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Notice of a Proposed Amendment to Prohibited Transaction Exemption (PTE) 90-29, 55 FR 21459 (May 24, 1990), as Amended by PTE 97-34, 62 FR 39021 (July 21, 1997), PTE 2000-58, 65 FR 67765 (November 13, 2000), PTE 2002-41, 67 FR 54487 (August 22,2002) and PTE 2007-05, 72 FR 13130 (March 20, 2007) as Corrected at 72 FR 16385 (April 4, 2007) (PTE 2007-05), (PTE 90-29), Involving Merrill Lynch, Pierce, Fenner & Smith, Inc., the Principal Subsidiary of Merrill Lynch & Co., Inc. and Its A   [5/6/2009]
[PDF]
FR Doc E9-10362
[Federal Register: May 6, 2009 (Volume 74, Number 86)]
[Notices]               
[Page 21002-21008]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr06my09-131]                         

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DEPARTMENT OF LABOR

Employee Benefits Security Administration

 
Notice of a Proposed Amendment to Prohibited Transaction 
Exemption (PTE) 90-29, 55 FR 21459 (May 24, 1990), as Amended by PTE 
97-34, 62 FR 39021 (July 21, 1997), PTE 2000-58, 65 FR 67765 (November 
13, 2000), PTE 2002-41, 67 FR 54487 (August 22,2002) and PTE 2007-05, 
72 FR 13130 (March 20, 2007) as Corrected at 72 FR 16385 (April 4, 
2007) (PTE 2007-05), (PTE 90-29), Involving Merrill Lynch, Pierce, 
Fenner & Smith, Inc., the Principal Subsidiary of Merrill Lynch & Co., 
Inc. and Its Affiliates (Merrill Lynch) and to PTE 2002-19, 67 FR 14979 
(March 28, 2002) as Amended by PTE 2007-05, (PTE 2002-19), Involving 
J.P. Morgan Chase & Company and Its Affiliates (D-11519)

AGENCY: Employee Benefits Security Administration, Department of Labor.

ACTION: Notice of a Proposed Amendment to PTE 90-29.

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SUMMARY: This document contains a notice of pendency before the 
Department of Labor (the Department) of a proposed amendment to PTE 90-
29 and PTE 2002-19, Underwriter Exemptions.\1\ The Underwriter 
Exemptions are individual exemptions that provide relief for the 
origination and operation of certain asset pool investment trusts and 
the acquisition, holding and disposition by employee benefit plans 
(Plans) of certain asset-backed pass-through certificates representing 
undivided interests in those investment trusts. The proposed amendment 
to PTE 90-29 and 2002-19, if granted, would provide a six month period 
to resolve certain affiliations, as a result of Bank of America 
Corporation's acquisition of Merrill Lynch, between Bank of America, 
N.A., the Trustee, and Merrill Lynch as members of the Restricted 
Group, as those terms are defined in the Underwriter Exemptions (the 
Proposed Amendment). The Proposed Amendment, if granted, would affect 
the participants and beneficiaries of the Plans participating in such 
transactions and the fiduciaries with respect to such Plans.
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    \1\ The ``Underwriter Exemptions'' are a group of individual 
exemptions that provide substantially identical relief for the 
operation of certain asset-backed or mortgage-backed investment 
pools and the acquisition and holding by Plans of certain securities 
representing interests in those investment pools.

DATES: Written comments and requests for a hearing should be received 
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by the Department by June 5, 2009.

ADDRESSES: All written comments and requests for a public hearing 
(preferably, three copies) should be sent to the Office of Exemption 
Determinations, Employee Benefits Security Administration, Room N-5700, 
U.S. Department of Labor, 200 Constitution Avenue, NW., Washington, DC 
20210, (Attention: Exemption Application Number D-11519). Interested 
persons are invited to submit comments and/or hearing requests to the 
Department by the end of the scheduled comment period either by 
facsimile to (202) 219-0204 or by electronic mail to 
moffitt.betty@dol.gov. The application pertaining to the Proposed 
Amendment (Application) and the comments received will be available for 
public inspection in the Public Disclosure Room of the Employee 
Benefits Security Administration, U.S. Department of Labor, Room N-
1513, 200 Constitution Avenue, NW., Washington, DC 20210.

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

SUPPLEMENTARY INFORMATION: This document contains a notice of pendency 
before the Department of a proposed exemption to amend PTE 90-29 and 
PTE 2002-19, Underwriter Exemptions. The Underwriter Exemptions are a 
group of individual exemptions granted by the Department that provide 
substantially identical relief from certain of the restrictions of 
sections 406 and 407 of the Employee Retirement Income Security Act of 
1974 (ERISA or the Act) and from the taxes imposed by sections 4975(a) 
and (b) of the Internal Revenue Code of 1986, as amended (Code), by 
reason of certain provisions of section of 4975(c)(1) of the Code for 
the operation of certain asset pool investment trusts and the 
acquisition, holding, and disposition by Plans of certain asset-backed 
pass-through certificates representing undivided interests in those 
investment trusts.
    All of the Underwriter Exemptions were amended by PTE 97-34, 62 FR 
39021 (July 21, 1997), PTE 2000-58, 65 FR 67765 (November 13, 2000), 
and PTE 2007-05, 72 FR 13130 (March 20, 2007), as corrected at 72 FR 
16385 (April 4, 2007). Certain of the Underwriter Exemptions were 
amended by PTE 2002-41, 67 FR 54487 (August 22, 2002) or modified by 
PTE 2002-19.
    The Department is proposing this amendment to PTE 90-29 and to PTE 
2002-19 pursuant to section 408(a) of the Act and section 4975(c)(2) of 
the Code, and in accordance with the procedures set forth in 29 CFR 
Part 2570, Subpart B (55 FR 32836, 32847, August 10, 1990).\2\
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    \2\ Section 102 of Reorganization Plan No. 4 of 1978 (5 U.S.C. 
App. 1 [1996]) generally transferred the authority of the Secretary 
of the Treasury to issue exemptions under section 4975(c)(2) of the 
Code to the Secretary of Labor.
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    1. The Underwriter Exemptions permit Plans to invest in pass-
through securities representing undivided interests in asset-backed or 
mortgage-backed investment pools (Securities). The Securities generally 
take the form of certificates issued by a trust (Trust). The 
Underwriter Exemptions permit transactions involving a Trust, including 
the servicing, management and operation of the Trust, and the sale, 
exchange or transfer of Securities evidencing interests therein, in the 
initial issuance of the Securities or in the secondary market for such 
Securities (the Covered Transactions). The most recent amendment to the 
Underwriter Exemptions is PTE 2007-05, 72 FR 13130 (March 20, 2007), as 
corrected at 72 FR 16385 (April 4, 2007) (PTE 2007-05). One of the 
General Conditions of the Underwriter Exemptions, as amended, requires 
that the Trustee not

[[Page 21003]]

be an ``Affiliate'' of any member of the ``Restricted Group'' other 
than an ``Underwriter.'' PTE 2007-05, subsection II.A.(4). The term 
``Restricted Group'' is defined under section III.M. as: (1) Each 
Underwriter; (2) Each Insurer; (3) The Sponsor; (4) The Trustee; (5) 
Each Servicer (6) Any Obligor with respect to obligations or 
receivables included in the Issuer constituting more than 5 percent of 
the aggregate unamortized principal balance of the assets in the 
Issuer, determined on the date of the initial issuance of Securities by 
the Issuer; (7) Each counterparty in an Eligible Swap Agreement; or (8) 
Any Affiliate of a person described in subsections III.M.(1)-(7).'' The 
term ``Servicer'' is defined to include ``the Master Servicer and any 
Subservicer.'' PTE 2007-05, section III.G. The term ``Affiliate'' is 
defined, in part, to include ``(1) Any person directly or indirectly, 
through one or more intermediaries, controlling, controlled by, or 
under common control with such other person; (2) Any officer, director, 
partner, employee * * * of such other person; and (3) Any corporation 
or partnership of which such other person is an officer, director or 
partner.'' PTE 2007-05, section III.N.
    2. On May 24, 1990, PTE 90-29 was granted to Merrill Lynch, Pierce, 
Fenner & Smith, Inc. (MLPFS), the principal subsidiary of Merrill 
Lynch. MLPF&S is a Delaware corporation registered with and regulated 
by the SEC as a broker-dealer, and is a member of the New York Stock 
Exchange, and the National Association of Securities Dealers, Inc. 
MLPFS is also regulated by the Municipal Securities Rulemaking Board 
(with respect to municipal securities activities), the Commodity 
Futures Trading Commission, and the National Futures Association (with 
respect to MLPFS's activities as a futures commission merchant). MLPFS 
is a leading broker and/or dealer in the purchase and sale of corporate 
equity and debt securities, mutual funds, money market instruments, 
government securities, high yield bonds, municipal securities, 
financial futures contracts, and options. As a leading investment 
banking firm, MLPFS provides corporate, institutional, and government 
clients with a wide variety of financial services including 
underwriting the sale of securities to the public, structured and 
derivative financing, private placements, mortgage and lease financing, 
and financial advisory services, which includes advice on mergers and 
acquisitions. MLPFS also acts as a prime broker for hedge funds. 
Further, MLPFS operates mutual fund advisory programs, which provide 
plans governed by ERISA or section 4975 of the Code investment advice 
concerning purchasing mutual funds shares.
    3. Bank of America Corporation (Bank of America or the Applicant) 
notes that it is the parent holding company of Bank of America, N.A., 
the Trustee of each of the commercial or residential mortgage-backed 
securitizations in the Covered Transactions. The Proposed Amendment was 
requested by application dated November 24, 2008, and as updated by 
Bank of America (the Application). The Applicant states that on January 
1, 2009 (the Acquisition Date), Bank of America acquired Merrill Lynch 
(the Acquisition). Merrill Lynch is a holding company that, through its 
subsidiaries, provides broker-dealer, investment banking, financing, 
wealth management, advisory, insurance, lending and related products 
and services on a global basis. Merrill Lynch is a ``Consolidated 
Supervised Entity,'' \3\ and is subject to group-wide supervision by 
the SEC. On March 4, 2009, the Applicant explained that Merrill Lynch & 
Co., Inc. (Parent or Merrill Lynch) is the ultimate parent of all of 
its subsidiaries, and was (prior to its acquisition by Bank of America) 
a publicly traded holding company. Among the direct subsidiaries of the 
Parent, each 100% owned by Parent, are Merrill Lynch Group, Inc. (MLG), 
Merrill Lynch Bank & Trust Co., FSB (MLBT) and Merrill Lynch, Pierce, 
Fenner & Smith Incorporated (MLPFS).
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    \3\ Effective August 2004, the Securities Exchange Commission 
(Commission) adopted rule amendments that established a voluntary, 
alternative method for computing net capital for certain broker-
dealers. As a condition to its use of the alternative method, a 
broker-dealer's ultimate holding company and affiliates (referred to 
collectively as a consolidated supervised entity or CSE) must 
consent to group-wide Commission supervision. These rules, among 
other things, respond to international developments. Specifically, 
affiliates of certain US broker-dealers that conduct business in the 
European Union (EU) have stated that they must demonstrate that they 
are subject to consolidated supervision at the ultimate holding 
company level that is ``equivalent'' to EU consolidated supervision. 
Commission supervision incorporated into these rule amendments 
addresses this standard. These amendments and the SEC's program for 
consolidated supervision of broker-dealers and affiliates will 
minimize duplicative regulatory burdens on firms that are active in 
the EU, as well as in other jurisdictions that may have similar 
laws.
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    For the Covered Transactions that are the subject of the 
Applicant's request, Merrill Lynch Mortgage Capital Inc. (Mortgage 
Capital) is the Sponsor of certain transactions subject to PTE 90-29 
and is an indirect, 100% owned subsidiary of MLG. Mortgage Capital's 
direct 100% owned subsidiaries include Merrill Lynch Mortgage Lending, 
Inc., the Sponsor of certain Covered Transactions, Merrill Lynch 
Mortgage Investors, Inc., the Sponsor of one Covered Transaction and 
Wilshire Credit Corporation (Wilshire), the Servicer of certain Covered 
Transactions.
    Mortgage Capital purchased Wilshire in January 2004. MLBT is the 
100% parent of FF Mortgage Corporation, which in turn is the 100% 
parent of Home Loan Services, Inc. (HLS), a Servicer of certain of the 
Covered Transactions. On October 20, 2006, MLBT acquired the subprime 
mortgage assets of National City Bank, including the stock of First 
Franklin Financial Corporation (FFFC), National City Home Loan Services 
(the related servicing platform) and the mortgage loan origination 
platform of National City Bank (which operated as the First Franklin 
Financial division of National City Bank). The mortgage loan 
origination platform was subsequently transferred into First Franklin 
Financial Corporation. With the acquisition, the servicing division was 
renamed HLS and this entity services First Franklin loans. HLS is a 
direct 100% owned subsidiary of MLBT. FFFC is the Sponsor of certain of 
the Covered Transactions. On March 5, 2008, Parent announced that FFFC 
would no longer originate loans. Concurrent with this announcement, FF 
Mortgage Corporation sold the stock of FFFC to Merrill Lynch Mortgage 
Services Corporation, a subsidiary of Mortgage Capital (which actions 
were taken to satisfy the Office of Thrift Supervision). PTE 90-29 was 
granted to MLPFS, a direct 100% owned subsidiary of Parent and the 
Underwriter of certain of the Covered Transactions.
    4. The Acquisition caused certain transactions previously subject 
to PTE 90-29 or PTE 2002-19 to fail to satisfy the requirement under 
the Underwriter Exemptions that the Trustee not be an Affiliate of any 
member of the Restricted Group other than an Underwriter. PTE 2007-05 
subsection II.A.(4). Currently, for transactions where Merrill Lynch is 
the Servicer, a six-month period is provided by the Underwriter 
Exemptions to sever the affiliation between the Servicer and the 
Trustee if the affiliation occurred after the initial issuance of the 
Securities. PTE 2007-05, subsection II.A.(4)(b). However, there is 
currently no transitional relief under PTE 90-29 where Merrill Lynch is 
a Sponsor, Underwriter or a Swap Counterparty and Bank of America, N.A. 
is the Trustee. Accordingly, Bank of America seeks a temporary 
amendment to PTE 90-29 to provide for a six-month period for resolution 
of certain

[[Page 21004]]

prohibited affiliations caused by the Acquisition of Merrill Lynch by 
Bank of America, the parent of the Trustee.
    In addition, the Applicant requests that the amendment provide 
similar relief for one other Covered Transaction, JPM 2003-ML1, where 
Bank of America is Trustee and Merrill Lynch is a Sponsor. In this 
transaction, the Underwriter, J.P. Morgan Securities Inc., who is 
unrelated to Bank of America, relies upon PTE 2002-19, granted to J.P. 
Morgan Chase & Co. and its affiliates. The Applicant provides that J.P. 
Morgan Securities Inc. is the principal nonbank subsidiary of J.P. 
Morgan Chase & Co. JP Morgan Chase Commercial Mortgage Securities Corp. 
is 100% owned by JPMorgan Chase Bank, N.A., which in turn, is 100% 
owned by J.P. Morgan Chase & Co. JP Morgan Chase Commercial Mortgage 
Securities Corp. has confirmed to the Applicant that it has been 
notified of the application for the Proposed Amendment and has agreed 
to coverage under the Proposed Amendment. Bank of America represents 
that it has placed a notice on its web pages for each of the Covered 
Transactions affected by the Acquisition and that this notice would be 
updated upon publication of the Proposed Amendment, and if granted, the 
final amendment. Further, the Web pages will note the appointment of 
any co-trustee and the appointment of the replacement trustee. The 
Applicant states that Bank of America, N.A., in its role of Trustee, 
will bear the cost of appointing such co-trustee and that there will be 
no financial impact on any Underwriter.
    5. Bank of America represents that the Covered Transactions 
affected by the Acquisition consist of 49 commercial or residential 
mortgage-backed securitizations (CMBS or RMBS) (Securitizations) as 
detailed at section III.KK of the Proposed Amendment (the 
Securitizations List). Bank of America states that all of the 
Securitizations were structured and are managed to meet the 
requirements of PTE 90-29 or in the case of JPM 2003-ML1, PTE 2002-19, 
in each case as amended by PTE 2007-05. Bank of America, N.A. is the 
Trustee in each of the Securitizations. The Applicant represents that, 
in its role as Trustee, Bank of America, N.A. is obligated under both 
the operative documents that securitize the loans, and under state law 
relating to fiduciaries, to protect the interests of security holders. 
Specifically, the Trustee is required to enforce the rights of security 
holders against other parties to the transaction, including Servicers, 
Swap Counterparties and loan sellers. The Applicant notes further that 
in practice, due to industry standards and reputation concerns by the 
various parties, little such protection or enforcement is necessary, 
and the Trustee's role, while vigilant, is relatively passive. Merrill 
Lynch is a party to each of the Securitizations in the capacity or 
capacities detailed in the Securitizations List. The Applicant states 
that, in any of these capacities, Merrill Lynch is obligated, under the 
operative documents of the transaction, to perform its designated 
duties under contractual and, in some cases, industry standards for the 
benefit of security holders. The Applicant represents that each of the 
Pooling and Servicing Agreements has been structured to comply with PTE 
90-29 or in the case of JPM 2003-ML1, PTE 2002-19 and that each of the 
Trusts has been managed in accordance with the related Pooling and 
Servicing Agreement. Consequently, Securities issued by each Trust 
currently are eligible for purchase by Plans that meet the requirements 
of PTE 90-29 or in the case of JPM 2003-ML1, PTE 2002-19.
    6. The Applicant states that none of the Trusts were formed or 
marketed with the knowledge that Bank of America and Merrill Lynch 
would become affiliated. In this regard, the Applicant notes that there 
are no securitizations on the Securitization List that closed later 
than 2007; the Acquisition was announced in the third quarter of 2008. 
The Applicant states that, in general, the Pooling and Servicing 
Agreements governing the applicable Securitizations permit the cures 
detailed in their Application by contemplating a Trustee's resignation 
and replacement so as to comply with applicable law and providing the 
Trustee the ability to appoint co-trustees and other agents authorized 
to carry out the Trustees' duties. The Applicant notes that the 
agreements do not provide specific qualifications for co-trustees. 
While the agreements vary in the detail, after due diligence, the 
Applicant asserts that it is not aware of any provisions of the 
agreements or SEC requirements that preclude the cures detailed in the 
Application.
    7. Bank of America represents in its Application that during the 
proposed six month resolution period, for each Securitization on the 
Securitization List, the Trustee shall appoint a co-trustee, which is 
not an Affiliate of Bank of America, no later than the earlier of (a) 
April 1, 2009 or (b) five business days after Bank of America, N.A., 
the Trustee, has become aware of a conflict between the Trustee and any 
member of the Restricted Group that is an Affiliate of the Trustee. The 
co-trustee will be solely responsible for resolving such conflict 
between the Trustee and any member of the Restricted Group that has 
become an Affiliate of the Trustee as a result of the Acquisition; 
provided that if the Trustee has resigned on or prior to April 1, 2009, 
and no event described in clause (b) has occurred, no co-trustee shall 
be required since a replacement trustee would be in place by April 1, 
2009. Bank of America represents that as Trustee, Bank of America, N.A. 
will appoint a co-trustee with the knowledge and skill necessary to 
resolve any conflict arising between Bank of America, N.A. and any Bank 
of America affiliated member of the Restricted Group. In the event that 
a co-trustee were appointed, such co-trustee would assume Bank of 
America, N.A.'s role under the related Pooling and Servicing Agreement 
(solely with respect to any conflict between Bank of America, N.A. and 
a Bank of America affiliate that is a member of the Restricted Group) 
until a replacement trustee replaced Bank of America, N.A.
    On January 29, 2009, The Applicant informed the Department that 
Bank of America, N. A. is resigning as Trustee from a total of 70 
transactions (this number includes transactions where the conflict is 
not ERISA-related and the transaction is not on the Securitization 
List). Bank of America, N.A. resigned from 12 of these transactions on 
December 31, 2008, will resign from 50 of these transactions by March 
31, 2009, and will resign from the remaining 8 no later than June 30, 
2009. Of the 12 transactions BofA resigned from on December. 31, 2008, 
it resigned from 2 solely for ERISA purposes and 10 solely for 
securities law purposes. As of January 29, 2009, 27 transactions had 
received replacement trustees. The Applicant represented that the 
replacement trustees for the remaining transactions were currently 
being negotiated. On March 16, 2009, the Applicant informed the 
Department that for all 49 of the Covered Transactions on the 
Securitization List, the replacement trustees will be in place as of 
March 31, 2009. Wells Fargo Bank, N.A. will be the replacement trustee 
for five of the Covered Transactions and U.S. Bank National Association 
will be the replacement trustee for the remaining 44 Covered 
Transactions. The Applicant has further indicated that there were no 
actual conflicts from the date that the affiliation arose, January 1, 
2009 through March 20, 2009. Thus, no co-trustee had to be appointed 
during that period. The Applicant noted that in cases where the Trustee 
is also the securities administrator, Bank of

[[Page 21005]]

America, N.A. will resign as Trustee and remain securities 
administrator.
    For purposes of this Proposed Amendment, a conflict would arise 
whenever (a) Merrill Lynch is a member of the Restricted Group and 
fails to perform in accordance with the timeframes contained in the 
relevant Pooling and Servicing Agreement following a request for 
performance from Bank of America, N.A., as Trustee, or (b) Bank of 
America, N.A., as Trustee, fails to perform in accordance with the 
timeframes contained in the relevant Pooling and Servicing Agreement 
following a request for performance from Merrill Lynch, a member of the 
Restricted Group. The time as of which a conflict occurs is the earlier 
of the day immediately following the last day on which compliance is 
required under the relevant Pooling and Servicing Agreement; or the day 
on which a party affirmatively responds that it will not comply with a 
request for performance.
    Additionally, for purposes of this Proposed Amendment, the term 
conflict includes but is not limited to, the following: (1) Merrill 
Lynch's failure, as Sponsor, to repurchase a loan for breach of 
representation within the time period prescribed in the relevant 
Pooling and Servicing Agreement, following Bank of America, N.A.'s 
request, as Trustee, for performance; (2) Merrill Lynch, as Sponsor, 
notifies Bank of America, N.A., as Trustee, that it will not repurchase 
a loan for breach of representation, following Bank of America, N.A.'s 
request that Merrill Lynch repurchase such loan within the time period 
prescribed in the relevant Pooling and Servicing Agreement (the 
notification occurs prior to the expiration of the prescribed time 
period for the repurchase); and (3) Merrill Lynch, as Swap 
Counterparty, makes or requests a payment based on a value of LIBOR \4\ 
that Bank of America, N.A., as Trustee, considers erroneous.
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    \4\ The London Interbank Offered Rate.
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    8. In correspondence dated January 29, and February 3, 2009, Bank 
of America represented to the Department that it and Merrill Lynch were 
currently identifying replacement trustees to replace Bank of America, 
N.A. as Trustee in approximately 70 transactions. The Applicant stated 
that it intends to complete the negotiations and paperwork on an 
ongoing basis, with the effective date for all changes to be April 1, 
2009. The Applicant noted that in contrast to co-trustees, any 
replacement trustee will have to meet the requirements of the related 
Trust agreement for qualification as a Trustee (i.e., will meet the 
same requirements that Bank of America, N.A. (and its predecessor, 
LaSalle Bank, N.A. had to meet). A copy of a typical Pooling and 
Servicing Agreement requirements for a Trustee was provided to the 
Department. The Applicant further noted that if a conflict were to 
arise prior to April 1, 2009 with respect to any Trust, the most likely 
course would be that Bank of America, N.A. would promptly resign as 
Trustee and the replacement trustee would assume its role earlier than 
scheduled. The next most likely scenario is that the party that would 
become the replacement trustee (and hence meets the requirements of the 
related Pooling and Servicing Agreement for qualification as a Trustee) 
would be appointed co-trustee under the terms of the Proposed 
Amendment. The Applicant stated, however, there might be situations 
where either such course of action would be impossible or impractical, 
in which case the parties would have to appoint a different co-trustee 
until the replacement trustee assumed its role.
    The Applicant states that in certain cases, Bank of America, N.A. 
will continue as a securities administrator, retaining certain 
reporting requirements but be responsible to the replacement trustee. 
The replacement trustee will have legal title to the assets of the 
trust, will have fiduciary responsibility to the securities holders and 
will be responsible for supervising Bank of America, N.A. in whatever 
role it retains.
    9. Bank of America represents that, as of March 20, 2009, there was 
no outstanding conflict requiring resolution involving Bank of America, 
N.A. and any Merrill Lynch entity involved in the transactions listed 
in the Securitizations List. Further, Bank of America has stated that 
it would notify the Department of Labor of any conflict that arose 
prior to the replacement of Bank of America, N.A. as Trustee in any of 
these transactions. The Applicant notes that, as a technical matter, in 
the most likely case (e.g. the assertion of a breach of representation 
or warranty by the Sponsor), the Pooling and Servicing Agreements all 
require that the Trustee provide the offending party 90 days to cure 
the issue before the Trustee may take any action to do so itself. 
Consequently, if an issue would have arisen after January 1, 2009; the 
Trustee would not have been able to take any action to cure the issue 
until after April 1, 2009. The Applicant asserts that since it is 
expected that the Trustee replacements will be made by April 1, 2009, 
it is not anticipated that a conflict will arise while Bank of America, 
N.A. is the Trustee of any of the Covered Transactions.
    10. The Applicant notes that Plans acquired Securities issued under 
the Securitizations in reliance on the exemptive relief provided by the 
Underwriter Exemptions. Absent additional relief, the Acquisition has 
caused these granted exemptions to cease to apply to several of the 
Securitizations. Bank of America represents that the Securities issued 
in transactions such as the Securitizations are attractive investments 
for Plans subject to Title I of ERISA or section 4975 of the Code and 
conversely, such plans are an important market for issuers of such 
Securities. Bank of America asserts that to force Bank of America, N.A. 
to resign as Trustee in all of the Securitizations before the 
Acquisition was not administratively feasible because the number of 
available trustees is limited and there is work required in changing 
trustees. Similarly, to have the exemptions no longer apply to the 
Securitizations would force the Plans to sell their securities in the 
current unstable market, likely at a loss. The Applicant additionally 
notes that although the Acquisition has been widely covered, it is 
conceivable that Plan fiduciaries would not realize that the 
Underwriter Exemption relied upon by the Plans had ceased to apply, 
raising the possibility that a Plan would not sell and that non-exempt 
prohibited transactions would occur.
    11. Bank of America states that the Plans purchased Securities in 
reliance on PTE 90-29 or PTE 2002-19. At that time, the Plans had no 
knowledge that the Trustee would become an Affiliate of one or more 
members of the Restricted Group. On or after the Acquisition, except in 
cases covered by PTE 90-29 as amended by PTE 2000-58 (providing a six-
month window for Trustee-Servicer affiliations) or PTE 2002-41 
(Trustee-Underwriter affiliations), the purchased Securities would no 
longer be afforded coverage under the Underwriter Exemptions and the 
Plans would have been obligated to sell the Securities prior to January 
1, 2009. The Applicant asserts that this is problematic for several 
reasons. First, as is customary for such transactions, the physical 
securities are not used in most cases. Rather, an electronic system, 
usually the Depository Trust Company's electronic system, is utilized 
and the securities are in global form. In such cases, it is difficult 
(and may be impossible) to ascertain the beneficial ownership of the 
securities, meaning that it is not known whether Plans are owners and 
to what extent. The Applicant asserts that identifying the

[[Page 21006]]

affected Plans would be time consuming and expensive, and may be 
impossible to do with complete accuracy because of the book-entry 
system under which Securities were issued. As stated above, the 
Applicant represents that notice of this request for relief was posted 
on the Trustee's website at the time this Application was submitted, 
which would be updated to reflect any action of the Department with 
respect to the Application. The Applicant has informed the Department 
that, although Bank of America, N.A. will have been replaced as Trustee 
by April 1, 2009, Bank of America, N.A. will remain as the Securities 
Administrator for any of the Securitizations on the Securitization List 
for which it was providing such services. Further, the Applicant has 
indicated that either Bank of America, N.A. (in cases where Bank of 
America, N.A. continues as Securities Administrator) or the replacement 
trustee (in all other cases) will continue to update its website 
concerning the status of the Proposed Amendment. In this regard, the 
Applicant also requests that the publication of the Proposed Amendment 
in the Federal Register serve as the Notice to Interested Persons for 
purposes of this submission.
    Second, and more importantly, the current disruption in the 
mortgage-backed securities market makes sales problematic, both in 
terms of finding buyers and establishing proper valuation. Granting the 
requested relief prevents these problems. The Applicant states further 
that the relief is of the same duration, six months, as that already 
provided by the Department for Trustee-Servicer affiliations, 
suggesting that the Department has already determined that this period 
is sufficiently brief to prevent serious conflicts of interest from 
arising.
    12. Bank of America requests that the relief, if granted, be made 
retroactive to January 1, 2009, the Acquisition Date. If the relief is 
granted retroactively, Plans would be able to retain their prior 
Securitization investments and to purchase Securities in the secondary 
market relying upon the Underwriter Exemptions once exemptive relief is 
granted, even if the transactions originally closed or will close prior 
to the date the final Amendment is published in the Federal Register, 
if granted by the Department.

General Information

    The attention of interested persons is directed to the following:
    1. The fact that a transaction is the subject of an exemption under 
section 408(a) of the Act and section 4975(c)(2) of the Code does not 
relieve a fiduciary or other party in interest or disqualified person 
from certain other provisions of the Act and the Code, including any 
prohibited transaction provisions to which the exemption does not apply 
and the general fiduciary responsibility provisions of section 404 of 
the Act, which require, among other things, a fiduciary to discharge 
his or her duties respecting the plan solely in the interest of the 
participants and beneficiaries of the plan and in a prudent fashion in 
accordance with section 404(a)(1)(B) of the Act; nor does it affect the 
requirements of section 401(a) of the Code that the plan operate for 
the exclusive benefit of the employees of the employer maintaining the 
plan and their beneficiaries;
    2. Before an exemption can be granted under section 408(a) of the 
Act and section 4975(c)(2) of the Code, the Department must find that 
the exemption is administratively feasible, in the interest of the 
plans and of their participants and beneficiaries and protective of the 
rights of participants and beneficiaries of the plans; and
    3. The proposed amendment, if granted, will be supplemental to, and 
not in derogation of, any other provisions of the Act and/or the Code, 
including statutory or administrative exemptions and transitional 
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.

Written Comments and Hearing Requests

    All interested persons are invited to submit written comments or 
requests for a hearing on the pending amendment to the address above, 
within the time frame set forth above, after the publication of this 
proposed amendment in the Federal Register. All comments will be made a 
part of the record. Comments received will be available for public 
inspection with the Application at the address set forth above.

Proposed Exemption

    Based on the facts and representations set forth in the 
application, under the authority of section 408(a) of the Act and 
section 4975(c)(2) of the Code and in accordance with the procedures 
set forth in 29 CFR Part 2570, Subpart B (55 FR 32836, August 10, 
1990), the Department proposes to modify Prohibited Transaction 
Exemption (PTE) 90-29, 55 FR 21459 (May 24, 1990), as amended by PTE 
97-34, 62 FR 39021 (July 21, 1997), PTE 2000-58, 65 FR 67765 (November 
13, 2000), PTE 2002-41, 67 FR 54487 (August 22, 2002) and PTE 2007-05, 
72 FR 13130 (March 20, 2007), as corrected at 72 FR 16385 (April 4, 
2007) (PTE 2007-05), (PTE 90-29) and to modify PTE 2002-19, 67 FR 14979 
(March 28, 2002) as amended by PTE 2007-05, (PTE 2002-19).
    1. Subsection II.A.(4) of PTE 90-29 and PTE 2002-19 is amended to 
add a new subsection (c) that reads as follows:

    (c) Effective January 1, 2009 through July 1, 2009, Bank of 
America, N.A., the Trustee, shall not be considered to be an 
Affiliate of any member of the Restricted Group solely as the result 
of the acquisition of Merrill Lynch & Co., Inc. and its affiliates 
(Merrill Lynch) by Bank of America Corporation and its subsidiaries 
(Bank of America), the parent holding company of Bank of America, 
N.A. (the Acquisition), which occurred after the initial issuance of 
the Securities, provided that:
    (i) The Trustee, Bank of America, N.A., ceases to be an 
Affiliate of any member of the Restricted Group no later than July 
1, 2009;
    (ii) Any member of the Restricted Group that is an Affiliate of 
the Trustee, Bank of America, N.A., did not breach any of its 
obligations under the Pooling and Servicing Agreement, unless such 
breach was immaterial and timely cured in accordance with the terms 
of such agreement, during the period from January 1, 2009 through 
the date the member of the Restricted Group ceased to be an 
Affiliate of the Trustee, Bank of America, N.A.; and
    (iii) In accordance with each Pooling and Servicing Agreement, 
the Trustee, Bank of America, N.A., appoints a co-trustee, which is 
not an Affiliate of Merrill Lynch or any other member of the 
Restricted Group, no later than the earlier of (A) April 1, 2009 or 
(B) five business days after Bank of America, N.A. becomes aware of 
a conflict between the Trustee and any member of the Restricted 
Group that is an Affiliate of the Trustee. The co-trustee will be 
responsible for resolving any conflict between the Trustee and any 
member of the Restricted Group that has become an Affiliate of the 
Trustee as a result of the Acquisition; provided, that if the 
Trustee has resigned on or prior to April 1, 2009 and no event 
described in clause (B) has occurred, no co-trustee shall be 
required.
    (iv) For purposes of this subsection II.A.(4)(c), a conflict 
arises whenever (A) Merrill Lynch, as a member of the Restricted 
Group, fails to perform in accordance with the timeframes contained 
in the relevant Pooling and Servicing Agreement following a request 
for performance from Bank of America, N.A., as Trustee, or (B) Bank 
of America, N.A., as Trustee, fails to perform in accordance with 
the timeframes contained in the relevant Pooling and Servicing 
Agreement following a request for performance from Merrill Lynch, a 
member of the Restricted Group.
    The time as of which a conflict occurs is the earlier of: the 
day immediately following the last day on which compliance is 
required under the relevant Pooling and Servicing Agreement; or the 
day on which a party affirmatively responds that it will not comply 
with a request for performance.

[[Page 21007]]

    For purposes of this subsection II.A.(4)(c), the term 
``conflict'' includes but is not limited to, the following: (1) 
Merrill Lynch's failure, as Sponsor, to repurchase a loan for breach 
of representation within the time period prescribed in the relevant 
Pooling and Servicing Agreement, following Bank of America, N.A.'s 
request, as Trustee, for performance; (2) Merrill Lynch, as Sponsor, 
notifies Bank of America, N.A., as Trustee, that it will not 
repurchase a loan for breach of representation, following Bank of 
America, N.A.'s request that Merrill Lynch repurchase such loan 
within the time period prescribed in the relevant Pooling and 
Servicing Agreement (the notification occurs prior to the expiration 
of the prescribed time period for the repurchase); and (3) Merrill 
Lynch, as Swap Counterparty, makes or requests a payment based on a 
value of the London Interbank Offered Rate (LIBOR) that Bank of 
America, N.A., as Trustee, considers erroneous.

    2. The Definition of ``Underwriter'' at section III.C. of PTE 90-29 
and PTE 2002-19 is temporarily replaced with a definition that includes 
J.P. Morgan Securities Inc. and reads:
    C. Effective January 1, 2009 through July 1, 2009, ''Underwriter'' 
means:

    (1) Merrill Lynch or J.P. Morgan Securities Inc.;
    (2) Any person directly or indirectly, through one or more 
intermediaries, controlling, controlled by or under common control 
with such entities; or
    (3) Any member of an underwriting syndicate or selling group of 
which such firm or person described in subsections III.C.(1) or (2) 
is a manager or co-manager with respect to the Securities.

    3. The Definition of ``Sponsor'' at section III.D. of PTE 90-29 and 
PTE 2002-19 is temporarily extended to include language applicable to 
transactions on the Securitization List at section III.KK and reads:
    D. ``Sponsor'' means:

    (1) The entity that organizes an Issuer by depositing 
obligations therein in exchange for Securities; or
    (2) Effective January 1, 2009 through July 1, 2009, for those 
transactions listed on the Securitization List at section III.KK., 
Merrill Lynch.

    4. Section III of PTE 90-29 and PTE 2002-19 is temporarily amended 
to add a new section III.KK that reads as follows:
    KK. Effective January 1, 2009 through July 1, 2009,
    ``Securitization List'' means:

------------------------------------------------------------------------
                Name                   Issuance type       MLynch role
------------------------------------------------------------------------
CMAC Series 1997 ML1...............  C................  S, U
WFPD 1996 WFP-D....................  C................  S, U
Merrill Lynch 2003-KEY 1...........  C................  S, U
Merrill Lynch Series 1997-C1.......  C................  S, U
Merrill Lynch Series 2004-KEY 2....  C................  S, U
Merrill Lynch Series 2006-C2.......  C................  S, U
Mezz Cap 2004-C2...................  C................  S, U
C-BASS 2007-CB4....................  R................  S, U
First Franklin MLT 2006-FF18.......  R................  S, U, MS
First Franklin MLT 2007-01.........  R................  S, U, MS
First Franklin MLT 2007-02.........  R................  U, MS
First Franklin MLT 2007-03.........  R................  U, MS
First Franklin MLT 2007-4..........  R................  S, U, MS
First Franklin MLT 2007-5..........  R................  S, U, MS
First Franklin MLT 2007-A..........  R................  S, U, MS
First Franklin MLT 2007-FF1........  R................  S, U, MS
First Franklin MLT 2007-FF2........  R................  S, U, MS
First Franklin MLT 2007-FFA........  R................  S, U, MS
First Franklin MLT 2007-FFC........  R................  S, U, MS
First Franklin MLT 2007-H1.........  R................  S, U, MS
Merrill Lynch Series 2005-SL3......  R................  S, U, MS
Merrill Lynch Series 2006-AHL1.....  R................  S, U, MS
Merrill Lynch Series 2006-AR1......  R................  S, U, MS
Merrill Lynch Series 2006-FF1......  R................  S, U, MS
Merrill Lynch Series 2006-FM1......  R................  S, U, MS
Merrill Lynch Series 2006-HE2......  R................  S, U, MS
Merrill Lynch Series 2006-HE3......  R................  S, U, MS
Merrill Lynch Series 2006-HE4......  R................  S, U, MS
Merrill Lynch Series 2006-HE6......  R................  S, U, MS
Merrill Lynch Series 2006-MLN1.....  R................  S, U, MS
Merrill Lynch Series 2006-OPT1.....  R................  S, U
Merrill Lynch Series 2006-RM1......  R................  S, U, MS
Merrill Lynch Series 2006-RM2......  R................  S, U, MS
Merrill Lynch Series 2006-RM3......  R................  S, U
Merrill Lynch Series 2006-RM4......  R................  S, U, MS
Merrill Lynch Series 2006-RM5......  R................  S, U, MS
Merrill Lynch Series 2006-SD1......  R................  S, U, MS
Merrill Lynch Series 2006-SL1......  R................  S, U, MS
Merrill Lynch Series 2006-WMC2.....  R................  S, U, MS
Merrill Lynch Series 2007-HE1......  R................  S, U, MS
Merrill Lynch Series 2007-HE3......  R................  S, U, MS
Merrill Lynch Series 2007-SD1......  R................  S, U, MS
MLMI Trust 2002-AFC1...............  R................  S, U
Ownit Mort Loan ABS 2006-3.........  R................  S, U
Ownit Mort Loan ABS 2006-4.........  R................  S, U
Ownit Mort Loan ABS 2006-5.........  R................  S, U
Ownit Mort Loan ABS 2006-6.........  R................  S, U
Ownit Mort Loan ABS 2006-7.........  R................  S, U

[[Page 21008]]


JP Morgan Chase 2003-ML1 (U--JP      C................  S
 Morgan Securities Inc.).
------------------------------------------------------------------------
Legend: C = Commercial mortgage-backed securitizations.
R = Residential mortgage-backed securitizations.
U = Underwriter.
S = Sponsor.
MS = Master Servicer (either HLS or Wilshire).
MLynch = Merrill Lynch.

    The availability of this amendment, if granted, is subject to the 
express condition that the material facts and representations contained 
in the Application are true and complete and accurately describe all 
material terms of the transactions. In the case of continuing 
transactions, if any of the material facts or representations described 
in the Application change, the amendment will cease to apply as of the 
date of such change. In the event of any such change, an application 
for a new amendment must be made to the Department.

    Signed at Washington, DC, this 30th day of April, 2009.
Ivan L. Strasfeld,
Director of Exemption Determinations, Employee Benefits Security 
Administration, U.S. Department of Labor.
[FR Doc. E9-10362 Filed 5-5-09; 8:45 am]

BILLING CODE 4510-29-P