Proposed Exemption for Certain Prohibited Transaction Restrictions Involving JPMorgan Chase Co. (JPMC or the Applicant) Located in New York, New York, 63802-63818 [2022-22861]

Agencies

• Employee Benefits Security Administration
• DEPARTMENT OF LABOR

[Federal Register Volume 87, Number 202 (Thursday, October 20, 2022)]
[Notices]
[Pages 63802-63818]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-22861]


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DEPARTMENT OF LABOR

Employee Benefits Security Administration

[Exemption Application No. D-12035]


Proposed Exemption for Certain Prohibited Transaction 
Restrictions Involving JPMorgan Chase Co. (JPMC or the Applicant) 
Located in New York, New York

AGENCY: Employee Benefits Security Administration, Labor.

ACTION: Notice of proposed exemption.

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SUMMARY: This document provides notice of the pendency before the 
Department of Labor (the Department) of a proposed individual exemption 
from certain of the prohibited transaction restrictions of the Employee 
Retirement Income Security Act of 1974 (ERISA) and/or the Internal 
Revenue Code of 1986 (the Code). If the proposed exemption is granted, 
certain asset managers with specified relationships to JPMorgan Chase 
Co. (JPMC) (the JPMC Affiliated qualified professional asset managers 
(QPAMs) and the JPMC Related QPAMs) will not be precluded from relying 
on the exemptive relief provided by Prohibited Transaction Class 
Exemption 84-14 (PTE 84-14 or the QPAM Exemption), notwithstanding the 
judgment of conviction against JPMC, as described below.

DATES: If granted, this proposed exemption will be effective for a 
period of four years beginning on January 10, 2023, and ending on 
January 9, 2027, if the exemption's conditions and definitions are 
satisfied.
    Written comments and requests for a public hearing on the proposed 
exemption should be submitted to the Department by December 19, 2022.

ADDRESSES: All written comments and requests for a hearing should be 
sent to the Employee Benefits Security Administration (EBSA), Office of 
Exemption Determinations, Attention: Application No. D-12035 via email 
to [email protected] or online through https://www.regulations.gov. Any 
such comments or requests should be sent by the end of the scheduled 
comment period. The application for exemption and the comments received 
will be available for public inspection in the Public Disclosure Room 
of the Employee Benefits Security Administration, U.S. Department of 
Labor, Room N-1515, 200 Constitution Avenue NW, Washington, DC 20210. 
See SUPPLEMENTARY INFORMATION below for additional information 
regarding comments.

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

SUPPLEMENTARY INFORMATION:

Comments

    In light of the current circumstances surrounding the COVID-19 
pandemic caused by the novel coronavirus which may result in disruption 
to the receipt of comments by U.S. Mail or hand delivery/courier, 
persons are encouraged to submit all comments electronically and not to 
follow with paper copies. Comments should state the nature of the 
person's interest in the proposed exemption and the manner in which the 
person would be adversely affected by the exemption, if granted. Any 
person who may be adversely affected by an exemption can request a 
hearing on the exemption. A request for a hearing must state: (1) the 
name, address, telephone number, and email address of the person making 
the request; (2) the nature of the person's interest in the exemption 
and the manner in which the person would be adversely affected by the 
exemption; and (3) a statement of the issues to be addressed and a 
general description of the evidence to be presented at the hearing. The 
Department will grant a request for a hearing made in accordance with 
the requirements above where a hearing is necessary to fully explore 
material factual issues identified by the person requesting the 
hearing. A notice of such hearing shall be published by the Department 
in the Federal Register. The Department may decline to hold a hearing 
if: (1) the request for the hearing does not meet the requirements 
above; (2) the only issues identified for exploration at the hearing 
are matters of law; or (3) the factual issues identified can be fully 
explored through the submission of evidence in written (including 
electronic) form.
    WARNING: All comments received will be included in the public 
record without change and may be made available online at https://www.regulations.gov, including any personal information provided, 
unless the comment includes information claimed to be confidential or 
other information whose disclosure is restricted by statute. If you 
submit a comment, EBSA recommends that you include your name and other 
contact information in the body of your comment, but DO NOT submit 
information that you consider to be confidential, or otherwise 
protected (such as a Social Security number or an unlisted phone 
number) or confidential business information that you do not want 
publicly disclosed. However, if EBSA cannot read your comment due to 
technical difficulties and cannot contact you for clarification, EBSA 
might not be able to consider your comment. Additionally, the https://www.regulations.gov website is an ``anonymous access'' system, which 
means EBSA will not know your identity or contact information unless 
you provide it in the body of your comment. If you send an email 
directly to EBSA without going through https://www.regulations.gov, 
your email address will be automatically captured and included as part 
of the comment that is placed in the public record and made available 
on the internet.

Proposed Exemption

    The Department is considering granting an exemption under the 
authority of Section 408(a) of the Employee Retirement Income Security 
Act of 1974, as amended (ERISA), and Section 4975(c)(2) of the Internal 
Revenue Code of 1986, as amended (the Code), and in accordance with the

[[Page 63803]]

procedures set forth in 29 CFR part 2570, subpart B (75 FR 66637, 
66644, October 27, 2011).\1\ If the proposed exemption is granted, 
certain asset managers with specified relationships to JPMC (the JPMC 
Affiliated QPAMs and the JPMC Related QPAMs) will not be precluded from 
relying on the exemptive relief provided by Prohibited Transaction 
Class Exemption 84-14 (PTE 84-14 or the QPAM Exemption),\2\ 
notwithstanding the judgment of conviction against JPMC (the 
Conviction) \3\ for engaging in a conspiracy to fix the price of, or 
eliminate competition in, the purchase or sale of the euro/U.S. dollar 
currency pair exchanged in the Foreign Exchange (FX) Spot Market. This 
proposed exemption, if granted, will be effective for a period of four 
years beginning on January 10, 2023, and ending on January 9, 2027, if 
the exemption's conditions and definitions are satisfied.
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    \1\ For purposes of this proposed exemption, references to 
specific provisions of ERISA Title I, unless otherwise specified, 
should be read to refer as well to the corresponding provisions of 
Code Section 4975. Further, this proposed exemption, if granted, 
does not provide relief from the requirements of, or specific 
sections of, any law not noted above. Accordingly, the Applicant is 
responsible for ensuring compliance with any other laws applicable 
to the transactions described herein.
    \2\ 49 FR 9494 (March 13, 1984), as corrected at 50 FR 41430 
(October 10, 1985), as amended at 70 FR 49305 (August 23, 2005), and 
as amended at 75 FR 38837 (July 6, 2010).
    \3\ Section I(g) of PTE 84-14 generally provides that 
``[n]either the QPAM nor any affiliate thereof . . . nor any owner . 
. . of a 5 percent or more interest in the QPAM is a person who 
within the 10 years immediately preceding the transaction has been 
either convicted or released from imprisonment, whichever is later, 
as a result of'' certain felonies including violation of the Sherman 
Antitrust Act, Title 15 United States Code, Section 1.
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    This proposed exemption, would provide relief from certain of the 
restrictions set forth in ERISA sections 406 and 407. It would not, 
however, provide relief from any other violation of law. Furthermore, 
the Department cautions that the relief in this proposed exemption 
would terminate immediately if, among other things, an entity within 
the JPMC corporate structure is convicted of a crime covered by Section 
I(g) of PTE 84-14 (other than the Conviction as defined in Section 
I(a)) during the exemption period (as defined in Section I(c)). 
Although the JPMC QPAMs could apply for a new exemption in that 
circumstance, the Department would not be obligated to grant the 
exemption.
    The terms of this proposed exemption have been specifically 
designed to permit plans to terminate their relationships in an orderly 
and cost-effective fashion in the event of an additional conviction or 
a determination by a plan that it is otherwise prudent to terminate its 
relationship with an entity covered by the exemption.

Summary of Facts and Representations 4
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    \4\ The Summary of Facts and Representations is based on the 
Applicant's representations provided in its exemption application 
and does not reflect factual findings or opinions of the Department 
unless indicated otherwise. The Department notes that availability 
of this exemption, is subject to the express condition that the 
material facts and representations contained in application D-12035 
are true and complete at all times, and accurately describe all 
material terms of the transactions covered by the exemption. If 
there is any material change in a transaction covered by the 
exemption, or in a material fact or representation described in the 
application, the exemption will cease to apply as of the date of the 
change.
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Background

    1. JPMC is a financial holding company and global financial 
services firm incorporated in Delaware and headquartered in New York, 
New York. JPMC's principal bank subsidiaries are JPMorgan Chase Bank, 
N.A. and Chase Bank USA, National Association. Two of JPMC's principal 
non-bank subsidiaries are its primary broker-dealer subsidiary, J.P. 
Morgan Securities LLC, and its primary investment management 
subsidiary, J.P. Morgan Investment Management Inc. (JPMIM). JPMC 
operates through four major reportable segments or lines of business: 
Consumer & Community Banking (CCB), Corporate & Investment Bank (CIB), 
Commercial Banking (CB), and Asset & Wealth Management (AWM).
    2. JPMC is the publicly-traded parent company of investment 
management affiliates that function as QPAMs, through which the CCB, 
CIB, and AWM segments operate. Since the Department granted PTE 2017-03 
(as discussed in more detail below), the following seven JPMC QPAMs 
have exercised discretionary control over the management and 
disposition of client assets held by ERISA-covered Plans and IRAs 
(together, Covered Plans): \5\ JPMorgan Chase Bank, N.A., J.P. Morgan 
Alternative Asset Management, Inc., JPMorgan Asset Management (Asia 
Pacific) Limited, J.P. Morgan Investment Management Inc., J.P. Morgan 
Private Investments Inc., J.P. Morgan Securities LLC., and Security 
Capital Research & Management Incorporated.
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    \5\ For purposes of this proposed exemption, the term Covered 
Plan means a plan subject to Part IV of Title I of ERISA (an 
``ERISA-covered plan'') or a plan subject to Code section 4975 (an 
``IRA''), in each case, with respect to which a JPMC Affiliated QPAM 
relies on PTE 84-14, or with respect to which a JPMC Affiliated QPAM 
(or any JPMC affiliate) has expressly represented that the manager 
qualifies as a QPAM or relies on PTE 84-14.
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    The JPMC Affiliated QPAMs provide investment management services to 
thousands of plans and IRAs. In managing these assets, the JPMC 
Affiliated QPAMs regularly rely on the QPAM Exemption. In addition to 
the JPMC Affiliated QPAMs, JPMC currently owns a 5% or greater direct 
or indirect interest in certain investment managers that are not 
affiliated with JPMC in the actual control sense (the JPMC Related 
QPAMs). JPMC does not have the authority to exercise a controlling 
influence over the JPMC Related QPAMs and is not involved with their 
clients, strategies, or ERISA assets under management, if any.

ERISA and Code Prohibited Transactions and PTE 84-14

    3. The rules set forth in ERISA Section 406 and Code Section 
4975(c)(1) proscribe certain ``prohibited transactions'' between plans 
and certain parties in interest with respect to those plans.\6\ ERISA 
Section 3(14) defines parties in interest with respect to a plan to 
include, among others, the plan fiduciary, a sponsoring employer of the 
plan, a union whose members are covered by the plan, service providers 
with respect to the plan, and certain of their affiliates.\7\ The 
prohibited transaction provisions under ERISA Section 406(a) and Code 
Section 4975(c)(1) prohibit, in relevant part, (1) sales, leases, 
loans, or the provision of services between a party in interest and a 
plan (or an entity whose assets are deemed to constitute the assets of 
a plan), (2) the use of plan assets by or for the benefit of a party in 
interest, or (3) a transfer of plan assets to a party in interest.\8\
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    \6\ For purposes of the Summary of Facts and Representations, 
references to specific provisions of Title I of ERISA, unless 
otherwise specified, refer also to the corresponding provisions of 
the Code.
    \7\ Under the Code, such parties, or similar parties, are 
referred to as ``disqualified persons.''
    \8\ The prohibited transaction provisions also include certain 
fiduciary prohibited transactions under ERISA Section 406(b). These 
include transactions involving fiduciary self-dealing, fiduciary 
conflicts of interest, and kickbacks to fiduciaries.
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    Under the authority of ERISA Section 408(a) and Code Section 
4975(c)(2), the Department has the authority to grant exemptions from 
such ``prohibited transactions'' in accordance with the procedures set 
forth in 29 CFR part 2570, subpart B (76 FR 66637, 66644, October 27, 
2011) if the Department finds an exemption is: (a) administratively 
feasible, (b) in the interests of the plan and of its participants and 
beneficiaries, and (c)

[[Page 63804]]

protective of the rights of participants and beneficiaries.
    4. PTE 84-14 exempts certain prohibited transactions between a 
party in interest and an ``investment fund'' (as defined in Section 
VI(b) of PTE 84-14) in which a plan has an interest if the investment 
manager satisfies the definition of ``qualified professional asset 
manager'' (QPAM) and satisfies additional conditions of the exemption. 
PTE 84-14 was developed and granted based on the essential premise that 
broad relief could be afforded for all types of transactions in which a 
plan engages only if the commitments and the investments of plan assets 
and the negotiations leading thereto are the sole responsibility of an 
independent, discretionary manager.\9\
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    \9\ See 75 FR 38837, 38839 (July 6, 2010).
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    5. Section I(g) of PTE 84-14 prevents an entity that may otherwise 
meet the definition of QPAM from utilizing the exemptive relief 
provided by the QPAM exemption, for itself and its client plans if that 
entity, an ``affiliate'' thereof,\10\ or any direct or indirect five 
percent or more owner in the QPAM has been either convicted or released 
from imprisonment, whichever is later, as a result of criminal activity 
described in section I(g) within the 10 years immediately preceding the 
transaction. Section I(g) was included in PTE 84-14, in part, based on 
the Department's expectation that QPAMs and those who may be in a 
position to influence the QPAM's policies maintain a high standard of 
integrity.
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    \10\ Section VI(d) of PTE 84-14 defines the term ``affiliate'' 
for purposes of Section I(g) as ``(1) Any person directly or 
indirectly through one or more intermediaries, controlling, 
controlled by, or under common control with the person, (2) Any 
director of, relative of, or partner in, any such person, (3) Any 
corporation, partnership, trust or unincorporated enterprise of 
which such person is an officer, director, or a 5 percent or more 
partner or owner, and (4) Any employee or officer of the person 
who--(A) Is a highly compensated employee (as defined in Section 
4975(e)(2)(H) of the Code) or officer (earning 10 percent or more of 
the yearly wages of such person), or (B) Has direct or indirect 
authority, responsibility or control regarding the custody, 
management or disposition of plan assets.''
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JPMC Conviction and PTE 84-14 Disqualification

    6. On May 20, 2015, the Department of Justice filed a Criminal 
Information in the U.S. District Court for the District of Connecticut 
(the District Court) \11\ charging JPMC with a one-count violation of 
the Sherman Antitrust Act.\12\ The Information charged that from at 
least as early as July 2010 until at least January 2013, JPMC, through 
one of its euro/U.S. dollar (EUR/USD) traders, entered into and engaged 
in a combination and conspiracy to fix, stabilize, maintain, increase 
or decrease the price of, and rig bids and offers for, the EUR/USD 
currency pair exchanged in the foreign exchange (FX) spot market by 
agreeing to eliminate competition in the purchase and sale of the EUR/
USD currency pair in the United States and elsewhere (the Criminal 
Misconduct). The Criminal Misconduct involved near-daily conversations 
some of which were in code, in an exclusive electronic chat room used 
by certain EUR/USD traders.
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    \11\ Case Number 3:15-CR-79-SRU.
    \12\ 15 U.S.C. 1.
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    JPMC resolved the charges through a plea agreement presented to the 
District Court on May 20, 2015 (the Plea Agreement), under which JPMC 
agreed to enter a plea of guilty to the charge set out in the 
Information. A judgment of the Conviction was subsequently entered 
against JPMC on January 10, 2017, and pursuant to the judgment, JPMC 
was required to pay approximately $550 million in total fines and 
restitution in connection with the Conviction.

The Prior and Existing Exemptions

    7. PTE 2016-15. Once the District Court entered the Conviction, the 
JPMC Affiliated QPAMs and the JPMC Related QPAMs, as well as their 
Covered Plan clients, became ineligible to rely on PTE 84-14, pursuant 
to section I(g) of the class exemption without receiving an individual 
prohibited transaction exemption from the Department. The JPMC 
Affiliated QPAMs submitted an exemption application to the Department 
on May 20, 2015, and after reviewing the application, the Department 
granted PTE 2016-15 on January 10, 2017. PTE 2016-15 permitted the JPMC 
Affiliated QPAMs and the JPMC Related QPAMs to continue to rely upon 
the relief provided in the QPAM exemption for one-year period from the 
date of the Conviction.\13\
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    \13\ PTE 2016-15, 81 FR 94028 (December 22, 2016). PTE 2016-15 
became effective on January 10, 2017 (the date on which the District 
Court entered the Conviction against JPMC) and expired on January 
10, 2018.
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    8. PTE 2017-03. Subsequently, on December 29, 2017, the Department 
granted PTE 2017-03, a second individual exemption that permitted the 
JPMC Affiliated QPAMs and the JPMC Related QPAMs to continue to rely 
upon the relief provided by PTE 84-14 for a period of five years 
beginning on January 10, 2018, and ending on January 9, 2023.\14\
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    \14\ PTE 2017-03, 82 FR 61816 (December 29, 2017).
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    9. PTEs 2016-15 and 2017-03 each contain a set of conditions that 
are designed to protect those Covered Plans that entrust their assets 
to a JPMC Affiliated QPAM despite the serious nature of the Criminal 
Misconduct underlying the Conviction. The Department discusses some of 
the protective conditions below.\15\
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    \15\ The following paragraphs do not discuss all of the 
conditions set out in PTE 2017-03. For the complete set of 
conditions, see PTE 2017-03, 82 FR 61816 (December 29, 2017).
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Conditions of PTE 2017-03

    10. PTE 2017-03 requires each JPMC Affiliated QPAM to develop, 
implement, maintain, and follow written policies (the Policies) that 
are reasonably designed to ensure that, among other things: (a) the 
asset management decisions of the JPMC Affiliated QPAM are independent 
of the corporate management and business activities of JPMC; (b) the 
JPMC Affiliated QPAM fully complies with ERISA's fiduciary duties; (c) 
any filings or statements made by the JPMC Affiliated QPAM to 
regulators on behalf of Covered Plans are materially accurate and 
complete; and (d) the JPMC Affiliated QPAM complies with the terms of 
PTE 2017-03. Further, any violation of or failure to comply with the 
Policies must be corrected promptly upon discovery, and any such 
violation or compliance failure that is not promptly corrected must be 
reported, in writing to appropriate corporate officers upon the 
discovery of the failure to promptly correct.
    11. PTE 2017-03 requires each JPMC Affiliated QPAM to develop and 
implement a training program (the Training) that is conducted at least 
annually by a prudently selected independent professional. The Training 
must cover the Policies, ERISA and Code compliance, ethical conduct, 
the consequences for not complying with the conditions of PTE 2017-03, 
and the duty to promptly report wrongdoing.
    12. PTE 2017-03 further requires each JPMC Affiliated QPAM to be 
audited biannually (covering the preceding 12-month period) by a 
prudently selected independent auditor (the Auditor). The Auditor must 
evaluate the adequacy of each JPMC Affiliated QPAM's implementation of 
the Policies and Training requirements of PTE 2017-03 and their 
compliance with them. The Auditor must issue a written report (the 
Audit Report) to JPMC and each JPMC Affiliated QPAM to which the audit 
applies that describes the procedures performed during the Audit. In 
its Audit Report, the Auditor must assess the

[[Page 63805]]

adequacy of each of the JPMC Affiliated QPAM's Policies and Training, 
their compliance with the Policies and Training, the need, if any, to 
strengthen the Policies and Training, and any instance(s) of 
noncompliance.
    13. PTE 2017-03 also requires certain JPMC senior personnel to 
review the Audit Report, make certain certifications, and take 
corrective actions when necessary. In this regard, a general counsel, 
or one of the three most senior executive officers of each JPMC 
Affiliated QPAM to which the Audit Report applies must certify in 
writing and under penalty of perjury that the officer has reviewed the 
Audit Report, addressed, corrected, or remedied any inadequacy 
identified in the Audit Report, and determined that the Policies and 
Training comply with the requirements of PTE 2017-03 and applicable 
provisions of ERISA and the Code.
    14. PTE 2017-03 requires each JPMC Affiliated QPAM to agree and 
warrant to its Covered Plan clients that it will: (a) comply with ERISA 
and the Code; (b) refrain from engaging in prohibited transactions that 
are not otherwise exempt (and promptly correct any inadvertent 
prohibited transactions); and (c) comply with the standards of prudence 
and loyalty set forth in ERISA Section 404. PTE 2017-03 also requires 
each JPMC Affiliated QPAM to agree and warrant: (a) to indemnify and 
hold harmless Covered Plans for certain damages; and (b) not to require 
(or otherwise cause) Covered Plans to waive, limit, or qualify the 
liability of each JPMC Affiliated QPAM for violating ERISA or the Code 
or engaging in prohibited transactions. Finally, PTE 2017-03 requires 
the JPMC Affiliated QPAMs to agree and warrant not to: (a) restrict the 
ability of Covered Plans to terminate or withdraw from their 
arrangement with the JPMC Affiliated QPAM, with the exception of 
reasonable restrictions disclosed in advance, as defined in PTE 2017-
03; or (b) impose any fees, penalties, or charges for such termination 
or withdrawal, with the exception of reasonable fees.
    15. PTE 2017-03 contains extensive notice requirements that 
obligate the JPMC Affiliated QPAMs to provide Covered Plans with a 
notice of the QPAM's obligations under the exemption, a copy of the 
notice of the exemption as published in the Federal Register, a 
separate summary describing the facts that led to the Conviction (the 
Summary), and a prominently displayed statement (the Statement) that 
the Conviction results in a failure to meet a condition in PTE 84-14.
    16. PTE 2017-03 also requires JPMC to designate a senior compliance 
officer (the Compliance Officer) to conduct an annual review to 
determine the adequacy and effectiveness of the implementation of the 
Policies and Training (the Annual Review). The Compliance Officer must 
prepare a written report for each Annual Review that, among other 
things, summarizes their material activities during the preceding year, 
sets forth any instance of noncompliance discovered during the 
preceding year, and any related corrective action taken.

Current Exemption Request

    17. On October 1, 2021, the Applicant filed an application for 
exemptive relief that would permit the JPMC Affiliated QPAMs and the 
JPMC Related QPAMs to continue to rely upon the relief provided under 
PTE 84-14 for a period of four years from January 10, 2023 (the 
expiration of PTE 2017-03), through January 9, 2027 (the conclusion of 
the Section I(g) 10-year ineligibility period triggered by the 
Conviction). On February 7, 2022, the Applicant supplemented its 
application with the Second Audit Report. In support of its request, 
the Applicant states that: each of the JPMC Affiliated QPAMs and the 
JPMC Related QPAMs have complied with the conditions of PTE 2017-03 
and, therefore, should be permitted to continue to rely upon PTE 84-14 
through the remainder of the ineligibility period in order to avoid 
substantial costs and other disruptions that would occur if it no 
longer could rely on the exemption. The Applicant's representations 
regarding PTE 2017-03 compliance are addressed immediately below and 
its representations regarding costs to Covered Plans begins at 
paragraph 42 under the heading ``Hardship to Plans.''

Compliance With PTE 2017-03

    18. Training. The Applicant represents that the JPMC Affiliated 
QPAMs developed and implemented a comprehensive Training program before 
the July 9, 2018, deadline specified in PTE 2017-03. Through a web-
based e-learning training module, the Applicant requires the Training 
to be completed annually by relevant personnel of each JPMC Affiliated 
QPAM, including asset/portfolio management, trading, legal, compliance, 
and internal audit personnel, as required under PTE 2017-03. The 
Training is designed to track completion by required participants and 
covers compliance with ERISA and the Code, including applicable ERISA 
fiduciary duty and prohibited transaction provisions. The Applicant 
updates the Training annually, as necessary, for clarity, 
accessibility, and legislative and regulatory changes.
    19. Policies and Procedures. The Applicant represents that before 
the effective date of PTE 2016-15, each JPMC Affiliated QPAM developed 
and instituted a firmwide policy specifically addressing fiduciary 
responsibilities under ERISA and the Code (the ERISA Policies). The 
ERISA Policies cover a broad range of topics relevant to the JPMC 
QPAMs' management of Covered Plan assets, including ERISA's prohibited 
transaction rules, party in interest transactions, self-dealing and 
conflicts of interest, employer securities, and employer real property. 
The ERISA Policies also cover PTE 84-14, PTE 2017-03, the statutory 
exemption provided under ERISA Section 408(b)(2), recordkeeping and 
reporting obligations, and the applicability of the ERISA Policies to 
Covered Plans.
    Each section of the ERISA Policies provides background information, 
identifies responsible parties, and describes objective requirements, 
internal practices, and reporting obligations. The ERISA Policies 
address compliance requirements for Covered Plans and assign 
responsibility for specific activities to relevant JPMC personnel. They 
further address PTE 2017-03's required content related to manager 
independence, compliance with ERISA and the Code, communications with 
regulators, exemption compliance, corrections, and the Training. The 
ERISA Policies also feature cross-references to related policies, 
procedures, and compliance manuals, and are supplemented by a library 
of pre-existing firmwide, line of business-specific, and JPMC QPAM-
specific policies and procedures on particular topics.
    The ERISA Policies apply to all lines of business that engage in 
activities involving a JPMC Affiliated QPAM's exercise of investment 
discretion or provision of investment advice to plans and plan asset 
investment funds, or indirect service as an adviser or sub-adviser to a 
pooled investment vehicle deemed to hold the assets of Covered Plans. 
The Applicant represents that an electronic notice was sent to relevant 
JPMC Affiliated QPAM personnel regarding the availability of the ERISA 
Policies and that the ERISA Policies have been easily accessible on 
JPMC's intranet during the relevant period. The Applicant states that 
the ERISA Policies are reviewed annually and updated as necessary.
    20. Internal Compliance Processes. The Applicant represents that 
the JPMC Affiliated QPAMs conducted a thorough

[[Page 63806]]

review of their ERISA policies and procedures and implemented or 
augmented a variety of testing, monitoring, and reporting capabilities 
to ensure that they employ and follow robust and comprehensive 
compliance systems.
    21. The Audits. PTE 2017-03 requires the JPMC Affiliated QPAMs to 
submit to an audit conducted annually by a prudently selected 
independent auditor to evaluate the adequacy of, and each JPMC 
Affiliated QPAM's compliance with, the Policies and Training 
requirements of the exemption. The JPMC Affiliated QPAMs have undergone 
two comprehensive audits performed by Newport Trust Company (Newport). 
Newport completed its first audit (covering July 10, 2018 through July 
9, 2019) on January 9, 2020 (the First Audit). Newport completed its 
second audit (covering July 10, 2020-July 9, 2021) on January 9, 2022 
(the Second Audit). In conducting the audits, Newport states that it 
thoroughly analyzed the Policies and Training implemented by each JPMC 
Affiliated QPAM in connection with PTE 2017-03.

Auditor's Findings

    22. The ERISA Policies. With respect to the ERISA Policies, Newport 
gathered information from JPMC through six separate data requests, 
reviewed the JPMC Affiliated QPAMs' obligations under ERISA and 
applicable Policies and Procedures, held discussions with JPMC 
personnel regarding existing internal governance structures (and how 
the Policies were uniquely tailored to accommodate individual JPMC 
Affiliated QPAMs' investment strategies), and tested the JPMC 
Affiliated QPAMs' operational compliance with the Policies.
    In the First Audit, Newport determined that JPMC's ERISA Policies 
are ``comprehensive in scope and adequately address all of the content 
required by PTE 2017-03.'' Based on its review, Newport, ``determined 
that the JPMC QPAMs developed, implemented and maintained Policies in 
accordance with the conditions of the Exemption.'' In the Second Audit, 
Newport concluded that ``[t]he ERISA Policy is comprehensive in scope 
and adequately addresses all of the content required by the 
Exemption.'' Newport identified no gaps or areas of insufficient 
coverage within the ERISA Policy and concluded that the ERISA Policy is 
clearly written and provides relevant personnel with an appropriate 
amount of information about each topic.
    Newport also reviewed JPMC's firmwide and line of business-specific 
policies and procedures that supplement the ERISA Policy to better 
understand how the ERISA Policy fits within JPMC's broader governance 
structure. Newport concluded that the Policies, comprised of the ERISA 
Policy and these supplemental policies and procedures, provide JPMC 
personnel with clear guidance on relevant procedural requirements and 
extensive documentation related to the management of assets held by 
Covered Plans.
    23. The Training. In its assessment of the Training, Newport states 
that it held discussions with JPMC personnel regarding the 
qualifications of the Training's developer and implementer, as well as 
the format, timing, and schedule for the Training. Newport also 
reviewed the online course material and attendance records. Newport 
states that the JPMC Affiliated QPAMs developed and implemented a 
comprehensive Training program before the deadline specified in PTE 
2017-03 and rolled out a web-based e-learning training module more than 
a year before the required deadline of July 9, 2018.
    Newport further states that it reviewed the content of the Online 
Training Module and noted that, in compliance with the requirement 
specified in the ERISA Policies, the training covered: (a) the 
Policies; (b) ERISA and Code compliance (including applicable fiduciary 
duties and the prohibited transaction provisions); (c) ethical conduct; 
(d) the consequences of not complying with the exemption conditions 
(including any loss of exemptive relief); and (e) prompt reporting of 
wrongdoing. During the period covered by the Second Audit, Newport 
states that based upon a comparison of enrollment records against 
completion records, the Training had a 99.89% attendance rate for the 
designated individuals.
    24. Compliance with ERISA and the Code. Newport states that it 
selected individual prohibited transaction exemptions, principal 
transactions, proprietary investments, and record retention as focus 
areas for special scrutiny during the period covered by its audits. 
Newport notes that it identified the following issues.
    25. Issue: PTE 2003-24 Compliance. Newport states that, on December 
2, 2021, JPMC personnel disclosed to Newport an issue related to 
compliance with PTE 2003-24.\16\ As described by JPMC in a written 
summary to Newport, during a review of certain bank regulatory 
reporting requirements relating to affiliated transactions, JPMC's 
Asset Management Line of Business (AM) identified 19 new issuances,\17\ 
constituting approximately 2% of the 946 total new issuances that JPMC 
purchased on behalf of managed funds and accounts from July 2020 to 
June 2021, that were underwritten by an affiliate but not included on 
the respective 23B bank regulatory reporting.
---------------------------------------------------------------------------

    \16\ PTE 2003-24 permits the purchase of securities by an asset 
management affiliate of the applicant (JPMorgan Chase Bank) on 
behalf of employee benefit plans, including those investing in a 
pooled fund, for which the applicant acts as a fiduciary, from any 
person other than the applicant or an affiliate thereof, during the 
existence of an underwriting or selling syndicate with respect to 
such securities, where the affiliated broker-dealer is a manager or 
member of such syndicate, and/or where an affiliated trustee serves 
as trustee of a trust that issued the securities (whether or not 
debt securities) or serves as indenture trustee of securities that 
are debt securities.
    \17\ The JPMC asset manager subsequently reviewed its quarterly 
PTE 2003-24 reporting during the same period and determined that 12 
of the 19 new issuances were reported but 7 were not reported.
---------------------------------------------------------------------------

    Newport states that JPMC is remediating this PTE 2003-24 
underreporting issue consistent with its correction procedures and past 
precedent by taking the following steps: (a) completing a review of 
affiliated transactions; (b) reviewing all issuances purchased by the 
asset manager on behalf of managed funds and accounts from July 2020 
through June 2021 that were underwritten by an affiliate to confirm 
compliance with reporting requirements; (c) further analyzing 
exceptions to determine the root cause, identifying and implementing 
procedural enhancements, and considering any redress as applicable and 
necessary; and (d) re-issuing relevant PTE 2003-24 quarterly reporting 
per the asset manager's internal procedures for reporting affiliated 
transactions with an explanation to the impacted Covered Plans.
    Based on its evaluation, Newport determined that AM complied with 
the ERISA Policies and line of business-specific procedures with 
respect to PTE 2003-24 for transactions involving Covered Plans during 
the period covered by the audit. Newport states that it intends to 
follow up to confirm that the proposed remediation was implemented as 
planned.
    26. Issue: Fee Offsetting Issues. Newport states that 
representatives from JPMC's Private Banking line of business (PB) 
identified three separate issues related to the offsetting process for 
Covered Plans invested in proprietary investment products. On July 28, 
2020, JPMC notified Newport that PB had identified gaps in the fee 
offsetting

[[Page 63807]]

process during a historical review of the firm's fee offsetting process 
conducted in late 2019. The review identified two primary gaps: (a) a 
failure to flag certain proprietary funds as fee offset eligible in the 
relevant systems and therefore not providing the relevant monthly 
information regarding fee offsets; and (b) a failure to set up certain 
accounts for fee offsetting. The review encompassed approximately 
100,000 Covered Plans dating back to 2012 and identified 753 accounts 
that were impacted.
    Newport states that, before 2013, account coding errors were more 
frequent because portfolio managers had to go through a manual process 
to make sure account coding was set up for fee offsetting. After the 
implementation of enhancements in 2013, the fee offset coding was 
automatically applied to accounts identified as Covered Plans. In 
addition, PB now performs weekly checks to ensure that all new Covered 
Plans are fee offset eligible. With these enhancements, JPMC determined 
that no further changes to the fee offsetting process were needed.
    Newport states that PB Operations led the remediation process, 
identified impacted accounts, calculated the amounts owed to each 
client (the amount of fees that were not offset plus an interest charge 
for lost earnings calculated using the Department's VFCP Calculator), 
and notified clients. Newport also notes that PB fully credited all 
impacted client accounts and prepared an excise tax filing.
    27. JPMC identified two other PB issues related to fee offsetting 
for proprietary investments and communicated those issues to Newport on 
December 2, 2021. While preparing a response to one of Newport's 
inquiries regarding the fee offsetting process for Sample Accounts, PB 
representatives identified an issue with one proprietary exchange 
traded fund (ETF) held in one of the Sample Accounts that closed in the 
middle of a month during the period covered under the Second Audit. PB 
conducted a review of all Covered Plans that had closed mid-month and 
held ETFs and escalated the issue with legal, compliance, and 
operations leadership.
    Newport states that JPMC detected an error in the process for 
calculating offset amounts associated with proprietary ETFs held at the 
time accounts are closed, and that this issue has persisted since July 
2018 when proprietary ETFs were first launched for use in managed 
accounts. Specifically, the Closed Account Report used to determine the 
credit amount owed to accounts that closed mid-month and that held 
proprietary funds showed certain issues.
    PB conducted an analysis of all Covered Plans managed by PB that 
closed mid-month between July 2018 and September 2021. PB's analysis 
found that over 550 accounts were under-credited for an aggregate 
amount of approximately $4,500 and that over 1,400 accounts were over-
credited for an aggregate of approximately $144,000. PB representatives 
notified Newport that the Closed Account Report has been corrected to 
ensure accuracy going forward, and that PB is currently calculating the 
total impact of the fee offset amounts owed (including lost earnings), 
determining the approach for crediting accounts, developing a plan for 
communication with clients and advisors for affected accounts, and 
preparing an excise tax filing. Newport plans to follow up on the 
anticipated timing of the remediation process and has requested that PB 
update Newport throughout the remediation process.
    28. Another issue was identified on August 9, 2021, when an 
investor notified the PB fee billing team of a discrepancy in its 
client's advisory fee calculation. Upon further analysis, the PB team 
discovered that while the proprietary fund fee offset had been 
correctly applied when the account was initially billed, the offset was 
not reapplied following an update to (i.e., recalculation of) the 
previously calculated fee. The issue arose when a coding change was 
made following a conversion from an old fee to a new billing program in 
March 2020. This resulted in offsets no longer being applied when there 
was a rebilling of an incorrect advisory fee after onboarding.
    PB representatives conducted a review of all Covered Plans that had 
a fee update between September 2018 and July 2021 and calculated a 
preliminary impact of approximately $2,000 across 80 accounts.\18\ PB 
representatives notified Newport that the fee billing group has 
corrected the program to ensure that all future fee updates include the 
required offset. PB is currently calculating the total impact of the 
offset amounts owed (including lost earnings), determining the approach 
for crediting accounts, developing a plan for communication with 
clients and advisors for affected accounts, and preparing an excise tax 
filing.
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    \18\ With respect to this last issue, the Applicant represents 
that PB did not choose September 2018 as a beginning date for their 
search. In March 2020, the functionality that enabled an advisory 
fee to be recalculated was migrated from one system to another. In 
connection with this migration, the functionality was not 
implemented correctly in the new system. Thus, as of March 2020, 
when an advisory fee was recalculated, the offset was not included 
in the recalculated fee. Once this system issue was discovered, PB 
reviewed all accounts that had an advisory fee that was updated/
recalculated between March 2020 and July 2021, the period during 
which the functionality was faulty. The earliest dated invoice that 
required rebilling through the new system--and thus impacted by the 
defective system migration and functionality--was from September 
2018.
---------------------------------------------------------------------------

    Newport states that it plans to follow up on the anticipated timing 
of the remediation process and has requested that PB update Newport 
throughout the process. Based on Newport's assessment, PB self-
identified several issues related to fee offsetting for proprietary 
investment products and promptly took steps to remediate those issues 
in accordance with its correction procedures. Therefore, Newport did 
not find any instances of noncompliance related to proprietary 
investment products within PB during the period covered by PTE 2017-03. 
However, given the multiple issues that have been identified above, 
Newport recommended that PB perform a comprehensive assessment of its 
existing fee offsetting processes.

Deferred Prosecution Agreement

    29. On September 29, 2020, JPMC, JPMorgan Chase Bank and J.P. 
Morgan Securities LLC (JPMS) entered into a deferred prosecution 
agreement with the Department of Justice (the DPA).\19\ As required by 
the conditions of PTE 2017-03, JPMC provided written notification to 
the Department regarding the DPA on that date. In response to a request 
for information from Newport, and as set forth in the DPA, JPMC stated 
that between 2008 and 2016, former employees of JPMC and JPMS who 
worked on the Precious Metals Desk and U.S. Treasuries Desk within the 
CIB in the Global Markets division, engaged in trading practices known 
as ``spoofing'', in which the traders placed orders to buy or sell 
precious metals or U.S. Treasury futures contracts, or U.S. Treasury 
notes and bonds in the secondary cash market with the intent to cancel 
those orders before execution in an effort to manipulate the market in 
those instruments.
---------------------------------------------------------------------------

    \19\ The CFTC and SEC announced separate settlements in 
connection with related, parallel proceedings on the same date as 
the DPA.
---------------------------------------------------------------------------

    30. The Applicant represents that there is no connection between 
the lines of business that manage assets through QPAMs in reliance on 
PTE 84-14 and the conduct cited in the DPA. JPMC, as a firm, conducts 
discretionary investment management activities through various lines of 
business that engage in relevant transactions through several JPMC 
legal entities. JPMorgan Chase Bank, NA is the legal entity that 
manages cash collateral related to the

[[Page 63808]]

securities lending sub-line of business. Accordingly, JPMorgan Chase 
Bank, NA is the QPAM in this instance, and it may rely on PTE 84-14 to 
manage such cash collateral.
    While all JPMC personnel ultimately report to common senior 
leadership at some level, the Agency Securities Finance business (i.e., 
the asset management business) is distinct from the Global Markets 
business (including the business groups that comprise the Precious 
Metals and U.S. Treasuries Desks), and each such business has separate 
heads and dedicated compliance and internal staff.\20\ The Applicant 
states that the control functions have dedicated personnel covering 
Agency Securities Finance, and those individuals do not perform those 
services for the Global Markets Division, including the Precious Metals 
and U.S. Treasuries Desks within that division. Ultimately, these 
control function personnel report up to common senior leadership at 
some level.
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    \20\ All CIB Compliance function personnel roll up to the CCO 
for CIB, and all firm-wide Compliance function personnel roll up to 
the JPMorgan Global Chief Compliance Officer, who reports to the 
firm's Chief Risk Officer. Similarly, business-aligned Internal 
Audit function personnel roll up to the Chief Auditor-CIB and 
ultimately to the General Auditor of JPMC. In addition, some 
surveillance, monitoring, and testing functions utilize centralized 
resources and personnel within Compliance, and business-aligned 
Compliance personnel collaborate with other stakeholders across the 
firm across many lines of business.
---------------------------------------------------------------------------

    31. The Applicant represents that, to the best of its knowledge, 
there have been no instances where JPMC QPAMs entered into trades for 
Covered Plans with the Precious Metals or U.S. Treasuries Desks. 
Accordingly, the spoofing activity referred to in the DPA should not 
have directly impacted any such Covered Plans. Further, JPMC states 
that it is not aware of any impact to Covered Plans from the conduct 
underlying the DPA. JPMC, however, states that the activities described 
in the DPA may have had an indirect impact on participants in the 
markets at issue, regardless of whether such market participants had 
traded with the Precious Metals and U.S. Treasuries Desks.
    32. Newport states that the trading conduct cited in the DPA ceased 
in 2016, before the Audit periods covered under PTEs 2016-15 and 2017-
03. In addition, JPMC confirmed to Newport that, to its knowledge, none 
of the JPMC Affiliated QPAMs traded directly with the CIB Global 
Markets Precious Metals or U.S. Treasuries Desks during the period 
between 2008 and 2016, nor do they today. JPMC states that it has found 
no evidence of direct impact to Covered Plans managed on a 
discretionary basis by JPMC QPAMs during the period cited in the DPA. 
JPMC also stated that Covered Plans were not found to have been 
affected in connection with precious metals barrier options 
transactions.
    33. Newport requested information regarding the structure and 
functions of the JPMC compliance and internal audit controls pertaining 
to the activities described in the DPA to determine whether oversight 
measures are sufficient to prevent and detect future similar 
activities. Based on its review, Newport concluded that the trading and 
market conduct and personnel that are the subject of the DPA did not 
have any direct bearing on the activities of the JPMC Affiliated QPAMs 
subject to the Audits and that JPMC took measures designed to enhance 
oversight and controls, prevent the occurrence of similar future 
conduct, and detect any issues relating to trading activities cited in 
the DPA.

Compliance With Other Conditions of PTE 2017-03

    34. Newport determined that the JPMC QPAMs did not participate in 
the Criminal Misconduct that is the subject of the Conviction.\21\ 
Rather, the Criminal Misconduct was the action of one trader working in 
the FX trading business of JPMorgan Chase Bank who did not work at any 
time for a fiduciary line of business within JPMC. Newport determined 
further that there was no indication that the Criminal Misconduct 
related to any identified transaction involving Covered Plans nor did 
any JPMC QPAM personnel participate in such activities or receive 
remuneration in connection with them. Newport further determined that 
the JPMC QPAMs did not employ or knowingly engage the individual that 
participated in the Criminal Misconduct.
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    \21\ As noted earlier, the Criminal Misconduct is in connection 
with FX spot market manipulation in violation of the Sherman 
Antitrust Act, 15 U.S.C. 1, entered in the District Court for the 
District of Connecticut (the District Court) (case number 3:15-cr-
79-SRU).
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    35. The conditions of PTE 2017-03 require Newport to determine that 
filings or statements made by the JPMC QPAMs to regulators, including 
but not limited to the Department, the Treasury, the DOJ, and the PBGC, 
on behalf of or in relation to Covered Plans, are materially accurate 
and complete. Based on its review of regulator communications, Newport 
determined that the JPMC QPAMs followed their ERISA Policies in 
accordance with the communications requirements of PTE 2017-03.
    36. Condition I(d) of PTE 2017-03 provides that JPMC must not use 
its authority or influence to direct any investment fund subject to 
ERISA or the Code and managed by a JPMC QPAM with respect to one or 
more Covered Plans to enter into any transaction with JPMC, or to 
engage JPMC 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. Newport 
determined that JPMC has met its obligations in these regards.
    37. Based on its review of the client documentation and 
representations made by JPMC personnel, Newport determined that the 
JPMC Affiliated QPAMs have complied with the various contractual 
requirements specified in Section I(j) of PTE 2017-03. Newport also 
determined that the JPMC Affiliated QPAMs have complied with the 
communication requirements of Section I(k) of PTE 2017-03.
    38. With regard to the Compliance Officer requirements of PTE 2017-
03, Newport states that in April 2018, JPMC designated David S. 
Villwock, JPMC's Head of Firmwide Fiduciary Compliance, to serve as the 
Compliance Officer for purposes of PTE 2017-03. Newport states that Mr. 
Villwock has the requisite experience with, and knowledge of, the 
regulation of financial services and products (including under ERISA 
and the Code) and has a direct reporting line to JPMC's highest-ranking 
corporate officer in charge of legal compliance for asset management. 
Newport concludes that, with the appointment of Mr. Villwock as the 
Compliance Officer, JPMC complied with the relevant requirements of PTE 
2017-03.
    39. PTE 2017-03 also requires Newport to assess the adequacy of the 
Annual Review conducted by the Compliance Officer. Newport states that 
Mr. Villwock conducted an Annual Review for the most recent twelve-
month period that ended on January 9, 2021, which was memorialized in 
an Annual Report provided to Newport on April 8, 2021. Based on its 
review, Newport determined that: (a) the Annual Report covers all of 
the content required under PTE 2017-03; (b) Mr. Villwock provided the 
required written certifications regarding the Annual Report; and (c) 
the recipients of the Annual Report included the appropriate corporate 
officers of JPMC and each JPMC QPAM to which such report

[[Page 63809]]

relates. Further, Newport found that the Annual Report was thorough and 
effectively leveraged JPMC's existing compliance apparatus.
    40. Newport determined that the JPMC Affiliated QPAMs' record 
retention activities were operationally compliant with Section I(n) of 
PTE 2017-03 and with JPMC's Record Management Policies.
    41. Newport states that it did not find any instance where a client 
contract specifically contradicted the requirements of Section I(j)(7) 
of PTE 2017-03. In this regard, Newport notes that JPMC provided a copy 
of the Supplement to Account Agreement found on JPMC's client portal, 
which specifically incorporates the contract requirements set out in 
Section I(j) of PTE 2017-03. Newport states that JPMC representatives 
confirmed that the JPMC Affiliated QPAMs provided notice to Covered 
Plan clients informing them that a Supplement to Account Agreement was 
available through its client portal, prior to July 9, 2018.

Hardship to Covered Plans

    42. The Applicant represents that if the Department declines to 
grant this proposed exemption, there would be adverse consequences for 
ERISA-covered plans, public plans, and IRAs. In the absence of 
exemptive relief, the JPMC Affiliated QPAMs may be unable to manage, or 
manage as efficiently, the strategies for which they have contracted 
with thousands of Covered Plans. Further, Covered Plans desiring to 
withdraw from their arrangements could incur significant transaction 
costs as well as costs associated with finding new managers and 
reinvesting assets with those new managers. The Applicant states that 
the transaction costs associated with changing managers are 
significant, especially in many of the strategies employed by the JPMC 
Affiliated QPAMs. In this regard, the cost of liquidating assets, 
identifying and selecting new managers, and reinvesting assets would be 
borne by the Covered Plans and their participants.
    43. The Applicant states that, if the Department denies the 
exemption request, transactions currently dependent on PTE 84-14 or 
where PTE 84-14 was the counterparty's expected relief, could be in 
default and terminated at a significant cost to Covered Plans. 
According to the Applicant, Covered Plans that decide to retain the 
JPMC Affiliated QPAMs as their asset manager could be prohibited from 
engaging in certain potentially beneficial transactions such as hedging 
transactions using over-the-counter options or derivatives. The 
Applicant states that counterparties to such transactions are far more 
comfortable with the QPAM Exemption than any other currently available 
exemption, and the unavailability of the QPAM Exemption could trigger a 
default or early termination by a Covered Plan or pooled trust.
    44. The Applicant represents that in the event of an exemption 
denial, certain derivatives transactions and other contractual 
agreements automatically and immediately could be terminated without 
notice or action or could become subject to termination upon notice 
from a counterparty in the event the Applicant no longer qualifies for 
relief under the QPAM Exemption.
    45. The Applicant represents that some of its strategies tend to be 
less liquid than others and, thus, the transition costs would be 
significantly higher than, for example, liquidating a large-cap equity 
portfolio. Real estate is an example of a strategy that could 
experience significant disruption without the QPAM Exemption. Clients 
of the JPMC Affiliated QPAMs have over $38.9 billion in ERISA and 
public plan assets in commingled funds that are invested in real estate 
strategies, with approximately 224 holdings. Many transactions in these 
accounts rely on Parts I, II, and III of the QPAM Exemption as a backup 
to the collective investment fund exemption \22\ (which may become 
unavailable to the extent a related group of plans has a greater than 
10% interest in the collective investment fund). The Applicant 
estimates that there could be a significant loss in value if assets had 
to be quickly liquidated. In that instance, the QPAM may end up having 
to sell assets at a discount of more than 10% of their carrying price, 
which is pegged at FMV. There could also be prepayment penalties on the 
financing of these assets.
---------------------------------------------------------------------------

    \22\ 56 FR 31966 (July 12, 1991).
---------------------------------------------------------------------------

    46. The Applicant further asserts that JPMC Affiliated QPAMs rely 
on the QPAM Exemption when buying and selling fixed income products. 
Stable value strategies, for example, rely on the QPAM Exemption to 
enter into wrappers and insurance contracts that permit the assets to 
be valued at book value. Many counterparties specifically require a 
representation that the QPAM Exemption applies, and those contracts 
could be in default if the requested exemption were not granted. 
Depending on the market value of the assets in these funds at the time 
of termination, such termination could result in losses to the stable 
value funds.
    47. The Applicant states that as of March 31, 2021, approximately 
500 accounts managed through the JPMC Affiliated QPAMs (including 
commingled funds and separately managed accounts) invest in fixed 
income products with a total portfolio of approximately $100 billion in 
market value of ERISA and public plan assets in commingled funds. If 
the QPAM Exemption were lost, the Applicant estimates that its clients' 
costs of approximately could incur average weighted liquidation 50-75 
basis points of the total market value in fixed income products. While 
money markets and short and intermediate term bonds could be liquidated 
for between 5-50 basis points, long duration bonds may be more 
difficult to liquidate, and liquidation costs may range from 75-100 
basis points. Further, the liquidation costs for high-yield and 
emerging market investments could range from 75-150 basis points.
    The Applicant notes that not all JPMC QPAM investment strategies 
exclusively rely upon the QPAM exemption for prohibited transaction 
relief. In fact, for equities, foreign exchange, and publicly traded 
bond strategies, the JPMC Affiliated QPAMs have other exemptions upon 
which they can rely. In the case of public bonds, the JPMC Affiliated 
QPAMs can rely upon class exemption 75-1 Part II and the statutory 
exemption under ERISA Section 408(b)(17).
    48. While equity purchases in the market are not necessarily made 
in reliance on the QPAM Exemption, such strategies often use 
derivatives, foreign exchange (for non-U.S. strategies), and other 
products that require the QPAM Exemption. The Applicant manages over 
$50 billion in ERISA and public plan assets in equity strategies within 
the Applicant's Asset Management business that could suffer different 
liquidation costs depending on the strategy. On average, for all equity 
strategies, the liquidation costs for a 30-day liquidation timeframe 
might range from 40-80 basis points.
    49. Agency securities lending is a business within JPMorgan Chase 
Bank that makes loans of securities owned by clients, including Covered 
Plans, secured by cash collateral. JPMorgan Chase Bank acts as 
investment manager for such cash and invests it in short-term 
instruments. The cash collateral is maintained in 32 separately managed 
accounts with total ERISA assets under management of approximately $3.9 
billion.\23\ JPMorgan Chase Bank may

[[Page 63810]]

rely on the QPAM Exemption with respect to the investment of cash 
collateral for its agency securities lending business. The Applicant 
believes that many brokers and counterparties with whom JPMorgan Chase 
Bank deals in regard to cash collateral investments rely on JPMorgan 
Chase Bank's QPAM status, because of the prevalence of the QPAM 
Exemption as the industry standard exemption. If the QPAM Exemption 
were unavailable, such brokers and counterparties could be reluctant to 
continue doing business with Covered Plans.
---------------------------------------------------------------------------

    \23\ As of June 2021.
---------------------------------------------------------------------------

    50. Many accounts managed by the JPMC Affiliated QPAMs are 
similarly invested in hedging instruments to deal with the risk of 
currency exposure for investments in foreign markets. For example, the 
JPMC Affiliated QPAMs engage in foreign exchange swap transactions and 
in foreign exchange spot and forward transactions to hedge against 
fluctuations in foreign exchange rates, for speculative or other alpha-
seeking purposes, to settle trades in foreign securities, and for other 
reasons. The Applicant represents that it would not be in the interests 
of Covered Plans to be invested in global strategies without being able 
to hedge currency risk or otherwise engage in foreign exchange 
transactions. While there may be other exemptions upon which to rely, 
the market and regular counterparties may choose to rely on the QPAM 
Exemption and refuse to trade or price the trade accordingly for any 
greater risk they foresee in the absence of that exemption.

Applicant's Requested Modifications

    52. With its exemption request, the Applicant requested that this 
exemption incorporate certain modifications relative to the conditions 
of PTE 2017-03. These modification requests and the Department's 
responses to them are described in further detail below.
    53. Newly Acquired Asset Managers. The Applicant represents that 
from time to time, JPMC acquires asset managers that could rely on PTE 
84-14. According to the Applicant, it would be nearly impossible for 
such managers to come into full compliance with PTE 2017-03 or this 
proposed exemption before any such acquisition closes considering all 
the conditions regarding notices, training, policies, and compliance 
regimes. Where the Applicant acquires a new asset manager that already 
has its own plan clients for which it is using the QPAM Exemption as of 
the closing date of the transaction, in the absence of relief, that 
manager needs to comply with the terms of the individual QPAM exemption 
immediately. Where the new asset manager is not in immediate 
compliance, Covered Plan clients of the new asset manager with swaps 
ongoing might have to terminate them immediately, and new transactions 
could not be consummated, because the new asset manager is not in 
compliance on day one with all of the conditions of the exemption 
(e.g., contractual obligations and other investment management 
agreement amendments; distribution of exemption notice, statement and 
policy summary; drafting of policies and procedures; training; and 
feasibility of audit coverage).
    The Applicant states that the process of integrating an acquired 
company can take many months or years. The company being acquired does 
not in the normal course adopt policies, train on those policies, or 
interfere with existing client communications or agreements before the 
acquisitions close, particularly when the acquirer is a large and 
complex financial institution such as the Applicant. According to the 
Applicant, it is not free to communicate with a target's clients until 
after the closing, nor can it communicate with a target's employees, 
directors, officers, or agents to cause them to draft or adopt 
policies, procedures, or training. Therefore, the Applicant requests 
that the conditions of this proposed exemption would not apply until a 
date that is six months after the closing date for an acquisition.\24\
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    \24\ The Applicant further states that, the acquired manager 
would continue to rely on PTE 84-14 during that six-month period, 
which could be used to provide the necessary notices to the new 
affiliate's clients, to provide training to the new affiliate's 
employees, to make sure that systems are in place to implement the 
ERISA policies, etc.
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    Department's Response: The Department is unable to make the 
requested change without detailed information regarding the specific 
conditions implicated by the requested change, and an explanation 
regarding why six months is an appropriate extension period.
    54. Training Conducted Electronically. The Applicant requests 
confirmation from the Department that the Training may be conducted 
electronically or via a website. In reliance on a prior clarification 
from the Department, the JPMC Affiliated QPAMs have been utilizing a 
web-based training tool that the Auditor has already deemed sufficient 
to provide JPMC Affiliated QPAM personnel with adequate training in 
compliance with PTE 2017-03.
    Department's Response: The Department confirms the Applicant's 
request that the Training of JPMC personnel may be conducted either 
electronically or via a website.
    55. Timing of the Training. The Applicant requests that the 
Department change the timing of the Training to once per calendar year 
ending on December 31 as opposed to once every twelve months ending on 
July 9, with the last training required during calendar year 2026. The 
Applicant states that doing so will enable the JPMC Affiliated QPAMs to 
measure compliance with the training requirement as of year-end (as 
opposed to July 9). Per this request, relevant personnel would be 
required to complete a Training under PTE 2017-03 by July 9, 2022, and 
the next training would be completed under this proposed exemption by 
December 31, 2023. Future Trainings would be required by December 31, 
2024, 2025, and 2026.
    Department's Response: The Department declines to make the 
Applicant's requested change, which would result in approximately 18 
months between deadlines for annual Training, without justification 
that the requested change is equally protective of Covered Plans as the 
current annual training requirement.
    56. Flexibility to Abbreviate the Training for Returning Learners. 
The Applicant requests confirmation that the content of Training need 
not be the same for new learners as for JPMC Affiliated QPAM personnel 
who have previously demonstrated proficiency with the subject matter of 
the Training. The Applicant states that: (a) the Training fully covers 
the subject matter required under PTE 2017-03 in significant detail and 
concludes with a knowledge assessment; (b) the Training has been 
administered for several years now; and (c) tenured employees have 
demonstrated comprehension of the subject matter by successfully 
completing the assessment. Accordingly, the Applicant requests 
confirmation that less detailed training can be used for personnel who 
have completed the full Training and successfully completed the 
accompanying assessment in a prior year.
    Department's Response: The Department declines to make this 
requested change because the Applicant has not sufficiently 
demonstrated that less detailed Training for relevant JPMC personnel 
would be equally protective of Covered Plans as the training described 
in this proposed exemption.
    57. Notification Requirements. If this proposed exemption is 
granted, the Applicant must provide a Notice to Interested Persons 
(NTIP) to Covered

[[Page 63811]]

Plan clients shortly after the proposed exemption is published in the 
Federal Register. The Applicant requests clarification that the NTIP 
requirement will be deemed met for each Covered Plan client via notice 
by Federal Register publication.
    To the extent that the Department is unwilling to grant this 
request, the Applicant requests clarification that the NTIP requirement 
will be deemed met for each Covered Plan client by posting the required 
NTIP materials on the JPMC Affiliated QPAM or JPMC Related QPAM's 
website where the notice of obligations under PTE 2017-03 (Section 
I(j)(7)), and notice of the Exemption (Section I(k)), are currently 
posted provided such website is updated, as necessary, within 15 days 
of the publication of this exemption in the Federal Register.
    In addition, with respect to the Notice requirements of this 
exemption, the Applicant requests clarification that such requirements 
will be deemed met for each Covered Plan client that received the 
equivalent notifications pursuant to PTE 2017-03, provided the website 
currently containing the materials stipulated is updated, as necessary, 
by May 10, 2023 (four months following the effective date of this 
exemption, if granted). Accordingly, such clients would not need to be 
notified again pursuant to this proposed exemption.
    Department's Response: The Department declines to make the 
requested changes. The Applicant has not demonstrated that simply 
updating a website without sending a corresponding notification of the 
update to Covered Plans would represent adequate notice. Without a 
corresponding notice that directs Covered Plans to access the website, 
certain Covered Plans may never become aware that a new proposed 
exemption has been published.
    58. New Covered Plan Clients. The Applicant represents that it is 
likely that many clients that retain the JPMC Affiliated QPAMs shortly 
after the effective date of this proposed exemption (January 10, 2023) 
would enter into investment management or comparable agreements with 
the JPMC Affiliated QPAMs that continue to include notification 
language referencing PTE 2017-03 and a link to the required materials 
thereunder. As the Department did through email clarification when PTE 
2017-03 was published, the Applicant requests clarification that it 
would meet the notification requirements in this exemption for such 
clients that first become Covered Plan clients on or after January 10, 
2023, but before May 10, 2023, to the extent the investment management 
or comparable agreements with the JPMC Affiliated QPAMs include 
notification language referencing PTE 2017-03 and a link to the 
required materials, provided the website containing such materials 
stipulated under the notification conditions in this proposed 
exemption, if granted is updated, as necessary, by May 10, 2023. The 
Applicant expects that clients that first become Covered Plan clients 
on or after May 10, 2023, would enter into agreements with the JPMC 
Affiliated QPAMs that include notification language specifically 
referencing this exemption including links to the updated website 
containing the materials stipulated under such conditions.
    Department's Response: The Department concurs with the Applicant's 
request regarding clients that first become Covered Plan clients on or 
after January 10, 2023, but before May 10, 2023.
    59. Audit and Compliance Officer Annual Review Timing. The 
Applicant requests that the Department change the timing of the final 
two audits to begin on July 1, rather than July 10. The Applicant 
states that this change would enable the Auditor to request data and 
other necessary information as of the end of calendar quarters, 
facilitating the JPMC Affiliated QPAMs' ability to readily gather and 
deliver such material. The Applicant also requests the beginning of the 
Compliance Officer's Annual Review period to be delayed nine days, from 
January 1 to January 10.
    Department's Response: The Department concurs with the Applicant's 
requests regarding the start date of the audit and the start date of 
the Compliance Officer Annual Review.
    60. Auditor Cooperation. The Applicant states that continued relief 
under this exemption should not be conditioned upon the Auditor 
cooperating with, or disclosing workpapers to, the Department. The 
Applicant states that neither the JPMC Affiliated QPAMs nor Covered 
Plans can control the Independent Auditor's actions in this regard.
    Department's Response: The Department declines to make this 
requested revision. JPMC should make every effort to ensure that the 
Auditor fully cooperates with the Department. The Department, also, is 
unaware of any instance where an Auditor failed to fully cooperate with 
the Department in connection with a QPAM Section I(g) audit.
    61. Definition of Covered Plan. The Applicant requests 
clarification that a JPMC QPAM may include a disclaimer in a 
modification of a contract, arrangement, or agreement with a Covered 
Plan as follows: ``Notwithstanding the above, a JPMC Affiliated 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 JPMC Affiliated QPAM will not represent that it is a QPAM, and will 
not rely on the relief described in PTE 84-14.''
    Department's Response: The Department concurs with the Applicant's 
requested change.
    62. Section I(j) requires each JPMC Affiliated QPAM to provide a 
notice of its obligations under that section to each Covered Plan. The 
Applicant requests the Department's confirmation that this condition 
would be met where the JPMC Affiliated QPAM previously agreed to the 
same obligations required by Section I(j) in an updated investment 
management agreement between the JPMC Affiliated QPAM and a Covered 
Plan.
    Department's Response: The Department confirms that this condition 
would be met where the JPMC Affiliated QPAM previously agreed to the 
same obligations required by Section I(j) in an updated investment 
management agreement between the JPMC Affiliated QPAM and a Covered 
Plan.

Additional Changes to the Exemption's Conditions

    63. Since granting PTE 2017-03, the Department has clarified and 
updated certain conditions included in QPAM Section I(g) exemptions to 
enhance protections for Covered Plans. These updated conditions appear 
in Sections III(a) and (b) of this proposed exemption.

Proposed Exemption's Protective Conditions

    64. In developing administrative exemptions under ERISA Section 
408(a), the Department implements its statutory directive to grant only 
exemptions that are appropriately protective and in the interest of 
affected plans and IRAs. The Department is proposing this exemption 
with conditions that would protect Covered Plans (and their 
participants and beneficiaries) and allow them to continue to utilize 
the services of the

[[Page 63812]]

JPMC Affiliated and Related QPAMs. If this proposed exemption is 
granted as proposed, it would allow Covered Plans to avoid costs and 
disruptions to investment strategies that may arise if such Covered 
Plans are forced, on short notice, to hire a different QPAM or asset 
manager because the JPMC Affiliated and Related QPAMs no longer are 
able to rely on the relief provided by PTE 84-14 due to the Conviction.
    65. The Department notes that the protective conditions of this 
proposed exemption are essentially the same as the protective suite of 
conditions set forth under PTE 2017-03, with certain modifications for 
consistency with the Department's more recent individual exemptions 
relating to Section I(g) of PTE 84-14. Given the seriousness of the 
misconduct described in the DPA discussed above, the Department is 
adding two new conditions. The first provides that, other than former 
employees who worked on the Precious Metals Desk and U.S. Treasuries 
Desk within the CIB in the Global Markets division, the JPMC Affiliated 
QPAMs and the JPMC Related QPAMs (including their officers, directors, 
agents and employees of such QPAMs who had responsibility for, or 
exercised authority in connection with the management of plan assets) 
did not know of, did not have reason to know of, and did not 
participate in the conduct underlying the DPA. Further, any other party 
engaged on behalf of the JPMC Affiliated QPAMs and JPMC Related QPAMs 
who had responsibility for or exercised authority in connection with 
the management of plan assets did not know or have reason to know of 
and did not participate in the criminal conduct that is the subject of 
the DPA.
    The second provides that, apart from a non-fiduciary line of 
business within JPMorgan Chase Bank, the JPMC Affiliated QPAMs and the 
JPMC Related QPAMs (including their officers, directors, and agents, 
and employees of such JPMC QPAMs who had responsibility for, or 
exercised authority in connection with the management of plan assets) 
did not receive direct compensation, or knowingly receive indirect 
compensation, in connection with the conduct underlying the DPA. 
Further, any other party engaged on behalf of the JPMC Affiliated QPAMs 
and the JPMC Related QPAMs who had responsibility for, or exercised 
authority in connection with the management of plan assets did not 
receive direct compensation, or knowingly receive indirect 
compensation, in connection with the conduct underlying the DPA.

Statutory Findings

    66. Based on the conditions included in this proposed exemption, 
the Department has tentatively determined that the relief sought by the 
Applicant would satisfy the statutory requirements for an exemption 
under ERISA Section 408(a).
    67. The Proposed Exemption is ``Administratively Feasible.'' The 
Department has tentatively determined that the proposed exemption is 
administratively feasible because, among other things, a qualified 
independent auditor would be required to perform an in-depth audit 
covering each JPMC Affiliated QPAM's compliance with the terms of the 
exemption, and a corresponding written audit report would be provided 
to the Department and made available to the public. The Department 
notes that the independent audit would incentivize compliance while 
reducing the immediate need for review and oversight by the Department.
    68. The Proposed Exemption is ``In the Interest of the Covered 
Plans.'' The Department has tentatively determined that the proposed 
exemption would be in the interests of the participants and 
beneficiaries of affected Covered Plans. It is the Department's 
understanding, based on representations from the Applicant, that if the 
requested exemption is denied, Covered Plans may be forced to find 
other managers at a potentially significant cost. According to the 
Applicant, ineligibility under Section I(g) of PTE 84-14 would deprive 
the Covered Plans of the investment management services that these 
plans expected to receive when they appointed these managers. In this 
regard, an exemption denial could result in the termination of 
relationships that the fiduciaries of the Covered Plans have determined 
to be in the best interests of those plans.
    69. The Proposed Exemption Is ``Protective of the Plan.'' The 
Department has tentatively determined that the proposed exemption is 
protective of the interests of the participants and beneficiaries of 
Covered Plans. As described above, the proposed exemption is subject to 
a suite of conditions that include, but are not limited to: (a) the 
development and maintenance of the Policies; (b) the continued 
implementation of the Training; (c) a robust audit conducted by a 
qualified independent auditor; (d) the provision of certain agreements 
and warranties on the part of the JPMC Affiliated QPAMs; (e) specific 
notices and disclosures that inform Covered Plans of the circumstances 
necessitating the need for exemptive relief and the JPMC Affiliated 
QPAMs' obligations under this exemption; and (f) the designation of a 
Compliance Officer who must ensure the JPMC Affiliated QPAMs continue 
to comply with the Policies and Training requirements of this 
exemption.

Summary

    70. This proposed exemption would provide relief from certain of 
the restrictions set forth in ERISA Section 406 and Code Section 
4975(c)(1). No relief or waiver of a violation of any other law would 
be provided by this proposed exemption. The relief set forth in this 
proposed exemption would terminate immediately if, among other things, 
an entity within the JPMC corporate structure were convicted of any 
crime covered by Section I(g) of PTE 84-14 (other than the Conviction). 
While such an entity could request a new individual prohibited 
transaction exemption in that event, the Department is not obligated to 
grant such request. Consistent with this proposed exemption, the 
Department's consideration of additional exemptive relief is subject to 
the findings required under ERISA Section 408(a) and Code Section 
4975(c)(2).
    71. When interpreting and implementing this exemption, the 
Applicant and the JPMC Affiliated QPAMs should resolve any ambiguities 
in light of the exemption's protective purposes. To the extent 
additional clarification is necessary, these persons or entities should 
contact EBSA's Office of Exemption Determinations at 202-693-8540.
    72. Based on the conditions that are included in this proposed 
exemption, the Department has tentatively determined that the relief 
sought by the Applicant would satisfy the statutory requirements for an 
individual exemption under ERISA Section 408(a) and Code Section 
4975(c)(2).

Notice to Interested Persons

    Notice of the proposed exemption will be provided to all interested 
persons within thirty (30) days of the publication of the notice of 
proposed four-year exemption in the Federal Register. The notice will 
be provided to all interested persons in the manner approved by the 
Department and will contain the documents described therein and a 
supplemental statement, as required pursuant to 29 CFR 2570.43(a)(2). 
The supplemental statement will inform interested persons of their 
right to comment on and to request a hearing with respect to the 
pending exemption. All written

[[Page 63813]]

comments and/or requests for a hearing must be received by the 
Department within sixty (60) days of the date of publication of this 
proposed four-year exemption in the Federal Register. All comments will 
be made available to the public.
    Warning: If you submit a comment, EBSA recommends that you include 
your name and other contact information in the body of your comment, 
but DO NOT submit information that you consider to be confidential, or 
otherwise protected (such as Social Security number or an unlisted 
phone number) or confidential business information that you do not want 
publicly disclosed. All comments may be posted on the internet and can 
be retrieved by most internet search engines.

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 ERISA Section 408(a) and/or Code Section 4975(c)(2) does not 
relieve a fiduciary or other party in interest or disqualified person 
from certain other provisions of ERISA and/or the Code, including any 
prohibited transaction provisions to which the exemption does not apply 
and the general fiduciary responsibility provisions of ERISA Section 
404, which, among other things, require a fiduciary to discharge their 
duties respecting the plan solely in the interest of the participants 
and beneficiaries of the plan and in a prudent fashion in accordance 
with ERISA Section 404(a)(1)(B); nor does it affect the requirement of 
Code Section 401(a) that the plan must operate for the exclusive 
benefit of the employees of the employer maintaining the plan and their 
beneficiaries;
    (2) Before an exemption may be granted under ERISA Section 408(a) 
and/or Code Section 4975(c)(2), the Department must find that the 
exemption is administratively feasible, in the interests of the plan 
and of its participants and beneficiaries, and protective of the rights 
of participants and beneficiaries of the plan;
    (3) The proposed exemption would be supplemental to, and not in 
derogation of, any other provisions of ERISA and/or the Code, including 
statutory or administrative exemptions and transitional rules. 
Furthermore, the fact that a transaction is subject to an 
administrative or statutory exemption is not dispositive of whether the 
transaction is, in fact, a prohibited transaction; and
    (4) The proposed exemption would be subject to the express 
condition that the material facts and representations contained in the 
application are true and complete at all times, and that the 
application accurately describes all material terms of the transactions 
which are the subject of the exemption.

Proposed Exemption

    The Department is considering granting a four-year exemption under 
the authority of ERISA Section 408(a) and Internal Revenue Code (or 
Code) section 4975(c)(2), and in accordance with the procedures set 
forth in exemption procedure regulation.\25\
---------------------------------------------------------------------------

    \25\ 29 CFR part 2570, subpart B (76 FR 66637, 66644, October 
27, 2011). 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 proposed exemption is issued solely by the 
Department.
---------------------------------------------------------------------------

Section I. Definitions

    (a) The term ``Conviction'' means the judgment of conviction 
against JPMC for violation of the Sherman Antitrust Act, 15 U.S.C. 1, 
entered in the District Court for the District of Connecticut (the 
District Court) (case number 3:15-cr-79-SRU). For all purposes under 
this exemption, ``conduct'' of any person or entity that is the 
``subject of [a] Conviction'' encompasses the conduct described in 
Paragraph 4(g)-(i) of the Plea Agreement filed in the District Court in 
case number 3:15-cr-79-SRU (the Plea Agreement).
    (b) The term ``Covered Plan'' means a plan subject to Part IV of 
Title I of ERISA (an ``ERISA-covered plan'') or a plan subject to Code 
section 4975 (an ``IRA''), in each case, with respect to which a JPMC 
Affiliated QPAM relies on PTE 84-14, or with respect to which a JPMC 
Affiliated QPAM (or any JPMC 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 JPMC Affiliated QPAM has expressly disclaimed 
reliance on QPAM status or PTE 84-14 in entering into a contract, 
arrangement, or agreement with the ERISA-covered plan or IRA. Further, 
a JPMC Affiliated 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 JPMC Affiliated QPAM will not represent that it is a QPAM, 
and will not rely on the relief described in PTE 84-14.
    (c) The term ``Exemption Period'' means January 10, 2023, through 
January 9, 2027.
    (d) The term ``JPMC'' means JPMorgan Chase and Co.
    (e) The term ``JPMC Affiliated QPAM'' means a ``qualified 
professional asset manager,'' as defined in Section VI(a) of PTE 84-14, 
that relies on the relief provided by PTE 84-14 or represents to 
Covered Plans that it qualifies as a QPAM, and with respect to which 
JPMC is a current or future ``affiliate'' (as defined in Section 
VI(d)(1) of PTE 84-14). The term ``JPMC Affiliated QPAM'' excludes the 
parent entity, JPMC, the entity implicated in the criminal conduct that 
is the subject of the Conviction.
    (f) The term ``JPMC Related QPAM'' means any current or future 
``qualified professional asset manager'' (as defined in section VI(a) 
of PTE 84-14) that relies on the relief provided by PTE 84-14, and with 
respect to whom JPMC owns a direct or indirect five percent or more 
interest but is not an ``affiliate'' (as defined in Section VI(d)(1) of 
PTE 84-14).

Section II. Covered Transactions

    Under this proposed exemption, the JPMC Affiliated QPAMs and the 
JPMC Related QPAMs, as defined in Sections I(e) and I(f), respectively, 
would not be precluded from relying on the exemptive relief provided by 
Prohibited Transaction Class Exemption 84-14 (PTE 84-14 or the QPAM 
Exemption) notwithstanding the Conviction, as defined in Section I(a), 
during the Exemption Period,\26\ provided that the conditions set forth 
in in Section III below are satisfied.
---------------------------------------------------------------------------

    \26\ 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 violation of the Sherman 
Antitrust Act, Title 15 United States Code, Section 1.
---------------------------------------------------------------------------

Section III. Conditions

    (a) Other than a single individual who worked for a non-fiduciary 
business within JPMorgan Chase Bank and who had no responsibility for, 
nor exercised any authority in connection with, the management of plan 
assets, the JPMC Affiliated QPAMs and the JPMC Related QPAMs (including 
their officers,

[[Page 63814]]

directors, agents other than JPMC, and employees of such QPAMs who had 
responsibility for, or exercised authority in connection with the 
management of plan assets) did not know of, did not have reason to know 
of, and did not participate in the criminal conduct that is the subject 
of the Conviction. Further, any other party engaged on behalf of the 
JPMC Affiliated QPAMs and JPMC Related QPAMs who had responsibility for 
or exercised authority in connection with the management of plan assets 
did not know or have reason to know of and did not participate in the 
criminal conduct that is the subject of the Conviction. For purposes of 
this proposed exemption, ``participate in'' refers not only to active 
participation in the criminal conduct of JPMC that is the subject of 
the Conviction, but also to knowing approval of the criminal conduct or 
knowledge of such conduct without taking active steps to prohibit it, 
including reporting the conduct to such individual's supervisors, and 
to the Board of Directors;
    (b) Apart from a non-fiduciary line of business within JPMorgan 
Chase Bank, the JPMC Affiliated QPAMs and the JPMC Related QPAMs 
(including their officers, directors, and agents other than JPMC, and 
employees of such JPMC QPAMs who had responsibility for, or exercised 
authority in connection with the management of plan assets) did not 
receive direct compensation, or knowingly receive indirect 
compensation, in connection with the criminal conduct that is the 
subject of the Conviction. Further, any other party engaged on behalf 
of the JPMC Affiliated QPAMs and the JPMC Related QPAMs who had 
responsibility for, or exercised authority in connection with the 
management of plan assets did not receive direct compensation, or 
knowingly receive indirect compensation, in connection with the 
criminal conduct of that is the subject of the Conviction;
    (c) The JPMC Affiliated 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 
Conviction.
    (d) At all times during the Exemption Period, no JPMC Affiliated 
QPAM will use its authority or influence to direct an ``investment 
fund'' (as defined in Section VI(b) of PTE 84-14) that is subject to 
ERISA or the Code and managed by such JPMC Affiliated QPAM in reliance 
on PTE 84-14, or with respect to which a JPMC Affiliated QPAM has 
expressly represented to a Covered Plan that it qualifies as a QPAM or 
relies on the QPAM class exemption, to enter into any transaction with 
JPMC, or to engage JPMC 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 a JPMC Affiliated QPAM or a JPMC Related QPAM to 
satisfy Section I(g) of PTE 84-14 arose solely from the Conviction;
    (f) A JPMC Affiliated QPAM or a JPMC Related QPAM did not exercise 
authority over the assets of any plan subject to Part 4 of Title I of 
ERISA (an ERISA-covered plan) or Code Section 4975 (an IRA) in a manner 
that it knew or should have known would: further the criminal conduct 
that is the subject of the Conviction; or cause the JPMC Affiliated 
QPAM, the JPMC Related QPAM, or their affiliates to directly or 
indirectly profit from the criminal conduct that is the subject of the 
Conviction;
    (g) Other than with respect to employee benefit plans maintained or 
sponsored for its own employees or the employees of an affiliate, JPMC 
will not act as a fiduciary within the meaning of ERISA Section 
3(21)(A)(i) or (iii), or Code Section 4975(e)(3)(A) and (C), with 
respect to Covered Plan assets; provided, however, that JPMC will not 
be treated as violating the conditions of this exemption solely because 
it acted as an investment advice fiduciary within the meaning of ERISA 
Section 3(21)(A)(ii) or Code Section 4975(e)(3)(B);
    (h)(1) Each JPMC Affiliated QPAM must maintain, adjust (to the 
extent necessary), implement, and follow the written policies and 
procedures (the Policies). The Policies must require and be reasonably 
designed to ensure that:
    (i) The asset management decisions of the JPMC Affiliated QPAM are 
conducted independently of the corporate management and business 
activities of JPMC;
    (ii) The JPMC Affiliated QPAM fully complies with ERISA's fiduciary 
duties and with ERISA and the Code's prohibited transaction provisions, 
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 JPMC Affiliated QPAM does not knowingly participate in 
any other person's violation of ERISA or the Code with respect to 
Covered Plans;
    (iv) Any filings or statements made by the JPMC Affiliated QPAM to 
regulators, including, but not limited to, the Department, the 
Department of the Treasury, the Department of Justice, and the Pension 
Benefit Guaranty Corporation, on behalf of or in relation to Covered 
Plans, are materially accurate and complete to the best of such QPAM's 
knowledge at that time;
    (v) To the best of the JPMC Affiliated QPAM's knowledge at the 
time, the JPMC Affiliated QPAM does not make material 
misrepresentations or omit material information in its communications 
with such regulators with respect to Covered Plans or make material 
misrepresentations or omit material information in its communications 
with Covered Plans;
    (vi) The JPMC Affiliated QPAM complies with the terms of this 
exemption; and
    (vii) Any violation of or failure to comply with an item in 
subparagraphs (ii) through (vi) is corrected as soon as reasonably 
possible upon discovery or as soon after the QPAM reasonably should 
have known of the noncompliance (whichever is earlier), and any such 
violation or compliance failure not so corrected is reported, upon the 
discovery of such failure to so correct, in writing, to the head of 
compliance and the general counsel (or their functional equivalent) of 
the relevant line of business that engaged in the violation or failure, 
and the independent auditor responsible for reviewing compliance with 
the Policies. A JPMC Affiliated QPAM will not be treated as having 
failed to develop, implement, maintain, or follow the Policies, 
provided 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 it adheres to the reporting 
requirements set forth in this subparagraph (vii);
    (2) Each JPMC Affiliated QPAM must continue to implement a training 
program (the Training) conducted at least annually for all relevant 
JPMC Affiliated QPAM asset/portfolio management, trading, legal, 
compliance, and internal audit personnel. The Training required under 
this exemption may be conducted electronically and must: (i) at a 
minimum, cover the Policies, ERISA and Code compliance (including 
applicable fiduciary duties and the prohibited transaction provisions), 
ethical conduct, the consequences for not complying with the conditions 
of this exemption (including any loss of exemptive relief provided 
herein), and prompt reporting of wrongdoing; and (ii) be conducted by a 
professional who has been prudently

[[Page 63815]]

selected and who has appropriate technical training and proficiency 
with ERISA and the Code to perform the tasks required by this 
exemption;
    (i)(1) Each JPMC Affiliated QPAM must submit to an audit conducted 
every two years 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 JPMC 
Affiliated QPAM's compliance with the Policies and Training conditions 
described herein. The audit requirement must be incorporated in the 
Policies. Each audit must cover the preceding consecutive twelve (12) 
month period. The first audit must cover the period from July 10, 2022, 
through July 9, 2023, and must be completed by December 31, 2023. The 
second audit must cover the period from July 1, 2024, through June 30, 
2025, and must be completed by December 31, 2025. The third audit must 
cover the period from July 1, 2026, through January 9, 2027, and must 
be completed by July 8, 2027;
    (2) Within the scope of the audit and to the extent necessary for 
the auditor, in its sole opinion, to complete its audit and comply with 
the conditions for relief described herein, each JPMC Affiliated QPAM 
and, if applicable, JPMC, will grant the auditor unconditional access 
to its businesses, including, but not limited to: its computer systems; 
business records; transactional data; workplace locations; training 
materials; and personnel. Such access will be provided only to the 
extent that it is not prevented by state or federal statute, or 
involves communications subject to attorney client privilege and may be 
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 JPMC Affiliated QPAM has developed, 
implemented, maintained, and followed the Policies in accordance with 
the conditions of this exemption, and has developed and implemented the 
Training, as required herein;
    (4) The auditor's engagement must specifically require the auditor 
to test each JPMC Affiliated QPAM's operational compliance with the 
Policies and Training conditions. In this regard, the auditor must 
test, for each QPAM, a sample of the QPAM's transactions involving 
Covered Plans sufficient in size and nature to afford the auditor a 
reasonable basis to determine the QPAM's operational compliance with 
the Policies and Training;
    (5) For each audit, on or before the end of the relevant period for 
completing the audit described in Section I(i)(1), the auditor must 
issue a written report (the Audit Report) to JPMC and the JPMC 
Affiliated QPAM to which the audit applies that describes the 
procedures performed by the auditor during the course of its 
examination. At its discretion, the auditor may issue a single 
consolidated Audit Report that covers all the JPMC Affiliated QPAMs. 
The Audit Report must include the auditor's specific determinations 
regarding:
    (i) the adequacy of each JPMC Affiliated QPAM's Policies and 
Training; each JPMC Affiliated QPAM's compliance with the Policies and 
Training conditions; the need, if any, to strengthen such Policies and 
Training; and any instance of the respective JPMC Affiliated QPAM's 
noncompliance with the written Policies and Training described in 
Section I(h) above. The JPMC Affiliated QPAM must promptly address any 
noncompliance and promptly address or prepare a written plan of action 
to address any determination by the auditor regarding the adequacy of 
the Policies and Training and the auditor's recommendations (if any) 
with respect to strengthening the Policies and Training of the 
respective JPMC Affiliated QPAM. Any action taken, or the plan of 
action to be taken, by the respective JPMC Affiliated QPAM must be 
included in an addendum to the Audit Report (and such addendum must be 
completed before 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 the Audit Report is submitted, the following 
period's Audit Report must state whether the plan was satisfactorily 
completed. Any determination by the auditor that the respective JPMC 
Affiliated QPAM has implemented, maintained, and followed sufficient 
Policies and Training must not be based solely or in substantial part 
on an absence of evidence indicating noncompliance. In this last 
regard, any finding that a JPMC Affiliated QPAM has complied with the 
requirements under this subparagraph must be based on evidence that the 
particular JPMC Affiliated QPAM has actually implemented, maintained, 
and followed the Policies and Training required by this exemption. 
Furthermore, the auditor must not solely rely on the Annual 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; and
    (ii) The adequacy of the most recent Annual Review described in 
Section I(m);
    (6) The auditor must notify the respective JPMC Affiliated QPAM of 
any instance of noncompliance identified by the auditor within five (5) 
business days after such noncompliance is identified by the auditor, 
regardless of whether the audit has been completed as of that date;
    (7) With respect to each Audit Report, the general counsel, or one 
of the three most senior executive officers of the line of business 
engaged in discretionary asset management services through the JPMC 
Affiliated 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 and that to the best of 
such officer's knowledge at the time, the JPMC Affiliated QPAM has 
addressed, corrected or remedied any noncompliance and inadequacy, or 
has an appropriate written plan to address any inadequacy regarding the 
Policies and Training identified in the Audit Report. The certification 
must also include the signatory's determination that the Policies and 
Training in effect at the time of signing are adequate to ensure 
compliance with the conditions of this exemption and with the 
applicable provisions of ERISA and the Code. Notwithstanding the above, 
no person, including any person referenced in the Statement of Facts 
that gave rise to the Conviction, who knew of, or should have known of, 
or participated in, any misconduct described in the Statement of Facts 
underlying the Conviction, by any party, may provide the certification 
required by this exemption, unless the person took active documented 
steps to stop the misconduct;
    (8) The Risk Committee of JPMC's Board of Directors 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 JPMC 
must review the Audit Report for each JPMC Affiliated QPAM and certify 
in writing, under penalty of perjury, that such officer has reviewed 
each Audit Report;
    (9) Each JPMC Affiliated QPAM provides its certified Audit Report, 
by electronic mail to [email protected] This delivery must take place no 
later than

[[Page 63816]]

thirty (30) days following completion of the Audit Report. The Audit 
Report will be made part of the public record regarding this exemption. 
Furthermore, each JPMC Affiliated QPAM must make its Audit Report 
unconditionally available, electronically or otherwise, for examination 
upon request by any duly authorized employee or representative of the 
Department, other relevant regulators, and any fiduciary of a Covered 
Plan;
    (10) Each JPMC Affiliated QPAM and the auditor must submit to [email protected] any engagement agreement(s) executed pursuant to the 
engagement of the auditor under this exemption no later than two (2) 
months after the execution of any such engagement agreement;
    (11) The auditor must provide the Department, upon request access 
to all the workpapers created and utilized in the course of the audit, 
for inspection and review, provided such access and inspection is 
otherwise permitted by law; and
    (12) JPMC must notify the Department of a change in the independent 
auditor no later than two (2) months after the engagement of a 
substitute or subsequent auditor and must provide an explanation for 
the substitution or change including a description of any material 
disputes between the terminated auditor and JPMC;
    (j) Throughout the Exemption Period, with respect to any 
arrangement, agreement, or contract between a JPMC Affiliated QPAM and 
a Covered Plan, the JPMC Affiliated QPAM agrees and warrants:
    (1) To comply with ERISA and the Code, as applicable with respect 
to such Covered Plan; refrain from engaging in prohibited transactions 
that are not otherwise exempt (and to promptly correct any prohibited 
transactions); and comply with the standards of prudence and loyalty 
set forth in ERISA Section 404 with respect to each such Covered Plan, 
to the extent that section is applicable;
    (2) To indemnify and hold harmless the Covered Plan for any actual 
losses resulting directly from a JPMC Affiliated QPAM's violation of 
ERISA's fiduciary duties, as applicable, and of the prohibited 
transaction provisions of ERISA and the Code, as applicable; a breach 
of contract by the QPAM; or any claim arising out of the failure of 
such JPMC Affiliated QPAM to qualify for the exemptive relief provided 
by PTE 84-14 as a result of a violation of Section I(g) of PTE 84-14, 
other than the Conviction. This condition applies only to actual losses 
caused by the JPMC Affiliated QPAM's violations. Actual losses include 
losses and related costs arising from unwinding transactions with third 
parties and from transitioning Plan assets to an alternative asset 
manager as well as costs associated with any exposure to excise taxes 
under Code section 4975 as a result of a QPAM's inability to rely upon 
the relief in the QPAM Exemption.
    (3) Not to require (or otherwise cause) the Covered Plan to waive, 
limit, or qualify the liability of the JPMC Affiliated QPAM for 
violating ERISA or the Code or engaging in prohibited transactions;
    (4) Not to restrict the ability of the Covered Plan to terminate or 
withdraw from its arrangement with the JPMC Affiliated QPAM with 
respect to any investment in a separately managed account or pooled 
fund subject to ERISA and managed by the 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 of 
these arrangements involving investments in pooled funds subject to 
ERISA entered into after the effective date of this exemption, the 
adverse consequences must relate to a lack of liquidity of the 
underlying assets, valuation issues, or regulatory reasons that prevent 
the fund from promptly redeeming a Covered Plan's investment, and the 
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 the withdrawal or termination may have 
adverse consequences for all other investors, provided that such fees 
are applied consistently and in like manner to all such investors;
    (6) Not to include exculpatory provisions disclaiming or otherwise 
limiting liability of the JPMC Affiliated QPAM for a violation of such 
agreement's terms. To the extent consistent with ERISA Section 410, 
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 JPMC and its affiliates, or damages arising from acts outside the 
control of the JPMC Affiliated QPAM; and
    (7) Each JPMC Affiliated QPAM must provide a notice of its 
obligations under this Section I(j) to each Covered Plan. For all other 
prospective Covered Plans, the JPMC Affiliated QPAM must agree to its 
obligations under this Section I(j) in an updated investment management 
agreement between the JPMC Affiliated QPAM and such clients or other 
written contractual agreement. This condition will be deemed met for 
each Covered Plan that received a notice pursuant to PTE 2016-15 or PTE 
2017-03 that meets the terms of this condition. This condition will 
also be met where the JPMC Affiliated QPAM previously agreed to the 
same obligations required by this Section I(j) in an updated investment 
management agreement between the JPMC Affiliated QPAM and a Covered 
Plan. Notwithstanding the above, a JPMC Affiliated QPAM will not 
violate this condition solely because a Covered Plan refuses to sign an 
updated investment management agreement;
    (k) Within 60 days after the effective date of this exemption, each 
JPMC Affiliated QPAM provides notice of the exemption as published in 
the Federal Register, along with a separate summary describing the 
facts that led to the Conviction (the Summary), which has been 
submitted to the Department, and a prominently displayed statement (the 
Statement) that the Conviction results in a failure to meet a condition 
in PTE 84-14 to each sponsor and beneficial owner of a Covered Plan 
that has entered into a written asset or investment management 
agreement with a JPMC Affiliated QPAM, or the sponsor of an investment 
fund in any case where a JPMC Affiliated QPAM acts as a sub-adviser to 
the investment fund in which such ERISA-covered plan and IRA invests. 
All prospective Covered Plan clients that enter into a written asset or 
investment management agreement with a JPMC Affiliated QPAM after a 
date that is 60 days after the effective date of this exemption must 
receive a copy of the notice of the exemption, the Summary, and the 
Statement before, or contemporaneously with, the Covered Plan's receipt 
of a written asset or investment management agreement from the JPMC 
Affiliated QPAM. The notices may be delivered electronically (including 
by an email that has a link to the exemption). Notwithstanding the 
above, a JPMC Affiliated QPAM will not violate the condition solely 
because a Covered Plan refuses to sign an updated investment management 
agreement.

[[Page 63817]]

    For Covered Plan clients that first become clients on or after 
January 10, 2023, but before May 10, 2023, a JPMC Affiliated QPAM will 
meet the requirements of this Section (k) to the extent the investment 
management or comparable agreements with the JPMC Affiliated QPAM 
includes notification language referencing PTE 2017-03 and a link to 
the required materials, provided the website containing such materials 
stipulated under the notification conditions in this proposed 
exemption, if granted, is updated, as necessary, by May 10, 2023;
    (l) The JPMC Affiliated QPAM must comply with each condition of PTE 
84-14, as amended, with the sole exception of the violation of Section 
I(g) of PTE 84-14 that is attributable to the Conviction. If, during 
the Exemption Period, an entity within the JPMC corporate structure is 
convicted of a crime described in Section I(g) of PTE 84-14 (other than 
the Conviction), relief in this exemption would terminate immediately;
    (m)(1) Within 60 days after the effective date of this exemption, 
each JPMC Affiliated QPAM must designate a senior compliance officer 
(the Compliance Officer) who will be responsible for compliance with 
the Policies and Training requirements described herein. For purposes 
of this condition (m), each relevant line of business within a JPMC 
Affiliated QPAM may designate its own Compliance Officer(s). 
Notwithstanding the above, no person, including any person referenced 
in the Statement of Facts that gave rise to the Plea Agreement, who 
knew of, or should have known of, or participated in, any misconduct 
described in the Statement of Facts, by any party, may be involved with 
the designation or responsibilities required by this condition, unless 
the person took active documented steps to stop the misconduct. The 
Compliance Officer must conduct a review of each twelve-month period of 
the Exemption Period (the Exemption Review), to determine the adequacy 
and effectiveness of the implementation of the Policies and Training. 
With respect to the Compliance Officer, the following conditions must 
be met:
    (i) The Compliance Officer must be a professional who has extensive 
experience with, and knowledge of, the regulation of financial services 
and products, including under ERISA and the Code; and
    (ii) The Compliance Officer must have a direct reporting line to 
the highest-ranking corporate officer in charge of legal compliance for 
asset management.
    (2) With respect to the Exemption Review, the following conditions 
must be met:
    (i) The annual Exemption Review includes a review of the JPMC 
Affiliated 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 2017-03; any 
material change in the relevant business activities of the JPMC 
Affiliated QPAMs; and any change to ERISA, the Code, or regulations 
related to fiduciary duties and the prohibited transaction provisions 
that may be applicable to the activities of the JPMC Affiliated QPAMs;
    (ii) The Compliance Officer prepares a written report for the 
Exemption Review (an Exemption Report) that (A) summarizes their 
material activities during the prior year; (B) sets forth any instance 
of noncompliance discovered during the prior 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 the Exemption Report, the Compliance Officer must certify 
in writing that to the best of their 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 prior year and any related correction taken 
to date have been identified in the Exemption Report; and (D) the JPMC 
Affiliated QPAMs have complied with the Policies and Training, and/or 
corrected (or are correcting) any known instances of noncompliance in 
accordance with Section III(h) above;
    (iv) The Exemption Report must be provided to appropriate corporate 
officers of JPMC and each JPMC Affiliated QPAM to which such report 
relates; the head of compliance and the general counsel (or their 
functional equivalent) of JPMC and the relevant JPMC Affiliated QPAM; 
and must be made unconditionally available to the independent auditor 
described in Section I(i) above;
    (v) The annual Exemption Review, including the Compliance Officer's 
written Report, must be completed within three (3) months following the 
end of the period to which it relates. The annual Exemption Reviews 
under this exemption must cover the following periods: January 10, 
2023, through December 31, 2023; January 1, 2024, through December 31, 
2024; January 1, 2025, through December 31, 2025; and January 1, 2026, 
through January 9, 2027.
    (n) JPMC imposes internal procedures, controls, and protocols to 
reduce the likelihood of any recurrence of conduct that is the subject 
of the Convictions;
    (o) JPMC complies in all material respects with the requirements 
imposed by a U.S. regulatory authority in connection with the 
Conviction;
    (p) Each JPMC Affiliated QPAM maintains 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 JPMC 
Affiliated QPAM relies upon the relief in this exemption;
    (q) During the Exemption Period, JPMC must: (1) immediately 
disclose to the Department any Deferred Prosecution Agreement (a DPA) 
or Non-Prosecution Agreement (an NPA) with the U.S. Department of 
Justice, entered into by JPMC or any of its affiliates (as defined in 
Section VI(d) of PTE 84-14) in connection with conduct described in 
Section I(g) of PTE 84-14 or section 411 of ERISA; and (2) immediately 
provide the Department with any information requested by the 
Department, as permitted by law, regarding the agreement and/or conduct 
and allegations that led to the agreement;
    (r) Within 60 days after the effective date of this exemption, each 
JPMC Affiliated QPAM, in its agreements with, or in other written 
disclosures provided to Covered Plans, will clearly and prominently 
inform Covered Plan clients of their right to obtain a copy of the 
Policies or a description (Summary Policies) which accurately 
summarizes key components of the JPMC Affiliated QPAM's written 
Policies developed in connection with this exemption. If the Policies 
are thereafter changed, each Covered Plan client must receive a new 
disclosure within six (6) months following the end of the calendar year 
during which the Policies were changed. If the Applicant meets this 
disclosure requirement through Summary Policies, changes to the 
Policies shall not result in the

[[Page 63818]]

requirement for a new disclosure unless, as a result of changes to the 
Policies, the Summary Policies are no longer accurate. With respect to 
this requirement, the description may be continuously maintained on a 
website, provided that such website link to the Policies or Summary 
Policies is clearly and prominently disclosed to each Covered Plan;
    (s) A JPMC Affiliated QPAM will not fail to meet the terms of this 
exemption solely because a different JPMC Affiliated QPAM fails to 
satisfy a condition for relief described in Sections III(c), (d), (h), 
(i), (j), (k), (l), (p) or (r); or if the independent auditor described 
in Section III(i) fails to comply with a provision of the exemption, 
other than the requirement described in Section III(i)(11), provided 
that such failure did not result from any actions or inactions of JPMC 
or its affiliates; and
    (t) All the material facts and representations set forth in the 
Summary of Facts and Representations are true and accurate.
    (u) Other than former employees who worked on the Precious Metals 
Desk and U.S. Treasuries Desk within the CIB in the Global Markets 
division, the JPMC Affiliated QPAMs and the JPMC Related QPAMs 
(including their officers, directors, agents and employees of such 
QPAMs who had responsibility for, or exercised authority in connection 
with the management of plan assets) did not know of, did not have 
reason to know of, and did not participate in the conduct underlying 
the September 29, 2020, deferred prosecution agreement entered into 
between the Department of Justice and JPMC, JPMorgan Chase Bank, and 
JPMS (the DPA). Further, any other party engaged on behalf of the JPMC 
Affiliated QPAMs and JPMC Related QPAMs who had responsibility for or 
exercised authority in connection with the management of plan assets 
did not know or have reason to know of and did not participate in the 
criminal conduct that is the subject of the DPA.
    (v) Apart from a non-fiduciary line of business within JPMorgan 
Chase Bank, the JPMC Affiliated QPAMs and the JPMC Related QPAMs 
(including their officers, directors, and agents, and employees of such 
JPMC QPAMs who had responsibility for, or exercised authority in 
connection with the management of plan assets) did not receive direct 
compensation, or knowingly receive indirect compensation, in connection 
with the conduct underlying the DPA. Further, any other party engaged 
on behalf of the JPMC Affiliated QPAMs and the JPMC Related QPAMs who 
had responsibility for, or exercised authority in connection with the 
management of plan assets did not receive direct compensation, or 
knowingly receive indirect compensation, in connection with the conduct 
underlying the DPA.
    Effective Date: If granted, the exemption will be effective for a 
period of four years beginning on January 10, 2023, and ending on 
January 9, 2027.

George Christopher Cosby,
Director, Office of Exemption Determinations, Employee Benefits 
Security Administration, U.S. Department of Labor.
[FR Doc. 2022-22861 Filed 10-19-22; 8:45 am]
BILLING CODE 4510-29-P