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EBSA Notices

Grant of Individual Exemptions; Deutsche Bank and Its Affiliates (Collectively, Deutsche Bank of the Applicants)   [11/24/2000]
[PDF]
[Federal Register: November 24, 2000 (Volume 65, Number 227)]
[Notices]               
[Page 70618-70625]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24no00-97]                         

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DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

[Prohibited Transaction Exemption 2000-59; Exemption Application No. D-
10770, 
et al.]

 
Grant of Individual Exemptions; Deutsche Bank and Its Affiliates 
(Collectively, Deutsche Bank of the Applicants)

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.

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.

[[Page 70619]]

Deutsche Bank AG and Its Affiliates (Collectively, Deutsche Bank or 
the Applicants) Located in Frankfurt, Germany

[Prohibited Transaction Exemption 2000-59; Exemption Application No. D-
10770]

Exemption

Section I--Retroactive Exemption for the Acquisition, Holding and 
Disposition of Deutsche Bank AG 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 June 4, 1999 until Novmeber 24, 2000, to 
the acquisition, holding and disposition of the common stock of 
Deutsche Bank AG (the Deutsche Bank AG Stock) by Index and Model-Driven 
Funds managed by Deutsche Bank, provided that the following conditions 
and the general conditions in Section III are met:
    (a) The acquisition or disposition of the Deutsche Bank AG 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 Deutsche 
Bank AG Stock which is intended to benefit Deutsche Bank or any party 
in which Deutsche Bank may have an interest.
    (b) All aggregate daily purchases of Deutsche Bank AG 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 Deutsche 
Bank AG 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 Deutsche Bank AG 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 Deutsche Bank AG 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 Deutsche Bank 
that is subject to regulation and supervision by the Deutsche 
Bundesbank and the Bundesaufsichtsamt fuer das Kreditwesen (the BAK), 
the Bundesaufsichtsamt fur den Wertpapierhandel (the BAWe), or another 
applicable regulatory authority (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 Deutsche Bank 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 BAK, 
the BAWe, or another applicable regulatory authority.
    (d) No transactions by a Fund involve purchases from, or sales to, 
Deutsche Bank (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 Deutsche 
Bank AG Stock issued and outstanding at any time is held in the 
aggregate by Index and Model-Driven Funds managed by Deutsche Bank.
    (f) Deutsche Bank AG 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 Deutsche Bank authorizes the 
investment of such plan's assets in an Index or Model-Driven Fund which 
purchases and/or holds Deutsche Bank AG Stock, pursuant to the 
procedures described in the notice of proposed exemption published on 
September 19, 2000 (65 FR 56708, 56714), other than in the case of an 
employee benefit plan sponsored or maintained by Deutsche Bank and/or 
an Affiliate for its own employees (a Deutsche Bank Plan).
    (h) A fiduciary independent of Deutsche Bank directs the voting of 
the Deutsche Bank AG Stock held by an Index or Model-Driven Fund on any 
matter in which shareholders of Deutsche Bank AG Stock are required or 
permitted to vote.
    (i) No more than ten (10) percent of the assets of any Fund that 
acquires and holds Deutsche Bank AG Stock is comprised of assets of any 
Deutsche Bank Plan(s) for which Deutsche Bank exercises investment 
discretion.
Section II--Prospective Exemption for the Acquisition, Holding and 
Disposition of Deutsche Bank 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 Deutsche Bank AG Stock or the 
common stock of an affiliate of Deutsche Bank AG (Deutsche Bank 
Affiliate Stock) by Index and Model-Driven Funds managed by Deutsche 
Bank, provided that the following conditions and the general conditions 
in Section II are met:
    (a) The acquisition or disposition of Deutsche Bank AG Stock or 
Deutsche Bank Affiliate Stock (collectively, Deutsche Bank 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 Deutsche 
Bank Stock which is intended to benefit Deutsche Bank or any party in 
which Deutsche Bank may have an interest.
    (b) Whenever Deutsche Bank 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 
Deutsche Bank 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;
    (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

[[Page 70620]]

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 Deutsche Bank 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 Deutsche Bank 
that is either registered under the '34 Act, and thereby subject to 
regulation by the SEC, or subject to regulation and supervision by the 
BAK, the BAWe, 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 Deutsche Bank Stock cannot 
be acquired within 10 business days from the date of the event which 
causes the particular Fund to require Deutsche Bank Stock, Deutsche 
Bank appoints a fiduciary which is independent of Deutsche Bank to 
design acquisition procedures and monitor Deutsche Bank's compliance 
with such procedures.
    (c) Subsequent to acquisitions necessary to bring a Fund's holdings 
of Deutsche Bank Stock to its specified weighting in the index or model 
pursuant to the restrictions described in paragraph (b) above, all 
aggregate daily purchases of Deutsche Bank 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 Deutsche 
Bank 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 Deutsche Bank 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 Deutsche Bank 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 Deutsche Bank and is either registered under the '34 
Act, and thereby subject to regulation by the SEC, or subject to 
regulation and supervision by the BAK, the BAWe, 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 Deutsche Bank that is subject to regulation by either the SEC, the 
BAK, the BAWe, 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, 
Deutsche Bank (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 
Deutsche Bank AG Stock or any Deutsche Bank Affiliate Stock, that is 
issued and outstanding at any time, is held in the aggregate by Index 
and Model-Driven Funds managed by Deutsche Bank.
    (g) Deutsche Bank 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 Deutsche Bank authorizes the 
investment of such plan's assets in an Index or Model-Driven Fund which 
purchases and/or holds Deutsche Bank Stock, pursuant to the procedures 
described in the notice of proposed exemption published on September 
19, 2000 (65 FR 56708, 56714), other than with respect to a Deutsche 
Bank Plan.
    (i) A fiduciary independent of Deutsche Bank directs the voting of 
the Deutsche Bank Stock held by an Index or Model-Driven Fund on any 
matter in which shareholders of Deutsche Bank Stock are required or 
permitted to vote.
    (j) No more than ten (10) percent of the assets of any Fund that 
acquires and holds Deutsche Bank Stock is comprised of assets of 
Deutsche Bank Plan(s) for which Deutsche Bank exercises investment 
discretion.
Section III--General Conditions
    (a) Deutsche Bank 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 Deutsche Bank, 
the records are lost or destroyed prior to the end of the six-year 
period, and (2) no party in interest other than Deutsche Bank 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.
    (2) None of the persons described in subparagraphs (B) through (D) 
of this paragraph (b) shall be authorized to examine trade secrets of 
Deutsche Bank 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 Deutsche Bank, 
in which one or more investors invest, and--

[[Page 70621]]

    (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 Deutsche Bank does not use its discretion, or data 
within their 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 Deutsche Bank or any party in which Deutsche Bank may have an 
interest.
    (b) The term ``Model-Driven Fund'' means any investment fund, 
account or portfolio sponsored, maintained, trusteed, or managed by 
Deutsche Bank, 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 Deutsche Bank, 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 Deutsche Bank 
or any party in which Deutsche Bank 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 Deutsche Bank; and,
    (3) The index is a generally accepted standardized index of 
securities which is not specifically tailored for the use of Deutsche 
Bank.
    (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 Deutsche Bank 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 ``Deutsche Bank'' refers to Deutsche Bank AG or an 
Affiliate, as defined below in paragraph (g).
    (g) The term ``Affiliate'' means, with respect to Deutsche Bank AG, 
an entity which, directly or indirectly, through one or more 
intermediaries, is controlled by Deutsche Bank AG.
    (h) An ``affiliate'' of Deutsche Bank 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 U.S.C. 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 U.S.C. 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 June 4, 1999, 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 September 19, 2000 at 65 
FR 56708.

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

John L. Rust Co. Profit Sharing Plan (the Plan) Located in 
Albuquerque, New Mexico

[Prohibited Transaction Exemption 2000-60; Exemption Application No. D-
10877]

Exemption

    The restrictions of sections 406(a), 406(b)(1) and (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)(A) through (E) of the Code, 
shall not apply to (1) The purchases by the Plan of certain leases of 
equipment (the Leases) from John L. Rust Co. (Rust), the Plan sponsor 
and a party in interest with respect to the Plan, and (2) the agreement 
by Rust to indemnify the Plan against any loss relating to the Leases 
and also to repurchase any Leases that are in default in accordance 
with paragraph (E) below, provided that the following conditions are 
met:
    A. Any sale of Leases to the Plan is on terms at least as favorable 
to the Plan as an arm's length transaction with an unrelated third 
party.
    B. Subsequent to September 22, 2000, the acquisition of a Lease 
from Rust shall not cause the Plan to hold immediately following the 
acquisition (1) more than 25% of the current value (as that term is 
defined in section 3(26) of the Act) \1\ of Plan assets in customer 
notes (Notes) and Leases sold by Rust or (2) more than 10% of Plan 
assets in the

[[Page 70622]]

aggregate of Leases with and Notes of any one entity.
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    \1\ According to section 3(26) of the Act, the term ``current 
Value'' means fair market value where available and otherwise the 
fair market value as determined in good faith by a trustee or a 
named fiduciary pursuant to the terms of the plan and in accordance 
with regulations of the Secretary [of Labor], assuming an orderly 
liquidation at the time of such determination.
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    C. Prior to the purchase of each Lease, an independent, qualified 
fiduciary determines that the purchase is appropriate and suitable for 
the Plan and that any Lease purchase is a fair market value 
transaction.
    D. The independent fiduciary, on behalf of the Plan, monitors the 
terms of the Leases and the exemption and takes whatever action is 
necessary to enforce the rights of the Plan.
    E. Upon default by the lessee on any payment due under a Lease, 
Rust repurchases the Lease from the Plan at the payout value \2\ as of 
the date of the default, without discount, and indemnifies the Plan for 
any loss suffered. The occurrence of any of the following events shall 
be considered events of default for purposes of this section: (1) The 
lessee's failure to pay any amounts due hereunder within five days 
after receipt of written notice from the Plan's independent fiduciary, 
or the lessee's failure to pay any amounts due hereunder within 30 days 
after payment becomes past due, if earlier; (2) the lessee's failure to 
perform any other obligation under this agreement within ten days of 
receipt of written notice from the Plan's independent fiduciary; (3) 
abandonment of the equipment by the lessee; (4) the lessee's cessation 
of business; (5) the commencement of any proceeding in bankruptcy, 
receivership or insolvency or assignment for the benefit of creditors 
by the lessee; (6) false representation by the lessee as to its credit 
or financial standing; (7) attachment or execution levied on lessee's 
property; or (8) use of the equipment by third parties without lessor's 
prior written consent.
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    \2\ ``Payout value'' of a Lease is defined as the price that the 
lessee would pay at any point in time to obtain title to the leased 
property.
---------------------------------------------------------------------------

    F. The Plan receives adequate security for the Lease. For purposes 
of this exemption, the term adequate security means that the Lease is 
secured by a perfected security interest in the leased property which 
will name the Plan as the secured party.
    G. Insurance against loss or damage to the leased property from 
fire or other hazards is procured and maintained by the lessee and the 
proceeds from such insurance are assigned to the Plan.
    H. The Plan maintains for the duration of any Lease which is sold 
to the Plan pursuant to this exemption, records necessary to determine 
whether the conditions of this exemption have been met. The Plan 
continues to maintain the records for a period of six years following 
the expiration of the Lease or the disposition by the Plan of the 
Lease. The records referred to above must be unconditionally available 
at their customary location for examination, for purposes reasonably 
related to protecting rights under the Plan, during normal business 
hours by the Internal Revenue Service, the Department, Plan 
participants, any employee organization any of whose members are 
covered by the Plan, or any duly authorized employee or representative 
of the above described persons.
    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 September 22, 2000 at 65 
FR 57394.

Temporary Nature of Exemption

EFFECTIVE DATES: This exemption is temporary and will be effective from 
September 21, 2000 through September 21, 2005 with respect to the 
Plan's purchases of Leases. The Plan may hold the Leases acquired 
pursuant to the terms of the exemption subsequent to the end of the 
five year period.

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

Maple Partners Financial Group, Inc. (Maple) Located in Toronto, 
Ontario, Canada

[Prohibited Transaction Exemption 2000-61; Exemption Application No. D-
10905]

Exemption

Section I--Transactions
    A. The restrictions of section 406(a)(1)(A) through (D) 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 May 31, 2000, to any purchase or sale of 
securities between certain non-U.S. affiliates of Maple, which are 
foreign broker-dealers or banks (the Foreign Affiliates, as defined 
below) and employee benefit plans (the Plans) with respect to which the 
Foreign Affiliates are parties in interest, including options written 
by a Plan, Maple, or a Foreign Affiliate, provided that the following 
conditions, and the General Conditions of Section II, are satisfied:
    (1) The Foreign Affiliate customarily purchases and sells 
securities for its own account in the ordinary course of its business 
as a broker-dealer or bank;
    (2) The terms of any transaction are at least as favorable to the 
Plan as those the Plan could obtain in a comparable arm's length 
transaction with an unrelated party; and
    (3) Neither the Foreign Affiliate nor an affiliate thereof has 
discretionary authority or control with respect to the investment of 
the Plan assets involved in the transaction, or renders investment 
advice [within the meaning of 29 CFR 2510. 3-21(c)] with respect to 
those assets, and the Foreign Affiliate is a party in interest or 
disqualified person with respect to the Plan assets involved in the 
transaction solely by reason of section 3(14)(B) of the Act or section 
4975(e)(2)(B) of the Code, or by reason of a relationship to a person 
described in such sections. For purposes of this paragraph, the Foreign 
Affiliate shall not be deemed to be a fiduciary with respect to a Plan 
solely by reason of providing securities custodial services for a Plan.
    B. The restrictions of sections 406(a)(1)(A) through (D) 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)(A) through 
(D) of the Code, shall not apply, effective May 31, 2000, to any 
extension of credit to the Plan by the Foreign Affiliate, to permit the 
settlement of securities transactions, regardless of whether they are 
effected on an agency or a principal basis, or in connection with the 
writing of options contracts, provided that the following conditions 
and the General Conditions of Section II, are satisfied:
    (1) The Foreign Affiliate is not a fiduciary with respect to the 
Plan assets involved in the transaction, unless no interest or other 
consideration is received by the Foreign Affiliate or an affiliate 
thereof, in connection with such extension of credit; and
    (2) Any extension of credit would be lawful under the Securities 
Exchange Act of 1934 (the 1934 Act) and any rules or regulations 
thereunder, if the 1934 Act, rules, or regulations were applicable.
    C. The restrictions of section 406(a)(1)(A) through (D) 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 May 31, 2000, to the lending of securities to the 
Foreign Affiliates by the Plans, provided that the following 
conditions, and the General Conditions of Section II, are satisfied:
    (1) Neither the Foreign Affiliate nor an affiliate thereof has 
discretionary authority or control with respect to the investment of 
the Plan assets involved in the transaction, or renders investment 
advice [within the meaning of 29 CFR

[[Page 70623]]

2510. 3-21(c)] with respect to those assets;
    (2) The Plan receives from the Foreign Affiliate (by physical 
delivery, by book entry in a securities depository, wire transfer, or 
similar means) by the close of business on the day the loaned 
securities are delivered to the Foreign Affiliate, collateral 
consisting of cash, securities issued or guaranteed by the U.S. 
Government or its agencies or instrumentalities, irrevocable U.S. bank 
letters of credit issued by persons other than the Foreign Affiliate or 
an affiliate of the Foreign Affiliate, or any combination thereof. All 
collateral shall be in U.S. dollars, or dollar-denominated securities 
or bank letters of credit, and shall be held in the United States;
    (3) The collateral has, as of the close of business on the 
preceding business day, a market value equal to at least 100 percent of 
the then market value of the loaned securities (or, in the case of 
letters of credit, a stated amount equal to same);
    (4) The loan is made pursuant to a written loan agreement (the Loan 
Agreement), which may be in the form of a master agreement covering a 
series of securities lending transactions, and which contains terms at 
least as favorable to the Plan as those the Plan could obtain in a 
comparable arm's length transaction with an unrelated party;
    (5) In return for lending securities, the Plan either (a) receives 
a reasonable fee, which is related to the value of the borrowed 
securities and the duration of the loan, or (b) has the opportunity to 
derive compensation through the investment of cash collateral. In the 
latter case, the Plan may pay a loan rebate or similar fee to the 
Foreign Affiliate, if such fee is not greater than what the Plan would 
pay in a comparable arm's length transaction with an unrelated party;
    (6) The Plan receives at least the equivalent of all distributions 
on the borrowed securities made during the term of the loan, including, 
but not limited to, cash dividends, interest payments, shares of stock 
as a result of stock splits, and rights to purchase additional 
securities, that the Plan would have received (net of applicable tax 
withholdings) \3\ had it remained the record owner of such securities;
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    \3\ The Department notes the applicant's representation that 
dividends and other distributions on foreign securities payable to a 
lending Plan may be subject to foreign tax withholdings and that the 
Foreign Affiliate will always put the Plan back in at least as good 
a position as it would have been in had it not loaned the 
securities.
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    (7) If the market value of the collateral as of the close of 
trading on a business day falls below 100 percent of the market value 
of the borrowed securities as of the close of trading on that day, the 
Foreign Affiliate delivers additional collateral, by the close of 
business on the following business day, to bring the level of the 
collateral back to at least 100 percent. However, if the market value 
of the collateral exceeds 100 percent of the market value of the 
borrowed securities, the Foreign Affiliate may require the Plan to 
return part of the collateral to reduce the level of the collateral to 
100 percent;
    (8) Before entering into a Loan Agreement, the Foreign Affiliate 
furnishes to the independent Plan fiduciary (a) the most recent 
available audited statement of the Foreign Affiliate's financial 
condition, (b) the most recent available unaudited statement of its 
financial condition (if more recent than the audited statement), and 
(c) a representation that, at the time the loan is negotiated, there 
has been no material adverse change in its financial condition that has 
not been disclosed since the date of the most recent financial 
statement furnished to the independent Plan fiduciary. Such 
representation may be made by the Foreign Affiliate's agreeing that 
each loan of securities shall constitute a representation that there 
has been no such material adverse change;
    (9) The Loan Agreement and/or any securities loan outstanding may 
be terminated by the Plan at any time, whereupon the Foreign Affiliate 
shall deliver certificates for securities identical to the borrowed 
securities (or the equivalent thereof in the event of reorganization, 
recapitalization, or merger of the issuer of the borrowed securities) 
to the Plan within (a) the customary delivery period for such 
securities, (b) three business days, or (c) the time negotiated for 
such delivery by the Plan and the Foreign Affiliate, whichever is 
least, or, alternatively, such period as permitted by Prohibited 
Transaction Class Exemption (PTE) 81-6 (46 FR 7527, January 23, 1981, 
as amended at 52 FR 18754, May 19, 1987), as it may be amended or 
superseded; \4\
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    \4\ PTE 81-6 provides an exemption under certain conditions from 
section 406(a)(1)(A) through (D) of the Act and the corresponding 
provisions of section 4975(c) of the Code for the lending of 
securities that are assets of an employee benefit plan to a U.S. 
broker-dealer registered under the 1934 Act (or exempted from 
registration under the 1934 Act as a dealer in exempt Government 
securities, as defined therein) or to a U.S. bank, that is a party 
in interest with respect to such plan.
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    (10) In the event that the loan is terminated and the Foreign 
Affiliate fails to return the borrowed securities, or the equivalent 
thereof, within the time described in paragraph 9, the Plan may 
purchase securities identical to the borrowed securities (or their 
equivalent as described above) and may apply the collateral to the 
payment of the purchase price, any other obligations of the Foreign 
Affiliate under the Loan Agreement, and any expenses associated with 
the sale and/or purchase. The Foreign Affiliate is obligated to pay, 
under the terms of the Loan Agreement, and does pay, to the Plan the 
amount of any remaining obligations and expenses not covered by the 
collateral, plus interest at a reasonable rate. Notwithstanding the 
foregoing, the Foreign Affiliate may, in the event it fails to return 
borrowed securities as described above, replace non-cash collateral 
with an amount of cash not less than the then current market value of 
the collateral, provided that such replacement is approved by the 
independent Plan fiduciary; and
    (11) The independent Plan fiduciary maintains the situs of the Loan 
Agreement in accordance with the indicia of ownership requirements 
under section 404(b) of the Act and the regulations promulgated under 
29 CFR 2550.404(b)-1. However, in the event that the independent Plan 
fiduciary does not maintain the situs of the Loan Agreement in 
accordance with the indicia of ownership requirements of Section 404(b) 
of the Act, the Foreign Affiliate shall not be subject to the civil 
penalty which may be assessed under section 502(i) of the Act, or the 
taxes imposed by section 4975(a) and (b) of the Code.
    If the Foreign Affiliate fails to comply with any condition of the 
exemption in the course of engaging in a securities lending 
transaction, the Plan fiduciary who caused the Plan to engage in such 
transaction shall not be deemed to have caused the Plan to engage in a 
transaction prohibited by section 406(a)(1)(A) through (D) of the Act 
solely by reason of the Foreign Affiliate's failure to comply with the 
conditions of the exemption.
Section II--General Conditions
    A. The Foreign Affiliate is a registered broker-dealer or bank 
subject to regulation by a governmental agency, as described in Section 
III.B, and is in compliance with all applicable rules and regulations 
thereof in connection with any transactions covered by this exemption, 
if granted;
    B. The Foreign Affiliate, in connection with any transactions 
covered by this exemption, is in compliance with the requirements of 
Rule 15a-6 (17 CFR 240.15a-6) of the

[[Page 70624]]

1934 Act, and Securities and Exchange Commission (SEC) interpretations 
thereof, providing for foreign affiliates a limited exemption from U.S. 
broker-dealer registration requirements;
    C. Prior to any transaction, the Foreign Affiliate enters into a 
written agreement with the Plan in which the Foreign Affiliate consents 
to the jurisdiction of the courts of the United States for any civil 
action or proceeding brought in respect of the subject transactions;
    D. The Foreign Affiliate maintains, or causes to be maintained, 
within the United States for a period of six years from the date of any 
transaction such records as are necessary to enable the persons 
described in paragraph E. to determine whether the conditions of the 
exemption have been met, except that--
    (1) A party in interest with respect to a Plan, other than the 
Foreign Affiliate, shall not be subject to a civil penalty under 
section 502(i) of the Act or the taxes imposed by section 4975 (a) and 
(b) of the Code, if such records are not maintained, or not available 
for examination, as required by paragraph E; and
    (2) A prohibited transaction shall not be deemed to have occurred 
if, due to circumstances beyond the Foreign Affiliate's control, such 
records are lost or destroyed prior to the end of the six year period; 
and
    E. Notwithstanding any provisions of subsections (a)(2) and (b) of 
section 504 of the Act, the Foreign Affiliate makes the records 
referred to in paragraph D unconditionally available during normal 
business hours at their customary location to the following persons or 
a duly authorized representative thereof: (1) The Department, the 
Internal Revenue Service, or the SEC; (2) any fiduciary of a Plan; (3) 
any contributing employer to a Plan; (4) any employee organization any 
of whose members are covered by a Plan; and (5) any participant or 
beneficiary of a Plan. However, none of the persons described in (2) 
through (5) of this subsection are authorized to examine the trade 
secrets of the Foreign Affiliate or commercial or financial information 
which is privileged or confidential.
Section III--Definitions
    A. The term ``affiliate'' of another person shall include: (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, or partner, employee or relative (as 
defined in section 3(15) of the Act) of such other person; and (3) any 
corporation or partnership of which such other person is an officer, 
director or partner. For purposes of this definition, the term 
``control'' means the power to exercise a controlling influence over 
the management or policies of a person other than an individual;
    B. The term ``Foreign Affiliate'' shall mean an affiliate of Maple 
that is subject to regulation as a broker-dealer or bank by (1) the 
Ontario Securities Commission and the Investment Dealers Association in 
Canada; (2) the Securities and Futures Authority in the United Kingdom; 
(3) the Deutsche Bundesbank and the Federal Banking Supervisory 
Authority, i.e., der Bundesaufsichtsamt fur das Kreditwesen (the BAK) 
in Germany, and the Federal Securities Trading Supervisory Commission, 
Bundesaufsichtsamt fur den Wertpapierhandel (the BAWe); and
    C. The term ``security'' shall include equities, fixed income 
securities, options on equity and on fixed income securities, 
government obligations, and any other instrument that constitutes a 
security under U.S. securities laws. The term ``security'' does not 
include swap agreements or other notional principal contracts.

EFFECTIVE DATE: This exemption is effective as of May 31, 2000.
    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 September 19, 2000 at 65 
FR 56732.

FOR FURTHER INFORMATION CONTACT: Ekaterina A. Uzlyan of the Department, 
telephone (202) 219-8883. (This is not a toll-free number.)

Pembroke Construction Company, Inc. Employees 401(k) Profit Sharing 
Plan (the Plan) Located in Hampton, Virginia

[Prohibited Transaction Exemption 2000-62; Exemption Application No. D-
10915]

Exemption

    The restrictions of sections 406(a), 406(b)(1) and (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)(A) through (E) of the Code, 
shall not apply to the sale of a condominium (the Condo) by Thomas N. 
Hunnicutt (Mr. Hunnicutt), and his wife Ann N. Hunnicutt, to Mr. 
Hunnicutt's self-directed individual account (the Account) in the Plan, 
with respect to which the Hunnicutts are parties in interest; provided 
that the following conditions are satisfied:
    (a) the proposed sale will be a one-time cash transaction;
    (b) the Account will pay the current fair market value for the 
Condo, as established at the time of the purchase by an independent 
qualified appraiser;
    (c) the Account will pay no expenses or commissions associated with 
the purchase; and
    (d) the purchase will enable the Account to acquire the Condo, 
which is expected to be a valuable asset that will yield significant 
rental income.
    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 October 11, 2000 at 65 FR 
60469.

FOR FURTHER INFORMATION CONTACT: Ekaterina A. Uzlyan of the Department 
at (202) 219-8883. (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.


[[Page 70625]]


    Signed at Washington, D.C., this 20th day of November, 2000.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits 
Administration, Department of Labor.
[FR Doc. 00-29971 Filed 11-22-00; 8:45 am]
BILLING CODE 4510-29-P