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Secretary of Labor Hilda L. Solis
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EBSA Notices

Grant of Individual Exemption To Amend and Replace Prohibited Transaction Exemption (PTE) 99-15, Involving Salomon Smith Barney Inc.(Salomon Smith Barney), Located in New York, NY   [9/7/2000]
[PDF]
[Federal Register: September 7, 2000 (Volume 65, Number 174)]
[Notices]               
[Page 54315-54320]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07se00-135]                         

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DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

[Prohibited Transaction Exemption 2000-45; Exemption Application Nos. 
D-10809 and D-10865]

 
Grant of Individual Exemption To Amend and Replace Prohibited 
Transaction Exemption (PTE) 99-15, Involving Salomon Smith Barney Inc. 
(Salomon Smith Barney), Located in New York, NY

AGENCY: Pension and Welfare Benefits Administration, Department of 
Labor.

ACTION: Grant of individual exemption to modify and replace PTE 99-15.

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SUMMARY: This document contains a final exemption (the Final Exemption) 
by the Department of Labor (the Department) which amends and replaces 
PTE 99-15 (64 FR 1648, April 5, 1999), an exemption granted to Salomon 
Smith Barney. PTE 99-15 relates to the operation of the TRAK 
Personalized Investment Advisory Service product (the TRAK Program) and 
the Trust for Consulting Group Capital Markets Funds (the Trust). These 
transactions are described in a notice of pendency (the Proposed

[[Page 54316]]

Exemption) that was published in the Federal Register on June 1, 2000 
at 65 FR 35138.

EFFECTIVE DATES: This exemption is effective as of April 1, 2000 with 
respect to the amendments to Section II(i) and Section III(b) of the 
grant notice. In addition, this exemption is effective as of April 1, 
2000 with respect to the inclusion of new Section III(d) in the grant 
notice.

FOR FURTHER INFORMATION CONTACT: Ms. Jan D. Broady, Office of Exemption 
Determinations, Pension and Welfare Benefits Administration, U.S. 
Department of Labor, telephone (202) 219-8881. (This is not a toll-free 
number.)

SUPPLEMENTARY INFORMATION: On June 1, 2000, the Department published, 
in the Federal Register, the above referenced Proposed Exemption which 
would amend and replace PTE 99-15. PTE 99-15, provides an exemption 
from certain prohibited transaction restrictions of section 406 of the 
Employee Retirement Income Security Act of 1974 (the Act) and from the 
sanctions resulting from the application of section 4975 of the 
Internal Revenue Code of 1986 (the Code), as amended, by reason of 
section 4975(c)(1) of the Code. Specifically, PTE 99-15 provides 
exemptive relief from the restrictions of section 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, for 
the purchase or redemption of shares in the Trust by an employee 
benefit plan, an individual retirement account (the IRA), a retirement 
plan for a self-employed individual, or an individual account pension 
plan that is subject to the provisions of Title I of the Act and 
established under section 403(b) of the Code (the Section 403(b) Plan; 
collectively, the Plans).
    PTE 99-15 also provides exemptive relief from the restrictions of 
section 406(b) of the Act and the sanctions resulting from the 
application of section 4975 of the Code, by reason of section 
4975(c)(1)(E) and (F) of the Code, with respect to the provision, by 
the Consulting Group of Salomon Smith Barney (the Consulting Group), of 
(1) investment advisory services or (2) an automatic reallocation 
option to an independent fiduciary of a participating Plan (the 
Independent Plan Fiduciary) which may result in such fiduciary's 
selection of a portfolio (the Portfolio) in the TRAK Program for the 
investment of Plan assets.\1\
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    \1\ PTE 99-15 also (a) described a series of corporate mergers 
which changed the names of the parties identified in two prior TRAK 
exemptions which it superseded [i.e., PTE 94-50 (59 FR 32024, June 
21, 1994) and PTE 92-77 (55 FR 45833, October 5, 1992)] and which 
would permit broader distribution of TRAK-related products; (b) 
implemented a recordkeeping reimbursement offset procedure under the 
TRAK Program; (c) adopted an automated reallocation option under the 
TRAK Program that would reduce the reallocation option under the 
TRAK Program that would reduce the Plan-level investment advisory 
fee (the Outside Fee) paid to Salomon Smith Barney by a Plan 
investor; and (d) expanded the scope of the exemption to include 
Section 403(b) Plans.
    PTE 94-50 permitted Smith, Barney Inc. (Smith Barney), Salomon 
Smith Barney's predecessor, to add a daily-traded collective 
investment fund (the GIC Fund) to the existing portfolios (the 
Portfolios) of mutual funds (the Funds) comprising the Trust, and to 
describe the various entities operating the GIC Fund. PTE 94-50 also 
replaced references to Shearson Lehman Brothers, Inc. (Shearson 
Lehman) with Smith Barney and amended and replaced PTE 92-77.
    Finally, PTE 92-77 permitted Shearson Lehman to make the TRAK 
Program available to Plans that acquired shares in the former Trust 
for TRAK Investments and allowed the Consulting Group to provide 
investment advisory services to an Independent Plan Fiduciary which 
might result in such fiduciary's selection of a Portfolio in the 
TRAK Program for the investment of Plan assets.
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    In the Proposed Exemption, Salomon Smith Barney requested a 
modification of PTE 99-15 and a replacement of that exemption with a 
new exemption for purposes of uniformity.\2\ Specifically, Salomon 
Smith Barney requested that the term ``affiliate,'' as set forth in PTE 
99-15, in Section II(h) of the General Conditions and in Section III(b) 
of the Definitions, be amended and clarified to avoid possible 
misinterpretation. In this regard, Salomon Smith Barney also requested 
that the term ``officer'' be defined and incorporated into the Proposed 
Exemption, in new Section III(d), to limit the affiliate definition to 
persons who have a significant management role. Further, Salomon Smith 
Barney requested that Section II(i) of PTE 99-15 be amended to permit 
an independent sub-adviser (the Sub-Adviser), under certain 
circumstances, to exceed the current one percent limitation on the 
acquisition of securities that are issued by Salomon Smith Barney and/
or its affiliates, notably in the Sub-Adviser's replication of a third-
party index (the Index). The Final Exemption is effective as of April 
1, 2000 with respect to the amendments to Sections II(i) and III(b) of 
the grant notice, and is effective as of July 10, 2000 with respect to 
Section III(d) of the grant notice.
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    \2\ The Department deems PTE 94-50 as having been effectively 
superseded by PTE 99-15. Therefore, the amendments described herein 
do not apply to PTE 94-50.
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    The Proposed Exemption was requested in an application filed on 
behalf of Salomon Smith Barney pursuant to section 408(a) of the Act 
and section 4975(c)(2) of the Code, and in accordance with the 
procedures (the Procedures) set forth in 29 CFR Part 2570, Subpart B 
(55 FR 32836, August 10, 1990). Effective December 31, 1978, section 
102 of Reorganization Plan No. 4 of 1978 (43 FR 47713, October 17, 
1978) transferred the authority of the Secretary of the Treasury to 
issue exemptions of the type requested to the Secretary of Labor. 
Accordingly, this Final Exemption is being issued solely by the 
Department.
    The Proposed Exemption gave interested persons an opportunity to 
comment and to request a hearing. During the comment period, the 
Department received two written comments and no requests for a hearing. 
One of the comments was submitted by the holder of an IRA which 
participates in the TRAK Program. The commenter said he concurred with 
the modifications proposed by Salomon Smith Barney to amend and clarify 
the terms ``affiliate'' and ``officer.'' The commenter also stated that 
he supported the proposed modification of the one percent limitation on 
the acquisition, by an independent Sub-Adviser, of securities that are 
issued by Salomon Smith Barney and/or its affiliates in the Sub-
Adviser's replication of an Index. The commenter explained that he 
believed the requested changes made sense and would be beneficial to 
all TRAK Program participants. Therefore, the commenter urged the 
Department to approve the Final Exemption.
    The second comment was submitted by Salomon Smith Barney. The 
comment is intended to clarify and modify the preamble (the Preamble) 
of the Proposed Exemption. Following is a discussion of Salomon Smith 
Barney's comment letter and the Department's responses with respect 
thereto.
    1. Modifications to the Proposed Exemption. On page 35139 of the 
Proposed Exemption, the first paragraph of the Preamble states that 
``As of December 31, 1998, the TRAK Program held assets that were in 
excess of $9.6 billion.'' Also, in that same paragraph, the last 
sentence states, in part, that ``one or more unaffiliated [S]ub-
advisers [is] selected by Salomon Smith Barney.'' Salomon Smith Barney 
notes that the December 31, 1998 valuation date at the beginning of the 
paragraph should be changed to September 30, 1999 and the last words of 
the paragraph should be changed from ``Salomon Smith Barney'' to ``the 
Consulting Group,'' which actually chooses the Sub-Advisers.
    In addition, on page 35140 of the Proposed Exemption, the last 
paragraph of the Preamble states, in part, that--


[[Page 54317]]


Due to the one percent limitation of Section II(i), Salomon Smith 
Barney states that active Sub-Advisers for the Consulting Group may 
not own or trade Citigroup Common Stock and they will continue to be 
prohibited from trading in Citigroup Common Stock.

Salomon Smith Barney wishes to clarify that active Sub-Advisers also do 
not trade in Citigroup Common Stock because of restrictions that apply 
under Rule 12d3-1(c) of the Investment Company Act of 1940 (the 
ICA).\3\
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    \3\ Rule 12d3-1(c) of the ICA states that an acquiring company, 
such as a registered investment company, may not acquire a general 
partnership interest or a security issued by the acquiring company's 
investment adviser, promoter, or principal underwriter, or by any 
affiliated person of such investment adviser, promoter, or principal 
underwriter.
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    On page 35141 of the Proposed Exemption, the third sentence of the 
first ``carry-over'' paragraph of the Preamble identifies two Funds 
which currently comply with the one percent limitation on investments 
in Citigroup Common Stock. These Funds are the ``Consulting Group 
Capital Markets Large Cap Value Fund'' and the ``Large Cap Growth 
Consulting Group Capital Markets Fund.'' However, Salomon Smith Barney 
suggests, for the purpose of clarity, that the formal names of the 
subject Funds be specified. Thus, Salomon Smith Barney explains that 
the proper names for the Funds are the ``Consulting Group Capital 
Markets Funds Large Capitalization Value Equity Investments'' and the 
``Consulting Group Capital Markets Funds Large Capitalization Growth 
Investments.'' Similarly, in the next paragraph of the Proposed 
Exemption on page 35141 of the Preamble, Salomon Smith Barney wishes to 
clarify that the formal name for the S&P Fund designated as the 
``Consulting Group Capital Markets S&P 500 Index Investment Fund 
Portfolio'' is the ``Consulting Group Capital Markets S&P Index 
Investment Fund Portfolio.''
    In response to these comments, the Department acknowledges the 
foregoing clarifications to the names for the Funds identified in the 
Preamble of the Proposed Exemption.
    2. General Information. As a matter of general information, Salomon 
Smith Barney states that beginning with the billing cycle commencing on 
January 1, 2001, the Outside Fee charged to 401(k) Plan clients will be 
calculated on the average daily asset value for the quarter for which 
the fee is billed rather than the asset value on the last day of the 
quarter. Salomon Smith Barney explains that this change generally 
conforms to the billing procedure in the industry generally and is 
believed to be more equitable since it reflects the asset value over 
time rather than on a single day during a calendar quarter which may 
not be representative of the account balance during the period.
    In response to this comment, the Department notes Salomon Smith 
Barney's modification to the billing procedure in the calculation of 
the Outside Fee for participants in the TRAK Program that are section 
401(k) Plans.
    For further information regarding the comments or other matters 
discussed herein, interested persons are encouraged to obtain copies of 
the exemption application files (Exemption Application Nos. D-10809 and 
D-10865) the Department is maintaining in this case. The complete 
application files, as well as all supplemental submissions received by 
the Department, are made available for public inspection in the Public 
Documents Room of the Pension and Welfare Benefits Administration, Room 
N-5638, U.S. Department of Labor, 200 Constitution Avenue, N.W., 
Washington, D.C. 20210.
    Accordingly, after giving full consideration to the entire record, 
including the written comments received, the Department has decided to 
grant the exemption subject to the modifications and clarifications 
described above.

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 section 4975(c)(2) of the Code does 
not relieve a fiduciary or other party in interest or disqualified 
person from certain other provisions of the Act and the Code, including 
any prohibited transaction provisions to which the exemption does not 
apply and the general fiduciary responsibility provisions of section 
404 of the Act, which require, among other things, a fiduciary to 
discharge his or her duties respecting the plan solely in the interest 
of the participants and beneficiaries of the plan and in a prudent 
fashion in accordance with section 404(a)(1)(B) of the Act; nor does it 
affect the requirements of section 401(a) of the Code that the plan 
operate for the exclusive benefit of the employees of the employer 
maintaining the plan and their beneficiaries;
    (2) The exemption will extend to transactions prohibited under 
section 406(b)(3) of the Act and section 4975(c)(1)(F) of the Code;
    (3) In accordance with section 408(a) of the Act and section 
4975(c)(2) of the Code, and the Procedures cited above, and based upon 
the entire record, the Department finds that the exemption is 
administratively feasible, in the interest of the plan and of its 
participants and beneficiaries and protective of the rights of 
participants and beneficiaries of the plan;
    (4) The exemption will be supplemental to, and not in derogation 
of, any other provisions of the Act and the Code, including statutory 
or administrative exemptions. 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
    (5) The exemption is subject to the express condition that the 
Summary of Facts and Representations set forth in the notice of 
proposed exemption relating to PTE 99-15, as amended by this Final 
Exemption, accurately describe, where relevant, the material terms of 
the transactions to be consummated pursuant to this exemption.

Exemption

    Under the authority of section 408(a) of the Act and section 
4975(c)(2) of the Code and in accordance with the Procedures set forth 
above, the Department hereby amends PTE 99-15 as follows:
Section I. Covered Transactions
    A. The restrictions of section 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, to 
the purchase or redemption of shares by an employee benefit plan, an 
individual retirement account (the IRA), a retirement plan for self-
employed individuals (the Keogh Plan), or an individual account pension 
plan that is subject to the provisions of Title I of the Act and 
established under section 403(b) of the Code (the Section 403(b) Plan; 
collectively, the Plans) in the Trust for Consulting Group Capital 
Market Funds (the Trust), established by Salomon Smith Barney, in 
connection with such Plans' participation in the TRAK Personalized 
Investment Advisory Service product (the TRAK Program).
    B. The restrictions of section 406(b) of the Act and the sanctions 
resulting from the application of section 4975 of the Code, by reason 
of section 4975(c)(1)(E) and (F) of the Code, shall not apply, to the 
provision, by the Consulting Group, of (1) investment advisory services 
or (2) an automatic reallocation option (the Automatic Reallocation 
Option) to an

[[Page 54318]]

independent fiduciary of a participating Plan (the Independent Plan 
Fiduciary), which may result in such fiduciary's selection of a 
portfolio (the Portfolio) in the TRAK Program for the investment of 
Plan assets.
    This exemption is subject to the following conditions that are set 
forth below in Section II.
Section II. General Conditions
    (a) The participation of Plans in the TRAK Program will be approved 
by an Independent Plan Fiduciary. For purposes of this requirement, an 
employee, officer or director of Salomon Smith Barney and/or its 
affiliates covered by an IRA not subject to Title I of the Act will be 
considered an Independent Plan Fiduciary with respect to such IRA.
    (b) The total fees paid to the Consulting Group and its affiliates 
will constitute no more than reasonable compensation.
    (c) No Plan will pay a fee or commission by reason of the 
acquisition or redemption of shares in the Trust.
    (d) The terms of each purchase or redemption of Trust shares shall 
remain at least as favorable to an investing Plan as those obtainable 
in an arm's length transaction with an unrelated party.
    (e) The Consulting Group will provide written documentation to an 
Independent Plan Fiduciary of its recommendations or evaluations based 
upon objective criteria.
    (f) Any recommendation or evaluation made by the Consulting Group 
to an Independent Plan Fiduciary will be implemented only at the 
express direction of such Independent Plan Fiduciary, provided, 
however, that--
    (1) If such Independent Plan Fiduciary shall have elected in 
writing (the Election), on a form designated by Salomon Smith Barney 
from time to time for such purpose, to participate in the Automatic 
Reallocation Option under the TRAK Program, the affected Plan or 
participant account will be automatically reallocated whenever the 
Consulting Group modifies the particular asset allocation 
recommendation which the Independent Plan Fiduciary has chosen. Such 
Election shall continue in effect until revoked or terminated by the 
Independent Plan Fiduciary in writing.
    (2) Except as set forth below in paragraph II(f)(3), at the time of 
a change in the Consulting Group's asset allocation recommendation, 
each account based upon the asset allocation model (the Allocation 
Model) affected by such change would be adjusted on the business day of 
the release of the new Allocation Model by the Consulting Group, except 
to the extent that market conditions, and order purchase and redemption 
procedures, may delay such processing through a series of purchase and 
redemption transactions to shift assets among the affected Portfolios.
    (3) If the change in the Consulting Group's asset allocation 
recommendation exceeds an increase or decrease of more than 10 percent 
in the absolute percentage allocated to any one investment medium 
(e.g., a suggested increase in a 15 percent allocation to greater than 
25 percent, or a decrease of such 15 percent allocation to less than 5 
percent), Salomon Smith Barney will send out a written notice (the 
Notice) to all Independent Plan Fiduciaries whose current investment 
allocation would be affected, describing the proposed reallocation and 
the date on which such allocation is to be instituted (the Effective 
Date). If the Independent Plan Fiduciary notifies Salomon Smith Barney, 
in writing, at any time within the period of 30 calendar days prior to 
the proposed Effective Date that such fiduciary does not wish to follow 
such revised asset allocation recommendation, the Allocation Model will 
remain at the current level, or at such other level as the Independent 
Plan Fiduciary then expressly designates, in writing. If the 
Independent Plan Fiduciary does not affirmatively ``opt out'' of the 
new Consulting Group recommendation, in writing, prior to the proposed 
Effective Date, such new recommendation will be automatically effected 
by a dollar-for-dollar liquidation and purchase of the required amounts 
in the respective account.
    (4) An Independent Plan Fiduciary will receive a trade confirmation 
of each reallocation transaction. In this regard, for all Plan 
investors other than Section 404(c) Plan accounts (i.e., 401(k) Plan 
accounts), Salomon Smith Barney will mail trade confirmations on the 
next business day after the reallocation trades are executed. In the 
case of Section 404(c) Plan participants, notification will depend upon 
the notification provisions agreed to by the Plan recordkeeper.
    (g) The Consulting Group will generally give investment advice in 
writing to an Independent Plan Fiduciary with respect to all available 
Portfolios. However, in the case of a Plan providing for participant-
directed investments (the Section 404(c) Plan), the Consulting Group 
will provide investment advice that is limited to the Portfolios made 
available under the Plan.
    (h) Any sub-adviser (the Sub-Adviser) that acts for the Trust to 
exercise investment discretion over a Portfolio will be independent of 
Salomon Smith Barney and its affiliates.
    (i) Immediately following the acquisition by a Portfolio of any 
securities that are issued by Salomon Smith Barney and/or its 
affiliates, such as Citigroup Inc. common stock (the Citigroup Common 
Stock), the percentage of that Portfolio's net assets invested in such 
securities will not exceed one percent. However, this percentage 
limitation may be exceeded if--
    (1) The amount held by a Sub-Adviser in managing a Portfolio is 
held in order to replicate an established third party index (the 
Index).
    (2) The Index represents the investment performance of a specific 
segment of the public market for equity securities in the United States 
and/or foreign countries. The organization creating the Index must be--
    (i) Engaged in the business of providing financial information;
    (ii) A publisher of financial news information; or
    (iii) A public stock exchange or association of securities dealers.
    The Index is created and maintained by an organization independent 
of Salomon Smith Barney and its affiliates and is a generally-accepted 
standardized Index of securities which is not specifically tailored for 
use by Salomon Smith Barney and its affiliates.
    (3) The acquisition or disposition of Citigroup Common Stock does 
not include any agreement, arrangement or understanding regarding the 
design or operation of the Portfolio acquiring the Citigroup Common 
Stock, which is intended to benefit Salomon Smith Barney or any party 
in which Salomon Smith Barney may have an interest.
    (4) The Independent Plan Fiduciary authorizes the investment of a 
Plan's assets in an Index Fund which purchases and/or holds Citigroup 
Common Stock and the Sub-Adviser is responsible for voting any shares 
of Citigroup Common Stock that are held by an Index Fund on any matter 
in which shareholders of Citigroup Common Stock are required or 
permitted to vote.
    (j) The quarterly investment advisory fee that is paid by a Plan to 
the Consulting Group for investment advisory services rendered to such 
Plan will be offset by such amount as is necessary to assure that the 
Consulting Group retains no more than 20 basis points from any 
Portfolio (with the exception of the Government Money Investments 
Portfolio and the GIC Fund Portfolio for which the Consulting Group and 
the Trust will retain no

[[Page 54319]]

investment management fee) which contains investments attributable to 
the Plan investor.
    (k) With respect to its participation in the TRAK Program prior to 
purchasing Trust shares,
    (1) Each Plan will receive the following written or oral 
disclosures from the Consulting Group:
    (A) A copy of the Prospectus for the Trust discussing the 
investment objectives of the Portfolios comprising the Trust, the 
policies employed to achieve these objectives, the corporate 
affiliation existing between the Consulting Group, Salomon Smith Barney 
and its subsidiaries and the compensation paid to such entities.\4\
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    \4\ The fact that certain transactions and fee arrangements are 
the subject of an administrative exemption does not relieve the 
Independent Plan Fiduciary from the general fiduciary responsibility 
provisions of section 404 of the Act. In this regard, the Department 
expects the Independent Plan Fiduciary to consider carefully the 
totality of the fees and expenses to be paid by the Plan, including 
the fees paid directly to Salomon Smith Barney or to other third 
parties.
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    (B) Upon written or oral request to Salomon Smith Barney, a 
Statement of Additional Information supplementing the Prospectus which 
describes the types of securities and other instruments in which the 
Portfolios may invest, the investment policies and strategies that the 
Portfolios may utilize and certain risks attendant to those 
investments, policies and strategies.
    (C) A copy of the investment advisory agreement between the 
Consulting Group and such Plan relating to participation in the TRAK 
Program and, if applicable, informing Plan investors of the Automatic 
Reallocation Option.
    (D) Upon written request of Salomon Smith Barney, a copy of the 
respective investment advisory agreement between the Consulting Group 
and the Sub-Advisers.
    (E) In the case of a Section 404(c) Plan, if required by the 
arrangement negotiated between the Consulting Group and the Plan, an 
explanation by a Salomon Smith Barney Financial Consultant (the 
Financial Consultant) to eligible participants in such Plan, of the 
services offered under the TRAK Program and the operation and 
objectives of the Portfolios.
    (F) A copy of the Proposed Exemption and the Final Exemption 
pertaining to the exemptive relief described herein.
    (2) If accepted as an investor in the TRAK Program, an Independent 
Plan Fiduciary of an IRA or Keogh Plan, is required to acknowledge, in 
writing, prior to purchasing Trust shares that such fiduciary has 
received copies of the documents described above in subparagraph (k)(1) 
of this Section.
    (3) With respect to a Section 404(c) Plan, written acknowledgement 
of the receipt of such documents will be provided by the Independent 
Plan Fiduciary (i.e., the Plan administrator, trustee or named 
fiduciary, as the recordholder of Trust shares). Such Independent Plan 
Fiduciary will be required to represent in writing to Salomon Smith 
Barney that such fiduciary is (a) independent of Salomon Smith Barney 
and its affiliates and (b) knowledgeable with respect to the Plan in 
administrative matters and funding matters related thereto, and able to 
make an informed decision concerning participation in the TRAK Program.
    (4) With respect to a Plan that is covered under Title I of the 
Act, where investment decisions are made by a trustee, investment 
manager or a named fiduciary, such Independent Plan Fiduciary is 
required to acknowledge, in writing, receipt of such documents and 
represent to Salomon Smith Barney that such fiduciary is (a) 
independent of Salomon Smith Barney and its affiliates, (b) capable of 
making an independent decision regarding the investment of Plan assets 
and (c) knowledgeable with respect to the Plan in administrative 
matters and funding matters related thereto, and able to make an 
informed decision concerning participation in the TRAK Program.
    (l) Subsequent to its participation in the TRAK Program, each Plan 
receives the following written or oral disclosures with respect to its 
ongoing participation in the TRAK Program:
    (1) The Trust's semi-annual and annual report which will include 
financial statement for the Trust and investment management fees paid 
by each Portfolio.
    (2) A written quarterly monitoring statement containing an analysis 
and an evaluation of a Plan investor's account to ascertain whether the 
Plan's investment objectives have been met and recommending, if 
required, changes in Portfolio allocations.
    (3) If required by the arrangement negotiated between the 
Consulting Group and a Section 404(c) Plan, a quarterly, detailed 
investment performance monitoring report, in writing, provided to an 
Independent Plan Fiduciary of such Plan showing Plan level asset 
allocations, Plan cash flow analysis and annualized risk adjusted rates 
of return for Plan investments. In addition, if required by such 
arrangement, Financial Consultants will meet periodically with 
Independent Plan Fiduciaries of Section 404(c) Plans to discuss the 
report as well as with eligible participants to review their accounts' 
performance.
    (4) If required by the arrangement negotiated between the 
Consulting Group and a Section 404(c) Plan, a quarterly participant 
performance monitoring report provided to a Plan participant which 
accompanies the participant's benefit statement and describes the 
investment performance of the Portfolios, the investment performance of 
the participant's individual investment in the TRAK Program, and gives 
market commentary and toll-free numbers that will enable the 
participant to obtain more information about the TRAK Program or to 
amend his or her investment allocations.
    (5) On a quarterly and annual basis, written disclosures to all 
Plans of the (a) percentage of each Portfolio's brokerage commissions 
that are paid to Salomon Smith Barney and its affiliates and (b) the 
average brokerage commission per share paid by each Portfolio to 
Salomon Smith Barney and its affiliates, as compared to the average 
brokerage commission per share paid by the Trust to brokers other than 
Salomon Smith Barney and its affiliates, both expressed as cents per 
share.
    (m) Salomon Smith Barney shall maintain, for a period of six years, 
the records necessary to enable the persons described in paragraph (n) 
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 Salomon Smith Barney and/or its affiliates, the records are lost or 
destroyed prior to the end of the six year period, and (2) no party in 
interest other than Salomon Smith Barney 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 (n) below.
    (n)(1) Except as provided in section (2) of this paragraph and 
notwithstanding any provisions of subparagraphs (a)(2) and (b) of 
section 504 of the Act, the records referred to in paragraph (m) of 
this Section II shall be unconditionally available at their customary 
location during normal business hours by:
    (A) Any duly authorized employee or representative of the 
Department or the Service;
    (B) Any fiduciary of a participating Plan or any duly authorized 
representative of such fiduciary;
    (C) Any contributing employer to any participating Plan or any duly

[[Page 54320]]

authorized employee representative of such employer; and
    (D) Any participant or beneficiary of any participating Plan, or 
any duly authorized representative of such participant or beneficiary.
    (2) None of the persons described above in subparagraphs (B)-(D) of 
this paragraph (n) shall be authorized to examine the trade secrets of 
Salomon Smith Barney or commercial or financial information which is 
privileged or confidential.
Section III. Definitions
    For purposes of this exemption:
    (a) The term ``Salomon Smith Barney'' means Salomon Smith Barney 
Inc. and any affiliate of Salomon Smith Barney, as defined in paragraph 
(b) of this Section III.
    (b) An ``affiliate'' of Salomon Smith Barney includes--
    (1) Any person directly or indirectly through one or more 
intermediaries, controlling, controlled by, or under common control 
with Salomon Smith Barney (For purposes of this subparagraph, the term 
``control'' means the power to exercise a controlling influence over 
the management or policies of a person other than an individual);
    (2) Any individual who is an officer (as defined in Section III(d) 
hereof), director or partner in Salomon Smith Barney or a person 
described in subparagraph (b)(1);
    (3) Any corporation or partnership of which Salomon Smith Barney, 
or an affiliate described in subparagraphs(b)(1), is a 10 percent or 
more partner or owner; and
    (4) Any corporation or partnership of which any individual which is 
an officer or director of Salomon Smith Barney is a 10 percent or more 
partner or owner.
    (c) An ``Independent Plan Fiduciary'' is a Plan fiduciary which is 
independent of Salomon Smith Barney and its affiliates and is either--
    (1) A Plan administrator, sponsor, trustee or named fiduciary, as 
the recordholder of Trust shares under a Section 404(c) Plan;
    (2) A participant in a Keogh Plan;
    (3) An individual covered under (i) a self-directed IRA or (ii) a 
Section 403(b) Plan, which invests in Trust shares;
    (4) A trustee, investment manager or named fiduciary responsible 
for investment decisions in the case of a Title I Plan that does not 
permit individual direction as contemplated by Section 404(c) of the 
Act; or
    (5) A participant in a Plan, such as a Section 404(c) Plan, who is 
permitted under the terms of such Plan to direct, and who elects to 
direct, the investment of assets of his or her account in such Plan.
    (d) The term ``officer'' means a president, any vice president in 
charge of a principal business unit, division or function (such as 
sales, administration or finance), or any other officer who performs a 
policymaking function for the entity.
Section IV. Effective Dates
    This exemption is effective as of April 1, 2000 with respect to the 
amendments to Section II(i) and Section III(b) of this grant notice. In 
addition, this exemption is effective as of April 1, 2000 with respect 
to the inclusion of new Section III(d) in the grant notice.
    The availability of this exemption is subject to the express 
condition that the material facts and representations contained in the 
application for exemption are true and complete and accurately describe 
all material terms of the transactions. In the case of continuing 
transactions, if any of the material facts or representations described 
in the applications change, the exemption will cease to apply as of the 
date of such change. In the event of any such change, an application 
for a new exemption must be made to the Department.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant PTE 92-77, PTE 94-50 and 
PTE 99-15, refer to the proposed exemptions and the grant notices which 
are cited above.

    Signed at Washington, D.C., this 31st day of August, 2000.
Ivan L. Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits 
Administration, U.S. Department of Labor.
[FR Doc. 00-22853 Filed 9-6-00; 8:45 am]
BILLING CODE 4510-29-P