EBSA
Notices
Grant of Individual Exemption Involving BlackRock, Inc. and Its Investment Advisory, Investment Management and Broker-Dealer Affiliates and Their Successors (Applicants) Located in New York, NY
[ 8/15/2011]
[ PDF]
Federal Register, Volume 76 Issue 157 (Monday, August 15, 2011)
[Federal Register Volume 76, Number 157 (Monday, August 15, 2011)]
[Notices]
[Pages 50632-50659]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-20344]
[[Page 50631]]
Vol. 76
Monday,
No. 157
August 15, 2011
Part III
Labor Department
-----------------------------------------------------------------------
Employee Benefits Security Administration
Grant of Individual Exemption Involving BlackRock, Inc. and its
Investment Advisory, Investment Management and Broker-Dealer Affiliates
and their Successors (Applicants); Notice
Federal Register / Vol. 76 , No. 157 / Monday, August 15, 2011 /
Notices
[[Page 50632]]
-----------------------------------------------------------------------
DEPARTMENT OF LABOR
Employee Benefits Security Administration
[Prohibited Transaction Exemption 2011-17; Exemption Application No. D-
11588]
Grant of Individual Exemption Involving BlackRock, Inc. and Its
Investment Advisory, Investment Management and Broker-Dealer Affiliates
and Their Successors (Applicants) Located in New York, NY
AGENCY: Employee Benefits Security Administration, U.S. Department of
Labor.
ACTION: Grant of individual exemption.
-----------------------------------------------------------------------
SUMMARY: This document contains an individual exemption from certain
prohibited transaction restrictions of the Employee Retirement Income
Security Act of 1974, as amended (ERISA), the Federal Employees'
Retirement System Act of 1986, as amended (FERSA), and the Internal
Revenue Code of 1986, as amended (the Code). The transactions involve
BlackRock, Inc. and its investment advisory, investment management and
broker-dealer affiliates and their successors. The individual exemption
affects plans for which BlackRock, Inc. and its investment advisory,
investment management and broker-dealer affiliates and their successors
serve as fiduciaries, and the participants and beneficiaries of such
plans.
DATES: Effective Date: This exemption is effective as of December 1,
2009.
SUPPLEMENTARY INFORMATION: On March 18, 2011, the Department published
a notice of proposed individual exemption from the restrictions of
ERISA sections 406(a)(1) and 406(b), FERSA sections 8477(c)(1) and
(c)(2) and the sanctions resulting from the application of Code section
4975, by reason of Code section 4975(c)(1) (the Proposed Exemption).\1\
The Proposed Exemption was requested by BlackRock, Inc. and its
investment advisory, investment management and broker-dealer affiliates
and their successors pursuant to ERISA section 408(a), Code section
4975(c)(2) and FERSA section 8477(c)(3), and in accordance with the
procedures set forth in 29 CFR part 2570, subpart B (55 FR 32836,
32847, August 10, 1990). Effective December 31, 1978, section 102 of
the Reorganization Plan No. 4 of 1978, (43 FR 47713, October 17, 1978)
transferred the authority of the Secretary of the Treasury to issue
exemptions of the type requested to the Secretary of Labor.
Accordingly, this final individual exemption is being issued solely by
the Department.
---------------------------------------------------------------------------
\1\ 76 FR 15058 (March 18, 2011).
---------------------------------------------------------------------------
Background \2\
---------------------------------------------------------------------------
\2\ Capitalized terms used but not defined in the Background
Section have the meaning set forth in Section VI of the exemption.
---------------------------------------------------------------------------
BlackRock, Inc. (BlackRock), based in New York, NY, is the largest
publicly-traded investment management firm in the United States.
BlackRock, through its investment advisory and investment management
subsidiaries, currently manages assets for institutional and individual
investors worldwide through a variety of equity, fixed income, cash
management and alternative investment products. As of September 30,
2010, BlackRock, through its advisor subsidiaries, had approximately
$3.446 trillion in assets under management, including assets managed by
BlackRock Institutional Trust Company, N.A. (BTC) (formerly known as
Barclays Global Investors, N.A. (BGI)) and its affiliates.
BTC is a national banking association headquartered in San
Francisco, California. Prior to its acquisition by BlackRock on
December 1, 2009 (the Acquisition), BTC (then BGI) was the largest
asset manager in the U.S. A significant amount of BTC's assets under
management in the U.S. consist of assets of employee benefit plans
subject to ERISA, FERSA and/or the Code. BTC is a market leader in
index and model-driven investment products. Until its sale to
BlackRock, BGI was an indirect subsidiary of Barclays PLC. BTC, as of
the date of the Acquisition, is now a wholly-owned subsidiary of
BlackRock.
Immediately following the Acquisition, (1) Barclays PLC (Barclays),
(2) Bank of America Corporation (BOA), and (3) The PNC Financial
Services Group, Inc. (PNC) (each of these, a Minority Passive
Shareholder, or MPS) controlled the following interests in BlackRock:
(a) BOA. BOA owned approximately 3.7% of BlackRock voting common
stock and approximately 34.2% of BlackRock equity by value.
(b) PNC. PNC owned approximately 35.2% of BlackRock voting common
stock and approximately 24.5% of BlackRock equity by value.
(c) Barclays. Barclays owned approximately 4.8% of BlackRock voting
common stock and approximately 19.8% of BlackRock equity by value.
Post-Acquisition, a secondary offering of BlackRock common stock
was completed on November 15, 2010 (the Secondary Offering).
BlackRock's ownership structure following the Secondary Offering was as
follows: (a) BOA controlled 0% of BlackRock's voting common stock and
approximately 7.1% of BlackRock's equity by value; (b) PNC controlled
approximately 25.3% of BlackRock's voting common stock and
approximately 20.3% of BlackRock's equity by value; and (c) Barclays
controlled approximately 2.3% of BlackRock's voting common stock and
approximately 19.6% of BlackRock's equity by value.
All BlackRock stock beneficially owned by each MPS (other than
stock held in certain fiduciary capacities and customer or market
making accounts) is subject to a stockholders agreement entered into by
and between that MPS and BlackRock (collectively, the Stockholders
Agreements). Pursuant to each Stockholders Agreement, each MPS has or
had the right to identify to BlackRock two (2) prospective directors,
and, if such nominees are reasonably acceptable to the BlackRock Board
of Directors (the Board), BlackRock and each respective MPS agrees to
use best efforts to cause the election of such nominees to the Board.
As a result of the Secondary Offering, BOA fell below a ten percent
(10%) equity interest, and, assuming that it remains below this level,
it lost the right to identify to BlackRock one representative director
on or about February 13, 2011.
At least ten (10) of the current eighteen (18) BlackRock directors
must be ``independent'' (within the meaning of New York Stock Exchange
rules) of the MPSs and BlackRock management and each MPS must vote its
BlackRock voting common stock in accordance with the recommendations of
the Board. In addition, the Audit Committee, the Management Development
and Compensation Committee, and the Nominating and Governance Committee
of the Board consist entirely of independent directors, and a majority
of each other Board committee (if any), with the exception of the
Executive Committee,\3\ must consist of independent directors. As of
the date hereof, none of the directors representing an MPS serve on any
Board committee, except that one director representing PNC serves on
the Executive Committee. Further, no MPS representative directors sit
on any of the Board of Directors of BlackRock Managers. While each MPS
monitors its investment in BlackRock through its
[[Page 50633]]
Board representatives and each MPS has certain limited governance
rights, no MPS has or will have any involvement in the day-to-day
management of BlackRock, any BlackRock Manager or any other BlackRock
Entity. In addition, the respective Stockholder Agreements impose
standstill agreements, transfer restrictions and arm's length
transaction restrictions on the ability of an MPS to control BlackRock
or any BlackRock Manager.
---------------------------------------------------------------------------
\3\ While the Executive Committee may exercise the powers of the
Board during intervals between Board meetings or at times when the
Board is unable to convene, the Executive Committee has not met for
over five (5) years.
---------------------------------------------------------------------------
A BlackRock Manager is a fiduciary with investment discretion with
respect to the applicable Client Plan.\4\ As a result, the BlackRock
Manager decides whether to enter into a Covered Transaction \5\ with or
involving an MPS. The ownership interest of the MPS in BlackRock could
affect the BlackRock Manager's best judgment as a fiduciary, raising
issues under ERISA Section 406(b). Therefore, the Applicants sought
relief from the prohibitions of ERISA section 406(b).
---------------------------------------------------------------------------
\4\ ``Client Plan'' means any plan subject to section 406 of the
Act, Code section 4975 or FERSA section 8477(c) for which a
BlackRock Manager is a fiduciary as described in section 3(21) of
ERISA, including, but not limited to, any Pooled Fund, MPS Plan,
Index Account or Fund, Model-Driven Account or Fund, Other Account
or Fund, or In-House Plan, except where specified to the contrary.
\5\ ``Covered Transaction'' means each transaction set forth in
Section III of the exemption by a BlackRock Manager for a Client
Plan with or involving, directly or indirectly, an MPS and/or a
BlackRock Entity.
---------------------------------------------------------------------------
Further, if BlackRock and one or more MPS are deemed affiliates,
each MPS and its affiliates will very likely be parties in interest
within the meaning of ERISA section 3(14) with respect to many Client
Plans. Therefore, the Applicants also sought relief from the
prohibitions of ERISA section 406(a).
Such ERISA section 406(a) and section 406(b) relief was sought
solely with respect to certain enumerated types of Covered Transactions
entered into after the Acquisition and, in certain cases, before the
Acquisition and that have continued after the Acquisition.
The structure of the requested relief is founded upon compliance
with five sets of general conditions. The five sets of general
conditions are: (a) Modified conditions derived from Prohibited
Transaction Exemption 84-14, as amended (sometimes referred to as the
QPAM Exemption) \6\; (b) restrictions on the compensation of BlackRock
Managers and their employees; (c) the establishment and implementation
of certain policies and procedures; (d) the appointment by BlackRock of
an Exemption Compliance Officer; and (e) the retention by BlackRock of
an Independent Monitor. The purpose of these general conditions is,
when coupled with the restrictions of the Stockholders Agreements and
the BlackRock ownership structure, to foster independence of action by
BlackRock notwithstanding the equity interests in BlackRock held by the
MPSs. This unique overarching structure includes a comprehensive
compliance function and an independent monitor, each of which work
together for the benefit of Client Plans and their participants and
beneficiaries by allowing Covered Transactions with or involving an MPS
only if the Covered Transaction is, as best as can be determined, as
favorable to the Client Plans as arm's length transactions with third
parties.
---------------------------------------------------------------------------
\6\ 49 FR 9494 (Mar. 13, 1984), as amended, 70 FR 49305 (Aug.
23, 2005), and as amended, 75 FR 38837 (July 6, 2010).
---------------------------------------------------------------------------
In addition to the general conditions, each Covered Transaction has
its own set of specific conditions deemed suitable for it in light of
the nature of the transaction. Many of the conditions for individual
Covered Transactions are derived from statutory exemptions,
administrative class exemptions or administrative individual exemptions
frequently relied upon by fiduciaries and parties in interest
(sometimes affiliated and sometimes not) to exempt similar
transactions. The general and transaction-specific conditions for
relief attempt to strike a balance that takes into account both the
MPSs' unique equity interests in BlackRock and the ability of BlackRock
acting on behalf of Client Plans to engage in arm's length Covered
Transactions with or involving institutions as significant in their
markets as are the MPSs.
Compliance with the exemption requires that all Violations must be
completely corrected. No non-exempt prohibited transaction will be
deemed to occur, however, if the Violation is completely corrected
(within the meaning of the exemption) no later than fourteen (14)
business days following the date on which the Exemption Compliance
Officer submits the quarterly report to the Independent Monitor for the
quarter in which the Covered Transaction first became a non-exempt
prohibited transaction.
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 May 2, 2011. During the
comment period, the Department received one (1) Comment letter on the
proposed exemption. The sole comment letter was filed by BlackRock. The
Department received no hearing requests during the comment period. The
following is a discussion of BlackRock's comments and the Department's
responses.
Section III.D. of the Proposed Exemption. Section III.D. of the
Proposed Exemption applies to certain transactions in the secondary
market by BlackRock Managers of Fixed Income Obligations, including
Fixed Income Obligations issued by or traded with an MPS. Specifically,
BlackRock comments on the language in Section III.D.2(a) of the
Proposed Exemption that states that ``[t]he purchase of the Fixed
Income Obligation issued by an MPS is not made from the issuing
MPS[.]'' BlackRock believes that so long as the purchase of an MPS
Fixed Income Obligation is the result of the Three Quote Process, as
required by the Proposed Exemption, there is no reason why the purchase
from the issuing MPS should not be permitted.
BlackRock points out that, for ERISA purposes, the purchase of a
Fixed Income Obligation issued by an MPS represents two separate
transactions: (1) The purchase of a debt security and (2) an extension
of credit, an ongoing relationship with an MPS, which could present the
potential for an ERISA conflict of interest. The Proposed Exemption
requires that all purchases (or sales) in the secondary market of Fixed
Income Obligations issued by or traded with an MPS be conducted through
the Three Quote Process in order to ensure that the purchase is
executed on the best available economic terms. BlackRock believes that
whether or not an MPS Fixed Income Obligation is purchased from the
issuing MPS or some other dealer is irrelevant, and the potential for
later conflict is unrelated to a purchase pursuant to the Three Quote
Process. BlackRock further notes that other safeguards contained in the
proposed exemption, particularly the existence of and involvement of
the Exemption Compliance Officer and the Independent Monitor, serve to
adequately mitigate the risk that an unaddressed conflict will arise
during the holding of an MPS Fixed Income Obligation, whether acquired
from the issuing MPS or another dealer. In order to address this issue,
BlackRock requests that Section III.D.2(a) of the Proposed Exemption be
deleted in its entirety.
The Department agrees with the comment, and it has deleted Section
III.D.2(a) from the exemption's operative language.
Section III.F. of the Proposed Exemption. Section III.F. of the
Proposed Exemption applies to the purchase in an underwriting and
holding by BlackRock Managers of Asset-Backed Securities, when an MPS
[[Page 50634]]
is an underwriter, in the capacity as either a manager or a member of
the selling syndicate, trustee, or, in the case of Asset-Backed
Securities which are CMBS, servicer. BlackRock states that the language
of Section III.F. of the Proposed Exemption would not provide relief in
circumstances where an MPS was acting as both an underwriter and a
servicer of a CMBS Asset-Backed Security. BlackRock believes such a
result was not intended by the Department.\7\ BlackRock comments that
both the Affiliated Underwriting provisions of the Proposed Exemption
(Section IV.A.) and the Affiliated Servicing provisions of the Proposed
Exemption (Section IV.B.) should apply to the transaction.
Specifically, in order to address this issue, BlackRock believes that:
(1) In the first paragraph of Section III.F. of the Proposed Exemption,
clause (iii) should be deleted in its entirety and the following should
be substituted ``(iii) solely in the case of Asset-Backed Securities
which are CMBS, serves as servicer of a trust that issued such CMBS,
provided that:'', and (2) in Section III.F.(1), ``and'' before ``(b)''
should be replaced with a comma, and the following should be inserted
before the semi-colon: ``and (c) if an MPS is an underwriter and an MPS
is a servicer as described in clause (b), the conditions of both
Section IV.A., as modified by Section III.F.1(a), and Section IV.B.
must be satisfied.''
---------------------------------------------------------------------------
\7\ See Preamble to the Proposed Exemption (76 FR at 15067).
---------------------------------------------------------------------------
The Department agrees with the comment, and it has modified Section
III.F. of the exemption's operative language accordingly.
Section III.M. of the Proposed Exemption. Section III.M.1. of the
Proposed Exemption applies to securities lending transactions involving
Client Plan assets by BlackRock Managers to an MPS which is a U.S.
Broker-Dealer, a U.S. Bank, a Foreign Broker-Dealer or a Foreign Bank.
Conditions applicable to these transactions are set forth in Sections
III.M.2. and III.M.3. of the Proposed Exemption. BlackRock points out
that Sections III.M.2(d), III.M.3(b) and III.M.3(c) of the Proposed
Exemption provide an alternative means of compliance with certain
collateral requirements if the lending agent is a U.S. Broker-Dealer or
U.S. Bank and agrees to provide an indemnity. BlackRock does not
believe, however, that there are any significant policy issues
presented with respect to these conditions in circumstances where a
BlackRock Manager is acting as a lending agent through one of its U.S.
registered investment advisor affiliates and not through a U.S. Bank or
U.S. Broker-Dealer. BlackRock argues that, as the largest publicly-
traded investment management firm in the world, there should be no
concern that an indemnity delivered by a BlackRock Manager would not be
honored.\8\
---------------------------------------------------------------------------
\8\ BlackRock also points out that certain cross-references were
inadvertently omitted in Section III.M.3. of the Proposed Exemption.
The Department agrees, and the language has been modified to apply
the proper cross references to Sections VI.KK. and VI.JJ. of the
exemption.
---------------------------------------------------------------------------
In order to address these issues, BlackRock believes that Section
III.M. of the Proposed Exemption should be revised to include the
phrase ``, an investment advisor registered under the Investment
Advisors Act of 1940, as amended'' after the words ``U.S. Bank'' in the
first sentence of Sections III.M.2(d), III.M.3(b)(ii) and III.M.3(c) of
the Proposed Exemption.
The Department agrees that under the unique factual scenario
presented by this exemption, adding U.S. registered investment advisors
does not present any significant policy concerns, provided that the
registered investment advisor is required to meet additional
requirements regarding assets under management and shareholders' or
partners' equity. Such additional requirements will ensure that the
applicable BlackRock Manager can meet the terms of an indemnity
agreement. As a result, the Department has modified Section III.M. of
the exemption's operative language to include the term ``Registered
Investment Advisor'' after the words ``U.S. Bank'' in the first
sentence of Sections III.M.2(d), III.M.3(b)(ii) and III.M.3(c) of the
Proposed Exemption. Further, the Department has inserted a definition
in Section VI.GGG. of the exemption that reads as follows:
``Registered Investment Advisor'' means an investment advisor
registered under the Investment Advisors Act of 1940, as amended,
that has total client assets under its management or control in
excess of $5 billion as of the last day of its most recent fiscal
year and shareholders' or partners' equity in excess of $1 million,
as shown in the most recent balance sheet prepared within the two
years immediately preceding a Covered Transaction, in accordance
with generally accepted accounting principles.''
Section III.P. of the Proposed Exemption. Section III.P. of the
Proposed Exemption applies to agency execution of equity and fixed
income securities trades and related clearing as described in
Prohibited Transaction Exemption 86-128, as amended \9\ (PTE 86-128),
including agency cross trades, where the broker is an MPS. Section
III.P.2. of the Proposed Exemption requires that Covered Transactions
described in Section III.P. of the Proposed Exemption must satisfy the
conditions of Section III(e), Section III(f), Section III(g)(2) and
Section III(h) of PTE 86-128, which Sections require, among other
things, the delivery of certain information to a Client Plan's
``authorizing fiduciary.'' BlackRock is concerned that this provision
is inconsistent with Section III.P.3. of the Proposed Exemption which
requires that the ECO Function receive the information required to be
provided to the ``authorizing fiduciary'' under those sections of PTE
86-128. Applicants believe that it was the Department's intention that
the conditions of Section III of PTE 86-128 that relate to actions
required of, or information to be provided to, the Client Plan's
authorizing fiduciary, may be satisfied if required of, or provided to,
the ECO Function, including the authority to terminate the MPS broker-
dealer.\10\
---------------------------------------------------------------------------
\9\ 51 FR 41686 (Nov. 18, 1986), as amended, 67 FR 64137 (Oct.
17, 2002).
\10\ The Applicants believe such intent is set forth in the
Summary of Facts and Representations published with the Proposed
Exemption, 76 FR at 15073.
---------------------------------------------------------------------------
In order to address this ambiguity, BlackRock proposes that Section
III.P.3. of the Proposed Exemption be deleted and Section III.P.2. of
the Proposed Exemption be amended to read as follows:
``2. The conditions of PTE 86-128 set forth in the following
sections of that exemption must be complied with: Section III(e);
Section III(f); Section III(g)(2); and Section III(h); provided,
however, that for purposes of Section III(e), Section III(f) and
Section III(g)(2) of PTE 86-128, the ECO Function is the
``authorizing fiduciary'' referred to therein; and the ECO has the
authority to terminate the use of the MPS as broker-dealer without
penalty to Client Plans at any time; and provided further that the
first sentence of Section III(h) of PTE 86-128 is amended for
purposes of this Section III.P.2. to provide as follows: * * *''
The Department agrees that its intent was to permit the ECO
Function to satisfy certain provisions that otherwise might be
applicable to a Client Plan's ``authorizing fiduciary'' under PTE 86-
128. While the Department does not believe that the language of the
Proposed Exemption is unclear, in order to ensure clarity, it has
modified Section III.P. of the exemption's operative language as
requested by BlackRock.
Section III.U. of the Proposed Exemption. Section III.U. of the
Proposed Exemption applies to purchases, sales and holdings by
BlackRock Managers for Client Plans of commercial paper issued by ABCP
[[Page 50635]]
Conduits, when an MPS has one or more roles. BlackRock points out that
Section III.U. of the Proposed Exemption does not specifically apply to
circumstances under which commercial paper issued by an ABCP Conduit in
which an MPS is a placement agent and/or has one or more continuing
roles is purchased from or sold to an MPS by a BlackRock Manager.
BlackRock believes that this omission was unintentional and is
inconsistent with the intent and subsequent provisions of Section
III.U. of the Proposed Exemption. In order to address this issue,
BlackRock requests that the first paragraph of Section III.U. of the
Proposed Exemption should be revised to read:
``Relief under Section I of this exemption is available for the
purchase or sale, including purchases from or sales to an MPS, and
the holding by BlackRock Managers acting on behalf of Client Plans
of commercial paper issued by an ABCP Conduit with respect to which
an MPS acts as seller, placement agent, and/or in some continuing
capacity such as program administrator, provider of liquidity or
provider of credit support, provided that: * * *''
Further, Section III.U.4. of the Proposed Exemption requires that
purchases and sales of ABCP Conduit commercial paper must be conducted
pursuant to the Three Quote Process even in situations where such
purchase or sale is with a third party in the secondary market and the
MPS' sole involvement relates to its performance in a continuing role
with respect such ABCP Conduit. BlackRock believes that if the sole
involvement of an MPS is acting in a continuing role, then the Three
Quote Process should not be required for purchases from or sales to
third parties because there will be no additional compensation payable
to and/or other benefits conferrable on such MPS in the secondary
market by reason of such purchase or sale whether or not the Three
Quote Process is followed. In order to address this issue, BlackRock
believes that Section III.U.4. of the Proposed Exemption should be
revised to delete the words ``and/or an MPS performs a continuing role
with respect to the Securities.''
The Department agrees with the comments, and it has modified
Section III.U. of the exemption's operative language accordingly.
Structured Securities, Including Guaranteed Governmental Mortgage
Pool Certificates. BlackRock has determined that there is a common type
of transaction which is superficially similar to the ``guaranteed
governmental mortgage pool certificate'' TBA transactions covered by
Section III.N. of the Proposed Exemption, but which in substance is
more similar to a straightforward secondary market purchase of a
``guaranteed governmental mortgage pool certificate'' as defined in the
Department's regulations at 29 CFR 2510.3-101(i). An example, BlackRock
states, of such a transaction would be a ``specified pool'' trade,
wherein a BlackRock Manager identifies an existing specific mortgage
pool listed on the FHLMC Web site, and asks a dealer (or dealers) for a
quote on the delivery of a FHLMC pass-through certificate based on such
specified pool in a few days time. BlackRock believes that this sort of
purchase from an MPS was intended to be covered by the Proposed
Exemption, subject to the credit quality determination set forth in
Section III.N.2 of the Proposed Exemption and the Three Quote Process.
Accordingly, BlackRock requests that the definition of ``Fixed Income
Obligation'' be amended to explicitly include Securities which are
guaranteed governmental mortgage pool certificates.
BlackRock additionally believes purchases of Fixed Income
Securities, including guaranteed governmental mortgage pool
certificates, should be explicitly permitted where an MPS has either an
ongoing function or can potentially incur liability. It notes that,
pursuant to 29 CFR 2510.3-101(i)(1), when a plan invests in a
guaranteed governmental mortgage pool, its assets include its
investment in the certificate, but do not, solely by reason of such
investment, include any of the underlying mortgages. However, private
sector entities, such as an MPS, may perform services with respect to
the underlying mortgages.\11\ BlackRock believes investments in
guaranteed governmental pool certificates are analogous to investments
in high quality asset-backed debt Securities.
---------------------------------------------------------------------------
\11\ See, e.g., Advisory Opinion 99-05A, regarding the Federal
Agricultural Mortgage Corporation.
---------------------------------------------------------------------------
BlackRock observes that Sections III.B., III.C. and III.D. of the
Proposed Exemption would permit BlackRock Managers to acquire Fixed
Income Obligations issued by an MPS, subject to applicable conditions.
On such grounds, BlackRock believes that BlackRock Managers should,
therefore, be able to purchase Fixed Income Obligations, whether they
are debt under 29 CFR 2510.3-101, or they are guaranteed governmental
mortgage pool certificates, if an MPS performs an ongoing function with
respect to such Fixed Income Obligations, such as trustee or servicer
of collateral of a private sector collateralized structured obligation
constituting debt under the plan asset regulation, or such as a trustee
or mortgage servicer under a FNMA certificate.
The conditions of Sections III.D. and III.E. of the Proposed
Exemption reflect the ability of a BlackRock Manager to purchase and
hold third party Fixed Income Obligations under which an MPS has an
ongoing function ``such as debt trustee [or] servicer of collateral for
asset-backed debt. * * *'' BlackRock notes that the heading for Section
III.E. mentions only one such role, that of ``[d]ebt [t]rustee'', and
the heading of Section III.D. does not mention any continuing roles.
BlackRock believes that the exemption should clearly reflect the
ability of BlackRock Managers to acquire and hold Fixed Income
Obligations despite an MPS or MPSs performing one or more of a
multiplicity of possible roles with respect to such Securities.
BlackRock argues that, in the primary markets, the affiliated
underwriting restrictions minimize the chance that a purchase may be
intended to benefit an MPS.
Accordingly, BlackRock believes that the following changes should
be made to the exemption:
1. Section VI.HH. should be amended to read as follows: ``Fixed
Income Obligations'' means:
(1) Fixed income obligations including structured debt or other
instruments characterized as debt pursuant to 29 CFR 2510.3-101,
including, but not limited to, debt convertible into equity,
certificates of deposit and loans (other than loans with respect to
which an MPS is the entity which acts as lead lender); and
(2) guaranteed governmental mortgage pool certificates within the
meaning of 29 CFR 2510.3-101(i).
(3) Asset-Backed Securities are not Fixed Income Obligations for
purposes of this exemption.
2. The title of Section III.D. and the opening paragraphs thereof
should be revised to read as follows:
``D. Certain Transactions in the Secondary Market by BlackRock
Managers of Fixed Income Obligations Including Fixed Income Obligations
Issued by or Traded With an MPS, and/or Under Which an MPS has Either
an Ongoing Function or Can Potentially Incur Liability. Relief under
Section I of this exemption is available for a purchase or sale in the
secondary market or the holding by BlackRock Managers on behalf of
Client Plans of (i) Fixed Income Obligations issued by an MPS, (ii)
Fixed Income Obligations issued by a third party but purchased from or
sold to an MPS, and/or (iii) Fixed Income Obligations under which
[[Page 50636]]
an MPS has either an ongoing function or can potentially incur
liability, provided that:
(1) If the Fixed Income Obligations are purchased from or sold to
an MPS, it is as a result of the Three Quote Process.
(2) * * *''
3. The title of Section III.E. and the opening paragraph thereof
should be revised to ``Purchase in an Underwriting and Holding by
BlackRock Managers of Fixed Income Obligations Issued by a Third Party
when an MPS is Underwriter, in Either a Manager or Member Capacity,
and/or Under Which an MPS has Either an Ongoing Function or Can
Potentially Incur Liability. Relief under Section I of this exemption
is available for the purchase and holding by BlackRock Managers of
Fixed Income Obligations issued by third parties in an underwriting
when an MPS is an Underwriter, in either a manager or a member
capacity, and/or Fixed Income Obligations under which an MPS has either
an ongoing function or can potentially incur liability, provided that:
* * *''
4. A new subsection should be added to each of Sections III.D. and
III.E. of the exemption, the text of which would be:\12\.
---------------------------------------------------------------------------
\12\ An ``explicit U.S. Government guarantee'' refers to the
U.S. Government's statutory guarantee of certain guaranteed
governmental mortgage pool certificates. An ``implicit U.S.
Government guarantee'' refers to guaranteed governmental mortgage
pool certificates that are not statutorily guaranteed by the U.S.
Government but are still issued by corporations chartered by the
U.S. Government.
``( ) With respect to any Fixed Income Obligation acquired under
this Section III which is a guaranteed governmental mortgage pool
certificate within the meaning of 29 CFR 2510.3-101(i) which is
accompanied by an implicit U.S. Government guarantee as opposed to
an explicit U.S. Government guarantee (i) The BlackRock Manager
initiating a purchase of such Securities makes a determination that
such Securities are of substantially similar credit quality as
guaranteed governmental mortgage pool certificates accompanied by an
explicit U.S. Government guarantee, (ii) the ECO (in regular
consultation with and under the supervision of the IM) monitors the
credit spread between such implicitly and explicitly guaranteed
certificates, and (iii) each of the ECO and the IM (independently)
has the authority and responsibility to determine whether purchases
of implicitly guaranteed certificates should not be permitted due to
such credit spread, and such authority and responsibility is
---------------------------------------------------------------------------
reflected in the EPPs.''
The Department agrees with the comments, and it has modified the
exemption's operative language.
Model or Quantitative Conformity. Sections III.B.1., III.D.2(c),
III.R.1. and III.X.1. of the Proposed Exemption apply to Covered
Transactions that involve Model-Driven Accounts or Funds and Index
Accounts or Funds. The Applicants have noted that the provisions in
Sections III.B.1., III.D.2(c), III.R.1. and III.X.1. of the Proposed
Exemption that state that purchases must not ``exceed the purchase
amount necessary for such Model or quantitative conformity'' present a
practical issue for the Applicants due to the fact that in the ordinary
course of trading in Securities under the specified Covered
Transactions, the amount of the Securities purchased could
inadvertently exceed the amount necessary for Model or quantitative
conformity despite the responsible BlackRock Manager's intention and
reasonable attempt to comply with the condition.
The Applicants have suggested that the language be revised as
follows: ``And such purchase is reasonably calculated not to exceed the
purchase amount necessary for such Model or quantitative conformity by
more than a de minimis amount.''
The Department agrees with the comment, and it has modified
Sections III.B.1., III.D.2(c), III.R.1. and III.X.1. of the exemption's
operative language accordingly.
Effective Dates. Section I of the Proposed Exemption states that
the exemption will be effective from December 1, 2009, through the
earlier of (1) The effective date of an individual exemption granting
permanent relief for the Covered Transaction or (2) May 31, 2011.
BlackRock believes that it is unlikely that an individual exemption
granting permanent relief for the Covered Transactions will be granted
until late in 2011 or early 2012. As a result, BlackRock requests that
the date May 31, 2011, set forth in Section I of the Proposed
Exemption, should be revised to March 31, 2012.
The Department agrees with the comment, and it has modified Section
I of the final exemption accordingly.
Following the Secondary Offering, BOA's interest in BlackRock
decreased significantly. As a result, the exemption ceased to be
available with respect to Bank of America Corporation and any entity
directly or indirectly, through one or more intermediaries,
controlling, controlled by or under common control with Bank of America
Corporation (collectively, the BOA Group) on the day after the number
of representatives of the BOA Group on the BlackRock Board of Directors
was reduced to one (1).
Technical Corrections. BlackRock also sought a number of technical
corrections to the Proposed Exemption. Where the Department agrees with
such technical corrections, the technical corrections have been made.
After giving full consideration to the entire record, including
BlackRock's written comment, the Department has decided to grant the
exemption, as modified herein. For further information regarding
BlackRock's comments and other matters discussed herein, interested
persons are encouraged to obtain copies of the exemption application
file (Exemption Application No. D-11588) that the Department maintains
with respect to this case. The complete application file, as well as
supplemental submissions received by the Department, 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 Ave., 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 of proposed exemption published on March 18, 2011, at 76 FR
15058.
FOR FURTHER INFORMATION CONTACT: Brian Shiker, Office of Exemption
Determinations, Employee Benefits Security Administration, U.S.
Department of Labor, telephone (202) 693-8552.
Exemption
Section I: Covered Transactions Generally
For the period from December 1, 2009, through the earlier of (i)
The effective date of an individual exemption granting permanent relief
for the following transactions, or (ii) March 31, 2012,\13\ the
restrictions of ERISA sections 406(a)(1) and 406(b), FERSA sections
8477(c)(1) and (2), and the sanctions resulting from the application of
Code section 4975, by reason of Code section 4975(c)(1),\14\ shall not
apply to the Covered Transactions set forth in Section III and entered
into on behalf of or with the assets of a Client Plan; provided, that
(x) the generally
[[Page 50637]]
applicable conditions of Section II of this exemption are satisfied,
and, as applicable, the transaction-specific conditions set forth below
in Sections III and IV of this exemption are satisfied, or (y) the
Special Correction Procedure set forth in Section V of this exemption
is satisfied.
---------------------------------------------------------------------------
\13\ The exemption ceased to be available with respect to Bank
of America Corporation and any entity directly or indirectly,
through one or more intermediaries, controlling, controlled by or
under common control with Bank of America Corporation (collectively,
the BOA Group) on the day after the number of representatives of the
BOA Group on the BlackRock Board of Directors was reduced to one
(1).
\14\ For purposes of this exemption, references to ERISA section
406 should be read to refer as well to the corresponding provisions
of Code section 4975 and FERSA section 8477(c).
---------------------------------------------------------------------------
Section II: Generally Applicable Conditions
A. Compliance with the QPAM Exemption. The following conditions of
Part I of Prohibited Transaction Exemption 84-14, as amended (PTE 84-14
or the QPAM Exemption),\15\ must be satisfied with respect to each
Covered Transaction:
---------------------------------------------------------------------------
\15\ 49 FR 9494 (Mar. 13, 1984), as amended, 70 FR 49305 (Aug.
23, 2005), and as amended, 75 FR 38837 (July 6, 2010).
---------------------------------------------------------------------------
1. The BlackRock Manager engaging in the Covered Transaction is a
Qualified Professional Asset Manager;
2. Except as set forth in Section III of this exemption, at the
time of the Covered Transaction (as determined under Section VI(i) of
the QPAM Exemption) with or involving an MPS, such MPS, or its
affiliate (within the meaning of Section VI(c) of the QPAM
Exemption),\16\ does not have the authority to:
---------------------------------------------------------------------------
\16\ Solely for purposes of this Section II.A.2., no BlackRock
Entity will be deemed to be an affiliate of an MPS. The Department
is not making herein a determination as to whether any BlackRock
Entity is an affiliate of an MPS under ERISA.
---------------------------------------------------------------------------
(a) Appoint or terminate the BlackRock Manager as a manager of the
Client Plan assets involved in the Covered Transaction, or
(b) negotiate on behalf of the Client Plan the terms of the
management agreement with the BlackRock Manager (including renewals or
modifications thereof) with respect to the Client Plan assets involved
in the Covered Transaction;
3. (a) Notwithstanding the foregoing, in the case of an investment
fund (as defined in Section VI(b) of the QPAM Exemption) in which two
or more unrelated Client Plans have an interest, a Covered Transaction
with an MPS will be deemed to satisfy the requirements of Section
II.A.2. of this exemption if the assets of a Client Plan on behalf of
which the MPS or its affiliate possesses the authority set forth in
Subsections 2(a) and/or (b) above, and which are managed by the
BlackRock Manager in the investment fund, when combined with the assets
of other Client Plans established or maintained by the same employer
(or an affiliate thereof described in section VI(c)(1) of the QPAM
Exemption) or by the same employee organization, on behalf of which the
same MPS possesses such authority and which are managed in the same
investment fund, represent less than ten percent (10%) of the assets of
the investment fund;
(b) For purposes of Section II.A.3.(a) of this exemption, and for
purposes of Sections III.I.6, L.3(b), M.2.(b) and U.1. of this
exemption, with respect to the assets of an MPS Plan invested in a
Pooled Fund as of the date of the Acquisition, which Pooled Fund is a
bank-maintained common or collective trust, such assets when aggregated
with the assets of all other MPS Plans of the same MPS Group and
invested in such Pooled Fund shall be deemed to constitute less than
ten percent (10%) of the assets of such Pooled Fund from the date of
the Acquisition through July 1, 2010 (the Unwind Period); provided,
that:\17\
---------------------------------------------------------------------------
\17\ For purposes of this Section II.A.3.(b), the MPS Plans of
each of the MPS Groups (the PNC MPSs, the BOA MPSs, and the Barclays
MPSs) are separately aggregated (e.g., all MPS Plans of BOA MPSs are
aggregated together but are not aggregated with MPS Plans of
Barclays MPSs or PNC MPSs).
---------------------------------------------------------------------------
(i) The fees paid by such MPS Plans to BlackRock Managers during
the Unwind Period are not more than reasonable compensation and are
substantially the same as fees paid to the same BlackRock Managers by
other, comparable Client Plans which are not MPS Plans, invested in
such Pooled Fund as of the date of the Acquisition;
(ii) such MPS Plans do not pay to the same BlackRock Managers
during the Unwind Period any type of fee or other compensation that was
not charged to or otherwise borne by Client Plan investors, which are
not MPS Plans, in the Pooled Fund as of the date of the Acquisition;
(iii) during the Unwind Period, the IM reviews the investment by
the MPS Plans in the Pooled Fund; all fees paid by the MPS Plans to
BlackRock Managers are disclosed to the IM; the IM reviews the offering
documents for the Pooled Funds and any advisory or management
agreements with BlackRock Managers; and any material change in the
terms and conditions of the investment by the MPS Plans in the Pooled
Fund, including but not limited to fees paid to BlackRock Managers and
the terms of the advisory or management agreements with BlackRock
Managers, are promptly disclosed to the IM and are subject to the IM's
approval; and
(iv) during the Unwind Period, each MPS Plan may terminate its
investment in the Pooled Fund upon no more than thirty (30) days notice
and without incurring a redemption fee paid to a BlackRock Manager;
4. The terms of the Covered Transaction are negotiated on behalf of
the investment fund by, or under the authority and general direction
of, the BlackRock Manager and either the BlackRock Manager or (so long
as the BlackRock Manager retains full fiduciary responsibility with
respect to the Covered Transaction) a property manager acting in
accordance with written guidelines established and administered by the
BlackRock Manager, makes the decision on behalf of the investment fund
to enter into the Covered Transaction, provided that the Covered
Transaction is not part of an agreement, arrangement or understanding
designed to benefit the MPS;
5. The Covered Transaction is not entered into with an MPS which is
a party in interest or disqualified person with respect to any Client
Plan whose assets managed by the BlackRock Manager, when combined with
the assets of other Client Plans established or maintained by the same
employer (or affiliate thereof described in Section VI(c)(1) of the
QPAM Exemption) or by the same employee organization, and managed by
the BlackRock Manager, represent more than twenty percent (20%) of the
total client assets managed by the BlackRock Manager at the time of the
Covered Transaction;
6. At the time the Covered Transaction is entered into, and at the
time of any subsequent renewal or modification thereof that requires
the consent of the BlackRock Manager, the terms of the Covered
Transaction are at least as favorable to the investment fund as the
terms generally available in arm's length transactions between
unrelated parties; and
7. Neither the BlackRock Manager nor any affiliate thereof (as
defined in Section VI(d) of the QPAM Exemption),\18\ nor any owner,
direct or indirect, of a five percent (5%) or more interest in the
BlackRock Manager \19\ is a person who within the ten years immediately
preceding the Covered Transaction has been either convicted or released
from imprisonment, whichever is later, as a result of: any felony
involving abuse or misuse of such person's employee benefit plan
position or employment, or position or employment with a labor
organization; any felony arising out of the conduct of the business of
a broker, dealer, investment adviser, bank, insurance
[[Page 50638]]
company or fiduciary; income tax evasion; any felony involving the
larceny, theft, robbery, extortion, forgery, counterfeiting, fraudulent
concealment, embezzlement, fraudulent conversion, or misappropriation
of funds or securities; conspiracy or attempt to commit any such crimes
or a crime in which any of the foregoing crimes is an element; or any
other crime described in ERISA section 411. For purposes of this
section, a person shall be deemed to have been ``convicted'' from the
date of the judgment of the trial court, regardless of whether that
judgment remains under appeal.
---------------------------------------------------------------------------
\18\ For the avoidance of doubt, all MPSs are excluded from the
term ``affiliate'' for these purposes.
\19\ For the avoidance of doubt, all MPSs are excluded from the
term ``owner'' for these purposes.
---------------------------------------------------------------------------
B. Compensation. None of the employees of a BlackRock Manager
receive any compensation that is based on any Covered Transaction
having taken place between Client Plans and any of the MPSs (as opposed
to with another institution that is not an MPS). The fact that a
specific Covered Transaction occurred with an MPS as opposed to a non-
MPS counterparty is ignored by BlackRock and BlackRock Managers for
compensation purposes. None of the employees of BlackRock or a
BlackRock Manager receive any compensation from BlackRock or a
BlackRock Manager which consists of equity Securities issued by an MPS,
which fluctuates in value based on changes in the value of equity
Securities issued by an MPS, or which is otherwise based on the
financial performance of an MPS independent of BlackRock's performance,
provided that this condition shall not fail to be met because the
compensation of an employee of a BlackRock Manager fluctuates with the
value of a broadly-based index which includes equity Securities issued
by an MPS.
C. Exemption Policies and Procedures. BlackRock adopts and
implements Exemption Policies and Procedures (EPPs) which address each
of the types of Covered Transactions and which are designed to achieve
the goals of: (1) Compliance with the terms of the exemption, (2)
ensuring BlackRock's decision-making with respect to the Covered
Transactions on behalf of Client Plans with MPSs or BlackRock Entities
is done in the interests of the Client Plans and their participants and
beneficiaries, and (3) to the extent possible, verifying that the terms
of such Covered Transactions are at least as favorable to the Client
Plans as the terms generally available in arm's length transactions
with unrelated parties. The EPPs are developed with the cooperation of
both the Exemption Compliance Officer (ECO) and the Independent Monitor
(IM), and such EPPs are subject to the approval of the IM. The EPPs
need not address transactions which are not within the definition of
the term Covered Transactions.
Transgressions of the EPPs which do not result in Violations
require correction only if the amount involved in the transgression and
the extent of deviation from the EPPs is material, taking into account
the amount of Client Plan assets affected by such transgressions (EPP
Corrections). The ECO will make a written determination as to whether
such transgressions require EPP Correction, and, if the ECO determines
an EPP Correction is required, the ECO will provide written notice to
the IM of the EPP Correction. The ECO will provide summaries for the IM
of any such EPP Corrections as part of the quarterly report referenced
in Section II.D.11.
D. Exemption Compliance Officer. BlackRock appoints an Exemption
Compliance Officer (ECO) with respect to the Covered Transactions. If
the ECO resigns or is removed, BlackRock shall appoint a successor ECO
within a reasonable period of time, not to exceed thirty (30) days,
which successor shall be subject to the affirmative written approval of
the IM. With respect to the ECO, the following conditions shall be met:
1. The ECO is a legal professional with at least ten years of
experience and extensive knowledge of the regulation of financial
services and products, including under ERISA and FERSA;
2. A committee made up exclusively of members of the Board who are
independent of BlackRock and the MPSs determines the ECO's compensation
package, with input from the general counsel of BlackRock; the ECO's
compensation is not set by BlackRock business unit heads, and there is
no direct or indirect input regarding the identity or compensation of
the ECO from any MPS;
3. The ECO's compensation is not based on performance of any
BlackRock Entity or MPS, although a portion of the ECO's compensation
may be provided in the form of BlackRock stock or stock equivalents;
4. The ECO can be terminated by BlackRock only with the approval of
the IM;
5. The EPPs prohibit any officer, director or employee of BlackRock
or any MPS or any person acting under such person's direction from
directly or indirectly taking any action to coerce, manipulate,
mislead, or fraudulently influence the ECO in the performance of his or
her duties;
6. The ECO is responsible for monitoring Covered Transactions and
shall determine whether Violations have occurred, and the appropriate
correction thereof, consistent with the requirements of Section V of
this exemption;
7. If the ECO determines a Violation has occurred, the ECO must
determine why it occurred and what steps should be taken to avoid such
a Violation in the future (e.g., additional training, additional
procedures, additional monitoring, or additional and/or changed
processes or systems);
8. The ECO is responsible for monitoring and overseeing the
implementation of the EPPs. The ECO may delegate such responsibilities
to the ECO Function, but the ECO will remain responsible for monitoring
and overseeing the ECO Function's implementation of the EPPs. When
appropriate, the ECO will recommend changes to the EPPs to BlackRock
and the IM. The ECO will consult with the IM regarding the need for,
timing, and form of EPP Corrections;
9. The ECO carries out the responsibilities required of the ECO
described in: (a) The definition of ``Index'' in this exemption and (b)
with respect to loans of Securities to an MPS in Section III.M. of this
exemption, and carries out such other responsibilities stipulated or
described in Section III of this exemption including supervision of the
ECO Function;
10. The ECO, with the assistance of the ECO Function, monitors
Covered Transactions and situations resulting from Covered Transactions
with or involving an MPS with respect to which, because of the
investment of the MPS in BlackRock, an action or inaction on the part
of a BlackRock Manager might be thought to be motivated by an interest
which may affect the exercise of such BlackRock Manager's best judgment
as a fiduciary. If a situation is identified by the ECO which poses the
potential for a conflict, as specified in Section III, the ECO shall
consult with the IM, or refer decision-making to the discretion of the
IM;
11. The ECO provides a quarterly report \20\ to the IM summarizing
the material activities of the ECO for the preceding quarter and
setting forth any Violations discovered during the quarter and actions
taken to correct such Violations. With respect to Violations, the ECO
report details changes to process put in place to guard against a
substantially similar Violation occurring again, and recommendations
for additional training, additional procedures, additional monitoring,
or
[[Page 50639]]
additional and/or changed processes or systems or training changes and
BlackRock management's actions on such recommendations. In connection
with providing the quarterly report for the second quarter and fourth
quarter of each year, upon the request of the IM, the ECO and the IM
shall meet in person to review the content of the report. Other members
of the ECO Function may attend such meetings at the request of either
the ECO or the IM;
---------------------------------------------------------------------------
\20\ The first quarterly report covered a 4-month period ending
March 31, 2010.
---------------------------------------------------------------------------
12. In each quarterly report, the ECO certifies in writing to his
or her knowledge that (a) The quarterly report is accurate; (b)
BlackRock's compliance program is working in a manner which is
reasonably designed to prevent Violations; (c) any Violations
discovered during the quarter and the related corrections taken to date
have been identified in the report; and (d) BlackRock has complied with
the EPPs in all material respects;
13. No less frequently than annually, the ECO certifies to the IM
as to whether BlackRock has provided the ECO with adequate resources,
including, but not limited to, adequate staffing of the ECO Function,
and, in connection with the quarterly report for the fourth quarter of
each year, the ECO shall identify to the IM those BlackRock Managers
that relied upon this exemption during the prior year and those that he
reasonably anticipates relying on this exemption during the current
year; and
14. The ECO provides any further information regarding Covered
Transactions reasonably requested by the IM.
E. Independent Monitor. BlackRock retains an Independent Monitor
(IM) with respect to the Covered Transactions. If the IM resigns or is
removed, BlackRock shall appoint a successor IM within a reasonable
period of time, not to exceed thirty (30) days. The IM:
1. Agrees in writing to serve as IM, and he or she is independent
within meaning of Section VI(OO);
2. Approves the ECO selected by BlackRock, and as part of the
approval process and annually thereafter approves in general terms the
reasonableness of the ECO's compensation, taking into account such
information as the IM may request of BlackRock and which BlackRock must
supply, and approves any termination of the ECO by BlackRock;
3. Assists in the development of, and the granting of written
approval of, the EPPs and any material alterations of the EPPs by
determining that they are reasonably designed to achieve the goals of
(a) compliance with the terms of the exemption, (b) ensuring
BlackRock's decision-making with respect to Covered Transactions on
behalf of Client Plans with MPSs or BlackRock Entities is done in the
interests of the Client Plans and their respective participants and
beneficiaries and, (c) requiring, to the extent possible, verification
that the terms of such Covered Transactions are at least as favorable
to the Client Plans as the terms generally available in comparable
arm's length transactions with unrelated parties;
4. Consults with the ECO regarding the need for, timing and form of
any EPP Corrections. The IM has the responsibilities with respect to
corrections of Violations, as set forth in Section V of this Exemption.
In response to EPP Corrections or Violations, the IM considers whether,
and must have the authority, to require further sampling, testing or
corrective action if necessary;
5. Exercises discretion for Client Plans in situations specified in
Section III of this exemption where BlackRock Managers may be thought
to have conflicts;
6. Performs certain monitoring functions described in Section III,
and carries out the responsibilities required of the IM, as set forth
in the definition of ``Index'' in this exemption, and with respect to
loans of Securities to an MPS as set forth in Section III.M. of this
exemption, and carries out such other responsibilities stipulated in
Section III of this exemption;
7. Reviews the quarterly reports of the ECO, obtains and reviews
representative samples of the data underlying the quarterly reports of
the ECO, and, if the IM deems it appropriate, obtains additional
factual information on either an ad hoc basis or on a systematic basis;
8. Reviews the certifications of the ECO as to whether (a) The
quarterly report is accurate; (b) BlackRock's compliance program is
working in a manner which is reasonably designed to prevent Violations;
(c) any Violations discovered during the quarter and the related
corrections taken to date have been identified in the report; (d)
BlackRock has complied with the EPPs in all material respects; and (e)
BlackRock has provided the ECO with adequate resources, including, but
not limited to, adequate staffing of the ECO Function;
9. Determines, on the basis of the information supplied to the IM
by BlackRock and the ECO, whether there has occurred a pattern or
practice of insufficient diligence in adhering to the EPPs and/or the
conditions of the exemption, and if such a determination is made,
reports the same to the Department, and informs BlackRock and the ECO
of any such report;
10. Determines whether the purchases of equity Securities issued by
an MPS on behalf of Client Plans that are Other Accounts or Funds by a
BlackRock Manager has had a positive material impact on the market
price for such Securities, notwithstanding any volume limitations
imposed by Section III.S. of the exemption and/or imposed by the IM
with respect to such equity Securities. The IM makes this determination
based upon its review of the relevant monthly reports required by the
exemption with respect to such Covered Transactions provided by the ECO
and publicly available information materially related to the trading of
the Securities of an MPS on its primary listing exchange (or market);
11. Issues an annual compliance report,\21\ to be timely delivered
to (i) the Chairman of the Board of Directors of BlackRock, (ii) the
Chief Executive Officer of BlackRock and (iii) the General Counsel of
BlackRock. The annual compliance report shall be based on a review of
the EPPs, the quarterly reports provided by the ECO, any transactions
reviewed by the IM as well as any additional information the IM
requests from BlackRock, and certifying to each of the following (or
describing any exceptions thereto) that:
---------------------------------------------------------------------------
\21\ The first annual compliance report covered the 13-month
period ending December 31, 2010.
---------------------------------------------------------------------------
(a) The EPPs are reasonably designed to achieve the goals of (i)
compliance with the terms of the exemption, (ii) ensuring BlackRock's
decision-making with respect to Covered Transactions on behalf of
Client Plans with MPSs or BlackRock Entities is done in the interests
of the Client Plans and the respective participants and beneficiaries,
and (iii) requiring to the extent possible, verification that the terms
of any Covered Transaction are at least as favorable to Client Plans as
the terms generally available in comparable arm's length transactions
with unrelated parties;
(b) the EPPs and the other terms of the exemption were complied
with, with any material exceptions duly noted;
(c) the IM has made the determination referred to in Section
II.E.9. and the results of that determination;
(d) BlackRock has provided the ECO with adequate resources,
including but not limited to adequate staffing of the ECO Function; and
(e) the compensation package for the ECO for the prior year is
reasonable;
12. The annual compliance report of the IM, as described in Section
II.E.11., shall contain a summary of Violations,
[[Page 50640]]
any corrections of Violations required by the IM and/or the ECO at any
time during the prior year. In addition, the IM further certifies that
BlackRock correctly implemented the prescribed corrections, based in
part on certification from the ECO; and
13. The annual compliance report of the IM shall also be timely
delivered by the IM to the chief executive officer, the general counsel
and the members of the boards of directors of each of the BlackRock
Managers identified to the IM by the ECO as having relied upon this
exemption during the prior year and those that the ECO reasonably
anticipates will be relying on this exemption during the current year.
The copies of the compliance report described in this Section II.E.13.
shall be accompanied by a cover letter from the IM calling the
attention of the recipients to any violations, material exceptions to
compliance with the EPPs, or other shortfalls in compliance with the
exemption to assist such officers and directors in carrying out their
respective responsibilities.
F. Special Notice Provisions. A Special Notice containing (i) A
notice of all of the conditions for relief under Sections III.C., E.,
F., G., Q., R., S. and V. and (ii) a copy of the Notice to Interested
Parties must be provided to affected Client Plans in writing (which may
be provided by U.S. mail or electronically, including by e-mail or use
of a centralized electronic mailbox, so long as such electronic
communication is reasonably calculated to result in the applicable
Client Plan's receipt) as soon as practical, but no later than fifteen
(15) days, following the date that the Notice to Interested Persons is
provided to Client Plans generally, through publication in the Federal
Register. As soon as practical following the Special Notice, a Client
Plan fiduciary independent of any BlackRock Entity must be provided any
additional material information regarding Covered Transactions
described in Sections III.C., E., F., G., Q., R., S. and V. by the
applicable BlackRock Manager on reasonable request; provided, that,
solely for purposes of this subsection, the fiduciary of an In-House
Plan is not required to be independent of any BlackRock Entity.
Section III: Covered Transactions
A. Continuing Transactions. Relief under Section I of this
exemption is available for Type B Covered Transactions and Type C
Covered Transactions and the unwind, settlement or other termination
thereof provided that:
1. A list of all Type B Covered Transactions and all Type C Covered
Transactions (the B and C List) as of the date of the Acquisition is
prepared by BlackRock and provided to the ECO.
2. Any discretionary act by a BlackRock Manager with respect to a
transaction on the B and C List is approved in advance in writing by
the ECO. Such approval is required for, but not limited to, sales and
other transfers to a third party, redemptions, the exercise of options,
and the declaration of default or other credit impairment-driven
decisions. The ECO must determine that the terms of such discretionary
act are in the interests of the affected Client Plans.
3. The ECO Function periodically monitors outstanding transactions
on the B and C List to inquire if an affirmative discretionary act,
such as a credit driven action, would be appropriate. If the ECO makes
such a determination, the ECO must direct the action be taken and must
approve the terms thereof as being in the interests of the affected
Client Plans.
4. The ECO Function sends to the IM an updated copy of the B and C
List as of the end of each fiscal quarter summarizing the Type B
Covered Transactions and Type C Covered Transactions remaining at the
end of the quarter and any discretionary actions taken during the
quarter by BlackRock Managers with respect to such transactions.
5. Upon the determination by the IM that an action taken with
respect to a Type B Covered Transaction or Type C Covered Transaction
was inappropriate or that the compensation the Client Plans received
was inadequate, or that an action should have been taken but was not,
the Client Plans are made whole by BlackRock.
B. Purchases and Holdings by BlackRock Managers of Fixed Income
Obligations Issued by an MPS in an Underwriting on Behalf of Client
Plans Invested in an Index Account or Fund, or in a Model-Driven
Account or Fund. Relief under Section I of this exemption is available
for a purchase and holding by BlackRock Managers of Fixed Income
Obligations issued by an MPS in an underwriting on behalf of Client
Plans for an Index Account or Fund, or a Model-Driven Account or Fund,
provided that:
1. Such purchase is for the sole purpose of maintaining
quantitative conformity with the weight of such Securities prescribed
by the relevant Index, for Index Accounts or Funds, or the weight of
such Securities prescribed by the relevant Model, for Model-Driven
Accounts or Funds; and such purchase is reasonably calculated not to
exceed the purchase amount necessary for such Model or quantitative
conformity by more than a de minimis amount;
2. Such purchase is not made from any MPS;
3. No BlackRock Entity is in the selling syndicate;
4. After purchase, the responsible BlackRock Manager notifies the
ECO if circumstances arise in which an action or inaction on the part
of the BlackRock Manager regarding an MPS Fixed Income Obligation so
acquired might be thought to be motivated by an interest which may
affect the exercise of such BlackRock Manager's best judgment as a
fiduciary, and complies with decisions of the ECO regarding the taking,
or the refraining from taking, of actions in such circumstances; and
5. After purchase, any decision regarding conversion of an MPS
Fixed Income Obligation into equity in the MPS is made by the IM.
C. Purchase and Holding by BlackRock Managers of Fixed Income
Obligations Issued by an MPS in an Underwriting on Behalf of Client
Plans Invested in an Other Account or Fund. Relief under Section I of
this exemption is available for a purchase and holding by BlackRock
Managers of Fixed Income Obligations issued by an MPS in an
underwriting on behalf of Client Plans invested in an Other Account or
Fund provided that:
1. The conditions of Section IV.A. of this exemption are satisfied,
except that for purposes of Section IV.A.4.(a) and Section IV.A.5.(c),
the MPS-issued Fixed Income Obligations at the time of purchase must be
rated in one of the three highest rating categories by a Rating
Organization and none of the Rating Organizations may rate the Fixed
Income Obligations lower than in the third highest rating category;
2. Such purchase is not made from an MPS;
3. No BlackRock Entity is in the selling syndicate;
4. After purchase, the responsible BlackRock Manager notifies the
ECO if circumstances arise in which an action or inaction on the part
of the BlackRock Manager regarding an MPS Fixed Income Obligation so
acquired might be thought to be motivated by an interest which may
affect the exercise of such BlackRock Manager's best judgment as a
fiduciary, and complies with decisions of the ECO regarding the taking,
or the refraining from taking, of actions in such circumstances;
5. After purchase, any decision regarding conversion of an MPS
Fixed Income Obligation into equity in the MPS is made by the IM; and
[[Page 50641]]
6. Special Notice of all of the foregoing conditions for relief
under this Section III.C. must be provided in accordance with the terms
of Section II.F.
D. Certain Transactions in the Secondary Market by BlackRock
Managers of Fixed Income Obligations Including Fixed Income Obligations
Issued by or Traded With an MPS, and/or Under Which an MPS has Either
an Ongoing Function or Can Potentially Incur Liability. Relief under
Section I of this exemption is available for a purchase or sale in the
secondary market or the holding by BlackRock Managers on behalf of
Client Plans of (i) Fixed Income Obligations issued by an MPS, (ii)
Fixed Income Obligations issued by a third party but purchased from or
sold to an MPS, and/or (iii) Fixed Income Obligations under which an
MPS has either an ongoing function or can potentially incur liability,
provided that:
1. If the Fixed Income Obligations are purchased from or sold to an
MPS, it is as a result of the Three Quote Process.
2. With respect to Fixed Income Obligations that are issued by an
MPS and are purchased and held by a BlackRock Manager for a Client
Plan--
(a) After purchase, the responsible BlackRock Manager notifies the
ECO if circumstances arise in which an action or inaction on the part
of the BlackRock Manager regarding an MPS Fixed Income Obligation so
acquired might be thought to be motivated by an interest which may
affect the exercise of such BlackRock Manager's best judgment as a
fiduciary, and complies with the decisions of the ECO regarding the
taking, or the refraining from taking, of actions in such
circumstances;
(b) After purchase, any decision regarding conversion of an MPS
Fixed Income Obligation into equity in the MPS is made by the IM; and
(c) If purchased for an Index Account or Fund, or a Model-Driven
Account or Fund, such purchase is for the sole purpose of maintaining
quantitative conformity with the weight of such Securities prescribed
by the relevant Index, for Index Accounts or Funds, or the weight of
such Securities prescribed by the relevant Model, for Model-Driven
Accounts or Funds and such purchase is reasonably calculated not to
exceed the purchase amount necessary for such Model or quantitative
conformity by more than a de minimis amount.
3. With respect to Fixed Income Obligations (whether or not issued
by an MPS) held by a BlackRock Manager for a Client Plan under which an
MPS has an ongoing function, such as servicing of collateral for asset-
backed debt, or the potential for liability, such as under
representations or warranties made by an MPS with respect to collateral
for such asset-backed debt which the MPS originated, the taking of or
refraining from taking any action by the responsible BlackRock Manager
which could have a material positive or negative effect upon the MPS is
decided upon by the ECO.
4. With respect to any Fixed Income Obligation acquired under this
Section III.D. which is a guaranteed governmental mortgage pool
certificate within the meaning of 29 CFR 2510.3-101(i) which is
accompanied by an implicit U.S. Government guarantee as opposed to an
explicit U.S. Government guarantee, (a) The BlackRock Manager
initiating a purchase of such Securities makes a determination that
such Securities are of substantially similar credit quality as
guaranteed governmental mortgage pool certificates accompanied by an
explicit U.S. Government guarantee, (b) the ECO (in regular
consultation with and under the supervision of the IM) monitors the
credit spread between such implicitly and explicitly guaranteed
certificates, and (c) each of the ECO and the IM (independently) has
the authority and responsibility to determine whether purchases of
implicitly guaranteed certificates should not be permitted due to such
credit spread, and such authority and responsibility is reflected in
the EPPs.
5. For purposes of this Section III.D., Asset-Backed Securities are
not Fixed Income Obligations.
E. Purchase in an Underwriting and Holding by BlackRock Managers of
Fixed Income Obligations Issued by a Third Party when an MPS is
Underwriter, in Either a Manager or Member Capacity, and/or Under Which
an MPS has Either an Ongoing Function or Can Potentially Incur
Liability. Relief under Section I of this exemption is available for
the purchase and holding by BlackRock Managers of Fixed Income
Obligations issued by third parties in an underwriting when an MPS is
an Underwriter, in either a manager or a member capacity, and/or Fixed
Income Obligations under which an MPS has either an ongoing function or
can potentially incur liability, provided that:
1. The conditions of Section IV.A. are satisfied.
2. Such purchase is not made from an MPS.
3. No BlackRock Entity is in the selling syndicate.
4. With respect to Fixed Income Obligations under which an MPS has
either an ongoing function, such as debt trustee, servicer of
collateral for asset-backed debt, or the potential for liability, such
as under representations or warranties made by an MPS with respect to
collateral for such asset-backed debt which the MPS originated, the
taking of or refraining from taking any action by the responsible
BlackRock Manager which could have a material positive or negative
effect upon the MPS is decided upon by the ECO.
5. With respect to any Fixed Income Obligation acquired under this
Section III.E. which is a guaranteed governmental mortgage pool
certificate within the meaning of 29 CFR 2510.3-101(i) which is
accompanied by an implicit U.S. Government guarantee as opposed to an
explicit U.S. Government guarantee, (a) The BlackRock Manager
initiating a purchase of such Securities makes a determination that
such Securities are of substantially similar credit quality as
guaranteed governmental mortgage pool certificates accompanied by an
explicit U.S. Government guarantee, (b) the ECO (in regular
consultation with and under the supervision of the IM) monitors the
credit spread between such implicitly and explicitly guaranteed
certificates, and (c) each of the ECO and the IM (independently) has
the authority and responsibility to determine whether purchases of
implicitly guaranteed certificates should not be permitted due to such
credit spread, and such authority and responsibility is reflected in
the EPPs.
6. For purposes of this Section III.E., Asset-Backed Securities are
not Fixed Income Obligations.
7. Special Notice of all of the foregoing conditions for relief
under this Section III.E. must be provided in accordance with the terms
of Section II.F.
F. Purchase in an Underwriting and Holding by BlackRock Managers of
Asset-Backed Securities, when an MPS is an Underwriter, in the capacity
as either a Manager or a Member of the Selling Syndicate, Trustee, or,
in the case of Asset-Backed Securities Which Are CMBS, Servicer. Relief
under Section I of this exemption is available for the purchase and
holding by BlackRock Managers of Asset-Backed Securities issued in an
underwriting where an MPS is (i) An underwriter, in the capacity as
either a manager or a member of the selling syndicate, (ii) trustee, or
(iii) solely in the case of Asset-Backed Securities which are CMBS,
serves as servicer of a trust that issued such CMBS, provided that:
1. The conditions of Section IV.A. are satisfied, except that (a)
For purposes of Section IV.A.4.(a), the Asset-Backed Securities at the
time of purchase must
[[Page 50642]]
be rated in one of the three highest rating categories by a Rating
Organization and none of the Rating Organizations may rate the Asset-
Backed Securities lower than the third highest rating category, (b) in
the case of Asset-Backed Securities which are CMBS and for which the
MPS is servicer, the conditions of Section IV.B. are satisfied instead
of the conditions of Section IV.A., and (c) if an MPS is an underwriter
and an MPS is a servicer as described in clause (b), the conditions of
both Section IV.A., as modified by Section III.F.1(a), and Section
IV.B. must be satisfied;
2. Such purchase is not made from an MPS;
3. No BlackRock Entity is in the selling syndicate;
4. In the case of Asset-Backed Securities with respect to which an
MPS has either an ongoing function, such as trustee, servicer of
collateral for CMBS, or the potential for liability, such as under
representations or warranties made by an MPS with respect to collateral
for CMBS which collateral the MPS originated, the taking of or
refraining from taking of any action by a responsible BlackRock Manager
which could have a material positive or negative effect upon the MPS is
decided upon by the ECO;
5. The purchase meets the conditions of an applicable Underwriter
Exemption; and
6. Special Notice of all of the foregoing conditions for relief
under this Section III.F. must be provided in accordance with the terms
of Section II.F.
G. Purchase and Holding by BlackRock Managers of Equity Securities
Issued by an Entity which is not an MPS and is Not a BlackRock Entity,
in an Underwriting when an MPS is an Underwriter, in either a Manager
or a Member Capacity. Relief under Section I of this exemption is
available for the purchase and holding by BlackRock Managers of Equity
Securities issued by an entity which is not an MPS and which is not a
BlackRock Entity in an underwriting when an MPS is an underwriter, in
either a manager or a member capacity, provided that:
1. The conditions of Section IV.A. are satisfied;
2. Such purchase is not made from an MPS;
3. No BlackRock Entity is in the selling syndicate;
4. The Securities are not Asset-Backed Securities; and
5. Special Notice of all of the foregoing conditions for relief
under this Section III.G. must be provided in accordance with the terms
of Section II.F.
H. Purchase and Sale by BlackRock Managers of Asset-Backed
Securities in the Secondary Market, from or to an MPS, and/or when an
MPS is Sponsor, Servicer, Originator, Swap Counterparty, Liquidity
Provider, Trustee or Insurer, and the Holding Thereof. Relief under
Section I of this exemption is available for a sale of Asset-Backed
Securities by a BlackRock Manager to an MPS, or the purchase of Asset-
Backed Securities by BlackRock Managers from an MPS and the holding
thereof, and/or any such purchase or sale in the secondary market or
holding when an MPS is a sponsor, a servicer, an originator, a swap
counterparty, a liquidity provider, a trustee or an insurer, provided
that:
1. If the Asset-Backed Securities are purchased from or sold to an
MPS, the purchase or sale is as a result of the Three Quote Process.
2. Regardless of from whom the BlackRock Manager purchases the
Asset-Backed Securities, the purchase and holding of the Asset-Backed
Security otherwise meets the conditions of an applicable Underwriter
Exemption.
3. Regardless of from whom the BlackRock Manager purchased the
Asset-Backed Securities, if an MPS is, with respect to such Asset-
Backed Securities, a sponsor, servicer, originator, swap counterparty,
liquidity provider, insurer or trustee, as those terms are utilized or
defined in the Underwriter Exemptions, and circumstances arise in which
the taking of or refraining from taking of any action by the
responsible BlackRock Manager could have a material positive or
negative effect upon the MPS, the taking of or refraining from taking
of any such action is decided upon by the ECO.
I. Repurchase Agreements when MPS is the Seller. Section I of this
exemption applies to an investment by a BlackRock Manager of Client
Plan assets which involves the purchase or other acquisition, holding,
sale, exchange or redemption by or on behalf of a Client Plan of a
repurchase agreement (or Securities or other instruments under cover of
a repurchase agreement) in which the seller of the underlying
Securities or other instruments is an MPS which is a bank supervised by
the United States or a State, a broker-dealer registered under the 1934
Act, or a dealer who makes primary markets in Securities of the United
States government or any agency thereof, or in banker's acceptances,
and reports daily to the Federal Reserve Bank of New York its positions
with respect to these obligations, provided that each of the following
conditions are satisfied:
1. The repurchase agreement is embodied in, or is entered into
pursuant to a written agreement. Such written agreement must be a
standardized industry form; provided, that with the approval of the ECO
on or about the date of the Acquisition, written agreements with an MPS
that were in effect as of the date of the Acquisition may continue to
be used until there is a material modification of the same, at which
time standardized industry forms must be adopted;
2. The repurchase agreement has a term of one year or less;
3. The Client Plan receives interest no less than that which it
would receive in a comparable arm's length transaction with an
unrelated party;
4. The Client Plan receives Securities, banker's acceptances,
commercial paper or certificates of deposit having a market value equal
to not less than one hundred percent (100%) of the purchase price paid
by the Client Plan;
5. Upon expiration of the repurchase agreement and return of the
Securities or other instruments to the seller, the seller transfers to
the Client Plan an amount equal to the purchase price plus the
appropriate interest;
6. Neither the MPS seller nor any MPS which is a member of the same
MPS Group has discretionary authority or control with respect to the
investment of the Client Plan assets involved in the transaction or
renders investment advice (within the meaning of 29 CFR 2510.3-21(c))
with respect to such assets. This Section III.I.6. shall be deemed
satisfied notwithstanding the investment of assets of an MPS Plan of
the MPS which is the seller under such repurchase agreement in a Pooled
Fund as of the date of the Acquisition, which Pooled Fund is a bank-
maintained common or collective trust, provided that such assets, when
aggregated with the assets of all other MPS Plans of the same MPS Group
as that of the MPS seller and invested in such Pooled Fund, at all
times since the date of the Acquisition, constitute or are deemed
pursuant to Section II.A.3.(b) to constitute less than ten percent
(10%) of the assets of such Pooled Fund.
7. The Securities, banker's acceptances, commercial paper or
certificates of deposit received by the Client Plan:
(a) could be acquired directly by the Client Plan in a transaction
not covered by this Section III.I. without violating ERISA sections
406(a)(1)(E), 406(a)(2) or 407(a); and,
(b) if the Securities are subject to the provisions of the 1933
Act, they are
[[Page 50643]]
obligations that are not ``restricted securities'' within the meaning
of Rule 144 under the 1933 Act; provided that such restricted
securities are permitted until July 31, 2010.
8. If the market value of the underlying Securities or other
instruments falls below the purchase price at any time during the term
of the agreement, the Client Plan may, under the written agreement
required by Section III.I.1., require the MPS seller to deliver, by the
close of business on the following business day (as such term is
defined for purposes of the relevant written agreement), additional
Securities or other instruments the market value of which, together
with the market value of Securities or other instruments previously
delivered or sold to the Client Plan under the repurchase agreement,
equals at least one hundred percent (100%) of the purchase price paid
by the Client Plan.
9. If the MPS seller does not deliver additional Securities or
other instruments as required above, the Client Plan may terminate the
agreement, and, if upon termination or expiration of the agreement, the
amount owing is not paid to the Client Plan, the Client Plan may sell
the Securities or other instruments and apply the proceeds against the
obligations of the MPS seller under the agreement, and against any
expenses associated with the sale.
10. The MPS seller agrees to furnish the Client Plan with the most
recent available audited statement of its financial condition as well
as its most recent available unaudited statement, agrees to furnish
additional audited and unaudited statements of its financial condition
as they are issued and either: (a) Agrees that each repurchase
agreement transaction pursuant to the agreement shall constitute a
representation by the MPS seller that there has been no material
adverse change in its financial condition since the date of the last
statement furnished that has not been disclosed to the Client Plan with
whom such written agreement is made; or (b) prior to each repurchase
agreement transaction, the MPS seller represents that, as of the time
the transaction is negotiated, there has been no material adverse
change in its financial condition since the date of the last statement
furnished that has not been disclosed to the Client Plan with whom such
written agreement is made.
11. In the event of termination and sale as described in Section
III.I.9., the MPS seller pays to the Client Plan the amount of any
remaining obligations and expenses not covered by the sale of the
Securities or other instruments, plus interest at a reasonable rate.
12. If an MPS seller involved in a repurchase agreement covered by
this exemption fails to comply with any condition of this exemption in
the course of engaging in the repurchase agreement, the BlackRock
Manager who caused the plan to engage in such repurchase agreement
shall not be deemed to have caused the plan to engage in a transaction
prohibited by ERISA sections 406(a)(1)(A) through (D) or ERISA section
406(b), Code section 4975, or FERSA section 8477(c) solely by reason of
the MPS seller's failure to comply with the conditions of the
exemption.
13. In the event of any dispute between a BlackRock Manager and an
MPS seller involving a Covered Transaction under this Section III.I.,
the IM has the responsibility to decide whether, and if so how,
BlackRock is to pursue relief on behalf of the Client Plan(s) against
the MPS Seller.
14. At time of entry into or renewal of each Covered Transaction
under this Section III.I., including both term repurchase transactions
and daily renewals for ``open'' or ``overnight'' transactions, either
(a) each Covered Transaction under this Section III.I., is as a result
of the Three Quote Process, or, (b) the BlackRock Manager determines
that the yield on the proposed transaction, or the renewal thereof, is
at least as favorable to the Client Plans as the yield of the Client
Plan on two (2) other available transactions which are comparable in
terms of size, collateral type, credit quality of the counterparty,
term and rate. The methodology employed for purposes of the comparison
in (b) above must (c) be approved in advance by the ECO Function and
(d), to the extent possible, refer to objective external data points,
such as the Eurodollar overnight time deposit bid rate, the rate for
repurchase agreements with U.S. government Securities, or rates for
commercial paper issuances or agency discount note issuances sourced
from Bloomberg, or another third party pricing service or market data
provider (which providers may use different terminology to refer to
these same external data points). The applicable BlackRock Manager must
record a description of the comparable transactions, if reliance is
placed upon same, and such data must be periodically reviewed by the
ECO Function. The procedures described in this Section III.I.14. must
be designed to ensure that BlackRock Managers determine to only enter
into Covered Transactions with MPS sellers which are in the interests
of Plan Clients, and such procedures must be reviewed and may be
commented on by the IM.
J. Responding to Tender Offers and Exchange Offers Solicited by an
MPS. Relief under Section I of this exemption is available for
participation by BlackRock Managers on behalf of Client Plans in tender
offers or exchange offers or similar transactions where an MPS acts as
agent for the entity (which entity may not be an MPS) making the offer,
provided that:
1. The Client Plan pays no fees to the MPS in connection with this
Covered Transaction;
2. The BlackRock Manager submits to the ECO in advance of
participation a written explanation of the reasons for such
participation; and
3. The ECO Function determines that the reasons for participation
by the BlackRock Manager in the Covered Transaction are appropriate
from the vantage point of the Client Plans. Effective as of October 1,
2010, the ECO Function must affirmatively make this determination in
writing prior to the BlackRock Manager participating in the Covered
Transactions under this Section III.J.
K. Purchase in Underwritings of Securities Issued by an Entity
which is not an MPS when the Proceeds are Used to Repay a Debt to an
MPS. Relief under Section I of this exemption is available for the
purchase by BlackRock Managers of Securities in underwritings issued by
an entity which is not an MPS, but where the proceeds of the offering
are used to repay a debt owed to an MPS, and the payment of such
proceeds to the MPS, provided that the BlackRock Manager does not know
that the proceeds will be applied to the repayment of debt owed to an
MPS. If the BlackRock Manager does know that proceeds of the offering
will be applied to the repayment of debt owed to an MPS, the purchase
of the Securities and the payment of the proceeds to the MPS are exempt
under Section I of this exemption provided that no more than twenty
percent (20%) of the offering is purchased by BlackRock Managers for
Client Plans, and no more than fifty percent (50%) of the offering in
the aggregate is purchased by BlackRock, BlackRock Managers and other
BlackRock Entities for Client Plans, other clients of BlackRock
Managers, or as proprietary investments.
L. Bank Deposits and Commercial Paper. Relief under Section I of
this exemption is available for an investment by a BlackRock Manager of
Client Plan assets which involves the purchase or other acquisition,
holding, sale, exchange or redemption by or on behalf
[[Page 50644]]
of a Client Plan of certificates of deposit, time deposits or other
bank deposits at an MPS, or in commercial paper issued by an MPS,
provided that:
1. With respect to bank deposits, either:
(a)(i) The bank is supervised by the United States or a State, and
at the outset of the Covered Transaction or renewal thereof of, such
bank has a credit rating in one of the top two (2) categories by at
least one of the Rating Organizations; (ii) neither the bank nor an
affiliate of the bank has discretionary authority or control with
respect to the investment of Client Plan assets involved in the Covered
Transaction or renders investment advice (within the meaning of 29 CFR
2510.3-21(c)) with respect to those assets; and (iii) such deposit
bears a reasonable interest rate, or--
(b) the BlackRock Manager and the MPS comply with ERISA section
408(b)(4).
2. With respect to commercial paper:
(a) the Client Plan is not an MPS Plan of the MPS issuing the
commercial paper;
(b) the commercial paper has a stated maturity date of nine (9)
months or less from the date of issue, exclusive of days of grace, or
is a renewal of an issue of commercial paper the maturity of which is
likewise limited;
(c) neither the MPS issuer of the commercial paper, any MPS
guarantor of the commercial paper, nor any member of the same MPS Group
as such MPS issuer or guarantor has discretionary authority or control
with respect to the investment of the Client Plan assets involved in
the Covered Transaction or renders investment advice (within the
meaning of 29 CFR 2510.3-21(c)) with respect to those assets; and
(d) at the time it is acquired, the commercial paper is ranked in
one of the two (2) highest rating categories by at least one of the
Rating Organizations.
3. For purposes of the Covered Transactions set forth in this
Section III.L.:
(a) No BlackRock Entity shall be regarded as an affiliate of an MPS
bank at which a deposit is made of Client Plan assets, nor of an MPS
issuer of commercial paper in which a BlackRock Manager invests Client
Plan assets, and
(b) Section III.L.1.(a)(ii) and Sections III.L.2.(a) and (c) shall
be deemed satisfied notwithstanding the investment of assets of an MPS
Plan of the MPS which is the depository bank or issuer of commercial
paper in a Pooled Fund as of the date of the Acquisition, which Pooled
Fund is a bank-maintained common or collective trust, provided that
such assets when aggregated with the assets of all other MPS Plans of
the same MPS Group as the issuer of such asset and invested in such
Pooled Fund, at all times since the date of the Acquisition, constitute
or are deemed pursuant to Section II.A.3.(b) to constitute less than
ten percent (10%) of such Pooled Fund.
M. Securities Lending to an MPS.
1. Relief under Section I of this exemption is available for:
(a) the lending of Securities by a BlackRock Manager that are
assets of a Client Plan to an MPS which is a U.S. Broker-Dealer or a
U.S. Bank provided that the conditions set forth in Section III.M.2.
are met;
(b) the lending of Securities by a BlackRock Manager that are
assets of a Client Plan to an MPS which is a Foreign Broker-Dealer or
Foreign Bank; provided that, the conditions set forth in Section
III.M.2. and Section III.M.3. below are met; and
(c) the payment to a BlackRock Manager of compensation for services
rendered in connection with loans of Client Plan assets that are
Securities to an MPS; provided that, the conditions set forth in
Section III.M.4. below are met.
2. General Conditions for Transactions Described in Sections
III.M.1.(a) and (b).
(a) The length of a Securities loan to an MPS does not exceed one
year in term.
(b) Neither the MPS borrower nor any MPS which is a member of the
same MPS Group as the MPS borrower has or exercises discretionary
authority or control with respect to the investment of the Client Plan
assets involved in the transaction, or renders investment advice
(within the meaning of 29 CFR 2510.3-21(c)) with respect to those
assets. This Section III.M.2.(b) shall be deemed satisfied
notwithstanding the investment of the assets of an MPS Plan of the MPS
which is the borrower under such Securities lending transaction in a
Pooled Fund as of the date of the Acquisition, which Pooled Fund is a
bank-maintained common or collective trust, provided that such assets
when aggregated with the assets of all other MPS Plans of the same MPS
Group as that of the MPS borrower and invested in such Pooled Fund, at
all times since the date of the Acquisition, constitute or are deemed
pursuant to Section II.A.3.(b) to constitute less than ten percent
(10%) of the assets of such Pooled Fund.
(c) The Client Plan receives from the MPS borrower by the close of
the BlackRock Manager's business on the day in which the Securities
lent are delivered to the MPS,
(i) U.S. Collateral having, as of the close of business on the
preceding business day, a market value, or, in the case of bank letters
of credit, a stated amount, equal to not less than one hundred percent
(100%) of the then market value of the Securities lent; or
(ii) Foreign Collateral having as of the close of business on the
preceding business day, a market value, or, in the case of bank letters
of credit, a stated amount, equal to not less than:
(x) one hundred two percent (102%) of the then market value of the
Securities lent as valued on a Recognized Securities Exchange or an
Automated Trading System on which the Securities are primarily traded
if the collateral posted is denominated in the same currency as the
Securities lent, or
(y) one hundred five percent (105%) of the then market value of the
Securities lent as valued on a Recognized Securities Exchange or an
Automated Trading System on which the Securities are primarily traded
if the collateral posted is denominated in a different currency than
the Securities lent.
(d) Notwithstanding the foregoing, if the BlackRock Manager is a
U.S. Bank, a Registered Investment Advisor, or U.S. Broker-Dealer, and
such BlackRock Manager indemnifies the Client Plan with respect to the
difference, if any, between the replacement cost of the borrowed
Securities and the market value of the collateral on the date of a
borrower default, the Client Plan receives from the MPS borrower by the
close of the BlackRock Manager's business on the day in which the
Securities lent are delivered to the borrower, Foreign Collateral
having as of the close of business on the preceding business day, a
market value, or, in the case of bank letters of credit, a stated
amount, equal to not less than:
(i) One hundred percent (100%) of the then market value of the
Securities lent as valued on a Recognized Securities Exchange or an
Automated Trading System on which the Securities are primarily traded
if the collateral posted is denominated in the same currency as the
Securities lent; or
(ii) one hundred one percent (101%) of the then market value of the
Securities lent as valued on a Recognized Securities Exchange or an
Automated Trading System on which the Securities are primarily traded
if the collateral posted is denominated in a different currency than
the Securities lent and such currency is denominated in Euros, British
pounds, Japanese yen, Swiss francs or Canadian dollars; or
[[Page 50645]]
(iii) one hundred five percent (105%) of the then market value of
the Securities lent as valued on a Recognized Securities Exchange or an
Automated Trading System if the collateral posted is denominated in a
different currency than the Securities lent and such currency is other
than those specified above.
(e)(i) If the MPS borrower is a U.S. Bank or U.S. Broker-Dealer,
the Client Plan receives such U.S. Collateral or Foreign Collateral
from the MPS borrower by the close of the BlackRock Manager's business
on the day in which the Securities are delivered to the MPS borrower.
Such collateral is received by the Client Plan either by physical
delivery, wire transfer or by book entry in a Securities depository
located in the United States, or,
(ii) If the MPS borrower is a Foreign Bank or Foreign Broker-
Dealer, the Client Plan receives U.S. Collateral or Foreign Collateral
from the MPS borrower by the close of the BlackRock Manager's business
on the day in which the Securities are delivered to the borrower. Such
collateral is received by the Client Plan either by physical delivery,
wire transfer or by book entry in a Securities depository located in
the United States or held on behalf of the Client Plan at an Eligible
Securities Depository. The indicia of ownership of such collateral
shall be maintained in accordance with section 404(b) of ERISA and 29
CFR 2550.404b-1.
(f) Prior to making of any such loan, the MPS borrower shall have
furnished the BlackRock Manager with:
(i) The most recent available audited statement of the MPS
borrower's financial condition, as audited by a United States certified
public accounting firm or in the case of an MPS borrower that is a
Foreign Broker-Dealer or Foreign Bank, a firm which is eligible or
authorized to issue audited financial statements in conformity with
accounting principles generally accepted in the primary jurisdiction
that governs the borrowing MPS Foreign Broker-Dealer or Foreign Bank;
(ii) the most recent available unaudited statement of its financial
condition (if the unaudited statement is more recent than such audited
financial statement); and
(iii) a representation that, at the time the loan is negotiated,
there has been no material adverse change in its financial condition
since the date of the most recent financial statement furnished to the
BlackRock Manager that has not been disclosed to the BlackRock Manager.
Such representations may be made by the MPS borrower's agreement that
each loan shall constitute a representation by the MPS borrower that
there has been no such material adverse change.
(g) The loan is made pursuant to a written loan agreement, the
terms of which are at least as favorable to the Client Plan as an
arm's-length transaction with an unrelated party would be. Such loan
agreement states that the Client Plan has a continuing security
interest in, title to, or the rights of secured creditor with respect
to the collateral. Such agreement may be in the form of a master
agreement covering a series of Securities lending transactions.
(h) The written loan agreement must be a standardized industry
form; provided, that, with the approval of the ECO on or about the date
of the Acquisition, written loan agreements with an MPS borrower that
were in effect as of the date of the Acquisition may continue to be
used until there is a material modification of the same, at which time
standardized industry forms must be adopted.
(i) In return for lending Securities, the Client Plan:
(i) receives a reasonable fee (in connection with the Securities
lending transaction), and/or
(ii) has the opportunity to derive compensation through the
investment of the currency collateral. Where the Client Plan has that
opportunity, the Client Plan may pay a loan rebate or similar fee to
the MPS borrower, if such fee is not greater than the Client Plan would
pay in a comparable transaction with an unrelated party.
(j) All fees and other consideration received by the Client Plan in
connection with the loan of Securities are reasonable. The identity of
the currency in which the payment of fees and rebates will be made is
set forth either in the written loan agreement or the loan confirmation
as agreed to by the MPS borrower and the BlackRock Manager prior to the
making of the loan.
(i) Pricing of a loan to an MPS borrower is based on (i) rates for
comparable loans of the same Security to non-MPS borrowers and (ii)
third-party market data:
(x) For loans of liquid Securities (sometimes referred to as
general collateral loans), an automatic system may be used to price
loans so long as the resulting rate the Client Plan receives from the
MPS borrower is at least as favorable to the Client Plan as the rate
the BlackRock Managers are receiving for Client Plans or other clients
from non-MPS borrowers of the same Security;
(y) For purposes of pricing loans of less liquid Securities
(sometimes referred to as ``special loans''), and for purposes of
determining whether to terminate or continue a loan which does not have
a set term, pricing may also be based on a BlackRock trader
determination that continuing the loan is in the interest of the Client
Plan based on all relevant factors, including price (provided that
price is within the range of prices of other loans of the same Security
to comparable non-MPS borrowers by BlackRock Managers for Client Plans
or other clients) and potential adverse consequences to the Client Plan
of terminating the loan, provided that the pricing data used in making
these decisions is retained and made available for possible review by
the ECO.
(ii) Automatic pricing mechanisms and pricing decisions by traders
are subject to ongoing periodic review by the ECO Function, and the
results of such review are included in reports by the ECO to the IM.
Specifically, the quarterly reports by the ECO to the IM must address
the lending patterns of:
(x) illiquid Securities to the MPS borrowers from all Client Plans,
including the percentage that loans of such Securities to the MPSs
represent of all loans of such Securities from all Client Plans; and
(y) illiquid Securities to the MPS borrowers from all Other
Accounts or Funds, including the percentage that loans of such
Securities to the MPSs represent of all loans of such Securities from
all Other Accounts or Funds.
(k) The Client Plan receives the equivalent of all distributions
made to holders of the borrowed Securities during the term of the loan
including, but not limited to, dividends, interest payments, shares of
stock as a result of stock splits and rights to purchase additional
Securities;
(l) If the market value of the collateral at the close of trading
on a business day is less than the applicable percentage of the market
value of the borrowed Securities at the close of trading on that day
(as described in this Section III.M.2.(c) of this exemption), then the
MPS borrower shall deliver, by the close of business on the following
business day, an additional amount of U.S. Collateral or Foreign
Collateral the market value of which, together with the market value of
all previously delivered collateral, equals at least the applicable
percentage of the market value of all the borrowed Securities as of
such preceding day.
Notwithstanding the foregoing, part of the U.S. Collateral or
Foreign Collateral may be returned to the MPS borrower if the market
value of the collateral exceeds the applicable percentage (described in
this Section III.M.2.(c) of
[[Page 50646]]
this exemption) of the market value of the borrowed Securities, as long
as the market value of the remaining U.S. Collateral or Foreign
Collateral equals at least the applicable percentage of the market
value of the borrowed Securities.
(m) The loan may be terminated by the Client Plan at any time,
whereupon the MPS borrower shall deliver certificates for Securities
identical to the borrowed Securities (or the equivalent thereof in the
event of reorganization, recapitalization or merger of the issuer of
the borrowed Securities) to the Client Plan within the lesser of:
(i) The customary delivery period for such Securities,
(ii) five business days, or
(iii) the time negotiated for such delivery by the BlackRock
Manager for the Client Plan, and the borrower.
(n) In the event that the loan is terminated, and the MPS borrower
fails to return the borrowed Securities or the equivalent thereof
within the applicable time described in Section III.M.2(m), the
BlackRock Manager for the Client Plan may, under the terms of the loan
agreement:
(i) Purchase Securities identical to the borrowed Securities (or
their equivalent as described above) and may apply the collateral to
the payment of the purchase price, any other obligations of the
borrower under the agreement, and any expenses associated with the sale
and/or purchase, and
(ii) the MPS borrower is obligated, under the terms of the loan
agreement, to pay, and does pay to the Client Plan the amount of any
remaining obligations and expenses not covered by the collateral,
including reasonable attorney's fees incurred by the Client Plan for
legal action arising out of default on the loans, plus interest at a
reasonable rate.
Notwithstanding the foregoing, the MPS borrower may, in the event
the MPS borrower fails to return borrowed Securities as described
above, replace collateral, other than U.S. currency, with an amount of
U.S. currency that is not less than the then current market value of
the collateral, provided such replacement is approved by the BlackRock
Manager.
(o) If the MPS borrower fails to comply with any provision of a
loan agreement which requires compliance with this exemption, the
BlackRock Manager who caused the Client Plan to engage in such
transaction shall not be deemed to have caused the Client Plan to
engage in a transaction prohibited by ERISA sections 406(a)(1)(A)
through (D) or ERISA section 406(b) or FERSA section 8477(c) solely by
reason of the borrower's failure to comply with the conditions of the
exemption.
(p) If the Securities being loaned to an MPS borrower are managed
in an Index Account or Fund, or a Model-Driven Account or Fund where
the Index or the Model are created or maintained by the MPS borrower,
the ECO Function periodically performs a review, no less than
quarterly, of the use of such MPS-sponsored Index or Model, and the
Securities loaned from such an account or fund to the MPS, which review
is designed to enable a reasonable judgment as to whether the use of
such Index or Model, or any changes thereto, were for the purpose of
benefitting BlackRock or the MPS through the Securities lending
activity described in this Section III.M. If the ECO forms a reasonable
judgment that the use of such Index or Model, or any changes thereto,
were for the purpose of benefitting BlackRock or the MPS, the ECO shall
promptly inform the IM.
(q) In the event of any dispute between the BlackRock Manager on
behalf of a Client Plan and an MPS borrower involving a Covered
Transaction under this Section III.M., the IM shall decide whether, and
if so, how the BlackRock Manager is to pursue relief on behalf of the
Client Plan(s) against the MPS borrower.
(r) If the Securities being loaned to an MPS borrower are managed
in an Other Account or Fund, the employees of the BlackRock Manager who
exercise discretionary authority or control over the Other Account or
Fund shall not have access to the information regarding whether the
particular Securities are on loan to an MPS, with such access
limitations imposed on or about September 30, 2010, and implemented
through the EPPs on or about September 30, 2010.
3. Specific Conditions for Transactions Described in Section
III.M.1.(b).
(a) The BlackRock Manager maintains the written documentation for
the loan agreement at a site within the jurisdiction of the courts of
the United States.
(b) Prior to entering into a transaction involving an MPS Foreign
Broker-Dealer that is described in Section VI.KK.(1) or (2) or an MPS
Foreign Bank that is described in Section VI.JJ.(1) either:
(i) The MPS Foreign Broker-Dealer or Foreign Bank agrees to submit
to the jurisdiction of the United States; agrees to appoint an agent
for service of process in the United States, which may be an affiliate;
consents to service of process on such agent; and agrees that any
enforcement by a Client Plan of its rights under the Securities lending
agreement will, as the option of the Client Plan, occur exclusively in
the United States courts; or
(ii) the BlackRock Manager, if a U.S. Bank, a Registered Investment
Advisor, or U.S. Broker-Dealer, agrees to indemnify the Client Plan
with respect to the difference, if any, between the replacement cost of
the borrowed Securities and the market value of the collateral on the
date of an MPS borrower default plus interest and any transaction costs
incurred (including attorney's fees of such Client Plan arising out of
the default on the loans or the failure to indemnify properly under
this provision) which the Client Plan may incur or suffer directly
arising out of a borrower default by the MPS Foreign Broker-Dealer or
Foreign Bank.
(c) In the case of a Securities lending transaction involving an
MPS Foreign Broker-Dealer that is described in Section VI.KK.(3) or an
MPS Foreign Bank that is described in Section VI.JJ.(2), the BlackRock
Manager must be a U.S. Bank, a Registered Investment Advisor, or U.S.
Broker-Dealer, and prior to entering into the loan transaction, such
BlackRock Manager must agree to indemnify the Client Plan with respect
to the difference, if any, between the replacement cost of the borrowed
Securities and the market value of the collateral on the date of an MPS
borrower default plus interest and any transaction costs incurred
(including attorney's fees of such plan arising out of the default on
the loans or the failure to indemnify properly under this provision)
which the Client Plan may incur or suffer directly arising out of a
borrower default by the MPS Foreign Broker-Dealer or Foreign Bank.
4. Specific Conditions for Transactions Described in Section
III.M.1.(c):
(a) The loan of Securities is not prohibited by section 406(a) of
ERISA or otherwise satisfies the conditions of this exemption.
(b) The BlackRock Manager is authorized to engage in Securities
lending transactions on behalf of the Client Plan.
(c) The compensation, the terms of which are at least as favorable
to the Client Plan as an arm's length transaction with an unrelated
party, is reasonable and is paid in accordance with the terms of a
written instrument, which may be in the form of a master agreement
covering a series of Securities lending transactions.
(d) Except as otherwise provided in Section III.M.4.(f), the
arrangement under which the compensation is paid:
(i) Is subject to the prior written authorization of a fiduciary of
a Client
[[Page 50647]]
Plan (the authorizing fiduciary), who is (other than in the case of an
In-House Plan) independent of the BlackRock Manager, provided that for
purposes of this Section III.M.4.(d) a fiduciary of an MPS Plan acting
as the authorizing fiduciary shall be deemed independent of the
BlackRock Manager so long as such fiduciary, as of the date of the
authorization, is not a BlackRock Entity, and
(ii) may be terminated by the authorizing fiduciary within:
(x) the time negotiated for such notice of termination by the
Client Plan and the BlackRock Manager, or
(y) five business days, whichever is less, in either case without
penalty to the Client Plan.
(e) No such authorization is made or renewed unless the BlackRock
Manager shall have furnished the authorizing fiduciary with any
reasonably available information which the BlackRock Manager reasonably
believes to be necessary to determine whether such authorization should
be made or renewed, and any other reasonably available information
regarding the matter that the authorizing fiduciary may reasonably
request.
(f) Special Rule for Commingled Investment Funds. In the case of a
pooled separate account maintained by an insurance company qualified to
do business in a State or a common or collective trust fund maintained
by a bank or trust company supervised by a State or Federal agency, the
requirements of Section III.M.4.(d) of this exemption shall not apply,
provided that:
(i) The information described in Section III.M.4.(e) (including
information with respect to any material change in the arrangement)
shall be furnished by the BlackRock Manager to the authorizing
fiduciary described in Section III.M.4.(d) with respect to each Client
Plan whose assets are invested in the account or fund, not less than 30
days prior to implementation of the arrangement or material change
thereto, and, where requested, upon the reasonable request of the
authorizing fiduciary;
(ii) in the event any such authorizing fiduciary submits a notice
in writing to the BlackRock Manager objecting to the implementation of,
material change in, or continuation of the arrangement, the Client Plan
on whose behalf the objection was tendered is given the opportunity to
terminate its investment in the account or fund, without penalty to the
Client Plan, within such time as may be necessary to effect such
withdrawal in an orderly manner that is equitable to all withdrawing
plans and to the non-withdrawing plans. In the case of a Client Plan
that elects to withdraw pursuant to the foregoing, such withdrawal
shall be effected prior to the implementation of, or material change
in, the arrangement; but an existing arrangement need not be
discontinued by reason of a Client Plan electing to withdraw; and
(iii) in the case of a Client Plan whose assets are proposed to be
invested in the account or fund subsequent to the implementation of the
compensation arrangement and which has not authorized the arrangement
in the manner described in Sections III.M.4.(f)(i) and (ii), the Client
Plan's investment in the account or fund shall be authorized in the
manner described in Section III.M.4.(d)(i).
N. To-Be-Announced Trades (TBAs) of GNMA, FHLMC or FNMA Mortgage-
Backed Securities with an MPS Counterparty. Relief under Section I of
this exemption is available for trades (purchases and sales) on a
principal basis of mortgage-backed Securities issued by FHLMC, FNMA or
guaranteed by GNMA and meeting the definition of ``guaranteed
governmental mortgage pool certificate'' in 29 CFR 2510.3-101(i) with
an MPS on a TBA basis, including, when applicable, delivery of the
underlying Securities to a Client Plan, provided that:
1. The Covered Transactions under this Section III.N. are a result
of the Three Quote Process; provided that, solely for purposes of this
Section III.N.1., firm quotes under the Three Quote Process may also
include firm quotes obtained on comparable Securities, as described
below, when firm quotes with respect to the applicable TBA transactions
are not reasonably attainable.
2. With regard to purchases of FHLMC and FNMA mortgage-backed
Securities on a TBA basis, (i) The BlackRock Manager makes a
determination that such Securities are of substantially similar credit
quality as GNMA guaranteed governmental mortgage pool certificates,
(ii) the ECO (in regular consultation with and under the supervision of
the IM) monitors the credit spread between GNMA and FHLMC/FNMA
mortgage-backed Securities, and (iii) each of the ECO and the IM
(independently) has the authority and responsibility to determine
whether purchases of FHLMC and/or FNMA mortgage-backed Securities on a
TBA basis should not be permitted due to such credit spread, and such
authority and responsibility is reflected in the EPPs.
3. With regard to possible delivery of underlying Securities to
Client Plans, as opposed to cash settlement, the ECO Function approves
any such delivery in advance.
For purposes of Section III.N.1., ``comparable Securities'' are
Securities that: (a) Are issued and/or guaranteed by the same agency,
(b) have the same coupon, (c) have a principal amount at least equal to
but no more than two percent (2%) greater than the Security purchased
or sold, (d) are of the same program or class, and (e) either (i) Have
an aggregate weighted average monthly maturity within a 12-month
variance of the Security purchased or sold, but in no case can the
variance be more than ten percent (10%) of such aggregate weighted
average maturity of the Securities purchased or sold, or (ii) meet some
other comparable objective standard containing a range of variance that
is no greater than that described in (i) above and that assures that
the aging of the Securities is properly taken into account.
O. Foreign Exchange Transactions with an MPS Counterparty. Relief
under Section I of this exemption is available for a Foreign Exchange
Transaction by a BlackRock Manager on behalf of Client Plans with an
MPS as counterparty provided that:
1. (a) The Foreign Exchange Transaction is as a result of the Three
Quote Process; or (b) the total net amount of the Foreign Exchange
Transaction on behalf of Client Plans by BlackRock Managers is greater
than $1 million and the exchange rate is within 0.5% above or below the
Interbank Rate as represented to the BlackRock Managers by the MPS;
2. Foreign Exchange Transactions with an MPS counterparty only
involve currencies of countries that are classified as ``developed'' or
``emerging'' markets by a third party Index provider that divides
national economies into ``developed,'' ``emerging'' and ``frontier''
markets. The Index provider shall be selected by BlackRock, provided,
however, the IM shall have the right to reject the Index provider in
its sole discretion at any time; and
3. Each Foreign Exchange Transaction complying with Section
III.O.1.(b) must be set forth in the applicable quarterly reports of
the ECO to the IM.
P. Agency Execution of Equity and Fixed Income Securities Trades
and Related Clearing as Described in PTE 86-128, Including Agency Cross
Trades, When the Broker is an MPS. Relief under Section I of this
exemption is available for transactions in Securities described in
Section II of Prohibited Transaction Exemption 86-128, as
[[Page 50648]]
amended \22\ (PTE 86-18), as if BlackRock Managers and MPS broker-
dealers were ``affiliates'' as defined in Section I.(b) of PTE 86-128,
provided the following conditions are satisfied:
---------------------------------------------------------------------------
\22\ 51 FR 41686 (Nov. 18, 1986), as amended, 67 FR 64137 (Oct.
17, 2002).
---------------------------------------------------------------------------
1. The MPS is selected to perform Securities brokerage services for
Client Plans pursuant to the normal brokerage placement practices,
policies and procedures of the BlackRock Manager designed to ensure
best execution.
2. The conditions of PTE 86-128 set forth in the following sections
of that exemption must be complied with: Section III(e); Section
III(f); Section III(g)(2); and Section III(h); provided, however, that,
for purposes of Section III(e), Section III(f) and Section III(g)(2) of
PTE 86-128, the ECO Function is the ``authorizing fiduciary'' referred
to therein; and the ECO has the authority to terminate the use of the
MPS as broker-dealer without penalty to Client Plans at any time; and
provided further that the first sentence of Section III(h) of PTE 86-
128 is amended for purposes of this Section III.P.2. to provide as
follows: ``A trustee [other than a nondiscretionary trustee] may only
engage in a covered transaction with a plan that has total net assets
with a value of at least $50 million and in the case of a pooled fund,
the $50 million requirement will be met if fifty percent (50%) or more
of the units of beneficial interest in such pooled fund are held by
investors having total net assets with a value of at least $50
million.''
3. With respect to agency cross transactions described in Section
III(g) of PTE 86-128 that are being effected or executed by an MPS
broker, (i) Neither the MPS broker effecting or executing the agency
cross transaction nor any member of the same MPS Group as the MPS
broker effecting or executing the agency cross transaction may have
discretionary authority to act on behalf of, and/or provide investment
advice to another party to the agency cross transaction which is a
seller when the Client Plan is a buyer, or which is a buyer, when the
Client Plan is a seller (Another Party), and (ii), the BlackRock
Manager instituting the transaction for the Client Plan must not have
knowledge that a BlackRock Entity has discretionary authority and/or
provides investment advice to Another Party to the agency cross
transaction.
4. The exceptions in Sections IV(a), (b), and (c) of PTE 86-128 are
applicable to this exemption.
5. Notwithstanding the other conditions of this Section III.P.,
with respect to Client Plans which as of the date of the Acquisition
had in place with BlackRock Managers either directed brokerage and/or
wrap fee arrangements which required the BlackRock Managers to use an
MPS as a Securities broker, BlackRock Managers may continue to use that
MPS as the Securities broker for such Client Plans under the brokerage
procedures in place as of the date of the Acquisition; provided that a
list of all of such arrangements has been provided to the ECO and no
material changes are made to such arrangements.
Q. Use by BlackRock Managers of Exchanges and Automated Trading
Systems on Behalf of Client Plans. Relief under Section I of this
exemption is available for the direct or indirect use by, or directing
of trades to, U.S. and non-U.S. exchanges or U.S. Automated Trading
Systems (ATS) in which one or more MPSs have an ownership interest by
BlackRock Managers for Client Plans, provided that:
1. Prior to January 1, 2011,
(a) No single MPS (together with other members of the same MPS
Group) has a greater than twenty percent (20%) ownership interest in
the exchange or the ATS; and
(b) the ECO does not make a determination, summarized in the ECO
quarterly report, that a BlackRock Manager or all BlackRock Managers
must discontinue such direct or indirect use of or the directing of
trades to any such exchange or ATS on the basis that either the amount
of use or the volume of trades is unwarranted or not in the interests
of the Client Plans and their participants and beneficiaries.
2. Effective on and after January 1, 2011, either
(a) No one MPS (together with other members of the same MPS Group)
has (i) A greater than ten percent (10%) ownership interest in the
exchange or ATS or (ii) the BlackRock Managers do not know the level of
such ownership interest; or
(b) if a BlackRock Manager knows that an MPS (together with other
members of the same MPS Group) has an ownership interest that is
greater than ten percent (10%) but not greater than twenty percent
(20%) in the exchange or ATS,
(i) The ECO makes a determination, summarized in the ECO quarterly
report, that there is no reason for a BlackRock Manager or all
BlackRock Managers to discontinue such direct or indirect use of or the
directing of trades to any such exchange or ATS on the basis that the
amount of use or the volume of trades is unwarranted or not in the
interests of the Client Plans and their participants and beneficiaries,
and does not make a determination that a BlackRock Manager or all
BlackRock Managers must discontinue such direct or indirect use of or
the directing of trades to any such exchange or ATS on the basis that
the amount of use or the volume of trades is unwarranted or not in the
interests of the Client Plans and their participants and beneficiaries.
The IM may request any additional information relating to any such
determination summarized in the ECO quarterly report and may, after
consultation with the ECO, make a determination that a BlackRock
Manager or all BlackRock Managers must discontinue such direct or
indirect use of or the directing of trades to any such exchange or ATS
on the basis that the amount of use or the volume of trades is
unwarranted or not in the interests of the Client Plans and their
participants and beneficiaries;
(ii) the price and compensation associated with any purchases or
sales utilizing such exchange or ATS are not greater than the price and
compensation associated with an arm's length transaction with an
unrelated party;
(iii) all such exchanges and ATSs shall be situated within the
jurisdiction of the U.S. District Courts and regulated by a U.S.
Federal regulatory body or a U.S. federally approved self-regulatory
body, provided that this condition shall not apply to the direct or
indirect use of or the directing of trades to an exchange in a country
other than the United States which is regulated by a government
regulator or a government approved self-regulatory body in such country
and which involves trading in Securities (including the lending of
Securities) or futures contracts; and
(iv) Special Notice of all of the foregoing conditions for relief
under this Section II.Q.2.(b) must be provided in accordance with the
terms of Section II.F.
R. Purchases in the Secondary Market of Common and Preferred Stock
Issued by an MPS by BlackRock Managers for Client Plans Invested in an
Index Account or Fund, or a Model-Driven Account or Fund. Relief under
Section I of this exemption is available for the purchase in the
secondary market of common or preferred stock issued by an MPS by
BlackRock Managers for Client Plans invested in an Index Account or
Fund, or a Model-Driven Account or Fund provided that:
1. Such purchase is for the sole purpose of maintaining
quantitative conformity with the weight of such Securities prescribed
by the relevant Index, for Index Accounts or Funds, or the weight of
such Securities prescribed by the relevant Model, for Model-Driven
Accounts or Funds, and such purchase
[[Page 50649]]
is reasonably calculated not to exceed the purchase amount necessary
for such Model or quantitative conformity by more than a de minimis
amount.
2. Such purchase is not made from the issuing MPS.
3. Notwithstanding Section III.R.2.,
(a) With respect to Client Plans which as of the date of the
Acquisition had in place with a BlackRock Manager either a directed
brokerage and/or wrap fee arrangement which required the BlackRock
Manager to use a certain MPS as a Securities broker, the BlackRock
Manager may purchase MPS common or preferred stock through such MPS,
including, if applicable, the issuing MPS, acting as agent under the
brokerage arrangement in place as of the date of the Acquisition;
provided that, a list of all of such arrangements has been provided to
the ECO and no material changes are made to such arrangements. Special
Notice of all of the foregoing conditions for relief under this Section
III.R. must be provided in accordance with the terms of Section II.F.
(b) BlackRock Managers may rely on other exemptive relief when
acquiring stock of an MPS for Client Plans through an MPS broker,
including the issuing MPS.
S. Purchase in the Secondary Market of Common and Preferred Stock
Issued by an MPS by BlackRock Managers for Client Plans Invested in an
Other Account or Fund. Relief under Section I of this exemption is
available for the purchase in the secondary market of common or
preferred stock issued by an MPS by BlackRock Managers for Client Plans
invested in an Other Account or Fund provided that:
1. Such purchase is not made from the issuing MPS.
2. Notwithstanding Section III.S.1.,
(a) With respect to Client Plans which as of the date of the
Acquisition had in place with a BlackRock Manager either a directed
brokerage and/or wrap fee arrangement which required the BlackRock
Manager to use a certain MPS as a Securities broker, the BlackRock
Manager may purchase MPS common or preferred stock through such MPS,
including if applicable, the issuing MPS, acting as agent under the
brokerage arrangements in place as of the date of the Acquisition;
provided that, a list of all of such arrangements has been provided to
the ECO and no material changes are made to such arrangements. Special
Notice of all of the foregoing conditions for relief under this Section
III.S. must be provided in accordance with the terms of Section II.F.
(b) BlackRock Managers may rely on other exemptive relief when
acquiring stock of an MPS for Client Plans under this Section III.S.
through an MPS broker, including the issuing MPS.
3. With respect to Client Plans described in Section III.S.2.(a),
the ECO Function periodically monitors purchases of MPS stock for such
Client Plans to ensure that the amount of stock of an MPS purchased for
such Client Plans is not disproportionate to the amount of such stock
of the same MPS purchased for Client Plans invested in Other Accounts
or Funds not subject to directed brokerage and/or wrap fee arrangements
and described in Section III.S.2.(a).
4. As a consequence of a purchase of MPS stock, the class of stock
purchased does not constitute more than five percent (5%) of the Other
Account or Fund. In the case of a Pooled Fund, the class of stock
purchased and attributed to each Client Plan does not exceed five
percent (5%) of such Client Plan's proportionate interest in the Pooled
Fund.
5. Aggregate daily purchases of a class of MPS stock for Client
Plans do not exceed the greater of (i) Fifteen percent (15%) of the
aggregate average daily trading volume (ADTV) for the previous ten (10)
trading days, or (ii) fifteen percent (15%) of trading volume on the
date of the purchase. These volume limitations must be met on a
portfolio manager by portfolio manager basis unless purchases are
coordinated among portfolio managers, in which case the limitations are
applied to the coordinated purchase.\23\ Any coordinated purchases of
the same class of MPS stock in the secondary market for Index Accounts
or Funds or for Model-Driven Accounts or Funds must be taken into
account when applying these ADTV limitations on purchases for an Other
Account or Fund; provided, however, if coordinated purchases for Index
Accounts or Funds, or for Model-Driven Accounts or Funds, would cause
the fifteen percent (15%) limitation to be exceeded, BlackRock Managers
can nonetheless acquire for Other Accounts or Funds up to the greater
of five percent (5%) of ADTV for the previous ten (10) trading days or
five percent (5%) of trading volume on the day of the Covered
Transaction. For purposes of this Section III.S.5., cross trades of MPS
equity Securities which comply with an applicable statutory or
administrative prohibited transaction exemption are not taken into
account.
---------------------------------------------------------------------------
\23\ For example, if two or more portfolio managers send their
purchase orders to the same trading desk and the traders on that
trading desk coordinate the purchases of the same MPS equity
Securities, the limitations apply to the trading desk; if two or
more portfolio managers or two or more trading desks are
coordinating purchases of MPS equity Securities, the limitations are
applied across the group of portfolio managers or traders who are
coordinating the purchase orders.
---------------------------------------------------------------------------
6. The ECO Function monitors the volume limits on purchases of MPS
stock described in Section III.S.5. and provides a monthly report to
the IM with respect to such purchases and limits. The IM shall impose
lower volume limitations and take other appropriate action with respect
to such purchases if the IM determines on the basis of these reports by
the ECO and publicly available information materially related to the
trading of the Securities of an MPS on its primary listing exchange (or
market) that the purchases described have a material positive impact on
the market price for such Securities.
T. The Provision of Custodial, Administrative and Similar
Ministerial Services by an MPS for a Client Plan as a Consequence of a
BlackRock Manager Exercising Investment Discretion on Behalf of the
Client Plan or Rendering Investment Advice to the Client Plan. Relief
under Section I of this exemption is available for the provision of
custodial, administrative and similar ministerial services by an MPS
for a Client Plan as a consequence of a BlackRock Manager exercising
investment discretion or rendering investment advice (in each case,
within the meaning of ERISA section 3(21)(A)) for or to such Client
Plan, provided that (1) the terms of such service are comparable to
those a Client Plan would receive in an arm's length transaction with
an unrelated party and (2) the ECO approves in advance and in writing
(which may include electronic communication if retrievable by the ECO)
the choice or recommendation of the MPS by the BlackRock Manager and
the terms of the services, including but not limited to, the associated
fees.
U. Purchases, Sales and Holdings by BlackRock Managers for Client
Plans of Commercial Paper Issued by ABCP Conduits, When an MPS Has One
or More Roles. Relief under Section I of this exemption is available
for the purchase or sale, including purchases from or sales to an MPS,
and the holding by BlackRock Managers acting on behalf of Client Plans
of commercial paper issued by an ABCP Conduit with respect to which an
MPS acts as seller, placement agent, and/or in some continuing capacity
such as program administrator, provider of liquidity or provider of
credit support, provided that:
1. (a)(i) The Client Plan is not an MPS Plan of the MPS with whom
the purchase or sale takes place, or an MPS Plan of another member of
the same
[[Page 50650]]
MPS Group as such MPS, and (ii) the Client Plan is not an MPS Plan of
an MPS which is acting in a continuing capacity, or an MPS Plan of
another member of the same MPS Group as such MPS, and (iii) no MPS
described in Sections III.U.1.(a)(i) or (ii), or another member of the
same MPS Group as such MPS, has discretionary authority or control with
respect to the Client Plan assets involved in the Covered Transaction
or renders investment advice (within the meaning of 29 CFR 2510.3-
21(c)) with respect to such assets;
(b) This Section III.U.1 shall be deemed satisfied notwithstanding
the investment of assets of an MPS Plan of the MPS, which is placement
agent or otherwise is acting in a continuing capacity, in a Pooled Fund
as of the date of the Acquisition, which Pooled Fund is a bank-
maintained common or collective trust, provided that such assets when
aggregated with the assets of all other MPS Plans of the same MPS Group
as the MPS which is the placement agent or otherwise is acting in a
continuing capacity and invested in such Pooled Fund, at all times
since the date of the Acquisition, constitute or are deemed pursuant to
Section II.A.3.(b) to constitute less than ten percent (10%) of such
Pooled Fund.
2. The commercial paper has a stated maturity date of nine months
or less from the date of issue, exclusive of days of grace, or is a
renewal of an issue of commercial paper the maturity of which is
likewise limited;
3. At the time it is acquired, the commercial paper is ranked in
the highest rating category by at least one of the Rating
Organizations;
4. If the seller or purchaser of the ABCP Conduit commercial paper
is an MPS, secondary market purchases and sales are pursuant to the
Three Quote Process, provided that, for purposes of this Section
III.U.4., firm quotes on comparable short-term money market instruments
rated in the same category may be used as quotes for purposes of the
Three Quote Process;
5. If an MPS performs a continuing role and there is a default, the
taking of or refraining from taking of any action by the responsible
BlackRock Manager which could have a material positive or negative
effect upon the MPS is decided upon by the IM;
No BlackRock Entity is to be regarded as an affiliate of any MPS
for purposes of the Covered Transactions set forth in this Section
III.U.
V. Purchase, Holding and Disposition by BlackRock Managers for
Client Plans of Shares of Exchange-Traded Open-End Investment Companies
Registered Under the 1940 Act (ETF) Managed by BlackRock Managers.
Relief under Section I of this exemption is available for the purchase,
holding and disposition by BlackRock Managers for Client Plans of
shares of an ETF managed by a BlackRock Manager provided that:
1. (a) the BlackRock Manager purchases such ETF shares from or
through a person other than an MPS or a BlackRock Entity, and
(b) no purchase is exempt under Section I of this exemption if the
BlackRock Manager portfolio manager acting for the Client Plan knows or
should know that the shares to be acquired for Client Plans are
Creation Shares, or that the purchase for Client Plans will result in
new Creation Shares.
2. Notwithstanding Section III.V.1.(a), BlackRock Managers may
purchase shares of ETFs managed by a BlackRock Manager through an MPS
acting as agent for Client Plans which, as of the date of the
Acquisition, had in place with a BlackRock Manager either a directed
brokerage and/or wrap fee arrangement which required the BlackRock
Manager to use such MPS as a Securities broker; provided that, (i) A
list of all of such arrangements has been provided to the ECO and no
material changes are made to such arrangements and (ii) the ECO
Function periodically monitors purchases of Securities to ensure that
the amount of BlackRock-managed ETF shares purchased for Client Plans
under Section III.V.2. is not disproportionate to the amount of
BlackRock-managed ETF shares purchased for Client Plans pursuant to
Section III.V.1. Special Notice of all of the foregoing conditions for
relief under this Section III.V.2. must be provided in accordance with
the terms of Section II.F.
W. Investment of Assets of MPS Plans in a BlackRock Bank-Maintained
Common or Collective Trust as of the Date of the Acquisition--Fees Paid
Outside the Trust. Relief under Section I of this exemption is
available with respect to MPS Plans invested in Pooled Funds as of the
date of the Acquisition, which Pooled Funds are common or collective
trusts maintained by BlackRock Institutional Trust Company, N.A., and
in connection with which investments such MPS Plans pay management fees
directly to BlackRock Managers until the earliest of (i) Termination of
the investment in the Pooled Fund, (ii) transition of the fee
arrangement to one under which the BlackRock Manager's fees are paid
from assets of the Pooled Fund or by the MPS Plan sponsor, or (iii)
December 31, 2010 (Unwind Period 2) provided that:
1. The fees paid by such MPS Plans to the BlackRock Managers during
Unwind Period 2 are neither more than reasonable compensation nor
significantly more than fees paid to the BlackRock Managers by other,
comparable Client Plans invested in such Pooled Funds which are not MPS
Plans; and
2. The MPS Plans do not pay to BlackRock Managers during Unwind
Period 2 any type of fee or other compensation that was not charged to
or otherwise borne by MPS Client Plan investors in the Pooled Fund as
of the date of the Acquisition.
During Unwind Period 2, the IM must review the investment by the
MPS Plans in the Pooled Fund; all fees paid by the affected MPS Plans
to BlackRock Managers must be disclosed to the IM; the IM must review
the offering documents for the Pooled Funds and any advisory or
management agreements with BlackRock Managers; and any material change
in the terms and conditions of the investment by the affected MPS Plans
in the Pooled Fund, including but not limited to changes to fees paid
to BlackRock Managers or the terms of the advisory or management
agreements with BlackRock Managers, must be promptly disclosed to the
IM and be subject to the IM's written approval. Further, during Unwind
Period 2, each such MPS Plan may terminate its investment in the Pooled
Fund upon no more than thirty (30) days notice and without incurring a
redemption fee paid to a BlackRock Manager.
X. Purchase, Holding and Disposition of BlackRock Equity Securities
in the Secondary Market by BlackRock Managers for an Index Account or
Fund, or a Model-Driven Account or Fund, Including Buy-Ups.\24\ Relief
under Section I of this exemption is available for the purchase,
holding and disposition of common or preferred stock issued by
BlackRock in the secondary market by BlackRock Managers for Client
Plans in an Index Account or Fund, or in a Model-Driven Account or Fund
provided that:
---------------------------------------------------------------------------
\24\ BlackRock requested such relief for the avoidance of any
issue about the necessity for such relief in particular
circumstances; the Department is not opining on the need for such
relief herein.
---------------------------------------------------------------------------
1. The acquisition, holding and disposition of the BlackRock
Securities is for the sole purpose of maintaining quantitative
conformity with the weight of such Securities prescribed by the
relevant Index, for Index Accounts or Funds, or the weight of such
Securities prescribed by the relevant Model, for Model-Driven Accounts
or Funds, and
[[Page 50651]]
such purchase is reasonably calculated not to exceed the purchase
amount necessary for such Model or quantitative conformity by more than
a de minimis amount.
2. Any acquisition of BlackRock Securities does not involve any
agreement, arrangement or understanding regarding the design or
operation of the account or fund acquiring the BlackRock Securities
which is intended to benefit BlackRock or any party in which BlackRock
may have an interest.
3. With respect to an acquisition of BlackRock Securities by such
an account or fund which constitutes a Buy-Up,
(a) The acquisition is made on a single trading day from or through
one broker-dealer, which broker-dealer is not an MPS or a BlackRock
Entity; provided, however, that if the volume limitation in Section
III.X.3.(d) below cannot be satisfied in a single trading day, the
acquisition will be completed in as few trading days as possible in
compliance with such volume limitation and such trades will be reviewed
by the ECO and reported to the IM;
(b) based upon the best available information, the acquisition is
not the opening transaction of a trading day and is not made in the
last half hour before the close of the trading day;
(c) the price paid by the BlackRock Manager is not higher than the
lowest current independent offer quotation, determined on the basis of
reasonable inquiry from broker-dealers who are not MPSs or BlackRock
Entities;
(d) aggregate daily purchases do not exceed fifteen percent (15%)
of aggregate average daily trading volume for the Security, as
determined by the greater of (i) The trading volume for the Security
occurring on the applicable Recognized Securities Exchange and/or
Automated Trading System on the date of the transactions, or (ii) the
aggregate average daily trading volume for the Security occurring on
the applicable Recognized Securities Exchange and/or Automated Trading
System for the previous ten (10) trading days, both based on the best
information reasonably available at the time of the transaction. These
volume limitations are applied on a portfolio manager by portfolio
manager basis unless purchases of BlackRock Securities are coordinated
by the portfolio managers or trading desks, in which case the
limitations are aggregated for the coordinating portfolio managers or
trading desks. Provided further, if BlackRock, without Client Plan
direction or consent, initiates a new Index Account or Fund or Model-
Driven Account or Fund on its own accord, with BlackRock Securities
included therein, the volume restrictions for such new account or fund
shall be determined by aggregating all portfolio managers purchasing
for such new account of fund. Cross trades of BlackRock Securities
which comply with an applicable statutory or administrative prohibited
transaction exemption are not included in the amount of aggregate daily
purchases to which the limitations of this Section III.X. apply;
(e) All purchases and sales of BlackRock Securities occur either
(i) On a Recognized Securities Exchange, (ii) through an Automated
Trading System operated by a broker-dealer that is not a BlackRock
Entity and is either registered under the 1934 Act, and thereby subject
to regulation by the Securities and Exchange Commission, or subject to
regulation and supervision by the Securities and Futures Authority of
the UK or another applicable regulatory authority, which provides a
mechanism for customer orders to be matched on an anonymous basis
without the participation of a broker-dealer, or (iii) through an
Automated Trading System that is operated by a Recognized Securities
Exchange, pursuant to the applicable securities laws, and provides a
mechanism for customer orders to be matched on an anonymous basis
without the participation of a broker-dealer; and
(f) the ECO designs acquisition procedures for BlackRock Managers
to follow in Buy-Ups, which the IM approves in advance of the
commencement of any Buy-Up, and the ECO Function monitors BlackRock
Manager's compliance with such procedures.
Y. Acquisition by BlackRock Managers of Financial Guarantees,
Indemnities and Similar Protections for Client Plans from MPSs. Relief
under Section I of this exemption is available for the provision by an
MPS of a financial guarantee, indemnification arrangement or similar
instrument or arrangement providing protection to a Client Plan against
possible losses or risks provided that:
1. The terms of the arrangement (including the identity of the
provider) are approved by a fiduciary of the Client Plan which is
independent of the MPS providing such protection and of BlackRock;
2. The compensation owed the MPS under the arrangement is paid by a
BlackRock Entity and not paid out of the assets of the Client Plan;
3. In the event a Client Plan or the ECO concludes an event has
occurred which should trigger the obligations of the MPS under the
arrangement, and the MPS disagrees to any material extent, the IM
determines the steps the BlackRock Manager must take to protect the
interests of the Client Plan; and
4. The MPS providing the arrangement is capable of being sued in
United States courts, has contractually agreed to be subject to
litigation in the United States with respect to any matter relating to
this Section III.Y., and has sufficient assets in the United States to
honor its commitments under the arrangement.
Section IV: Affiliated Underwritings and Affilliated Servicing
A. Affiliated Underwritings
1. The Securities to be purchased are either:
(a) Part of an issue registered under the 1933 Act, or, if
Securities to be purchased are part of an issue that is exempt from
such registration requirement, such Securities:
(i) Are issued or guaranteed by the United States or by any person
controlled or supervised by and acting as an instrumentality of the
United States pursuant to authority granted by the Congress of the
United States,
(ii) are issued by a bank,
(iii) are exempt from such registration requirement pursuant to a
Federal statute other than the 1933 Act, or
(iv) are the subject of a distribution and are of a class which is
required to be registered under section 12 of the 1934 Act, and are
issued by an issuer that has been subject to the reporting requirements
of section 13 of the 1934 Act for a period of at least ninety (90) days
immediately preceding the sale of such Securities and that has filed
all reports required to be filed thereunder with the SEC during the
preceding twelve (12) months; or
(b) part of an issue that is an Eligible Rule 144A Offering. Where
the Eligible Rule 144A Offering of the Securities is of equity
securities, the offering syndicate shall obtain a legal opinion
regarding the adequacy of the disclosure in the offering memorandum; or
(c) municipal bonds taxable by the United States, including Build
America Bonds created under section 54AA of the Code or successor
thereto, under which the United States pays a subsidy to the state or
local government issuer, but not including Building America Bonds which
provide a tax credit to investors.
2. The Securities to be purchased are purchased prior to the end of
the first day on which any sales are made, pursuant to that offering,
at a price that
[[Page 50652]]
is not more than the price paid by each other purchaser of the
Securities in that offering or in any concurrent offering of the
Securities, except that:
(a) If such Securities are offered for subscription upon exercise
of rights, they may be purchased on or before the fourth day preceding
the day on which the rights offering terminates; or
(b) if such Securities are debt Securities, they may be purchased
at a price that is not more than the price paid by each other purchaser
of the Securities in that offering or in any concurrent offering of the
Securities and may be purchased on a day subsequent to the end of the
first day on which any sales are made, pursuant to that offering,
provided that the interest rates, as of the date of such purchase, on
comparable debt Securities offered to the public subsequent to the end
of the first day on which any sales are made and prior to the purchase
date are less than the interest rate of the debt Securities being
purchased; and
3. The Securities to be purchased are offered pursuant to an
underwriting or selling agreement under which the members of the
syndicate are committed to purchase all of the Securities being
offered, except if:
(a) such Securities are purchased by others pursuant to a rights
offering; or
(b) such Securities are offered pursuant to an over-allotment
option.
4. The issuer of the Securities to be purchased pursuant to this
exemption must have been in continuous operation for not less than
three (3) years, including the operation of any predecessors, unless
the Securities to be purchased:
(a) Are non-convertible debt Securities rated in one of the four
highest rating categories by a Rating Organization; provided that none
of the Rating Organizations rates such Securities in a category lower
than the fourth highest rating category; or
(b)(i) are debt Securities issued or fully guaranteed by the United
States or by any person controlled or supervised by and acting as an
instrumentality of the United States pursuant to authority granted by
the Congress of the United States; or
(ii) are municipal bonds taxable by the United States, including
Build America Bonds created under section 54AA of the Code or successor
thereto, under which the United States pays a subsidy to the state or
local government issuer, but not including Building America Bonds which
provide a tax credit to investors; or
(c) are debt Securities which are fully guaranteed by a guarantor
that has been in continuous operation for not less than three (3)
years, including the operation of any predecessors, provided that such
guarantor has issued other Securities registered under the 1933 Act; or
if such guarantor has issued other Securities which are exempt from
such registration requirement, such guarantor has been in continuous
operation for not less than three (3) years, including the operation of
any predecessors, and such guarantor is:
(i) a bank;
(ii) an issuer of Securities which are exempt from such
registration requirement, pursuant to a Federal statute other than the
1933 Act; or
(iii) an issuer of Securities that are the subject of a
distribution and are of a class which is required to be registered
under section 12 of the 1934 Act, and are issued by an issuer that has
been subject to the reporting requirements of section 13 of the 1934
Act for a period of at least ninety (90) days immediately preceding the
sale of such Securities and that has filed all reports required to be
filed hereunder with the SEC during the preceding twelve (12) months.
5. The aggregate amount of Securities of an issue purchased,
pursuant to this exemption, by the BlackRock Manager with: (i) the
assets of all Client Plans; and (ii) the assets, calculated on a pro
rata basis, of all Client Plans investing in Pooled Funds managed by
the BlackRock Manager; and (iii) the assets of plans to which the
BlackRock Manager renders investment advice within the meaning of 29
CFR 2510.3 21(c) does not exceed:
(a) ten percent (10%) of the total amount of the Securities being
offered in an issue, if such Securities are equity securities;
(b) thirty five percent (35%) of the total amount of the Securities
being offered in an issue, if such Securities are Asset-Backed
Securities rated in one of the three highest rating categories by at
least one of the Rating Organizations; provided that none of the Rating
Organizations rates such Securities in a category lower than the third
highest rating category;
(c) thirty five percent (35%) of the total amount of the Securities
being offered in an issue, if such Securities are debt Securities rated
in one of the four highest rating categories by at least one of the
Rating Organizations; provided that none of the Rating Organizations
rates such Securities in a category lower than the fourth highest
rating category; or
(d) twenty five percent (25%) of the total amount of the Securities
being offered in an issue, if such Securities are debt Securities rated
in the fifth or sixth highest rating categories by at least one of the
Rating Organizations; provided that none of the Rating Organizations
rates such Securities in a category lower than the sixth highest rating
category; and
(e) the assets of any single Client Plan (and the assets of any
Client Plans investing in Pooled Funds) may not be used to purchase any
Securities being offered, if such Securities are debt Securities rated
lower than the sixth highest rating category by any of the Rating
Organizations;
(f) notwithstanding the percentage of Securities of an issue
permitted to be acquired, as set forth in Subsections A.(5)(a)-(d) of
this Section IV., the amount of Securities in any issue (whether equity
or debt Securities or Asset-Backed Securities) purchased, pursuant to
this exemption, by the BlackRock Manager on behalf of any single Client
Plan, either individually or through investment, calculated on a pro
rata basis, in a Pooled Fund may not exceed three percent (3%) of the
total amount of such Securities being offered in such issue, provided
that a Sub-Advised Pooled Fund described in Section VI.AAA. as a whole
may purchase up to three percent (3%) of an issue; and
(g) If purchased in an Eligible Rule 144A Offering, the total
amount of the Securities being offered for purposes of determining the
percentages, described, above, in Section IV.A.5.(a)-(d) and (f), is
the total of:
(i) The principal amount of the offering of such class of
Securities sold by underwriters or members of the selling syndicate to
QIBs; plus
(ii) The principal amount of the offering of such class of
Securities in any concurrent public offering.
6. The aggregate amount to be paid by any single Client Plan in
purchasing any Securities which are the subject of this exemption,
including any amounts paid by any Client Plan in purchasing such
Securities through a Pooled Fund, calculated on a pro rata basis, does
not exceed three percent (3%) of the fair market value of the net
assets of such Client Plan, as of the last day of the most recent
fiscal quarter of such Client Plan prior to such transaction, provided
that a Sub-Advised Pooled Fund as a whole may pay up to one percent
(1%) of fair market value of its net assets in purchasing such
Securities.
7. The covered transactions are not part of an agreement,
arrangement, or understanding designed to benefit any BlackRock Entity
or MPS.
8. Each Client Plan shall have total net assets with a value of at
least $50 million (the $50 Million Net Asset Requirement). For purposes
of engaging
[[Page 50653]]
in covered transactions involving an Eligible Rule 144A Offering, each
Client Plan shall have total net assets of at least $100 million in
Securities of issuers that are not affiliated with such Client Plan
(the $100 Million Net Asset Requirement).
For purposes of a Pooled Fund engaging in an Affiliated
Underwriting, each Client Plan in such Pooled Fund other than a Sub-
Advised Pooled Fund shall have total net assets with a value of at
least $50 million. Notwithstanding the foregoing, if each such Client
Plan in a Pooled Fund other than a Sub-Advised Pooled Fund does not
have total net assets with a value of at least $50 million, the $50
Million Net Asset Requirement will be met, if fifty percent (50%) or
more of the units of beneficial interest in such Pooled Fund are held
by investors, each of which has total net assets with a value of at
least $50 million.
For purposes of a Pooled Fund engaging in an Affiliated
Underwriting involving an Eligible Rule 144A Offering, each Client Plan
in such Pooled Fund other than a Sub-Advised Pooled Fund shall have
total net assets of at least $100 million in Securities of issuers that
are not affiliated with such Client Plan. Notwithstanding the
foregoing, if each such Client Plan in such Pooled Fund other than a
Sub-Advised Pooled Fund does not have total net assets of at least $100
million in Securities of issuers that are not affiliated with such
Client Plan, the $100 Million Net Asset Requirement will be met if
fifty percent (50%) or more of the units of beneficial interest in such
Pooled Fund are held by investors, each of which have total net assets
of at least $100 million in Securities of issuers that are not
affiliated with such investor, and the Pooled Fund itself qualifies as
a QIB.
For purposes of the net asset requirements described, above in
Section IV.A.8., where a group of Client Plans is maintained by a
single employer or controlled group of employers, as defined in ERISA
section 407(d)(7), the $50 Million Net Asset Requirement (or in the
case of an Eligible Rule 144A Offering, the $100 Million Net Asset
Requirement) may be met by aggregating the assets of such Client Plans,
if the assets of such Client Plans are pooled for investment purposes
in a single master trust.
9. No more than twenty percent (20%) of the assets of a Pooled
Fund, at the time of a covered transaction, are comprised of assets of
In-House Plans for which the BlackRock Manager, or a BlackRock Entity
exercises investment discretion.
10. The BlackRock Manager must be a QPAM, and, in addition to
satisfying the requirements for a QPAM under section VI(a) of PTE 84-
14, the BlackRock Manager must also have total client assets under its
management and control in excess of $5 billion, as of the last day of
its most recent fiscal year and shareholders' or partners' equity in
excess of $1 million.
11. The BlackRock Manager maintains, or causes 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 persons described below in
Section IV.A.12.(a) to determine whether the conditions of this
exemption have been met, except that:
(a) No party in interest with respect to a plan which engages in
the covered transactions, other than the BlackRock Manager, shall be
subject to a civil penalty under ERISA section 502(i) or the taxes
imposed by Code sections 4975(a) and (b), if such records are not
maintained, or not available for examination as required below by
Section IV.A.12.(a); and
(b) A separate prohibited transaction shall not be considered to
have occurred if, due to circumstances beyond the control of the
BlackRock Manager, such records are lost or destroyed prior to the end
of the six-year period.
12. (a) Except as provided below, in Section IV.A.12.(b), and
notwithstanding the provisions of subsections (a)(2) and (b) of ERISA
section 504, the records referred to, above, in Section IV.A.11. are
unconditionally available at their customary location for examination
during normal business hours by:
(i) Any duly authorized employee or representative of the
Department, the Internal Revenue Service, or the SEC;
(ii) Any fiduciary of any plan that engages in the covered
transactions, or any duly authorized employee or representative of such
fiduciary;
(iii) 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
(iv) Any participant or beneficiary of a plan that engages in the
covered transactions, or duly authorized employee or representative of
such participant or beneficiary;
(b) None of the persons described in Sections IV.A.12.(a)(ii)
through (iv) shall be authorized to examine trade secrets of the
BlackRock Manager, or commercial or financial information which is
privileged or confidential; and
(c) Should the BlackRock Manager refuse to disclose information on
the basis that such information is exempt from disclosure, pursuant to
Section IV.A.12.(b), the BlackRock Manager 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
Department may request such information.
B. Affiliated Servicing
1. The Securities are CMBS that are rated in one of the three
highest rating categories by a Rating Organization; provided that none
of the Rating Organizations rates such Securities in a category lower
than the third highest rating category.
2. The purchase of the CMBS meets the conditions of an applicable
Underwriter Exemption.
3. (a) The aggregate amount of CMBS of an issue purchased, pursuant
to this exemption, by the BlackRock Manager with:
(i) The assets of all Client Plans; and
(ii) The assets, calculated on a pro rata basis, of all Client
Plans and In-House Plans investing in Pooled Funds managed by the Asset
Manager; and
(iii) The assets of plans to which the Asset Manager renders
investment advice, within the meaning of 29 CFR Sec. 2510.3-21(c), does
not exceed thirty five percent (35%) of the total amount of the CMBS
being offered in an issue.
(b) Notwithstanding the percentage of CMBS of an issue permitted to
be acquired, as set forth in Section IV.B.3.(a) of this exemption, the
amount of CMBS in any issue purchased, pursuant to this exemption, by
the Asset Manager on behalf of any single Client Plan, either
individually or through investment, calculated on a pro rata basis, in
a Pooled Fund may not exceed three percent (3%) of the total amount of
such CMBS being offered in such issue, and
(c) If purchased in an Eligible Rule 144A Offering, the total
amount of the CMBS being offered for purposes of determining the
percentages described in Section IV.B.3(a), is the total of:
(i) The principal amount of the offering of such class of CMBS sold
by underwriters or members of the selling syndicate to QIBs; plus
(ii) The principal amount of the offering of such class of CMBS in
any concurrent public offering.
4. The aggregate amount to be paid by any single Client Plan in
purchasing any CMBS which are the subject of this exemption, including
any amounts paid by any Client Plan in purchasing such
[[Page 50654]]
CMBS through a Pooled Fund, calculated on a pro rata basis, does not
exceed three percent (3%) of the fair market value of the net assets of
such Client Plan, as of the last day of the most recent fiscal quarter
of such Client Plan prior to such transaction.
5. The Covered Transactions under this Section IV.B. are not part
of an agreement, arrangement, or understanding designed to benefit any
MPS.
6. The requirements of Sections IV.A.8. through 12. are met.
Section V: Correction Procedures
A. 1. The ECO shall monitor Covered Transactions and shall
determine whether a particular Covered Transaction constitutes a
Violation. The ECO shall notify the IM within five (5) business days
following the discovery of any Violation.
2. The ECO shall make an initial determination as to how to correct
a Violation and place the conclusion of such determination in writing,
with such conclusion disclosed to the IM within five (5) business days
of the placing of the conclusion of such determination in writing.
Following the initial determination, the ECO must keep the IM apprised
on a current basis of the process of correction and must consult with
the IM regarding each Violation and the appropriate form of correction.
The ECO shall report the correction of the Violation to the IM within
five (5) business days following completion of the correction. For
purposes of this Section V.A.2., ``correction'' must be consistent with
ERISA section 502(i) and Code section 4975(f)(5).
3. The IM shall determinate whether it agrees that the correction
of a Violation by the ECO is adequate and shall place the conclusion of
such determination in writing, and, if the IM does not agree with the
adequacy of the correction, the IM shall have the authority to require
additional corrective actions by BlackRock.
4. A summary of Violations and corrections of Violations will be in
the IM's annual compliance report as described in Section II.E.12.
B. Special Correction Procedure
1. If a Covered Transaction which would otherwise constitute a
Violation is corrected under this ``Special Correction Procedure,''
such Covered Transaction shall continue to be exempt under Section I of
this exemption.
2. (a) The Special Correction Procedure is a complete correction of
the Violation no later than fourteen (14) business days following the
date on which the ECO submits the quarterly report to the IM for the
quarter in which the Covered Transaction first would become a non-
exempt prohibited transaction by reason of constituting a Violation if
not for this Section V.B.
(b) Solely for purposes of the Special Correction Procedure,
``correction'' of a Covered Transaction which would otherwise be a
Violation means either:
(i) Restoring the Client Plan to the position it would have been in
had the conditions of the exemption been complied with;
(ii) correction consistent with ERISA section 502(i) and Code
section 4975(f)(5); or
(iii) correction consistent with the Voluntary Fiduciary Correction
Program.\25\
---------------------------------------------------------------------------
\25\ PTE 2002-51, 67 FR 70623 (November 25, 2002), as amended,
71 FR 20135 (April 19, 2006).
---------------------------------------------------------------------------
(c) Other than with respect to the definition of ``correction''
specified above, when utilizing the Special Correction Procedure the
ECO and the IM shall comply with Section V.A.
Section VI: Definitions \26\
---------------------------------------------------------------------------
\26\ The definition of terms herein shall apply equally to the
singular and plural forms of the terms defined. Section headings are
for convenience only.
---------------------------------------------------------------------------
A. ``1933 Act'' means the Securities Act of 1933, as amended.
B. ``1934 Act'' or ``Exchange Act'' means the Securities Exchange
Act of 1934, as amended.
C. ``1940 Act'' means the Investment Company Act of 1940, as
amended.
D. ``$50 Million Net Asset Requirement'' shall have the meaning set
forth in Section IV.A.8. of this exemption.
E. ``$100 Million Net Asset Requirement'' shall have the meaning
set forth in Section IV.A.8. of this exemption.
F. ``ABCP Conduit'' means a special purpose vehicle that acquires
assets from one or more originators and issues commercial paper to
provide funding to the originator(s). Such vehicles are typically
administered by a bank, but is not required to be administered by a
bank, which provides liquidity support (standing ready to purchase the
conduit's commercial paper if it cannot be rolled over) and/or credit
support (committing to cover losses in the event of default). The
program administrator also typically acts as placement agent for the
commercial paper, sometimes together with one or more other placement
agents. Commercial paper issued by such a conduit may be purchased
directly from the program administrator or other placement agent, or
traded on the secondary market with another broker-dealer making a
market in the Securities.
G. ``Acquisition'' means the acquisition by BlackRock of Barclays
Global Investors UK Holdings, Ltd. and its subsidiaries on December 1,
2009.
H. ``Affiliate'' of another person means:
(1) Any person directly or indirectly, through one or more
intermediaries, controlling, controlled by, or under common control
with such person;
(2) Any officer, director, partner, employee, or relative (as
defined in section 3(15) of ERISA) of such other person; and
(3) Any corporation or partnership of which such other person is an
officer, director, partner or employee.
I. ``Asset-Backed Securities'' means Securities which are pass-
through certificates or trust certificates characterized as equity
pursuant to 29 CFR 2510.3-101 that represent a beneficial ownership
interest in the assets of an issuer which is a trust, with any such
trust limited to (1) A single or multi-family residential or commercial
mortgage investment trust, (2) a motor vehicle receivable investment
trust, or (3) a guaranteed governmental mortgage pool certificate
investment trust, and which entitles the holder to payments of
principal, interest and/or other payments made with respect to the
assets of the trust, the corpus or assets of which consist solely or
primarily of secured obligations that bear interest or are purchased at
a discount. For purposes of Section IV.A. of this exemption, Asset-
Backed Securities are treated as debt Securities.
J. ``authorizing fiduciary'' has the meaning set forth in Section
III.M.4(d)(i) of this exemption.
K. ``Automated Trading System'' or ``ATS'' means an electronic
trading system, ECN or electronic clearing network or similar venue
that functions in a manner intended to simulate a Securities exchange
by electronically matching orders from multiple buyers and sellers,
such as an ``alternative trading system'' within the meaning of the
SEC's Reg. ATS (17 CFR part 242.300), as such definition may be amended
from time to time, or an ``automated quotation system'' as described in
Section 3(a)(51)(A)(ii) of the 1934 Act.
L. ``B and C List'' has the meaning set forth in Section III.A.1.
of this exemption.
M. ``BlackRock'' means BlackRock, Inc. and any successors thereof.
N. ``BlackRock Entity'' means BlackRock and any entity directly or
indirectly, through one or more intermediaries, under the control of
[[Page 50655]]
BlackRock, and any other entity which subsequently becomes directly or
indirectly, through one or more intermediaries, under the control of
BlackRock, and successors of the foregoing.
O. ``BlackRock Manager'' means any bank, investment advisor,
investment manager directly or indirectly, through one or more
intermediaries, under the control of BlackRock, and any other bank,
investment advisor, or investment manager which subsequently becomes
directly or indirectly, through one or more intermediaries, under the
control of BlackRock, and successors of the foregoing, including but
not limited to BlackRock Advisors, LLC, BlackRock Financial Management,
Inc., BlackRock Capital Management, Inc., BlackRock Institutional
Management Corporation, BlackRock International, Ltd., State Street
Research and Management Company, BlackRock Realty Advisors, Inc.,
BlackRock Investment Management, LLC, BlackRock Fund Advisors, and
BlackRock Institutional Trust Company, N.A. and any of the investment
advisors and investment manager it controls.
P. ``Buy-Up'' means an initial acquisition of Securities issued by
BlackRock by a BlackRock Manager, if such acquisition exceeds one
percent (1%) of the aggregate daily trading volume for such Security,
for an Index Account or Fund, or a Model-Driven Account or Fund which
is necessary to bring the fund's or account's holdings of such
Securities either to its capitalization-weighted or other specified
composition in the relevant Index, as determined by the organization
maintaining such Index, or to its correct weighting as determined by
the Model.
Q. ``Client Plan'' means any plan subject to ERISA section 406,
Code section 4975 or FERSA section 8477(c) for which a BlackRock
Manager is a fiduciary as described in ERISA section 3(21), including,
but not limited to, any Pooled Fund, MPS Plan, Index Account or Fund,
Model-Driven Account or Fund, Other Account or Fund, or In-House Plan,
except where specified to the contrary.
R. ``CMBS'' means an Asset-Backed Security with respect to which
the assets or corpus of the issuer consist solely or primarily of
obligations secured by commercial real property (including obligations
secured by leasehold interests on commercial real property).
S. ``Code'' means the Internal Revenue Code of 1986, as amended.
T. ``control'' means the power to exercise a controlling influence
over the management or policies of a person other than an individual.
U. ``Covered Transaction'' means each transaction set forth in
Section III by a BlackRock Manager for a Client Plan with, affecting or
involving, directly or indirectly, an MPS and/or a BlackRock Entity.
V. ``Creation Shares'' means new shares in an ETF created by an
exchange of a specified basket of Securities and/or cash to the ETF for
such new shares of the ETF.
W. ``ECO Function'' means the ECO and such other BlackRock Entity
employees in legal and compliance roles working under the supervision
of the ECO in connection with the Covered Transactions. The list of
BlackRock Entity employees shall be shared with the IM from time to
time, not less than quarterly, and such employees will be made
available to discuss the relevant Covered Transactions with the IM to
the extent the IM or the ECO deem it reasonably prudent.
X. ``Electronic Communications Network'' or ``ECN'' means an
electronic system described in Rule 600(b)(23) of Regulation NMS under
the 1934 Act.
Y. ``Eligible Rule 144A Offering'' shall have the same meaning as
defined in SEC Rule 10f-3(a)(4) (17 CFR 270.10f-3(a)(4)) under the 1940
Act.
Z. ``Eligible Securities Depository'' means an eligible securities
depository as that term is defined under Rule 17f-7 of the 1940 Act, as
such definition may be amended from time to time.
AA. ``EPP Correction'' has the meaning set forth in Section II.C.
of this exemption.
BB. ``ERISA'' means the Employee Retirement Income Security Act of
1974, as amended.
CC. ``Exemption Compliance Officer'' or ``ECO'' means an officer of
BlackRock or of a BlackRock Entity appointed by BlackRock or such
BlackRock Entity, subject to the approval of the IM, who is responsible
for compliance with the exemption. The ECO, unless otherwise stated in
this exemption, will be responsible for: monitoring all Covered
Transactions and reviewing compliance with all of the conditions of the
exemption applicable thereto; approving certain Covered Transactions in
advance as required by the terms of the exemption; reviewing reports of
Covered Transactions and the results of sampling of Covered
Transactions; and determining when Covered Transactions transgress the
EPPs and/or constitute a Violation.
DD. ``ETF'' means an exchange-traded open-end investment company
registered under the 1940 Act.
EE. ``Exemption Polices and Procedures'' or ``EPPs'' means the
written policy adopted and implemented by BlackRock for BlackRock
Entities that is reasonably designed to ensure compliance with the
terms of the exemption. The EPPs must reflect the specific requirements
of the exemption, but must also be designed to ensure that the
decisions to enter into Covered Transactions on behalf of Client Plans
with the MPSs are in the interests of Client Plans and their
participants and beneficiaries, including by ensuring to the extent
possible that the terms of each Covered Transaction are at least as
favorable to the Client Plan as the terms generally available in
comparable arm's length transactions with unrelated parties.
FF. ``FERSA'' means the Federal Employees' Retirement System Act of
1986, as amended.
GG. ``FHLMC'' means the Federal Home Loan Mortgage Corporation.
HH. ``Fixed Income Obligations'' means: (1) Fixed income
obligations including structured debt or other instruments
characterized as debt pursuant to 29 CFR 2510.3-101, including, but not
limited to, debt convertible into equity, certificates of deposit and
loans (other than loans with respect to which an MPS is the entity
which acts as lead lender) and (2) guaranteed governmental mortgage
pool certificates within the meaning of 29 CFR 2510.3-101(i). Asset-
Backed Securities are not Fixed Income Obligations for purposes of this
exemption.
II. ``FNMA'' means the Federal National Mortgage Association.
JJ. ``Foreign Bank'' means an institution that has substantially
similar powers to a bank as defined in section 202(a)(2) of the
Investment Advisers Act, as amended, has as of the last day of its most
recent fiscal year, equity capital which is the equivalent of no less
than $200 million, and is:
(1)(a) Registered and regulated under the laws of the Financial
Services Authority in the United Kingdom, or (b)(i) registered and
regulated by a securities commission of a Province of Canada that is a
member of the Canadian Securities Administration, and (ii) is subject
to the oversight of a Canadian self-regulatory authority; or
(2) subject to regulation by the relevant governmental banking
agency(ies) of a country other than the United States and the
regulation and oversight of these banking agencies were applicable to a
bank that received: (i) An individual exemption, granted by the
Department under section 408(a) of ERISA, involving the loan of
securities
[[Page 50656]]
by a plan to a bank or (ii) a final authorization by the Department to
engage in an otherwise prohibited transaction pursuant to Prohibited
Transaction Exemption 96-62, as amended (PTE 96-62), involving the loan
of securities by a plan to a bank. On the date this exemption becomes
effective, the following countries shall qualify for purposes of this
clause (ii): United Kingdom, Canada, Germany, Japan, Australia,
Switzerland, France, the Netherlands and Sweden.
KK. ``Foreign Broker-Dealer'' means a broker-dealer that has, as of
the last day of its most recent fiscal year, equity capital that is the
equivalent of no less than $200 million and is:
(1) Registered and regulated under the laws of the Financial
Services Authority in the United Kingdom;
(2) Registered and regulated by a securities commission of a
Province of Canada that is a member of the Canadian Securities
Administration, and is subject to the oversight of a Canadian self-
regulatory authority; or
(3) Registered and regulated under the relevant securities laws of
a governmental entity of a country other than the United States and
such securities laws and regulation were applicable to a broker-dealer
that received: (a) An individual exemption, granted by the Department
under section 408(a) of ERISA, involving the loan of securities by a
plan to a broker-dealer or (b) a final authorization by the Department
to engage in an otherwise prohibited transaction pursuant to PTE 96-62,
as amended, involving the loan of securities by a plan to a broker-
dealer. On the date this exemption becomes effective, the following
countries shall qualify for purposes of this clause (2): United
Kingdom, Canada, Germany, Japan, Australia, Switzerland, France, the
Netherlands and Sweden.
LL. ``Foreign Collateral'' means:
(1) Securities issued by or guaranteed as to principal and interest
by the following Multilateral Development Banks, the obligations of
which are backed by the participating countries, including the United
States: The International Bank for Reconstruction and Development, the
Inter-American Development Bank, the Asian Development Bank, the
African Development Bank, the European Bank for Reconstruction and
Development and the International Finance Corporation;
(2) Foreign sovereign debt securities provided that at least one
nationally recognized statistical rating organization has rated in one
of its two highest categories either the issue, the issuer or
guarantor;
(3) The British pound, the Canadian dollar, the Swiss franc, the
Japanese yen or the Euro;
(4) Irrevocable letters of credit issued by a Foreign Bank, other
than the borrower or an affiliate thereof, which has a counterparty
rating of investment grade or better as determined by a nationally
recognized statistical rating organization; or
(5) Any type of collateral described in Rule 15c3-3 of the 1934 Act
as amended from time to time provided that the lending fiduciary is a
U.S. Bank or U.S. Broker-Dealer and such fiduciary indemnifies the plan
with respect to the difference, if any, between the replacement cost of
the borrowed Securities and the market value of the collateral on the
date of a borrower default plus interest and any transaction costs
which a plan may incur or suffer directly arising out of a borrower
default. Notwithstanding the foregoing, collateral described in any of
the categories enumerated in section V(e) of Prohibited Transaction
Exemption 2006-16 will be considered U.S. Collateral for purposes of
the exemption.
MM. ``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 option contracts on foreign exchange transactions. Foreign
Exchange Transactions may be either ``spot'', ``forward'' or ``split''
depending on the settlement date of the transaction.
NN. ``GNMA'' means the Government National Mortgage Association.
OO. ``Independent Monitor'' or ``IM'' means an individual or entity
appointed by BlackRock to carry out certain functions set forth in
Sections II, III and V of the exemption and who (or which), given the
number of types of Covered Transactions and the number of actual
individual Covered Transactions potentially covered by the exemption,
must be knowledgeable and experienced with respect to each Covered
Transaction and able to demonstrate sophistication in relevant markets,
instruments and trading techniques relative thereto, and, in addition,
must understand and accept in writing its duties and responsibilities
under ERISA and the exemption with respect to the Client Plans. The IM
must be independent of and unrelated to BlackRock and any MPS. For
purposes of this exemption, such individual or entity will not be
deemed to be independent of and unrelated to BlackRock and the MPSs if:
(1) Such individual or entity directly or indirectly controls, is
controlled by, or is under common control with BlackRock or an MPS;
(2) Such individual or entity, or any employee thereof performing
services in connection with this exemption, or an officer, director,
partner, or highly compensated employee (as defined in Code section
4975(e)(2)(H)) thereof, is an officer, director, partner or highly
compensated employee (as defined in Code section 4975(e)(2)(H)) of
BlackRock or an MPS; or any member of the business segment performing
services in connection with this exemption is a relative of an officer,
director, partner or highly compensated employee (as defined in Code
section 4975(e)(2)(H)) of BlackRock or an MPS.
However, if an individual is a director of the IM and an officer,
director, partner or highly compensated employee (as defined in Code
section 4975(e)(2)(H)) of BlackRock or an MPS, and if he or she
abstains from participation in any of the services performed by the IM
under this exemption, then this Section VI.OO.(2) shall not apply.
For purposes of this Subsection, the term officer means a
president, any senior 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 IM,
BlackRock, or an MPS.
(3) The IM directly or indirectly receives any compensation or
other consideration for the IM's personal account in connection with
any Covered Transaction, except that the IM may receive compensation
from BlackRock for acting as IM as contemplated herein if the amount or
payment of such compensation is reasonable and not contingent upon or
in any way affected by any decision made by the IM while acting as IM;
or
(4) The annual gross revenue received by the IM, during any year of
its engagement, from the MPSs and BlackRock Entities for all services
exceeds the greater of (a) Five percent (5%) of the IM's annual gross
revenue from all sources for its prior tax year, or, (b) one percent
(1%) of the annual gross revenue of the IM and its majority shareholder
from all sources for their prior tax year.
PP. ``Index'' means an equity or debt Securities or commodities
index that represents the investment performance of a specific segment
of the market for equity or debt Securities or commodities in the
United States and/or an individual foreign country or any
[[Page 50657]]
collection of foreign countries, but only if--
(1) The organization creating and maintaining the index is:
(a) Engaged in the business of providing financial information,
evaluation, advice or Securities brokerage services to institutional
clients,
(b) a publisher of financial news or information, or
(c) a public Securities exchange or association of Securities
dealers; and
(2) The index is created and maintained by an organization
independent of all BlackRock Entities. For purposes of this definition
of ``Index,'' every BlackRock Entity is deemed to be independent of
every MPS.
(3) The index is a generally accepted standardized index of
Securities or commodities which is not specifically tailored for the
use of a BlackRock Manager(s).
(4) If the organization creating, providing or maintaining the
Index is an MPS:
(a) such Index must be widely-used in the market by independent
institutional investors other than pursuant to an investment management
or advisory relationship with a BlackRock Manager, and must be prepared
or applied by such MPS in the same manner as for customers other than a
BlackRock Manager(s);
(b) BlackRock must certify to the ECO whether, in its reasonable
judgment, such Index is widely-used in the market. In making this
determination, BlackRock shall take into consideration factors such as
(i) Publication of summary Index information by the MPS providing the
Index, Bloomberg, Reuters, or a similar institution involved in the
dissemination of financial information, and (ii) delivery of Index
information including but not limited to Index component information by
such MPS to clients or other subscribers including by electronic means
including via the Internet;
(c) BlackRock must notify the ECO if it becomes aware that: (i)
Such Index is operated other than in accordance with objective rules,
in the ordinary course of business, (ii) manipulation of any such Index
has occurred for the purpose of benefiting BlackRock, or (iii) in the
event that any rule change occurred in connection with the rules
underlying such Index, such rule change was made by the MPS for the
purpose of benefiting BlackRock; provided, however, this Subsection
(c)(iii) expressly excludes instances where the rule changes were made
in response to requests from clients/prospective clients of BlackRock
even if BlackRock is ultimately hired to manage such a portfolio (e.g.,
if plan sponsor X requests a ``Global ex-Sudan Fixed Income Index'', an
MPS decides to sponsor such index and plan sponsor X approaches
BlackRock or otherwise issues a ``Request for Proposal'' for investment
managers who could manage an index portfolio benchmarked to the Global
ex-Sudan Fixed Income Index).
(d) BlackRock must certify to the ECO annually that it is not aware
of the occurrence of any of the events described in Section
VI.PP.(4)(c), and if BlackRock cannot so certify, or if BlackRock
provides the ECO with the notice described Section VI.PP.(4)(c), the
ECO shall notify the IM, and the IM must take appropriate remedial
action which may include, but need not be limited to, instructions for
relevant BlackRock Managers to cease using such Index.
QQ. ``Index Account or Fund'' means any investment fund, account or
portfolio sponsored, maintained, trusteed, or managed by a BlackRock
Manager or a BlackRock Entity, in which one or more Client Plans
invest, and--
(1) Which is designed to track the rate of return, risk profile and
other characteristics of an Index by either (i) replicating the same
combination of Securities or commodities which compose such Index or
(ii) sampling the Securities or commodities which compose such Index
based on objective criteria and data;
(2) for which the BlackRock Manager does not use its discretion, or
data within its control, to affect the identity or amount of Securities
or commodities to be purchased or sold;
(3) that contains ``plan assets'' subject to either ERISA section
406, Code section 4975 or FERSA section 8477(c); and,
(4) that involves no agreement, arrangement, or understanding
regarding the design or operation of the Index Account or Fund which is
intended to benefit a BlackRock Entity or an MPS, or any party in which
a BlackRock Entity or an MPS may have an interest.
For purposes of this definition of ``Index Account or Fund'', every
BlackRock Entity is deemed to be independent of each MPS.
RR. ``In-House Plan'' means an employee benefit plan that is
subject to ERISA section 406 and/or Code section 4975, and that is
sponsored by a BlackRock Entity for its employees.
SS. ``Interbank Rate'' means the interbank bid and asked rate for
foreign exchange transactions of comparable size and maturity at the
time of the transaction as quoted on a nationally recognized service
for facilitating foreign currency trades between large commercial banks
and Securities dealers.
TT. ``know'' means to have actual knowledge. BlackRock Managers
will be deemed to have actual knowledge of information set forth in a
written agreement or offering document as of the date the BlackRock
Manager receives such agreement or document.
UU. ``Model'' means a computer model that is based on prescribed
objective criteria using independent data not within the control of a
BlackRock Entity to transform an Index.
VV. ``Model-Driven Account or Fund'' means any investment fund,
account or portfolio sponsored, maintained, trusteed, or managed by a
BlackRock Manager or a BlackRock Entity in which one or more Client
Plans invest, and--
(1) Which is composed of Securities or commodities the identity of
which and the amount of which are selected by a Model;
(2) that contains ``plan assets'' subject to either ERISA section
406, Code section 4975 or FERSA section 8477(c); and
(3) that involves no agreement, arrangement, or understanding
regarding the design or operation of the Model-Driven Account or Fund
or the utilization of any specific objective criteria which is intended
to benefit a BlackRock Entity or an MPS, or any party in which a
BlackRock Entity or an MPS may have an interest.
For purposes of this definition of ``Model-Driven Account or
Fund,'' every BlackRock Entity is deemed to be independent of each MPS.
WW. ``MPS'' or ``Minority Passive Shareholder'' means (1) Barclays
PLC, (2) Bank of America Corporation, (3) The PNC Financial Services
Group, Inc., or (4) each entity directly or indirectly, through one or
more intermediaries, controlling, controlled by or under common control
with one or more of Barclays PLC (Barclays MPSs), Bank of America
Corporation (BOA MPSs) or The PNC Financial Services Group, Inc., (PNC
MPSs) (each of the PNC MPSs, Barclays MPSs, and the BOA MPSs, an MPS
Group) but excluding any and all BlackRock Entities. Bank of America
Corporation and any entity directly or indirectly, through one or more
intermediaries, controlling, controlled by or under common control with
Bank of America Corporation (collectively, the BOA Group) shall cease
to be an MPS on the day after the number of representatives of the BOA
Group on the BlackRock Board of Directors is reduced to one (1).
[[Page 50658]]
XX. ``MPS Group'' shall have the meaning set forth in the
definition of MPS.
YY. ``MPS Plans'' means an employee benefit plan(s) that is subject
to ERISA section 406 and/or Code section 4975, and that is sponsored by
an MPS for its employees.
ZZ. ``Other Account or Fund'' means any investment fund, account or
portfolio sponsored, maintained, trusteed, or managed by a BlackRock
Manager or a BlackRock Entity in which one or more Client Plans invest,
and--
(1) which is not an Index Account or Fund or a Model-Driven Account
or Fund; and
(2) that contains ``plan assets'' subject to either ERISA section
406, Code section 4975 or FERSA section 8477(c).
AAA. ``Pooled Fund'' means a common or collective trust fund or
other pooled investment fund:
(1) In which Client Plan(s) invest;
(2) for which a BlackRock Manager exercises discretionary authority
or discretionary control respecting the management or disposition of
the assets of such fund(s); and
(3) that contains ``plan assets'' subject to either ERISA section
406, Code section 4975 or FERSA section 8477(c).
Solely for purposes of Section IV of this exemption, ``Pooled
Fund(s)'' shall only include funds or trusts which otherwise meet this
definition but which also are either (i) Maintained by a BlackRock
Entity or (ii) maintained by a person which is not a BlackRock Entity
but is sub-advised by a BlackRock Manager, provided that with respect
to a Pooled Fund described in (ii), (A) the fund or trust is either a
bank-maintained common or collective trust fund or an insurance company
pooled separate account that holds assets of at least $250 million, (B)
the bank or insurance company sponsoring the pooled fund has total
client assets under its management or control in excess of $5 billion
as of the last day of its most recent fiscal year, and shareholders' or
partners' equity in excess of $1 million, and (C) the decision to
invest the Client Plan into the bank-maintained common or collective
trust or insurance company pooled separate account and to maintain such
investment is made by a Client Plan fiduciary which is not a BlackRock
Entity. Such sub-advised Pooled Funds are sometimes referred to herein
as ``Sub-Advised Pooled Funds''.
BBB. ``QPAM Exemption'' or ``PTE 84-14'' means Prohibited
Transaction Exemption 84-14, as amended.
CCC. ``Qualified Professional Asset Manager'' or ``QPAM'' shall
have the meaning set forth in Section VI(a) of the QPAM Exemption.
DDD. ``Qualified Institutional Buyer'' or ``QIB'' shall have the
same meaning as defined in SEC Rule 144A (17 CFR 230.144A(a)(1)) under
the 1933 Act.
EEE. ``Rating Organizations'' means Standard & Poor's Rating
Services, Moody's Investors Service, Inc., Fitch Ratings Inc., DBRS
Limited, DBRS, Inc., or any similar agency subsequently recognized by
the Department as a Rating Organization or any successors thereto.
FFF. ``Recognized Securities Exchange'' means a U.S. securities
exchange that is registered as a ``national securities exchange'' under
section 6 of the 1934 Act, or a designated offshore securities market,
as defined in Regulation S of the SEC (17 CFR part 230.902(b)), as such
definition may be amended from time to time, which performs with
respect to Securities the functions commonly performed by a stock
exchange within the meaning of definitions under the applicable
Securities laws (e.g., 17 CFR part 240.3b-16).
GGG. ``Registered Investment Advisor'' means an investment advisor
registered under the Investment Advisors Act of 1940, as amended, that
has total client assets under its management or control in excess of $5
billion as of the last day of its most recent fiscal year and
shareholders' or partners' equity in excess of $1 million, as shown in
the most recent balance sheet prepared within the two years immediately
preceding a Covered Transaction, in accordance with generally accepted
accounting principles.
HHH. ``SEC'' means the United States Securities and Exchange
Commission.
III. ``Securities'' shall have the same meaning as defined in
section 2(a)(36) of the 1940 Act. For purposes of Section IV of this
exemption, except as where specifically identified, Asset-Backed
Securities are treated as debt Securities.
JJJ. ``Special Notice'' shall have the meaning set forth in Section
II.F. of this exemption.
KKK. ``Three Quote Process'' means three bids or offers (either of
which being sometimes referred to as quotes) are received by a trader
for a BlackRock Manager each of which such quotes such trader
reasonably believes is an indication that the dealer presenting the bid
or offer is willing to transact the trade at the stipulated volume
under discussion, and all material terms (including volume) under
discussion are materially similar with respect to each other such
quote. In selecting the best of three such quotes, a BlackRock Manager
shall maintain books and records for the three firm bids/offers in a
convention that it reasonably believes is customary for the specific
asset class (such as ``price'' quotes, ``yield'' quotes or ``spread''
quotes). For example, corporate bonds are often quoted on a spread
basis and dealers customarily quote the spread above a certain
benchmark bond's yield (e.g., for a given size and direction such as a
BlackRock trader may ask for quotes to sell $1 million of a particular
bond, dealer 1 may quote 50 bps above the yield of the 10 year treasury
bond, dealer 2 might quote 52 bps above the yield of the 10 year
treasury bond and dealer 3 might quote 53 bps above the yield of the 10
year treasury bond). If only two firm bids/offers can be obtained, the
trade requires prior approval by the ECO and the ECO must inquire as to
why three firm bids/offers could not be obtained. If in the case of a
sale or purchase a trader for a BlackRock Manager reasonably believes
it would be injurious to the Client Plan to specify the size of the
intended trade to certain bidders, a bid on a portion of the intended
trade may be treated as a firm bid if the trader documents (i) Why the
bid price is a realistic indication of the economic terms for the
actual amount being traded despite the difference in the size of the
actual trade and (ii) why it would be harmful to the Client Plan to
solicit multiple bids on the actual amount of the trade. If a trader
for a BlackRock Manager solicits bids from three or more dealers on a
sale or purchase of a certain volume of Securities, and receives back
three or more bids, but at least one bid is not for the full amount of
the intended sale, if the price offered by the partial bidder(s) is
less than the price offered by the full bidder(s), the trader may
assume a full bid by the partial bidder(s) would not be the best bid,
and the trader can consummate the trade, in the case of at least two
full bids, with the dealer making the better of the full bids, or in
the case of only one full bid, with the dealer making that full bid.
LLL. ``Type A Transactions'' means transactions between BlackRock
Managers on behalf of Client Plans with MPSs which (i) are or were
continuing transactions within the meaning of section VI(i) of PTE 84-
14 and/or section IV(h) of Prohibited Transaction Exemption 91-38 in
existence on the date of the Acquisition, and (ii) pursuant to which
there is no discretion on the part of either party, other than the
ability of the BlackRock Manager to sell or otherwise transfer the
Client Plan's position to a third party, or the ability of the MPS to
sell or otherwise transfer its position to a third party, or
[[Page 50659]]
the ability of the MPS to otherwise terminate the transaction on
previously specified terms.
MMM. ``Type B Covered Transactions'' means transactions which meet
the criteria to be Type A Transactions but which possess the additional
feature that the BlackRock Manager, on behalf of a Client Plan, has the
option to terminate the transaction with the MPS on previously
specified terms.
NNN. ``Type C Covered Transactions'' means transactions which meet
the criteria to be Type B Covered Transactions but which possess the
additional feature that the BlackRock Manager may terminate or modify
the transaction on behalf of a Client Plan under certain circumstances,
but only with negotiation and/or payment of consideration to the MPS or
to the Client Plan which was not predetermined.
OOO. ``Underwriter Exemption(s)'' means a group of individual
exemptions granted by the Department to provide relief for the
origination and operation of certain asset pool investment trusts and
the acquisition, holding and disposition by plans of Asset-Backed
Securities representing undivided interests in those trusts. Such group
of individual exemptions was collectively amended by Prohibited
Transaction Exemption 2009-31, 74 FR 59001 (Nov. 16, 2009).
PPP. ``Unwind Period'' shall have the meaning set forth in Section
II.A.3.(b) of this exemption.
QQQ. ``Unwind Period 2'' shall have the meaning set forth in
Section III.W. of this exemption.
RRR. ``U.S. Bank'' means a bank as defined in section 202(a)(2) of
the Investment Advisers Act, as amended.
SSS. ``U.S. Broker-Dealer'' means a broker-dealer registered under
the 1934 Act or exempted from registration under section 15(a)(1) of
the 1934 Act as a dealer in exempted government Securities (as defined
in section 3(a)(12) of the 1934 Act).
TTT. ``U.S. Collateral'' means:
(1) U.S. currency;
(2) ``government securities'' as defined in section 3(a)(42)(A) and
(B) of the 1934 Act;
(3) ``government securities'' as defined in section 3(a)(42)(C) of
the 1934 Act issued or guaranteed as to principal or interest by the
following corporations: The Federal Home Loan Mortgage Corporation, the
Federal National Mortgage Association, the Student Loan Marketing
Association and the Financing Corporation;
(4) mortgage-backed Securities meeting the definition of a
``mortgage related security'' set forth in section 3(a)(41) of the 1934
Act;
(5) negotiable certificates of deposit and bankers acceptances
issued by a ``bank'' as that term is defined in section 3(a)(6) of the
1934 Act, and which are payable in the United States and deemed to have
a ``ready market'' as that term is defined in 17 CFR 240.15c3-1; or
(6) irrevocable letters of credit issued by a U.S. Bank other than
the borrower or an affiliate thereof, or any combination, thereof.
WWW. ``Violation'' means a Covered Transaction which is a
prohibited transaction under section 406 or 407 of ERISA, Code section
4975, or FERSA section 8477(c) and which is not exempt by reason of a
failure to comply with this exemption or another administrative or
statutory exemption. To the extent that the non-exempt prohibited
transaction relates to an act or omission that is separate and distinct
from a prior otherwise exempt transaction that may relate to the same
asset (e.g., a conversion of a debt instrument into an equity
instrument or a creditor's committee for a debt instrument), the
Violation occurs only at the current point in time and no Violation
shall be deemed to occur for the earlier transaction relating to the
same asset (e.g., the initial purchase of the asset) that was otherwise
in compliance with ERISA, the Code or FERSA.
Signed at Washington, DC, this 4th day of August, 2011.
Ivan Strasfeld,
Director of Exemption Determinations, Employee Benefits Security
Administration, U.S. Department of Labor.
[FR Doc. 2011-20344 Filed 8-12-11; 8:45 am]
BILLING CODE 4510-29-P
|
|