skip to page content
Secretary of Labor Hilda L. Solis
     DOL Home > Federal Register > Notices > EBSA
EBSA Notices

Prohibited Transaction Exemptions and Grant of Individual Exemptions involving: 2010-01; Deutsche Bank, AG (Deutsche Bank or the Applicant), D-11082 and D-11109; 2010-02, State Street Bank and Trust Company, D-11522; and 2010-03, The Bank of New York Mellon (BNY Mellon), D-11571   [2/23/2010]
[PDF]
FR Doc 2010-3445
[Federal Register: February 23, 2010 (Volume 75, Number 35)]
[Notices]               
[Page 8117-8128]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr23fe10-125]                         


[[Page 8117]]

=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF LABOR

Employee Benefits Security Administration

 
Prohibited Transaction Exemptions and Grant of Individual 
Exemptions involving: 2010-01; Deutsche Bank, AG (Deutsche Bank or the 
Applicant), D-11082 and D-11109; 2010-02, State Street Bank and Trust 
Company, D-11522; and 2010-03, The Bank of New York Mellon (BNY 
Mellon), D-11571

AGENCY: Employee Benefits Security Administration, Labor.

ACTION: Grant of Individual Exemptions.

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

SUMMARY: This document contains exemptions issued by the Department of 
Labor (the Department) from certain of the prohibited transaction 
restrictions of the Employee Retirement Income Security Act of 1974 
(ERISA or the Act) and/or the Internal Revenue Code of 1986 (the Code).
    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.

Deutsche Bank, AG (Deutsche Bank or the Applicant) Located in Germany, 
with Affiliates in New York, NY and Other Locations

    [Prohibited Transaction Exemption 2010-01; Exemption Application 
Nos. D-11082 and D-11109.]

Exemption

Section I. Covered Transactions
    The restrictions of sections 406(a)(1)(A) through (D) and 406(b)(1) 
and (b)(2) of the Act (or ERISA), and the taxes imposed by section 
4975(a) and (b) of Code, by reason of section 4975(c)(1)(A) through (E) 
of the Code,\1\ shall not apply, effective July 8, 2008, to the 
following foreign exchange transactions involving less developed 
currencies, that are executed by Deutsche Bank or a current or future 
affiliate (domestic or foreign) thereof that is a bank or broker-
dealer, acting as a local subcustodian where Deutsche Bank or its 
affiliates, as asset managers, have determined to invest the assets of 
a client plan held in a separately managed account, an in-house plan 
whose assets are held in a separately managed account with Deutsche 
Bank or its affiliate, or a pooled fund, in foreign securities, if the 
conditions set forth in Sections II, III and IV below are met with 
respect to:
---------------------------------------------------------------------------

    \1\ For purposes of this exemption, references to specific 
provisions of Title I of the Act, unless otherwise specified, refer 
also to the corresponding provisions of the Code.
---------------------------------------------------------------------------

    (1) A trade-related currency conversion, or
    (2) An income item conversion.
Section II. General Conditions
    (a) At the time the foreign exchange transaction is entered into, 
the terms of the transaction are not less favorable to the client plan, 
in-house plan or pooled fund than the terms generally available in a 
comparable arm's length foreign exchange transaction between unrelated 
parties.
    (b) The exchange rate used for a particular foreign exchange 
transaction does not deviate by more than 3 percent (above or below) 
the interbank bid and asked rates for such currency at the time of the 
transaction as displayed on an independent, nationally-recognized 
service that reports rates of exchange in the foreign currency market 
for such currency.
    (c) The covered transactions are limited to those less developed 
currencies in which a transaction is executed with Deutsche Bank or its 
affiliate acting as local subcustodian at the direction of the global 
custodian because the global custodian either does not make a market in 
such currency, or otherwise determines to execute with the local 
subcustodian because of market conditions, market restrictions, 
illiquidity of the currency or similar exigencies.
    (d) Where a market is served by more than one subcustodian, 
Deutsche Bank or its affiliate, as asset manager, has no decision 
making authority or role, or otherwise makes no recommendations with 
respect to the global custodian's selection of the subcustodian.
    (e) The foreign exchange transaction is executed by Deutsche Bank 
or its affiliate thereof acting as subcustodian at the direction of the 
global custodian in the ordinary course of its business as global 
custodian.
    (f) The decision to select Deutsche Bank or its affiliate as the 
subcustodian is made by an unrelated global custodian for the relevant 
account.
    (g) The selection of Deutsche Bank or its affiliate as subcustodian 
and any foreign exchange transactions executed by Deutsche Bank or its 
affiliate at the direction of the global custodian are not part of any 
agreement, arrangement or understanding, written or otherwise, designed 
to benefit Deutsche Bank, its affiliate or any other party in interest.
    (h) Deutsche Bank or its affiliate, as asset manager, appoints an 
independent fiduciary to receive, review and take appropriate action, 
if any, with respect to the report required by Section II(l)(3) and the 
notices in Section III(a) and (c) on behalf of (1) an in-house plan, or
    (2) plans investing in a restricted pooled fund.
    (i) The decision to select Deutsche Bank or its affiliate as asset 
manager is part of an investment strategy that is adopted by an 
independent fiduciary of a client plan whose assets are held in a 
separately managed account or the independent fiduciary of an unrelated 
pooled fund.
    (j) On an annual basis, determined as of December 31 of the 
relevant year, the percentage of assets of in-house plans and pooled 
funds in which client plans invest for which Deutsche Bank and/or its 
affiliates select the global custodian represent less than 20 percent 
of the total assets under custody by any such global custodian.

[[Page 8118]]

    (k) Foreign affiliates of Deutsche Bank which engage in the covered 
transactions--
    (1) Agree to submit to the jurisdiction of the United States;
    (2) Agree to appoint an agent for service of process in the United 
States, which may be an affiliate (the Process Agent);
    (3) Consent to service of process on the Process Agent;
    (4) Agree that they may be sued in the United States Courts in 
connection with the covered transactions described in this exemption;
    (5) Agree that any judgment on behalf of a plan or pooled fund may 
be collected in the United States from Deutsche Bank; and
    (6) Agree to comply with, and be subject to, all relevant 
provisions of the Act.
    (l) With respect to the covered transactions--
    (1) Deutsche Bank or its affiliate as asset manager, designates an 
individual (the responsible reviewing individual) who is responsible 
for periodically (but no less frequently than on an annual basis) 
reviewing a sample of such foreign exchange transactions to determine 
whether the covered transactions have been executed in accordance with 
the terms of this exemption. Such sample must include a sufficient 
number of transactions to ensure that each affected currency is tested.
    (2) Deutsche Bank or its affiliate provides the responsible 
reviewing individual with the records (which may be provided 
electronically) described in Section IV(a)(1)-(7), on an annual basis.
    (3) The responsible reviewing individual notifies Deutsche Bank or 
its affiliate as asset manager, the independent fiduciary of each 
client plan whose assets are held in a separately managed account, the 
independent fiduciary of an in-house plan and any restricted pooled 
fund required under Section II(h), the independent fiduciary of an 
unrelated pooled fund, and the independent fiduciary of each plan 
investing in an unrestricted pooled fund, of its findings in a written 
report within 90 days after the period to which the periodic review 
relates. Such report describes the steps performed by such individual 
during the course of the review, the level of compliance by Deutsche 
Bank or its affiliate with the terms and conditions of the exemption, 
and any specific instances of non-compliance by Deutsche Bank or its 
affiliate with the terms and conditions of the exemption.
Section III. Notice Requirements
    (a) At the time Deutsche Bank or its affiliate is retained as asset 
manager, or prior to the initial investment of the plan's assets or 
pooled fund's assets in any foreign investments that may require the 
execution of a foreign exchange transaction by Deutsche Bank or its 
affiliate as subcustodian, Deutsche Bank or its affiliate provides the 
independent fiduciary of each client plan whose assets are held in a 
separately managed account, the independent fiduciary of each in-house 
plan and restricted pooled fund as required under Section II(h), the 
independent fiduciary of each unrelated pooled fund, and the 
independent fiduciary of each plan investing in an unrestricted pooled 
fund, a written notice (which may be effected electronically) that 
includes the following:
    (1) The reasons why Deutsche Bank or its affiliate as asset 
manager, may consider a particular market to be an appropriate 
investment for the plan or pooled fund.
    (2) The factors considered by Deutsche Bank or its affiliate as 
asset manager, in its selection of a global custodian (if applicable) 
including: (i) The identity of the global custodian; and (ii) a summary 
of the global custodian's policies and procedures regarding the 
handling of foreign exchange transactions for plans or pooled funds 
with respect to which Deutsche Bank or its affiliate is a fiduciary and 
the factors that the global custodian considers in its selection of a 
subcustodian.
    (3) Notice that such foreign exchange transaction may be executed 
by Deutsche Bank or its affiliate as subcustodian, at the direction of 
a global custodian.
    (4) A list of the markets in which plans or pooled funds may invest 
where Deutsche Bank or its affiliate serves as a subcustodian, where a 
foreign exchange transaction may be executed by Deutsche Bank or its 
affiliate as subcustodian at the direction of a global custodian.
    (5) A list of the markets where currency transactions are executed 
by Deutsche Bank or an affiliate, as subcustodian, to the extent known.
    (6) Notice that Deutsche Bank or its affiliate maintains records 
(described in Section IV), and that such records are reasonably 
available at their customary location for examination in the U.S., 
during normal business hours, by the responsible reviewing individual, 
the independent fiduciary of a client plan whose assets are held in a 
separate account, the independent fiduciary of an in-house plan or a 
restricted pooled fund, as required under Section II(h), the 
independent fiduciary of an unrelated pooled fund, the independent 
fiduciary of each plan investing in an unrestricted pooled fund, any 
participant or beneficiary of such plan or pooled fund, or any duly 
authorized employee or representative of such participant or 
beneficiary.
    (7) Copies of the notice of proposed exemption and the grant of 
final exemption with respect to the subject transactions.
    (8) Notice of the definition of the term ``independent'' under this 
exemption as used in the term ``independent fiduciary,'' and a request 
that the independent fiduciary of a client plan notify Deutsche Bank or 
its affiliate asset manager if, at any time, such fiduciary is not 
independent of Deutsche Bank.
    (b) If the independent fiduciary fails to object in writing to 
Deutsche Bank or its affiliate within 30 days following receipt of the 
information described in Section III(a) by such fiduciary, then such 
fiduciary's authorization of the arrangement contemplated under this 
exemption shall be presumed.
    (c) Deutsche Bank or its affiliate as asset manager shall provide 
notification of any changes to the information required by Section III, 
including, but not limited to, the situation where Deutsche Bank or its 
affiliate as asset manager, replaces the global custodian with another 
independent entity or where there are changes in the markets in which 
currency transactions are executed by the subcustodian. If the 
independent fiduciary fails to object in writing to Deutsche Bank or 
its affiliate as asset manager within 30 days following disclosure of 
such changes, such fiduciary's approval of these changes shall be 
presumed.
    (d) With respect to pooled funds, in the event the independent 
fiduciary of a client plan submits a notice in writing to the person 
engaging in or proposing to engage in the covered transaction objecting 
to the implementation of, a material change in or continuation of the 
arrangement, the plan on whose behalf the objection was tendered is 
given the opportunity to terminate its investment in the pooled fund 
without penalty to the plan, within such time as may be necessary to 
effect the withdrawal in an orderly manner that is equitable to all 
withdrawing plans and to the non-withdrawing plans. In the case of a 
plan that elects to so withdraw, the withdrawal shall be effected prior 
to the implementation of a material change in the arrangement, but an 
existing arrangement need not be discontinued

[[Page 8119]]

by reason of a plan electing to withdraw.
Section IV. Recordkeeping Requirements
    (a) Deutsche Bank or its affiliate maintains, or causes to be 
maintained, for a period of six years from the date of the covered 
transactions, the following records, as well as any records necessary 
to enable the persons described in paragraph (c) of this Section IV, to 
determine whether the conditions of this exemption have been met:
    (1) The account name,
    (2) The foreign exchange transaction execution date,
    (3) The exchange rate,
    (4) The high and low on Reuters or similar independent service on 
the date of the transaction,
    (5) The identity of the foreign currency sold or purchased,
    (6) The amount of foreign currency sold or purchased,
    (7) The amount of U.S. dollars exchanged, where the exchange is 
between foreign currencies and U.S. dollars or the amount of foreign 
currency exchanged, where the exchange is between two foreign 
currencies, and
    (8) The annual report described in Section II(l).
    (b) The following are exceptions to paragraph (a) of this Section 
IV:
    (1) If the records necessary to enable the persons described in 
paragraph (c) to determine whether the conditions of the exemption have 
been met are lost or destroyed, due to circumstances beyond the control 
of Deutsche Bank, then no prohibited transaction will be considered to 
have occurred solely on the basis of the unavailability of those 
records; and
    (2) No party in interest, other than Deutsche Bank, shall be 
subject to the civil penalty that may be assessed under section 502(i) 
of the Act or to the taxes imposed by section 4975(a) and (b) of the 
Code if the records are not maintained or are not available for 
examination as required by paragraph (c) below.
    (c)(1) Except as provided in paragraph (c)(2) of this Section IV 
and notwithstanding the provisions of subsections (a)(2) and (b) of 
section 504 of the Act, the records referred to above in paragraph (a) 
of this Section IV are unconditionally available for examination during 
normal business hours at their customary location to the following 
persons or an authorized representative thereof:
    (i) Any duly authorized employee or representative of the 
Department or the Internal Revenue Service;
    (ii) The independent fiduciary of a client plan whose assets are 
held in a separately managed account, the independent fiduciary of an 
in-house plan or restricted pooled fund required under Section II(h), 
the independent fiduciary of each unrelated pooled fund, or the 
independent fiduciary of each plan investing in an unrestricted pooled 
fund, or
    (iii) Any participant or beneficiary of such plans or pooled funds 
(described in paragraph (ii) above) or any duly authorized employee or 
representative of such participant or beneficiary.
    (2) None of the persons described above in paragraphs (ii) and 
(iii) of this paragraph (c)(1) of this Section IV shall be authorized 
to examine trade secrets of Deutsche Bank, or any commercial or 
financial information, which is privileged or confidential.
    (3) Should Deutsche Bank refuse to disclose information on the 
basis that such information is exempt from disclosure, Deutsche Bank 
shall, by the close of the thirtieth (30th) day following the request, 
provide written notice advising that the person of the reason for the 
refusal and that the Department may request such information.
Section V. Definitions
    For purposes of this exemption,
    (a) The term ``Deutsche Bank'' means Deutsche Bank AG.
    (b) An ``affiliate'' of Deutsche Bank means any domestic or foreign 
bank or broker-dealer that is, directly or indirectly, through one or 
more intermediaries, controlling, controlled by, or under common 
control with Deutsche Bank;
    (c) The term ``control'' means the power to exercise a controlling 
influence over the management or policies of a person other than an 
individual.
    (d) The term ``bank'' means a bank as defined in section 202(a)(2) 
of the Investment Advisers Act of 1940 (the Investment Advisers Act), 
or an institution that has substantially similar powers to a bank 
defined in section 202(a) of the Investment Advisers Act, and is--

    (1) Supervised by the United States or a State;
    (2) Supervised and examined by the German banking authorities, 
or monitored and controlled pursuant to the statutory and regulatory 
standards of German law; or
    (3) Subject to regulation and oversight by governmental entities 
that are substantially similar to the regulatory oversight of banks 
present in the United States.

    (e) The term ``broker-dealer'' means a broker-dealer registered 
under the Securities Exchange Act of 1934, or is engaged in the 
business of effecting transactions in securities for the account of 
others, and is--
    (1) Registered and regulated under the relevant securities laws of 
the United States;
    (2) Registered and regulated under the relevant securities laws of 
Germany; or
    (3) Registered and regulated under the relevant securities laws of 
a country with securities laws that are substantially similar to the 
securities laws governing broker-dealers in the United States.
    (f) The term ``global custodian'' means a bank or broker-dealer 
that is unrelated to Deutsche Bank or its affiliate, which is selected 
by (1) The independent fiduciary of a client plan in the case of a 
separately managed account; (2) the sponsor (other than Deutsche Bank 
or its affiliate) of an unrelated pooled fund; (3) Deutsche Bank or its 
affiliate as asset manager, in the case of an in-house plan; or (4) 
Deutsche Bank or its affiliate as asset manager in the case of a pooled 
fund established by Deutsche Bank or an affiliate, for the purpose of 
holding and safeguarding the assets of the client plan, in-house plan, 
or pooled fund, physically or through securities depositories, foreign 
clearing agencies or other entities which act as securities 
depositories, through its branches or through its subcustodian network. 
For purposes of Section V(f) only, the global custodian will be 
unrelated to Deutsche Bank or its affiliate if the global custodian is 
not controlling, controlled by under common control with Deutsche Bank, 
directly or indirectly through one or more intermediaries.
    (g) The term ``subcustodian'' means a bank or broker-dealer, 
selected by a global custodian, to hold and safekeep designated assets 
of the plan or pooled fund at securities depositories, foreign clearing 
agencies or other entities which act as securities depositories, and at 
the direction of the global custodian to execute foreign exchange 
transactions and income item conversions. A subcustodian has no 
contractual relationship with the global custodian's clients for 
custodial or subcustodial services with respect to the assets involved 
in the covered transactions, but the subcustodian's contractual 
relationship with respect to subcustody is only with the global 
custodian.
    (h) The term ``responsible reviewing individual'' means a senior 
official appointed by Deutsche Bank or its affiliate acting as asset 
manager, who has at least 10 years experience with the fiduciary 
responsibility provisions of

[[Page 8120]]

the Act, and appropriate compliance training. Such person is appointed 
by Deutsche Bank or its affiliate to review a sample of the covered 
transactions periodically, but no less frequently than on an annual 
basis, in order to ensure compliance with the terms of the exemption on 
behalf of a client plan whose assets are held in a separately managed 
account, an in-house plan, or a pooled fund.
    (i) The term ``in-house plan'' means an employee benefit plan as 
described in section 3(3) of the Act, or a plan as described in section 
4975(e)(1) of the Code, that is sponsored by Deutsche Bank or any 
person that directly or indirectly, through one or more intermediaries, 
controls or is controlled by, or is under common control with, Deutsche 
Bank.
    (j) The term ``client plan'' means an employee benefit plan, as 
described in section 3(3) of the Act, or a plan, as described in 
section 4975(e)(1) of the Code, other than an in-house plan, with 
respect to which Deutsche Bank or its affiliate acts as a fiduciary 
with discretionary authority over the management of the assets involved 
in covered transactions (whether or not any such authority has been 
delegated to an unaffiliated sub-adviser).
    (k) The term ``pooled fund'' means a collective investment fund or 
a pooled arrangement: (1) That is deemed to hold ``plan assets'' 
(within the meaning of section 3(42) of the Act and the regulations 
thereunder), (2) that holds assets of at least two or more unrelated 
employee benefit plans within the meaning of section 3(3) of the Act or 
plans within the meaning of section 4975(e)(1) of the Code, and (3) for 
which Deutsche Bank or its affiliate acts as fiduciary with 
discretionary authority over the management of its assets (whether or 
not any such authority has been delegated to an unaffiliated sub-
adviser).
    (l) The term ``restricted pooled fund'' refers to a pooled fund (1) 
that is sponsored and managed by Deutsche Bank or an affiliate, (2) in 
which the total invested assets of an in-house plan (or in-house 
plans), if aggregated (whether invested directly or indirectly through 
another pooled fund), represent 20% or more (determined as of the last 
day of each month) of the total invested assets of such pooled fund, 
and (3) for which Deutsche Bank or an affiliate will appoint an 
independent fiduciary, as described in Section V(o) below, to represent 
the interests of all plans investing in such fund.
    (m) The term ``unrestricted pooled fund'' refers to a pooled fund 
that (1) is sponsored and managed by Deutsche Bank or an affiliate and 
(2) in which the total invested assets of an in-house plan (or in-house 
plans), if aggregated (whether invested directly or indirectly through 
another pooled fund), represent less than 20% (determined as of the 
last day of each month) of the total invested assets of such pooled 
fund.
    (n) The term ``unrelated pooled fund'' refers to a pooled fund that 
is not sponsored by Deutsche Bank or an affiliate, but is managed by 
either of these entities.
    (o) The term ``independent'' as used in the term ``independent 
fiduciary'' means--
    (1) In the case of a client plan whose assets are held in a 
separately managed account or an unrelated pooled fund, a plan 
fiduciary or the named fiduciary of a pooled fund, or a fiduciary 
appointed by the named fiduciary that is unrelated to, and independent 
of, Deutsche Bank and it affiliates. For purposes of this exemption, a 
plan fiduciary will be deemed to be unrelated to, and independent of, 
Deutsche Bank if neither such fiduciary, nor any individual responsible 
for the decision to authorize or terminate authorization for the 
transactions described in Section I, is an officer, director, or highly 
compensated employee (within the meaning of section 4975(e)(2)(H) of 
the Code) of Deutsche Bank and such fiduciary represents that it will 
advise Deutsche Bank or its affiliate if those facts change, or
    (2) In the case of the fiduciary required under Section II(h), in 
connection with an in-house plan or in connection with a restricted 
pooled fund, an individual or company is qualified and independent of 
Deutsche Bank and its affiliates if such individual or company: (i) Has 
at least 10 years experience in the financial services business and 
significant experience in foreign currency trading and pricing, and 
(ii) certifies that the gross income received from Deutsche Bank and 
its affiliates for the current year does not exceed 5% of such 
fiduciary's gross income from all services for the prior fiscal year. 
The independent fiduciary shall represent to Deutsche Bank that such 
fiduciary is aware of its ERISA duties and responsibilities in acting 
as a fiduciary with respect to an in-house plan or a restricted pooled 
fund and the covered transactions.
    (3) In the case of an unrestricted pooled fund, the persons 
described in Section V(o)(1) or (2).
    (4) Notwithstanding anything to the contrary in this Section V(o), 
a plan fiduciary is not independent if--
    (i) Such fiduciary directly or indirectly controls, is controlled 
by, or is under common control with Deutsche Bank, other than described 
herein;
    (ii) Such fiduciary directly or indirectly receives any 
compensation or other consideration from Deutsche Bank for his own 
personal account in connection with any transaction described in this 
exemption in excess of the 5% gross income limitation set forth in 
Section V(o)(2)above;
    (iii) Any officer, director or highly compensated employee (within 
the meaning of section 4975(e)(2)(H) of the Code) of Deutsche Bank or 
an affiliate responsible for the transactions described in Section I is 
an officer, director or highly compensated employee (within the meaning 
of section 4975(e)(2)(H) of the Code) of the client plan sponsor, the 
sponsor of an unrelated pooled fund, or of the fiduciary responsible 
for the decision to authorize or terminate authorization for 
transactions described in Section I. However, if such individual is a 
director of the client plan sponsor, the sponsor of an unrelated pooled 
fund, or of the responsible fiduciary, and if he or she abstains from 
participation in (A) the choice of Deutsche Bank or an affiliate as the 
investment manager/adviser for the client plan or unrelated pooled fund 
and (B) the decision to authorize or terminate authorization for 
transactions described in Section I, then Section V(o)(4)(iii) shall 
not apply.
    (p) 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 entity.
    (q) The term ``foreign exchange'' transaction means the exchange of 
the currency of one nation for the currency of another nation.
    (r) The term ``less developed currencies'' means those currencies 
in which the global custodian does not make a market at the time of the 
transaction and in which the global custodian determines to purchase 
from or sell to the plan's or pooled fund's local subcustodian on 
behalf of a plan or pooled fund because the currency is difficult to 
trade, undeveloped or the subject of local government restrictions, or 
because of the volatility or lack of liquidity in the market at the 
time of the transaction. The term ``less developed currencies'' does 
not include the following currencies: The Euro; the British pound; the 
Swiss franc, the Canadian dollar; or the Japanese yen.
    (s) The term ``trade-related currency conversion'' means the 
conversion of trade-related items (i.e., amounts necessary for 
purchases or proceeds

[[Page 8121]]

from sales) into foreign currency or into U.S. dollars in order to 
permit purchase transactions to settle, and to permit proceeds of sales 
to be deployed in other investments or to be used to make 
distributions.
    (t) The term ``income item conversions'' means the conversion of 
income items (e.g., interest, dividends, tax reclaims or other 
distributions) denominated in a foreign currency into U.S. dollars or 
another foreign currency.
    Effective Date: This exemption is effective as of July 8, 2008.

Written Comments

    The proposed exemption gave interested persons an opportunity to 
comment and to request a hearing. In this regard, all interested 
persons were invited to submit written comments and/or requests for a 
hearing on the pending exemption on or before August 22, 2008. During 
the comment period, the Department received one written comment letter 
and no requests for a public hearing. The comment was submitted by the 
Applicant, and it is intended to clarify the operative language and the 
Summary of Facts and Representations of the proposed exemption in a 
number of areas or to confirm their validity. A discussion of the 
comments and the responses made by the Department is presented below.

A. Clarifications to the Operative Language \2\
---------------------------------------------------------------------------

    \2\ The clarifications discussed in this section are also meant 
to include modifications to the Summary of Facts and Representations 
of the proposal.
---------------------------------------------------------------------------

    1. Large Pooled Fund and Small Pooled Fund/Word Substitutions. 
Section II(h) of the proposed exemption states that Deutsche Bank or 
its affiliate will appoint an independent fiduciary to represent the 
interests of (a) an in-house plan or (b) plans investing in a ``large 
pooled fund.'' The Applicant explains that the term ``large pooled 
fund'' may be misleading since what is relevant is not the size of the 
fund but the level of in-house plan investment in such fund. Therefore, 
the Applicant requests that the Department change the term to 
``restricted pooled fund.'' Similarly, the Applicant requests that the 
Department revise the term ``small pooled fund'' to ``unrestricted 
pooled fund.''
    In response to this comment, the Department has substituted the 
terms ``restricted pooled fund'' and ``unrestricted pooled fund'' for 
the terms ``large pooled fund'' and ``small pooled fund'' in the final 
exemption.
    2. Investment Decisions by Independent Fiduciary or Applicant. 
Section II(i) of the proposed exemption requires that the decision by 
an independent fiduciary of a client plan, an in-house plan, a large 
pooled fund (redesignated herein as a ``restricted pooled fund'') and 
unrelated pooled funds to invest in a given market and to select 
Deutsche Bank or an affiliate as asset manager is part of an investment 
strategy that is adopted by such fiduciary. The Applicant requests that 
the Department clarify that this condition requires nothing more than 
the authorization specified in Section III(b) of the proposal. The 
Applicant points out that in all instances, the decision to invest in a 
given market is made by Deutsche Bank or an affiliate, as asset 
manager, and not by the independent fiduciary. While a plan's 
independent fiduciary decides on a general investment strategy (e.g., 
emerging markets debt), the Applicant points out that such fiduciary 
may or may not know the countries to which plan assets may be 
committed. The Applicant also explains that the decision to commit plan 
assets to a particular country and in what amounts are decisions made 
by the discretionary investment manager, which is Deutsche Bank or an 
affiliate. Further, in the context of an in-house plan or a restricted 
pooled fund, the Applicant states that the decision to appoint Deutsche 
Bank or an affiliate, as asset manager, is made by Deutsche Bank or an 
affiliate, and not by an independent fiduciary.
    In response to this comment, the Department has revised Section 
II(i) of the final exemption to clarify that the decision to select 
Deutsche Bank or an affiliate as asset manager is made by the 
independent fiduciary of a client plan whose assets are held in a 
separately managed account or the independent fiduciary of an unrelated 
pooled fund.
    3. Parties to Receive Notice from the Responsible Reviewing 
Individual/Word Substitutions. Section II(l)(3) of the proposal 
describes the parties that are to be notified by the responsible 
reviewing individual as to its determination whether the covered 
transactions have been executed in accordance with the terms and 
conditions of the exemption. Among the persons who are designated in 
the proposed exemption as recipients of periodic written reports from 
the responsible reviewing individual are ``Deutsche Bank or its 
affiliate, the independent fiduciary of a client plan whose assets are 
held in a separately managed account, the independent fiduciary of an 
in-house plan, the independent fiduciary of a large pooled fund, the 
independent fiduciary of an unrelated pooled fund, or the receiving 
fiduciary of a small pooled fund.'' The Applicant requests that Section 
II(l)(3) of the proposed exemption be modified to reflect the 
substitution of the term ``large'' with ``restricted'' and the term 
``small'' with ``unrestricted,'' as appropriate, in the context of the 
term ``pooled fund.'' The Applicant also asks that the term ``receiving 
fiduciary'' for an unrestricted pooled fund, as defined in Section V(q) 
of the proposal and as used in Section II(l)(3) be stricken because the 
responsible reviewing individual will notify the independent fiduciary 
of each plan investing in an unrestricted pooled fund directly.
    In response to this comment, the Department has made the requested 
modifications to Section II(l)(3), and deleted Section V(q) of the 
proposal. The Department has also made corresponding revisions to 
Section III(a) and Section IV(c)(1)(ii) where these terms appear, as 
well.
    4. Written Disclosures Provided to the Independent Fiduciary.
    Section II(l)(3) of the proposal requires that the responsible 
reviewing individual notify Deutsche Bank, the independent fiduciary of 
each client plan whose assets are held in a separately managed account, 
the independent fiduciary of an in-house plan and any restricted pooled 
fund required under II(h), the independent fiduciary of unrelated 
pooled fund, and the independent fiduciary of each plan investing in an 
unrestricted pooled fund, of its findings in a written report within 90 
days following the period to which the periodic review relates. Such 
report is to be completed annually. The Applicant states in the 
preamble to the proposed exemption (in the last paragraph of 
Representation 30) that within 90 days of a request by the independent 
fiduciary, Deutsche Bank must provide written compliance reports. The 
Applicant notes that the operative language does not contain this 
condition. The Applicant believes that such reports, would be 
duplicative of those required by Section II(l) and be overly 
burdensome. In response to this comment, the Department concurs with 
the Applicant, and notes that the exemption does not require additional 
reports other than those described in II(l)(3).
    In addition, Section III(a)(4) of the proposed exemption states 
that Deutsche Bank or an affiliate is required to provide written 
disclosure to an independent fiduciary of the list of markets in which 
plans or pooled funds invest where Deutsche Bank or its affiliate 
serves as a subcustodian. Representation 30(e) of the Summary of Facts 
and Representations adds that

[[Page 8122]]

disclosure must be provided as to whether a particular market is served 
by more than one subcustodian. The Applicant requests confirmation that 
this additional disclosure is not required because it will not have 
access to this information.
    The Department concurs with the Applicant's comment and clarifies 
that disclosure of whether a particular market is served by more than 
one subcustodian is not required.
    5. Negative Consent by the Independent Fiduciary. As stated briefly 
above, Section III(b) of the proposed exemption states that if the 
independent fiduciary fails to object in writing to Deutsche Bank or 
its affiliate within 30 days following the receipt of information 
concerning the investment of a plan or a pooled fund assets in foreign 
investments that may require the execution of foreign exchange 
transactions by Deutsche Bank or its affiliates as subcustodians, then 
such fiduciary's authorization of the contemplated arrangement will be 
presumed. The Applicant suggests that at the end of Section III(b), in 
order to clarify what happens if an independent fiduciary objects, the 
following language should be inserted:

    The independent fiduciary required under Section II(h) shall not 
have any authority under this section. With respect to pooled funds, 
in the event the independent fiduciary submits a notice in writing 
to the person engaging in or proposing to engage in the covered 
transaction objecting to the implementation of, material change in 
or continuation of the arrangement, the plan on whose behalf the 
objection was tendered is given the opportunity to terminate its 
investment in the pooled fund, without penalty to the plan, within 
such time as may be necessary to effect the withdrawal in an orderly 
manner that is equitable to all withdrawing plans and to the non-
withdrawing plans. In the case of a plan that elects to so withdraw, 
the withdrawal shall be affected prior to the implementation of a 
material change in the arrangement, but an existing arrangement need 
not be discontinued by reason of a plan electing to withdraw.

    In response to this comment, the Department has determined to make 
some of the changes requested by the Applicant by adding a new 
condition designated as Section III(d). However, the Department has 
determined not to adopt the exclusionary language appearing in the 
first sentence of the above-referenced text, as suggested by the 
Applicant, which pertains to the independent fiduciary required under 
Section II(h) because of the independent fiduciary's critical role in 
protecting an in-house plan or a restricted pooled fund by taking all 
actions that are necessary and proper on behalf of such plan or pooled 
fund. Section III(d) of the final exemption reads as follows:

    With respect to pooled funds, in the event the independent 
fiduciary of a client plan submits a notice in writing to the person 
engaging in or proposing to engage in the covered transaction 
objecting to the implementation of, a material change in or 
continuation of the arrangement, the plan on whose behalf the 
objection was tendered is given the opportunity to terminate its 
investment in the pooled fund without penalty to the plan, within 
such time as may be necessary to effect the withdrawal in an orderly 
manner that is equitable to all withdrawing plans and to the non-
withdrawing plans. In the case of a plan that elects to so withdraw, 
the withdrawal shall be effected prior to the implementation of a 
material change in the arrangement, but an existing arrangement need 
not be discontinued by reason of a plan electing to withdraw.

    6. Access to Records by Participants and Beneficiaries. Section 
IV(c)(1)(iii) of the proposed exemption permits any participant or 
beneficiary of a plan or a pooled fund, the assets of which are 
involved in foreign exchange transactions pursuant to the exemption to 
have access to the records that the exemption, requires Deutsche Bank 
to maintain. The Applicant has requested that the Department delete 
Section IV(c)(1)(iii) and the reference to such subsection in Section 
IV(c)(2) because the requirement is burdensome. The Department 
continues to believe that the participants and beneficiaries in plans 
or pooled funds should have access to the required records, and 
accordingly, has decided not to make the requested changes.
    7. Affiliate Definition. Section V(b) of the proposed exemption 
defines the term ``affiliate'' of Deutsche Bank as ``any domestic or 
foreign bank or broker-dealer directly or indirectly through one or 
more intermediaries, controlling, controlled by, or under common 
control with Deutsche Bank.'' The Applicant has requested that this 
definition be expanded to include: ``any domestic or foreign investment 
adviser that is, directly or indirectly, through one or more 
intermediaries, controlling, controlled by, or under common control 
with Deutsche Bank.'' According to the Applicant, this addition will 
ensure that the exemption is available where an affiliate of Deutsche 
Bank, which is a bank, broker-dealer or investment adviser, acts as 
asset manager, rather than Deutsche Bank, itself.
    The Department has determined not to make the Applicant's requested 
change because it greatly expands the scope of the relief proposed 
without an opportunity for notice and comment by interested persons.
    8. Global Custodian Definition. Section V(f) of the proposed 
exemption defines the term ``global custodian'' as follows:

    The term ``global custodian'' means a bank or broker-dealer that 
is unrelated to Deutsche Bank or its affiliate, which is selected by 
(1) the named fiduciary of a client plan; (2) the sponsor (other 
than Deutsche Bank or its affiliate) of an unrelated pooled fund; 
(3) Deutsche Bank or its affiliate in the case of an in-house plan; 
or (4) Deutsche Bank or its affiliate in the case of a pooled fund 
established by Deutsche Bank or an affiliate, for the purpose of 
holding and safeguarding all assets of the client plan, in-house 
plan, or pooled fund, physically or through a depository, through 
its branches or through its subcustodian network.

    For clarity, the Applicant requests that Section V(f)(1) of the 
definition be modified by substituting the term ``named'' with the term 
``independent'' because Deutsche Bank will not know whether the plan 
fiduciary selecting the global custodian is actually a named fiduciary 
because such plan fiduciary may be the trustee or some other fiduciary 
to whom a named fiduciary has delegated appropriate authority. In 
response to this comment, the Department has made the requested change.
    In addition, the Applicant requests that, in the last clause of 
Section V(f), the word ``all'' be deleted because some plans or funds 
may have more than one global custodian. Further, the Applicant 
suggests that the last clause of Section V(f) the phrase ``a 
depository'' be substituted with the phrase ``securities depositories, 
foreign clearing agencies or other entities which act as securities 
depositories.'' According to the Applicant, this will ensure 
consistency with Section V(g) of the exemption which utilizes the 
latter language. The Department concurs with the Applicant's suggested 
revisions and has made the changes in the final exemption.
    In addition, at the Applicant's recommendation, the Department has 
modified Section V(f) of the final exemption by clarifying that the 
term ``unrelated,'' as used therein, means that ``the global custodian 
will be unrelated to Deutsche Bank or its affiliates if the global 
custodian is not controlling, controlled by or under common control 
with Deutsche Bank, directly or indirectly through one or more 
intermediaries.'' Thus, the revised definition of the term ``global 
custodian'' is set forth as follows:

    The term ``global custodian'' means a bank or broker-dealer that 
is unrelated to Deutsche

[[Page 8123]]

Bank or its affiliate, which is selected by (1) the independent 
fiduciary of a client plan in the case of a separately managed 
account; (2) the sponsor (other than Deutsche Bank or its affiliate) 
of an unrelated pooled fund; (3) Deutsche Bank or its affiliate as 
asset manager in the case of an in-house plan; or (4) Deutsche Bank 
or its affiliate as asset manager in the case of a pooled fund 
established by Deutsche Bank or an affiliate, for the purpose of 
holding and safeguarding the assets of the client plan, in-house 
plan, or pooled fund, physically or through securities depositories, 
foreign clearing agencies or other entities which act as securities 
depositories, through its branches or through its subcustodian 
network. For purposes of Section V(f) only, the global custodian 
will be unrelated to Deutsche Bank or its affiliates if the global 
custodian is not controlling, controlled by or under common control 
with Deutsche Bank, directly or indirectly through one or more 
intermediaries.

    9. In-House Plan Definition. Section V(i) of the proposed exemption 
defines the term ``in-house plan'' as a ``plan sponsored by Deutsche 
Bank or any person that directly or indirectly, through one or more 
intermediaries, controls or is controlled by, or is under common 
control with, Deutsche Bank.'' The Applicant has requested that the 
Department adopt the following language as the new definition of ``in-
house plan'' in order to maintain consistency with the Class Exemption 
for Plan Asset Transactions Determined by In-House Asset Managers (PTE 
96-23) (61 FR 15975, 15982 (April 10, 1996):

    The term ``in-house plan'' means a plan sponsored by Deutsche 
Bank or any affiliate. For purposes of the foregoing only, 
``affiliate'' means a member of either (1) a controlled group of 
corporations (as defined in section 414(b) of the Code) of which 
Deutsche Bank is a member, or (2) a group of trades or businesses 
under common control (as defined in section 414(c) of the Code) of 
which Deutsche Bank is a member; provided that ``50 percent'' shall 
be substituted for ``80 percent'' wherever ``80 percent'' appears in 
section 414(b) or 414(c) or the rules thereunder.''

    The Department notes that the Applicant's suggested definition of 
``in-house plan,'' which is taken from PTE 96-23 would limit certain 
plans from being considered ``in-house plans'' as these plans would not 
come within the proposed definition. Therefore, the Department has not 
adopted the requested change. Instead, the Department has modified the 
definition of ``in-house plan'' as follows:

    The term ``in-house plan'' means an employee benefit plan as 
described in section 3(3) of the Act, or a plan as described in 
section 4975(e)(1) of the Code, that is sponsored by Deutsche Bank 
or any person that directly or indirectly, through one or more 
intermediaries, controls or is controlled by, or is under common 
control with, Deutsche Bank.

    10. Client Plan Definition. Section V(j) of the proposed exemption 
defines the term ``client plan'' as ``an employee benefit plan, other 
than a plan sponsored by Deutsche Bank, as described in section 3(3) of 
the Act or section 4975(e)(1) of the Code with respect to which 
Deutsche Bank or its affiliate acts as a fiduciary having full 
investment discretion.'' The Applicant has requested that the 
definition of ``client plan'' be modified as follows:

    The term ``client plan'' means an employee benefit plan, as 
described in section 3(3) of the Act, or a plan, as described in 
section 4975(e)(1) of the Code, other than an in-house plan, with 
respect to which Deutsche Bank or its affiliate acts as a fiduciary 
with discretionary authority over the management of the assets 
involved in covered transactions (whether or not any such authority 
has been delegated to an unaffiliated sub-adviser).

    The Applicant states that the revised definition clarifies Deutsche 
Bank's role with respect to plan assets because the meaning of the 
phrase ``full investment discretion,'' as used in the client plan 
definition, is unclear. In addition, the Applicant states that the 
modification ensures that separately managed accounts that are sub-
advised by a third party are included within the scope of exemptive 
relief.
    In response to this comment, the Department has made the 
Applicant's requested revision in the final exemption.
    11. Pooled Fund Definition. Section V(k) of the proposed exemption 
defines the term ``pooled fund'' as follows:

    The term ``pooled fund'' means a collective investment fund or a 
pooled arrangement established for investment on behalf of two or 
more unrelated employee benefit plans by Deutsche Bank or an 
affiliate or by a fund sponsor other than Deutsche Bank or an 
affiliate for which Deutsche Bank or its affiliate acts as fiduciary 
with full investment discretion. The assets of a pooled fund may 
include the assets of (i) client plans, (ii) in-house plans of 
Deutsche Bank or an affiliate, (iii) other pooled funds in which 
Deutsche Bank or an affiliate is not the fund sponsor, and (iv) 
other pooled funds in which Deutsche Bank or an affiliate is the 
fund sponsor.

    The Applicant has suggested that this definition be deleted in its 
entirety and replaced with the following definition:

    The term ``pooled fund'' means a collective investment fund or a 
pooled arrangement--(1) that is deemed to hold ``plan assets'' 
(within the meaning of section 3(42) of Act and the regulations 
thereunder), (2) that holds assets of at least two or more unrelated 
employee benefit plans within the meaning of section 3(3) of Act or 
plans within the meaning of section 4975(e)(1) of the Code, and (3) 
for which Deutsche Bank or its affiliate acts as fiduciary with 
discretionary authority over the management of its assets (whether 
or not any such authority has been delegated to an unaffiliated sub-
adviser).

    The Applicant believes that the requested change provides 
clarification that the exemption applies to pooled funds only when they 
are deemed to hold plan assets. Moreover, the Applicant states that the 
revised definition acknowledges that non-plan investors may be invested 
in pooled funds that hold plan assets. In response to this comment, the 
Department has made the requested change.\3\
---------------------------------------------------------------------------

    \3\ For consistency in the formatting of the final exemption, 
the Department has also replaced the romanettes with numbers for the 
investment vehicles defined in Comments 11-13 above.
---------------------------------------------------------------------------

    12. Large Pooled Fund Redefined/Word Substitution. Section V(l) of 
the proposed exemption defines the term ``large pooled fund'' as 
follows:

    The term ``large pooled fund'' refers to a pooled fund that is 
sponsored and managed by Deutsche Bank or an affiliate. A large 
pooled fund may include the assets of (i) client plans, (ii) in-
house plans of Deutsche Bank or an affiliate, (iii) other pooled 
funds in which Deutsche Bank or an affiliate is not the fund 
sponsor, and (iv) other pooled funds in which Deutsche Bank or an 
affiliate is the fund sponsor. In a large pooled fund, the total 
invested assets of an in-house plan (or in-house plans), if 
aggregated (whether invested directly or indirectly through another 
pooled fund), represent more than 20% of the total invested assets 
of such fund. Also, in a large pooled fund, Deutsche Bank will 
appoint an independent fiduciary, as described in Section V(o) 
below, to represent the interests of all plans investing in such 
fund.

    The Applicant has requested that the term ``large pooled fund'' be 
changed to ``restricted pooled fund'' as it appears throughout the 
proposed exemption and as defined in Section V(l). In the Applicant's 
view, the modified language more accurately describes this term.
    In response to this comment, the Department has replaced the term 
``large pooled fund'' with ``restricted pooled fund'' throughout the 
operative language of the final exemption. The Department also notes 
the corresponding changes to the Summary of Facts and Representations.
    In addition, the Applicant has requested that the definition of the 
term ``large pooled fund'' be replaced with the following new 
definition:

    The term ``restricted pooled fund'' refers to a pooled fund (i) 
that is sponsored by Deutsche Bank or an affiliate, (ii) in which 
the total invested assets of an in-house plan (or in-house plans), 
if aggregated (whether

[[Page 8124]]

invested directly or indirectly through another pooled fund), 
represent 20% or more (determined as of the last day of each month) 
of the total invested assets of such pooled fund, and (iii) for 
which Deutsche Bank or an affiliate will appoint an independent 
fiduciary, as described in Section V(o) below, to represent the 
interests of all plans investing in such fund.

    The Applicant states that the revised definition omits the 
reference to Deutsche Bank's management because the revised definition 
of ``pooled fund'' already references Deutsche Bank's management. In 
addition, the Applicant explains that the revised definition 
acknowledges that non-plan investors often invest in pooled funds that 
hold plan assets and requires monthly testing of the level of in-house 
plan investment.
    The Department concurs, in part, with the Applicant's revised 
definition of the term ``restricted pooled fund.'' However, the 
Department has decided to leave the reference to Deutsche Bank's or its 
affiliate's management authority intact in the final exemption in order 
to emphasize that Deutsche Bank or its affiliate sponsors the 
restricted pooled fund and has discretion over the assets of such 
pooled fund. Therefore, the revised definition of the term restricted 
pooled fund reads as follows:

    The term ``restricted pooled fund'' refers to a pooled fund (1) 
that is sponsored and managed by Deutsche Bank or an affiliate, (2) 
in which the total invested assets of an in-house plan (or in-house 
plans), if aggregated (whether invested directly or indirectly 
through another pooled fund), represent 20% or more (determined as 
of the last day of each month) of the total invested assets of such 
pooled fund, and (3) for which Deutsche Bank or an affiliate will 
appoint an independent fiduciary, as described in Section V(o) 
below, to represent the interests of all plans investing in such 
fund.

    13. Small Pooled Fund Redefined/Word Substitution. Section V(m) of 
the proposed exemption defines the term ``small pooled fund'' as 
follows:

    The term ``small pooled fund'' refers to a pooled fund that is 
sponsored and managed by Deutsche Bank or an affiliate. A small 
pooled fund may include the assets of (i) client plans, (ii) in-
house plans of Deutsche Bank or an affiliate, (iii) other pooled 
funds in which Deutsche Bank or an affiliate is not the fund 
sponsor, and (iv) other pooled funds in which Deutsche Bank or an 
affiliate is the fund sponsor. In a small pooled fund, the total 
invested assets of an in-house plan (or in-house plans), if 
aggregated (whether invested directly or through another pooled 
fund), represent less than 20% of the total invested assets of such 
fund.

    The Applicant has requested that the term ``small pooled fund'' be 
changed to ``unrestricted pooled fund.'' Also, for the same reasons 
expressed above by the Applicant for modifying the term ``large pooled 
fund,'' the Applicant requests that Section V(m) be revised to the 
following:

    The term ``unrestricted pooled fund'' refers to a pooled fund 
that (1) is sponsored by Deutsche Bank or an affiliate and (2) in 
which the total invested assets of an in-house plan (or in-house 
plans), if aggregated (whether invested directly or indirectly 
through another pooled fund), represent less than 20% (determined as 
of the last day of each month) of the total invested assets of such 
pooled fund.

    The Department concurs with the Applicant's revised definition of 
the term ``unrestricted pooled fund,'' with the exception of deleting 
the reference to Deutsche Bank or its affiliate managing the fund, and 
has made appropriate changes in the final exemption. The revised 
definition reads as follows:

    The term ``unrestricted pooled fund'' refers to a pooled fund 
that (1) is sponsored and managed by Deutsche Bank or an affiliate 
and (2) in which the total invested assets of an in-house plan (or 
in-house plans), if aggregated (whether invested directly or 
indirectly through another pooled fund), represent less than 20% 
(determined as of the last day of each month) of the total invested 
assets of such pooled fund.

B. Confirmations

    1. Fee Disclosures. The Applicant points out that in the proposed 
exemption, Representation 30(c) of the Summary of Facts and 
Representations provides for the disclosure of all fees Deutsche Bank 
or its affiliate may receive as a result of the covered transactions. 
However, the Applicant notes that there is no such requirement in the 
operative language of the proposal. The Applicant explains that the 
proposed exemption only requires that Deutsche Bank or its affiliate 
retain records that specify the price at which the transaction 
occurred, which is acceptable to the Applicant. Therefore, the 
Applicant requests that the final exemption reflect that the disclosure 
of ``all fees'' should not be required, but that the rate and other 
market information should be required.
    The Department does not concur with the Applicant's reasoning. To 
the extent Deutsche Bank or its affiliate are able to make appropriate 
fee disclosures to independent fiduciaries without undue burden, the 
Department would require Deutsche Bank or its affiliate to provide this 
information.
    2. Exemptive Relief for the Global Custodian. The Applicant has 
asked the Department to confirm that no exemptive relief is necessary 
if the global custodian makes a market in a particular currency and 
executes the foreign exchange transaction as principal. The Applicant 
explains that although a global custodian would be engaged in a 
principal transaction, it might receive a ticket charge, as it would 
for any transaction. However, the Applicant believes that it is very 
unlikely that the global custodian would receive a ticket charge given 
that the plan would be engaging in a foreign exchange transaction 
through the global custodian's custody network. The Applicant also 
emphasizes that because it is unaware of the policies of each global 
custodian, it can only make generalized assertions about such policies.
    In response to this comment, the Department believes that this 
comment is beyond the scope of the exemption. The Department notes that 
exemptive relief may be available for the global custodian under 
section 408(b)(18) of the Act to the extent the conditions therein are 
satisfied.\4\
---------------------------------------------------------------------------

    \4\ Section 408(b)(18) of the Act is a statutory exemption that 
was enacted under the Pension Protection Act of 2006. This statutory 
exemption provides relief from section 406(a) of the Act and limited 
relief from section 406(b) of the Act for custodians or trustees 
with respect to foreign exchange transactions between a bank or 
broker-dealer (or an affiliate of either) and a plan with respect to 
which such bank or broker-dealer (or affiliate) is a trustee, 
custodian, fiduciary or other party in interest if,--(1) the 
transaction is in connection with the purchase, holding or sale of 
securities or other investment assets (other than a foreign exchange 
transaction unrelated to any other investment in securities or other 
investment assets); (2) at the time the foreign exchange transaction 
is entered into, the terms of the transaction are not less favorable 
to the plan than the terms generally available in comparable arm's 
length foreign exchange transactions between unrelated parties, or 
the terms afforded by the bank or broker-dealer (or an affiliate of 
either) in comparable arm's-length foreign exchange transactions 
involving unrelated parties; (3) the exchange rate used by such bank 
or broker-dealer (or affiliate) for a particular foreign exchange 
transaction does not deviate by more than 3 percent from the 
interbank bid and asked rates for transactions of comparable size 
and maturity at the time of the transaction as displayed on an 
independent service that reports rates of exchange in the foreign 
currency market for such currency; and (4) the bank or broker-dealer 
(or any affiliate of either) does not have investment discretion or 
provide investment advice with respect to the transaction.
---------------------------------------------------------------------------

    3. Application of Foreign Laws. The Applicant has requested the 
Department to confirm that Section II(k) does not preclude the 
application of foreign laws. Section II(k) of the exemption requires 
that:

    Foreign affiliates of Deutsche Bank which engage in the covered 
transactions--
    (1) Agree to submit to the jurisdiction of the United States;
    (2) Agree to appoint an agent for service of process in the 
United States, which may be an affiliate (the Process Agent);
    (3) Consent to service of process on the Process Agent;

[[Page 8125]]

    (4) Agree that they may be sued in the United
    States Courts in connection with the covered transactions 
described in this proposed exemption;
    (5) Agree that any judgment on behalf of a plan or pooled fund 
may be collected in the United States from Deutsche Bank; and
    (6) Agree to comply with, and be subject to, all relevant 
provisions of the Act.

    In response, the Department notes that this section does not 
preclude the application of foreign laws, but rather provides a means 
for a plan to seek a judgment in the courts of the United States if a 
claim arises in connection with the covered transactions. In addition, 
to the extent those foreign laws preclude a foreign affiliate of 
Deutsche Bank from meeting the conditions of the exemption, such 
affiliate may not rely on the relief provided by this exemption.
    4. Development of Policies and Procedures by Global Custodian. The 
Applicant requests that the Department confirm that Section III(a) does 
not require the global custodian to develop any special policies and 
procedures regarding the handling of foreign exchange transactions for 
plans or pooled funds with respect to which Deutsche Bank or its 
affiliate is a fiduciary or disclose to Deutsche Bank the factors that 
the global custodian considers in its selection of a subcustodian.
    In response to this comment, the Department notes that the 
requirements of Section III(a) relate exclusively to the information 
that Deutsche Bank must provide to certain designated persons.
    For a complete statement of the facts and representations 
supporting the Department's decision to grant this exemption, refer to 
the notice of proposed exemption that was published in the Federal 
Register on July 8, 2008 at 73 FR 39158. For further information 
regarding the Applicant's comment letter or other matters discussed 
herein, interested persons are encouraged to obtain copies of the 
exemption application files (Exemption Application Nos. D-11082 and D-
11109) the Department is maintaining in this case. The application 
files, as well as all supplemental submissions received by the 
Department, are made available for public inspection in the Public 
Disclosure Room of the Employee Benefits Security Administration, Room 
N-1513, U.S. Department of Labor, 200 Constitution Avenue, NW., 
Washington, DC 20210. The Applicant's comment letter may also be viewed 
online at http://www.regulations.gov, at Docket ID Number: EBSA-2008-
0006.
    Accordingly, after giving full consideration to the entire record, 
including the Applicant's comment letters and supplements, the 
Department has decided to grant the exemption.
    For Further Information Contact: Allison Padams-Lavigne, U.S. 
Department of Labor, telephone (202) 693-8564. (This is not a toll-free 
number.)

State Street Bank and Trust Company; Located in Massachusetts

    [Prohibited Transaction Exemption No. 2010-02; Application No. D-
11522.]

Exemption

    The restrictions of sections 406(a)(1)(A) and (D) and 406(b) of the 
Act and the sanctions resulting from the application of section 4975 of 
the Code, by reason of section 4975(c)(1)(A), (D), (E), and (F) of the 
Code, shall not apply as of October 24, 2008, to the cash sale of 
certain mortgage, mortgage-related, and other asset-backed securities 
for $2,447,381,010 (the Sale) by stable value commingled funds and 
separate accounts both holding assets of employee benefit plans (the 
Accounts) to State Street Bank and Trust Company (State Street), the 
investment manager and/or trustee for the Accounts, provided that the 
conditions set forth below are met.
    (a) The Sale was a one-time transaction for cash payment made on a 
delivery versus payment basis.
    (b) The Accounts did not bear any commissions or transaction costs 
in connection with the Sale.
    (c) The Accounts received as a purchase price for the securities an 
amount which, as of the effective date of the Sale, was equal to the 
fair market value of the securities, determined by reference to prices 
provided by independent third-party pricing sources consulted in 
accordance with pricing procedures used by the Accounts prior to the 
transaction.
    (d) In connection with the Sale, State Street transferred to and 
allocated among the Accounts cash in the amount of $450,000,000.
    (e) At the time of the transaction, State Street, as trustee of the 
Accounts, determined (except with respect to the State Street Salary 
Savings Program, an employee benefit plan maintained for employees of 
State Street and certain affiliates (the State Street Plan)) that the 
Sale was appropriate for and in the best interests of the Accounts and 
the employee benefit plans invested in the Accounts. An independent 
fiduciary determined at the time of the transaction that the Sale was 
appropriate for and in the best interest of the State Street Plan and 
its participants and beneficiaries.
    (f) An independent consultant reviewed, after the Sale, the 
reasonableness of the prices used to purchase the securities, and 
concluded that the pricing methodology used by State Street provided a 
reasonable basis for determining the fair market value of the 
securities and that the methodology was reasonably applied with only 
immaterial deviations.
    (g) In carrying out the Sale, State Street took all appropriate 
actions necessary to safeguard the interests of each Account and each 
employee benefit plan with a direct or indirect interest in an Account.
    (h) State Street and its affiliates, as applicable, will maintain, 
or cause to be maintained, for a period of six (6) years from the date 
of the Sale such records as are necessary to enable the persons 
described below in paragraph (i)(i) to determine whether the conditions 
of this exemption have been met, except that--
    (i) No party in interest with respect to a plan which engaged in 
the covered transaction, other than State Street and its affiliates, as 
applicable, shall be subject to a civil penalty under section 502(i) of 
the Act or the taxes imposed by section 4975(a) and (b) of the Code, if 
such records are not maintained or are not available for examination as 
required by paragraph (i) below; and
    (ii) A separate prohibited transaction shall not be considered to 
have occurred solely because due to circumstances beyond the control of 
State Street or its affiliate, as applicable, such records are lost or 
destroyed prior to the end of the six-year period.
    (i)(i) Except as provided below, in paragraph (ii), and 
notwithstanding any provisions of subsections (a)(2) and (b) of 
sections 504 of the Act, the records referred to in paragraph (h) 
above, are unconditionally available at their customary location for 
examination during normal business hours by--
    (A) Any duly authorized employee or representative of the 
Department, the Internal Revenue Service, the Securities and Exchange 
Commission or the Federal Reserve Board;
    (B) Any fiduciary of any plan that engaged in the covered 
transaction, or any duly authorized employee or representative of such 
fiduciary;
    (C) Any employer of participants and beneficiaries and any employee 
organization whose members are covered by a plan that engages in the 
covered transactions, or any authorized employee or representative of 
these entities; or

[[Page 8126]]

    (D) Any participant or beneficiary of a plan that engages in the 
covered transactions, or duly authorized employee or representative of 
such participant or beneficiary;
    (ii) None of the persons described above in subparagraphs (B)-(D) 
of paragraph (i)(i) are authorized to examine the trade secrets of 
State Street or commercial or financial information that is privileged 
or confidential.
    (iii) Should State Street refuse to disclose information on the 
basis that such information is exempt from disclosure, State Street 
shall, by the close of the thirtieth (30th) day following the request, 
provide written notice advising that person of the reason for the 
refusal and that the Department may request such information.
    The Department received one comment regarding the proposed 
exemption. At the Department's request, State Street submitted a 
response to the comment. A discussion of the commenter's assertions, 
State Street's responses, and the Department's views follows.
    The commenter first stated that State Street failed to disclose 
certain information to the Department. Specifically, the commenter 
cited several news items reporting on litigation involving State Street 
that the commenter believed to be relevant to the pending exemption. 
The commenter also asserted that State Street concealed certain matters 
from the Department, most notably, the fact that the SEC had issued a 
``Wells Notice'' to State Street, indicating that the staff of the SEC 
is recommending enforcement action against the company for violations 
of the antifraud provisions of the federal securities laws, relating to 
the disclosure and management of State Street's active fixed income 
strategies during 2007 and prior periods.\5\ Finally, the commenter 
stated that State Street had not provided all the information required 
by the Department's regulations at 29 CFR 2570.34 and 35. The commenter 
indicated that the application did not include required contact 
information about individual plans affected by the exemption.
---------------------------------------------------------------------------

    \5\ The commenter identified two other matters that State Street 
had omitted from its application: First, that a partner in the law 
firm that represented State Street with respect to the exemption 
application, Ropes & Gray, was a member of State Street's Board of 
Directors and was chairman of its Executive Committee during the 
relevant time period; and second, that State Street sought a 
regulatory exemption from the SEC in 2002 with respect to the types 
of securities that could be used as collateral in securities lending 
transactions.
---------------------------------------------------------------------------

    In addition, the commenter took the position that the criteria 
established under section 408(a) of ERISA for the grant of an exemption 
would not be satisfied with respect to the pending exemption, in that 
the exemption would not serve the interests of the affected plans and 
their participants and beneficiaries.\6\ The commenter stated that the 
exemption would ``paper[] over information that would enable the Named 
Plans and their respective participants and beneficiaries to pursue the 
fiduciary for additional underlying breaches.'' Further, the commenter 
asserted that participants in the State Street Salary Savings Program 
who were invested in the State Street Company Stock Fund saw the value 
of their accounts decline as a result of actions taken by State Street 
management at the time of the transaction that is the subject of the 
proposed exemption. The commenter requested that the Department hold a 
public hearing, or, alternatively, require State Street to disclose all 
pending lawsuits filed by employee benefit plans, as well as the 
contact information and employer identification number for all plans 
invested in any fund cited in the application, as well as certain other 
State Street funds.
---------------------------------------------------------------------------

    \6\ Section 408(a) of ERISA provides that an exemption may not 
be granted unless the Secretary of Labor finds that the exemption 
is: ``(1) administratively feasible, (2) in the interests of the 
plan and of its participants and beneficiaries, and (3) protective 
of the rights of participants and beneficiaries of such plan.''
---------------------------------------------------------------------------

    In response, State Street stated that the news items identified by 
the commenter are not relevant to the transaction covered by the 
proposed exemption. In that regard, State Street pointed out that the 
news items did not involve funds affected by the proposed exemption, 
and pertain to events that occurred after the publication of the 
proposed exemption. State Street noted that the SEC Wells Notice was 
disclosed to the Department on July 8, 2009, and also was generally 
available as part of a public filing. State Street asserted that the 
other matters omitted from the application are not relevant to the 
Department's consideration of the proposed exemption. State Street 
stated that it believes it satisfied the requirements of the 
Department's regulations with respect to disclosures in its 
application.
    The Department has carefully considered the issues raised by the 
commenter and the Applicant's responses. The Department does not 
believe that any of the news items or allegedly concealed or omitted 
matters would have materially affected the Department's decision to 
propose, and ultimately, grant the exemption.\7\
---------------------------------------------------------------------------

    \7\ The Department notes that the SEC Wells Notice was disclosed 
to the Department as stated by the Applicants.
---------------------------------------------------------------------------

    With respect to plan contact information, the Department requested 
and the Applicant agreed to supplement its application with contact 
information for affected plans that were managed in separate accounts. 
As to plans invested in pooled funds, the Department's regulations at 
29 CFR 2570.35 require disclosure of information with respect to the 
pooled funds as opposed to individual investing plans. See 29 CFR 
2570.35(c)(2). State Street's original application provided the 
employer identification number for the pooled funds. Because the pooled 
funds are sponsored by State Street, the Department does not believe it 
is necessary to have additional contact information on file for the 
pooled funds.
    Finally, the Department has determined that the exemption does 
satisfy the criteria established in section 408(a) of ERISA, including 
the requirement that the exemption be in the interests of the affected 
plans and their participants and beneficiaries. The Department does not 
believe that the grant of the exemption will undermine any rights that 
a plan participant or beneficiary might have against State Street as 
fiduciary. The Department's view is that by purchasing distressed 
securities (the Selected Assets) and making an additional cash infusion 
into the affected Accounts, State Street took actions designed to 
protect the interests of the plans invested in those Accounts. The 
Department believes that the Applicant was persuasive in arguing that 
it was necessary to remove the Selected Assets from the Accounts in 
order to reduce the likelihood that the wrap providers would terminate 
their contracts, thereby depriving the Accounts of ``book value'' 
treatment of plan investments. In this regard, the Department notes 
that the identification of the Selected Assets was confirmed by an 
independent consultant. In addition, the sale price of the Selected 
Assets was determined by independent third party pricing services and 
confirmed as reasonable by an independent consultant.\8\
---------------------------------------------------------------------------

    \8\ The commenter suggested that the Department deny the 
exemption, thereby requiring State Street to pay an excise tax 
pursuant to section 4975 of the Internal Revenue Code, so that 
``State Street's incumbent management will face intra-corporate 
measures to remove bad managers and executives.'' The Department 
notes that if the exemption were denied, not only would State Street 
be required to pay an excise tax under section 4975 of the Code, it 
also would be required to ``correct'' the transaction, possibly by 
returning the Selected Assets to the Accounts. The Department does 
not believe that this would be a favorable result for the Accounts 
and their investing plans.

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

[[Page 8127]]

    The Department has determined not to hold a public hearing with 
respect to the proposed exemption. The Department's regulations provide 
that a hearing will be held where necessary to fully explore material 
factual issues identified by the person requesting the hearing. See 29 
CFR 2570.46. In this case, the Department concludes that the commenter 
has not identified any material factual issues that would require a 
hearing.
    With respect to the additional disclosure requested by the 
commenter, the Department's regulations require disclosure of much of 
the information requested by the commenter, including lawsuits against 
the applicant concerning the applicant's conduct as a fiduciary or 
party in interest with respect to any plan, as well as contact 
information/EIN for affected plans or pooled funds. The Department 
believes that the additional disclosure requested by the commenter 
regarding plans that are not affected by the exemption is beyond the 
scope of the Department's exemption procedure regulation and this 
proceeding.
    Accordingly, after giving full consideration to the entire record, 
including the written comment, the Department has determined to grant 
the exemption. For a more complete statement of the facts and 
representations supporting the Department's decision to grant this 
exemption, refer to the notice of proposed exemption published on 
September 25, 2009, at 74 FR 49031.
    For Further Information Contact: Karen E. Lloyd of the Department, 
at (202) 693-8554. This is not a toll-free number.

The Bank of New York Mellon (BNY Mellon or the Applicant) Located in 
New York, NY

    [Prohibited Transaction Exemption 2010-03; Exemption Application 
No. D-11571.]

Exemption

    The restrictions of sections 406(a) and 406(b)(1) and 406(b)(2) of 
the Act and the sanctions resulting from the application of section 
4975 of the Code, by reason of section 4975(c)(1)(A) through (E) of the 
Code, shall not apply as of February 20, 2009, to the cash sale of 
certain floating rate securities (the Securities) issued by Lehman 
Brothers Holdings, Inc. or its affiliates (together, Lehman) for an 
aggregate purchase price of $235,737,419.05 by the EB Temporary 
Investment Fund--Lehman (Liquidating Fund), the EB SMAM Short Term 
Investment Fund--Lehman (Liquidating Fund), the DF Temporary Investment 
Fund--Lehman (Liquidating Fund) and the Pooled Employee Daily Liquidity 
Fund--Lehman (Liquidating Fund) (collectively, the Liquidating Funds) 
to the Bank of New York Mellon Corporation (BNYMC), a party in interest 
with respect to employee benefit plans (the Plans) invested, directly 
or indirectly, in the Liquidating Funds. This exemption is subject to 
the following conditions:
    (a) The sale was a one-time transaction for cash;
    (b) The Liquidating Funds received an amount for the sale of the 
Securities, which was equal to the sum of (1) The par value of the 
Securities plus (2) accrued but unpaid interest through September 12, 
2008, determined at the contract rate, plus (3) accrued and unpaid 
interest from September 15, 2008 through the earlier of (i) the date of 
sale or (ii) the maturity date of the Securities, determined at the 
investment earnings rate of the collective fund from which the 
Securities were transferred to the Liquidating Fund for the period from 
September 15, 2008 to the earlier of the maturity date of the Security 
or February 20, 2009;
    (c) The Liquidating Funds did not bear any commissions, fees, 
transaction costs or other expenses in connection with the sale of the 
Securities;
    (d) BNY Mellon, as trustee of the Liquidating Funds, determined 
that the sale of the Securities was appropriate for and in the best 
interests of the Liquidating Funds, and the Plans invested, directly or 
indirectly, in the Liquidating Funds, at the time of the transaction;
    (e) BNY Mellon took all appropriate actions necessary to safeguard 
the interests of the Liquidating Funds, and the Plans invested, 
directly or indirectly, in the Liquidating Funds, in connection with 
the transaction;
    (f) If the exercise of any of BNYMC's rights, claims or causes of 
action in connection with its ownership of the Securities results in 
BNYMC recovering from Lehman, the issuer of the Securities, or from any 
third party, an aggregate amount that is more than the sum of:
    (1) the purchase price paid for the Securities by BNYMC; and
    (2) interest on the par value of the Securities from and after the 
date BNYMC purchased the Securities from the Liquidating Funds, 
determined at the last-published interest rate on the Securities 
preceding the Lehman's bankruptcy filing, BNYMC refunds such excess 
amount promptly to the Liquidating Funds (after deducting all 
reasonable expenses incurred in connection with the recovery);
    (g) BNY Mellon and its affiliates, as applicable, maintain, or 
cause to be maintained, for a period of six (6) years from the date of 
any covered transaction such records as are necessary to enable the 
person described below in paragraph (h)(1), to determine whether the 
conditions of this exemption have been met, except that--
    (1) No party in interest with respect to a Plan which engages in 
the covered transaction, other than BNY Mellon and its affiliates, as 
applicable, shall be subject to a civil penalty under section 502(i) of 
the Act or the taxes imposed by section 4975(a) and (b) of the Code, if 
such records are not maintained, or not available for examination, as 
required, below, by paragraph (h)(1);
    (2) A separate prohibited transaction shall not be considered to 
have occurred solely because due to circumstances beyond the control of 
BNY Mellon or its affiliates, as applicable, such records are lost or 
destroyed prior to the end of the six-year period;
    (h)(1) Except as provided, below, in paragraph (h)(2), and 
notwithstanding any provisions of subsections (a)(2) and (b) of section 
504 of the Act, the records referred to, above, in paragraph (g) are 
unconditionally available at their customary location for examination 
during normal business hours by--
    (A) Any duly authorized employee or representative of the 
Department, the Internal Revenue Service, or the Securities and 
Exchange Commission; or
    (B) Any fiduciary of any Plan that engages in the covered 
transaction, or any duly authorized employee or representative of such 
fiduciary; or
    (C) Any employer of participants and beneficiaries and any employee 
organization whose members are covered by a Plan that engages in the 
covered transaction, or any authorized employee or representative of 
these entities; or
    (D) Any participant or beneficiary of a Plan that engages in the 
covered transaction, or duly authorized employee or representative of 
such participant or beneficiary;
    (2) None of the persons described above, in paragraph (h)(1)(B)-(D) 
shall be authorized to examine trade secrets of BNY Mellon or its 
affiliates, or commercial or financial information which is privileged 
or confidential; and
    (3) Should BNY Mellon refuse to disclose information on the basis 
that such information is exempt from disclosure, BNY Mellon shall, by 
the

[[Page 8128]]

close of the thirtieth (30th) day following the request, provide a 
written notice advising that person of the reasons for the refusal and 
that the Department may request such information.
    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 November 16, 2009 at 74 
FR 58992.
    For Further Information Contact: Mr. Anh-Viet Ly of the Department 
at (202) 693-8648. (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 16th day of February, 2010.
Ivan Strasfeld,
Director of Exemption Determinations, Employee Benefits Security 
Administration, U.S. Department of Labor.
[FR Doc. 2010-3445 Filed 2-22-10; 8:45 am]
BILLING CODE 4510-29-P