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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: 2009-10, Camino Medical Group, Inc. Employee Retirement Plan (the Retirement Plan) D-11336; and 2009-11, JPMorgan Chase Bank, National Association, D-11471   [3/26/2009]
[PDF]
FR Doc E9-6620
[Federal Register: March 26, 2009 (Volume 74, Number 57)]
[Notices]               
[Page 13235-13241]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr26mr09-105]                         

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DEPARTMENT OF LABOR

Employee Benefits Security Administration

 
Prohibited Transaction Exemptions and Grant of Individual 
Exemptions Involving: 2009-10, Camino Medical Group, Inc. Employee 
Retirement Plan (the Retirement Plan) D-11336; and 2009-11, JPMorgan 
Chase Bank, National Association, D-11471

AGENCY: Employee Benefits Security 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 
(ERISA or the Act) and/or the Internal Revenue Code of 1986 (the Code).
    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.
Camino Medical Group, Inc. Employee Retirement Plan
(the Retirement Plan)
Located in Sunnyvale, CA
[Prohibited Transaction Exemption 2009-10;
Exemption Application No. D-11336]

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,\1\ shall not apply, effective July 1, 2003 until December 14, 
2007, to (1) the leasing (the 2003 Leases) of a medical facility (the 
Urgent Care Facility) and a single family residence

[[Page 13236]]

converted to an office (the Residence) by the Retirement Plan to CMG, 
the sponsor of the Retirement Plan and a party in interest with respect 
to such plan; and (2) the exercise, by CMG, of options to renew the 
2003 Lease with respect to the Residence for one year and the 2003 
Lease with respect to the Urgent Care Facility for three years, 
provided that the following conditions were or will be met:
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    \1\ For purposes of this exemption reference to specific 
provisions of Title I of the Act, unless otherwise specified, refer 
also to the corresponding provisions of the Code.
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    (a) The terms and conditions of each 2003 Lease were no less 
favorable to the Retirement Plan than those obtainable by the 
Retirement Plan under similar circumstances when negotiated at arm's 
length with unrelated third parties.
    (b) The Retirement Plan was represented for all purposes under the 
2003 Leases, and during each renewal term, by a qualified, independent 
fiduciary.
    (c) The independent fiduciary negotiated, reviewed, and approved 
the terms and conditions of the 2003 Leases and the options to renew 
such leases on behalf of the Retirement Plan and determined that the 
transactions were appropriate investments for the Retirement Plan and 
were in the best interests of the Retirement Plan and its participants 
and beneficiaries.
    (d) The rent paid to the Retirement Plan under each 2003 Lease, and 
during each renewal term, was no less than the fair market rental value 
of the Urgent Care Facility and the Residence, as established by a 
qualified, independent appraiser.
    (e) The rent was subject to adjustment at the commencement of the 
second year of each 2003 Lease and each year thereafter by way of an 
independent appraisal. A qualified, independent appraiser was selected 
by the independent fiduciary to conduct the appraisal. If the appraised 
fair market rent of the Urgent Care Facility or the Residence was 
greater than that of the current base rent, then the base rent was 
revised to reflect the appraised increase in fair market rent. If the 
appraised fair market rent of the Urgent Care Facility or the Residence 
was less than or equal to the current base rent, then the base rent 
remained the same.
    (f) Each 2003 Lease was triple net, requiring all expenses for 
maintenance, taxes, utilities and insurance to be paid by CMG, as 
lessee.
    (g) The independent fiduciary--
    (1) Monitored CMG's compliance with the terms of each 2003 Lease 
and the conditions of the exemption throughout the duration of such 
leases and the renewal terms, and was responsible for legally enforcing 
the payment of the rent and the proper performance of all other 
obligations of CMG under the terms of such leases.
    (2) Expressly approved the renewals of the 2003 Leases beyond their 
initial terms.
    (3) Determined whether the rent had been paid on a monthly basis 
and in a timely manner based on documentation provided by CMG.
    (4) Determined whether CMG owed the Camino Medical Group, Inc. 
Matching 401(k) Plan (the 401(k) Plan) or the Retirement Plan 
additional rent by reason of CMG's leasing of the Urgent Care Facility 
and/or the Residence from such plans prior to July 1, 2003 and ensured 
that CMG made such payments to the Plans, including reasonable 
interest.
    (h) At all times throughout the duration of each 2003 Lease and 
each respective renewal term, the fair market value of the Urgent Care 
Facility and the Residence did not exceed 25 percent of the value of 
the total assets of the Retirement Plan.
    (i) Within 90 days of the publication of the grant notice in the 
Federal Register, Palo Alto Medical Foundation, the successor in 
interest to CMG, (1) files a Form 5330 with the Internal Revenue 
Service and pays all applicable excise taxes that are due with respect 
to the leasing of the Urgent Care Facility and the Residence to CMG by 
the 401(k) Plan and/or the Retirement Plan prior to July 1, 2003; and 
(2) provides a copy of the cancelled check and other documentary 
evidence to the Department indicating that the taxes were correctly 
computed and paid within 45 days of such payment.

DATES: Effective Date: This exemption is effective from July 1, 2003 
until December 14, 2007.
    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 December 24, 2008 at 73 
FR 79168.

FOR FURTHER INFORMATION CONTACT: Ms. Jan D. Broady of the Department, 
telephone (202) 693-8556. (This is not a toll-free number.)
JPMorgan Chase Bank, National Association, Located in Columbus, Ohio
[Prohibited Transaction Exemption 2009-11; Exemption Application No. D-
11471]

Exemption

Section I. Covered Transactions

    The restrictions of sections 406(a)(1)(A) through (D) and 406(b)(1) 
and (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 lending of securities to 
affiliates of JPMorgan Chase & Co. Inc. (JPMCC), which are engaged in 
JPMCC's capital markets line of business (referred to herein as Global 
Capital Markets), by employee benefit plans (the Client Plans), 
including commingled investment funds holding Client Plan assets, for 
which JPMCC through its Financing & Market Products or any other 
similar division of JPMCB or a U.S. affiliate of JPMCC (collectively, 
FMP) acts as securities lending agent or sub-agent, and for which 
JPMCC, through its Investor Services line of Business, as operated 
through JPMCB and its affiliates (Investor Services), may also act as 
directed trustee or custodian, and (2) to the receipt of compensation 
by FMP in connection with the proposed transactions, provided the 
general conditions set forth below in Section II are met.

Section II. General Conditions

    (a) This exemption applies to loans of securities to Global Capital 
Markets, as operated in the United States (J. P. Morgan Securities 
Inc., or the U.S. Affiliated Borrower) and in the following foreign 
countries: the United Kingdom (J. P. Morgan Securities Ltd.), Canada 
(J. P. Morgan Securities Canada Inc.), Australia (J. P. Morgan 
Securities Australia Limited), Japan (J. P. Morgan Securities Japan Co. 
Ltd) (collectively, the Foreign Affiliated Borrowers). Global Capital 
Markets will also include other companies or their successors which are 
affiliated with either JPMCB or JPMCC within these countries.\2\
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    \2\ Unless otherwise noted, Global Capital Markets will consist 
collectively of the above referenced entities.
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    (b) For each Client Plan, neither Investor Services, Global Capital 
Markets, FMP, nor any other division or affiliate of JPMCC has or 
exercises discretionary authority or control with respect to the 
investment of the assets of Client Plans involved in the transaction 
(other than with respect to the lending of securities designated by an 
independent fiduciary of a Client Plan as being available to lend and 
the investment of cash collateral after securities have been loaned and 
collateral received), or renders investment advice (within the meaning 
of 29 CFR 2510.3-21(c)) with respect to those assets, including 
decisions concerning a Client Plan's acquisition and disposition of 
securities available for loan.
    (i) Notwithstanding the foregoing, for the period from March 16, 
2008,

[[Page 13237]]

through June 14, 2008, section II(b) shall not apply to the lending of 
securities by a Client Plan to Bear Stearns Affiliates, provided that 
(i) no division or affiliate of JPMCC that has discretionary authority 
or control with respect to the investment of the assets of the Client 
Plan involved in the transaction, or renders investment advice (within 
the meaning of 29 CFR 2510.3-21(c)) with respect to those assets, has 
access to information regarding whether the particular securities have 
been loaned to a Bear Stearns Affiliate, and (ii) an Independent 
Fiduciary (as defined in section IV(f)) conducts a Review (as defined 
in section IV(g)) of Client Plan securities loans to Bear Stearns 
Affiliates and within 180 days of the date of publication of this 
proposed amendment in the Federal Register, issues a written report 
presenting its specific findings.
    (c) Before a Client Plan participates in a securities lending 
program and before any loan of securities to Global Capital Markets is 
effected, a Client Plan fiduciary which is independent of Global 
Capital Markets must have--
    (1) Authorized and approved a securities lending authorization 
agreement with FMP, where FMP is acting as the securities lending 
agent;
    (2) Authorized and approved the primary securities lending 
authorization agreement with the primary lending agent where FMP is 
lending securities under a sub-agency agreement with the primary 
lending agent; \3\ and
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    \3\ The Department, herein, is not providing exemptive relief 
for securities lending transactions engaged in by primary lending 
agents, other than FMP, beyond that provided pursuant to PTE 2006-
16.
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    (3) Approved the general terms of the securities loan agreement 
(the Loan Agreement) between such Client Plan and Global Capital 
Markets, the specific terms of which are negotiated and entered into by 
FMP.
    Notwithstanding the foregoing, effective March 16, 2008, section 
II(c)(3) shall be deemed satisfied with respect to loans of securities 
by Client Plans to Bear Stearns Affiliates by FMP as securities lending 
agent or sub-agent, provided (i) FMP provided to such Client Plans no 
later than April 15, 2008, a description of the general terms of the 
securities loan agreements between such Client Plans and the Bear 
Stearns Affiliates and (ii) at the time of providing such information, 
FMP notified each Client Plan that it had 10 days to object in writing 
to the continued lending of securities to the Bear Stearns Affiliates. 
If a written objection is received from a Client Plan within the 10-day 
period, FMP shall cease to make any new securities loans on behalf of 
that Client Plan to Bear Stearns Affiliates; any securities loans made 
on behalf of that Client Plan to Bear Stearns Affiliates prior to the 
date the objection is received shall be covered by this exemption, and 
FMP shall seek to expeditiously terminate such securities loan in a 
manner approved by the Client Plan.
    (d) Each loan of securities by a Client Plan to Global Capital 
Markets is at market rates and terms which are at least as favorable to 
such Client Plan as if made at the same time and under the same 
circumstances to an unrelated party.
    (e) The Client Plan may terminate the agency or sub-agency 
arrangement at any time without penalty to such Client Plan on five 
business days notice whereupon Global Capital Markets delivers 
securities identical to the borrowed securities (or the equivalent in 
the event of reorganization, recapitalization or merger of the issuer 
of the borrowed securities) to the Client Plan within--
    (1) The customary delivery period for such securities;
    (2) Five business days; or
    (3) The time negotiated for such delivery by the Client Plan and 
Global Capital Markets, whichever is less.
    (f) The Client Plan receives from Global Capital Markets (either by 
physical delivery or by book entry in a securities depository located 
in the United States, wire transfer or similar means) by the close of 
business on or before the day the loaned securities are delivered to 
Global Capital Markets, collateral consisting of cash, securities 
issued or guaranteed by the United States Government or its agencies or 
instrumentalities, or irrevocable United States bank letters of credit 
issued by a U.S. bank, which is a person other than Global Capital 
Markets or an affiliate thereof, or any combination thereof, or other 
collateral permitted under PTE 2006-16 (as amended from time to time 
or, alternatively, any additional or superseding class exemption that 
may be issued to cover securities lending by employee benefit plans), 
having, as of the close of business on the preceding business day, a 
market value (or, in the case of a letter of credit, a stated amount) 
initially equal to at least the percentage required in PTE 2006-16 (as 
amended from time to time) but in no case less than 102 percent of the 
market value of the loaned securities.
    (g) If the market value of the collateral on the close of trading 
on a business day is less than 100 percent of the market value of the 
borrowed securities at the close of business on that day, Global 
Capital Markets delivers additional collateral on the following day 
such that the market value of the collateral again equals 102 percent 
or the percentage otherwise required by 2006-16.
    (h) The Loan Agreement gives the Client Plan a continuing security 
interest in, title to, or the rights of a secured creditor with respect 
to the collateral and a lien on the collateral and FMP monitors the 
level of the collateral daily.
    (i) Before entering into a Loan Agreement, Global Capital Markets 
furnishes FMP the most recently available audited and unaudited 
statements of the financial condition of the applicable borrower within 
Global Capital Markets. Such statements are, in turn, provided by FMP 
to the Client Plan. At the time of the loan, Global Capital Markets 
gives prompt notice to the Client Plan fiduciary of any material 
adverse change in the borrower's financial condition since the date of 
the most recent financial statement furnished to the Client Plan. In 
the event of any such changes, FMP requests approval of the Client Plan 
to continue lending to Global Capital Markets before making any such 
additional loans. No new securities loans will be made until approval 
is received and each loan constitutes a representation by Global 
Capital Markets that there has been no such material adverse change.
    Notwithstanding the foregoing, effective March 16, 2008, section 
II(i) shall be deemed satisfied with respect to loans of securities by 
Client Plans to Bear Stearns Affiliates by FMP as securities lending 
agent or sub-agent, provided (i) FMP provided to such Client Plans no 
later than April 15, 2008, the most recently available audited and 
unaudited consolidated statements of the financial condition of the 
parent company of the applicable Bear Stearns Affiliates and the parent 
company's subsidiaries, and notice of any material adverse change in 
financial condition since the date of the most recent financial 
statement being furnished to the Client Plans, and (ii) at the time of 
providing such information, FMP notified each Client Plan that it had 
10 days to object in writing to the continued lending of securities to 
the Bear Stearns Affiliates. If a written objection is received from a 
Client Plan within the 10-day period, FMP shall cease to make any new 
securities loans on behalf of that Client Plan to Bear Stearns 
Affiliates; any securities loans made on behalf of that Client Plan to 
Bear Stearns Affiliates prior to the date the objection is received 
shall be covered by this exemption, and FMP

[[Page 13238]]

shall seek to expeditiously terminate such securities loan in a manner 
approved by the Client Plan. Loans of securities by such Client Plans 
to a Bear Stearns Affiliate entered into on or after April 15, 2008, 
under the same securities loan agreement terms disclosed in accordance 
with the second paragraph of section II(c)(3) above shall be deemed to 
satisfy this section II(i), absent a material adverse change in the 
financial condition of the particular Bear Stearns Affiliate since 
April 15, 2008 (in which event the provisions of the first paragraph of 
this section II(i) shall apply).
    (j) In return for lending securities, the Client Plan either--
    (1) Receives a reasonable fee, which is related to the value of the 
borrowed securities and the duration of the loan; or
    (2) Has the opportunity to derive compensation through the 
investment of cash collateral. (In the case of cash collateral, the 
Client Plan may pay a loan rebate or similar fee to Global Capital 
Markets if such fee is not greater than the fee the Client Plan would 
pay an unrelated party in a comparable arm's length transaction.)
    (k) All procedures regarding the securities lending activities 
conform to the applicable provisions of PTE 2006-16 (as amended from 
time, or alternatively, any additional or superseding class exemption 
that may be issued to cover securities lending by employee benefit 
plans).
    (l) If Global Capital Markets defaults on the securities loan or 
enters bankruptcy, the collateral will not be available to Global 
Capital Markets or its creditors, but will be used to make the Client 
Plan whole. In this regard,
    (1) In the event a Foreign Affiliated Borrower defaults on a loan, 
JPMCB will liquidate the loan collateral to purchase identical 
securities for the Client Plan. If the collateral is insufficient to 
accomplish such purchase, JPMCB will indemnify the Client Plan for any 
shortfall in the collateral plus interest on such amount and any 
transaction costs incurred (including attorney's fees of the Client 
Plan for legal actions arising out of the default on the loans or 
failure to indemnify properly under this provision). Alternatively, if 
such identical securities are not available on the market, FMP will pay 
the Client Plan cash equal to--
    (i) The market value of the borrowed securities as of the date they 
should have been returned to the Client Plan, plus
    (ii) All the accrued financial benefits derived from the beneficial 
ownership of such loaned securities as of such date, plus
    (iii) Interest from such date to the date of payment.
    The lending Client Plans will be indemnified in the United States 
for any loans to the Foreign Affiliated Borrowers.
    (2) In the event the U.S. Affiliated Borrower defaults on a loan, 
JPMCB will liquidate the loan collateral to purchase identical 
securities for the Client Plan. If the collateral is insufficient to 
accomplish such purchase, either JPMCB or the U.S. Affiliated Borrower 
will indemnify the Client Plan for any shortfall in the collateral plus 
interest on such amount and any transaction costs incurred (including 
attorney's fees of the Client Plan for legal actions arising out of the 
default on the loans or failure to indemnify property under this 
provision).
    (m) The Client Plan receives the equivalent of all distributions 
made to holders of the borrowed securities during the term of the loan, 
including all interest, dividends and distributions on the loaned 
securities during the loan period.
    (n) Prior to any Client Plan's approval of the lending of its 
securities to Global Capital Markets, copies of the notice of proposed 
exemption and the final exemption, and, effective November 7, 2008, the 
proposed amendment to the exemption and, upon publication in the 
Federal Register, the final amendment to the exemption, are provided to 
the Client Plan; provided, that for Client Plans of FMP as of the date 
of the proposed amendment or final amendment, as applicable, is 
published in the Federal Register, section II(n) shall be deemed 
satisfied if such notice is provided to the Client Plan within 15 days 
of publication in the Federal Register.
    (o) Each Client Plan receives a monthly report with respect to its 
securities lending transactions, including but not limited to the 
information described in Representation 24 of the proposed exemption 
for PTE 99-34 (64 FR 34281, 6/25/99), so that an independent fiduciary 
of the Client Plan may monitor the securities lending transactions with 
Global Capital Markets.
    (p) Only Client Plans with total assets having an aggregate market 
value of at least $50 million are permitted to lend securities to 
Global Capital Markets; provided, however, that--
    (1) In the case of two or more Client Plans which are maintained by 
the same employer, controlled group of corporations or employee 
organization (i.e., the Related Client Plans), whose assets are 
commingled for investment purposes in a single master trust or any 
other entity the assets of which are ``plan assets'' under 29 CFR 
2510.3-101 (the Plan Asset Regulation), which entity is engaged in 
securities lending arrangements with Global Capital Markets, the 
foregoing $50 million requirement shall be deemed satisfied if such 
trust or other entity has aggregate assets which are in excess of $50 
million; provided that if the fiduciary responsible for making the 
investment decision on behalf of such master trust or other entity is 
not the employer or an affiliate of the employer, such fiduciary has 
total assets under its management and control, exclusive of the $50 
million threshold amount attributable to plan investment in the 
commingled entity, which are in excess of $100 million.
    (2) In the case of two or more Client Plans which are not 
maintained by the same employer, controlled group of corporations or 
employee organization (i.e., the Unrelated Client Plans), whose assets 
are commingled for investment purposes in a group trust or any other 
form of entity the assets of which are ``plan assets'' under the Plan 
Asset Regulation, which entity is engaged in securities lending 
arrangements with Global Capital Markets, the foregoing $50 million 
requirement is satisfied if such trust or other entity has aggregate 
assets which are in excess of $50 million (excluding the assets of any 
Client Plan with respect to which the fiduciary responsible for making 
the investment decision on behalf of such group trust or other entity 
or any member of the controlled group of corporations including such 
fiduciary is the employer maintaining such Plan or an employee 
organization whose members are covered by such Plan). However, the 
fiduciary responsible for making the investment decision on behalf of 
such group trust or other entity--
    (i) Has full investment responsibility with respect to plan assets 
invested therein; and
    (ii) Has total assets under its management and control, exclusive 
of the $50 million threshold amount attributable to plan investment in 
the commingled entity, which are in excess of $100 million.
    (In addition, none of the entities described above are formed for 
the sole purpose of making loans of securities.)
    (q) With respect to each successive two week period, on average, at 
least 50 percent or more of the outstanding dollar value of securities 
loans negotiated on behalf of Client Plans by FMP, in the aggregate, 
will be to unrelated borrowers.

[[Page 13239]]

    (r) In addition to the above, all loans involving Foreign 
Affiliated Borrowers within Global Capital Markets have the following 
supplemental requirements:
    (1) Such Foreign Affiliated Borrower is registered as a bank or 
broker-dealer with--
    (i) The Financial Services Authority in the case of J. P. Morgan 
Securities Ltd.;
    (ii) The Office of the Superintendent of Financial Institutions 
(OSFI), in the case of J.P. Morgan Securities Canada Inc.;
    (iii) The Australian Securities & Investments Commission in the 
case of J.P. Morgan Securities Australia Ltd.; and
    (iv) The Financial Services Agency in the case of J.P. Morgan 
Securities Japan Ltd.
    (2) Such broker-dealer or bank is in compliance with all applicable 
provisions of Rule 15a-6 (17 CFR 240.15a-6) under the Securities 
Exchange Act of 1934 (the 1934 Act) which provides for foreign broker-
dealers a limited exemption from United States registration 
requirements;
    (3) All collateral is maintained in United States dollars or 
dollar-denominated securities or letters of credit of U.S. banks or any 
combination thereof, or other collateral permitted under PTE 2006-16 
(as amended from time to time, or alternatively, any additional or 
superseding class exemption that may be issued to cover securities 
lending by employee benefit plans);
    (4) All collateral is held in the United States;
    (5) The situs of the Loan Agreement is maintained in the United 
States;
    (6) The lending Client Plans are indemnified by JPMCB in the United 
States for any transactions covered by this exemption with the Foreign 
Affiliated Borrower so that the Client Plans do not have to litigate in 
a foreign jurisdiction nor sue the Foreign Affiliated Borrower to 
realize on the indemnification; and
    (7) Prior to the transaction, each Foreign Affiliated Borrower 
enters into a written agreement with FMP on behalf of the Client Plan 
whereby the Foreign Affiliated Borrower consents to service of process 
in the United States and to the jurisdiction of the courts of the 
United States with respect to the transactions described herein.
    (s) JPMCB or J.P. Morgan Securities Inc. (JPMSI) maintains, or 
causes to be maintained within the United States for a period of six 
years from the date of such transaction, in a manner that is convenient 
and accessible for audit and examination, such records as are necessary 
to enable the persons described in paragraph (t)(1) to determine 
whether the conditions of the exemption have been met, except that--
    (1) A prohibited transaction will not be considered to have 
occurred if, due to circumstances beyond the control of JPMCB or JPMSI, 
the records are lost or destroyed prior to the end of the six year 
period; and
    (2) No party in interest other than JPMCB or JPMSI 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 below by paragraph (t)(1).
    (t)(1) Except as provided in subparagraph (t)(2) of this paragraph 
and notwithstanding any provisions of subsections (a)(2) and (b) of 
section 504 of the Act, the records referred to in paragraph (s) are 
unconditionally available at their customary location during normal 
business hours by:
    (i) Any duly authorized employee or representative of the 
Department, the Internal Revenue Service or the Securities and Exchange 
Commission;
    (ii) Any fiduciary of a participating Client Plan or any duly 
authorized representative of such fiduciary;
    (iii) Any contributing employer to any participating Client Plan or 
any duly authorized employee representative of such employer; and
    (iv) Any participant or beneficiary of any participating Client 
Plan, or any duly authorized representative of such participant or 
beneficiary.
    (t)(2) None of the persons described above in paragraphs 
(t)(1)(ii)-(t)(1)(iv) of this paragraph (t)(1) are authorized to 
examine the trade secrets of JPMCB, the U.S. Affiliated Borrowers, or 
the Foreign Affiliated Borrowers or commercial or financial information 
which is privileged or confidential.

Section III. Temporary Exemption for Investment in Bear Stearns Master 
Note

    The restrictions of sections 406(a)(1)(A) through (D) and sections 
406(b)(1) and (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 
investment of securities lending collateral by JPMCB, as the investment 
manager of such collateral on behalf of the Client Plan or Collective 
Fund that has lent the securities, in the Bear Stearns Master Note (as 
defined in paragraph (b) below), provided that the condition set forth 
below in paragraph (a) is met.
    (a) Repayment of the Bear Stearns Master Note is unconditionally 
guaranteed by JPMCB.
    (b) For purposes of this Section III, the term ``Bear Stearns 
Master Note'' means the $750 million Evergreen Advance dated October 
23, 2007, under the Master Note Agreement dated February 9, 2007, by 
and between JPMCB as agent for a group of lending entities and certain 
subsidiaries of The Bear Stearns Companies Inc., which matured on June 
13, 2008, and was paid in full.

Section IV. Definitions

    For purposes of this exemption,
    (a) The terms ``JPMCB'' and ``JPMCC'' as referred to herein in 
Sections I, II and III, refer to JPMorgan Chase Bank, National 
Association, and its parent, JPMorgan Chase & Co., Inc.
    (b) The term ``affiliate'' means any entity now or in the future, 
directly or indirectly, controlling, controlled by, or under common 
control with JPMCC or its successors. (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.)
    (c) The term ``U.S. Affiliated Borrower'' means an affiliate of 
JPMCC that is a bank supervised by the United States or a State, or a 
broker-dealer registered under the 1934 Act.
    (d) The term ``Foreign Affiliated Borrower'' means an affiliate of 
JPMCC that is a bank or a broker-dealer which is supervised by--
    (i) The Financial Services Authority in the United Kingdom;
    (ii) OSFI in Canada;
    (iii) The Australian Securities & Investments Commission in 
Australia; and
    (iv) The Financial Services Agency in Japan.
    (e) The term ``Bear Stearns Affiliate'' means The Bear Stearns 
Companies Inc. and its affiliates as constituted on March 15, 2008.
    (f) The term ``Independent Fiduciary'' means a fiduciary who is 
independent of and unrelated to JPMCB and Bear Stearns Affiliates. For 
purposes of this exemption, a fiduciary will not be deemed to be 
independent of and unrelated to JPMCB and Bear Stearns Affiliates if:
    (i) Such fiduciary directly or indirectly controls, is controlled 
by, or is under common control with JPMCB or a Bear Stearns Affiliate;
    (ii) Such fiduciary, or any employee of the fiduciary who will be 
involved in the Review (as defined in section IV(g)), or any officer, 
director, partner, or highly compensated employee (as

[[Page 13240]]

defined in section 4975(e)(2)(H) of the Code) of the fiduciary, is an 
officer, director, partner or highly compensated employee (as defined 
in section 4975(e)(2)(H) of the Code) of JPMCB or a Bear Stearns 
Affiliate; or any member of the business segment performing the 
independent fiduciary services is a relative of an officer, director, 
partner or highly compensated employee (as defined in section 
4975(e)(2)(H) of the Code) of JPMCB or a Bear Stearns Affiliate.
    However, if an individual is a director of the fiduciary and an 
officer, director, partner or highly compensated employee (as defined 
in section 4975(e)(2)(H) of the Code) of JPMCB or a Bear Stearns 
Affiliate, and if he or she abstains from participation in the Review, 
then this section IV(f)(ii) shall not apply.
    For purposes of this section IV(f)(ii), the term officer means a 
president, any vice president in charge of a principal business unit, 
division or function (such as sales, administration, or finance), or 
any other officer who performs a policy-making function for the 
fiduciary, JPMCB, or a Bear Stearns Affiliate.
    (iii) Such fiduciary directly or indirectly receives any 
compensation or other consideration for his or her own personal account 
in connection with any transaction described in this exemption, except 
that the Independent Fiduciary may receive compensation from JPMCB for 
acting as Independent Fiduciary as contemplated herein if the amount or 
payment of such compensation is not contingent upon or in any way 
affected by the Independent Fiduciary's ultimate decision; or
    (iv) The annual gross revenue received by such fiduciary, during 
any year of its engagement, from JPMCB and Bear Stearns Affiliates 
exceeds five percent (5%) of the fiduciary's annual gross revenue from 
all sources for its prior tax year.
    (g) The term ``Review'' means a test by an Independent Fiduciary of 
a representative sample of transactions falling under section II(b)(i) 
of this Exemption that is sufficient in size to afford the Independent 
Fiduciary a reasonable basis to make findings as to compliance with the 
following:
    (i) Whether allocation of the opportunity to lend securities to the 
applicable client plan account was in accordance with JPMCB's internal 
securities loan allocation procedures;
    (ii) Whether the loan of securities by the Client Plan to Bear 
Stearns Affiliates was at market rates and terms which were at least as 
favorable to such Client Plan as if made at the same time and under the 
same circumstances to an unrelated party (as required by section II(d) 
hereof);
    (iii) Whether with respect to each successive two-week period, on 
average, at least 50 percent or more of the outstanding dollar value of 
securities loans negotiated on behalf of Client Plans by FMP, in the 
aggregate, were to unrelated borrowers (as required by section II(q) of 
the exemption); and
    (iv) Whether investment by the applicable Client Plan in the 
underlying securities that were loaned was consistent with the 
investment guidelines for the particular Client Plan account.
    For a more complete statement of facts and representations 
supporting the Department's decision to grant PTE 99-34, refer to the 
proposed exemption (64 FR 34281, June 25, 1999), the grant notice (64 
FR 46419, August 25, 1999) and the notice of proposed amendment (the 
Notice)(73 FR 63200, October 23, 2008).

DATES: Effective Date: Except as otherwise specified herein, the 
amendment is effective as of August 25, 1999.
    Written Comments: The Department received one comment with respect 
to the Notice, which was filed by the Applicants. The Applicants' 
commentary, a discussion of the Department's views in response thereto 
and the modifications to the proposed exemption are discussed below.
    The Applicants noted that the proposed amendments to sections 
II(c)(3) and II(i) would deem certain disclosure conditions of the 
exemption to be satisfied with respect to Bear Stearns Affiliate loans 
``for the period between March 16, 2008, and April 15, 2008,'' provided 
that the required information was furnished to the plans no later than 
April 15, 2008. The special relief would expire on April 15, 2008, and 
then preexisting disclosure conditions, which require disclosure prior 
to participating in a securities lending program and before any loans 
are effected, would apply. Applicants believe that loans to Bear 
Stearns Affiliates that were made before April 15, 2008, in reliance on 
the special relief, might be deemed non-compliant after April 15, 2008. 
Additionally, according to the Applicants, reinstating the general rule 
as of April 15, 2008, might also mean that further loans to Bear 
Stearns Affiliates could not be made after that date even though the 
required information has now been provided.
    The Applicants suggest that removing the end date on the period for 
which relief is provided would address this concern. Relief would be 
limited to loans for those Client Plans that were clients of FMP during 
the March 16 to April 15 period, because those are the only plans that 
will have received the required disclosures by the April 15, 2008 date. 
For post-April 15 clients, the general rules of the exemption would 
apply. With that understanding of the applicability of the special 
relief, the Department has revised the final exemption accordingly.
    The Applicants also suggest that with respect to section II(i), 
language be added to clarify that the special relief would not 
supersede the requirement to update the provided information in the 
event of a material adverse change to the borrower's financial 
condition. The Applicants provided the following sentence to be added 
to section II(i):

    Loans of securities by such Client Plans to a Bear Stearns 
Affiliate entered into on or after April 15, 2008, under the same 
securities loan agreement terms disclosed in accordance with the 
second paragraph of section II(c)(3) above shall be deemed to 
satisfy this section II(i), absent a material adverse change in the 
financial condition of the particular Bear Stearns Affiliate since 
April 15, 2008 (in which event the provisions of the first paragraph 
of this section II(i) shall apply).

The Department has added Applicants' proposed sentence at the end of 
the new paragraph in section II(i).
    Applicants request that an additional sentence be added to the new 
paragraphs in section II(c)(3) and II(i) to give effect to certain 
provisions previously only described in the disclosure provisions of 
these paragraphs. The disclosure provisions in question require that 
FMP notify each Client Plan of its ability to object to continued 
securities lending to Bear Stearns Affiliates, and detail the process 
that will occur if a Client Plan objects. Applicants' proposed sentence 
states that:

    If a written objection is received from a Client Plan within the 
10-day period, FMP shall cease to make any new securities loans on 
behalf of that Client Plan to Bear Stearns Affiliates; any 
securities loans made on behalf of that Client Plan to Bear Stearns 
Affiliates prior to the date the objection is received shall be 
covered by this exemption, and FMP shall seek to expeditiously 
terminate such securities loan in a manner approved by the Client 
Plan.

    The Department concurs; however, to avoid redundancy, the 
Department shortened the disclosure provisions preceding Applicants' 
requested sentences.
    With respect to section II(n), which requires copies of the notice 
of proposed exemption and final exemption to be

[[Page 13241]]

provided to Client Plans, Applicants suggest that the section be 
amended to require disclosure of the notice of proposed amendment and 
final amendment. The Department has revised that section as suggested.
    Applicants additionally request a revision of the definition of 
``Independent Fiduciary,'' in particular, the language describing the 
relationships that will cause the fiduciary not to be independent. The 
language in question, section IV(f)(ii) of the exemption, reads: ``Such 
fiduciary, or any officer, director, partner, employee or relative of 
the fiduciary, is an officer, director, partner or employee of JPMCB or 
a Bear Stearns Affiliate (or is a relative of such persons).''
    Applicants state that the firm that has been retained as 
Independent Fiduciary is U.S. Trust, Bank of America Private Wealth 
Management, a business unit of Bank of America, N.A. Bank of America 
has entered into a definitive agreement to sell the Special Fiduciary 
Services (``SFS'') business segment of U.S. Trust, which is performing 
the Independent Fiduciary services for purposes of the exemption, to 
Evercore Partners (Evercore), in a transaction expected to close in 
early 2009, before U.S. Trust will be issuing its Independent Fiduciary 
report. Following this transaction, SFS will operate as Evercore Trust 
Company, N.A., a subsidiary of Evercore, which will assume the 
Independent Fiduciary role.
    Given the size of JPMCB and Bear Stearns, Applicants assert that 
relationships of individuals within these organizations would be 
difficult to monitor, and should not affect the fiduciary's 
independence unless they involve persons with responsibility for the 
particular transaction. More specifically, Applicants informed the 
Department that monitoring relatives of the various classes of people 
was administratively burdensome. Applicants additionally request that a 
director of the fiduciary who is also an officer, director, partner or 
highly compensated employee of JPMCB or a Bear Stearns Affiliate be 
permitted to abstain from participation in the Review rather than cause 
the fiduciary to fail to be independent. Finally, Applicants requested 
that the exemption contain a definition of the term ``officer.''
    The Department has revised the language to reduce the 
administrative burden to Applicants while continuing to protect plan 
participants and beneficiaries. In particular, the Department notes 
that the definition requires tracking the relatives only of the members 
of the SFS business unit performing the independent fiduciary services. 
The language, as revised, reads:

    (f) The term ``Independent Fiduciary'' means a fiduciary who is 
independent of and unrelated to JPMCB and Bear Stearns Affiliates. 
For purposes of this exemption, a fiduciary will not be deemed to be 
independent of and unrelated to JPMCB and Bear Stearns Affiliates 
if:
    * * *
    (ii) Such fiduciary, or any employee of the fiduciary who will 
be involved in the Review (as defined in section IV(g)), or any 
officer, director, partner, or highly compensated employee (as 
defined in section 4975(e)(2)(H) of the Code) of the fiduciary, is 
an officer, director, partner or highly compensated employee (as 
defined in section 4975(e)(2)(H) of the Code) of JPMCB or a Bear 
Stearns Affiliate; or any member of the business segment performing 
the independent fiduciary services is a relative of an officer, 
director, partner or highly compensated employee (as defined in 
section 4975(e)(2)(H) of the Code) of JPMCB or a Bear Stearns 
Affiliate.
    However, if an individual is a director of the fiduciary and an 
officer, director, partner or highly compensated employee (as 
defined in section 4975(e)(2)(H) of the Code) of JPMCB or a Bear 
Stearns Affiliate, and if he or she abstains from participation in 
the Review, then this section IV(f)(ii) shall not apply.
    For purposes of this section IV(f)(ii), the term officer means a 
president, any vice president in charge of a principal business 
unit, division or function (such as sales, administration, or 
finance), or any other officer who performs a policy-making function 
for the fiduciary, JPMCB, or a Bear Stearns Affiliate.

    Finally, Applicants address the definition of ``Review'' (section 
IV(g)(ii)) which states that the Independent Fiduciary will conduct a 
review of:

    [w]hether the loan of securities by the Client Plan to Global 
Capital Markets was at market rates and terms which were at least as 
favorable to such Client Plan as if made at the same time and under 
the same circumstances to an unrelated party * * *.

Applicants' position is that the scope of the Independent Fiduciary's 
review is limited to securities loans to Bear Stearns Affiliates, and 
accordingly, references in this section to Global Capital Markets 
should be changed to Bear Stearns Affiliates. The Department has made 
the requested change.

DATES: Effective Date: Except as otherwise specified herein, the 
amendment is effective as of August 25, 1999.

FOR FURTHER INFORMATION CONTACT: Karen E. Lloyd of the Department at 
(202) 693-8554. (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 20th day of March, 2009.
Ivan Strasfeld,
Director of Exemption, Determinations Employee Benefits Security 
Administration, U.S. Department of Labor.
[FR Doc. E9-6620 Filed 3-25-09; 8:45 am]

BILLING CODE 4510-29-P