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EBSA Notices

Prohibited Transaction Exemptions From Certain Prohibited Transaction Restrictions   [12/16/2010]
[PDF]
FR Doc 2010-31571
[Federal Register: December 16, 2010 (Volume 75, Number 241)]
[Notices]               
[Page 78758-78768]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16de10-84]                         

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DEPARTMENT OF LABOR

Employee Benefits Security Administration

 
Prohibited Transaction Exemptions From Certain Prohibited 
Transaction Restrictions

AGENCY: Employee Benefits Security Administration, Labor.

ACTION: Grant of Individual Exemptions.

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SUMMARY: This document contains exemptions issued by the Department of 
Labor (the Department) from certain of the prohibited transaction 
restrictions of the Employee Retirement Income Security Act of 1974 
(ERISA or the Act) and/or the Internal Revenue Code of 1986 (the Code).
    This notice includes the following: 2010-31, Deutsche Asset 
Management (UK) Limited, D-11495; 2010-32, Sherburne Tele Systems, Inc. 
Amended and Restored Stock Ownership Plan and Trust (the ``ESOP''), D-
11569; 2010-33, Citigroup Global Markets, Inc. and Its Affiliates 
(together, CGMI or the Applicant), D-11573; and 2010-34, Retirement 
Plan for Employees of the Rehabilitation Institute of Chicago (the 
Plan), D-11585.

SUPPLEMENTARY INFORMATION: A notice was published in the Federal 
Register of the pendency before the Department of a proposal to grant 
such exemption. The notice set forth a summary of facts and 
representations contained in the application for exemption and referred 
interested persons to the application for a complete statement of the 
facts and representations. The application has been available for 
public inspection at the Department in Washington, DC. The notice also 
invited interested persons to submit comments on the requested 
exemption to the Department. In addition, the notice stated that any 
interested person might submit a written request that a public hearing 
be held (where appropriate). The applicant has represented that it has 
complied with the requirements of the notification to interested 
persons. No requests for a hearing were received by the Department. 
Public comments were received by the Department as described in the 
granted exemption.
    The notice of proposed exemption was issued and the exemption is 
being granted solely by the Department because, effective December 31, 
1978, section 102 of Reorganization Plan No. 4 of 1978, 5 U.S.C. App. 1 
(1996), transferred the authority of the Secretary of the Treasury to 
issue exemptions of the type proposed to the Secretary of Labor.

Statutory Findings

    In accordance with section 408(a) of the Act and/or section 
4975(c)(2) of the Code and the procedures set forth in 29 CFR Part 
2570, Subpart B (55 FR 32836, 32847, August 10, 1990) and based upon 
the entire record, the Department makes the following findings:
    (a) The exemption is administratively feasible;
    (b) The exemption is in the interests of the plan and its 
participants and beneficiaries; and
    (c) The exemption is protective of the rights of the participants 
and beneficiaries of the plan.

Deutsche Asset Management (UK) Limited (the Applicant), Located in 
London, England, a Wholly-Owned Subsidiary of Deutsche Bank AG, Located 
in Frankfurt, Germany, and Throughout the World
[Prohibited Transaction Exemption 2010-31; Exemption Application Number 
D-11495]

Exemption

Section I--Covered Transactions

    The restrictions of sections 406(a)(1)(A), 406(a)(1)(B), 
406(a)(1)(D), 406(b)(1), and 406(b)(2) of the Act and the sanctions 
resulting from the application of section 4975 of the Code, by reason 
of sections 4975(c)(1)(A), (B), (D), and (E) of the Code, shall not 
apply to certain foreign exchange Hedging and

[[Page 78759]]

Administrative Conversion transactions that occurred between November 
30, 2007 and May 30, 2008, inclusive, between the DB Torus Japan Master 
Portfolio (the Master Fund), in which the assets of a client employee 
benefit plan (the Client Plan) were invested, and Deutsche Bank AG, a 
party in interest with respect to the Client Plan, provided that the 
conditions contained herein are satisfied.

Section II--General Conditions

    (a) The Foreign Exchange Transactions were executed solely in 
connection with the Master Fund's Hedging of the Japanese yen currency 
risk for its share classes denominated in U.S. dollars (USD), and for 
Administrative Conversions;
    (b) At the time that the Foreign Exchange Transactions were entered 
into, the terms of such transactions were not less favorable to the 
Master Fund than the terms generally available in comparable arm's 
length Foreign Exchange Transactions between unrelated parties;
    (c) Any Foreign Exchange Transactions authorized by Deutsche Asset 
Management (UK) Ltd. and executed by Deutsche Bank AG were not part of 
any agreement, arrangement, or understanding, written or otherwise, 
designed to benefit the foregoing entities or their Affiliates 
(collectively, Deutsche Bank), or any other party in interest;
    (d) Prior to investing in DB Torus Japan Fund Ltd. (hereinafter the 
Feeder Fund, the vehicle through which investments in the Master Fund 
are effected), the fiduciary of the Client Plan received the offering 
memorandum for the Feeder Fund;
    (e) The exchange rate used for a particular Foreign Exchange 
Transaction did not deviate by more than three percent (above or below) 
the interbank bid and asked rate for such currency at the time of such 
transaction, as displayed on an independent, nationally-recognized 
service that reports rates of exchange in the foreign currency market 
for such currency;
    (f) Prior to the granting of this exemption concerning the subject 
Foreign Exchange Transactions, Deutsche Asset Management (UK) Ltd. 
reimbursed the Client Plan for its pro-rata share of: (1) The Spread on 
each Foreign Exchange Transaction subject to this exemption; and (2) 
Any fees charged by Deutsche Bank AG for executing the subject Foreign 
Exchange Transaction(s), plus interest at the applicable Internal 
Revenue Service (the Service) underpayment penalty rate up to the date 
of reimbursement;
    (g) Within 30 days after taking the corrective action described in 
Section II(f) above, Deutsche Asset Management (UK) Ltd. provided the 
independent fiduciary of the Client Plan whose assets were involved in 
the Foreign Exchange Transactions with: (1) Written information, 
formulas, and/or other documentation sufficient to enable such 
fiduciaries to independently verify that the Plans have been reimbursed 
in accordance with the requirements of Section II(f) above; and (2) a 
copy of the Notice of Proposed Exemption (the Notice);
    (h) Within 30 days after taking the corrective action described in 
Section II(f) above, Deutsche Asset Management (UK) Ltd. provided the 
Department with written documentation demonstrating that the foregoing 
reimbursements to the Client Plan were correctly computed and paid;
    (i) Effective May 31, 2008, Deutsche Asset Management (UK) Ltd., in 
conjunction with the administrator of both the Master Fund and the 
Feeder Fund (together, the Funds), continuously monitors the percentage 
of total assets invested by benefit plan investors in the Funds so 
that, as of each acquisition or redemption of equity interests, 
Deutsche Asset Management (UK) Ltd. and the administrator of the Funds 
are able to verify whether equity participation in the Funds by benefit 
plan investors is not significant pursuant to section 3(42) of the Act 
and 29 CFR 2510.3-101;
    (j) Deutsche Asset Management (UK) Ltd. maintains, or causes to be 
maintained, for a period of six years from the date of the transactions 
that are the subject of this exemption, the following records, as well 
as any other records necessary to enable the persons described in 
Section II(l) of this exemption, to determine whether the conditions of 
this exemption have been met:
    (1) The account name;
    (2) The trade and settlement dates of the subject foreign exchange 
Hedging and Administrative Conversion transactions;
    (3) The USD/Japanese yen currency exchange rates for each covered 
transaction;
    (4) The interbank bid and asked currency rates for USD/Japanese yen 
exchanges on Bloomberg or a similar independent service at the time of 
the transaction;
    (5) The identification of the type of currency trade undertaken 
(whether spot or forward or other contractual trade);
    (6) The amount of Japanese yen sold or purchased in the Hedging and 
Administrative Conversion transactions; and
    (7) The amount of U.S. dollars exchanged for Japanese yen in the 
Hedging and Administrative Conversion transactions.
    (k) The following are exceptions to the requirements of Section 
II(j):
    (1) A separate prohibited transaction shall not be considered to 
have occurred solely because, due to circumstances beyond the control 
of Deutsche Asset Management (UK) Ltd. or its Affiliates, the records 
necessary to enable the persons described in Section II(l) to determine 
whether the conditions of the exemption have been met are lost or 
destroyed prior to the end of the six-year period; and
    (2) No party in interest, other than Deutsche Asset Management (UK) 
Ltd. and its Affiliates, shall be subject to the civil penalty that may 
be assessed under section 502(i) of the Act or to the excise taxes 
imposed by section 4975(a) and (b) of the Code if the records are not 
maintained for examination as required by Section II(l) below.
    (l)(1) Except as provided in paragraph (2) of this Section II(l) 
and notwithstanding the provisions of subsections (a)(2) and (b) of 
section 504 of the Act, the records referred to above in Section II(j) 
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 Service;
    (ii) The independent fiduciary of the Client Plan (or a duly 
authorized employee or representative of such fiduciary), or
    (iii) Any participant or beneficiary of the Client Plan or any duly 
authorized employee of representative of a participant or beneficiary 
in such Client Plan.
    (2) None of the persons described above in paragraphs (ii) and 
(iii) of Section II(l)(1) shall be authorized to examine trade secrets 
of Deutsche Bank or its Affiliates, or any commercial or financial 
information which is privileged or confidential.
    (3) Should Deutsche Asset Management (UK) Ltd. refuse to disclose 
information to the persons described above in paragraphs (ii) and (iii) 
of Section II(l)(1) on the basis that such information is exempt from 
disclosure, Deutsche Asset Management (UK) shall, by the 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

[[Page 78760]]

Department may request such information.

Section III--Definitions

    For purposes of this exemption:
    (a) An ``Affiliate'' of Deutsche Asset Management (UK) Ltd. means:
    (1) Any person or entity directly or indirectly, through one or 
more intermediaries, controlling, controlled by, or under common 
control with such person or entity; (2) Any officer, director, partner, 
employee, or relative (as defined in section 3(15) of the Act) of such 
other person or entity; and (3) Any corporation or partnership of which 
such other person or entity is an officer, director, partner, or 
employee.
    (b) The term ``Control'' means the power to exercise a controlling 
influence over the management or policies of a person other than an 
individual.
    (c) The term ``Client Plan'' means an employee benefit plan, other 
than a plan sponsored by Deutsche Bank and its affiliates, as described 
in section 3(3) of the Act or section 4975(e)(1) of the Code that 
invested directly or indirectly in the Master Fund, and for which 
Deutsche Asset Management (UK) Ltd. or its affiliate served as an 
investment advisor.
    (d) The term ``Foreign Exchange Transaction'' means the exchange of 
the currency of one nation for the currency of another nation, or a 
contract for such an exchange. The term foreign exchange transaction 
includes options contracts on such transactions.
    (e) The term ``Hedging'' means a strategy used to offset the 
investment risk of future gains or losses resulting from anticipated 
fluctuations in the value of currency, such as an investor's decision 
to exchange foreign currency in anticipation of upward or downward 
movement in the value of that currency.
    (f) The term ``Administrative Conversions'' means, with respect to 
foreign exchange transactions, those transactions necessary to effect 
(1) subscriptions, (2) redemptions, or (3) the payment of fees and 
expenses identified below:
    (i) December 27, 2007 spot conversions in the total amount of 
$552,650 for management fees, incentive fees, administration fees and 
expenses, legal fees, the Funds' Board of Directors fees, the Funds' 
Conflict Advisory Board fees, translation services, and bank charges; 
and
    (ii) January 30, 2008 spot conversions in the total amount of 
$554,637 for management fees, incentive fees, administration fees and 
expenses, legal fees, the Funds' Board of Directors fees, the Funds' 
Conflicts Advisory Board fees, translation services, and bank charges.
    (g) The term ``Spread'' means the difference between (i) the rate 
at which the transaction occurred and (ii) the reported market price 
(i.e., the interbank bid or asked price depending on the direction of 
the trade) at the time of the transaction as reflected by a ``screen 
shot'' taken from an independent pricing service.

Written Comments

    1. The Notice of Proposed Exemption (the Notice), published in the 
January 19, 2010 issue of the Federal Register beginning at page 3067, 
invited all interested persons to submit written comments and requests 
for a hearing to the Department within forty-five (45) days of the date 
of its publication. In response, the Department received an extensive 
written comment from the Applicant regarding the content of the Notice. 
This comment, which was the only one received by the Department in 
connection with the Notice, suggested a number of clarifications and 
editorial adjustments to the operative language of Section I (``Covered 
Transactions''), Section II (``General Conditions''), and Section III 
(``Definitions'') of the Notice, which are detailed below; those 
modifications suggested by the Applicant which the Department has 
determined to adopt are reflected in the text of this final grant (the 
Grant) of exemption. The Applicant's comment also requested certain 
clarifications to the text of the ``Summary of Facts and 
Representations'' section of the Notice, which are also generally 
described below. The Department notes that it did not receive any 
requests for a hearing from the Applicant or from any other person 
during the aforementioned 45-day comment period.
    2. In its written comment, the Applicant expressed its view that 
the scope of exemptive relief proposed in Section I of the Notice for 
``foreign exchange hedging transactions'' could be construed as 
limiting such relief to those spot and forward transactions directly 
related to the purpose of hedging currencies, while potentially 
excluding certain ``administrative conversion'' activities. The 
Applicant's comment explained that the term ``administrative 
conversions'' is intended to encompass those transactions necessary to 
effect: (i) Subscriptions (through the conversion of U.S. dollars (USD) 
to the Japanese yen, the Funds' base currency, as required by the terms 
of Class A of the Feeder Fund); (ii) redemptions out of the Funds' base 
currency and back into the currency required to be paid to investors 
(through the conversion of yen to USD as required by the terms of Class 
A of the Feeder Fund); or (iii) the payment of assorted fees and 
expenses (through the spot conversion of such expenses from yen to 
USD). Accordingly, the Applicant's comment requested that the 
Department insert the words ``and administrative conversion'' after the 
words ``foreign exchange hedging'' and before the word ``transactions'' 
in Section I of the Grant in order to clarify that exemptive relief 
extends to the administrative conversion activities necessary for the 
completion of the foreign exchange transactions. After due 
consideration of the Applicant's request, the Department agrees to the 
insertion of this clarifying language in this Grant.
    The Applicant's comment further requested that a definition for the 
term ``administrative conversions'' in Section III(f) be made 
consistent with the various activities described in the previous 
paragraph; this revised definition would also reference the specific 
categories of fees and expenses incurred by the Funds with respect to 
certain spot conversions that occurred during the period of exemptive 
relief. In addition, the Applicant has requested that conforming 
adjustments to the text be made to Sections II(j)(2), II(j)(6), and 
II(j)(7) of the Grant by adding the term ``administrative conversions'' 
to each of these general conditions for relief, and that a reference to 
the administrative conversion activities described in Section III(f) be 
added at the conclusion of Section II(a). The Department agrees that 
each of these suggested insertions and adjustments would provide 
additional clarity and consistency to the text, and has, therefore, 
decided to incorporate each of the foregoing modifications. In this 
connection, the Department notes that the adoption of these adjustments 
should not be construed to mean that the Department is expressing an 
opinion herein as to whether the assessment of the various fees and 
expenses charged to the Funds in connection with the administrative 
conversion transactions were consistent with, or in violation of, the 
fiduciary requirements of Part 4 of Title I of the Act.
    3. In its comment, the Applicant also requested that a number of 
references made in the text of the Notice to Deutsche Bank AG and/or 
its affiliates be adjusted and clarified in the final Grant. In this 
connection, the Applicant requested that the initial reference to 
``Deutsche Bank Asset Management (UK) Ltd. or its affiliates 
(collectively, Deutsche Bank)'' in Section I of the Notice be deleted, 
and that the words

[[Page 78761]]

``Deutsche Bank AG'' be substituted in lieu thereof. Concomitantly, the 
Applicant requested that the language of the general condition at 
Section II(c) should be amended to read: ``Any foreign exchange 
transactions authorized by Deutsche Asset Management (UK) Ltd. and 
executed by Deutsche Bank AG were not part of any agreement, 
arrangement, or understanding, written or otherwise, designed to 
benefit Deutsche Bank, its affiliates, or any other party in 
interest.'' The Applicant further requested that all references to 
``Deutsche Bank'' made in the Notice at Sections II(f), II(g), II(h), 
II(i), II(j), and II(k) of the Notice be deleted, and that the term 
``Deutsche Asset Management (UK) Ltd.'' be substituted in lieu thereof 
in each instance. After reviewing these suggested clarifications 
concerning references to Deutsche Bank entities, the Department has 
agreed to adopt each of these modifications in the text of the final 
Grant.
    4. In its comment, the Applicant stated that a definition for the 
term ``spread'' be added to the text of Section III of the final Grant. 
According to the Applicant, ``spread'' means the difference between (i) 
the rate at which the transaction occurred and (ii) the reported market 
price (i.e., the bid or asked price depending on the direction of the 
trade) at the time of the transaction as reflected by a ``screen shot'' 
taken from an independent pricing service. The Applicant commented that 
the screen shot provides an accurate reflection of the market price 
since the prices quoted on the screen shot depict the prices at the 
time a trade occurred. The Department concurs that the inclusion of 
such a definition would improve the clarity of the exemption, and 
accordingly has modified the definition at Section III(g) of the Grant.
    5. In addition, the Applicant requested in its comment that the 
definition of ``foreign exchange transaction'' appearing at Section 
III(d) of the Notice be modified by adding similar language found in 
the definition of the same term that appears in the text of an 
administrative class exemption, PTE 94-20 (59 FR 51216, February 10, 
1994). Section IV(a) of PTE 94-20 states that ``a `foreign exchange 
transaction' means the exchange of the currency of one nation for the 
currency of another nation, or a contract for such an exchange. The 
term foreign exchange transaction includes options contracts on foreign 
exchange transactions.'' The Applicant's comment further requested that 
the clause ``including a synthetic contract'' be added to this 
definition after the word ``contract''. In its comment, the Applicant 
equated the term ``synthetic contract'' with a ``swap,'' which, 
according to the Applicant, is the economic equivalent of continuous 
currency forwards selling the yen for the USD, settling differences in 
cash and then putting the same trade on immediately at the close of 
each forward trade.''
    After due consideration of this request, the Department has 
determined to substitute, in Section III(d) of the Grant, the exact 
language defining a ``foreign exchange transaction'' found in Section 
IV(a) of PTE 94-20 in lieu of the definitional language contained in 
Section III(d) of the Notice; however, the Department declines to 
insert an additional ``synthetic contracts'' clause to the foregoing 
definition. In this regard, the Department is of the view that the 
exemptive relief provided in this Grant encompasses the various foreign 
exchange transactions activities described by the Applicant in its 
application, and that there is insufficient information on the record 
for the Department to determine the scope of the term ``synthetic 
contracts'' as they relate to foreign exchange transactions.
    6. The Applicant's comment also suggested several additional 
modifications to the text of Section II(j) of the Notice. At Section 
II(j)(3), the Applicant requested that the words ``on the trade and 
settlement dates'' be deleted, and that the words ``for each covered 
transaction'' be substituted in lieu thereof in the final Grant. After 
due consideration, the Department agrees to this change. At Section 
II(j)(4), the Applicant also requested the deletion of the words ``The 
high and low currency prices on Bloomberg or similar independent 
service on the dates of the subject transactions'' and the substitution 
of language in the text of the Grant that would require the utilization 
of the interbank bid and asked currency rates for Japanese yen/USD 
exchanges on Bloomberg or a similar independent service at the time of 
the transaction. As described above in Item 4, the Applicant explained 
that it desires this modification because it believes that the currency 
rates at the time of the transaction are ``a better indicator of market 
prices than the high and low for the day.'' The Department concurs, and 
adopts this substitution in Section II(j)(4) of the Grant. At Section 
II(j)(5), the Applicant requested the insertion of the words ``or other 
contractual trade'' after the word ``forward'' in the text of the final 
Grant. The Applicant explains in its comment that these ``other 
contractual trades'' represent ``continuous currency forwards'' in 
which yen are sold in exchange for the USD. After due consideration, 
the Department agrees to the Applicant's suggested modification at 
Section II(j)(5).
    7. In its comment, the Applicant requested that the language 
contained in Section II(l)(1)(iii) of the Notice, which permits ``[A]ny 
participant of beneficiary of such Client Plans or any duly authorized 
employee or representative of a participant or beneficiary in such 
Client Plans'' to inspect the records required to be maintained by 
Deutsche Asset Management (UK) Ltd. pursuant to Section II(j) of the 
Grant, be deleted in its entirety from the text of the final Grant. In 
requesting this change, the Applicant's comment stated that the class 
of individuals comprising these participants and beneficiaries ``could 
exceed tens of thousands of individuals, which could cause an 
extraordinary burden to the Applicant.'' The Applicant further stated 
that ``[b]ecause any plan invested in the [Feeder] Fund was a defined 
benefit plan, we request that only plan fiduciaries (and the Department 
and Service) have access to the Applicant's records.'' After due 
consideration of this comment, the Department has determined not to 
adopt the Applicant's suggested modification. The Department is of the 
view that providing participants and beneficiaries with a right of 
inspection of records that are otherwise required to be maintained 
promotes transparency and is not onerous or burdensome. In this 
connection, the Department, on its own motion, has also determined to 
add a new Section II(l)(3) to the text of the final Grant which would 
require Deutsche Asst Management (UK) Ltd., in instances where it 
refuses to disclose the foregoing information to an independent plan 
fiduciary, participant, and/or beneficiary on the basis that such 
information is exempt from disclosure, to provide to such persons with 
a written notice advising them of the reasons for the refusal.
    8. The Applicant's comment included additional recommendations for 
technical and clarifying changes. In this regard, the Applicant 
requested that the first reference to ``Master Fund'' made in Section 
II(d) of the Notice be deleted, and the words ``Feeder Fund (and 
indirectly in the Master Fund through the Feeder Fund)'' be substituted 
in lieu thereof. In response to the Applicant's suggestion, the 
Department has determined to clarify and reformulate the text of 
Section II(d) in the Grant by stating that, ``[p]rior to investing in 
DB Torus Japan Fund Ltd. (hereinafter the Feeder Fund, the vehicle 
through which investments in the Master Fund are

[[Page 78762]]

effected), the fiduciary of each Client Plan received the offering 
memorandum for the Feeder Fund.''
    The Applicant also requested that the reference to ``Applicant'', 
found in Section III(a) of the Notice (which defines ``affiliate'') be 
deleted, and that the word ``Deutsche Asset Management (UK) Ltd.'' be 
substituted in lieu thereof in the final Grant. In addition, the 
Applicant requested that the first reference to the ``Applicant'' in 
Section III(c) of the Notice (which defines the term ``Client Plan'') 
be deleted and the words ``Deutsche Bank'' be substituted in lieu 
thereof in the text of the Grant; similarly, the Applicant requested 
that the second reference to the ``Applicant'' in Section III(c) of the 
Notice be deleted, and the words ``Deutsche Asset Management (UK) 
Ltd.'' be substituted in lieu thereof in the final Grant. Also, the 
Applicant requests that the text of Section III(c) of the Notice be 
further amended in the Grant by inserting the words ``directly or 
indirectly'' after the word ``invested,'' and by deleting the words 
``and the Feeder Fund'' after the words ``Master Fund.'' After 
consideration of these clarifying modifications suggested by the 
Applicant, the Department has determined to adopt each of them in the 
text of the final Grant.
    9. In its comment, the Applicant also requested several technical 
clarifications to the text of the Summary of Facts and Representations 
section of the Notice. The majority of these adjustments involved the 
systematic substitution in the text of the names of various Deutsche 
Bank entities in the same manner as the substitutions described in 
Items 3 and 8 above; other systematic modifications suggested by the 
Applicant involved the multiple additions of the term ``administrative 
conversion'' after each use of the words ``foreign exchange hedging 
transaction'' when referencing the scope of relief covered by the 
exemption. Accordingly, the Department herewith adopts the foregoing 
systemic, clarifying modifications suggested by the Applicant to the 
text of the Facts and Representations section of the Notice.
    In addition, the Applicant requests that the Department amend the 
language contained in the penultimate sentence of the second paragraph 
of Representation 7 of the Notice by inserting the words ``may have'' 
before the phrase ``caused a breach of the 25% limitation until 
approximately April 15, 2008.'' The Department has determined to adopt 
this suggested modification in order to maintain the internal 
consistency of the text of the Facts and Representations contained in 
the Notice.
    The Department has also determined to make the following additional 
technical clarifications to the text of the Facts and Representations 
section of the Notice that were requested by the Applicant in its 
comment: Deleting the word ``is'' in line 8 of the first paragraph of 
Representation 1 and inserting in lieu thereof the words ``until June 
19, 2009 was''; inserting the word ``indirectly'' before the words 
``wholly-owned'' in line 11 of the second paragraph of Representation 
1; inserting the words ``and that its subscription will be converted to 
yen, its redemptions will be converted to USD, and fees and expenses 
will be converted to the appropriate currency for the recipient'' at 
the conclusion of the third sentence of Representation 4; inserting the 
words ``in advance'' before the words ``the execution of currency 
trades'' in the final sentence of Representation 4; inserting the words 
``bid or asked'' before the phrase ``rate available on these trades 
based on the aforementioned Bloomberg screen prints'' in the final 
sentence of the first paragraph of Representation 8; substituting the 
word ``subscriptions'' in lieu of the word ``investments'' at the 
beginning of item (ii) at line 17 of Representation 9; inserting the 
words ``any class of shares in'' before the word ``either'' in item (v) 
of Representation 9; inserting the words ``any class of shares'' at the 
end of the final sentence of Representation 9; and inserting the words 
``at the same time'' after the words ``unrelated third party'' in the 
second sentence of Representation 10.
    10. The Department notes that, subsequent to the submission of the 
exemption application, the Applicant determined that only a single 
Client Plan was affected by the foreign exchange and administrative 
conversions covered by this exemption.\1\ The Applicant also made a 
subsequent representation to the Department that no fees were charged 
by the Applicant's affiliates or other financial institutions for 
executing the exemption transactions; accordingly, there were no fees 
to add to the principal amount (i.e., the Spread on each Foreign 
Exchange Transaction subject to the exemption) in determining the 
interest component of the reimbursement owed to the Client Plan 
pursuant to Section II(f) of the exemption. In computing this interest 
component, the Applicant confirms that it utilized the Department's 
online Voluntary Fiduciary Correction Program (VFCP) calculator to 
arrive at the applicable Internal Revenue Service underpayment rate 
described in Section 5(b)(5) of the VFCP at 71 FR 20271 (April 19, 
2006). The Applicant represents that, pursuant to Section II(g) of the 
exemption, a copy of the Notice was furnished to the independent 
fiduciary for the affected Client Plan on February 3, 2010. The 
Applicant further represents that, on September 9, 2010, in accordance 
with Section II(f) of the exemption, Deutsche Asset Management (UK) 
Ltd. paid the affected Client Plan $6,396.16, which amount included 
$741.20 in interest.
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    \1\ Section 404(a) of the Act requires, among other things, that 
the fiduciary of a plan act prudently, solely in the interests of 
the plan's participants and beneficiaries, and for the exclusive 
purpose of providing benefits to participants and beneficiaries when 
making investment decisions on behalf of a plan. In granting this 
exemption, the Department is expressing no opinion herein as to 
whether the fiduciary provisions of Part 4 of Title I of the Act 
have been satisfied.
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    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption, refer to 
the text of the Notice at 75 FR 3067 (January 19, 2010).

FOR FURTHER INFORMATION CONTACT: Mr. Mark Judge of the Department, 
telephone (202) 693-8550. (This is not a toll-free number.)

Sherburne Tele Systems, Inc. 2008 Amended and Restated Employee Stock 
Ownership Plan and Trust (the ``ESOP'') Located in Big Lake, Minnesota

[Prohibited Transaction Exemption 2010-32; Exemption Application No. D-
11569]

Exemption

    The restrictions of sections 406(a)(1)(A) and (D) and 406(b)(1) and 
406(b)(2) of the Act and the sanctions imposed under section 4975 of 
the Code, by reason of sections 4975(c)(1)(A), (D), and (E) of the 
Code, shall not apply to the sale by the ESOP of all its shares of 
common stock (the ``ESOP Shares'') in Sherburne Tele Systems, Inc. (the 
``Company'') to the Company, a party in interest with respect to the 
ESOP, provided that the following conditions are satisfied:\2\
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    \2\ For purposes of this exemption, references to provisions of 
Title I in the Act, unless otherwise specified, should be read to 
refer also to the corresponding provisions of the Code.
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    (a) The sale is a one-time transaction for cash;
    (b) The terms and conditions of the sale are at least as favorable 
to the ESOP as those that the ESOP could obtain in an arm's length 
transaction with an unrelated third party;
    (c) The sales price is the greater of (i) $5.01 per share, or (ii) 
the fair market value of the ESOP Shares as of the date

[[Page 78763]]

of the sale, as determined by a qualified, independent appraiser (the 
appraiser);
    (d) The sales proceeds received by the ESOP pursuant to the 
transaction are valued at a share price that is greater than the share 
price received by the non-ESOP shareholders;
    (e) The benefits received by the members of the board of directors 
and officers of the Company pursuant to the board of directors awards 
program, the Company's phantom stock plan and retention plans, which 
were paid, coincident with the closing of the asset sale of the Company 
to Iowa Telecommunications Services, Inc. were reasonable;
    (f) A qualified, independent fiduciary (the ``Independent 
Fiduciary'') for the ESOP was and is responsible for (i) reviewing the 
terms of the sale of the Company's assets; (ii) engaging the appraiser 
to value the ESOP Shares; (iii) reviewing and, if appropriate, 
approving the methodology used by the appraiser, to ensure that such 
methodology is properly applied in determining the fair market value of 
the ESOP Shares, to be updated as of the date of the sale; (iv) 
negotiating the terms of the sale of the ESOP Shares to the Company to 
ensure that the ESOP participants receive at least the fair market 
value of the ESOP Shares; (v) determining, and documenting in writing, 
whether the terms of the sale are fair and reasonable to the ESOP and 
whether it is prudent to proceed with the transaction; (vi) approving 
the transaction; and (vii) determining whether the transaction 
satisfies the criteria set forth in section 404 and section 408(a) of 
the Act;
    (g) The ESOP pays no fees, commissions, or other expenses in 
connection with the sale (including the fees paid to the appraiser and 
the Independent Fiduciary), other than a one-time $500.00 escrow fee 
(as described in the notice of proposed exemption's Summary of Facts 
and Representations 10); and
    (h) The proceeds from the sale are promptly forwarded to the ESOP's 
trust simultaneously with the transfer of the ESOP Shares to the 
Company.
    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 August 6, 2010 at 75 FR 
47639.

Written Comments

    No written comments were received by the Department with respect to 
the notice of proposed exemption.

FOR FURTHER INFORMATION CONTACT: Ms. Karin Weng of the Department, 
telephone (202) 693-8557. (This is not a toll-free number.)

Citigroup Global Markets, Inc. and Its Affiliates (together, CGMI or 
the Applicant), Located in New York, New York

[Prohibited Transaction Exemption 2010-33; Exemption Application No. D-
11573]

Exemption

Section I. Covered Transactions

    A. The restrictions of section 406(a) of the Act and the sanctions 
resulting from the application of section 4975 of the Code, by reason 
of section 4975(c)(1)(A) through (D) of the Code, shall not apply, 
effective May 31, 2009, to the purchase or redemption of shares by an 
employee benefit plan, an individual retirement account (an IRA), a 
retirement plan for self-employed individuals (a Keogh Plan), or an 
individual account pension plan that is subject to the provisions of 
Title I of the Act and established under section 403(b) of the Code 
(the Section 403(b) Plan) (collectively, the Plans) in the Trust for 
Consulting Group Capital Markets Funds (the Trust), sponsored by MSSB 
in connection with such Plans' participation in the TRAK Personalized 
Investment Advisory Service (the TRAK Program).
    B. The restrictions of section 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)(E) and (F) of the Code, shall not apply, 
effective May 31, 2009, with respect to the provision of (i) investment 
advisory services by the Adviser or (ii) an automatic reallocation 
option as described below (the Automatic Reallocation Option) to an 
independent fiduciary of a participating Plan (the Independent Plan 
Fiduciary), which may result in such fiduciary's selection of a 
portfolio (the Portfolio) \3\ in the TRAK Program for the investment of 
Plan assets.
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    \3\ For the avoidance of doubt, unless the context suggests 
otherwise, the term ``Portfolio'' includes the Stable Value 
Investments Fund, a collective trust fund established and maintained 
by First State Trust Company, formerly a wholly-owned subsidiary of 
Citigroup.
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    This exemption is subject to the following conditions set forth 
below in Section II.

Section II. General Conditions

    (a) The participation of Plans in the TRAK Program is approved by 
an Independent Plan Fiduciary. For purposes of this requirement, an 
employee, officer or director of the Adviser and/or its affiliates 
covered by an IRA not subject to Title I of the Act will be considered 
an Independent Plan Fiduciary with respect to such IRA.
    (b) The total fees paid to the Adviser and its affiliates will 
constitute no more than reasonable compensation.
    (c) No Plan pays a fee or commission by reason of the acquisition 
or redemption of shares in the Trust.
    (d) The terms of each purchase or redemption of Trust shares remain 
at least as favorable to an investing Plan as those obtainable in an 
arm's length transaction with an unrelated party.
    (e) The Adviser provides written documentation to an Independent 
Plan Fiduciary of its recommendations or evaluations based upon 
objective criteria.
    (f) Any recommendation or evaluation made by the Adviser to an 
Independent Plan Fiduciary is implemented only at the express direction 
of such Independent Plan Fiduciary, provided, however, that --
    (1) If such Independent Plan Fiduciary elects in writing (the 
Election), on a form designated by the Adviser from time to time for 
such purpose, to participate in the Automatic Reallocation Option under 
the TRAK Program, the affected Plan or participant account is 
automatically reallocated whenever the Adviser modifies the particular 
asset allocation recommendation which the Independent Plan Fiduciary 
has chosen. Such Election continues in effect until revoked or 
terminated by the Independent Plan Fiduciary in writing.
    (2) Except as set forth below in paragraph II(f)(3), at the time of 
a change in the Adviser's asset allocation recommendation, each account 
based upon the asset allocation model (the Allocation Model) affected 
by such change is adjusted on the business day of the release of the 
new Allocation Model by the Adviser, except to the extent that market 
conditions, and order purchase and redemption procedures, may delay 
such processing through a series of purchase and redemption 
transactions to shift assets among the affected Portfolios.
    (3) If the change in the Adviser's asset allocation recommendation 
exceeds an increase or decrease of more than 10 percent in the absolute 
percentage allocated to any one investment medium (e.g., a suggested 
increase in a 15 percent allocation to greater than 25 percent, or a 
decrease of such 15 percent allocation to less than 5 percent), the 
Adviser sends out a written notice (the Notice) to all Independent Plan 
Fiduciaries whose current investment allocation may be affected, 
describing the proposed reallocation and the date on which such 
allocation is to be

[[Page 78764]]

instituted (the Effective Date). If the Independent Plan Fiduciary 
notifies the Adviser, in writing, at any time within the period of 30 
calendar days prior to the proposed Effective Date that such fiduciary 
does not wish to follow such revised asset allocation recommendation, 
the Allocation Model remains at the current level, or at such other 
level as the Independent Plan Fiduciary then expressly designated, in 
writing. If the Independent Plan Fiduciary does not affirmative `opt 
out' of the new Adviser recommendation, in writing, prior to the 
proposed Effective Date, such new recommendation is automatically 
effected by a dollar-for-dollar liquidation and purchase of the 
required amounts in the respective account.
    (4) An Independent Plan Fiduciary will receive a trade confirmation 
of each reallocation transaction. In this regard, for all Plan 
investors other than Section 404(c) Plan accounts (i.e., 401(k) Plan 
accounts), CGMI or MSSB, as applicable, mails trade confirmations on 
the next business day after the reallocation trades are executed. In 
the case of Section 404(c) Plan participants, notification depends upon 
the notification provisions agreed to by the Plan recordkeeper.
    (g) The Adviser generally gives investment advice in writing to an 
Independent Plan Fiduciary with respect to all available Portfolios. 
However, in the case of a Plan providing for participant-directed 
investments (the Section 404(c) Plan), the Adviser provides investment 
advice that is limited to the Portfolios made available under the Plan.
    (h) Any sub-adviser (the Sub-Adviser) that acts for the Trust to 
exercise investment discretion over a Portfolio is independent of 
Morgan Stanley, Inc. (Morgan Stanley), CGMI, MSSB and their respective 
affiliates (collectively, the Affiliated Entities).
    (i) Immediately following the acquisition by a Portfolio of any 
securities that are issued by any Affiliated Entity, such as Citigroup 
or Morgan Stanley common stock (the Adviser Common Stock), the 
percentage of that Portfolio's net assets invested in such securities 
will not exceed one percent. However, this percentage limitation may be 
exceeded if--
    (1) The amount held by a Sub-Adviser in managing a Portfolio is 
held in order to replicate an established third-party index (the 
Index).
    (2) The Index represents the investment performance of a specific 
segment of the public market for equity securities in the United States 
and/or foreign countries. The organization creating the Index is:
    (i) Engaged in the business of providing financial information;
    (ii) A publisher of financial news information; or
    (iii) A public stock exchange or association of securities dealers.
    The Index is created and maintained by an organization independent 
of the Affiliated Entities and is a generally-accepted standardized 
Index of securities which is not specifically tailored for use by the 
Affiliated Entities.
    (3) The acquisition or disposition of Adviser Common Stock does not 
include any agreement, arrangement or understanding regarding the 
design or operation of the Portfolio acquiring such Adviser Common 
Stock, which is intended to benefit the Affiliated Entities or any 
party in which any of the Affiliated Entities may have an interest.
    (4) The Independent Plan Fiduciary authorizes the investment of a 
Plan's assets in an Index Fund which purchases and/or holds the Adviser 
Common Stock and the Sub-Adviser is responsible for voting any shares 
of Adviser Common Stock that are held by an Index Fund on any matter in 
which shareholders of Adviser Common Stock are required or permitted to 
vote.
    (j) The quarterly investment advisory fee that is paid by a Plan to 
the Adviser for investment advisory services rendered to such Plan is 
offset by any amount in excess of 20 basis points that MSSB retains 
from any Portfolio (with the exception of the Money Market Investments 
Portfolio and the Stable Value Investments Portfolio for which neither 
MSSB nor the Trust will retain any investment management fee) which 
contains investments attributable to the Plan investor.
    (k) With respect to its participation in the TRAK Program prior to 
purchasing Trust shares,
    (1) Each Plan receives the following written or oral disclosures 
from the Adviser:
    (A) A copy of the Prospectus for the Trust discussing the 
investment objectives of the Portfolios comprising the Trust, the 
policies employed to achieve these objectives, the corporate 
affiliation existing among the Adviser and its affiliates, and the 
compensation paid to such entities.\4\
---------------------------------------------------------------------------

    \4\ The fact that certain transactions and fee arrangements are 
the subject of an administrative exemption does not relieve the 
Independent Plan Fiduciary from the general fiduciary responsibility 
provisions of section 404 of the Act. In this regard, the Department 
expects the Independent Plan Fiduciary to consider carefully the 
totality of the fees and expenses to be paid by the Plan, including 
any fees paid directly to MSSB, CGMI or to other third parties.
---------------------------------------------------------------------------

    (B) Upon written or oral request to the Adviser, a Statement of 
Additional Information supplementing the Prospectus which describes the 
types of securities and other instruments in which the Portfolios may 
invest, the investment policies and strategies that the Portfolios may 
utilize and certain risks attendant to those investments, policies and 
strategies.
    (C) A copy of the investment advisory agreement between the Adviser 
and such Plan which relates to participation in the TRAK Program and 
describes the Automatic Reallocation Option.
    (D) Upon written request of the Adviser, a copy of the respective 
investment advisory agreement between MSSB and
    (E) the Sub-Advisers.
    (F) In the case of a Section 404(c) Plan, if required by the 
arrangement negotiated between the Adviser and the Plan, an explanation 
by an Adviser representative (the Financial Advisor) to eligible 
participants in such Plan, of the services offered under the TRAK 
Program and the operation and objectives of the Portfolios.
    (G) A copy of the proposed exemption and the final exemption 
pertaining to the exemptive relief described herein.
    (2) If accepted as an investor in the TRAK Program, an Independent 
Plan Fiduciary of an IRA or Keogh Plan is required to acknowledge, in 
writing, prior to purchasing Trust shares that such fiduciary has 
received copies of the documents described above in subparagraph (k)(1) 
of this section.
    (3) With respect to a Section 404(c) Plan, written acknowledgement 
of the receipt of such documents is provided by the Independent Plan 
Fiduciary (i.e., the Plan administrator, trustee or named fiduciary, as 
the recordholder of Trust shares). Such Independent Plan Fiduciary is 
required to represent in writing to the Adviser that such fiduciary is 
(a) independent of the Affiliated Entities and (b) knowledgeable with 
respect to the Plan in administrative matters and funding matters 
related thereto, and able to make an informed decision concerning 
participation in the TRAK Program.
    (4) With respect to a Plan that is covered under Title I of the 
Act, where investment decisions are made by a trustee, investment 
manager or a named fiduciary, such Independent Plan Fiduciary is 
required to acknowledge, in writing, receipt of such documents and 
represent to the Adviser that such fiduciary is (a) independent of the 
Affiliated Entities, (b) capable of making

[[Page 78765]]

an independent decision regarding the investment of Plan assets and (c) 
knowledgeable with respect to the Plan in administrative matters and 
funding matters related thereto, and able to make an informed decision 
concerning participation in the TRAK Program.
    (l) Subsequent to its participation in the TRAK Program, each Plan 
receives the following written or oral disclosures with respect to its 
ongoing participation in the TRAK Program:
    (1) The Trust's semi-annual and annual report including a financial 
statement for the Trust and investment management fees paid by each 
Portfolio.
    (2) A written quarterly monitoring statement containing an analysis 
and an evaluation of a Plan investor's account to ascertain whether the 
Plan's investment objectives have been met and recommending, if 
required, changes in Portfolio allocations.
    (3) If required by the arrangement negotiated between the Adviser 
and a Section 404(c) Plan, a quarterly, detailed investment performance 
monitoring report, in writing, provided to an Independent Plan 
Fiduciary of such Plan showing Plan level asset allocations, Plan cash 
flow analysis and annualized risk adjusted rates of return for Plan 
investments. In addition, if required by such arrangement, Financial 
Advisors meet periodically with Independent Plan Fiduciaries of Section 
404(c) Plans to discuss the report as well as with eligible 
participants to review their accounts' performance.
    (4) If required by the arrangement negotiated between the Adviser 
and a Section 404(c) Plan, a quarterly participant performance 
monitoring report provided to a Plan participant which accompanies the 
participant's benefit statement and describes the investment 
performance of the Portfolios, the investment performance of the 
participant's individual investment in the TRAK Program, and gives 
market commentary and toll-free numbers that enable the participant to 
obtain more information about the TRAK Program or to amend his or her 
investment allocations.
    (5) On a quarterly and annual basis, written disclosures to all 
Plans of (a) the percentage of each Portfolio's brokerage commissions 
that are paid to the Affiliated Entities and (b) the average brokerage 
commission per share paid by each Portfolio to the Affiliated Entities, 
as compared to the average brokerage commission per share paid by the 
Trust to brokers other than the Affiliated Entities, both expressed as 
cents per share.
    (m) The Adviser maintains or causes to be maintained, for a period 
of (6) six years, the records necessary to enable the persons described 
in paragraph (m)(1) of this section to determine whether the applicable 
conditions of this exemption have been met. Such records are readily 
available to assure accessibility by the persons identified in 
paragraph (1) of this section.
    (1) Notwithstanding any provisions of section 504(a)(2) and (b) of 
the Act, the records referred to in the first paragraph of this section 
are unconditionally available at their customary location for 
examination during normal business hours by--
    (i) Any duly authorized employee or representative of the 
Department or the Internal Revenue Service;
    (ii) Any fiduciary of a participating Plan or any duly authorized 
representative of such fiduciary;
    (iii) Any contributing employer to any participating Plan or any 
duly authorized employee representative of such employer; and
    (iv) Any participant or beneficiary of any participating Plan, or 
any duly authorized representative of such participant or beneficiary.
    (2) A prohibited transaction is not deemed to have occurred if, due 
to circumstances beyond the control of the Adviser, the records are 
lost or destroyed prior to the end of the six-year period, and no party 
in interest other than the Adviser is subject to the civil penalty that 
may be assessed under section 502(i) of the Act or to the taxes imposed 
by sections 4975(a) and (b) of the Code if the records are not 
maintained or are not available for examination as required by 
paragraph (1) of this section.
    (3) None of the persons described in subparagraphs (ii)-(iv) of 
section (m)(1) is authorized to examine the trade secrets of the 
Adviser or commercial or financial information which is privileged or 
confidential.
    (4) Should the Adviser refuse to disclose information on the basis 
that such information is exempt from disclosure, the Adviser 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.

Section III. Definitions

    For purposes of this exemption:
    (a) The term ``Adviser'' means CGMI or MSSB as investment adviser 
to Plans.
    (b) The term ``Affiliated Entities'' means Morgan Stanley, CGMI, 
MSSB and their respective affiliates.
    (c) The term ``CGMI'' means Citigroup Global Markets Inc. and any 
affiliate of Citigroup Global Markets Inc.
    (d) An ``affiliate'' of any of the Affiliated Entities includes:
    (1) Any person directly or indirectly through one or more 
intermediaries, controlling, controlled by, or under common control 
with the Affiliated Entity. (For purposes of this subparagraph, the 
term ``control'' means the power to exercise a controlling influence 
over the management or policies of a person other than an individual);
    (2) Any individual who is an officer (as defined in Section III(g) 
hereof), director or partner in the Affiliated Entity or a person 
described in subparagraph (d)(1);
    (3) Any corporation or partnership of which the Affiliated Entity, 
or an affiliate described in subparagraph (d)(1), is a 10 percent or 
more partner or owner; and
    (4) Any corporation or partnership of which any individual which is 
an officer or director of the Affiliated Entity is a 10 percent or more 
partner or owner.
    (e) An ``Independent Plan Fiduciary'' is a Plan fiduciary which is 
independent of the Affiliated Entities and is either:
    (1) A Plan administrator, sponsor, trustee or named fiduciary, as 
the recordholder of Trust shares under a Section 404(c) Plan;
    (2) A participant in a Keogh Plan;
    (3) An individual covered under (i) a self-directed IRA or (ii) a 
Section 403(b) Plan, which invests in Trust shares;
    (4) A trustee, investment manager or named fiduciary responsible 
for investment decisions in the case of a Title I Plan that does not 
permit individual direction as contemplated by Section 404(c) of the 
Act; or
    (5) A participant in a Plan, such as a Section 404(c) Plan, who is 
permitted under the terms of such Plan to direct, and who elects to 
direct, the investment of assets of his or her account in such Plan.
    (f) The term ``MSSB'' means Morgan Stanley Smith Barney Holdings 
LLC, together with its subsidiaries.
    (g) 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 
policymaking function for the entity.

Section IV. Effective date

    This exemption is effective as of May 31, 2009 with respect to the 
Covered Transactions, the General Conditions and the Definitions that 
are described in Sections I, II and III.

[[Page 78766]]

Written Comments

    The Department invited all interested persons to submit written 
comments and/or requests for a public hearing with respect to the 
notice of proposed exemption on or before August 25, 2010. During the 
comment period, the Department received 13 telephone calls and 2 
comment letters from participants or beneficiaries in Plans with 
investments in the TRAK Program, which concerned the commenters' 
difficulty in understanding the notice of proposed exemption or the 
effect of the exemption on the commenters' benefits. The Department 
also received one written comment from the Applicant, which concerned 
the correction of a publication error appearing in the operative 
language of Section II of the proposed exemption and the correction of 
a typographical error appearing in Representation 15 of the Summary of 
Facts and Representations (the Summary). The Department received no 
hearing requests during the comment period.
    With respect to the operative language, the Applicant notes that 
the first two paragraphs of Section II, General Conditions read:

    (a) The participation of Plans in the TRAK Program is
    (b) Approved by an Independent Plan Fiduciary. For purposes of 
this requirement, an employee, officer or director of the Adviser 
and/or its affiliates covered by an IRA not subject to Title I of 
the Act will be considered an Independent Plan Fiduciary with 
respect to such IRA.

Accordingly, the Applicant requests that parenthetical ``(b)'' be 
deleted and the sentence fragments reproduced above be combined into a 
single paragraph following the parenthetical ``(a)'', and that the 
ensuing paragraphs in Section II be re-lettered for consistency. The 
Department concurs with the Applicant's requested correction of this 
publication error and it has revised Section II of the final exemption.
    With respect to the Summary, the Applicant notes that, at the end 
of Representation 15, which describes revisions to the operative 
language of PTE 2009-12, the proposed exemption states that ``a new 
definition of MSSB is added in Section III(f) to mean Morgan Stanley 
Smith Barney Holdings LLC, together with its affiliates.'' However, the 
Applicant points out that the definition of MSSB in Section III(f) of 
the proposed exemption includes the term ``subsidiaries,'' rather than 
``affiliates.'' Accordingly, the Applicant requests that, at the end of 
Representation 15, the word ``affiliates'' be replaced with the word 
``subsidiaries,'' in order to be consistent with Section III(f) of the 
Definitions. The Department concurs and takes note of the foregoing 
revision to Representation 15 of the Summary.
    After giving full consideration to the entire record, including the 
written comments, the Department has decided to grant the exemption, as 
described above. The complete application file is made available for 
public inspection in the Public Documents Room of the Employee Benefits 
Security Administration, Room N-1513, U.S. Department of Labor, 200 
Constitution Avenue, NW., Washington, DC 20210.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption refer to 
the proposed exemption published in the Federal Register on June 11, 
2010 at 75 FR 33344.

FOR FURTHER INFORMATION CONTACT: Warren Blinder of the Department, 
telephone (202) 693-8553. (This is not a toll-free number.)

Retirement Plan for Employees of the Rehabilitation Institute of 
Chicago (the Plan), Located in Chicago, Illinois
[Prohibited Transaction Exemption 2010-34; Application No. D-11585]

Exemption

Section I: Transactions

    The restrictions of sections 406(a)(1)(B), 406(a)(1)(D), and 
406(b)(2) of the Act and the sanctions resulting from the application 
of section 4975 of the Code, by reason of section 4975(c)(1)(B) and 
4975(c)(1)(D) of the Code,\5\ shall not apply:
---------------------------------------------------------------------------

    \5\ 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) To a series of interest-free Advances in the aggregate amount 
of $701,117 (the Advances or individually, an Advance), made to Hewitt 
Associates, LLC (Hewitt), the Pension Benefit Guaranty Corporation 
(PBGC), the Internal Revenue Service (the IRS), and Deloitte and 
Touche, LLP (Deloitte),\6\ during the period from September 28, 2006, 
through June 2, 2009, by the Rehabilitation Institute of Chicago (RIC), 
for the purpose of paying ordinary operating expenses incurred on 
behalf of the Plan; and
---------------------------------------------------------------------------

    \6\ Hewitt, PBGC, IRS, and Deloitte are collectively referred 
to, herein, as the Service Providers.
---------------------------------------------------------------------------

    (2) To the reimbursement to RIC by the Plan of such Advances made 
during the period from September 28, 2006, through June 2, 2009, in an 
aggregate amount not to exceed $701,117, where each such reimbursement 
occurred at least sixty (60) days but no more than 365 days after the 
date of each such Advance; provided that the conditions as set forth in 
section II of this exemption were satisfied.

Section II: Conditions

    (1) During the period from September 28, 2006, through June 2, 
2009, when RIC made each of the Advances and during the period at least 
sixty (60) days but no more than 365 days after the date of each such 
Advance, when the Plan reimbursed each such Advance, all of the 
requirements of Prohibited Transaction Exemption 80-26 (PTE 80-26), as 
amended, effective December 15, 2004,\7\ were satisfied, except for the 
requirement in Section IV(f)(1) of PTE 80-26 that loans made on or 
after April 7, 2006, with a term of sixty (60) days or longer be made 
pursuant to a written loan agreement that contains all of the material 
terms of such loan;
---------------------------------------------------------------------------

    \7\ 71 FR 17917, April 7, 2006.
---------------------------------------------------------------------------

    (2) With regard to any reimbursement covered by this exemption, an 
independent, qualified auditor certifies that such reimbursement 
matches each of the Advances, during the period from September 28, 
2006, through June 2, 2009, made by RIC to the Service Providers on 
behalf of the Plan; and such reimbursements were made by the Plan to 
RIC during the period at least sixty (60) days but no more than 365 
days after the date of each such Advance;
    (3) The Advances made by RIC to the Service Providers, during the 
period from September 28, 2006, through June 2, 2009, were for the 
payment of ordinary operating expenses of the Plan which were properly 
incurred on behalf of the Plan;
    (4) Within ninety (90) days of the publication in the Federal 
Register of the final exemption for the transactions which are the 
subject of this exemption, RIC must refund to the Plan an amount equal 
to $74,555 (the Refund Amount), plus earning and interest. Such Refund 
Amount represents the total for certain reimbursements to RIC by the 
Plan in connection with payments by RIC to Monticello Associates Inc. 
(Monticello), Deloitte, the IRS, and the Department in the amounts, 
respectively of $55,500, $18,530, $375, and $150. Furthermore, RIC must 
refund to the Plan an additional amount attributable to lost earnings 
experienced by the Plan on the Refund Amount, and interest on such lost 
earnings, for the period from April 7, 2006, to the date upon which RIC 
has returned to the Plan the entire Refund Amount, the lost earnings on 
such Refund Amount, plus interest on such

[[Page 78767]]

lost earnings. For the purpose of calculating the lost earnings on the 
Refund Amount due to the Plan, plus interest, on such lost earnings, 
RIC must use the Online Calculator for the Voluntary Fiduciary 
Correction Program \8\ that appears on the Web site of the Employee 
Benefits Security Administration; and
---------------------------------------------------------------------------

    \8\ 70 FR 17516, April 6, 2005.
---------------------------------------------------------------------------

    (5) Within ninety (90) days of the publication in the Federal 
Register of the final exemption for the transactions which are the 
subject of this exemption, RIC must file a Form 5330 with the IRS and 
pay to the IRS all applicable excise taxes, and any interest on such 
excise taxes deemed to be due and owing with respect to the Refund 
Amount.
    Effective Date: This exemption is effective, for each Advance to 
the Service Providers made by RIC from September 28, 2006, through June 
2, 2009, and for reimbursements to RIC by the Plan of such Advances 
covered by this exemption.

Written Comments

    In the Notice of Proposed Exemption (the Notice), the Department of 
Labor (the Department) invited all interested persons to submit written 
comments and requests for a hearing on the proposed exemption within 
forty-four (44) days of the date of the publication of the Notice in 
the Federal Register on September 16, 2010. All comments and requests 
for a hearing were due by October 30, 2010.
    During the comment period, the Department received three letters 
from the same commentator requesting a hearing. In addition, the 
Department received comment letters, and e-mails from seven (7) 
commentators. The concerns expressed by the commentators are summarized 
in the paragraph below.
    Generally, the comments from commentators have been classified into 
the following categories: (1) Comments from individuals who 
misunderstood the subject transactions or requested an explanation of 
the subject transactions or requested confirmation that the subject 
transactions do not affect benefits under the Plan; and (2) a request 
for clarification from a commentator; and (3) a request for hearing 
from a commentator.

Comments Requesting Explanation

    With respect to the first category of comments, it is represented 
that the applicant mailed to all interested persons copies of (1) the 
Notice, and (2) the supplemental statement required pursuant to the 
Department's Regulation section 29 CFR Sec.  2570.43 which explained 
the facts and circumstances surrounding the subject transactions in a 
summary form. Based on the foregoing, the Department maintains that the 
applicant has provided a clear explanation and adequate notice 
regarding the subject transactions and should not be required to 
respond further to comment letters, and e-mails from commentators 
requesting further explanation.

Clarification From an Individual

    With respect to the second category of comments, during the comment 
period, the Department did receive an e-mail dated October 6, 2010, 
from Wayne M. Lerner, DPH, FACHE, the President and CEO of Holy Cross 
Hospital in Chicago, Illinois. Mr. Lerner requests a clarification of 
the language, as set forth in the Summary of Facts and Representations 
on page 56572, column 2, lines 47-49 in the Notice. In this regard, the 
second and third sentences of representation no. 2 in the Notice read, 
as follows:
    As of March 13, 2006, and at the start of the relevant period for 
which relief is requested in this proposed exemption, the members of 
the Committee, were: (a) Wayne M. Lerner, President and Chief Executive 
Officer of RIC; (b) Edward B. Case (Mr. Case), Executive Vice President 
and Chief Financial Officer of RIC; (c) Susan H. Cerletty, Executive 
Vice President, Clinical, of RIC and (d) Nancy Paridy, Esq. (Ms. 
Paridy), Senior Vice President of RIC and General Counsel to RIC. The 
following individuals have been members of the Committee, since 
December 1, 2007: (a) Joanne C. Smith, M.D., President and Chief 
Executive Officer of RIC, (b) Mr. Case, and (c) Ms. Paridy.
    In Mr. Lerner's view it can be inferred from these two sentences 
that appeared in the Notice that the committee membership, as of March 
13, 2006, was in place until a new committee was formed on December 1, 
2007. Mr. Lerner points out that in fact, he resigned as President and 
CEO of the RIC on June 7, 2006, and that Ms. Cerletty left RIC in 
August of that same year. The Department concurs with Mr. Lerner's 
requested clarification.

Requests for Hearing

    With regard to the third category of comments, the Department 
received three (3) letters from the same commentator requesting a 
hearing. In none of the comment letters did the commentator give a 
reason why a hearing should be held. As no material issues relating to 
the subject transaction were raised by the commentator during the 
comment period which would require the convening of a hearing, the 
Department has determined not to delay consideration of the final 
exemption by holding a hearing on application D-11585.
    After giving full consideration to the entire record, including the 
written comments from the commentators, the Department has decided to 
grant the exemption, as described above. The complete application file, 
including the written comments from the commentators, is made available 
for public inspection in the Public Documents Room of the Employee 
Benefits Security Administration, Room N-1513, U.S. Department of 
Labor, 200 Constitution Avenue, NW., Washington, DC 20210.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption refer to 
the Notice published on September 16, 2010, at 75 FR 56568.

FOR FURTHER INFORMATION CONTACT: Ms. Angelena C. Le Blanc of the 
Department, telephone (202) 693-8540. (This is not a toll-free number.)

General Information

    The attention of interested persons is directed to the following:
    (1) The fact that a transaction is the subject of an exemption 
under section 408(a) of the Act and/or section 4975(c)(2) of the Code 
does not relieve a fiduciary or other party in interest or disqualified 
person from certain other provisions to which the exemption does not 
apply and the general fiduciary responsibility provisions of section 
404 of the Act, which among other things require a fiduciary to 
discharge his duties respecting the plan solely in the interest of the 
participants and beneficiaries of the plan and in a prudent fashion in 
accordance with section 404(a)(1)(B) of the Act; nor does it affect the 
requirement of section 401(a) of the Code that the plan must operate 
for the exclusive benefit of the employees of the employer maintaining 
the plan and their beneficiaries;
    (2) This exemption is supplemental to and not in derogation of, any 
other provisions of the Act and/or the Code, including statutory or 
administrative exemptions and transactional rules. Furthermore, the 
fact that a transaction is subject to an administrative or statutory 
exemption is not dispositive of whether the transaction is in fact a 
prohibited transaction; and
    (3) The availability of this exemption is subject to the express 
condition that the material facts and representations contained in the 
application accurately describes all material terms of the

[[Page 78768]]

transaction which is the subject of the exemption.

    Signed at Washington, DC, this 13th day of December 2010.
Ivan Strasfeld,
Director of Exemption Determinations, Employee Benefits Security 
Administration, U.S. Department of Labor.
[FR Doc. 2010-31571 Filed 12-15-10; 8:45 am]
BILLING CODE 4510-29-P