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EBSA Notices

Grant of Individual Exemption Involving UBS AG (UBS or the Applicant); Located in Zurich, Switzerland   [9/13/2013]
[PDF]
Federal Register, Volume 78 Issue 178 (Friday, September 13, 2013)
[Federal Register Volume 78, Number 178 (Friday, September 13, 2013)]
[Notices]
[Pages 56740-56742]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-22314]


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DEPARTMENT OF LABOR

Employee Benefits Security Administration

[Prohibited Transaction Exemption 2013-09; Application No. D-11772]


Grant of Individual Exemption Involving UBS AG (UBS or the 
Applicant); Located in Zurich, Switzerland

AGENCY: Employee Benefits Security Administration, U.S. Department of 
Labor.

ACTION: Grant of individual exemption.

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SUMMARY: This document contains an individual exemption from certain 
prohibited transaction restrictions of the Employee Retirement Income 
Security Act of 1974, as amended (ERISA or the Act) and the Internal 
Revenue Code of 1986, as amended (the Code). The transactions involve 
UBS, and certain entities within UBS's Global Asset Management and 
Wealth Management Americas divisions that function as ``qualified 
professional asset managers'' (QPAMs) under Prohibited Transaction 
Class Exemption 84-14 (PTE 84-14).\1\ The individual exemption affects 
UBS QPAMS, and participants and beneficiaries of ERISA plans the assets 
of which plan are managed by a UBS QPAM.
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    \1\ 49 FR 9494 (March 13, 1984), as corrected at 50 FR 41430 
(October 10, 1985), as amended at 70 FR 49305 (August 23, 2005), and 
as amended at 75 FR 38837 (July 6, 2010).

DATES: Effective Date: This exemption is effective as of the date a 
judgment of conviction against UBS Securities Japan for wire fraud is 
entered in the District Court of Connecticut in Case Number 3:12-cr-
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00268-RNC.

FOR FURTHER INFORMATION CONTACT: Mr. Erin S. Hesse of the Department, 
telephone (202) 693-8546. (This is not a toll-free number.)

SUPPLEMENTARY INFORMATION: On July 9, 2013, the Department of Labor 
(the Department) published a notice of proposed individual exemption in 
the Federal Register at 78 FR 41105, such that entities within UBS's 
Global Asset Management and Wealth Management Americas divisions that 
function as QPAMs, would not be precluded from relying on the relief 
provided by PTE 84-14, solely due to the failure to satisfy the 
condition in section I(g) of PTE 84-14 as a result of their affiliation 
with UBS Securities Japan Co. Ltd., against whom a judgment of 
conviction for one count of wire fraud is scheduled to be entered in 
the District Court of Connecticut in Case Number 3:12-cr-00268-RNC. The 
proposed exemption was requested by UBS pursuant to section 408(a) of 
the Act and section 4975(c)(2) of the Code, and in accordance with the 
procedures set forth in 29 CFR Part 2570, Subpart B (76 FR 66637, 
October 27, 2011).\2\ Effective December 31, 1978, section 102 of the 
Reorganization Plan No. 4 of 1978, (5 USC App. 1 (1996)) 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.
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    \2\ For purposes of this exemption, references to the provisions 
of Title I of the Act, unless otherwise specified, refer also to the 
corresponding provisions of the Code.
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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. All comments and requests for hearing 
were due by August 11, 2013. During the comment period, the Department 
received no comments and no requests for a hearing from interested 
persons. Accordingly, after giving full consideration to the entire 
record, the Department has decided to grant the exemption. The complete 
application file (Application No. D-11772), including all supplemental 
submissions received by the Department, is available for public 
inspection in the Public Disclosure Room of the Employee Benefits 
Security Administration, Room N-1513, U.S. Department of Labor, 200 
Constitution Avenue NW., Washington, DC 20210.
    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 July 9, 2013, at 78 FR 
41105.

General Information

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

[[Page 56741]]

of the Code and in accordance with the procedures set forth in 29 CFR 
Part 2570, Subpart B (76 FR 66637, 66644, October 27, 2011):

Exemption

    Entities within UBS's Global Asset Management and Wealth Management 
Americas divisions that function as ``qualified professional asset 
managers'' (QPAMs), shall not be precluded from relying on the relief 
provided by Prohibited Transaction Exemption 84-14 (PTE 84-14),\3\ 
solely due to the failure to satisfy the condition in section I(g) of 
PTE 84-14 as a result of their affiliation with UBS Securities Japan 
Co. Ltd. (UBS Securities Japan), against whom a judgment of conviction 
for one count of wire fraud (the Conviction) is scheduled to be entered 
in the District Court of Connecticut in Case Number 3:12-cr-00268-RNC, 
provided the following conditions are satisfied:
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    \3\ 49 FR 9494 (March 13, 1984), as corrected at 50 FR 41430 
(October 10, 1985), as amended at 70 FR 49305 (August 23, 2005), and 
as amended at 75 FR 38837 (July 6, 2010).
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    (a) No ERISA-covered assets were involved in, or directly affected 
by, the conduct of UBS Securities Japan that is the subject of the 
Conviction. For purposes of this paragraph, ERISA-covered assets are 
not considered directly affected solely because an ERISA plan held an 
economic interest in a security or investment product, the value of 
which was tied to one of the benchmark interest rates manipulated in 
connection with conduct by certain UBS personnel;
    (b) The entities acting as QPAMs within UBS's Global Asset 
Management and Wealth Management Americas divisions (UBS QPAMs) did not 
know of, have reason to know of, participate in, or directly receive 
compensation in connection with, the conduct by certain UBS personnel 
that gave rise to the manipulation of certain benchmark interest rates;
    (c) UBS Securities Japan did not provide any fiduciary services to, 
or act as a QPAM for, ERISA plans or otherwise exercise any 
discretionary control over ERISA-covered assets;
    (d) UBS Securities Japan will not enter into any transactions with 
funds managed by UBS QPAMs or provide any services to UBS QPAMs;
    (e) UBS QPAMs were insulated from UBS Securities Japan due to: (1) 
The independent business operations of the Wealth Management Americas 
and Global Asset Management divisions from UBS's other divisions, and 
(2) Written policies and procedures which created information barriers 
that were in place to ensure that the UBS QPAMs, and the ERISA-covered 
assets they manage, were not affected by the business activities of UBS 
affiliates within the Investment Bank division, such as UBS Securities 
Japan;
    (f) UBS maintains and follows written policies and procedures that 
create information barriers designed to ensure UBS QPAMs, and the 
ERISA-covered assets they manage, are not affected by the business 
activities of UBS affiliates within the Investment Bank division, such 
as UBS Securities Japan. UBS also develops and implements a program of 
training for UBS personnel regarding such written policies and 
procedures;
    (g) UBS submits to an annual audit which meets the following 
requirements:
    (1) An independent auditor, who has appropriate technical training 
and proficiency with Title I of ERISA, shall conduct an annual written 
audit;
    (2) The audit shall specifically require the auditor to determine 
whether UBS has continued to maintain and follow, and developed and 
implemented a training program with respect to, written policies and 
procedures that create information barriers designed to ensure that the 
UBS QPAMs, and the ERISA-covered assets they manage, are not improperly 
influenced or affected by the business activities of UBS affiliates 
within the Investment Bank division, such as UBS Securities Japan;
    (3) The audit shall test operational compliance with the training 
requirements and written policies and procedures requirements described 
in paragraph (f);
    (4) The auditor shall issue a written report (the Audit Report) 
describing the steps performed by the auditor during the course of its 
examination. The Audit Report shall include the auditor's specific 
determinations regarding the adequacy of the training requirements and 
written policies and procedures requirements described in paragraph 
(f), the auditor's recommendations (if any) with respect to 
strengthening such training requirements and policies and procedures, 
and any instances of UBS's noncompliance with developing and 
implementing such training requirements and policies and procedures. 
Any determinations made by the auditor as a result of the audit 
regarding the adequacy of the training requirements and written 
policies and procedures requirements described in paragraph (f) and the 
auditor's recommendations (if any) with respect to strengthening such 
training requirements and policies and procedures shall be promptly 
addressed by UBS, and any actions taken by UBS to address such 
recommendations should be included in an addendum to the Audit Report. 
Any determinations by the auditor that UBS has developed and maintained 
sufficient written policies and procedures, and developed and 
maintained a training program regarding such policies and procedures, 
shall not be based solely or in substantial part on an absence of 
evidence indicating noncompliance;
    (5) UBS shall provide notice to the Department's Office of 
Exemption Determinations (OED) of any instances of UBS's noncompliance 
reviewed by the auditor within ten (10) business days after such 
noncompliance is determined by the auditor, regardless of whether the 
audit has been completed as of that date. Upon request, the auditor 
shall provide OED with all of the relevant workpapers reflecting the 
instances of noncompliance. The workpapers should identify whether and 
to what extent the assets of ERISA plans were involved in the 
instance(s) of noncompliance and an explanation of any corrective 
actions taken by UBS;
    (6) The yearly Audit Report will be provided to OED no later than 
90 days following the 12-month period to which it relates and will be 
unconditionally available for examination by any duly authorized 
employee or representative of the Department, Internal Revenue Service, 
U.S. Commodity Futures Trading Commission, U.S. Department of Justice, 
Japanese Financial Services Authority, other relevant regulators, and 
any fiduciary of an ERISA plan the assets of which plan are managed by 
a UBS QPAM;
    (7) This audit requirement in paragraph (g) herein shall continue 
to be applicable for five (5) years from the date of Conviction;
    (h) Notwithstanding the Conviction, UBS complies with each 
condition of PTE 84-14, as amended;
    (i) UBS imposes its internal procedures, controls, and protocols on 
UBS Securities Japan to: (1) Reduce the likelihood of any recurrence of 
conduct that is the subject of the Conviction, and (2) Comply in all 
material respects with the Business Improvement Order, dated December 
16, 2011, issued by the Japanese Financial Services Authority;
    (j) UBS complies in all material respects with the audit and 
monitoring procedures imposed on UBS by the United States Commodity 
Futures Trading Commission Order, dated December 19, 2012;
    (k) UBS maintains records necessary to demonstrate that the 
conditions of this exemption have been met for six (6) years following 
the completion date of

[[Page 56742]]

the last audit conducted in accordance with paragraph (g); and
    (l) Each sponsor of an ERISA plan the assets of which plan are 
managed by a UBS QPAM receives: Notice of the proposed exemption with a 
copy of the summary of facts that led to the Conviction, which was 
submitted to the Department; and a prominently displayed statement that 
the Conviction results in a failure to meet a condition in PTE 84-14.
    Effective Date: This exemption is effective as of the date a 
judgment of conviction against UBS Securities Japan for wire fraud is 
entered in the District Court of Connecticut in Case Number 3:12-cr-
00268-RNC.

    Signed at Washington, DC, this 9th day of September, 2013.
Lyssa E. Hall,
Director, Office of Exemption Determinations, Employee Benefits 
Security Administration, U.S. Department of Labor.
[FR Doc. 2013-22314 Filed 9-12-13; 8:45 am]
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