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EBSA Notices

Grant of Individual Exemptions; Barclays Bank PLC and Its Affiliates (Collectively, Barclays)   [6/13/2000]
[PDF]
[Federal Register: June 13, 2000 (Volume 65, Number 114)]
[Notices]               
[Page 37165-37175]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13jn00-96]                         

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DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

[Prohibited Transaction Exemption 2000-30; Exemption Application No. D-
10188, et al.

 
Grant of Individual Exemptions; Barclays Bank PLC and Its 
Affiliates (Collectively, Barclays)

AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Grant of Individual Exemptions.

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SUMMARY: This document contains exemptions issued by the Department of 
Labor (the Department) from certain of the prohibited transaction 
restrictions of the Employee Retirement Income Security Act of 1974 
(the Act) and/or the Internal Revenue Code of 1986 (the Code).
    Notices were published in the Federal Register of the pendency 
before the Department of proposals to grant such exemptions. The 
notices set forth a summary of facts and representations contained in 
each application for exemption and referred interested persons to the 
respective applications for a complete statement of the facts and 
representations. The applications have been available for public 
inspection at the Department in Washington, DC. The notices also 
invited interested persons to submit comments on the requested 
exemptions to the Department. In addition the notices stated that any 
interested person might submit a written request that a public hearing 
be held (where appropriate). The applicants have represented that they 
have complied with the requirements of the notification to interested 
persons. No public comments and no requests for a hearing, unless 
otherwise stated, were received by the Department.
    The notices of proposed exemption were issued and the exemptions 
are being granted solely by the Department because, effective December 
31, 1978, section 102 of Reorganization Plan No. 4 of 1978, 5 U.S.C. 
App. 1 (1996), transferred the authority of the Secretary of the 
Treasury to issue exemptions of the type proposed to the Secretary of 
Labor.

[[Page 37166]]

Statutory Findings

    In accordance with section 408(a) of the Act and/or section 
4975(c)(2) of the Code and the procedures set forth in 29 CFR part 
2570, subpart B (55 FR 32836, 32847, August 10, 1990) and based upon 
the entire record, the Department makes the following findings:
    (a) The exemptions are administratively feasible;
    (b) They are in the interests of the plans and their participants 
and beneficiaries; and
    (c) They are protective of the rights of the participants and 
beneficiaries of the plans.

Barclays Bank PLC and its Affiliates (Collectively, Barclays), 
Located in London, England;

[Prohibited Transaction Exemption 2000-30; Application No. D-10188]

Exemption

Section I--Retroactive Exemption for the Acquisition, Holding and 
Disposition of Barclays PLC Stock
    The restrictions of sections 406(a)(1)(D), 406(b)(1) and 406(b)(2) 
of the Act, and the sanctions resulting from the application of section 
4975 of the Code by reason of section 4975(c)(1)(D) and (E) of the 
Code, shall not apply, as of December 31, 1995 until June 13, 2000, to 
the acquisition, holding and disposition of the common stock of 
Barclays PLC (the Barclays PLC Stock) by Index and Model-Driven Funds 
managed by Barclays, provided that the following conditions and the 
general conditions in Section III are met:
    (a) The acquisition or disposition of the Barclays PLC Stock is for 
the sole purpose of maintaining strict quantitative conformity with the 
relevant index upon which the Index or Model-Driven Fund is based, and 
does not involve any agreement, arrangement or understanding regarding 
the design or operation of the Fund acquiring the Barclays PLC Stock 
which is intended to benefit Barclays or any party in which Barclays 
may have an interest.
    (b) All aggregate daily purchases of Barclays PLC Stock by the 
Funds do not exceed on any particular day the greater of:
    (1) 15 percent of the average daily trading volume for the Barclays 
PLC Stock occurring on the applicable exchange and automated trading 
system (as described in paragraph (c) below) for the previous five (5) 
business days, or
    (2) 15 percent of the trading volume for Barclays PLC Stock 
occurring on the applicable exchange and automated trading system on 
the date of the transaction, as determined by the best available 
information for the trades occurring on that date.
    (c) All purchases and sales of Barclays PLC Stock occur either (i) 
on the London Stock Exchange, a recognized securities exchange as 
defined in Section IV(k) below, (ii) through an automated trading 
system (as defined in Section IV(j) below) operated by a broker-dealer 
independent of Barclays that is subject to regulation and supervision 
by the Securities and Futures Authority of the United Kingdom (pursuant 
to the applicable securities laws) that provides a mechanism for 
customer orders to be matched on an anonymous basis without the 
participation of a broker-dealer, or (iii) in a direct, arms-length 
transaction entered into on a principal basis with a broker-dealer, in 
the ordinary course of its business, where such broker-dealer is 
independent of Barclays and is either registered under the Securities 
Exchange Act of 1934 (the ``34 Act), and thereby subject to regulation 
by the U.S. Securities and Exchange Commission (SEC), or subject to 
regulation and supervision by the Securities and Futures Authority of 
the United Kingdom (UK).
    (d) No transactions by a Fund involve purchases from, or sales to, 
Barclays (including officers, directors, or employees thereof), or any 
party in interest that is a fiduciary with discretion to invest plan 
assets into the Fund (unless the transaction by the Fund with such 
party in interest would otherwise be subject to an exemption).
    (e) No more than five (5) percent of the total amount of Barclays 
PLC Stock issued and outstanding at any time is held in the aggregate 
by Index and Model-Driven Funds managed by Barclays.
    (f) Barclays PLC Stock constitutes no more than three (3) percent 
of any independent third party index on which the investments of an 
Index or Model-Driven Fund are based.
    (g) A plan fiduciary independent of Barclays authorizes the 
investment of such plan's assets in an Index or Model-Driven Fund which 
purchases and/or holds Barclays PLC Stock, pursuant to the procedures 
described in the notice of proposed exemption published on March 14, 
2000 \1\ (see Paragraph 11 of the Summary of Facts and Representations 
regarding portfolio management services provided for particular plans), 
other than in the case of an employee benefit plan sponsored or 
maintained by Barclays PLC and/or an Affiliate for its own employees (a 
Barclays Plan).
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    \1\ See 65 FR 13836.
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    (h) A fiduciary independent of Barclays directs the voting of the 
Barclays PLC Stock held by an Index or Model-Driven Fund on any matter 
in which shareholders of Barclays PLC Stock are required or permitted 
to vote.
    (i) No more than ten (10) percent of the assets of any Fund that 
acquires and holds Barclays PLC Stock is comprised of assets of any 
Barclays Plan(s) for which Barclays exercises investment discretion.
Section II--Prospective Exemption for the Acquisition, Holding and 
Disposition of Barclays Stock
    The restrictions of sections 406(a)(1)(D), 406(b)(1) and 406(b)(2) 
of the Act, section 8477(c)(2)(A) and (B) of FERSA, and the sanctions 
resulting from the application of section 4975 of the Code by reason of 
section 4975(c)(1)(D) and (E) of the Code, shall not apply to the 
acquisition, holding and disposition of Barclays PLC Stock or the 
common stock of an Affiliate of Barclays PLC (Barclays PLC Affiliate 
Stock) by Index and Model-Driven Funds managed by Barclays, provided 
that the following conditions and the general conditions in Section III 
are met:
    (a) The acquisition or disposition of Barclays PLC Stock or 
Barclays PLC Affiliate Stock (collectively, Barclays Stock) is for the 
sole purpose of maintaining strict quantitative conformity with the 
relevant index upon which the Index or Model-Driven Fund is based, and 
does not involve any agreement, arrangement or understanding regarding 
the design or operation of the Fund acquiring the Barclays Stock which 
is intended to benefit Barclays or any party in which Barclays may have 
an interest.
    (b) Whenever Barclays Stock is initially added to an index on which 
an Index or Model-Driven Fund is based, or initially added to the 
portfolio of an Index or Model-Driven Fund, all acquisitions of 
Barclays Stock necessary to bring the Fund's holdings of such Stock 
either to its capitalization-weighted or other specified composition in 
the relevant index, as determined by the independent organization 
maintaining such index, or to its correct weighting as determined by 
the model which has been used to transform the index, occur in the 
following manner:
    (1) Purchases are from, or through, only one broker or dealer on a 
single trading day;
    (2) Based on the best available information, purchases are not the 
opening transaction for the trading day;

[[Page 37167]]

    (3) Purchases are not effected in the last half hour before the 
scheduled close of the trading day;
    (4) Purchases are at a price that is not higher than the lowest 
current independent offer quotation, determined on the basis of 
reasonable inquiry from non-affiliated brokers;
    (5) Aggregate daily purchases do not exceed 15 percent of the 
average daily trading volume for the security, as determined by the 
greater of either (i) the trading volume for the security occurring on 
the applicable exchange and automated trading system on the date of the 
transaction, or (ii) an aggregate average daily trading volume for the 
security occurring on the applicable exchange and automated trading 
system for the previous five (5) business days, both based on the best 
information reasonably available at the time of the transaction;
    (6) All purchases and sales of Barclays Stock occur either (i) on a 
recognized securities exchange (as defined in Section IV(k) below), 
(ii) through an automated trading system (as defined in Section IV(j) 
below) operated by a broker-dealer independent of Barclays that is 
either registered under the '34 Act, and thereby subject to regulation 
by the SEC, or subject to regulation and supervision by the Securities 
and Futures Authority of the UK or another applicable regulatory 
authority, which provides a mechanism for customer orders to be matched 
on an anonymous basis without the participation of a broker-dealer, or 
(iii) through an automated trading system (as defined in Section IV(j) 
below) that is operated by a recognized securities exchange (as defined 
in Section IV(k) below), pursuant to the applicable securities laws, 
and provides a mechanism for customer orders to be matched on an 
anonymous basis without the participation of a broker-dealer; and
    (7) If the necessary number of shares of Barclays Stock cannot be 
acquired within 10 business days from the date of the event which 
causes the particular Fund to require Barclays Stock, Barclays appoints 
a fiduciary which is independent of Barclays to design acquisition 
procedures and monitor Barclays' compliance with such procedures.
    (c) Subsequent to acquisitions necessary to bring a Fund's holdings 
of Barclays Stock to its specified weighting in the index or model 
pursuant to the restrictions described in paragraph (b) above, all 
aggregate daily purchases of Barclays Stock by the Funds do not exceed 
on any particular day the greater of:
    (1) 15 percent of the average daily trading volume for the Barclays 
Stock occurring on the applicable exchange and automated trading system 
(as defined below) for the previous five (5) business days, or
    (2) 15 percent of the trading volume for Barclays Stock occurring 
on the applicable exchange and automated trading system (as defined 
below) on the date of the transaction, as determined by the best 
available information for the trades that occurred on such date.
    (d) All transactions in Barclays Stock not otherwise described in 
paragraph (b) above are either: (i) Entered into on a principal basis 
in a direct, arms-length transaction with a broker-dealer, in the 
ordinary course of its business, where such broker-dealer is 
independent of Barclays and is either registered under the '34 Act, and 
thereby subject to regulation by the SEC, or subject to regulation and 
supervision by the Securities and Futures Authority of the UK (SFA-UK) 
or another applicable regulatory authority, (ii) effected on an 
automated trading system (as defined in Section IV(j) below) operated 
by a broker-dealer independent of Barclays that is subject to 
regulation by either the SEC, SFA-UK, or another applicable regulatory 
authority, or an automated trading system operated by a recognized 
securities exchange (as defined in Section IV(k) below) which, in 
either case, provides a mechanism for customer orders to be matched on 
an anonymous basis without the participation of a broker-dealer, or 
(iii) effected through a recognized securities exchange (as defined in 
Section IV(k) below) so long as the broker is acting on an agency 
basis.
    (e) No transactions by a Fund involve purchases from, or sales to, 
Barclays (including officers, directors, or employees thereof), or any 
party in interest that is a fiduciary with discretion to invest plan 
assets into the Fund (unless the transaction by the Fund with such 
party in interest would otherwise be subject to an exemption).
    (f) No more than five (5) percent of the total amount of either 
Barclays PLC Stock or any Barclays PLC Affiliate Stock, that is issued 
and outstanding at any time, is held in the aggregate by Index and 
Model-Driven Funds managed by Barclays.
    (g) Barclays Stock constitutes no more than five (5) percent of any 
independent third party index on which the investments of an Index or 
Model-Driven Fund are based.
    (h) A plan fiduciary independent of Barclays authorizes the 
investment of such plan's assets in an Index or Model-Driven Fund which 
purchases and/or holds Barclays Stock, pursuant to the procedures 
described in the notice of proposed exemption published on March 14, 
2000 (see Paragraph 11 of the Summary of Facts and Representations 
regarding portfolio management services provided for particular plans), 
other than in the case of a Barclays Plan.
    (i) A fiduciary independent of Barclays directs the voting of the 
Barclays Stock held by an Index or Model-Driven Fund on any matter in 
which shareholders of Barclays Stock are required or permitted to vote.
    (j) No more than ten (10) percent of the assets of any Fund that 
acquires and holds Barclays Stock is comprised of assets of any 
Barclays Plan(s) for which Barclays exercises investment discretion.
Section III--General Conditions
    (a) Barclays maintains or causes to be maintained for a period of 
six years from the date of the transaction the records necessary to 
enable the persons described in paragraph (b) of this Section to 
determine whether the conditions of this exemption have been met, 
except that (1) a prohibited transaction will not be considered to have 
occurred if, due to circumstances beyond the control of Barclays, the 
records are lost or destroyed prior to the end of the six-year period, 
and (2) no party in interest other than Barclays shall be subject to 
the civil penalty that may be assessed under section 502(i) of the Act 
or to the taxes imposed by section 4975(a) and (b) of the Code if the 
records are not maintained or are not available for examination as 
required by paragraph (b) below.
    (b)(1) Except as provided in paragraph (b)(2) and notwithstanding 
any provisions of section 504(a)(2) and (b) of the Act, the records 
referred to in paragraph (a) of this Section are unconditionally 
available at their customary location for examination during normal 
business hours by--
    (A) Any duly authorized employee or representative of the 
Department or the Internal Revenue Service,
    (B) Any fiduciary of a plan participating in an Index or Model-
Driven Fund who has authority to acquire or dispose of the interests of 
the plan, or any duly authorized employee or representative of such 
fiduciary,
    (C) Any contributing employer to any plan participating in an Index 
or Model-Driven Fund or any duly authorized employee or representative 
of such employer, and
    (D) Any participant or beneficiary of any plan participating in an 
Index or Model-Driven Fund, or a representative of such participant or 
beneficiary.

[[Page 37168]]

    (2) None of the persons described in subparagraphs (B) through (D) 
of this paragraph (b) shall be authorized to examine trade secrets of 
Barclays or commercial or financial information which is considered 
confidential.
Section IV--Definitions
    (a) The term ``Index Fund'' means any investment fund, account or 
portfolio sponsored, maintained, trusteed, or managed by Barclays, in 
which one or more investors invest, and--
    (1) which is designed to track the rate of return, risk profile and 
other characteristics of an independently maintained securities Index, 
as described in Section IV(c) below, by either (i) replicating the same 
combination of securities which compose such Index or (ii) sampling the 
securities which compose such Index based on objective criteria and 
data;
    (2) for which Barclays does not use its discretion, or data within 
its control, to affect the identity or amount of securities to be 
purchased or sold;
    (3) that contains ``plan assets'' subject to the Act, pursuant to 
the Department's regulations (see 29 CFR 2510.3-101, Definition of 
``plan assets''--plan investments); and,
    (4) that involves no agreement, arrangement, or understanding 
regarding the design or operation of the Fund which is intended to 
benefit Barclays or any party in which Barclays may have an interest.
    (b) The term ``Model-Driven Fund'' means any investment fund, 
account or portfolio sponsored, maintained, trusteed, or managed by 
Barclays, in which one or more investors invest, and--
    (1) which is composed of securities the identity of which and the 
amount of which are selected by a computer model that is based on 
prescribed objective criteria using independent third party data, not 
within the control of Barclays, to transform an independently 
maintained Index, as described in Section IV(c) below;
    (2) which contains ``plan assets'' subject to the Act, pursuant to 
the Department's regulations (see 29 CFR 2510.3-101, Definition of 
``plan assets''--plan investments); and
    (3) that involves no agreement, arrangement, or understanding 
regarding the design or operation of the Fund or the utilization of any 
specific objective criteria which is intended to benefit Barclays or 
any party in which Barclays may have an interest.
    (c) The term ``Index'' means a securities index that represents the 
investment performance of a specific segment of the public market for 
equity or debt securities in the United States and/or foreign 
countries, but only if--
    (1) the organization creating and maintaining the index is--
    (A) engaged in the business of providing financial information, 
evaluation, advice or securities brokerage services to institutional 
clients,
    (B) a publisher of financial news or information, or
    (C) a public stock exchange or association of securities dealers; 
and,
    (2) the index is created and maintained by an organization 
independent of Barclays; and,
    (3) the index is a generally accepted standardized index of 
securities which is not specifically tailored for the use of Barclays.
    (d) The term ``opening date'' means the date on which investments 
in or withdrawals from an Index or Model-Driven Fund may be made.
    (e) The term ``Buy-up'' means an acquisition of Barclays Stock by 
an Index or Model-Driven Fund in connection with the initial addition 
of such Stock to an independently maintained index upon which the Fund 
is based or the initial investment of a Fund in such Stock.
    (f) The term ``Barclays'' refers to Barclays PLC and its 
Affiliates, as defined below in paragraph (g), including Barclays 
Global Investors, N.A. (BGI), Barclays Global Fund Advisors, Barclays 
Global Investors Services, Barclays Global Investors International, 
Inc., Barclays Global Investors Asset Risk Management Limited, Barclays 
Bank PLC (London), Barclays Bank of Canada, Barclays Bank Zimbabwe, 
Barclays Bank of Kenya, and Barclays Bank of Botswana, Ltd.
    (g) The term ``Affiliate'' means, with respect to Barclays PLC, an 
entity which, directly or indirectly, through one or more 
intermediaries, is controlled by Barclays PLC;
    (h) An ``affiliate'' of Barclays includes:
    (1) Any person, directly or indirectly, through one or more 
intermediaries, controlling, controlled by or under common control with 
the person;
    (2) Any officer, director, employee or relative of such person, or 
partner of any such person; and
    (3) Any corporation or partnership of which such person is an 
officer, director, partner or employee.
    (i) The term ``control'' means the power to exercise a controlling 
influence over the management or policies of a person other than an 
individual.
    (j) The term ``automated trading system'' means an electronic 
trading system that functions in a manner intended to simulate a 
securities exchange by electronically matching orders on an agency 
basis from multiple buyers and sellers, such as an ``alternative 
trading system'' within the meaning of the SEC's Reg. ATS [17 CFR part 
242.300], as such definition may be amended from time to time, or an 
``automated quotation system'' as described in Section 3(a)(51)(A)(ii) 
of the '34 Act [15 USC 78c(a)(51)(A)(ii)].
    (k) The term ``recognized securities exchange'' means a U.S. 
securities exchange that is registered as a ``national securities 
exchange'' under Section 6 of the '34 Act (15 USC 78f), or a designated 
offshore securities market, as defined in Regulation S of the SEC [17 
CFR part 230.902(b)], as such definition may be amended from time to 
time, which performs with respect to securities the functions commonly 
performed by a stock exchange within the meaning of definitions under 
the applicable securities laws (e.g., 17 CFR part 240.3b-16).

Effective Date: This exemption is effective as of December 31, 1995, 
for those transactions described in Section I above, and as of the date 
the exemption is published in the Federal Register for those 
transactions described in Section II above.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption, refer to 
the notice of proposed exemption published on March 14, 2000, at 65 FR 
13836.
    Written Comments:
    The applicant (i.e., Barclays) submitted written comments with 
respect to the notice of proposed exemption (the Proposal). These 
comments, and the Department's responses thereto, are summarized below.
    1. Volume Limitations. With respect to the percentage limitations 
on the volume of trading that aggregate daily purchases of Barclays 
Stock by the Funds may represent, sections I(b), II(b)(5), and II(c) of 
the Proposal state that such purchases may not exceed 15 percent of the 
average daily trading volume ``* * * occurring on the applicable 
exchange or automated trading system.'' The Applicant stated that the 
volume limitation should refer to the aggregate trading volume in 
Barclays Stock, rather than the trading volume on a particular trading 
system on which the Barclays Stock may have been traded. Barclays noted 
that the language of the Proposal may prove overly restrictive and 
present difficulties in gathering the required daily volume data for a 
particular

[[Page 37169]]

automated trading system. Therefore, Barclays requested that the 
conditions relating to the volume limitation be modified to state that 
aggregate daily purchases not exceed 15% of the total trading volume of 
the Barclays Stock (regardless of where it is traded).
    In consideration of this comment, the Department has revised the 
language of sections I(b)(1) and (2), II(b)(5), and II(c)(1) and (2) of 
the exemption by deleting the word ``or'' and substituting the word 
``and'' in its place, so that the operative phrase in each of the 
subsections now reads ``* * * occurring on the applicable exchange and 
automated trading system.'' [emphasis added]
    2. Investments by Affiliated Plans. The applicant represented that 
certain employee benefit plans established or maintained by an 
Affiliate of Barclays PLC for its own employees (i.e., a Barclays Plan) 
have invested, and may continue to invest, in Index Funds or Model-
Driven Funds that invest in Barclays Stock. Since December 31, 1995, 
and currently, three of these Barclays Plans have invested in a Fund 
which held or holds Barclays PLC Stock. These three Barclays Plans are: 
(i) The Barclays Global Investors 401(k) Savings Plan; (ii) the 
Barclays Global Investors Retirement Plan; and (iii) the Barclays Bank 
PLC USA Pension Trust. The applicant stated that at all times since 
December 31, 1995, the holdings of these three Barclays Plans together 
have comprised less than ten (10) percent of the assets of the Fund. In 
this regard, Barclays stated that a Barclays Plan should not be 
required to have an independent fiduciary authorize the investment of 
such a Plan's assets in an Index or Model-Driven Fund that includes 
Barclays Stock in its portfolio, especially since such Stock may only 
represent a small portion of the index on which the investments of the 
Fund are based. Therefore, the applicant requested that the 
requirements contained in section I(g) and II(h) of the Proposal be 
modified accordingly.
    In consideration of the applicant's comment, the Department has 
modified sections I(g) and II(h) herein by inserting the phrases `` * * 
* other than in the case of an employee benefit plan sponsored or 
maintained by Barclays PLC and/or an Affiliate for its own employees (a 
Barclays Plan)'' and ``* * * other than in the case of a Barclays 
Plan'' respectively at the end of those subsections.
    In addition, with the applicant's consent, the Department has added 
a condition (see sections I(i) and II(j) above) which requires that no 
more than ten (10) percent of the assets of any Fund that acquires and 
holds Barclays Stock shall be comprised of assets of any Barclays 
Plan(s) for which Barclays exercises investment discretion.
    3. Changes in Names and Status of Certain Entities. The Applicant 
noted that in section III(f) of the Proposal, and in Paragraph 1 of the 
Summary of Facts and Representations in the Proposal (the Summary), 
reference is made to several entities whose name has changed since the 
date the exemption application was filed. In this regard, the Applicant 
represented the following: BZW Barclays Global Investors, N.A., is now 
Barclays Global Investors, N.A.; BZW Barclays Global Fund Advisors is 
now Barclays Global Fund Advisors; BZW Barclays Global Investors 
Services is now Barclays Global Investors Services; BZW Investment 
Management, Inc. is now Barclays Global Investors International Inc.; 
and BZW Asset Risk Management Limited is now Barclays Global Investors 
Asset Risk Management Limited. The Applicant noted further that 
Barclays Global Investors Asset Risk Management Limited is no longer 
registered as an investment adviser under the Investment Advisers Act 
of 1940.
    Therefore, the Department has modified the information contained in 
the definition of the term ``Barclays'' in section IV(f) of the 
exemption to refer to these entities as stated above.
    4. Exclusion of Barclays Stock from Certain Funds. The Applicant 
noted that in Paragraph 5 of the Summary, reference is made to the 
exclusion of Barclays Stock, since December 31, 1995, from the 
portfolios of any new Index or Model-Driven Funds established by 
Barclays, even though such Stock is included in indexes upon which such 
Funds are based. Barclays wished to clarify that there have been Index 
and Model-Driven Funds established since December 31, 1995, that have 
purchased Barclays Stock. However, Barclays represented that these 
Funds were not subject to the fiduciary responsibility provisions of 
the Act at the time the ``buy-up'' of Barclays Stock by the Funds 
occurred.
    The Department acknowledges the applicant's clarification to the 
information contained in Paragraph 5 of the Summary.
    5. Weight of Barclays PLC Stock in Certain Indexes. The applicant 
noted that in Paragraph 10 of the Summary, reference is made to the 
weight of Barclays PLC Stock in certain indexes. In this regard, 
Barclays represented that as of April 25, 2000, Barclays PLC Stock 
represented 2.05% of the MSCI UK Index and 1.75% of the FTSE 100 Index.
    The Department acknowledges the applicant's additional information 
and notes that the data provided is consistent with the requirements of 
the exemption (see section I(f) above).
    6. Transactions with Parties in Interest. The applicant noted that 
in Sections I(d) and II(e) of the Proposal, Barclays Stock cannot be 
acquired from, or sold to, a Barclays entity (including officers, 
directors or employees thereof) or any party in interest that is a 
fiduciary with discretion to invest plan assets into the Fund. With 
respect to the latter portion of these restrictions, the applicant 
requested that the Department clarify that principal transactions by a 
Fund with such parties in interest should be permitted, if such 
transactions would otherwise be subject to an applicable exemption.
    In such transactions, Barclays Stock would be acquired or sold by 
the Fund along with a ``basket'' of other securities. The Fund would 
enter into a principal transaction with a party in interest that is a 
broker-dealer that is either registered under the '34 Act, and thereby 
subject to regulation by the SEC, or subject to regulation and 
supervision by the SFA-UK or another applicable regulatory authority 
(see Section II(d)(i) of the exemption). The applicant stated that such 
a transaction could be exempt under another exemption, if the 
applicable conditions of that exemption were met. For example, 
Prohibited Transaction Exemption (PTE) 91-38, 56 FR 31966 (July 12, 
1991) permits bank collective investment funds, in which employee 
benefit plans have an interest, to engage in certain transactions with 
parties in interest (including fiduciaries of investing plans), 
provided that the specified conditions required therein are met. 
However, Section I(a) of PTE 91-38 does not provide an exemption for 
any violations of section 406(b)(1) of the Act which may occur as a 
result of such transactions. Section 406(b)(1) states, in pertinent 
part, that a fiduciary for a plan shall not deal with the assets of the 
plan in his own interest or for his own account.
    In consideration of these comments, the Department has modified the 
language of Sections I(d) and II(e) of the exemption by adding the 
following parenthetical phrase at the end of those subsections:

    ``* * * (unless the transaction by the Fund with such party in 
interest would otherwise be subject to an exemption).''

    In this regard, the Department is providing no opinion as to 
whether such principal transactions would be covered by any existing 
exemptions.

[[Page 37170]]

    Finally, the applicant stated that there is a pending merger of the 
London Stock Exchange and the German Bourse, a recognized securities 
exchange as defined in Section IV(k) above. Therefore, the applicant 
requested that Section II(b)(6) and II(d)(i) and (ii) be amended to 
refer to applicable foreign regulatory authorities other than the SFA-
UK.
    In response to this comment, the Department has modified Section 
II(b)(6) and II(d)(i) and (ii) by adding the phrase ``* * * or another 
applicable regulatory authority'' following the reference to the SFA-UK 
in those subsections.
    No other comments, and no requests for a hearing, were received by 
the Department. Accordingly, the Department has determined to grant the 
exemption as modified herein.

FOR FURTHER INFORMATION CONTACT: Mr. E.F. Williams of the Department, 
telephone (202) 219-8194. (This is not a toll-free number.)

H. Ray McPhail (Mr. McPhail) and the H. Ray McPhail Profit Sharing 
Plan (the Plan), Located in Atlanta, Georgia

[Prohibited Transaction Exemption 2000-31; Exemption Application No. D-
10678]

Exemption

    The sanctions resulting from the application of section 4975 of the 
Code, by reason of section 4975(c)(1)(A) through (E) of the Code, shall 
not apply to the sale (the Sale) of four parcels of unimproved real 
property (the Property) and loan (the Loan) from the Plan to Mr. 
McPhail,\2\ a disqualified person with respect to the Plan, provided 
that the following conditions are met:
---------------------------------------------------------------------------

    \2\ Since Mr. McPhail is the only participant in the Plan, there 
is no jurisdiction under Title I of the Act pursuant to 29 CFR 
2510.3-3(b). However, there is jurisdiction under Title II of the 
Act pursuant to section 4975 of the Code.
---------------------------------------------------------------------------

    (1) With respect to the Sale:
    (A) The terms and conditions of the Sale will be at least as 
favorable to the Plan as those obtainable in an arm's length 
transaction with an unrelated party;
    (B) The Sale will occur at a price (the Sale Price) which includes 
the greater of $270,000 or the Property's fair market value as 
established by a qualified, independent appraiser;
    (C) In addition, the Sale Price will include a premium of $30,000 
(the Assemblage Value) due to Mr. McPhail's ownership of unimproved 
real property located adjacent to the Property;
    (D) The Plan will pay no fees or commissions with respect to the 
Sale; and
    (E) Mr. McPhail will pay $60,000 or 20% of the Sale Price in cash 
with the balance paid for by the Loan; and
    (2) With Respect to the Loan:
    (A) The interest rate on the Loan (the Interest Rate) will be 7%, a 
rate set by the Macon Bank for a real estate loan having terms similar 
to the Loan;
    (B) The Loan terms are at least as favorable to the Plan as those 
obtainable in an arm's length transaction with an unrelated party;
    (C) The Loan is secured by a first security interest on certain 
real property, which has been appraised by a qualified, independent 
appraiser to have a fair market value not less than 150% of the 
principal amount of the Loan;
    (D) The outstanding balance of the Loan will never exceed 20% of 
the assets of the Plan throughout the duration of the Loan; and
    (E) The fair market value of the collateral remains at least equal 
to 150% of the outstanding principal balance plus accrued but not 
unpaid interest, throughout the duration of the Loan; and
    (3) Should any employee of the Plan Sponsor become eligible for 
Plan participation, the new participant will be enrolled in another 
qualified retirement plan or the Loan will be immediately repaid.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption, refer to 
the notice of proposed exemption published on April 7, 2000 at 65 FR 
18354.

FOR FURTHER INFORMATION CONTACT: Mr. J. Martin Jara of the Department, 
telephone (202) 219-8883 (this is not a toll free number).

Triumph Capital Group, Inc., Located in Boston, MA;

[Prohibited Transaction Exemption 2000-32; Exemption Application No. D-
10708]

Exemption

    The restrictions of sections 406(a) of the Act and the sanctions 
resulting from the application of section 4975 of the Code, by reason 
of section 4975(c)(1)(A) through (D) of the Code, shall not apply, 
effective July 22, 1997, to the making, by an employee benefit plan 
subject to the Act (the Plan), of capital contributions to any private 
equity fund (the Triumph Fund) that is organized, sponsored and/or 
managed by Triumph Capital Group, Inc. and/or any of its affiliates 
(collectively, Triumph) pursuant to a contractual obligation by a Plan 
having an interest in the Triumph Fund.\3\
---------------------------------------------------------------------------

    \3\ Triumph Funds are generally expected to be organized as 
venture capital operating companies that are managed by Triumph.
---------------------------------------------------------------------------

    This exemption is subject to the following conditions:
    a. At the time the Plan undertakes the obligation to make such 
capital contributions (the Determination Date), the Triumph Fund is not 
a party in interest with respect to the Plan.
    b. The decision to make a capital contribution to a Triumph Fund is 
made on behalf of the Plan by a Plan fiduciary which is independent of 
and unrelated to Triumph and the portfolio company whose interest is 
acquired by the Triumph Fund.
    c. Triumph does not otherwise provide investment advice as a 
fiduciary to the Plan, within the meaning of the Department's 
regulations at 29 CFR 2510.3-21(c), with respect to such Plan's assets 
that are invested in the Triumph Fund.
    d. At the Determination Date, the Plan has aggregate assets that 
are in excess of $50 million; provided, however, that in the case of:
    (1) Two or more Plans which are not maintained by the same 
employer, controlled group of corporations or employee organization 
(the Unrelated Plans), whose assets are invested in a Triumph Fund 
through a group trust, an insurance company pooled separate account or 
any other form of entity the assets of which are ``plan assets'' under 
the Department's regulations at 29 CFR 2510.3-101 (the Plan Asset 
Regulation), the foregoing $50 million requirement shall be satisfied 
if such trust, separate account, or other entity has aggregate assets 
which are in excess of $50 million, provided further that the fiduciary 
responsible for making the investment decision on behalf of such group 
trust, insurance company pooled separate account, or other entity has--
    i. Full investment responsibility \4\ with respect to the plan 
assets invested therein; and
---------------------------------------------------------------------------

    \4\ For purposes of this exemption, the term ``full investment 
responsibility'' means that the fiduciary responsible for making the 
investment decision has and exercises discretionary management 
authority over all of the assets of the group trust or other plan 
assets entity.
---------------------------------------------------------------------------

    ii. Total assets under its management and control, exclusive of the 
assets invested in the Triumph Fund, which are in excess of $100 
million, for Triumph Funds established after April 7, 2000 (i.e., the 
date the notice of proposed exemption was published in the Federal 
Register).
    (2) Two or more Plans which are maintained by the same employer,

[[Page 37171]]

controlled group of corporations or employee organization (the Related 
Plans), whose assets are invested in a Triumph Fund through a master 
trust or any other entity the assets of which are ``plan assets'' under 
the Plan Asset Regulation, the $50 million requirement shall in any 
event be satisfied if such trust or other entity has aggregate assets 
which are in excess of $50 million, provided, further, that, in the 
case of a Triumph Fund established after the date the notice granting 
the exemption is published in the Federal Register, in addition to the 
$50 million requirement, if the fiduciary responsible for making the 
investment decision on behalf of such master trust or other entity is 
not the employer or an affiliate of the employer, then such fiduciary 
has total assets under its management and control, exclusive of the 
assets invested in the Triumph Fund, which are in excess of $100 
million.
    e. The Triumph Fund is a party in interest with respect to the Plan 
solely by reason of a relationship to a portfolio company which is a 
service provider to a Plan, as described in Section 3(14)(H) or (I) of 
the Act, including a fiduciary with respect to such Plan.
    f. The capital commitment of the Plan (together with the capital 
commitments of any other Plans maintained by the same employer, 
controlled group of corporations or employee organization) with respect 
to the Triumph Fund, does not exceed 15 percent of the total capital 
commitments made by all investors with respect to such Triumph Fund, 
determined at the later of (i) the Determination Date or (ii) the date 
on which the Triumph Fund first becomes a party in interest with 
respect to such Plan.
    g. At the Determination Date, the percentage of the Plan's assets 
committed to be invested in the Triumph Fund does not exceed 5 percent 
of the Plan's total assets.
    h. At the Determination Date, a Plan's aggregate capital commitment 
to all Triumph Funds does not exceed 25 percent of the Plan's total 
assets.
    i. The Plan receives the following initial and ongoing disclosures 
with respect to the Triumph Fund:
    (1) A copy of the private placement memorandum applicable to the 
Triumph Fund or another comparable document containing substantially 
the same information;
    (2) A copy of the limited partnership or other agreement 
establishing the Triumph Fund;
    (3) A copy of the subscription agreement applicable to the Triumph 
Fund, if any;
    (4) Copies of the proposed and final exemption, once such documents 
are published in the Federal Register; and
    (5) Periodic, but no less frequently than annually, reports 
relating to the overall financial position and operational results of 
the Triumph Fund, including copies of the Triumph Fund's annual 
financial statements.
    j. With respect to capital contributions made to a Triumph Fund by 
a Plan after the date this exemption is published in the Federal 
Register, Triumph maintains or causes to be maintained, for a period of 
six (6) years from the date of the transaction, the records necessary 
to enable the persons described in paragraph (k) to determine whether 
the conditions of the exemption have been met, except that--
    (1) A prohibited transaction will not be considered to have 
occurred, if due to circumstances beyond the control of Triumph, the 
records are lost or destroyed prior to the end of the six year period; 
and
    (2) No party in interest, other than Triumph, shall be subject to 
the civil penalty that may be assessed under section 502(i) of the Act, 
or to the taxes imposed by section 4975(a) and (b) of the Code, if the 
records are not maintained, or are not available for examination as 
required by paragraph (k).
    k. (1) Except as provided in paragraph (k)(2) and notwithstanding 
any provisions of subsection (a) (2) and (b) of section 504 of the Act, 
the records referred to in paragraph (j) are unconditionally available 
at their customary location for examination during normal business 
hours by--
    (A) Any duly authorized employee or representative of the 
Department or the Internal Revenue Service;
    (B) Any fiduciary of a Plan which has an interest in the Triumph 
Fund and has the authority to acquire or dispose of the interest of the 
Plan in the Triumph Fund, or any duly authorized employee or 
representative of such fiduciary; and
    (C) Any participant or beneficiary of any Plan which has an 
interest in the Triumph Fund, or duly authorized representative of such 
participant or beneficiary.
    (2) None of the persons described in paragraph (k)(1)(B) and 
(k)(1)(C) shall be authorized to examine trade secrets of Triumph or 
commercial or financial information which is privileged or 
confidential.
    Effective Date: This exemption is effective as of July 22, 1997.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption, refer to 
the notice of proposed exemption published on April 7, 2000, at 65 FR 
18356.

FOR FURTHER INFORMATION CONTACT: Mr. Gary Lefkowitz of the Department, 
telephone (202) 219-8881. (This is not a toll-free number.)

McDonald Investments Inc. (McDonald), Located in Cleveland, Ohio

[Prohibited Transaction Exemption 2000-33; Exemption Application No. D-
10857]

Exemption

I. Transactions

    A. Effective January 4, 2000, the restrictions of sections 406(a) 
and 407(a) of the Act, and the taxes imposed by section 4975(a) and (b) 
of the Code by reason of section 4975(c)(1)(A) through (D) of the Code, 
shall not apply to the following transactions involving trusts and 
certificates evidencing interests therein:
    (1) The direct or indirect sale, exchange or transfer of 
certificates in the initial issuance of certificates between the 
sponsor or underwriter and an employee benefit plan when the sponsor, 
servicer, trustee or insurer of a trust, the underwriter of the 
certificates representing an interest in the trust, or an obligor is a 
party in interest with respect to such plan;
    (2) The direct or indirect acquisition or disposition of 
certificates by a plan in the secondary market for such certificates; 
and
    (3) The continued holding of certificates acquired by a plan 
pursuant to subsection I.A.(1) or (2).
    Notwithstanding the foregoing, section I.A. does not provide an 
exemption from the restrictions of sections 406(a)(1)(E), 406(a)(2) and 
407 for the acquisition or holding of a certificate on behalf of an 
Excluded Plan by any person who has discretionary authority or renders 
investment advice with respect to the assets of that Excluded Plan.\5\
---------------------------------------------------------------------------

    \5\ Section I.A. provides no relief from sections 406(a)(1)(E), 
406(a)(2) and 407 for any person rendering investment advice to an 
Excluded Plan within the meaning of section 3(21)(A)(ii) and 
regulation 29 CFR 2510.3-21(c).
---------------------------------------------------------------------------

    B. Effective January 4, 2000, the restrictions of sections 
406(b)(1) and 406(b)(2) of the Act, and the taxes imposed by section 
4975(a) and (b) of the Code by reason of section 4975(c)(1)(E) of the 
Code, shall not apply to:
    (1) The direct or indirect sale, exchange or transfer of 
certificates in the initial issuance of certificates between the 
sponsor or underwriter and a plan

[[Page 37172]]

when the person who has discretionary authority or renders investment 
advice with respect to the investment of plan assets in the 
certificates is (a) an obligor with respect to 5 percent or less of the 
fair market value of obligations or receivables contained in the trust, 
or (b) an affiliate of a person described in (a); if:
    (i) the plan is not an Excluded Plan;
    (ii) solely in the case of an acquisition of certificates in 
connection with the initial issuance of the certificates, at least 50 
percent of each class of certificates in which plans have invested is 
acquired by persons independent of the members of the Restricted Group 
and at least 50 percent of the aggregate interest in the trust is 
acquired by persons independent of the Restricted Group;
    (iii) a plan's investment in each class of certificates does not 
exceed 25 percent of all of the certificates of that class outstanding 
at the time of the acquisition; and
    (iv) immediately after the acquisition of the certificates, no more 
than 25 percent of the assets of a plan with respect to which the 
person has discretionary authority or renders investment advice are 
invested in certificates representing an interest in a trust containing 
assets sold or serviced by the same entity.\6\ For purposes of this 
paragraph B.(1)(iv) only, an entity will not be considered to service 
assets contained in a trust if it is merely a subservicer of that 
trust;
---------------------------------------------------------------------------

    \6\ For purposes of this exemption, each plan participating in a 
commingled fund (such as a bank collective trust fund or insurance 
company pooled separate account) shall be considered to own the same 
proportionate undivided interest in each asset of the commingled 
fund as its proportionate interest in the total assets of the 
commingled fund as calculated on the most recent preceding valuation 
date of the fund.
---------------------------------------------------------------------------

    (2) The direct or indirect acquisition or disposition of 
certificates by a plan in the secondary market for such certificates, 
provided that the conditions set forth in paragraphs B.(1)(i), (iii) 
and (iv) are met; and
    (3) The continued holding of certificates acquired by a plan 
pursuant to subsection I.B.(1) or (2).
    C. Effective January 4, 2000, the restrictions of sections 406(a), 
406(b) and 407(a) of the Act, and the taxes imposed by section 4975(a) 
and (b) of the Code by reason of section 4975(c) of the Code, shall not 
apply to transactions in connection with the servicing, management and 
operation of a trust, provided:
    (1) Such transactions are carried out in accordance with the terms 
of a binding pooling and servicing agreement; and
    (2) The pooling and servicing agreement is provided to, or 
described in all material respects in, the prospectus or private 
placement memorandum provided to investing plans before they purchase 
certificates issued by the trust.\7\
---------------------------------------------------------------------------

    \7\ In the case of a private placement memorandum, such 
memorandum must contain substantially the same information that 
would be disclosed in a prospectus if the offering of the 
certificates were made in a registered public offering under the 
Securities Act of 1933. In the Department's view, the private 
placement memorandum must contain sufficient information to permit 
plan fiduciaries to make informed investment decisions. For purposes 
of this exemption, references to ``prospectus'' include any related 
prospectus supplement thereto, pursuant to which certificates are 
offered to investors.
---------------------------------------------------------------------------

    Notwithstanding the foregoing, section I.C. does not provide an 
exemption from the restrictions of section 406(b) of the Act, or from 
the taxes imposed by reason of section 4975(c) of the Code, for the 
receipt of a fee by a servicer of the trust from a person other than 
the trustee or sponsor, unless such fee constitutes a ``qualified 
administrative fee'' as defined in section III.S.
    D. Effective January 4, 2000, the restrictions of sections 406(a) 
and 407(a) of the Act, and the taxes imposed by sections 4975(a) and 
(b) of the Code by reason of sections 4975(c)(1)(A) through (D) of the 
Code, shall not apply to any transactions to which those restrictions 
or taxes would otherwise apply merely because a person is deemed to be 
a party in interest or disqualified person (including a fiduciary) with 
respect to a plan by virtue of providing services to the plan (or by 
virtue of having a relationship to such service provider described in 
section 3(14)(F), (G), (H) or (I) of the Act or section 4975(e)(2)(F), 
(G), (H) or (I) of the Code), solely because of the plan's ownership of 
certificates.
II. General Conditions
    A. The relief provided under Part I is available only if the 
following conditions are met:
    (1) The acquisition of certificates by a plan is on terms 
(including the certificate price) that are at least as favorable to the 
plan as they would be in an arm's-length transaction with an unrelated 
party;
    (2) The rights and interests evidenced by the certificates are not 
subordinated to the rights and interests evidenced by other 
certificates of the same trust;
    (3) The certificates acquired by the plan have received a rating 
from a Rating Agency (as defined in section III.W.) at the time of such 
acquisition that is in one of the three highest generic rating 
categories;
    (4) The trustee is not an affiliate of any other member of the 
Restricted Group. However, the trustee shall not be considered to be an 
affiliate of a servicer solely because the trustee has succeeded to the 
rights and responsibilities of the servicer pursuant to the terms of a 
pooling and servicing agreement providing for such succession upon the 
occurrence of one or more events of default by the servicer;
    (5) The sum of all payments made to and retained by the 
underwriters in connection with the distribution or placement of 
certificates represents not more than reasonable compensation for 
underwriting or placing the certificates; the sum of all payments made 
to and retained by the sponsor pursuant to the assignment of 
obligations (or interests therein) to the trust represents not more 
than the fair market value of such obligations (or interests); and the 
sum of all payments made to and retained by the servicer represents not 
more than reasonable compensation for the servicer's services under the 
pooling and servicing agreement and reimbursement of the servicer's 
reasonable expenses in connection therewith;
    (6) The plan investing in such certificates is an ``accredited 
investor'' as defined in Rule 501(a)(1) of Regulation D of the 
Securities and Exchange Commission under the Securities Act of 1933; 
and
    (7) In the event that the obligations used to fund a trust have not 
all been transferred to the trust on the closing date, additional 
obligations as specified in subsection III.B.(1) may be transferred to 
the trust during the pre-funding period (as defined in section III.BB.) 
in exchange for amounts credited to the pre-funding account (as defined 
in section III.Z.), provided that:
    (a) The pre-funding limit (as defined in section III.AA.) is not 
exceeded;
    (b) All such additional obligations meet the same terms and 
conditions for eligibility as those of the original obligations used to 
create the trust corpus (as described in the prospectus or private 
placement memorandum and/or pooling and servicing agreement for such 
certificates), which terms and conditions have been approved by a 
Rating Agency. Notwithstanding the foregoing, the terms and conditions 
for determining the eligibility of an obligation may be changed if such 
changes receive prior approval either by a majority of the outstanding 
certificateholders or by a Rating Agency;
    (c) The transfer of such additional obligations to the trust during 
the pre-funding period does not result in the certificates receiving a 
lower credit

[[Page 37173]]

rating from a rating agency upon termination of the pre-funding period 
than the rating that was obtained at the time of the initial issuance 
of the certificates by the trust;
    (d) The weighted average annual percentage interest rate (the 
average interest rate) for all of the obligations in the trust at the 
end of the pre-funding period will not be more than 100 basis points 
lower than the average interest rate for the obligations which were 
transferred to the trust on the closing date;
    (e) In order to ensure that the characteristics of the receivables 
actually acquired during the pre-funding period are substantially 
similar to those which were acquired as of the closing date, the 
characteristics of the additional obligations will be either monitored 
by a credit support provider or other insurance provider which is 
independent of the sponsor, or an independent accountant retained by 
the sponsor will provide the sponsor with a letter (with copies 
provided to the Rating Agency, the underwriter and the trustees) 
stating whether or not the characteristics of the additional 
obligations conform to the characteristics of such obligations 
described in the prospectus, private placement memorandum and/or 
pooling and servicing agreement. In preparing such letter, the 
independent accountant will use the same type of procedures as were 
applicable to the obligations which were transferred as of the closing 
date;
    (f) The pre-funding period shall be described in the prospectus or 
private placement memorandum provided to investing plans; and
    (g) The trustee of the trust (or any agent with which the trustee 
contracts to provide trust services) will be a substantial financial 
institution or trust company experienced in trust activities and 
familiar with its duties, responsibilities and liabilities as a 
fiduciary under the Act. The trustee, as the legal owner of the 
obligations in the trust, will enforce all the rights created in favor 
of certificateholders of such trust, including employee benefit plans 
subject to the Act.
    B. Neither any underwriter, sponsor, trustee, servicer, insurer, 
nor any obligor, unless it or any of its affiliates has discretionary 
authority or renders investment advice with respect to the plan assets 
used by a plan to acquire certificates, shall be denied the relief 
provided under Part I, if the provision of subsection II.A.(6) above is 
not satisfied with respect to acquisition or holding by a plan of such 
certificates, provided that (1) such condition is disclosed in the 
prospectus or private placement memorandum; and (2) in the case of a 
private placement of certificates, the trustee obtains a representation 
from each initial purchaser which is a plan that it is in compliance 
with such condition, and obtains a covenant from each initial purchaser 
to the effect that, so long as such initial purchaser (or any 
transferee of such initial purchaser's certificates) is required to 
obtain from its transferee a representation regarding compliance with 
the Securities Act of 1933, any such transferees will be required to 
make a written representation regarding compliance with the condition 
set forth in subsection II.A.(6) above.
III. Definitions
    For purposes of this exemption:
    A. ``Certificate'' means:
    (1) a certificate--
    (a) that represents a beneficial ownership interest in the assets 
of a trust; and
    (b) that entitles the holder to pass-through payments of principal, 
interest, and/or other payments made with respect to the assets of such 
trust; or
    (2) a certificate denominated as a debt instrument--
    (a) that represents an interest in a Real Estate Mortgage 
Investment Conduit (REMIC) or a Financial Asset Securitization 
Investment Trust (FASIT) within the meaning of section 860D(a) or 
section 860L, respectively, of the Code; and
    (b) that is issued by, and is an obligation of, a trust; with 
respect to certificates defined in (1) and (2) above for which McDonald 
or any of its affiliates is either (i) the sole underwriter or the 
manager or co-manager of the underwriting syndicate, or (ii) a selling 
or placement agent.
    For purposes of this exemption, references to ``certificates 
representing an interest in a trust'' include certificates denominated 
as debt which are issued by a trust.
    B. ``Trust'' means an investment pool, the corpus of which is held 
in trust and consists solely of:
    (1) (a) Secured consumer receivables that bear interest or are 
purchased at a discount (including, but not limited to, home equity 
loans and obligations secured by shares issued by a cooperative housing 
association); and/or
    (b) Secured credit instruments that bear interest or are purchased 
at a discount in transactions by or between business entities 
(including, but not limited to, qualified equipment notes secured by 
leases, as defined in section III.T); and/or
    (c) Obligations that bear interest or are purchased at a discount 
and which are secured by single-family residential, multi-family 
residential and commercial real property (including obligations secured 
by leasehold interests on commercial real property); and/or
    (d) Obligations that bear interest or are purchased at a discount 
and which are secured by motor vehicles or equipment, or qualified 
motor vehicle leases (as defined in section III.U); and/or
    (e) ``Guaranteed governmental mortgage pool certificates,'' as 
defined in 29 CFR 2510.3-101(i)(2); and/or
    (f) Fractional undivided interests in any of the obligations 
described in clauses (a)-(e) of this section B.(1);
    (2) property which had secured any of the obligations described in 
subsection B.(1);
    (3)(a) Undistributed cash or temporary investments made therewith 
maturing no later than the next date on which distributions are to be 
made to certificateholders; and/or
    (b) Cash or investments made therewith which are credited to an 
account to provide payments to certificateholders pursuant to any yield 
supplement agreement or similar yield maintenance arrangement to 
supplement the interest rates otherwise payable on obligations 
described in subsection III.B.(1) held in the trust, provided that such 
arrangements do not involve swap agreements or other notional principal 
contracts; and/or
    (c) Cash transferred to the trust on the closing date and permitted 
investments made therewith which:
    (i) are credited to a pre-funding account established to purchase 
additional obligations with respect to which the conditions set forth 
in clauses (a)-(g) of subsection II.A.(7) are met and/or;
    (ii) are credited to a capitalized interest account (as defined in 
section III.X.); and
    (iii) are held in the trust for a period ending no later than the 
first distribution date to certificateholders occurring after the end 
of the pre-funding period.
    For purposes of this clause (c) of subsection III.B.(3), the term 
``permitted investments'' means investments which are either: (i) 
Direct obligations of, or obligations fully guaranteed as to timely 
payment of principal and interest by the United States, or any agency 
or instrumentality thereof, provided that such obligations are backed 
by the full faith and credit of the United States or (ii) have been 
rated (or the obligor has been rated) in one of the three highest 
generic rating categories by a rating agency; are described in the 
pooling and

[[Page 37174]]

servicing agreement; and are permitted by the rating agency; and
    (4) Rights of the trustee under the pooling and servicing 
agreement, and rights under any insurance policies, third-party 
guarantees, contracts of suretyship, yield supplement agreements 
described in clause (b) of subsection III.B.(3) and other credit 
support arrangements with respect to any obligations described in 
subsection III.B.(1).
    Notwithstanding the foregoing, the term ``trust'' does not include 
any investment pool unless: (i) The investment pool consists only of 
assets of the type described in clauses (a) through (f) of subsection 
III.B.(1) which have been included in other investment pools, (ii) 
certificates evidencing interests in such other investment pools have 
been rated in one of the three highest generic rating categories by a 
Rating Agency for at least one year prior to the plan's acquisition of 
certificates pursuant to this exemption, and (iii) certificates 
evidencing interests in such other investment pools have been purchased 
by investors other than plans for at least one year prior to the plan's 
acquisition of certificates pursuant to this exemption.
    C. ``Underwriter'' means:
    (1) McDonald;
    (2) Any person directly or indirectly, through one or more 
intermediaries, controlling, controlled by or under common control with 
McDonald; or
    (3) Any member of an underwriting syndicate or selling group of 
which McDonald or a person described in (2) is a manager or co-manager 
with respect to the certificates.
    D. ``Sponsor'' means the entity that organizes a trust by 
depositing obligations therein in exchange for certificates.
    E. ``Master Servicer'' means the entity that is a party to the 
pooling and servicing agreement relating to trust assets and is fully 
responsible for servicing, directly or through subservicers, the assets 
of the trust.
    F. ``Subservicer'' means an entity which, under the supervision of 
and on behalf of the master servicer, services obligations contained in 
the trust, but is not a party to the pooling and servicing agreement.
    G. ``Servicer'' means any entity which services obligations 
contained in the trust, including the master servicer and any 
subservicer.
    H. ``Trustee'' means the trustee of the trust, and in the case of 
certificates which are denominated as debt instruments, also means the 
trustee of the indenture trust.
    I. ``Insurer'' means the insurer or guarantor of, or provider of 
other credit support for, a trust. Notwithstanding the foregoing, a 
person is not an insurer solely because it holds securities 
representing an interest in a trust which are of a class subordinated 
to certificates representing an interest in the same trust.
    J. ``Obligor'' means any person, other than the insurer, that is 
obligated to make payments with respect to any obligation or receivable 
included in the trust. Where a trust contains qualified motor vehicle 
leases or qualified equipment notes secured by leases, ``obligor'' 
shall also include any owner of property subject to any lease included 
in the trust, or subject to any lease securing an obligation included 
in the trust.
    K. ``Excluded Plan'' means any plan with respect to which any 
member of the Restricted Group is a ``plan sponsor'' within the meaning 
of section 3(16)(B) of the Act.
    L. ``Restricted Group'' with respect to a class of certificates 
means:
    (1) each underwriter;
    (2) each insurer;
    (3) the sponsor;
    (4) the trustee;
    (5) each servicer;
    (6) any obligor with respect to obligations or receivables included 
in the trust constituting more than 5 percent of the aggregate 
unamortized principal balance of the assets in the trust, determined on 
the date of the initial issuance of certificates by the trust; or
    (7) any affiliate of a person described in (1)-(6) above.
    M. ``Affiliate'' of another person includes:
    (1) Any person directly or indirectly, through one or more 
intermediaries, controlling, controlled by, or under common control 
with such other person;
    (2) Any officer, director, partner, employee, relative (as defined 
in section 3(15) of the Act), a brother, a sister, or a spouse of a 
brother or sister of such other person; and
    (3) Any corporation or partnership of which such other person is an 
officer, director or partner.
    N. ``Control'' means the power to exercise a controlling influence 
over the management or policies of a person other than an individual.
    O. A person will be ``independent'' of another person only if:
    (1) such person is not an affiliate of that other person; and
    (2) the other person, or an affiliate thereof, is not a fiduciary 
who has investment management authority or renders investment advice 
with respect to any assets of such person.
    P. ``Sale'' includes the entrance into a forward delivery 
commitment (as defined in section Q below), provided:
    (1) The terms of the forward delivery commitment (including any fee 
paid to the investing plan) are no less favorable to the plan than they 
would be in an arm's-length transaction with an unrelated party;
    (2) The prospectus or private placement memorandum is provided to 
an investing plan prior to the time the plan enters into the forward 
delivery commitment; and
    (3) At the time of the delivery, all conditions of this exemption 
applicable to sales are met.
    Q. ``Forward delivery commitment'' means a contract for the 
purchase or sale of one or more certificates to be delivered at an 
agreed future settlement date. The term includes both mandatory 
contracts (which contemplate obligatory delivery and acceptance of the 
certificates) and optional contracts (which give one party the right 
but not the obligation to deliver certificates to, or demand delivery 
of certificates from, the other party).
    R. ``Reasonable compensation'' has the same meaning as that term is 
defined in 29 CFR 2550.408c-2.
    S. ``Qualified Administrative Fee'' means a fee which meets the 
following criteria:
    (1) the fee is triggered by an act or failure to act by the obligor 
other than the normal timely payment of amounts owing in respect of the 
obligations;
    (2) the servicer may not charge the fee absent the act or failure 
to act referred to in (1);
    (3) the ability to charge the fee, the circumstances in which the 
fee may be charged, and an explanation of how the fee is calculated are 
set forth in the pooling and servicing agreement; and
    (4) the amount paid to investors in the trust will not be reduced 
by the amount of any such fee waived by the servicer.
    T. ``Qualified Equipment Note Secured By A Lease'' means an 
equipment note:
    (1) which is secured by equipment which is leased;
    (2) which is secured by the obligation of the lessee to pay rent 
under the equipment lease; and
    (3) with respect to which the trust's security interest in the 
equipment is at least as protective of the rights of the trust as would 
be the case if the equipment note were secured only by the equipment 
and not the lease.
    U. ``Qualified Motor Vehicle Lease'' means a lease of a motor 
vehicle where:
    (1) the trust owns or holds a security interest in the lease;

[[Page 37175]]

    (2) the trust owns or holds a security interest in the leased motor 
vehicle; and
    (3) the trust's security interest in the leased motor vehicle is at 
least as protective of the trust's rights as would be the case if the 
trust consisted of motor vehicle installment loan contracts.
    V. ``Pooling and Servicing Agreement'' means the agreement or 
agreements among a sponsor, a servicer and the trustee establishing a 
trust. In the case of certificates which are denominated as debt 
instruments, ``Pooling and Servicing Agreement'' also includes the 
indenture entered into by the trustee of the trust issuing such 
certificates and the indenture trustee.
    W. ``Rating Agency'' means Standard & Poor's Structured Rating 
Group (S&P's), Moody's Investors Service, Inc. (Moody's), Duff & Phelps 
Credit Rating Co. (D&P) or Fitch IBCA, Inc. (Fitch) or their 
successors;
    X. ``Capitalized Interest Account'' means a trust account: (i) 
which is established to compensate certificateholders for shortfalls, 
if any, between investment earnings on the pre-funding account and the 
pass-through rate payable under the certificates; and (ii) which meets 
the requirements of clause (c) of subsection III.B.(3).
    Y. ``Closing Date'' means the date the trust is formed, the 
certificates are first issued and the trust's assets (other than those 
additional obligations which are to be funded from the pre-funding 
account pursuant to subsection II.A.(7)) are transferred to the trust.
    Z. ``Pre-Funding Account'' means a trust account: (i) Which is 
established to purchase additional obligations, which obligations meet 
the conditions set forth in clauses (a)-(g) of subsection II.A.(7); and 
(ii) which meets the requirements of clause (c) of subsection 
III.B.(3).
    AA. ``Pre-Funding Limit'' means a percentage or ratio of the amount 
allocated to the pre-funding account, as compared to the total 
principal amount of the certificates being offered which is less than 
or equal to 25 percent.
    BB. ``Pre-Funding Period'' means the period commencing on the 
closing date and ending no later than the earliest to occur of: (i) the 
date the amount on deposit in the pre-funding account is less than the 
minimum dollar amount specified in the pooling and servicing agreement; 
(ii) the date on which an event of default occurs under the pooling and 
servicing agreement; or (iii) the date which is the later of three 
months or 90 days after the closing date.
    CC. ``McDonald'' means McDonald Investments Inc. and its 
affiliates.
    The Department notes that this exemption is included within the 
meaning of the term ``Underwriter Exemption'' as it is defined in 
section V(h) of Prohibited Transaction Exemption 95-60 (60 FR 35925, 
July 12, 1995), the Class Exemption for Certain Transactions Involving 
Insurance Company General Accounts at (see 60 FR 35932).
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption, refer to 
the notice of proposed exemption published on April 7, 2000 at 65 FR 
18365.

FOR FURTHER INFORMATION CONTACT: Gary Lefkowitz of the Department, 
telephone (202) 219-8881. (This is not a toll-free number.)

General Information

    The attention of interested persons is directed to the following:
    (1) The fact that a transaction is the subject of an exemption 
under section 408(a) of the Act and/or section 4975(c)(2) of the Code 
does not relieve a fiduciary or other party in interest or disqualified 
person from certain other provisions to which the exemptions does not 
apply and the general fiduciary responsibility provisions of section 
404 of the Act, which among other things require a fiduciary to 
discharge his duties respecting the plan solely in the interest of the 
participants and beneficiaries of the plan and in a prudent fashion in 
accordance with section 404(a)(1)(B) of the Act; nor does it affect the 
requirement of section 401(a) of the Code that the plan must operate 
for the exclusive benefit of the employees of the employer maintaining 
the plan and their beneficiaries;
    (2) These exemptions are supplemental to and not in derogation of, 
any other provisions of the Act and/or the Code, including statutory or 
administrative exemptions and transactional rules. Furthermore, the 
fact that a transaction is subject to an administrative or statutory 
exemption is not dispositive of whether the transaction is in fact a 
prohibited transaction; and
    (3) The availability of these exemptions is subject to the express 
condition that the material facts and representations contained in each 
application accurately describes all material terms of the transaction 
which is the subject of the exemption.

    Signed at Washington, DC, this 7th day of June, 2000.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits 
Administration, Department of Labor.
[FR Doc. 00-14809 Filed 6-12-00; 8:45 am]
BILLING CODE 4510-29-P