Exemption From Certain Prohibited Transaction Restrictions Involving Pacific Investment Management Company LLC (PIMCO or the Applicant) Located in Newport Beach, California, 42953-42966 [2023-14121]

Agencies

• Employee Benefits Security Administration
• DEPARTMENT OF LABOR

[Federal Register Volume 88, Number 127 (Wednesday, July 5, 2023)]
[Notices]
[Pages 42953-42966]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-14121]


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DEPARTMENT OF LABOR

Employee Benefits Security Administration

[Prohibited Transaction Exemption 2023-15; Exemption Application No. D-
12075]


Exemption From Certain Prohibited Transaction Restrictions 
Involving Pacific Investment Management Company LLC (PIMCO or the 
Applicant) Located in Newport Beach, California

AGENCY: Employee Benefits Security Administration, Labor.

ACTION: Notice of exemption.

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SUMMARY: This document contains a notice of exemption issued by the 
Department of Labor (the Department) from certain of the prohibited 
transaction restrictions of the Employee Retirement Income Security Act 
of 1974 (ERISA or the Act) and/or the Internal Revenue Code of 1986 
(the Code). This exemption allows certain asset managers with specified 
relationships to PIMCO (the PIMCO Affiliated QPAMs) to continue to rely 
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 Allianz Global Investors US LLC (AGI US) 
for one count of securities fraud (the AGI US Conviction), as described 
below. This exemption does not grant any relief to AGI US. AGI US 
submitted an exemption request to the Department (D-12074), which it 
subsequently withdrew. The Department did not grant any relief to AGI 
US pursuant to its application or as part of this exemption.

DATES: The exemption will be in effect for a period of five years 
beginning on the date of the AGI US Conviction, as defined below.

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

SUPPLEMENTARY INFORMATION: On March 28, 2023, the Department published 
a notice of proposed exemption in the Federal Register \1\ permitting 
the PIMCO Affiliated QPAMs to continue to rely on the exemptive relief 
provided by the QPAM Exemption \2\ for a period of five years, 
notwithstanding the judgment of conviction against PIMCO's affiliate, 
AGI US, for one count of securities fraud.\3\ The Department is 
granting this exemption to ensure that the participants and 
beneficiaries of ERISA-covered Plans and IRAs managed by the PIMCO 
Affiliated QPAMs (together, Covered Plans) are protected. This 
exemption provides only the relief specified in the text of the 
exemption and does not provide relief from violations of any law other 
than the prohibited transaction provisions of

[[Page 42954]]

Title I of ERISA and the Code expressly stated herein.
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    \1\ 88 FR 18333 (March 28, 2023).
    \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 crimes.
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    The Department intends for the terms of this exemption to promote 
adherence by the PIMCO Affiliated QPAMs to basic fiduciary standards 
under Title I of ERISA and the Code. An important objective in granting 
this exemption is to ensure that Covered Plans can terminate their 
relationships with a PIMCO Affiliated QPAM in an orderly and cost-
effective fashion in the event the fiduciary of a Covered Plan 
determines that it is prudent to do so.
    Based on the Applicant's adherence to all the conditions of the 
exemption, the Department makes the requisite findings under ERISA 
Section 408(a) that the exemption is: (1) administratively feasible, 
(2) in the interest of Covered Plans and their participants and 
beneficiaries, and (3) protective of the rights of the participants and 
beneficiaries of Covered Plans. Accordingly, affected parties should be 
aware that the conditions incorporated in this exemption are, 
individually and taken as a whole, necessary for the Department to 
grant the relief requested by the Applicant. Absent these or similar 
conditions, the Department would not have granted this exemption.
    The Applicant requested an individual exemption pursuant to ERISA 
Section 408(a) in accordance with the procedures set forth in 29 CFR 
part 2570, subpart B (76 FR 66637, 66644, October 27, 2011).

Background

    PIMCO is a global investment management firm that manages the 
assets of ERISA-covered plans on a discretionary basis and advises or 
sub-advises pooled funds. PIMCO manages approximately $156 billion in 
assets for ERISA plans, approximately $1.89 billion in pooled funds, 
and approximately $9.58 billion in collective investment trusts 
maintained for ERISA and public pension plan investors.
    PIMCO routinely relies upon the QPAM Exemption to provide relief 
for party-in-interest investment transactions. The clients of PIMCO 
include the Covered Plans, which are plans subject to Part 4 of Title I 
of ERISA and plans subject to Code Section 4975, with respect to which 
PIMCO relies on the QPAM Exemption or has expressly represented that it 
qualifies as a QPAM or relies on the QPAM Exemption. PIMCO also may in 
the future acquire other asset managers that rely upon the QPAM 
exemption. This exemption applies to PIMCO and other asset managers 
that are affiliated with PIMCO and that are 100 percent owned, directly 
or indirectly, by PIMCO (the PIMCO Affiliated QPAMs).

Relevant ERISA Provisions and PTE 84-14

    The QPAM Exemption 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 meets the definition of ``qualified professional asset 
manager'' (QPAM) and satisfies additional conditions of the exemption. 
The Department developed and granted the QPAM Exemption based on the 
essential premise that broad relief could be afforded for all types of 
transactions in which a plan engages with parties in interest only if 
the commitments and investments of plan assets and the negotiations 
leading thereto are the sole responsibility of an independent, 
discretionary investment manager.\4\
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    \4\ See 75 FR 38837, 38839 (July 6, 2010).
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    Section I(g) of the QPAM Exemption 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,\5\ or any direct or indirect 
five percent or more owner of 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. The Department included Section I(g) in the 
QPAM Exemption, in part, based on its expectation that a QPAM, and 
those who may be in a position to influence a QPAM's policies, must 
maintain a high standard of integrity.
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    \5\ 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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Criminal Charges Against AGI US

    On May 17, 2022, the Department of Justice filed a criminal 
information in the District Court for the Southern District of New York 
charging AGI US with one count of securities fraud (the 
Information).\6\ AGI US resolved the charges through a plea agreement 
(the Plea Agreement) under which it agreed to enter a guilty plea to 
the charge set out in the Information. The judgment of the Conviction 
against AGI US is scheduled to be entered in District Court on July 12, 
2023, in Case Number 1:22-cr-00279-CM.\7\
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    \6\ In violation of title 15, United States Code, sections 
78j(b) and 78ff, title 17, Code of Federal Regulations, section 
240.10b-5, and title 18, United States Code, section 2.
    \7\ The date the Conviction will be entered may change, subject 
to judicial approval.
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    According to the Statement of Facts that served as the basis for 
the Plea Agreement (the Statement of Facts), beginning in at least 2014 
and continuing through March 2020, AGI US engaged in a scheme to 
defraud investors in a series of private investment funds (the 
Structured Alpha Funds) that at their height held over $11 billion in 
assets under management (the Misconduct). The investors that were 
victims of the Misconduct included ERISA-covered Plans. The fraudulent 
scheme was carried out by the three managers in AGI US's Structured 
Products Group who were primarily responsible for managing the 
Structured Alpha Funds (collectively, the Fund Managers).\8\
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    \8\ The three managers were Gregoire Tournant, Trevor Taylor, 
and Stephen Bond-Nelson.
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    According to the Statement of Facts, AGI US made false and 
misleading statements to investors that substantially understated the 
risks being taken by the Structured Alpha Funds and failed to disclose 
and sought to affirmatively withhold relevant risk information. AGI US 
repeatedly represented to investors that their investments were low-
risk and designed to minimize the risk of large losses. Despite these 
assurances, AGI US deployed an investment strategy that prioritized 
returns over effective risk management by, among other things, taking 
aggressive options bets and devoting insufficient resources to hedge 
positions. When investors sought to obtain documentation to assess 
investment risk, AGI responded by providing manually altered data.
    According to the Statement of Facts, while the Misconduct was 
perpetrated by the Fund Managers within AGI US's Structured Products 
Group, these individuals were able to carry out the fraud, in part, 
because AGI US lacked sufficient internal controls and oversight for 
the Structured Alpha Funds. AGI US's control functions were not 
designed and did not function to ensure that risk for the Structured 
Alpha Funds was being monitored in line with the disclosures AGI US 
made to investors. Further, AGI US's Compliance, Enterprise Risk

[[Page 42955]]

Management, and Legal departments were unaware that many of the 
misleading disclosures described above were being sent to investors at 
all, with or without alterations. The Fund Managers thus were able to 
employ more aggressive investment strategies than they disclosed they 
would employ, thereby exposing investors to undisclosed risk.
    AGI US's failure to address data quality issues in back-office 
functions allowed the Fund Managers' fraudulent scheme to continue 
undetected. In this regard, multiple AGI US employees within the 
Structured Products Group who were not directly involved in the 
fraudulent scheme were nonetheless aware that the Fund Managers were 
altering numbers on certain disclosures before sending them to 
investors. To cover up their wrongdoing, the Fund Managers explained to 
their Structured Products colleagues that they were simply correcting 
``errors'' in disclosures generated by back-office functions.

The Limited Scope of the Misconduct

    In its Statement of Facts, the Department of Justice states the 
following: ``The misconduct occurred only within the small Structured 
Products Group at AGI US. The Government's investigation has not 
revealed evidence that anyone at AGI US outside of the Structured 
Products Group was aware of the misconduct before March 2020. The 
investigation also has not revealed that anyone at any other 
organizations that fell within the broader umbrella of the parent 
company Allianz SE was aware of or participated in the misconduct.''

PIMCO's Affiliation With AGI US

    PIMCO is a direct subsidiary of the following three entities that 
are indirectly wholly owned by Allianz SE (Allianz): (1) Allianz Asset 
Management of America L.P. (AAM) (77.9 percent ownership of PIMCO); (2) 
Allianz Asset Management of America LLC (11.4 percent ownership of 
PIMCO); and (3) Allianz Asset Management Holding II LLC (2.4 percent of 
PIMCO). PIMCO's parent and managing member is AAM, which is generally 
responsible for oversight of PIMCO on behalf of Allianz. Allianz is 
PIMCO's ultimate parent company. Allianz also indirectly owns 100 
percent of AGI US, the entity that engaged in the fraudulent scheme. 
Thus, PIMCO and AGI US are affiliates for the purposes of Section I(g) 
of the QPAM Exemption. As affiliates of AGI US, the PIMCO Affiliated 
QPAMs would no longer be able to rely on the relief provided by the 
QPAM Exemption once AGI US is sentenced in connection with its 
conviction, absent this exemption.

Separation of PIMCO From AGI US

    The Applicant made the following representations regarding how 
PIMCO acts independently from AGI US.
    PIMCO operates autonomously and independently from both Allianz and 
AGI US, and PIMCO has no directors, officers, or employees in common 
with Allianz, AAM, or any other Allianz subsidiary. PIMCO asserts that 
Allianz employees do not have access to PIMCO's systems and are not 
involved in any way in the PIMCO Affiliated QPAMs' investment 
processes. PIMCO's management of plan assets is conducted separately 
from (a) the investment management activities of AGI US; (b) the non-
investment management business activities of Allianz; and (c) the 
conduct underlying the AGI US Conviction. Further, Allianz employees 
are not involved in the portfolio management of PIMCO accounts, nor do 
they supervise or oversee PIMCO's portfolio management activities. 
Investment decisions for PIMCO accounts, including decisions regarding 
investment strategy, are made by PIMCO personnel pursuant to PIMCO 
policies, procedures, and guidelines, without consultation with Allianz 
or AGI US.
    Allianz has delegated to the PIMCO Management Board the authority 
to manage all of PIMCO's business affairs, except for certain 
extraordinary matters where Allianz retains approval rights. The PIMCO 
Management Board, which is comprised solely of PIMCO's Managing 
Directors, relies upon the PIMCO Executive Committee as the primary 
governance body for review and approval of significant matters. There 
are no representatives of Allianz (or other non-PIMCO personnel) on the 
Management Board.
    The Applicant represents that the PIMCO Executive Committee has 
authority for most significant matters and is currently composed of 
nine voting members and two non-voting members, all of whom are PIMCO 
Managing Directors. PIMCO's Senior Executive Officers are elected by 
the PIMCO Management Board and may be removed by the PIMCO Executive 
Committee and the PIMCO Performance and Compensation Committee.
    PIMCO states that Allianz and the other Allianz subsidiaries do not 
have a role in the governance of PIMCO's global subsidiaries. PIMCO's 
global offices are primarily organized as direct or indirect 
subsidiaries of PIMCO, and each has its own defined governance 
structure. Nonetheless, PIMCO's global affiliates are subject to 
PIMCO's oversight as the direct or indirect parent entity. Except as 
otherwise required by applicable local law, PIMCO conducts oversight of 
its global affiliates through the application of PIMCO's global 
policies.
    PIMCO states that it does not share information or coordinate 
investment management decisions with Allianz or other Allianz asset 
management subsidiaries, including AGI US. Among other things, PIMCO 
does not share investment research, portfolio holdings, client 
information, or trade information, and all trading decisions are made 
independently. Also, PIMCO does not coordinate proxy voting and makes 
all decisions, including decisions with respect to the valuation of 
securities, independently and pursuant to its own valuation policies 
and procedures. Further, PIMCO's products, including funds for which 
PIMCO Investments is the principal underwriter, are distributed 
independently; and PIMCO's technology and proprietary trading systems 
are not shared.
    PIMCO does contract with Allianz insurance subsidiaries for the 
management of insurance portfolios, and therefore PIMCO shares 
information and holdings with respect to those activities as they would 
with their other clients. Regarding Allianz as a parent, information 
flows are limited to those necessary for appropriate prudent oversight, 
supervision of controls, and groupwide financial reporting and 
regulatory requirements.
    Finally, hiring, termination, and compensation decisions for PIMCO 
personnel and executives are determined entirely pursuant to PIMCO's 
processes, independent of any influence by Allianz and Allianz asset 
management subsidiaries. Allianz (but no other Allianz affiliate) 
retains the right to approve the hiring of PIMCO's CEO, Group CIO, CFO, 
General Counsel, and head of Compliance.

Hardship to Covered Plans

    The Applicant represents that Covered Plans would suffer the 
following hardships if PIMCO loses its eligibility to rely on the QPAM 
Exemption.
    Without the ability to rely upon the QPAM exemption, PIMCO asserts 
that it will be unable to effectively implement the investment 
strategies that Covered Plans engaged PIMCO to pursue. Consequently, 
PIMCO assumes that Covered Plans will terminate their relationship with 
PIMCO and seek out alternative asset managers. According to PIMCO, the 
transaction costs to Covered Plans of changing managers are 
significant, especially in many of the

[[Page 42956]]

strategies employed by the PIMCO. These costs, which include the cost 
of liquidating assets, identifying and selecting new managers, and then 
reinvesting those assets, would be borne by the Covered Plans and their 
participants. Further, the process for transitioning to a new manager 
is typically lengthy and likely would involve numerous steps, each of 
which could last several months. These steps could include retaining a 
consultant, engaging in a request for proposals, negotiating contracts, 
and ultimately transitioning assets. For a more complete description of 
PIMCO's representations regarding the harm to Covered Plans if the 
exemption is not granted, please refer to the proposed exemption.
    PIMCO currently manages 451 ERISA plan institutional separate 
accounts, representing $170.35 billion in assets under management. 
82.3% of these 451 plan accounts, representing $155.15 billion in 
assets, invest in cash bonds and derivatives, whereas 17.7% of the 
accounts, representing $15.2 billion in assets, invest only in cash 
bonds. Because of the critical role played by derivatives, PIMCO 
believes that a Covered Plan that selects PIMCO to actively manage its 
fixed income portfolio pursuant to a broad set of guidelines, including 
derivatives, would be unlikely to retain PIMCO to run a cash bond 
strategy in the absence of the QPAM Exemption.
    Based on its understanding of the experience of other asset 
managers who did not receive a QPAM exemption, and who lost at least 
some plan business, PIMCO believes that it is likely that many of its 
plan clients whose guidelines permit derivatives would terminate their 
relationship if PIMCO could no longer trade in derivatives for those 
plans because PIMCO would be limited in its ability to manage a 
portfolio consistent with such clients' objectives. The Department 
notes that PIMCO was unable to provide a precise estimate of the size 
or significance of the plan assets affected.
    In the absence of an exemption, PIMCO represents that Covered Plans 
that choose to remain with PIMCO would have a circumscribed set of 
transactions available to them and could be prohibited from engaging in 
certain transactions that would be beneficial, such as hedging 
transactions using over-the-counter options or derivatives. 
Counterparties to such transactions are far more comfortable with the 
QPAM Exemption than any other existing exemption, and the 
unavailability of the QPAM Exemption could trigger a default or early 
termination. Even if other exemptions were acceptable to such 
counterparties, the associated transaction costs might well increase to 
reflect any lack of comfort with relying on another exemption.
    The PIMCO Affiliated QPAMs also have entered, and could in the 
future enter, into contracts for other transactions such as swaps, 
forwards, real estate financing and leasing on behalf of their ERISA 
clients. The Applicant represents that: (a) these and other strategies 
and investments require the PIMCO Affiliated QPAMs to meet the 
conditions of the QPAM Exemption; (b) the loss of the QPAM Exemption 
could disrupt the plans using each of these strategies, as 
counterparties to those transactions could seek to terminate their 
contracts, resulting in significant losses to their Covered Plan 
clients; and (c) 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 PIMCO no longer qualifies for relief 
under the QPAM Exemption.
    The Applicant submits that the question of which applicable 
exemption can be used is entirely at the discretion of the 
counterparty; if the counterparty is uncomfortable with the risks 
presented by other exemptions, it will simply terminate the ongoing 
transaction based on the plan's default (considered to occur if its 
investment manager is no longer able to use the QPAM Exemption). While 
PIMCO could argue that other exemptions apply, whether to accept that 
exemption is the decision of the counterparty, and the strongest 
counterparties generally will take the smallest legal risk on exemptive 
relief. PIMCO states that because the Department has never issued any 
guidance on the applicability of other exemptions to transactions 
involving cleared and over-the-counter swaps, PIMCO's Covered Plan 
clients could be at a disadvantage with respect to those transactions.
    PIMCO represents that the cost of terminating an investment is the 
difference between the bid and ask price on the instrument since, 
generally, these investments are terminated earlier than contemplated 
and on the counterparty's side of the market. Some investments, 
however, are more liquid than others (e.g., Treasury bonds generally 
are more liquid than foreign sovereign bonds, and equities generally 
are more liquid than swaps). Some of the strategies followed by PIMCO 
tend to be less liquid than certain other strategies and, thus, the 
transition costs would be significantly higher than, for example, 
liquidating a large cap equity portfolio. The Applicant believes that, 
depending on the strategy, the cost of liquidating assets in connection 
with transitioning clients to another manager could be significant.
    In the proposed exemption, PIMCO provided an assessment of the 
potential harm to Covered Plans if this exemption is not granted, both 
in the aggregate and with respect to a representative Covered Plan 
account, under orderly, stressed, and expedited scenarios in which all 
the Covered Plans decide to terminate their relationships with PIMCO. 
The Department refers readers to the proposed exemption for more detail 
regarding these harms.\9\
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    \9\ See 88 FR 18339-18340 (March 28, 2023).
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Department Note

    The Department notes that this exemption includes protective 
conditions that allow Covered Plans to continue to utilize the services 
of a PIMCO Affiliated QPAM if they determine that it is prudent to do 
so. The Department's primary objective in granting this exemption is to 
allow Covered Plans to avoid cost and disruption 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 PIMCO 
Affiliated QPAM is no longer able to rely on the relief provided by the 
QPAM Exemption due to the Conviction.

Written Comments

    In the proposed exemption, the Department invited all interested 
persons to submit written comments and/or requests for a public hearing 
with respect to the notice of proposed exemption by May 12, 2023. The 
Department received one written comment from the Applicant and no 
requests for a public hearing. The Department discusses the Applicant's 
comments below.

I. Comments From the Applicant

Comment 1: Exemption Period

    Section I(d) of the proposed exemption states: The term ``Exemption 
Period'' means May 17, 2023, through May 16, 2028.
    The Applicant requests that the Department extend the term of the 
exemption to ten years, which would cover the entire period of 
disqualification. As support for this request, the Applicant asserts 
that the PIMCO Affiliated QPAMs operate their business separately and 
autonomously from Allianz and its subsidiaries and

[[Page 42957]]

that Allianz and its subsidiaries, including AGI US, are not involved 
in any way in the PIMCO Affiliated QPAMs' investment processes. 
According to the Applicant, PIMCO's independence is embedded in PIMCO's 
governance and documented in written agreements between the PIMCO 
Affiliated QPAMs and Allianz that contemplate explicitly that the PIMCO 
Affiliated QPAMs will operate independently from any other Allianz 
asset management subsidiaries and, accordingly, function as competitors 
in the asset management marketplace. The Applicant maintains that the 
PIMCO Affiliated QPAMs' autonomy is demonstrated by the separation of 
all business functions, including investment management activities and 
control functions, and legal and compliance functions.
    The Applicant submits that a truncated period of relief would 
penalize PIMCO's Covered Plan clients for the isolated misconduct of 
three individuals employed by AGI US and that withholding exemptive 
relief under the circumstances would not render such conduct less 
likely, nor would a five-year initial term serve any administrative 
purpose. Put differently, even if the Department were to re-evaluate 
the propriety of exemptive relief after five years, the key 
requirements of the exemption could not provide any additional 
assurance, beyond that already provided by the complete separation 
between PIMCO and AGI US, that the Applicant's plan clients would be 
unaffected by future misconduct at AGI US.
    Regardless of the length of the term, the Applicant requests that 
the proposed exemption define the ``Exemption Period'' as a period 
beginning on the date of the AGI US Conviction. The Applicant states 
that because the AGI US Conviction will not occur on May 17, 2023, as 
originally scheduled, the definition of ``Exemption Period'' would not 
accurately reflect the date of the AGI US Conviction.
    Department's Response: The Department declines to extend the term 
of the exemption to ten years. The misconduct perpetrated within the 
Structured Products Group at AGI US was serious and directly involved 
ERISA-covered plan assets. The Department disagrees with the 
Applicant's characterization that the misconduct was ``the isolated 
acts of three individuals.'' As alleged in the Department of Justice's 
May 17, 2022 release and discussed earlier in this preamble, ``Much of 
this historic fraud was made possible because AGI's control environment 
was not designed to verify that [the three individuals] were telling 
the truth. Because AGI, a registered investment adviser, failed to 
provide meaningful oversight, [the three fund managers] were able to 
deceive investigators about the risks they were taking with their 
money.'' This exemption's five-year term and protective conditions 
reflect the Department's intent to protect Covered Plans that entrust 
retirement assets to a PIMCO Affiliated QPAM, despite the serious 
misconduct and supervisory failures of PIMCO's affiliate. Further, the 
limited term of this exemption provides the Department the opportunity 
to review the adherence by the PIMCO Affiliated QPAMs to the conditions 
established in this exemption before determining whether to extend the 
relief provided in this exemption for an additional term.
    The Department agrees with the Applicant's second requested change 
and accordingly has modified this exemption to provide that the 
exemption period begins on the date of the AGI US Conviction.

Comment 2: PIMCO Related QPAMs

    The Applicant requests the deletion of Section I(h), which defines 
the term ``PIMCO Related QPAMs'' and all references to PIMCO Related 
QPAMs throughout the exemption. The Applicant represents that no such 
entities exist or are expected to exist in the future, and, as such, no 
relief is necessary for PIMCO Related QPAMs.
    Department's Response: The Department agrees with the Applicant's 
requested change and has updated the exemption to remove all references 
to PIMCO Related QPAMs accordingly.

Comment 3: Participation in Misconduct

    Section III(a) of the proposed exemption states: The PIMCO 
Affiliated QPAMs and the PIMCO Related QPAMs (including their officers, 
directors, agents other than AGI US, and employees of such QPAMs) did 
not know or have reason to know of and did not participate in the 
Misconduct that is the subject of the AGI US Conviction. Further, any 
other party engaged on behalf of the PIMCO Affiliated QPAMs and PIMCO 
Related QPAMs who had responsibility for, or exercised authority in 
connection with the management of plan assets did not know nor have 
reason to know of and did not participate in the Misconduct that is the 
subject of the AGI Conviction. For purposes of this proposed exemption, 
``participate in'' refers not only to active participation in the 
Misconduct of AGI US that is the subject of the AGI US Conviction, but 
also to knowing approval of the Misconduct, or knowledge of such 
Misconduct without taking active steps to stop it, including reporting 
the Misconduct to the individual's supervisors and to the Board of 
Directors.
    The Applicant requests that this condition require reporting to the 
PIMCO Executive Committee because PIMCO does not have a formal Board of 
Directors. The Applicant states that the PIMCO Executive Committee 
determines PIMCO's strategic direction and oversees the broad scope of 
its operations. As such, requiring reporting to the Executive Committee 
would better reflect PIMCO's organizational structure.
    Department's Response: The Department agrees with the Applicant's 
request and has modified Section (III)(a) accordingly.

Comment 4: Compensation

    Section III(b) of the proposed exemption states: The PIMCO 
Affiliated QPAMs and the PIMCO Related QPAMs (including their officers, 
directors, and agents other than AGI US, and employees of such PIMCO 
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 
Misconduct that is the subject of the AGI US Conviction. Further, any 
other party engaged on behalf of the PIMCO Affiliated QPAMs and the 
PIMCO Related QPAMs who had responsibility for or exercised authority 
in connection with the management of plan assets did not receive direct 
compensation nor knowingly receive indirect compensation in connection 
with the Misconduct that is the subject of the AGI US Conviction.
    The Applicant requests that the prohibition on receiving direct 
compensation be limited to knowingly doing so. The Applicant states 
that, as the Department recognized by narrowing the prohibition on 
receipt of indirect compensation to knowing receipt, inadvertent 
receipt of compensation, whether direct or indirect, should not 
disqualify PIMCO from exemptive relief.
    Department's Response: The Department declines to make the 
Applicant's requested change. Throughout its application and comment 
letter, PIMCO emphasized the complete separation and independence 
between PIMCO and AGI US--not only organizationally but also with 
respect to their investment processes. Before submitting this comment, 
the Applicant

[[Page 42958]]

had not mentioned that the PIMCO Affiliated QPAMs may have received 
direct compensation in connection with the criminal misconduct of AGI 
US. Further, this comment does not provide any detail on the type of 
direct compensation that may have been received. For these reasons, the 
Department declines to make the requested change.

Comment 5: Employment of Individuals Who Participated in the Misconduct

    Section III(c) of the proposed exemption states: The PIMCO 
Affiliated QPAMs do not currently and will not in the future employ or 
knowingly engage any of the individuals who participated in any of the 
Misconduct, or any individual who was employed in AGI US's Structured 
Products Group from January 1, 2014, through March 31, 2020.
    The Applicant requests that there be no prohibition on the 
employment of any individual who was employed by AGI US's Structured 
Products Group, other than the three individuals who participated in 
the misconduct. The Applicant states that the Department of Justice 
made clear that only three individuals were involved in the misconduct 
that was the subject of the AGI US Conviction and the wrongdoing of 
these three individuals should not be imputed to the entire Structured 
Products Group, including, for example, support staff, secretaries, and 
information technology specialists. As a practical matter, PIMCO does 
not have and cannot gain access to employment records for AGI US and, 
therefore, is not able to verify compliance with this condition unless 
the former AGI US employee indicates such employment on his or her 
resume.
    The Applicant submits that prohibiting employment by the PIMCO 
Affiliated QPAMs of the three individuals identified by the Department 
of Justice as having participated in the misconduct adequately protects 
Covered Plans and their participants from any influence by the 
wrongdoers, and a far broader prohibition affects a hardship on 
innocent employees.
    Department's Response: The Department declines to make the 
Applicant's requested change in part. The Department will modify 
Section III(c) by deleting the reference to ``any individual who was 
employed in AGI US's Structured Products Group from January 1, 2014, 
through March 31, 2020.'' The condition now states: The PIMCO 
Affiliated QPAMs do not currently and will not in the future employ or 
knowingly engage any of the individuals who participated in any of the 
Misconduct, or any of the individuals who were referenced in the DOJ 
Statement of Facts as having known about the Misconduct without 
reporting the Misconduct. The PIMCO QPAMs should make every effort to 
ensure that no employees who participated in the Misconduct, including 
anyone who knew about the Misconduct and failed to report it, is 
employed by a PIMCO Affiliated QPAM and use every reasonably available 
resource to identify these employees, including during PIMCO's hiring 
processes.

Comment 6: Direction of Investment Fund

    Section III(d) of the proposed exemption states: At all times 
during the Exemption Period, no PIMCO 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 PIMCO Affiliated QPAM in reliance on PTE 84-14 or with 
respect to which a PIMCO Affiliated QPAM has expressly represented to 
an ERISA-covered plan or IRA with assets invested in such ``investment 
fund'' that it qualifies as a QPAM or relies on the QPAM class 
exemption, to enter into any transaction with AGI US or to engage AGI 
US 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.
    The Applicant requests that the term ``investment fund'' be 
replaced with the term ``Covered Plan'' because the description of 
``investment fund'' in the proposed exemption duplicates the definition 
of Covered Plan, and the use of the term Covered Plan would be clearer 
and less ambiguous while achieving the same result.
    Department's Response: The Department does not agree that the 
requested change provides any additional clarity and, therefore, is not 
making the requested change.

Comment 7: Conditions Relating to AGI US

    Section III(g) of the proposed exemption states: Other than with 
respect to employee benefit plans maintained or sponsored for its own 
employees or the employees of an affiliate, AGI US 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 ERISA-covered plan 
and IRA assets; provided, however, that PIMCO will not be treated as 
violating the conditions of this exemption solely because AGI US acted 
as an investment advice fiduciary within the meaning of ERISA Section 
3(21)(A)(ii) or Code Section 4975(e)(3)(B).
    Section III(n) of the proposed exemption provides: AGI US complies 
in all material respects with the requirements imposed by a U.S. 
regulatory authority in connection with the AGI US Conviction.
    The Applicant requests that these provisions be deleted because 
PIMCO is entirely separate from the Allianz entities and, as such, 
PIMCO has no control whatsoever over AGI US and could do nothing to 
ensure these conditions are met. The Applicant submits that imposing 
conditions upon PIMCO over which PIMCO has no control is not protective 
of Covered Plans and their participants, nor does it further their 
interests. Conversely, imposing a condition that is entirely outside of 
PIMCO's control could potentially harm plans if AGI US does not comply, 
as PIMCO would have no way to remedy the breach but would lose 
advantageous exemptive relief, nonetheless.
    If the Department declines to delete the conditions, the Applicant 
requests that they be narrowed to actions within PIMCO's control--i.e., 
that PIMCO will not contribute to any actions by AGI US as a fiduciary 
or to any failure by AGI US to comply with regulatory requirements.
    Department's Response: The Department declines to make the 
Applicant's requested changes. The Department notes that Allianz is the 
parent entity of both PIMCO and AGI US and should ensure that AGI US 
complies with the requirements imposed by a U.S. regulatory authority 
in connection with the AGI US Conviction.

Comment 8: Timing of Policies

    Section III(h)(1) of the proposed exemption states: Within 180 
calendar days of the effective date of this five-year exemption, each 
PIMCO Affiliated QPAM must immediately develop, maintain, implement, 
and follow written policies and procedures (the Policies).
    The Applicant requests the deletion of the term ``immediately.'' 
Because the Proposal expressly allows 180 days for the development and 
implementation of the Policies, the Applicant assumes the contradictory 
requirement to do so immediately was inadvertent.
    Department's Response: The Department agrees with the Applicant's 
request and has modified Section III(h)(1) accordingly.

[[Page 42959]]

Comment 9: Misrepresentation to Regulators

    Section III(h)(1)(v) of the proposed exemption states: To the best 
of the PIMCO Affiliated QPAM's knowledge at the time, the PIMCO 
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.
    The Applicant submits that the clause prohibiting material 
misrepresentations and omission of material information in 
communications with regulators is duplicative of the immediately 
preceding condition, which requires all filings and statements to 
regulators to be ``materially accurate and complete.'' While Section 
III(h)(1)(iv) concerns communications with regulators, Section 
III(h)(1)(v) should be devoted solely to communications with Covered 
Plans.
    The Applicant requests that Section III(h)(1)(v) be modified to 
read: To the best of the PIMCO Affiliated QPAM's knowledge at the time, 
the PIMCO Affiliated QPAM does not make material misrepresentations or 
omit material information in its communications with Covered Plans.
    Department's Response: The Department declines to make the 
requested change. Mandating that the PIMCO Affiliated QPAMs not make 
material misrepresentations or omit material information in their 
communications to regulators is an important protection for Covered 
Plans and the Department is not persuaded that the PIMCO Affiliated 
QPAMs will be unable to comply with Sections III(h)(1)(iv) and (v) as 
they are currently written.

Comment 10: Violations and Failures To Comply

    Section III(h)(1)(vii) of the proposed exemption states, in 
pertinent part: 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.
    The Applicant requests clarification that any violation or failure 
to comply must be reported to the head of compliance and the General 
Counsel of the relevant PIMCO Affiliated QPAM, rather than the relevant 
line of business. Currently, these are the Chief Compliance Officer and 
General Counsel of PIMCO LLC. The Applicant states that this change 
would better reflect PIMCO's organizational structure, which generally 
does not have separate general counsels or chief compliance officers 
for different lines of business.
    Department's Response: The Department agrees with the Applicant's 
requested change and has modified Section III(h)(1)(vii) accordingly.

Comment 11: Audit Periods

    Section III(i)(1) of the proposed exemption states: Each PIMCO 
Affiliated QPAM must submit to an audit conducted every two years by an 
independent auditor who has been prudently selected and has appropriate 
technical training and proficiency with ERISA and the Code to evaluate 
the adequacy of the Policies and Training conditions described herein 
and each PIMCO Affiliated QPAM's compliance with them. The audit 
requirement must be incorporated into the Policies. Each audit must 
cover the preceding consecutive twelve (12) month period. The first 
audit under this exemption must cover the period from May 17, 2023, 
through May 16, 2024, and must be completed by November 16, 2024. The 
second audit must cover the period from May 17, 2025, through May 16, 
2026, and must be completed by November 16, 2026. The third audit must 
cover the period from May 17, 2027, through May 16, 2028, and must be 
completed by November 16, 2028.
    The Applicant submits that the dates for the audit cycles should be 
calculated from the date of the AGI US Conviction, rather than from May 
17, 2023.
    Department's Response: The Department agrees with the Applicant's 
requested change and has modified Section III(i)(1) accordingly.

Comment 12: Audit Report

    Section III(i)(5) and Section III(i)(7) of the proposed exemption 
state, in pertinent part:
    (5) For each audit, on or before the end of the relevant period 
described in Section III(i)(1) for completing the audit, the auditor 
must issue a written report (the Audit Report) to PIMCO and the PIMCO 
Affiliated QPAM to which the audit applies that describes the 
procedures performed by the auditor during its examination. . . .
    (7) With respect to each Audit Report, the general counsel or one 
of the three most senior executive officers of PIMCO or the Affiliated 
QPAM with respect to which the Audit Report applies must certify in 
writing and under penalty of perjury that (a) the officer has reviewed 
the Audit Report and this exemption; and (b) the PIMCO Affiliated QPAM 
has addressed, corrected or remedied any instance of noncompliance or 
inadequacy or has an appropriate written plan in place to address any 
instance of noncompliance or 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 the certification are adequate to ensure 
compliance with the exemption conditions and with the applicable 
provisions of ERISA and the Code.
    The Applicant requests clarification to reflect that the PIMCO 
Affiliated QPAMs comprise the universe of managers that would utilize 
this exemption. By their terms, these conditions assume that PIMCO is a 
separate entity from the Affiliated QPAMs, which is not factually 
accurate because PIMCO is currently the sole Affiliated QPAM. Thus, the 
Applicant requests that the Department revise the phrases ``PIMCO and 
the PIMCO Affiliated QPAM'' and ``PIMCO or the PIMCO Affiliated QPAM'' 
to ``the PIMCO Affiliated QPAM.''
    Department's Response: The Department accepts the Applicant's 
clarification and affirms that the PIMCO Affiliated QPAMs comprise the 
universe of managers that would utilize this exemption.

Comment 13: Certification of Audit Report

    Section III(i)(8) of the proposed exemption states: The PIMCO Board 
of Directors is provided with a copy of each Audit Report, and a senior 
executive officer with a direct reporting line to the highest-ranking 
legal compliance officer of PIMCO must review the Audit Report for each 
PIMCO Affiliated QPAM and certify in writing under penalty of perjury 
that such officer has reviewed the Audit Report.
    The Applicant requests that this condition require reporting to the 
PIMCO Executive Committee, rather than the Board of Directors. In 
addition, the Applicant requests that this condition require 
certification of the Audit Report by a senior executive officer, 
without the requirement that the senior executive officer report to the

[[Page 42960]]

highest-ranking legal compliance officer of PIMCO. The Applicant states 
that the term ``senior executive officer'' in this condition is 
undefined and, while there are many experienced personnel who report to 
PIMCO's Chief Compliance Officer, they are not necessarily the most 
senior executive officers at the firm in terms of overall managerial 
responsibility.
    Department's Response: The Department declines to make the 
Applicant's requested change, in part. The Department agrees that the 
audit report should be provided to the PIMCO Executive Committee, 
rather than the Board of Directors. The Department, however, disagrees 
with the Applicant's other requested change. While this condition 
requires that the designated audit-certifying senior executive officer 
must have a direct reporting line to the highest-ranking legal 
compliance officer of PIMCO, such designated officer does not need to 
be one of the most senior executive officers at the firm in terms of 
overall managerial responsibility.

Comment 14: Compliance With ERISA and the Code

    Section III(j)(1) of the proposed exemption states that the PIMCO 
Affiliated QPAMs will agree and warrant: To comply with ERISA and the 
Code, as applicable with respect to such Covered Plan; to refrain from 
engaging in prohibited transactions that are not otherwise exempt (and 
to promptly correct any inadvertent prohibited transactions); and to 
comply with the standards of prudence and loyalty set forth in ERISA 
Section 404, with respect to each such ERISA-covered plan and IRA (to 
the extent that ERISA Section 404 is applicable).
    The Applicant requests the deletion of the term ``inadvertent'' 
with respect to the correction of prohibited transactions, claiming 
that limiting the obligation to correct prohibited transactions to only 
those that are inadvertent would not serve the interest of plans. The 
Applicant states that the PIMCO Affiliated QPAMs would endeavor to 
promptly correct any prohibited transaction, whether or not 
inadvertent, and are prepared to agree and warrant to that effect to 
Covered Plans.
    Department's Response: The Department accepts the Applicant's 
requested change and has modified Section III(j)(1) accordingly.

Comment 15: Indemnification

    Section III(j)(2) of the proposed exemption states that the PIMCO 
Affiliated QPAMs will agree and warrant: To indemnify and hold harmless 
the Covered Plan for any actual losses resulting directly from the 
PIMCO 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 PIMCO 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 PIMCO 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 because of PIMCO's 
inability to rely upon the relief in the QPAM Exemption.
    The Applicant requests that the Department modify this condition so 
that only a material breach of contract by a PIMCO Affiliated QPAM will 
trigger the indemnification provision. The Applicant states that a 
nonmaterial breach of a contract, such as an ancillary provision that 
does not affect the fundamental aspects of the contract, typically does 
not provide a basis for contractual remedies. Mandating indemnification 
for nonmaterial breaches by a QPAM would invite myriad claims arising 
over minor or technical aspects of the contract, including claims for 
consequential or punitive damages, which are commonly excluded from 
most agreements, but which the QPAMs nonetheless would be obligated to 
defend, and which would expend valuable resources that would be better 
utilized in serving plans. The Applicant urges the Department to limit 
the meaning of actual losses to losses and related costs directly 
arising from unwinding and excise tax exposure. The Applicant argues 
that expanding the definition of ``actual losses'' beyond direct costs 
could encourage plans to seek indemnification for indirect and 
incidental losses only tenuously or remotely arising from the QPAM's 
actions.
    Department's Response: The Department declines to make the 
Applicant's requested change. The Department notes that this condition 
has been included in several previously granted QPAM individual 
exemptions, and the Department is not aware of any instances of the 
harm that has been identified by the Applicant in this comment.

Comment 16: Exemption Review

    Section III(m)(2)(i) of the proposed exemption states: The annual 
Exemption Review includes a review by the Compliance Officer of: (A) 
the PIMCO Affiliated QPAM's compliance with and effectiveness of the 
Policies and Training; (B) 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; (C) the most 
recent Audit Report issued pursuant to this exemption; (D) any material 
change in the relevant business activities of the PIMCO Affiliated 
QPAMs; and (E) 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 PIMCO Affiliated QPAMs.
    The Applicant requests that the above description be modified to 
reflect that the Compliance Officer must review ``any material error, 
recommendation, and compliance failure identified in the'' Audit 
Report. The Applicant submits that this modification would be helpful 
to clarify that the focus of the Compliance Officer's review of the 
Audit Report should be the correction of errors and compliance failures 
and the implementation of recommendations, rather than the entirety of 
the Audit Report generally.
    Department's Response: The Department agrees with the Applicant's 
request and has modified Section III(m)(2)(i) accordingly.

Comment 17: Timing of Exemption Review

    Section III(m)(2)(iii) of the proposed exemption states, in 
relevant part: The annual Exemption Review, including the Compliance 
Officer's written Report, must be completed within 90 calendar days 
following the end of the period to which it relates. The annual 
Exemption Reviews under this exemption must cover the following 
periods: May 17, 2023, through May 16, 2024; May 17, 2024, through May 
16, 2025; May 17, 2025, through May 16, 2026; May 17, 2026, through May 
16, 2027; May 17, 2027, through May 16, 2028.
    The Applicant requests that the dates for the Exemption Review 
cycles be calculated from the date of the AGI US Conviction, rather 
than from May 17, 2023.
    Department's Response: The Department accepts the Applicant's 
requested change and has modified Section III(m)(2)(iii) to calculate 
the

[[Page 42961]]

Exemption Review periods from the date of the AGI US Conviction.

Comment 18: Summary Policies

    Section III(q) of the proposed exemption states: Within 60 calendar 
days after the effective date of this exemption, each PIMCO 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 PIMCO 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 180 
calendar days following the end of the calendar year during which the 
Policies were changed. 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.
    The Applicant requests that this condition allow 240 days after the 
effective date of the exemption to notify Covered Plans of their right 
to Policies or Summary Policies. Pursuant to Section III(h), the PIMCO 
Affiliated QPAMs have 180 days to develop and implement the Policies. 
The Applicant states that the notification deadline should occur after 
the development period for the Policies because notifying plans of 
their right to Policies that do not yet exist would serve only to 
confuse them. The Applicant requests an additional 60 days after the 
Policies have been drafted to prepare and send notices.
    Department's Response: The Department declines to make the 
Applicant's requested change and notes that this condition only 
requires the PIMCO Affiliated QPAMs to inform Covered Plans that they 
have the right to request and receive a copy of the Policies or Summary 
Policies. The Department believes that the PIMCO Affiliated QPAMs can 
accomplish this task within the timeframe set out in this condition.

Comment 19: Typographical Issues

    The Applicant also requests the correction of certain typographical 
issues in the proposed exemption.
    Department's Response: The Department agrees with all of the 
Applicant's typographical correction requests and has incorporated them 
into this exemption.
    The complete application file (D-12075) is available for public 
inspection in the Public Disclosure Room of the Employee Benefits 
Security Administration, Room N-1515, U.S. Department of Labor, 200 
Constitution Avenue NW, Washington, DC 20210. For a more complete 
statement of the facts and representations supporting the Department's 
decision to grant this exemption, please refer to the notice of 
proposed exemption that the Department published in the Federal 
Register on March 28, 2023 (88 FR 18333).

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) does not relieve a fiduciary or other party 
in interest from certain requirements of other ERISA provisions, 
including but not limited to 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 plan's participants and 
beneficiaries and in a prudent fashion in accordance with ERISA Section 
404(a)(1)(B).
    (2) As required by ERISA Section 408(a), the Department hereby 
finds that the exemption is: (a) administratively feasible; (b) in the 
interests of Covered Plans and their participants and beneficiaries; 
and (c) protective of the rights of the Covered Plan's participants and 
beneficiaries.
    (3) This exemption is supplemental to, and not in derogation of, 
any other ERISA provisions, 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 for determining whether the transaction is in fact a 
prohibited transaction.
    (4) The availability of this exemption is subject to the express 
condition that the material facts and representations contained in the 
application accurately describe all material terms of the transactions 
that are the subject of the exemption and are true at all times.
    Accordingly, after considering the entire record developed in 
connection with the Applicant's exemption application and the 
Applicant's comments on the proposed exemption, the Department has 
determined to grant the following exemption under the authority of 
ERISA Section 408(a) in accordance with the Department's exemption 
procedures set forth in 29 CFR part 2570, subpart B: \10\
---------------------------------------------------------------------------

    \10\ 76 FR 66637, 66644 (October 27, 2011).
---------------------------------------------------------------------------

Exemption

Section I. Definitions

    (a) The term ``AGI US'' means Allianz Global Investors U.S. LLC.
    (b) The term ``AGI US Conviction'' means the judgment of conviction 
against AGI US for one count of securities fraud in violation of Title 
15, United States Code, Sections 78j(b) and 78ff, Title 17, Code of 
Federal Regulations, Section 240.10b-5, and Title 18, United States 
Code, Section 2, entered in the District Court for the U.S. District 
Court Southern District of New York (the District Court) case number 
1:22-cr-00279-CM.
    (c) 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 PIMCO 
Affiliated QPAM relies on PTE 84-14, or with respect to which a PIMCO 
Affiliated QPAM (or any PIMCO affiliate) has expressly represented that 
the manager qualifies as a QPAM or relies on the QPAM class exemption 
(PTE 84-14 or the QPAM Exemption).\11\ A Covered Plan does not include 
an ERISA-covered plan or IRA to the extent the PIMCO 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.
---------------------------------------------------------------------------

    \11\ 49 FR 9494 (March 13, 1984), as corrected at 50 FR 41430, 
(Oct. 10, 1985), as amended at 70 FR 49305 (Aug. 23, 2005), and as 
amended at 75 FR 38837 (July 6, 2010).
---------------------------------------------------------------------------

    (d) The term ``Exemption Period'' means the period of five years 
that begins on the date of the AGI US Conviction.
    (e) The term ``Misconduct'' means the conduct described in the 
Statement of Facts in case number 1:22-cr-00279-CM which indicated that 
beginning in at least 2014 and continuing through March 2020, AGI US 
engaged in a scheme to defraud investors in a series of private 
investment funds (the Structured Alpha Funds) that at their height had 
over $11 billion in assets under management.
    (f) The term ``PIMCO'' means Pacific Investment Management Company 
LLC.
    (g) The term ``PIMCO 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 ERISA-
covered plans and/or IRAs that it qualifies as a QPAM, and

[[Page 42962]]

with respect to which PIMCO is a current or future ``affiliate'' (as 
defined in Section VI(d)(1) of PTE 84-14). For the purposes of this 
exemption, the term ``PIMCO Affiliated QPAMs'' does not include AGI US, 
or entities that are under the control of AGI US. The term only 
includes entities that are 100 percent owned, directly or indirectly, 
by PIMCO.

Section II. Covered Transactions

    Under this exemption, the PIMCO Affiliated 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 Conviction, as defined in Section I(b), during the 
Exemption Period, as defined in Section I(c) provided that the 
conditions set forth in Section III below are satisfied.

Section III. Conditions

    (a) The PIMCO Affiliated QPAMs (including their officers, 
directors, agents other than AGI US, and employees of such QPAMs) did 
not know or have reason to know of and did not participate in the 
Misconduct that is the subject of the AGI US Conviction. Further, any 
other party engaged on behalf of the PIMCO Affiliated QPAMs who had 
responsibility for, or exercised authority in connection with the 
management of plan assets did not know nor have reason to know of and 
did not participate in the Misconduct that is the subject of the AGI 
Conviction. For purposes of this proposed exemption, ``participate in'' 
refers not only to active participation in the Misconduct of AGI US 
that is the subject of the AGI US Conviction, but also to knowing 
approval of the Misconduct, or knowledge of such Misconduct without 
taking active steps to stop it, including reporting the Misconduct to 
the PIMCO Executive Committee.
    (b) The PIMCO Affiliated QPAMs (including their officers, 
directors, and agents other than AGI US, and employees of such PIMCO 
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 
Misconduct that is the subject of the AGI US Conviction. Further, any 
other party engaged on behalf of the PIMCO Affiliated QPAMs who had 
responsibility for or exercised authority in connection with the 
management of plan assets did not receive direct compensation nor 
knowingly receive indirect compensation in connection with the 
Misconduct that is the subject of the AGI US Conviction;
    (c) The PIMCO Affiliated QPAMs do not currently and will not in the 
future employ or knowingly engage any of the individuals who 
participated in any of the Misconduct, or any of the individuals who 
were referenced in the DOJ Statement of Facts as having known about the 
Misconduct without reporting the Misconduct. The PIMCO QPAMs must make 
every reasonable effort to ensure that no employees who participated in 
the Misconduct, including any employees who knew about the Misconduct 
and failed to report it, are employed by a PIMCO Affiliated QPAM. This 
involves using every reasonably available resource to identify these 
employees;
    (d) At all times during the Exemption Period, no PIMCO 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 PIMCO Affiliated QPAM in reliance 
on PTE 84-14 or with respect to which a PIMCO Affiliated QPAM has 
expressly represented to an ERISA-covered plan or IRA with assets 
invested in such ``investment fund'' that it qualifies as a QPAM or 
relies on the QPAM class exemption, to enter into any transaction with 
AGI US or to engage AGI US 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 PIMCO Affiliated QPAM to satisfy Section I(g) 
of PTE 84-14 arose solely from the AGI US Conviction;
    (f) A PIMCO Affiliated 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: (i) further the Misconduct that is the subject 
of the AGI US Conviction; or (ii) cause the PIMCO Affiliated QPAM or 
its affiliates to directly or indirectly profit from the Misconduct 
that is the subject of the AGI US Conviction;
    (g) Other than with respect to employee benefit plans maintained or 
sponsored for its own employees or the employees of an affiliate, AGI 
US 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 ERISA-covered plan and IRA assets; provided, however, that PIMCO 
will not be treated as violating the conditions of this exemption 
solely because AGI US 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) Within 180 calendar days after the effective date of this 
five-year exemption, each PIMCO Affiliated QPAM must develop, maintain, 
implement, and follow written policies and procedures (the Policies) 
that must require, and be reasonably designed to ensure that:
    (i) The asset management decisions of the PIMCO Affiliated QPAM are 
conducted independently of the corporate management and business 
activities of AGI US;
    (ii) The PIMCO 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 PIMCO 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 PIMCO 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 the time they are made;
    (v) To the best of the PIMCO Affiliated QPAM's knowledge at the 
time, the PIMCO 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 PIMCO 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 by the PIMCO Affiliated 
QPAM as soon as reasonably possible upon discovery, or as soon after 
the PIMCO Affiliated 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

[[Page 42963]]

Counsel (or their functional equivalent) of the PIMCO Affiliated QPAM 
that engaged in the violation or failure, and the independent auditor 
responsible for reviewing compliance with the Policies. A PIMCO 
Affiliated QPAM will not be treated as having failed to develop, 
implement, maintain, or follow the Policies if it corrects any instance 
of noncompliance as soon as reasonably possible upon discovery, or as 
soon as reasonably possible after the PIMCO Affiliated QPAM reasonably 
should have known of the noncompliance (whichever is earlier), and if 
it adheres to the reporting requirements set forth in this subparagraph 
(vii);
    (2) Within 180 calendar days after the effective date of the 
exemption, each PIMCO Affiliated QPAM must develop, maintain, adjust 
(to the extent necessary), and implement a training program during the 
Exemption Period that will be conducted at least annually for all 
relevant PIMCO Affiliated QPAM's asset/portfolio management, trading, 
legal, compliance, and internal audit personnel (the Training). 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 selected 
and has appropriate technical training and proficiency with ERISA and 
the Code to perform the tasks required by this exemption;
    (iii) Be verified through in-training knowledge checks, 
``graduation'' tests, and/or other technological tools designed to 
confirm that personnel fully and in good faith participate in the 
Training;
    (i)(1) Each PIMCO Affiliated QPAM must submit to an audit conducted 
every two years by an independent auditor who has been prudently 
selected and has appropriate technical training and proficiency with 
ERISA and the Code to evaluate the adequacy of the Policies and 
Training conditions described herein and each PIMCO Affiliated QPAM's 
compliance with them. The audit requirement must be incorporated into 
the Policies. Each audit must cover the preceding consecutive twelve 
(12) month period. The first audit under this exemption must cover the 
twelve-month period beginning on the date of the AGI US Conviction The 
second audit must cover the twelve-month period beginning two years 
from the date of the AGI US Conviction The third audit must cover the 
twelve-month period beginning four years from the date of the AGI US 
Conviction. Each audit must be completed no later than six (6) months 
after the conclusion of the period to which the audit relates.
    (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, the PIMCO Affiliated QPAMs 
will grant the auditor unconditional access to their 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 PIMCO 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 PIMCO Affiliated QPAM's operational compliance with the 
Policies and Training conditions. In this regard, the auditor must 
test, a sample of each PIMCO Affiliated QPAMs' transactions involving 
Covered Plans that is sufficient in size and nature to afford the 
auditor a reasonable basis to determine the PIMCO Affiliated QPAM's 
operational compliance with the Policies and Training conditions;
    (5) For each audit, on or before the end of the relevant period 
described in Section III(i)(1) for completing the audit, the auditor 
must issue a written report (the Audit Report) to the PIMCO Affiliated 
QPAM to which the audit applies that describes the procedures performed 
by the auditor during its examination. The auditor, at its discretion, 
may issue a single consolidated Audit Report that covers all of the 
PIMCO Affiliated QPAMs. The Audit Report must include the auditor's 
specific determinations regarding: (i) the adequacy of each PIMCO 
Affiliated QPAM's Policies and Training and compliance with the 
Policies and Training conditions; the need, if any, to strengthen such 
Policies and Training; and any instance of each PIMCO Affiliated QPAM's 
noncompliance with the written Policies and Training conditions 
described in Section III(h) above. The PIMCO Affiliated QPAM must 
promptly address any identified noncompliance 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 PIMCO Affiliated QPAM's 
Policies and Training. Any action taken, or the plan of action to be 
taken, by the respective PIMCO Affiliated QPAM must be included in an 
addendum to the Audit Report (and such addendum must be completed 
before the certification described in Section III(i)(7) below). In the 
event the plan of action that is developed to address the auditor's 
recommendation regarding the adequacy of the Policies and Training is 
not completed by the time of submission of the Audit Report, the 
following period's Audit Report must state whether the plan was 
satisfactorily completed. Any determination by the auditor that the 
respective PIMCO Affiliated QPAM has implemented, maintained, and 
followed sufficient Policies and a 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 PIMCO Affiliated QPAM has 
complied with the requirements under this subparagraph must be based on 
evidence that such PIMCO Affiliated QPAM has implemented, maintained, 
and followed the Policies and Training conditions required by this 
exemption. Furthermore, the auditor must not solely rely on the Annual 
Report created by the compliance officer (the Compliance Officer), 
described in Section III(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 III(i)(3) and (4) above; and 
(ii) The adequacy of the most recent Annual Review described in Section 
III(m);
    (6) The auditor must notify the respective PIMCO 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 PIMCO Affiliated 
QPAM with respect to which the Audit Report applies must certify in 
writing and under penalty of

[[Page 42964]]

perjury that (a) the officer has reviewed the Audit Report and this 
exemption; and (b) the PIMCO Affiliated QPAM has addressed, corrected 
or remedied any instance of noncompliance or inadequacy or has an 
appropriate written plan in place to address any instance of 
noncompliance or 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 the certification are adequate to ensure compliance with 
the exemption conditions and with the applicable provisions of ERISA 
and the Code;
    (8) The PIMCO Executive Committee is provided with a copy of each 
Audit Report, and a senior executive officer with a direct reporting 
line to the highest-ranking legal compliance officer of PIMCO must 
review the Audit Report for each PIMCO Affiliated QPAM and certify in 
writing under penalty of perjury that such officer has reviewed the 
Audit Report;
    (9) Each PIMCO Affiliated QPAM provides its certified Audit Report 
by electronic mail to the Department by submitting it to [email protected]. 
This submission must take place no later than thirty (30) days after 
completion of the Audit Report. The Audit Report will be made part of 
the public record regarding this exemption, which is available for 
publication inspection and copying. Furthermore, each PIMCO Affiliated 
QPAM must make its Audit Report unconditionally available for 
examination by electronic means or otherwise upon request by any duly 
authorized employee or representative of the Department, other relevant 
regulators, and any fiduciary of a Covered Plan;
    (10) Each PIMCO Affiliated QPAM and the auditor must submit to OED 
any engagement agreement(s) entered into pursuant to the engagement by 
the auditor under this exemption no later than sixty (60) calendar days 
after the execution of any such engagement agreement;
    (11) The auditor must provide the Department, upon request, for 
inspection and review, access to all the workpapers created and 
utilized during the audit, provided such access and inspection is 
otherwise permitted by law; and
    (12) PIMCO must notify the Department of a change in the 
independent auditor no later than sixty (60) calendar days 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 PIMCO;
    (j) Throughout the Exemption Period, with respect to any 
arrangement, agreement, or contract between a PIMCO Affiliated QPAM and 
a Covered Plan, the PIMCO Affiliated QPAM agrees and warrants:
    (1) To comply with ERISA and the Code, as applicable with respect 
to such Covered Plan; to refrain from engaging in prohibited 
transactions that are not otherwise exempt (and to promptly correct any 
prohibited transactions); and to comply with the standards of prudence 
and loyalty set forth in ERISA Section 404 with respect to each such 
ERISA-covered plan and IRA (to the extent that ERISA Section 404 is 
applicable);
    (2) To indemnify and hold harmless the Covered Plan for any actual 
losses resulting directly from the PIMCO Affiliated QPAM's violation of 
ERISA's fiduciary duties, as applicable, and 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 PIMCO 
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 PIMCO Affiliated QPAM's violations, which include: (i) actual 
losses include losses and related costs arising from unwinding 
transactions with third parties and from transitioning Plan assets to 
an alternative asset manager; and (ii) costs associated with any 
exposure to excise taxes under Code Section 4975 because of the PIMCO 
Affiliated 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 PIMCO 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 PIMCO Affiliated QPAM with 
respect to any investment in a separately managed account or pooled 
fund subject to ERISA and managed by the PIMCO Affiliated 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 initial effective 
date of this exemption, the adverse consequences must relate to a lack 
of liquidity of the underlying assets, valuation issues, or regulatory 
reasons that prevent the fund from promptly redeeming an ERISA-covered 
plan's or IRA's investment, and 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 the 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 the liability of the PIMCO 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 PIMCO and its affiliates, or damages arising from acts 
outside the control of the PIMCO Affiliated QPAM; and
    (7)(a) Each PIMCO Affiliated QPAM must provide a notice of its 
obligations under this Section III(j) to each sponsor or beneficial 
owner of a Covered Plan which is a client as of the Effective Date by a 
date that is 90 days after the Effective Date. For all other Covered 
Plans that become clients between the Effective Date and a date that is 
120 days after the Effective Date, each sponsor or beneficial owner of 
such Covered Plans must be provided with a notice of the obligations 
under this section by a date that is 180 days after the Effective Date. 
All prospective sponsors and beneficial owners of Covered Plans that 
enter into a written investment management agreement with a PIMCO 
Affiliated QPAM after a date that is 120 days after the Effective Date 
must receive a copy of the notice of the obligations under this Section 
III(j) before, or contemporaneously with, the Covered Plan's receipt of 
a written investment management or comparable agreement from the PIMCO 
Affiliated QPAM. The notices may be delivered

[[Page 42965]]

electronically (including by an email that has a link to a website that 
contains the documents required by this section). Notwithstanding the 
above, a PIMCO Affiliated QPAM will not violate this condition solely 
because a Covered Plan refuses to sign an updated investment management 
agreement.
    (k) Within 90 days after the effective date of this exemption, each 
PIMCO 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 AGI US Conviction results in a failure to meet a 
condition in the QPAM Exemption to each sponsor or beneficial owner of 
a Covered Plan that has entered into a written investment management 
agreement with a PIMCO Affiliated QPAM, or the sponsor of an investment 
fund in any case where a PIMCO Affiliated QPAM acts as a sub-adviser to 
the investment fund in which such Covered Plan invests. For all other 
Covered Plans that become clients between the Effective Date and a date 
that is 120 days after the Effective Date, each sponsor or beneficial 
owner of such Covered Plans is provided the documents described in this 
Section III(k) by a date that is 180 days after the Effective Date. All 
sponsors or beneficial owners of prospective Covered Plans that enter 
into a written investment management or comparable agreement with a 
PIMCO Affiliated QPAM after a date that is 120 days after the Effective 
Date 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 investment management agreement from the PIMCO 
Affiliated QPAM. The notices may be delivered electronically (including 
by an email that has a link to a website that contains the documents 
required by this section). Notwithstanding the above, a PIMCO 
Affiliated QPAM will not violate the condition solely because a Covered 
Plan refuses to sign an updated investment management agreement.
    (l) The PIMCO 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 AGI US 
Conviction. If an affiliate of PIMCO's (as defined in Section VI(d) of 
PTE 84-14) is convicted of a crime described in Section I(g) of PTE 84-
14 (other than the Conviction) during the Exemption Period, relief in 
this exemption would terminate immediately;
    (m)(1) Within 60 calendar days after the effective date of this 
exemption, each PIMCO 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. Notwithstanding the above, no person, including any person 
referenced in the Statement of Facts underlying the AGI US Conviction, 
who knew of, or should have known of, or participated in, any of the 
Misconduct, 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. The 
following conditions must be met with respect to the Compliance 
Officer:
    (i) The Compliance Officer must be a professional who has extensive 
experience with and knowledge of the regulation of financial services 
and products, including under ERISA and the Code; and
    (ii) The Compliance Officer must have a direct reporting line to 
the highest-ranking corporate officer in charge of compliance for the 
applicable PIMCO Affiliated QPAM.
    (2) With respect to the Exemption Review, the following conditions 
must be met:
    (i) The annual Exemption Review includes a review by the Compliance 
Officer of: (A) the PIMCO Affiliated QPAM's compliance with and 
effectiveness of the Policies and Training; (B) 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; (C) any 
material error, recommendation, and compliance failure identified in 
the most recent Audit Report issued pursuant to this exemption; (D) any 
material change in the relevant business activities of the PIMCO 
Affiliated QPAMs; and (E) 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 PIMCO Affiliated QPAMs;
    (ii) The Compliance Officer must prepare a written report for the 
Exemption Review (an Exemption Report) that: (A) summarizes the 
Compliance Officer's 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 that 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 corrections 
taken to date have been identified in the Exemption Report; and (D) the 
PIMCO 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 
PIMCO and each PIMCO Affiliated QPAM to which such report relates, the 
head of compliance and the general counsel (or their functional 
equivalent) of the relevant PIMCO Affiliated QPAM. The Exemption Report 
also must be made unconditionally available to the independent auditor 
described in Section III(i) above; (v) The annual Exemption Review, 
including the Compliance Officer's written Report, must be completed 
within 90 calendar days after the end of the period to which it 
relates. The annual Exemption Review, including the Compliance 
Officer's written Report, must be completed within 90 calendar days 
after the end of the period to which it relates. The annual Exemption 
Reviews under this exemption must cover the five consecutive twelve-
month periods beginning on the date of the Conviction.
    (n) AGI US complies in all material respects with the requirements 
imposed by a U.S. regulatory authority in connection with the 
Conviction;
    (o) Each PIMCO Affiliated QPAM will maintain records necessary to 
demonstrate that it has met the conditions of this exemption for six 
(6) years after the date of any transaction for which the PIMCO 
Affiliated QPAM relies upon the relief in this exemption;
    (p) During the Exemption Period, PIMCO must: (1) immediately 
disclose to the Department any Deferred

[[Page 42966]]

Prosecution Agreement (a DPA) or Non-Prosecution Agreement (an NPA) 
with the U.S. Department of Justice, entered into by PIMCO or any of 
its affiliates (as defined in Section VI(d) of PTE 84-14) in connection 
with the conduct described in Section I(g) of PTE 84-14 or ERISA 
Section 411; and (2) immediately provide any information requested by 
the Department, as permitted by law, regarding the DPA or NPA and/or 
conduct and allegations that led to the DPA or NPA;
    (q) Within 60 calendar days after the effective date of this 
exemption, each PIMCO Affiliated QPAM 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 PIMCO Affiliated QPAM's written 
Policies developed in connection with this exemption in its agreements 
with or in other written disclosures provided to Covered Plans. If the 
Policies are thereafter changed, each Covered Plan client must receive 
a new disclosure within 180 calendar days after the end of the calendar 
year during which the Policies were changed.\12\ 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 must be clearly and prominently disclosed to each Covered 
Plan;
---------------------------------------------------------------------------

    \12\ If the Applicant meets this disclosure requirement through 
Summary Policies, changes to the Policies shall not result in the 
requirement for a new disclosure unless, as a result of changes to 
the Policies, the Summary Policies are no longer accurate.
---------------------------------------------------------------------------

    (r) A PIMCO Affiliated QPAM will not fail to meet the conditions of 
this exemption solely because a different PIMCO Affiliated QPAM fails 
to satisfy a condition for relief described in Sections III(c), (d), 
(h), (i), (j), (k), (l), (o) or (q); 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 PIMCO or its affiliates; and
    (s) All the material facts and representations set forth in the 
Summary of Facts and Representations are true and accurate at all 
times.
    (t) With respect to an asset manager that becomes a PIMCO 
Affiliated QPAM after the effective date of this exemption by virtue of 
being acquired (in whole or in part) by PIMCO or a subsidiary of PIMCO 
(a ``newly-acquired PIMCO Affiliated QPAM''), the newly-acquired PIMCO 
Affiliated QPAM would not be precluded from relying on the exemptive 
relief provided by PTE 84-14 notwithstanding the Conviction as of the 
closing date for the acquisition; however, the operative terms of the 
exemption shall not apply to the newly-acquired PIMCO Affiliated QPAM 
until a date that is six (6) months after the closing date for the 
acquisition. To that end, the newly-acquired PIMCO Affiliated QPAM will 
initially submit to an audit pursuant to Section III(i) of this 
exemption as of the first audit period that begins following the 
closing date for the acquisition. However, the first audit to which a 
newly-acquired QPAM submits may require the auditor to look back into 
the previous year for that particular QPAM. This will be the case where 
the interval between the acquisition date and the beginning of the next 
audit period is greater than 6 months.
    Exemption Date: This exemption is in effect for a period of five 
years, beginning on the date of the AGI US Conviction.

    Signed at Washington, DC.
George Christopher Cosby,
Director, Office of Exemption Determinations, Employee Benefits 
Security Administration, U.S. Department of Labor.
[FR Doc. 2023-14121 Filed 7-3-23; 8:45 am]
BILLING CODE 4510-29-P