding the Policies and Training identified in the Audit Report.’’ Credit Suisse requests that the Department replace ‘‘General Counsel’’ in Section I(i)(7) with ‘‘general counsel,’’ and clarify that the certification of the Audit Report may come from the respective CS Affiliated QPAM’s general counsel or one of its three most senior officers. Department’s Response: Given that the criminal misconduct that gave rise to the CSAG Conviction did not occur at any CS Affiliated QPAM, the Department has replaced ‘‘General Counsel’’ with ‘‘general counsel.’’ The condition is otherwise clear and reflects the Department’s intent as to who must certify the Audit Report. Technical Correction Request 4. Section I(i)(12) provides: ‘‘CSG 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 CSAG.’’ Credit Suisse requests that the reference to ‘‘CSG’’ in Section I(i)(12) be revised to read, ‘‘CSAG and/or the CS Affiliated QPAMs.’’ Department’s Response: The Department has revised the exemption consistent with this request. II. The Morjanoff Letter a. The Individuals’ Hearing Request: The three individuals that submitted the Morjanoff Letter stated that ‘‘it is impractical to present all the necessary evidence as comments, but it can be presented at a hearing. Briefly, the reasons are: 1. Recent investigations and court decisions show that CS provided false information for the first exemption. 2. It has declined to correct this false information since then. 3. CS lodged their comment on the last day and was not publicly visible until after public comments had closed. 4. That CS comment requested a relaxation of waiver conditions based on highly dubious assumptions. 5. In essence, this would tend to recreate conditions which could facilitate illegal activity based on the same general scheme as facilitated the criminal activity for which it was convicted. 6. That scheme was based on having a set of ‘ineffective rules & policies’ for appearances while ‘inciting’ staff to E:\FR\FM\14NON1.SGM 14NON1 khammond on DSKJM1Z7X2PROD with NOTICES Federal Register / Vol. 84, No. 220 / Thursday, November 14, 2019 / Notices break those ‘rules & policies’ for the bank’s illegal profit. 7. Quasi ‘third parties’ were created which pretended to be ‘external’ to the bank, but in fact operated as if they were a part of the bank. 8. Because thousands of bank employees became accustomed to such extreme double standards, special remediation is required. 9. The public have a right and an urgent need to respond to CS’s proposals. 10. Since comments have closed, that would have to be at a public hearing. 11. The sophistication of the bank’s deceptions go beyond what can be reasonably expected of the DOL or pension funds to adequately discern. 12. As further proof of the bank’s absence of seriousness in correcting its illegal activities, we note that it continues to refuse to respond to formal notifications of crime in the bank sent to top management. 13. A complete analysis of the flaws in CS’s submissions is beyond the scope of a comment.’’ The individuals stated further, ‘‘A public hearing is essential: CS’s submission contains false statements, omissions & half-truths while the DOL can’t be expected to have the expertise to see through CS’s schemes.’’ The individuals attached numerous links to recent court cases and other sources. The individuals added, ‘‘The matters raised are not merely matters of law and the factual issues identified are too complex to be adequately explored through the submission of evidence in written (including electronic) form.’’ The individuals concluded, ‘‘[s]ince the ‘CS Public Hearing’ was held on January 15, 2015, a mass of new evidence has become publicly available which dramatically changes the context of the application. Had this knowledge been available previously, it is likely that the previous application would have either been rejected or the waiver substantially modified. Broadly speaking, CS would have known these facts and their nondisclosure represents a serious lack of candour and likely a sufficient breach of requirements to summarily reject the current application.’’ Department’s Response to the Individuals’ Hearing Request: The Department declines to hold a hearing. The individuals articulated and supported their views in a twelve page comment letter. The individuals had adequate time (a 45 day comment period, plus one additional week) to supplement their letter with all relevant information that was available to them. The individuals did not demonstrate that the issues they raised in the VerDate Sep<11>2014 17:47 Nov 13, 2019 Jkt 250001 Morjanoff Letter would be more fully or expeditiously explored at a hearing. Regarding the three individuals’ contention that, ‘‘[s]ince the ‘CS Public Hearing’ was held on January 15, 2015, a mass of new evidence has become publicly available which dramatically changes the context of the application[,]’’ the Department believes the Independent Auditor is best suited to determine whether any newly uncovered evidence affects Credit Suisse’s compliance with requirements of the exemption. An essential premise in the Department’s determination to grant PTE 2015–14 (and this exemption) is that a qualified independent auditor will annually determine whether each condition of the exemption had been met over the prior year. This includes an in-depth analysis of a wide range of transactions, arrangements, policies, agreements, and procedures relating to the operation of, and services provided by, the Credit Suisse QPAMs. Further, in the Department’s view, the factual issues described by the individuals in the Morjanoff Letter could be fully explored through the submission of evidence in written (including electronic) form, which the individuals failed to submit. b. The Individuals’ Response to the Credit Suisse Comment Letter: In the Morjanoff Letter, the three individuals took issue with many of the revisions that Credit Suisse requested in their response letter. With respect to the Credit Suisse-requested revisions which the Department accepted, the three individuals stated the following: (a) Regarding Credit Suisse’s request to remove the term ‘‘related parties’’ from Section I(f), the three individuals state that Credit Suisse structured their crime so that undefined ‘‘quasi-third parties’’ benefited from and concealed criminal activity. ‘‘It is futile to attempt to define related parties while CS uses its creativity in manufacturing them. Details can be provided at a public hearing.’’ (b) The three individuals state that the exemption should specify the actual affiliates who will receive relief under the exemption. The individuals recommend that relief should be limited to CSAM LLC and CSAM Ltd, ‘‘who are the only affiliates that currently manage the assets of ERISA-covered plans on a discretionary basis.’’ The individuals state that Credit Suisse Securities (USA) LLC ‘‘has participated in all manner of illegal, criminal and disreputable activities (as described in previous submissions and subsequently)’’ and should not be permitted to be QPAM. The individuals state that if relief is available to potentially other affiliates, PO 00000 Frm 00068 Fmt 4703 Sfmt 4703 61935 ‘‘they should be named now, and their suitability examined at a public hearing.’’ Department’s Response: The Department does not agree the suitability of future CS Affiliated QPAMs must be examined at a public hearing. This exemption contains a suite of protective conditions, including an in-depth annual audit of, among other things, each CS Affiliated QPAM’s transactions, training and policies, as well as each QPAM’s compliance with the terms of this exemption. The Department has reviewed prior audits of CS Affiliated QPAMs under PTE 2015– 14, and the Department believes the conditions of this exemption are sufficiently protective of Covered Plans with assets managed by current and future QPAMs. 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 ERISA 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 Code, including any prohibited transaction provisions to which the exemption does not apply and the general fiduciary responsibility provisions of section 404 of ERISA, which, among other things, require a fiduciary to discharge its 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 ERISA; 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 and 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 E:\FR\FM\14NON1.SGM 14NON1 61936 Federal Register / Vol. 84, No. 220 / Thursday, November 14, 2019 / Notices (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. Five-Year Exemption The Department is granting a five-year exemption under the authority of section 408(a) of the Employee Retirement Income Security Act of 1974, as amended (ERISA), and section 4975(c)(2) of the Internal Revenue Code of 1986, as amended (the Code), and in accordance with the procedures set forth in 29 CFR part 2570, subpart B (76 FR 66637, 66644, October 27, 2011).9 Section I. Covered Transactions khammond on DSKJM1Z7X2PROD with NOTICES The CS Affiliated QPAMs, as further defined in Section II(d), will not be precluded from relying on the exemptive relief provided by Prohibited Transaction Exemption 84–14 (PTE 84– 14),10 notwithstanding the ‘‘Conviction’’ against CSAG (as further defined in Section II(a)),11 during the Exemption Period, provided that the following conditions are satisfied: (a) The CS Affiliated QPAMs and the CS Related QPAMs (including their officers, directors, agents other than CSAG, employees of such QPAMs, and CSAG employees described in subparagraph (d) below) did not know of, have reason to know of, or participate in the criminal conduct of CSAG that is the subject of the Conviction. For purposes of this exemption, including paragraph (c) below, ‘‘participate in’’ refers not only to active participation in the criminal conduct of CSAG that is the subject of the Conviction, but also to knowing approval of the criminal conduct, or knowledge of such conduct without taking active steps to prohibit such conduct, including reporting the conduct to such individual’s supervisors, and to the Board of Directors. 9 For purposes of this five-year exemption, references to section 406 of Title I of ERISA, unless otherwise specified, should be read to refer as well to the corresponding provisions of section 4975 of the Code. 10 49 FR 9494 (March 13, 1984), as corrected at 50 FR 41430 (October 10, 1985), as amended at 70 FR 49305 (August 23, 2005), and as amended at 75 FR 38837 (July 6, 2010). 11 Section I(g) of PTE 84–14 generally provides that ‘‘[n]either the QPAM nor any affiliate thereof . . . nor any owner . . . of a 5 percent or more interest in the QPAM is a person who within the 10 years immediately preceding the transaction has been either convicted or released from imprisonment, whichever is later, as a result of’’ certain criminal activity therein described. VerDate Sep<11>2014 17:47 Nov 13, 2019 Jkt 250001 (b) The CS Affiliated QPAMs and the CS Related QPAMs (including their officers, directors, agents other than CSAG, employees of such QPAMs, and CSAG employees described in subparagraph (d)(3) below) did not receive direct compensation, or knowingly receive indirect compensation, in connection with the criminal conduct of CSAG that is the subject of the Conviction; (c) The CS Affiliated QPAMs will not employ or knowingly engage any of the individuals that ‘‘participated in’’ the criminal conduct of CSAG that is the subject of the Conviction; (d) At all times during the Exemption Period, a CS Affiliated QPAM will not use its authority or influence to direct an ‘‘investment fund’’ (as defined in Section VI(b) of PTE 84–14) that is subject to ERISA or the Code and managed by such CS Affiliated QPAM with respect to one or more Covered Plans, to enter into any transaction with CSAG or to engage CSAG 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. A CS Affiliated QPAM will not fail this condition solely because: (1) A CSAG affiliate serves as a local sub-custodian that is selected by an unaffiliated global custodian that, in turn, is selected by someone other than a CS Affiliated QPAM or CS Related QPAM; (2) CSAG provides only necessary, non-investment, non-fiduciary services that support the operations of CS Affiliated QPAMs, at the CS Affiliated QPAM’s own expense, and the Covered Plan is not required to pay any additional fee beyond its agreed-to asset management fee. This exception does not permit CSAG or its branches to provide any service to an investment fund managed by a CS Affiliated QPAM or CS Related QPAM; or (3) CSAG employees are doublehatted, seconded, supervised, or subject to the control of a CS Affiliated QPAM; (e) Any failure of a CS Affiliated QPAM to satisfy Section I(g) of PTE 84– 14 arose solely from the Conviction; (f) A CS Affiliated QPAM or a CS 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 criminal conduct that is the subject of the Conviction; or cause the CS Affiliated QPAM or CS Related PO 00000 Frm 00069 Fmt 4703 Sfmt 4703 QPAM or its affiliates to directly or indirectly profit from the criminal conduct that is the subject of the Conviction; (g) CSAG will not act as a fiduciary 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, except it may act as such a fiduciary (1) with respect to employee benefit plans sponsored for its own employees or employees of an affiliate; or (2) in connection with securities lending services of the New York Branch of CSAG. CSAG will not be treated as violating the conditions of the 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) Prior to May 21, 2020, a CS Affiliated QPAM may continue to maintain, follow and implement the policies described in Section I(h)(1) of PTE 2015–14. Otherwise, each CS Affiliated QPAM must maintain, adjust (to the extent necessary), implement, and follow the written policies and procedures described below (the Policies). Notwithstanding the preceding sentence, a CS Affiliated QPAM may not engage in any transaction or arrangement described in Section I(d)(1) through (3) of this exemption prior to the date the Policies below have been developed, implemented and followed. The Policies must require and be reasonably designed to ensure that: (i) The asset management decisions of the CS Affiliated QPAMs are conducted independently of CSAG’s corporate management and business activities, and without considering any fee a CSrelated local sub-custodian may receive from those decisions. This condition does not preclude a CS Affiliated QPAM from receiving publicly available research and other widely available information from a CSAG affiliate; (ii) The CS 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 CS 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 CS Affiliated QPAM to regulators, including but not limited to, the Department of Labor, the Department of the Treasury, the Department of Justice, E:\FR\FM\14NON1.SGM 14NON1 khammond on DSKJM1Z7X2PROD with NOTICES Federal Register / Vol. 84, No. 220 / Thursday, November 14, 2019 / Notices and the Pension Benefit Guaranty Corporation, on behalf of, or in relation to Covered Plans are materially accurate and complete, to the best of such QPAM’s knowledge at that time; (v) To the best of its knowledge at the time, the CS 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; and (vi) The CS Affiliated QPAM complies with the terms of this five-year exemption, and CSAG complies with the terms of Section I(d)(2); (2) Any violation of, or failure to comply with, an item in subparagraphs (h)(1)(ii) through (vi) of this section, 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 discovery of such failure to so correct, in writing, to the head of Compliance and the general counsel (or their functional equivalent) of the relevant CS Affiliated QPAM, and the independent auditor responsible for reviewing compliance with the Policies. A CS 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 paragraph (2); (3) Each CS Affiliated QPAM must maintain, adjust (to the extent necessary), and implement a program of training (the Training), conducted at least annually, for all relevant CS 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 five-year 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 VerDate Sep<11>2014 17:47 Nov 13, 2019 Jkt 250001 and proficiency with ERISA and the Code; (i)(1) Each CS Affiliated QPAM submits to three audits, 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 CS Affiliated QPAM’s compliance with, the Policies and Training described herein. The audit requirement must be incorporated in the Policies. The first audit must cover the 24 month period that begins on November 21, 2019. The second audit must cover the 24 month period that begins on November 21, 2021, and the third audit must cover the 12 month period that begins on November 21, 2023. Each audit must be completed no later than six (6) months after the period to which the audit applies; 12 (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 CS Affiliated QPAM and, if applicable, CSAG, 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 CS Affiliated QPAM has developed, implemented, maintained, and followed the Policies in accordance with the conditions of this five-year exemption, and has developed and implemented the Training, as required herein; (4) The auditor’s engagement must specifically require the auditor to test each CS Affiliated QPAM’s operational compliance with the Policies and Training. In this regard, the auditor must test a sample of: (1) Each CS Affiliated QPAM’s transactions involving Covered Plans; (2) each CS Affiliated QPAM’s transactions involving CSAG affiliates that serve as a local sub-custodian. The samples must be sufficient in size and nature to afford the auditor a reasonable basis to determine the QPAM’s operational 12 Periods prior to November 21, 2019 must be audited consistent with PTE 2015–14. PO 00000 Frm 00070 Fmt 4703 Sfmt 4703 61937 compliance with the Policies and Training; (5) For each 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) to CSAG and the CS Affiliated QPAMs to which the audit applies that describes the procedures performed by the auditor during the course of its examination. The auditor, at its discretion, may issue a single consolidated Audit Report that covers all the CS Affiliated QPAMs. The Audit Report must include the auditor’s specific determinations regarding: (i) The adequacy of the CS Affiliated QPAM’s Policies and Training; the CS 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 CS Affiliated QPAM’s noncompliance with the written Policies and Training described in Section I(h) above. The CS Affiliated QPAMs must promptly address any noncompliance. The CS 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 CS Affiliated QPAM. Any action taken or the plan of action to be taken by the respective CS Affiliated QPAM must be included in an addendum to the Audit Report (such addendum must be completed prior to the certification described in Section I(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 the respective CS 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 CS Affiliated QPAM has complied with the requirements under this subparagraph must be based on evidence that the particular CS 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 Annual Exemption Report created by the compliance officer (the Compliance Officer), as described in Section I(m) E:\FR\FM\14NON1.SGM 14NON1 khammond on DSKJM1Z7X2PROD with NOTICES 61938 Federal Register / Vol. 84, No. 220 / Thursday, November 14, 2019 / Notices below, as the basis for the auditor’s conclusions in lieu of independent determinations and testing performed by the auditor as required by Section I(i)(3) and (4) above; and (ii) The adequacy of the Annual Exemption Review described in Section I(m); (6) The auditor must notify the respective CS Affiliated QPAMs 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; (7) With respect to each Audit Report, the general counsel, or one of the three most senior executive officers of the CS Affiliated QPAMs to which the Audit Report applies, must certify in writing, under penalty of perjury, that the officer has reviewed the Audit Report and this five-year exemption; that, to the best of such officer’s knowledge at the time, the CS Affiliated QPAM addressed, corrected, or remedied any noncompliance and inadequacy or has an appropriate written plan to address any inadequacy regarding the Policies and Training identified in the Audit Report. Such certification must also include the signatory’s determination that, to the best of the officer’s knowledge at the time, the Policies and Training in effect at the time of signing are adequate to ensure compliance with the conditions of this exemption and the applicable provisions of ERISA and the Code; (8) A copy of the Audit Report must be provided to CSAG’s Board of Directors and to either the Risk Committee or the Audit Committee; and a senior executive officer at either the Risk Committee or the Conduct and Financial Crime Control Committee must review the Audit Report for each CS Affiliated QPAM and must certify in writing, under penalty of perjury, that such officer has reviewed each Audit Report; (9) Each CS Affiliated QPAM must provide its certified Audit Report, by regular mail to: The Department’s 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. The delivery must take place no more than 45 days following the completion of the Audit Report. The Audit Report will be part of the public record regarding this five-year exemption. Furthermore, each CS Affiliated QPAM must make its Audit Report unconditionally available, electronically or otherwise, for examination upon VerDate Sep<11>2014 17:47 Nov 13, 2019 Jkt 250001 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 by this exemption must be submitted to OED no later than two (2) months after the execution of the engagement agreement; (11) The auditor must provide the Department, upon request, for inspection and review, access to all of the workpapers created and used in connection with the audit, provided the access and inspection are otherwise permitted by law; and (12) CSAG and/or the CS Affiliated QPAMs 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 CSAG and/or the CS Affiliated QPAMs; (j) As of the effective date of this fiveyear exemption, with respect to any arrangement, agreement, or contract between a CS Affiliated QPAM and a Covered Plan, each CS Affiliated QPAM agrees and warrants to Covered Plans: (1) To comply with ERISA and the Code, as applicable with respect to the 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 404 is applicable; (2) To indemnify and hold harmless the Covered Plan for any actual losses resulting directly from a CS 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 a CS Affiliated QPAM; or any claim arising out of the failure of such CS Affiliated QPAMs to qualify for the exemptive relief provided by PTE 84–14 as a result of a violation of Section I(g) of PTE 84–14 other than the Conviction. This condition only applies to actual losses caused by the CS Affiliated QPAM’s violations; (3) Not to require (or otherwise cause) the Covered Plan to waive, limit, or qualify the liability of the CS Affiliated QPAM for violating ERISA or the Code or engaging in prohibited transactions; (4) Not to restrict the ability of the Covered Plan to terminate or withdraw PO 00000 Frm 00071 Fmt 4703 Sfmt 4703 from its arrangement with the CS 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 arrangement involving investments in pooled funds subject to ERISA entered into after the effective date of this exemption, the adverse consequences must relate to a lack of liquidity of the underlying assets, valuation issues, or regulatory reasons that prevent the fund from promptly redeeming an ERISAcovered 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 generallyrecognized abusive investment practices or specifically designed to ensure equitable treatment of all investors in a pooled fund in the event such withdrawal or termination may have adverse consequences for all other investors, provided that such fees are applied consistently and in like manner to all such investors; (6) Not to include exculpatory provisions disclaiming or otherwise limiting liability of the CS Affiliated QPAMs for a violation of the 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 CSAG and its affiliates, or damages arising outside the control of the CS Affiliated QPAM; and (7) Within four (4) months of the effective date of this five-year exemption, each CS Affiliated QPAM must provide a notice of its obligations under this Section I(j) to each Covered Plan. For Covered Plans that enter into a written asset or investment management agreement with a CS Affiliated QPAM on or after November 21, 2019, the CS Affiliated QPAM must agree to its obligations under this Section I(j) in an updated investment management agreement between the CS Affiliated QPAM and such clients or E:\FR\FM\14NON1.SGM 14NON1 khammond on DSKJM1Z7X2PROD with NOTICES Federal Register / Vol. 84, No. 220 / Thursday, November 14, 2019 / Notices other written contractual agreement. Notwithstanding the above, a CS Affiliated QPAM will not violate the condition solely because a Covered Plan refuses to sign an updated investment management agreement. This condition will be deemed met for each Covered Plan that received a notice pursuant to PTE 2015–14 that meets the terms of this condition. (k) Notice to Covered Plan Clients. Each CS Affiliated QPAM provides a notice of the five-year exemption, along with a separate summary describing the facts that led to the Conviction (the Summary), which have been submitted to the Department, and a prominently displayed statement (the Statement) that the Conviction results in a failure to meet a condition in PTE 84–14, to each sponsor and beneficial owner of a Covered Plan that entered into a written asset or investment management agreement with a CS Affiliated QPAM, or the sponsor of an investment fund in any case where a CS Affiliated QPAM acts as a sub-adviser to the investment fund in which such ERISA-covered plan and IRA invests. The notice, Summary and Statement must be provided prior to, or contemporaneously with, the client’s receipt of a written asset management agreement from the CS Affiliated QPAM. The clients must receive a Federal Register copy of the notice of final five-year exemption within sixty (60) days of the effective date of this exemption. The notice may be delivered electronically (including by an email that has a link to the five-year exemption). (l) The CS Affiliated QPAM must comply with each condition of PTE 84– 14, as amended, with the sole exception of the violation of Section I(g) of PTE 84–14 that is attributable to the Conviction. If, during the Exemption Period, an entity within the Credit Suisse corporate structure is convicted of a crime described in Section I(g) of PTE 84–14, relief in this exemption would terminate immediately; (m)(1) By May 20, 2020, each CS Affiliated QPAM designates a senior compliance officer (the Compliance Officer) who will be responsible for compliance with the Policies and Training requirements described herein. For purposes of this condition (m), each relevant line of business within a CS Affiliated QPAM may designate its own compliance officer. The Compliance Officer must conduct an annual review for each twelve month period, beginning on November 21, 2019, (the Annual Exemption Review) to determine the adequacy and effectiveness of the implementation of the Policies and Training. With respect to the VerDate Sep<11>2014 17:47 Nov 13, 2019 Jkt 250001 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 the applicable CS Affiliated QPAM. (2) With respect to each Annual Exemption Review, the following conditions must be met: (i) The Annual Exemption Review includes a review of the CS 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 issued pursuant to this exemption or PTE 2015–14; any material change in the relevant business activities of the CS 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 CS Affiliated QPAMs; (ii) The Compliance Officer prepares a written report for each Annual Exemption Review (each, an Annual Exemption Report) that (A) summarizes his or her material activities during the preceding year; (B) sets forth any instance of noncompliance discovered during the preceding year, and any related corrective action; (C) details any change to the Policies or Training to guard against any similar instance of noncompliance occurring again; and (D) makes recommendations, as necessary, for additional training, procedures, monitoring, or additional and/or changed processes or systems, and management’s actions on such recommendations; (iii) In each Annual Exemption Report, the Compliance Officer must certify in writing that to the best of his or her knowledge at the time: (A) The report is accurate; (B) the Policies and Training are working in a manner which is reasonably designed to ensure that the Policies and Training requirements described herein are met; (C) any known instance of noncompliance during the preceding year and any related correction taken to date have been identified in the Annual Exemption Report; and (D) the CS Affiliated PO 00000 Frm 00072 Fmt 4703 Sfmt 4703 61939 QPAMs have complied with the Policies and Training, and/or corrected (or are correcting) any known instances of noncompliance in accordance with Section I(h) above; (iv) Each Annual Exemption Report must be provided to appropriate corporate officers of CSAG and each CS Affiliated QPAM to which such report relates; the head of Compliance and the general counsel (or their functional equivalent) of the relevant CS Affiliated QPAM; and must be made unconditionally available to the independent auditor described in Section I(i) above; (v) Each Annual Exemption Review, including the Compliance Officer’s written Annual Exemption Report, must be completed within three (3) months following the end of the period to which it relates; (n) Each CS Affiliated QPAM will maintain records necessary to demonstrate that the conditions of this five-year exemption have been met, for six (6) years following the date of any transaction for which the CS Affiliated QPAM relies upon the relief in the fiveyear exemption; (o) During the Exemption Period, CSAG: (1) Immediately discloses to the Department any Deferred Prosecution Agreement (a DPA) or Non-Prosecution Agreement (an NPA) that Credit Suisse Group AG or CSAG or any affiliate (as defined in Section VI(d) of PTE 84–14) enters into with the U.S Department of Justice, to the extent such DPA or NPA relates to the conduct described in Section I(g) of PTE 84–14 or section 411 of ERISA; and (2) immediately provides the Department any information requested by the Department, as permitted by law, regarding the agreement and/or the conduct and allegations that led to the agreement; (p) Within 60 days of the effective date of the five-year exemption, each CS 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 CS 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.13 With respect to this 13 In the event the Applicant meets this disclosure requirement through Summary Policies, changes to E:\FR\FM\14NON1.SGM Continued 14NON1 61940 Federal Register / Vol. 84, No. 220 / Thursday, November 14, 2019 / Notices 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 (q) A CS Affiliated QPAM will not fail to meet the terms of this five-year exemption, solely because a different CS Affiliated QPAM fails to satisfy a condition for relief under this five-year exemption described in Sections I(c), (d), (h), (i), (j), (k), (l), (n), and (p); or, if the independent auditor described in Section I(i) fails a provision of the exemption other than the requirement described in Section I(i)(11), provided that such failure did not result from any actions or inactions of CSAG or its affiliates. khammond on DSKJM1Z7X2PROD with NOTICES Section II. Definitions (a) The term ‘‘Conviction’’ means the judgment of conviction against CSAG for one count of conspiracy to violate section 7206(2) of the Internal Revenue Code in violation of Title 18, United States Code, Section 371, that was entered in the District Court for the Eastern District of Virginia in Case Number 1:14–cr–188–RBS, on November 21, 2014. (b) 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 CS Affiliated QPAM relies on PTE 84–14, or with respect to which a CS Affiliated QPAM (or any CSAG 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 CS 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. (c) The term ‘‘CSAG’’ means Credit Suisse AG. (d) The term ‘‘CS Affiliated QPAM’’ means a ‘‘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 CSAG is a current or future ‘‘affiliate’’ (as defined in Section VI(d) of PTE 84–14), but is not a CS Related QPAM. The term ‘‘CS Affiliated QPAM’’ excludes the parent entity, CSAG. 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. VerDate Sep<11>2014 17:47 Nov 13, 2019 Jkt 250001 (e) The term ‘‘CS 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 CSAG owns a direct or indirect five (5) percent or more interest, but with respect to which CSAG is not an ‘‘affiliate’’ (as defined in section VI(d)(1) of PTE 84– 14). (f) The term ‘‘Exemption Period’’ means the period from November 21, 2019 through November 20, 2024. Effective Date: This five-year exemption will be in effect for five years beginning on the expiration of PTE 2015–14. FOR FURTHER INFORMATION CONTACT: Mrs. Blessed Chuksorji-Keefe of the Department, telephone (202) 693–8567. (This is not a toll-free number.) Signed at Washington, DC, this 8th day of November, 2019. Lyssa Hall, Director, Office of Exemption Determinations, Employee Benefits Security Administration, U.S. Department of Labor. [FR Doc. 2019–24750 Filed 11–13–19; 8:45 am] BILLING CODE 4510–29–P DEPARTMENT OF LABOR Occupational Safety and Health Administration [Docket No. OSHA–2018–0007] National Advisory Committee on Occupational Safety and Health (NACOSH): Notice of Membership Meeting Occupational Safety and Health Administration (OSHA), Labor. ACTION: Announcement of a NACOSH meeting. AGENCY: NACOSH will meet on December 12, 2019, in Washington, DC. DATES: NACOSH will meet from 9:30 a.m. to 4:00 p.m., ET, Thursday, December 12, 2019. ADDRESSES: NACOSH will meet in Room N–5437, Conference Rooms A–D, U.S. Department of Labor, 200 Constitution Avenue NW, Washington, DC 20210. Submission of comments and requests to speak: Submit comments and requests to speak at the NACOSH meeting by December 5, 2019, identified by the docket number for this Federal Register notice (Docket No. OSHA– 2018–0007), using one of the following methods: Electronically: You may submit comments, including attachments, SUMMARY: PO 00000 Frm 00073 Fmt 4703 Sfmt 4703 electronically at: http:// www.regulations.gov, the Federal eRulemaking Portal. Follow the online instructions for submitting comments. Facsimile: If your comments, including attachments, do not exceed 10 pages, you may fax them to the OSHA Docket Office at (202) 693–1648. Regular mail, express mail, hand delivery, and messenger or courier service: You may submit comments and attachments to the OSHA Docket Office, Docket No. OSHA–2018–0007, Occupational Safety and Health Administration, U.S. Department of Labor, Room N–3653, 200 Constitution Avenue NW, Washington, DC 20210. Deliveries (express mail, hand (courier) delivery, and messenger service) are accepted during the OSHA Docket Office’s normal business hours, 10:00 a.m. to 3:00 p.m., ET. Instructions: All submissions must include the agency name and the OSHA docket number for this Federal Register notice (Docket No. OSHA–2018–0007). Because of security-related procedures, submissions by regular mail may result in a significant delay in receipt. Please contact the OSHA Docket Office for information about security procedures for making submissions by express mail, hand (courier) delivery, and messenger service. OSHA will place comments and requests to speak, including personal information, in the public docket, which may be available online. Therefore, OSHA cautions interested parties about submitting personal information such as Social Security numbers and birthdates. Docket: To read or download documents in the public docket for this NACOSH meeting, go to http:// www.regulations.gov. All documents in the public docket are listed in the index; however, some documents (e.g., copyrighted material) are not publicly available to read or download through http://www.regulations.gov. All submissions are available for inspection and, when permitted, copying at the OSHA Docket Office at the above address. For information on using http://www.regulations.gov to make submissions or to access the docket, click on the ‘‘Help’’ tab at the top of the homepage. Contact the OSHA Docket Office for information about materials not available through that website and for assistance in using the internet to locate submissions and other documents in the docket. Requests for special accommodations: Please submit requests for special accommodations for this NACOSH meeting by December 5, 2019, to Ms. Carla Marcellus, OSHA, Technical Data Center, Room N–3508, U.S. Department E:\FR\FM\14NON1.SGM 14NON1

Agencies

[Federal Register Volume 84, Number 220 (Thursday, November 14, 2019)]
[Notices]
[Pages 61928-61940]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-24750]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF LABOR

Employee Benefits Security Administration

[Prohibited Transaction Exemption 2019-07; Exemption Application No. D-
11962]


Notice of Exemption Involving Credit Suisse Group AG (CSG) and 
Its Current and Future Affiliates, Including Credit Suisse AG (CSAG) 
(Collectively, Credit Suisse or the Applicant), Located in Zurich, 
Switzerland

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

ACTION: Notice of individual exemption.

-----------------------------------------------------------------------

SUMMARY: This document contains an 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). 
This notice is for the following granted exemption: 2019-07, Credit 
Suisse AG, D-11962.

DATES: This five-year exemption will be in effect for five years 
beginning on the expiration of PTE 2015-14.

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

SUPPLEMENTARY INFORMATION: A notice was published in the Federal 
Register of the pendency before the Department of a proposal to grant 
this exemption. The notice set forth a summary of facts and 
representations contained in the application for exemption and referred 
interested persons to the application for a complete statement of the 
facts and representations. The application has been available for 
public inspection at the Department in Washington, DC. The notice also 
invited interested persons to submit comments on the requested 
exemption to the Department. In addition, the notice stated that any 
interested person might submit a written request that a public hearing 
be held (where appropriate). The applicant has represented that it has 
complied with the requirements of the notification to interested 
persons. One request for a hearing was received by the Department. 
Public comments were received by the Department as described in the 
granted exemption.
    The notice of proposed exemption was issued and the exemption is 
being granted solely by the Department because, effective December 31, 
1978, section 102 of Reorganization Plan No. 4 of 1978, 5 U.S.C. App. 1 
(1996), transferred the authority of the Secretary of the Treasury to 
issue exemptions of the type proposed to the Secretary of Labor.

Discussion

    On July 16, 2019, the Department of Labor (the Department) 
published a notice of proposed exemption in the Federal Register at 84 
FR 33966, for certain entities with specified relationships to CSAG (CS 
Affiliated QPAMs) to continue to rely upon the relief provided by PTE 
84-14 for a period of five years,\1\ notwithstanding CSAG's criminal 
conviction, as described herein. The Department is granting this 
exemption in order to ensure that Covered Plans \2\ whose

[[Page 61929]]

assets are managed by a CS Affiliated QPAM may continue to benefit from 
the relief provided by PTE 84-14. The exemption is effective from 
November 21, 2019 through November 20, 2024 (the Exemption Period).
---------------------------------------------------------------------------

    \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.
    \2\ The term ``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 CS 
Affiliated QPAM relies on PTE 84-14, or with respect to which a CS 
Affiliated QPAM (or any CS 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 CS Affiliated QPAM has 
expressly disclaimed reliance on QPAM status or PTE 84-14 in 
entering into its contract, arrangement, or agreement with the 
ERISA-covered plan or IRA.
---------------------------------------------------------------------------

    No relief from a violation of any other law is provided by this 
exemption, including any criminal conviction described in the proposed 
exemption, as clarified herein. Furthermore, the Department cautions 
that the relief in this exemption will terminate immediately if, among 
other things, an entity within the Credit Suisse corporate structure is 
convicted of a crime described in Section I(g) of PTE 84-14 (other than 
the Conviction) during the Exemption Period. The terms of this 
exemption have been specifically designed to promote conduct that 
adheres to basic fiduciary standards under ERISA and the Code. The 
exemption also aims to ensure that plans and IRAs can terminate 
relationships in an orderly and cost effective fashion in the event a 
plan or IRA fiduciary determines it is prudent for the plan or IRA to 
sever 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. All comments and requests for a hearing 
were due by August 30, 2019. The Department received three comment 
letters in response to the proposed exemption.\3\ One letter did not 
identify substantive issues. Credit Suisse commented, and requested 
numerous revisions to the proposed exemption. Three individuals (Dr. 
Paul Morjanoff, James S. Henry and Andreas Frank) joined together in 
one letter (the Morjanoff Letter).\4\ In the Morjanoff Letter, the 
individuals: Requested a hearing; commented on Credit Suisse's letter; 
and requested revisions to the proposed exemption.\5\
---------------------------------------------------------------------------

    \3\ The letters are summarized below. The commenters' letters 
are available in their entirety by contacting 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, and referencing Application No. D-11962.
    \4\ The letter included a statement that, ``Mr. Bartlett Naylor, 
Senior Financial Policy Advocate, Public Citizen's Congress Watch, 
also formally requests a hearing.'' However, Mr. Naylor did not 
submit any information that validates or supports this request.
    \5\ The Department requested that Credit Suisse respond, on the 
record, to the Morjanoff Letter. Credit Suisse's response may be 
requested through the Public Disclosure Office in the Employee 
Benefits Security Administration, Room N-1515, U.S. Department of 
Labor, 200 Constitution Avenue NW, Washington, DC 20210, by 
referencing Application No. D-11962.
---------------------------------------------------------------------------

    After considering these submissions, the Department has determined 
to grant the proposed exemption, with revisions, as described below.

I. The Credit Suisse Comment Letter

    Credit Suisse Comment 1. Credit Suisse requested that the 
Department reconsider its decision to impose the exemption's annual 
audit requirement. Credit Suisse contends: (1) The conviction occurred 
outside of the CS Affiliated QPAMs, in an entity that is separate from 
the asset management business; (2) the audit proposed for the second 
five-year term of relief is more burdensome than the audit imposed 
under the existing exemption for the first five-year term; and (3) the 
exemption's Compliance Officer requirement is a reasonable substitute 
for a full audit. Credit Suisse represents that it has demonstrated a 
strong culture of compliance and commitment to addressing the 
Department's articulated concerns.
    Department's Response: The Department is not eliminating the 
exemption's audit requirement. CSAG, which is the corporate parent of 
the CS Affiliated QPAMs, knowingly and willfully engaged in serious, 
substantial, pervasive and decades-long criminal misconduct. The audits 
required by this exemption are structured to ensure that CS Affiliated 
QPAMs remain insulated from CSAG and the criminal misconduct that gave 
rise to the Conviction. Each future annual audit is essential to the 
Department's determination that, prospectively, this exemption will be 
in the interest of, and protective of, Covered Plans, and will be 
administratively feasible, as required by Section 408(a) of ERISA.
    Credit Suisse Comment 2. Credit Suisse requests that, if the audit 
requirement is not eliminated, the Department revise the certification 
process for an Audit Report's addendum. In this regard, Section I(i)(5) 
of the exemption provides, in pertinent part, that the CS 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 CS Affiliated 
QPAM. Any action taken or the plan of action to be taken by the 
respective CS Affiliated QPAM must be included in an addendum to the 
Audit Report (such addendum must be completed prior to the 
certification described in Section I(i)(7) below).
    Section I(i)(7) of the exemption requires, in relevant part, that a 
senior executive officer of the CS Affiliated QPAM certify in writing, 
under penalty of perjury, that the CS Affiliated QPAM addressed, 
corrected, or 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.
    Credit Suisse states that ``it would be preferable'' to require 
that the addendum be completed as part of the senior executive officer 
certification process, rather than prior to it. According to Credit 
Suisse, requiring completion of addenda as part of the certification 
process would allow for meaningful, comprehensive input by the 
certifying officer.
    Department's Response: The Department is not making the requested 
modification. The certification of a completed addendum by a CS 
executive officer ensures that a senior, knowledgeable corporate 
officer with relevant experience has reviewed the actual actions taken, 
or the actual plans of action that will be taken, by the CS Affiliated 
QPAM, to address any instances of the CS Affiliated QPAM's 
noncompliance or inadequacy. The Department is not persuaded that 
certification of actions, or plans of action, that are not finalized 
provides meaningful protection to Covered Plans. Further, nothing in 
the exemption precludes a certifying officer from providing meaningful, 
comprehensive input prior to the finalization of the addendum.
    Credit Suisse Comment 3. Section I(i)(8) provides, in part: ``The 
Risk Committee, the Audit Committee, and CSAG's Board of Directors are 
provided a copy of each Audit Report. . . and the head of Compliance 
and the General Counsel must review the Audit Report for each CS 
Affiliated QPAM and must certify in writing, under penalty of perjury, 
that such officer has reviewed each Audit Report . . . .''
    First, Credit Suisse states that the requirement that the Audit 
Report be provided to the Risk Committee, Audit Committee, and Board of 
Directors is an escalation compared to not only the

[[Page 61930]]

existing exemption but to prior exemptions for similarly situated 
applicants. PTE 2015-14 contains no requirement to provide the audit 
report to a committee of the Board of Directors. Credit Suisse notes 
that the Department granted exemptions arising from criminal 
convictions of entities that conspired to manipulate the price of U.S. 
dollars and euros exchanged in the foreign currency exchange (FX) spot 
market (the FX exemptions),\6\ and the Audit Reports in those 
exemptions were required to be provided to either the Risk Committee or 
the Audit Committee of the entity's Board of Directors (depending on 
their structure), not both, and not to the full Board.
---------------------------------------------------------------------------

    \6\ Citicorp, JPMorgan Chase & Co. and Barclays PLC were 
criminally convicted for conspiring to manipulate the price of U.S. 
dollars and euros exchanged in the foreign currency exchange (FX) 
spot market (the FX convictions). QPAMs related to those entities 
received five year exemptions (the FX exemptions) allowing them to 
continue to rely on the relief provided by PTE 84-14, 
notwithstanding the FX convictions. See PTE 2017-05 (Citicorp), PTE 
2017-03 (JPMorgan Chase & Co.) and PTE 2017-06 (Barclays).
---------------------------------------------------------------------------

    Second, Credit Suisse requests that the condition be revised to 
require that an executive officer of Credit Suisse AG must review the 
Audit Report for each CS Affiliated QPAM and must certify in writing, 
under penalty of perjury, that such officer has reviewed each Audit 
Report.
    Department's Response: The Department is not persuaded that the 
conditions in this exemption must mirror the conditions in the FX 
exemptions. First, the Department's individual exemptions and the 
conditions therein are not precedential. Further, the Department does 
not view all criminal convictions as analogous when determining whether 
to grant an individual exemption and how best to protect affected plans 
and IRAs. Each applicant for an exemption must demonstrate, and the 
Department must affirmatively find, on the record, that the requested 
relief is in the interest of, and protective of, affected plans and 
IRAs, and administratively feasible. Finally, the Department will not 
fail to impose a condition it believes will enhance the protection of 
affected plans and IRAs, merely because an earlier exemption does not 
contain that condition.
    It is the Department's understanding that the primary function of 
Credit Suisse's Risk Committee is to assist the Credit Suisse Group AG 
Board of Directors in fulfilling its risk management responsibilities 
as defined by applicable law and regulations as well as Credit Suisse 
Group AG's articles of association and internal regulations. 
Additionally, it is the Department's understanding that the primary 
function of Credit Suisse's Audit Committee is to assist the Board of 
Directors in its oversight role by monitoring and assessing the 
financial statements of Credit Suisse. Given those roles, the 
Department believes that receipt of the Audit Report by either the Risk 
Committee or the Audit Committee will provide a meaningful protection 
to Covered Plans. Consistent with this requirement, the exemption 
mandates that a senior executive officer of the Risk or Audit Committee 
that received the Audit Report must review the Audit Report, and must 
certify in writing, under penalty of perjury, that the officer has 
reviewed the Audit Report.
    Credit Suisse Comment 4. Section I(i)(9) requires, in part, that 
each CS Affiliated QPAM must provide its certified Audit Report to the 
Department no more than 30 days following the completion of the Audit 
Report. Credit Suisse requests that the time for delivering the audit 
report to the Department be extended from 30 days to 45 days.
    Department's Response: The Department has revised Section I(i)(9) 
as requested.
    Credit Suisse Comment 5. Credit Suisse requests that relief to the 
CS Affiliated QPAMs and to Covered Plans not be conditioned upon the 
independent auditor's cooperation with the Department or disclosure of 
work papers. In this regard, Section I(i)(11) provides, in part: ``The 
auditor must provide the Department, upon request, for inspection and 
review, access to all of the work papers created and used in connection 
with the audit, provided the access and inspection are otherwise 
permitted by law. . . .'' And Section I(q) provides, in part: ``A CS 
Affiliated QPAM will not fail to meet the terms of this five-year 
exemption solely because a different CS Affiliated QPAM fails to 
satisfy a condition for relief described in Sections I(c), (d), (h), 
(i), (j), (k), (l), (n), and (p); or, if the independent auditor 
described in Section I(i) fails a provision of the exemption other than 
the requirement described in Section I(i)(11), provided that such 
failure did not result from any actions or inactions of CSAG or its 
affiliates.''
    Department's Response: The Department is not making the requested 
revision. The Department expects the CS Affiliated QPAMs and the 
Independent Auditor will make every effort to ensure that their 
respective responsibilities under the exemption are fulfilled, and to 
contact the Office of Exemption Determinations in a timely manner any 
time guidance is needed. The Department is not aware of any instance 
where an independent auditor has failed to meet its responsibilities 
under a QPAM Section I(g) individual exemption.
    Credit Suisse Comment 6. Section I(a) of the proposed exemption 
provides, in part: ``For purposes of this exemption, including 
paragraph (c) below, ``participate in'' refers not only to active 
participation in the criminal conduct of CSAG that is the subject of 
the Conviction, but also to knowing approval of the criminal conduct, 
or knowledge of such conduct without taking active steps to prohibit 
such conduct, including reporting the conduct to such individual's 
supervisors, and to the Board of Directors. In this regard, unless the 
individual reasonably believed that his or her initial report was given 
an appropriate response within a reasonable time, the individual must 
further report the criminal conduct to the person or persons the 
individual reasonably expected would carry out the appropriate 
response.''
    Credit Suisse requests that this condition be replaced with the 
language in the FX exemptions. No prior exemption has contained a 
requirement that an individual determine whether his or her initial 
report of criminal conduct was appropriately addressed, and Credit 
Suisse submits that this requirement is not necessary to protect 
Covered Plans, and the requirement is inherently problematic. According 
to Credit Suisse, instead of reflecting a state of affairs that existed 
at the time of the criminal conduct, the condition appears to be 
prospective in that it requires further action by any individual with 
knowledge of the criminal conduct. Credit Suisse states that even the 
parallel conditions in the exemptions granted to BNP Paribas in May 
2018 and to UBS in February 2019, both for third convictions, applied 
only to the criminal conduct at issue and did not contain a prospective 
component. Credit Suisse performed the diligence required by the 
Department under the existing exemption. Credit Suisse states that the 
requirement is unjust and, with the significant passage of time, 
potentially impossible, to now require the investigation and diligence 
required by this provision.
    Credit Suisse additionally argues that the condition as written 
involves a subjective assessment of the state of mind of the reporting 
individual at the time of the criminal conduct. According to Credit 
Suisse, this analysis requires the Applicant to speculate about what an 
individual may have been thinking, which is nearly impossible to comply

[[Page 61931]]

with or confirm, especially five years removed from the criminal 
conduct.
    The applicant also complains that the term ``reasonably'' is used 
three times and is not defined, resulting in a further lack of clarity 
as to whether and how this condition could be satisfied. Credit Suisse 
submits that this condition is not practically enforceable and that 
there is no need to deviate from the objective conditions used in the 
FX exemptions.
    Department's Response: The Department is revising the exemption in 
part in response to the Credit Suisse request. The condition, as 
written, is consistent with an essential premise of the QPAM class 
exemption: That the QPAM, and those persons and entities that control 
the QPAM, act with integrity. The condition, as written, is also 
consistent with representations by Credit Suisse: That the criminal 
misconduct did not occur within any CS Affiliated QPAM. The Department 
carefully considered those representations when structuring the 
protective conditions of PTE 2015-14 and this exemption. The Department 
expects that each CS Affiliated QPAM will use every effort to ensure 
that this condition is met throughout the duration of the exemption. 
The Department is revising the condition by removing the last sentence 
of Section I(a) beginning with ``In this regard . . .'' as requested by 
Credit Suisse.
    Credit Suisse Comment 7. Section I(d) of the proposed exemption 
provides, in part: At all times during the Exemption Period, a CS 
Affiliated QPAM will not use its authority or influence to direct an 
``investment fund'' (as defined in Section VI(b) of PTE 84-14) that is 
subject to ERISA or the Code and managed by such CS Affiliated QPAM 
with respect to one or more Covered Plans, to enter into any 
transaction with CSAG or to engage CSAG 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. A Credit Suisse Affiliated QPAM will not fail this 
condition solely because:
    (1) A CSAG affiliate serves as a local sub-custodian that is 
selected by an unaffiliated global custodian that, in turn, is selected 
by someone other than a CS Affiliated QPAM or CS Related QPAM;
    (2) CSAG provides only necessary, non-investment, nonfiduciary 
services that support the operations of CS Affiliated QPAMs, at the CS 
Affiliated QPAM's own expense, and the Covered Plan is not required to 
pay any additional fee beyond its agreed-to asset management fee. This 
exception does not permit CSAG or its branches to provide any service 
to an investment fund managed by a CS Affiliated QPAM or CS Related 
QPAM; or
    (3) CSAG employees are double-hatted, seconded, supervised, or 
subject to the control of a CS Affiliated QPAM.
    First, regarding Section I(d)(1), Credit Suisse states: ``the 
formulation here is not practically workable and must be revised. 
Although Section I(d)(1) allows a CSAG affiliate to serve as a local 
sub-custodian, this condition does not benefit the Covered Plan clients 
of Credit Suisse because only the Bank and its branches--not an 
affiliate--currently serve as local sub-custodians for the four largest 
plan global custodians. While in some markets, it might be possible for 
a global custodian to select an affiliate or subsidiary of a bank, that 
situation is very rare.''
    Department's Response: The Department is not revising Section 
I(d)(1). The criminal wrong-doing that is the subject of the Conviction 
was committed by CSAG, and the charging documents cite participation by 
CSAG subsidiaries. In this regard, as noted in the proposed exemption, 
on May 19, 2014, in the U.S. District Court for the Eastern District of 
Virginia (the District Court),\7\ the U.S. Department of Justice 
charged CSAG with, and CSAG pled guilty to, one criminal count of 
conspiracy to violate Code section 7206(2).\8\ The charging documents 
cited Credit Suisse and its subsidiaries, Credit Suisse Fides and 
Clariden Leu Ltd., for willfully aiding, assisting in, procuring, 
counseling, and advising the preparation and presentation of false 
income tax returns and other documents to the Internal Revenue Service 
of the Treasury Department (IRS), for decades, prior to and through 
approximately 2009. On May 19, 2014, pursuant to a plea agreement, CSAG 
entered a guilty plea for assisting U.S. citizens in federal income tax 
evasion. On November 21, 2014, the District Court entered a judgment of 
conviction against CSAG.
---------------------------------------------------------------------------

    \7\ United States of America v. Credit Suisse AG, Case Number 
1:14-cr-188-RBS.
    \8\ Section 7206(2) of the Code prohibits willfully aiding, 
assisting, procuring, counseling, or advising the preparation or 
presentation of false income tax returns. Section 371 of Title 18 of 
the United States Code generally prohibits two or more persons from 
conspiring either to commit any offense against the United States or 
to defraud the United States.
---------------------------------------------------------------------------

    Credit Suisse has not adequately demonstrated that permitting CSAG 
and its subsidiaries and branches to participate in the sub-custody 
transactions described in Section I(d)(1) of the exemption would be in 
the interest of, and protective of, affected Covered Plans.
    Second, regarding Section I(d)(2), Credit Suisse states: The 
condition should be clarified to permit CSAG to provide support 
services to the CS Affiliated QPAMs regardless of whether such support 
also benefits an investment fund managed by a QPAM, as long as the 
Covered Plan pays no additional fee. According to Credit Suisse, the 
condition, as written, creates confusion in any situation where CSAG 
may provide services to the CS Affiliated QPAMs because of the 
prohibition on services to investment funds managed by the QPAMs.
    Department's Response: The Department is not revising the 
condition. Credit Suisse has not demonstrated that the condition 
creates confusion. In the Department's view, the condition is clear and 
unambiguous: CSAG may only provide necessary, non-investment, non-
fiduciary services that support the operations of CS Affiliated QPAMs, 
at the CS Affiliated QPAM's own expense. Further, the Department notes 
that if it is unclear whether a particular arrangement or situation 
satisfies a term in the exemption, the CS Affiliated QPAM should 
resolve the ambiguity in light of the exemption's protective purposes. 
To the extent additional clarification is necessary, persons or 
entities should contact EBSA's Office of Exemption Determinations, at 
202-693-8540.
    Credit Suisse Comment 8. Section I(l) of the proposed exemption 
provides, in part: ``The CS Affiliated QPAM must comply with each 
condition of PTE 84-14, as amended, with the sole exception of the 
violation of Section I(g) of PTE 84-14 that is attributable to the 
Conviction. If, during the Exemption Period, an entity within the 
Credit Suisse corporate structure is convicted of a crime described in 
Section I(g) of PTE 84-14, (other than the Conviction), including a 
conviction in a foreign jurisdiction for a crime described in Section 
I(g) of PTE 84-14, relief in this exemption would terminate 
immediately.''
    Credit Suisse requests that the Department ``reconsider its 
additional condition that a conviction in a foreign jurisdiction 
automatically would disqualify Credit Suisse from relief under Section 
I(g) of PTE 84-14 and under this individual exemption, as stated in 
Section I(l).'' Credit Suisse submits that, should the Department 
include the condition in Section I(l) for Credit Suisse and later 
reconsider its view, the CS Affiliated QPAMs would be treated 
differently from similarly

[[Page 61932]]

situated applicants and the regulated community as a whole.
    Department's Response: The Department has removed the condition's 
reference to foreign convictions. This revision should not be 
interpreted, however, as the Department's affirmation that a violation 
of Section I(g) of PTE 84-14 does not occur when a person or entity is 
convicted in a foreign jurisdiction for a crime described in Section 
I(g) of PTE 84-14.
    Credit Suisse Comment 9. Credit Suisse requests three revisions to 
Sections I(a) and I(b) of the proposed exemption. Section I(a) 
provides, in relevant part: ``The CS Affiliated QPAMs (including their 
officers, directors, agents other than CSAG, employees of such QPAMs, 
and CSAG employees described in subparagraph (d) above) did not know 
of, have reason to know of, or participate in the criminal conduct of 
CSAG that is the subject of the Conviction . . ''
    Section I(b) of the proposed exemption provides: ``The CS 
Affiliated QPAMs and the CS Related QPAMs (including their officers, 
directors, agents other than CSAG, employees of such QPAMs, and CSAG 
employees described in subparagraph (d) above) did not receive direct 
compensation, or knowingly receive indirect compensation, in connection 
with the criminal conduct of CSAG that is the subject of the 
Conviction.''
    First, Credit Suisse requests that the Department qualify that the 
conditions apply only to employees of the CS Affiliated and Related 
QPAMs who had responsibility for or exercised authority in connection 
with the management of plan assets. Credit Suisse states that 
comparable sections in the FX exemptions covered only QPAM employees 
``who had responsibility for, or exercised authority in connection with 
the management of plan assets.''
    Second, Credit Suisse states that the phrase ``or knowingly receive 
indirect compensation'' implicates the same problems as the definition 
of ``participated in,'' described above. Credit Suisse states that it 
performed the diligence required by the Department under the existing 
exemption, and it is potentially impossible, given the passage of time, 
to perform the investigation and diligence required by this provision.
    Third, Credit Suisse requests that the Department clarify that 
references to CSAG employees described in subparagraph (d) of the 
proposed exemption, is intended to refer only to subparagraph (d)(3).
    Department's Response: The Department is not making the first two 
requested revisions. The FX convictions involve criminal misconduct 
that occurred within non-asset management divisions of certain entities 
that acted as QPAMs. Consistent with those facts, Section I(a) of each 
FX exemption precludes relief if a QPAM's asset management division 
employs an individual who knew of the misconduct, had reason to know of 
the misconduct, or who participated in the relevant FX criminal 
misconduct. Also consistent with those facts, Section I(b) of each FX 
exemption precludes relief if an employee in a QPAM's asset management 
division received direct compensation or knowingly received indirect 
compensation from participating in the criminal conduct that gave rise 
to the relevant FX conviction.
    It is the Department's understanding, consistent with Credit 
Suisse's representations, that the CSAG Conviction arose from criminal 
misconduct that occurred outside any CS Affiliated QPAM. No CS 
Affiliated QPAM employee (asset management or otherwise) knew of, had 
reason to know of, or participated in, the criminal misconduct that 
gave rise to the CSAG Conviction. Section I(a) and Section I(b) of the 
exemption are structured consistent with both the record and with 
Credit Suisse's representations. Credit Suisse has not demonstrated 
that it would be in the interest of Covered Plans if individuals who 
participated in, or were compensated from, the CSAG criminal misconduct 
were permitted to work in a non-asset management division of a CS 
Affiliated QPAM.
    Regarding Credit Suisse's comment regarding the difficulty a CS 
Affiliated QPAM may have in complying with these conditions, the 
Department expects that each CS Affiliated QPAM will use every effort 
to ensure that the conditions are complied with throughout the duration 
of the exemption.
    Credit Suisse's third requested revision is consistent with the 
Department's intent, and the Department has made the requested 
revision.
    Credit Suisse Comment 10. Section I(f) provides: ``A CS Affiliated 
QPAM or a CS 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 criminal conduct that is the subject of the 
Conviction; or cause the CS Affiliated QPAM or CS Related QPAM, its 
affiliates, or related parties to directly or indirectly profit from 
the criminal conduct that is the subject of the Conviction.''
    Credit Suisse requests that the term ``related parties'' be removed 
from this condition. Credit Suisse states that the term is undefined 
and should be removed.
    For clarity, the Department is removing the term ``related 
parties.''
    Credit Suisse Comment 11. Section I(h)(1) provides, in pertinent 
part: ``Each CS Affiliated QPAM must continue to maintain, adjust (to 
the extent necessary) or immediately implement and follow written 
policies and procedures (the Policies). The Policies must require and 
be reasonably designed to ensure that:
    (i) The asset management decisions of the CS Affiliated QPAMs are 
conducted independently of CSAG's corporate management and business 
activities, and without considering any fee a CS-related local sub-
custodian may receive from those decisions. This condition does not 
preclude a CS Affiliated QPAM from receiving publicly available 
research and other widely available information from a CSAG affiliate;
* * * * *
    (vi) The CS Affiliated QPAM complies with the terms of this five-
year exemption, and CSAG complies with the terms of Section I(d)(2).''
    First, Credit Suisse states that the phrase ``or immediately 
implement'' should be deleted. ``Immediately'' is not defined, and in 
Credit Suisse's view, it is unrealistic for the CS Affiliated QPAMs to 
``immediately implement'' the policies required under the exemption. 
Credit Suisse requests that the Department revise the condition, such 
that each CS Affiliated QPAM must continue to maintain and follow or, 
within six (6) months of the effective date of this exemption, adjust 
(to the extent necessary) and implement written policies.
    Department's Response: Credit Suisse has not demonstrated or 
supported its contention that it would be ``unrealistic'' for the CS 
Affiliated QPAMs to ``immediately implement'' the policies required by 
the exemption. However, the Department believes that Covered Plans 
would be adequately protected if the CS Affiliated QPAMs continue to 
follow and maintain policies the Policies required by PTE 2015-14 for 
six months following the effective date of this exemption (i.e., until 
May 20, 2020). Notwithstanding this, the Department notes that the 
policies required by PTE 2015-14 do not cover transactions or 
arrangements described in Section I(d) of this exemption. Therefore, 
the Department is

[[Page 61933]]

revising Section I(h)(1), which now begins as follows: Prior to May 21, 
2020, a CS Affiliated QPAM may continue to maintain, follow and 
implement the policies described in Section I(h)(1) of PTE 2015-14. 
Otherwise, each CS Affiliated QPAM must maintain, adjust (to the extent 
necessary), implement, and follow the written policies and procedures 
described below (the Policies). Notwithstanding the preceding sentence, 
a CS Affiliated QPAM may not engage in any transaction or arrangement 
described in Section I(d)(1) through (3) of this exemption prior to the 
date the Policies have been developed, implemented and followed.
    Second, Credit Suisse notes that Section I(h)(1)(i) includes the 
additional prohibition that asset management decisions are made 
``without considering any fee a CS-related local sub-custodian may 
receive from those decisions.'' Credit Suisse states that the scope of 
this condition is unclear by virtue of the ambiguous word 
``considering. . .'' Credit Suisse requests that the Department 
substitute the following language: ``without putting the fact of any 
fee a CS-related local sub-custodian may receive before the interest of 
the plan client.''
    Department's Response: The Department is not revising the 
condition. Credit Suisse has not demonstrated why the term 
``considering'' is ambiguous. As written, the condition makes it clear 
that the Policies must require and be reasonably designed to ensure 
that the CS Affiliated QPAM's asset management decisions do not take 
into account the fee a CS-related local sub-custodian may receive from 
those decisions.
    Third, Credit Suisse states that the second clause of Section 
I(h)(1)(vi) ``is impracticable for the reasons [Credit Suisse raised] 
in connection with Section I(d)(2).''
    Department's Response: The Department is not revising the second 
clause of Section I(h)(1)(vi) for the same reasons the Department 
expressed in response to Credit Suisse's request to revise Section 
I(d)(2).
    Credit Suisse Comment 12. Section I(h)(2) provides: ``Any violation 
of, or failure to comply with, an item in subparagraphs (h)(1)(ii) 
through (vi) of this section, 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 
discovery of such failure to so correct, in writing, to appropriate 
corporate officers, the head of Compliance and the General Counsel (or 
their functional equivalent) of the relevant CS Affiliated QPAM, and 
the independent auditor responsible for reviewing compliance with the 
Policies. A CS 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 paragraph (2).''
    Credit Suisse states that the notification requirements of this 
condition are unclear by virtue of the phrase ``appropriate corporate 
officers.'' Credit Suisse suggests instead that subsection (h)(2) read 
as follows: ``Any violation of, or failure to comply with, an item in 
subparagraphs (h)(1)(ii) through (vi) of this section, 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 discovery of such failure to so correct, in writing, 
to the head of Compliance and the General Counsel (or their functional 
equivalent) of the relevant CS Affiliated QPAM, and the independent 
auditor responsible for reviewing compliance with the Policies. A CS 
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), or 
provided that it adheres to the reporting requirements set forth in 
this paragraph (2), if applicable.''
    Department's Response: The Department is removing the condition's 
reference to ``appropriate corporate officers.'' However, the 
Department is not making Credit Suisse's remaining requested revisions. 
Credit Suisse has not demonstrated why a CS Affiliated QPAM should not 
be treated as having failed to develop, implement, maintain or follow 
the Policies merely because it adheres to the condition's reporting 
requirements.
    Credit Suisse Comment 13. Section I(h)(3) provides, in part: ``Each 
CS Affiliated QPAM must maintain, adjust (to the extent necessary), and 
implement a program of training (the Training), conducted at least 
annually, for all relevant CS Affiliated QPAM asset/portfolio 
management, trading, legal, compliance, and internal audit personnel. 
The Training must:
* * * * *
    (ii) Be conducted by a professional who has been prudently selected 
and who has appropriate technical training and proficiency with ERISA 
and the Code.''
    Credit Suisse requests confirmation that the training may be 
conducted electronically or via a website. In addition, Credit Suisse 
requests a period of six (6) months from the effective date of the 
exemption to adjust and implement training as necessary.
    Department's Response: The Department declines to incorporate the 
Applicant's requested language regarding the use of electronic or web-
based methods in conducting the Training. Further, the training 
required by this exemption is substantially similar to the training 
required by PTE 2015-14, and Credit Suisse has not demonstrated the 
need to delay the training required by this exemption for six months. 
Given the importance of this condition, the Department is not revising 
the condition to allow the six month adjustment/implementation period 
sought by Credit Suisse.
    Credit Suisse Comment 14. Section I(k)(1) provides: ``Each CS 
Affiliated QPAM provides a notice of the five-year exemption, along 
with a separate summary describing the facts that led to the Conviction 
(the Summary), which have been submitted to the Department, and a 
prominently displayed statement (the Statement) that the Conviction 
results in a failure to meet a condition in PTE 84-14, to each sponsor 
and beneficial owner of a Covered Plan that entered into a written 
asset or investment management agreement with a CS Affiliated QPAM, or 
the sponsor of an investment fund in any case where a CS Affiliated 
QPAM acts as a sub-adviser to the investment fund in which such ERISA-
covered plan and IRA invests. The notice, Summary and Statement must be 
provided prior to, or contemporaneously with, the client's receipt of a 
written asset management agreement from the CS Affiliated QPAM. If this 
five-year exemption is granted, the clients must receive a Federal 
Register copy of the notice of final five-year exemption within sixty 
(60) days of its publication in the Federal Register. The notice may be 
delivered electronically (including by an email that has a link to the 
five-year exemption).''
    Credit Suisse requests that the sixty-day period to provide notice 
of the final

[[Page 61934]]

exemption run from the effective date, rather than the date of 
publication in the Federal Register.
    Department's Response. The Department has revised the condition as 
requested.
    Credit Suisse Comment 15. Section I(m)(1) provides:
    ``By May 20, 2020, CSAG 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 an annual review for each twelve month period, 
beginning on November 21, 2019, (the Annual 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:
* * * * *
    (ii) The Compliance Officer must have a direct reporting line to 
the highest ranking corporate officer in charge of compliance for asset 
management.''
    Credit Suisse requests that the condition be changed to require a 
CS Affiliated QPAM, rather than the parent company, to designate the 
senior compliance officer. In addition, Credit Suisse requests that the 
Department clarify that each relevant line of business may designate 
its own compliance officer. Finally, Credit Suisse requests 
clarification that the designated compliance officer report to (or be) 
the highest ranking corporate officer in charge of compliance for the 
CS Affiliated QPAM.
    Department's Response: The Department is making the requested 
revisions.

Credit Suisse Technical Corrections Request

    In addition to the substantive comments above, Credit Suisse 
requested that certain technical clarifications be made to the proposed 
exemption. The Department's responses are described below.
    Technical Correction Request 1. Section I(h)(1)(iv) provides: ``Any 
filings or statements made by the CS Affiliated QPAM to regulators, 
including but not limited to, the Department of Labor, the Department 
of the Treasury, the Department of Justice, and the Pension Benefit 
Guaranty Corporation, on behalf of, or in relation to Covered Plans are 
materially accurate and complete, to the best of such QPAM's knowledge 
at that time . . . .''
    Credit Suisse requests that the Department strike the phrase ``in 
relation to Covered Plans'' in Section (I)(h)(1)(iv). Section 
(I)(h)(1)(v) includes ``communications with such regulators with 
respect to Covered Plans,'' which encompasses all communications that 
would potentially be covered by Section I(h)(1)(iv). Because a similar 
requirement is included in both subsections, the assumption is that a 
different meaning is intended.
    Department's Response: The Department is not making the requested 
revision. The phrase ``in relation to Covered Plans'' is sufficiently 
clear such that the requested revision is not warranted.
    Technical Correction Request 2. Section I(i)(5)(i) provides, in 
part, that ``the Audit Report must include the auditor's specific 
determinations regarding the adequacy of the CS Affiliated QPAM's 
Policies and Training; the CS 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 CS Affiliated QPAM's 
noncompliance with the written Policies and Training described in 
Section I(h) above. The CS Affiliated QPAMs must promptly address any 
noncompliance. The CS 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 CS Affiliated QPAM.''
    Credit Suisse requests that the requirement in Section I(i)(5)(i) 
to ``promptly'' address any noncompliance be revised to be ``as soon as 
reasonably possible.'' This would align the procedure with the 
provisions for addressing noncompliance relating to the policies, set 
forth in Section I(h)(2), which require action ``as soon as reasonably 
possible.''
    Department's Response: The Department is not making the requested 
revision. The term ``promptly'' is consistent with the Department's 
view that addressing any noncompliance must be an important and high 
priority for a CS Affiliated QPAM.
    Technical Correction Request 3. Section I(i)(7) provides, in part: 
``With respect to each Audit Report, the General Counsel, or one of the 
three most senior executive officers of the CS Affiliated QPAMs to 
which the Audit Report applies, must certify in writing, under penalty 
of perjury, that the officer has reviewed the Audit Report and this 
five-year exemption; and that to the best of such officer's knowledge 
at the time the CS Affiliated QPAM addressed, corrected, or 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.''
    Credit Suisse requests that the Department replace ``General 
Counsel'' in Section I(i)(7) with ``general counsel,'' and clarify that 
the certification of the Audit Report may come from the respective CS 
Affiliated QPAM's general counsel or one of its three most senior 
officers.
    Department's Response: Given that the criminal misconduct that gave 
rise to the CSAG Conviction did not occur at any CS Affiliated QPAM, 
the Department has replaced ``General Counsel'' with ``general 
counsel.'' The condition is otherwise clear and reflects the 
Department's intent as to who must certify the Audit Report.
    Technical Correction Request 4. Section I(i)(12) provides: ``CSG 
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 CSAG.''
    Credit Suisse requests that the reference to ``CSG'' in Section 
I(i)(12) be revised to read, ``CSAG and/or the CS Affiliated QPAMs.''
    Department's Response: The Department has revised the exemption 
consistent with this request.

II. The Morjanoff Letter

    a. The Individuals' Hearing Request: The three individuals that 
submitted the Morjanoff Letter stated that ``it is impractical to 
present all the necessary evidence as comments, but it can be presented 
at a hearing. Briefly, the reasons are:
    1. Recent investigations and court decisions show that CS provided 
false information for the first exemption.
    2. It has declined to correct this false information since then.
    3. CS lodged their comment on the last day and was not publicly 
visible until after public comments had closed.
    4. That CS comment requested a relaxation of waiver conditions 
based on highly dubious assumptions.
    5. In essence, this would tend to recreate conditions which could 
facilitate illegal activity based on the same general scheme as 
facilitated the criminal activity for which it was convicted.
    6. That scheme was based on having a set of `ineffective rules & 
policies' for appearances while `inciting' staff to

[[Page 61935]]

break those `rules & policies' for the bank's illegal profit.
    7. Quasi `third parties' were created which pretended to be 
`external' to the bank, but in fact operated as if they were a part of 
the bank.
    8. Because thousands of bank employees became accustomed to such 
extreme double standards, special remediation is required.
    9. The public have a right and an urgent need to respond to CS's 
proposals.
    10. Since comments have closed, that would have to be at a public 
hearing.
    11. The sophistication of the bank's deceptions go beyond what can 
be reasonably expected of the DOL or pension funds to adequately 
discern.
    12. As further proof of the bank's absence of seriousness in 
correcting its illegal activities, we note that it continues to refuse 
to respond to formal notifications of crime in the bank sent to top 
management.
    13. A complete analysis of the flaws in CS's submissions is beyond 
the scope of a comment.''
    The individuals stated further, ``A public hearing is essential: 
CS's submission contains false statements, omissions & half-truths 
while the DOL can't be expected to have the expertise to see through 
CS's schemes.''
    The individuals attached numerous links to recent court cases and 
other sources. The individuals added, ``The matters raised are not 
merely matters of law and the factual issues identified are too complex 
to be adequately explored through the submission of evidence in written 
(including electronic) form.'' The individuals concluded, ``[s]ince the 
`CS Public Hearing' was held on January 15, 2015, a mass of new 
evidence has become publicly available which dramatically changes the 
context of the application. Had this knowledge been available 
previously, it is likely that the previous application would have 
either been rejected or the waiver substantially modified. Broadly 
speaking, CS would have known these facts and their non-disclosure 
represents a serious lack of candour and likely a sufficient breach of 
requirements to summarily reject the current application.''
    Department's Response to the Individuals' Hearing Request: The 
Department declines to hold a hearing. The individuals articulated and 
supported their views in a twelve page comment letter. The individuals 
had adequate time (a 45 day comment period, plus one additional week) 
to supplement their letter with all relevant information that was 
available to them. The individuals did not demonstrate that the issues 
they raised in the Morjanoff Letter would be more fully or 
expeditiously explored at a hearing.
    Regarding the three individuals' contention that, ``[s]ince the `CS 
Public Hearing' was held on January 15, 2015, a mass of new evidence 
has become publicly available which dramatically changes the context of 
the application[,]'' the Department believes the Independent Auditor is 
best suited to determine whether any newly uncovered evidence affects 
Credit Suisse's compliance with requirements of the exemption. An 
essential premise in the Department's determination to grant PTE 2015-
14 (and this exemption) is that a qualified independent auditor will 
annually determine whether each condition of the exemption had been met 
over the prior year. This includes an in-depth analysis of a wide range 
of transactions, arrangements, policies, agreements, and procedures 
relating to the operation of, and services provided by, the Credit 
Suisse QPAMs. Further, in the Department's view, the factual issues 
described by the individuals in the Morjanoff Letter could be fully 
explored through the submission of evidence in written (including 
electronic) form, which the individuals failed to submit.
    b. The Individuals' Response to the Credit Suisse Comment Letter: 
In the Morjanoff Letter, the three individuals took issue with many of 
the revisions that Credit Suisse requested in their response letter. 
With respect to the Credit Suisse-requested revisions which the 
Department accepted, the three individuals stated the following:
    (a) Regarding Credit Suisse's request to remove the term ``related 
parties'' from Section I(f), the three individuals state that Credit 
Suisse structured their crime so that undefined ``quasi-third parties'' 
benefited from and concealed criminal activity. ``It is futile to 
attempt to define related parties while CS uses its creativity in 
manufacturing them. Details can be provided at a public hearing.''
    (b) The three individuals state that the exemption should specify 
the actual affiliates who will receive relief under the exemption. The 
individuals recommend that relief should be limited to CSAM LLC and 
CSAM Ltd, ``who are the only affiliates that currently manage the 
assets of ERISA-covered plans on a discretionary basis.'' The 
individuals state that Credit Suisse Securities (USA) LLC ``has 
participated in all manner of illegal, criminal and disreputable 
activities (as described in previous submissions and subsequently)'' 
and should not be permitted to be QPAM. The individuals state that if 
relief is available to potentially other affiliates, ``they should be 
named now, and their suitability examined at a public hearing.''
    Department's Response: The Department does not agree the 
suitability of future CS Affiliated QPAMs must be examined at a public 
hearing. This exemption contains a suite of protective conditions, 
including an in-depth annual audit of, among other things, each CS 
Affiliated QPAM's transactions, training and policies, as well as each 
QPAM's compliance with the terms of this exemption. The Department has 
reviewed prior audits of CS Affiliated QPAMs under PTE 2015-14, and the 
Department believes the conditions of this exemption are sufficiently 
protective of Covered Plans with assets managed by current and future 
QPAMs.

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 ERISA 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 Code, including any 
prohibited transaction provisions to which the exemption does not apply 
and the general fiduciary responsibility provisions of section 404 of 
ERISA, which, among other things, require a fiduciary to discharge its 
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 ERISA; 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 and 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

[[Page 61936]]

    (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.

Five-Year Exemption

    The Department is granting a five-year exemption under the 
authority of section 408(a) of the Employee Retirement Income Security 
Act of 1974, as amended (ERISA), and section 4975(c)(2) of the Internal 
Revenue Code of 1986, as amended (the Code), and in accordance with the 
procedures set forth in 29 CFR part 2570, subpart B (76 FR 66637, 
66644, October 27, 2011).\9\
---------------------------------------------------------------------------

    \9\ For purposes of this five-year exemption, references to 
section 406 of Title I of ERISA, unless otherwise specified, should 
be read to refer as well to the corresponding provisions of section 
4975 of the Code.
---------------------------------------------------------------------------

Section I. Covered Transactions

    The CS Affiliated QPAMs, as further defined in Section II(d), will 
not be precluded from relying on the exemptive relief provided by 
Prohibited Transaction Exemption 84-14 (PTE 84-14),\10\ notwithstanding 
the ``Conviction'' against CSAG (as further defined in Section 
II(a)),\11\ during the Exemption Period, provided that the following 
conditions are satisfied:
---------------------------------------------------------------------------

    \10\ 49 FR 9494 (March 13, 1984), as corrected at 50 FR 41430 
(October 10, 1985), as amended at 70 FR 49305 (August 23, 2005), and 
as amended at 75 FR 38837 (July 6, 2010).
    \11\ Section I(g) of PTE 84-14 generally provides that 
``[n]either the QPAM nor any affiliate thereof . . . nor any owner . 
. . of a 5 percent or more interest in the QPAM is a person who 
within the 10 years immediately preceding the transaction has been 
either convicted or released from imprisonment, whichever is later, 
as a result of'' certain criminal activity therein described.
---------------------------------------------------------------------------

    (a) The CS Affiliated QPAMs and the CS Related QPAMs (including 
their officers, directors, agents other than CSAG, employees of such 
QPAMs, and CSAG employees described in subparagraph (d) below) did not 
know of, have reason to know of, or participate in the criminal conduct 
of CSAG that is the subject of the Conviction. For purposes of this 
exemption, including paragraph (c) below, ``participate in'' refers not 
only to active participation in the criminal conduct of CSAG that is 
the subject of the Conviction, but also to knowing approval of the 
criminal conduct, or knowledge of such conduct without taking active 
steps to prohibit such conduct, including reporting the conduct to such 
individual's supervisors, and to the Board of Directors.
    (b) The CS Affiliated QPAMs and the CS Related QPAMs (including 
their officers, directors, agents other than CSAG, employees of such 
QPAMs, and CSAG employees described in subparagraph (d)(3) below) did 
not receive direct compensation, or knowingly receive indirect 
compensation, in connection with the criminal conduct of CSAG that is 
the subject of the Conviction;
    (c) The CS Affiliated QPAMs will not employ or knowingly engage any 
of the individuals that ``participated in'' the criminal conduct of 
CSAG that is the subject of the Conviction;
    (d) At all times during the Exemption Period, a CS Affiliated QPAM 
will not use its authority or influence to direct an ``investment 
fund'' (as defined in Section VI(b) of PTE 84-14) that is subject to 
ERISA or the Code and managed by such CS Affiliated QPAM with respect 
to one or more Covered Plans, to enter into any transaction with CSAG 
or to engage CSAG 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. A CS 
Affiliated QPAM will not fail this condition solely because:
    (1) A CSAG affiliate serves as a local sub-custodian that is 
selected by an unaffiliated global custodian that, in turn, is selected 
by someone other than a CS Affiliated QPAM or CS Related QPAM;
    (2) CSAG provides only necessary, non-investment, non-fiduciary 
services that support the operations of CS Affiliated QPAMs, at the CS 
Affiliated QPAM's own expense, and the Covered Plan is not required to 
pay any additional fee beyond its agreed-to asset management fee. This 
exception does not permit CSAG or its branches to provide any service 
to an investment fund managed by a CS Affiliated QPAM or CS Related 
QPAM; or
    (3) CSAG employees are double-hatted, seconded, supervised, or 
subject to the control of a CS Affiliated QPAM;
    (e) Any failure of a CS Affiliated QPAM to satisfy Section I(g) of 
PTE 84-14 arose solely from the Conviction;
    (f) A CS Affiliated QPAM or a CS 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 criminal 
conduct that is the subject of the Conviction; or cause the CS 
Affiliated QPAM or CS Related QPAM or its affiliates to directly or 
indirectly profit from the criminal conduct that is the subject of the 
Conviction;
    (g) CSAG will not act as a fiduciary 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, except it may 
act as such a fiduciary (1) with respect to employee benefit plans 
sponsored for its own employees or employees of an affiliate; or (2) in 
connection with securities lending services of the New York Branch of 
CSAG. CSAG will not be treated as violating the conditions of the 
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) Prior to May 21, 2020, a CS Affiliated QPAM may continue to 
maintain, follow and implement the policies described in Section 
I(h)(1) of PTE 2015-14. Otherwise, each CS Affiliated QPAM must 
maintain, adjust (to the extent necessary), implement, and follow the 
written policies and procedures described below (the Policies). 
Notwithstanding the preceding sentence, a CS Affiliated QPAM may not 
engage in any transaction or arrangement described in Section I(d)(1) 
through (3) of this exemption prior to the date the Policies below have 
been developed, implemented and followed.
    The Policies must require and be reasonably designed to ensure 
that:
    (i) The asset management decisions of the CS Affiliated QPAMs are 
conducted independently of CSAG's corporate management and business 
activities, and without considering any fee a CS-related local sub-
custodian may receive from those decisions. This condition does not 
preclude a CS Affiliated QPAM from receiving publicly available 
research and other widely available information from a CSAG affiliate;
    (ii) The CS 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 CS 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 CS Affiliated QPAM to 
regulators, including but not limited to, the Department of Labor, the 
Department of the Treasury, the Department of Justice,

[[Page 61937]]

and the Pension Benefit Guaranty Corporation, on behalf of, or in 
relation to Covered Plans are materially accurate and complete, to the 
best of such QPAM's knowledge at that time;
    (v) To the best of its knowledge at the time, the CS 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; and
    (vi) The CS Affiliated QPAM complies with the terms of this five-
year exemption, and CSAG complies with the terms of Section I(d)(2);
    (2) Any violation of, or failure to comply with, an item in 
subparagraphs (h)(1)(ii) through (vi) of this section, 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 discovery of such failure to so correct, in writing, 
to the head of Compliance and the general counsel (or their functional 
equivalent) of the relevant CS Affiliated QPAM, and the independent 
auditor responsible for reviewing compliance with the Policies. A CS 
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 paragraph (2);
    (3) Each CS Affiliated QPAM must maintain, adjust (to the extent 
necessary), and implement a program of training (the Training), 
conducted at least annually, for all relevant CS 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 five-year 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 CS Affiliated QPAM submits to three audits, 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 CS Affiliated QPAM's compliance 
with, the Policies and Training described herein. The audit requirement 
must be incorporated in the Policies. The first audit must cover the 24 
month period that begins on November 21, 2019. The second audit must 
cover the 24 month period that begins on November 21, 2021, and the 
third audit must cover the 12 month period that begins on November 21, 
2023. Each audit must be completed no later than six (6) months after 
the period to which the audit applies; \12\
---------------------------------------------------------------------------

    \12\ Periods prior to November 21, 2019 must be audited 
consistent with PTE 2015-14.
---------------------------------------------------------------------------

    (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 CS Affiliated 
QPAM and, if applicable, CSAG, 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 CS Affiliated QPAM has developed, 
implemented, maintained, and followed the Policies in accordance with 
the conditions of this five-year exemption, and has developed and 
implemented the Training, as required herein;
    (4) The auditor's engagement must specifically require the auditor 
to test each CS Affiliated QPAM's operational compliance with the 
Policies and Training. In this regard, the auditor must test a sample 
of: (1) Each CS Affiliated QPAM's transactions involving Covered Plans; 
(2) each CS Affiliated QPAM's transactions involving CSAG affiliates 
that serve as a local sub-custodian. The samples must be sufficient in 
size and nature to afford the auditor a reasonable basis to determine 
the QPAM's operational compliance with the Policies and Training;
    (5) For each 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) to CSAG and the CS Affiliated 
QPAMs to which the audit applies that describes the procedures 
performed by the auditor during the course of its examination. The 
auditor, at its discretion, may issue a single consolidated Audit 
Report that covers all the CS Affiliated QPAMs. The Audit Report must 
include the auditor's specific determinations regarding:
    (i) The adequacy of the CS Affiliated QPAM's Policies and Training; 
the CS 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 CS Affiliated QPAM's noncompliance with the 
written Policies and Training described in Section I(h) above. The CS 
Affiliated QPAMs must promptly address any noncompliance. The CS 
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 CS Affiliated 
QPAM. Any action taken or the plan of action to be taken by the 
respective CS Affiliated QPAM must be included in an addendum to the 
Audit Report (such addendum must be completed prior to the 
certification described in Section I(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 the respective CS 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 CS Affiliated QPAM has complied with the requirements under this 
subparagraph must be based on evidence that the particular CS 
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 Annual Exemption Report created by 
the compliance officer (the Compliance Officer), as described in 
Section I(m)

[[Page 61938]]

below, as the basis for the auditor's conclusions in lieu of 
independent determinations and testing performed by the auditor as 
required by Section I(i)(3) and (4) above; and
    (ii) The adequacy of the Annual Exemption Review described in 
Section I(m);
    (6) The auditor must notify the respective CS Affiliated QPAMs 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;
    (7) With respect to each Audit Report, the general counsel, or one 
of the three most senior executive officers of the CS Affiliated QPAMs 
to which the Audit Report applies, must certify in writing, under 
penalty of perjury, that the officer has reviewed the Audit Report and 
this five-year exemption; that, to the best of such officer's knowledge 
at the time, the CS Affiliated QPAM addressed, corrected, or remedied 
any noncompliance and inadequacy or has an appropriate written plan to 
address any inadequacy regarding the Policies and Training identified 
in the Audit Report. Such certification must also include the 
signatory's determination that, to the best of the officer's knowledge 
at the time, the Policies and Training in effect at the time of signing 
are adequate to ensure compliance with the conditions of this exemption 
and the applicable provisions of ERISA and the Code;
    (8) A copy of the Audit Report must be provided to CSAG's Board of 
Directors and to either the Risk Committee or the Audit Committee; and 
a senior executive officer at either the Risk Committee or the Conduct 
and Financial Crime Control Committee must review the Audit Report for 
each CS Affiliated QPAM and must certify in writing, under penalty of 
perjury, that such officer has reviewed each Audit Report;
    (9) Each CS Affiliated QPAM must provide its certified Audit 
Report, by regular mail to: The Department's 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. The delivery must take place no more 
than 45 days following the completion of the Audit Report. The Audit 
Report will be part of the public record regarding this five-year 
exemption. Furthermore, each CS 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 by this exemption must be submitted to OED no later than two 
(2) months after the execution of the engagement agreement;
    (11) The auditor must provide the Department, upon request, for 
inspection and review, access to all of the workpapers created and used 
in connection with the audit, provided the access and inspection are 
otherwise permitted by law; and
    (12) CSAG and/or the CS Affiliated QPAMs 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 
CSAG and/or the CS Affiliated QPAMs;
    (j) As of the effective date of this five-year exemption, with 
respect to any arrangement, agreement, or contract between a CS 
Affiliated QPAM and a Covered Plan, each CS Affiliated QPAM agrees and 
warrants to Covered Plans:
    (1) To comply with ERISA and the Code, as applicable with respect 
to the 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 404 
is applicable;
    (2) To indemnify and hold harmless the Covered Plan for any actual 
losses resulting directly from a CS 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 a CS Affiliated QPAM; or any claim arising out of the 
failure of such CS Affiliated QPAMs to qualify for the exemptive relief 
provided by PTE 84-14 as a result of a violation of Section I(g) of PTE 
84-14 other than the Conviction. This condition only applies to actual 
losses caused by the CS Affiliated QPAM's violations;
    (3) Not to require (or otherwise cause) the Covered Plan to waive, 
limit, or qualify the liability of the CS Affiliated QPAM for violating 
ERISA or the Code or engaging in prohibited transactions;
    (4) Not to restrict the ability of the Covered Plan to terminate or 
withdraw from its arrangement with the CS 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 arrangement involving investments in pooled funds subject to ERISA 
entered into after the effective date of this exemption, the adverse 
consequences must relate to a lack of liquidity of the underlying 
assets, valuation issues, or regulatory reasons that prevent the fund 
from promptly redeeming an ERISA-covered plan's or IRA's investment, 
and such restrictions must be applicable to all such investors and 
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;
    (6) Not to include exculpatory provisions disclaiming or otherwise 
limiting liability of the CS Affiliated QPAMs for a violation of the 
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 CSAG and its affiliates, or damages arising outside the control of 
the CS Affiliated QPAM; and
    (7) Within four (4) months of the effective date of this five-year 
exemption, each CS Affiliated QPAM must provide a notice of its 
obligations under this Section I(j) to each Covered Plan. For Covered 
Plans that enter into a written asset or investment management 
agreement with a CS Affiliated QPAM on or after November 21, 2019, the 
CS Affiliated QPAM must agree to its obligations under this Section 
I(j) in an updated investment management agreement between the CS 
Affiliated QPAM and such clients or

[[Page 61939]]

other written contractual agreement. Notwithstanding the above, a CS 
Affiliated QPAM will not violate the condition solely because a Covered 
Plan refuses to sign an updated investment management agreement. This 
condition will be deemed met for each Covered Plan that received a 
notice pursuant to PTE 2015-14 that meets the terms of this condition.
    (k) Notice to Covered Plan Clients. Each CS Affiliated QPAM 
provides a notice of the five-year exemption, along with a separate 
summary describing the facts that led to the Conviction (the Summary), 
which have been submitted to the Department, and a prominently 
displayed statement (the Statement) that the Conviction results in a 
failure to meet a condition in PTE 84-14, to each sponsor and 
beneficial owner of a Covered Plan that entered into a written asset or 
investment management agreement with a CS Affiliated QPAM, or the 
sponsor of an investment fund in any case where a CS Affiliated QPAM 
acts as a sub-adviser to the investment fund in which such ERISA-
covered plan and IRA invests. The notice, Summary and Statement must be 
provided prior to, or contemporaneously with, the client's receipt of a 
written asset management agreement from the CS Affiliated QPAM. The 
clients must receive a Federal Register copy of the notice of final 
five-year exemption within sixty (60) days of the effective date of 
this exemption. The notice may be delivered electronically (including 
by an email that has a link to the five-year exemption).
    (l) The CS Affiliated QPAM must comply with each condition of PTE 
84-14, as amended, with the sole exception of the violation of Section 
I(g) of PTE 84-14 that is attributable to the Conviction. If, during 
the Exemption Period, an entity within the Credit Suisse corporate 
structure is convicted of a crime described in Section I(g) of PTE 84-
14, relief in this exemption would terminate immediately;
    (m)(1) By May 20, 2020, each CS Affiliated QPAM designates a senior 
compliance officer (the Compliance Officer) who will be responsible for 
compliance with the Policies and Training requirements described 
herein. For purposes of this condition (m), each relevant line of 
business within a CS Affiliated QPAM may designate its own compliance 
officer. The Compliance Officer must conduct an annual review for each 
twelve month period, beginning on November 21, 2019, (the Annual 
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 the 
applicable CS Affiliated QPAM.
    (2) With respect to each Annual Exemption Review, the following 
conditions must be met:
    (i) The Annual Exemption Review includes a review of the CS 
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 issued pursuant to this exemption or PTE 2015-14; any 
material change in the relevant business activities of the CS 
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 CS Affiliated QPAMs;
    (ii) The Compliance Officer prepares a written report for each 
Annual Exemption Review (each, an Annual Exemption Report) that (A) 
summarizes his or her material activities during the preceding year; 
(B) sets forth any instance of noncompliance discovered during the 
preceding year, and any related corrective action; (C) details any 
change to the Policies or Training to guard against any similar 
instance of noncompliance occurring again; and (D) makes 
recommendations, as necessary, for additional training, procedures, 
monitoring, or additional and/or changed processes or systems, and 
management's actions on such recommendations;
    (iii) In each Annual Exemption Report, the Compliance Officer must 
certify in writing that to the best of his or her knowledge at the 
time: (A) The report is accurate; (B) the Policies and Training are 
working in a manner which is reasonably designed to ensure that the 
Policies and Training requirements described herein are met; (C) any 
known instance of noncompliance during the preceding year and any 
related correction taken to date have been identified in the Annual 
Exemption Report; and (D) the CS Affiliated QPAMs have complied with 
the Policies and Training, and/or corrected (or are correcting) any 
known instances of noncompliance in accordance with Section I(h) above;
    (iv) Each Annual Exemption Report must be provided to appropriate 
corporate officers of CSAG and each CS Affiliated QPAM to which such 
report relates; the head of Compliance and the general counsel (or 
their functional equivalent) of the relevant CS Affiliated QPAM; and 
must be made unconditionally available to the independent auditor 
described in Section I(i) above;
    (v) Each Annual Exemption Review, including the Compliance 
Officer's written Annual Exemption Report, must be completed within 
three (3) months following the end of the period to which it relates;
    (n) Each CS Affiliated QPAM will maintain records necessary to 
demonstrate that the conditions of this five-year exemption have been 
met, for six (6) years following the date of any transaction for which 
the CS Affiliated QPAM relies upon the relief in the five-year 
exemption;
    (o) During the Exemption Period, CSAG: (1) Immediately discloses to 
the Department any Deferred Prosecution Agreement (a DPA) or Non-
Prosecution Agreement (an NPA) that Credit Suisse Group AG or CSAG or 
any affiliate (as defined in Section VI(d) of PTE 84-14) enters into 
with the U.S Department of Justice, to the extent such DPA or NPA 
relates to the conduct described in Section I(g) of PTE 84-14 or 
section 411 of ERISA; and (2) immediately provides the Department any 
information requested by the Department, as permitted by law, regarding 
the agreement and/or the conduct and allegations that led to the 
agreement;
    (p) Within 60 days of the effective date of the five-year 
exemption, each CS 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 CS 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.\13\ With respect to this

[[Page 61940]]

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
---------------------------------------------------------------------------

    \13\ 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.
---------------------------------------------------------------------------

    (q) A CS Affiliated QPAM will not fail to meet the terms of this 
five-year exemption, solely because a different CS Affiliated QPAM 
fails to satisfy a condition for relief under this five-year exemption 
described in Sections I(c), (d), (h), (i), (j), (k), (l), (n), and (p); 
or, if the independent auditor described in Section I(i) fails a 
provision of the exemption other than the requirement described in 
Section I(i)(11), provided that such failure did not result from any 
actions or inactions of CSAG or its affiliates.

Section II. Definitions

    (a) The term ``Conviction'' means the judgment of conviction 
against CSAG for one count of conspiracy to violate section 7206(2) of 
the Internal Revenue Code in violation of Title 18, United States Code, 
Section 371, that was entered in the District Court for the Eastern 
District of Virginia in Case Number 1:14-cr-188-RBS, on November 21, 
2014.
    (b) 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 CS Affiliated QPAM relies on PTE 84-14, or with respect to 
which a CS Affiliated QPAM (or any CSAG 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 CS 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.
    (c) The term ``CSAG'' means Credit Suisse AG.
    (d) The term ``CS Affiliated QPAM'' means a ``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 CSAG is a current or future ``affiliate'' (as defined in Section 
VI(d) of PTE 84-14), but is not a CS Related QPAM. The term ``CS 
Affiliated QPAM'' excludes the parent entity, CSAG.
    (e) The term ``CS 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 CSAG owns a direct or indirect five (5) percent or 
more interest, but with respect to which CSAG is not an ``affiliate'' 
(as defined in section VI(d)(1) of PTE 84-14).
    (f) The term ``Exemption Period'' means the period from November 
21, 2019 through November 20, 2024.
    Effective Date: This five-year exemption will be in effect for five 
years beginning on the expiration of PTE 2015-14.

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

    Signed at Washington, DC, this 8th day of November, 2019.
Lyssa Hall,
Director, Office of Exemption Determinations, Employee Benefits 
Security Administration, U.S. Department of Labor.
[FR Doc. 2019-24750 Filed 11-13-19; 8:45 am]
 BILLING CODE 4510-29-P