Exemption for Certain Prohibited Transaction Restrictions Involving DWS Investment Management Americas, Inc. (DIMA or the Applicant) and Certain Current and Future Asset Management Affiliates of Deutsche Bank AG (each a DB QPAM) Located in New York, New York, 20410-20417 [2021-07963]
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By order of the Commission.
Issued: April 14, 2021.
Lisa Barton,
Secretary to the Commission.
[FR Doc. 2021–07988 Filed 4–16–21; 8:45 am]
BILLING CODE 7020–02–P
DEPARTMENT OF LABOR
Employee Benefits Security
Administration
[Prohibited Transaction Exemption 2021–
01; Exemption Application No. D–12018]
Exemption for Certain Prohibited
Transaction Restrictions Involving
DWS Investment Management
Americas, Inc. (DIMA or the Applicant)
and Certain Current and Future Asset
Management Affiliates of Deutsche
Bank AG (each a DB QPAM) Located
in New York, New York
Employee Benefits Security
Administration, Labor.
ACTION: Notice of exemption.
AGENCY:
This document is a notice of
exemption issued by the Department of
Labor (the Department) from certain of
the prohibited transaction restrictions of
the Employee Retirement Income
Security Act of 1974 (ERISA or the Act)
and/or the Internal Revenue Code of
1986 (the Code). The exemption allows
entities with specified relationships to
Deutsche Bank AG to continue to rely
on the exemptive relief provided by
Prohibited Transaction Class Exemption
84–14, if certain conditions are met.
DATES: This exemption will be in effect
for a period of up to three (3) years
beginning on April 18, 2021.
FOR FURTHER INFORMATION CONTACT:
Frank Gonzalez of the Department at
(202) 693–8553. (This is not a toll-free
number.)
SUPPLEMENTARY INFORMATION: On
February 12, 2021, the Department
published a notice of proposed
exemption in the Federal Register at 86
FR 9376, for certain qualified
professional asset managers within the
corporate family of Deutsche Bank AG
SUMMARY:
3 Electronic Document Information System
(EDIS): https://edis.usitc.gov.
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(Deutsche Bank), including DWS
Investment Management Americas Inc.
(DIMA or the Applicant), to continue
relying on the class exemptive relief
granted in Prohibited Transaction
Exemption (PTE) 84–14 (PTE 84–14 or
the QPAM Class Exemption), for up to
three years, notwithstanding the 2017
criminal conviction of DB Group
Services (UK) Limited (the U.S.
Conviction). The Department is granting
this exemption to ensure that Covered
Plans with assets managed by an asset
manager within the corporate family of
Deutsche Bank may continue to benefit
from the relief provided by PTE 84–14,
with the protection of this exemption’s
additional conditions.1
The grant of this three-year exemption
does not imply that the Department will
grant additional relief for the DB
QPAMs to continue to rely on the relief
in PTE 84–14 beyond the end of this
exemption’s three-year term. This
exemption provides only the relief
specified in the text of the exemption,
and only with respect to the criminal
convictions or criminal conduct
described herein. It provides no relief
from violations of any law other the
prohibited transaction provisions of
ERISA and the Code.
The Department intends for the terms
of this exemption to promote adherence
to basic fiduciary standards under
ERISA and the Code. This exemption
also aims to ensure that Covered Plans
can terminate relationships in an
orderly and cost-effective fashion in the
event the fiduciary of a Covered Plan
determines it is prudent to terminate the
relationship with a DB QPAM. The
Department makes the requisite findings
under ERISA section 408(a) based on
adherence to all the conditions of the
exemption. Accordingly, affected parties
should be aware that the conditions
incorporated in this exemption are,
1 For purposes of this exemption, a ‘‘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
DB QPAM relies on PTE 84–14, or with respect to
which a DB QPAM (or any Deutsche Bank 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 DB
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. Notwithstanding the above, a DB
QPAM may disclaim reliance on QPAM status or
PTE 84–14 in a written modification of a contract,
arrangement, or agreement with an ERISA-covered
plan or IRA, where: The modification is made in a
bilateral document signed by the client; the client’s
attention is specifically directed toward the
disclaimer; and the client is advised in writing that,
with respect to any transaction involving the
client’s assets, the DB QPAM will not represent that
it is a QPAM, and will not rely on the relief
described in PTE 84–14.
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taken as a whole, necessary for the
Department to grant the relief requested
by the Applicant. Absent these or
similar conditions, the Department
would not have granted this exemption.
The Applicant requested an
individual exemption pursuant to
section 408(a) of ERISA and section
4975(c)(2) of the Code, and in
accordance with the procedures set
forth in 29 CFR part 2570, subpart B (76
FR 66637, 66644, October 27, 2011).
Effective December 31, 1978, section
102 of the Reorganization Plan No. 4 of
1978, 5 U.S.C. App. 1 (1996), transferred
the authority of the Secretary of the
Treasury to issue administrative
exemptions under section 4975(c)(2) of
the Code to the Secretary of Labor.
Accordingly, the Department grants this
exemption under its sole authority.
Department’s Comment
The Department cautions that the
relief in this exemption will terminate
immediately if an entity within the
Deutsche Bank corporate structure is
convicted of a crime described in
Section I(g) of PTE 84–14 (other than the
judgment of conviction against DB
Group Services (UK) Limited for one (1)
count of wire fraud, as further defined
below) during the Exemption Period.
Although the DB QPAMs could apply
for a new exemption in that
circumstance, the Department would
not be obligated to grant the exemption.
The Department specifically designed
the terms of this exemption to permit
plans to terminate their relationships in
an orderly and cost effective fashion in
the event of an additional conviction, or
the expiration of this exemption without
additional relief, or a determination that
it is otherwise prudent for a plan to
terminate its relationship with an entity
covered by the exemption.
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Written Comments
The Department invited all interested
persons to submit written comments
and/or requests for a public hearing
with respect to the notice of proposed
exemption. In this regard, the Applicant
was given seven days to provide notice
to interested persons, and all comments
and requests for a hearing were due by
March 22, 2021. The Department
received two written comments. One
commenter raised issues unrelated to
and outside of the scope of the proposed
exemption. The other commenter was
the Applicant. After considering the
entire record developed in connection
with the Applicant’s exemption request,
the Department has determined to grant
the exemption, as described below.
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Comments From the Applicant
I. Revision to Section I(i)(8). Section
I(i)(8) of the proposed exemption
provides: ‘‘The Audit Committee of
Deutsche Bank’s Supervisory Board is
provided a copy of each Audit Report;
and a senior executive officer with a
direct reporting line to the highest
ranking legal compliance officer of
Deutsche Bank must review the Audit
Report for each DB QPAM and must
certify in writing, under penalty of
perjury, that such officer has reviewed
each Audit Report. Deutsche Bank must
provide notice to the Department in the
event of a switch in the committee to
which the Audit Report will be
provided.’’
Applicant’s Request: The Applicant
notes that Section I(i)(8) of the proposed
extension requires review and
certification of the audit report by a
‘‘senior executive officer with a direct
reporting line to the highest ranking
legal compliance officer of Deutsche
Bank.’’ The Applicant requests that the
term ‘‘legal’’ be deleted.
Department’s Response: The
Department has revised the exemption
consistent with the Applicant’s request.
II. Revision to Section I(j)(7). Section
I(j)(7) of the proposed exemption
provides: ‘‘By August 18, 2021, each DB
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 DB QPAM on or after April 18, 2021,
the DB QPAM must agree to its
obligations under this section I(j) in an
updated investment management
agreement between the DB QPAM and
such clients or other written contractual
agreement. . . .’’
Applicant’s Request: The Applicant
requests that Section I(j)(7) be revised to
provide that, for Covered Plans that
enter into a written asset or investment
management agreement (IMA) on or
after August 18, 2021 (rather than April
18, 2021), the DB QPAM must agree to
its obligations in an updated IMA.
Department’s Response: The
Department has revised the exemption
consistent with the Applicant’s request.
Department’s Note: The first sentence
of Section I(j)(4) of the proposed
exemption read: ‘‘Not to restrict the
ability of such Covered Plan to
terminate or withdraw from its
arrangement with the DB 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
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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.’’
The Department has revised this
sentence for purposes of this exemption,
by striking the phrase ‘‘with respect to
any investment in a separately managed
account or pooled fund subject to ERISA
and managed by such QPAM.’’ It is the
Department’s understanding, based on
representations from the Applicant, that
no other accounts are applicable.
III. Revision to Section I(k). Section
I(k) of the proposed exemption
provides: ‘‘Each DB QPAM provides a
notice regarding the proposed
exemption, along with a separate
summary describing the facts that led to
the U.S. Conviction (the Summary),
which have been submitted to the
Department, and a prominently
displayed statement (the Statement) that
the U.S. 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 DB QPAM, or the
sponsor of an investment fund in any
case where a DB 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 DB QPAM. The
clients must receive a Federal Register
copy of the notice of final exemption
within sixty (60) days of this
exemption’s effective date. The notice
may be delivered electronically
(including by an email that has a link to
this exemption).’’
Applicant’s Request: The Applicant
requests that the DB QPAMs have until
August 18, 2021 to provide the required
disclosures to Covered Plans that enter
or have entered into an IMA before that
date. The Applicant states that it will be
operationally difficult for the DB
QPAMs to provide clients with physical
copies of the required documents
beginning on the effective date of the
exemption, given the various systemdriven account opening processes
utilized among the impacted lines of
business. The Applicant states that it is
probable that many such prospective
clients have already received copies of
current account opening agreements,
which they are reviewing and will sign
and return over the following several
weeks or months. These account
opening documents would not include
the new exemption materials. The
Applicant requests further that a similar
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period of time be provided for
prospective Covered Plan clients that
enter into an IMA on or after that date.
In addition, the Applicant requests that
the DB QPAMs should not fail this
condition solely because a Covered Plan
refuses to sign an updated IMA.
Department’s Response: The
Department is revising the exemption,
in part, as requested by the Applicant.
The Department has revised Section I(k)
to allow the DB QPAMs sixty days to
provide the required notices, and has
revised the exemption to provide that
the DB QPAMs will not fail Section I(k)
solely because a Covered Plan refuses to
sign an updated IMA.
IV. Revision to Section I(m)(1)(ii) of
the Proposed Exemption. Section
I(m)(1)(ii) states: ‘‘The Compliance
Officer must have a direct reporting line
to the highest-ranking corporate officer
in charge of legal compliance for asset
management.’’
Applicant’s Request: The Applicant
seeks removal of the term ‘‘legal’’ from
this condition.
Department’s Response: The
Department has made the requested
revision.
V. Definition of Covered Plan. Section
II(b) of the proposed exemption defines
the term ‘‘Covered Plan’’ as: ‘‘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 DB
QPAM relies on PTE 84–14, or with
respect to which a DB QPAM (or any
Deutsche Bank affiliate) has expressly
represented that the manager qualifies
as a QPAM or relies on PTE 84–14. A
Covered Plan does not include an
ERISA-covered plan or IRA to the extent
the DB 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.’’
Applicant’s Request: The Applicant
requests that new language be added to
the proposed exemption’s definition of
Covered Plan, clarifying that a DB
QPAM may disclaim reliance on QPAM
status or PTE 84–14 where the
disclaimer is made in a modification of
a contract, arrangement, or agreement
with an ERISA-covered plan or IRA. The
Applicant states that the modification
would be made in a bilateral document
signed by the client, where the client’s
attention is specifically directed toward
the disclaimer, and where the client is
advised in writing what it means to not
use the QPAM Exemption.
Department’s Response: The
Department has added the following
new language to the definition of
Covered Plan: Notwithstanding the
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above, a DB QPAM may disclaim
reliance on QPAM status or PTE 84–14
in a written modification of a contract,
arrangement, or agreement with an
ERISA-covered plan or IRA, where: The
modification is made in a bilateral
document signed by the client; the
client’s attention is specifically directed
toward the disclaimer; and the client is
advised in writing that, with respect to
any transaction involving the client’s
assets, the DB QPAM will not represent
that it is a QPAM, and will not rely on
the relief described in PTE 84–14.
VI. Revision to Section II(f). Section
II(f) of the proposed exemption provides
that the term ‘‘Plea Agreement’’ means:
‘‘The Plea Agreement entered into
between DB Group Services and the
U.S. Department of Justice, Fraud
Section, Criminal Division, on April 23,
2015 in connection with Case Number
3:15–cr–00062–RNC filed in the U.S.
District Court for the District of
Connecticut, subsequently adjudged by
the Court on March 28, 2017.’’
Applicant’s Request: The Applicant
requests a revision to Section II(f) of the
proposed exemption to clarify that the
Plea Agreement was entered into on
April 23, 2015, and DB Group Services
was sentenced on March 28, 2017.
Department’s Response: The
Department has revised the exemption
consistent with the Applicant’s request.
Other Requested Revisions: In its
comment letter, the Applicant
requested: (1) Deletion of the word
‘‘certain’’ from the Section II(a) phrase
‘‘any certain current and future,
Deutsche Bank asset management
affiliates . . . ;’’ and (2) revision of the
Section II(c) term ‘‘DB Group Services
UK Limited’’ to ‘‘DB Group Services
(UK) Limited.’’
Department’s Response: The
Department has made the requested
revisions.
After full consideration and review of
the entire record, the Department has
decided to grant the exemption, with
the modifications discussed above. The
complete application file (D–12018) is
available in the Public Disclosure Room
of the Employee Benefits Security
Administration, Room N–1515, U.S.
Department of Labor, 200 Constitution
Avenue NW, Washington, DC 20210.
For a more complete statement of the
facts and representations supporting the
Department’s decision to grant this
exemption, refer to the notice of
proposed exemption published on
February 12, 2021 at 86 FR 9376.
(1) The fact that a transaction is the
subject of an exemption under section
408(a) of the Act or section 4975(c)(2) of
the Code does not relieve a fiduciary or
other party in interest or disqualified
person from certain other provisions of
the Act and/or the Code, including any
prohibited transaction provisions to
which the exemption does not apply
and the general fiduciary responsibility
provisions of section 404 of the Act,
which, among other things, require a
fiduciary to discharge his or her duties
respecting the plan solely in the interest
of the participants and beneficiaries of
the plan and in a prudent fashion in
accordance with section 404(a)(1)(B) of
the Act; nor does it affect the
requirement of section 401(a) of the
Code that the plan must operate for the
exclusive benefit of the employees of
the employer maintaining the plan and
their beneficiaries;
(2) In accordance with section 408(a)
of ERISA and section 4975(c)(2) of the
Code, the Department makes the
following determinations: The
exemption is administratively feasible,
the exemption is in the interests of
affected plans and of their participants
and beneficiaries, and the exemption is
protective of the rights of participants
and beneficiaries of such plans;
(3) The exemption is supplemental to,
and not in derogation of, any other
provisions of ERISA, including statutory
or administrative exemptions and
transitional rules. Furthermore, the fact
that a transaction is subject to an
administrative or statutory exemption is
not dispositive of whether the
transaction is in fact a prohibited
transaction; and
(4) The availability of this exemption
is subject to the express condition that
the material facts and representations
contained in the application are
accurate.
Accordingly, the following exemption
is granted under the authority of section
408(a) of ERISA and section 4975(c)(2)
of the Code and in accordance with the
procedures set forth in 29 CFR part
2570, subpart B (76 FR 66637, 66644,
October 27, 2011):
Three Year Exemption
The Department is granting this threeyear exemption under the authority of
section 408(a) of the Act (or ERISA) and
section 4975(c)(2) of the Internal
Revenue Code (or Code), and in
accordance with the procedures set
forth in 29 CFR part 2570, subpart B (76
FR 66637, 66644, October 27, 2011).2
General Information
The attention of interested persons is
directed to the following:
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2 For purposes of this three-year exemption,
references to section 406 of Title I of the Act, unless
otherwise specified, should be read to refer as well
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Effective December 31, 1978, section
102 of Reorganization Plan No. 4 of
1978, 5 U.S.C. App. 1 (1996), transferred
the authority of the Secretary of the
Treasury to issue exemptions of the type
requested to the Secretary of Labor.
Therefore, this notice of exemption is
issued solely by the Department.
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Section I. Covered Transactions
The DB QPAMs, as further defined in
Section II(c), will not be precluded from
relying on the exemptive relief provided
by Prohibited Transaction Exemption
84–14 (PTE 84–14),3 notwithstanding
the ‘‘U.S. Conviction’’ against DB Group
Services (as further defined in Section
II(a)), during the Exemption Period,
provided that the following conditions
are satisfied: 4
(a) The DB QPAMs (including their
officers, directors, agents other than
Deutsche Bank, and employees of such
QPAMs) did not know of, have reason
to know of, or participate in the
criminal conduct of DB Group Services
that is the subject of the U.S.
Conviction. For purposes of this
exemption, ‘‘participate in’’ or
‘‘participated in’’ refers not only to
active participation in the criminal
conduct that is the subject of the U.S.
Conviction, but also to knowing
approval of the criminal conduct that is
the subject of the U.S. Conviction, or
knowledge of the conduct without
taking active steps to prevent the
conduct, including reporting the
conduct to the individual’s supervisors,
and to the Board of Directors;
(b) The DB QPAMs (including their
officers, directors, agents other than
Deutsche Bank, and employees of such
QPAMs) did not receive direct
compensation, or knowingly receive
indirect compensation, in connection
with the criminal conduct that is the
subject of the U.S. Conviction.
(c) The DB QPAMs do not currently
and will not in the future employ or
knowingly engage any of the individuals
that ‘‘participated in’’ the criminal
conduct that is the subject of the U.S.
Conviction;
(d) At all times during the Exemption
Period, no DB QPAM will use its
to the corresponding provisions of section 4975 of
the Code.
3 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).
4 Section I(g) of PTE 84–14 generally provides
relief only if ‘‘[n]either the QPAM nor any affiliate
thereof . . . nor any owner . . . of a 5 percent or
more interest in the QPAM is a person who within
the 10 years immediately preceding the transaction
has been either convicted or released from
imprisonment, whichever is later, as a result of’’
certain felonies including fraud.
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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 DB QPAM with
respect to one or more Covered Plan (as
defined in Section II(b), to enter into
any transaction with DB Group Services,
or to engage DB Group Services to
provide any service to such investment
fund, for a direct or indirect fee borne
by such investment fund, regardless of
whether such transaction, or service,
may otherwise be within the scope of
relief provided by an administrative or
statutory exemption;
(e) Any failure of the DB QPAMs to
satisfy Section I(g) of PTE 84–14 arose
solely from the U.S. Conviction;
(f) A DB QPAM did not exercise
authority over the assets of any plan
subject to Part 4 of Title I of ERISA (an
ERISA-covered plan) or section 4975 of
the Code (an IRA) in a manner that it
knew, or should have known, would:
Further the criminal conduct that is the
subject of the U.S. Conviction; or cause
the DB QPAM or its affiliates to directly,
or indirectly, profit from the criminal
conduct that is the subject of the U.S.
Conviction;
(g) Other than with respect to
employee benefit plans maintained or
sponsored for its own employees or the
employees of an affiliate, DB Group
Services 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; provided, however, DB Group
Services will not be treated as violating
the conditions of this exemption solely
because it acted as an investment advice
fiduciary within the meaning of section
3(21)(A)(ii) of ERISA, or section
4975(e)(3)(B) of the Code, or because DB
Group Services employees may be
double-hatted, seconded, supervised or
otherwise subject to the control of a DB
QPAM, including in a discretionary
fiduciary capacity with respect to the
DB QPAM clients;
(h)(1) Each DB QPAM must continue
to maintain, adjust (to the extent
necessary), implement and follow
written policies and procedures (the
Policies). The Policies must require, and
must be reasonably designed to ensure
that:
(i) The asset management decisions of
the DB QPAM are conducted
independently of the corporate
management and business activities of
DB Group Services;
(ii) The DB QPAM fully complies
with ERISA’s fiduciary duties and with
ERISA and the Code’s prohibited
transaction provisions, in each such
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20413
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 DB 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 DB QPAM to regulators, including,
but not limited to, the Department, the
Department of the Treasury, the
Department of Justice, and the Pension
Benefit Guaranty Corporation, on behalf
of or in relation to Covered Plans, are
materially accurate and complete, to the
best of such QPAM’s knowledge at that
time;
(v) To the best of the DB QPAM’s
knowledge at the time, the DB QPAM
does not make material
misrepresentations or omit material
information in its communications with
such regulators with respect to Covered
Plans, or make material
misrepresentations or omit material
information in its communications with
Covered Plans;
(vi) The DB QPAM complies with the
terms of this exemption; and
(2) Any violation of, or failure to
comply with an item in subparagraphs
(h)(1)(ii) through (h)(1)(vi), is corrected
as soon as reasonably possible upon
discovery, or as soon after the QPAM
reasonably should have known of the
noncompliance (whichever is earlier),
and any such violation or compliance
failure not so corrected is reported,
upon the discovery of such failure to so
correct, in writing, to the head of
compliance and the DB QPAM’s general
counsel (or their functional equivalent)
of the relevant DB QPAM that engaged
in the violation or failure, and the
independent auditor responsible for
reviewing compliance with the Policies.
A DB QPAM will not be treated as
having failed to develop, implement,
maintain, or follow the Policies,
provided that it corrects any instance of
noncompliance as soon as reasonably
possible upon discovery, or as soon as
reasonably possible after the QPAM
reasonably should have known of the
noncompliance (whichever is earlier),
and provided that it adheres to the
reporting requirements set forth in this
subparagraph (2);
(3) Each DB QPAM must maintain,
adjust (to the extent necessary) and
implement a program of training (the
Training), to be conducted at least
annually, for all relevant DB QPAM
asset/portfolio management, trading,
legal, compliance, and internal audit
personnel. The Training must:
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(i) At a minimum, cover the Policies,
ERISA and Code compliance (including
applicable fiduciary duties and the
prohibited transaction provisions),
ethical conduct, the consequences for
not complying with the conditions of
this exemption (including any loss of
exemptive relief provided herein), and
prompt reporting of wrongdoing; and
(ii) Be conducted by a professional
who has been prudently selected and
who has appropriate technical training
and proficiency with ERISA and the
Code; and
(iii) Be conducted in-person,
electronically or via a website;
(i)(1) Each DB QPAM submits to three
audits conducted annually 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 DB
QPAM’s compliance with, the Policies
and Training described herein. The
audit requirement must be incorporated
in the Policies. The first audit must
cover a 12 month period that begins on
April 18, 2021 and ends on April 17,
2022. The second and third audits must
cover the 12 month period that begins
on April 18, 2022, and April 18, 2023,
respectively. Each of the three annual
audits must be completed no later than
six (6) months after the corresponding
audit’s ending period;
(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
described herein, and only to the extent
such disclosure is not prevented by state
or federal statute, or involves
communications subject to attorneyclient privilege, each DB QPAM and, if
applicable, Deutsche Bank, will grant
the auditor unconditional access to its
business, including, but not limited to:
Its computer systems; business records;
transactional data; workplace locations;
Training materials; and personnel. 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 DB QPAM has
developed, implemented, maintained,
and followed the Policies in accordance
with the conditions of this exemption,
and has developed and implemented
the Training, as required herein;
(4) The auditor’s engagement must
specifically require the auditor to test
each DB QPAM’s operational
compliance with the Policies and
Training. In this regard, the auditor
must test, for each QPAM, a sample of
such QPAM’s transactions involving
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Covered Plans, sufficient in size and
nature to afford the auditor a reasonable
basis to determine such QPAM’s
operational compliance with the
Policies and Training;
(5) For 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 Deutsche Bank,
and the DB QPAM to which the audit
applies that describes the procedures
performed by the auditor in connection
with its examination. The auditor, at its
discretion, may issue a single
consolidated Audit Report that covers
all the DB QPAMs. The Audit Report
must include the auditor’s specific
determinations regarding:
(i) The adequacy of each DB QPAM’s
Policies and Training; each DB QPAM’s
compliance with the Policies and
Training; the need, if any, to strengthen
such Policies and Training; and any
instance of the respective DB QPAM’s
noncompliance with the written
Policies and Training described above.
The DB QPAM must promptly address
any noncompliance. The DB 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 QPAM. Any
action taken or the plan of action to be
taken by the DB 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 DB 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 DB QPAM has complied
with the requirements under this
subparagraph must be based on
evidence that the particular DB QPAM
has actually implemented, maintained,
and followed the Policies and Training
required by this exemption.
Furthermore, the auditor must not
solely rely on the Exemption Report
created by the compliance officer (the
Compliance Officer), as described in
Section I(m) below as the basis for the
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auditor’s conclusions in lieu of
independent determinations and testing
performed by the auditor as required by
Section I(i)(3) and (4) above;
(ii) The adequacy of the most recent
Exemption Review described in Section
I(m);
(6) The auditor must notify the
respective DB QPAM of any instance of
noncompliance identified by the auditor
within five (5) business days after such
noncompliance is identified by the
auditor, regardless of whether the audit
has been completed as of that date;
(7) With respect to each Audit Report,
the DB QPAM’s general counsel, or one
of the three most senior executive
officers of the line of business engaged
in discretionary asset management
services through the DB QPAM with
respect to which the Audit Report
applies, must certify in writing, under
penalty of perjury, that the officer has
reviewed the Audit Report and this
exemption; that, to the best of such
officer’s knowledge at the time, the DB
QPAM has addressed, corrected,
remedied any noncompliance and
inadequacy or has an appropriate
written plan to address any inadequacy
regarding the Policies and Training
identified in the Audit Report. Such
certification must also include the
signatory’s determination that, to the
best of such 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 with the
applicable provisions of ERISA and the
Code;
(8) The Audit Committee of Deutsche
Bank’s Supervisory Board is provided a
copy of each Audit Report; and a senior
executive officer with a direct reporting
line to the highest ranking compliance
officer of Deutsche Bank must review
the Audit Report for each DB QPAM
and must certify in writing, under
penalty of perjury, that such officer has
reviewed each Audit Report. Deutsche
Bank must provide notice to the
Department in the event of a switch in
the committee to which the Audit
Report will be provided;
(9) Each DB QPAM provides its
certified Audit Report, by regular mail
to: Office of Exemption Determinations
(OED), 200 Constitution Avenue NW,
Suite 400, Washington, DC 20210; or by
private carrier to: 122 C Street NW,
Suite 400, Washington, DC 20001–2109.
This delivery must take place no later
than forty-five (45) days following
completion of the Audit Report. The
Audit Report will be made part of the
public record regarding this exemption.
Furthermore, each DB QPAM must
make its Audit Report unconditionally
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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 months after the
execution of such agreement;
(11) The auditor must provide the
Department, upon request, for
inspection and review, access to all the
workpapers created and used in
connection with the audit, provided
such access and inspection is otherwise
permitted by law; and
(12) Deutsche Bank 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 accurate explanation of
the basis for the substitution or change
including an accurate description of any
material disputes between the
terminated auditor and Deutsche Bank
or any of its affiliates;
(j) As of April 18, 2021, with respect
to any arrangement, agreement, or
contract between a DB QPAM and a
Covered Plan, the DB QPAM agrees and
warrants to Covered Plans:
(1) To comply with ERISA and the
Code, as applicable with respect to such
Covered Plan; to refrain from engaging
in prohibited transactions that are not
otherwise exempt (and to promptly
correct any 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 DB QPAM’s
violation of ERISA’s fiduciary duties, as
applicable, and of the prohibited
transaction provisions of ERISA and the
Code, as applicable; a breach of contract
by the QPAM; or any claim arising out
of the failure of such DB QPAM to
qualify for the exemptive relief provided
by PTE 84–14 as a result of a violation
of Section I(g) of PTE 84–14 other than
the U.S. Conviction. This condition
applies only to actual losses caused by
the DB QPAM’s violations.
(3) Not to require (or otherwise cause)
the Covered Plan to waive, limit, or
qualify the liability of the DB QPAM for
violating ERISA or the Code or engaging
in prohibited transactions;
(4) Not to restrict the ability of such
Covered Plan to terminate or withdraw
from its arrangement with the DB
QPAM with the exception of reasonable
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restrictions, appropriately disclosed in
advance, that are specifically designed
to ensure equitable treatment of all
investors in a pooled fund in the event
such withdrawal or termination may
have adverse consequences for all other
investors. In connection with any such
arrangements involving investments in
pooled funds subject to ERISA entered
into after the effective date of PTE 2017–
04, 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 generally
recognized abusive investment practices
or specifically designed to ensure
equitable treatment of all investors in a
pooled fund in the event such
withdrawal or termination may have
adverse consequences for all other
investors, provided that such fees are
applied consistently and in like manner
to all such investors; and
(6) Not to include exculpatory
provisions disclaiming or otherwise
limiting liability of the DB QPAM for a
violation of such agreement’s terms. To
the extent consistent with Section 410
of ERISA, however, this provision does
not prohibit disclaimers for liability
caused by an error, misrepresentation,
or misconduct of a plan fiduciary or
other party hired by the plan fiduciary
who is independent of Deutsche Bank,
and its affiliates, or damages arising
from acts outside the control of the DB
QPAM; and
(7) By August 18, 2021, each DB
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 DB QPAM on or after August 18, 2021,
the DB QPAM must agree to its
obligations under this section I(j) in an
updated investment management
agreement between the DB QPAM and
such clients or other written contractual
agreement. Notwithstanding the above,
a DB QPAM will not violate the
condition solely because a Covered Plan
or IRA refuses to sign an updated
investment management agreement.
This condition will be deemed met for
each Covered Plan that received notice
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20415
pursuant to PTE 2017–04 that meets the
terms of this condition.
(k) Within 60 days of the effective
date of this three-year exemption, each
DB QPAM provides a Federal Register
notice regarding the exemption, along
with a separate summary describing the
facts that led to the U.S. Conviction (the
Summary), which has been submitted to
the Department, and a prominently
displayed statement (the Statement) that
the U.S. 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 DB QPAM, or the
sponsor of an investment fund in any
case where a DB QPAM acts as a subadviser to the investment fund in which
such ERISA-covered plan and IRA
invests. All Covered Plan clients that
enter into a written asset or investment
management agreement with a DB
QPAM after the date that is sixty days
after the effective date of this exemption
must receive a copy of the notice of the
exemption,, the Summary and the
Statement prior to, or
contemporaneously with, the client’s
receipt of a written asset management
agreement from the DB QPAM. The
notice may be delivered electronically
(including by an email that has a link to
this exemption). Notwithstanding the
above, a DB QPAM will not violate the
condition solely because a Plan or IRA
refuses to sign an updated investment
management agreement;
(l) The DB QPAMs 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 U.S.
Conviction;
(m)(1) Deutsche Bank continues to
designate 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 April 18, 2021, (the Exemption
Review) to determine the adequacy and
effectiveness of the implementation of
the Policies and Training. With respect
to the Compliance Officer, the following
conditions must be met:
(i) The Compliance Officer must be a
professional who has extensive
experience with, and knowledge of, the
regulation of financial services and
products, including under ERISA and
the Code; and
(ii) The Compliance Officer must have
a direct reporting line to the highest
ranking corporate officer in charge of
compliance for asset management;
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(2) With respect to each Exemption
Review, the following conditions must
be met:
(i) The Exemption Review includes a
review of the DB QPAM’s 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
2017–04; any material change in the
relevant business activities of the DB
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 DB QPAMs;
(ii) The Compliance Officer prepares
a written report for each Exemption
Review (each, an 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 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 Exemption Report; and
(D) the DB 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 Exemption Report must be
provided to appropriate corporate
officers of Deutsche Bank and to each
DB QPAM to which such report relates,
and to the head of compliance and the
DB QPAM’s general counsel (or their
functional equivalent) of the relevant
DB QPAM; and the Exemption Report
must be made unconditionally available
to the independent auditor described in
Section I(i) above;
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(v) Each Exemption Review, including
the Compliance Officer’s written
Exemption Report, must be completed
within three (3) months following the
end of the period to which it relates.
The Exemption Review for the period
April 18, 2020 through April 17, 2021
must be conducted, and completed,
under the requirements of PTE 2017–04;
(n) In connection with the deferred
prosecution agreement entered on
January 8, 2021, between Deutsche Bank
and the U.S. Department of Justice, to
resolve the U.S. government’s
investigation into violations of the
Foreign Corrupt Practices Act and a
separate investigation into a
commodities fraud scheme, no DB
QPAMs were involved in the conduct
that gave rise to the deferred
prosecution agreement, and no Covered
Plan assets were involved in the
transactions that gave rise to the
deferred prosecution agreement;
(o) Each DB QPAM will maintain
records necessary to demonstrate that
the conditions of this exemption have
been met for six (6) years following the
date of any transaction for which the DB
QPAM relies upon the relief in the
exemption;
(p) During the Exemption Period,
Deutsche Bank: (1) Immediately
discloses to the Department any
Deferred Prosecution Agreement or a
Non-Prosecution Agreement with the
U.S. Department of Justice entered into
by Deutsche Bank or any of its affiliates
(as defined in Section VI(d) of PTE 84–
14) in connection with conduct
described in Section I(g) of PTE 84–14
or section 411 of ERISA; and (2)
immediately provides the Department
any information requested by the
Department, as permitted by law,
regarding the agreement and/or conduct
and allegations that led to the
agreement;
(q) Each DB QPAM, in its agreements
with, or in other written disclosures
provided to Covered Plans, clearly and
prominently informs 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 DB 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.5 With respect to this
5 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
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requirement, the description may be
continuously maintained on a website,
provided that such website links to the
Policies or Summary Policies is clearly
and prominently disclosed to each
Covered Plan; and
(r) A DB QPAM will not fail to meet
the terms of this exemption solely
because a different DB QPAM fails to
satisfy a condition for relief described in
Sections I(c), (d), (h), (i), (j), (k), (l), (o)
and (q) 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 Deutsche Bank or its affiliates.
Section II. Definitions
(a) The term ‘‘U.S. Conviction’’ means
the judgment of conviction against DB
Group Services (UK) Limited (DB Group
Services), entered on April 18, 2017, by
the United States District Court for the
District of Connecticut, in case number
3:15–cr–00062–RNC, for one (1) count
of wire fraud, in violation of 18 U.S.C.
1343. For all purposes under this
exemption, ‘‘conduct’’ of any person or
entity that is the ‘‘subject of [a]
Conviction’’ encompasses the factual
allegations described in Paragraph 13 of
the Plea Agreement filed in the District
Court in case number 3:15–cr–00062–
RNC.
(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 DB QPAM relies on PTE 84–14,
or with respect to which a DB QPAM (or
any Deutsche Bank affiliate) has
expressly represented that the manager
qualifies as a QPAM or relies on PTE
84–14. A Covered Plan does not include
an ERISA-covered plan or IRA to the
extent the DB 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.
Notwithstanding the above, a DB QPAM
may disclaim reliance on QPAM status
or PTE 84–14 in a written modification
of a contract, arrangement, or agreement
with an ERISA-covered plan or IRA,
where: The modification is made in a
bilateral document signed by the client;
the client’s attention is specifically
directed toward the disclaimer; and the
client is advised in writing that, with
respect to any transaction involving the
client’s assets, the DB QPAM will not
represent that it is a QPAM, and will not
the Policies, the Summary Policies are no longer
accurate.
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rely on the relief described in PTE 84–
14.
(c) The term ‘‘DB QPAM’’ or ‘‘DB
QPAMs’’ means DWS Investment
Management Americas, Inc., and any
current and future, Deutsche Bank’s
asset management affiliates that qualify
as a ‘‘qualified professional asset
manager’’ (as defined in Section VI(a) of
PTE 84–14),6 and that rely on the relief
provided by PTE 84–14, and with
respect to which Deutsche Bank is an
‘‘affiliate’’ (as defined in section VI(d)(1)
of PTE 84–14). The term ‘‘DB QPAM’’
excludes DB Group Services.
(d) The term ‘‘Deutsche Bank’’ means
Deutsche Bank AG, a publicly-held
global banking and financial services
company headquartered in Frankfurt,
Germany;
(e) The term ‘‘Exemption Period’’
means the three year period from April
18, 2021 and ending on April 17, 2024;
(f) The term ‘‘Plea Agreement’’ means
the Plea Agreement entered into
between DB Group Services and the
U.S. Department of Justice, Fraud
Section, Criminal Division, on April 23,
2015 in connection with Case Number
3:15–cr–00062–RNC filed in the U.S.
District Court for the District of
Connecticut, subsequently adjudged by
the Court on March 28, 2017.
Effective Date: This exemption will be
in effect for up to three years, beginning
on April 18, 2021.
Signed at Washington, DC, this 9th day of
April 2021.
Christopher Motta,
Chief, Division of Individual Exemptions,
Office of Exemption Determinations,
Employee Benefits Security Administration,
U.S. Department of Labor.
[FR Doc. 2021–07963 Filed 4–16–21; 8:45 am]
BILLING CODE 4510–29–P
DEPARTMENT OF LABOR
Agency Information Collection
Activities; Submission for OMB
Review; Comment Request; Office of
Federal Contract Compliance
Programs Construction Recordkeeping
and Reporting Requirements
Notice of availability; request
for comments.
ACTION:
The Department of Labor
(DOL) is submitting this Office of
Federal Contract Compliance Programs
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SUMMARY:
6 In general terms, a QPAM is an independent
fiduciary that is a bank, savings and loan
association, insurance company, or investment
adviser that meets certain equity or net worth
requirements and other licensure requirements and
that has acknowledged in a written management
agreement that it is a fiduciary with respect to each
plan that has retained the QPAM.
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(OFCCP)-sponsored information
collection request (ICR) to the Office of
Management and Budget (OMB) for
review and approval in accordance with
the Paperwork Reduction Act of 1995
(PRA). Public comments on the ICR are
invited.
DATES: The OMB will consider all
written comments that agency receives
on or before May 19, 2021.
ADDRESSES: Written comments and
recommendations for the proposed
information collection should be sent
within 30 days of publication of this
notice to www.reginfo.gov/public/do/
PRAMain. Find this particular
information collection by selecting
‘‘Currently under 30-day Review—Open
for Public Comments’’ or by using the
search function.
Comments are invited on: (1) Whether
the collection of information is
necessary for the proper performance of
the functions of the Department,
including whether the information will
have practical utility; (2) if the
information will be processed and used
in a timely manner; (3) the accuracy of
the agency’s estimates of the burden and
cost of the collection of information,
including the validity of the
methodology and assumptions used; (4)
ways to enhance the quality, utility and
clarity of the information collection; and
(5) ways to minimize the burden of the
collection of information on those who
are to respond, including the use of
automated collection techniques or
other forms of information technology.
FOR FURTHER INFORMATION CONTACT:
Mara Blumenthal by telephone at 202–
693–8538, or by email at DOL_PRA_
PUBLIC@dol.gov.
SUPPLEMENTARY INFORMATION: This ICR
outlines the legal authority, procedures,
burden, and cost associated with the
recordkeeping and reporting
requirements of construction
contractors. It contains one form
(Construction Contract Award
Notification Form) that construction
contractors must give to OFCCP
notifying the agency of new contract
awards that exceed $10,000 and three
information collection instruments
(compliance review scheduling letter
and itemized listing, direct federal
compliance check letter, and federally
assisted compliance check letter) that
notify construction contractors that they
have been selected to undergo a
compliance evaluation. OFCCP is
seeking reauthorization of the
Construction Contract Award
Notification Form (Form CC–314).
OFCCP is merging the direct federal
compliance check letter and federally
assisted compliance check letter
PO 00000
Frm 00057
Fmt 4703
Sfmt 4703
20417
currently approved under OMB Control
No. 1250–0011 into this ICR. This ICR
also incorporates the requirements and
burden for the new Construction
Compliance Review Scheduling Letter
and Itemized Listing. For additional
substantive information about this ICR,
see the related notices published in the
Federal Register on October 30, 2020
(85 FR 68933) and December 23, 2020
(85 FR 84002).
This information collection is subject
to the PRA. A Federal agency generally
cannot conduct or sponsor a collection
of information, and the public is
generally not required to respond to an
information collection, unless the OMB
approves it and displays a currently
valid OMB Control Number. In addition,
notwithstanding any other provisions of
law, no person shall generally be subject
to penalty for failing to comply with a
collection of information that does not
display a valid OMB Control Number.
See 5 CFR 1320.5(a) and 1320.6.
DOL seeks PRA authorization for this
information collection for three (3)
years. OMB authorization for an ICR
cannot be for more than three (3) years
without renewal. The DOL notes that
information collection requirements
submitted to the OMB for existing ICRs
receive a month-to-month extension
while they undergo review.
Agency: DOL–OFCCP.
Title of Collection: Office of Federal
Contract Compliance Programs
Construction Recordkeeping and
Reporting Requirements.
OMB Control Number: 1250–0001.
Affected Public: Private Sector—
Businesses or other for-profits and notfor-profit institutions.
Total Estimated Number of
Respondents: 12,609.
Total Estimated Number of
Responses: 32,316.
Total Estimated Annual Time Burden:
157,570 hours.
Total Estimated Annual Other Costs
Burden: $10,125.
Authority: 44 U.S.C. 3507(a)(1)(D).
Dated: April 9, 2021.
Mara Blumenthal,
Senior PRA Analyst.
[FR Doc. 2021–07964 Filed 4–16–21; 8:45 am]
BILLING CODE 4510–CM–P
NUCLEAR REGULATORY
COMMISSION
[Docket No. 50–220; NRC–2021–0082]
Exelon Generation Company, LLC;
Nine Mile Point Nuclear Station, Unit 1
Nuclear Regulatory
Commission.
AGENCY:
E:\FR\FM\19APN1.SGM
19APN1
]]>Agencies
[Federal Register Volume 86, Number 73 (Monday, April 19, 2021)]
[Notices]
[Pages 20410-20417]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-07963]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF LABOR
Employee Benefits Security Administration
[Prohibited Transaction Exemption 2021-01; Exemption Application No. D-
12018]
Exemption for Certain Prohibited Transaction Restrictions
Involving DWS Investment Management Americas, Inc. (DIMA or the
Applicant) and Certain Current and Future Asset Management Affiliates
of Deutsche Bank AG (each a DB QPAM) Located in New York, New York
AGENCY: Employee Benefits Security Administration, Labor.
ACTION: Notice of exemption.
-----------------------------------------------------------------------
SUMMARY: This document is a notice of exemption issued by the
Department of Labor (the Department) from certain of the prohibited
transaction restrictions of the Employee Retirement Income Security Act
of 1974 (ERISA or the Act) and/or the Internal Revenue Code of 1986
(the Code). The exemption allows entities with specified relationships
to Deutsche Bank AG to continue to rely on the exemptive relief
provided by Prohibited Transaction Class Exemption 84-14, if certain
conditions are met.
DATES: This exemption will be in effect for a period of up to three (3)
years beginning on April 18, 2021.
FOR FURTHER INFORMATION CONTACT: Frank Gonzalez of the Department at
(202) 693-8553. (This is not a toll-free number.)
SUPPLEMENTARY INFORMATION: On February 12, 2021, the Department
published a notice of proposed exemption in the Federal Register at 86
FR 9376, for certain qualified professional asset managers within the
corporate family of Deutsche Bank AG (Deutsche Bank), including DWS
Investment Management Americas Inc. (DIMA or the Applicant), to
continue relying on the class exemptive relief granted in Prohibited
Transaction Exemption (PTE) 84-14 (PTE 84-14 or the QPAM Class
Exemption), for up to three years, notwithstanding the 2017 criminal
conviction of DB Group Services (UK) Limited (the U.S. Conviction). The
Department is granting this exemption to ensure that Covered Plans with
assets managed by an asset manager within the corporate family of
Deutsche Bank may continue to benefit from the relief provided by PTE
84-14, with the protection of this exemption's additional
conditions.\1\
---------------------------------------------------------------------------
\1\ For purposes of this exemption, a ``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 DB QPAM relies on PTE 84-14, or with respect to which a DB
QPAM (or any Deutsche Bank 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 DB 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. Notwithstanding the above, a DB QPAM may disclaim reliance on
QPAM status or PTE 84-14 in a written modification of a contract,
arrangement, or agreement with an ERISA-covered plan or IRA, where:
The modification is made in a bilateral document signed by the
client; the client's attention is specifically directed toward the
disclaimer; and the client is advised in writing that, with respect
to any transaction involving the client's assets, the DB QPAM will
not represent that it is a QPAM, and will not rely on the relief
described in PTE 84-14.
---------------------------------------------------------------------------
The grant of this three-year exemption does not imply that the
Department will grant additional relief for the DB QPAMs to continue to
rely on the relief in PTE 84-14 beyond the end of this exemption's
three-year term. This exemption provides only the relief specified in
the text of the exemption, and only with respect to the criminal
convictions or criminal conduct described herein. It provides no relief
from violations of any law other the prohibited transaction provisions
of ERISA and the Code.
The Department intends for the terms of this exemption to promote
adherence to basic fiduciary standards under ERISA and the Code. This
exemption also aims to ensure that Covered Plans can terminate
relationships in an orderly and cost-effective fashion in the event the
fiduciary of a Covered Plan determines it is prudent to terminate the
relationship with a DB QPAM. The Department makes the requisite
findings under ERISA section 408(a) based on adherence to all the
conditions of the exemption. Accordingly, affected parties should be
aware that the conditions incorporated in this exemption are,
[[Page 20411]]
taken as a whole, necessary for the Department to grant the relief
requested by the Applicant. Absent these or similar conditions, the
Department would not have granted this exemption.
The Applicant requested an individual exemption pursuant to section
408(a) of ERISA and section 4975(c)(2) of the Code, and in accordance
with the procedures set forth in 29 CFR part 2570, subpart B (76 FR
66637, 66644, October 27, 2011). Effective December 31, 1978, section
102 of the Reorganization Plan No. 4 of 1978, 5 U.S.C. App. 1 (1996),
transferred the authority of the Secretary of the Treasury to issue
administrative exemptions under section 4975(c)(2) of the Code to the
Secretary of Labor. Accordingly, the Department grants this exemption
under its sole authority.
Department's Comment
The Department cautions that the relief in this exemption will
terminate immediately if an entity within the Deutsche Bank corporate
structure is convicted of a crime described in Section I(g) of PTE 84-
14 (other than the judgment of conviction against DB Group Services
(UK) Limited for one (1) count of wire fraud, as further defined below)
during the Exemption Period. Although the DB QPAMs could apply for a
new exemption in that circumstance, the Department would not be
obligated to grant the exemption. The Department specifically designed
the terms of this exemption to permit plans to terminate their
relationships in an orderly and cost effective fashion in the event of
an additional conviction, or the expiration of this exemption without
additional relief, or a determination that it is otherwise prudent for
a plan to terminate its relationship with an entity covered by the
exemption.
Written Comments
The Department invited all interested persons to submit written
comments and/or requests for a public hearing with respect to the
notice of proposed exemption. In this regard, the Applicant was given
seven days to provide notice to interested persons, and all comments
and requests for a hearing were due by March 22, 2021. The Department
received two written comments. One commenter raised issues unrelated to
and outside of the scope of the proposed exemption. The other commenter
was the Applicant. After considering the entire record developed in
connection with the Applicant's exemption request, the Department has
determined to grant the exemption, as described below.
Comments From the Applicant
I. Revision to Section I(i)(8). Section I(i)(8) of the proposed
exemption provides: ``The Audit Committee of Deutsche Bank's
Supervisory Board is provided a copy of each Audit Report; and a senior
executive officer with a direct reporting line to the highest ranking
legal compliance officer of Deutsche Bank must review the Audit Report
for each DB QPAM and must certify in writing, under penalty of perjury,
that such officer has reviewed each Audit Report. Deutsche Bank must
provide notice to the Department in the event of a switch in the
committee to which the Audit Report will be provided.''
Applicant's Request: The Applicant notes that Section I(i)(8) of
the proposed extension requires review and certification of the audit
report by a ``senior executive officer with a direct reporting line to
the highest ranking legal compliance officer of Deutsche Bank.'' The
Applicant requests that the term ``legal'' be deleted.
Department's Response: The Department has revised the exemption
consistent with the Applicant's request.
II. Revision to Section I(j)(7). Section I(j)(7) of the proposed
exemption provides: ``By August 18, 2021, each DB 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 DB QPAM on or after April 18, 2021, the DB
QPAM must agree to its obligations under this section I(j) in an
updated investment management agreement between the DB QPAM and such
clients or other written contractual agreement. . . .''
Applicant's Request: The Applicant requests that Section I(j)(7) be
revised to provide that, for Covered Plans that enter into a written
asset or investment management agreement (IMA) on or after August 18,
2021 (rather than April 18, 2021), the DB QPAM must agree to its
obligations in an updated IMA.
Department's Response: The Department has revised the exemption
consistent with the Applicant's request.
Department's Note: The first sentence of Section I(j)(4) of the
proposed exemption read: ``Not to restrict the ability of such Covered
Plan to terminate or withdraw from its arrangement with the DB 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.''
The Department has revised this sentence for purposes of this
exemption, by striking the phrase ``with respect to any investment in a
separately managed account or pooled fund subject to ERISA and managed
by such QPAM.'' It is the Department's understanding, based on
representations from the Applicant, that no other accounts are
applicable.
III. Revision to Section I(k). Section I(k) of the proposed
exemption provides: ``Each DB QPAM provides a notice regarding the
proposed exemption, along with a separate summary describing the facts
that led to the U.S. Conviction (the Summary), which have been
submitted to the Department, and a prominently displayed statement (the
Statement) that the U.S. 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 DB QPAM, or the sponsor of an investment fund in any
case where a DB 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 DB
QPAM. The clients must receive a Federal Register copy of the notice of
final exemption within sixty (60) days of this exemption's effective
date. The notice may be delivered electronically (including by an email
that has a link to this exemption).''
Applicant's Request: The Applicant requests that the DB QPAMs have
until August 18, 2021 to provide the required disclosures to Covered
Plans that enter or have entered into an IMA before that date. The
Applicant states that it will be operationally difficult for the DB
QPAMs to provide clients with physical copies of the required documents
beginning on the effective date of the exemption, given the various
system-driven account opening processes utilized among the impacted
lines of business. The Applicant states that it is probable that many
such prospective clients have already received copies of current
account opening agreements, which they are reviewing and will sign and
return over the following several weeks or months. These account
opening documents would not include the new exemption materials. The
Applicant requests further that a similar
[[Page 20412]]
period of time be provided for prospective Covered Plan clients that
enter into an IMA on or after that date. In addition, the Applicant
requests that the DB QPAMs should not fail this condition solely
because a Covered Plan refuses to sign an updated IMA.
Department's Response: The Department is revising the exemption, in
part, as requested by the Applicant. The Department has revised Section
I(k) to allow the DB QPAMs sixty days to provide the required notices,
and has revised the exemption to provide that the DB QPAMs will not
fail Section I(k) solely because a Covered Plan refuses to sign an
updated IMA.
IV. Revision to Section I(m)(1)(ii) of the Proposed Exemption.
Section I(m)(1)(ii) states: ``The Compliance Officer must have a direct
reporting line to the highest-ranking corporate officer in charge of
legal compliance for asset management.''
Applicant's Request: The Applicant seeks removal of the term
``legal'' from this condition.
Department's Response: The Department has made the requested
revision.
V. Definition of Covered Plan. Section II(b) of the proposed
exemption defines the term ``Covered Plan'' as: ``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 DB QPAM relies on PTE 84-14, or with respect to
which a DB QPAM (or any Deutsche Bank affiliate) has expressly
represented that the manager qualifies as a QPAM or relies on PTE 84-
14. A Covered Plan does not include an ERISA-covered plan or IRA to the
extent the DB 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.''
Applicant's Request: The Applicant requests that new language be
added to the proposed exemption's definition of Covered Plan,
clarifying that a DB QPAM may disclaim reliance on QPAM status or PTE
84-14 where the disclaimer is made in a modification of a contract,
arrangement, or agreement with an ERISA-covered plan or IRA. The
Applicant states that the modification would be made in a bilateral
document signed by the client, where the client's attention is
specifically directed toward the disclaimer, and where the client is
advised in writing what it means to not use the QPAM Exemption.
Department's Response: The Department has added the following new
language to the definition of Covered Plan: Notwithstanding the above,
a DB QPAM may disclaim reliance on QPAM status or PTE 84-14 in a
written modification of a contract, arrangement, or agreement with an
ERISA-covered plan or IRA, where: The modification is made in a
bilateral document signed by the client; the client's attention is
specifically directed toward the disclaimer; and the client is advised
in writing that, with respect to any transaction involving the client's
assets, the DB QPAM will not represent that it is a QPAM, and will not
rely on the relief described in PTE 84-14.
VI. Revision to Section II(f). Section II(f) of the proposed
exemption provides that the term ``Plea Agreement'' means: ``The Plea
Agreement entered into between DB Group Services and the U.S.
Department of Justice, Fraud Section, Criminal Division, on April 23,
2015 in connection with Case Number 3:15-cr-00062-RNC filed in the U.S.
District Court for the District of Connecticut, subsequently adjudged
by the Court on March 28, 2017.''
Applicant's Request: The Applicant requests a revision to Section
II(f) of the proposed exemption to clarify that the Plea Agreement was
entered into on April 23, 2015, and DB Group Services was sentenced on
March 28, 2017.
Department's Response: The Department has revised the exemption
consistent with the Applicant's request.
Other Requested Revisions: In its comment letter, the Applicant
requested: (1) Deletion of the word ``certain'' from the Section II(a)
phrase ``any certain current and future, Deutsche Bank asset management
affiliates . . . ;'' and (2) revision of the Section II(c) term ``DB
Group Services UK Limited'' to ``DB Group Services (UK) Limited.''
Department's Response: The Department has made the requested
revisions.
After full consideration and review of the entire record, the
Department has decided to grant the exemption, with the modifications
discussed above. The complete application file (D-12018) is available
in the Public Disclosure Room of the Employee Benefits Security
Administration, Room N-1515, U.S. Department of Labor, 200 Constitution
Avenue NW, Washington, DC 20210. For a more complete statement of the
facts and representations supporting the Department's decision to grant
this exemption, refer to the notice of proposed exemption published on
February 12, 2021 at 86 FR 9376.
General Information
The attention of interested persons is directed to the following:
(1) The fact that a transaction is the subject of an exemption
under section 408(a) of the Act or section 4975(c)(2) of the Code does
not relieve a fiduciary or other party in interest or disqualified
person from certain other provisions of the Act and/or the Code,
including any prohibited transaction provisions to which the exemption
does not apply and the general fiduciary responsibility provisions of
section 404 of the Act, which, among other things, require a fiduciary
to discharge his or her duties respecting the plan solely in the
interest of the participants and beneficiaries of the plan and in a
prudent fashion in accordance with section 404(a)(1)(B) of the Act; nor
does it affect the requirement of section 401(a) of the Code that the
plan must operate for the exclusive benefit of the employees of the
employer maintaining the plan and their beneficiaries;
(2) In accordance with section 408(a) of ERISA and section
4975(c)(2) of the Code, the Department makes the following
determinations: The exemption is administratively feasible, the
exemption is in the interests of affected plans and of their
participants and beneficiaries, and the exemption is protective of the
rights of participants and beneficiaries of such plans;
(3) The exemption is supplemental to, and not in derogation of, any
other provisions of ERISA, including statutory or administrative
exemptions and transitional rules. Furthermore, the fact that a
transaction is subject to an administrative or statutory exemption is
not dispositive of whether the transaction is in fact a prohibited
transaction; and
(4) The availability of this exemption is subject to the express
condition that the material facts and representations contained in the
application are accurate.
Accordingly, the following exemption is granted under the authority
of section 408(a) of ERISA and section 4975(c)(2) of the Code and in
accordance with the procedures set forth in 29 CFR part 2570, subpart B
(76 FR 66637, 66644, October 27, 2011):
Three Year Exemption
The Department is granting this three-year exemption under the
authority of section 408(a) of the Act (or ERISA) and section
4975(c)(2) of the Internal Revenue Code (or Code), and in accordance
with the procedures set forth in 29 CFR part 2570, subpart B (76 FR
66637, 66644, October 27, 2011).\2\
[[Page 20413]]
Effective December 31, 1978, section 102 of Reorganization Plan No. 4
of 1978, 5 U.S.C. App. 1 (1996), transferred the authority of the
Secretary of the Treasury to issue exemptions of the type requested to
the Secretary of Labor. Therefore, this notice of exemption is issued
solely by the Department.
---------------------------------------------------------------------------
\2\ For purposes of this three-year exemption, references to
section 406 of Title I of the Act, unless otherwise specified,
should be read to refer as well to the corresponding provisions of
section 4975 of the Code.
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Section I. Covered Transactions
The DB QPAMs, as further defined in Section II(c), will not be
precluded from relying on the exemptive relief provided by Prohibited
Transaction Exemption 84-14 (PTE 84-14),\3\ notwithstanding the ``U.S.
Conviction'' against DB Group Services (as further defined in Section
II(a)), during the Exemption Period, provided that the following
conditions are satisfied: \4\
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\3\ 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).
\4\ Section I(g) of PTE 84-14 generally provides relief only if
``[n]either the QPAM nor any affiliate thereof . . . nor any owner .
. . of a 5 percent or more interest in the QPAM is a person who
within the 10 years immediately preceding the transaction has been
either convicted or released from imprisonment, whichever is later,
as a result of'' certain felonies including fraud.
---------------------------------------------------------------------------
(a) The DB QPAMs (including their officers, directors, agents other
than Deutsche Bank, and employees of such QPAMs) did not know of, have
reason to know of, or participate in the criminal conduct of DB Group
Services that is the subject of the U.S. Conviction. For purposes of
this exemption, ``participate in'' or ``participated in'' refers not
only to active participation in the criminal conduct that is the
subject of the U.S. Conviction, but also to knowing approval of the
criminal conduct that is the subject of the U.S. Conviction, or
knowledge of the conduct without taking active steps to prevent the
conduct, including reporting the conduct to the individual's
supervisors, and to the Board of Directors;
(b) The DB QPAMs (including their officers, directors, agents other
than Deutsche Bank, and employees of such QPAMs) did not receive direct
compensation, or knowingly receive indirect compensation, in connection
with the criminal conduct that is the subject of the U.S. Conviction.
(c) The DB QPAMs do not currently and will not in the future employ
or knowingly engage any of the individuals that ``participated in'' the
criminal conduct that is the subject of the U.S. Conviction;
(d) At all times during the Exemption Period, no DB QPAM will use
its authority or influence to direct an ``investment fund'' (as defined
in Section VI(b) of PTE 84-14) that is subject to ERISA or the Code and
managed by such DB QPAM with respect to one or more Covered Plan (as
defined in Section II(b), to enter into any transaction with DB Group
Services, or to engage DB Group Services to provide any service to such
investment fund, for a direct or indirect fee borne by such investment
fund, regardless of whether such transaction, or service, may otherwise
be within the scope of relief provided by an administrative or
statutory exemption;
(e) Any failure of the DB QPAMs to satisfy Section I(g) of PTE 84-
14 arose solely from the U.S. Conviction;
(f) A DB QPAM did not exercise authority over the assets of any
plan subject to Part 4 of Title I of ERISA (an ERISA-covered plan) or
section 4975 of the Code (an IRA) in a manner that it knew, or should
have known, would: Further the criminal conduct that is the subject of
the U.S. Conviction; or cause the DB QPAM or its affiliates to
directly, or indirectly, profit from the criminal conduct that is the
subject of the U.S. Conviction;
(g) Other than with respect to employee benefit plans maintained or
sponsored for its own employees or the employees of an affiliate, DB
Group Services 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;
provided, however, DB Group Services will not be treated as violating
the conditions of this exemption solely because it acted as an
investment advice fiduciary within the meaning of section 3(21)(A)(ii)
of ERISA, or section 4975(e)(3)(B) of the Code, or because DB Group
Services employees may be double-hatted, seconded, supervised or
otherwise subject to the control of a DB QPAM, including in a
discretionary fiduciary capacity with respect to the DB QPAM clients;
(h)(1) Each DB QPAM must continue to maintain, adjust (to the
extent necessary), implement and follow written policies and procedures
(the Policies). The Policies must require, and must be reasonably
designed to ensure that:
(i) The asset management decisions of the DB QPAM are conducted
independently of the corporate management and business activities of DB
Group Services;
(ii) The DB QPAM fully complies with ERISA's fiduciary duties and
with ERISA and the Code's prohibited transaction provisions, in each
such 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 DB 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 DB QPAM to regulators,
including, but not limited to, the Department, the Department of the
Treasury, the Department of Justice, and the Pension Benefit Guaranty
Corporation, on behalf of or in relation to Covered Plans, are
materially accurate and complete, to the best of such QPAM's knowledge
at that time;
(v) To the best of the DB QPAM's knowledge at the time, the DB QPAM
does not make material misrepresentations or omit material information
in its communications with such regulators with respect to Covered
Plans, or make material misrepresentations or omit material information
in its communications with Covered Plans;
(vi) The DB QPAM complies with the terms of this exemption; and
(2) Any violation of, or failure to comply with an item in
subparagraphs (h)(1)(ii) through (h)(1)(vi), is corrected as soon as
reasonably possible upon discovery, or as soon after the QPAM
reasonably should have known of the noncompliance (whichever is
earlier), and any such violation or compliance failure not so corrected
is reported, upon the discovery of such failure to so correct, in
writing, to the head of compliance and the DB QPAM's general counsel
(or their functional equivalent) of the relevant DB QPAM that engaged
in the violation or failure, and the independent auditor responsible
for reviewing compliance with the Policies. A DB QPAM will not be
treated as having failed to develop, implement, maintain, or follow the
Policies, provided that it corrects any instance of noncompliance as
soon as reasonably possible upon discovery, or as soon as reasonably
possible after the QPAM reasonably should have known of the
noncompliance (whichever is earlier), and provided that it adheres to
the reporting requirements set forth in this subparagraph (2);
(3) Each DB QPAM must maintain, adjust (to the extent necessary)
and implement a program of training (the Training), to be conducted at
least annually, for all relevant DB QPAM asset/portfolio management,
trading, legal, compliance, and internal audit personnel. The Training
must:
[[Page 20414]]
(i) At a minimum, cover the Policies, ERISA and Code compliance
(including applicable fiduciary duties and the prohibited transaction
provisions), ethical conduct, the consequences for not complying with
the conditions of this exemption (including any loss of exemptive
relief provided herein), and prompt reporting of wrongdoing; and
(ii) Be conducted by a professional who has been prudently selected
and who has appropriate technical training and proficiency with ERISA
and the Code; and
(iii) Be conducted in-person, electronically or via a website;
(i)(1) Each DB QPAM submits to three audits conducted annually 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 DB QPAM's compliance with, the
Policies and Training described herein. The audit requirement must be
incorporated in the Policies. The first audit must cover a 12 month
period that begins on April 18, 2021 and ends on April 17, 2022. The
second and third audits must cover the 12 month period that begins on
April 18, 2022, and April 18, 2023, respectively. Each of the three
annual audits must be completed no later than six (6) months after the
corresponding audit's ending period;
(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 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 DB QPAM and,
if applicable, Deutsche Bank, will grant the auditor unconditional
access to its business, including, but not limited to: Its computer
systems; business records; transactional data; workplace locations;
Training materials; and personnel. 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 DB QPAM has developed, implemented,
maintained, and followed the Policies in accordance with the conditions
of this exemption, and has developed and implemented the Training, as
required herein;
(4) The auditor's engagement must specifically require the auditor
to test each DB QPAM's operational compliance with the Policies and
Training. In this regard, the auditor must test, for each QPAM, a
sample of such QPAM's transactions involving Covered Plans, sufficient
in size and nature to afford the auditor a reasonable basis to
determine such QPAM's operational compliance with the Policies and
Training;
(5) For 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 Deutsche Bank, and the DB
QPAM to which the audit applies that describes the procedures performed
by the auditor in connection with its examination. The auditor, at its
discretion, may issue a single consolidated Audit Report that covers
all the DB QPAMs. The Audit Report must include the auditor's specific
determinations regarding:
(i) The adequacy of each DB QPAM's Policies and Training; each DB
QPAM's compliance with the Policies and Training; the need, if any, to
strengthen such Policies and Training; and any instance of the
respective DB QPAM's noncompliance with the written Policies and
Training described above. The DB QPAM must promptly address any
noncompliance. The DB 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
QPAM. Any action taken or the plan of action to be taken by the DB 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 DB 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 DB QPAM has complied with the requirements
under this subparagraph must be based on evidence that the particular
DB QPAM has actually implemented, maintained, and followed the Policies
and Training required by this exemption. Furthermore, the auditor must
not solely rely on the Exemption Report created by the compliance
officer (the Compliance Officer), as described in Section I(m) below as
the basis for the auditor's conclusions in lieu of independent
determinations and testing performed by the auditor as required by
Section I(i)(3) and (4) above;
(ii) The adequacy of the most recent Exemption Review described in
Section I(m);
(6) The auditor must notify the respective DB QPAM of any instance
of noncompliance identified by the auditor within five (5) business
days after such noncompliance is identified by the auditor, regardless
of whether the audit has been completed as of that date;
(7) With respect to each Audit Report, the DB QPAM's general
counsel, or one of the three most senior executive officers of the line
of business engaged in discretionary asset management services through
the DB QPAM with respect to which the Audit Report applies, must
certify in writing, under penalty of perjury, that the officer has
reviewed the Audit Report and this exemption; that, to the best of such
officer's knowledge at the time, the DB QPAM has addressed, corrected,
remedied any noncompliance and inadequacy or has an appropriate written
plan to address any inadequacy regarding the Policies and Training
identified in the Audit Report. Such certification must also include
the signatory's determination that, to the best of such 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 with the applicable provisions of ERISA and the
Code;
(8) The Audit Committee of Deutsche Bank's Supervisory Board is
provided a copy of each Audit Report; and a senior executive officer
with a direct reporting line to the highest ranking compliance officer
of Deutsche Bank must review the Audit Report for each DB QPAM and must
certify in writing, under penalty of perjury, that such officer has
reviewed each Audit Report. Deutsche Bank must provide notice to the
Department in the event of a switch in the committee to which the Audit
Report will be provided;
(9) Each DB QPAM provides its certified Audit Report, by regular
mail to: Office of Exemption Determinations (OED), 200 Constitution
Avenue NW, Suite 400, Washington, DC 20210; or by private carrier to:
122 C Street NW, Suite 400, Washington, DC 20001-2109. This delivery
must take place no later than forty-five (45) days following completion
of the Audit Report. The Audit Report will be made part of the public
record regarding this exemption. Furthermore, each DB QPAM must make
its Audit Report unconditionally
[[Page 20415]]
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
months after the execution of such agreement;
(11) The auditor must provide the Department, upon request, for
inspection and review, access to all the workpapers created and used in
connection with the audit, provided such access and inspection is
otherwise permitted by law; and
(12) Deutsche Bank 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 accurate
explanation of the basis for the substitution or change including an
accurate description of any material disputes between the terminated
auditor and Deutsche Bank or any of its affiliates;
(j) As of April 18, 2021, with respect to any arrangement,
agreement, or contract between a DB QPAM and a Covered Plan, the DB
QPAM agrees and warrants to Covered Plans:
(1) To comply with ERISA and the Code, as applicable with respect
to such Covered Plan; to refrain from engaging in prohibited
transactions that are not otherwise exempt (and to promptly correct any
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 DB QPAM's violation of ERISA's
fiduciary duties, as applicable, and of the prohibited transaction
provisions of ERISA and the Code, as applicable; a breach of contract
by the QPAM; or any claim arising out of the failure of such DB QPAM to
qualify for the exemptive relief provided by PTE 84-14 as a result of a
violation of Section I(g) of PTE 84-14 other than the U.S. Conviction.
This condition applies only to actual losses caused by the DB QPAM's
violations.
(3) Not to require (or otherwise cause) the Covered Plan to waive,
limit, or qualify the liability of the DB QPAM for violating ERISA or
the Code or engaging in prohibited transactions;
(4) Not to restrict the ability of such Covered Plan to terminate
or withdraw from its arrangement with the DB QPAM with the exception of
reasonable restrictions, appropriately disclosed in advance, that are
specifically designed to ensure equitable treatment of all investors in
a pooled fund in the event such withdrawal or termination may have
adverse consequences for all other investors. In connection with any
such arrangements involving investments in pooled funds subject to
ERISA entered into after the effective date of PTE 2017-04, 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; and
(6) Not to include exculpatory provisions disclaiming or otherwise
limiting liability of the DB QPAM for a violation of such agreement's
terms. To the extent consistent with Section 410 of ERISA, however,
this provision does not prohibit disclaimers for liability caused by an
error, misrepresentation, or misconduct of a plan fiduciary or other
party hired by the plan fiduciary who is independent of Deutsche Bank,
and its affiliates, or damages arising from acts outside the control of
the DB QPAM; and
(7) By August 18, 2021, each DB 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 DB QPAM on or after August 18, 2021, the DB QPAM must
agree to its obligations under this section I(j) in an updated
investment management agreement between the DB QPAM and such clients or
other written contractual agreement. Notwithstanding the above, a DB
QPAM will not violate the condition solely because a Covered Plan or
IRA refuses to sign an updated investment management agreement. This
condition will be deemed met for each Covered Plan that received notice
pursuant to PTE 2017-04 that meets the terms of this condition.
(k) Within 60 days of the effective date of this three-year
exemption, each DB QPAM provides a Federal Register notice regarding
the exemption, along with a separate summary describing the facts that
led to the U.S. Conviction (the Summary), which has been submitted to
the Department, and a prominently displayed statement (the Statement)
that the U.S. 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
DB QPAM, or the sponsor of an investment fund in any case where a DB
QPAM acts as a sub-adviser to the investment fund in which such ERISA-
covered plan and IRA invests. All Covered Plan clients that enter into
a written asset or investment management agreement with a DB QPAM after
the date that is sixty days after the effective date of this exemption
must receive a copy of the notice of the exemption,, the Summary and
the Statement prior to, or contemporaneously with, the client's receipt
of a written asset management agreement from the DB QPAM. The notice
may be delivered electronically (including by an email that has a link
to this exemption). Notwithstanding the above, a DB QPAM will not
violate the condition solely because a Plan or IRA refuses to sign an
updated investment management agreement;
(l) The DB QPAMs 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 U.S. Conviction;
(m)(1) Deutsche Bank continues to designate 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 April 18, 2021, (the Exemption Review) to
determine the adequacy and effectiveness of the implementation of the
Policies and Training. With respect to the Compliance Officer, the
following conditions must be met:
(i) The Compliance Officer must be a professional who has extensive
experience with, and knowledge of, the regulation of financial services
and products, including under ERISA and the Code; and
(ii) The Compliance Officer must have a direct reporting line to
the highest ranking corporate officer in charge of compliance for asset
management;
[[Page 20416]]
(2) With respect to each Exemption Review, the following conditions
must be met:
(i) The Exemption Review includes a review of the DB QPAM's
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 2017-04; any material change
in the relevant business activities of the DB 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 DB QPAMs;
(ii) The Compliance Officer prepares a written report for each
Exemption Review (each, an 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 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 Exemption Report; and (D) the
DB 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 Exemption Report must be provided to appropriate
corporate officers of Deutsche Bank and to each DB QPAM to which such
report relates, and to the head of compliance and the DB QPAM's general
counsel (or their functional equivalent) of the relevant DB QPAM; and
the Exemption Report must be made unconditionally available to the
independent auditor described in Section I(i) above;
(v) Each Exemption Review, including the Compliance Officer's
written Exemption Report, must be completed within three (3) months
following the end of the period to which it relates. The Exemption
Review for the period April 18, 2020 through April 17, 2021 must be
conducted, and completed, under the requirements of PTE 2017-04;
(n) In connection with the deferred prosecution agreement entered
on January 8, 2021, between Deutsche Bank and the U.S. Department of
Justice, to resolve the U.S. government's investigation into violations
of the Foreign Corrupt Practices Act and a separate investigation into
a commodities fraud scheme, no DB QPAMs were involved in the conduct
that gave rise to the deferred prosecution agreement, and no Covered
Plan assets were involved in the transactions that gave rise to the
deferred prosecution agreement;
(o) Each DB QPAM will maintain records necessary to demonstrate
that the conditions of this exemption have been met for six (6) years
following the date of any transaction for which the DB QPAM relies upon
the relief in the exemption;
(p) During the Exemption Period, Deutsche Bank: (1) Immediately
discloses to the Department any Deferred Prosecution Agreement or a
Non-Prosecution Agreement with the U.S. Department of Justice entered
into by Deutsche Bank or any of its affiliates (as defined in Section
VI(d) of PTE 84-14) in connection with conduct described in Section
I(g) of PTE 84-14 or section 411 of ERISA; and (2) immediately provides
the Department any information requested by the Department, as
permitted by law, regarding the agreement and/or conduct and
allegations that led to the agreement;
(q) Each DB QPAM, in its agreements with, or in other written
disclosures provided to Covered Plans, clearly and prominently informs
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 DB 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.\5\ With respect to this requirement, the description may be
continuously maintained on a website, provided that such website links
to the Policies or Summary Policies is clearly and prominently
disclosed to each Covered Plan; and
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\5\ In the event the Applicant meets this disclosure requirement
through Summary Policies, changes to the Policies shall not result
in the requirement for a new disclosure unless, as a result of
changes to the Policies, the Summary Policies are no longer
accurate.
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(r) A DB QPAM will not fail to meet the terms of this exemption
solely because a different DB QPAM fails to satisfy a condition for
relief described in Sections I(c), (d), (h), (i), (j), (k), (l), (o)
and (q) 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 Deutsche Bank or its affiliates.
Section II. Definitions
(a) The term ``U.S. Conviction'' means the judgment of conviction
against DB Group Services (UK) Limited (DB Group Services), entered on
April 18, 2017, by the United States District Court for the District of
Connecticut, in case number 3:15-cr-00062-RNC, for one (1) count of
wire fraud, in violation of 18 U.S.C. 1343. For all purposes under this
exemption, ``conduct'' of any person or entity that is the ``subject of
[a] Conviction'' encompasses the factual allegations described in
Paragraph 13 of the Plea Agreement filed in the District Court in case
number 3:15-cr-00062-RNC.
(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 DB QPAM relies on PTE 84-14, or with respect to which a DB QPAM
(or any Deutsche Bank affiliate) has expressly represented that the
manager qualifies as a QPAM or relies on PTE 84-14. A Covered Plan does
not include an ERISA-covered plan or IRA to the extent the DB 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. Notwithstanding the above, a DB QPAM may disclaim reliance on
QPAM status or PTE 84-14 in a written modification of a contract,
arrangement, or agreement with an ERISA-covered plan or IRA, where: The
modification is made in a bilateral document signed by the client; the
client's attention is specifically directed toward the disclaimer; and
the client is advised in writing that, with respect to any transaction
involving the client's assets, the DB QPAM will not represent that it
is a QPAM, and will not
[[Page 20417]]
rely on the relief described in PTE 84-14.
(c) The term ``DB QPAM'' or ``DB QPAMs'' means DWS Investment
Management Americas, Inc., and any current and future, Deutsche Bank's
asset management affiliates that qualify as a ``qualified professional
asset manager'' (as defined in Section VI(a) of PTE 84-14),\6\ and that
rely on the relief provided by PTE 84-14, and with respect to which
Deutsche Bank is an ``affiliate'' (as defined in section VI(d)(1) of
PTE 84-14). The term ``DB QPAM'' excludes DB Group Services.
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\6\ In general terms, a QPAM is an independent fiduciary that is
a bank, savings and loan association, insurance company, or
investment adviser that meets certain equity or net worth
requirements and other licensure requirements and that has
acknowledged in a written management agreement that it is a
fiduciary with respect to each plan that has retained the QPAM.
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(d) The term ``Deutsche Bank'' means Deutsche Bank AG, a publicly-
held global banking and financial services company headquartered in
Frankfurt, Germany;
(e) The term ``Exemption Period'' means the three year period from
April 18, 2021 and ending on April 17, 2024;
(f) The term ``Plea Agreement'' means the Plea Agreement entered
into between DB Group Services and the U.S. Department of Justice,
Fraud Section, Criminal Division, on April 23, 2015 in connection with
Case Number 3:15-cr-00062-RNC filed in the U.S. District Court for the
District of Connecticut, subsequently adjudged by the Court on March
28, 2017.
Effective Date: This exemption will be in effect for up to three
years, beginning on April 18, 2021.
Signed at Washington, DC, this 9th day of April 2021.
Christopher Motta,
Chief, Division of Individual Exemptions, Office of Exemption
Determinations, Employee Benefits Security Administration, U.S.
Department of Labor.
[FR Doc. 2021-07963 Filed 4-16-21; 8:45 am]
BILLING CODE 4510-29-P
