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Secretary of Labor Thomas E. Perez
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EBSA Notices

Prohibited Transaction Exemptions and Grant of Individual Exemptions Involving: D-11481, CitiGroup Inc. 2009-06; D-11484, Robert W. Baird & Co. Incorporated, 2009-07; D-11490 Raymond James & Associates, Inc., 2009-08; and Northwestern Mutual Investment Services, LLC   [2/27/2009]
[PDF]
FR Doc E9-4235
[Federal Register: February 27, 2009 (Volume 74, Number 38)]
[Notices]               
[Page 8992-8997]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27fe09-119]                         

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DEPARTMENT OF LABOR

Employee Benefits Security Administration

 
Prohibited Transaction Exemptions and Grant of Individual 
Exemptions Involving: D-11481, CitiGroup Inc. 2009-06; D-11484, Robert 
W. Baird & Co. Incorporated, 2009-07; D-11490 Raymond James & 
Associates, Inc., 2009-08; and Northwestern Mutual Investment Services, 
LLC

AGENCY: Employee Benefits Security Administration, Labor.

ACTION: Grant of Individual Exemptions.

-----------------------------------------------------------------------

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 
(ERISA or the Act) and/or the Internal Revenue Code of 1986 (the Code).

FOR FURTHER INFORMATION CONTACT: Chris Motta of the Department, 
telephone (202) 693-8540. (This is not a toll-free number.)

SUPPLEMENTARY INFORMATION: A notice was published in the Federal 
Register of the pendency before the Department of a proposal to grant 
such exemption. The notice set forth a summary of facts and 
representations contained in the application for exemption and referred 
interested persons to the application for a complete statement of the 
facts and representations. The application has been available for 
public inspection at the Department in Washington, DC. The notice also 
invited interested persons to submit comments on the requested 
exemption to the Department. In addition the notice stated that any 
interested person might submit a written request that a public hearing 
be held (where appropriate). The applicant has represented that it has 
complied with the requirements of the notification to interested 
persons. No requests for a hearing were received by the Department. 
Public comments were received by the Department as described in the 
granted exemption.
    The notice of proposed exemption was issued and the exemption is 
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 exemption is administratively feasible;
    (b) The exemption is in the interests of the plan and its 
participants and beneficiaries; and
    (c) The exemption is protective of the rights of the participants 
and beneficiaries of the plan.

Citigroup, Inc., Located in New York, New York

[Prohibited Transaction Exemption 2009-06; Exemption Application Number 
D-11481]

Exemption

Section I. Transactions Involving Plans Described in Both Title I and 
Title II of ERISA

    The restrictions of section 406(a)(1)(A) through (D) and section 
406(b) of ERISA, and the taxes imposed by section 4975(a) and (b) of 
the Code, by reason of section 4975(c)(1) of the Code, shall not apply, 
effective February 1, 2008, to the following transactions, if the 
conditions set forth in section III have been met: \1\
---------------------------------------------------------------------------

    \1\ For purposes of this exemption, references to section 406 of 
ERISA should be read to refer as well to the corresponding 
provisions of section 4975 of the Code.
---------------------------------------------------------------------------

    (a) The sale or exchange of an Auction Rate Security (as defined in 
section IV (b)) by a Plan (as defined in section IV(h)) to the Sponsor 
(as defined in section IV (g)) of such Plan; or
    (b) A lending of money or other extension of credit to a Plan in 
connection with the holding of an Auction Rate Security by the Plan, 
from: (1) Citigroup, Inc. or an affiliate (Citigroup); (2) an 
Introducing Broker (as defined in section IV (f)); or (3) a Clearing 
Broker (as defined in section IV (d)); where the loan is: (i) repaid in 
accordance with its terms; and (ii) guaranteed by the Plan Sponsor.
II. Transactions Involving Plans Described in Title II of ERISA Only
    The sanctions resulting from the application of section 4975(a) and 
(b) of the Code, by reason of section 4975(c)(1) of the Code, shall not 
apply, effective February 1, 2008, to the following transactions, if 
the conditions set forth in section III have been met:
    (a) The sale or exchange of an Auction Rate Security by a Title II 
Only Plan (as defined in section IV(i)) to the Beneficial Owner (as 
defined in section IV(c)) of such Plan; or
    (b) A lending of money or other extension of credit to a Title II 
Only Plan in connection with the holding of an Auction Rate Security by 
the Title II Only Plan, from: (1) Citigroup; (2) an Introducing Broker; 
or (3) a Clearing Broker; where the loan is: (i) repaid in accordance 
with its terms and; (ii) guaranteed by the Beneficial Owner.
III. Conditions
    (a) Citigroup acted as a broker or dealer, non-bank custodian, or 
fiduciary in connection with the acquisition or holding of the Auction 
Rate Security that is the subject of the transaction;
    (b) For transactions involving a Plan (including a Title II Only 
Plan) not sponsored by Citigroup for its own employees, the decision to 
enter into the transaction is made by a Plan fiduciary who is 
Independent (as defined in section IV(e)) of Citigroup. Notwithstanding 
the foregoing, an employee of Citigroup who is the Beneficial Owner of 
a Title II Only Plan may direct such Plan to engage in a transaction 
described in section II, if all of the other conditions of this section 
III have been met;
    (c) The last auction for the Auction Rate Security was 
unsuccessful;
    (d) The Plan does not waive any rights or claims in connection with 
the loan or sale as a condition of engaging in the above-described 
transaction;
    (e) The Plan does not pay any fees or commissions in connection 
with the transaction;
    (f) The transaction is not part of an arrangement, agreement or 
understanding designed to benefit a party in interest;
    (g) With respect to any sale described in section I (a) or section 
II(a):
    (1) The sale is for no consideration other than cash payment 
against prompt delivery of the Auction Rate Security; and
    (2) For purposes of the sale, the Auction Rate Security is valued 
at par, plus any accrued but unpaid interest; \2\
---------------------------------------------------------------------------

    \2\ This exemption does not address tax issues. The Department 
has been informed by the Internal Revenue Service and the Department 
of the Treasury that they are considering providing limited relief 
from the requirements of sections 72(t)(4), 401(a)(9), and 4974 of 
the Code with respect to retirement plans that hold Auction Rate 
Securities. The Department has also been informed by the Internal 
Revenue Service that if Auction Rate Securities are purchased from a 
Plan in a transaction described in sections I and II at a price that 
exceeds the fair market value of those securities, then the excess 
value would be treated as a contribution for purposes of applying 
applicable contribution and deduction limits under sections 219, 
404, 408, and 415 of the Code.

---------------------------------------------------------------------------

[[Page 8993]]

    (h) With respect to an in-kind exchange described in section (I)(a) 
or section II(a), the exchange involves the transfer by a Plan of an 
Auction Rate Security in return for a Delivered Security, as such term 
is defined in section IV(j), where:
    (1) The exchange is unconditional;
    (2) For purposes of the exchange, the Auction Rate Security is 
valued at par, plus any accrued but unpaid interest;
    (3) The Delivered Security is valued at fair market value, as 
determined at the time of the in-kind exchange by a third party pricing 
service or other objective source;
    (4) The Delivered Security is appropriate for the Plan and a 
security that the Plan is otherwise permitted to hold under applicable 
law; \3\ and
---------------------------------------------------------------------------

    \3\ The Department notes that the Act's general standards of 
fiduciary conduct also would apply to the transactions described 
herein. In this regard, section 404 requires, among other things, 
that a fiduciary discharge his duties respecting a plan solely in 
the interest of the plan's participants and beneficiaries and in a 
prudent manner. Accordingly, a plan fiduciary must act prudently 
with respect to, among other things: (1) The decision to exchange an 
Auction Rate Security for a Delivered Security; and (2) the 
negotiation of the terms of such exchange (or a cash sale or loan 
described above), including the pricing of such securities. The 
Department further emphasizes that it expects plan fiduciaries, 
prior to entering into any of the transactions, to fully understand 
the risks associated with these types of transactions following 
disclosure by Citigroup of all relevant information.
---------------------------------------------------------------------------

    (5) The total value of the Auction Rate Security (i.e., par plus 
any accrued but unpaid interest) is equal to the fair market value of 
the Delivered Security;
    (i) With respect to a loan described in section I(b) or II(b):
    (1) The loan is documented in a written agreement containing all of 
the material terms of the loan, including the consequences of default;
    (2) The Plan does not pay an interest rate that exceeds one of the 
following three rates as of the commencement of the loan:
    (A) The coupon rate for the Auction Rate Security;
    (B) The Federal Funds Rate; or
    (C) The Prime Rate;
    (3) The loan is unsecured; and
    (4) The amount of the loan is not more than the total par value of 
the Auction Rate Securities held by the Plan.
IV. Definitions
    (a) The term ``affiliate'' means: any person directly or 
indirectly, through one or more intermediaries, controlling, controlled 
by, or under common control with such other person;
    (b) The term ``Auction Rate Security'' or ``ARS'' means a security:
    (1) That is either a debt instrument (generally with a long-term 
nominal maturity) or preferred stock; and
    (2) With an interest rate or dividend that is reset at specific 
intervals through a Dutch auction process;
    (c) The term ``Beneficial Owner'' means: the individual for whose 
benefit the Title II Only Plan is established and includes a relative 
or family trust with respect to such individual;
    (d) The term ``Clearing Broker'' means: a member of a securities 
exchange that acts as a liaison between an investor and a clearing 
corporation and that helps to ensure that a trade is settled 
appropriately, that the transaction is successfully completed and that 
is responsible for maintaining the paper work associated with the 
clearing and executing of a transaction;
    (e) The term ``Independent'' means a person who is: (1) not 
Citigroup or an affiliate; and (2) not a relative (as defined in ERISA 
section 3(15)) of the party engaging in the transaction;
    (f) The term ``Introducing Broker'' means: a registered broker that 
is able to perform all the functions of a broker except for the ability 
to accept money, securities, or property from a customer;
    (g) The term ``Sponsor'' means: a plan sponsor as described in 
section 3(16)(B) of the Act and any Affiliates;
    (h) The term ``Plan'' means: any plan described in section 3(3) of 
the Act and/or section 4975(e)(1) of the Code;
    (i) The term ``Title II Only Plan'' means: any plan described in 
section 4975(e)(1) of the Code which is not an employee benefit plan 
covered by Title I of ERISA;
    (j) The term ``Delivered Security means a security that is: (1) 
Listed on a national securities exchange (excluding OTC Bulletin Board-
eligible securities and Pink Sheets-quoted securities); or (2) a U.S. 
Treasury obligation; or (3) A fixed income security that has a rating 
at the time of the exchange that is in one of the two highest generic 
rating categories from an independent nationally recognized statistical 
rating organization (e.g., a highly rated municipal bond or a highly 
rated corporate bond); or (4) A certificate of deposit insured by the 
Federal Deposit Insurance Corporation. Notwithstanding the above, the 
term ``Delivered Security'' shall not include any Auction Rate 
Security, or any related Auction Rate Security, including derivatives 
or securities materially comprised of Auction Rate Securities or any 
illiquid securities.
    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 in the Federal Register on 
November 7, 2008 at 73 FR 66260.

FOR FURTHER INFORMATION CONTACT: Chris Motta of the Department, 
telephone (202) 693-8540. (This is not a toll-free number.)

Robert W. Baird & Co. Incorporated, Located in Milwaukee, Wisconsin

[Prohibited Transaction Exemption 2009-07; Exemption Application Number 
D-11484]

Exemption

Section I. Transactions Involving Plans Described In Both Title I and 
Title II of ERISA

    The restrictions of section 406(a)(1)(A) through (D) and section 
406(b) of ERISA, and the taxes imposed by section 4975(a) and (b) of 
the Code, by reason of section 4975(c)(1) of the Code, shall not apply, 
effective February 1, 2008, to the following transactions, if the 
conditions set forth in section III have been met: \4\
---------------------------------------------------------------------------

    \4\ For purposes of this exemption, references to section 406 of 
ERISA should be read to refer as well to the corresponding 
provisions of section 4975 of the Code.
---------------------------------------------------------------------------

    (a) The sale or exchange of an Auction Rate Security (as defined in 
section IV(b)) by a Plan (as defined in section IV(h)) to the Sponsor 
(as defined in section IV(g)) of such Plan; or
    (b) A lending of money or other extension of credit to a Plan in 
connection with the Plan's holding of an Auction Rate Security, from: 
(1) Robert W. Baird & Co. Incorporated or any of its current or future 
affiliates or subsidiaries (Baird); (2) an Introducing Broker (as 
defined in section IV(f)); or (3) a Clearing Broker (as defined in 
section IV(d)); where the loan is: (i) repaid in accordance with its 
terms; and (ii) guaranteed by the Plan Sponsor.
II. Transactions Involving Plans Described In Title II of ERISA Only
    The sanctions resulting from the application of section 4975(a) and 
(b) of the Code, by reason of section 4975(c)(1) of the Code, shall not 
apply, effective February 1, 2008, to the following transactions, if 
the conditions set forth in section III have been met:
    (a) The sale or exchange of an Auction Rate Security by a Title II 
Only Plan (as defined in section IV(i)) to the Beneficial Owner (as 
defined in section IV(c)) of such Plan; or
    (b) A lending of money or other extension of credit to a Title II 
Only

[[Page 8994]]

Plan in connection with the Plan's holding of an Auction Rate Security, 
from: (1) Baird; (2) an Introducing Broker; or (3) a Clearing Broker; 
where the loan is: (i) repaid in accordance with its terms and; (ii) 
guaranteed by the Beneficial Owner.
III. Conditions
    (a) Baird acted as a broker or dealer, non-bank custodian, or 
fiduciary in connection with the acquisition or holding of the Auction 
Rate Security that is the subject of the transaction;
    (b) For transactions involving a Plan (including a Title II Only 
Plan) not sponsored by Baird for its own employees, the decision to 
enter into the transaction is made by a Plan fiduciary who is 
Independent (as defined in section IV (e)) of Baird. Notwithstanding 
the foregoing, an employee of Baird who is the Beneficial Owner of a 
Title II Only Plan may direct such Plan to engage in a transaction 
described in section II, if all of the other conditions of this section 
III have been met;
    (c) The last auction for the Auction Rate Security was 
unsuccessful;
    (d) The Plan does not waive any rights or claims in connection with 
the loan or sale as a condition of engaging in the transaction;
    (e) The Plan does not pay any fees or commissions in connection 
with the transaction;
    (f) The transaction is not part of an arrangement, agreement or 
understanding designed to benefit a party in interest;
    (g) With respect to any sale described in section I (a) or section 
II (a):
    (1) The sale is for no consideration other than cash payment 
against prompt delivery of the Auction Rate Security; and
    (2) For purposes of the sale, the Auction Rate Security is valued 
at par, plus any accrued but unpaid interest; \5\
---------------------------------------------------------------------------

    \5\ This exemption does not address tax issues. The Department 
has been informed by the Internal Revenue Service and the Department 
of the Treasury that they are considering providing limited relief 
from the requirements of sections 72(t)(4), 401(a)(9), and 4974 of 
the Code with respect to retirement plans that hold Auction Rate 
Securities. The Department has also been informed by the Internal 
Revenue Service that if Auction Rate Securities are purchased from a 
Plan in a transaction described in sections I and II at a price that 
exceeds the fair market value of those securities, then the excess 
value would be treated as a contribution for purposes of applying 
applicable contribution and deduction limits under sections 219, 
404, 408, and 415 of the Code.
---------------------------------------------------------------------------

    (h) With respect to an in-kind exchange described in section (I)(a) 
or section II(a), the exchange involves the transfer by a Plan of an 
Auction Rate Security in return for a Delivered Security, as such term 
is defined in section IV(j), where:
    (1) The exchange is unconditional;
    (2) For purposes of the exchange, the Auction Rate Security is 
valued at par, plus any accrued but unpaid interest;
    (3) The Delivered Security is valued at fair market value, as 
determined at the time of the in-kind exchange by a third party pricing 
service or other objective source;
    (4) The Delivered Security is appropriate for the Plan and a 
security that the Plan is otherwise permitted to hold under applicable 
law; \6\ and
---------------------------------------------------------------------------

    \6\ The Department notes that the Act's general standards of 
fiduciary conduct also would apply to the transactions described 
herein. In this regard, section 404 requires, among other things, 
that a fiduciary discharge his duties respecting a plan solely in 
the interest of the plan's participants and beneficiaries and in a 
prudent manner. Accordingly, a plan fiduciary must act prudently 
with respect to, among other things: (1) The decision to exchange an 
Auction Rate Security for a Delivered Security; and (2) the 
negotiation of the terms of such exchange (or a cash sale or loan 
described above), including the pricing of such securities. The 
Department further emphasizes that it expects plan fiduciaries, 
prior to entering into any of the transactions, to fully understand 
the risks associated with these types of transactions following 
disclosure by Baird of all relevant information.
---------------------------------------------------------------------------

    (5) The total value of the Auction Rate Security (i.e., par plus 
any accrued but unpaid interest) is equal to the fair market value of 
the Delivered Security;
    (i) With respect to a loan described in section I(b) or II(b):
    (1) The loan is documented in a written agreement containing all of 
the material terms of the loan, including the consequences of default;
    (2) The Plan does not pay an interest rate that exceeds one of the 
following three rates as of the commencement of the loan:
    (A) The coupon rate for the Auction Rate Security;
    (B) The Federal Funds Rate; or
    (C) The Prime Rate;
    (3) The loan is unsecured; and
    (4) The amount of the loan is not more than the total par value of 
the Auction Rate Securities held by the Plan.
IV. Definitions
    (a) The term ``affiliate'' means any person directly or indirectly, 
through one or more intermediaries, controlling, controlled by, or 
under common control with such other person;
    (b) The term ``Auction Rate Security'' or ``ARS'' means a security:
    (1) That is either a debt instrument (generally with a long-term 
nominal maturity) or preferred stock; and
    (2) With an interest rate or dividend that is reset at specific 
intervals through a Dutch auction process;
    (c) The term ``Beneficial Owner'' means: the individual for whose 
benefit the Title II Only Plan is established and includes a relative 
or family trust with respect to such individual;
    (d) The term ``Clearing Broker'' means: a member of a securities 
exchange that acts as a liaison between an investor and a clearing 
corporation and that helps to ensure that a trade is settled 
appropriately, that the transaction is successfully completed and that 
is responsible for maintaining the paperwork associated with the 
clearing and executing of a transaction;
    (e) The term ``Independent'' means a person who is: (1) not Baird 
or an affiliate; and (2) not a relative (as defined in ERISA section 
3(15)) of the party engaging in the transaction;
    (f) The term ``Introducing Broker'' means: a registered broker that 
is able to perform all the functions of a broker except for the ability 
to accept money, securities, or property from a customer;
    (g) The term ``Sponsor'' means: a plan sponsor as described in 
section 3(16)(B) of the Act and any Affiliates;
    (h) The term ``Plan'' means: any plan described in section 3(3) of 
the Act and/or section 4975(e)(1) of the Code;
    (i) The term ``Title II Only Plan'' means: any plan described in 
section 4975(e)(1) of the Code which is not an employee benefit plan 
covered by Title I of ERISA;
    (j) The term ``Delivered Security means a security that is: (1) 
Listed on a national securities exchange (excluding OTC Bulletin Board-
eligible securities and Pink Sheets-quoted securities); or (2) a U.S. 
Treasury obligation; or (3) A fixed income security that has a rating 
at the time of the exchange that is in one of the two highest generic 
rating categories from an independent nationally recognized statistical 
rating organization (e.g., a highly rated municipal bond or a highly 
rated corporate bond); or (4) A certificate of deposit insured by the 
Federal Deposit Insurance Corporation. Notwithstanding the above, the 
term ``Delivered Security'' shall not include any Auction Rate 
Security, or any related Auction Rate Security, including derivatives 
or securities materially comprised of Auction Rate Securities or any 
illiquid securities.
    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 in the Federal Register on 
November 7, 2008 at 73 FR 66263.

FOR FURTHER INFORMATION CONTACT: Chris Motta of the Department, 
telephone (202) 693-8540. (This is not a toll-free number.)

[[Page 8995]]

Raymond James & Associates, Inc., Located in St. Petersburg, Florida.

[Prohibited Transaction Exemption 2009-08; Exemption Application Number 
D-11490]

Exemption

Section I. Transactions Involving Plans Described In Both Title I and 
Title II of ERISA

    The restrictions of section 406(a)(1)(A) through (D) and section 
406(b) of ERISA, and the sanctions imposed by section 4975(a) and (b) 
of the Code, by reason of section 4975(c)(1) of the Code, shall not 
apply, effective February 1, 2008, to the following transactions, if 
the conditions set forth in section III have been met: \7\
---------------------------------------------------------------------------

    \7\ For purposes of this exemption, references to section 406 of 
ERISA should be read to refer as well to the corresponding 
provisions of section 4975 of the Code.
---------------------------------------------------------------------------

    (a) The sale or exchange of an Auction Rate Security (as defined in 
section IV (b)) by a Plan (as defined in section IV(h)) to the Sponsor 
(as defined in section IV (g)) of such Plan; or
    (b) A lending of money or other extension of credit to a Plan in 
connection with the Plan's holding of an Auction Rate Security, from: 
(1) Raymond James & Associates, Inc. or any of its current or future 
affiliates or subsidiaries (Raymond James); (2) an Introducing Broker 
(as defined in section IV (f)); or (3) a Clearing Broker (as defined in 
section IV (d)); where the loan is: (i) repaid in accordance with its 
terms; and (ii) guaranteed by the Plan Sponsor.
II. Transactions Involving Plans Described In Title II of ERISA Only
    The sanctions resulting from the application of section 4975(a) and 
(b) of the Code, by reason of section 4975(c)(1) of the Code, shall not 
apply, effective February 1, 2008, to the following transactions, if 
the conditions set forth in section III have been met:
    (a) The sale or exchange of an Auction Rate Security by a Title II 
Only Plan (as defined in section IV(i)) to the Beneficial Owner (as 
defined in section IV(c)) of such Plan; or
    (b) A lending of money or other extension of credit to a Title II 
Only Plan in connection with the Plan's holding of an Auction Rate 
Security, from: (1) Raymond James; (2) an Introducing Broker; or (3) a 
Clearing Broker; where the loan is: (i) repaid in accordance with its 
terms and; (ii) guaranteed by the Beneficial Owner.
III. Conditions
    (a) Raymond James acted as a broker or dealer, non-bank custodian, 
or fiduciary in connection with the acquisition or holding of the 
Auction Rate Security that is the subject of the transaction;
    (b) For transactions involving a Plan (including a Title II Only 
Plan) not sponsored by Raymond James for its own employees, the 
decision to enter into the transaction is made by a Plan fiduciary who 
is Independent (as defined in section IV(e)) of Raymond James. 
Notwithstanding the foregoing, an employee of Raymond James who is the 
Beneficial Owner of a Title II Only Plan may direct such Plan to engage 
in a transaction described in section II, if all of the other 
conditions of this section III have been met;
    (c) The last auction for the Auction Rate Security was 
unsuccessful;
    (d) The Plan does not waive any rights or claims in connection with 
the loan or sale as a condition of engaging in the transaction;
    (e) The Plan does not pay any fees or commissions in connection 
with the transaction;
    (f) The transaction is not part of an arrangement, agreement or 
understanding designed to benefit a party in interest;
    (g) With respect to any sale described in section I(a) or section 
II(a):
    (1) The Sale is for no consideration other than cash payment 
against prompt delivery of the Auction Rate Security; and
    (2) For purposes of the sale, the Auction Rate Security is valued 
at par, plus any accrued but unpaid interest; \8\
---------------------------------------------------------------------------

    \8\ This exemption does not address tax issues. The Department 
has been informed by the Internal Revenue Service and the Department 
of the Treasury that they are considering providing limited relief 
from the requirements of sections 72(t)(4), 401(a)(9), and 4974 of 
the Code with respect to retirement plans that hold Auction Rate 
Securities. The Department has also been informed by the Internal 
Revenue Service that if Auction Rate Securities are purchased from a 
Plan in a transaction described in sections I and II at a price that 
exceeds the fair market value of those securities, then the excess 
value would be treated as a contribution for purposes of applying 
applicable contribution and deduction limits under sections 219, 
404, 408, and 415 of the Code.
---------------------------------------------------------------------------

    (h) With respect to an in-kind exchange described in section (I)(a) 
or section II(a), the exchange involves the transfer by a Plan of an 
Auction Rate Security in return for a Delivered Security, as such term 
is defined in section IV(j), where:
    (1) The exchange is unconditional;
    (2) For purposes of the exchange, the Auction Rate Security is 
valued at par, plus any accrued but unpaid interest;
    (3) The Delivered Security is valued at fair market value, as 
determined at the time of the in-kind exchange by a third party pricing 
service or other objective source;
    (4) The Delivered Security is appropriate for the Plan and a 
security that the Plan is otherwise permitted to hold under applicable 
law; \9\ and
---------------------------------------------------------------------------

    \9\ The Department notes that the Act's general standards of 
fiduciary conduct apply to the transactions described herein. In 
this regard, section 404 requires, among other things, that a 
fiduciary discharge his duties respecting a plan solely in the 
interest of the plan's participants and beneficiaries and in a 
prudent manner. Accordingly, a plan fiduciary must act prudently 
with respect to, among other things: (1) The decision to exchange an 
Auction Rate Security for a Delivered Security; and (2) the 
negotiation of the terms of such exchange (or a cash sale or loan 
described above), including the pricing of such securities. The 
Department further emphasizes that it expects plan fiduciaries, 
prior to entering into any of the transactions, to fully understand 
the risks associated with these types of transactions following 
disclosure by Raymond James of all relevant information.
---------------------------------------------------------------------------

    (5) The total value of the Auction Rate Security (i.e., par plus 
any accrued but unpaid interest) is equal to the fair market value of 
the Delivered Security;
    (i) With respect to a loan described in section I(b) or II(b):
    (1) The loan is documented in a written agreement containing all of 
the material terms of the loan, including the consequences of default;
    (2) The Plan does not pay an interest rate that exceeds one of the 
following three rates as of the commencement of the loan:
    (A) The coupon rate for the Auction Rate Security;
    (B) The Federal Funds Rate; or
    (C) The Prime Rate;
    (3) The loan is unsecured; and
    (4) The amount of the loan is not more than the total par value of 
the Auction Rate Securities held by the Plan.
IV. Definitions
    (a) The term ``affiliate'' means any person directly or indirectly, 
through one or more intermediaries, controlling, controlled by, or 
under common control with such other person;
    (b) The term ``Auction Rate Security'' or ``ARS'' means a security:
    (1) That is either a debt instrument (generally with a long-term 
nominal maturity) or preferred stock; and
    (2) With an interest rate or dividend that is reset at specific 
intervals through a Dutch auction process;
    (c) The term ``Beneficial Owner'' means: the individual for whose 
benefit the Title II Only Plan is established and includes a relative 
or family trust with respect to such individual;
    (d) The term ``Clearing Broker'' means: a member of a securities 
exchange that acts as a liaison between an investor and a clearing 
corporation and that helps to ensure that a trade is settled 
appropriately, that the transaction is successfully completed

[[Page 8996]]

and that is responsible for maintaining the paper work associated with 
the clearing and executing of a transaction;
    (e) The term ``Independent'' means a person who is: (1) Not Raymond 
James or an affiliate; and (2) not a relative (as defined in ERISA 
section 3(15)) of the party engaging in the transaction;
    (f) The term ``Introducing Broker'' means: a registered broker that 
is able to perform all the functions of a broker except for the ability 
to accept money, securities, or property from a customer;
    (g) The term ``Sponsor'' means: a plan sponsor as described in 
section 3(16)(B) of the Act and any Affiliates;
    (h) The term ``Plan'' means: any plan described in section 3(3) of 
the Act and/or section 4975(e)(1) of the Code;
    (i) The term ``Title II Only Plan'' means: any plan described in 
section 4975(e)(1) of the Code which is not an employee benefit plan 
covered by Title I of ERISA;
    (j) The term ``Delivered Security'' means a security that is: (1) 
Listed on a national securities exchange (excluding OTC Bulletin Board-
eligible securities and Pink Sheets-quoted securities); or (2) a U.S. 
Treasury obligation; or (3) A fixed income security that has a rating 
at the time of the exchange that is in one of the two highest generic 
rating categories from an independent nationally recognized statistical 
rating organization (e.g., a highly rated municipal bond or a highly 
rated corporate bond); or (4) A certificate of deposit insured by the 
Federal Deposit Insurance Corporation. Notwithstanding the above, the 
term ``Delivered Security'' shall not include any Auction Rate 
Security, or any related Auction Rate Security, including derivatives 
or securities materially comprised of Auction Rate Securities or any 
illiquid securities.
    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 in the Federal Register on 
November 7, 2008 at 73 FR 66266.

FOR FURTHER INFORMATION CONTACT: Chris Motta of the Department, 
telephone (202) 693-8540. (This is not a toll-free number.)

Northwestern Mutual Investment Services, LLC, Located in Milwaukee, 
Wisconsin.

[Prohibited Transaction Exemption 2009-09; Exemption Application Number 
D-11505]

Exemption

Section I. Transactions

    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, 
effective September 30, 2008, to the sale (the Sale) by a Plan (as 
defined in section II(d)) of an Auction Rate Security (as defined in 
section II(b) to Northwestern Mutual Investment Services, LLC (NMIS), 
provided that the following conditions are met: \10\
---------------------------------------------------------------------------

    \10\ For purposes of this exemption, references to section 406 
of ERISA should be read to refer as well to the corresponding 
provisions of section 4975 of the Code.
---------------------------------------------------------------------------

    (a) The Plan acquired the Auction Rate Security (ARS) in connection 
with brokerage services provided by NMIS;
    (b) The last auction for the ARS was unsuccessful;
    (c) The Sale is made in connection with a written offer by NMIS 
(the Offer) containing all of the material terms of the Sale;
    (d) The Sale is for no consideration other than cash payment 
against prompt delivery of the ARS;
    (e) The amount of the Sale is equal to the greater of:
    (1) The fair market value of the ARS as of the date of the Sale, as 
determined by a qualified, independent appraiser; or
    (2) The sum of the price paid by the Plan for the ARS and any 
accrued but unpaid interest; \11\
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    \11\ In the event that the fair market value of an ARS exceeds 
the sum of its par value plus any accrued, but unpaid, interest as 
of the date of the Sale, NMIS will credit the difference to the 
Plan, with interest equal to the Federal Funds rate plus 125 basis 
points.
---------------------------------------------------------------------------

    (f) The Plan does not waive any rights or claims in connection with 
the Sale;
    (g) The decision to accept the Offer or retain the ARS is made by a 
Plan fiduciary or Plan participant or IRA owner, who (in all cases) is 
Independent (as defined in section II (c)) of NMIS; \12\
---------------------------------------------------------------------------

    \12\ The Department notes that the Act's general standards of 
fiduciary conduct apply to the transactions described herein. In 
this regard, section 404 requires, among other things, that a 
fiduciary discharge his duties respecting a plan solely in the 
interest of the plan's participants and beneficiaries and in a 
prudent manner. Accordingly, a plan fiduciary must act prudently 
with respect to, among other things, the decision to engage (or to 
not engage) in a Sale. The Department further emphasizes that it 
expects a plan fiduciary, prior to entering into a Sale (or, 
alternately, prior to deciding to retain an ARS), to fully 
understand the risks associated with such a decision, following 
disclosure by NMIS of all relevant information.
---------------------------------------------------------------------------

    (h) Neither NMIS nor any affiliate exercises investment discretion 
or renders investment advice [within the meaning of 29 CFR 2510.3-
21(c)] with respect to the decision to accept the Offer or retain the 
ARS;
    (i) The Plan does not pay any commissions or transaction costs with 
respect to the Sale;
    (j) The Sale is not part of an arrangement, agreement or 
understanding designed to benefit a party in interest to the Plan;
    (k) NMIS and its affiliates, as applicable, maintain, or cause to 
be maintained, for a period of six (6) years from the date of the Sale 
such records as are necessary to enable the persons described below in 
paragraph (l)(i), to determine whether the conditions of this exemption 
have been met, except that--
    (i) No party in interest with respect to a Plan which engages in a 
Sale, other than NMIS and its affiliates, as applicable, shall 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, below, by 
paragraph (l)(i); and
    (ii) A separate prohibited transaction shall not be considered to 
have occurred solely because, due to circumstances beyond the control 
of NMIS or its affiliates, as applicable, such records are lost or 
destroyed prior to the end of the six-year period;
    (l)(i) Except as provided below in paragraph (l)(ii), and 
notwithstanding any provisions of subsections (a)(2) an (b) of section 
504 of the Act, the records referred to above in paragraph (k) are 
unconditionally available at their customary location for examination 
during normal business hours by--
    (A) Any duly authorized employee or representative of the 
Department, the Internal Revenue Service, or the U.S. Securities and 
Exchange Commission; or
    (B) Any fiduciary of any Plan that engages in a Sale, or any duly 
authorized employee or representative of such fiduciary; or
    (C) Any employer of participants and beneficiaries and any employee 
organization whose members are covered by a Plan that engages in the 
Sale, or any authorized employee or representative of these entities; 
or
    (D) Any IRA owner, participant or beneficiary of a Plan that 
engages in a Sale, or duly authorized employee or representative of 
such IRA owner, participant or beneficiary;
    (ii) None of the persons described above in paragraph (l)(i)(B)-(D) 
shall be authorized to examine trade secrets of NMIS, or commercial or 
financial information which is privileged or confidential; and
    (iii) Should NMIS refuse to disclose information on the basis that 
such information is exempt from disclosure, NMIS shall, by the close of 
the thirtieth (30th) day following the request,

[[Page 8997]]

provide a written notice advising that person of the reasons for the 
refusal and that the Department may request such information.
Section II. Definitions
    (a) The term ``affiliate'' means: any person directly or 
indirectly, through one or more intermediaries, controlling, controlled 
by, or under common control with such other person;
    (b) The term ``Auction Rate Security'' or ``ARS'' means a security:
    (1) That is either a debt instrument (generally with a long-term 
nominal maturity) or preferred stock; and
    (2) With an interest rate or dividend that is reset at specific 
intervals through a Dutch auction process;
    (c) The term ``Independent'' means a person who is: (1) not NMIS or 
an affiliate; and (2) not a relative (as defined in ERISA section 
3(15)) of the party engaging in the transaction; and
    (d) The term ``Plan'' means: any plan described in section 3(3) of 
the Act and/or section 4975(e)(1) of the Code.
    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 in the Federal Register on 
November 7, 2008 at 73 FR 66268.

FOR FURTHER INFORMATION CONTACT: Chris Motta of the Department, 
telephone (202) 693-8540. (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 exemption 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) This exemption is 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 this exemption is subject to the express 
condition that the material facts and representations contained in the 
application accurately describes all material terms of the transaction 
which is the subject of the exemption.

    Signed at Washington, DC, this 24th day of February 2009.
Ivan Strasfeld,
Director of Exemption Determinations, Employee Benefits Security 
Administration, U.S. Department of Labor.
[FR Doc. E9-4235 Filed 2-26-09; 8:45 am]

BILLING CODE 4510-29-P